Wise oil money investment: Azerbaijan's example

Wise oil money investment: Azerbaijan's example
17:07 24 Dekabr 2015
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Baku, Azerbaijan, Dec. 24

By Maksim Tsurkov – Trend:

Azerbaijan’s President Ilham Aliyev on Dec. 23 said what many politicians and economists prefer to remain silent about, and some, especially those in the West, even deny.

“Personally, I believe that the sharp decline in oil prices has no natural economic grounds […] it is a thought-out policy,” said the Azerbaijani president, directly pointing to a confrontation among various global players through manipulation of prices for energy resources, which, in turn, affects other countries.

The main issue here isn’t that this process is going on now – there have long ago been talks that such thing would happen. The question is: who and how well has managed to prepare to live in such a crisis, having received significant oil revenues?

Let’s take it back a few years. High oil prices at the time meant significant revenues for oil extracting countries, including Azerbaijan. And Azerbaijan spent its oil revenues to construct highways, a new major port on the Caspian Sea, buy new vessels, create a shipbuilding yard, modernize the country’s railway infrastructure, and in particular, to implement the Baku-Tbilisi-Kars project.

Was it worth to invest billions of dollars into those works and projects? Of course it was. Just take a look at the current developments. Due to the deterioration of relations between Moscow and Ankara, transportations from Turkey to Asia are now entirely being carried out through Azerbaijan.

The demand for vessels, ports, main roads has increased by several times. It grew so much that the countries on the other side of the Caspian Sea do not have time to receive the Azerbaijani ferries. It shows Azerbaijan’s economic farsightedness, payback of invested funds and revenues from the non-oil sector.

“In recent years, we have attached great importance to local production, allocated funds for the public and private sector,” President Aliyev said Dec.23.

The vast majority of the food products are produced in Azerbaijan, said Aliyev, adding that therefore, the prices for the local food products, as well as the construction materials should remain stable.

Those who have doubts about farsightedness of Azerbaijan’s economic strategy, shouldn’t forget that several years ago, the country didn’t only initiate the Baku-Tbilisi-Kars project, but also allocated loan to Georgia for road construction on its territory.

There were a plenty of negative remarks by “experts”. However, today, China, which is the main source of cargo in Asia, considers Azerbaijan as the priority route for exporting its goods to Europe.

It is not the first time that Azerbaijan faces a biased attitude: many negative remarks were made during the period of construction of the Baku-Tbilisi-Ceyhan oil pipeline. Where are those critics now?

Significant funds were invested in the development of energy infrastructure. Today the country has a completely independent power system, and even has the capacities to export electricity. What would happen if this work wasn’t carried out? For that, it’s enough to look at other countries of the former Soviet Union.

Lack of funds for modernization and replacement of old energy infrastructure, which depleted its resources, leads not only to its shutdown, but even man-made disasters. In addition, modern equipment made it possible for Azerbaijan to significantly reduce energy consumption.

Similar work has been done in other spheres as well. For example, significant income allowed Azerbaijan to refuse foreign loans, and as a result, the external debt of the country is about 12 percent of GDP, which is a very low index.

But economy is not the only vital component of today's security of Azerbaijan. At the expense of oil revenues, Azerbaijani government almost completely re-equipped and modernized the army, which is vital for a country in a state of war.

However, despite the measures taken in advance, one shouldn’t relax. There is still much to be done.

“From now on, we should even more seriously pursue the policy of economic liberalization,” said the president, adding that in particular, the country will even more seriously fight monopolism.

Ilham Aliyev pointed out that monopolism should be prevented both in import and local production, adding that no one has or can have special privileges here.

“Those who will impede the receipt of funds to the state budget will be punished,” said the president. “Therefore, maximal transparency should be and will be ensured in the customs and the tax system.”

“Today Azerbaijan lives in the conditions when the political and economic instability is observed everywhere,” the president said. He also pointed to the main task for the future development of the country.

"There was no single process in a positive direction in our region in 2015,” the president said. “In such a situation we advance our country, ensure the safety of the Azerbaijani people, reduce the possible risks for Azerbaijan, including geopolitical, military risks for Azerbaijani people to live in terms of security, tranquility, prosperity. This is our main task."

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Maksim Tsurkov is Trend Agency’s staff journalist, follow him on Twitter: @MaksimTsurkov

Follow us on Twitter @TRENDNewsAgency

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