ECONOMY OF AZERBAIJAN 25 Years of Independence Prof. Dr. Osman Nuri Aras Fatih University, Istanbul, Turkey Assoc. Prof. Dr. Elchin Suleymanov Qafqaz University, Baku, Azerbaijan Assoc. Prof. Dr. Karim Mammadov Western University, Baku, Azerbaijan DESIGN Sahib Kazimov PRINTING AND BINDERING “Sharg-Garb” Publishing House A§iq aiesgar kiig., No: 17, Xatai rayonu, Baki, Azarbaycan; Tel: (+99412) 374 83 43 ISBN: 978-9952*468-57-1 © Prof. Dr. Osman Nuri Aras. Baki, 2016 © Assoc. Prof. Dr. Elchin Suleymanov. Baki. 2016 © Assoc. Prof. Dr. Karim Mammadov. Baki. 2016 Foreword During every work, whether it is academic or professional, we interact, get assistance and are guided by certain group of people who value and assist us to achieve our targets. We are sure that the people who support us and provide valuable contribution to the English version of this book will not be limited in a short list, but we would like to mention, and in certain ways, express our acknowledgement to the people who enabled us to get on a track and deliver the book in a few months. Thanks to Turan Agayeva, Ulker Gurbaneliyeva, Khayala Mahmudiu and especially to Tural Hasanov for their help in preparing and delivering this book to your valuable consideration. GENERAL INFORMATION ABOUT AZERBAIJAN The Establishment of the Republic of Azerbaijan 28 May 1918 The independence Day 18 October 1991 Joining to the Organization for Security and Cooperation in Europe 30 January 1992 Joining to the United Nations 2 March 1992 Joining to the Commonweaith of independent States 19 September 1995 Joining to the Council of Europe 17 January2001 Area (thousand km^) 86.6 Population, (thousand person) (According to the beginning of 2015) 9593.0 Density of population in Ikm^(person) 111 Capital Baku Official Language Azerbaijan Currency Manat The course of Manat to Dollar (07.02.2016) 0.6389 The Head of State President ___ ________________________ ____ ______ ' .L-L; r - j = r . ' .. ■ . - - r -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- ■. L-;;/';” Autonomous Republic 1 Districts 66 Cities 78 City based Districts 14 Settlements 261 Villages 1727 Village-settlements 4249 GeographlGal Information: Area: 86600 km^ (12% forests, 1.7% water basin, suitable lands, 31.1% pastures and hay fields, 31.4 other lands). Azerbaijan lies between latitudes 38° and 42° N, and longitudes 44° and 51° E. The distance from Baku to North Pole is 5550 km, and the distance from Baku to equator is 4440 km. Neighbours: The total length of Azerbaijan's land borders is 2,650 km, of which 1007 kilometers are with Armenia, 765 kilometers with Iran, 471 kilometers with Georgia, 392 kilometers with Russia and 15 kilometers with Turkey. The biggest lakes: Sarisu: 67.0 km^ Aggol: 56.2 km^ Agzibirchala: 37.0 km^ Mehman: 35.0 km^ Boyukshor: 9.2 km^ Hacigabul; 8.4 km^ The biggest lake in the world: Caspian Sea (Area: 400000 km^; Depth: 1025 m) The highest mountain: Bazarduzu - 4466 m The biggest islands: Pirallahi-14.4 km^ Chilov-11.5 km^ Khere-Zire- 3.5 km^ BoyukZire-1.4 km^ The longets rivers: Kur-1515km Araz-1072km Alazan (Ganix)- 413 km lorri (Gabirri)- 389 km Samur-216km Tartar- 200 km Table of Contents INTRODUCTION ................................................................................................................... 1 CHAPTER ONE THE TRANSITION PERIOD IN AZERBAIJAN ECONOMY................................................. 3 1.1. AZERBAIJAN BEFORE THE INDEPENDENCE ............................................................. 4 1.1.1. ..................................................................................................................... SOVIET UNION AND THE COLLAPSE OF THE USSR ............................................................... 4 1.1.2. AZERBAIJAN IN SOVIET UNION ..................................................................................... 5 1.2. FIRST PERIOD AFTER THE INDEPENDENCE .............................................................. 7 1.2.1. THE FIRST PERIOD REFORMS ....................................................................................... 8 1.3. SECOND PERIOD AFTER THE INDEPENDENCE (1995-2003) ...................................... 9 1.3.1. THE SECOND PERIOD REFORMS ................................................................................ 14 1.4. THE THIRD PERIOD ARER THE INDEPENDENCE (FROM 2003) ............................... 16 1.5. GENERAL ASSESSMENT OF THE TRANSITION PERIOD ........................................... 17 CHAPTER TWO MACRO-ECONOMIC ANALYSIS OF AZERBAIJAN ECONOMY ..................................... 21 2.1. GROSS DOMESTIC PRODUCT ...................................................................................... 22 2.2. INFLATION ....................................................................................................................... 27 2.3. EMPLOYMENT ................................................................................................................ 30 2.4. PRIVATIZATION .............................................................................................................. 33 2.4.1. THE COMPARISON BETWEEN PUBLIC AND PRIVATE SECTOR ............................. 37 2.5. STATE BUDGET .............................................................................................................. 38 2.6. MONETARY POLICY ....................................................................................................... 40 2.7. FOREIGN TRADE ............................................................................................................ 42 2.7.1. THE MAIN COUNTRIES IN FOREIGN TRADE .............................................................. 45 2.7.2. FOREIGN TRADE RELATIONS WITH CIS COUNTRIES .............................................. 46 2.8. FOREIGN DEBTS ............................................................................................................ 47 2.9. ENVIRONMENT AND ECOLOGY ................................................................................... 51 2.10. POPULATION ................................................................................................................ 53 CHAPTER THREE SECTORIAL ANALYSIS ................................................................................................... 55 3.1. INDUSTRY ......................................................................................................................... 55 3.1.1. MINING INDUSTRY .......................................................................................................... 58 3.1.2. ELECTRICITY ................................................................................................................... 58 3.2. AGRICULTURE AND CAHLE-BREEDING ....................................................................... 60 3.2.1. STOCK-BREEDING .......................................................................................................... 72 3.2.2. FISHING ............................................................................................................................ 77 3.2.3. BEEKEEPING ................................................................................................................... 80 3.3. SERVICE SECTOR ........................................................................................................... 81 3.3.1. EDUCATION ..................................................................................................................... 81 3.3.2. HEALTH ............................................................................................................................ 84 3.3.3. TOURISM .......................................................................................................................... 85 3.3.4. FINANCE ........................................................................................................................... 90 3.3.4.1. Bank ............................................................................................................................................. 90 3.5.4.2. Insurance ................................................................................................................................... 100 5.3.4.3. Securities Exchange ................................................................................................................ 104 3.3.5. TRANSPORT AND COMMUNICATIONS ...................................................................... 106 3.3.5.1. Sea transport ............................................................................................................................. 107 3.3.5.2. Road transport .......................................................................................................................... 110 5.3.5.3. Railway Transport .................................................................................................................... 113 3.3.5.4. Airport Road Transport ............................................................................................................ 115 3.3.5.5. The pipeline transport .............................................................................................................. 116 3.3.5.6. Communication......................................................................................................................... 117 3.3.5.7. New Silk Road