ADB-Azerbaijan Partnership

Ganja bypass road project in Azerbaijan. The Asian Development Bank’s main interventions in Azerbaijan’s transport sector will include developing the east-west and north-south corridors to boost connectivity to neighboring countries. Photo by: ADB / CC BY-NC-ND Recent progress in Azerbaijan has been impressive. By exploiting its abundant hydrocarbon resources, the country managed to raise gross national income from $660 in 2001 to $7,350 in 2013. Over the same period, poverty incidence dropped from 49 percent to just 5 percent. Although investments in its oil sector have paid dividends, allowing Azerbaijan to reach upper-middle income status, the government recognizes the need to move away from oil dependency and diversify its economy. In this light, the government has set its focus on creating a viable trade environment to encourage local enterprises and foreign investors to do business in the country. The government is guided by its strategy document, “Azerbaijan 2020: Look into the Future.” Its main thrust is to transform the country’s market-based economy into one that is knowledge-based by developing human capital. Accordingly, the Asian Development Bank has aligned its 2014-2018 country partnership strategy with the government’s objectives. Funding levels and priorities In August 2013, ADB reclassified Azerbaijan as a Group C country, which means the country is only eligible to receive funding from the bank’s ordinary capital resources. Additional financing for this partnership period will be drawn from the private sector through public-private partnerships. For 2014-2017, the total indicative OCR sovereign funding amounts to $752 million. Below is a breakdown of previous ADB contributions by funding source. The government’s Azerbaijan 2020 strategy hinges on six key pillars: - Transition to a knowledge-based economy. - Double the country’s gross domestic product per capita to $13,000 by 2020. - Achieve an average 7 percent nonoil GDP growth annually through 2020. - Raise nonoil exports to $1,000 per capita by 2020. - Reduce regional inequality in terms of quality of life, per-capita production and volume of investment. - Achieve gradual minimum wage increase to 60 percent of the average monthly salary. In support of these goals, ADB will focus on diversifying the country’s economy by strengthening transportation systems, urban infrastructure and services, as well as the energy sector. Main interventions in the transport sector will include developing the east-west and north-south corridors to boost Azerbaijan’s connectivity to neighboring countries. Local roads will also be developed to increase access to markets as well as centers of health, education and other basic social services in rural areas. Interventions to improve urban infrastructure will tackle water supply and sanitation, as well as solid waste management, with the goal of expanding service quality and coverage. Actions under this component will also be geared toward strengthening environmental management. ADB will also support the development of alternative energy sources such as biomass, wind, solar, hydropower and other environmentally sustainable means of generating electricity. In doing so, the bank will help lower production costs for businesses, improve energy distribution and protect the environment. Below is a breakdown of bank allocations by sector. Projects approved earlier this year include: - Second Road Network Development Investment Program - Solid Waste Management Project - Road Network Development Program - Microfinance Sector Development - Water Supply and Sanitation Investment Program - Second Road Network Development Program Devex analysis Azerbaijan’s tremendous progress over the past decade has prompted ADB to recalibrate the way it delivers aid to the country. While the bank has committed to providing continued assistance to Azerbaijan, the country will no longer have access to the bank’s Asian Development Fund, ADB’s concessional funding envelope. The bank will engage the private sector to further advance industry and trade, as well as infrastructure development. Particularly, ADB intends to broaden access to finance for low-income households and businesses, with a particular focus on women, to encourage economic activities and diversification that will reduce the country’s reliance on oil. ADB will also work closely with the government in order to build capacity in several areas. The bank will provide technical assistance to public institutions in carrying out reforms, primarily in procurement, auditing and financial reporting. Governance support at the sectoral level will also be provided to strengthen analysis and planning. The bank will likewise seek to increase its involvement with local universities and civil service organizations in developing knowledge solutions and project monitoring. Baku is set to host ADB’s Annual Meeting of the Board of Governors in May 2015. With participants from 48 regional and 19 nonregional member countries, the summit is expected to promote regional cooperation, a key element in the bank’s aid strategy. Contact Tel: (63-2) 632-4744 Mobile: (63-999) 999-4744