Economic diversification as a factor of sustainable development: A case of Azerbaijan

Abstract

In modern conditions, the one-sidedness in the economy of Azerbaijan makes it necessary to accelerate the diversification process of the country’s economy. From this point of view, the development of the non-oil sector in the country presents the main priority of the government’s economic policy in Azerbaijan. The purpose of the study is to investigate ways of ensuring the diversification of the national industries in Azerbaijan, which aims to move to a new economic growth model in modern conditions. The study analyzes the economy’s current state and export diversification level in Azerbaijan using the Herfindahl-Hirshman index. As a result of the analysis, the level of diversification in Azerbaijan’s economy and exports was found to be very low (in 2021, the Herfindahl-Hirshman index was 0.23 for the economy and 0.79 for exports). The findings indicate that cooperation between the state and business plays a significant role in increasing the diversification of the economy following the goals of sustainable development of Azerbaijan. On the other hand, it helps stimulate entrepreneurship development in the non-oil sector. One of the ways to solve existing problems in this area is to create Eximbanks to increase the country’s export capabilities of non-oil products. The study offers recommendations to speed up the process of diversification of the economy in Azerbaijan and increase its efficiency.