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Economy of Azerbaijan, how reforms can save a volatile oil dependent economy

Updated: Apr 5

With a Gross Domestic Product of 46.94 billion USD, Azerbaijan is a nation with a population figure of 9.981 million based on the statistics of 2019. Narrowing on the economic practice of the country, Azerbaijan is a nation where the energy sector is the backbone of the nation’s economy. Speaking of the energy sector, Crude oil and related natural gases are the key revenue sources of this nation. Half of the economy is driven by the energy sector. The other half is partly divided into two where one part depends on the energy sector indirectly as corporations and workers where a few people major in agriculture. Well, that was in the past, the nation since independence has greatly grown through a commanding reform in the realm of economic scalability and growth.


One of the major milestones achieved in the economy of Azerbaijan is the privatization of various economic activities in the nation. One of them is the agricultural sector where land is equitably distributed across individuals of different capacities. Large-scale owners, medium-scale owners, and small-scale owners are the three categories that private farmers with different capabilities enjoy. Although agriculture is reforming, only 6% of the profit yield facilitates the growth of the GDP of this country. The reset practices such as tourism are still off the grid. The reforms done to steer the economy of this country are gradual but at the same time rapidly growing. Reforms are needed to save the volatile oil-dependent economy.  Below is a description of reforms that can save a volatile oil-dependent economy.


How reforms can save a volatile oil-dependent economy

There are a few major economic realms that are key determiners in the reform process of an economy. More of economic growth, law is one of the key fields that boost the economy of a nation. Technology is another factor, followed by human capital and so forth. Below is how reforms can save a volatile oil-dependent nation.


Technology Reforms

Technology is the current backbone or rather the spine of a nation’s economy. For over 10 years, there have been many opportunities that have been brought about by technology. Scalability is one of the key advantages of technology. If technological advancements are injected into a given economy, the creation of jobs is effective. For a nation depending on oil, the adoption of technology will double the rate at which non-oil revenue flow is generated in a country. Automation of labor, meaning new chances of survivors will be introduced.


Technology is the accessibility of information. Information concerning agriculture and other income-generating attributes is merit-full thus the growth of an economy. Communication is in the category of these reforms. Better communication infrastructure is the beginning of advancements and growth of the economy. Ease in communication promotes global partnership. A nation that grabs the way of technology also increases self-employment. Many people have started their online empire thus improving their standards which also results in the growth of a nation.  


How easy it is to acquire accurate statistics on any given industry, how easy it is to get weather reports on any given region if I am going to invest in agriculture, how easy it is to set up a company virtually, how easy it is to set up a bank account & so on are the questions which need to be addressed at start. The government needs to make sure that such transactions are pain-free & non-time-consuming.


Law Reforms.

Among the major virtues of economic development are the legal statutes of a nation. A set of rules that govern trade needs to be imposed in the constitution of a specific nation. Trading laws that promote profiting doctrines such as capitalism need to be enhanced. There is less about the law because law does not scale growth but it creates a harmonious environment for all.


We all know that the majority of our constitution was inherited with the collapse of the soviet union & it requires a constant update. There have been multiple occasions where Big 4 companies put forward proposals on updating certain laws governing the business end of our legislative system & however, the adaptation of those proposals is quite unhurried. Furthermore, this section includes taxation as well, as one of the main drivers of developing economies. The key driver of the government entities that collect taxes should be the sustainability and growth of the economy, especially in countries like Azerbaijan. However, I observe the daily actions of the above-mentioned entities and I have to admit that those actions have a hint of intimidation & in some cases extortion toward SMEs. Nonetheless, have to admit that such activities do not reflect the overall vision & strategy set by higher institutions & governing state.


The Reforms of Physical Capital or Infrastructure.

Factories, machinery, and various infrastructures such as roads are the key drivers of an economically reformed nation. The reason as to why the latter is true is because they create opportunities for investors such as a boosted investment in the tangible capital development of a nation. Investments in machines and manufacturing will reduce the cost of importing raw materials for processing. The development of roads will reduce the cost of transport of the raw material and when all these are combined, a reformed economy of a nation is achieved. Also, increased job opportunities will be a key factor resulting in the growth of the nation’s GDP.


In this realm, we have done quite a few things with new industrial parks & ports under construction, however without adopting proper advancements which I mentioned before this paragraph, those new settlements will not have enough power to facilitate the expected change to the economy.

In conclusion, oil addiction is a fatal custom because it also affects a nation in terms of global warming. adopting a clean energy routine by investing in clean renewable energy should be promoted. Educating oneself on the hazardous impact of oil also saves in the quest for this form of reform.


The social and political effects of a nation.

Modernization or what is commonly known as globalization is key in the reform of an economy that dwells on Oil and natural substances. Customs, traditional values, and belief attributes are used to explain social factors. Oil economic countries have a sole culture which puts them economically at risk. Culture can affect the growth of such a nation.


In the realm of political factors, governance in general depends on how such an economy will grow. If it’s a non-properly governed state, wealth will revolve around a certain group thus putting the larger population at risk. Having a properly functioning government, which continuously creates an ecosystem for a boost of the private sector and an up-to-date constitution is a reform step to a better economy.


Education and related education system.

By far the most important factor above all. An oil-resourceful nation disregards education due to profit associated with the naturally occurring substance. Well, the oil well can get exhausted and bring back the nation to a downfall. The education system is a major reform milestone in the strengthening of such economies. New professionals and professions are generated by education thus economic development at a higher rate.


Conclusion

After the above reforms have been imposed, the population of a nation will grow. The growth of a population is a possible human resource that will fill the growing opportunities. A quality education system should result in a nation producing resourceful human resources that will be markable on a global level. The population quality is measured through the skills the inhabitants of the nation possess. Creative abilities are a factor that matters in the reform of such an economy. For the educated, proper training should be done to bring a matching nation.


 Since March we have observed various organizations cope with the pandemic & its distressed effects on the economy and the nation. Thanks to media we have also accumulated vast amounts of data on how other countries reacted to it as well. Since ATL is operating in various industries we have observed how rules & regulations imposed on the industries & the nation affected our business & businesses of our partners. I encountered so much negativity around it, that it was very hard to keep a calm state of mind. 

 I am not an expert on epidemiology or an expert on any related field of this matter. However, as a rational person, I saw how resilient and assertive other governments were in handling this pandemic. Although I applaud the effort, I cannot comprehend some of the actions taken during this crisis. I truly believe that we could have done a better job not only as a government but as a nation. On our end, ATL tried its best to keep adding value to our community & society. Furthermore, we made sure to not do anything drastic in terms of downsizing and we complied with all the rules & regulations imposed by the cabinet of ministers.


To conclude, I would like to mention that the year 2020 will be remembered as the year of liberation and victory. Our joy of liberation of our lands is endless. It is very significant to understand that there is an immense weight on our shoulders from this point on, as a nation & as a government. We have to make sure that all our actions from now on are focused on Azerbaijan’s future development, for generations to come. We have portrayed a historic unity in this war & that unity should be transcended towards all our future endeavors. I am proud to be Azerbaijani! Karabakh is Azerbaijan!

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