On Financial and Investment Problems in the Context of Regional Economic Development of the Republic of Azerbaijan

Journal of Critical Reviews ISSN- 2394-5125 Vol 7, Issue 3, 2020

Review Article ON FINANCIAL AND INVESTMENT PROBLEMS IN THE CONTEXT OF REGIONAL ECONOMIC DEVELOPMENT OF THE REPUBLIC OF AZERBAIJAN

Quliyeva Aygün, Eldar qizi

PhD in economics,Azerbaijan State Agricultural University,450, Ataturk Avenue, Ganja, AZ2000, Azerbaijan, E-mail: [email protected]

Received: 19.11.2019 Revised: 23.12.2019 Accepted: 22.01.2020

Abstract The factors which enable the sustainable development of the regions, the principles and measures of the financial and investment support were determined. The significance of practical conceptual approach to business and investment support of the regional social and economic development was revealed. The importance of financial and investment assistance in the modelling of social-economic development on the regional level, the maximum rational use of the local natural and economic supplies in the formation of the financial resources, and enterprise modelling issues were analysed. There was prepared a structure of regional investment policy formation and implementation system. The main aim of the research is to investigate the problems of financial and investment support modelling of the local social and economic development, to analyse the conceptual praсtical approach to these problems and definition of the adequate mechanisms. Proceeding from the objective situation of the regional social and economic development in Azerbaijan, there was justified a complex functional structure of the regions. The formation factors and implementation ways of preparation mechanisms of the regional investment policy were determined. The directions of strengthening of the finance and credit support of the social and economic development programs were justified. There was also given a scheme of enhancement of the financial and credit support rationality of the regional social, economic development program. The fraction of regions in the total amount of the commercial agents in Azerbaijan was analysed. There was prepared a scheme of essential directions of the multiplicative effect in the social-economic development of the regions. The efficiency issues of the regional social-economic development program in Azerbaijan were analysed. There were presented the dynamics of funds oriented to the nominal capital on areas in Azerbaijan and dynamics of funds geared to the symbolic capital per capita on regions. The current situation of the regional social, economic development in Azerbaijan and production of outputs on the commercial areas were analysed. The dynamics of outputs production per capita in the main fields of economics region-wise and the dynamics of industrial production volume region- wise were also presented. Generalized, the factors were determining the strengthening of financial and investment support of the regional social-economic development. There were shown the ways of a strategic approach to the commercial and investment support of the social, economic growth in the regions in the short and long terms in Azerbaijan. There were prepared suggestions and advised on the issues reviewed in the article.

Keywords: Azerbaijan, regional economic policy, social and economic development, financial and investment support, interregional economic development differences, regional natural resources, local economic potential. JEL classifications:R1; R10; R11; R13; R53; R58.

INTRODUCTİON AND RESEARCH OF THE PROBLEM programs itself. From this point of view the national The economics of Azerbaijan appeared for the element of the commercial interests, the economic development tendencies of former Russian Empire during the long period of 70 years the country and especially the perspectives of regional (1920-1990). Back then, there were no available capabilities for development modelling grew up. It is interesting that on the development of the economic modelling of the country or January 15, 1992, the law about ‘Foreign investment protection’ regional development programs. Everything was solved in the was adopted. The rule about ‘Investment operations was put in centre – in Moscow. Other ways of saying Moscow determined force on January 13th, 1995. It means that during a short time the programs and economic development tendencies which it after the restoration of independence the government of considered necessary for Azerbaijan. The resources were also Azerbaijan was quite interested in bringing foreign investments divided from the centre. It is worth to mention one interesting to Azerbaijan and in increasing the attractiveness of these detail: for example, in Sumgayit industrial centre the two huge processes and took active measures in this field. It is known that chemical enterprises were separated by just a fence, but these the realization of the economic reforms is impossible without two plants did not have a right on an independent division of financial resources and the balanced regional social and resources and raw materials between them. This issue had to economic development programs require the severe level of be reviewed three thousand kilometres away in Moscow, and finance and credit maintenance. Formation of sustainable and the work had to be done based on the solution received from continuous financial support and adequate modelling of the there. All the financial problems were solved the same way. The local development to the national economic interests of the government of Azerbaijan could not independently divide the country depends on each other very much. financial resources, and allocate funds for development programs of the regions. Imagine that the issue of construction For this reason, making investments to the regions is one of the of any infrastructure object in a distant village in Azerbaijan required fields of activity of the Azerbaijan government in its was solved in Moscow and the financial resources were also economic policy. The objective scientifically and practical allocated from there. Of course, all these became history. After approach is the main criteria in this article. Our main goal is to the restoration of independence in 1990 Azerbaijan had already reveal the modern essence of the balanced regional social and to conduct a free economic policy, social, economic reforms and economic development in Azerbaijan, to show the local to solve the issues of preparation of the regional development problems. For this reason, we did not want to overload the article with the current economic theoretical views and

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ON FINANCIAL AND INVESTMENT PROBLEMS IN THE CONTEXT OF REGIONAL ECONOMIC DEVELOPMENT OF THE REPUBLIC OF AZERBAIJAN approaches; in the report alongside with avoiding these of view. The author thinks that there are not any results in thoughts we gave preference mainly to find the solution of the solution optimization of the issues of finance and investment problem by the benefit of the social and economic stability supply modelling yet, and the researches and investigations in already existing in modern Azerbaijan and economic this sphere should be continued. development tendencies. The contemporary scientific and practical standpoints on the increase of the finance and credit The possibility of the contribution of the article to global supply of the regional development programs in Azerbaijan are economic science. We think that the ideas about the regional covered in the article. Alongside with all these under the social and economic development problems and its finance and circumstances of global economic challenges of the local social investment supply, the approaches to the issues, specific and economic development and critical economic characteristics, modelling of the solution of finance and transformations the definition and measurement of tendency investment supply of the regional social and economic direction, the preparation of the sustainable mechanisms of the development on the country level can attract the attention of finance and credit supply in the processes and suggestions for global economists, researchers and experts, the state implementation stand in the centre of the reviewed problem. authorities responsible for this sphere. From the other hand, The aim is quite actual and essential, but the challenges ahead Azerbaijan differs with dynamic economic development in a are much more complicate. First of all, we сconsidered positive meaning. Because of this, the development of the social necessary to give our opinion to the researches on these issues, and economic development programs and the materials, to the arguments mentioned in the economics literature, to the analysis and judgments on their finance and investment supply scientific approaches and thoughts, and statistic and the other modelling keep their chance to become a contribution to global databases, and explore the study level of the given issues. economics.

The issues covered in the article. I generalize the topics LEVEL PROBLEM STUDY AND LİTERATURE REVİEW covered in the report are mainly connected with finance and As mentioned above, taking into consideration the modern strong investment supply modelling of the regional social and economic transformations and complexity of global economic economic development in Azerbaijan. First of all, it is appeal, we decided that usage of last years economic literature considered essential to investigate the content of finance and and resources were more rational. But information about the investment supply of the local economics importance and main thoughts and considerations on the issues the major place is regional social and economic development. On the assumption given to the author’s approaches. Of course, this is not evidence of of objective assessment of the resource and industry level in the a cold approach to the other economic thoughts and statements; region, human resources, business development level, each research work has its scientific essence and practical value. investment and real analyses, the determination of increase Taking these into consideration there were declared against the directions of the finance and investment supply in the areas is problems indicated in the article according to the theoretical one of the main problems. The problems of elimination of views of a group of classic economists and the other world maladjustments between social and economic development of economists: Smith Adam (1909–14; 2001), Alfred Marshall the regions, the growth of the population’s income in the areas, (1890-1891), Keynes M. John (1936), Solow Robert Merton the issues of economic activity increase also remain in the (1974), Samuelson P.A., Nordhaus W.D. (Economics, 2009), centre of attention. The importance and solution to matters of Stiglitz E.Jozeph, Charlton Andrew (2005). Under the condition of finance and investment supply reinforcement and factors treating classic economic views and many world scientists’ connected with them were reviewed, and the relevant thoughts and statements with respect, we would like to mention mechanisms and suggestions were prepared with the aim of that in the article the preference was given mostly to scientific- modelling of the social and economic development of the practical approaches to the reviewed issues adequate to the last regions. year's global economic appeals. The regional social and economic development processes taking place in Azerbaijan and the The practical importance of the article. First of all, it is mechanisms of finance and credit supply of these problems connected with the consideration of the regional social and require new approaches, mechanisms considering local specific economic development in Azerbaijan on an advanced stage on characteristics and economic tools. From this point of view, it is a strategic level. The strategic aims were determined in this quite difficult to mention the fundamental study of the financing field, and thуmain goals were reducing the difference in issues of the regional development programs in Azerbaijan. Thus, economic development level between the regions and the the existing economic, practical mechanisms and the thoughts, centre – capital city Baku, development of mechanisms suggestions and advice mentioned in the economic literature are balancing the social and economic development between the not enough to solve the existing problems, and their relevance is parts and provision of its implementation. From the other hand, not adequate. Azerbaijan researches such as Nuriyev A. H. (2013), there were developed the scientific and practical approach Atashov B.Kh. (2016), Hasanli Y.H. (2011), Huseynova Kh.M. methods and suggestions on the available issues of determining (2010), Aliyev Sh.T. (2015), Shirinov Sh.V (2012), Allahverdiev financial resources and increasing the investment. The advice N.B., Gafarov K.S., Ahmedov A.A. (2012) conducted researches, on the modeling of the finance and investment supply in the prepared monographs, expressed their thoughts and made regions were given, and the adequatу activity directions were suggestions about the complex problems of the social and justified. economic development, importance and modelling of the regional Methods and approaches. A lot of techniques and procedures development programs, the positive and negative features, the widely known in the economic science such as comparative issues of financial and credit supply of these development analysis, synthesis, systematization, generalization, diagrams, programs and finance and investment supply. Taking into bar charts, graphs and tables were used in the preparation of consideration these problems the works of a group of young Azeri the article. The was expressed an adequate opinion on the researches such as Ahmedzadeh (2010), Baghirov N.A (2014), thought sand observations of classiс economists and modern Khakimova Y.A (2014), Mammadova G.G (2012), Rzayev P.G researchers, and also the generalization was made. The was (2011), Rahimov M.R (2014) and Sadygov E.M (2013) attract given a great place to the international experience, and the main attention last years. The regional economic development reason of this is that the economic development in Azerbaijan processes and the issues of financial and investment supply is specific and formation of the regional social and economic related to them were in the highlight of several world types of growth in the framework of the local interests. The regions of research. As an example we can show the scientific articles and the country are rich with resources and the social and economic research works of Arias Maria A., Wen Yi (2015), Brown Ross development of each of them, and their financial support (2000), Chaplyuk V.Z (2006), Capello Roberta (2011), Florida requires a unique approach. From this point of view, a solution Richard (2002), Gazizulina I.A (2011), Gren Jörgen (2003), to the problem on the assumption of objective realities and Harshana Kasseeah (2016), Korchagina Y.V (2012), Otsuka available resources was considered more rational. Was Akihiro, Yamano Norihiko (2006), Rakar Fredrik., Tallberg Pontus considered more rational. The main idea of the article consists (2014), Storper Michael (2011), Tolstolesova L.A (2010), of the author’s approach to the current problem and his point Tabellini Guido (2006), Venables Anthony J (2003), etc. Alongside with all these, we would like to notify that the modelling problems

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ON FINANCIAL AND INVESTMENT PROBLEMS IN THE CONTEXT OF REGIONAL ECONOMIC DEVELOPMENT OF THE REPUBLIC OF AZERBAIJAN of financial and investment supply of the regional social and concept of investment is one of the essential categories of the economic development in Azerbaijan are quite relevant and have market economy; we can observe the quite dangerous control a strategic impact for our country. For this reason, the importance of it. The source of this variety is the position of both classic of problems reviewed in the article is approached by the features and neo-classic, Keynesian and neo-Keynesian economic and tendency of regional economic development processes taking schools and contradictions of the modern reality. The place in Azerbaijan. representatives of typical political economy consider with significant foresight that ‘any increase or decrease of the Analysis of the conceptual and practical approach to the capital will naturally cause the increase or decrease of the finance and investment supply of the regional social and industrial activities, the number of production workers, and as economic development a result the annual value of products on the land and labour of The social and economic development priorities of each the country, the real wealth and income of its population’ country are directly linked to the economic development (Smith Adam., 1909–14; 2001). We would like to note that the features of the country, the objective reality and optimal conception of state regulation of the economics composes the modelling of the regional development. After accomplishing theoretical and methodology, and practical base of the the phase of its economic reforms, Azerbaijan achieved the investment policy as an essential part of the economic system. boosting of local social and economic development to the J.M. Keynes’s point of view on investment which gives proof to priority activity level. The two-state programs on the regional the non-compliance of the market in the pure form with social event which followed and complemented each other were and ecological requirements of the society and the relevance of realized, and the third sate program is now being developed. state regulation of the modern economics conforms the We are not going to list off the main essence of these state terminology of the current investment policy the most. Thus, programs. The problems of renovation or improvement of the as to the Keynes who notes that investment increase gives an most social and economic development components in the impetus to economic activity, “an investment is a purchase of regions of the country and also of the financial andivestment an old or new property by a person or corporation. In some supply mechanisms attracts attention. And what is the area, instances, this conception is limited by purchase and sale of the modern elements of cities, what the formation or paper holdings on stock-market. At the same time, for example, development components consist of? As the primary factors in the purchase and sale of a car or a house, it can be referred information and development of any region, the adequateness to the investments in gathering stock of the finished of the natural resources and population base in this region, the manufactures or uncompleted production” (Keynes M. John., formation of market infrastructure, production, social, 1936). The diversity of financial supply in the region, the ecological and institutional infrastructure components are of creation of sustained and productive finance resources depend great importance. Professor Nuriyev A. considers the finance on attracting investment in the area. Or the new economic and investment supply of social and economic development in appeals stipulates the enhancement of the economics, the regions to be the determinative factor (Nuriyev A.H., 2013). abolition of the trans-regional economic differences (Storper Professor Atashov B. mentions that investment funds in Michael, 2011). In several developing countries such as China, Azerbaijan began to appear comparably later than commercial Mexica, Brazil and India, the issues of the abolition of the trans- banks (Atashov B.Kh., 2016). Taking into consideration that regional economic differences attract attention (Venables some problems have already performed nowadays in the bank Anthony J., 2003). R.Capello considers that the power system in Azerbaijan it means that it is not still so real to wait improvement of the local production in the development of the for the valuable results from the investment funds activities in regions and rational use of the advantages of the areas are the the country. From this point of view, the financial and crucial issues (Capello Roberta, 2011). Following the research investment supply in the regions of our country has to be based on the 125 country’s information, K.Harshana arrived at emulated in a sophisticated and systematic way. Thus, in an important conclusion that enterprise development plays an reality, the balanced development of the areas have to be essential role in the increase of economic potential and considered reasonably with the provision of national economic perspectives of the regions (Harshana Kasseeah, economic security of each country and one of the main tasks in 2016). The complex development of the infrastructure in the these processes is the establishment of the secure financial areas must be seriously in the highlight (Gren Jörgen, 2003). system. For that end, first of all, the optimal limit of the Also, the intensity and enhancement of the industrialization in government intervention into the private and state financial the regions can assert significant favourable influence on the institute activities and the methods of achieving it should be development of the area and financial investment supply determined. Besides it, the provision of government (Otsuka Akihiro, Yamano Norihiko, 2006). From the other side, intervention transparency should also be kept in the centre of the effective use of the resources in the fields and also the attention. The determined optimal intervention levels enhancement of the clusterization will form the potential of between the state and private sectors can cause the increase in productive influence on the social and economic development the rational use of the resource potential in the region, of the regions (Florida Richard, 2002), etc. formation of the sustainable and productive financial We deem it advisable to give preference to the approach of resources, and maximum effective use of the capital and labour proceeding from real objectivity on the level of regional economic resources in the area. Besides this, the government must development in Azerbaijan and modern financial appeals in the provide the attraction of investment in the fields for the full review of such kind of issues. It is evident that in this approach, all productive use of the population labour resources, creation of the mentioned above are also considered and generalized. We the capable infrastructure and competitive production also discussed the different methods and scientific views in our enterprises network. efforts to form the regional investment policy and to build the structure of its implementation system. We consider that for The essence of the practical conceptual approach to the preparation of the local development investment policy and its financial and investment supply of the social and economic implementation first of all the domestic investment policy has to development in the regions be developed, and the factors forming the realization mechanisms A theoretical approach to the increase of investment attraction have to be determined ad listed following their importance level, and financial resources formation in the area should be after that the formation levels of the regional investment policy provided. The different factors in the areas, the internal and have to be specified, and at last the ways to achieve the goals of external factors influencing the creation and development of local investment policy have to be chosen (see: Picture 1). the region should take place adequate to their features in this conceptual approach. It’s no coincidence that despite the

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ON FINANCIAL AND INVESTMENT PROBLEMS IN THE CONTEXT OF REGIONAL ECONOMIC DEVELOPMENT OF THE REPUBLIC OF AZERBAIJAN

The factors formig the The factors formig the The stages of The methods of development realization formation of the goals achieving of mechanisms of the mechanisms of the regional investment regional investment the regionall regional investment policy policy investment policy policy

✓ Formation of ✓ Development of the ✓ Determination of aims ✓ The complex of economic, investment investment policy and priorities of the administrattive, social respective to the investment policy; phycological methods of the environment in the management; features of the specific region; ✓ Development of the ✓ The legal footwork sistem of development of the regional investment ✓ Assessment of the the mechanisms activity; region; program; ✓ The system of investment potential ✓ Formation of the ✓ Development and organizational support of the in the region; regional investment implementation of the mechanisms activity; ✓ Definition of the funds; principles of the ✓ The system of information ✓ Organization of realization mechanisms of provision of th mechanisms factors influencing activity foreign investors the rgional investmment the investment risks policy attracton to the rergion in the region

Picture 1. The structure of formation and implementation of the regional investment policy (composed by the author).

As we can see from Picture 1 the factors are forming the 1936). By differentiating the factors creating the multiplicative development mechanisms of the regional investment policy effect from the character influencing the investment volume and the mechanisms of realization of this policy, the levels of and structure, on the different levels and stages of the geographical investment policy formation and the ways to economic development, the estimation of their place and role achieve the goals of the local investment policy stipulates the demands the complete research. In addition to all mentioned complex and systemic approach to many problems. about the multiplicator, we would like to note that the fiscal Implementation of the results-oriented directions of the social policy instruments, and also taxes and customs duties should and economic developments in the regions and modelling of be specially mentioned alongside with the factors stipulating the finance and credit supply in these processes is of essential the economic growth and influencing the investment value and conditions. Increase of competitiveness of regional economics structure. Generation of a prompt system of the regional is primarily kept in the centre of attention. At the other end of financial regulation utilizing these tools possesses the real the scale from investment attracting and its rational use, more opportunities for strengthening the multiplicative effect attention should be given to the formation of the definite created by the social a commercial development in the regions infrastructure and development issues. The finance and credit as it can be seen from the progressive experience. Usually, with system plays a massive role in the financing of the real sector consumers’ increasing tendency for acquisition, in other of economics (Chaplyuk V.Z., 2006). To create a multiplicative words as long as they decrease the intake, the multiplicator effect of the social and economic development in the regions, also falls. And conversely, if consumers increase the funds the investment activity should possess the necessary allocated to the input from the increased income (of course, in development rate and coverage area in the real sector. Let’s this situation, the funds directed to the acquisition decrease), review some points stipulating the necessity to study the the multiplication also increases. It is hard to agree with the processes of multiplicative effect creation of the social and opinion that ‘a country with the mixed economy can achieve economic development in the country regions and the change of its real national product structure in the strengthening of the national financial security in the unified direction of the capital increase and current consumption complex. First of all, we should mention that the multiplicative decrease in terms of high employment by the provision of the effect is related to investment processes, and these processes necessary integrity of the fiscal and credit funds policy’ are related to the features of investment flows. A multiplicator (Samuelson P.A., Nordhaus W.D. Economics., 2009). The reflects the interrelation between the national income and essential directions of the multiplicative effect in the social and investment amounts. As to Keynes, a multiplicative effect is economic development of the regions were indicated in stipulated by the interrelation, which causes the increase Picture 2. between the national income and investment (Keynes M. John.,

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ON FINANCIAL AND INVESTMENT PROBLEMS IN THE CONTEXT OF REGIONAL ECONOMIC DEVELOPMENT OF THE REPUBLIC OF AZERBAIJAN

Essential directions of multiplicative effect in the social and economic development of the regions

Provision of the rational use of the Strengthening of population’s resource potencial in the region economic activity in the region

Implementation of reinforcement Possitive effect on solving of mechanisms of the enterprise development in employment issues in the region the region

Transparency of the business Formation of the healthy environment in the region competition in the region

Enhancement of progressive and high Formation of new elements of the technologies implementation financial mechanisms

Increase of investment environment Possitive effect on development of financial- attractiveness investment funds

Formation of modeling potential of the social Formation of alternative and economic development development models in the region

Increase of manoeuvrability of the state- Increase in demand in innovation private sector cooperation functions implementation

Increase of inclusivity of the social Increase of potential of social and and economic development economic modeling and etc.

Picture 2. Approximate scheme of critical paths in the multiplicative impact on the social and economic development of the areas (prepared by the author).

While reviewing Picture 2, we will see that the financial state program on 2014-2018 years is in the process of investment supply can be evaluated as an essential term in the realization. In 2004-2008 the increase in state investment realization of each vital direction of the multiplicative effect in volume gave a fillip to increase of infrastructure, communal, the regional social and economic development. Thus, social service objects building several times and increase in organization of the rational use of the resource potential in the quality of the service sector (Bagirov N.A., 2014). Most of these region, strengthening of population’s economical activity, measures are directly connected with the commissioning of support of enterprise development, the solution to the essential infrastructure objects. In the framework of the second employment problem, implementation of high technologies, the massive state program of the regional economic development realization of innovative functions, enhancement of “state- in Azerbaijan (2009-2013) the main priority activity directions private sector” cooperation and finally resolution of social and consisted of modernization of the rural sector in the regions and economic issues are directly associated with the availability of strengthening of the market infrastructure. Finally, the third sustainable and adequate finance and investment supply massive state regional development program which is still in mechanisms primarily and their further realization. the process of realization (2014-2018) first of all is connected with the diversification of economics in the regions, The effectivity problems of financial and investment development of import replacing areas, increase of production supply of the regional social and economic development in of the export directed and competitive outputs, development of Azerbaijan enterprise, and improvement of the business environment. The As we have mentioned before, with the aim of acceleration of financial resources for principal capital on Azerbaijan regions social and economic development of the regions in Azerbaijan, during 2005-2015, the funds per capita and the share of areas the state programs of wide-format are used actively and in the total funds are indicated in Table 1 and Picture 3. consistently. For example, in 2004-2008, 2009-2013 the 1st and the 2nd state programs were always realized, and now the

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Table 1. The funds directed to the principal capital on the regions (mln USD) and per capita (USD) in Azerbaijan 2005 Per capita 2010 Per capita 2015 Per capita Countrywide 6099,8 713,18 12342,0 15551,1 1602,3 Baku 5390,3 2774,93 8449,3 3680,81 11165,87 5016,55 Absheron 143,25 309,1 148,3 283,6 381,1 683,2 Ganja-Gazakh 73,47 64,60 523,92 44,0 637,75 508,86 Shaki-Zagatala 16,92 30,66 228,6 397,4 209,34 345,4 Lankaran 98,0 124,0 167,7 197,7 332,1 366,7 Guba-Khachmaz 36,2 76,6 692,9 1390,2 262,9 492,3 Aran 123,96 72,13 694,5 400,9 1078,4 549,8 Upper Garabakh 45,0 75,4 105,9 169,7 40,8 617,3 Kalbajar – Lachin 0,73 3,4 0,96 4,1 0,19 - Mountainous Shirvan 28,0 103,6 228,3 793,1 148,1 480,7 Nakhchivan 133,3 348,9 624,3 1522,4 927,0 2086,0 Note: The table was prepared by the author based on the official information of The State Statistical Committee of the Republic of Azerbaijan: http://azstat.org.

The region's shares in the resources directed to the principal from 88.4% to 72% during that period. The increase in capital in Azerbaijan in 2015 were indicated (as %) in Picture Nakhchivan region composed from 2.25% to 6%, and in Ganja- 3. In 2015 as compared to 2005, the share of Aran region Gazakh economic region formed from 1.20% to 4%. increased from 2% to 7%. The percentage of Baku decreased

The share of regions (in %) in the funds directed to the main capital in Azerbaijan during 2015 Nationwide total: 100% 4% 6% Baku 7% 2% Absheron 2% Ganja-Gazakh 1% Shaki-Zagatala 4% Lankaran 2% Guba-Khachmaz Aran Nakhchivan 72% Others

Picture 3. The share of regions (in %) in the funds directed to the principal capital in Azerbaijan during 2015 (Prepared by the author based on statistical information).

The analysis of the current state of the regional social and the dynamism in the local social and economic development economic development in Azerbaijan was provided. The output of products on the industrial regions The remarkable thing is that during 2005-1015 in Azerbaijan, of the country is indicated in Picture 4.

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The output of products on the economic regions of 6000 Azerbaijan Republic, mln USD (2005-2015)

5000 4927.6

4000

3027.7 3000 2742.9 2973.7

2000 1494.6 1835.5 2005 1468.31237.6 1136.2 1465.6 2010 692.6 836.8 597.5 1000 1104.4 384.9 2015 751.4 786.2 1254.3 430.4 274 0 366.8 279.6 362.4 329.1 121.8 150.1 360.1

Picture 4. The output of products on the economic regions of Azerbaijan Republic, mln USD (2005-2015).

Based on Picture 4, we can mention that during 2005-2015 Upper Garanagh economic region - 3.16, Mountainous Shirvan production of outputs in the Aran economic region increased economic region – 3.98 and Nakhchivan financial sector – 8.41 3.93 times and amounted to 4802,3 mln USD in 2015. During times. As can be seen, in most industrial areas, the increase in that period the increase in Baku city composed 2.88 times, in production of outputs was on the same level (for example, 4.1 Absheron economic region – 4.1, Ganja-Gazakh economic times in 3 regions). In Picture 5 there are indicated the shares region - 3.65, Shaki-Zagatala economic region - 4.1, Lankaran of economic areas in the production of outputs in 2015. economic region - 4.1, Guba-Khachmaz economic region – 3.76,

1.10% 0.20% 1.20% 4.98% 9.00% Baku 2.00% Absheron 3.39% Ganja-Gazakh 2.70% Shaki-Zagatala 5.47% Lankaran 2.52% Guba-Khachmaz 67.44% Aran

Picture 5. The share of economic regions in the output of products in Azerbaijan in 2015 (as %; total 100%).

The output of products per capita in the main fields of economics on the regions in Azerbaijan in 2015 is indicated in Picture 6.

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The ouput of products per capita in the main fields of economics on the

8000 regions in Azerbaijan, USD 6824,6

6000

4000 3607,6

2694

2528,6

2338,8

2199,6

2229,2

1952,3

1884,3

1632,1

1631,5

1505,6

1331,6 1547,9

2000 1373,1

537,4

998,8

943

918,9

721,6

703

685,5

666,7

500,7

453,5

543,6 299,8 0

2005 2010 2015

Picture 6. The output of products per capita in the main fields of economics on the regions in Azerbaijan in 2005-2015 (in current costs, USD)

The incomes per capita on economic regions of Azerbaijan Republic (2005-2015) are indicated in Picture 7. The incomes per capita on economic regions of Azerbaijan Republic, USD 5000 (2005-2015) 3977,1 4000 2871,1 3000 2719,6 2564,3 2664,8 2242,9 2093,4 2397,6 3089,8 2005 2000 2551,3 2407,2 2387,7 2193,8 2053,7 2319,7 581,1 2117 2010 1000 723,6 700,2 663 648,5 660,9 620,5 770,1 2015 657,7 602,4 0 209,6

Picture 7. The incomes per capita on commercial sectors of Azerbaijan Republic, USD (2005-2015).

The regional distribution of new workplaces opened in the Azerbaijan Republic in 2015 is indicated in Picture 8. The regional distribution of new work places opened in Azerbaijan Republic in 2015, (as %) Upper Garabagh Kalbajar-Lachin(115869 wor places in total) Mountainous Nakhchivan 3,2% 0,7% Shirvan4% 2,5% Baku Aran 33,97% 19,1%

Guba-Khachmaz 4,1%

Lankaran 6,6% Absheron Ganja-Gazakh 9,65% Shaki-Zagatala 11,69% 4,49%

Picture 8. The regional distribution of new workplaces opened in the Azerbaijan Republic in 2015, as % (115869 workplaces in total).

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ON FINANCIAL AND INVESTMENT PROBLEMS IN THE CONTEXT OF REGIONAL ECONOMIC DEVELOPMENT OF THE REPUBLIC OF AZERBAIJAN

It is worth to note that the objective review and evaluation of terms have to be found. The role of finance and credit the factors stimulating the strengthening of financial and organizations in the regional enterprise and business investment supply of the regional social and economic development should be enhanced, the adequate development development in Azerbaijan in present time is of great model of the regional enterprise should be built, and in general, importance. Thus, the strengthening of finance and investment the financial and investment model of the regional social and supply in the regional economic development modelling in economic development should be developed. Azerbaijan requires the mixed review of a group of issues and substantiation of the factors caused by this. Alongside with CONCLUSION macroeconomic problems of the finance and investment supply What do we have in the conclusion of the issues reviewed in the improvement the development and realization of the optimal article? What is barring and missing the financial and variant of the financial and investment policy in the regions, investment supply of the social and economic development in especially the models taking into consideration the specific the regions of Azerbaijan? It would be expediently to determine development tendencies in the regions are significant the adequate approach to these questions and directions of (Mammadova G.G., 2012). Defining the priorities of regional practical activity. First of all, we should note that the available economic development the real situation on the available mechanisms of the financial and investment supply of the between the regions financial and investment, natural regional social and economic development are known: they resources, material and technical, infrastructure and staff consist of free credits, investments directed to the regional potential should be objectively evaluated, and the social, enterprise development, chief capital investment, resources, economic development programs adequate to the different equipment, etc. allocated via leasing. But in each established advantages of each region should be prepared, the financial and state program, it was prescribed to use the non-budgetary investment supply of these programs should be measured and foundation, foreign investment, foreign enterprises resource, planned (Gadzhieva N.G., 2015). The orientation of mutual financial resources of international organizations and foreign relations between a region and the centre on the productive states as funding resource alongside with the state support and activity direction and the active participation of the centre in the state resources for strengthening the regional financial and objective determination of the financial investment supply in an investment supply. Unfortunately, in connection with this, the increase of the regional repeated production volume are the real measures are on a superficial level. It must be important terms in the modeling of regional economic acknowledged that the active attracting of foreign investments development processes. In all cases turning on the ‘green light’ into Azerbaijan regions, organization of foreign investors’ joint to the intensive flow of financial investment resources from the activity is still inadequate, and many measures have to be taken centre to the regions is considered to be very important. They in this field. The government put a lot of efforts to enterprise swear by the regional economic development of the central development and financial investment supply of the social and government, keeping the regional problems in the centre of economic development in the regions, but the most (80-85%) attention created the conducive conditions for strengthening of enterprises and private firms operating in the regions consist of the necessary financial and investment supply alongside with small enterprises. Generally, on the assumption of the modern making a positive impact on the realization of the regional reality of social and economic development in the regions, it is economic development programs. In the present time, one of possible to achieve the following results: the most important problems of the regional economic ⎯ The social and economic development of the regions development consists of reaching sustainable growth in both in Azerbaijan and the revision and modelling of the financial and economic and social field in this direction. With this aim to investment supply of the development program connected with achieve the economic rationality in the regions the rational use this is important; and arrangement of the resource and production potential, ⎯ In the regions of the country, there is no finance and creation of the network of competitive enterprises in the credit organizations, finance and investment funds, finance and regions, the abolition of maladjustments in the regional industry group operating with independent balance and activity development processes, in other words, transregional program. Generally, such kind of finance and credit development disparities, the social justice and economic organizations were centred in the capital city – Baku; progress in the regions, improvement of the social standard of ⎯ After the devaluation of the local currency-manat, the living should be provided. The financial planning and forecasts activity of non-bank finance and credit organizations in the on the regions are of great importance in the realization of a regions decreased, and this situation made the financial and strategical approach to the financial and investment supply of investment supply in the regions more complex; the regional social and economic development. In Azerbaijan, ⎯ The enterprises and private farms in the regions have the process of financial planning in the regions is the multiple- no practical experience in state support mechanisms and stage process. Based on these standards the salaries expenses in privileged credits, and also in searching and attraction of the regions, the electric and telecommunication expenses are financial and investment resources alternative to subsidies, this determined, and the tax process of the regions is defined in the means that in this field the measures on raise interest of process of state budget implementation (Khakimova Y.A., 2014). regional subjects to the educational measures and active Against the global economic appeals and in the context of the participation in the international financial and investment transformation of the global economic processes today the cooperation should be purposefully organized in a complex and necessity of searching of new and more effective mechanisms of system manner; social and economic development management appeared in ⎯ To strengthen the financial and investment supply of Azerbaijan (Huseynova Kh.M., 2010). In this context, the the social and economic development in the regions the elimination of differences of the regional social and economic financial and investment organizations and companies creation development levels is considered to be one of the priority should be stimulated and arranged in such formats as ‘Regional directions of regional development, and as a result, the model of development funds’, ‘Regional finance and investment funds’, regional financial and investment supply should be developed ‘Regional investment development banks’, ‘Regional financial and implemented. It is known that in terms of market relations, and industrial groups’, ‘Regional agro-industrial companies’ the financial supply is paid by the investments funded by this or etc., and the companies, banks, investment funds which possess another resource (Ahmedzadeh A.H., 2010). From this point of global experience in the similar spheres should be attracted in view, the maximum rational ways of strategic approaches of this processes. To organize these measurements, the financial and investment supply of the regional social and international tenders should be held, the concrete financial and economic development in Azerbaijan in the short and long investment supply projects should be prepared; the foreign

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