2014 Index of Economic Freedom

Azerbaijan

overall score61.3
world rank81
Rule of Law

Property Rights20.0

Freedom From Corruption22.7

Limited Government

Government Spending64.8

Fiscal Freedom88.1

Regulatory Efficiency

Business Freedom73.5

Labor Freedom77.9

Monetary Freedom78.8

Open Markets

Trade Freedom77.2

Investment Freedom60.0

Financial Freedom50.0

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Quick Facts
  • Population:
    • 9.2 million
  • GDP (PPP):
    • $96.8 billion
    • 2.2% growth
    • 5.4% 5-year compound annual growth
    • $10,478 per capita
  • Unemployment:
    • 6.0%
  • Inflation (CPI):
    • 1.1%
  • FDI Inflow:
    • $2.0 billion
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Background

Azerbaijan’s dispute with Armenia over the Nagorno–Karabakh region has cost tens of thousands of lives and the loss of about a fifth of Azerbaijan’s territory. A 2009 constitutional amendment abolishing presidential term limits allowed President Ilham Aliyev to be re-elected for a third term in October 2013. Oil and gas production, construction, and private investment are increasing, and exports of gas to Russia have also risen. In June 2012, Turkey and Azerbaijan agreed to build the Trans-Anatolian Natural Gas Pipeline, which will ease Europe’s dependence on Russian gas. Negotiations on accession to the World Trade Organization continue.

Rule of LawView Methodology

Property Rights 20.0 Create a Graph using this measurement

Freedom From Corruption 22.7 Create a Graph using this measurement

Although anti-corruption laws are in place, corrupt practices permeate all spheres of public life in Azerbaijan. About half of all citizens report having to pay bribes for such services as customs, education, land-related services, medical services, the police, registry and permit services, and utilities. The judiciary is burdened by non-transparent regulations and interference from the executive. Contract enforcement can be lax.

Limited GovernmentView Methodology

The top individual tax rate has fallen to 25 percent, and the top corporate tax rate remains at 20 percent. Other taxes include a value-added tax (VAT) and a property tax. The overall tax burden has risen to 12.8 percent of the domestic economy. Government spending is 34 percent of GDP, and public debt remains low. Withdrawals from the state oil fund have been increasing, cushioning public finances.

Regulatory EfficiencyView Methodology

Business start-up has become simpler. Required procedures have been reduced to six, and no minimum capital is required. However, obtaining necessary permits takes more than 150 days. Despite the lack of a fully developed labor market, labor productivity growth has been slightly higher than wage hikes. Price controls are in place for most energy products, and monopolies and limits on imports also cause distortions in domestic prices.

Open MarketsView Methodology

Azerbaijan’s tariff rate is 3.9 percent. Weak legal institutions and non-transparent regulations act as barriers to trade and investment. The financial sector, dominated by banks, remains stable and relatively well-capitalized. The government has injected new capital into the majority state-owned International Bank of Azerbaijan, raising the state’s share in the bank to slightly over 50 percent.

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 Kong90.10.8
2Singapore89.41.4
3Australia82-0.6
4New Zealand81.2-0.2
5Taiwan73.91.2
6Japan72.40.6
7Macau71.3-0.4
8South Korea71.20.9
9Malaysia 69.63.5
10Kazakhstan63.70.7
11Thailand 63.3-0.8
12Azerbaijan61.31.6
13Samoa61.14.0
14Kyrgyz Republic 61.11.5
15The Philippines60.11.9
16Sri Lanka60-0.7
17Vanuatu59.52.9
18Mongolia58.9-2.8
19Fiji58.71.5
20Indonesia58.51.6
21Tonga58.22.2
22Cambodia57.4-1.1
23Bhutan56.71.7
24India55.70.5
25Pakistan 55.20.1
26Bangladesh 54.11.5
27Papua New Guinea53.90.3
28China52.50.6
29Tajikistan52-1.4
30Laos51.21.1
31Maldives512.0
32Vietnam50.8-0.2
33Nepal50.1-0.3
34Micronesia49.8-0.3
35Burma46.57.3
36Uzbekistan46.50.5
37Kiribati46.30.4
38Solomon Islands46.21.2
39Timor-Leste43.2-0.5
40Turkmenistan42.2-0.4
41North Korea1-0.5
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