Azerbaijan: Issues of Increasing the Efficiency of Large State-Owned Enterprises
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Azerbaijan: issues of increasing the efficiency of large state-owned enterprises Baku, 2020 1 Azerbaijan: issues of increasing the efficiency of large state-owned enterprises This report was developed by Entrepreneurship Development Foundation’s expert group with support from the Center for International Private Enterprise (CIPE). The views expressed in this document may not necessarily reflect the views of CIPE. Based in Washington, D.C., CIPE is a nonprofit affiliate of the U.S. Chamber of Commerce. Since 1983, CIPE has worked with business leaders, policymakers, and journalists to support private enterprise and market-oriented reforms across the globe. © Sahibkarlığa vəBazar İqtisadiyyatının İnkişafına Yardım Fondu (SBİİYF) Center for International Private Enterprise (CIPE, Washington DC) 2 About the authors SAMIR ALIYEV, is the chairman of the Center For Media and Public İnitiatives and the member of Board of the Center For Support For Economic İnitiatives. He is also editor in chief of “Economic Forum” magazine. Samir Aliyev has deep engagement in sub-national budgeting and Financial Management projects and was part of reviews to implemented and amended state budgets of Azerbaijan since 2006. He is author of many books and research papers on financial and banking sector, entrepreneurship, local self-government, public administration reforms, decentralization, housing. Samir Aliyev has good experience of collaboration with local and international mass media. He participates as an expert in global initiatives such as Open Government Partnership (OGP), Eastern Partnership Civil Society Forum (EaP CSF), Extractive Industries Transparency Initiative (EITI) INGILAB AHMADOV is the Professor of the Department of Economics and Management and the Director of Eurasia Extractive Industries Knowledge Hub at Khazar University (Baku) since 2010. Prof. Ahmadov has research collaborations and is a visiting professor at the following leading universities: Kiel Institute for the World Economy, Oxford University, and Reading University. His research interests include oil & gas economy, the economic impact of oil revenues, Caspian energy resources and oil contracts. Prof. Ahmadov has written more than 30 research papers and books. Prof. Ingilab Ahmadov is a former member of the International Board of the Extractive Industries Transparency Initiative. Prof. Ahmadov holds a Doctorate in Economic Science from the Saint- Petersburg State University of Economics and Finance (Russia). In 2008 as a Chevening Fellow, Mr. Ahmadov studied “Economics of Energy” course at Reading University (UK). AZER MEHTIYEV is an associate professor at the Azerbaijan State University of Economics (UNEC) and holds a PhD in Economics. He teaches "Firm 3 Economics", "Theory of Industrial Organization" and other subjects. He is the author of more than 100 research papers published in the country and abroad. Azer Mehtiyev has been the head of the Public Association for Support of Economic Initiatives since 2007. The organization mainly conducts research and implements projects on economic and social issues. Mehtiyev's main research topics include transparency and accountability in the extractive industry, efficient use of oil revenues, efficient management of public finances and the state budget, business and investment climate, as well as the organization of local self- government. A. Mehtiyev was a member of the Board of the National Budget Group from 2005 to 2014, participated in the development of opinions on annual state budget drafts and the state of their implementation, is the author of a number of studies to increase transparency, accountability and efficiency in public finance and state budget management. A.Mehtiyev is an expert of the Eurasian Knowledge Center and a member of the Economic Forum. ABIL BAYRAMOV has been chairing the Center toward Civil Society Public Union since 1999. The Center implements projects in the areas of local self- governance. Abil managed and coordinated many of these projects, aimed at enhancing the institutional capacity of local self-governing authorities, strengthening their financial and economic basis, etc. Abil is a member of the Collegium of Advocates of the Republic of Azerbaijan. He has the experience of defending the rights of individuals and legal entities at courts and in other state bodies. He worked as Lecturer at Baku Asiya University in 1994-1997 and the Department of Law at Khazar University in 1998-2009. Abil is an author of many books and articles. RASIM HASANOV is a Doctor of Economics and Professor at the Azerbaijan State University of Economics (UNEC). His main areas of research are the development of national economic policy, as well as macroeconomic regulation and improvement of the state economic management system, acceleration of social and regional development, development of functional, sectorial and regional socio-economic development concepts 4 and programs, operation of the state economic management mechanism, improving the efficiency and effectiveness of the use of public funds, integration of the Azerbaijani economy into the world economic system, the development of geo-economics relations, etc. Rasim Hasanov has participated in numerous local and foreign research projects. He is the author of more than 250 articles and three monographs and a co-author of five collective monographs, including 60 published abroad. In 1999-2003, he was the National Coordinator for Economic Research of the Economic Cooperation Organization (ECO), Deputy Chairman of the "Economy" Problem Council under the State Committee for Science and Technology. Since 1989, he has been a member of various Dissertation Councils and in 2010-2014 was the Chairman of the D.052.02 doctorate council of the Azerbaijan State University of Economics. Since 2016, he has been a member of the Expert Council on Economic Sciences of the Supreme Attestation Commission under the President of Azerbaijan. ROVSHAN AGAYEV is Deputy Chairman of the Board of the Support for Economic Initiatives Public Union. He completed both undergraduate and graduate studies at Azerbaijan State University of Economics. Rovshan Agayev has carried out various studies in the area of public finance, local self-governance, and efficient use of resource revenues since 2003. He is an author of various publications and studies dedicated to evaluating the effectiveness of the government's agrarian policy, the role of municipalities in rural development, setting a model for metropolitan management, studying the diversification problems of Azerbaijan’s economy, defining the conceptual basis for decentralization in the country, and assessing the differences in the socio-economic development of the regions in Azerbaijan. VAHID MAHARRAMOV graduated from the Leningrad Agricultural Institute. He has extensive experience in the agricultural sector, has worked as an agronomist and manager in a number of agricultural entities in the Republic of Azerbaijan and the Russian Federation. 5 Vahid Maharramov has advised companies operating in the agricultural sector. He has worked as an expert on agrarian issues in a number of international organizations and projects. He is the author of many research and journalistic papers. He is one of the well-known specialists in the field of agriculture in Azerbaijan. 6 CONTENTS FOREWORD ……………………………………………………………………... 8 Samir Aliyev TRANSPARENCY AND ACCOUNTABILITY IN THE ACTIVITIES OF THE STATE OIL COMPANY OF the REPUBLIC OF AZERBAIJAN ……… 14 Ingilab Ahmadov “AZERIGAZ” PRODUCTION ASSOCIATION IN THE SHADOW OF THE STATE OIL COMPANY ………………………………………………….. 28 Azer Mehtiyev ASSESSING ECONOMIC ACTIVITIES OF “AZERBAIJAN RAILWAYS” CJSC ………………………………………………………………………………. 39 Abil Bayramov CURRENT SITUATION AND WAYS OF INCREASING EFFIENCY IN THE AIR TRANSPORT SECTOR ……………………………………………… 52 Rasim Hasanov PROBLEMS AND PROSPECTS FOR IMPROVING DRINKING WATER SUPPLY AND INCREASING THE EFFICIENCY OF PUBLIC FUNDS …… 66 Rovshan Agayev PROSPECTS FOR INCREASING GOVERNANCE EFFICIENCY IN AZERBAIJAN’S TELECOMMUNICATION SERVICES SECTOR …………. 79 Vahid Maharramov WAYS OF ENHANCING EFFICIENCY OF “AGRICULTURAL PROCUREMENT AND SUPPLY” OJSC ……………………………………… 95 7 FOREWORD The book you are holding in your hands is a collection of brief studies on the effectiveness of a number of large state-owned and joint-stock companies in Azerbaijan. These studies were carried out by renowned local experts, including Professor Rasim Hasanov, Professor Ingilab Ahmadov, Professor Azer Mehtiyev, economists Samir Aliyev, Rovshan Agayev, Vahid Maharramov and lawyer Abil Bayramov. The studies cover such state enterprises and joint stock companies as: 1) State Oil Company SOCAR, 2) “AzeriGaz” Production Association, 3) “Azerbaijan Railways” Closed Joint-Stock Company, 4) “Azerbaijan Airlines” Closed Joint-Stock Company, 5) “AzerSu” Joint-Stock Company, 6) “AzInTelecom” LLC and “Baku Telephone Communication” LLC, which operate in the telecommunications sector, and 7) “Agricultural Procurement and Supply” Open Joint-Stock Company. The problems of efficiency of state-owned and joint-stock companies are not new and have been the subject of constant debate among economists and the media. These problems were also in the spotlight of international financial institutions. In particular, the World Bank published a report "Republic of Azerbaijan: Corporate Governance and Ownership of State Owned Enterprises"1 in 2017. In August 2020, the Asian Development Bank published a report “Azerbaijan: Transforming State-Owned Enterprises