AZE.US
Azerbaijan can begin gradually easing restrictions at its land borders, starting by allowing Azerbaijani citizens to return home through ground crossings, economist and politician Natig Jafarli has said.
Jafarli made the remarks during an extensive interview with Farhad Parvizi on the Potensialist Podcast. The discussion covered Azerbaijan’s closed borders, economic development model, comparisons with Armenia and Georgia, challenges facing small businesses, national security and the need for a new development strategy.
Pandemic Explanation No Longer Convincing
Jafarli said the official explanation linking the continued closure of Azerbaijan’s land borders to the pandemic is no longer considered convincing by much of the public.
He acknowledged that the government may have serious security concerns amid regional instability, including the Russia-Ukraine war and repeated military tensions involving Iran.
However, he noted that land borders remain open in neighboring Georgia, Armenia and Iran, as well as in countries directly affected by war.
Foreign nationals can leave Azerbaijan through land crossings, while Azerbaijani citizens generally cannot use the same routes to return to their own country.
“I may fly to Georgia, handle my affairs and want to return home several days later. An Azerbaijani citizen should have the right to enter his own country through a land border,” Jafarli said.
As an initial step, he proposed allowing entry to citizens who previously left Azerbaijan by air or rail and can present a corresponding ticket.
Jafarli also pointed to the special rules applied to residents registered in Nakhchivan. They can cross the land border with Turkey, while travel through Iran remains possible under certain restrictions.
In his view, the Nakhchivan arrangement demonstrates that controlled cross-border movement can operate without undermining national security.
Closed Borders Have Hurt Tourism
Jafarli described 2019 as a record year for Azerbaijan’s tourism industry. The country received approximately 3.7 million visitors, while tourism revenue exceeded 4 billion manats, or about $2.35 billion, according to figures he cited.
A significant number of tourists arrived by bus through Georgia, supporting hotels, restaurants and other businesses in Sheki, Gabala, Gakh, Zagatala, Balakan and surrounding districts.
Jafarli said tourist arrivals fell by approximately 14% during the first seven months of this year compared with the same period a year earlier.
He stressed that the border restrictions were not the only cause of the decline. However, he described them as one of the factors limiting tourism, transportation, hospitality and cross-border trade.
The restrictions also affect Azerbaijani students studying in Turkey. Jafarli said approximately 24,000 Azerbaijani students are enrolled in Turkish bachelor’s, master’s and doctoral programs.
With Turkey becoming considerably more expensive and airfares remaining high, many students struggle to return home during their summer break.
Why Azerbaijan Is Compared With Armenia
Discussing comparisons among the economies of Azerbaijan, Armenia and Georgia, Jafarli said references to Armenia are particularly effective in attracting the attention of Azerbaijani officials.
Azerbaijan restored its territorial integrity and emerged as the winner of the conflict, he said, making any economic areas in which it falls behind Armenia especially sensitive for policymakers.
Jafarli nevertheless argued that a significant share of Armenia’s growth since 2022 has been linked to Russian money, the relocation of Russian citizens and businesses, and Armenia’s role in re-export operations.
According to figures cited during the interview, trade between Russia and Armenia increased roughly sevenfold and at one point reached $14 billion to $15 billion. The volume later declined to approximately $8 billion to $9 billion after Russia shifted part of its gold and precious-stone trade to Arab countries.
Azerbaijan deliberately avoided adopting a similar model because it could have created political and sanctions-related risks, Jafarli said.
He also described Azerbaijan as the South Caucasus country with the smallest Russian corporate presence in strategic sectors. Armenia remains heavily dependent on Russia, while Russian-linked companies are represented in Georgia’s banking, telecommunications and other important industries.
“Economic Revival, Not Simply Filling the Budget”
Jafarli criticized what he described as the government’s growing reliance on taxes, customs duties, fines and new fees to compensate for declining oil production and revenue.
“Simply filling the budget cannot be the objective. The objective should be economic revival, with higher budget revenue emerging alongside economic growth,” he said.
He argued that small and medium-sized businesses face a lower tax and customs burden in Armenia and particularly in Georgia than in Azerbaijan.
Azerbaijani entrepreneurs, meanwhile, encounter excessive regulation, numerous permits, mandatory registrations, certification requirements and inspections.
Jafarli cited the case of an entrepreneur who ordered a $300 chemical product to launch a mobile car-washing service. Registering the product required an additional payment of 700 manats, or about $412.
Businesses ultimately include such direct and indirect expenses in the prices of their goods and services, contributing to Azerbaijan’s high consumer prices, he said.
Tax and Customs Codes Should Be Rewritten
Jafarli called for Azerbaijan’s Tax Code to be rewritten from the ground up.
He said approximately 2,000 amendments and additions had been introduced since 2018 or 2019, with some provisions revised repeatedly over only a few years.
He also proposed rewriting the Customs Code and reducing the enforcement powers of regulatory agencies.
Jafarli questioned why the tax and customs authorities require their own investigative units. In his view, those institutions should focus on audits and compliance, while criminal investigations should be handled by the country’s law enforcement agencies.
He urged the authorities to consider the impact of regulations on approximately 600,000 active individual entrepreneurs and microbusiness owners.
When their families are included, policies affecting this sector influence the livelihoods of close to 1.8 million people.
A fine of 5,000 manats, or roughly $2,940, can equal several months of income for a small entrepreneur and may force the business to close, Jafarli warned.
Why Baku Businesses Are Closing
Jafarli also pointed to the growing number of commercial properties advertised for rent in central Baku, where many cafes and stores have closed in recent months.
He attributed the trend to several factors, including the expansion of online retail, high rents, weaker purchasing power, frequent inspections and substantial fines.
Some property owners refuse to reduce rents even when their premises remain vacant. As a result, retailers are shifting online or leaving the market altogether.
Jafarli said state stability cannot be secured through military and law enforcement capabilities alone. Economic and social security are also essential components of national security.
“The middle class is the foundation of stability. Azerbaijan’s middle class remains too small, and we must create it,” he said.
Livestock Numbers Continue to Fall
Jafarli cited declining livestock numbers as an example of a domestic economic problem unrelated to external security threats.
Over five years, Azerbaijan’s sheep and goat population declined by more than 2 million, while the number of cattle fell by over 230,000, according to figures he presented.
He said government agencies frequently identify negative trends but do not sufficiently examine or address their underlying causes.
Officials should determine whether the decline is being driven by higher feed prices, inadequate pastures, problems with agricultural subsidies or the reluctance of younger people to work in traditional livestock farming.
Security and Growth Are Not Opposites
Jafarli rejected the argument that Azerbaijan must restrict economic activity to maximize security.
A strong economy, high employment and a prosperous middle class would make the country more resilient to foreign influence, he argued.
Neighboring powers could exploit poverty and social dissatisfaction inside Azerbaijan. Russia may seek influence through political projects, while Iran may work through religious networks and financial assistance to low-income communities.
Investment, transparent business rules and rising household incomes should therefore be treated as elements of national security rather than threats to it.
Jafarli described Azerbaijan’s foreign policy as one of the government’s strongest areas. The country avoided becoming either pro-Russian or explicitly anti-Russian, preserving room for independent decisions.
He also identified the military alliance with Turkey, formalized through the Shusha Declaration, as a significant component of Azerbaijan’s security architecture.
Azerbaijan Needs a New Development Model
The discussion concluded that Azerbaijan has yet to formulate clear answers to two fundamental questions: What unites modern Azerbaijanis, and where should the country go after restoring its territorial integrity?
Jafarli called for an open national debate on a new development model involving economists, entrepreneurs, political scientists, historians and government representatives.
He also criticized what he described as insufficient coordination among economic institutions. The Finance Ministry, Economy Ministry and Central Bank pursue their own institutional objectives but do not always act as a unified team, he said.
Reducing public expenditure may improve government finances. However, in an economy heavily dependent on state spending and public contracts, budget cuts can also weaken business activity.
Fiscal consolidation must therefore be accompanied by reforms that create new opportunities for the private sector, Jafarli argued.
Jafarli’s Main Proposal to President Aliyev
At the end of the interview, Parvizi asked Jafarli what single proposal he would present to President Ilham Aliyev if given a 15-minute meeting.
Jafarli said Azerbaijan needs a new Constitution.
“My first and only proposal would be a new Constitution for a victorious state and a victorious people. We should work together to draft it and then resolve the related issues through other legislative acts,” he said.
AZE.US