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Azerbaijan
Please note: All linked documents are in PDF format
| Objective |
SO Number |
FY 2004 |
FY 2005 |
FY 2006 |
| Development of Small and Medium Enterprises |
112-0130 |
10,807 |
11,000 |
10,000 |
| Civil Society |
112-0210 | 5,900 |
6,470 |
6,270 |
| Humanitarian Assistance |
112-0310 | 8,790 |
7,907 |
7,907 |
| Cross-Cutting Programs |
112-0420 |
5,927 |
5,978 |
4,633 |
| Transfers |
|
7,358 |
6,000 |
6,190 |
| Total (in thousands of dollars) |
38,782 |
37,355 |
35,000 |
|
The Development Challenge:
Azerbaijan is a strategic gateway between Europe and Asia, bordering Russia, Georgia, Armenia, Turkey, Iran and the oil-rich Caspian Sea. Azerbaijan has been able to successfully develop its oil and gas resources and to achieve macroeconomic stability. However, it is still far from being a functioning economy with gainful employment, rule of law, or health and other social systems for its eight million citizens.
The oil wealth of Azerbaijan has the potential to help shed the legacy of the Soviet Union and build an efficient nation-state. However, the current, carefully-designed government consists of heavy reliance on family and clan relationships, oil revenues, and patronage. Corruption systemically permeates the political, economic and social spheres. If these issues are not addressed before the estimated fifteen-year supply of oil and gas revenues comes online next year, development of a competitive free market economy with reallocation of oil revenues to the majority of the population and the development of a functioning democracy will not succeed. Eliminating corruption and building the capacity to use these resources wisely are the two most significant development challenges facing Azerbaijan.
Ilham Aliyev was victorious in October 2003 presidential elections that regrettably did not meet Organization for Security and Cooperation in Europe (OSCE) standards. However, the political debate prior to the election and the newly-adopted Unified Election Code were considered steps forward for Azerbaijan. Municipal elections in December 2004 did not even meet even the standard of the Presidential election - a disappointing development in the run up to the Parliamentary elections in late 2005. However, progress in transparent governance can be seen in adoption of a Judicial Code of Ethics and a law on corruption. However implementation has not occurred and political will to encourage improvements in democratic and judicial systems and combat corruption is not evident. Transparency International ranks Azerbaijan 140 out of 146 in its 2004 corruption perception index. The recent signing by the Government of Azerbaijan (GOAZ) of the first Extractive Industries Transparency Initiative worldwide will provide it an opportunity to demonstrate commitment to combating corruption in handling the nation's oil revenues.
Azerbaijan's economic situation remains stable with a slight increase in the rate of inflation. Per capita gross domestic product (GDP) has increased to $3,400. However, 49% of the population remains below the poverty line indicating that the poor are not benefiting from increased oil revenues or improvements in economic legislation. Factors impeding economic growth in the non-oil sector include corruption, lack of legal and regulatory frameworks and implementation, and lack of access to investment capital. Oil contracts are honored and enforced by law based on production-sharing agreements (PSAs). Non-oil enterprises in the private sector do not have similar protections. Most sectors from pharmaceuticals and agriculture to transport and construction are closely controlled monopolies, preventing a free market economy from developing.
The education and health ministries are notoriously corrupt at every level, which is demonstrated in the deplorable conditions of the majority of school buildings and materials, ancient and irrelevant curricula from the Soviet era and severely underpaid education personnel. The same is true in the health sector. While the health system has a surplus of doctors, nurses and other personnel, their training and knowledge is outdated, they are inadequately trained for preventive medicine, the system is financially starved, many facilities are poorly maintained, equipped and supplied, and quality of care is falling while costs to consumers rise, so utilization is declining. According to the CDC Reproductive Health Survey in 2001, the infant and under five mortality rates are 81 and 92 per 1000 live births, respectively. These rates are the highest in Europe and Eurasia, and comparable to many countries in South Asia and Sub Saharan Africa. UNICEF (MICS, 2000) estimates the maternal mortality ratio at 79 per 100,000 live births.
Azerbaijan is a U.S. ally in the global war on terrorism and the U.S. seeks Azerbaijan's cooperation in combating terrorism and other trans-border threats. The U.S. also wants Azerbaijan to successfully transition to a democratic market economy. It is the interest of the U.S. to help Azerbaijan become a reliable supplier of oil and gas to international markets in the West as it will be an important source of non-OPEC oil in the future. The President's December 2003 waiver of Section 907 of the FREEDOM Support Act allowed the U.S. Government to continue assistance to the GOAZ in key policy areas of economic reform, energy reform, and democracy and governance.
The USAID Program:
USAID's four objectives concentrate on promoting economic growth and reform, including guiding energy wealth toward developing infrastructure and a sustainable social system, and strengthening and expanding democratic institutions and rule of law. FY 2006 funds will be used to: foster democratic progress; develop a market economy with a well-functioning private sector to include job creation and regional economic development; and promote social service systems for vulnerable communities. Several new activities will work closely with the GOAZ to implement these activities.
Other Program Elements:
USAID's Global Health Bureau manages the Child Survival Program which funds technical assistance to reduce infant, child and maternal mortality and morbidity. USAID's Bureau for Economic Growth, Agriculture, and Trade (EGAT) Bureau manages the Cluster Access to Business Services Program. Both are implemented by Mercy Corps in southeast Azerbaijan. EGAT also manages the Farmer-to-Farmer Program, which provides short-term, U.S. volunteer technical assistance to increase farm and agribusiness productivity.
Other Donors:
Other donors in Azerbaijan are the World Bank, International Monetary Fund (IMF), Governments of Germany and United Kingdom, United Nations Development Programme (UNDP), the European Bank for Reconstruction and Development (EBRD), the European Union, the United Nations Children's Fund (UNICEF), the World Health Organization (WHO), and United Nations High Commissioner for Refugees (UNHCR).
Donor coordination continues to be strong in rule of law, democracy and governance, financial, economic and energy sector reforms, and community health activities. USAID is taking the lead to focus donor coordination on anticorruption strategies and to forge new ties with key donors, such as the Global Fund for AIDS, TB and Malaria. USAID coordinates with the European Union, German and British governments, and the Organization for Security and Cooperation in Europe (OSCE) on rule of law and elections, Council of Europe on municipalities, the United Nations Population Fund (UNFPA) on reproductive health, World Bank, EBRD and IMF on financial, economic, and energy sector reform.
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