Socio-economic view of 2018 - REVIEW

Baku. 29 December. REPORT.AZ/ The year 2018 was full of several socio-economic developments and saw appointments  in almost all fields in Azerbaijan. Important decisions were made, opening ceremonies  held. Below you can find the socio-economic review of the year prepared by Report:

Energy

In 2018, just like in previous years, the oil and gas sector was the driving force of Azerbaijan’s economy. The Southern Gas Corridor project was commissioned in Sangachal and the first stage of TANAP in Eskishehir, Turkey was completed. TANAP started to transport Shahdeniz 2 gas to Turkey. SOCAR’s STAR Oil Refinery was launched in Aliaga, Izmir, Turkey. A new bitumen plant and liquefied gas filling station were launched at the Heydar Aliyev Baku Oil Refinery and the first phase of the refinery modernization project was completed.

Moreover, SOCAR and BP signed in London a new production sharing agreement (PSA) on the joint exploration and development of Block D230 in the Azerbaijan sector of the Caspian Sea. SOCAR and Equinor group signed a Risk Service Agreement on the appraisal and development of the Karabakh oilfield and a Production Sharing Agreement for the Ashrafi, Dan Ulduzu, Aypara area.

Head of Azerenergy OJSC Etibar Pirverdiyev was replaced with Azerishig OJSC chairman Balababa Rzayev. The staff change took place after the power failure. But the list is far from being complete. Azerenergy’s overhauled Mingechevir Hydro Power Station and Lerik power station were put into operation. Azerishig launched a new administrative building and substations of Baku Distributing Network, Automated Control and Monitoring Centers in Mingechevir and Imishli, substations in Goranboy and Ismayilli. Besides, the Yeni Yashma Wind Power Park was opened in Khizi district.

Agriculture

The year 2018 was marked by innovations in agricultural sector, an area which the Azerbaijani government pays special attention to for achieving economic diversification. Minister of Agriculture Heydar Asadov was replaced by Inam Kerimov, head the State Agency for Public Service and Social Innovations under the President of Azerbaijan. The new minister  announced commitment to principles of correct and effective management (transparency, effectiveness, reporting), closeness to villagers and farmers, application of innovations and made some staff changes and replaced Agrolizing’s chairman. 

The State Agrarian Development Centers were established in regions. For sale of farmers’ products, State Agrarian Trade Company LLC was established under the ministry. The ministry also decided to establish the ‘Agrarian Procurement and Supply’ OJSC. For this purpose, the Food Products’ Procurement and Supply OJSC was abolished. 

The new concessions were made to several fields of agrarian sector. The purchase price of cotton was increased, subsidies were granted to bee-keepers, producers of seed and saplings. The Ministry's Gakh Silkworm Breeding Station was launched, and the Qarabag Equestrian Complex of Qarabag Horse Breeding Farm LLC under the Ministry’s Animal Breeding Scientific-Research Institute was opened.

Industry

Not only agriculture but also industry was in spotlight in 2018. With the commissioning of SOCAR Polymer's Polypropylene plant in Sumgayit, Azerbaijan embarked on production of polypropylene for the first time. Moreover, construction chemicals plant, plants of non-ferrous metals and ferroalloys, tobacco products were launched in the Chemical Industrial Park. 

The Masalli Industrial District was also opened. Khazar private cars began to be assembled jointly with Iranian businessmen in Neftchala Industrial District, which was opened earlier. Along with the heavy industry, the light industry also developed throughout the year. Azerkhalcha OJSC opened branches in Khachmaz, Ismayilli, Lankaran and Aghdam districts. An enterprise on production of two types of yarns (Ring and Open End methods) was put into operation in Mingachevir Industrial Park.

Tourism

A special state body, responsible for development of tourism in Azerbaijan – the State Tourism Agency was established in 2018. To this end, the Ministry of Culture and Tourism was abolished, Fuad Nagiyev, head of National Tourism Propaganda Bureau, was appointed as the chairman of the new Agency. Under his chairmanship, the Agency opened offices in six countries, introduced Azerbaijan’s new tourism brand titled ‘Take another look’, appointed German citizen Rodderix Mark Leffler the chairman of Shahdag Tourism Center CJSC, which operated on loss. Moreover, the Reserves Management Center was established within the agency.

ICT

The most important ICT-related novelty in Azerbaijan in 2018 was launching the second satellite - Azerspace-2 into orbit bringing the number of Azerkosmos OJSC’s satellites with Azersky to three. In the outgoing year Azerbaijan was also re-elected the member of the International Telecommunication Union Council (ITU Council). For the first time, Baku has hosted the International E-Trade Forum and Caspian Innovation Conference.  The State Fund for Development of Information Technologies under the Ministry of Transport and High Technologies and High Tech Park LLC were merged and Innovations agency was established. Moreover, an information system on new registration duty for mobile devices was launched,  the new-generation IDs were supplied with E-signature certificates, a mobile version of E-signature was introduced.

Business

The year 2018 was remarkable in terms of business development in our country. Azerbaijan advanced 32 steps in Doing Business-2019 and ranked 25th among 190 countries, settling among 10 countries that implemented numerous reforms. Throughout the year, the government have taken several steps for development of entrepreneurship, among which was the establishment of the Agency for Development of Small and Medium-Sized Enterprises (SMEs). Under the chairmanship of CEO Orkhan Mammadov, the Agency established small and medium business houses in Azerbaijan. Moreover, export missions were organized to different countries for acceleration of export of non-oil products. Azerbaijan opened wine houses in Urumqi and Shanghai (China), trading houses in Astrakhan (Russia), Kiev (Ukraine), Minsk (Belarus), Riga (Latvia), Warsaw (Poland) and Luzhou (China). 

Serious amendments were made in Azerbaijan's tax system. Structural reforms were conducted in the Ministry of Taxes, new departments, as well as a department for the control of export-import operations, were established under the Ministry, e-invoice was introduced, more than 250 amendments were made in the Tax Code. Under these amendments, the simplified tax rates were reduced from 4% to 2%, the circle of these taxpayers was limited, the excise tax for imported cars was raised, those working in non-oil sector and earning less than AZN 8,000 were exempted from income tax. Instead, the social insurance burden of entrepreneurs and citizens was increased, control over tax levy in this field was transferred from the Ministry of Labor and Social Protection of Population to the Ministry of Taxes.

In 2018, chairman of the State Customs Committee was replaced by his deputy Sefer Mehdiyev. Under his chairmanship, the Committee has seen some structural reforms. The customs departments in districts were abolished and West, South and North Territorial Customs Departments, new Head Departments were established in their place. In accordance with the ‘single window’ system, works of several employees were entrusted to one employee, use of the ‘Green Corridor’ system was extended.

Finance

The year 2018 was successful in terms of stability in the financial sector. Board of Directors of the Financial Markets Supervisory Authority (FIMSA) was abolished, chairman of the Board, Rufat Aslanli, who presided over FIMSA for two years, was dismissed and the presidency of the structure was entrusted to Ibrahim Alishov, as the acting chairman of the board.

Though FIMSA did not revoke the license of any bank and non-banking organization, it removed 15 credit unions from the microfinance market, revoked licenses of 3 insurers for reinsurance, 34 individuals for insurance agency, granted license of insurance agency to 76 individuals and 1 legal entity, and documented the entry of 1 investment company to the securities market. 

The State Register of Encumbrance of Movable Property has been launched and the Azerbaijan Credit Bureau with chairman Elchin Habibov has been established with the participation of 8 banks this year.

This year has also seen the change of the Financial Stability Board chairman with Natig Amirov, Assistant to the President for Economic Policy and Industrial Issues, replaced Prime Minister Novruz Mammadov in this position. 

In 2018, the Central Bank of Azerbaijan (CBA) managed to stabilize the manat exchange rate and USD made AZN 1.7. The bank reduced the interest rates from 15% to 9.75%, while the lower and upper limits of the interest corridor were reduced from 10 and 18% to 7.75% and 11.75%. Moreover, AZN 200 banknotes were issued.

Infrastructure

Azerbaijan implemented several infrastructure projects in 2018. The State Agency for Housing Construction launched the Yasamal Residential Complex, the first Social Housing project, most of apartments in here were sold, the groundbreaking ceremony of the new complex was held. The Agency head was replaced. Samir Nuriyev who previously held the post was appointed chairman of the State Town-Building and Architecture Committee, while his deputy Sadig Sadigov replaced him in his previous position. This change enlivened the activity of the Committee and the structure embarked on redevelopment of the General Plan of Baku. 

The Baku International Sea Trade Port Complex and Ro-Ro terminal inside this complex were opened in Alat, Garadagh district. Azerbaijan Caspian Shipping Company rebranded to ASCO (Azerbaijan Shipping Company), ‘Mardakan’, ‘Shuvelan’, ‘Zire’ and etc. towing and supply vessels were added to the balance of the Caspian Sea Oil Fleet. The number of Azerbaijan’s ships sailing in Azov, Black and Mediterranean Seas has been brought to 14.

As for water and sewerage system in the country, Khachmaz and Khizi cities, Altiagaj settlement were supplied with drinking water. Water supply system of Mingechevir was reconstructed. First stage of project ‘reconstruction of water supply and sewerage systems of Sharur district’, projects on ‘Water supply systems of Astara city’ and ‘Reconstructoin of drinking water system of Lerik city and construction of sewerage system for the first time’ were completed, Nakhchivan Treatment Plants Complex was established.

In addition, the opening of a new confluent canal of Araz river in Imishli, the crossing facility and the 5-km section of the Shamkir-Samukh-Goranboy major irrigation canal and the Silk Road was held.

The Baku Transport Agency has had its powers enlarged. BakuBus LLC was transferred from the Baku City Executive Power to the Agency. The Agency renews the bus park, changed carriers on several routes, and launched the next stage of concept of the Transportation Exchange Center.

The Azerbaijan Railway Company launched the express train en route Baku-Ganja.

At the same time, the opening of passages from the Olympic Stadium to Heydar Aliyev Avenue, the new road connecting Ziya Bunyadov Avenue with Balakhani-Binagadi motorway, reconstructed Lokbatan-Gobu motor road, Alat-Astara-Iranian border highway, 26 km-part of Mingechevir-Behramtepe highway, Khachmaz-Khudat and Shaki-Kish highways was held in 2018.

World

The global economic picture was not stable in 2018 with tensions observed in commodity, stock and exchange rates. The instability was mainly due to the steps taken by the United States including its trade wars against China and EU countries, customs duties imposed on import of products from these countries that prompted retaliatory moves. The United States has toughened its policy on Russia and Iran, imposed sanctions on Russian companies and entrepreneurs functioning in occupied Crimea region of Ukraine, ‘punished’ Iran with sanctions over nuclear program in two stages. All these resulted in depreciation of national currencies of both countries against USD. Turkey was also among  the countries that suffered the 'dollar crisis' over the arrest of American pastor Andrew Brunson. This caused a few months of political tensions between Ankara and Washington. TRY depreciated almost twofold, while the US dollar went up due to the rise in interest rates from 1.25%-1.5% to 2.25%-2.5%.

OPEC and non-OPEC countries tried to prevent oil price from falling by cutting output. Azerbaijan supported OPEC+ in this decisiondecision. Brent crude price fluctuated at around $50-87 a barrel, while WTI crude price at $42-77.