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loans were in the main sufficient to enable banks to repay their foreign debts without reducing their own lending.
The Georgian banking sector in 2008 mostly maintained the required capital adequacy ratios. Despite a decline, according to NBG data, they remained above the legally required 12% and constituted 13.9%; the liquidity ratio in the banking sector, measured as total liquid assets divided by total liabilities, fell from 39% to 28% (the required ratio is 20%).
Overall, the Georgian banking sector has passed a difficult test: none of the commercial banks went bankrupt. This is due, on the one hand, to the relative independence of the banking system from attracted funds because of strict supervision requirements and, on the other, to the relatively low impact of the financial crisis.
C o n c l u s i o n
Despite the financial crisis and the grave consequences of the war with Russia in August 2008, Georgia has so far maintained positive GDP growth rates (+2.1%), relative stability of the national currency, target inflation rates, an effective monetary policy, and public finance stability. Not a single commercial bank has failed. These results have been achieved due to domestic resources and massive financial assistance from the United States, EU countries and international financial institutions; part of this assistance has been utilized, and the rest is to be utilized in the near future.
Even so, analysts expect a slowdown in economic growth, a further decline in foreign investment, a growing trade deficit, difficulties in the development of the real sector (industry, agriculture), and a rise in unemployment. These and other unresolved problems will sharpen financial and monetary contradictions. In order to deal with the expected problems, in 2009 the Georgian government developed a medium-term strategy for 2010-2013, which is fragmented and imperfect. The adopted document should be reworked and completed so as to take the form of an action program designed to meet the expected challenges.
Ruzi MAMEDOV
Editor-in-Chief, Banks and Business magazine
(Baku, Azerbaijan).
ON THE ECONOMIC COMPETITIVENESS OF AZERBAIJAN
Abstract
T
This article examines the parameters of Azerbaijan’s economic competitiveness based on the reports of the World
Economic Forum. To complete the picture, Azerbaijan’s economic indicators are compared with those of countries similar to it in
various respects: Georgia, Russia, Kazakhstan, Turkey, Ukraine and Armenia. The article presents analytical comparisons for 12 pillars of competitiveness, showing the strengths and weaknesses of Azerbaijan’s
competitiveness. It also considers the business environment in the country, which helps to identify the most problematic factors for doing business in Azerbaijan based on the opinion of business executives.
I n t r o d u c t i o n
Competitiveness cannot be measured directly or expressed in absolute terms. The level of a country’s economic competitiveness, like that of an enterprise or an industry, is a relative indicator that can be measured only in comparison. Its dynamics over time (several years) make it possible, on the one hand, to determine the quality of economic growth and the economic development trends in a particular country (as well as on a global and regional scale) and, on the other, to define the tasks that can be regarded as particularly relevant in the coming years.1
There are several methodologies for measuring national economic competitiveness, each of which has its strong and weak points. These methodologies are seriously affected by the political orientation of the research centers that develop them. In analyzing various cross-country comparative studies in the field of competitiveness, it is important to take into account that the vast majority of research centers engaged in such studies hold right-of-center views and, accordingly, advocate the maximum possible reduction of government intervention in the economy.
One of these centers is the World Economic Forum (WEF), a Switzerland-based international non-profit organization. Its annual analytical reports on relative national economic competitiveness are generally recognized as the most objective reports in this area. These reports, first, cover a sufficiently representative number of countries and, second, analyze a sufficiently wide range of indicators, which add up to provide a more or less comprehensive picture of national economic competitiveness. An undeniably positive feature of the WEF methodology is that it does not overlook the so-called physical infrastructure of the economy, as most other similar studies unfortunately do.2
The latest WEF report in this series was published in the fall of 2009 and is available to the public.3 In this article, Azerbaijan’s economic competitiveness is analyzed based on that report.
Best and Worst Performers
An analysis of changes in national economic competitiveness in recent years shows that the list of the world’s top performers in this area is more or less stable, at least at the present stage. Since 2008, the top 10 countries have remained the same, with some changes in rank among them. In particular, Switzerland has changed places with the United States to become the world’s most competitive economy; Canada has strengthened its position, for the first time moving up to 9th place,
1 See, for example: M. Porter, On Competition, Harvard Business School, Boston, 1998; C. Zinnes, Y. Eilat, J.D. Sachs, “Benchmarking Competitiveness in Transition Economies,” Economics of Transition, Vol. 9, No. 2, July 2001, available at [http://ssrn.com/abstract=273155]; E.G. Manuel, Innovation and Competitiveness. Perspectives of Different Countries of the World and Opportunities of Benchmarking, p. 4, available at [http://ssrn.com/abstract=1122456].
2 A detailed critical analysis of the WEF methodology is given in: N. Muzaffarli, Reiting Azerbaidzhana v mezh-dunarodnykh sravnitelnykh issledovaniakh, Kavkaz Publishers, Baku, 2006, pp. 389-417.
3 See: The Global Competitiveness Report 2009-2010, available at [http://www.weforum.org/documents/GCR09/ index.html].
while Denmark and the Netherlands have dropped in the rankings (see Table 1). It should be noted that the average competitiveness index score for the top 10 countries has declined from last year’s 5.51 to 5.45 (out of a maximum possible score of 7). This is clearly due to the impact of the global economic downturn on the economy of these countries.
Table 1
Top 10 Countries in Global Competitiveness Rankings in 2009 and Their Positions in 2003-20084
Country 2009 2008 2007 2006 2005 2004 2003
Switzerland 1 2 2 1 4 8 7
United States 2 1 1 6 1 2 2
Singapore 3 5 7 5 5 7 6
Sweden 4 4 4 3 7 3 3
Denmark 5 3 3 4 3 5 4
Finland 6 6 6 2 2 1 1
Germany 7 7 5 8 6 13 13
Japan 8 9 8 7 10 9 11
Canada 9 10 13 16 13 15 16
Netherlands 10 8 10 9 11 12 12
The 10 lowest-ranking countries include Tajikistan, Kyrgyzstan, Paraguay, Nepal and several African countries.
Basic Premise: Classification of Countries by Level of Economic Development
The WEF methodology is based on the indisputable fact that countries with radically different economic development levels cannot be compared using the same competitiveness measures. That is why the starting point is an appropriate classification (grouping) of countries/economies based on two criteria: quantitative (GDP per capita adjusted for purchasing power parity) and qualitative (sectoral structure of the economy determined by the structure of exports).
As for GDP per capita growth rates, over the past 15 years Azerbaijan has been one of the world’s best-performing countries. This conclusion is confirmed not only by national statistics, but also by data from various international sources, although these data do not always coincide (see Fig. 1).
4 Compiled from: The Global Competitiveness Reports for 2003, 2004, 2005, 2006, 2007, 2008, 2009, available at [http://www.weforum.org/en/initiatives/gcp/Global%20Competitiveness%20Report/PastReports/index.htm].
Figure 1
GDP Per Capita in Azerbaijan (PPP international dollars),
1994-20085
Figure 1 shows a clear acceleration of GDP per capita growth in Azerbaijan since 2003. Taking into account the absolute level of this indicator, the WEF divides all countries of the world into three groups (“stages”): countries whose competitiveness is driven by factors of production (Stage 1), efficiency (Stage 2) and innovation (Stage 3). In accordance with the WEF’s quantitative criteria and taking into account IMF data (these data are used to classify countries), from 2007 Azerbaijan should have moved to Stage 2, and from 2010 it should have been classified as a country “in transition” between Stages 2 and 3.
But this did not happen. The obstacle here was the second (qualitative) criterion: the share of oil and oil products in total exports is still high and is variously estimated at 75-85% (see Fig. 2). Given the country’s excessive dependence on oil and gas exports, it was included among countries in transition from Stage 1 to Stage 2.
Even without further analysis it is clear that providing incentives to increase the share of non-oil products in total exports is now one of Azerbaijan’s main tasks in order to improve, among other things, the country’s economic competitiveness. It is only natural that this task was clearly formulated by Azerbaijan President Ilham Aliev.6
5 Compiled from: Central Intelligence Agency CIA), The World Factbook, available at [https://www.cia.gov/li-brary/publications/the-world-factbook/]; International Monetary Fund (IMF), World Economic Outlook, April 2009, available at [http://www.imf.org/external/pubs/cat/longres.cfm?sk=22575.0].
6 See, for example: Decree of the President of the Azerbaijan Republic approving the Long-Term Strategy for the Management of Oil and Gas Revenues, available at [http://www.oilfund.az/old/index_az.php?n=100].
Share of Oil and Oil Products in Azerbaijan's Total Exports, 2004-20087
60,000
50.000
40.000
30.000
20.000 10,000
2004
2005
2006
2007
2008
Exports (total, millions of dollars)
Share of oil and oil products in total exports (%)
100%
95%
90%
85%
80%
75%
70%
0
Selection of Countries for Competitiveness Comparisons
Cross-country comparisons have constructive potential only if they are made for countries that are somehow comparable. This comparability can be due to similar economic systems (as in comparing transition countries), the size of the economy (measured by universal indicators such as GDP or GNP volume or the size of the domestic market), similar sectoral structure of the economy (as in comparing countries dependent on raw material exports), common national-spiritual values (as in comparing Muslim countries), location in the same region (as in comparing countries of the Caucasus), and other factors such as common foreign markets, etc.
Considering all these factors, in this article Azerbaijan’s economic competitiveness is compared with that of Georgia, Russia, Kazakhstan, Turkey, Ukraine and Armenia.
According to the latest WEF report, Azerbaijan is the leader in national economic competitiveness in its own region (Central Caucasus) as expressed by the Global Competitiveness Index (GCI). Azerbaijan, Georgia and Armenia hold the 51st, 90th and 97th places, respectively, in the overall GCI rankings. Whereas Azerbaijan has improved 18 places since the previous year, the ranks of Georgia and Armenia have remained the same.
7 Compiled based on data from the State Statistical Committee of the Azerbaijan Republic, available at [http:// www.azstat.org/publications/azfigures/2009/az/018.shtml].
Competitiveness Structure of Azerbaijan and Countries in the Comparison Group8
Azerbaijan
Armenia
12 _1
10
4 10
5 9
Georgia
2
80 60 40 20
4 10 ^ 0
59
Turkey
Ukraine
12 1
10
4 10
59
86
7
12 12
Russia
2
3
4 10
59
7
10
Kazakhstan 2
3
4
1. Institutions
2. Infrastructure
3. Macroeconomic stability
4. Health and primary education
5. Higher education and training
6. Goods market efficiency
7. Labor market efficiency
8. Financial market sophistication
9. Technological readiness
10. Market size
11. Business sophistication
12. Innovation
1
1
4
7
7
7
1
1
1
4
7
1
7
8 These and subsequent charts are based on data from The Global Competitiveness Report 2009-2010 , available at [http://www.weforum.org/documents/GCR09/index.html].
The GCI is determined based on an analysis of 12 economic parameters (“pillars”). For a more detailed examination of Azerbaijan’s competitiveness and its comparison with the other six selected countries, we can use a graphical method based on the distance from the center (see Fig. 3). The smallest area of the shaded part of the chart indicates the best position in the GCI rankings. This chart gives an idea of the country’s performance in each of the 12 pillars of competitiveness.
Factor Analysis
An analysis of national economic competitiveness has the obvious advantage that it helps to identify the country’s international comparative advantages and potentialities. For this purpose, each of the 12 pillars listed above should be considered separately.
1. Institutions. The advocates of the theory of international competitiveness believe that each country’s economic competitiveness is ultimately determined by the competitiveness of its companies, while the success of the latter primarily depends on institutional factors. For their assessment, the WEF uses two criteria (subpillars), distinguishing between public (government) and private institutions.
In both subpillars, Azerbaijan is the leader among the countries compared, holding strong positions in the protection of property rights, especially intellectual property rights. In assessing the development level of private institutions, the WEF takes into account two components: corporate ethics and the degree of economic transparency (“accountability of private institutions”). In both of these, Azerbaijan is highest in the rankings (see Fig. 4).
Figure 4
Public and Private Institutions (rank)
A relatively weak spot, in the opinion of the authors of the report, is security. But this is easily explained considering that a significant part of the country’s territory is still under occupation, while violations of the ceasefire regime by the Armenian armed forces have become more regular. All of this undoubtedly increases the likelihood of a resumption of large-scale hostilities.
2. Infrastructure is regarded as the 2nd pillar of national competitiveness. The report distinguishes between general and specific infrastructure. General infrastructure includes infrastructure elements that influence the development of all sectors of the economy, often playing a key role in this process. As for so-called specific infrastructure, its level is assessed based on survey data on the quality of roads, railroads, ports, air transport, electricity supply and some other infrastructure systems. The WEF also uses a number of statistical indicators (hard data) measuring the availability of telephone lines or the “density” of passenger air transportation (“available seat kilometers”).
In terms of the development of general infrastructure, Azerbaijan is first among the countries compared, and in specific infrastructure it is outranked only by Turkey and Russia (see Fig. 5).
Figure 5
General and Specific Infrastructure (rank)
100
90
80
70
60
50
40
30
20
10
0
Azerbaijan
Armenia
Georgia
Turkey
Ukraine
Russia
Kazakhstan
General
infrastructure
Specific
infrastructure
3. Macroeconomic stability. The economic downturns of recent years have once again confirmed the importance of macroeconomic stability for the international competitiveness of entire countries and their companies. Macroeconomic balance enables market actors to base their decision-making on a more solid foundation.
For a comparative assessment of macroeconomic stability, the WEF analyzes hard data on government budget balance (deficit or surplus), national savings rate, inflation, interest rate spread and government debt. In the first two indicators, Azerbaijan’s positions are quite strong: it ranks first in the world in national savings rate and is among the world’s top 10 countries in government budget balance. Government debt (relative to GDP) is insignificant. In terms of this indicator, Azerbaijan is among the top 20 countries in the world, although in the comparison group it ranks slightly below Russia and Kazakhstan. The only cause for concern is inflation (for which the WEF uses 2008 statistics) and the interest rate spread. At the same time, it should be noted that in most countries compared these indicators are even worse than in Azerbaijan: for example, in terms of the interest rate spread Azerbaijan is ahead of all other countries in the group except Turkey and Russia. The results of the study of macroeconomic stability are shown in Figure 6.
Figure 6
Macroeconomic Stability (rank)
140 t
Budget National Inflation Interest rate Government
deficit savings rate spread debt
| Azerbaijan Armenia Georgia | Turkey Ukraine Russia Kazakhstan
4. Health and primary education are included among the basic (primary) factors of competitiveness (“basic requirements”). In this pillar, Azerbaijan ranks 96th in the world. This is the country’s lowest ranking for any of the 12 pillars (see Fig. 7). Much work lies ahead to improve all the components of this pillar. These include: infant mortality, life expectancy, HIV prevalence, malaria and tuberculosis incidence, and also the quality of primary education, primary enrollment and education expenditure.
Health and Primary Education (rank)
120
100
80
60
40
20
0
Azerbaijan
Armenia
Georgia
Turkey
Ukraine
Russia
Kazakhstan
Health
Primary education
5. Higher education and training. This pillar has three subpillars:
(a) quantity of higher education;
(b) quality of higher education and
(c) on-the-job training.
The first subpillar is calculated from statistical data on the relative number of citizens receiving a secondary and higher professional education (“secondary and tertiary enrollment”). In these indicators, Azerbaijan is unfortunately the lowest-ranking among the countries compared. The problem is compounded by lax hiring practices since employers prefer to hire and retrain employees. The quality of education (as well as on-the-job training) is determined from survey data taking into account the quality of the educational system (especially of math and science education), the quality of management schools, and Internet access in schools. Azerbaijan’s performance in these areas, except Internet access, can hardly be regarded as satisfactory. In the comparison group, it is ahead of only Georgia and Armenia and is in the second half of the world rankings, as in the previous subpillar.
As for on-the-job training (training and retraining of staff), the report uses survey data to assess the local availability of specialized research and training services and the extent of staff training in companies. In this indicator, Azerbaijan ranks first in the comparison group. The results of the WEF study of this factor are shown in Figure 8.
6. Goods market efficiency is analyzed based on two subpillars: competition (subdivided into domestic and foreign competition) and quality of demand conditions (see Fig. 9). Domestic competition is assessed depending on its intensity, dominance of local companies in domestic markets, effectiveness of anti-monopoly policy, total tax rate, extent and effect of taxation, number of procedures and time required to start a business, and agricultural policy costs.
Figure 8
Higher Education and Training (rank)
140 120 100 80 60 40 20 0
Quantity of Quality of On-the-job training
education education
Azerbaijan Armenia Georgia | Turkey Ukraine Russia Kazakhstan
Figure 9
Goods Market Efficiency (rank)
140 120 100 80 60 40 20 0
Azerbaijan Armenia Georgia | Turkey Ukraine Russia Kazakhstan
Overall Domestic Foreign Quality of
competition competition competition demand conditions
Judging by the first three components, Turkey has a freer market than Azerbaijan. This is quite natural: a market economy in that country was created over a long period of time, while the former socialist countries had virtually no time at all. Azerbaijan’s positions in these three components (105th, 89th and 116th in the world rankings, respectively) indicate the need for serious reforms to improve market mechanisms. As for the extent and effect of taxation, the number of procedures required to start a business and agricultural policy costs, in these components Azerbaijan ranks second in the group, and in total tax rate it is 64th in the overall rankings, which is a natural result of its socially oriented budget policy.
In the area of foreign competition, the situation is contradictory. In terms of the impact of trade barriers on imports (“prevalence of trade barriers”) and the average level of tariff rates (“tariff barriers”), Azerbaijan is significantly behind the other countries compared, whereas in three other components (prevalence of foreign ownership, business impact of rules on foreign direct investment and burden of customs procedures) it is significantly ahead of many of them.
In overall competition (domestic and foreign), Azerbaijan ranks third in the group behind Turkey and Georgia.
The quality of demand conditions is one of the most interesting and, at the same time, difficult-to-measure indicators analyzed in WEF reports. It is assessed based, first, on companies’ treatment of consumers (“degree of customer orientation”) and, second, on buyer sophistication. The latter takes into account the degree of customers’ awareness of their rights and how demanding they are with respect to supply. Both these indicators are known to be highly subjective, so that Azerbaijan’s top ranking in the comparison group for these components is all the more encouraging.
7. Labor market efficiency as interpreted by the WEF reflects the productive use of the country’s labor resources, i.e., the best possible use of people’s skills and abilities. In this context, the report analyzes two subpillars. The first one characterizes the flexibility of the labor
Figure 10
Labor Market Efficiency (rank)
140
120
100
80
60
40
20
II
Azerbaijan
Armenia
Georgia
Turkey
Ukraine
Russia
Kazakhstan
Flexibility Efficient use of
talent
market and includes cooperation in labor-employer relations, flexibility of wage determination, ease of hiring and firing workers, and firing costs. In these indicators, Azerbaijan is second in the group, outranked only by Georgia.
The second subpillar (efficient use of talent) includes dependence of pay on productivity, reliance on professional management, brain drain, and female participation in labor force. According to the report, reliance on professional management in Azerbaijan is relatively low (95th place in the world rankings). But one should take into account the mental peculiarities of Azerbaijani entrepreneurs, most of whom prefer to run their own business. This may have a negative effect on the quality of management, but at the same time it prevents so-called depersonalization of ownership, which often leads, judging from the experience of a number of economically developed countries, to even more significant negative consequences. Azerbaijan’s position in the efficient use of talent can be regarded as satisfactory (in the comparison group, it is only slightly behind Russia and Kazakhstan).
The overall results for labor market efficiency are shown in Figure 10.
8. Financial market sophistication. The current financial crisis has shown once again the importance of financial markets for overall national economic stability. The WEF analyzes this pillar using two subpillars. The first one (efficiency) includes financial market sophistication, opportunities for financing through local equity market, ease of access to loans, venture capital availability, restriction on capital flows and strength of investor protection. In all these indicators (except possibly restrictions on the free movement of capital), Azerbaijan’s positions are sufficiently strong. In the overall result for the efficiency subpillar, it is second among the countries compared.
The second subpillar (trustworthiness and confidence) includes soundness of banks, regulation of securities exchanges and a so-called legal rights index. In these indicators, Azerbaijan is the leader in the comparison group (see Fig. 11).
Figure 11
Financial Market Sophistication (rank)
9. Technological readiness. This pillar measures the relative level of an economy’s “openness” to new technologies. For this purpose, the WEF analyzes such indicators as the availability of latest technologies and the agility with which companies adopt these technologies (“firm-level technology absorption”). A kind of infrastructure background to this is provided by laws regulating information and communication technologies (ICT) and foreign direct investment. In addition, the WEF uses a number of simple statistical data on the relative number of mobile telephone subscriptions, personal computers and Internet users, including broadband Internet subscribers. Somewhat unexpectedly, Azerbaijan ranks below most comparison group countries in the indicators related to personal computers and the Internet, although in the other components of this pillar it is either in the lead or is in second place behind Turkey.
10. Market size is assessed from the size of both the foreign and the domestic market. Such indicators (GDP, exports, etc.) in the context of universal relative competitiveness are of conditional importance, because they are determined, in the first place, by the size of the economy as a whole. Clearly, the larger the country the larger is its market (all other qualitative indicators of economic growth being relatively equal). Nevertheless, a large market is an obvious economic advantage. Figure 12 gives an idea of the size of the market in the countries compared.
Figure 12
Market Size (rank)
11. Business sophistication concerns, first, the quality of interaction between companies and supporting (supplying) industries (“networks and supporting industries”). It also takes into account the state of cluster development in the country. The second subpillar is the sophistication of firms’ operations and strategy, which is assessed based on the nature of their competitive advantage, production process sophistication, the quality of marketing strategies, etc. In both subpillars, Azerbaijan is second among the countries in the comparison group, outranked only by Turkey (see Fig. 13).
Business Sophistication (rank)
| Azerbaijan | Armenia | Georgia
■ Turkey H Ukraine
■ Russia
■ Kazakhstan
Networks and supporting Sophistication of firms'
industries operations and strategy
12. Innovation. In this pillar, Azerbaijan is the leader among the countries compared. This is particularly important given the set of indicators used by the WEF to compare countries in terms of innovation. These include: capacity for innovation, quality of scientific research institutions, company spending on R&D, university-industry collaboration in R&D, government procurement of advanced technology products, availability of scientists and engineers, utility patents, and intellectual property protection.
Business Environment
It is easy to see that most of the factor indicators of national economic competitiveness simultaneously characterize the quality of the national business environment (primarily infrastructure) for doing business. At the same time, the WEF analyzes business conditions by holding surveys among business executives. Their purpose is to identify the barriers to business (“the most problematic factors for doing business”) in a particular country.
For this purpose, WEF experts have compiled a list of the 15 most widespread (universal) barriers, whose importance is determined in the course of the survey. This makes it possible to draw up a list of the most problematic factors for doing business in each particular country and to rank them in order of decreasing importance. An advantage of this approach, among other things, is that it helps to assess the dynamics of changes in the business environment over time, i.e., to compare the importance of various problematic factors in different years. These comparisons are very useful for determining how promptly the country’s government responds to the real situation, adjusting its methods of economic regulation.
In 2009, for example, Azerbaijani business executives believed that the five most problematic factors for doing business in the country were corruption, inflation, tax rates, access to financing and inefficient government bureaucracy. These five factors added up to 66.5% of all problematic factors,
while the share of the five lowest-ranking factors (i.e., the least problematic for the country) was only 7%. In 2010, we find serious changes in the five most problematic factors, although corruption remains “in the lead.” Today it is followed by an inadequately educated workforce, tax rates, tax regulations and inefficient government bureaucracy. The total share of the first five factors is 57.6%. Inflation, which was ranked second based on the results of the previous survey, has largely lost its significance. The results of the latest WEF survey are given in Figure 14.
Figure 14
The Most Problematic Factors for Doing Business in Azerbaijan in 2010
0.0 0.5 10.0 15.0 20.0 25.0
Corruption
Inadequately educated workforce Tax rates Tax regulations Inefficient government bureaucracy Inflation Access to financing Inadequate supply of infrastructure Poor work ethic in national labor force Restrictive labor regulations Foreign currency regulations Policy instability Government instability/coups Crime and theft Poor public health
C o n c l u s i o n
In its latest study, the WEF has assessed the relative economic competitiveness of 133 countries. For each competitiveness factor, all countries are divided into two groups: countries ranked from 1st to 50th are considered to be advanced on this criterion, and the rest are included among lagging countries.
According to the latest WEF report, Azerbaijan has competitive advantages in 38 factors (i.e., in these factors it is among the top 50 countries in the world). This is the best indicator for the countries compared. It automatically implies that Azerbaijan has the smallest number of competitive disadvantages. From this perspective, the least favorable situation is in Armenia and Kazakhstan (see Table 2).
Table 2
Number of Competitive Advantages and Disadvantages in the Countries Compared
n ja ai rb er z Az Turkey Russia Georgia Ukraine n a t s JZ k a z a * ia ni e rm Ar
Advantages 38 27 26 26 22 18 17
Disadvantages 82 93 94 94 98 102 103
Despite the successes of recent years, in the near future Azerbaijan will have to implement even larger-scale projects to enhance economic competitiveness. An analysis of the results obtained by WEF experts makes it possible, among other things, to prioritize these programs. In this context, the purpose of government intervention can be formulated as maintaining and strengthening the country’s competitive advantages, on the one hand, and steadily improving the indicators that point to competitive disadvantages, on the other. The latter include, according to the WEF report, inflation, education in the field of management, anti-monopoly activity, etc. (see Table 3).
Table 3
Ten Weakest Factors of Azerbaijan's Competitiveness
Factors Place in world rankings
Inflation* 123
Quality of management schools 117
Effectiveness of anti-monopoly policy 116
Prevalence of trade barriers 113
Infant mortality* 112
State of cluster development 111
Imports as a percentage of GDP* 110
Regulation of securities exchanges 109
Soundness of banks 106
Intensity of local competition 105
Education expenditure* 102
* Hard data; the other indicators are based on survey data.
At the same time, it should be taken into account that this list is not always an accurate reflection of the current state of affairs. For example, the inflation indicator used by the WEF, as noted above,
relates to 2008. Later on, inflation in Azerbaijan slowed significantly under the impact of a number of factors, primarily the global financial crisis. In January-December 2009, the consumer price index rose by only 1.5% compared to the same period of the previous year.9
Questions also arise about the low, in the opinion of WEF experts, share of imports in GDP, which is known to be an indicator of economic openness. On the whole, the ratio of a country’s foreign trade (both imports and exports) to its GDP is an indicator pointing to the degree of globalization of its economy. But the share of imports considered without regard to the sectoral structure of the economy and exports, the dynamics of the country’s international reserves and other similar indicators is hardly representative enough for assessing national competitiveness. This is well illustrated by Azerbaijan, where the low share of imports in GDP certainly does not indicate their relative (let alone absolute) insufficiency. Even with full satisfaction of the country’s import requirements its international reserves continue to increase rapidly due to its huge (by the standards of the national economy) oil and gas revenues.
But on the whole the results of the WEF study are very useful for identifying the “weak spots” in national competitiveness and in this sense have great constructive potential.
9 See: Data from the Central Bank of Azerbaijan, available at [http://www.cbar.az/assets/86/qiymet_indeksinin_ deyishmesi.pdf].
Vakhtang BURDULI
D.Sc. (Econ.), Department Head at the Paata Gugushvili Institute of Economics
(Tbilisi, Georgia).
Nanuli AREVADZE
D.Sc. (Econ.), Department Head at the Paata Gugushvili Institute of Economics
(Tbilisi, Georgia).
REGIONAL FACTORS OF EMPLOYMENT GROWTH AND THEIR INFLUENCE ON ECONOMIC DEVELOPMENT (GEORGIAN CASE STUDY)
Abstract
T
his article takes a look at the external and internal reasons for the low employment level in Georgia.
It analyzes ways to improve employment structure in terms of type of occupation and region.
