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New country strategy for Azerbaijan
EBRD praises oil revenue management; urges harder fight against corruption
Azerbaijan has been doing a good job managing the oil boom buoying its
economy, the European Bank for Reconstruction and Development says in its
latest biennial country strategy, released today during the Bank’s Annual
Meeting in Belgrade. With annual GDP growth averaging 10 per cent since 2000,
and in a position to double during the next two years, the Caspian nation has
so far achieved economic growth without significant macroeconomic imbalances.
Azerbaijan has made real progress in developing an institutional framework for
the responsible management of oil and gas revenues. Part of its energy
windfall is set aside in a State Oil Fund, created in 2000 and worth nearly $1
billion, whose functions are increasingly open. SOCAR, the state oil company,
is undergoing restructuring and commercialisation. And Azerbaijan actively
supports the UK government’s Extractive Industries Transparency Initiative
(EITI), which promotes transparency and accountability by demanding of
governments and extractive industry companies alike, “publish what you pay,
publish what you receive.” In March 2005, Azerbaijan became the first country
to issue an Extractive Industries Transparency Initiative Report.
However, substantial challenges for Azerbaijan still lie ahead. Achieving and
maintaining the efficient and equitable management of energy revenues and
ensuring they support economic diversification will be essential, as almost
half of Azerbaijan’s population still lives below the poverty line today. The
investment climate has to be significantly improved to support private-sector
investment. At present, noted Olivier Descamps, Business Group Director for
south-eastern Europe and the Caucasus, speaking on the eve of the Bank’s
Annual Meeting here, corruption is widespread and pervasive, the banking
sector is weak and undercapitalised, in most areas the regulatory environment
is underdeveloped and inadequate and laws and regulations are often
arbitrarily enforced. Because the presidential elections of 2003 failed to
meet international standards, it adds, the parliamentary elections due in
November 2005 will be an important benchmark of Azerbaijan’s democratic
development.
The EBRD has set out a two-year strategy for further engagement that both
builds on its existing large-scale energy-sector investments and supports
economic diversification, especially to micro-, small- and medium-sized
enterprises outside the oil sector. The Bank will foster policy dialogue on
banking, focussing on improving competitiveness, while looking for equity
investments in the sector. It will seek improvements in the investment climate
through policy dialogue. And it will target sustainable infrastructure
improvements along strategic transport corridors and in the power sector.
Country strategy for Azerbaijan
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