AmCham Azerbaijan: “the Government must be Prepared for the Post-Pandemic Period”
Over 257 U.S. companies operate in various sectors of the Azerbaijani economy. As one of the major fields hit by the pandemic has been tourism and hospitality, U.S. businesses operating in this sector have been affected in a significant way. However, as a substantial part of U.S. businesses operate in the oil and gas industry, these investments have overcome the current situation more smoothly.
“In order to speed up the recovery of the economy, the government must be prepared for the post-pandemic period. The government must provide credit for business development and sustainability. Also, there should be an option to consider offering minimum wage support. Additionally, for most affected sectors the government can establish specific rules. For example, in the tourism sector, there can be strict guidelines imposed around social distancing and medical precautions to force the sector to operate within new norms that can attract more visitors to Azerbaijan,” said Gulnara Aslanbayli, Executive Director at the American Chamber of Commerce in Azerbaijan.
In her exclusive interview with Forbes Georgia, Mrs. Aslanbayli also talked about the negative economic impacts of the Armenia-Azerbaijan conflict on Azerbaijan and on the whole region.
The special COVID-19 Operational Headquarters was established by authorities that were tasked to develop specific measures to reduce the negative impact of the pandemic on the country's business environment. How would you assess these measures, did they manage to bring relief to businesses?
At the beginning of the pandemic in the country, the President of Azerbaijan issued an order to allocate 1 billion manats from the state budget to the Cabinet of Ministers for the implementation of measures to reduce the negative impact of the Coronavirus pandemic on the economy, to ensure macroeconomic stability, to support employment and entrepreneurship. In order to effectively implement the measures, the Cabinet of Ministers adopted an action plan containing compensation for damages to entrepreneurs and their employees. The government of Azerbaijan also began to implement a credit and guarantee support program, which enables businesses to get loans with preferential terms. Additionally, the economic support program of the government also envisages tax benefits, privileges, and holidays for business entities. These measures helped affected businesses to reduce their challenges in a significant way.
Some local politicians and economists stated that it would be incorrect to assess the impact of the Coronavirus on the Azerbaijani economy only negatively, as increased demand for IT and communications services have had some positive impact. Can we seethe pandemic as an accelerator to the above-mentioned sectors?
I would say that the pandemic affected certain businesses in a positive way. It boosted the IT sphere and other digital and online businesses. I think this tendency will continue in the post-pandemic period too, including the fact that the government has decided to support these businesses after the pandemic.
What are your expectations regarding how global pandemic will change the culture of doing business?
The pandemic has fundamentally changed the way of doing business and it seems that it will continue to do so. It has forced business and policymakers to do things that were previously considered impossible. As a result, business leaders are quickly embracing new ways to engage with customers, adapting to new ways of working, investing in technology innovation, and revisiting their business resiliency plans for long-term success. Remote working will boost regions around global economic hubs as firms shed more than a quarter of their city-center office space. Business will tend to be more actively engaged in technological innovations and automation. Also, corporate social responsibility, sustainability, and climate risk will become part of the overall business supply chain agenda and strategy.
There seems no end to the global pandemic yet, but still, every country is trying to get over it with minimal economic impact. What would you suggest to businesses in this regard, what are the main steps that are required to be taken to return to pre-pandemic economic conditions soon?
During this period, it is important to establish a comprehensive remote working option. Employees showing the necessary flexibility to shift to the new normal. Businesses must communicate transparently with their customers. To return to the previous economic environment soon, in my view, businesses should create a detailed relaunch plan. In this, they will have to accelerate digital transformation to serve new customers and employee needs and improve data-driven decision making. Additionally, businesses must reinvest in recovery to be able to achieve it soon and properly.
The volume of U.S. investment in the Azerbaijani economy has reached $14 billion, of which $12.8 billion relates to the oil and gas industry. While the oil and gas sector has historically attracted the majority of foreign investment, the Azerbaijani government has targeted four non-oil sectors to diversify the economy: agriculture, tourism, information communications technology (ICT), and transport. What are the main reasons behind the lack of investors’ interest in non-oil sectors in Azerbaijan?
Currently, the country is undergoing certain reforms, especially economic and judiciary reforms. These are the two main fields requiring most reform. Those four non-oil sectors are the ones that the legislation has set certain preferential terms for. A strong and transparent judiciary is key to attracting investment, it will help to protect investors’ rights. Additionally, the government must promote the investment climate for the aforementioned sectors by letting investors know about the current privileges, also to introduce new benefits for them in case they need further ones.
What are the main concerns for investors willing to invest in Azerbaijan?
As I mentioned previously, one of the main concerns for investors is about the protection of their rights by law. In this case, they look for fair judgment and transparency. Businesses seek mediation and arbitration options also to be in place. Furthermore, predictability for newly adopted legislation can be another concern as the businesses tend to be ready for all circumstances in advance. Additionally, I would note employment issues – easy hiring and firing –in accordance with employment legislation.
What are the main advantages of Azerbaijan in comparison to other countries of the Caucasus?
Azerbaijan’s economy is growing, and it has already been for a few years since the government started to diversify. It is not only attractive for oil and gas companies, but also for the non-oil economy too. There are ongoing economic, judicial, and structural reforms. The country has stability, which also affects its business climate positively. There were free economic zone and industrial parks established with a number of benefits for investors.
AmCham Azerbaijan has recently organized a webinar: “Economic Implications of the Armenia-Azerbaijan conflict”, during which your guest speaker briefed the participants on the negative economic impact of the conflict on Azerbaijan and on the whole region. What is your estimation of this issue and what is the cost of the conflict to the region?
In general terms, the conflict destroyed the integrity of the South-Caucasus region. Trade relations with the former Soviet Union were disrupted. The entire occupied region, full of natural resources and production opportunities, remains almost unused. The conflict also led to the loss of large financial resources on both sides because of military expenditure. Instead, these resources could be used for economic development and regional projects, strengthening the economic prosperity of the region. The conflict also threatens European energy security and stability in the whole region, as well as the business and investment climate too.
Over the past several years, the Government of Azerbaijan has adopted a series of measures to increase transparency and combat corruption. However, corruption, together with the authoritarian political regime remains one of the weak points of the country. Are AmCham members still affected by the existence of corruption?
As AmCham, we always cooperate with the government to improve the business climate in the country. In this direction, we submit various policy papers, such as white papers or position papers to the government. In different periods, these policy documents also included proposals in the way of improvement of transparency, prevention of corruption, reforms in the judiciary system, and so on. Although there still is a need for further improvement in this way, it should also be stated that there is significant progress too. Setting up ASAN (Azerbaijan Service and Assessment Network) centers across Azerbaijan is one of the best initiatives that the government has taken in recent years to aggressively fight bureaucracy and corruption. The establishment of a fully functioning E-government platform also helps to take this initiative even further. Another significant measure aimed at increasing transparency, integrity, and helping the fight against corruption in the judiciary system was the introduction of the electronic court system. The system introduced electronic filing of documents, automatic allocation of cases, and case tracking, observation, and notification (including online observation of court proceedings, receipt of SMS and e-mail notifications by the participants of the proceedings). As soon as the E-court system will be fully implemented in all courts of the country, it will significantly ease access to justice.
It’s quite interesting that AmCham Azerbaijan has been led by women for quite a long time. However, women being active in business is still a challenge in Azerbaijan. What are the main obstacles for female involvement in businesses and how can it change?
I think there are several matters that affect this. Lack of support by their families at early stages in their careers, certain legislative assistance, and access to finance for establishing business can be some examples of obstacles. However, if there would be support programs for women in business to help grow their businesses, for example, legal consulting services free of charge or supplemented by the state, and support for finding relevant markets for their products, then we may witness fundamental changes in this area. For instance, in public procurements, there could be a requirement for procuring a certain percentage of goods from female-led businesses.