Public Procurement System in Azerbaijan

The efficiency of public procurement in Azerbaijan has become an important issue of debate, particularly due to the vast windfall of petrodollars that have steadily increased the financial opportunities of Azerbaijan government. In 2007 alone, the country's GDP increased by 25% and public expenditures have increased ten-fold in the last four years. Revenue Watch has been engaged in the transparency movement in Azerbaijan for several years now. Despite the notable progress made in the sphere of revenues transparency and noteworthy reforms in the budget process, risks of corruption and ineffective use of the oil revenues in Azerbaijan still remain at a very high level: an essential downstream shift in corruption.

The government has taken some steps towards reforming the public procurement system in Azerbaijan; however, according to preliminary interviews conducted among entrepreneurs, there have been no real improvements. Vast amounts of state revenue are being allocated by the government and the state oil company for construction and reconstruction projects without proper legislation and state control mechanisms.

With RWI support, the Public Union "Support to Economic Initiatives" (SEI) project seeks to establish a mechanism for public oversight and improved transparency in public procurement in Azerbaijan; develop indicators that will allow monitors to realistically assess the efficiency of the public procurement system and state reforms; establish a feedback mechanism between the users and "managers" of the public procurement system; and assist in the development of a regulatory and legal framework for public procurement.

SEI is producing quarterly reports on the state of public procurement and steps being taken towards reform; a methodology for analyzing the system in Azerbaijan (which can be adapted to other countries); a package of reforms and recommendations to the government; and a regional experience-sharing network and dialogue.

Improving public procurement has been identified as a strategic priority for the region at large. This issue is not unique to Azerbaijan, since all of the countries in the region have relatively weak state accountability in procurement processes, but Azerbaijan provides a prime example of where the Extractive Industry Transparency Initiative (EITI) fails in the value chain and this project will add a valuable perspective on addressing some missing components from the EITI.