After gaining independence in 1991, Azerbaijan became a member of the International Monetary Fund, the World Bank, the European Bank for Reconstruction and Development, the Islamic Development Bank and the Asian Development Bank. The banking system of Azerbaijan consists of the Central Bank of Azerbaijan, commercial banks and non-banking credit organizations. The National (now Central) Bank was created in 1992 based on the Azerbaijan State Savings Bank, an affiliate of the former State Savings Bank of the USSR. The Central Bank serves as Azerbaijan’s central bank, empowered to issue the national currency, the Azerbaijani manat, and to supervise all commercial banks. Two major commercial banks are the state-owned International Bank of Azerbaijan, which is run by Dr. Jahangir Hajiyev, and the UniBank.
Pushed up by spending and demand growth, the 2007 Q1 inflation rate reached 16.6%. Nominal incomes and monthly wages climbed 29% and 25% respectively against this figure, but price increases in non-oil industry encouraged inflation in the country. Azerbaijan shows some signs of the so-called “Dutch disease” because of the fast growing energy sector, which causes inflation and makes non-energy exports more expensive.
In the early years of this century the chronically high inflation was brought under control and this led to the launch of a new currency, the new Azerbaijani manat, on January 1, 2006, to cement the acquisition of the economic reforms and erase the vestiges of an unstable economy
In 2008, Azerbaijan was cited as one of the top 10 reformers by the World Bank’s Doing Business Report.
Azerbaijan led the world as the top reformer in 2007/08, with improvements on seven out of 10 indicators of regulatory reform. Azerbaijan started operating a one-stop shop in January 2008 that halved the time, cost and number of procedures to start a business. Business registrations increased by 40% in the first six months. Azerbaijan also eliminated the minimum loan cutoff of $1,100, more than doubling the number of borrowers covered by the credit registry. Also, taxpayers can now file forms and pay their taxes online. Azerbaijan’s extensive reforms moved it far up the ranks, from 97 to 33 in the overall ease of doing business.
Azerbaijan is also ranked 57th in the Global Competitiveness Report for 2010–2011, which is above other CIS countries.
Two thirds of Azerbaijan is rich in oil and natural gas. The region of the Lesser Caucasus accounts for most of the country’s gold, silver, iron, copper, titanium, chromium, manganese, cobalt, molybdenum, complex ore and antimony. In September 1994, a 30-year contract was signed between the State Oil Company of Azerbaijan Republic (SOCAR) and 13 oil companies, among them Amoco, BP, ExxonMobil, Lukoil and Statoil. As Western oil companies are able to tap deepwater oilfields untouched by the Soviet exploitation, Azerbaijan is considered one of the most important spots in the world for oil exploration and development. Meanwhile the State Oil Fund of Azerbaijan was established as an extra-budgetary fund to ensure the macroeconomic stability, transparency in the management of oil revenue, and the safeguarding of resources for future generations.
Azeriqaz, a sub-company of SOCAR, intends to ensure full gasification of the country by 2021.
Azerbaijan has the largest agricultural basin in the region. About 54,9 percent of Azerbaijan is agricultural lands. At the beginning of 2007 there were 4,755,100 hectares of utilized agricultural area. In the same year the total wood resources counted 136 million m³. Azerbaijan’s agricultural scientific research institutes are focused on meadows and pastures, horticulture and subtropical crops, green vegetables, viticulture and wine-making, cotton growing and medicinal plants. In some lands it is profitable to grow grain, potatoes, sugar beets, cotton and tobacco. Livestock, dairy products, and wine and spirits are also important farm products. The Caspian fishing industry is concentrated on the dwindling stocks of sturgeon and beluga. In 2002 the Azerbaijani merchant marine had 54 ships.
Some portions of most products that were previously imported from abroad have begun to be produced locally (among them are Coca Cola by Coca Cola Bottlers LTD, beer by Baki-Kastel, parquet by Nehir and oil pipes by EUPEC Pipe Coating Azerbaijan).
Tourism is an important part of the economy of Azerbaijan. The country was a well-known tourist spot in the 1980s, yet, after the fall of the Soviet Union and the Nagorno-Karabakh War during the 1990s, damaged the tourist industry and the image of Azerbaijan as a tourist destination.
It was not until the 2000s that the tourism industry began to recover, and the country has since experienced a high rate of growth in the number of tourist visits and overnight stays. In the recent years, Azerbaijan has also becoming a popular destination for religious, spa, and health care tourism. During winter, the skiing resorts such as Shahdag Winter Complex are popular with foreign visitors.
The Government of Azerbaijan has set the development of Azerbaijan as an elite tourist destination a top priority. It is a national strategy to make tourism a major, if not the single largest, contributor to the Azerbaijani economy. These activities are regulated by the Ministry of Culture and Tourism of Azerbaijan.
The convenient location of Azerbaijan on the crossroad of major international traffic arteries, such as the Silk Road and the South-North corridor, highlights the strategic importance of transportation sector for the country’s economy.The transport sector in the country includes roads, railways, aviation, and maritime transport.
Azerbaijan is also an important economic hub in the transportation of raw materials. The Baku-Tbilisi-Ceyhan pipeline (BTC) became operational in May 2006 and extends more than 1,774 kilometers through the territories of Azerbaijan, Georgia and Turkey. The BTC is designed to transport up to 50 million tons of crude oil annually and carries oil from the Caspian Sea oilfields to global markets. The South Caucasus Pipeline, also stretching through the territory of Azerbaijan, Georgia and Turkey, became operational at the end of 2006 and offers additional gas supplies to the European market from the Shah Deniz gas field. Shah Deniz is expected to produce up to 296 billion cubic meters of natural gas per year. Azerbaijan also plays a major role in the EU-sponsored Silk Road Project.
In 2002, the Azerbaijani government established the Ministry of Transport with a broad range of policy and regulatory functions. In the same year, the country became a member of the Vienna Convention on Road Traffic. The highest priority being; upgrading the transport network and transforming transportation services into one of the key comparative advantages of the country, as this would be highly conducive to the development of other sectors of the economy.
In 2012, the construction of Kars–Tbilisi–Baku railway expected to provide transportation between Asia and Europe through connecting the railways of China and Kazakhstan in the east with Turkey’s Marmaray to the European railway system in the west. Broad gauge railways in 2010 stretched for 2,918 km (1,813 mi) and electrified railways numbered 1,278 km (794 mi). By 2010, there were 35 airports and one heliport.