HUMAN DEVELOPMENT AND MODERN TECHNOLOGIES
Chapter 1
1.4. Modern Technologies and Economic Base of Human Development
Despite the steady rate of growth brought about largely by investments in the oil sector, Azerbaijan's economy still cannot provide demand supported by the necessary investments in hi-tech products. In the years of economic growth between 1996 and 2002, only individual sectors of the economy and a few enterprises managed to apply modern technologies effectively. Among enterprises with state-of-the-art equipment, we can name those of the oil and gas producing, petro-chemical, power engineering, metallurgic and food industries. Among other economic sectors, the telecommunication sector is the most advanced sector in terms of exploring the newest technologies. At the majority of old industrial enterprises, equipment and technologies are outdated.
For the period between 1998 and 2002, which differs from previous periods in terms of the active involvement of investments in the economy, the fixed assets were renewed by around 3.4 percent each year. However, the renewal of technological assets involves a limited number of sectors and enterprises. At the majority of industrial enterprises, retirement of assets prevail over their renewal. Average annual data for 1998-2002 show that the renewal of fixed assets made up 4.2 percent for oil and gas extracting enterprises.
In the oil and gas extraction sector, there has been a stable process of renewal of fixed assets. In this sector where foreign oil companies are operational offshore and onshore, renewal of fixed assets made up 4.2 percent per year. These figures demonstrated that among the oil industry and international oil companies, first of all BP and its partners play an important role in human capacity building as an essential element of human development.
The process of renewal of technologies in the food processing industry was relatively even, with the speed of fixed assets' renewal of 4.2 percent per year between 1998 and 2002. In other industrial branches, renewal of assets was of discrete nature and associated with a short-term investment programs. For example, in 2000, the fixed assets were renewed by 59.4 percent in the tobacco industry. In 2000-2002, the fixed assets were renewed by almost 23 percent in oil refineries and by around 15 percent in the chemical industry. Regarding the other branches of the economy, the most active processes are taking place in the telecommunication sector where outdated cable telephone lines are being replaced by digital ones. A survey among potential Internet users confirms that the lack of reliable communication lines prevents them from entering the World Wide Web. Telecommunications have become one of the determining infrastructures for Azerbaijan's economic transition to the technological revolution.
Although Azerbaijan has shown considerable growth in economic development, this success should be considered only as a prerequisite for technological and sustainable development in line with world progress. There are necessary human and natural resources required for that. However, there is a shortage of investment funds needed for wide-scale involvement of modern technologies in the economic and social sphere.
Foreign investments are the main source of investments. Capital investment in Azerbaijan's economy between 1993 and 2001 was 22,800 billion manats with foreign companies investing 80.3 percent. Therefore, foreign investments in these years have been the main source of rehabilitation of the national economy on a new technological base. However, it is necessary to state that foreign investment has created sufficient conditions for a technological breakthrough in the context of covering all the fields of economy and social life. A significant portion (more than 76 percent) of foreign capital was invested in the oil sector.
Between 1995 and 2001, foreign companies invested $6.9 billion in Azerbaijan, including 79.7 percent as direct foreign investments. During this period, the credits issued primarily by bilateral structures for financing the projects including ICT-oriented ones, exceeded $1.4 billion. The foreign direct investments were partially used for ICT development also by joint telecommunication companies such as AzEuroTel, Azercell and Bakcell. Following the oil industry, the telecommunication sector is the second most active field for foreign investments. ICT is also developing within the oil sector, which ensures involvement of local personnel in using these and other modern technologies.
Foreign investment in the non-oil sectors of the economy are basically insignificant. There are studies, which claim that for every dollar spent in the oil sector where oil projects are being implemented, an additional $0.50 is invested in other branches of the economy.
In Azerbaijan, this ratio is now only 11.3 percent (Table 1.7). The new technology-based telecommunication, metallurgic, food and cement enterprises, established by foreign investments, are the major contributors to GDP after the oil sector. In these enterprises, wages twice exceed the average wage in the country (which stands at approximately $65 per month).
The poverty reduction strategy for 2003-2005 envisages the expansion of state involvement into the investment projects on the base of modern technologies as well as attracting project-designed credits under the government's guarantor. According to the government, $8 billion will be invested in Azerbaijan's national economy between 2003-2005, including state budget assets of around $320 million (Table 1.7). Direct foreign investments in non-oil branches are anticipated at $450 million. The government has been discussing a state investment program for the future. Simultaneously, according to the government, a project on the creation of the Foreign Investments Agency (FIA) is currently in the process of becoming institutionally legalized. The FIA will also contribute in attracting foreign investments.
The real economic growth between 2003-2007 is about 112.0 percent because there has been an average annual growth of 14.6 percent. By attracting investments and using modern technologies to develop the potential of non-oil branches, the growth of these branches is predicted at around 71.0 percent as compared to 154.0 percent in the oil sector. The real growth in the telecommunications sector in 2003-2007 is expected to be about 124 percent.
It is anticipated that the role of modern technologies and ICT in economic growth in the next years will witness qualitative changes, especially in relation to information technology. By attracting direct foreign investment, project-designed credits and domestic investment funds, new kinds of equipment and technological means will be involved in production. For this period, it is reasonable to expect an increase of the share of expenditures for equipment in the structure of fixed investments. According to the State Statistics Committee, this index was less than 24 percent in 1999-2001. Progress in this field should ensure a more efficient national economy, which can be more competitive in foreign markets. This will require considerable effort, which is needed to ensure that the equipment and technologies, especially those demanded by foreign companies, reflect the newest technological achievements. Failure to diminish and eliminate technological lag would result in what the UNDP refers to as “development without future”. Another important factor is to provide for the scientific capacity of the technologies that will be launched. This will effect employment rates, the development of natural sciences and engineering, and help to develop human capital to generate ideas and create modern technologies. It should be noted that ICT are the tools and necessary elements of nearly all modern technologies. From this viewpoint, ICT development provides the base for development and use of modern technologies, including advanced technologies.
In the coming years, ICT will not only expand its role in economic growth as a more perfect means of communication, but they should become one of the tools of Azerbaijan's market. In this capacity, ICT should influence all aspects of the production of goods, involving more effective manufacturing and transfer to the market. Removal of regional disparities in access to ICT resources, which currently are concentrated in Baku, should create equal logistical and information conditions for competition among producers. This is particularly important for rural areas. A developed network of business-incubators, oriented at formation demands, will contribute to their more clear orientation in selecting priorities for activity and, in general, increasing their motivation for working in the market.
Table 1.5. Azerbaijan's TAI as compared to other countries
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Table 1.6. Foreign Investments, in millions, US Dollars
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Table 1.7. Forecasted Economic Indicators of the Azerbaijan Republic
(Millions in US Dollars)
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Table 1.8 GDP Real Growth Rate, 2003-2007, in percentage
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