Expert says 2019 year of reforms

By Azernews

By Ofeliya Afandiyeva

2019 was the year of the largest-scale social, economic, structural, political, judicial, legal and administrative reforms in Azerbaijan's history, Executive Director of the Center for Economic Reforms Analysis and Communication Vusal Gasimli has said.

Addressing the press conference on economic results of 2019, Gasimli reminded that Azerbaijan moved up 11 places in the Global Competitiveness Report in 2019 to become the 58th most competitive economy in the world.

Gasimli added that Azerbaijan made it to the TOP-20 reformers according to the World Bank's Doing Business report in 2019, while Moody's set the country’s credit rating at Ba2, which was confirmed by Fitch.

“Along with this, 2019 saw the opening of the Europe link of the TANAP (Trans-Anatolian Natural Gas Pipeline). Azerbaijan's growing natural gas production will play a role in the energy security of Georgia, Turkey and Europe through the Southern Gas Corridor. SOCAR Carbamide Plant, Gobu Park-2 Residential Complex, Koroglu Transport Exchange Center, ‘Diamed Co’ syringe plant, DOST agency and first DOST center, Real Estate Services residence, Lachin Tanker, branches of Azarkhalcha OJSC, Biyan Industrial Park and other were significant facilities, commissioned this year,” Gasimli said.

Economic growth

In 2019, the country’s GDP growth exceeded 2 percent for the first time in the past five years and non-oil GDP reached 3.5 percent, exceeding the world economic growth rate, Gasimli stated.

The growth in the key drivers of the economy was 13.9 percent in the non-oil industry, 11.3 percent in plant growing, 15.9 percent in information and communication services, and 11.1 percent in tourism (the number of tourists) in the first nine months of 2019, he added.

The economic growth is expected to reach 3 percent for the first time in six years in 2020, 3.7 percent in 2021, 3.1 percent in 2022, and 3.2 percent in 2023, Gasimli went on saying.

Gasimli also noted that in the first 11 months of this year, the state budget surplus reached $562,9 million, with a positive balance of $6 billion. Strategic currency reserves reached $50 billion and are sufficient for 37 months of imports of goods and services, exceeding foreign debt six times.

He further said that the inflation rate was 2.6 percent.

"At the moment, inflation is under the control and management of the Central Bank, which is a positive indicator. The reason for the optimal level of inflation in Azerbaijan is that a surplus has formed in the trade balance and surplus is expected to further grow by the end of this year”.

“The state budget received over $588 million in 2019 as a result of tax and customs reform and the fight against the shadow economy. The social reform package, implemented at the expense of the growing budget of the state, cost $1.3 billion, covering 4.2 million people,” Gasimli emphasized.

Trade Balance

Azerbaijan’s exports totaled $18.3 billion in January-November 2019 and a positive balance of $6 billion was achieved in trade turnover. In the first 11 months of 2019, exports in the non-oil sector totaled $1.8 billion and increased by 16 percent. In January-November 2019, Azexport.az received $ 532 million worth of export orders. During this period, non-oil products were mainly exported to Russia, Turkey, Switzerland, Georgia and Ukraine, Gasimli said.

He added that in January-November, exports of alcoholic and non-alcoholic beverages - 54 percent, cotton fiber - 53 percent, exports of plastics and its products - 52 percent, chemical industry exports - 30 percent, cotton yarn - 28 percent, electricity - 17 percent, sugar exports - 14 percent, aluminum and its products - 11 percent, fruits and vegetables - 9 percent increased compared to the same period of 2018, as director underlined.

He touched upon the list of non-oil goods exported in January-November of this year, which includes tomatoes, gold, hazelnut, raw cotton, persimmon, electricity, methanol (methyl alcohol) and primary forms of polyethylene.

Social reforms

In 2019, the social reform package was distinguished for the growth of the minimum wage, minimum pensions, benefits, repayment and restructuring of problem and overdue loans, as well as support to vulnerable people as provision of houses, cars and so on, Gasimli said.

The social reform package of 2019 covers 4.2 million people, or more than 40 percent of the population, with a financial worth of $1.3 billion.

The minimum wage was increased by 93 percent - from $76 to $147. As of 2019, the minimum wage in Azerbaijan exceeds the national subsistence minimum by 40 percent. In terms of purchasing power parity, Azerbaijan ranks second among the CIS countries and is in top three for the average salary.

The minimum pension increased from $68 to $117 in 2019 and today Azerbaijan is in the 1st place across CIS countries in terms of the minimum pension.

Administrative reforms

Gasimli said that legislative, executive and judicial reforms, conducted in 2019, are primarily aimed at improving the efficiency of public administration and serve the interests of citizens and businesses.

He continued that within this framework, the new structure of the Presidential Administration and the Cabinet of Ministers has been approved, structural reforms are underway in the central executive bodies and new requirements are addressed to the local executive bodies.

“Reforms in executive power, led by President Ilham Aliyev, stimulated e-government development, the shift from One-Stop-Shop to Non-Stop-Shop, the principle of ‘Only One Entry’, the shift from reactive services to proactive services, compact, mobile and resolute activity. Public administration reform will further develop public-private and state-citizen dialogue,” Gasimli added.

The director spoke about the reforms in the judiciary government, which include improving the development of e-court, improving the quality of justice, enhancing the transparency in the courts, elaborating the execution process of judicial decisions, humanization and decriminalization, development of institutional advocacy, improving facilities and equipments, forensic examination.

Furthermore, he commented on the government’s decision to hold early parliamentary election, saying that the election will enable the parliament support the reforms and support citizen participation in public administration. “The formation of the new parliament within the framework of public administration reform will further increase the responsibility of the legislative power,” he emphasized.

The director pointed out the efficiency of the reforms being carried out in the country.

“An effective public administration system has been established under the leadership of President Ilham Aliyev. Azerbaijan has made the most progress in the region in 2007-2018 for the ‘Government efficiency’ sub-indicator, calculated by the World Bank. Thus, in the relevant period Azerbaijan was ahead of Kazakhstan - 6, Uzbekistan - 5, Georgia - 5, and Kyrgyzstan - 2 steps. Azerbaijan ranked 39th in the Global Competitiveness Report for the judicial independence among 140 countries, the 3rd for the burden of government regulation, the 11th for the government ensuring policy stability, the 5th for the government's responsiveness to change and the 10th for the government long-term vision. ASAN, DOST, ABAD, One Window Export Support Center, Shebeke etc. Citizens' satisfaction with the services like ASAN, DOST, ABAD, One Window Export Support Center, Shebeke etc. is about 100 percent,” the expert said.

Business reforms

Gasimli noted that as a result of the reforms in 2019, all procedures for obtaining permits for the construction and operation of the building, connection to power supply networks, property registration and all procedures in public procurement have been digitized.

“Through new Mobile number and FIN code program on state registration of legal entities, more than 3,677 legal entities were registered since its launch in 2018. This means 30.8 percent growth year-on-year”.

“In 2019, some 591 foreign trade participants applied for the Green Corridor gating system for permanent use, of which 307 were granted the right to import and 198 to export operations. In general, as a result of the new rule, the possibility of more effective and transparent application of customs control and clearance was introduced,” Gasimli said.

He added that there has been progress in reducing tax rates, improving tax administration, and fighting the shadow economy. As a result of reforms conducted by tax and customs authorities in 2019, about $588 million were added to the state budget in addition to the plan.

Financial - banking sector

The capital sustainability of banks increased, digitalization strengthened and transition to prudent management was ensured in 2019, Gasimli said, adding that these positive trends reinforce expectations for broader financing of the real economy.

“The loan portfolio of the banking sector, assets and deposits, the balance sheet capital increased, and external debt decreased. Thus, the sector’s assets in 10 months of 2019 showed an increase of 6 percent compared to the same period last year. Net profit of the banking sector increased twice compared to 2018. There is a positive trend in balance sheet capital, operating profit and other indicators of bank profitability. Bank lending increased by 11 percent,” he said.

The executive director noted that in 2019, the number of branches, departments, representative offices of banks, ATMs significantly increased, and the number of employees in the banking sector grew. Thus, in 2019 alone, the number of employees in the sector showed a record increase of 10 percent, Gasimli added.

“In the first 10 months of the year, the volume of deposits placed in banks reached 23.4 billion manat ($13.7 billion), which means an increase of 7 percent compared to the same period in 2018,” Gasimli noted.

“Deposits allocated in banks for the first 10 months of this year reached $13,7 billion, which is a 7 percent increase compared to the same period of 2018, while deposits of individuals have reached the highest figure in recent years – $5,1 billion, demonstrated an increase of 5 percent. Over the year, the specific weight of manat in deposits reached 37 percent, which is the highest indicator since 2015 and should be considered as the best example of increasing trust in the stability of the national currency,” he stressed.

Gasimli further commented on the strengthening of the banking system's legal framework.

“For the first time in the country, it was decided to establish a special regime for currency transactions. Thus, according to the amendment of March 15, 2019, the regulation of currency operations in the Alat Free Economic Zone was adopted in accordance with the Law on the Free Economic Zone of Alat,” Gasimli said.

“Azerbaijan is the second country in the world after Estonia to create an electronic resident, and the adopted rules and measures have enabled non-residents to carry out their business activities without need to come to the country,” he noted.