Problems Encountered during the Transition to Market Economy in Azerbaijan and Solution Attempts

Suleymanov, Elchin and Yusifov, Sabuhi (2014): Problems Encountered during the Transition to Market Economy in Azerbaijan and Solution Attempts. Published in: Expert Journal of Economics , Vol. 2, No. 2 (17 July 2014): pp. 45-54.

Abstract

After re-gaining its independence on 18 October 1991, the Republic of Azerbaijan started the transformation to the market-based economy and the integration into the world economy. The country’s oil and natural gas reserves have been considered the main source for financing a range of government programs for reforms. On the one hand, these reserves had to be used effectively; on the other hand, there was a huge demand for foreign investment for extraction. To this end, Azerbaijan has signed “Contract of the Century” in 1994. Although Azerbaijan has wide oil and natural gas reserves, it has faced a number of difficulties in its transition path. This study analyzes these problems and reforms for solving them. One of the types of the problems related to the economic structure of the former Soviet Union: disruption of the economic ties between the republics resulted in a decline of production, high levels of unemployment and prices and consequently led to an economic recession in all of the republics. Another set of problems related to the lack of sufficient institutional bases to transform to the market economy. Moreover, internal conflicts between the political parties and groups for having authority as well as political chaos in the republic can be considered other serious problems during the transition period. Furthermore, Karabakh war and occupation of 20 percent of the Azerbaijani territory by the Armenian military forces had made the situation extremely complicated. Despite all of these extremes, Azerbaijan transformed to the market-based economy decidedly and even became one of the fast growing countries of the world. Even in 2013, with the GDP growth rate of 5.6 percent, Azerbaijan was a leader among growing economies. In parallel with this significant economic development, there is still a need for some socio-economic and institutional reforms in order to get a well-functioning market-based economy in Azerbaijan.

• Item Type: MPRA Paper
• Language: English
• Keywords: Azerbaijan, oil, natural gas, informal sector, energy resources, oil dependency
• Subjects: P - Economic Systems > P2 - Socialist Systems and Transitional Economies; P - Economic Systems > P2 - Socialist Systems and Transitional Economies > P21 - Planning, Coordination, and Reform

References

Aras, O.N., Suleymanov, E., and Zeynalov, A., 2012. Azerbaijan's Energy Source Revenues and Their Effect on the Economy of the Country. Working Paper, Available online at: http://dx.doi.org/10.2139/ssrn.2194173

Bulut, C., and Suleymanov, E., 2012. Importance of Economic Collaboration between Azerbaijan and Turkey in Preventing Dutch Disease in Azerbaijan. International Symposium on Regional Cooperation and Development, Erzurum, Turkey, October 17-20, 2012. Available at: Suleymanov, E., and Yusifov, S., 2014. Problems Encountered during the Transition to Market Economy in Azerbaijan and Solution Attempts. Expert Journal of Economics, 2(2), pp. 45-54 54 http://dx.doi.org/10.2139/ssrn.2172960

Suleymanov, E., and Zeynalov, A., 2009. The General Assessment of Macroeconomic Indicators of Azerbaijan Economy after Independence from the Economic Stability Point of View. Journal of Qafquaz University, Available at SSRN: http://ssrn.com/abstract=2167943

Aras, O. N., 2005. Azerbaycan Ekonomisi ve Yatırım İmkanları. Bakü: TÜSİAB Yayın No: 2005-001.

AR Merkezi Bankı. 2012. 2011 İllik Hesabat. Bakı.

Aras, O.N., 2008. Azerbaycanın Hazar Ekonomisi ve Stratejisi. İstanbul: Derin Yayınları.

Aras, O.N., and Süleymanov, E., 2010. Azerbaycan Ekonomisi. Baku: Şark-Garb Matbaası.

Aslanlı, A., 2004. Bakü-Tiflis-Ceyhan: Petrolün Ötesinde Önem Taşıyan Hat. TUSAM Ulusal Güvenlik Stratejileri Araştırma Merkezi. Available online at: http://www.tusam.net/makaleler.asp?id=48&sayfa=53.

Atakıshıyev. M., 2007. New Oil Policiy and Economic Development in Azerbaijan. Baku: Aspoligraf.

Bağırzade, E.R., 2007. Kayıtdışı Ekonominin Temel Özendirici Faktörlerinden Biri Gibi Yolsuzluk ve Onunla Mücadelenin Azerbaycan Girişimleri. Akademik Bakış, Uluslararası Hakemli Sosyal Bilimler E-Dergisi, Ocak, 11(5), Available online at: http://www.akademikbakis.org/sayi11/makale/kayitdisi.pdf

Bağırzade, E.R., 2009. Müstegil Azerbaycanda Reallaşdırılan İktisadi Siyasetin Leqallaşdırma Aspektleri. “Heyder Eliyev Iktisadi Inkişaf Strategiyasının Tentenesi” Mövzusunda Keçirilmiş Elmi-Praktiki Konfransın Tezisleri, Bakı: İktisad Universiteti, pp. 141-145

Bağırov, S., 1996. Azerbaijan Oil: Glimpses of a Long History. Journal of International Affair, 1(2), p.28. BP.com. BP Statistical Review of World Energy 2011, Available online at: http://www.bp.com/centres/energy,

Cornell Svante E. - Ismaılzade Fariz, (2005) “The Baku-Tbilisi-Ceyhan Pipeline: Implications for Azerbaijan”, The Baku-Tbilisi-Ceyhan Pipeline: Oil Window to the West, (Edited by S. Frederick Starr and Svante E. Cornell)

Baker & McKenzie. 2012. Doing Business in Azerbaijan

Eldaroğlu, E., 2001. Neft Fondunun Vesaitleri Hansı İstiqamete Yöneldilmelidir? Azerbaycan Milli Demokratiya Fondu, ''Azerbaycan'' Bülleteni, 25 (145).

Sabiroğlu, İ., 2001. Neft Böhranları ve Holland Sindromu. Azerbaycan Milli Demokratiya Fondu Azerbaycan Bülleteni, No: 19 (139).

Süleymanov, E., Zeynalov, A., 2010. Azərbaycan Respublikasının Xalis İxrac Funksiyası və Xarici Ticarət Multipikatoru", Azərbaycan, Qloballaşma Prosesində Qafqaz və Mərkəzi Asya III beynəlxalq Konfrans, Qafqaz Universiteti, səhifə/səhifə aralığı: 124-125.