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The Positions of Azerbaijan in the World Ratings |
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Friday, 21 October 2011By Ramiz Rahmanov & Zaur Valiyev
Why Do We Need Ratings?
The need for ratings can be easily explained. On the one hand, ratings create an image of a country and on the other hand, they are necessary for purely economic reasons. In particular, ratings give information about the competitiveness of economies, standards of living, development levels of information technologies, and institutional development.
Which Ratings Are Used to Evaluate the Position of a Country?
The most frequently used ratings are listed below:
• The Global Competitiveness Index (the Global Competitiveness Report of the World Economic Forum)
• The Ease of Doing Business Index (the Doing Business Report of the World Bank and International Finance Corporation)
• The Human Development Index (the Human Development Report of the United Nations)
• The Networked Readiness Index (the Global Information Technology Report of the World Economic Forum)
• The E-Government Development Index (the Global E-Government Development Report of the United Nations)
• The ICT Development Index (Measuring the Information Society, a report of the International Telecommunication Union)
• The Open Budget Index (the Open Budget Survey of the International Budget Partnership)
The Azerbaijani Economy in Recent Years
In the period of 2003-2010, the GDP of the economy increased by three times in real terms. Particularly, the non-oil sector increased by two times, the budget revenues 9.3 times, the trade volume 5.4 times, and finally the strategic currency reserves 19 times. In 2010, the current account surplus increased by 90 times in comparison with the surplus of 2005. All these statistical facts indicate the economic development of Azerbaijan, which is the result of the prudent macroeconomic policy.
Chart 2 shows that the ratio of the startegic currency reserves to GDP increased by 3.1 times during the last six years. It is also seen that during the financial crisis of 2008, the volume of reserves did not decrease in comparison to the volume of the previous year but increased.
During the last years the budget indicators increased several times. In particular, in the last eight years, the expenditures on education increased by five times, the expenditures on medicine 7.8 times, the expenditures on social security 5.2 times, and the expenditures on investment 47 times.
Azerbaijan has improved its position in the world ratings. In the 2010-2011 Global Competitiveness Index, Azerbaijan was in 57th place and in the 2011-2012 Global Competitiveness Index, it moved two steps up and took 55th place. Furthermore, according to the latest report, in the macroeconomic stability subindex, Azerbaijan is 16th in the world and the leader among CIS and neighbor countries (see Chart 4).
The competiveness rating is based on the combination of publicly available statistical data and the results of surveys of companies’ CEOs. The surveys are yearly research done by the World Economic Forum in partnership with the network of local organizations, which are usually leading research institutions or companies in the countries for which analyses are produced. The result of the generalized estimations of competitiveness is the Global Competiveness Index created for the World Economic Forum by a professor of Columbia University, Xavier Sala-i-Martin, and first published in 2004.
The other important indices in this report are fiscal ones (budget balance and public debt) which are subcomponents of the macroeconomic block.
As in the case of the Global Competitiveness Index, in the fiscal indices Azerbaijan also outperforms all its neighbors.
Due to the creation of the online platform, the access to credit in Azerbaijan improved. The online platform enables credit organizations to send information to the state credit registry and receive it from there. Furthermore, the changes in the tax code of the country led to the decrease of tax rates, including profit tax rate and eased the procedure of tax payment on corporate profits and VAT. Such advancements enabled Azerbaijan to take 54th place in the 2011 Ease of Doing Business Index.
The methodology of “Doing Business” has several advantages. It is transparent and based on real information regarding laws and regulations and assumes multiple contacts with respondents in order to clarify possible incorrect interpretations of various issues. The implementation of the described methodology is easy and does not require considerable investments. For this reason, it is possible to cover a lot of countries and respondents.
According to the 2011 Human Development Report, during the period of 2005-2010, in the standard of living rankings Azerbaijan moved from 101st place to 67th. Thus, the Human Development Index increased from 0.655 in 2005 to 0.713 in 2010.
The Human Development Index is an integrated indicator, computed annually for cross-country comparison measurement of standards of living, literacy, education, and longevity as main characteristics of human potential in the investigated territory. It is a standard instrument for the general comparison of standards of living in different countries and regions.
In the 2010-2011 Network Readiness Index, Azerbaijan is 70th, behind only Kazakhstan among CIS countries.
In the computation of this index, criteria such as the number of connections to the Internet and mobile networks, the quality of operators’ services, and the number of registered patents are considered.
The Global E-Government Development Report surveys the development of information technologies and covers 191 countries. In the 2010 E-Government Development Index, Azerbaijan took 83rd place among 183 countries and in the 2010 Online Service Index, Azerbaijan was 69th.
The E-Government Development Index reflects such characteristics of the access to E-Government as technological infrastructure and an educational attainment in order to evaluate how well a country uses ITC opportunities for national, economic, social, and cultural development.
In the ICT Development Index, reported by the International Telecommunication Union, Azerbaijan was 74th in 2010 while it was 83rd in 2008 among 152 countries.
The ICT Development Index is a composite index which includes 11 indicators covering the access to ICT, usage of ICT, and skills in ICT. It was developed to measure the development level and evolution of ICT in developed as well as developing countries.
According to the 2010 Open Budget Survey, Azerbaijan scored 43 out of 100 in the Open Budget Index and this is almost equal to an average score for all countries studied. In comparison with the score of 2008, in the latest survey the score increased by 6 points because Azerbaijan has started providing more complete information about audit reports and reports prepared during the year.
The Open Budget Index estimates budget transparency in the national and federal governance levels. It takes into consideration the completeness of information regarding budget revenues, expenditures and debts, and correspondence of actual achievements of the budget for its purposes.
Conclusions
In the competitiveness index, the Azerbaijani economy is 55th.
In the Ease of Doing Business Index, which is a very important indicator for investors, Azerbaijan is 54th. Moreover, in 2008, Azerbaijan was one of few countries which was acknowledged as a reformist country.
In the standard of living, Azerbaijan has moved 34 steps up.
Azerbaijan is also in a good position in ICT ratings.
The indices in public finances improve annually.
Finally, it needs to be mentioned that the observed improvement in the international ratings is the result of the prudent economic policy and timely responses to challenges.
*Ramiz Rahmanov is a senior consultant and Zaur Valiyev is a research fellow at the Center for Strategic Studies in Baku, Azerbaijan. |
Friday, 21 October 2011
Ramiz Rahmanov & Zaur Valiyev
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