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Problems Encountered during the Transition to Market Economy in Azerbaijan and Solution Attempts

Author

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  • Suleymanov, Elchin
  • Yusifov, Sabuhi

Abstract

After re-gaining its independence on 18 October 1991, the Republic of Azerbaijan started the transformation to the market-based economy and the integration into the world economy. The country’s oil and natural gas reserves have been considered the main source for financing a range of government programs for reforms. On the one hand, these reserves had to be used effectively; on the other hand, there was a huge demand for foreign investment for extraction. To this end, Azerbaijan has signed “Contract of the Century” in 1994. Although Azerbaijan has wide oil and natural gas reserves, it has faced a number of difficulties in its transition path. This study analyzes these problems and reforms for solving them. One of the types of the problems related to the economic structure of the former Soviet Union: disruption of the economic ties between the republics resulted in a decline of production, high levels of unemployment and prices and consequently led to an economic recession in all of the republics. Another set of problems related to the lack of sufficient institutional bases to transform to the market economy. Moreover, internal conflicts between the political parties and groups for having authority as well as political chaos in the republic can be considered other serious problems during the transition period. Furthermore, Karabakh war and occupation of 20 percent of the Azerbaijani territory by the Armenian military forces had made the situation extremely complicated. Despite all of these extremes, Azerbaijan transformed to the market-based economy decidedly and even became one of the fast growing countries of the world. Even in 2013, with the GDP growth rate of 5.6 percent, Azerbaijan was a leader among growing economies. In parallel with this significant economic development, there is still a need for some socio-economic and institutional reforms in order to get a well-functioning market-based economy in Azerbaijan.

Suggested Citation

  • Suleymanov, Elchin & Yusifov, Sabuhi, 2014. "Problems Encountered during the Transition to Market Economy in Azerbaijan and Solution Attempts," MPRA Paper 57802, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:57802
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    References listed on IDEAS

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    1. Elchin SULEYMANOV & Sabuhi YUSIFOV, 2014. "Problems Encountered during the Transition to Market Economy in Azerbaijan and Solution Attempts," Expert Journal of Economics, Sprint Investify, vol. 2(2), pages 45-54.
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    Cited by:

    1. Elchin SULEYMANOV & Sabuhi YUSIFOV, 2014. "Problems Encountered during the Transition to Market Economy in Azerbaijan and Solution Attempts," Expert Journal of Economics, Sprint Investify, vol. 2(2), pages 45-54.
    2. Farhad Aliyev & Taylan Ürkmez & Ralf Wagner, 2018. "Luxury brands do not glitter equally for everyone," Journal of Brand Management, Palgrave Macmillan, vol. 25(4), pages 337-350, July.

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    1. Farhad Aliyev & Taylan Ürkmez & Ralf Wagner, 2018. "Luxury brands do not glitter equally for everyone," Journal of Brand Management, Palgrave Macmillan, vol. 25(4), pages 337-350, July.

    More about this item

    Keywords

    Azerbaijan; oil; natural gas; informal sector; energy resources; oil dependency;
    All these keywords.

    JEL classification:

    • P2 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies
    • P21 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Planning, Coordination, and Reform

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