Azerbaijan’s Performance on the Revenue Governance Index
Azerbaijan received a “weak” score of 48, ranking 28th out of 58 countries. A “failing” Enabling Environment score undermined the country’s “partial” performance on other components.
(out of 58)
(out of 100)
|36||Institutional & Legal Setting||57|
|34||Safeguards & Quality Controls||51|
Institutional & Legal Setting Rank: 36th/58, Score: 57/100 learn more
Azerbaijan earned a “partial” score of 57, its highest on any component, the product of an uneven legal framework and the government’s efforts to improve transparency.
Azerbaijan has no laws specifically governing the management of hydrocarbons or the licensing process; the president approves rules for negotiations and contracts with foreign companies. The state oil company, SOCAR, grants hydrocarbon rights and participates in all production sharing contracts with foreign companies. The contracts require environmental impact assessments, which are subject to a process of public consultation.
Oil and gas revenues flow to the State Oil Fund of Azerbaijan (SOFAZ) and the federal budget. Tax revenues from SOCAR and foreign oil companies are collected by the Taxes Ministry and go directly into the budget, while the revenues from production sharing contracts, bonus payments, and royalties go to SOFAZ.
In 2009, Azerbaijan became the first country to achieve compliant status with the Extractive Industries Transparency Initiative. Azerbaijan adopted a freedom of information law in 2005, but state agencies have been slow to comply with its provisions.
Reporting Practices Rank: 22nd/58, Score: 54/100 learn more
While the Azeri government provides detailed data on most revenues and subsidies, its “partial” score of 54 reflects a lack of comprehensive information on the licensing process, contracts, exploration, and the rules governing transfers from SOFAZ.
Environmental impact assessments are made public, but the government does not publish contracts. Provisions regarding taxes can be found on the Taxes Ministry website, and two BP contracts have been published by the company itself.
SOFAZ publishes annual reports on its website describing revenue sources, production volumes, the names of companies operating in the country, the cost of social investments, production stream values, the government’s portion of production sharing contracts, royalties, special taxes, dividends, bonuses, and acreage fees, but this information is not disaggregated by company. No other agency publishes information on hydrocarbon revenues.
Safeguards & Quality Controls Rank: 34th/58, Score: 51/100 learn more
Incomplete government oversight of the extractive sector countered a positive performance on audit requirements and conflict-of-interest disclosure policies, leading to a “partial” score of 51.
National law requires the parliament to ratify contracts, but in practice this oversight role is very weak. SOFAZ reports are audited by an external auditor but not scrutinized by legislators. The parliament adopted legislation in June 2012 that will bar government officials from distributing information about companies, and the Azeri government has pursued lawsuits against reporters and editors critical of official policies, making it increasingly difficult for civil society groups to hold public officials accountable.
Enabling Environment Rank: 40th/58, Score: 24/100 learn more
Poor performance on corruption control, accountability, and democracy rankings led to a “failing” score of 24.
State-Owned Companies Rank: 16th/45, Score: 67/100
SOCAR is wholly owned by the government of Azerbaijan and takes part in all oil and gas activities. It publishes regular reports on production volumes, the value of exports, estimates of investments in exploration and development, production costs, the names of companies operating in the country, production data by company, quasi-fiscal activities, and the government’s portion of production-sharing contracts. SOCAR’s annual financial reports are audited by an independent external auditor and include the consolidated accounts of all SOCAR’s subsidiaries, but revenue data is incomplete.
Natural Resource Fund Rank: 14th/23, Score: 44/100 learn more
A 1999 decree established SOFAZ as an “extra-budgetary institution,” giving the president unrestricted power to determine its expenditures. No legislation is adopted to set governance rules of the fund. The parliament has no oversight role, but the fund’s financial reports are audited annually and include information on its assets, transactions, and investments.
INSTITUTIONAL & LEGAL SETTING
SAFEGUARDS & QUALITY CONTROLS
To explore all data and compare country scores, use the RGI Data Tool.
Key Economic Indicators
|GDP (constant 2011 international $ billions)||6.7||15.0||63.4|
|GDP per capita, PPP (constant 2005 international $)||2,490||4,496||8,890|
|Oil and gas revenue (% total government revenue)||54||65|
|Extractive exports (% total exports)||87||78||95|
|Sources: Oil and gas revenue as share of total government revenue from the Economist Intelligence Unit and the International Monetary Fund. All other data form the World Bank. Oil and gas revenues 2005 data from 2007.|