Business

NO COMPETITION IN TOBACCO / DRINKS MARKET

Prices set by monopolists

By Fuad Ismayilov

Azernews Staff Writer

Azerbaijan’s consumer market seems to be sufficiently supplied, largely with imported products. This abundance, however, has an important feature to it, which is often overlooked: what is being offered to consumers? Do these products, food in particular, meet quality requirements? According to the legislation, imported products are licensable. Is this being abided by? Observations show that these requirements are very frequently ignored, as products of suspicious quality are sold to consumers. Let’s, for instance, take a look at the market situation with cigarettes and alcoholic beverages.

Many commercial and public catering enterprises in the republic are extensively selling various imported alcoholic beverages and cigarettes. In January-October of 2000, local manufacturers produced 1.6 billion cigarettes, or 80 million cigarette packs, of which only 1.3 billion, or 70 million packs, were licensed. However, according to specialist estimates, the demand for tobacco is much higher.

Therefore, cigarettes produced by underground workshops, as well as cheap foreign cigarettes, are paving their way to the retail network. Ministry of Economics says yearly demand for tobacco is 10 billion cigarettes, which has been confirmed by foreign tobacco companies active in Azerbaijan. Only around 3 billion cigarettes reach the market in a legal way, while the other 7 billion is sold without documentation or license.

As a result, Russian, Ukrainian and other products with excise labels but devoid of import licenses such as “Zolotaya Yava”, “Nasha Marka”, “21 Vek”, “Russkiy Stil”, “Prima” cigarettes, tobacco products from “Philip Morris Tobacco”, “Winston Salem Tobacco”, “British American Tobacco”, “RJR”, as well as foreign alcoholic beverages “Vodka Russkaya”, “Vodka Stolichnaya”, “Vodka Moscovskaya”, “Mimino”, cognacs, whiskies, liqueurs, etc. are widely available for sale. Over 70 types of alcoholic drinks are consumed every day at night bars and wedding palaces, which means foreign companies can uninterruptedly sell their products in Azerbaijan without a license and paying tax.

Experts say 71,267 decaliters of alcoholic beverages were imported in Azerbaijan in 10 months of 2000, of which just 1,894 decaliters of wine were licensed. As to imported cognac and champagne, not a single bottle was licensed at all. Ministry of Agriculture experts say legally functioning local enterprises manufacture 24 million bottles of alcoholic drinks a year, or 30% of the demand.

The domestic market is overstuffed with cheap drinks. A half-liter bottle of cognac costs cheaper than one-liter bottle of water. One is tempted to ask a question how such products are brought to Azerbaijan.

Even more important is the potential threat to human health posed by the drinks. The Ministry for Agriculture has recently shut down 7 private firms involved in production of filterless cigarettes after a laboratory analysis had discovered excessive content of moisture, dust and nicotine.

Another thing to reckon with is the fact that prices on tobacco have risen 20-30% lately. Among reasons for this is the increase in the Customs Committee’s prognosis on imports of tobacco and alcoholic beverages for this year.

Many believe that the Committee is now having to register the tobacco items that have bypassed customs, which will inevitably cause a rise in domestic prices.

The surge in prices is also explained by the latent struggle between the gradually strengthening local manufacturers and those importing cigarettes.

Others think that prices have been raised in order to squeeze petty producers and importers out of the market.

NEW DRAFT LAW ON EMPLOYMENT PREPARED

Specialists of the ministry of labor and social security of the population have prepared a new draft law "On employment", which has been forwarded to the parliament for approval, according to a source from the ministry.

The ministry experts say the previous law on employment, adopted in 1991, no longer meets the present-day requirements.

The new draft legislation reflects the current problems relating to job market regulation and employment, especially employer-employee relations.

According to the source, laws "On licensing of foreign labor force" and "On labor migration", adopted this year, will be enacted since 2001.

Besides, a new draft law "On employment in Azerbaijan" is being prepared. The legislation is intended to govern the labor market in the republic, increase unemployment allowances, etc.

Regulation of the labor market has come to the fore considering the speeding up migration processes.

Also to be introduced shortly are restrictions on labor and social pensions. According to a source from the ministry for labor and social security of the population, for this purpose the ministry of labor intends to initiate an absolutely new law "On individual social insurance system", whereby each employee's social security payments and calculation of pension will be monitored.

AGRARIAN SECTOR POWERING AHEAD

20% of GDP and 35% of employment is contributed by the agrarian sector of the economy, president of the Confederation of Entrepreneurs of Azerbaijan Alakbar Mammadov told a science conference "Development of the agrarian sector. Problems and prospects".

Mentioned among problems impeding a normal development of the sector were the imperfection of the legal framework, absence of entrepreneurial skills, poor material and technical logistics of farms, shortage of water due to the disrepair of irrigation systems, expensive electricity and recurrent energy supply.

The conference participants also indicated the incomplete infrastructure of the agrarian sector, vulnerability of the domestic market and absence of financial resources.

Addressing rural entrepreneurs and farmers from all over Azerbaijan were the vice-premier Abbas Abbasov, deputy foreign minister, ambassador to Great Britain Mahmud Mammadguliyev, minister for agriculture Irshad Aliyev, etc.

According to the CEA A. Mammadov, such conferences will be continued next year in all spheres of entrepreneurship.

Needs satisfied

The agricultural produce picked from 1,100,000 hectares has fully satisfied the needs of the population for it, minister for agriculture Irshad Aliyev said Thursday.

According to him, 1,540,000 tons of grains were produced this year, enabling Azerbaijan to export its grains for the first time in its history. Peasant farms have produced 465,000 tons of potato, 765,000 tons of vegetables, 407,000 tons of fruit, 260,000 tons of garden crops, and 13,800 tons of tobacco. Production of meat, milk and eggs has risen 4%, while 19,000 tons of rice picked.

The minister said grape- and cotton-growing indices have dwindled. As where 96,000 tons of cotton and 74,000 tons of grape were produced last year, this year the figures stand at 90,000 and 67,000 tons respectively.

CASPIAN NATIONS INTRODUCE MORATORIUM ON STURGEON FISHING

All Caspian nations except Iran have agreed on a moratorium for sturgeon fishing and caviar exports. The document prohibits commercial fishing of sturgeons, but does not affect science researches, according to the first deputy chairman of the "AzerBaliq" (Azerbaijan fish) state concern Tariel Mammadov. He was addressing the 14th meeting of the commission on water bio-resources of the Caspian in Astrakhan, Russia.

According to him, the meeting adopted a separate document on Iran, a non-member of the commission with highest sturgeon fishing rate. The document urges Iran to abide by the decision of other Caspian littoral states.

In 2001-2002, Azerbaijan will assume rotating presidency in the commission, T. Mammadov said.

NBA ADVOCATES FOR GREATER HARD CURRENCY ROLE

Azerbaijan has so far pursued a careful policy with regard to its hard currency resources, but is now having to step up their role. For this, relevant analytical entities will be set up within the National Bank, NBA chairman Elman Rustamov told a presentation ceremony of the Bank-prepared strategic planning program Friday.

The ceremony was attended by representatives of international financial organizations. Mr. Rutsamov indicated that the National Bank is going to amend the system of licensing bank activities and the methodology of control over banks.

Admitting that "dollarization" of the economy has assumed extensive proportions, he said the struggle against the phenomenon was one of the challenges ahead.

Mr. Rustamov said the process of privatization of the banking system was delaying. According to him, denomination of the manat will be conducted in 2005. He said the strategic planning program was intended to turn the National Bank into a more flexible entity and to ensure its active participation in the macroeconomic policy of the country.

UNDP EXPERTS TO STUDY DRAUGHT PROBLEMS

UNDP experts are expected to visit Azerbaijan January 3-9 to assess the damage to the agriculture of lowland regions of Azerbaijan inflicted by this year's draught, Minister for Agriculture Irshad Aliyev said Saturday.

According to him, the mission will then evaluate the volume of assistance to Azerbaijan. Mr. Aliyev himself estimates the damage at 50 billion manats.

BANK CREDITS FOR CONSTRUCTION HALVE

In January-November 2000, the volume of bank credits for construction made up 271 billion manats, or half of last year's. Since the share of bank credits constitutes only 6.5% of total financing of the construction sector, the drastic decline hasn't seriously affected the overall indicator, which has even increased 2.3% to last year's due to the growth in other funding sources. Thus, the means of enterprises and organizations has increased 8%, of the population 16%, state budget means 91%, etc.

MANUFACTURING SECTOR GIVES 44% OF GDP

In 11 months of 2000, GDP made up 19.9 trillion manats, or 11.3% over 1999. Some 25.6% of GDP was contributed by the industrial sector and 18.3% by agriculture. In other words, 43.9% of GDP was made up of the manufacturing sector. This indicator is slightly below CIS average.

GDP growth rate in industry has made up 6.9%.

In 11 months, GDP per capita constituted 2,511,000 manats ($562.3), 10.4% over 1999.

MANAT RATE FORECAST FAILS

The exchange rate policy in 2000 of the National Bank remained unchanged with a focus of a gradual decline in the rate of the Manat. According to available data, an average rate of USD to manat has surged by 8.6% (0.71% per month) to 4,473 manats, as opposed to 4,440 manats forecast by the Ministry of Economics. As compared to December 1999, the rate of manat has gone 4.3% to 4,563 manats in December 2000.

The overall tendency of a gradual decline in Manat's rate has barely affected consumer price indices, but has led to a relative increase in cash volume, thus stimulating exporters and promoting business activity in the country.

PRODUCTION OF IMPORTANT FOOD UP

In January-November 2000, production of pastry has increased 37%, soft drinks 24%, tinned food 4%, dairy products 1%, alcoholic beverages 10%, etc. The increase has affected a total of 19 important types of food, leading to an overall surge in food industry by 2.1%.

Just like earlier, the difficulties with marketing of tinned food, wine, fermented tobacco and soft drinks remained.

OVERDUE CREDITS UP

As of early December 2000, 2.1 trillion manats, or 5% over 1999, were invested in the economy in credits.

Only 15% of credits were long-term. Over a quarter of credits, or 2% over 1999, were overdue.41% of credits were issued by private banks.

LIGHT INDUSTRY GOODS BARELY MARKETED

In January-November of this year, despite a considerable decline in production volume, the remainder of unclaimed finished light industry goods has increased to last year's. The reason is still poor competitiveness of the products.

Although production of cotton and woolen fabrics has dwindled by 25 and 45%, their remainder in warehouses has increased 8 and 6 times respectively.

A similar situation is observed on other types of products: the remainder of unclaimed knitted garments has increased 8 times, leather goods 4 times, footwear 20 times, carpets 12 times, etc.