Page 73 - Azerbaijan State University of Economics

Bahruz Babayev: Implementıng Growth Patterns and Diversification Issues of the Non-Oil Export Sector in
Azerbaijan

the country's oil sector, 90% of the country's exports will be oil products, and only 5%
of the population will work in the oil sector. All these figures prove that the export
potential of the non-oil sector is low and does not bring significant revenues to the
country. The country's economy has not been diversified well so far, and serious work
is needed to be implemented in this direction.

According to the Trading Economics, Azerbaijan's exports are dominated by oil and
natural gas, which account for 95 percent of total export earnings. Other Azerbaijani
exports include sugar, fruit, metals and polymers. Although the country is seeking to
diversify its economy, it remains one of the key priorities for the government. Export
diversification means “diversification of exports means increasing the range of products
in a country exports” (Dennis and Shepherd, 2007). In addition, in some literatures,
export diversification is seen as a transition from the export of raw materials to the
export of manufactured products. The problems of diversification of the non-oil export
sector have been identified by many economists. The sector needs to be analyzed in
more depth. Economic reforms implemented in Azerbaijan aim to strengthen the
country's non-oil sector, diversify the economy and integrate the Azerbaijani economy
into the world economy. Rovlan Karimov argues that today the Azerbaijani economy is
characterized by two interrelated problems. The first of these is the country's
dependence on oil revenues. The second is that Azerbaijan's refining industry is so weak
that all of this continues to make the economy dependent on oil.

The results of the research of the Baku Research Institute, the main problems of non-
oil exports of Azerbaijan were identified, which included the followings: “Problem
1: Absence of variety of supplies, Problem 2: Limited volume of supplies, Problem
3: Geographical Limit, Problem 4: Technological Constraints, Problem 5: Exporter
Limitations and Problem 6: Private Sector Potential”. The web portal claims that “in
this regard, diversification of Azerbaijan's exports and increase of non-resource
based foreign exchange earnings are extremely important. The short-term
depreciation of the Azerbaijani manat more than twice in 2015 showed that long-
term sustainable development and macroeconomic stability will not be possible
unless the exchange rate of the national currency is freed from dependence on
natural resource revenues” (BRI, no date).

GROWTH PATTERNS OF THE NON-OIL EXPORT SECTOR
The State of Azerbaijan has been implementing a number of programs to develop
the economy during the recent years. The diversification of the economy and
business development, the creation of a competitive environment and the
diversification of the non-oil sector play an important role in all these programs.
These programs have been included into the “Azerbaijan 2020:

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