## _cr04322

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---

### SPPRED: purpose, scope, and process
- SPPRED is a national poverty reduction strategy produced by Azerbaijan in the period 2001-2003 and formulated for the period 2003-2005; the annual report summarises activities and progress in the year 2003.
- Objectives and approach:
  - Takes into account multiple dimensions of poverty: lack of opportunities, low capabilities, low security, and empowerment.
  - Presented as a nationally owned strategy and focal point for donor coordination.
- Institutional arrangements and milestones:
  - Secretariat set up in 2001 at the Ministry of Economic Development (MED).
  - 15 Sector Working Groups (SWGs) established.
  - Draft presented at international conference in Baku on 25 of October 2002; received final approval by Presidential Decree on February 20, 2003.
  - SPPRED document submitted to IMF and WB; Joint Staff Assessment (JSA) produced in April 2003.
  - Cabinet of Ministers decree in May 2003 assigned MED to coordinate implementation; Secretariat extended to include a Poverty Monitoring Unit (PMU).
  - Secretariat activities in 2003 supported by WB, ADB, UNDP, USAID and GTZ.
- Policy matrix structure (four functional groups):
  - Economic development and employment growth
  - Social policy and human development
  - Regional policy and infrastructure development
  - Institutional reform and capacity building

### Four core SPPRED questions and six strategic directions
- Core questions:
  - Where are we now?
  - Where do we want to go?
  - How do we want to get there?
  - How will we know that we are getting there?
- Six strategic directions:
  - Creating an enabling environment for the growth of income-generating opportunities
  - Maintenance of economic stability
  - Improvement of the quality of and equity of access to basic health and education services
  - Improvement of infrastructure
  - Reform of the existing system of social protection
  - Improvement of the living conditions and opportunities of the refugee and IDP population

### Alignment with Millennium Development Goals (MDGs)
- Global MDG framework: 8 goals, 18 targets and 48 indicators for 1990–2015.
- SPPRED compatibility and country-specific adaptation:
  - SPPRED’s overall aim is poverty reduction and is compatible with MDGs.
  - Includes a Medium-Term Expenditure Framework (MTEF) to link goals to an expenditure programme.
  - Proposed country-specific education goal: replace global MDG 2 with achieving universal secondary education (conditional on SPPRED measures).
  - Proposed country-specific Goal 8 emphasis: “increasing FDI in the non-oil sector”.
- Baseline and monitoring notes:
  - 1990 not a suitable baseline for most targets; poverty baseline set at 2002 using a new absolute poverty line.
  - Secretariat working on setting concrete targets and building statistical capacity.
  - Report doubles as annual SPPRED report and country MDG report.

### Macroeconomic performance and fiscal outcomes (selected figures)
- GDP and growth:
  - GDP increased from 30,312.3 bln. AZM in 2002 to 35,053.4 bln. AZM in 2003 (real growth 11.2%).
  - Per capita GDP reached 4.3 mln. AZM (879.7 USD) in 2003; per capita growth was 10.2% in 2002 and 10.3% in 2003.
  - Deflator index: 104.0% in 2003 (100.7% in 2002).
- Inflation and exchange rate:
  - Average annual inflation rate was 2.2% in 2003 (0.6% lower than in 2002).
  - Average annual exchange rate: 4,860.8 AZM in 2002 and 4,910.8 AZM in 2003.
- Fiscal revenues and expenditure:
  - Revenues: 4,551 bln. AZM in 2002; 6,131.9 bln. AZM in 2003 (increase of 34.7%).
  - Expenditure: 4,567 bln. AZM in 2002; 6,173 bln. AZM in 2003 (increase of 32.5%).
  - Budget deficit: 107.6 bln. AZM in 2002 and 41.1 bln. AZM in 2003 (0.4% and 0.1% of GDP respectively).
  - Expenditure composition: 17.3% social protection; 19% education; 4.5% health; 19.4% capital investments.
  - Wages, pensions and benefits: 2,301 bln. AZM in 2002 and 2,676.3 bln. AZM in 2003 (increased by 16.2%).
- Monetary and financial sector:
  - M-2 increased by 28% in 2003 to 2,592.2 bln. AZM; real growth of M2 25.2%.
  - National currency reserves increased by 23.7% in 2003 to 2,316 bln. AZM as of January 1, 2004.
  - Discount rate reduced from 10% to 7% since September, 2002; unchanged in 2003.
  - Average interest rates for credit in national currency decreased from 15.6% at the beginning of 2003 to 14.9% at the end of 2003.
  - External debt: USD 1,358 mln. as of January 1, 2003 (22.3% of GDP) and USD 1,508.1 mln. as of November 17, 2003 (21.2% of GDP); external debt per capita USD 182.5 as of November 17, 2003.

### Structural change, investment and non-oil sector
- Investment dynamics:
  - Total investments (1994–2003): 3,986.1 mln USD in 2003 (foreign investments 3,273.3 mln USD in 2003).
  - Fixed capital investments: 5.9 trillion AZM in 2001; 10.4 trillion AZM in 2002; 17.8 trillion AZM in 2003.
  - FDIs account for more than 80% of all investments; foreign investments increased by 46.5% in 2003 to 3,273.3 mln USD (93.5% direct investment).
- GDP sectoral shares and privatization:
  - Non-oil sector share rose from 68% in 2001 to 71% in 2003.
  - Private sector share of GDP: 73.3% in 2003.
  - Oil Fund (SOFAR) resources: USD 692 mln. in 2002; USD 815 mln. in 2003; SOFAR financed specified resettlement, BTC share financing and transfers to state budget in 2003.
- Trade:
  - Foreign trade turnover: 3,745.2 mln. USD in 2001; 3,832.9 mln. USD in 2002; 5,218.2 mln. USD in 2003.
  - Export composition in 2003: “Mineral products” 86.0% of exports; oil and oil products 85.4% within that group.
  - 2003 foreign trade balance: negative USD 34.2 mln.

### Poverty in 2002: incidence, depth and profile
- Poverty lines and baselines:
  - Absolute poverty line used: 175,000 AZM (value of total minimum consumption basket for 2002).
  - Overall poverty level (absolute line 175,000 AZM): 46.7% for 2002.
  - Relative poverty line: 70% of median per capita consumption expenditure set at 125,134 AZM; overall poverty level 8.8% using this relative line.
  - Alternative absolute poverty line discussed: 120,000 AZM (estimated 49% below that line).
  - Poverty gap (absolute): 0.0822.
  - Gini coefficient (2002 HBS): income distribution 0.271; expenditure distribution 0.276.
- Regional and urban/rural patterns (selected):
  - Urban poverty: 47.8% (absolute); Rural: 45.4% (absolute).
  - Baku poverty: 40.0% (absolute) and hosts 21% of poor population.
  - Highest regional incidence: Nakhchivan AR 62.9% (absolute).
- Household characteristics associated with poverty (absolute 175,000 AZM; relative 125,134 AZM):
  - Head education: higher education 30.4% (absolute); less than secondary 49.6% (absolute).
  - Children in household: 3 children 59.1% (absolute); 4+ children 69.35% (absolute).
  - Household size: 6+ members 58.3% (absolute).
  - Head gender: male-headed households 40.9% (absolute); female-headed 36.1% (absolute).
- Data comparability and quality:
  - 2001 and 2002 estimates not strictly comparable due to revised HBS methodology in 2002.

### Employment and labour market (2002–2003 data)
- Employment and labour force:
  - Annual average employed (1998-2002) increased from 3,701,500 to 3,726,000 (0.6%).
  - Working age population increased from 3.973 mln. in 1990 to 4.988 mln. in 2002 (25% increase).
- Sectoral employment shifts (1995–2002):
  - Agricultural employed increased by 35% (1,112,800 to 1,497,500).
  - Industry employed decreased by 20% (537,200 to 428,600).
  - Service sector employed decreased by 8.2% (1,963,000 to 1,801,000).
- Wages and benefits:
  - Average monthly salary in the formal economy increased 21.4% nominal in 2003 reaching 383,100 AZM (USD 78).
  - Minimum wage increased from 27,500 to 60,000 manat in January 2004.
- Unemployment and LFS 2003:
  - Registered unemployed at employment offices in 2002: 50,963 (1.4% of economically active population).
  - LFS 2003 unemployment rate: 10.7%.
  - Youth unemployment: 20-24 age group highest at 23.8%; 20-24 with incomplete high education unemployment 53.6%.
  - Labour force participation rate (LFS 2003): 62.9% overall; 75.6% for men; 51,1% for women.

### Education: coverage, trends and SPPRED priorities
- Coverage and attainment:
  - Literacy rate (1999 census): 99%.
  - 15-24 age group primary completion (1999 census): 975 out of every 1000 persons.
  - Pre-school gross enrolment rate 2002: 19%.
  - Upper secondary gross enrolment ratio (classes 10-11) 2002: 63.4% (1990: 66.7).
  - Vocational education gross enrolment ratio (total) 2002: 2.9 (1990: 15.5).
  - Persons with higher education per 1000: 1939 — 10; 1999 — 91.
- SPPRED education policy directions:
  - Focus on improving quality and equality of access; re-orient education to market needs.
  - Tentative country-specific MDG: near-to-universal secondary education (11 classes).
  - Policy measures include rationalisation of teaching staff with a rise in teachers' wages and performance-linked bonuses.
  - Free textbooks: about 15.2 bln. AZM allocated for I-V grades and refugee/IDP children in VI-XI for academic year 2003-2004.

### Health, child nutrition, and maternal indicators
- Immunization and child nutrition:
  - Proportion of under-1 children vaccinated against TB: 99.1% (2002).
  - Proportion of under-1 children vaccinated against measles: 98.8% (2002).
  - MICS 2000 under-five stunting: 19.6%; underweight: 16.8%; wasting: 7.9%.
  - RHS 2001 under-five chronic malnutrition: 13.3%; general malnutrition: 6.8%; acute malnutrition: 2.4%.
- Infant and under-five mortality—data issues:
  - Administrative and survey discrepancies in infant and maternal mortality noted; recommendation to use both sources and repeat MICS (next scheduled 2004).
  - Infant mortality administrative series: 1999: 16.5; 2000: 12.8; 2001: 12.5; 2002: 12.8 (per 1,000 live births).
  - Under-five mortality administrative series: 1999: 31.7; 2000: 31.7; 2001: 24.8; 2002: 23.1 (per 1,000 children).
- Maternal mortality:
  - Official maternal mortality ratio: 1990: 9.3 per 100,000 live births; 2002: 19.9 per 100,000 live births.
  - Survey-based estimates higher: UNICEF MICS reported 79 per 100,000 in 1988.

### Infectious diseases and public health actions
- HIV/AIDS:
  - Registered HIV cases: SSC reported 97 in 2002; National Centre reported 105 in 2002 and total 556 by July 1, 2003.
  - Number of HIV tests: 164-170 in 2002; total tests 1987–2002 more than 3,600,000.
  - Low awareness and low testing rates noted; monitoring and prevention programmes expanded.
- Tuberculosis and malaria:
  - New TB cases in 2002: 54.5 per 100,000 population.
  - Malaria incidence declined to 505 persons in 2002 (1999: 2312).
  - DOTS anti-TB strategy introduced and expanded.

### Environmental sustainability, land and water resources
- Key environmental problems:
  - Pollution from Soviet-era industry and agriculture; de-forestation related to fuel shortages; water supply and quality issues; Caspian Sea pollution.
- Land and forestry:
  - Forest cover reported as 192.2 thousand hectares or 2.2% of total area.
  - Total territory figures and land use series preserved across years (selected entries in source).
  - National Program on Forest Rehabilitation and Extension adopted 2002: planting and sowing targets preserved in source.
- Water resources and sanitation:
  - National water resources estimated at 29.7 bn. m3.
  - Access to improved water sources (HBS 2002): 62.0% of population.
  - Administrative data on access to piped water (2002): 94.2% urban; 11.2% rural.
  - Inefficient irrigation causes loss of 2.5 - 3.0 billion m3 of water; half of Absheron peninsula water is lost.
- Caspian Sea pollution (UNEP 2002 tables):
  - Total (all sources) discharges: BOD 1,076,000; Nitrogen 886,000; Phosphorus 104,000; Oil 139,000 (tons per year).

### Refugees and Internally Displaced Persons (IDPs)
- Scale and living conditions:
  - Circa 1 mln. refugees and IDPs (approximately 12% of population).
  - IDP accommodation (1999 → 2003 totals): 546,337 → 574,663 persons in listed accommodations.
  - Temporary settlements: 56% rely on artesian wells; 38% use river and channels as water source; many settlements “often poorly heated and equipped”.
- Employment and income:
  - Survey evidence: approximately 47% of IDPs unemployed (WB AIDPS 2002); other surveys show two thirds unemployed in 2001.
  - Access to land: AIDPS results 15% of IDPs have access to land; 1 ha plots allocated to 5,081 families with grant assistance.
  - Income structure (refugee/IDP vs resident shares): wages and salaries 16.9% vs 25.7%; social benefits 14.7% vs 7.7%.
- Health and education:
  - Underweight among refugees and IDPs two times more than rest of population (SCRIDP).
  - 94.8% of refugee and IDP families have difficulties obtaining school materials.
  - Number of teenagers over 16 with incomplete secondary education 37.8% (SCRIDP, 2002).

### Social protection, pensions and targeting
- Pension and SSPF (2003):
  - Nominal pensions: 1999: 64,968 AZM; 2000: 71,984; 2001: 73,705; 2002: 88,493; 2003: 120,300.
  - Nominal wages: 1999: 184,368 AZM; 2003: 383,100 AZM.
  - SSPF budget (2003): total SSPF budget 1,808,000 mln AZM.
    - Pensions: 827,641.8 mln AZM (45.7% of SSPF).
    - Social assistance: 711,240 mln AZM (39.3% of SSPF).
    - Social pensions: 75,000 mln AZM (4.1% of SSPF).
  - SSPF funding sources: 57.5% social insurance contributions; 42.5% transfers from state budget.
- Child benefits:
  - Child benefits provided for 1,320,172 children from 576,131 families until August 2003.
  - Government spent circa 14 billion AZM per month on child benefits in 2003 (approximate annual 168 billion AZM).
- Unemployment benefits and registration (2002 data):
  - Registered unemployed: 50,963; benefit recipients: 3,292 (6.5% of registered).
  - Average benefit in September 2003: 129.800 AZM; minimum benefit 30,000 AZM.
- Targeting and distribution:
  - Social benefits share slightly greater for bottom four deciles; categorical/state benefits distributed more equally across deciles; privileges skewed toward higher deciles.
  - Removing social benefits would raise poverty incidence by 30-40% (HBS analysis).

### Fiscal framework and MTEF (2003–2005) — key parameters and policy directions
- MTEF integrated into SPPRED; projections for 2003-2005 based on macro forecasts.
- Growth forecasts:
  - Real GDP growth: 2003 actual 11.2%; 2004 forecast 15.3%; 2005 forecast 11.5%; Average 2003 - 2005 11.0%.
  - Non-oil GDP (Real) average 2003 - 2005 11.8%.
- Resource envelope and revenues (selected values):
  - Tax and non-tax revenues: 2003 budget 6310 AZM bln.; 2004 budget 7200 AZM bln.; 2005 forecast 7913 AZM bln.
  - Transfers from State Oil Fund: 2003 1218 AZM bln.; 2004 889 AZM bln.; 2005 750 AZM bln.
  - Total (2003): 10021 AZM bln.; Total excluding implicit subsidies: 8422 AZM bln.
- Expenditure strategy:
  - Emphasis on maintaining macroeconomic stability, cautious use of expected oil revenues, and targeting pro-poor expenditures.
  - Public sector pay measures: selective 50% wage increases in 2003 for key sectors; minimum wage increases in 2003–2004.
  - Capital expenditure rose strongly in 2003 (2107 AZM bln.) with PIP inclusion of all capital projects.
- External and domestic financing constraints:
  - New external borrowing limited to USD 200 millions per year during 2003-2005; priority concessional terms.

### Participatory process, monitoring, and capacity building
- PMU activities and data improvements:
  - PMU created under Secretariat; HBS re-designed in 2001 and improved; LFS carried out in 2003 with ILO/UNDP assistance.
  - Qualitative survey (summer 2003) in 11 regions to supplement quantitative HBS.
  - Work on legislative base for minimum subsistence level and gender-disaggregated statistics.
- Outreach and civil society engagement:
  - Regional workshops in 2003 (Guba, Nakhchivan, Shaki, Masally, Shamakhy, Ganja) with participation training and sector focus; 257 civil society representatives from 23 districts attended, producing 187 proposals.
  - Mass-media dissemination: dozens of articles, radio and TV programmes, press releases and media competitions.
  - Recommendations to expand seminars, strengthen participation of vulnerable groups, increase training for municipalities and NGOs, and sustain media engagement.

### Key policy implications and priority recommendations (as presented)
- Maintain macroeconomic stability while strengthening mechanisms to manage large-scale oil revenues and avoid “Dutch disease”.
- Build local statistical capacity to set concrete targets and indicators for SPPRED and country-specific MDGs.
- Align education policy to support a shift toward universal secondary education: focus on quality, access, curriculum relevance and attendance monitoring.
- Improve monitoring systems for water quality and access; clarify national definition of “improved water source”.
- Set environmental targets sensitively with local community involvement to protect livelihoods.
- Use Oil Fund resources transparently to support non-oil sector development, resettlement and social measures for IDPs and refugees.
- Strengthen banking system, expand long-term savings, and maintain monetary management that supports investment without harming non-oil competitiveness.
- Implement targeted social assistance reforms, improve benefit targeting, and continue pension and social insurance reforms including individual accounts pilots.

*Source: _cr04322 — Introduction; Chapter 1; selected chapters and appendices (SPPRED report, annual implementation report 2003)*

### Introduction...........................................................................6

### Introduction

### SPPRED: purpose and scope
- SPPRED is a national poverty reduction strategy produced by Azerbaijan in the period 2001-2003 with support from international partners.
- It attempts to take into account multiple dimensions of poverty and to understand links between them.
- SPPRED is presented as a nationally owned strategy and a focal point for donor coordination.
- SPPRED was formulated for the period 2003-2005; this annual report summarises activities and progress in the year 2003.

### Four key questions SPPRED addresses
- 1. Where are we now? — describes what is known about poverty, its determinants, and impediments to future economic development.
- 2. Where do we want to go? — the vision is further economic development guaranteeing a fairer distribution of benefits of growth.
- 3. How do we want to get there? — SPPRED identifies six key strategic directions:
  - Creating an enabling environment for the growth of income-generating opportunities
  - Maintenance of economic stability
  - Improvement of the quality of and equity of access to basic health and education services
  - Improvement of infrastructure
  - Reform of the existing system of social protection
  - Improvement of the living conditions and opportunities of the refugee and IDP population
- 4. How will we know that we are getting there? — SPPRED includes a policy matrix which summarises policy directions and measures, categorises them into four functional groups, and lists indicators for monitoring implementation progress.

### Dimensions of poverty as summarized in SPPRED
- Lack of opportunities: relates to income and consumption levels, human capital, employment, wages, and access to assets such as land.
- Low capabilities: relates to health and education indicators; low education attainment, illness, and malnutrition contribute to income poverty.
- Low level of security: linked to risks at national or local level, including predictable seasonal risks (e.g., seasonal risks in agricultural harvest) and less predictable risks such as macro-economic shocks and natural disasters.
- Empowerment: extent to which poor people can participate and influence decision-making.

### Institutional arrangements and process
- In 2001 a Secretariat was set up at the Ministry of Economic Development (MED) to lead and coordinate work on SPPRED.
- 15 Sector Working Groups (SWGs) were established, including members from government agencies, NGOs and civil society.
- Drafts were discussed in national and regional seminars; final draft presented at an international conference in Baku on 25 October 2002 and received final approval by Presidential Decree on February 20, 2003.
- SPPRED document was submitted to IMF and WB; in April 2003 IMF and IDA staff produced a Joint Staff Assessment (JSA) evaluating SPPRED as “a significant achievement” and stating that it “represents a credible poverty reduction strategy that provides a sound basis for Bank and Fund concessional assistance”.
- In May 2003 Cabinet of Ministers decreed that MED should coordinate implementation; the Secretariat was re-formed and extended to include a Poverty Monitoring Unit (PMU).
- Secretariat activities in 2003 were supported by WB, ADB, UNDP, USAID and GTZ.
- Line ministries are responsible for implementing policy actions within the Policy Matrix and providing quarterly implementation status reports to the Secretariat.

### SPPRED structure: four main functional groups (policy matrix)
- 1. Economic development and employment growth
- 2. Social policy and human development
- 3. Regional policy and infrastructure development
- 4. Institutional reform and capacity building
- The policy matrix includes a list of indicators to monitor implementation progress.

### Report purpose and limitations
- Aim: summarise progress achieved during the first year of implementation, highlight problems encountered, and outline future activities.
- Limitation: as it is the first year (2003) of the programme, there has not been time to organise impact analyses; full implementation effects of most measures have not yet become apparent, making impact analyses premature.

### Chapter-by-chapter content summary
- Chapter 1: relationship between global Millennium Development Goals (MDGs) and SPPRED goals; country-specific MDGs, targets, and indicators are under discussion and expected to be similar to SPPRED objectives.
- Chapter 2: update by PMU on main economic development and living standards indicators; points out links to country-specific MDGs for monitoring progress.
- Chapter 3: progress updates on fiscal policy, monetary policy and banking sector development, investment policy, energy policy, and labour market and employment policies; based on line ministries’ implementation progress reports.
- Chapter 4: implementation progress in education, culture, health, social protection, and improving living standards of IDPs and refugees.
- Chapter 5: activities related to public investment in utilities and infrastructure; measures on agriculture, irrigation, land protection and water resources; environmental protection and tourism development measures are noted.
- Chapter 6: policy measures for institutional reform and capacity building including judicial and legal reforms, decentralisation, municipal capacity development, and capacity building in poverty monitoring.
- Chapter 7: participatory approach in implementation and evaluation; Secretariat facilitates extensive and inclusive consultation involving civil society, IFIs, and donor community; recommendations for strengthening participation of vulnerable and excluded groups are contained in the chapter.
- Appendixes: Appendix 1 MDGs Report; Appendix 2 Medium Term Expenditure Framework (MTEF) implementation status; Appendix 3 Main socio-economic indicators (1999-2003 summary table included in the report).

### MDGs and SPPRED alignment
- The Millennium Declaration set out 8 goals, 18 targets and 48 indicators for 1990–2015; the 8 main MDG goals listed in the source are:
  - Eradicate extreme poverty and hunger
  - Achieve universal primary education
  - Promote gender equality and empower women
  - Reduce child mortality
  - Improve maternal health
  - Combat HIV/AIDS, malaria and other diseases
  - Ensure environmental sustainability
  - Develop a global partnership for development
- SPPRED’s overall aim is poverty reduction and its goals are compatible with the MDGs.
- SPPRED includes a Medium-Term Expenditure Framework (MTEF) to link country-specific goals to a clear expenditure programme, making achievement realistic.
- Initial discussions of possible country-specific MDG goals took place in 2003 within SPPRED activities.
- WB and UNDP issued a joint statement supporting integration of PRSPs and country-specific MDGs; ADB adopted MDGs as principle targets for poverty reduction and supported SPPRED formulation and implementation.

### Key numeric and date references (verbatim)
- SPPRED formulated in the period 2001-2002.
- Secretariat set up in 2001.
- 15 Sector Working Groups (SWGs).
- Final draft presented at an international conference in Baku on 25 of October 2002.
- Presidential Decree on February 20, 2003.
- SPPRED document submitted to IMF and WB; JSA produced in April 2003.
- Cabinet of Ministers resolution in May 2003.
- Strategy period: 2003-2005.
- Annual report summarises activities and progress in the year 2003.
- World Bank estimates cited: 2.8 billion people live on less than $2 per day, and 1.2 billion on less than $1 per day.
- MDGs framework: 8 goals, 18 targets and 48 indicators covering 1990 to 2015.
- Appendixes in report: Appendix 1: MDGs Report; Appendix 2: MTEF implementation status; Appendix 3: Main socio-economic indicators (1999-2003).

*Source: _cr04322 - Introduction (SPPRED report), pages as provided in the source content*

### Chapter 1: SPPRED and the MDGs

### Chapter 1: SPPRED and the MDGs

### SPPRED and MDG formulation and monitoring
- SPPRED sets out policy goals and priorities for the period 2003-2005; the MDGs set goals and targets for the period up to 2015.
- The formulation period and first experiences of implementation are to be used as a basis for developing longer term goals and country-specific MDGs.
- Baselines:
  - 1990 cannot be taken as a baseline for most country-specific targets due to lack of data and because it precedes social collapse associated with the transition period.
  - For poverty figures the baseline will be 2002, due to the lack of comparable data before this date; a new absolute poverty line will be used to set the 2002 baseline.
- The Secretariat is working in parallel on: (i) setting concrete targets and indicators; and (ii) building up the statistical base and capacity in the country.
- Targets for SPPRED and country-specific MDGs will be developed through dialogue with stakeholders, SWGs and local experts.

### Key conclusions on adaptation of global MDGs to Azerbaijan
- Education:
  - It is expedient that the second global MDG (achieving universal primary education) be replaced by a country-specific goal of achieving universal secondary education, conditional on SPPRED measures to improve quality and access and ensure curriculum relevance.
  - Monitoring should include actual attendance rates in addition to enrolment rates.
- Gender (Goal 3):
  - Goal three (promoting gender equality and empowering women) is important for Azerbaijan; targets and indicators require further discussion.
  - Less emphasis on literacy and quality at lower education levels; more emphasis on encouraging women to take on higher education leading to top positions in economic and political life.
- Child and maternal mortality (Goals 4 and 5):
  - Goals four and five are considered appropriate, but there is a discrepancy between official administrative data and survey estimates for these indicators.
- Health (Goal 6):
  - Combating HIV/AIDS, malaria and other diseases is considered appropriate; discussion is taking place on targets and indicators.
- Environment (Goal 7):
  - Goal seven (ensure environmental sustainability) is integral to SPPRED.
  - Targets regarding land areas covered by forest or guaranteed protection to maintain biological diversity must be set sensitively and involve local communities, to avoid depriving the poor of access to land and energy (firewood) where alternative energy sources are unaffordable.
  - Setting a target for access to safe drinking water is appropriate but requires improved monitoring and clearer definition of “improved water source”; current administrative statistics are only on access to piped water with no consistent monitoring of quality.
- Slum dwellers:
  - The global MDG target on improving lives of slum dwellers is difficult to define and monitor in Azerbaijan; a possible country-specific target for 2010 rather than 2015 is to ensure that all IDPs are re-settled from accommodation without access to sanitation.
- Global partnership (Goal 8):
  - A first proposal adapts this to a country-specific goal of “increasing FDI in the non-oil sector”, compatible with SPPRED strategic aims to promote economic development outside the oil sector and Absheron peninsula.
- Reporting:
  - This report should be considered both an annual SPPRED report and the country MDG report, in line with the Joint Statement by the WB and UN (April 2003).

### Macroeconomic performance and fiscal outcomes (2002-2003)
- GDP and growth:
  - Gross domestic Product (GDP) growth increased by 11.2% in real terms (from 30,312.3 bln. AZM in 2002 to 35,053.4 bln. AZM in 2003).
  - Per capita GDP growth was 10.2% in 2002 and 10.3% in 2003, reaching 4.3 mln. AZM (879.7 USD) in 2003.
  - Deflator index: 104.0% in 2003 (100.7% in 2002).
- Inflation and exchange rate:
  - Average annual inflation rate was 2.2% in 2003 which is 0.6% lower than in 2002.
  - Average annual exchange rate of AZM to USD was 4,860.8 AZM in 2002 and 4,910.8 AZM in 2003.
- Fiscal revenues and expenditure:
  - Revenues: 4,551 bln. AZM in 2002 (increase of 16% from 3,924 bln. AZM in 2001); 6,131.9 bln. AZM in 2003 (increase of 34.7%).
  - Expenditure: 4,567 bln. AZM in 2002 (increase of 13.1%); 6,173 bln. AZM in 2003 (increase of 32.5%).
  - Budget deficit: 107.6 bln. AZM in 2002 (from 113.5 bln. AZM), and 41.1 bln. AZM in 2003 (0.4% and 0.1% of GDP respectively).
  - Expenditure composition: 17.3% on social protection, 19% on education, 4.5% on health, 19.4% on capital investments.
  - Wages, pensions and benefits: increased by 16.2% and accounted for 2,301 bln. AZM in 2002 and 2,676.3 bln. AZM in 2003.
- Monetary and interest developments:
  - National Bank purchase-oriented interventions: USD 122.4 mln. in the reported period making up 3.5% of total turnover.
  - Discount rate reduced from 10% to 7% since September, 2002; unchanged in 2003.
  - Compulsory reserve norms: short-term deposits 10%; long-term deposits 0%; reduction of reserve norms to zero associated with long-term deposits increasing even as short-term deposits rose 11.0% and long-term deposits increased 3.2 times.
  - Average interest rates for credit in national currency decreased from 15.6% at the beginning of 2003 to 14.9% at the end of 2003.
- Money and reserves:
  - Money mass in AZM (M-2) increased by 28% in 2003 to 2,592.2 bln. AZM; real growth rate of M2 was 25.2%.
  - National currency reserves increased by 23.7% in 2003 and were 2,316 bln. AZM as of January 1, 2004.
  - Money multiplier increased by 3.7%.
  - Cash share in money mass decreased by 3.7%; cash money mass increased 22.3% while non-cash money mass increased 54.4%.
  - Share of foreign currency savings and deposits in total savings decreased by 2.3%.
- Savings and deposits:
  - Volume of savings and deposits increased by 35.3%.
  - Volume of individual savings increased by 64.2% to 1,259.7 bln. AZM.
  - Share of private banks' savings in total savings was 41.5% in 2003.
  - Savings and deposits in foreign currency increased by 31.7%; savings and deposits in national currency increased by 54.4%.
- External debt:
  - External debt paid off was USD 1,358 mln. (22.3% of GDP) as of January 1, 2003, and USD 1,508.1 mln. (21.2% of GDP) by November 17, 2003.
  - External debt per capita was USD 182.5 as of November 17, 2003 (USD 166 as of January 1, 2003).

### Structural reform, non-oil sector and public investment
- GDP sectoral shares and trends:
  - Share of production and non-oil sector in GDP increased: non-oil sector share rose from 68% in 2001 to 70.4% in 2002 and to 71% in 2003.
  - Sectoral changes (2002-2003): industry 37.8% (34.9%); construction 12.1% (10.8%); wholesale and retail, service sectors on repairing household and private stuff 7.9% (7.5%); agriculture 13.1% (14.2%); transport and communication 9.5% (9.8%); hotel, restaurant, social and informal service sectors 12.6% (15.1%); net taxes from goods and import 7% (7.7%).
  - While oil production increased by 0.3% to 15.38 mln. tons in 2003, industrial growth in the non-oil sector was higher than for the oil sector.
- Privatization and private sector:
  - Privatization increased the share of the private sector in GDP from 71.8% in 2001 to 73% in 2002 and to 73.3% in 2003.
  - By 2003 private sector accounted for: 53.4% in industry, 99.7% in agriculture, 88.7% in construction, 70.5% in transport, 68.9% in communication, 98.7% in trade and 71.2% in paid service sectors.
- Investment and construction:
  - Fixed capital investments: 5.9 trillion AZM in 2001; 10.4 trillion AZM in 2002; 17.8 trillion AZM in 2003 (increase of 71.2% to 17.8 trillion AZM noted elsewhere).
  - Construction buoyancy is partly due to start of BTC and BTA pipeline construction.
- Agriculture:
  - Agricultural reforms led to real growth rates of 6.4% in 2002 and 5.6% in 2003.
  - In agricultural production crop production was 60% and livestock production 40%.
- Oil Fund (SOFAR) resources and use:
  - Increase of 65.8% in SOFAR resources: USD 692 mln. in 2002, USD 815 mln. in 2003.
  - In 2003 the Oil Fund financed: 99.8 bln. AZM for resettling refugees and IDPs; 576 bln. AZM for financing the share of Azerbaijan in the BTC project; 500 bln. AZM transferred to the state budget.
  - Expenditure related to management of the Fund was 4.3 bln. AZM and the amount of resources transferred to the state budget as tax was 12 bln. AZM.
- Labor market and wages:
  - The average monthly salary in the formal economy increased 17.2% in real terms (nominal 21.4%) and reached 383,100 AZM (USD 78).
  - The oil sector currently employs 1-1.5% of the economically active population in the country.

### Policy implications and priorities highlighted
- Maintain macroeconomic stability while strengthening mechanisms to manage large-scale oil revenues and avoid “Dutch disease”.
- Build up local statistical capacity to set concrete targets and indicators for SPPRED and country-specific MDGs.
- Align SPPRED measures to accompany any shift to universal secondary education (quality, access, curriculum, attendance monitoring).
- Improve monitoring systems for water quality and access; clarify national definition of “improved water source”.
- Set environmental targets sensitively with local community involvement to protect livelihoods of the poor.
- Use Oil Fund resources with transparent spending mechanisms that support non-oil sector development and resettlement/social measures for IDPs and refugees.
- Strengthen banking system, expand long-term savings and maintain monetary management that supports investment without triggering revaluation that would harm non-oil competitiveness.

*Source: _cr04322 - Chapter 1: SPPRED and the MDGs*

### 1994. Thus, at present the key issue is to prepare

### _cr04322 - 1994. Thus, at present the key issue is to prepare

### 4. FDIs and Integration into the World Economy
- Overall investment since independence (1994-2003): more than 17.5 bln USD invested in Azerbaijan's economy; of which 12.5 mln. USD (71.4%) were in 1994-2003.  
- FDI share: FDIs account for more than 80% of all investments in the economy.
- Foreign investments increased by 46.5% in 2003 to 3,273.3 mln USD; 93.5% was direct investment and 6.5% provided as credit.
- Credit to the economy:
  - 2002: 2,600.8 bln. AZM (71.9% - short-term, 28.1% - long-term).
  - 2003: 3,339.1 bln. AZM (72.6% - short-term, 27.4% - long-term).
  - These represent increases of respectively 7% and 28.4% (5.7% in short-term credits and 25.3% in long-term credits) for appropriate years.
- Non-oil sector investments increasing in power, chemistry and petrochemistry, infrastructure and agriculture.

### Foreign trade dynamics (selected figures and patterns)
- Foreign trade turnover:
  - 2001: 3,745.2 mln. USD (61.8% export, 38.2% import).
  - 2002: 3,832.9 mln. USD (56.5% export, 43.5% import).
  - 2003: 5,218.2 mln. USD (49.7% export, 50.3% import).
- Trade composition and partners (1995-2003 table highlights):
  - 1995 Turnover: 1,215.0 (CIS 36.7%, Non-CIS 63.3%); Import 667.7 (CIS 34.2%); Export 547.4 (CIS 40.0%).
  - 2000 Turnover: 2,917.0 (CIS 20.9%, Non-CIS 79.1%); Import 1,172.1 (CIS 32.0%); Export 1,744.9 (CIS 13.5%).
  - 2001 Turnover: 3,745.2 (CIS 17.8%, Non-CIS 82.2%); Import 1,430.9 (CIS 31.1%); Export 2,314.3 (CIS 9.6%).
  - 2002 Turnover: 3,832.9 (CIS 23.3%, Non-CIS 76.7%); Import 1,665.4 (CIS 39.1%); Export 2,167.5 (CIS 11.3%).
  - 2003 Turnover: 5,218.2 (CIS 22.7%, Non-CIS 77.3%); Import 2,626.2 (CIS 32.4%); Export 2,592.0 (CIS 12.9%).
- 2003: foreign trade relations covered 124 countries (128 in 2002); CIS share 22.7% (23.3% in 2002), EU 48.7% (48.4%) and other countries 28.6% (28.3%) in foreign trade turnover.
- Export composition:
  - “Mineral products” share in exports: 86.0% in 2003 and 88.9% in 2002.
  - Oil and oil products share within that group: 85.4% in 2003.
- 2003 foreign trade balance: negative USD 34.2 mln., linked to increased import of investment-oriented goods for oil contracts.

### Table of investments (1994–2003; mln. USD)
- Foreign investments by year: 1994 150.0; 1995 375.1; 1996 621.0; 1997 1,307.3; 1998 1,472.0; 1999 1,091.1; 2000 927.0; 2001 1,091.8; 2002 2,234.9; 2003 3,273.3.
- Domestic investments by year: 1994 153.0; 1995 168.9; 1996 311.5; 1997 387.2; 1998 460.2; 1999 479.9; 2000 514.4; 2001 470.0; 2002 561.7; 2003 712.8.
- Total investments by year: 1994 303.0; 1995 544.0; 1996 932.5; 1997 1,694.5; 1998 1,932.2; 1999 1,571.0; 2000 1,441.4; 2001 1,561.8; 2002 2,796.6; 2003 3,986.1.

### 2.2 Poverty Update: results for 2002
- Poverty estimates for 2002 are based on the revised 2002 HBS and an absolute poverty line of 175,000 AZM.
- Overall poverty level (absolute line 175,000 AZM): 46.7% for 2002.
- Relative poverty line:
  - 70% of median per capita consumption expenditure set at 125,134 AZM.
  - Using this relative line, overall poverty level is 8.8%.
  - A relative poverty line (70% of median) was adopted for monitoring, replacing the 60% used for 2001.
- Alternative absolute/line values referenced:
  - A new absolute poverty line discussed: 120,000 AZM (estimated 49% of population below that line).
  - Minimum food basket value for 2002: 121,465 AZM (food share taken as 69.4%).
  - Minimum non-food product basket for 2002: 21,935 AZM (share 12.5%).
  - Minimum services basket for 2002: 31,600 AZM (share 18.1%).
  - Value of total minimum consumption basket for 2002: 175,000 AZM.
- Poverty monitoring note: 2001 and 2002 estimates are not strictly comparable due to revised HBS methodology introduced in 2002 and changes in poverty line definition.

### Poverty profile: regional and urban/rural patterns (2002)
- Poverty incidence (absolute line 175,000 AZM; relative 125,134 AZM) — selected categories:
  - Total population: 46.7 (absolute), 8.8 (relative).
  - Urban: 47.8, 9.6.
    - Large city: 44.5, 9.7.
    - Town: 53.5, 9.3.
  - Rural: 45.4, 8.0.
  - Nakhchivan: 62.9, 13.1.
  - Absheron-Guba: 47.1, 13.0.
  - Mughan-Salyan: 45.9, 6.7.
  - Ganja-Gazakh: 49.6, 5.6.
  - Shaki-Zagatala: 46.3, 5.7.
  - Lankaran-Astara: 48.1, 7.8.
  - Shirvan: 55.4, 7.2.
  - Karabakh-Mil: 43.5, 11.8.
  - Baku: 40.0, 9.1.
- Observations:
  - Poverty rate slightly higher in urban (47.8%) than rural (45.4%).
  - Highest regional incidence in Nakhchivan AR: 62.9% (but only 6.1% of country’s poor live there).
  - In large cities poverty is lower (44.5%) than in smaller towns (53.5%); Baku poverty 40.0% though it hosts 21% of poor population.

### Poverty incidence by household characteristics (absolute 175,000 AZM; relative 125,134 AZM)
- Head of household education:
  - Higher education: 30.4, 5.6.
  - Secondary education: 40.29, 7.1.
  - Less than secondary: 49.6, 8.3.
- Children in household:
  - Households without children: 24.3, 4.1.
  - 1 child: 40.8, 8.0.
  - 2 children: 47.2, 8.2.
  - 3 children: 59.1, 11.7.
  - 4+ children: 69.35, 18.7.
- Age of household head (absolute, relative):
  - 18-29: 24.06, 6.
  - 30-39: 41.04, 6.4.
  - 40-49: 41.0, 6.3.
  - 50-59: 36.63, 7.6.
  - 60+ : 41.0, 6.8.
- Household size (absolute, relative):
  - Single person household: 7.9, 0.8.
  - 2 members: 16.7, 1.8.
  - 3 members: 23.8, 3.4.
  - 4 members: 35.4, 4.8.
  - 5 members: 50.1, 8.6.
  - 6+ members: 58.3, 14.3.
- Head gender:
  - Male-headed households: 40.9, 7.3.
  - Female-headed households: 36.1, 6.4.
- Key patterns:
  - Higher education of head associated with lower poverty incidence.
  - Poverty risk increases markedly with household size beyond 4 members.
  - Households without children and with 1 child have lower-than-average poverty; households with 3+ children have much higher poverty.

### Poverty depth and inequality
- Poverty gap (absolute poverty line): 0.0822 — the average consumption expenditure of the poor population is 8.2% less than the poverty line.
- Gini coefficient (2002 HBS):
  - Using income distribution: 0.271.
  - Using expenditure distribution: 0.276.
- Data quality note: Further improvement of HBS may be required to capture informal sector incomes and top-decile incomes fully.

### 2.3 Employment — trends and labour market indicators
- Employment trends (administrative data 1998-2002):
  - Annual average number of employed in working age groups increased by 0.6% (3,701,500 to 3,726,000) during 1998-2002.
  - GDP in non-oil sector increased by 26.8% over same period, implying growth in labour productivity.
- Sectoral employment (1995-2002 changes):
  - Agricultural employed increased by 35% (1,112,800 to 1,497,500).
  - Service sector employed decreased by 8.2% (1,963,000 to 1,801,000).
  - Industry sector employed decreased by 20% (537,200 to 428,600).
- Wages:
  - Average reported monthly wage in 2003 was 21.4% higher in nominal terms than in 2002 (22.2% in real terms).
  - Minimum wage increased from 27500 to 60000 manat in January 2004, leading to public sector wage and linked social benefit increases.
- Public vs non-state employment (2002):
  - Public sector employment decreased by approximately 2.1 times since 1990; public sector employed was 1.192 mln. in 2002.
  - Non-state sector employment increased by 2.3 times and was 2.535 mln. in 2002.
  - Trends since 1998 suggest decrease in public sector employment exceeded private sector increase, implying rising unregistered unemployment or informal employment.
- Labour force population:
  - Working age population increased from 3.973 mln. in 1990 to 4.988 mln. in 2002 (25% increase).
  - Labour market entrants expected to be significant due to demographic structure.
- Labour Force Survey (LFS) 2003 results (population 15+):
  - Labour force participation rate (LFPR): 62.9% overall; 75.6% for men; 51,1% for women.
  - LFPR by census (1999) comparison: 64.6% overall; 73% men; 57.2% women.
  - Employment to population rates: men 68.4%, women 44.9% (gap 23.5 percentage points).
  - Inactivity and unemployment differ by urban/rural:
    - High employment rates and LFPR in rural areas related to land reform.
    - Urban areas have higher unemployment and inactivity, and lower employment-to-population rates.
- Unemployment:
  - Officially registered unemployed at employment offices in 2002: 50,963 (1.4% of economically active population) — this understates actual unemployment.
  - LFS 2003 unemployment rate: overall 10.7%.
  - Youth unemployment:
    - Highest unemployment rate 23.8% among youth aged 20-24.
    - Unemployment among 20-24 with incomplete high education: 53.6%.
    - 20-29 age group with higher education: 26%.
  - Gender and age dimensions: inactivity rates highest in youngest and oldest age groups; women aged 25-59 have significantly higher inactivity rates than men.

*Source: _cr04322 - 1994. Thus, at present the key issue is to prepare (PDF chapter content provided).*

### 2.4 Education

### 2.4 Education

### Background
- Literacy rate (1999 census): 99%.
- Estimated share of adult population completing (at minimum) primary school education: 97%.
- Literacy and primary completion: no significant gender differences.
- HBS (2002) finding: higher the level of education of the head of household, the lower the probability that the household will be poor.
- SPPRED strategic aim: “to improve the quality and equality of access to basic health and education services.”
- SPPRED stipulates 12 policy directions for improving quality of education and equality of access.
- SPPRED envisages rationalisation of education expenditure through rationalisation of the teaching staff (see MTEF), accompanied by a rise in teachers' wages and a new system for linking performance to bonus payments.
- Concern: younger generations may not invest beyond compulsory education because returns to education are not considered worth the investment.

### Education and the MDGs
- MDG number 2 (global): “achieve universal primary education.”
- 1999 census: in the 15-24 age group, 975 out of every 1000 persons had completed at least primary school education (women 980 per 1000; men 971 per 1000). Urban: 975; rural: 976.
- SPPRED view: universal primary education is already a reality in Azerbaijan; country-specific MDG discussions focus on improving secondary enrolment and quality.
- Suggested country-specific tentative goal: achieving universal primary and near-to-universal secondary education (11 classes), contingent on continuing efforts under SPPRED to improve quality in secondary schools.

### Trends in Education Indicators

- Pre-school education (3-6 years)
  - Number of pre-school facilities decreased 1990-2002: a total of 404 facilities closed.
  - Gross enrolment rates in pre-school institutions:
    - 1990: 20
    - 1995: 15
    - 1997: 14
    - 1998: 15
    - 1999: 16
    - 2000: 17
    - 2001: 18
    - 2002: 19
  - Overall gross enrolment rate for pre-school institutions: 19% in 2002.
  - Urban-rural differences in pre-school enrolment are significant.
  - Gross enrolment ratio (children in pre-school institutions; state and private):
    - Total: 1990 90.2; 1995 81.1; 1998 79.1; 1999 78.7; 2000 86.5; 2001 89.6; 2002 88.8
    - Male: 1990 89.6; 1995 77.2; 1998 78.9; 1999 78.4; 2000 87.1; 2001 90.4; 2002 89.8
    - Female: 1990 90.9; 1995 85.2; 1998 79.2; 1999 79.1; 2000 85.8; 2001 88.9; 2002 87.7
  - Urban gross enrolment ratio:
    - Total: 1990 89.6; 1995 81.4; 1998 78.7; 1999 79.1; 2000 89.2; 2001 94.0; 2002 94.9
    - Male: 1990 89.1; 1995 78.2; 1998 78.3; 1999 78.6; 2000 89.7; 2001 94.6; 2002 96.2
    - Female: 1990 90.1; 1995 84.8; 1998 79.1; 1999 79.6; 2000 88.6; 2001 93.4; 2002 93.5
  - Rural gross enrolment ratio:
    - Total: 1990 90.9; 1995 80.8; 1998 79.4; 1999 78.3; 2000 83.8; 2001 85.3; 2002 82.9
    - Male: 1990 91.2; 1995 76.2; 1998 79.5; 1999 78.1; 2000 84.5; 2001 86.2; 2002 83.7
    - Female: 1990 90.5; 1995 85.7; 1998 79.4; 1999 78.5; 2000 82.9; 2001 84.4; 2002 82.0

- Basic education (classes 1-9; enrolment in classes 1-9 is obligatory)
  - Primary (classes 1-4) gross enrolment:
    - 1990: 84.2% (relatively low in 1990), increased to 98.8% (date implied post-1990 period).
  - Middle secondary (classes 5-9) gross enrolment ratio (5-9 classes) peaked in 1990 at 90.2%.
    - Decline observed in 1998-99 (12% lower compared to 1990).
    - Since 2000 this index increased; in 2001 and 2002 the gross enrolment ratio was close to the 1990 rate.
  - Since 2000, gross enrolment rates in urban areas have been higher than in rural areas by:
    - 2000: 5.4%
    - 2001: 8.7%
    - 2002: 12.0%
  - Attendance information is not available from SSC and ME.

- Upper secondary education (classes 10-11; not obligatory)
  - Gross enrolment rate for classes 10-11:
    - 1990: 66.7
    - 1995: 48.7
    - 1998: 61.3
    - 1999: 60.8
    - 2000: 44.5
    - 2001: 43.2
    - 2002: 63.4
  - Male:
    - 1990: 64.0; 1995: 46.5; 1998: 60.0; 1999: 59.6; 2000: 44.0; 2001: 42.6; 2002: 63.4
  - Female:
    - 1990: 69.4; 1995: 51.0; 1998: 62.6; 1999: 62.1; 2000: 45.0; 2001: 43.7; 2002: 63.5
  - 1999 census: 41% of the urban population and 50% of the rural population had completed full secondary education.
  - Gross enrolment ratio for upper secondary in 2002 almost reached pre-transition (1990) rate of 66.7% (2002 value 63.4%).
  - Urban vs rural gross enrolment ratio in 2002:
    - Urban total: 65.0
      - Male: 63.3
      - Female: 66.7
    - Rural total: 61.9
      - Male: 63.4
      - Female: 60.3
  - Attendance data not available.

- Vocational education
  - Gross enrolment rates in vocational education declined considerably from 1990 to 1995: decreased by 10.6%.
  - By 2002 this indicator was 12.6% below the 1990 level.
  - Table indicators for vocational education:
    - Gross enrolment ratio (total): 1990 15.5; 1995 4.9; 1998 3.8; 1999 3.6; 2000 3.4; 2001 3.1; 2002 2.9
    - Net enrolment ratio (total): 1990 14.9; 1995 4.2; 1998 3.5; 1999 3.2; 2000 3.1; 2001 2.8; 2002 2.6
    - Gross enrolment (male): 1990 15.1; 1995 13.8; 1998 15.7; 1999 16.2; 2000 15.6; 2001 14.4; 2002 13.6
    - Net enrolment (male): 1990 8.5; 1995 10.0; 1998 10.5; 1999 13.6; 2000 12.2; 2001 11.3
    - Gross enrolment (female): 1990 10.0; 1995 11.3; 1998 9.8; 1999 10.8; 2000 11.2; 2001 11.7; 2002 11.3
    - Net enrolment (female): 1990 8.0; 1995 7.3; 1998 7.6; 1999 10.1; 2000 10.1; 2001 9.9

- Higher education (for 17-22 year olds)
  - Long-term increase in number of people with higher education: 1939 figure 10 persons per 1000; 1999 figure 91 persons per 1000.
  - Female enrolment rates for higher education courses are still slightly lower than male enrolment.

### Key statistics (selected, preserved exactly as in source)
- Literacy rate (1999 census): 99%.
- 15-24 age group primary completion (1999 census): 975 out of every 1000 persons (women 980 per 1000; men 971 per 1000; urban 975; rural 976).
- Pre-school gross enrolment rate 2002: 19%.
- Pre-school gross enrolment ratios (total): 1990 90.2; 1995 81.1; 1998 79.1; 1999 78.7; 2000 86.5; 2001 89.6; 2002 88.8.
- Upper secondary gross enrolment ratio (classes 10-11): 1990 66.7; 1995 48.7; 1998 61.3; 1999 60.8; 2000 44.5; 2001 43.2; 2002 63.4.
- Vocational education gross enrolment ratio (total): 1990 15.5; 1995 4.9; 1998 3.8; 1999 3.6; 2000 3.4; 2001 3.1; 2002 2.9.
- Persons with higher education per 1000: 1939 10; 1999 91.

### SPPRED strategic directions and policy implications
- Maintain good education indicators inherited from the Soviet period while re-orienting the education system to market economy needs.
- Improve quality and equality of access to basic education services by 2005 (one of SPPRED’s key strategic objectives).
- Identify a country-specific MDG for education that reflects that universal primary education is already achieved; focus on improving secondary enrolment and quality, especially upper secondary.
- Rationalise teaching staff to achieve rationalisation of education expenditure, accompanied by:
  - a rise in teachers' wages;
  - a new system for linking performance to bonus payments.
- Emphasize participatory regional consultations: population considers improving quality of education and access to secondary education among main problems (see regional workshops).

*Source: _cr04322 - 2.4 Education*

### 1. Registration of infant deaths. Until recently

### 1. Registration of infant deaths. Until recently

### Registration sources and limitations
- Official statistics for early neo-natal mortality (first 7 days of life) were based on two administrative sources: Ministry of Health (MOH) data and State Statistical Committee (SSC) data.
- MOH collects monthly data from maternity hospitals and annually from pediatric wards and polyclinics.
- SSC historically collected data from urban and rural civil registry bureaus (where relatives apply for official death certificates).
- Problems identified:
  - Very premature babies may be misclassified as miscarriages; early neonatal births may be recorded as stillborns because infant mortality is used to evaluate facility performance.
  - Infant deaths following home deliveries may not be reported.
  - Infants who die before having birth certificates issued may remain unregistered as a live birth or infant death.
  - Under-reporting of births and infant deaths to civil registries, particularly for infants not delivered at medical facilities, is likely the most important reason for differences between administrative and survey estimates.
- SSC now publishes only data from medical facilities to accelerate data collection.
- Recommendation implied: both administrative sources should be used for monitoring and efforts made to improve data collection using both survey and administrative methods; measures are already being taken to improve registration of infant and child deaths.

### Survey data and representativeness
- Two recent sample surveys: UNICEF MICS (2000) and Reproductive Health Survey (RHS, 2001). Samples designed to be nationally representative.
- Survey estimates include confidence intervals; example for infant mortality from RHS: point estimate 80.8 with a possible range of 72 to 89.6 (RHS, pp103-104).
- Survey data historically produced higher mortality figures than MOH administrative data.

### Key numeric findings on infant and under-five nutrition indicators (from surveys)
- MICS 2000 estimates:
  - Under-five stunting (height-for-age) in 2000: 19.6%
  - Under-five underweight (weight-for-age) in 2000: 16.8%
  - Under-five wasting (weight-for-height) in 2000: 7.9%
  - For children aged 12-23 months (MICS): height-for-age 30.7% and weight-for-age 28.0%
- RHS 2001 estimates:
  - Prevalence among children aged 3-59 months:
    - Chronic malnutrition (height-for-age): 13.3%
    - General malnutrition (weight-for-age): 6.8%
    - Acute malnutrition (weight-for-height): 2.4%
  - Rural–urban differentials (RHS):
    - Stunting: rural 15.9%, urban 10.6%
    - Underweight: rural 7.8%, urban 5.8%
  - Regionally higher chronic malnutrition in Southern (18.3%) and North & North-East (14.7%) regions; highest acute malnutrition in North & North-East (3.2%) and Central (3.1%) regions.
- Note on interpretation: low weight-for-age is usually considered an indicator of chronic malnutrition when acute malnutrition prevalence is low; the low acute malnutrition rate (2.4%) implies the 6.8% general malnutrition likely reflects higher stunting.

### Immunization coverage (MOH with WHO and UNICEF support)
- EPI immunizations: BCG, DTP, DT, Measles, Polio.
- 2002 coverage:
  - Proportion of under-1 year children vaccinated against TB: 99.1%
  - Proportion of under-1 year children vaccinated against measles: 98.8%
- Outcome noted: Azerbaijan received Certificate on Polio-Free Country in Europe in 2002; measles coverage described as among the best in the world.

### Breastfeeding indicators (survey results)
- WHO recommendation cited: “infants should be fed exclusively on breast milk from birth to 4 months of age” (RHS, pp 101).
- SSC reported about 30% of all infants are exclusively breast-fed until 3 months (see Figure 2.8).
- MICS reported only 9.4% of infants under 4 months are exclusively breast-fed.
- RHS reported:
  - 94.7% of children born during 1996-2001 were breast fed for at least a short period.
  - Average duration of exclusive breast-feeding: 0.4 months
  - Full breast-feeding: 3.3 months
  - Any breast-feeding: 11.6 months

### Data references and methodological note
- Both MICS and RHS used NCHS/CDC/WHO international reference (WHO, 1995) to classify malnutrition (less than 2.00 SD below the reference mean).

---

### 2. Definitions and historical measurement issues
- Until 2001, Azerbaijan used the Soviet definition of infant mortality that did not count as live births premature and low birth-weight babies who die within seven days after birth.
- Any infant with signs of life at delivery but weight less than 28 (units omitted in source) [text context: weight threshold used in Soviet definition] would be excluded under the old definition.
- Change in definition and continued classification issues contribute to discrepancies between administrative and survey mortality estimates.

---

### 3. Maternal welfare: mortality, reproductive health, abortion, contraceptives
### Maternal mortality trends and data issues
- Official maternal mortality ratio:
  - 1990: 9.3 per 100,000 live births
  - 2002: 19.9 per 100,000 live births
  - Peak in 1990-99 period: 43.4 per 100,000 live births
- Improvement noted since the peak; however, official figures may underestimate true maternal mortality due to under-reporting of deaths occurring at home or after discharge.
- Example survey-based historical figure: UNICEF MICS reported maternal death rate 79 persons per 100,000 births in 1988.
- Comparative context: average maternal mortality rate cited as 118 per 100,000 live births in middle income countries and 463 in developing countries.

### Access to maternal services and skilled attendance
- Proportion completing pregnancy with delivery in hospital (2001): 79%
- Delivery at home, further hospitalization: 6%
- Delivery at home (no further hospitalization): 15%
- RHS (1996-2001): proportion of births with skilled attendants present at delivery: 89%
- MICS (year before survey): share reporting skilled attendant at delivery: 87.5% (75% among poor households).
- Proportion of women receiving prenatal care from skilled health personnel: 69% (52% among poor people).
- Survey evidence: only 79% of women complete pregnancy with delivery in hospital (SSC survey, 2001).

### Fertility, adolescent births, and abortion
- Share of births to mothers under age 20:
  - 1990: 4.7% of total live births
  - 2001: 9.7% of total live births
- Births per 1,000 women ages 15-19 (WB estimate): 44 in 2002 (compared: 104 in low income and 24 in high income countries).
- Abortion indicators:
  - Official abortions per 1,000 females aged 15-49 decreased from 13.3 in 1990 to 7 in 2002.
  - Abortions per 100 births (including stillborns) increased from 14.0 to 17.6 over the same period (owing to drop in birth rate).
  - RHS (May 1998–April 2001) general abortion rate: 116 abortions per 1,000 women in 3 years before survey.
  - Lifetime abortion rate examples:
    - USSR pre-independence: 0.8 abortions per woman aged 15-49 (Brackett, 1993)
    - MOH estimate for 1998-2000: 0.3 lifetime abortions per woman
    - RHS survey found lifetime abortion rate higher: 3.2 abortions per woman in 2001 (survey figure) compared with 0.3 (official data).
  - Age distribution of abortions: particularly prevalent among women aged 25-34 (55% of all abortions).

### Contraceptive use and trends
- MICS: 55.1% of all women of reproductive age (15-49 years) use any contraception (15.8% modern methods, 39.3% traditional methods).
- RHS: contraceptive prevalence among currently married women aged 15-44 years: 55.4%; only 11.9% use modern methods and 43.5% use traditional methods.
- RCC/SSC 2001 survey: contraceptive use lower among youth and adults compared with ages 25-39.
- RHS and other survey results indicate contraceptive use increased over the post-Soviet period, accompanying a reduction in abortions.

### Service capacity indicators
- Number of female consultation units, child polyclinics and ambulatories:
  - 1990: 1,034
  - 1999: 879
  - 2002: 917
- Number of beds for women recovering from deliveries and childbirth:
  - Range post-Soviet period: between 7,300 and 7,600
  - 2002: 7,400 (same as 1990)

---

### 4. Disease incidence: HIV/AIDS, Malaria, Tuberculosis (TB) and surveillance
### HIV/AIDS surveillance and data
- HIV surveillance introduced in 1987; Azerbaijan National Center in Respond to AIDS established in 1990; Center has 12 regional offices.
- Registered cases and testing:
  - SSC reported number of registered AIDS infected persons and HIV infectors: 97 in 2002 (Figure 2.15).
  - Azerbaijan National Centre in Respond to AIDS reported number of HIV detected people: 105 in 2002 and total number of HIV infected people 556 by July 1, 2003. (Source discrepancy noted.)
  - The actual number of HIV carriers could be significantly higher than registered due to low awareness and low testing rates.
  - Number of HIV tests: 164-170 carried out in 2002; more than 3,600,000 tests in the period 1987–2002.
- Survey findings:
  - National AIDS Centre survey of HIV-infected citizens suggests about 90% of respondents had no idea about AIDS before being infected.
  - RHS: 74% of women of fertile age have heard of HIV/AIDS, but 72% could not spontaneously state any main way of avoiding HIV infection.
  - Lack of preventive knowledge higher among rural residents (84%), women younger than 20 (83%), never married/sexually inexperienced women (78%), respondents with less than complete high school education (84%), women of low socioeconomic status (82%), and non-IDP women living in IDP settlements (83%).
- Services and NGOs:
  - Center guarantees quality, confidentiality, 24-hour anonymous consultation and testing since May 1997, and telephone trust lines.
  - One NGO, "Imdad-SOS", established in 1998, provides moral, material, social and psychological help to people with HIV/AIDS; deals with more than 200 HIV/AIDS patients and their relatives.

### TB and Malaria incidence
- TB: number of new TB cases in 2002 was 54.5 per 100,000 population.
- Malaria and TB incidences increased compared with 1990, partly due to drops in living standards and health service quality during early transition.

---

### 5. Country-specific MDGs and relevant indicators
- Relevant MDGs:
  - Goal 4: Reduce child mortality
    - Target 5: Reduce by two-thirds between 1990 and 2015 the under-five mortality rate
    - Indicator 13: Under-five mortality rate
    - Indicator 14: Infant mortality rate
    - Indicator 15: Proportion of 1 year old children (implied: immunization coverage)
- Survey and administrative evidence suggests challenges in achieving targets without improved registration, routine data quality, periodic survey repetition, and continued immunization and maternal/child health interventions.
- Recommended monitoring action implied: repeat MICS survey planned for 2004; repetition every 3-4 years would be extremely useful to monitor poverty, living standards, and effects on child health and development.

*Source: _cr04322 - 1. Registration of infant deaths. Until recently*

### 1.5 times higher than the level of 1990. Malaria

### _cr04322 - 1.5 times higher than the level of 1990. Malaria

### Child and infant mortality — MDG targets and country projections
- Reducing under 5 mortality rates by two thirds by 2015 would imply a target of 14 per 1000.
- Proposed interim target for 2006: 21 by 2006, reaching 14 by 2015.
- Current rates for Eastern Europe are 20 for males and 16 for females.
- Since under 1 mortality accounts for 80% of all child mortality, an infant mortality target is proposed:
  - Reduce infant mortality by two thirds: from 23 to a target of 8 per 1,000 live births (compared with Eastern Europe average 14 and Western Europe 13).
  - Target could be set at 20 for 2006 and 14 for 2015 (based on Eastern Europe current rates).
- Alternative target based on survey data:
  - If 79 deaths per 100,000 live births is taken as proxy baseline for 1990 (data refers to 1988), a reduction by three quarters implies a target of 27 for 2015.
  - Tentative maternal mortality target for 2006 could be 35, and reduction from 37 to circa 13 for 2015 is implied under official-data scenario.
- Survey-data-based maternal mortality target for 2006: 74 (94% of 79).
- Proposed child mortality trajectory (survey-based example): reduce under five mortality from 102 per 1,000 to 95 by 2006, and to 50 by 2015. Infant mortality could be reduced from 79 to 74 by 2006 and to 40 by 2015 (80% of 50).

### Maternal health and data considerations
- SPPRED aims to improve maternal health through improvements in quality of maternal health services and access.
- Use two targets for mortality indicators: one based on official data and one based on survey data, given discrepancies between official and survey estimates and ongoing efforts to improve official data quality.
- Targets and indicators for HIV/AIDS are particularly problematic due to the low number of tests currently carried out in the country.
- Next MICS survey scheduled for 2004 (to provide survey reference points).

### Goals and indicators related to infectious diseases
- Goal 6: Combat HIV/AIDS, malaria and other diseases.
  - Target 7: Have halted by 2015, and begun to reverse, the spread of HIV/AIDS.
    - Indicator 18: HIV prevalence among 15-24 year old pregnant women.
    - Indicator 19: Contraceptive prevalence rate.
    - Indicator 20: Number of children orphaned by HIV/AIDS.
  - Target 8: Have halted by 2015, and begun to reverse, the incidence of malaria and other major diseases.
    - Indicator 21: Prevalence and death rates associated with malaria.
    - Indicator 22: Proportion of population in malaria risk areas using effective malaria prevention and treatment measures.
    - Indicator 23: Prevalence and death rates associated with tuberculosis.
    - Indicator 24: Proportion of TB cases detected and cured under DOTS (Directly Observed Treatment Short Course).

### Environmental sustainability — overview and main problems
- Environmental sustainability is linked to poverty goals (health, access to land) and long-term economic growth.
- Main environmental problems in Azerbaijan summarized:
  - Ecological problems/pollution arising from the previous Soviet industrial and agricultural policies.
  - De-forestation which has accelerated in some areas in recent years due to lack of reliable energy supplies (gas and electricity) to regions for heating.
  - Lack of piped water in rural areas, and the quality of piped water in urban areas.
  - Pollution of the Caspian Sea.

### Land resources, degradation and pollution
- Total territory: 86.6 thsd m. (text uses "86.6 2 thsd  m." — reported as in source).
- 54.8% (2001) of total area consists of arable land. Average population density: 94.7 persons per km2. Arable land per capita: 0.59 hectares.
- Table 2.11 distribution of land (percent of total) — selected entries preserved exactly:
  - Arable land: 50.7 51.9 54.2 54.3 54.9 54.9 54.9 (1990 1995 1998 1999 2000 2001 2002)
  - Tilled soil: 38.1 38.5 38.7 38.9 38.5 38.7 38.7
  - Land under permanent crops: 7.9 6.9 5.3 5.0 5.0 4.8 4.8
  - Pastures: 54.0 54.7 56.0 56.1 56.5 56.5 56.5
  - Non-arable land: 49.3 48.1 45.8 45.7 45.1 45.1 45.1
  - Industry, roads etc.: 7.8 7.1 8.6 7.9 10.1 9.5 9.4
  - Special protected areas: 2.8 3.5 4.8 4.9 4.9 5.0 5.6
  - Forests: 24.4 24.8 26.2 26.3 26.6 26.6 26.6
  - Lands under water: 3.1 3.4 3.1 3.8 3.9 3.7 3.7
  - Other: 61.9 61.3 57.3 57.1 54.5 55.2 54.7
- A total of 3.7 million ha of land is affected by erosion; 3 million ha is affected by water erosion.
- 1.2 million ha of land is affected by salinity.
- Total area of land affected by pollution is estimated at 30,000 ha of which 14,000 ha is polluted by oil and chemical agents.
- Heavy metal concentrations in polluted land compared with non-polluted land:
  - Lead content is 8 times higher.
  - Nickel content is 2 times higher.
  - Zinc is 50-60 times higher.
  - Copper is 10 times higher.
- SPPRED measures to tackle land pollution include: land recultivation on the Apsheron peninsula, de-contamination of land from mercury and other harmful substances, and preparation of waste management project.

### Air pollution and emissions
- Emissions from industrial enterprises (main source of air pollution) have been decreasing in all large industrial cities apart from Baku.
- Table 2.13 emissions from stationary sources (thousand tons) — selected city series preserved exactly:
  - Baku: 1393.9 623.9 358.6 326.6 333.8 335.4 110.3 (1990 1995 1998 1999 2000 2001 2002)
  - Sumgait: 96.5 40.2 15.8 40.3 17.6 22.3 13.0
  - Ganja: 56 4.8 0.8 1.6 5.7 3.0 2.2
  - Mingachevir: 42.9 26.7 26.4 26.4 28.6 13.8 12.0
  - Ali Bayramly: 67.3 27.8 22.7 31.7 28.6 27.6 20.5
- Main reasons for air pollution: wear and tear of equipment and outdated technology not renewed for the last 40 years; rapid decrease in use of natural gas and increased use of highly sulphurous mazut; regular non-fulfilment of planned protective measures; lack of sufficient investment for environmental protection.

### Water resources, supply, and pollution
- National water resources estimated at 29.7 bn. m3.
- Problem dimensions:
  - 4.1% of all permanently active canals (38,900 km in length) have artificial coatings; 95.9% have ground canal beds, resulting in loss of 2.5 - 3.0 billion m3 of water.
  - Inefficient irrigation and drainage channels lose up to 50% of the water they carry.
  - Half of the water supplied for the Absheron peninsula is lost. In the republic this amounts to about 30% of all water supplies for the year 2002.
- Figure data (selected time series as preserved):
  - Intake of water from natural water sources (1992–1999): 6,34 5,93 5,45 4,33 4,01 3,90 4,03 4,20 (years 1992 1993 1994 1995 1996 1997 1998 1999)
- Waste water in ground water over last 10 years decreased from 5,098 mln m3 to 4,114 mln m3.
- Access to improved water sources (HBS 2002): 62.0% of the population.
- Another survey (SSC): 84% of houses in cities and only 11.2% of houses in villages were provided with piped water.
- UNICEF MICS (2000) figure: 76.3% of the population has access to piped water.
- Administrative data shows access to improved water sources at 94.2% in urban areas and 11.2% in rural areas.
- Quality of drinking water — selected entries preserved exactly (Table 2.14):
  - Sanitary-chemical status: Centralized water supply 15.2; Communal water pipeline 14.5; Centralized water supply reserves 9.8
  - Microbiological status: Centralized water supply 9.1; Communal water pipeline 30.5; Centralized water supply reserves 14.2
- SPPRED actions: rehabilitation of internal water distribution network in a number of cities (Ganja, Shaki etc.) with donor support; improvement of water quality remains a priority.

### Forestry, fuel shortages, and protected areas
- Due to semi-desert vegetation and limited water, only a relatively small area is covered by forest; official statistic: only 11% of territory covered by forest (with possible further reductions from uncontrolled use).
- Unreliable gas supplies force populations to seek alternative fuel (wood), causing forest degradation.
  - 92.4% of rural population does not have access to piped gas supply.
  - Totally, 46% of the population in the republic does not have sustainable gas supply.
- SPPRED envisages forest rehabilitation in the regions and creation of new forestry areas along the Kur-Araz River and extension of existing forest cover.
- Protected areas and reserves:
  - At present there are 20 protected areas with a total area of more than 260,000 hectares (first established in 1923, last in 1993).
  - At present, 14 state reserves with a total area (figures in source) supplement the reserve system.
  - Forest rehabilitation work implemented on 8 thousands ha of area during the year 2002.

*Source: IMF country report content as provided in the supplied PDF excerpt.*

### 192.2 thousand hectares or 2.2% of the total area

### _cr04322 - 192.2 thousand hectares or 2.2% of the total area

### Forests, biodiversity, and land cover
- Forest cover reported as 192.2 thousand hectares or 2.2% of the total area.
- Estimates suggest large-scale work will lead to an optimum forest covering in the republic (18-20%) in 2025-2030.
- Azerbaijan has various climatic zones with rich biodiversity; poverty has contributed to the depletion of biodiversity through:
  - Unplanned and unregulated hunting and fishery.
  - Cutting of rare tree species.
  - Collection of traditional plant types as income sources for poor families.
- Illegal logging is highlighted as a problem; regulatory systems need improvement and local communities must be involved. Measures should ensure access to alternative fuel for local communities.

### National Program on Forest Rehabilitation and Extension (adopted 2002) — scope of work and targets
- Program adopted in 2002 on the initiative of the Ministry of Ecology and Natural Resources (MENR).
- Tabled scope of work envisaged under the National Program (Source: Ministry on Ecology and Natural Resources, 2003):
  - I. Reforestation through promoting natural regeneration: 25,000 (ha)
  - II. Planting and sowing: 44,700 (ha)
    - Using the state forest fund lands: 30,400 (ha)
    - Using the other land: 14,300 (ha)
      - Along the Caspian Sea: 4,500 (ha)
      - Along the roads: 3,700 (ha)
      - Along the railways: 300 (ha)
      - Valleys of Kur-Araz rivers: 5,800 (ha)
    - Total (planting and sowing): 69,700 (ha)
- Program envisages creation/expansion of protected areas (Shahdagh National Park) and reserves (Ordubad, Shahbuz, Talish and other regions).
- Functioning of reserves is hindered by economic problems.

### Caspian Sea pollution — sources, discharges, and regional programme
- Caspian Sea significance: landlocked reservoir with large influence on surrounding ecosystems.
- Pollution inputs and uncertainties: estimates vary (claims that 80% or 85% of hydrocarbons/total pollution entering the Caspian Sea come from the Volga River are noted as uncertain).
- Regional response: Caspian Environment Programme (CEP) among the five littoral states; outcome includes Transboundary Diagnostic Analysis (TDA) leading to Strategic Action Plan (SAP) and national contributions.
- Drivers of sea-level change noted: change in fresh water flow into the Caspian (about 75% or 80.3% of the river flow from the Volga River); construction of flow-regulating dams mentioned.

- Table 2.17. Estimated Pollution Discharges into the Caspian Sea from Industries (Source: UNEP, 2002)
  - Azerbaijan: BOD 7,100 (tons/year); Nitrogen 1,100 (tons/year); Phosphorus 330 (tons/year); Oil 14,000 (tons/year)
  - Iran: BOD 28,800; Nitrogen 600; Phosphorus 210; Oil 12,500
  - Kazakhstan: BOD 2,900; Nitrogen 7,100; Phosphorus 100; Oil 1,800
  - Russia: BOD 4,900; Nitrogen 300; Phosphorus 100; Oil 8,900
  - Turkmenistan: BOD 1,500; Nitrogen 100; Phosphorus 3,970; Oil 5,400
  - Total (industries): BOD 45,200; Nitrogen 9,200; Phosphorus 4,710; Oil 42,600

- Table 2.16. Pollution and Discharge via Rivers (Source: UNEP, 2002)
  - Azerbaijan — Kur: BOD 26,300; Nitrogen 17,000; Phosphorus 800; Oil 500
  - Azerbaijan — Others: BOD 9,700; Nitrogen 2,000; Phosphorus 200; Oil 100
  - Iran — All: BOD 49,500; Nitrogen 12,000; Phosphorus 1,200; Oil 400
  - Kazakhstan — Ural: BOD 12,200; Nitrogen 6,000; Phosphorus 600; Oil 900
  - Kazakhstan — Others: BOD 1,000; Nitrogen 0; Phosphorus 0; Oil 0
  - Russia — Volga: BOD 786,000; Nitrogen 759,000; Phosphorus 82,500; Oil 71,600
  - Russia — Others: BOD 21,900; Nitrogen 46,000; Phosphorus 5,000; Oil 1,500
  - Total (rivers): BOD 906,600; Nitrogen 842,000; Phosphorus 90,300; Oil 75,000

- Table 2.18. Sources of the Caspian Sea pollution (all countries) (Source: UNEP, 2002)
  - Rivers: BOD 907,000; Nitrogen 842,000; Phosphorus 90,000; Oil 75,000
  - Municipalities: BOD 124,000; Nitrogen 35,000; Phosphorus 9,000; Oil 21,000
  - Industries: BOD 45,000; Nitrogen 9,000; Phosphorus 5,000; Oil 43,000
  - Total (all sources): BOD 1,076,000; Nitrogen 886,000; Phosphorus 104,000; Oil 139,000

### Environmental sustainability, indicators, and energy
- MDG Goal 7: Ensure Environmental Sustainability.
- Target 9: Integrate sustainable development principles into country policies and programmes and reverse loss of environmental resources.
- Indicators discussed:
  - Proportion of land area covered by forest; ratio of area protected to surface area. Note: land acreage covered by forest may not capture forest quality decline; an indicator concerning land salinity may be appropriate for Azerbaijan.
  - Energy use per unit of GDP; carbon dioxide emissions (per capita) and consumption of ozone-depleting chlorofluorocarbons.
- Energy sector issues:
  - Inherited Soviet system of inefficient energy use; energy subsidies encourage inefficiency.
  - Rural households have inadequate access to electricity; carbon dioxide emissions are declining.

### Refugees and IDPs — scale, housing, employment, health, and education
- Scale and demographics:
  - Circa 1 mln. refugees and IDPs in the country, which makes up approximately 12% of the country's overall population.
  - 15 years passed since the IDP problem emerged (as of the report context).
  - IDPs concentrated near occupied territories; about one third living in Baku. Many live in special camps or temporary accommodation (hostels, unfinished buildings).
- Water and sanitation access:
  - Circa 84% of the urban population has access to piped drinking water, and 11% of the rural population.
  - IDP population concentrated in areas near occupied territories; quality of drinking water and monitoring is a concern (Ministry of Health lacks modern equipment).
- Housing of IDPs (Table 2.19; Source: State Committee for Refugees and IDPs, 2003)
  - 1999 total persons in listed accommodation: 546,337
  - 2003 total persons in listed accommodation: 574,663
  - Selected accommodation categories (1999 → 2003 persons and Share of IDP population %):
    - Public building: 66,822 (12.2%) → 77,653 (13.5%)
    - Hostel: 69,429 (12.7%) → 80,435 (14%)
    - Educational institution: 50,952 (9.3%) → 37,734 (6.6%)
    - Tent camp: 50,787 (9.3%) → 45,470 (7.9%)
    - Houses of relatives: 125,896 (23%) → 123,064 (21.4%)
    - Farms: 32,386 (5.9%) → 59,240 (10.3%)
    - Houses built by the SCRIDP: 801 (0.1%) → 10,511 (1.8%)
    - Houses built with donor help: 16,096 (2.9%) → 36,796 (6.4%)
- Employment and income
  - According to a survey carried out in 2001, two thirds of the IDP population is unemployed.
  - Results from AIDPS and other surveys:
    - Approximately 47% of the IDPs are unemployed (ILO definition) (WB AIDPS 2002).
    - Collected information shows approximately 33% of the refugees and IDPs were mainly engaged in agricultural activities before displacement.
    - AIDPS results: 15% of the IDPs have access to land.
    - Land access: 94% of the population living in rural areas has access to land; for IDPs the figure is 35%.
  - Income structure (Table 2.20; Source: HBS, 2002, SSC) — Refugee and IDP vs Resident population (percent shares):
    - Wages and salaries: Refugee and IDP 16.9; Resident 25.7
    - Income from self-employment: Refugee and IDP 20.0; Resident 18.4
    - Net income from agriculture: Refugee and IDP 5.9; Resident 14.1
    - Social benefits: Refugee and IDP 14.7; Resident 7.7
    - Pension: Refugee and IDP 6.0; Resident 6.5
    - State benefits: Refugee and IDP 5.9; Resident 1.0
    - Privileges: Refugee and IDP 2.7; Resident 0.0
    - Other income: Refugee and IDP 14.7; Resident 13.8
    - Private transfers: Refugee and IDP 12.2; Resident 11.4
  - SPPRED priority measures to resolve employment problems: extension of small loans and encouragement of small entrepreneurship; provision of soft loans/micro credit for IDPs for agriculture and small production units (carpet-making, weaving).
- Nutrition, health, and education
  - Poverty and instability have negatively affected IDP health: psychological stresses, incomplete and unsatisfactory nutrition, limited access to health services.
  - According to SCRIDP information:
    - Underweight among refugees and IDPs is two times more than the rest of the population.
    - 23.5% of the children under 5-year old of the IDPs are suffering from diphtheria.
    - People with disabilities among the IDPs: 30 per 1,000 persons.
    - Chronic disease prevalence higher and disease spread more likely among IDPs.
  - Education:
    - 94.8% of refugee and IDP families have difficulties obtaining school materials.
    - Number of teenagers over 16 with incomplete secondary education is 37.8% (2 times more than the national level, SCRIDP, 2002).
- Data and monitoring gaps
  - Lack of regular surveys and statistical data on IDP/refugee living conditions, quality of accommodation, and income differentials. The State Committee for Refugees and IDPs (SCRIDP) collects administrative data but representative household survey samples for IDPs/refugees remain small (less than 8% representation in SSC HBS; AIDPS sample 3303 individuals in 2002).

*Source: _cr04322 - 192.2 thousand hectares or 2.2% of the total area*

### 152.8 per 1,000 persons of the population. This often poorly heated and equipped.

### _cr04322 - 152.8 per 1,000 persons of the population. This often poorly heated and equipped.

### IDPs, living conditions, and health risks
- Indicator for IDPs is "199.6 persons among the IDPs."
- Temporary settlements:
  - 56% of temporary settlements for IDPs rely on drinking water from artesian wells.
  - 38% of the population uses river and channels as their source of water.
  - Many settlements are "often poorly heated and equipped," increasing risk of disease.
- Infrastructure interventions envisaged in SPPRED:
  - Construction of secondary schools in new settlements.
  - Improvement of physical and technical infrastructure in existing settlements.

### Education outcomes for refugees and IDPs
- Literacy:
  - Literacy among refugees and IDPs is 97.1%.
- School attendance (survey, 2001):
  - 62.4% of school-age children attended schools.
  - 21.8% did not go to school at all.
- Table 2.21 — Education levels of Refugee/IDP population (percent):
  - Illiterate: 2.9
  - Primary: 4.2
  - Incomplete secondary: 30.7
  - Secondary education: 37.3
  - Incomplete higher: 13.9
  - Higher: 11.0
- SPPRED special package measures prepared to improve IDP involvement in education.

### Social protection: objectives and background
- Aim: protection of individuals and households against risks and lack of security.
- SPPRED strategic objective: "the reform of the existing system of social protection to give more effective protection to the vulnerable."
- Transition context:
  - Previous system designed during Soviet period; complex reforms required.
  - Social protection had to address economic hardship and disruption in transition.

### Pensions and incomes (Table 2.22: Average nominal and real pensions, wages and per capita income levels 1999-2003)
- Nominal pensions (AZM):
  - 1999: 64,968
  - 2000: 71,984
  - 2001: 73,705
  - 2002: 88,493
  - 2003: 120,300
- Nominal wages (AZM):
  - 1999: 184,368
  - 2000: 221,606
  - 2001: 259,953
  - 2002: 315,407
  - 2003: 383,100
- Nominal incomes per capita (AZM):
  - 1999: 171,000
  - 2000: 1,845,33.3
  - 2001: 1,982,41.7
  - 2002: 219,625
  - 2003: 250,000
- Real pensions (AZM):
  - 1999: 71,003
  - 2000: 70,711
  - 2001: 72,616
  - 2002: 86,083
  - 2003: 117,941
- Real wages (AZM):
  - 1999: 201,495
  - 2000: 217,688
  - 2001: 256,111
  - 2002: 306,816
  - 2003: 375,588
- Real incomes per capita (AZM):
  - 1999: 186,885
  - 2000: 181,271
  - 2001: 195,312
  - 2002: 213,643
  - 2003: 245,098
- Observations:
  - Average monthly pension in 2002 was 88,493 AZM.
  - Average monthly wage in 2002 was 315,406 AZM.
  - Average per capita income in 2002 was 219,695 AZM.
  - Despite low pension levels, HBS 2002 suggests only 4.9% of all pensioners were poor—likely because many pensioners live with larger families and benefit from household support.
  - Almost 40% of households are considered poor (per capita household expenditure < 175,000 AZM); of these, 41% are headed by a pensioner.

### Pension categories and changes (2001–2002)
- Nominal increases reported:
  - Nominal pensions increased by 120%.
  - Old age pensions increased by 116% times.
  - Disability pensions increased by 135%.
  - Pensions for loss of head of household increased by 137%.
  - Service pensions increased by 119%.
  - Social pensions increased (figure reference).
- Definitions/eligibility notes:
  - Old Age pensions: men of 62 with at least 25 years of work (insurance) experience and women of 57 with at least 20 years of work (insurance) experience.
  - Disability pensions: for limitation of life activity due to genetic illnesses or injuries, physically or mentally handicapped people.
  - Pensions for losing the breadwinner: for family members whose family head has died.
  - Pensions for length of work experience: for pensioners whose work was connected with loss of capacity to work before retirement.
  - Social pensions: paid to those disabled from birth (over 67 years for men, over 62 years for women); to mothers of 57 years who gave birth to 4 or more children; mothers of 57 years who brought up disabled children; children who lost the head of household; disabled children over 16 years.

### SSPF budget and social assistance (2003)
- SSPF budget (2003):
  - Total SSPF budget: 1,808,000 mln AZM (100%)
  - State expenditure on social protection: 768,000 mln AZM (100% of state social protection expenditure)
  - Pensions (old age, invalid, loss of breadwinner): 827,641.8 mln AZM (45.7% of SSPF budget)
  - Social pensions: 75,000 mln AZM (4.1% of SSPF budget; 9.8% of state social protection expenditure)
  - Social assistance: 711,240 mln AZM (39.3% of SSPF budget; 76.3% of state social protection expenditure)
  - Privileges (compensation for subsidies for transport etc): 107,000 mln AZM (5.9% of SSPF budget; 13.9% of state social protection expenditure)
- SSPF funding sources (2003):
  - 57.5% from social insurance contributions.
  - 42.5% from transfers from the state budget.
- Specifics:
  - 711.24 billion AZM allocated for benefits, equal to 39.3% of total SSPF budget.
  - State expenditure on social protection (through SSPF) amounted to 768 bln mantas, of which:
    - 586 billion was spent on social assistance benefits;
    - 107 billion AZM for subsidies for transport, communal and other services;
    - 75 billion for social pensions.
- Child benefits:
  - Social Protection Centers provided child benefits for 1,320,172 children from 576,131 families until August 2003.
  - Additional 302,312 child benefits were paid through parents' place of work.
  - A Presidential Decree in August 2003 ruled that every beneficiary should receive their benefit from a SPC.
  - Government spent circa 14 billion AZM per month on child benefits in 2003; approximate annual expenditure on these benefits was 168 billion mantas.
  - This annual child-benefit expenditure amounts to 9.3% of total SSPF expenditure, equal to 23.6% of total amount paid in benefits from the SSPF, and 21.9% of the state budget's social protection expenditure.
- Table excerpt — categories of child benefits (monthly per capita AZM, number of children, amount spent from state budget per year, bln AZM):
  - Total: 1,511,938 children; 169.7 bln AZM; 22.1%
  - Low-income families: 9,000 AZM; 1,484,600 children; 160.3 bln AZM; 20.9%
  - Martyr families: 35,000 AZM; 5,629 children; 2.4 bln AZM; 0.3%
  - Families of invalids of war: 20,000 AZM; 12,257 children; 2.9 bln AZM; 0.4%
  - Families of those doing military service: 12,500 AZM; 2,450 children; 0.36 bln AZM; 0.05%
  - Families of invalids of Chernobyl: 25,000 AZM; 7,002 children; 2.1 bln AZM; 0.3%

### Unemployment benefits and registration
- In 2002, employment centres registered 50,963 people:
  - Men: 23,088 (45.3%)
  - Women: 27,875 (54.7%)
  - Registered unemployment rate: 1.4% (based on registered unemployed; see chapter 2).
- Benefits:
  - 3,292 unemployed people (6.5% of those registered) received benefits from the government.
  - Of beneficiaries: 1,520 (46.1%) were men; 1,597 (54.9%) were women.
  - Average size of benefits in September 2003: 129.800 AZM.
  - Minimum amount of benefit: 30,000 AZM, which is:
    - 9.5% of the average salary,
    - 17.14% of the poverty line,
    - 33.9% of the average pension.
  - The average benefit in September 2003 represented:
    - 41.2% of the average salary,
    - 74.2% of the poverty line,
    - 146.7% of the average pension.
- Observation: Low level of registered unemployed suggests little incentive to register as unemployed, due to benefit levels and limited employment services.

### Children and institutional care (Table 2.25)
- Number of nurseries (1990–2002): 4 (constant)
- Number of children in nurseries by year:
  - 1990: 241
  - 1995: 166
  - 1997: 181
  - 1998: 181
  - 1999: 184
  - 2000: 197
  - 2001: 191
  - 2002: 173
- Number of children's homes by year:
  - 1990: 5
  - 1995: 4
  - 1997: 4
  - 1998: 5
  - 1999: 5
  - 2000: 6
  - 2001: 6
  - 2002: 6
- Number of children in children's homes by year:
  - 1990: 397
  - 1995: 395
  - 1997: 461
  - 1998: 548
  - 1999: 608
  - 2000: 684
  - 2001: 705
  - 2002: 749
- Number of boarding schools for orphans and children deprived of parental care (1990–2002): 2 (constant)
  - Number of children in them (1990–2002): 505, 548, 616, 575, 569, 554, 540, 516
- Number of special boarding schools for children with limited health (1990–2002): 16, 13, 13, 14, 14, 13, 13, 12
  - Number of children in them (1990–2002): 2,811; 1,607; 2,132; 2,359; 2,498; 2,679; 2,731; 2,860
- Number of boarding schools for mentally retarded children (1990–2002): 2 (constant)
  - Number of children in them (1990–2002): 515; 271; 262; 302; 300; 300; 348; 359
- General type boarding schools (1990–2002): 50, 38, 38, 37, 38, 38, 39, 39
  - Number of children in them (thousands) by year:
    - 1990: 19.4
    - 1995: 15.2
    - 1997: 16.5
    - 1998: 16.1
    - 1999: 17.1
    - 2000: 17.6
    - 2001: 17.8
    - 2002: 18.9
- Observations:
  - HBS results for 2001 and 2002 suggest children have been one of the groups most at risk during transition.
  - Studies suggest the main reason for children entering institutional care is parents' inability to feed and clothe children due to poverty.

### Targeting of social benefits and distribution by deciles
- HBS (2002) analysis:
  - Social benefits share in total income is slightly greater for the bottom four deciles.
  - Share of pensions is greater for the bottom deciles, indicating some targeting.
  - Categorical/state benefits are distributed more or less equally among deciles—i.e., not targeted to the poor.
  - Privileges are skewed toward higher deciles:
    - First decile receives only 8.5% of all privileges.
    - 8th decile receives 17.8%.
    - 10th decile receives 13.6%.
- Table 2.27 — Receipt of Social Benefits by decile (selected shares, percent):
  - Social benefits (share of income) by decile: 1: 8.7; 2: 8.0; 3: 8.1; 4: 7.4; 5: 6.8; 6: 7.4; 7: 6.6; 8: 6.2; 9: 4.9; 10: 4.1
  - Pensions (share of income) by decile: 1: 6.4; 2: 6.0; 3: 6.5; 4: 5.8; 5: 5.0; 6: 5.7; 7: 5.0; 8: 4.5; 9: 3.8; 10: 3.1
  - State benefits (share of income) by decile: 1: 1.9; 2: 1.6; 3: 1.3; 4: 1.5; 5: 1.4; 6: 1.5; 7: 1.3; 8: 1.2; 9: 0.9; 10: 0.6
  - Privileges (share of income) by decile: 1: 0.3; 2: 0.2; 3: 0.3; 4: 0.2; 5: 0.4; 6: 0.2; 7: 0.3; 8: 0.5; 9: 0.3; 10: 0.32
- Receipt means (summary table, mean AZM):
  - Total mean social benefits: 99,324.9 AZM
  - Mean state benefits: 18,861.2 AZM
  - Mean privileges: 4,271.9 AZM
  - First decile: social benefits mean 112,693.6; state benefits mean 24,146.1; privileges mean 3,623.3
  - Tenth decile: social benefits mean 73,499.8; state benefits mean 10,811.4; privileges mean 5,823.6
- Effect on poverty:
  - If social benefits were subtracted from recipients' incomes, poverty incidence would rise by 30-40%.
  - Many people are situated just above the poverty line (taken here as 175,000 AZM), so small changes in income or expenditure result in large changes in poverty statistics.

### Fiscal and policy measures (SPPRED; fiscal policy development)
- SPPRED objectives within fiscal policy development include:
  - Increasing the effectiveness of planning and expenditure by improving the budget process.
  - Increasing municipalities' revenues.
  - Improving the effectiveness of the budget process: Regulations on “Budget preparation and implementation” prepared and submitted to the CM to strengthen enforcement of the Law on “Budget System” (approved July 2, 2002).
  - Improving tax and customs legislation: Additions and amendments to the Tax Code (127 additions and amendments including consolidation and renumbering) approved by the President on 28th of November, 2003.
  - Analysis of moving from a 6-staged customs tariff to a 4-staged customs tariff to simplify customs procedures.
- Implementation status in 2003:
  - Although the 2003 State Budget envisaged subsidies of 25 billion AZM to municipal budgets, only 5 billion AZM were allocated for that purpose.
  - Amount of state subsidies to be allocated from the 2004 State Budget to local budgets (municipalities) is 10 bln. AZM.
  - 312 bln. AZM (301.4 bln. AZM forecasted) were transferred to the budget to consolidate extra-budgetary funds covering about 3,000 budget organizations into the State Budget in 2003.
  - Extra-budgetary spendings for 2003 were analyzed.

*Source: _cr04322 (excerpt) — SPPRED / social protection, pensions, SSPF budget, child benefits, targeting analyses, 1999–2003 data*

### 293.1 bln AZM.

### _cr04322 - 293.1 bln AZM.

### Fiscal policy and budget framework
- Mid-term consolidated budget (MTEF) for 2004-2007 prepared within a long-term outlook to ensure rationalization of poverty-focused expenditure.
- Budget Envelope for 2004 was submitted to and approved by the Milli Majlis.
- Registration measures targeted non-recorded businesses: administrative protocols for 2,800 people, fines amounting to 240 mln. AZM imposed.
- Capital expenditures:
  - 2003: 895.3 bln. AZM.
  - 2004: 867.6 bln. AZM.
  - These represent increases of 377.6 bln. AZM and 349.7 bln. AZM respectively compared with 2002.
- A nominal financial unit equals to 5,500 AZM.

### Tax policy, collection, and administration
- Specific customs duties on some imported goods replaced with ad valorem duties.
- "Kyoto Convention on Simplification and Harmonization of the Customs Procedures" approved on December 9, 2003 by the Milli Majlis.
- Tax Code amendments (approved November, 2003) raised the free taxable monthly income level from 100,000 AZM to 150,000 AZM and changed from a 3-staged tax system (12%; 25%; 35% - 100,000; 1,000,000; 5,000,000 AZM) to a 2-staged tax system (14%; 35% -150,000; 3,000,000 AZM). Came into force from January, 2004.
- Simplified tax turnover threshold increased from 30 mln. AZM per quarter to 123.75 mln. AZM per quarter.
- Simplified tax rate: presently 4% in Baku and 2% in other regions; now applied to physical individuals alongside legal entities.
- Profit tax:
  - Reduced to 25% since January, 2003.
  - Further reduced to 24% since January, 2004.
- Agricultural producers granted additional 5 year exemptions from all taxes (excluding land tax) from January, 2004 by Presidential Decree.
- Administrative and outreach actions:
  - About 700 workshops, briefings and 8,500 mobile awareness campaigns delivered.
  - About 30,000 taxpayers participated in events.
  - 14 “Tax News” bulletins published.
  - 14,000? (Note: only "14 'Tax News' information bulletins" explicitly stated) — distribution to local tax bodies; website created (www.taxes.gov.az).
  - “Hot line” service (195) established and operating.
- Registration and legalization of non-registered economic activities emphasized to increase tax and social insurance collections.
- Customs transparency: website (www.az-customs.net) and “Customs News” Paper of the State Customs Committee used for publication of information and legislative changes.
- Draft customs agreements prepared for signing with Turkey, Poland, Romania, United Arab Emirates, Pakistan and the Russian Federation; “Customs Agreement between GUUAM member states” signed in Yalta, July, 2003.

### Tax and customs capacity building and international cooperation
- Cooperation and technical assistance continued with: Inter-European Organization of Tax Administrations, US Department of Treasury, IMF, WB, UN, EU TACIS Programme.
- Training outcomes:
  - Customs: newly recruited State Customs Committee employees involved in advanced training in the Training Center.
  - Tax Ministry: 280 tax inspectors attended training courses; up to 30 tax employees received training abroad in 2003.
  - About 700 workshops, 8,500 mobile awareness campaigns; about 30,000 taxpayer participants.
- Agreements signed with Austria, Great Britain, Norway, Russia, Turkey, Ukraine, Moldova, Kazakhstan, Georgia and Uzbekistan for cooperation.

### Social insurance and labor incentives
- Compulsory social insurance rate for employers reduced from 29% to 27% from January, 2003 to encourage employment.
- Measures to rationalize public expenditures and improve budgetary control:
  - Treasury being computerized with technical assistance of WB and USAID.
  - Analysis of number of employees, wage fund, labor productivity in budgetary organizations under Law on “Civil Service”.
  - Presidential decrees applied a 50% increase to monthly wages in 2003 for budget-funded sectors: education, health, science, social security, sport, youth, culture, art, mass media, agriculture, forestry, fishery, amelioration and water industry, ecology and hydrometeorology.

### Debt management and public finance institutions
- Draft Law on “State Debt and Guarantee” prepared and submitted to the Presidential Office.
- Draft Regulations of “External Loans Registry in the Republic of Azerbaijan” submitted to the CM for approval.
- Improvement of mechanisms for debt management continued to ensure appropriate level of debt and debt services.

### Monetary policy and banking sector development
- Monetary policy objectives included maintaining inflation at an appropriate level and not using NB loans to cover the budget deficit.
- Inflation:
  - 2003 inflation rate: 2.2%, within forecasted rate (2-3%).
- Money and credit:
  - Volume of credits into the economy increased 28.4% in 2003 compared with 2002.
  - As of January 1, 2004 monetary credits amounted to 3,339.1 bln. AZM.
  - Share of money supply in GDP (in the non-oil sector) increased 1% in 2003 compared with 2002.
  - Increase in money supply compared with 2002 was 28%.
- Exchange rate and reserves:
  - NB interventions to prevent real exchange rate appreciation continued; oil revenues sterilized through SOFAR and other methods.
  - Exchange rate of AZM to USD changed 30 AZM (nearly 0.6%), from 4,893 AZM to 4,923 AZM.
  - Official monetary reserves at the NB: 757 mln. USD as of the end of 2003, equal to approximately 5 month non-oil import.
- Currency supervision and liberalization:
  - “Regulation on Currency Transactions Regime for Residents and Non-residents in the Republic of Azerbaijan” introduced per amendments to the Law on “Regulation of Currency”.
  - Possibilities for liberalization of capital flow investigated.
- New monetary tools and regulatory framework:
  - New tools (rediscount, deposit, overnight crediting, pawn-shop crediting) regulatory framework created to improve liquidity regulation and transform open market transactions into principal monetary policy tool.
  - More liberal normative documents on currency supervision adopted by the NB.

### Banking sector infrastructure, supervision, and market development
- Draft Law “On Banks” adopted by the Milli Majlis on January 16, 2003 to strengthen regulatory capacity and form a deposit insurance system.
- Draft Law “On Collateral” prepared and submitted to the CM to create a centralized and simplified register of collaterals.
- Creation of a Credit Register to keep credit histories of legal entities and individuals underway; database design nearly completed.
- Adjustment of accounting and financial reporting in the banking system to international standards finalized.
- Minimum authorized capital requirements increased:
  - Existing banks: from 2 mln. USD to 2.5 mln. USD.
  - Newly established banks: 5 mln. USD.
  - Total authorized capital of banks increased 18.3% in 2003.
- Participation limits for foreign banking capital fully eliminated by the NB from January 1, 2004.
- First foreign capital investment in a local private bank (Uni Bank) occurred in 2003.
- New draft Law “On the National Bank of the Republic of Azerbaijan” submitted to the Presidential Office; strengthening of banking supervision quality continued with technical assistance of USAID.
- Human resources and corporate standards in banks: corporate standards of human resources management being developed through technical assistance.
- Clearing and payment systems:
  - Creation of a Clearing System for Small Transactions as second stage of electronic payment system introduction completed.
  - Measures launched to set up a Processing Center on card payments.
- Encouragement of non-cash settlements led to a decrease in percentage of cash turnover by 3.4% in 2003 compared to 2002.

### Financial inclusion, microfinance, and rural crediting
- Micro-finance market strategy development started with ADB technical assistance; license fee for micro-finance institutions reduced from 27.5 mln. AZM to 605,000 AZM.
- Micro-Finance Bank actions in 2003:
  - Opened 2 new branch offices.
  - Allocated credits of 18 bln. AZM to 2,000 people in total.
- Project on Development and Crediting of Agriculture (concessional WB loan):
  - License given to non-bank Executive Credit Agency to provide credits to agricultural enterprises and farms since 2003.
  - The Agency allocated 8.8 bln. AZM to 308 groups of borrowers; each group had a minimum of 10 farms.
  - Project target: set up 80 credit unions and 200 groups of borrowers within 2 years.
- Credit unions and agent banks:
  - Number of agent banks of the National Fund for Support to Entrepreneurship for allocation of loans to the regions increased to 14.
  - 85 new branch offices of commercial banks received licenses in 2003.
  - 13 new credit unions provided with licenses.
- Amendments to “Regulations on economic regulatory normatives (prudential norms) of Credit Unions” made to increase efficiency and access to financial resources.

### Restructuring, privatization, and state banks
- Presidential Decree (April, 2003) on privatization of state-owned banks (International Bank and BUS Bank).
  - 20% of the package of shares of the International Bank to be sold to EBRD; KPMG evaluated the package; Memorandum of Understanding signed with EBRD.
  - Work on institutional building of BUS Bank for privatization conducted; tender commission set up to prepare Terms of Reference for hiring financial consultant.
- Micro-finance legislative work: new draft law on “Micro-finance institutions” being prepared.

*Source: _cr04322 - 293.1 bln AZM.*

### Introduction

### _cr04322 - Introduction

### Investment policy — objectives and legislative framework
- Objectives set in the Policy Matrix of SPPRED within the framework of the Investment policy aim to create an enabling environment for the growth of income-generating opportunities.
- Improving the legislative framework:
  - Laws “On State Registration of Legal Entities” and “On Combating Corruption” have recently been adopted.
  - International conventions “On Criminal Liability for Corruption” and “On Civil and Legal Liability for Corruption” have recently been ratified by the Milli Majlis.
  - Draft Laws “On Investment Activities”, “On Special economic zones and regulation of their activities”, draft “Antimonopoly Code” and draft normative documents on improvement of state financial support to enterpreneurship have been prepared.
- Licensing reform:
  - Number of activities that require a license reduced from 240 to 30.
  - Amount of state duties for getting a license reduced 2.5 times and the term of licenses prolonged.
  - A single State Register has been created to get licenses.
- Draft Public Investment Program (PIP) for 2004-2007 submitted to the CM to improve efficiency of public investments in infrastructure important for regional development.

### Investment process management, privatization, and institutional improvements
- Improving management of the investment process:
  - A draft Public Investment Program (PIP) for 2004-2007 has been submitted to the CM.
- Increasing effectiveness of the privatization process (2003):
  - Six state enterprises privatized through investment competition: Mughan hydropower plant, Shaki hydropower plant, Diplomat ltd, Baku Steel Foundry, Azerelektoterm and Dashkasan Ore-Dressing Plant.
  - State shares of four joint ventures privatized in 2003: Khazar-III, Diplomat, Azvirt and Bakcell. Three purchased directly by foreign partner; Diplomat privatized through investment competition.
  - Applications made to the Ministry of Justice to exclude joint ventures which are non-active and non-recorded in the tax bodies from the state register and take them off the registration.
- Institutional improvement of the investment process:
  - Council for Entrepreneurs established in 2002; held discussion processes in 2002 and 2004 with the President of the Republic of Azerbaijan.
  - Draft regulations prepared to regulate activity of state representatives to effectively manage state shares of joint ventures.
  - “Azerbaijan Investment Promotion and Advisory Foundation” established in 2003 in close consultation with the donor community.
  - First International Investment Conference organized in May, 2003 with over 600 business people from 30 countries attending.

### Developing entrepreneurship in the regions and SME support
- Privatization and enterprise restructuring:
  - About 30,000 small enterprises have been privatized; over 1,500 medium and big enterprises turned into joint stock companies over the last 8 years.
- SME finance and outreach:
  - Number of agent banks of the National Fund for Support to Entrepreneurship increased to 14.
  - Budget resources increased from 57 bln. AZM in 2002 to 100 bln. AZM in 2003.
  - Availability of branch offices in the regions determined as one of the main selection criteria of the agent-banks by the Fund.
- Information, promotion, and capacity building:
  - Baku Business Center established in the National Seaside Park in 2003 with UNDP support.
  - Website on “State Care for Entrepreneurs” created (www.sahibkar.biz) and a “hot line” service (971332) organized at the MED.
  - Publications and materials: handbook “Development of Entrepreneurship in Azerbaijan”; series “Basics of entrepreneurial rights in Azerbaijan”; normative-legal documentation to establish professional-entrepreneurs associations prepared and delivered to entrepreneurs.
  - A Baku Business Center supported study of WTO admission experience; delegation attended WTO Cancun Ministers Conference September 10-14, 2003.
- Business linkages and market access:
  - A Baku Business Center and SMEs information system help increase sales capacity of goods produced by local SMEs and find new markets.
  - Several business meetings between local entrepreneurs and foreign business delegations organized.
  - Local entrepreneurs attended exhibitions, international trade-fairs, conferences and economic forums; visits of foreign business people to Azerbaijan organized in 2003.
- Credit focus and loan allocation:
  - Loans for production and processing industry with import-substituted industrial and agricultural products, and export oriented products with high quality of international standards made 92% of the total loans allocated to the entrepreneurs in 2003.

### WTO accession preparations and regulatory reforms
- WTO accession institutional arrangements:
  - State Commission for WTO admission formed by Resolution of the CM on August 22nd, 2003 with 9 working groups (analysis of legislative changes; preparation of commitments on subsidizing the agrarian sectors; intellectual property; social issues; regulation of investments; preparation of commitments on the service sectors; trade technical obstacles and sanitary-phytosanitary measures; conflict resolution and preparation of commitments on customs duty) and a Secretariat to coordinate activities.
  - A Concept Paper on Admission to the WTO and an Action Plan drafted by the Secretariat.
  - USTDA-funded technical assistance project signed in 2002: seminars held to discuss possible impact of WTO accession on the country's service market; second meeting of the Azerbaijan Working Group on the WTO expected in 2004.
- Regulatory and quality control measures:
  - Guideline documents of national certification system adjusted to international standard “ISO-9000”.
  - Draft regulations on “Import of Goods Subject to Obligatory Certification to the Republic of Azerbaijan” and “Recognition of Foreign Certificates” prepared.
  - Tariff Council functioning since January 31, 2002; organized meetings on tariffs of various services during 2003 (urban and rural telecommunication services; services of the Department for Technical Inventory and Registration of Property Rights; wholesale water price from Jeyranbatan reservoir; duties for customs duties for goods and transport means in customs warehouses and in temporary storage and for customs control; use of ambulances from First Aid Motor Depot of Baku Health Department).
  - To protect domestic production, Tariff Council prepared proposals to identify and change customs tariff rates and duties, introduce customs tariff concessions, regulate list of goods exempted from VAT and investigate negative impact caused by import of goods.
  - On the basis of the Tariff Council proposals CM issued a Resolution in October, 2003 to make amendments on the rate of duties for customs duties for import and export operations, the amount of collections for customs registration.
  - CM issued Resolution “On Regulation of Prices for Crude Oil and Oil Products in the Republic” in February, 2003 in the framework of Program “On Strengthening Financial Discipline in the Energy Sector”.

### Energy policy — objectives and payment dynamics
- Energy policy objectives in the Policy Matrix of SPPRED include:
  - Improving energy supply to the population through strengthening financial discipline in the fuel-energy sector.
  - Introducing efficient price policy.
  - Implementing structural reforms.
  - Developing carbohydrate capacity.
  - Improving the energy supply system.
- Payment dynamics for energy consumed by state enterprises approved by Presidential Decree in March, 2002:
  - 2002 - 20%
  - 2003 - 30%
  - 2004 - 45%
  - 2005 - 65%
  - 2006 - 80-100%

### Energy sector structural reforms and SOCAR restructuring
- SOCAR restructuring (Presidential Decree January, 2003):
  - 3 departments of the Company declared open to privatization.
  - 2 production units and 2 departments merged; previous 18 units restructured to 8 units.
  - Overall, previous 148 units, enterprises and structures of SOCAR restructured to 60.
- Privatization and sector project coordination:
  - BTC main export oil pipeline financing loan agreements around 1.2 bln. USD finalized with IFC, EBRD and other financial institutions.
  - Approximately 40% of planned pipe-laying activity completed by end 2003; full construction will be completed by the end of 2005.
  - BTC project managed by BP on behalf of an international group of investors including SOCAR, TPAO, Statoil, Unocal, Itochu, Delta Hess and ENI.
  - BTC coordinated with South Caucasus Gas Pipeline following same route through Azerbaijan and Georgia; first export of the gas expected in 2006.
- Privatization and long-term private management in distribution:
  - Regional electricity distribution networks transferred for long-term private management to “Barmek” and “Bayva”.
- Metering and computerized systems:
  - 97,270 (by Barmek) and 29,000 (by Bayva) electricity meters purchased and installed for consumers.
  - 50,000 gas meters purchased and installed by Azerigas in 2003.
  - Computerized system established by Azerigas to enable automatic purchase and sale of natural gas; fully operational in Baku, Sumgait, Ganja, Ali-Bairamly, Shamakhy, Siyazan and Davachi.

### Exploration, production increases, and gas infrastructure
- Geological and production measures (2003):
  - 1,020 geological measures implemented (806 planned).
  - Extra 489.7 thousand tons of oil produced by oil and gas extraction departments of SOCAR in 2003 (expected 266.4 thousand tons).
  - 311 non-active wells (planned 353 wells) by oil and gas extraction departments and 109 non-pump active wells (planned 64 wells) by joint ventures re-activated. Extra 187.4 thousand tons of oil produced (expected 119.6 thousand tons).
  - By end-2003 total number of well reserves of the SOCAR increased to 6,793 (86 wells more compared with January, 2003).
  - Number of oil and gas extraction departments and joint ventures became 5,567 and 1,226 respectively.
  - 5.4 mln. m3 water pumped into the layers in 2003 that made extra 232 thousand tons of extra oil produced from the facilities under pressure by oil and gas extraction departments of SOCAR.
  - Extra 47.4 thousand tons of oil produced as a result of introducing other techniques (III pressure methods).
- Gas infrastructure and storage:
  - Project documentation on reconstruction of underground gas storages and expansion of their capacity prepared; envisaged to increase gas storages with capacity of 3.5 bln. m3.
  - Computerized system by Azerigas fully operational in multiple cities.
- Power sector investments and reconstruction:
  - Shimal Power Plant and Garadagh compressor projects completed in 2003.
  - Project documentation prepared for construction of the II Steam-Boiler Unit with capacity of 400 MWt in Shimal Power Plant and reconstruction of the 1st and 8th units of AzDRES; negotiations with IFIs ongoing.
  - Loan agreement signed with KfW for reconstruction of 9 power substations and the first phase of Azenergy's control-dispatcher point as part of second stage of power transmission sector reconstruction; consulting company selected.
- Alternative energy and national program:
  - “National Program on use of alternative energy sources” drafted by the National Academy of Sciences together with relevant central executive bodies and submitted to the CM.

### Social impact analysis and tariff reforms
- Measures to mitigate impact of energy price increases:
  - Joint technical assistance project on Poverty and Social Impact Analysis (PSIA) started in 2003 with technical assistance of the WB; a working group established; first draft of the policy document expected by mid of 2004.
- Tariff Council capacity building and price regulation:
  - Workshops organized in 2003 within WB IBTA project to increase capacity of the Tariff Council and discuss international experience in regulation of prices (tariffs) for energy carriers.
  - Tariff Council prepared proposals to identify and change customs tariff rates and duties, introduce customs tariff concessions, regulate list of goods exempted from VAT and investigate negative impacts caused by import of goods.
  - CM issued a Resolution in October, 2003 to make amendments on the rate of duties for customs duties for import and export operations, the amount of collections for customs registration.
  - Regulation of energy prices regularly discussed between Government structures of the fuel and energy complex and Tariff Council.

*Source: _cr04322 - Introduction (PDF chapter).*

### Introduction

### Introduction

### Labor Market and Employment
- Strategic goal: the Program is to create 600,000 new job places for the mentioned period through promoting non-oil sector development in the regions.
- Regional development:
  - Comprehensive regional development plans for Guba-Gusar-Khachmaz (northern) and Lankaran-Astara (southern) prepared in 2003 with technical assistance (Israeli Government (MASHAV) and others).
  - Baku Business Center established in the National Seaside Park in 2003 to support entrepreneurship through exhibitions, conferences and bilateral meetings.
- Micro-finance:
  - Micro-finance sector analyzed within the framework of micro-finance development project with technical support of ADB; objective to develop credit schemes for various sections of the population intending to set up business.
  - Micro-finance sector development strategy (including regulatory and legal framework, infrastructure, demand and supply) expected to be prepared by mid of 2004.
  - Registration process of micro-finance institutions and credit unions simplified and license fee reduced in 2003.
  - Micro-Finance Bank expanded activities and increased credit portfolio.
- SME finance:
  - Government increased budget resources through agent banks of the National Fund for Support to Entrepreneurship: from 13 bln. AZM in 2001 to 57 bln. AZM in 2002 to 100 bln. AZM in 2003.
- Training and job creation:
  - Regular training courses on dressmaking, carpet weaving, hairdressing, confectionary and weaving organized for women by the State Employment Service (SES) in 2003.
  - More than 50% of the women who completed these courses were provided with appropriate jobs.
  - 70 new jobs were created for unemployed with a special need for social protection in 2003.
- Civil service wage reform and wages:
  - Several measures implemented in 2003 to reform wages in public sectors.
  - Wages of the following public sectors employees increased by 50%: education, health, science, social security, sport, youth, culture, art, mass media, agriculture, forestry, fishery, amelioration and water industry, ecology and hydrometeorology.
  - Minimum wage increased from 27,500 AZM to 45,000 AZM since September, 2003 and to 60,000 AZM since January, 2004.
  - Wage co-coefficients started to be applied for regions with difficult working and climatic conditions since August, 2002 according to the Resolution of CM.
  - Presidential Decree in November instructed CM to submit proposals on further increase of the wage level based on the first half of 2004 results.
- Labor market matching and re-entry:
  - New State Program on social and economic development of the regions for 2004-2008 prepared in 2003 and approved by Presidential Decree in February, 2004.
  - Preparation of employment strategy started in 2003 with UNDP and ILO technical assistance; working group with relevant ministries and international organizations established; sector and situation analysis completed; strategy expected to be completed by mid of 2004.
  - In order to improve SES management, staff number was reduced by 141 persons according to the Resolution of CM in November, 2003; a special program for vocational training of job-seekers and the unemployed was approved.
  - Labor Exchanges in Baku and Sumgait expanded in 2003; new Labor Exchange Office expected to open in Ganja for 2004.
  - Regular labor force survey started to be implemented by the SSC since 2003 with support from ILO and UNDP.
- Vocational education and career services:
  - Situation analysis made in 2003; proposals submitted to CM for profile change, restructuring, and amendments to the “Classification of specialties and specialization in vocational education”.
  - Technical assistance to develop strategy to improve career counseling, vocational training and re-training envisaged.
- Social dialogue and labour relations:
  - Sector and collective agreements concluded in 2003 and registered at State Labor Inspection.
  - Main Collective Agreement between CM, Trade-Union Confederation and National Confederation of Entrepreneurs (Employers) for 2001-2003 remained in force in 2003.
- Migration and population:
  - Draft Concept Paper on the State Migration Management Policy prepared in 2003 and submitted to CM.
  - State Coordination Commission on the population development established by Presidential Order in June, 2003; working group drafted State Program for demography and population development.
  - Research Center for Population Development established under the Scientific Research and Training Center on Labor and Social Problems with UNFPA support in 2003.
  - Preparations for Migration Information Center: organizational structure designed, draft project documentation prepared and submitted to potential donors.

### Education Policy
- Strategic program:
  - A new 10-year, 3-staged Education Reform Program covering 2003-2013 prepared jointly with WB experts within the SPPRED: I stage 2003-2007, II stage 2007-2010, III stage 2010-2013.
  - 25 new strategic initiatives identified for re-qualification and retraining of teachers; an action plan identifying 11 sets of actions for 2004 prepared.
- Free textbooks and budget allocation:
  - About 15.2 bln. AZM allocated from the state budget to provide all children in the I-V grades, as well as refugee and IDP children in the VI-XI grades with free textbooks for the academic year of 2003-2004. The textbooks have been published and distributed.
- Teaching quality and training:
  - New teaching plans designed for “Azerbaijani language”, “Mathematics”, “Geography” for V-XI grades; “Physics” and “Astronomy” for VII-XI grades; “Biology” for VI-XI grades; “Literature” for V-XI and “Mother tongue” for I-IV grades; and “Literature” and “Russian language” materials for selected pilot and Russian schools.
  - Targeted seminars on curriculum preparation and active/interactive teaching methods attended by 1,200 employees from advanced teaching institutions, Institute on Education Problems, and teachers from pilot schools.
  - 3-stage “Train the trainers” courses delivered to 66 teachers from 20 pilot schools, trainers from regional education departments, and 62 trainers from re-qualification institutions; certificates awarded during May-August, 2003.
  - 3 Pilot regions (Ali-Bairamly, Ujar and Ismailly) selected for improving information technology in schools.
- Early Childhood Care and Development (ECCD) and preschool expansion:
  - International experience explored to expand pre-school facilities; Charter on establishing family-based preschool facilities being prepared.
  - With UNICEF help, Project on “Parent and Child Development” implemented; 3 pilot preschool facilities (Narimanov district, Sumgait and Khyzy) provided with equipment and technical support.
  - 29 child development centers in 13 regions and 5 in Mingachevir established for children from refugee and IDP families; World Food Program (WFP) provides food supplies for nurses and children of these centers.
- Wages and education financing:
  - Presidential Order dated May 15, 2003: from 1 of June 2003, monthly wages of 320,000 teaching staff in public educational institutions increased by 50%.
  - Additional amount of 230.8 bln. AZM allocated for education for 2003.
- Infrastructure and materials:
  - 6 school buildings with 2,418 seats built in 2003.
  - Construction of 12 school buildings with 4,328 seats underway.
  - 89 extra classrooms with 1,780 seats built and commissioned at 12 schools; 34 extra classrooms with 680 seats being built at 4 schools.
  - Construction of 5 school buildings with 5,576 seats meeting modern requirements in Khatai, Nasimi, Surakhany, Yasamal and Binagadi Districts postponed till 2004; to be supported by soft credits from the Saudi Fund for Development (SFD); tender documents being prepared.
  - 4 preschool and primary training centers (Salyan, Gakh, Aghjabadi regions and Ganja) established, repaired and provided with equipment and funds for training within the same project in 2003.
- Libraries, ICT and monitoring:
  - Within WB-funded Education Reform Project, 20 pilot schools in Nakhchivan AR, Baku, Ganja, Sumgait and Lankaran provided with computer equipment and other training-related technical support in 2003.
  - National assessment held for the first time to review teaching conditions and quality of education at 11 schools in Baku, 5 in Lankaran, 2 in Ganja and 2 in Sumgait; approximately 1,900 children of the V grade were tested on “Mother tongue” and “Mathematics”.
  - International consultant involved under IBTA Project to analyze financing of education, education expenditure, its effectiveness and education priorities for the Government. Training sessions on methods of analyzing expenditure held; analysis ongoing in the Ministry of Finance.
- Language and publications:
  - Presidential Order on January 12, 2004 to ensure mass re-print of publications in Azerbaijani-Latin alphabet; list for 2004 approved. About 160 dictionaries and encyclopedias, works of world literature, Azerbaijan's folk literature and classics and modern Azerbaijani literature to be published in the Latin alphabet in 2004.
  - Preparations started to publish a new National Encyclopedia in the Latin alphabet in 2004-2008; first volume “Republic of Azerbaijan” to be published and distributed by end of 2004.
  - Preparations to re-print additional sets in the Latin alphabet for 2005-2008 to be prepared.

### Culture
- Objectives: improve equity of access to cultural and art centers; preserve cultural heritage; improve existing facilities and widen access to culture of Azerbaijan.
- Key actions and results in 2003:
  - State Philharmonic named after M. Magomayev refurbished.
  - Work started on improving the State Art Museum.
  - Measures to stimulate art workers and improve their skills linked to Presidential Decree dated June 5, 2003: from 1 of June of the same year, monthly wages of relevant categories increased (as part of the broader wage measures noted in Labor Market and Employment).

*Source: _cr04322 - Introduction*

### 2003.   An   electronic   catalogue   is   being

### _cr04322 - 2003.   An   electronic   catalogue   is   being

### Protecting the cultural heritage and museum modernization
- An electronic Cultural Heritage Archive has been established for the first time in Azerbaijan as part of computerizing and repairing cultural objects.
- Refurbishment of the Central State Library, named after M.F.Akhundov, was completed in 2004.
- Reconstruction of the second storey of Shirvanshahlar Palace has been mainly completed; purchase and installation of equipment for the Palace is currently being settled.
- Rehabilitation work in Shaki Khan Palace is expected to be completed in 2004; work included restoration of internal mural paintings and ornaments and construction of supporting buildings and units.
- Conservation of Momuna Khatun and Garabaghlar tombs were completed in September 2003; this project was implemented with a soft loan from the WB.
- A “New Development Program” by the Government and the WB will use saved funds (1.2 mln. USD) within the Cultural Heritage Preservation to develop community and infrastructure around monuments, especially in poor areas.
- Planned activities under the Program include:
  - establish a Center for Cultural Service and Information in Ichari-Shahar;
  - hold a holiday-festival “Day of Ichari-Shahar” and improve the environment;
  - organize training in tourism;
  - support establishment of tour-operator companies (to be created by participants of a training course in Nakhchivan);
  - establish an Association of Craftsmen and Family Recreation Association; and
  - develop tourism in Shaki.

### Health Policy — Strengthening Primary Health Care System
- Objective: Guarantee access to basic health services through strengthening of Primary Health Care System (beginning in 10 pilot regions).
- Community-level actions:
  - 45 community health councils have been set up.
  - 5 medical storehouses and 10 training centers refurbished.
  - A Rationalization Plan of the pilot regions prepared including reduction of beds, redundancy of medical staff, opening of new posts, professional training and other plans.
  - 15 different training courses have been held in each selected pilot region for developing medical staff skills.
  - 914 Medical employees and 105 community members attended training courses, workshops and conferences.

### Promoting safe motherhood and essential care for the newborn
- To encourage breastfeeding:
  - 185 medical employees attended training courses in 37 locations.
  - Surveys conducted among pregnant women in selected areas.
  - Monitoring of breast feeding is taking place in 9 baby clinics.
  - Training courses took place with support from UNICEF in 25 areas (with 5 doctors in each area).
- Legislative and public actions:
  - Law on “Nutrition of Infants and Young Children” adopted on July 17, 2003.
  - May 1-2, 2003 celebrated as “National Days” for healthy nutrition of the children in Azerbaijan.

### Strengthening the material and technical base of health sector
- 8 hospitals in Baku City refurbished through EU technical support (Institute of Traumatology, Scientific-Research Institute named after Topchubashov, Hospital named after Mirgasymov, Oncological Center, Institute of Obstetrics and Gynaecology, Institute of Pediatrics, Clinics No 4 of the Baku City, Centre for Combating AIDS).
- Refurbishment of the Institute of Traumatology launched; tender documentation prepared for others.

### Improving management of childhood diseases
- Essential drugs of 19 types supplied to 30 regions to improve child disease treatment.
- 49 medical employees — pediatricians — trained on medical treatment of acute respiratory diseases and diarrhea in 7 regions (Absheron, Sumgait, Ismailly, Tovuz, Guba, Mingachevir and Ganja).
- 1,500 posters on acute respiratory diseases and 1,500 posters on diarrhea published and distributed nationwide.
- Monitoring of these diseases conducted in 20 regions.

### Expanding program on immunization
- Government purchased various vaccines to implement the Immunization Program.
- 98% of children vaccinated with Hepatitis B.
- MMR vaccines and disposable syringes purchased for 30,000 children in 2003.
- 900 dozes of A vitamins purchased and distributed to all regions.
- About 2.1 bln. AZM allocated from the State Budget for the Immunization Program in 2003 which is approximately 40% of the overall vaccination costs.
- Refrigerators and generators purchased to strengthen and maintain a cold chain system to cover 20 regions.
- Hardware for disposal of used syringes in line with safe immunization purchased and distributed to 10 regions.
- Monitoring implemented in 30 regions within the framework of the EPI.

### Preventing malaria and reducing malaria incidence
- Monitoring of malaria conducted in 16 regions.
- Relevant disinfection measures against malaria transmitters implemented in the Sabirabad region.
- 30 persons involved in training courses on malaria in 2 regions (Sabirabad and Bilasuvar).
- Information leaflets for increasing public awareness on malaria prevention published and distributed.

### Reducing incidence of TB
- DOTS anti-TB strategy introduced and expanded; an interagency coordination committee established with participation of central executive bodies and donor organizations; initiative supported by WHO and GTZ.
- 5-day seminars held in 19 pilot regions for doctors and laboratory assistants.
- TB medicine purchased from the Global Medicine Fund and distributed free of charge to 3,500 diseased persons.
- International recommendations and training materials translated and simplified for local conditions.
- Bacterioscopy adapted to the program; information prepared; site visits organised to 36 areas in 2003 and 20 new pilot areas selected to expand DOTS coverage.
- The TB treatment clinic (consisting of 115 beds) in Bina prison refurbished and provided with furniture and equipment through EU assistance.

### Promoting healthy lifestyle, STI and HIV/AIDS prevention
- A Commission for Combating AIDS and its Prevention set up to promote health education and reduce sexually transmitted infections and HIV/AIDS (Order, CM, 16.08.2003).
- National Strategy Plan on Prevention of AIDS approved by the CM on September 25, 2002; since July epidemiological observations started among injection drug users and women who deliver sex services.
- Surveys conducted among 400 drug addicts (voluntary participants) in Baku and Lankaran and 200 women delivering sex services in various regions; blood tested for HIV and hepatitis “C”.
- 12 regional laboratories supplied with modern diagnostic equipment in 2003 for determining infections; 184,000 blood samples tested (1.9% of the whole population).
- Facilities made available for anonymous and free blood testing for HIV for the urban and rural population.
  - To date 6,588 anonymous calls received and 264 people tested at the Center for Combating AIDS. This represents an increase in tests by 1.5.
- The Center for Combating AIDS presented 279 articles and interviews; a mobile show and examination team (MPET) established providing information against AIDS in Baku and Sumgait streets.
- First caricature competition organized on “Azerbaijani caricaturists against AIDS!”, “We love the life” and “Mutants are unable to kill mankind”.
- Government provided care for 56 people by defining them as disabled and allocating benefits; Head Employment Office instructed regional employment offices to provide jobs to unemployed people infected with HIV.

### Providing access to contraceptives from reliable supply systems and reproductive health services
- Reproductive Health and Family Planning Centers established in Saatly, Imishli, Khyzy, Bilasuvar and Sabirabad regions with UNFPA support.
- One centre reconstructed in Shaki and provided with equipment in Gusar, Gabala, Aghdash and Jalilabad.
- All these Centers were provided with brochures and contraceptives.
- 215 Obstetricians and gynecologists attended relevant training courses.
- 1,100 Training materials on childlessness, family planning, tumors were prepared for gynecologists and obstetricians and distributed.
- 6 training packages were prepared in 2003 through UNFPA assistance.

### Reducing iodine deficiency disorders and iron deficiency anemia
- Equipment installed for iodization of salt and iron fortification of flour through ADB assistance.
- 5 flour-producing plants in Absheron peninsula and 3 salt producing plants (2 in Baku and 1 in Nakhchivan) had this equipment installed.
- A National conference on the Prevention of Mulnutrition was held.
- Training courses on prevention of iron deficiency anemia arranged for 120 educational and medical employees in 5 pilot regions (Aghjabadi, Saatly, Sabirabad, Bilasuvar and Imishli).
- Employees of 14 customs points were trained; 360 civil society representatives attended courses in 18 regions and cities.
- Decree of September 27, 2003 signed by the President to ensure enforcement of the Law “On Salt Iodization for Mass Prevention of the Iodine Deficiency Disorders” adopted on December 27, 2001.

### Improving budget rationalization and financial management in health sector
- Monthly wages of the state-funded health employees (total number is app. 143,400), as fixed by the Single Tariff Scheme, were increased by 50% since the 1st of June 2003 according to the Order of the President dated June 10, 2003.
  - Thus, additional funds of 30.1 bln. AZM were allocated for 2003.
- An international consulting company selected; preparation of a draft report covering the current system of financing Health and draft action plan produced within the framework of the WB IBTA project.

### Improving health information system
- Preparation of the Azeri version of the international statistical classification on diseases and health problems continued.
- Publication of the first and second volumes of the X review of the ICD was completed.
- Guidelines on the introduction of the new registration documents on birth, natal and prenatal mortalities prepared and published; 60 people provided with trainings.
- Trainings on the Health Information protection system for more effective protection of vulnerable groups arranged; registration and monitoring improvements undertaken.

### Social Protection System and Pension Reforms — Creating a system of targeted social assistance
- “Draft Concept of Social Assistance Reform in the Republic of Azerbaijan” prepared and submitted to the CM.
- Analysis of the structure of social assistance and related protection programs launched within IBTA-2 project financed by the WB in 2003.
- Preparation of a Mid-term Social Assistance Strategy launched; pilot projects implemented in Guba region and Nizami district of Baku within the Project on Social Protection and Pension Reforms with EU (TACIS) technical assistance to identify family income for child benefit recipients.
- Non-tax privileges covering 1.5 million persons of 25 categories were abolished from January 1, 2002; benefits fixed for 10 categories and starting from January 1, 2003 monthly benefits fixed for 7 more categories.
- Proposals to compensate veterans of the Karabakh War (following abolishment of non-tax privileges) prepared and submitted to the CM.
- A Draft Law on Targeted State Social Assistance prepared and submitted to the CM.
- A working group established within the Ministry of Labour and Social Protection (MLSP) in November 2003 to identify underprivileged groups; visits made to Ukraine and Bulgaria for staff familiarization with targeting mechanisms.

### Reforming the pension and social insurance system
- Separation of insurance and pension system from the state social assistance system initiated by the Decree on “Measures to Improve the State System of Pensions in the Republic of Azerbaijan” issued by the President on August 4, 2003.
- Pensions (for a total of 1,087,000 people) were increased on August 1, 2003. Additional funds of 89.4 bln. AZM were allocated from the state budget in 2003.
- The minimum wage level increased from 27,500 AZM to 45,000 AZM on September 1, 2003 and to 60,000 AZM from January 1, 2004.
- Steps taken to establish a system of individual accounts for those insured; a concept document prepared in 2003 with WB technical assistance and relevant technical and economic estimates made.
- A joint WB and UNDP project launched in November 2003 to implement individual accounts; a working group established and visits to Ukraine and Georgia undertaken for experience exchange.
- A pilot project introduced in Northern regions (Absheron, Khyzy, Siyazan, Guba, Gusar, Khachmaz and Davachi) to create a system of individual accounts.

*Source: _cr04322 - 2003.   An   electronic   catalogue   is   being*

### introduction   of   the   norms   stipulated   in   the

### _cr04322 - introduction   of   the   norms   stipulated   in   the

### Pension and social security reform
- Basicly completed by the end of 2003: adjustment of labour and social legislation to the norms of the European Social Charter covering remuneration of labour, labour relations, employment, migration, social security and social assistance.
- 18 articles out of 31 of the European Social Charter (1,4,5-9,11,14,16,20-22,24,26-29) have been ratified by the Milli Majlis in January 2004.
- Functions of local offices of the MLSP on fixing of pensions and benefits, as well as financing, supervision and payment of pensions, have been fully transferred to the SSPF and changes to handle this have been introduced.
- Measures to improve speed of delivery of pensions and benefits added to pensions:
  - Work started to create facilities for transition to the card payment system of the pensions and benefits through the banks in Baku and Sumgait; completion targeted by April 1, 2004; remaining towns and regional centres completion targeted by the end of 2004.
  - Tender process for selecting banks to arrange pensions payment system by plastic cards through the ATMs has already been completed.
- Legal and normative measures:
  - Relevant proposals submitted to the Milli Majlis; revised Law on “Pension Provision to Citizens” prepared.
  - Appropriate changes were made to the Law on “Social Insurance”.
  - A new Law on “Minimum Living Standards” of the Republic of Azerbaijan has been drafted.
- Card payment preparatory actions: tender completed; transition facilities to be in place in Baku and Sumgait by April 1, 2004.

### Social integration and services for vulnerable groups (disabled, elderly, War and Labour disabled)
- Rehabilitation and services:
  - Rehabilitation consisting of medical, social and professional rehabilitation is being implemented by the MLSP to ensure financial independence and re-integration of the disabled.
  - Repairs completed to: rest-home for the War and Labour disabled in Bilgah; boarding house No 7 in Saray; boarding school No 9 in Buzovna; boarding house No 1 in Shamakhy; boarding house No3 in Mardakan.
- Medical treatment centres functioning:
  - Medical Treatment Centre with 250 places in Shaghan settlement.
  - Ganja branch of Prosthetic and Orthopedic Rehabilitation Centre.
  - Medical Treatment Centre for the Disabled.
  - Child Rehabilitation Centre in Baku City and rehabilitation centres with 20 beds in Nakhchivan and 14 beds in Ali-Bairamly completed.
- Housing provision for disabled:
  - So far, 15 blocks of flats and 140 individual apartments have been built and more than 720 disabled have been provided with apartments.
  - Examples of completed blocks: 18 apartments in Ali-Bairamly city; 27 apartments in Ismailly region; 36 apartments in Sumgayit; 48 apartments in Ganja.
  - A block of flats with 36 apartments is being constructed in Sabunchi District; expected completion in 2004.
- Social service workforce and coverage:
  - In 74 Regional Departments under the MLSP in 74 regions and cities: 38 senior specialists and 1,621 social employees provide social services to 15,289 lone elderly citizens and disabled persons in their houses at least twice a week.
- Targeting, data and IT:
  - Instructions prepared by the Institute of Aesthetics for installing equipment in transport and public places to enable improvements for the disabled.
  - Preparations to create a single system of information for the disabled: initial data on about 270,000 registered disabled, privileges and assistance they receive, information on about 30,000 families with 2 and more disabled collected and systematized and included in the database.
  - A special questionnaire with 73 questions prepared; database, general guidelines and relevant software have been designed and prepared.
  - A website of the disabled has been designed and launched.
- Financial support and one-off payments:
  - In the first half-year of 2003, 509 mln. AZM was spent as a one off payment to 610 people for medical treatment, repair of apartments and arrangement of mourning ceremonies.
- Policy and legislative steps:
  - Draft law “On targeting state social assistance” prepared and submitted to the CM; a working group under the MLSP established since November 2003 to identify underprivileged parts of the population.
  - Visits organized to Ukraine and Bulgaria for MLSP local social protection center staff to familiarize with targeting mechanisms.

### Social protection of refugees and IDPs — objectives and 2003 implementation
- Strategic objectives (SPPRED): returning IDPs to permanent residence; improving social living conditions of refugees and IDPs; upgrading infrastructure in IDP camps; improving health care and food provision; addressing employment problems; providing education to IDP children.
- Housing and resettlement:
  - 826 families of refugees have been provided with houses (Baku 218; Shamkir 126; Nakhchivan AR 101; Goranboy 364; Aghstafa 17; Total 826).
  - 320 houses for refugees, construction unfinished since 1995, completed.
  - 25 micro-projects implemented to repair 25 units temporarily densely inhabited by refugee and IDPs' families in Baku, Sumgait, Mingachevir and Gabala; financed with soft credits allocated by the WB and community contributions.
  - Resettlement of 412 IDP families (1,895 persons) from several public schools and other public buildings in Mingachevir to new settlements with credits from the Asian Development Bank underway; construction envisaged to be completed in the first quarter of 2004.
  - Construction started for settlements: 50 families in Mehtiabad; 65 houses in Yevlakh region; 51 dwelling houses in Ismailly region — planned completion in I quarter of 2004.
- Infrastructure in prefab settlements and tent camps:
  - 27 new settlements set up for housing of 5,081 IDP families (22,841 persons) settled in tent camps and railway wagons.
  - Rehabilitation of 17 houses launched in Gadabay within framework of rehabilitation of 1,000 houses damaged during the war.
  - Utilities and works completed or rehabilitated:
    - 40,000 metres of cable and 83,000 metres of electricity lines replaced; 70 power transformers replaced with new ones.
    - 56 water pumps installed; 308 artesian wells rehabilitated in Aghdam, Tartar, Goranboy and Aghjabadi regions; 153 extra wells being rehabilitated using saved funds.
    - Khyndyrystan pumping-station and 18 km of pressure pipeline built in Aghdam region; Gazakhlar pumping-station and 7.2 km of pressure pipeline built in Fuzuli region. 2,000 Families benefited from this.
    - 74.2 km of the roads in the settlement repaired.
    - 3.27 km of effluent disposal lines rehabilitated in Baku and 10.05 km of collector and drainage network rehabilitated in Beylagan region.
    - 6.35 km distribution pipelines installed in Baku and Gazakh regions and 4 units of gas control points installed.
  - Restoration of energy supply being conducted in Tartar, Goranboy, Aghjabadi, Gazakh and Gadabay regions; planned completion in first quarter of next year; result: energy supplies to 120,000 people will be improved.
- Food provision and welfare:
  - Replacement of privileges with benefits started in 68 regions; IDPs currently provided with monthly food benefits.
  - Monthly food assistance rendered to 136,000 IDPs within the framework of the United Nations World Food Program.
  - 214,258 IDPs were deprived of food assistance rendered before by international humanitarian organizations in 50 regions due to suspension of those organizations’ activity; process of providing necessary monthly products to these IDPs implemented with funds allocated from the SOFAR.
- Employment and livelihoods:
  - Allocation of plots of land (1ha) to 5,081 families for farming purposes and grant assistance of 1 mln. AZM; 4,909 mln. AZM spent in 2003.
  - Micro-credit support: 593 families given micro-credits as legal entities and 4,920 persons as private individuals from the WB.
  - To address farming support broadly: 4,629 farmers received 40.9 bln. AZM credit resources in 2003; 329 Borrowers Groups (total members - 6,045) received 94 bln. AZM; 217.6 mln. AZM were allocated to credit unions in 2003.
- Education:
  - 15 schools and 18 pre-school institutions built at newly established settlements and provided with equipment.
  - IDP and refugee students studying on a paid basis in State Universities and schools of general education exempted from tuition fees starting academic year 2002-2003 till the end of their education period according to President’s Order of August 4, 2003.

### Regional policy and infrastructure development — transport, water, energy, melioration
- Transport infrastructure and roads:
  - Baku-Alat highway funded by the State Budget and Alat-Gazimammad highway funded by Kuwait Fund and IsDB under construction; expected completion in 2004.
  - Negotiations concluded for financing construction of Gazimammad-Kurdamir, Kurdamir-Ujar, Ujar-Yevlakh, Yevlakh-Ganja, Ganja-Gazakh, Alat-Astara and Gusar-Samur parts of the highway; construction expected to start in 2004.
  - Trans-Caucasus railway rehabilitation continued; additional 1.2 mln. USD approved for rural roads development project from remaining resources.
- Water, sewerage, irrigation and melioration:
  - Reconstruction of Imishli region water supply system completed through KfW resources of 14.8 mln. euro; saved resources directed to improve water supply systems of Ganja and Shaki.
  - Great Baku water system rehabilitation ongoing; reconstruction of Baku sewerage system started in 2003 and expected to continue in 2004.
  - Within the WB project on rehabilitation of irrigation and drainage infrastructure: rehabilitation of Samur main headwork and construction of siphon at intersection of main Mil-Mughan Collector and Trans-Araz River completed in 2003.
  - Memorandum of Understanding signed with IsDB, SFD and OPEC Fund in 2003 on financing construction of Valvalachay-Takhtakorpu section of Samur-Absheron canal.
  - Following construction of first part of Khanarkh canal (37.5 km) in 2003, water supply to 18,500 ha in Gusar and Khachmaz improved; construction of second part started and 1.8 bln. AZM allocated.
  - Construction of Vaykhir water reservoir started in 2003 within Shamkir-Mashin canal construction; 60 bln. AZM envisaged from 2004 State Budget for continuation.
  - Construction of 4.7 km of reinforced concrete canal line, 2 bridges, hydraulic units and 950 m of tunnel completed.
- Airports and urban transport:
  - Reconstruction of Nakhchivan airport started in 2003; expected to be completed in 2004 with additional 15 bln. AZM envisaged in 2004 State Budget.
  - Construction of “Hazi Aslanov” underground station completed in first quarter of 2003 with EU support; fleet of underground carriages repaired in 2003.

### Energy and related large infrastructure
- Energy projects and priorities:
  - Mentioned projects include BTC pipeline, the South Caucasus Gas Pipeline, Shimal Power Plant, Garadagh compressor pump, II Unit of Shimal Power Plant, reconstruction of the 1st and 8th units of AzDRES, and second stage of power transmission sector reconstruction (detailed implementation status given in energy section of chapter 3).
- Allocations and repairs:
  - 400 mln. AZM were allocated in 2002 and 150 mln. AZM in 2003 for reconstruction and repair of Khanlar biological enterprise (vaccine and serum workshops).
  - 9.5 bln. AZM were allocated for preventive measures against infections; 9.1 bln. AZM expected to be spent in 2004 for biological and other preventive medicines.
  - Equipment installed at Plants Quarantine Examination Laboratory through assistance by TIKA in 2003; new laboratories envisaged at Astara and Samur border points.

### Rural development, veterinary and plant protection, and access to credit
- Rural development strategy:
  - Long-term development strategy of agriculture prepared and submitted to the CM in 2003 to ensure sustainable and integrated rural development.
- Veterinary and plant protection:
  - Preventive measures and reconstruction/repair allocations noted above (400 mln. AZM in 2002; 150 mln. AZM in 2003; 9.5 bln. AZM for preventive measures).
  - Equipment installed for epizootic and phytosanitary supervision in public health and manufacturing.
- Land market and registration:
  - To develop land market and loan collateral systems: 10 regional land registration centres set up; 1,427 land users provided with certificate of the right of its temporary use.
- Credit and finance for farmers (preserving numeric values):
  - 4,629 farmers received 40.9 bln. AZM credit resources in 2003.
  - 329 Borrowers Groups (total number of members - 6,045) received 94 bln. AZM.
  - 217.6 mln. AZM were allocated to the credit unions in 2003.
  - For IDP livelihood support: 4,909 mln. AZM spent in 2003 on grants; 1 mln. AZM grant assistance per plot noted; micro-credit support to 593 families (legal entities) and 4,920 persons (private individuals) from the WB.

*Source: _cr04322 - introduction   of   the   norms   stipulated   in   the (PDF).*

### Introduction

### Introduction

### Agriculture, irrigation, and land protection
- 522 Water Users Associations have been established.
- The associations cover 622,000 ha of the irrigated plots of land and render services to 380,000 legal entities and individuals.
- More than 250 types of booklets, leaflets and articles were issued by the Information Service Group; 375,000 landowners and farmers benefited from them.
- 380,000 farmers and landowners received information on market prices on a regular basis.
- Since late 2003 a new project funded by WB soft loans on irrigation-distributing system and improvement regarding repair and construction of in-farm irrigation units through public funds has been launched.
- A project on oil sludge clean-up component of the EUIP has been implemented at a Polygon near Buzovna-Mashtagha settlement (selection of options for re-cultivation of 1 ha of oil polluted land); in the Absheron region approximately 30 ha of area has been selected for treatment and tender procedures are about to be completed.

### Flood protection and water resources
- A Memorandum of Understanding on financing the construction of protection dams for flood prevention through ADB soft loan was signed in December, 2003.
- Construction of a fence of 25 km length for environmental protection of Jeyranbatan reservoir has been completed.
- A new forest area was planted in 70 ha and improvements and maintenance are being carried out in 1,275 ha of forest area in that territory.
- Preparation of project papers (feasibility study) on reconstruction and expansion of purifying facilities in Baku and Sumgait, including the sewerage system in Sumgait, has been completed.

### Animal husbandry and poultry
- 5,000 heads of cattle were brought to the country from abroad in 2003; 2,500 heads of cattle were sold by the state to private stock-breeding farms.
- 5,500 heads of cow and heifers were artificially inseminated with seeds of the high quality breed.
- 46 combine harvesters were purchased from German company “Glaas” and 22 from Finland; these combine harvesters were given for lease to 66 farmers in 33 regions.
- A seedling planting machine produced in Turkey was purchased and given to Gabala Tobacco Enterprise.
- A joint vegetable seed-farm in Lankaran was set up with the TIKA.
- A meat processing line has been launched at “Qafqaz” tinned food factory of Khachmaz region providing 50 persons with jobs.
- “Milk Pro” Ltd obtained ISO-9001; the daily milk processing level has been brought up to 50 tons.
- 16 chicken poultry farms are currently operating in the country.
- Imishli-Broiler Ltd with the capacity of 200 tons of chicken meat started operating in 2003 and 150 persons were provided with jobs.

### Agricultural information, training, and technology diffusion
- More than 20 information days were held in regions covered by Nakhchivan and Ganja advisory centres.
- Farmers and landowners of Guba-Khachmaz, Lankaran-Astara, Mughan-Salyan and Ganja-Gazakh regions were provided with addresses of companies selling mineral fertilizers and plant protection chemicals and with norms for using the fertilizers.
- A workshop-training was held jointly with the farmers to meet the needs of the private sector in agricultural machinery.
- 207 types of booklets, leaflets, articles and other materials were published and distributed.
- A Japanese Government grant was used to purchase 46 combine harvesters and other equipment; seminars were organized with Russian “Rostselmash” Open Joint-Stock Company.

### Environmental protection and biodiversity
- A National Caspian Action Plan was developed within the framework of CEP with technical assistance from UNDP, UNEP, WB, EU TACIS Program and GEF; this plan was submitted to the CM in November, 2003.
- Reconstruction and expansion work of isotope center for storage and treatment of radioactive waste, as well as decontamination of radioactive wastes in Ramany and New-Surakhany plants, is being continued.
- A Polygon for toxic wastes has been constructed on 50 ha of the Absheron district to remove mercury waste of the Surface-Active Substances Plant; road leading to the Polygon has been covered with crushed stone-gravels and the bridge on the road crossing Samur-Absheron channel reconstructed; preparatory work for putting the Polygon into operation is currently underway.
- Neftchala sturgeon hatchery with capacity of 15 mln. sturgeons has been put into operation following preparatory work enabling protection of traditional sturgeon hatchery areas in the Kur and Araz rivers; these areas will have the status of official protected areas within the framework of the EUIP.
- Forests have been planted by sowing method in 275.5 ha area and with perennial plants in 1,279.5 ha area on the banks of the Kur and Araz rivers.
- Preparatory documents are being prepared to create biological stations and nurseries for rare and endangered species of animals and plants.
- The areas of Turyanchay, Pirgulu, Ismailly, Ilisu and Garayazi reserves have been established; preparatory work related to establishment of Shahdagh, Ordubad, Samur-Yalama and Hirkan national parks, Talysh reserve and expansion of Goy-Gol, Absheron, and Altyaghaj reserves is ongoing.
- Provision of regional laboratories with equipment within the framework of institutional development has been continued and 80% of the work related to preparation of 1: 500 000 scale map that will reflect dislocation of organizations subordinated to the MENR by areas, physical-geographical information about regions completed towards improving geographical-information systems.

### Radioactive pollution and waste management
- Reconstruction and expansion work on an isotope center for storage and treatment of radioactive waste is ongoing.
- Decontamination of radioactive wastes in Ramany and New-Surakhany plants is continuing.
- An Agency for Management of Toxic Wastes has been established for effective waste management.

### Institutional development and monitoring
- Within the MENR a National Monitoring Department has started operating to create a system of monitoring air pollutants; it is envisaged to be established from the beginning of 2004.
- It is envisaged to establish Tourism Information Center in Shaki and Lahij and conduct relevant trainings through the Center in 2004-2005 within the framework of Trans-Caucasus Tourism Initiative with financial support of the Swiss Government.
- The implementation status of the policy measures within the above mentioned objectives in 2003 has been described across multiple sectors (environment, tourism, institutional reforms).

### Tourism development
- Licensing period for companies engaged in tourist activities has been prolonged from 2 up to 5 years and license fee has been reduced from 8 mln. AZM to 2.75 mln. AZM.
- The price for single entry visa for tourists was reduced from USD 40 to USD 20.
- As a result of initiatives, the number of companies engaged in tourism was 100 as of beginning of 2004.
- A Project and business plan have been designed towards developing ecotourism and rural tourism in regions: Gusar, Guba, Shamakhy, Ismayilly, Lankaran, Ganja, Khyzy, Lerik, Masally, Zagatala, Khachmaz, Gazakh, Gabala, Oghuz and Nakhchivan and submitted to interested foreign investors.
- An agreement was signed with UNDP to support establishment of tourism information centers in Baku, Shaki, Ganja, Lankaran, Shamakhy, Nakhchivan, Guba and Khachmaz for publicity and coordination.

### Judicial and legal reforms; legal assistance and capacity building
- Within the “Legal Assistance Service” project implemented with OXFAM's support, 23 information and consulting centres were set up in Barda, Aghdam, Aghjabadi, Tartar, Yevlakh and Goranboy regions, and in Mingachevir and Ganja cities; these centres were provided with all necessary equipment and serve 1,100-1,300 clients per month.
- Training seminars on Criminal Code and Civil Code have been organized in Baku and the northern regions with participation of judges and public prosecutors.
- Conferences on “Legal and judicial reforms in Azerbaijan” and “Human rights protection” as well as lectures on Human Rights Convention, independence of the judicial system, public prosecutors in Germany and other relevant subjects were organized for approximately 120 participants.
- Assessment of quantitative and qualitative needs of 21 courts has been implemented to improve court administration within the framework of the EU TACIS funded project “Improvement and reform of the judicial system in the Republic of Azerbaijan.”
- Major repairs and equipment provision were carried out at the Legal Training Centre; computers and internet access were created and the Centre held training courses for 417 judges, court and juridical employees with consideration of gender equality.
- A study trip to Germany was organized for a delegation consisting of representatives of the Ministry of Justice, Main Prosecutor's Office and judges to familiarize with the experience of the German judicial system.

### Decentralization, municipalities, and local governance
- Decentralization was started through creation of municipalities in 1999.
- There are 2,669 municipalities in the country.
- Budget expenditure of municipalities last year was mainly used to support: repair of roads within residential areas, repair of schools, health centers, provision of schools with fuel, single financial aid to underprivileged families, assistance in maintenance of household and utilities, environmental protection, supply with electric and heating power, covering of losses in bills for gas, transport, water and sewerage.
- Subsidies from the State Budget: the State Budget for 2003 envisaged allocating subsidies of 25 billion AZM to Municipalities, but they received only 5 billion AZM of this amount.
- It is envisaged to allocate subsidies of 10 bln. AZM to the budgets of municipalities in 2004.
- Training has been delivered in Aghstafa, Tovuz, Gadabay, Khyzy, Siyazan and Davachi regions with GTZ support benefiting heads of about 210 municipalities.
- Two-daily workshops organized for members of municipalities in Khyzy, Siyazan and Davachi were supported by Save the Children and devoted to elucidation of the “Charter on Self-governance Coordinating Councils in the Republic of Azerbaijan”.
- Law “about Approval of the Charter on Tax Body of Municipalities” came into force following the Decree issued by the President of the Republic of Azerbaijan in October 23, 2003. Tax bodies are being established within municipalities.
- A book “Financing and Budget Process of Municipalities” was published and distributed by the Center Towards Civil Society.

### Support programs and investment projects for rural areas
- A New Rural Investment Project is being prepared by the Agency for Support to Agricultural Development through credits allocated by the WB; the Project is aimed at reducing poverty and encouraging community development in rural areas and will be launched in 2004 covering municipalities based in 30 regions.

### Monitoring poverty, household budget survey (HBS), and capacity building
- PMU was set up under the SPPRED Secretariat (with financial and technical support from the UNDP) to improve monitoring of different aspects of living standards; the PMU began activities in February 2003 and has been working closely with the SSC and the SWGs.
- Efforts to build up capacity in poverty analysis included training by the WB Institute: a training course on Poverty Measurement and Diagnostics provided lectures and hands-on training in SPSS for analyzing survey data.
- The EU FSP together with FAO organized a training seminar on Monitoring of Food Security.
- The WB supported the SSC in preparation of the HBS annual database for outside users and provided supervision and support to local researchers in using the database for analyzing various aspects of poverty.
- The SSC has taken measures to further improve data collection through its HBS; the HBS was completely re-designed in 2001 and has continued to be improved with technical assistance from the WB and ADB. The SSC published bulletins with results from the HBS in 2003.

*Source: _cr04322 - Introduction*

### Introduction

### Introduction

### Poverty Monitoring
- Integration of information from the FSIS Unit at the SSC into the regular poverty monitoring.
- SSC improved content and layout of annual bulletin “Women and Men in Azerbaijan” and plans annual publication; also published “Children in Azerbaijan-2003”.
- SSC cooperating with the EU FSP on surveys of vulnerability to food security; results published in quarterly bulletins.
- PMU created a database using standard indicators available in the country and documented their strengths and limitations.
- PMU examined options for country-specific MDG targets and indicators and established poverty estimates using the SSC's HBS data.
- A qualitative survey was carried out in the summer of 2003 under PMU supervision with UNDP support:
  - Focus groups and individual interviews in 11 regions of Azerbaijan: Sumgait, Guba, Gusar, Shaki, Gabala, Jalilabad, Yardimly, Mingachevir, Barda, Imishli, Aghstafa.
  - Results are being used by PMU to supplement quantitative information and to improve HBS questionnaires.
- National labour force survey (LFS) carried out for the first time in 2003 with technical assistance from the ILO and UNDP; SSC preparing bulletins summarizing results.
- Annual survey of refugees and IDPs carried out September-December 2003 in Saatly, Sabirabad, Bilasuvar and Barda regions to analyze living conditions; report expected to be published by the end of first quarter of 2004.
- Work underway on legislative base for minimum subsistence level:
  - Draft law on the “Minimum Subsistence Level” with methodology submitted to the CM.
  - Proposal to make the minimum wage equal to the minimum subsistence level submitted to the CM.
- Development of gender-disaggregated statistics and plan to publish annual bulletin focused on gender-disaggregated statistics.
- CDs and administrative data made available on the SSC's website and on CD-Rom.

### Participatory Process (SPPRED implementation)
- SPPRED formulation phase used a participatory approach to involve decision makers, civil society, and international donors.
- Objectives of participatory process in implementation:
  - To continue the dialogue with civil society.
  - To increase public awareness of the SPPRED implementation process.
  - To exchange views concerning the impact of Policy Matrix measures on living standards.
  - To make policy recommendations for changes based on civil society proposals.
  - To strengthen poverty reduction strategy by improved prioritization based on information from civil society.
  - To ensure the most vulnerable groups are involved and consulted in implementation.
- Activities in 2003 to relaunch participatory process included regional workshops, media discussions, and targeted activities with NGOs and communities.

### Regional Workshops
- From July 2003 the SPPRED Secretariat held regional workshops in Guba, Nakhichevan, Shaki, Masally, Shamakhy, and Ganja to provide information and exchange views on SPPRED measures.
- Local NGOs “Umid” and “Simurg” managed workshop organization in 2003; USAID funded “MDG and poverty reduction in Azerbaijan”.
- Attendance and participation:
  - Overall, 88 international experts and representatives of international and local NGOs participated in regional workshops.
  - So far a total of 257 representatives from various strata of civil society from 23 districts and cities have participated.
  - Representatives from national government and 11 Sector Working Groups attended meetings.
  - Participants put forward a total of 187 proposals for future revision of SPPRED.
- Table of regional workshops (topics, training date, workshop date):
  - Guba — Municipality, Health, Economic Development, Ecology & Tourism — Participation training date: July 1, 2003 — Workshop date: July 2, 2003
  - Nakhchivan — Municipality, Health, Energy, Agriculture — Participation training date: July 24, 2003 — Workshop date: July 25, 2003
  - Shaki — Education, Social Protection Ecology & Tourism, Investment — Participation training date: August 14, 2003 — Workshop date: August 15, 2003
  - Masally — Municipality, Ecology & Tourism, Agriculture, Economic Development — Participation training date: September 4, 2003 — Workshop date: September 5, 2003
  - Shamakhy — Education, Judicial Reforms, Ecology & Tourism, Energy — Participation training date: September 18, 2003 — Workshop date: September 19, 2003
  - Ganja — Health, Municipality, Economic Development, Refugee & IDPs — Participation training date: November 13, 2003 — Workshop date: November 14, 2003

### Dissemination through Mass Media
- Press:
  - 32 articles on SPPRED published in various newspapers including “Khalq”, “Respublika” and “Ayna”.
  - 74 articles published in various newspapers and journals in the context of SPPRED.
  - 5 press-releases on the regional workshops were sent to Trend, Turan, Sharq and AzerTaj agencies.
- Radio:
  - 3 reports of the media competition on “MDG and Poverty Reduction in Azerbaijan” broadcast via Azerbaijan State Radio1 and Radio Antenne FM.
  - Interviews with heads of Sector Working Groups of Social protection and Tourism broadcast on Azerbaijan State radio and Araz radio.
  - Interviews on SPPRED implementation status given on ANS, STV and Lider TV channels.
- Television:
  - 1 report and 1 documentary film were broadcast on Space TV.
  - 1 report on STV and 2 reports on Azad Azerbaijan TV in the context of “MDG and poverty reduction in Azerbaijan”.
  - 1 TV film on the implementation process broadcast on Az.TV; 1 TV film and 5 short TV spots on poverty in rural areas prepared.
  - Programmes on various SPPRED measures broadcast on AzTV, ANS, Lider, ATV, Space, Nakhchivan TV, Sumgait TV and Khayal TV (Guba).

### Work with Target Groups and Training
- Training and awareness activities aimed to increase participation capacity of key groups and local communities.
- Examples:
  - Conference “National community leader” organized in Imishly by Azerbaijan Community Development Research Training and Resource Center with USAID and CHF support; over 150 participants from 14 regions attended.
  - Presentation “Active participation role of the communities in the SPPRED” delivered by a member of SPPRED Secretariat.
  - Presentation “The SPPRED and Community Development” at Inter-agency Community Development seminar organized by Mercy Corps; 59 representatives from communities, municipalities and local NGOs participated.
  - Training-seminar “The role of municipalities in SPPRED” organized with Save the Children International and SPPRED Municipality Sector Working Group; seminars for Khyzy, Davachi and Siyazan municipalities held.
  - Discussions on poverty and ways to combat it for secondary school pupils in Barda with local NGO “Aran”.
  - Seminar “MDG and Poverty Reduction” for more than 50 mass media representatives organized with UNDP, OXFAM and International Press Center; media competition “Best articles and reportage.”
  - With OXFAM and local NGO “Potensial”, drawing competition “Poverty and future” for pupils in Sumgait, Khyzy, Davachi, Guba and Khachmaz.
  - Presentation on “Community development within the framework of the SPPRED” at seminar “Studying community type development experience” organized by Save the Children with WB support in Ganja; attended by 55 community representatives from 5 regions and 21 organizations.

### Other Activities and Materials
- SPPRED publicity stands organized in Baku, Barda, Ganja, Nakhchivan, Sumgait, Astara, Shaki, Masally and Guba to provide detailed information and encourage participation.
- CDs and audio tapes of SPPRED produced with OXFAM support; literature placed at stands.
- “Proposal books” placed at stands to collect public feedback on SPPRED measures.
- With OXFAM support, 1000 posters on challenging people to fight poverty were produced and dissemination commenced.

### Main Results
- Participatory activities created clearer understanding among government and civil society of SPPRED's goals.
- Activities provided civil society with details on SPPRED, highlighted local potential and resources, facilitated transfer of information and experience, and generated new ideas for future measures.
- Participants moved from merely enumerating problems to proposing solutions and ways to contribute.
- Increased confidence and competence of participants to engage effectively in debates.
- Activities supported decentralization by promoting municipalities’ involvement and understanding of SPPRED implementation.

### Gaps and Recommendations for Further Expansion
- Certain populations, especially in regions without regional workshops and areas with weak community development, have not yet taken active part in SPPRED.
- Recommendations:
  - Seminars should be organised in selected regions to discuss gaps and weaknesses which impede active participation of civil society.
  - More training seminars and projects should be designed to develop skills and knowledge to strengthen active participation of government and civil society organizations and attract more representatives to the participatory process.
  - Use qualitative survey methods to tap civil society potential in defining main determinants of poverty and ways of improving living standards.
  - Continue activities to encourage civil society organizations to become partners in the SPPRED implementation process.
  - Further efforts should be made to interact with media representatives to establish effective dialogue and increase national and regional coverage of SPPRED measures.
  - Training courses and seminars should be organised to increase skills and knowledge of municipalities, promote their involvement and understanding of SPPRED implementation.
  - Make further efforts to ensure high level of participation of women in the implementation process and in review of policy measures.
  - Involve as many local NGOs as possible in projects implemented under SPPRED.
  - Training courses should develop skills of civil society members to do independent research, collect qualitative information and analyze poverty indicators.

*Source: _cr04322 - Introduction*

### Appendix 1

### Appendix 1 — Report on Millennium Development Goals

### Goal 1: Eradicate extreme poverty and hunger — Azerbaijan country-specific adaptations
- Country-specific goal: Reduction of poverty.
- Baseline and timeframe:
  - Target: Reduce, between 2002 and 2015, the proportion of people whose per capita monthly consumption expenditure is below the country’s absolute poverty line.
  - Baseline for 2002 is 46.7%.
  - Per capita consumption expenditure preferred over income as welfare indicator.
- Indicators and baselines:
  - Indicator 1: Proportion of population with per capita monthly expenditure levels below the absolute poverty line.
    - Note: Methodology for absolute poverty line to be approved by the Cabinet of Ministers.
    - Recommendation: desirable to have an indicator based on $1 per day (PPP) but current PPP controversy suggests waiting for official PPP review.
  - Indicator 2: Poverty gap ratio.
    - Baseline for 2002 is 0.0822.
  - Indicator 3: Share of poorest quintile in national consumption.
    - Baseline for 2002 is 15.1%.
- Target 2 (extreme/relative poverty):
  - Target: Reduce, between 2002 and 2015, the proportion of people in extreme poverty. Halve the share of the population below the relative poverty line of the country.
  - Extreme poverty estimates:
    - SPPRED: 17% using poverty line of 60% of median.
    - 2002 estimate: 11% using relative poverty line equal to 70% of median per capita monthly consumption expenditure. Baseline for 2002 is 11%.
- Nutrition and child welfare indicators:
  - Indicator 4: Prevalence of underweight children (under five years of age).
    - In 2000 – 16.8 (MICS data).
    - In 2001 – 6.8% (RHS data).
  - Indicator 5 (adapted): Share of boys and girls aged 6-10 year old with goiter and anemia.
    - Anemia prevalence among children aged 0-14 years:
      - In 2001 – 0.5%.
      - In 2002 – 0.6%.
    - No official information on goiter available.
- Employment and social protection monitoring:
  - Indicator 6: Gender-disaggregated unemployment rates and employment in the non-oil sector.
    - New labor force survey data available from 2003 onwards.
    - Presidential target: creating 600,000 new jobs by 2008.
  - Indicator 7: Number of children entering institutional care due to parental poverty.
    - Data on children in institutional care being improved and will be checked for monitoring suitability.

### Goals 2 and 3: Education and gender equality — Azerbaijan country-specific adaptations
- Country-specific education goal: Achieve near-to-universal secondary education (classes 1–11); universal primary education is already a reality.
  - Target: Ensure that, by 2015, almost all boys and girls will be able to complete a full course of secondary education.
  - Note: Near-to-full secondary enrolment contingent on measures to improve education quality as envisaged in SPPRED.
- Education indicators and data notes:
  - Indicator 8: Gross and net enrolment ratios in secondary education.
    - Current methods only allow gross enrolment rates; net rates to become available with improved data.
  - Indicator 9: Attendance rates for secondary education (by class, by gender).
    - Current methods do not permit calculation; administrative data may be available from 2004.
    - Attendance rates will be used to monitor gender equality and quality improvements; to be monitored using administrative and survey sources.
  - Indicator 10 / 8 (literacy): Literacy rate of 15-24 year olds.
    - Literacy rates nearly universal; monitoring maintained for international comparison.
    - According to 1999 census data: per 1000 population male - 971 and female - 980.
  - Indicator 7 (primary): Proportion of pupils starting grade 1 who reach grade 5 — not yet available; administrative data may be available from 2004.
  - Need to develop indicators for secondary school learning achievement to monitor quality.
- Gender equality (Goal 3) — country-specific framing:
  - Target: Maintain gender equality in primary and secondary education, and improve gender equality in higher education by 2015.
    - Rationale: enrolment shows no gender differences at primary/secondary, but females less likely to continue to higher education.
  - Indicators:
    - Indicator 11 / 9: Ratio of girls to boys in primary, secondary and tertiary education — to be supplemented by attendance-based ratios.
    - Indicator 12 / 10: Ratio of literate females to males of 15-24 year olds — no discrepancy currently evident; to be monitored.
    - Indicator 13 / 11: Share of women in wage employment in the non-agricultural sector — to be adapted for Azerbaijan to cover share of women in top wage sectors/jobs; data availability under review.
    - Indicator 14 / 12: Share of women represented in top positions in economic and political life — national parliament not considered suitable; indicator needs refinement and data-source checks.

### Goals 4 and 5: Child and maternal health — baselines, measurement issues, and targets
- General measurement issues:
  - Discrepancy between administrative data and survey estimates for health indicators.
  - Strategy: set two targets for key indicators (one using administrative baseline, one using UNICEF’s MICS survey baseline).
  - 1990 often a poor baseline due to deterioration in transition years; alternative baselines (e.g., 1995) used where appropriate.
- Child mortality (Goal 4):
  - Target: Reduce by two-thirds, between 1990 and 2015, the under-five mortality rate.
  - Indicators:
    - Indicator 15 / 13: Under-five mortality rate (per 1,000 children) — to be monitored using administrative and survey data.
    - Indicator 16 / 14: Infant mortality rate (per 1000 live births) — to be monitored using administrative and survey data.
    - Indicator 17 / 15: Proportion of 1 year old children immunized against measles.
- Maternal health (Goal 5):
  - Target (country-specific): Reduce by three-quarters, between 1995 and 2015, the maternal mortality ratio;
    - i.e., from 37 per 100,000 live births in 1995 to 13 in 2015, using administrative data;
    - and from 79 per 100,000 live births (estimate for 1988) to 27 in 2015, using survey estimates.
  - Rationale: 1995 chosen as baseline because 1990 does not reflect post-transition deterioration.
  - Indicators:
    - Indicator 18 / 16: Maternal mortality ratio — monitor using administrative and survey data.
    - Indicator 19 / 17: Proportion of births attended by skilled health personnel — monitor using administrative and survey data.

### Goal 6: Combat HIV/AIDS, malaria and other diseases — data constraints and selected indicators
- HIV/AIDS monitoring challenges:
  - Testing coverage declined from 300,000 per year in early 1990s to 12,000 in 1998 — risk of underestimation.
  - Recorded cases: 556 cases recorded (1 July 2003) by National Centre in Response to AIDS.
- Country-specific target: Have halted by 2015, and begun to reverse, the spread of HIV/AIDS.
- Indicators and notes:
  - Indicator 20 / 18: HIV prevalence among 15-24 year old pregnant women — currently a problem with data collection for monitoring.
  - Indicator 21 / 19: Contraceptive prevalence rate — estimates available through surveys (RHS, 2001).
  - Indicator 22 / 20: Number of children orphaned by HIV/AIDS — currently none according to official data; will be monitored as data availability improves (sources: Epidemiological Fact Sheets, UNAIDS, UNICEF, WHO).
- Malaria and TB (Target 8):
  - Country kept malaria and TB as major diseases; discussion on possibly including brucellosis.
  - Indicators:
    - Indicator 23 / 21: Prevalence and death rates associated with malaria.
    - Indicator 24 / 22: Proportion of population in malaria risk areas using effective malaria prevention and treatment measures.
    - Indicator 25 / 23: Prevalence and death rates associated with tuberculosis.
    - Indicator 26 / 24: Proportion of TB cases detected and cured under DOTS — requires further discussion with WHO on monitoring.

### Goal 7: Ensure environmental sustainability — indicators and national considerations
- Country-specific framing: Integrate principles of sustainable development into policies/programmes and reverse loss of environmental resources.
- Indicators and implementation notes:
  - Indicator 27 / 25: Proportion of land area covered by forest.
    - Need sensitive implementation to consider local communities’ access to grazing land and fuel; official data to be checked.
  - Indicator 28 / 26: Land area protected to maintain biological diversity — indicators to be checked.
    - Need to explore indicator related to share of GDP spent on environmental measures.
    - Consider monitoring land salinisation — data available.
  - Indicator 29 / 27: GDP per unit of energy use (proxy for energy efficiency) — calculated for HDR reports; will be monitored.
  - Indicator 30 / 28: Carbon dioxide emissions (per capita) [Plus two figures of global atmospheric pollution: ozone depletion and the accumulation of global warming gases].
- Water, sanitation and slum dwellers (Target 10 and Target 11):
  - Target 10: Halve, by 2015, the proportion of people without sustainable access to safe drinking water.
    - Administrative data on access to piped water: 1990 – 89.2; 2015 – 44.6 (note: an exact target cannot be set until monitoring improves).
  - Indicator 31 / 29: Proportion of population with sustainable access to an improved water source.
    - Administrative data on access to piped water:
      - 1990 – 95.7% (urban); 10.8% (rural).
      - 1995 – 95.7% (urban); 11.5% (rural).
      - 2000 – 95.7% (urban); 11.3% (rural).
      - 2002 – 94.2% (urban); 11.2% (rural).
    - Administrative data on access to piped water in 2002: 94.2% - urban; 11.2% - rural.
    - Note: targets for rural piped water access should be coupled with water quality and regularity targets.
  - Target 11: By 2020, significant improvement in lives of at least 100 million slum dwellers — suggestion for Azerbaijan: consider a shorter-term target (2010?) to ensure all IDPs re-settled from accommodation with limited sanitation.
  - Indicator 30: Proportion of people with access to improved sanitation — to be developed as above.
  - Indicator 31: Proportion of people with access to secure tenure — urban/rural disaggregation relevant for slum monitoring.

### Goal 8: Develop a Global Partnership for Development — Azerbaijan emphasis on non-oil FDI and trade
- Country-specific goal: Increase FDI in the non-oil sector.
  - Note: exports from the non-oil sector could be used as an indicator.
  - Section requires further discussion.
- Global MDG targets and indicators noted (need local adaptation):
  - Target 12–15 cover trade, ODA, market access, debt sustainability, and related indicators.
  - Selected indicators referenced for adaptation/monitoring (no Azerbaijan-specific baselines provided in this Appendix):
    - Indicator 32: Net ODA as percentage of DAC donors’ GNI [targets of 0.7% in total and 0.15% for LDCs].
    - Indicator 33: Proportion of ODA to basic social services.
    - Indicator 34: Proportion of ODA that is untied.
    - Indicator 35: Proportion of ODA for environment in small island developing states.
    - Indicator 36: Proportion of ODA for transport sector in land-locked countries.
    - Indicator 37: Proportion of exports (by value and excluding arms) admitted free of duties and quotas.
    - Indicator 38: Average tariffs and quotas on agricultural products and textiles and clothing.
    - Indicator 39: Domestic and export agricultural subsidies in OECD countries.
    - Indicator 40: Proportion of ODA provided to help build trade capacity.
    - Indicator 41–44: Debt sustainability indicators (official bilateral HIPC debt cancelled; debt service as a percentage of exports; proportion of ODA provided as debt relief; number of countries reaching HIPC decision and completion points).
    - Indicator 45: Unemployment rate of 15-24 year olds — to be monitored as with employment indicators under Goal 1.
    - Indicator 46: Proportion of population with access to affordable essential drugs on a sustainable basis.
    - Indicator 47: Telephone lines per 1000 people — data available and important to monitor.
    - Indicator 48: Personal computers per 100 people — data available and important to monitor.

*Appendix 1 — Report on Millennium Development Goals (Azerbaijan) — source document content.*

### Appendix 2

### Appendix 2 — Mid-term Expenditure Framework for 2003-2005 (MTEF) and State Budget for 2003-2004

### Introduction
- MTEF is an integral part of the State Programme on Poverty Reduction and Economic Development for 2003-2005 (SPPRED), approved by Decree of the President on February 20, 2003.
- MTEF includes projections of Government resources for 2002-2005 based on macroeconomic forecasts, the expenditure strategy, and detailed expenditure plans.
- MTEF will be reviewed annually during the budget approval process.
- This report reflects achievements in MTEF implementation since SPPRED approval and focuses on 2003–2004 budget outcomes; SPPRED 2005 projections are not discussed due to lack of revenue and classification detail.

### Legal and institutional changes in budget management
- New “Budget System” Law approved in 2002; additions and changes made in May 2003 to align with international standards.
- Key provisions introduced by the law and May 2003 amendments:
  - Publication of the draft annual budget law in the press prior to submission to the Milli Majlis (Parliament).
  - Approval of the state budget after more detailed discussion of each sub-item within functional classification paragraphs by the Milli Majlis (first time).
  - Submission of three-year economic and budget forecasts to the Milli Majlis along with the draft annual budget law for the next year.
  - Publication of quarterly reports on execution of the consolidated budget in the press.
  - Milli Majlis authority to approve expenditure and deficit ceilings for the consolidated budget, excluding SOFAR revenues.
  - All operations of the consolidated budget (except SOFAR revenues, operational expenses and foreign investments) should be carried out by the Treasury.
  - All capital expenditure to be included in the Public Investment Program (PIP).
  - Extra-budgetary funds, including SOFAR, cannot make investments in domestic commercial activities or issue loans or loan guarantees.
  - SOFAR should hold equity positions abroad only through rated professional portfolio managers.
- Institutional reforms and outcomes:
  - Treasury system established; transparency and accountability highlighted.
  - Municipalities established and financing sources identified.
  - Anticipated sharp increase in oil and gas production and export starting from 2006-2007 due to investments in BTC pipeline and ACG development.
  - Government recognizes challenge of rapid growth in revenues (projected increase of more than 50% of existing government revenues between 2006 and 2008 under a conservative scenario) and commits to sustainable, multi-year fiscal policy.
  - By April 15, MoF to prepare and submit Mid-term Budget Forecast (next year) and Mid-term Consolidated Budget Forecast (next three years).
  - From 2003: all extra-budgetary funds of budgetary organizations included in the State Budget.
  - Implicit subsidies to electricity and gas included in State Budget starting 2002; mechanism identified in 2003; implicit subsidies to the chemical sector envisaged in 2004.
  - New budget classification developed and submitted to the Cabinet of Ministers.
  - Draft Law on State Debt and State Guarantees prepared; Regulations on register of State Foreign Debt developed.
  - Program on transition to international accounting standards approved.
  - Treasury computerization process started; World Bank tender announced to equip pilot areas.

### Resource envelope and performance
- Macroeconomic growth forecasts (note: footnote states “Unless otherwise noted, as here, all figures are nominal.” and “A nominal financial unit is 5,500 AZM.”):
  - Real GDP growth expected to average about 11% annually for 2003 - 2005.
  - Oil sector: averaging 11% annual real growth.
  - Non-oil economy: averaging 12% annual real growth.
  - Major oil-related spending expected to start in 2005; growth rates not evenly distributed across 2003–2005.
- Table 1: Economic Growth Forecast (selected figures preserved)
  - Real GDP: 2002 actual 10.6%; 2003 actual 11.2%; 2004 forecast 15.3%; 2005 forecast 11.5%; Average 2003 - 2005 11.0%
  - Oil GDP (Real): 2002 5.7%; 2003 3.0%; 2004 7.7%; 2005 22.2%; Average 2003 - 2005 11.0%
  - Non-oil GDP (Real): 2002 13.0%; 2003 12.6%; 2004 11.2%; 2005 11.5%; Average 2003 - 2005 11.8%
  - Nominal GDP: 2002 12.6%; 2003 13.6%; 2004 9.7 %; 2005 16.6%; Average 2003 - 2005 13.3%
  - Oil GDP (Nominal): 2002 12.7%; 2003 5.1%; 2004 0.2 %; 2005 22.2%; Average 2003 - 2005 9.2%
  - Non-oil GDP (Nominal): 2002 12.5%; 2003 17.6%; 2004 13.6%; 2005 14.6%; Average 2003 - 2005 15.3%
- Revenue outlook and tax measures:
  - Tax and non-tax revenues estimated to increase by an average 12% per annum.
  - Improved administration at Ministry of Taxes and State Customs Committee expected to raise collections.
  - Enterprise profit tax: lowered from 27% to 25% on January 1, 2003; regional differentiated taxation introduced; following IMF discussions, profit tax set at 24% by Milli Majlis on January 16, 2004 starting from 2004.
  - Simplified tax: scope extended from January 1, 2003; simplified tax turnover threshold increased to 22,500 times of the nominal financial unit (i.e. 123,750 thousand AZM); applied to private individuals doing business without creating a legal entity.
  - Simplified tax rates introduced: 4% in Baku City and 2% in the regions.
  - Liability for private property subject to simplified tax increased from 5 bln. AZM to 5.5 bln. AZM since 2004.
  - Property tax amount increased since 2004 from 50,000 times of the non-taxable monthly income (5 bln. AZM) to 1,000,000 times (5.5 bln. AZM).
  - Individual income tax: Law on State Budget for 2004 envisages increasing non-taxable monthly income from 100,000 AZM to 150,000 AZM and moving from a 3-staged tax system (12; 25; 35% - 100,000; 1,000,000; 5,000,000 AZM) to a 2-staged tax system (14; 35% - 150,000; 3,000,000 AZM).
  - Social contribution rate decreased from 29% to 27% since 2003.
- SOFAR financing of pro-poor capital projects:
  - SOFAR expected to transfer around USD mln. 380 to the State budget during 2003-2005 (USD mln. 100 in 2003, 130 in 2004 and 150 in 2005).
- Implicit subsidies to energy sector:
  - Included in Consolidated Budget starting 2003; Parliament approves subsidies per annum with the annual Budget Law.
  - Subsidies: 2003 budget 1,559 bln. AZM; 2004 budget 2,332 bln. AZM.
- External borrowing policy:
  - New external debt limited to USD 200 millions per year during 2003-2005; all borrowings to be on concessional terms.
- Table 2: External Financing (USD millions) (selected figures preserved)
  - Foreign loans for deficit financing (SAC II, PRSP): 2002 actual 30; 2003 budget 34; 2004 budget 20; 2005 forecast 15; Average 2003 - 2005 23
  - Net project loans (1)=(2)+(3): 2002 127; 2003 128; 2004 97; 2005 97; Average 2003 - 2005 107
  - Loans to the government (2): 2002 14; 2003 34; 2004 49; 2005 59; Average 2003 - 2005 47
  - Net credits to budgetary organizations (3)=(4)–(5): 2002 113; 2003 93; 2004 48; 2005 38; Average 2003 - 2005 60
  - Disbursements (4): 2002 122; 2003 103; 2004 60; 2005 50; Average 2003 - 2005 71
  - Repayments (5): 2002 9; 2003 10; 2004 12; 2005 12; Average 2003 - 2005 11
  - Total external financing (bln. AZM): 2002 762; 2003 788; 2004 590; 2005 525; Average 2003 - 2005 634
  - Memo: new loans contracted: 2002 70; 2003 148; 2004 200; 2005 200; Average 2003 - 2005 183
- Table 3: Domestic Financing (AZM billions) (selected figures preserved)
  - T-bills: 2002 actual -47.4; 2003 budget -30; 2004 budget 50; 2005 forecast 40; Average 2000 – 2002 19; Average 2003 - 2005 20
  - State Lottery Bonds: 2002 3; 2003 3; 2004 5; 2005 5; Average 2000 – 2002 2; Average 2003 - 2005 4
  - Privatization Receipts: 2002 108; 2003 98; 2004 160; 2005 90; Average 2000 – 2002 110; Average 2003 - 2005 116
  - Total Domestic Financing: 2002 63; 2003 71; 2004 215; 2005 134; Average 2000 – 2002 131; Average 2003 - 2005 140
- Table 4: Resource Envelope (AZM bln.) (selected figures preserved)
  - Tax and Non-tax Revenues: 2002 actual 5564; 2003 budget 6310; 2004 budget 7200; 2005 forecast 7913; Average 2003 – 2005 7141
  - SOCAR tax credit: 2002 1603; 2003 1599; 2004 2332; 2005 1842; Average 2003 – 2005 1924
  - Transfers from State Oil Fund: 2002 434; 2003 1218; 2004 889; 2005 750; Average 2003 – 2005 952
  - Domestic and External Financing: 2002 825; 2003 894; 2004 805; 2005 659; Average 2003 – 2005 737
  - Total: 2002 8426; 2003 10021; 2004 11226; 2005 11164; Average 2003 – 2005 10804
  - Total excluding implicit subsidies: 2002 6823; 2003 8422; 2004 8894; 2005 9322; Average 2003 – 2005 8880
  - Annual change: 18.9% (2003), 12.0% (2004), -0.1% (2005), 10.3% (Average)
  - Annual change excluding implicit subsidies: 23.4% (2003), 5.6% (2004), 4.8% (2005), 11.3% (Average)

### Expenditure strategy and policy measures
- Overarching principles:
  - Maintain macroeconomic stability.
  - Exercise caution in spending anticipated oil-related revenue increases; focus on long-term sustainability.
- Public sector pay and employment:
  - No large-scale public sector pay reform envisaged for 2002-2004; partial civil servants pay reform started in 2003 and expected to continue in 2004.
  - Selective wage increases of 50% implemented in 2003 for specific groups: education, health, science, social security, sport, youth, culture, art, mass media, agriculture, forestry, fishery, amelioration and water industry, ecology and hydrometeorology.
  - Decree of November 24, 2004 cited as an impulse to public sector pay reform.
- Sectoral expenditure adjustments and social policy:
  - Education: due to salary increases in 2003, education expenditure in 2004 budget will increase by 20.6% (instead of 10.1% envisaged in SPPRED).
  - Health: 2004 health expenditure increase of 16.6% (instead of 29.5% outlined in SPPRED). Average monthly wage in health after 2003 increase around 76 thousand AZM; education average wage after increase 237 thousand AZM.
  - 2003 policy eliminated all payments for services provided by out-patients' clinics to ensure universal access to basic health care.
  - Fewer provisions for primary health care in 2003-2004 budgets than intended in SPPRED.
  - Pensions increased approximately 40% starting from August 1, 2003.
  - No decision taken on compensation to households in line with increases in utility collection rate envisaged in energy sector reform.
  - Government aims to create 600,000 new jobs over the next five years; mid-term social assistance strategy under preparation.
- Pro-poor and economic services spending:
  - Increased focus and intended substantial increases in expenditure on economic services: housing and utility; fuel and energy; agriculture, forestry and fisheries; industry and construction; transport and communications.
  - Public Investment Program (PIP) prepared for 2003-2005 and 2004-2007; most PIP projects related to infrastructure rehabilitation and social sector investments.
  - Intention to include all capital expenditure in the PIP as required by the new Budget System Law.
- Operational costs and utilities:
  - Operational costs increased to allow for higher utility payments by budgetary organizations and to implement SPPRED measures.
  - Goods and services expenditure: 2002 actual goods and services expenditure were 13% more than in 2001; expected to increase 68% within the next two years (from the 2002 base).
  - Utility payments by budgetary organizations for 2002-2004 will be more than doubled.

### Key expenditure shares, trends and structure (excluding implicit subsidies)
- Aggregate and share dynamics (selected figures preserved from Table 5):
  - Total consolidated expenditure (bln. AZM): 2001 5467; 2002 6843; 2003 8303; 2004 8949.
  - Total nominal growth (2001-2003): bln. AZM 2836; 52% nominal; 49% real.
- By economic items:
  - Personnel Emoluments and Transfers to households (bln. AZM): 2001 2828; 2002 3414; 2003 3824; 2004 4643.
  - Personnel Emoluments: 2001 1195; 2002 1288; 2003 1593; 2004 2143. Share of total: 22% (2001), 19% (2002), 19% (2003), 24% (2004).
  - Transfers to households: 2001 1633; 2002 2126; 2003 2231; 2004 2500. Share of total: 30% (2001), 31% (2002), 27% (2003), 28% (2004).
  - Purchases of goods and services: 2001 1196; 2002 1656; 2003 2011; 2004 2269. Share of total: 22% (2001), 24% (2002), 24% (2003), 25% (2004).
  - Capital expenditure: 2001 954; 2002 1454; 2003 2107; 2004 1602. Share of total: 17% (2001), 21% (2002), 25% (2003), 18% (2004). Nominal change 2001-2003: bln. AZM 1153; 121% nominal; 116% real.
  - Other: 2001 489; 2002 319; 2003 361; 2004 435. Share of total: 9% (2001), 5% (2002), 4% (2003), 5% (2004).
- By functional classification:
  - State operating functions (bln. AZM): 2001 1265; 2002 1435; 2003 1771; 2004 2205. Share: 23% (2001), 21% (2002), 21% (2003), 25% (2004).
  - Social and welfare functions (bln. AZM): 2001 2821; 2002 3351; 2003 3811; 2004 4513. Share: 52% (2001), 49% (2002), 46% (2003), 50% (2004).
    - Education: 2001 931; 2002 956; 2003 1170; 2004 1501. Share: 17% (2001), 14% (2002), 14% (2003), 17% (2004).
    - Health: 2001 210; 2002 224; 2003 277; 2004 351. Share: 4% (2001), 3% (2002), 3% (2003), 4% (2004).
    - Social protection and social security: 2001 1570; 2002 2054; 2003 2204; 2004 2471. Share: 29% (2001), 30% (2002), 27% (2003), 28% (2004).
      - State Budget portion: 2001 216; 2002 479; 2003 409; 2004 500. Share: 4% (2001), 7% (2002), 5% (2003), 6% (2004).
      - Social Protection Fund: 2001 1354; 2002 1575; 2003 1795; 2004 1971. Share: 25% (2001), 23% (2002), 22% (2003), 22% (2004).
    - Culture, arts and religion: 2001 110; 2002 117; 2003 160; 2004 190. Share: 2% across years.
  - Economic Services (bln. AZM): 2001 1177; 2002 1757; 2003 2526; 2004 2079. Share: 22% (2001), 26% (2002), 30% (2003), 23% (2004).
    - Investment: 2001 791; 2002 1210; 2003 1746; 2004 1239. Share: 14% (2001), 18% (2002), 21% (2003), 14% (2004).
  - Other items: 2001 205; 2002 299; 2003 195; 2004 154. Share: 4% (2001), 4% (2002), 2% (2003), 2% (2004).
- Observations:
  - Capital expenditure rose to 21.3% of total spending in 2004 (text) and then will fall back to 2001 levels.
  - Wages and salaries declined from 22% to 19% in 2002, but with 2003 salary increases will reach 24% of total expenditure in 2004.
  - Health expenditure dropped from 4% to 3% of total expenditure in 2002, forecasted to be maintained through end-2004; health spending rise expected to continue in 2005.
  - Education expenditure fell from 17% to 15% of total expenditure in 2002, but is expected to return to 2001 levels by 2004; no major structural reforms in education planned for 2002-2004.
  - Social insurance and social assistance expanded: 30% of total expenditure in 2002 (29% in 2001), and around 28% in 2004; no reform measures considered in 2002-2004 budgets.
  - Share of expenditure on economic services increased from 22% to 26% in 2002; due to a fall in foreign financed project loans, economic services share projected at 23% in 2004 (excluding implicit subsidies).
- Policy outlook:
  - No serious structural reforms expected in 2002-2004; significant changes anticipated from 2005-2006 when oil revenues increase and “Dutch disease” considerations will become more prominent.

*Source: Appendix 2 — Mid-term Expenditure Framework for 2003-2005 (MTEF) and State Budget for 2003-2004*

### Appendix 3

### Appendix 3

### Demographic Indicators
- Total number of population (at the beginning of the year): 1,000 persons — 1999: 7953.4; 2000: 8016.2; 2001: 8081; 2002: 8141; 2003: 8203
- Male %: 1999: 48.8; 2000: 48.9; 2001: 48.9; 2002: 49; 2003: 49.1
- Female %: 1999: 51.2; 2000: 51.1; 2001: 51.1; 2002: 51; 2003: 50.9
- Birth rate: births per 1,000 population — 1999: 14.9; 2000: 14.8; 2001: 13.8; 2002: 13.8
- Death rate: deaths per 1,000 population — 1999: 5.9; 2000: 5.9; 2001: 5.7; 2002: 5.8
- Natural growth: per 1,000 population — 1999: 9; 2000: 8.9; 2001: 8.1; 2002: 8
- Population growth rate: per 1,000 population — 1999: 7.8; 2000: 8.0; 2001: 7.4; 2002: 7.5
- Life expectancy at birth: years — 1999: 71.6; 2000: 71.8; 2001: 71.9; 2002: 72.2
- Marriages per 1,000 population — 1999: 4.8; 2000: 5; 2001: 5.2; 2002: 5.2
- Divorces per 1,000 population — 1999: 0.6; 2000: 0.7; 2001: 0.7; 2002: 0.7
- Number of births out of wedlock in % of total number of live births — 1999: 6.4; 2000: 5.4; 2001: 6.6; 2002: 7.6
- Fertility rate (average number of children per woman) — 1999: 2; 2000: 2; 2001: 1.8; 2002: 1.8
- Net migration: 1,000 persons — 1999: -4.3; 2000: -5.5; 2001: -4.7; 2002: -3.1

### Economic Indicators
- Gross Domestic Product (GDP):
  - bln. AZM — 2001: 26619.8; 2002: 30312.3; 2003: 35053.4
  - mln. USD — 2001: 5707.8; 2002: 6089.9; 2003: 7138.0
  - growth rate % — 2001: 109.9; 2002: 110.6; 2003: 111.2
  - deflator index % — 2001: 102.7; 2002: 100.7; 2003: 104.0
  - share of public sector % — 2001: 28.2; 2002: 27.0; 2003: 26.7
  - share of private sector % — 2001: 71.8; 2002: 73.0; 2003: 73.3
  - share of oil sector % — 2001: 32.0; 2002: 29.6; 2003: 29.0
  - share of non-oil sector % — 2001: 68.0; 2002: 70.4; 2003: 71.0
- GDP distribution by sector (%):
  - industry — 2001: 35.2; 2002: 34.9; 2003: 37.8
  - agriculture — 2001: 15.8; 2002: 14.2; 2003: 13.1
  - construction — 2001: 6.2; 2002: 10.8; 2003: 12.1
  - trade and paid services — 2001: 7.9; 2002: 7.5; 2003: 7.9
  - transportation and communication — 2001: 10.9; 2002: 9.8; 2003: 9.5
  - others — 2001: 24.0; 2002: 22.8; 2003: 19.6
- GDP per capita:
  - 1,000 AZM — 2001: 3225.9; 2002: 3676.4; 2003: 4320.0
  - USD — 2001: 714.3; 2002: 756.3; 2003: 879.7
- Industrial products (goods and services) bln. AZM — 2001: 18845.0; 2002: 20097.7; 2003: 23652.2
  - growth rate % — 2001: 105.1; 2002: 103.6; 2003: 106.1
  - deflator index % — 2001: 101.8; 2002: 97.7; 2003: 116.1
- Agricultural products bln. AZM — 2001: 5899.7; 2002: 6352.6; 2003: 6832.6
  - growth rate % — 2001: 111.1; 2002: 106.4; 2003: 105.6
  - deflator index % — 2001: 103.4; 2002: 100.0; 2003: 102.0
  - production of harvested products % — 2001: 60.9; 2002: 61.0; 2003: 60.5
  - animal-husbandry products % — 2001: 39.1; 2002: 39.0; 2003: 39.5
- Capital investment from all financial sources (including foreign investments) bln. AZM — 2001: 7273.1; 2002: 13389.9; 2003: 19574.9
  - growth rate % — 2001: 110.6; 2002: 184.2; 2003: 146.2
- Domestic investments:
  - bln. AZM — 2001: 2188.7; 2002: 2526.5; 2003: 3500.0
  - mln USD — 2001: 470.1; 2002: 519.8; 2003: 712.8
  - growth rate % — 2001: 95.1; 2002: 115.4; 2003: 137.1
- Foreign investments:
  - bln. AZM — 2001: 5084.4; 2002: 10863.4; 2003: 14340.5
  - mln USD — 2001: 1092.0; 2002: 2234.9; 2003: 3273.3
  - growth rate % — 2001: 119.0; 2002: 200.0; 2003: 146.5
- Investment in fixed assets bln. AZM — 2001: 5854.1; 2002: 10534.9; 2003: 17809.5
  - growth rate % — 2001: 121.0; 2002: 180.0; 2003: 171.2
- Credit allocations bln. AZM — 2001: 2431.3; 2002: 2600.8; 2003: 3339.1
  - growth rate % — 2001: 104.7; 2002: 107.0; 2003: 128.4
  - Long-term credit allocations bln. AZM — 2001: 661.4; 2002: 729.6; 2003: 914.9
  - Short-term credit allocations bln. AZM — 2001: 1769.9; 2002: 1871.2; 2003: 2424.2
- Revenues of the State Budget bln. AZM — 2001: 3924.0; 2002: 4551.2; 2003: 6127.6
  - mln USD — 2001: 2741.9; 2002: 936.3; 2003: 1247.8
- Expenditures of the State Budget bln. AZM — 2001: 4037.5; 2002: 4658.6; 2003: 6169.5
  - mln USD — 2001: 2821.3; 2002: 958.4; 2003: 1256.3
- Budget deficit bln. AZM — 2001: -113.5; 2002: -107.4; 2003: -41.9
  - mln USD — 2001: -79.3; 2002: -22.1; 2003: -8.5
  - Ratio of budget deficit to GDP % — 2001: -0.4; 2002: -0.4; 2003: -0.1
- Retail commodity turnover bln. AZM — 2001: 11877.4; 2002: 13442.3; 2003: 15310.0
- Average nominal monthly wage:
  - 1,000 AZM — 2001: 260.0; 2002: 315.2; 2003: 383.1
  - USD — 2001: 55.8; 2002: 64.9; 2003: 78.0
- Total amount of paid services bln. AZM — 2001: 2488.6; 2002: 2659.0; 2003: 2961.1
- Nominal income of population bln. AZM — 2001: 19381.8; 2002: 21169.9; 2003: 24207.9
  - growth % — 2001: 108.3; 2002: 111.6; 2003: 114.1
  - per capita 1,000 AZM — 2001: 2378.9; 2002: 2635.5; 2003: 2983.4
- Consumer Price Index % — 2001: 102.4; 2002: 102.8; 2003: 102.2
- Average annual exchange rate (AZM/USD) AZM — 2001: 4656.4; 2002: 4860.8; 2003: 4910.8
- Money supply (end of the year) bln. AZM — 2001: 1755.6; 2002: 2025.8; 2003: 2592.2
  - growth rate % — 2001: 105.6; 2002: 115.4; 2003: 128.0
  - Cash turnover bln. AZM — 2001: 1469.0; 2002: 1668.7; 2003: 2040.8
  - Non-cash turnover bln. AZM — 2001: 286.6; 2002: 357.1; 2003: 551.4
- Foreign trade turnover mln USD — 2001: 3745.3; 2002: 3833.1; 2003: 5218.2
  - growth rate % — 2001: 128.4; 2002: 102.3; 2003: 136.1
  - Export mln USD — 2001: 2314.2; 2002: 2167.5; 2003: 2592.0
    - growth rate % — 2001: 132.6; 2002: 88.8; 2003: 119.6
  - Import mln USD — 2001: 1431.1; 2002: 1665.6; 2003: 2626.2
    - growth rate % — 2001: 122.1; 2002: 115.1; 2003: 157.7
  - Trade balance mln USD — 2001: 883.1; 2002: 502.0; 2003: -34.3
- SOCAR resources mln USD — 2001: 491.5; 2002: 692.0; 2003: 815.0
- International resources (including the SOFAR’s funds) mln USD — 2001: 1216.5; 2002: 1374.0; 2003: 1572.0
- External debt mln USD — 2001: 1270.0; 2002: 1358.0; 2003: 1508.1 (as of November 17th, 2003)
  - growth rate % — 2001: 109.3; 2002: 106.8; 2003: 111.0
  - Ratio of external debt to GDP % — 2001: 22.3; 2002: 22.3; 2003: 21.2

### Health Indicators
- Expenditure on Health % of total State Budget expenditures — 1999: 5.7; 2000: 5.4; 2001: 5.2; 2002: 4.8
- Maternal mortality rate (number of cases per 100,000 live births) — 1999: 43.4; 2000: 37.6; 2001: 25.4; 2002: 19.9
  - by MICS data (number of cases per 100,000 live births) — 79 (1988)
- Infant mortality rate (number of cases per 1,000 live births) — 1999: 16.5; 2000: 12.8; 2001: 12.5; 2002: 12.8
  - by RHS data (number of cases per 1,000 live births) — 85.9 (1991-1995); 80.8 (1991-2000); 74.4 (1996-2000)
  - by MICS data (number of cases per 1,000 live births) — 79 (1996)
- Under-five mortality rate (number of cases per 1,000 children) — 1999: 31.7; 2000: 31.7; 2001: 24.8; 2002: 23.1
  - by RHS data (number of cases per 1,000 children) — 96.8 (1991-1995); 92.2 (1991-2000); 88.4 (1996-2000)
  - by MICS data (number of cases per 1,000 children) — 102 (1996)
- Proportion of under 1 children covered with vaccination:
  - against tuberculosis % — 1999: 98.7; 2000: 97.9; 2001: 98.5; 2002: 99.1
  - against measles % — 1999: 99.0; 2000: 98.1; 2001: 98.9; 2002: 98.8
- Proportion of breast-fed infants:
  - under 3 months as % of total number of children at 1 year — 1999: 39.4; 2000: 37.6; 2001: 30.3; 2002: 29.7
  - under 6 months as % of total number of children at 1 year — 1999: 30.2; 2000: 32.6; 2001: 32.4; 2002: 30.4
  - under 4 months (exclusive) % — 9.4 (MICS)
- Children (born during 1996-2001) ever breast-fed % — 94.7 (RHS)
- Child (under 5) malnutrition:
  - stunting (height-for-age), children under 5 years % — 19.6 (MICS)
    - by RHS data % — 13.3
  - Underweight (weight-for-age), children under 5 years % — 16.8 (MICS)
    - by RHS data % — 6.8
  - Wasting (weight for height), children under 5 years % — 7.9 (MICS)
    - by RHS data % — 2.4
- General abortion rate (abortions per 1,000 women aged 15-49) — 1999: 9.4; 2000: 7.7; 2001: 7.9; 2002: 7
  - General abortion rate (abortions per 1,000 women aged 15-44) — 116 (May 1998 – April 2001)
  - Lifetime abortion rate (number of abortions per woman) — 3.2
- Skilled assistance at delivery:
  - as % of mothers completing pregnancy by childbirth in hospital — 79
  - Skilled assistance at delivery % (MICS) — 87.5
  - RHS data % — 89 (1996-2001)
- Contraceptive prevalence among women of reproductive age (15-49 years) % — 41.1 (survey data)
- Contraceptive prevalence among currently married women of reproductive age (15-49 years) % — 55.1
- Contraceptive prevalence among currently married women of reproductive age (15-44 years) % — 55.4
- Dynamics of HIV detection: persons — 1999: 177; 2000: 63; 2001: 130; 2002: 97
  - by Azerbaijan National Center in Respond to AIDS persons — 1999: 169; 2000: 64; 2001: 128; 2002: 105
  - out of them the children up to 14 year old persons — 5 (1999); - (2000); - (2001); - (2002)
- Tuberculosis incidence: number of persons registered by medical institutions with diagnosis per 100,000 population — 1999: 174.1; 2000: 180; 2001: 183.1; 2002: 178.2
- Malaria incidence persons — 1999: 2312; 2000: 1530; 2001: 1042; 2002: 505

### Social Protection Indicators
- Total number of pensioners 1,000 person — 1999: 1177; 2000: 1202; 2001: 1219; 2002: 1245; 2003: 1285
  - old-age pension 1,000 person — 1999: 727; 2000: 737; 2001: 734; 2002: 735; 2003: 743
  - disability pension 1,000 person — 1999: 155; 2000: 160; 2001: 168; 2002: 179; 2003: 199
  - loss head of household 1,000 person — 1999: 148; 2000: 139; 2001: 137; 2002: 136; 2003: 136
  - social pensions and service 1,000 person — 1999: 147; 2000: 166; 2001: 180; 2002: 195; 2003: 207
- Average sum of fixed monthly pensions, total AZM — 1999: 52574; 2000: 64968; 2001: 71984; 2002: 73705; 2003: 88493
  - old-age pensions AZM — 1999: 51198; 2000: 61510; 2001: 73049; 2002: 77730; 2003: 80047
  - disability pension AZM — 1999: 38419; 2000: 51721; 2001: 67481; 2002: 72029; 2003: 75026
  - loss head of household AZM — 1999: 27134; 2000: 38384; 2001: 54096; 2002: 53850; 2003: 73715
  - social pensions and service AZM — 1999: 31525; 2000: 45992; 2001: 60302; 2002: 60345; 2003: 66791
- Assistance rendered by the Government:
  - single child birth allowance:
    - number of contingent 1,000 person — 1999: 91.8; 2000: 99.6; 2001: 94; 2002: 94.2
    - amount mln. AZM — 1999: 4603.9; 2000: 4993.1; 2001: 6121.4; 2002: 6519
  - allowance for children under 3:
    - number of contingent 1,000 person — 1999: 42.1; 2000: 31.2; 2001: 27.5; 2002: 26.4
    - amount mln. AZM — 1999: 3705.7; 2000: 2910.5; 2001: 4413.4; 2002: 4361
  - funeral allowance:
    - number of contingent 1,000 person — 1999: 41.9; 2000: 43.7; 2001: 42.4; 2002: 46
    - amount mln. AZM — 1999: 9809.1; 2000: 8872.1; 2001: 9381.3; 2002: 10800
  - allowance for children under 16:
    - number of contingent 1,000 person — 1999: 1556.4; 2000: 1627.2; 2001: 1622.2; 2002: 1605
    - amount mln. AZM — 1999: 168814; 2000: 182504; 2001: 177239; 2002: 169159.9
- Boarding institutions for children:
  - Number of nurseries — 1999: 4; 2000: 4; 2001: 4; 2002: 4
    - number of children in the nurseries persons — 1999: 184; 2000: 197; 2001: 191; 2002: 173
  - number of boarding houses for children — 1999: 5; 2000: 6; 2001: 6; 2002: 6
    - number of children in the boarding houses persons — 1999: 608; 2000: 684; 2001: 705; 2002: 749
  - number of orphanages — 1999: 2; 2000: 2; 2001: 2; 2002: 2
    - number of children in the orphanages persons — 1999: 569; 2000: 554; 2001: 540; 2002: 516
  - Number of special boarding schools for physically retarded children — 1999: 14; 2000: 13; 2001: 13; 2002: 12
    - number of children in those schools persons — 1999: 2498; 2000: 2679; 2001: 2731; 2002: 2860
  - number of boarding schools for mentally retarded children — 1999: 2; 2000: 2; 2001: 2; 2002: 2
    - number of children in those schools persons — 1999: 300; 2000: 300; 2001: 348; 2002: 359
  - Boarding schools of general type — 1999: 38; 2000: 38; 2001: 39; 2002: 39
    - number of children in those schools persons — 1999: 17.1; 2000: 17.6; 2001: 17.8; 2002: 18.9

### Education indicators
- Population with higher and secondary education (complete or incomplete) of ages 15 and more per 1,000 persons — 1999: 909; 2000: 909; 2001: 910; 2002: 910; 2003: 911
- Children’s gross enrolment ratio in pre-school institutions % — 1999: 16; 2000: 17; 2001: 18; 2002: 19
- Gross enrolment ratio in primary education % — 1999: 95.7; 2000: 98.2; 2001: 98.6; 2002: 98.8
  - male % — 1999: 95.3; 2000: 98.7; 2001: 99; 2002: 99.6
  - female % — 1999: 96.2; 2000: 97.6; 2001: 98.2; 2002: 97.9
- Gross enrolment ratio in basic education % — 1999: 78.7; 2000: 86.5; 2001: 89.6; 2002: 88.8
  - male % — 1999: 78.4; 2000: 87.1; 2001: 90.4; 2002: 89.8
  - female % — 1999: 79.1; 2000: 85.8; 2001: 88.9; 2002: 87.7
- Gross enrolment ratio in upper secondary education % — 1999: 60.8; 2000: 44.5; 2001: 43.2; 2002: 63.4
  - male % — 1999: 59.6; 2000: 44; 2001: 42.6; 2002: 63.4
  - female % — 1999: 62.1; 2000: 45; 2001: 43.7; 2002: 63.5
- Gross enrolment ratio in vocational education % — 1999: 3.6; 2000: 3.4; 2001: 3.1; 2002: 2.9
  - Net enrolment ratio in vocational education % — 1999: 3.2; 2000: 3.1; 2001: 2.8; 2002: 2.6
- Gross enrolment ratio in higher education % — 1999: 13.5; 2000: 13.4; 2001: 13.1; 2002: 12.5
  - male % — 1999: 16.2; 2000: 15.6; 2001: 14.4; 2002: 13.6
  - female % — 1999: 10.8; 2000: 11.2; 2001: 11.7; 2002: 11.3
  - Net enrolment ratio in higher education % — 1999: 9; 2000: 11.9; 2001: 11.2; 2002: 10.6
    - of which, male % — 1999: 10.5; 2000: 13.6; 2001: 12.2; 2002: 11.3
    - female % — 1999: 7.6; 2000: 10.1; 2001: 10.1; 2002: 9.9

### Labor Market and Employment Indicators
- Economically active population 1,000 person — 1995: 3641.3; 1998: 3743.8; 1999: 3748.0; 2000: 3748.2; 2001: 3763.4; 2002: 3777.5
  - male 1,000 person — 1995: 1991.3; 1998: 1954.1; 1999: 1956.2; 2000: 1956.7; 2001: 1966.8; 2002: 1971.1
  - female 1,000 person — 1995: 1650.0; 1998: 1789.7; 1999: 1791.8; 2000: 1791.5; 2001: 1796.6; 2002: 1806.4
- Annual average number of employed population 1,000 person — 1995: 3613.0; 1998: 3701.5; 1999: 3702.8; 2000: 3704.5; 2001: 3715.0; 2002: 3726.5
  - male 1,000 person — 1995: 1979.9; 1998: 1935.9; 1999: 1936.6; 2000: 1937.5; 2001: 1945.0; 2002: 1948.0
  - female 1,000 person — 1995: 1633.1; 1998: 1765.6; 1999: 1766.2; 2000: 1767.0; 2001: 1770.0; 2002: 1778.5
- Employment by sector (1,000 person):
  - private sector — 1995: 1585.8; 1998: 1991.3; 1999: 2360.8; 2000: 2426.3; 2001: 2475.0; 2002: 2534.5
  - public sector — 1995: 2027.2; 1998: 1710.2; 1999: 1342.0; 2000: 1278.2; 2001: 1240.0; 2002: 1192.0
  - agricultural sector — 1995: 1112.8; 1998: 1139.6; 1999: 1565.4; 2000: 1519.2; 2001: 1484.3; 2002: 1497.5
  - service sector — 1995: 1963.0; 1998: 2155.7; 1999: 1723.7; 2000: 1782.3; 2001: 1828.7; 2002: 1800.4
  - industrial sector — 1995: 537.2; 1998: 406.2; 1999: 413.7; 2000: 403.0; 2001: 402.0; 2002: 428.6
- Number of registered unemployed person — 1995: 28314.0; 1998: 42329.0; 1999: 45211.0; 2000: 43739.0; 2001: 48446.0; 2002: 50963.0
  - male person — 1995: 11411.0; 1998: 18234.0; 1999: 19622.0; 2000: 19283.0; 2001: 21808.0; 2002: 23088.0
  - female person — 1995: 16903.0; 1998: 24095.0; 1999: 25589.0; 2000: 24456.0; 2001: 26638.0; 2002: 27875.0

### Main Indicators of Labor Force Survey
- Labour force participation rate (Total / Urban / Rural) and by age groups:
  - Total: 62.9; Urban: 58.8; Rural: 68.2
  - Age groups: 15-19: 66.3; 20-24: 26.4; 25-29: 19.4; 30-34: 20.5; 35-39: 20.1; 40-44: 17.8; 45-49: 20.0; 50-54: 29.4; 55-59: 45.8; 60-64: 73.0; 65-+ : 92.0
  - of which, male: 75.6; 72.8; 79.2; 60.6; 16.4; 5.5; 4.2; 4.8; 5.2; 7.3; 9.7; 19.9; 57.5; 87.9 (by age sequence)
  - female: 51.1; 46.3; 57.6; 72.0; 36.7; 33.1; 35.2; 33.0; 29.6; 32.1; 47.9; 67.1; 85.4; 95.3 (by age sequence)
- Inactivity rate (Total / Urban / Rural) and by age groups:
  - Total: 37.1; Urban: 41.2; Rural: 31.8
  - of which, male: 24.4; 27.2; 20.8; 60.6; 16.4; 5.5; 4.2; 4.8; 5.2; 7.3; 9.7; 19.9; 57.5; 87.9
  - female: 48.9; 53.7; 42.4; 72.0; 36.7; 33.1; 35.2; 33.0; 29.6; 32.1; 47.9; 67.1; 85.4; 95.3
- Employment rate (Total / Urban / Rural) and by age groups:
  - Total: 56.2; Urban: 50.5; Rural: 63.5
  - Age sequence: 15-19: 27.9; 20-24: 56.0; 25-29: 68.6; 30-34: 72.7; 35-39: 74.5; 40-44: 77.7; 45-49: 75.0; 50-54: 64.7; 55-59: 51.4; 60-64: 26.2; 65-+ : 7.9
  - of which, male: 68.4; 64.1; 73.7; 34.6; 65.1; 80.7; 88.0; 89.7; 90.1; 87.9; 84.0; 75.7; 41.0; 11.9
  - female: 44.9; 38.5; 53.5; 21.1; 46.7; 56.8; 59.0; 61.7; 66.0; 62.7; 46.7; 31.4; 12.9; 4.7
- Unemployment rate (Total / Urban / Rural) and by age groups:
  - Total: 10.7; Urban: 14.0; Rural: 7.0
  - Age sequence: 15-19: 17.3; 20-24: 23.8; 25-29: 14.9; 30-34: 8.5; 35-39: 6.7; 40-44: 5.5; 45-49: 6.2; 50-54: 8.3; 55-59: 5.2; 60-64: 2.8; 65-+ : 0.7
  - of which, male: 9.6; 12.0; 7.0; 12.0; 22.1; 14.6; 8.2; 5.7; 4.9; 5.2; 7.1; 5.5; 3.6; 1.1
  - female: 12.2; 16.9; 7.0; 24.6; 26.2; 15.2; 9.0; 7.9; 6.3; 7.6; 10.3; 4.5; 0.7; 0.0
- Unemployment rate by education (Total / Male / Female and by age groups):
  - higher — 4.9; 4.9; 5.0; age sequence: 0.0; 25.7; 26.1; 8.5; 4.8; 7.0; 10.3; 13.6; 2.6; 1.5; 0.0
  - incomplete higher — 9.4; 5.3; 13.6; age sequence: 17.9; 53.6; 10.7; 3.6; 3.6; 3.6; 0.0; 0.0; 7.1; 0.0; 0.0
  - secondary professional — 7.2; 5.3; 9.2; age sequence: 5.0; 24.9; 18.9; 10.0; 11.0; 8.5; 8.5; 10.3; 2.8; 0.0; 0.0
  - secondary special (vocational) — 6.5; 5.8; 9.0; age sequence: 3.0; 20.0; 17.0; 14.1; 17.0; 11.9; 10.4; 3.7; 1.5; 1.5; 0.0
  - complete secondary — 14.0; 12.9; 15.5; age sequence: 11.2; 32.7; 17.4; 10.8; 8.8; 8.3; 5.8; 3.9; 0.7; 0.2; 0.1
  - main secondary — 11.3; 10.1; 12.4; age sequence: 18.4; 32.0; 13.2; 6.6; 5.5; 5.9; 7.0; 5.9; 3.7; 1.5; 0.4
  - primary — 7.5; 7.7; 7.2; age sequence: 9.5; 9.5; 9.5; 19.0; 9.5; 14.3; 9.5; 4.8; 9.5; 4.8; 0.0
  - without primary education — 7.0; 9.1; 5.7; age sequence: 25.0; 0.0; 0.0; 50.0; 0.0; 0.0; 25.0; 0.0; 0.0; 0.0; 0.0

*Source: SSC; Main Labor Force Survey conducted by SSC through technical assistance of ILO and UNDP, 2003.*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2004/_cr04322.pdf_