Sociology of Developing Countries – SOC 300
May 29, 2011
Professor Chavella Pittman
Table of Contents
Economic Reforms:Pages 4 - 7
Azerbaijan is a small country in Southwest Asia about the equivalent size of Maine. Georgia, Armenia, Russia and Iran border Azerbaijan and are in a vital part geographically that is regarded for natural petroleum resources. Exporting these resources have been increasing lucrative for Azerbaijan’s economy. However, in the past decade there has been an ongoing progression in economic reform to help Azerbaijan come from under the title as a lesser developed country (LDC).
There are reforms concerning business, pension, taxes and land. These reforms have assisted in attracting foreign investors in doing business in Azerbaijan.
The goals for Azerbaijan in economic development reform have included investing more in land, pension, tax and business reforms. Also, a long standing obstacle in doing business in Azerbaijan has been corruption. This is considered a standard in small developing countries as a means in doing business and is in the elimination process at least for Azerbaijan.
Azerbaijan is beginning to implement dynamic and long term strategies in economic development. “1) the formation of a sustainable national economic system based at the principles of free market relations; 2) efficient utilization of the existing natural-economical, technical-production and scientific-technical potential for economic purposes; 3) rational integration of the national economy into the world economic system.” (Foundation, 2010) An important and intricate reform is the employee pension in Azerbaijan. Beginning in 2003, the average pension payout ballooned to over 400%. One major contributing factor to this situation was the lack organization and accuracy in record keeping at the State Social Protection Fund (SSPF). The SSPF offices across the country were overhauled and went through a major re-organization, this was imperative in pension payment growth. A major implement to pension reform was from having the international and government agencies monitor the changes. With pension reform, Azerbaijan’s citizens wanted to stay and not migrate to another country. This helped to increase the economy by keeping the money circulating within Azerbaijan. With more citizens staying in Azerbaijan, there was less need of employees from the foreign business’s home country and this reduces their foreign operating costs.
Higher levels of commitment from the government, the World Bank and United Nations Development Programme (UNDP) of international finance and accurate use of governance applications are key factors in successful pension reform. Azerbaijan significantly enhanced the relations with its people and foreign investors with tax reforms. Foreign investors embrace regulation with tax reform. For example: reducing 20% to18% on the Value Added Tax (VAT). To someone buying clothing for instance this is not a overly large reduction. However, a two percent reduction is a savings of significance with millions of currency being spent. Those savings could be used by foreign investors to reinvest stock into the company. Significant hindrance in lesser developed countries with tax collection is corruption. Of course, unknown or “unseen” corruption is still in practice. Corruption was considered to be an accepted thought with the citizens of Azerbaijan. A country that is a major exporter of petroleum and oil is usually held hostage under active corruption. Azerbaijan without elimination process of corruption could end up being similar to Nigeria. For Azerbaijan there has been a positive side to corruption. The increase of state worker salaries and training for anticorruption, assisted in the reduction of “incentives” that...