© 2004 International Monetary Fund October 2004 IMF Country Report No. 04/322 [Month, Day], 2001 August 2, 2001 January 29, 2001 [Month, Day], 2001 August 2, 2001 Azerbaijan Republic: Poverty Reduction Strategy Paper Progress Report Poverty Reduction Strategy Papers (PRSPs) are prepared by member countries in broad consultation with stakeholders and development partners, including the staffs of the World Bank and the IMF. Updated every three years with annual progress reports, they describe the country's macroeconomic, structural, and social policies in support of growth and poverty reduction, as well as associated external financing needs and major sources of financing. This country document for the Azerbaijan Republic, dated 2004, is being made available on the IMF website by agreement with the member country as a service to users of the IMF website. To assist the IMF in evaluating the publication policy, reader comments are invited and may be sent by e-mail to [email protected]. 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STATE PROGRAMME ON POVERTY REDUCTION AND ECONOMIC DEVELOPMENT AZERBAIJAN PROGRESSES TOWARD THE ACHIEVEMENT OF THE MILLENNIUM DEVELOPMENT GOALS ANNUAL PROGRESS REPORT - 2003 BAKU 2004 ACRONYMS: ADB Asian Development Bank AIDS Acquired Immune Deficiency Syndrome AZM Azerbaijan National Currency (Manat) BTA Baku-Tbilisi-Arzurum BTC Baku-Tbilisi-Ceyhan CIS Commonwealth of Independent States CM Cabinet of Ministers DOTS Directly Observed Treatment Short Course EBRD European Bank for Reconstruction and Development ECCD Early Childhood Care and Development ECO Economic Cooperation Organization EPI Expanded Programme on Immunization EU European Union EUIP Ecologically Urgent Investment Projects FAO Food and Agriculture Organization FDI Foreign Direct Investment FSIS Food Security Information System FSP Food Security Programme GDP Gross Domestic Product GEF Global Environment Facility GTZ German Society for Technical Assistance HBS Household Budget Survey HIV Human Immune Deficiency Virus IBTA Institutional Building Technical Assistance IDA International Development Agency IDP Internally Displaced Person IFC International Finance Corporation IFI International Financial Institution ILO International Labour Organization IMF International Monetary Fund IsDB Islamic Development Bank JSA Joint Staff Assessment KfW German Bank for Development LFPR Labour Force Participation Rate LFS Labour Force Survey MDG Millennium Development Goal MED Ministry of Economic Development MENR Ministry of Ecology and Natural Resources MICS Multiple Indicator Cluster Survey MLSP Ministry of Labour and Social Protection MOH Ministry of Health MTEF Medium Term Expenditure Framework NB National Bank NGO Non-government Organization ODA Official Development Assistance OECD Organization for Economic Cooperation and Development OPEC Organization of Petroleum Exporting Countries PIP Public Investment Programme PMU Poverty Monitoring Unit PPP Purchasing Power Parity PRSP Poverty Reduction Strategy Paper RHS Reproductive Health Survey SAP Strategic Action Plan SCRIDP State Committee for Refugees and Internally Displaced Persons SES State Employment Service SFD Saudi Fund for Development SME Small and Medium Enterprises SOCAR State Oil Company of Azerbaijan Republic SOFAR State Oil Fund of Azerbaijan Republic 3 SPPRED State Programme on Poverty Reduction and Economic Development SPSS Software Package for Social Sciences SSC State Statistical Committee SSPF State Social Protection Fund SWG Sector Working Group TACIS Technical Assistance to the Commonwealth of Independent States TB Tuberclosis UN United Nations UNDP United Nations Development Programme UNEP United Nations Environment Programme UNFPA United Nations Population Fund UNICEF United Nations International Children's Emergency Fund USAID United States Agency for International Development USD United States Dollars USTDA United States Trade and Development Ag ency WB World Bank WFP World Food Programme WHO World Health Organization WTO World Trade Organization 4 TABLE OF CONTENTS Introduction………………………………………………………………… 6 Chapter 1: SPPRED and the MDGs…………………………………… 9 Chapter 2: Poverty monitoring…………………………………………. 12 Chapter 3: Economic Development and Employment Growth…… 51 Chapter 4: Social Policy and Human Capital Development……… 63 Chapter 5: Regional Policy and Infrastructure Development…… 74 Chapter 6: Institutional Reforms and Capacity Building………… 79 Chapter 7: The Participatory Process………………………………… 84 Appendixes: Appendix 1: MDGs Report Appendix 2: Medium Term Expenditure Framework (MTEF) implementation status Appendix 3: Main socio-economic indicators 5 Introduction SPPRED: the global context Low level of security: This dimension is linked to risks which may arise at Since the end of the 1990s, there has been the national or local level. reconsideration by the international community Some are predictable of the best ways to promote economic growth such as seasonal risks in and reduce poverty in the world. This has agricultural connected to resulted in efforts by national governments, in harvest. But some are close collaboration with international caused less predictable organisations, to produce nationally strategies risks, such as macro- for poverty reduction (Poverty Reduction economic shocks, natural Strategy Paper PRSP). Such strategies also disasters; provide a focal point for ensuring better Empowerment: This dimension is linked to coordination of external (donor) assistance the extent to which poor aimed at poverty reduction. In the years 2001- people can participate 2003, Azerbaijan, with support from its and influence decision- international partners, produced such a national making. strategy document: the SPPRED. The SPPRED represents an attempt to take into The new global approach to poverty reduction account all of these dimensions of poverty and to has gone hand in hand with a broader understand the links between them. understanding of poverty. While there are different estimates of the number of poor in the The global commitment to reduce poverty has world, (and in individual countries), there is a been expressed in the clear poverty focus of common recognition that poverty is “multi- international organizations since the late 1990s. dimensional” and that a “mix” of parallel policy While different organisations may call the actions are required to tackle the different strategies different names, or may have a slightly dimensions. Whereas previously the focus was different focus, the end aim for all is poverty almost entirely on “income poverty” (low levels of reduction and economic development and the per capita income or expenditure levels), it is now strategies are fundamentally statements of accepted that coordinated efforts need to be national governments' commitment to poverty directed at all dimensions of poverty in order to reduction. However, they need not be a series of have a long term and sustainable effect on living different strategies for different donor standards. Using an income poverty type of organizations. In Azerbaijan, SPPRED has measurement, the World Bank (WB) has provided a successful example of full estimated that 2.8 billion people live on less than collaboration and coordination between the $2 per day, and 1.2 billion on less than $1 per government and the various donor organisations day1. (international and bilateral) in the formulation and implementation of one national strategy. The dimensions of poverty can be summarized as: SPPRED: Past and Present Lack of opportunities: This dimension relates As mentioned above, SPPRED was formulated income and consumption in the period 2001-2002. In 2001, a Secretariat levels, but also to human was set up at the Ministry of Economic capital, employment, Development (MED) with the task of leading and wages, and access to coordinating work on the strategy document. 15 assets, such as land; Sector Working Groups (SWGs) were also set Low capabilities: This dimension relates to up, including members from government health and education agencies, Non government organizations and indicators. Low education civil society. Drafts of the policy proposals being attainment, illness, and put forward in the strategy document were malnutrition contribute to discussed at various national and regional income poverty; seminars. The final draft was presented at an 1 World Development Report 2000/2001 6 international conference held in Baku on 25th of concentrated in the oil sector and which is October 2002, and received final approval with a spread evenly over the different regions of Presidential Decree on February 20th, 2003. the country. The SPPRED document was submitted to the 3. How do we want to get there? SPPRED International Monetary Fund (IMF) and WB. In identified six key strategic directions for April 2003, the staff of the International achieving its overall aims of poverty Development Agency (IDA) and IMF produced a reduction and economic development, Joint Staff Assessment (JSA) of the strategy namely: document. The JSA gives a positive review of SPPRED, evaluating it as a significant 1. Creating an enabling achievement, and stating that it “represents a environment for the growth of credible poverty reduction strategy