STATEMENT

of January 18^th, 2007

by the Coalition Increasing Transparency in Extractive Industries

on the decision by the Tariff Council of January 7^th, 2007

The oil sector has developed at a high pace in our country recently. Earnings from the sale of crude oil and petroleum products have played an exceptional role in boosting the expenditures of the state budget for 2006, as well as raising salaries, benefits and pensions and social allowances. Contributions from the Oil Fund have done their duty to show a disposition towards the removal of refugee and IDP camps, better the water supply system, build up road infrastructure, and launch a number of other capital-intensive projects on different occasions. In general, there has been observed a relative advancement with respect to solving social problems of the population.

Rise in the prices of petroleum products, public transport fare, and tariffs on consumption of electricity and water during the first week of the new year seems to bring to naught major socioeconomic achievements of 2006. As a matter of fact, the prices of commodities and services have been bulled reasonably – and are still climbing – following the notorious decision by the Tariff Council. The middle class and the needy are as ever in the vanguard of those who are affected by the price- and tariff hike.

We are seriously concerned over the stirring up of the factors that trigger inflation, as the greater extent of the use of oil incomes is the matter of apparent consequence to find a solution to emerging problems – such a policy, however, will shrink to the amount of the ‘national boon’ for future generations.

The other factors that make the Coalition uneasy are directly related to the activity of the Tariff Council and the way it follows in making decisions. Despite relevant legal texts and a series of international conventions, which Azerbaijan is a party to, make a provision for consultations with all stakeholders on whether to make a decision of the above-mentioned nature or not, neither the Union of Free Consumers (Azad Istehlakçılar Birliyi), nor the Confederation of Employers and Entrepreneurs (İşəgötürənlər və Sahibkarlar Konfederasiyası), the Coalition of Business Associations (Biznez Assosiasiyalar Koalisiyası) and other civil society organizations have been invited to the discussions on such occasion. The corresponding approach is far from Azerbaijan’s statements on and fails to match to the commitments the country has made with respect to drawing near to Europe.

Another fact that perturbs us is that among those who have promptly supported the decision are Members of Parliament and representatives from administrative bodies, with government officials and the leadership of the Tariff Council keeping their distance without any elaboration. Running counter to the statute of the Tariff Council is that the necessity, purpose and consequences of such a significant adjustment have not been presented to media.

By making its decision in a non-transparent manner, under the pressure from monopolistic groups, the Tariff Council thereby has opened up the horizons for economic misbalance, social crises and the impending threat of the failed use of oil incomes. The Coalition holds firm to the opinion that there must be put an end to such a practice!

Taking into consideration all noted above, the Coalition proposes the implementation of the following in the near future:

- it is high time to have the “independent regulator” model, the most correct leverage for countries in transition, introduced in Azerbaijan. Indeed, this model is capable of covering the interests of every single stakeholder, whether that is a common citizen, a private entrepreneur or a public institution, in the processes of change in prices, and ensuring transparency in the activity of the Tariff Council;

- attention must be paid to assessments and recommendations by the World Bank, the International Monetary Fund, the European Bank for Reconstruction and Development, and the Asian Development Bank on the existing business climate in our country, with the purpose of taking serious steps towards the improvement of economic freedoms and putting an end to monopolistic-oligarchic groups, the establishment of the climate of fair competition, liberalization of customs regime, and institutional reforming of public institutions. Indeed, as a result of these efforts the prices won’t be set in a secret deal among certain groups, but become established in the circumstances of free and fair competition, thereby being a better response to the needs and interests of consumers. The out-of-date methods for administrative regulation of prices will draw us back, rather than moving forward;

- to ensure that all calculations, which have been a reason for the Tariff Council for making its decision, are made available for the public;

- the cost of crude oil and petroleum products, electricity and water must always be made public. The economic efficiency of operation of the corresponding industries must be regulated, and the public must be informed of this;

- necessary impetus needs to be given to better the management of natural monopolies, strengthen accountability in this particular area, and ensure the transparency of budget remittances by those companies.

Last correction date of the file: 24/7/2008 - 15:0:20