IS AZERBAIJAN GETTING SERIOUS ABOUT STRUCTURAL REFORM?

Azerbaijani president Haidar Aliev issued a decree on June 25 calling for the shrinking and reorganization of the government’s central administration, as well as for more rapid privatization, banking reform, and increased assistance to small business. (Reuter, Russian agencies, June 25) This decree appears to have been made under pressure from the IMF, however, and the government’s commitment to implementing these reform steps remains uncertain.

Although Azerbaijan has, since 1995, made strong progress in macroeconomic stabilization and restarting economic growth, the government has relied mostly on foreign investment in the energy sector (some $18 billion worth of foreign investment projects have thus far been committed) to turn the economy around. By contrast, little has been done with privatization or reforming the state administrative, banking, and enterprise sectors. Unlike almost all the other CIS countries, voucher privatization was introduced only this year in Azerbaijan, and only 21 firms have thus far been privatized under the program. Likewise, a recent IMF report described the industrial ministries as de facto "state monopolies," and the continuation of Fund assistance has been conditioned on reductions in their numbers. (Azadlyg, June 24)

Aliev’s decree responds to these issues by abolishing the Ministry of Domestic Trade and the Ministry of Foreign Economic Relations, as well as the state-owned "Goods for the People" concern. In addition, the State Contract Corporation has been ordered to decide which enterprises are to remain under state ownership and which are to be privatized — within a ten-day period. With only slightly less haste the government and National Bank are to develop a plan for restructuring the banking system by August 1. Aliev also approved a program to support small business to the year 2000.

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