Creative Industries Azerbaijan
Population: 10,046,516 (July 2018 est.)
Internet country code: .az
three equal horizontal bands of blue (top), red, and green; a crescent and eight-pointed star in white are centered in the red band; the blue band recalls Azerbaijan’s Turkic heritage, red stands for modernization and progress, and green refers to Islam; the crescent moon is an Islamic symbol, while the eight-pointed star represents the eight Turkic peoples of the world
Republic of Azerbaijan / Azərbaycan Respublikası (Azerbaijani)
Azerbaijan – a nation with a majority-Turkic and majority-Shia Muslim population – was briefly independent (from 1918 to 1920) following the collapse of the Russian Empire; it was subsequently incorporated into the Soviet Union for seven decades. Azerbaijan has yet to resolve its conflict with Armenia over Nagorno-Karabakh, a primarily Armenian-populated region that Moscow recognized in 1923 as an autonomous republic within Soviet Azerbaijan after Armenia and Azerbaijan disputed the territory’s status. Armenia and Azerbaijan began fighting over the area in 1988; the struggle escalated after both countries attained independence from the Soviet Union in 1991. By May 1994, when a cease-fire took hold, ethnic Armenian forces held not only Nagorno-Karabakh but also seven surrounding provinces in the territory of Azerbaijan. The OSCE Minsk Group, co-chaired by the United States, France, and Russia, is the framework established to mediate a peaceful resolution of the conflict. Corruption in the country is widespread, and the government, which eliminated presidential term limits in a 2009 referendum, has been accused of authoritarianism. Although the poverty rate has been reduced and infrastructure investment has increased substantially in recent years due to revenue from oil and gas production, reforms have not adequately addressed weaknesses in most government institutions, particularly in the education and health sectors.
Economy of Azerbaijan
Prior to the decline in global oil prices since 2014, Azerbaijan’s high economic growth was attributable to rising energy exports and to some non-export sectors. Oil exports through the Baku-Tbilisi-Ceyhan Pipeline, the Baku-Novorossiysk, and the Baku-Supsa Pipelines remain the main economic driver, but efforts to boost Azerbaijan’s gas production are underway. The expected completion of the geopolitically important Southern Gas Corridor (SGC) between Azerbaijan and Europe will open up another source of revenue from gas exports. First gas to Turkey through the SGC is expected in 2018 with project completion expected by 2020-21.
Declining oil prices caused a 3.1% contraction in GDP in 2016, and a 0.8% decline in 2017, highlighted by a sharp reduction in the construction sector. The economic decline was accompanied by higher inflation, a weakened banking sector, and two sharp currency devaluations in 2015. Azerbaijan’s financial sector continued to struggle. In May 2017, Baku allowed the majority state-owed International Bank of Azerbaijan (IBA), the nation’s largest bank, to default on some of its outstanding debt and file for restructuring in Azerbaijani courts; IBA also filed in US and UK bankruptcy courts to have its restructuring recognized in their respective jurisdictions.
Azerbaijan has made limited progress with market-based economic reforms. Pervasive public and private sector corruption and structural economic inefficiencies remain a drag on long-term growth, particularly in non-energy sectors. The government has, however, made efforts to combat corruption, particularly in customs and government services. Several other obstacles impede Azerbaijan’s economic progress, including the need for more foreign investment in the non-energy sector and the continuing conflict with Armenia over the Nagorno-Karabakh region. While trade with Russia and the other former Soviet republics remains important, Azerbaijan has expanded trade with Turkey and Europe and is seeking new markets for non-oil/gas exports – mainly in the agricultural sector – with Gulf Cooperation Council member countries, the US, and others. It is also improving Baku airport and the Caspian Sea port of Alat for use as a regional transportation and logistics hub.
Long-term prospects depend on world oil prices, Azerbaijan’s ability to develop export routes for its growing gas production, and its ability to improve the business environment and diversify the economy. In late 2016, the president approved a strategic roadmap for economic reforms that identified key non-energy segments of the economy for development, such as agriculture, logistics, information technology, and tourism. In October 2017, the long-awaited Baku-Tbilisi-Kars railway, stretching from the Azerbaijani capital to Kars in north-eastern Turkey, began limited service.