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 | | HEYDAR ALIYEV - Ten Years At The Helm Milestones in a journey - hopes, failures, disappointmentsand faith in the revival of the Azerbaijan economy. |
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| By Fuad Alizadeh |
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Heydar Aliyev's arrival as Azerbaijan's leader in July 1993 came at the low point in the country's development, both politically and economically.
Before achieving independence in 1991, Azerbaijan was considered one of the healthier and more developed of the Soviet states. However, with the collapse of the Soviet Union came the grasping of independence by the leadership of the Popular Front in Azerbaijan - political and economic laymen - who had to cope immediately with Armenian aggression and economic collapse. The country faced famine, as the last flour supplies to the grinding mills were eked out to make brown bread, for which people queued all night. Attempts to revive the economy with an open-door policy resulted in the export, on an unprecedented scale, of non-ferrous metals and other raw materials from Azerbaijan to Iran and Turkey, which supplied colouful "rags" of doubtful quality in return.
Heydar Aliyev's experience in the political field was put to good use on his accession to power, bringing into effect a cease fire in Upper Garabakh. With peace and order returned to the country, and a capable leader at the helm of the ship of state, the people of Azerbaijan thought that an economic upswing would follow naturally. But the preconditions for economic growth, such as the creation of an attractive investment climate to attract foreign expertise to the country, were lacking.
On the Threshold of Development. September 20th, 1994 must be viewed as a pivotal date in the start of the Azerbaijan economic upswing. This was the date of the signing of "The Contract of the Century", and this historic commitment was backed by the start of structural reforms to bring down hyperinflation. Just one man - Heydar Aliyev - was responsible for taking the initiatives at this very difficult time for the country. One of these - the liquidation of the state monopoly on bread production by Azertakhyl - illustrated the impact of thoughtful policy - making for the population. Tens of thousands of small bakeries started to operate and produce cheap, high quality bread, eliminating the bread queues and the threat of famine.
Agrarian reform materialized and farmers took ownership of land. In the towns and cities, the process of privatization of state property activated a real estate market and a building boom, stimulating the construction trade. By 1997 the Contract of the Century began to bear fruit, with oil beginning to flow to the world markets through the Baku -Novorossiysk export pipeline. Foreign investors headed into Azerbaijan, and the national economy started to bloom.
Downturn But suddenly the flow of development was interrupted, as crises in Southeast Asia and Russia shook world markets, and some less than helpful blunders in policy - making at the macro-economic level were made. Several high ranking officials' heads were turned by the boom which they attempted to exploit by hastening the pace of privatisation, and the artificial support of the Manat in 1998, from 3,900 to 3,800 to the US dollar.
However, this artificial support of the Manat with currency reserves but without the backing of commodity production could only result in failure. Such economic policies stimulated the importation of cheap products, and at the same time undermined attempts to adjust domestic production to the new- market situation - domestic producers could not compete. Similarly, the transfer of state - operated businesses to private hands did not automatically result in continued full production. Facing high taxation, lack of capital, and other political and economic constraints, the new owners often failed to make a go of the concerns they had acquired.
The 1997 collapse of Southeast Asian economies, followed by the 1998 default in Russia, affected all the national currencies of the CIS . Azerbaijan was rescued from devaluation by the government decision to use "golden" reserves to support the Manat and keep the national currency rate stable.
July 8th 1999 saw the start of a recession as a result of the policies of artificial support of the Manat. The Manat fell by 6.9%, resulting in an average rate of 4,155 Manats to the dollar for the month. While the move to support the currency had appeared effective in the setting of a world financial crisis, the result for the country was a slowing of the pace of reforms as initiatives gro-und to a halt.
New Millenium One could compare the economic health of Azerbaijan today with that of a patient who has rallied from a coma, but it is too early to talk about him making a complete recovery. Heydar Aliyev's strategy from 1993 to 2002 has been to invest heavily in the oil sector of the economy. Of the $14 billion that make up the economy, which includes $ 10 billion of foreign investment, 65% has been in the oil sector - the king pin of the economy. This has been necessary to realize the projects planned to develop the industry - for example the Baku -Tbilisi-Jayhan pipeline costing an estimated $ 2.9 billion, and the operation of the Shahdeniz oil field development, at an estimated $3.2 billion.
However, the success achieved in developing the oil sector might seem to have come at the expense of ignoring the non-oil sector initiatives, resulting in charges that the national economy is lopsided and on the threshold of " Dutch syndrome". This is a charge that is unacceptable to Heydar Aliyev. In April-May 2002 the Head of State carried out meetings with domestic and foreign businessmen, resulting in the issuing of a number of decrees designed to improved the investment climate in Azerbaijan.
Following this, the leadership of the country has decided to organize an international conference": Investment in Azerbaijan:Gateway to the New Independent States" in May of this year, with the purpose of giving more information to foreign investors about changes taking place in the economy of Azerbaijan. The conference, which will be opened by the Head of State in the Gulistan Palace, should be a clear prologue for the progress of the non-oil sector of the economy.
Of course, finding solutions to all the problems besetting the revival of the economic potential of Azerbaijan is beyond the powers of any one man. So let us wish that the President's team and all the people of Azerbaijan give President Heydar Aliyev all their support in solving the problems facing the country today, however difficult. As has ever been the case, our power lies in our unity.
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