NON-OIL SECTOR

Following this initial recovery after the collapse of economic regime established in former Soviet Union, the Azerbaijani economy is now poised to meet the challenges of the transition to a market economy, while at the same time, developing oil resources that will provide the engine for long-term sustainable growth and rising per capita incomes across all segments of the population.

The government is aware of the potential dangers of building an economy that is overly dependent on a single industry or economic sector — oil — and the risk that this industry could inadvertently hinder the development of other sectors of the economy. The goal of Azerbaijan’s economic policy is to achieve balanced growth. To attain this goal, Azerbaijan has been implementing economic reforms supported by advice and the financial resources of the International Monetary Fund (IMF), the World Bank and other bilateral and multilateral creditors. The government’s broad program of reforms includes the following:

� • Liberalization of prices;

• Widespread cuts in government subsidies;

• Tight budgetary and fiscal controls to limit inflation;

• Restructuring the banking sector to improve transparency;

• Modernizing the tax structure;

• Instituting a land reform program; and

• Privatizing state-owned assets.

During the years the reforms have been in place, Azerbaijan’s economy has been undergoing a structural shift, in which services, transportation, communications, trade and construction sectors are rapidly expanding.

Macroeconomic stability was regained and inflation has been brought to lower level. Investment activity in both oil and non-oil sector of the economy have ensured the growth of the economy. As the result of recent achievements international rating agency Fitch IBCA has upgraded Azerbaijan’s long-term foreign exchange credit rating to "BB-”.

Privatization process as an important part of structural reforms in the country has continued. As the result of the first stage of privatization by January 2000, 21544 small companies and units have been privatized and 996 joint-stock companies has been established. By March 2001 this number was 23539 and 1230 correspondently. Since the commencement of privatization process by the year 2002, 33700 companies have been privatized.

Introduction

Azerbaijan is an industrial-agricultural country rich with natural resources including oil, natural gas, mineral resources, cotton and large areas of farmland. As a result, the country’s economy is built on manufacturing, mining and agriculture. Besides oil and gas, the reserves of iron ore, zinc ore, molybdenum ore, alunite, rock salt, gypsum, lime stone, bitumen, clay, and marble are used in industrial exploitation, including, hydro-electric power resources. The agriculture is specialized in the cultivation of fruits and� vegetables, fruits, cotton, tobacco, subtropical cultures, silkworm and sheep breeding.