Turning Strength into Sustainability

Turning Strength into Sustainability

 

By Foreign AffairsIn recent years the role of Azerbaijan as an alternative gas exporter to European markets has been growing. It is expected that exploitation of the second Shakh Deniz field will be started in 2018. Gas will be transported through TANAP and TAP. The consortium, which includes SOCAR, international oil-and-gas corporations and the South Gas Corridor Company, plans to construct pipelines in a few years. However, speaking about the priorities of its economic development, Azerbaijan is focused on projects which are not connected with oil and gas directly, for instance, establishing industrial zones in three regions of the country.The American magazine Foreign Affairs published an article on the prospects of the development of the Azerbaijani economy. Vestnik Kavkaza presents it.Over the past ten years Azerbaijan has been one of the fastest growing economies in the world. Rich hydrocarbon reserves and careful planning have enabled the country to build a healthy and forward-looking economy. Azerbaijan is now preparing to take the next leap. A program for economic diversification and a clear vision for development are shaping the future of Azerbaijan as a globally competitive player, creating abundant opportunities for investment along the way.“Our strategic goal is to further strengthen Azerbaijan’s independence and make it one of the most developed and competitive countries in the world,” Ilham Aliyev, President of the Republic of Azerbaijan, says.

By Foreign Affairs

 

In recent years the role of Azerbaijan as an alternative gas exporter to European markets has been growing. It is expected that exploitation of the second Shakh Deniz field will be started in 2018. Gas will be transported through TANAP and TAP. The consortium, which includes SOCAR, international oil-and-gas corporations and the South Gas Corridor Company, plans to construct pipelines in a few years. However, speaking about the priorities of its economic development, Azerbaijan is focused on projects which are not connected with oil and gas directly, for instance, establishing industrial zones in three regions of the country.


The American magazine Foreign Affairs published an article on the prospects of the development of the Azerbaijani economy. Vestnik Kavkaza presents it.

 

Over the past ten years Azerbaijan has been one of the fastest growing economies in the world. Rich hydrocarbon reserves and careful planning have enabled the country to build a healthy and forward-looking economy. Azerbaijan is now preparing to take the next leap. A program for economic diversification and a clear vision for development are shaping the future of Azerbaijan as a globally competitive player, creating abundant opportunities for investment along the way.

 

“Our strategic goal is to further strengthen Azerbaijan’s independence and make it one of the most developed and competitive countries in the world,” Ilham Aliyev, President of the Republic of Azerbaijan, says.

 

Azerbaijan’s transformation is particularly impressive considering that twenty years ago it was mired in deep political and economic crisis. Amid post-Soviet uncertainty, the economy was in free fall, with a severe contraction in output and rampant inflation. 

 

The revival of the country’s economy followed the introduction of a new oil strategy defined by Azerbaijan’s national leader Heydar Aliyev, which encompassed a series of production sharing agreements, and the opening of Azerbaijan’s historic oil sector to international investment. A 1994 agreement, hailed as the “contract of the century,” gave investors access to Azerbaijan’s rich oil fields in the Caspian Sea. The ensuing inflow of capital and expertise permanently altered the country’s fortunes. Large-scale production and the construction of multiple pipelines contributed to making Azerbaijan one of the world’s largest oil and gas exporters.

 

Since, Azerbaijan has experienced tremendous growth, which averaged 13.5 percent in the last decade. The country is flush with foreign exchange reserves and about half of Azerbaijan’s export oil revenues are collected in a state oil fund (SOFAZ), which finances long-term strategic investments in infrastructure and socioeconomic development. 

 

Azerbaijan’s biggest challenge today is diversifying away from hydrocarbons, which represent more than 90 percent of the country’s total exports, a 60-percent increase from fifteen years ago. The country expects to capitalize on hydrocarbons for at least another forty years, but oil production is believed to have peaked and Azerbaijan must do more for its non-oil economy. For the government this is a clear priority. “In the last ten years, a portion of the revenues obtained from oil and gas production has been channeled into the development of the non-oil sector, the establishment of new high-tech industrial facilities and diversification of the national economy,” President Aliyev recently stated. “As a result, the non-oil sector has been registering an annual growth rate of 10 percent each year.” 

 

Economic diversification is therefore a cornerstone of the country’s principal development concept, ‘Azerbaijan 2020: A look into the Future’, adopted in 2012. It positions Azerbaijan to become a politically developed and economically competitive country by 2020, applying its regional leadership to a global scale. Particular emphasis is placed on the strengthening of non-oil industries, transitioning the country into a knowledge-based economy, and exploiting Azerbaijan’s strategic position along international trade routes. For investors, this opens a new chapter of opportunities, particularly in view of further regional integration and rapid progress in the development of Azerbaijan’s infrastructure and services. Leaving very little to chance, Azerbaijan appears to be on full course to meeting its 2020 targets.

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