2013 Index of Economic Freedom

Azerbaijan

overall score59.7
world rank88
Rule of Law

Property Rights25.0

Freedom From Corruption24.0

Limited Government

Government Spending67.8

Fiscal Freedom85.5

Regulatory Efficiency

Business Freedom69.2

Labor Freedom79.4

Monetary Freedom73.5

Open Markets

Trade Freedom77.2

Investment Freedom55.0

Financial Freedom40.0

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Quick Facts
  • Population:
    • 9.1 million
  • GDP (PPP):
    • $93.1 billion
    • 0.1% growth
    • 9.7% 5-year compound annual growth
    • $10,202 per capita
  • Unemployment:
    • 1.0%
  • Inflation (CPI):
    • 7.9%
  • FDI Inflow:
    • $1.5 billion
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Azerbaijan’s economic freedom score is 59.7, making its economy the 88th freest in the 2013 Index. Its overall score is 0.8 point higher than last year, reflecting improved scores in the management of public finance and property rights. Azerbaijan is ranked 14th out of 41 countries in the Asia–Pacific region, and its overall score is above the regional and global averages.

Azerbaijan’s strong economic growth has been driven mainly by development of the energy sector. Substantial challenges to diversification and sustainable growth remain, and deeper systemic reforms are critically needed to strengthen the foundations of economic freedom. Despite some improvement, property rights are weak, and the level of corruption continues to be substantial. Government regulations add to the costs of foreign investment, and monetary instability adds to uncertainty.

Openness to global trade, recent tax reforms, and some improvements in regulatory efficiency have aided Azerbaijan’s transition to a more market-based system. Continued transformation and restructuring are needed, both to capitalize on the well-educated labor force and to broaden the production base.

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Background

Azerbaijan’s continuing dispute with Armenia over Nagorno–Karabakh has cost tens of thousands of lives and the loss of a fifth of Azerbaijan’s territory. A constitutional amendment abolishing presidential term limits, passed by referendum in 2009, allows President Ilham Aliyev to seek a third term in 2013. In 2011, the government cracked down on protests and jailed leading opposition figures. Economic growth almost halted in 2011, but expanded oil and gas production and increased private investment and consumption reflect growing investor confidence. Azerbaijan has increased its gas exports to Russia to 3 billion cubic meters per year. In June 2012, Turkey and Azerbaijan agreed to build the Trans-Anatolian Natural Gas Pipeline, which would ease Europe’s dependence on Russian gas. World Trade Organization accession negotiations are ongoing.

Rule of LawView Methodology

Property Rights 25.0 Create a Graph using this measurement

Freedom From Corruption 24.0 Create a Graph using this measurement

The judiciary is burdened by extensive non-transparent regulations and interference from the executive. Contract enforcement can be lax. Despite some progress, corruption continues to cause concern. The judiciary and police are susceptible to bribery, and businesses abuse their relations with government to gain monopoly control of major industries. The property registration system is awash with bureaucratic requirements.

Limited GovernmentView Methodology

The top individual income tax rate is 30 percent, and the top corporate tax rate is 20 percent.

Regulatory EfficiencyView Methodology

Other taxes include a value-added tax (VAT) and a property tax. The overall tax burden equals 12.4 percent of total domestic income. Government spending has fallen to 32.8 percent of GDP. Large revenues from the energy sector enable budget surpluses, but strong growth in the non-energy sector has also encouraged fiscal health. Public debt remains low.

Open MarketsView Methodology

Despite progress in streamlining the process for launching a business, other time-consuming requirements reduce regulatory efficiency. Completing licensing requirements takes more than 150 days. Labor regulations have become relatively more flexible, but enforcement of the labor code remains uneven. Inflation has risen, partly as a result of customs restrictions that limit import competition.

Country's Score Over Time

Bar Graph of Azerbaijan Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing Azerbaijan to other economic country groups

Regional Ranking

rank country overall change
1Hong Kong89.3-0.6
2Singapore880.5
3Australia82.6-0.5
4New Zealand81.4-0.7
5Taiwan72.70.8
6Japan71.80.2
7Macau71.7-0.1
8South Korea70.30.4
9Malaysia 66.1-0.3
10Thailand 64.1-0.8
11Kazakhstan63-0.6
12Mongolia61.70.2
13Sri Lanka60.72.4
14Azerbaijan59.70.8
15Kyrgyz Republic 59.6-0.6
16Cambodia58.50.9
17The Philippines58.21.1
18Fiji57.2-0.1
19Samoa57.1-3.4
20Indonesia56.90.5
21Vanuatu56.60.0
22Tonga56-1.0
23India55.20.6
24Pakistan 55.10.4
25Bhutan55-1.6
26Papua New Guinea53.6-0.2
27Tajikistan53.40.0
28Bangladesh 52.6-0.6
29China51.90.7
30Vietnam51-0.3
31Nepal50.40.2
32Micronesia50.1-0.6
33Laos50.10.1
34Maldives49-0.2
35Uzbekistan460.2
36Kiribati45.9-1.0
37Solomon Islands45-1.2
38Timor-Leste43.70.4
39Turkmenistan42.6-1.2
40Burma39.20.5
41North Korea1.50.5
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