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Azerbaijan
>> Regional Overview >> Azerbaijan Overview
Program Summary
Previous Years' Activities
2001, 2000, 1999, 1998, 1997
Last updated: 02
Introduction
Advancement of free market and democratic reforms in Azerbaijan will improve economic, political, and social conditions in a country critical to the achievement of U.S. regional goals and objectives. A stable and prosperous Azerbaijan is essential to the foreign policy goals of the United States in both the Central Asian Republics (CAR) and the Caucasus. Azerbaijan is a critical link in the East?West corridor and a vital connection in the Trans?Caspian energy export system. Its existence as a politically and socially stable, prosperous and westward?looking country will facilitate the flow of ideas and commerce from Europe and the Black Sea to the CAR and beyond. By encouraging economic development and democracy building, and lessening human suffering, the USAID program promotes Azerbaijan's stability and prosperity, and ultimately reduces the potential for conflict in the region. As it continues to build its oil industry and as it begins to benefit from increased volumes of oil transiting through it, Azerbaijan could become a growing market for U.S. goods and services. Stability and market growth, however, will be dependent not only on oil revenues, but also on the Government of Azerbaijan's (GOAz) upholding democratic principles of rule of law, freedom of expression, and human rights.
Section 907 of the Foreign Assistance Act limits, with few exceptions, the U.S. government (and the contractors it funds) from providing direct assistance to the GOAz and its officials. As a result, assistance in market reform and democracy building is largely targeted toward the private sector, non-governmental organizations (NGOs), and direct humanitarian assistance. Following recent exemptions to Section 907 granted by Congress, program activities have been expanded in private sector development and democracy. USAID's development assistance activities are fully consistent with the American Embassy's Mission Performance Plan (MPP) for Azerbaijan, which identifies transition to a democratic society and an open market economy as basic tenets of U.S. objectives in Azerbaijan.
Development Challenge
Azerbaijan continues to adjust to the new challenges and responsibilities of an independent state long after the break up of the Soviet Union. The GOAz has been slow to embrace the principles of democracy and a market economy, while society has been slow to demand them.
Azerbaijan's economy is polarized by two discrete sectors of influence. The urban sector, dominated by the oil industry, government, and a few big businesses, provides economic opportunities and comfortable incomes to a relatively small number of individuals. The rural sector, dominated by small and medium agri-businesses and non?urban focused services and industries, provides limited economic opportunities and contains the major share of the country's work force. There is a wide disparity of wealth between these two sectors, with the urban sector clearly in command. Much of the population, including refugees, internally displaced persons (IDPs), pensioners, unemployed and underemployed, and the handicapped, is vulnerable and, at best, participates minimally in the economy. In 1998, the last year for which figures are available, the per capita GNP was estimated to be $537, with an estimated 60 percent of all households falling below the poverty level.
Azerbaijan's transition to an open market economy has been hampered by inadequate economic policy reform and economic restructuring, insufficient privatization and private sector development, rampant corruption, and the absence of an enabling legal and regulatory environment. The GOAz continues to count on a financial windfall from the development of offshore oil and gas reserves in the Caspian. However, it is increasingly clear that there will be no near?term financial relief for the GOAz from this sector. Nonetheless, the country has achieved a degree of macroeconomic stability and growth, and a nascent micro? and small business sector is taking root.
Azerbaijan's efforts in establishing a democratic form of government have also been problematic. The current regime is authoritarian, discourages dissent, and limits freedom of expression and the media. Controversy relating to deficiencies in the electoral process surrounded the parliamentary elections held in November 2000 and January 2001. On the positive side, the strong support of western countries and international institutions has helped to establish a growing, albeit erratic, NGO community, and has laid the foundation for public advocacy and political reform.
USAID's efforts in Azerbaijan have largely focused on the critical needs of IDPs and refugees due to the Nagorno?Karabakh conflict. In FY 2000, USAID continued its support for activities that contributed significantly to the improvement of the quality of life of IDPs and other citizens living in conflict-affected areas. USAID programs for these target groups helped to create 3,200 new jobs. The number of micro-credit loans increased while the loan repayment rate improved to 98%.
Continued gains have been made in developing a more active private sector by supporting small and medium enterprises (SMEs) and other private sector economic growth activities. Expansion of credit and agribusiness service programs was particularly successful, as cumulative loans to SMEs reached $3.1 million in value in FY 2000.
Progress was achieved in democracy and governance, with successful programs being implemented to support NGOs, provide election support, and assist in those areas of legal drafting permitted under Section 907. The number of active NGOs increased from 200 last year to 350 in FY 2000. In general, the environment for NGO activities became less hostile. Progress was hindered, however, by a lack of government commitment to democratic processes, especially in the areas of free media and transparent elections.
In FY 2001, USAID began implementation of a new three-year strategic plan that focuses on the transition from relief to longer-term economic development. Humanitarian assistance programs had already shifted to a predominantly transitional character in recognition of the fact that more than six years after the cease-fire with Armenia over Nagorno-Karabakh, more permanent solutions were required. The new strategy will not only help meet the immediate needs of the target population, it also will set the stage for any post-conflict activities that would follow a peace settlement.
Other Donors
Major bilateral donors (France, Germany, Japan and the Netherlands) and multilateral lending institutions (the IMF and World Bank) have approved tens of millions of dollars in credits to support critical reforms geared to restructuring the economy and stimulating small business development, as well as loans for rehabilitation of Baku's main power plant, electricity grid network, and water-supply system. Under an IMF Systematic Transformation Facility, the GOAz is committed to a comprehensive program of economic stabilization and structural reform. The United Nations High Commissioner for Refugees (UNHCR) is improving its ability to coordinate humanitarian assistance. Humanitarian aid has fallen markedly over the past year, as many relief agencies begin to redirect their efforts to other countries with more critical emergency and humanitarian needs. Though several UN agencies remain engaged in humanitarian aid in Azerbaijan, many (e.g., United Nations Development Program, United Nations Children's Fund, World Food Programme, World Health Organization) have begun committing less funds and developing exit strategies. Other international organizations, including the International Federation of the Red Cross, the International Committee of the Red Cross and Oxfam among others, have taken a similar approach to USAID by moving beyond relief work to longer-term economic development.
FY 2002 Program
USAID's program in Azerbaijan is organized around three objectives: 1) accelerating the growth and development of small and medium-sized private enterprises (SMEs) by working primarily with business groups and associations; 2) promoting a better organized and represented civil society; and 3) reducing human suffering in conflict?affected areas.
Cross-cutting and special initiatives will include a variety of training programs designed to bolster the capacity of selected Azerbaijani citizens, groups, and institutions to advance the reform process. Increasingly, training will be focused on economics/business development and related leadership fields. USAID-funded training will continue to be U.S.-based or conducted in-country by U.S. implementors, although some third-country training will continue where appropriate. All of these initiatives will be carried out in accordance with Section 907 restrictions.
The USG will continue to implement activities to assist victims of the Nagorno-Karabakh conflict. In the event of a peace settlement, USAID expects to expand its efforts significantly in providing humanitarian and rehabilitation assistance. A peace settlement would remove Section 907 constraints, thus allowing USAID to address important economic restructuring issues and other pertinent development issues requiring policy change.
Activity Data Sheets
- 112-013 Accelerated Development and Growth of Private Small and Medium Enterprises in Targeted Areas
- 112-021 Civil Society Better Organized and Represented
- 112-031 Reduced Human Suffering in Conflict-Affected Areas
- 112-042 Cross-Cutting Programs
Country Background Information Resources
CIA Factbook
Library of CongressNational Geographic Country Maps
State Dept. Country Information
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Last Updated on: May 29, 2002 |
