In recent years the global economic crisis in the world has also affected the Azerbaijani economy. As a result, sharp oil price fluctuations had a negative impact on the national economy. The country's gross domestic product (GDP) decreased by 3.1% and non-oil GDP by 5.8% during the first eight months of 2016. CESD In such circumstances, more support of a sustainable economic development strategy that envisaged fundamental reforms to achieve a competitive, export-oriented and innovative economy, was extremely important. Such a system could develop the national economy and meet the emerging socio-economic challenges.

Last year, Azerbaijan has experienced the significant and groundbreaking transformative reforms that had started in previous years. The process of the transition of management to the younger generation of managers was accelerated throughout 2019. In accordance of the reform agenda of the President, on December 2, 2019, the ruling New Azerbaijan Party initiated the dissolution of the parliament and holding early parliamentary elections. The statement of the parliament supported the reforms of the President and said that in order to increase efficiency of the legislation and to adapt it deeper reform strategies asked for dissolution of the Parliament.

Nowadays, touching upon innovation economics in the country, it is worth noting that one of the main objectives is to support the economy which meets the requirements of innovation processes in the world because such model will boost the knowledge economy, use of hi-tech and the long-term development based on innovative practices in the country. To this end, the significant achievements in the sphere of education have been linked to the socio-economic policy towards modernization of the country in recent years. The "State Program on Education of Azerbaijani Youth Abroad in the years 2007-2015”, played a key role to meet the need of the country for highly qualified specialists for the purpose of ensuring the formation of a competitive and innovative economy. According to the Ministry of Education around 3558 Azerbaijani youth studied abroad in the world's leading higher education institutions via this program, and 60% of graduates are working in the private sector, while 40% in the public sector (Ministry of Education of the Republic of Azerbaijan). One can ask why is it so important? The answer is very clear the role of the program in shaping the knowledge economy is valuable.

In addition, to increase efficiency and transparency in the public sector, “ASAN Service Centers” were established in 2012 as part of the State Agency for Public Services and Social Innovations under the President of the Republic of Azerbaijan ASAN service is an important step towards increasing transparency in the country, strengthening the fight against corruption and greater use of electronic services. Innovation Center under ASAN Service supports sustainable socio-economic growth by providing innovative solutions both in public and private sectors (AzerTAC).

Furthermore, in order to broaden the coverage of economic reforms and manage effective coordination, the Center for Analysis of Economic Reforms and Communications was established. Touching upon the key objectives, one can underline that to ensure sustainable economic development of the country is one of the key priorities of this Center. Another priority was the development of “Made in Azerbaijan” brand because sharp decline of oil prices in global energy markets urged the acceleration of non-oil sector development, and this process made very important to develop and support the “Made in Azerbaijan” brand, as well as export of Azerbaijani local brands to the global markets. To this end, Azerbaijani companies participated in the 85th traditional “International Green Week” exhibition Berlin on January 17, 2020. It is worth noting that this event is one of the largest agricultural exhibitions in the world. Over 1,500 companies from more than 70 countries participate in the exhibition, whereas, Azerbaijan participated by 11 companies, presenting 180 types of products (Trend).

Another important step towards innovative reforms was the establishment of the Agency for Sustainable and Operational Social Security (DOST), which collects all the services of the Ministry of Labor and Social Protection of Population of Azerbaijan using the “Single Window System”. DOST agency can be characterized as an efficient example of innovation in the social sphere. This agency helps to improve the labor market of the country by using innovative methods, as well as help people to get the necessary help in such areas as employment, social security, pensions, social benefits, etc. Most importantly, DOST centers also create and update the unified portal for vacancies, registering CV-s of people seeking vacant positions. As President Ilham Aliyev noted: “one can see clearly the policy of modernization in DOST centers such as reforms, innovation, the fight against corruption and bribery, new technologies, the involvement of young people in this work, the activities of volunteers” (President.az). 

All the aforementioned and many other reforms in the country helped to grow the economic power of the country and diversify the national economy. In 2019 the national economy grew by 2.4% and non-energy GDP rose by 3.2% spurred by strong performances in agriculture, manufacturing, and the services sectors (Worldbank.org). 

It should be specially underlined that the development of the agricultural sector is the key part of the country's strategic plan, as well as the economic reforms undertaken in recent years clearly illustrate the diversification strategy regarding this sector.  For instance, the share of this sector in the labor market is quite high (about 1.5 million people are employed in this sector). However, the share of this sector in GDP is low. In this regard, the innovative development will lead to an increase in the agricultural sector's share in the country’s GDP. And for this purpose, a number of important steps should be taken to further develop and improve the agricultural sector. These steps include a clustering approach taking into account the specifics of the regions; support of innovative methods and scientific research in the agricultural sector; to develop highly skilled workers and professionals, taking into account the main needs of this sector; increasing production efficiency in this sector and strengthening consumer-supplier relations, etc. These are some important steps, which are important in every agricultural transformation. 

We can emphasize that all the aforementioned reforms have been positively assessed by international organizations. According to the Global Competitiveness Report 2019, Azerbaijan took 58^th place among 141 countries. In this report, Azerbaijan took 23rd place in business dynamism and 68th place in innovation capability. World Economic Forum Moreover, according to Doing Business Report 2020, Azerbaijan ranked 34th place in ease of doing business ranking. The country improved areas such as starting a business, registering property, getting credit, protecting minority investors, paying taxes and enforcing contracts (World Bank).

In the end, the recent World Economic Forum Annual Meeting Davos 2020 showed once again the interest of leading companies in Azerbaijan. For instance, the decision to choose the capital of Azerbaijan, Baku city as a regional center by Procter and Gamble Europe, is the result of the improved business environment for foreign investors in the country. Last but not least, the opening of the regional center of the World Economic Forum in Azerbaijan is very important for the economic environment. The country will be much more attractive for foreign investment, and especially, investments in the non-oil sector will be increased. All reforms, security, and political stability in Azerbaijan give confidence that the country will continue its development, and will be the hub to ensure regional and trans-regional projects.

Shahmar Hajiyev

Analyst, Center for Analysis of International Relations, Baku, Azerbaijan 

26 February 2020 / 10:22