Paper/Speech Details of Conference Program for the 18th NISPAcee Annual Conference Program Overview VII. Working Group on Policy Analysis Author(s) Vugar Bayramov Center for Economic and Social Development (CESD) Baku Azerbaijan Title Public administration reforms in resource rich Azerbaijan in context of usage of oil money; Lessons from Norway and Kazakhstan File Paper files are available only for conference participants, please login first. Presenter Abstract The economic life of Azerbaijan is closely tied to oil. This study claims that the advantage of possessing oil can quickly be spoiled if the revenues are merely spent to satisfy short-term interests. However, if managed wisely, e.g. through proper defining and prioritising the long-term interests of the entire society owning the resources, having oil can be extremely beneficial. Proper resource management ensures that the benefits are cumulative, sustainable and consistent. But if these interests are not well-defined, agreed upon, and followed through, then the resources run the risk of being squandered to serve short-term and small group interests only. zerbaijan is getting daily $ 50 million from oil sale now and the amount is expected to reach $ 90 million by the end of 2008. It means the country with 8 million populations will get about $ 30 billion money each year only from oil sale. The main question of the paper is whether Norway model is applied in usage of oil revenues in Azerbaijan? If so, why there is no economic efficiency in Public Administration Reforms in the country and if not, whether it is possible to apply it in Azerbaijan context? And what Kazakhstan experience offers related to the public administration reforms in terms of usage of oil money. Within the theoretical framework I will look different papers associated to the PA in oil countries. John Wakeman-Linn, Paul Mathieu and Bert van Selm conclude efficiency of PA in oil countries depends how oil funds are managed. The claimed that oil funds improve coordination between monetary and fiscal policy and that they function best when they can be separated from the state budget (Sterilization Policy). Yelena Kalyuzhnova sees the role of an oil fund “as formalising – or giving institutional focus to – a set of fiscal rules” (Stabilization- Fiscal Policy) Jeffrey Davis, Rolando Ossowski, James Daniel and Steven Barnett justify oil funds on political economy grounds: “Such funds may help the government to resist spending pressures if there are constraints on borrowing. These may reflect explicit fiscal rules or may arise from political difficulties in issuing debt.” (Policy among sterilization and stabilization) The paper analyses different scenarios of using the oil money and advocates for a strategy that would involve the following steps: • oil rent money needs to be isolated from the economy and collected in an Oil Fund • the Fund should select the most efficient strategy • the Fund’s resources should initially be invested abroad only • a diversification plan needs to be prepared • ethical principles need to be outlined • the correlation of the percentage share of funds needs to be determined • the relationship between the risk, expected return, number of investments and overall Fund resources needs to be determined • principles need to be developed for future possibilities for investing in the domestic business sector The study claims that the main challenge for Azerbaijan is to develop the non-oil sector to ensure that the economy continues to grow on a sustainable path after the oil boom, meeting both short-term expectations and longer-term demands. Key objectives include: • developing income-generating opportunities • creating new employment opportunities in the non-oil sector • building up small- and medium-sized entrepreneurship The paper concludes that the efficiency gap in the management of oil money in Azerbaijan is enormous. Improvements need to be made in the oil money accumulation, saving and spending processes in order for this short-term national resource to better serve the long-term development needs of the nation. The necessary changes include redefining and streamlining the Oil Fund in parallel with improvements in budgetary and public investment work.
