Retrospective of Economic and Trade Policies Focused on Agricultural Development: Case of Azerbaijan

Retrospective of Economic and Trade Policies Focused on Agricultural Development: Case of Azerbaijan

Khatai Aliyev (Baku Engineering University, Azerbaijan) and Ilkin Gasimov (Institute for Scientific Research on Economic Reforms, Azerbaijan)
DOI: 10.4018/978-1-5225-2733-6.ch009
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Abstract

The importance of the agricultural sector in the economy of Azerbaijan is high. This sector has always been at the center of economic reforms by the government. This chapter overviews economic and trade policies of the government focused on the development of agricultural production since 1991. Authors carry out analysis of policy changes during separate development stages. The research output presents agricultural policy before the oil boom as mainly devoted to achieving structural transformation from centrally planned economy to the market environment. Within the oil boom period, the government provided substantial fiscal and technical support to the agricultural sector as well as applied tax incentives to farmers but did not pay attention to the transformation from family farming to medium and large-scale production. However, fiscal and macroeconomic challenges of post-oil boom period forced the government to focus on increasing efficiency of the subsidies and incentives and implementation of further agricultural reforms.
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Introduction

Azerbaijan is a country situated in the South Caucasus region. After regaining its independence in October 1991, the country declared its intention to transform economic system from centrally planned to market economy. Before 1991, Azerbaijan’s economic system was totally owned and governed by the central government. Public property dominated in agricultural sector. That is why the primary focus of agricultural policy after regaining the independence was privatization of public property. However, efficiency of this transformation is still open to question.

Agriculture is a crucial sector for Azerbaijan economy due to different reasons such as maintaining food security of the country and share of population employed in this sector. That is why economic policies addressed to stimulate agricultural production have been the priority for the government. For this purpose, the government has provided subsidies and applied tax freedom for domestic agricultural producers. Moreover, preferential loans have been offered for agricultural enterprises with favorable conditions through Azerbaijan National Fund for Entrepreneurship Support (ANFES).

Several studies analyze the tendencies of agricultural production performance and efficiency of financial and technical support to this sector, i.e. Food and Agriculture Organization of the United Nations (2012); Welton, Astaryan, & Jijeleva (2013); Danilowska, Ismayilov, and Aliyev (2014); Huseyn (2014); Center for Economic and Social Development (2015); Karimov (2015); Aliyev and Suleymanov (2015); Khalilov (2015). The novelty of the current study is analyzing the tools of the economic policy of the Azerbaijan government oriented on agricultural development in retrospective context, including the recent policy implementation behavior. Especially, agricultural policy changes in post oil boom period are new for the literature.

The core purpose of this chapter is to outline the agricultural policy of Azerbaijan in the first years of independence, as well as before and after the oil boom by using descriptive tools. Within this framework, background section was devoted to present a detailed description of Azerbaijan’s agriculture sector since regaining the independence. Meanwhile, this section also represents the role of agriculture sector in Azerbaijan economy. Then, we review agricultural transformation process along with the governmental financial and technical support to this sector. Furthermore, problems, solutions, and recommendations are discussed.

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