Azernews.Az

BAKU – The World Bank board of directors on Thursday discussed a new partnership strategy with Azerbaijan, which provides the framework guiding its assistance to the country for 2011-2014, the WB office in Baku said.

The Country Partnership Strategy (CPS) builds on the government’s own development priorities and centers on two key areas. The first area is focused on strengthening the non-oil economy, primarily through an improved business environment, better infrastructure, and agriculture improvements. The second area centers on improving the effectiveness of social and community services, including health, education, social protection and water supply.

"While Azerbaijan weathered the recent global economic crisis relatively well, the crisis has underlined the need for a diversified economy, market-based policies, and strengthened social services and support," said Asad Alam, World Bank Regional Director for the South Caucasus. "As the government prepares to meet these emerging needs and challenges, this World Bank/International Finance Corporation strategy seeks to support the country in this endeavor."

The World Bank said that in recent years, Azerbaijan’s GDP has risen sharply and poverty has fallen dramatically, led by increasing oil and gas revenues. Its remarkable success in reducing poverty from 49 percent in 2001 to 16 percent in 2008 was largely driven by very high growth rates which averaged more than 20 percent for the period. This was complemented by a strong rise in wages and transfers, and a well-targeted social benefits system. However, much of the rapid growth stemmed from a large increase in oil and gas revenues which are now likely to flatten over the coming decade and decline thereafter. Therefore, economic diversification and development of non-oil sector are becoming more important, the WB said.

The new strategy has a number of distinctive features. First, the focus will be on accelerating the implementation of existing projects. Second, new investments will be undertaken selectively in the areas where there is clear government’s demand and ownership and a strong record of institutional capacity. Finally, the bank will rebalance activities towards more analytical work and policy dialogue.

"Boosting human capital development and resolving key institutional weaknesses are going to be critical for developing the non-oil sector as a relevant source for growth," said Joseph Owen, World Bank Country Manager for Azerbaijan. "This strategy, with its greater emphasis on analytical services, knowledge transfer and institutional capacity building is our effort to respond to this shift in the client needs. We will also be focusing on our large undisbursed portfolio and be giving a priority to accelerating project implementation."

According to the WB, for the full strategy period of four years the government has requested a total investment of about $1 billion. In the first two years, lending is anticipated to be around $380 million. With Azerbaijan’s per capita income of $4,820 (estimated in 2009), which is now placing the country in the group of the middle income countries, 2011 will be the last year when the country will receive concessional financing from the World Bank. International Finance Corporation (IFC), the World Bank Group’s private sector lending arm, will increase its investment program to about $200 million during this period.

Strengthening governance and institutional capacity, as a means to reduce corruption and improve public sector efficiency, will be a cross-cutting theme throughout the new Country Partnership Strategy. It will seek to address these issues at the three levels – project, sectoral, and national – with appropriately targeted instruments.

Assessing Azerbaijan’s development results, the WB said that during the past four to five years, Azerbaijan has had some very positive development successes. These include a quadrupling in its GNI per capita from $1,270 in 2005 to $4,820 in 2009; reducing poverty dramatically to below 16 percent by 2008;