WEF: Azerbaijan enjoys competitive advantage in region

By Arthur Bayhan

The World Economic Forum released its Global Enabling Trade Report of 2014 in Geneva on April 1, 2014.

The report places Azerbaijan in the 77th position out of 138 benchmarked economies.

Enabling Trade Index of 2014, which ranks Azerbaijan at 77 out of 138 countries, has four sub-indexes which are: Market access that ranks Azerbaijan at 66, border administration ranks Azerbaijan at 94, infrastructure ranks Azerbaijan at 45, and operating environment positions rank Azerbaijan at 58.

The report highlights that Azerbaijan's achievements in improving trade facilitations measures enjoy a competitive advantage in the region in the following areas: Customs transparency index (39), Ease of compliance with government regulation (19), Openness to foreign participation index (34), Ease of hiring foreign labor availability (30), Business costs of crime and violence (20), Quality of transport infrastructure (45), Quality of air transport infrastructure (46), Quality of railroad infrastructure (35), Efficiency of transport mode change (43), ICT use for business-to-business transactions (46), and Internet use for business-to-consumer transactions (50).

The Report also shows the areas that the Azerbaijani government needs to undertake more interventions to improve its competitive disadvantage. There is a need to focus on the areas, especially, of the import and export transactions. These areas are the number of the documents needed for import, which ranks Azerbaijan at 126 out of 138 countries included in the Report. The cost to import (US$ per container) ranks Azerbaijan at 127, number of documents to export ranks at 121, cost to export, (US$ per container) ranks it at 134, logistics competence ranks it at 134, and judicial efficiency & impartiality in commercial disputes ranks it at 106.

In the last couple of years Azerbaijan has been continuing to move up in the list of the global competitiveness rankings and is placed currently in the 39th position out of 148 countries. Indeed, Azerbaijan is leading even the most of the transition economies, even some of the new members of the European Union in the global competitiveness report of the WEF's Global Competitiveness Report of 2013.

In a rapidly integrating global economy, long-term growth will depend increasingly on trade facilitation and competitiveness towards developing a dynamic private sector to benefit from a globalized economy. To maintain its competitiveness advantage in trade facilitation in the region Azerbaijan needs to focus on the weaknesses identified in this report including lifting the existing import and export barriers.

The Global Enabling Trade Report assesses the trade enabling landscape of 138 ranked economies, providing insight into the trade facilitation reforms. The Report also refers to the measures agreed by 159 members of the World Trade Organization (WTO) in December 2013, in Bali/Indonesia. The Report assesses and benchmarks through its enabling trade index (ETI) various dimensions of enabling trade dividing them into four overall areas:

1. Market access which refers to the measures of a country's tariff regime, as well as tariff barriers faced and preferences enjoyed by a country's exporters in foreign markets.
2. Border administration which assesses the quality, transparency and efficiency of border administration of a country.
3. Infrastructure that assesses the availability and quality of transport infrastructure of a country, associated services, and communication infrastructure, necessary to facilitate the movement of goods within the country and across the border, and
4. Operating environment which measures the quality of key institutional factors impacting the business of importers and exporters active in a country.

The report findings show that Singapore tops the overall rankings in the global enabling trade, Hong Kong placed in the second position and followed by Netherlands in the third. New Zealand ranked at 4, Finland at 5, United Kingdom at 6, Switzerland at 7, Chile at 8, Sweden at 9, and Germany at 10. The United States ranked at the 15th position out of 138 economies ranked in the report.

The report shows Georgia tops the countries in the region and ranked at 36 out of 138 countries which is followed by Azerbaijan at 77, Ukraine at 83, Moldova at 92, Kazakhstan at 94, Russian Federation at 105, and Kyrgyzstan at 109. Tajikistan, Uzbekistan and, Turkmenistan are not covered by the report.

The WEF's Enabling Trade Report is one of the important policy tools for the governments to prepare a ground to benefit from trade to boost the economic growth and generate jobs. The Report stipulates that reducing even a restricted set of trade barriers halfway to the level of global best practices would yield close to a five percent increase in global GDP. To achieve these gains, governments would need to take a more supply-chain focused approach to trade reform, both in international coordination and domestic action. Indeed, the trade facilitation is the driving force of economic growth and growth is a crucial instrument to generate employment and in turn reduce poverty. Developing regions and smaller enterprises would see the largest gains from the WTO's measures stipulated in the Bali package.

The, so-called, WTO's Bali package contains a number of measures, including trade facilitation, agriculture and cotton, and development issues to promote economic growth and jobs creation in developing economies. Basically, the WTO's Bali package aimed at moving forward the process of the Doha round. Furthermore, the Bali Package in favor of the developing nations and developed countries alike.

The Global Enabling Trade Report 2014 is an important effort to remind the assessed and benchmarked countries leaders to move forward the Bali arrangement has the potential to move the global trade forward. While moving forward with the Bali package, the efforts on bilateral, regional and inter-regional free trade agreements will also continue to contribute to improving the global system of trade facilitation.

Arthur Bayhan is a senior advisor on economic growth and competitiveness with more than 20 years of project implementation experience in the areas of investment and trade facilitation, sector competitiveness, and public-private partnership development. He worked as chief of party for USAID, head of private sector development at OECD, and as advisor at the EU Commission. He is engaged in the highest levels of governments and the private sector to improve framework conditions for business enabling environments including trade and investment facilitation, developed sustainable economic institutions in Central Asia, Caucasia, Russia and in other transition economies as well as in South- and Southeast Asia. He is a German national and can be reached at: [email protected].