Situated at the crossroads of Europe, Central Asia and the Middle East, Azerbaijan has become a confident and relatively stable State in the post-Soviet era and an upper-middle-income country. It is experiencing one of the most exciting periods in its history and is implementing a development path intended to make it a leader in the South Caucasus and beyond. The Government has recently declared that “Azerbaijan has completed a period of transition”, with new socioeconomic systems established and with the necessary infrastructure to support expanded economic activities taking shape.Driven by hydrocarbon wealth, growth in Azerbaijan remained comparatively buoyant overall despite the global economic downturn, and GDP in 2012 reached US$66.6 billion, a more than threefold increase from 2003. While the hydrocarbon sector produce almost half the country’s GDP, it only employs 1% of the labour force. The sector is extremely capital intensive and requires very low labour participation. On the other hand, agriculture, forestry and fishing produce only 6% of GDP, but employ 45% of the economically active population.
Over the past decade employment in Azerbaijan has grown. Employment rate has marginally improved from 60.9% in 2011 to 61.2% in 2012 while the quality of employment seems to have deteriorated due to the increased share of informality as captured by swelling agricultural employment that acts largely as a fall back option for people who could not find productive employment in other sectors of the economy.
Disparities persist in terms of job productivity and level of pay between Baku and the regions. While pay level has increased in all parts of the country, the rate of pay increase in Baku is faster. People employed in Baku are at least two times better paid than those in the regions. Disparities from gender perspective remain stark - average monthly salary received by men makes AZN 520 against AZN 244 received by women. Women also have disproportionally high engagement in the agricultural sector characterized by low productivity. The highest unemployment level is continuously observed among youth aged 15-24. Another group excluded from productive life are people with disabilities (PWD). While there is no official statistics on unemployment among PWD, a quantitative survey by UNDP/UNICEF conducted in 2012 shows that 74% of PWD aged 16-64 are unemployed and little has been done to improve their access to employment.
Azerbaijan's economy continued to depend on the revenues from the oil sector, with private sector contributing about 80% to GDP, according to the government statistics, while lion's share of exports falls on hydrocarbons. As such, the economy remains vulnerable to the potential external shocks, particularly to volatility of oil prices at the international market.
There are two recognized international indexes that gauge business environment and competitiveness - the World Economic Forum’s “Global Competitiveness Index” and the World Bank’s “Ease of Doing Business” Report. The 2013-2014 Global Competitiveness Index has raised Azerbaijan’s ranking from the 46th to the 39th place out of 144 countries, which reflects a satisfactory state for future development of the country. The report cites corruption, tax rates and inadequately educated workforce as the top three problematic factors for doing business in Azerbaijan.
Azerbaijan also has a satisfactory standing in respect to business environment and competitiveness as reflected by its ranking at 70th out of 189 countries included in the World Bank’s 2013 Ease of Doing Business Index. The content of this index, however, also shows that Azerbaijan should particularly emphasize improvements in the areas of paying taxes (70/189), resolving insolvency (86th), trade across borders (168th), dealing with construction permits (180th), and getting electricity (181st).
Although Azerbaijan has decent international ratings on business environment and competitiveness, the qualitative assessments point to the fact that development of non-oil activities was spurred by public spending and revamped infrastructure while structural reforms encouraging competition and facilitating trade are resisted as disruptive of existing economic interests.
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