Trade & Transport Facilitation in the Caucasus

TRADE & TRANSPORT FACILITATION IN THE CAUCASUS

Identifying Information Mechanisms

(Final Report)

May 2002

CONTENT

CONTENT 2

INTRODUCTION 3

BRIEF REVIEW OF THE SITUATION IN TRADE AND TRANSPORTATION SPHERE 6

MAIN INFORMATION DIRECTIONS 14

Information on International Standards 17

The Role of Information on International Standards 17

The Most Important Directions of Information on International Standards 18

Large Foreign Firms 22

Large Local Firms 23

Medium and Small Local Firms 24

Information about Influence of Political Situation 26

Role of Information about Political Situation 26

Large Foreign Firms 33

Large Local Firms 34

Medium and Small Local Firms 34

Information on Legislative Framework 36

The Role of Information on Legislative Framework 36

Large Foreign Firms 47

Large Local Firms. 47

Medium and Small Local Firms 48

Information on the Implementation of Trade and Trade Transportation Operations 50

The Role of Information Support in the Implementation of Trade and Trade Transportation Operations 50

Usage of the information support by each of three firms types during the realization of separate stages of the whole transportation process. 50

SUMMARY 66

POTENTIAL MODALITIES 68

INTRODUCTION

«Trade & Transport Facilitation in the Caucasus» Project devoted to the study of mechanisms and incentives of trade and transport development in the region was conducted in spring 2002 under the initiative and sponsorship of the World Bank. Based on the outcomes of the survey the report covered the review of the constraints and obstacles for the trade and transport facilitation and also provided a general description of the political and administrative incentives for the development of trade in each country and region as a whole. Besides, the report aimed to cover the principal directions and reliable mechanisms of conducting specific reforms.

In the frame of the given project the three main directions within the above-described issue have been surveyed. The present report suggests the results of the work on one of the mentioned directions which consists in the study of information mechanisms, their role in the development of trade and trade transportation spheres as well as further potentialities. The final aim of the survey is to prepare the review describing the suggested process of the performed activities on the improvement of information prevalence mechanisms concerning the procedures, regulations and laws related to trade and transportation spheres.

On the whole the preparation of the report has comprised three stages:

Inception Report. The given report suggesting a review of situation in the area of information support on trade and closely related to it transportation sphere, was prepared on the basis of superficial study of the general situation in the market, analysis of electronic and print materials, laws and regulations related to the given sphere, as well as general awareness dialogs with specialists involved in the studied sphere in Azerbaijan. The report is of a review character and suggests a reader a general information about the studied sphere. All the figures and facts provided in the given review are obtained from the official sources. The descriptions and suggestions have been offered on the basis of and according to opinions of specialists involved in the sphere of transportation in Azerbaijan.

Interim Report. The present report is the second part of the great work devoted to the study of the situation concerning the mechanisms of information prevalence about the procedures, regulations, laws and legislative acts regarding the trade, and related to it transportation sphere. In general, the whole work contains the three independent but closely interrelated parts that suggest the general description of the situation in the given sphere in Azerbaijan, determining the principal stimulant and inhibitory processes as well as drawing up the further plan for the development of information infrastructure in the given sphere. The given report is based on the detailed study of various print and electronic materials, the analysis of the present legal framework as well as in-depth interviews with representatives of the business world of the country involved in the given sector. The mentioned sources enabled to gather sufficient information for determining the background and interpreting the analysis of some aspects covered in the given report. The professional survey conducted among organizations involved in the sphere of trade and trade transportation in Azerbaijan served as the main information base for the preparation of the present document. The survey covered 60 enterprises that were grouped in 10 directions according to their sphere of activity. The given report reflects the main ideas and the most interesting outcomes of the survey. The Completed Report will be attached to the Final Report as a separate document. The analysis of the results of the report were based on the close consultations with the specialists engaged in the sphere of trade and trade transportation.

Final Report. The present report combines and summarizes the information gathered as a result of preparation materials for the two previous reports. Besides the findings of the given survey as well as recommendations provided by expert group involved in the whole process of work, were also included into the given report. In addition to the main information directions the Final Report suggests a technical proposal on the preparation and publishing of the information materials as well as a detailed description of the plan on the creation of regional website containing comprehensive information about various processes in trade and trade transportation sphere. Along with the technical description the report provides the data concerning financial expenditures required for the construction of valuable regional information network.

The items below were covered in the process of preparation of the Final Report:

§  A detailed list of information required for structures directly or indirectly involved in trade and trade transportation sphere, and drawn according to the firm size: Large Foreign Firms, Large Local Firms, Medium And Small Local Firms.

§  A detailed review of the current sources and mechanisms of information prevalence concerning the required information about the legislative, administrative and institutional structure in the region.

§  Estimation of the size of the financial support required for the creation of shared information database on the current sources of information; preparation of the information directory and creation of the regional website as well as the its hosting mechanisms.

§  Identification of the most suitable mechanisms for providing the customers with the required information.

BRIEF REVIEW OF THE SITUATION IN TRADE AND TRANSPORTATION SPHERE

Azerbaijan experiences now a rather specific stage of its development. The variety of natural resources, which conditioned for the rapid rate of development of gas-and-oil producing industry, entailed the development of other rather important producing fields. At the same time the beneficial and strategically important geographical position of Azerbaijan which seriously affects both political and economic processes in the region, build the foundation for the potential development of a range of fields enabling in the future to determine the main income items of the state budget of the country.

Favorable environment reflects particularly in all spheres of business life in Azerbaijan and provides for the gradual but stable development of the country. Thus, according to the information provided by the State Statistical Committee dated from April 2002 about 56 000 of various organizations, of which 3 566 started their activity in 2001, were registered in the country at the end of 2001. Besides the sphere of activity of the given organizations is rather various. Interestingly that 93% of all firms operating in the country are small and medium (closer to small) firms. It is noteworthy that various surveys conducted by international companies in Azerbaijan[1] show that on the background of very favorable economic and political conditions the local obstacles put by government officials of medium and small rang also exert rather serious influence on the level of economic development in the country. It should be pointed out that separate small obstacles put by the mentioned above structures are not, as a rule, remarkably distinguished against the general background of the important governmental decisions and legislative acts issued by the supreme authority of the country, and intended in case of their proper application, to improve the home business climate in the country that stipulates for the economy development. However, the scope of the obstacles put by small and medium firms is so great that it does not only reduce to a minimum the favorable environment conditions, but also throws the shadow on the policy of the supreme authority of the country which aims, first of all, at the economic development of Azerbaijan. The optimism is arisen by the fact that for the recent time the upper authority of the country has been taking the firm steps aimed at the struggle with the described-above phenomenon.

On the background of the all above-mentioned the trade sphere can be distinguished as the most remarkable one. Thus, according to the official data obtained from the State Statistical Committee 32% of the firms actually operating today in the country are involved in the sphere of trade. Besides it is trade which is considered to be the main decisive mechanism in business. Thus organizations engaged in manufacture and other spheres related to it, are also involved to one or another extent into the broad sphere of trade.

Speaking about the situation in trade market it should be noted that according to the official data, the volume of export today considerably exceeds the volume of import (see the table on the next page). Thus, the data reported by the State Statistical Committee show that for 2000[(] the country exported the goods on the account of $ 1.744.899.900, and imported on the sum of $ 1.172.069.100. However, it should be noted that the great proportion of the country’s exports accounts for the oil-producing industry (about 85%), which equals to $ 1.485.341.1. Further among the main exports of the country one should mention textile production (2,3%) - $ 40.774.900 as well as goods manufactured by the chemical industry of the country (2,1%) - $ 36.195.600. Speaking about import one should firstly distinguish cars and the electrical equipment (31%) - $ 362.780.800 as well as constituent elements of non-ferrous metals (10,5%) - $ 123.416.200, agricultural products (except cattle-breeding) (10,2%) - $ 119.488.200. The principal partner of Azerbaijan in the sphere of international trade is Italy. During 2000 the turnover of this country comprised $ 790.643.300, which is about 27% of the whole foreign trade turnover of the country. It is Italy, which is the principal country of Azerbaijan export (43,7%) - $ 762.544.800. Such countries as Russian $ 347.628.100 (11,9% of total trade turnover) and Turkey - $ 233.473.300 (8%) should also be mentioned among the principal partners. If the principal export partner of Azerbaijan is Italy, Russia can be considered as a principal import partner. Within 2000 the amount of goods imported from this country accounted $ 249.326.600, which comprised 21,3% of total import of our republic.

2

Import and export by groups of goods in 2000
Names of groups / Imports thsd. US$ / Percentage / Exports thsd. US$ / Percentage
Total / 1 172 069.1 / 100 / 1 744899.9 / 100
Alive animals / 31 628.7 / 2.7 / 462.3 / 0
Vegetables / 119 488.2 / 10.2 / 28 457.9 / 1.6
Animal and vegetable fats and oils and their cleavage products / 11 242.4 / 1 / 3606 / 0.2
Food products, beverages, spirits and vinegar, tobacco / 59 457.5 / 5.1 / 24 182.5 / 1.4
Mineral products / 115 180.2 / 9.8 / 1 485 341.1 / 85.1
Products of chemical industry / 84 125.7 / 7.2 / 36 195.6 / 2.1
Plastic, rubber and articles thereof / 22 769.3 / 1.9 / 20 524.3 / 1.2
Row hides and skins and articles of leather / 809.4 / 0.1 / 1 667.8 / 0.1
Wood and articles of wood / 22 879 / 2 / 780.2 / 0
Paper and paperboard; articles of paper pulp or paperboard / 18 458.4 / 1.6 / 594.6 / 0
Textile materials / 25 166.8 / 2.1 / 40 774.9 / 2.3
Footwear, headwear, umbrellas, artificial flowers / 4 148.3 / 0.4 / 20.2 / 0
Articles of building materials (stone, cement and ceramic) / 17 708.6 / 1.5 / 272.2 / 0
Pearls, precious stones, precious metals / 110.5 / 0 / 3.2 / 0
Miscellaneous articles of base metal / 123 416.2 / 10.5 / 32031.8 / 1.8
Machine, electric equipment / 362 780.8 / 31 / 30 683.8 / 1.8
Vehicle other that railway or tramway rolling stock, ships and air-transport facilities / 100 004.7 / 8.5 / 34 763.8 / 2
Musical instruments, medical equipment / 35 841.3 / 3.1 / 3 135.1 / 0.2
Miscellaneous manufactured articles / 16 837.2 / 1.4 / 1 242.2 / 0.1
Works of art, collection pieces and antiques / 15.8 / 0 / 160.3 / 0

The table below shows the distribution of the total trade turnover among the principal partners of Azerbaijan in the sphere of trade.

A-Italy; B-Russia; C-Turkey; D-France; E-Israel; F-USA; G-Switzerland; H-Georgia; I-Great Britain; J-Germany; K-Iran; L-Kazakhstan; M-Ukraine; N-The Netherlands; O-Iceland; P-China; Q-United Arab Emirates; R-Greece; S-Malta; T-Poland; U-Other countries