Economic change and the business environment in the South Caucasus

Providing further analysis on political and foreign policy issues, Alum Bati, a British lawyer, writer and academic who is resident in Baku, discusses economic challenges and the region’s business environment over the last two decades. He concludes with a recommendation that in order to establish an environment conducive to a thriving economy, good legislation is key. Legislation has continued to pour out of parliaments, presidential offices, the Cabinets of Ministers and a plethora of ministries at an ever-increasing rate, and too much legislation can be counterproductive. On gaining independence in 1991, the three countries of the South Caucasus, Armenia, Azerbaijan and Georgia, faced similar economic and political challenges. Their industries and infrastructure had been devastated by the break-up of the Soviet Union. But while these challenges were similar, among them inter-ethnic strife and external threats, the resources at hand to deal with the birth pangs of nationhood were very different. Azerbaijan, with its larger population and oil and gas wealth, had a real advantage over Armenia, with its mineral wealth in the form of diamonds, and resource-poor Georgia. The surprise was that Georgia and Armenia, despite their relative disadvantages, managed to keep pace with Azerbaijan in economic development for the first 14 years of independence. Thereafter, Azerbaijan pulled ahead with increasing rapidity. Throughout these years, similar problems have bedeviled the economies of all three nations: corruption, political and economic oligarchies, narrow wealth distribution, and an absence or decline of skill bases. The erratic and inconsistent attempts to address these challenges have left much to be desired.

Authors: Alum Bati