Private investments in state-owned enterprises Way to increase diversification of Azerbaijani economy

Azerbaijan is consistently implementing structural reforms aimed at increasing efficiency, liberalisation and diversification of the economy.

The ongoing reforms also cover the activities of state-owned enterprises, Caliber.Az reports, citing the Azerbaijani Ministry of Economy.

The application of corporate governance principles in the state-owned enterprises’ activities, increasing their economic efficiency and improving their financial stability are among the main factors contributing to the country's economic development.

Among the advantages of the new management method is the transfer of management of state-owned enterprises to the Azerbaijan Investment Holding Company established for this purpose, whose tasks include control over their activities through supervisory boards.

The sharing of responsibility and ensuring accountability through supervisory boards have created a solid basis for increasing economic benefits: shifting from losses to profits, applying a policy of responsible expenditure, creating new sources of revenue, minimising budget subsidies, commercial transformation of state-owned enterprises making transfers to the budget.

Such factors as political and financial-economic stability, favourable business environment, comprehensive development of free market relations, support of sustainable private property in Azerbaijan accelerate economic development and increase the interest of foreign investors in the country. At the same time, the opportunities for citizens to benefit from economic development are growing steadily.

Attracting private investment in large state-owned enterprises will make it possible to adapt their activities to the requirements of the competitive environment. In this regard, the presidential decree "On measures in connection with the attraction of private investment in state enterprises of the Republic of Azerbaijan" of 31 August 2023 is of particular importance.

The document envisages the attraction of investments in International Bank of Azerbaijan OJSC, Baku Telephone Communication LLC, Aztelekom LLC, Azerbaijan Caspian Sea Shipping Company CJSC, AzerGold CJSC, Azerikimya Production Association (Ethylene Polyethylene Plant), Urea and Methanol Plants.

The implementation of the tasks specified in the Order is aimed at reducing the financial share and burden of the state in the management of large enterprises, as well as expanding public-private partnerships. The document will contribute to the wider application of corporate governance mechanisms and the revitalisation of capital markets in the country. The Order is also aimed at expanding opportunities for citizen participation in the management of state-owned enterprises and private investment in these enterprises.

According to the document, studies and proposals will be carried out with the involvement of reputable international consulting companies. They will cover restructuring, rehabilitation, evaluation of state-owned enterprises, identification of potential investors, liberalisation and anti-monopolisation of the relevant market, changes in the organisational and legal form of state-owned enterprises and the possibility of transferring non-core activities to the private sector, methods of partial sale of parts and shares of state participation intended for privatisation, as well as improvement of the legal framework in this regard.

Overall, through the consolidation of private investment and increased cooperation between private enterprises and state-owned enterprises, the diversification of the national economic structure will be accelerated, the dependence on the non-oil and gas sector will be reduced, and competitiveness will be enhanced.