You can't listen to a conversation about the business climate in Azerbaijan without hearing about the county's ongoing struggle against corruption. Recently Transparency International (TI) released their annual ranking of the world's most corrupt countries. Whereas Azerbaijan was ranked 140 out of 145 countries in 2004, they showed improvement in 2005 placing 137 out of 158 countries.

"This was in order to give credit to the Azeri government, because they adopted several vital laws this past year that will bolster its fight against corruption," said Dr. Rena Safarliyeva, TI's Executive Director.

One major impetus for the changes in Azerbaijan's corruption legislation has been the efforts of American Bar Association's Central European and Eurasia Legal Initiative (CEELI), which operates an office here in Baku. "Essentially, all the activities that CEELI does deals with anti-corruption in one way or another," said Robert Eisman, a lawyer and the organization's anti-corruption specialist.

CEELI was founded after the collapse of the USSR, when the U.S. government appealed to the American Bar Association to send lawyers and experts these countries with the goals of promoting democratic ideas and concepts of the rule of law in the states of former Soviet Union. The Azerbaijan office of CEELI has been in operation since 1999.

According to Mr. Eisman, the three major pieces of anti-corruption legislation are a conflict of interest law, an ethics law and financial disclosure law. And while Azerbaijan is in the process of creating such a legal structure, he said they seem to be going about it "backwards," first passing the financial disclosure law, having the ethics law in a state of near passage and the conflict of interest law just now being worked on. "They created the tool, before they had the law and any enforcement," said Mr. Eisman. "The way you should really do it is first determine the ethical standards of the society, then in order to enforce these ethics to give some sort of effect to them you create a conflicts of interest law and with it an enforcement body."

This would explain why while Financial Disclosure is a law is not yet being enforced. "They have the rule to file the documents, they are supposed to be filed with the ministries that you work for which is a problem, and there is no independent outside agency that can look at these things or have the law enforced," said Mr. Eisman. In other countries like America and Hong Kong they have investigative bodies that can see every record and can talk to people and can advise the government on how to avoid corrupt practices. There is nothing like that here.

Next we come to the conflict of interest law. What is a conflict of interest? A conflict of interest is anything that could influence a worker's ability to make ethical and lawful decisions in regards to their work. Examples of these for government workers would include a variety of types of things like links with foreign governments, major debts and, the problem most often encountered in Azerbaijan, certain investments in sectors which the employer's governmental department oversees. "It is alleged that numerous high level public officials own businesses in violation of the Constitutional prohibition of on owning businesses," said Mr. Eisman. "This creates conflicts of interest. If you have a customs minister, hypothetically, that allegedly is involved in these businesses where you have to import everything and he controls that boarders there are huge numbers of opportunities for a variety of conflicts of interests that could affect what goes in the country and what goes out. And it could affect prices."

The last piece of legislation key to the fight against corruption is the ethics law. Currently the ethics law is being prepared to be read before the parliament for the third and final time. If it passes then it needs to be signed by the president and becomes a law. Mr. Eisman said he had some reservations about the passing of legislation in its current state, however. "The ethic law deals with a variety of matters some matter involving conflict of interests, there is some overlap with the conflict of interests' law that was initially drafted by the ministry of justice and passed around to various other ministries which are now interested in putting this law into effect," he said. TI in cooperation with CEELI in Baku has been begun to address business ethics at a more grass roots level. Recently they complied a book with 10 codes of ethics from businesses in Azerbaijan which they are distributing to local businesses and encouraging them to implement similar codes. "The business community is the training ground for the government, this where the people is going to draw its government from eventually, and if people learn in their businesses how act honestly, and they learn code of ethics, they learn they should not sexually harass their worker, they learn to make sure all their weights and measures are true, all their books are accurate, they are going to take all these things they learned and they are going to take them with them when go to work for the government, "said Mr. Eisman. "So business ethics is key."

In light of all this talk about corruption in the business sector it is important to note that Dr. Safarliyeva said while corruption in the private business sector is a problem, a survey conducted by TI in 2004 actually showed that the areas people most frequently encountered corruption were in the public health system and with the road police. Ironically within the past year major changes have been made in both of these areas.

In the spring the salaries of road police nearly doubled and then this past fall Ali Hasanov was removed from his post as the Minister of Health. Dr. Safarliyeva said it was too early to see how the removal of the health minister would affect corruption in the health system but that the increase in policemen's salaries was having moderately positive results. "It is a fact that the amount of police asking for bribes has dropped significantly," said Dr. Safarliyeva. "However, they only raised the salaries of the policemen out on the roads. And so the logical result of this has been that the people working in offices at desk jobs now feel a lot of discontentment. And policemen are facing more scrutiny from them." Dr. Safarliyeva said this could this situation could only be resolved by across the board pay raises.

As for the improvement of the situation with corruption in the private business sector Dr. Safarliyeva has a bold idea, she is currently investigating the feasibility of. What she is would like to formally propose in the future is amnesty for all previously illegally earned money. "The country is ripe for this," said Dr. Safarliyeva. "Some companies want to implement more ethical practices but they can't because crimes of the company from long ago hang over their heads like a sword." This type of amnesty was previously afforded to business enterprises in Kazakhstan successfully and over the next several months TI will investigate its potential in Azerbaijan.

Mr. Eisman, in the meantime, called for patience. "It is going to take a long time to change not only the laws, but also the culture and the ways that people do business," he said. "It could take realistically 20 years or 30 years. You have to realistically recognize that you can't eliminate corruption, you can only minimize it." He also said the government needs to be stronger about enforcing the current legislation even while they are working to improve it. "You know if you just enforce the bribe statutes that already on the books, if you enforce them by just 10% more than they do right now, and start arresting people and doing it publicly, this would have impact on fighting corruption. When people see that there are consequences to their actions they tend to reform their behavior."