AZE.US
Rising food prices in Azerbaijan cannot be blamed on bad weather alone, economist Natig Jafarli said, arguing that weak domestic production and barriers facing small businesses are driving up costs.
Jafarli said agricultural producers around the world plan for weather-related losses and often use insurance to protect crops. Azerbaijan also has agricultural insurance, including coverage for fruit orchards, but the rules should be simplified so more farmers can qualify.
Compensation for farmers, however, does not solve the problem facing consumers at markets and grocery stores.
“We see cherries selling for 10, 15 or 18 manats per kilogram ($5.90, $8.80 or $10.60), while sour cherries and strawberries cost 4 to 5 manats ($2.35 to $2.95),” Jafarli said.
He estimated that prices for some products were 20% to 30% higher than last year, with increases reaching 40% to 50% in certain cases.
“The main reason is insufficient domestic production. It is impossible to explain all of this through weather conditions alone,” he said.
Azerbaijan cannot replace Armenia’s agricultural exports
Jafarli also questioned claims that Azerbaijani agricultural products could replace Armenian goods on the Russian market.
Russia, with a population of nearly 150 million, can absorb far more agricultural produce than Azerbaijan is currently able to supply, he said.
“They say Azerbaijan will fill the space left by Armenia. But what are we going to fill it with?” Jafarli said. “We do not produce enough. Russia will buy as much as we can sell, but we simply do not have the required volumes.”
He said Armenia exports roughly $30 million to $35 million in agricultural products to Russia each month, mainly fruit and vegetables.
Azerbaijan is not in a position to replace those volumes, he said.
The country already exports much of its higher-quality agricultural output, primarily to Russia. That reduces supply at home and puts further pressure on local prices.
“We send abroad the products that we manage to produce in reasonable quantities,” Jafarli said. “There is less left for the domestic market, and prices rise sharply.”
He said the government should address structural problems not only in grain production but also in fruit growing, vegetable farming and other parts of the agricultural sector.
A week in Nabran can cost more than a foreign trip
Jafarli also criticized claims that keeping Azerbaijan’s land borders closed helps support domestic tourism.
People compare prices, he said, and many have concluded that a holiday inside the country can cost more than traveling abroad.
“A family can spend 3,000 to 4,000 manats ($1,765 to $2,350) during a one-week stay in Nabran,” he said. “In some cases, even traveling abroad by plane can be cheaper.”
Jafarli said the solution was not to order hotels or restaurants to lower their prices. Prices are shaped by supply and demand, he said, and greater competition would be more effective than administrative intervention.
“A region should have five hotels instead of one, and 10 restaurants and cafes instead of one,” he said. “That is how competition is created.”
Small businesses face unclear rules
According to Jafarli, entrepreneurs who try to open cafes, restaurants or seasonal businesses often face inspections, unclear regulations and demands from several authorities.
A business owner may put a table and two chairs outside a cafe, only to find representatives of different agencies arriving soon afterward, he said.
“People are either not allowed to work or reach a point where they no longer want to work,” Jafarli said.
He said Azerbaijan still lacks clear, publicly available rules for street trading.
A person may sell fruit and vegetables one day without difficulty, then be told the next day that the activity is prohibited.
“The seller should know whether trade is allowed, what documents are required, where permission can be obtained and what standards must be followed,” he said.
Jafarli said the same uncertainty affects outdoor seating at cafes and restaurants during the summer.
In many European cities, tables on sidewalks and pedestrian streets are a normal part of urban life. In Azerbaijan, businesses often do not know whether they are permitted to set up outdoor seating or which authority is responsible for approving it.
“One day they say it is allowed, and the business puts the tables outside. The next day someone comes and says it is prohibited,” he said. “There should be one clear set of rules.”
Seasonal businesses in the regions face similar problems, Jafarli said.
A person may set up a samovar, tables and chairs near a scenic location to earn money during the summer, only to be accused of violating environmental rules.
Environmental protection is necessary, he said, but regulation should not become a constant stream of inspections and informal costs.
“There is too much control, and then there is control over the control,” Jafarli said. “Every stage creates another expense.”
A small entrepreneur may invest 3,000 to 4,000 manats ($1,765 to $2,350) at the start of the season, only to discover later that the entire investment has disappeared and the business has accumulated another 5,000 manats ($2,940) in debt.
“In the end, the person sits down, does the calculations and realizes that working has only produced losses,” Jafarli said.
AZE.US