The Ministry of Education of Azerbaijan Republic The Effects of agricultural incentives on the agricultural small and medium sized enterprises by using evidence Azerbaijan agricultural market Karam Rahimov UNEC SABAH Azerbaijan State Economic University 1 JUNE 2018 May 2018 Acknowledgements Initially, I would like to thank to my scientific supervisor, Zamin Babashov for his advice, encouragement and patient guidance. I am extremely lucky to have a supervisor who cared so much about my work and responded my questions so promptly. 2 List of Abbreviations NGO Non Govermental Organizations GTZ German Organisation for Technical Cooperation SCD Systematic Country Diagnostic WBG World Bank Group CPF Country Partnership Framework FAO Food and Agricultural Organization of the United Nations ANFES The Republic of Azerbaijan Ministry of Economy National fund for Entrereneurship Support EU European Union IRDP Integrated Rural Development Project IFAD International Fund for Agricultural Development WUA Water Users Association O&M Operation and Maintenance TICA Thailand International Cooperation Agency USAID United States Agency for International Development CIRC China Insurance Regulatory Commission FIIS Farmer Income Insurance Scheme OJSC Open joint-stock company IMF International Monetary Fund 3 Contents Acknowledgements ........................................................................................ 2 List of Abbreviations ............................. Ошибка! Закладка не определена. Contents ......................................................................................................... 4 Introduction .................................................................................................... 5 Chapter 1 ..................................................................................................... 99 1. The conceptual explanation regarding Agriculture and Incentives ............. 9 1.1 The Determinants of the Agricultural Activities ................................ 122 1.1.1 Human Resources ........................................................................ 122 1.1.2 Land, Agricultural Equipment and Machines, and Capital Accumulation ....................................................................................... 155 1.2. Azerbaijan İmport and Export ......................................................... 177 1.2.1Local substitution of imports: achievements and problems ............. 19 1.3 Agticultural Insurance ...................................................................... 233 1.3.1 Agricultural Insurance in Developing Countries: Experiences and Way Ahead ........................................................................................... 233 China .................................................................................................... 244 India ..................................................................................................... 255 1.3.2 Agricultural Insurance in Azerbaijan ........................................... 255 Chapter 2 ................................................................................................... 288 Agricultural Incentives ................................................................................. 28 2.1 Agricultural Incentives in Developing Countries ................................ 28 2.2 Agricultural Incentives in Azerbaijan ................................................. 31 The Republic of Azerbaijan Ministry of Economy National Fund for Entrepreneurship Support .................................................................... 333 Agroleasing .......................................................................................... 355 State Program on Reliable Provision of Population with Foodstuffs in the Republic of Azerbaijan for 2008-2015 .................................................. 377 4 Chapter 3 ................................................................................................... 400 The Agricultural Development Organizations ............................................ 400 3.1. The World Organisations of the Agricultural Enterprises ................ 400 3.1.1 The World Agricultural Organization- The Food and Agricultural Organization of the United Nations ........................................................ 40 3.1.2 World Bank .................................................................................. 433 3.1.3 International Fund for Agricultural Development (IFAD) ............. 45 3.2 National Organizations of the Agricultural Enterpises ..................... 477 3.2.1 Ministry of Agriculture ................................................................ 477 3.2.2 Banking-Institution ........................................................................ 48 Conclusion ................................................................................................. 511 References .................................................................................................. 544 Introduction Agriculture can be characterized as assessing, producing, protecting, and marketing of vegetable products and through processing of soil. Extremely diverse 5 soil and climatic conditions have led to the development of rich vegetation, which proves that Azerbaijan is one of the main centers of crop production (including grain). Azerbaijan is one of the richest countries in the world due to its diversity of vegetation. About 70 percent of the vegetation in the Caucasus flora is here. There are over 4,500 plant species in the country, including fruits, berries, vegetables and garden plants. Agriculture is a traditional production area of Azerbaijan. Historically, vineyards, silkworm and fruits are widely spread here. As a large part of the country has mountainous relief, livestock plays a vital role in the lives of people living here. The development of malnutrition, in turn, contributed to the growth of carpet weaving and carpet weaving. At that time, high quality carpets, wines, leather, silk products were exported from Azerbaijan to Europe and to the East. The economy of the republic in the 1960s, and one of its main field agriculture was in a long crisis and decline. The average annual growth rate of gross agricultural output was lower than in other republics. Certain and serious measures have been taken to eliminate the deficiencies in the development of the country's economy, increase the responsibility of the staff. In 1970-1975, the growth rate of agricultural production in Azerbaijan reached 34 % A tough task for the tenth Five (1976 - 1980) was the task of achieving rapid agricultural development by expanding the application of intensive factors and enhancing productivity, and the alliance's leadership was given specific recommendations. In July 1970, the Council of Ministers of the Soviet Communist Party and the USSR Council of Ministers on "Measures to Improve Agricultural Sector of Azerbaijan SSR", July 1975, "On Measures to Intensify Agricultural Production in the Azerbaijan SSR" and in 1979 Decisions were made in February of this year on measures to further improve the agricultural production in Azerbaijan SSR, to develop vineyards and winemaking. The improvements in all 6 areas of agriculture radically changed the social-economic image of the Azerbaijani village, and the country turned into an agrarian-industrial republic as a whole. In the early 1990s, Azerbaijan's economy was in full depression. This decline had a great impact on agriculture. The production structure collapsed, the potential created by the work of several generations reached the limit of destruction. Only in the period of 1990 - 1995 the production of agricultural products decreased by 58% Heydar Aliyev said at the meeting held in the Presidential Palace in March 1994: "As you know, our republic is in a severe economic and social crisis. This crisis, which covers all the spheres of the economy and social life of the Republic, is increasingly deepening, and its negative impact on the life of the country is intensifying. Heydar Aliyev saw the solution of these problems in the privatization of agrarian reforms and property. Hundreds of decrees, decrees, laws, decisions and other normative-legal documents on reforming and further deepening of the agrarian sector, formation of property relations and entrepreneurship were adopted, the formation of new property relations in the agrarian sector and the introduction of various types of economic subjects, state support directions and legal basis for the state regulation of the agrarian market. If the volume of gross output in agriculture declined from 1992 to 1995, this figure was increasing year by year (excluding 1997), from 7.0 in 1999 to 2001; 12.1; 11.1 percent increase In order to ensure fair distribution of property, the Decree of the President of the Republic of Azerbaijan dated January 10, 1997 "Rules for the distribution of property in rural enterprises and one of their parts to municipal ownership" were approved 7 The Law on Land Reform, adopted on 16 July 1996, was aimed at creating new property relations on the ground of freedom and social justice, developing market economy, achieving economic independence of the country, including food security. For this purpose, three states, municipalities and private ownership forms have been identified on the land.The State Program on deepening Agrarian reforms and assisting the Development of Entrepreneurship in Agriculture was adopted in 1999-2000 by the Decree of the President of