Economic Diversification in Azerbaijan (original) (raw)

In the modern world, economic structures of states vary. Some build their economies on industrial production and are quite developed countries. Others have very weak economies and are in need of foreign aids and loans. There is also a group of states, which are heavily dependent on resource revenues. Their economies are volatile in the face of external shocks, such as sharp decline of oil and gas prices. Diversification is necessary for their economic stability, since oil and gas are non-renewable energies and even in constant prices, their economies are under risk of resource depletion. By understanding this, many energydependent countries diversified their economies successfully. Indonesia, Norway, the United Arab Emirates, Malaysia, and Netherlands are good examples for this. At the same time, there are many countries that crawling on the same direction but have not succeeded yet. Azerbaijan is one of them. This country comprehended the essence of diversification later. That is why its reforms are still in progress, yet not completed. Due to some challenges and barriers the government faces, long-term strategies and economic planning is required for better future. In this article, Azerbaijani economic diversification is analyzed, while the United Arab Emirate’s successful policy implementation is taken as a pattern. I try to show all applicable courses of action realized in the UAE in early 21st century. Considering that geographies, population sizes and histories of these two countries are different, I focus only on common aspects of their economies. Despite Azerbaijan has comparative advantage in agriculture, I prefer tourism as the best short-term option to be developed as a non-oil sector. Tourism not only brings about economic diversification, but also entails institutional, export and partner diversification. The matter is that Azerbaijani government should spend oil revenues for development of tourism industry, as the UAE used rationally its oil and gas incomes for advancement of diverse sectors. Considering this, I built my research project around this question – How to achieve economic diversification in Azerbaijan, by taking the UAE experience as a benchmark?