# EUR-Lex - 52014SC0070 - EN

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# 52014SC0070

**JOINT STAFF WORKING DOCUMENT Implementation of the European Neighbourhood Policy in Azerbaijan Progress in 2013 and recommendations for action Accompanying the document JOINT COMMUNICATION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS Neighbourhood at the Crossroads: Implementation of the European Neighbourhood Policy in 2013 /* SWD/2014/070 final */**

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1.         OVERALL
ASSESSMENT AND RECOMMENDATIONS

This document reports on the progress made between 1 January and 31 December
2013 in implementing the EU-Azerbaijan European Neighbourhood Policy (ENP)
Action Plan, although developments outside this reporting period are also taken
into consideration when deemed relevant. It is not a general review of the
political and economic situation in Azerbaijan. Information on regional and
multilateral sector processes is contained in the Eastern Partnership
Implementation Report.

The EU-Azerbaijan political dialogue in 2013 was intense.
Commissioner Štefan Füle visited Baku in May and visits were made to Brussels by President Ilham Aliyev in June, by the Deputy Foreign Minister in April and
December, by the Speaker of Parliament in June and by the Minister of Economic
Development in August. The EU Special Representative
(EUSR) for the South Caucasus and the Crisis in Georgia, and the EUSR for Central Asia visited Azerbaijan several times.

2013 was a decisive year in EU-Azerbaijani bilateral relations. The
Strategic Energy Partnership with Azerbaijan was strengthened by the signature
of the final investment decision on the Shah Deniz II gas project that includes
the construction of the Southern Gas Corridor. The Shah-Deniz II consortium’s
decision can be seen as a strategic step towards stronger European energy
security and as a major milestone for the diversification of energy supplies.
Trilateral discussions between the EU, Azerbaijan and Turkmenistan on the Trans Caspian Pipeline also continued.

However, in contrast very little progress was seen on democratic
governance and human rights reform.

The overall environment for independent civil society has been made
more restrictive after several rounds of amendments to legislation on
non-governmental organisations (NGOs). The amendments adopted warranted a
statement by the spokepersons of the High Representative for Foreign Affairs
and Security Policy/Vice President of the Commission Ashton and Commissoner Füle in February 2014 underlining that, despite the
Government's efforts to engage civil society on its proposals, they remain
concerned by the overall impact of this legislation on civil society.

Despite progress
in the implementation of the National Human Rights Action Plan reported by the
government, political opponents were harassed, pressure was put on civil
society and human rights activists, while the media and public discourse was
effectively controlled. The OSCE office in Baku was downgraded to the status of
project co-ordinator, the negotiations of its mandate and budget are still
ongoing. The local office of the Council of Europe remained without an
appointed head, despite the upcoming Azerbaijani chairmanship of the Committee
of Ministers in the Council of Europe in May-November 2014.

Significant
efforts are therefore required if Azerbaijan is to meet its commitments on
democracy, protection of human rights and fundamental freedoms. In particular,
major concerns remain over Azerbaijan’s respect for the rule of law and the
independence of the judiciary, as well as over freedom of assembly and freedom
of expression. A number of prosecutions have raised concerns within the
international community as being potentially politically motivated.

In relation to the presidential elections in October 2013, the High
Representative Ashton and Commissioner Füle said
that the elections demonstrated the commitment of the people of Azerbaijan to the democratic process. However, they also took note of conclusions by the
Organisation for Security and Co-operation in Europe
/ Office for Democratic
Institutions and Human Rights (OSCE/ODIHR) that
identified significant problems at all stages of the election day process,
including limitations on freedom of expression, freedom of assembly and freedom
of association that did not guarantee a level playing field for candidates.
They further encouraged the Azerbaijani authorities to consider the
recommendations by the international community, with a view to continuing to
develop the path towards democracy and the rule of law in Azerbaijan.

Azerbaijan managed to keep stability of its macro-economic environment due to
growth in the non-oil economy and greater social stability. Measures were taken
to upgrade the transport infrastructure and to promote rural development.
Further efforts are needed to diversify the economy, including the development
of human capital and the establishment of a business-friendly environment.

Azerbaijan’s participation in the Eastern Partnership (EaP) Summit in Vilnius, which coincided with the signing of the Visa Facilitation Agreement and the
Mobility Partnership, underlined the potential to further develop
EU-Azerbaijani bilateral relations. Negotiations continued on the Association
Agreement and on a Strategic Modernisation Partnership. Azerbaijan continued negotiations on WTO membership, but with little determination and, as a result,
the meeting of the Working Party on accession of Azerbaijan was not convened in
2013. Negotiations were launched on an aviation agreement.

Azerbaijan committed to carrying out a public
expenditure and financial accountability assessment in 2014, on the basis of
which a new comprehensive, clear, time-bound and results-oriented multiannual
public financial management action plan can be adopted for the period from
2014.

For most of 2013, the stalemate continued in the Minsk Process,
which aims to settle the Nagorno-Karabakh conflict. Election cycles in Armenia (February) and Azerbaijan (October) affected progress. Tensions on the ground and around the
potential launch of flights to Nagorno-Karabakh against the background of
escalation of the arms race and confrontational rhetoric did not contribute to
a constructive atmosphere in the search for a solution. However, in an
encouraging development, the Presidents of the two countries reconvened in
November 2013 for the first time since January 2012 at a summit in Vienna, mediated by the OSCE Minsk Group Co-Chairs, at which they agreed to advance
negotiations towards a peaceful settlement and to meet again in the months
ahead. Amidst deadly armed clashes in late January and
early February 2014, the Minsk Group Co-Chairs met with the sides and called on
them to exercise restraint in their actions and rhetoric and emphasized the
need to continue negotiations at the highest level. The
EU continued to give its full support to the OSCE Minsk Group Co-Chairs in
their work to facilitate a lasting settlement. The EU
Special Representative for the South Caucasus and the crisis in Georgia visited
the region four times in 2013 in efforts to help defuse tension and to explore
conflict transformation opportunities. The EU also financially supported peace-building
activities through the ‘European Partnership for the Peaceful Settlement of the
Conflict in Nagorno-Karabakh’ project, bringing together stakeholders across
the conflict divide.

The Azerbaijani Government continued to improve the situation for
internally displaced persons (IDPs) and refugees, in particular by providing
new housing and education facilities, and carrying out mine clearance
activities.

Corruption
remained a serious issue, obstructing economic and business development. The
government initiated visible measures against corruption and to increase
transparency by launching on the basis of the "one-stop-shop"
principle the State Agency for Public Service and Social Innovations under the
President of Azerbaijan (ASAN), the services of which were made available also
on mobile applications as well as on online e-government services in the regions.
The government also adopted two action plans on the fight against corruption,
one covering the launch of services to improve statutory audits of officials
and legal entities and another one covering the creation of an independent
anti-corruption department of the State Prosecutor.

Azerbaijan acted on some of the key recommendations. It partly addressed its
public financial management issues and took measures to fight corruption.
However, it did not address key recommendations to bring its electoral legislation
into line with OSCE/ODIHR recommendations to ensure full freedom of expression
and assembly and full functioning of a civil society, nor did it amend laws on
defamation and competition. On the basis of this year’s report, and with a view
to the sustained implementation of the ENP Action Plan in 2014, Azerbaijan is invited to:

· 
ensure effective and comprehensive
implementation of the January 2013 resolution of the Parliamentary Assembly of
the Council of Europe on the honouring of obligations and commitments by Azerbaijan;

· 
continue implementation of the human rights
action plan adopted in December 2011;

· 
bring electoral legislation into line with
OSCE/ODIHR recommendations and ensure effective implementation before the
forthcoming municipal and parliamentary elections;

· 
continue the reform of
the judiciary and adopt the Judiciary Reform Programme 2014-2020. Ensure
full independence of the judiciary by inter alia enacting a law on the
role of the Judicial Legal Council, establishing a fixed retirement age applicable
to all judges, conducting an analysis of shortcomings in judicial practice, and
giving full consideration to reports of alleged shortcomings resulting in
unfair trials with a view to addressing these;

· 
adopt a law on defamation with the aim of decriminalising
libel;

· 
step up efforts to investigate cases of
harassment and murder of journalists and activists;

· 
implement the National Anti-Corruption Action
Plan (NACAP) 2012-2015;

· 
carry out and publish a public
expenditure and financial accountability assessment and
ensure the comprehensive public finance management policy reforms on the basis
of the findings;

continue the
  policy of economic diversification and development of the regions, in
  particular adopting and implementing a law on competition to create more
  predictability and transparency in the market and a level playing field
  for investors;
 implement the
  actions scheduled for 2013-2014 under the Memorandum of Understanding in
  the field of energy;
 align policy,
  legislative and institutional frameworks for local self-governance in Azerbaijan to the European Charter for Local Self-Government;
 step up
  efforts towards agreement on the Madrid Principles, as a basis for peace,
  in accordance with the commitments undertaken by the Presidents of
  Azerbaijan and Armenia within the Minsk Group; refrain from actions and
  statements that could heighten tension and undermine the peace process;
 promote an
  environment conducive to progress in the conflict settlement, encourage
  and support related peace-building activities;
 ensure
  unimpeded access for representatives of the EU to Nagorno-Karabakh and
  surrounding regions in support of conflict transformation activities in
  full complementarity with the efforts of the Minsk Group.

2. POLITICAL
DIALOGUE AND REFORM

The beginning of 2013 saw a heated political environment with the
suppression of a number of unsanctioned protests and spontaneous unrest leading
to a further deterioration of the human rights situation. A number of
opposition leaders, youth activists and representatives of religious
communities were detained and prosecuted. Political parties, civil society
activists and human rights defenders faced serious obstacles in organising
events, including EU-funded ones, both in Baku and in the regions, while
opposition parties were frequently prevented by the authorities from visiting
regions and holding meetings.

On 30 April, a second review of the human rights situation in Azerbaijan was conducted under the Universal Periodic Review (UPR) process of the United Nations.
On 20 September, Azerbaijan presented its response at the 24th session of the
Human Rights Council, accepting totally or partially 158 recommendations out of
162. In addition, Azerbaijan extended the standing invitation to the UN Special
Procedures Rapporteurs.

Despite the adoption of a national human rights action plan in
2011, a number of its stipulations remained on paper only, including those
with deadlines for implementation in 2012 and 2013. Among others, preparation
of amendments ensuring the rights of people detained for the purposes of
extradition and the development of proposals to ensure the compatibility of
criminal legislation with international legal standards in order to prevent
sexual exploitation of children, were not implemented.

The electoral code was not amended in 2013 to improve the
composition of electoral commissions or candidate registration, as had been
recommended inter alia by the OSCE/ODIHR.

The pre-election climate was marked by a significant
tightening of political freedoms in almost all areas. The Central Electoral
Commission’s technical preparation for the presidential elections was good. One
presidential candidate nominee, Ilgar Mammedov, and the Deputy Head of
the Musavat Party, Tofiq Yagublu, were imprisoned in February. Protracted
investigations prevented both from actively participating in the election.
Mammedov attempted to launch his candidacy while detained but failed due to
problems in the signature collection process. The EU Delegation, in agreement
with EU Heads of Missions, issued a joint statement with the United States and Norway prior to the elections expressing hope for an inclusive, transparent and
credible electoral process. The High
Representative for Foreign and Security Policy / Commission Vice-President (HRVP) Ashton and Commissioner Füle issued a statement on the
conduct of the presidential elections.

The post-election phase was marked by the arrest of Anar
Mammadli, the chair of a prominent independent NGO which monitored the October
elections. His arrest obstructed the release of the NGOs final
election-monitoring report. The EU issued a statement expressing concern and
calling for a speedy, fair, transparent and independent investigation. Azerbaijan reacted by suspending its participation in the Euronest
Parliamentary Assembly.

Freedom of expression remained limited
in media other than the internet, and in some aspects even deteriorated.
Opposition efforts to gain access to public national TV failed. Opposition
newspapers continued to suffer from disproportionate fines imposed following
multiple defamation lawsuits. One of the main opposition newspapers had its
bank account frozen and its website jammed. Another opposition newspaper was
obliged to decrease its circulation due to financial problems. On the other
hand, some opposition media received state funding. Azerbaijan continued its
cooperation with the Venice Commission on a new draft law on defamation, but
the draft has not yet been considered by Parliament. Instead, in May 2013, the
government introduced amendments to the Criminal Code and the Code of
Administrative Offences envisaging criminal penalties for libel and insult by
the media on the internet, including social networks. Following their entry
into force, the amendments’ provisions were implemented against several
Facebook users.

Although announced publicly by the authorities, investigation of
harassment and pressure against journalists and activists did not
progress, with perpetrators continuing to enjoy impunity. Some independent journalists
were sentenced to heavy imprisonment during the reporting period.

Restrictions on the freedom of assembly continued along with
the de facto interpretation of the requirement for prior notification as
a request for authorisation. Some participants in peaceful protests in January
and March were violently dispersed and temporarily detained. The authorities
have also started implementing amendments introduced in late 2012, imposing
considerable fines on those who participated in unsanctioned rallies.
Amendments adopted on 14 May increased the terms of administrative arrests for
organising such rallies and for disobeying police, which led to further
restrictions of freedom of assembly. In addition, on 26
November the National Assembly introduced draft amendments to the law on
freedom of assembly which will restrict the use of masks or veils during public
rallies. During the Universal Periodic Review exercise, several UN Member
States recommended that Azerbaijan allow rallies in Baku city centre. Due to
the authorities’ definition of the city centre, demonstrations are effectively
moved to the outskirts of the capital. However, several protests took place
under these conditions.

New amendments to the laws on NGOs and grants and the Code of
Administrative Offences came into force in March. By significantly increasing
penalties for failure to register grants and for inaccurate financial
reporting, as well as banning cash donations over AZN 200, the amendments
exacerbated already-burdensome requirements for NGOs and restricted the working
environment for non-registered NGOs. In December, the Parliament adopted
another series of amendments that increased existing fines and added new
administrative requirements. The amended NGO legislation was enacted in February
2014. This is likely to further limit the activity of local and foreign NGOs.
Several NGOs, both local and international, continued attempts to register
after years of unsuccessful efforts. Amendments in January allowed the
Central Bank of Azerbaijan to monitor foreign funding of the bank accounts of
all NGOs. However, a presidential decree of 20 November
provided for the improvement of e-services for registered NGOs, including the possibility
of registering grant contracts online.

In parallel, financial resources allocated to the Council of State
Support for NGOs by the President of Azerbaijan were significantly increased,
to approximately EUR 8.2 million from EUR 3.8 million in 2012. In addition, in
2013, some EUR 5 million was allocated from the state budget to the Azerbaijan
Youth Foundation under the President.

In terms of freedom of religion. Azerbaijan continued the
construction of mosques and venues for prayer for representatives of other
religions. On 22 February, Parliament passed amendments to the law on freedom
of religious belief, stipulating that all literature with religious content and
all religious goods must carry stamps by the Committee on Work with Religious
Structures. Reports were also received of religious communities that had not
been allowed to register. A renowned theologian was arrested by police on
charges of illegal possession of drugs; subsequently, charges against him were
upgraded to arson. Several people received prison sentences for their
participation in protests against the ban on hijab.

The fight against corruption lacked measures proportional to
the perceived pervasiveness of the phenomenon in many sectors. Azerbaijan was ranked 127 out of 177 countries in the 2013 Corruption Perceptions Index.
The implementation of existing legislation continued to be flawed, e.g.
officials did not make required declarations of income, and the introduction of
new business tax legislation effectively concealed private individuals’ cash
flows. Some, mostly low-level, corruption cases were reported. The
establishment of an independent anti-corruption department under the State
Prosecutors Office in October was an important milestone in the fight against
corruption. In February, Azerbaijan adopted the Law on joining the Additional
Protocol of the Convention on Criminal Liability for Corruption and the country
announced in its official response to the UN Universal Period Review that it
had become a fully-fledged member of the International Anti-Corruption Academy. Azerbaijan adopted action plans on anti-corruption and on the Open Government
Initiative, both covering 2012-2015. However, proposals to limit immunity from
criminal prosecution of judges and Members of Parliament still need to be
developed and implemented. In the area of public service, steps were taken to
implement merit-based recruitment procedures for mid-level and junior civil
servants but these have not yet been applied to senior civil servants. For the
first time, one former MP from the ruling party was sentenced to three years
imprisonment on corruption charges.

ASAN launched
its activities in 2013 under the ‘one-stop shop’
principle and offices are being opened in Baku and the regions. This was an
important step towards improving efficiency and transparency, reducing red tape
and tackling corruption. An EU-funded project has supported ASAN since August,
to develop corporate ISO and Human Resource Management (HRM) standards. During
the reporting period, ASAN’s staff increased from 120 to 260 employees.

Lack of judicial independence persisted in 2013. Access to
legal counsel continued to be impeded, and on several occasions courts ruled in
the absence of defendants’ lawyers. In some cases, individuals were kept in
pre-trial detention in the Ministry of National Security penitentiary facility
and were not transferred to the Ministry of Interior within the 48 hours
required by law. Pre-trial detentions lasted longer than one year, the
presumption of innocence was denied, and trials were delayed without
appropriate justification. Implementation of the EU
budget support programme in the Ministry of Justice continued during 2013, but
the lack of progress in meeting some of the conditions has hindered its smooth
implementation.

A draft law on public participation, providing for the creation
of Public Councils under central and local executive authorities, was enacted
by the President in January 2014 after consultation with local civil society
and international experts. The law will enter into force in mid-2014. The
Public Councils, composed of civil society organisations, will be tasked
with initiating public consultations in various forms and will have a
consultative mandate. In addition, all draft legal acts are required to be made
public before their adoption, and the consideration of related public
recommendations. It also introduces the possibility of public hearings within
the National Assembly. This reform represents a potentially positive step,
given next year’s local elections.

With respect to the promotion of local democracy, an
EU-funded project "to build capacity for increased participation by
citizens and increased accountability of elected bodies" successfully
established Advisory Councils within a number of local communities, among other
activities, but encountered obstacles, pressure and interference by authorities
in several regions.

Democratic control over the armed and security forces remained a concern. An increasing number of non-combat casualties
in the army and security forces over the year raised concerns among independent
civil society organisations and led to public protests.

Other
human rights and fundamental freedoms

Rulings by the European Court of Human Rights requiring measures to
reform national legislation continued to be neglected. Repeated reports were
received of torture and ill-treatment (including coerced public
confessions) of young political activists during pre-trial detention. Despite
calls by the international community, no effective investigation took place and
no perpetrators were prosecuted during the reporting period. No secondary
legislation to implement the 2012 law on the rights of individuals kept in
detention facilities was approved. Pressure on independent lawyers continued
with new reports of various other forms of harassment.

In February, amendments were made to the Administrative Code to
increase penalties for the evasion of statutory audit requirements for
officials and legal entities. The Chamber of Audit of Azerbaijan and the
Ministry of Taxes concluded a partnership to develop audit services and to
fight corruption.

On 30 September, the State Committee for Family,
Women and Children’s Affairs (SCFWCA) and the Ministry for Labour and
Social Protection of the Population signed a joint national action plan on
prevention of child labour exploitation, supported by an EU twinning project.
Draft rules on state regulation of gender equality and domestic and
inter-country adoption were developed and approved by the SCFWCA. Despite these positive measures and steps
taken, there is still a need to formulate a national action plan to further
safeguard women’s rights, including combatting violence against women, improve
gender equality through appropriate administrative and legal measures, and
adopt and implement laws on child protection and prohibition of corporal
punishment of children.

The office of the Human Rights Commissioner (Ombudsman), despite its
broad mandate, was not able to realise its full potential in ensuring the
effective promotion of human rights during 2013.
Comprehensive legislation on anti-discrimination was not drafted.

The protection of fundamental rights and freedoms continue to pose a
particular concern in the Nakhchivan Autonomous Republic (NAR) of Azerbaijan. A delegation of Member States’ Embassies and the local EU Delegation visited
the NAR in February 2013 and held discussions on this subject with relevant
actors.

Cooperation on foreign and security policy, conflict prevention and
confidence building measures

Azerbaijan continued to align with
common foreign and security policy (CFSP) declarations on a case-by-case
basis. Between January and December 2013, the country aligned with seven out of
thirty-two CFSP declarations to which it was invited to subscribe (22 %
alignment, which is almost double that of previous years).

As regards the
settlement of the Nagorno-Karabakh conflict, the stalemate in the Minsk Process
persisted for most of 2013. Elections cycles in Armenia (February) and Azerbaijan (October) affected progress. Tensions on the ground and
around the potential launch of flights to Nagorno-Karabakh against the
background of escalation of the arms race and confrontational rhetoric did not
contribute to a constructive atmosphere in the search for a solution.However, in an encouraging development in November, the Presidents
of the two countries reconvened for the first time since January 2012 in a
summit in Vienna, mediated by the OSCE Minsk Group Co-Chairs, at which they
discussed the way forward in the peace process and agreed to meet again the
months ahead. A follow up meeting at the level of the two foreign ministers
took place on 5 December in Kyiv during the OSCE Ministerial Council and
the Minsk Group Co‑Chairs travelled to the region on 15-19 December to
discuss recent developments in the Nagorno-Karabakh peace process. In late January 2014, deadly armed clashes along the Line of Contact
and the international border led to serious escalation of tension. The Minsk
Group Co-Chairs met the two foreign ministers on 24 January in Paris and visited the region 4-5 February. They called on the sides to exercise restraint
in their actions and rhetoric and emphasized the need to continue negotiations
at the highest level.The EU continued to fully support
the OSCE Minsk Group Co-Chairs in their work to facilitate a lasting
settlement. The EUSR for the South Caucasus and the crisis in Georgia visited the region four times in 2013 in efforts to help defuse tension and explore
conflict transformation opportunities. The EU also financially supported
peace-building activities through the ‘European Partnership for the Peaceful
Settlement of the Conflict in Nagorno-Karabakh’ project, bringing together
stakeholders across the conflict divide.

Increased
efforts as part of the Minsk Group process are needed to finalise agreement on
the Madrid Principles as a basis for peace, in accordance with the commitments
undertaken by the Presidents of Azerbaijan and Armenia. Parties should refrain
from actions and statements that could heighten tension and undermine the peace
process, and promote an environment conducive to progress in settling the
conflict, while encouraging and supporting peace-building actions. Unimpeded
access for EU representatives to Nagorno-Karabakh and the surrounding regions
is needed to support conflict transformation activities, complementing the
efforts of the Minsk Group.

The EU has
supported activities that promote confidence and people-to-people contact,
expand economic and business links, promote cultural and educational
activities, and facilitate the dissemination of balanced information in both Azerbaijan and Armenia.

As a party to the Nuclear Non-Proliferation Treaty (NPT) and Non-Nuclear
Weapon State, Azerbaijan continued constructive discussions at the
Preparatory Committees for the 2015 NPT Ninth Review Conference. Azerbaijan has an additional protocol with the International Atomic Energy Agency (IAEA)
and both sides work on a technical cooperation programme on nuclear safety and
applying nuclear technologies in industry, including projects on a feasibility
study for a research reactor and a radiation processing centre. There are no
known nuclear reactors, research facilities, or uranium mines in Azerbaijan; however, a large quantity of radioactive waste is stored and managed in the
country, a legacy of the Soviet era. This remains an issue of concern despite
recent improvements. Azerbaijan’s proposal to create a nuclear-free zone in the
 South Caucasus has not advanced in 2013. In March, the Azerbaijan National
Academy of Science proposed that the IAEA should test the Metsamor nuclear
power plant in extreme situations (e.g. to test resistance to earthquakes).

Azerbaijan did not accede to the Mine Ban
Treaty, the Convention on Conventional Weapons or the Convention
on Cluster Munitions. Baku officially says it fulfils all its obligations
under the Ottawa Convention, but cannot accede to the Conventions before the
Nagorno-Karabakh conflict is settled. Currently two national plans are being
implemented as part of the national mine action programme. The first (mid-term)
element, which aims to clear all suspected hazardous areas by the end of 2013,
has little chance of materialising, considering the recent pace of mine
clearance. The second (long-term) element relates to the improvement of
operational and management capacity. Azerbaijan increased co-financing from 10 %
to 90 %, being one of only a few mine-affected countries to tackle this
issue largely through the state budget.

Russia’s lease of the Gabala radar station
expired in December 2012, and was not renewed due to irreconcilable lease
expectations. The transfer of the station to Azerbaijan was completed in June.

In March, Azerbaijan tabled a proposal to decrease the size of the local
OSCE Office in Baku. In July, the OSCE Permanent Council approved the
decision to downgrade the local Office in Baku to a project coordinator from 1
January 2014. The new project coordinator is to continue carrying out projects
in all three dimensions of the OSCE.

The CoE’s local office remained without a permanent Head in 2013.

3. ECONOMIC
AND SOCIAL REFORM

Macroeconomic
framework and functioning market economy[1]

Following
measured recovery over the last year when the economy grew by 2.2%, real GDP
growth continued in 2013 and reached 5.8% year-on-year. While oil production
increased by 0.2 % due to efforts boosting production in big oil fields,
the non-oil sector increased by over 10.0%. Growth in the non-oil sector was
driven mainly by increased government spending and transfers of oil and gas
export revenues, as well as high domestic demand supporting the expansion of
the service sector and the already booming construction sector.

Inflationary
pressures re-emerged in 2013, with a rebound in food and fuel prices,
expansionary fiscal policy and a fast-growing non-oil economy. The average
annual inflation nevertheless increased only moderately to 2.4% year-on-year in
2013 from 1 % in 2012. The central bank reduced the key refinancing rate
to 4.75 % in February 2013, taking advantage of the low inflationary
environment to encourage economic activity. The conduct of its activities
remains constrained by the weak monetary policy transmission channel caused by
the tightly managed exchange rate and the absence of well-developed money and
bond-markets.

Azerbaijan continues to rely on hydrocarbon sales to finance state
expenditure, as transfers from the State Oil Fund of Azerbaijan (SOFAZ)
accounted for 58.43% of total revenue in 2013, leading to a budget surplus of
0.47 % of GDP (Ministry of Finance, SOFAZ). However, the growing reliance
on oil exports raises concerns about the long-term sustainability of public
finances since the state budget shows a deficit of 19.1% of GDP when SOFAZ
transfers are excluded (Ministry of Finance, SOFAZ).

The current
account surplus was projected to decline from 21.7% of GDP in the 2012 to 15.9%
of GDP at the end of 2013, due both to weaker oil proceeds and growing imports
responding to high domestic demand. The external position remained strong,
supported by the sound reserve standing and low level of public debt that
significantly mitigated the risks of the volatility of oil prices. However, the
non-oil current account deficit of 17.4 % of GDP remained large, due to
government-related non-oil imports and gas-related Foreign Direct Investment.

In November, the
government raised retail prices for various fuel products by between 25 %
and 33 %. This was allegedly due to upfront investment needs and capacity
problems in the refinery sector. At the same time, tariffs for various
telecommunication services were reduced. Despite the consequences for ordinary
households, no major protests against the price hikes were observed.

Baku hosted a number of international events such
as the Davos World Economic Forum, and the first South Caucasus Forum. In June
Azerbaijan organised a donor’s conference in support of Palestine which did not
lead to significant new commitments.

Social
situation, employment and poverty reduction

Despite Azerbaijan classified by OECD/DAC as an upper middle income country and the progress made
in reducing poverty levels through growth and social assistance programmes,
significant inequalities remain. Officially the unemployment rate
dropped to around 5 % in the first half of 2013 but the methodology used
to assess the real unemployment is debateable, with large categories of the
population being de facto jobless. The real unemployment rate is likely
to be much higher. At the same
date, the unemployment benefit was AZN 260 per month (compared to AZN 224 on 1
January).

Average monthly
wages grew in 2013 to AZN 423, or by over 6% compared to the same period of
2012 Discrepancies between different economic sectors remained high, with high
average salaries in the oil sector (AZN 1566.per month) and disproportionately
smaller wages in the non-oil sectors (AZN 387 in the non-oil sector, AZN 337 in
the state sector and AZN 539 in the non-state sector). Substantial income
disparities between Baku and the regions persisted in 2013.

Authorities
continued implementing the 2009-2013 State Programme on socio-economic
development of the regions of Azerbaijan, and the 2008-2015 State Programme of
poverty reduction and economic development. The National Entrepreneurship
Support Fund, under the Ministry for Economic Development, continued to provide
concessional loans throughout the year, thus contributing to the creation of
new jobs. Across 2013, subsidised lending from the Fund made up AZN 275
million. However, the distribution process for funds was not transparent, with
many bureaucratic obstacles facing the beneficiaries.

A number of laws tackled the area of social services and
social protection. A January presidential order approved support from the
President’s Reserve Fund to the Ministry of Labour and Social Security, aiming
to provide social services to children with disabilities and to young people at
risk. In February, the law on veterans was updated to provide social services
to war veterans. The rules on granting preferential mortgage loans were also
amended, thus increasing the maximum sum for social mortgages from AZN 35 000
to AZN 50 000 and reducing administrative requirements for accessing
social mortgages. Parliament also made
amendments to the law on labour pensions to simplify registration of
documents for old-age pensions for citizens residing abroad. According to official statistics, Azerbaijan has 1.27 million pensioners and the average pension reached AZN 170 in
October, while the average retirement pension was AZN 187.

Azerbaijani Ministry of Labour and Social Protection with support of
the World Bank has developed over 200 occupational standards and continued to
work on establishing a workforce resources development agency.

On 5 June, the National
Action Group on the development project ‘Azerbaijan 2020: vision into the
future’ was launched, with the Minister of Economic Development leading on
implementation. The action group was tasked with developing draft strategies
and state programmes to implement the project but so far little involvement
from independent experts and civil society has taken place.

Azerbaijan continued cooperation with international partners in the field of rural
development and special reserve funds were allocated to the executive power
to speed up socio-economic development. Agreements were signed with various
donors to renovate and improve roads and water supply and sewerage systems in
cities. The Cabinet of Ministers ordered the transfer of management of
internal water supply and sewerage systems in apartment buildings from
ministries and local authorities to the state company Azersu. This was
generally considered a positive step in coordinated management. As a result of
new, less permissive migration rules in place in Russia (one of the main
destinations for Azerbaijani labour migration) overall remittances decreased,
with a negative impact on the social situation of families living mostly in
rural Azerbaijan.

4.
TRADE-RELATED ISSUES, MARKET AND REGULATORY REFORM

The EU was Azerbaijan’s main trading partner in 2012.[2] In 2012 bilateral
trade flows decreased, compared to 2011, amounting to EUR 17.3 billion. EU
exports to Azerbaijan consisted mainly of machinery and transport equipment. EU
imports from Azerbaijan consisted mainly of mineral fuels.

There was no
significant progress in Azerbaijan’s WTO accession, which is a
pre-condition for Deep and Comprehensive Free Trade Area (DCFTA) negotiations.
No meetings of the WTO working party on the accession were convened in 2013.
Nevertheless, technical work advanced in 2013 and working party activity resumed
in February 2014.

According to the
World Bank classification, Azerbaijan is an ‘upper-middle income’ country, thus
not qualifying to benefit from preferential treatment under the EU Generalised
System of Preferences (GSP) from February 2014.

On customs regulations and procedures, informal obstacles in
providing full information to the public on customs tariffs persisted.
Corruption within the customs system represented one of the biggest
difficulties for both local and foreign businesses. In
order to reduce this burden, further progress in e-services is necessary. The
State Customs Committee (SCC) took some measures to improve its Risk Management
Centre activity. Following
the entry into force of the new Customs Code in 2012, the SCC issued a number
of implementing normative acts to implement the new rules. A new law on customs
tariff came into force in July. It set out rules and guidelines for the
applicability of customs tariffs, rules on payment of customs tariffs, customs
declaration rules, safeguards for confidentiality of information, the rights
and obligations of customs authorities and applicants, and tariff exemptions.
The new customs control rules were approved by the government in January 2013.

In the area of movement of goods and technical regulations,
the Standards Institute was restructured in October, into a Standardisation and
Certification Institute, with a broader remit including a standards database
and management of the national technical committees. In December, Azerbaijan adopted a law on accreditation.

Reforms in the sanitary
and phyto-sanitary (SPS) field progressed slowly, as legal measures
such as the amendment to the law of food products remained pending. Conditions
set as part of the EU budget support programme relating to food safety and SPS
measures have also not yet been met. For example, legislation eliminating the
overlap of agencies responsible for food safety has not been passed, and
veterinary procedures have not been fully harmonised with standards and
procedures set by the World Organisation for Animal Health and the
International Plant Protection Convention. In April and July, Azerbaijan provided feedback on the proposed recommendations regarding aflatoxin contamination in
hazelnuts by the 2012 European Commission Food and Veterinary Office (FVO)
mission to Azerbaijan. In April, the State Committee
for Standardisation, Metrology and Patents established a laboratory to detect
genetically modified foods in the domestic consumer market.

Azerbaijan advanced slightly, compared with the
previous year, to 70th place[3]
(out of 189 economies) on ease of doing business in the World Bank’s annual
report, ‘Doing Business 2014’. The business climate in Azerbaijan suffered from issues in obtaining construction permits, getting electricity and
trading across borders. Problems continued to be reported with property
registration. Further systemic reforms are needed to
ensure property rights are protected. Azerbaijan moved up to 39th place (out of 148) in
the World Economic Forum’s ‘Global Competitiveness Report 2013-2014’. Although
some major improvements were seen, mainly in the areas of macroeconomics, labour
market efficiency and innovation, Azerbaijan scores very low in other areas
such as institutions, health, primary education, higher education and training,
goods market efficiency or financial market development. Among the most
problematic factors for doing business, the Report lists corruption, tax rates,
an inadequately educated workforce, access to financing, tax regulations and
inefficient government bureaucracy.

In the area of financial services, Azerbaijan transferred the
functions of the State Securities Depositary to the National Depository
Centre (NDC). Calculating and clearing services for securities transactions,
which were previously provided by the Baku Stock Exchange, were also
transferred to the NDC. The approximation of
legislation in the field of securities market to EU legislation is supported by
an EU project.

There were no substantial regulatory changes in the areas of establishment,
company law, movement of capital and current payments.

Other
key areas

Tax collection has improved
significantly but overall tax revenues are low by international standards, as
tax revenues make up just 12 % of GDP in Azerbaijan. This ratio decreased
in recent years from a peak of 18 % in 2007. This could be partly
explained by the significant oil-driven GDP growth over this period, but was
nevertheless worrying, in particular in view of the heavy reliance of budget
expenditure on oil revenues. The amended Tax Code,
developed with the support of an EU project, introduced measures to stimulate
the increased use of cashless payment operations and new requirements
for electronic reporting. It also provided the legal basis for e-auditing and Azerbaijan developed an action plan to introduce this.

Although the third reading of a draft Competition Code was
planned for the spring session of Parliament, discussions were postponed. Lack
of competition legislation is one of the key hindrances to further development
of business and to foreign direct investments in Azerbaijan.

Progress was made after the entry into force in 2012 of
the law on enforcement of intellectual
property rights and combating piracy. An
Intellectual Property Rights Centre was established under the Copyright Agency
in early 2013, and is fully equipped and supported by IT specialists. In early
2013, Azerbaijan increased penalties for infringement of copyright law.

Regarding statistics, Azerbaijan continued work
on harmonising sector accounts with European standards (ESA 2010) in the area
of national accounts. The Statistical Office website has been reorganised to
allow for improved dissemination of statistics and better presentation of
metadata. The Statistical Office has undergone an ISO certification process for
quality assurance.

In the area of public finance management (PFM), Azerbaijan largely completed the implementation of the Ministry of Finance action plan
2011-2013. However, issues of transparency and accountability in relation to
the budget cycle were not fully addressed. After a serious setback in 2012, the
dialogue was resumed on PFM. Disbursements under the ongoing EU budget support
programmes are subject to timely development of a credible and comprehensive
multiannual PFM action plan based on a public expenditure financial
accountability (PEFA) assessment. Following Azerbaijan’s official confirmation
of its willingness to carry out a PEFA assessment, the World Bank developed, in
close cooperation with the EU Delegation and the Swiss Cooperation Office, a
PEFA concept note, which needs the government’s approval. The assessment was
scheduled to start in March 2014, and is expected to be published in the course
of 2014. It will provide the basis for a future comprehensive, clear,
time-bound and results-oriented multiannual PFM action plan. There were no publically available detailed audit reports of
the Chamber of Accounts throughout the reporting period. As part of the Fourth
EUROSAI/ARABOSAI Conference on Supreme Audit Institutions, Baku issued a
statement supporting the UN General Assembly Resolution on promoting the
efficiency, accountability, effectiveness and transparency of public
administration by strengthening Supreme Audit Institutions.[4]

The implementation of the Small Business Act for Europe assessment recommendations (published in October 2012) will be reviewed in a second
round covering the period 2012-2015. The main weaknesses in development of
local entrepreneurship include limited new product lines, lack of
innovative research and difficulty in long-term access to financial resources.
The private sector is increasingly interested in development and recruitment of
new staff, and opening regional branches in Azerbaijan and its neighbours. In
September, the first European-Azerbaijani Investment Conference successfully
took place in Baku, bringing together over 220 mainly SME representatives from
more than 12 countries. The Conference was organised in the framework of the
EU-sponsored East Invest programme. In August, the European Investment Bank and
  Azerbaijan concluded the Framework Agreement under which the Bank may start
financing projects in the country.

There were no substantial regulatory
changes in the area of public procurement.

5.
COOPERATION ON JUSTICE, FREEDOM AND SECURITY

Azerbaijan participated in the EaP flagship
initiative on the 2011-2013 Integrated Border Management Flagship
Initiative Training project and actively engaged with two EU-funded assessment
missions in January and March, to prepare for a joint Azerbaijan-Georgia Green
Border project. On border security, the State Border
Service installed new portal monitors during its upgrade at the Ganja
international airport. In April, Frontex
and Azerbaijan’s State Border Service signed a Working Arrangement to enable
joint activities on information exchange and risk analyses, training and
R&D in border management and border control. The first meeting of the
Azerbaijani-Russian Commission on demarcation of the state border was held in Moscow in February and the demarcation process began. An agreement on construction
of a bridge over the Samur River was reached during the Russian President’s
visit to Baku in August. Delineation of the state border with Georgia remains to be completed (with a 280 kilometre-long section of the 480
kilometre-long border already agreed).

EU-Azerbaijan negotiations on Visa
Facilitation and Readmission Agreements were concluded in March and the two
agreements were initialled in July. The Visa Facilitation Agreement was signed
at the Vilnius EaP Summit in November. The EU-Azerbaijan Mobility Partnership
was signed on 5 December.

The new Migration Code came into force on 1 August. It takes
into consideration international practice and EU legislation. Parliament
adopted the text through a fast-track procedure, without consultation of the
wider stakeholder community. In March, Parliament adopted amendments to the law
on registration of foreigners, stateless persons and foreigners staying
in Azerbaijan for more than 30 days, as well as amendments to the law on
registration of residence. Property owners, managers of hotels and other
similar facilities must now submit a copy of foreigners’ passports within three
working days to the relevant executive authorities. In May, Azerbaijan became a participant in the Asylum Systems Quality Initiative in Eastern Europe
and South Caucasus, aimed at improving asylum procedures and refugee
protection. The number of Azerbaijani nationals
applying for asylum in the European countries decreased in the last year from 2 299
to 2 015, as reported by UNHCR.

Azerbaijan law enforcement authorities continued
cooperation with international organisations in order to build its intelligence
capacity to combat criminal activities up to international standards. In this
context, a pilot project was launched in Azerbaijan, as part of a new EU
initiative on preventing organised crime at EU borders. This initiative
also includes Moldova, Turkey, and Bosnia and Herzegovina.

The Financial Monitoring Service continued to
work jointly with Moneyval in order to address the full range of anti-money
laundering and counter-terrorism financing issues identified in its Mutual
Evaluation Report.

Azerbaijan continued efforts to combat human
trafficking and continued to implement the 2009-2013 action plan on human
trafficking. However, no substantive improvement in prosecution of cases and
convictions was seen and Azerbaijan remains a source, transit, and destination
country for trafficking in human beings for forced labour and sexual
exploitation.

Azerbaijan continued to strengthen its counterterrorism
efforts and had some success in reducing the presence of terrorist facilitators
and preventing their activities. In March, an international conference on
strengthening cooperation in the fight against terrorism took place in Baku, with wide international attendance. The
government completed the modernisation of its Central Reference
Laboratory, a bio-safety facility designed to conduct research on potential
bioterrorism threats. As part of the Weapons of Mass Destruction Proliferation
Prevention Programme, the government deployed seven radar stations along the
Caspian coast to conduct maritime surveillance and detect smuggling. In 2013, Azerbaijan continued to participate in working group meetings of
 Caspian Sea littoral states which aim to coordinate efforts to fight
terrorism, smuggling, drug trafficking and organised crime on the Caspian.

Azerbaijan adopted a new
Programme on tackling drugs 2013-2018 and expressed
interest in establishing a national drug monitoring scheme. Azerbaijan expresed
interest to cooperate with
the European Monitoring Centre for Drugs and Drug
Addiction (EMCDDA) and appointed a national
correspondent to the EMCDDA.

As regards data protection, the Council of Europe's Additional Protocol to the Convention for the Protection of
Individuals with regard to Automatic Processing of Personal Data regarding
supervisory authorities and transborder data flows remains unsigned. An
independent data protection authority has not yet been established.

As regards judicial cooperation in civil matters, a number of
conventions of the Hague Conference on Private International Law in the field
of international legal cooperation and litigation, as well as the protection of
children, remain unratified. Azerbaijan applied in 2013 to become Member of the
Hague Conference on Private International Law. As regards judicial
cooperation in criminal matters, the Second Protocol to the Council of
Europe Convention on Mutual Legal Assistance in Criminal Matters remains
unratified. The Third Additional Protocol to the 1957 European Convention on
Extraditionand was ratified in January 2014.

6. TRANSPORT,
ENERGY, ENVIRONMENT, THE INFORMATION SOCIETY, RESEARCH AND DEVELOPMENT

The first round of EU-Azerbaijan talks on the Common Aviation Area
Agreement took place in January with participation by the State Aviation
Administration and other Ministries. However, later in the year Azerbaijani
authorities indicated that the country was not yet ready to join the European
Common Aviation Area due to the specific situation of the state owned national
carrier AZAL. No follow-up talks have been scheduled to date.

In September, a Maritime Security Strategy for Azerbaijan was approved by the President. As part of the EU twinning programme launched in
2012, EU experts supported the State Maritime Administration in their work
towards meeting 28 EU Directives on maritime safety.

Azerbaijan
Railways announced that the Baku-Tbilisi-Kars (BTK) railway would become
operational in late 2014, despite frequent reports of possible delays. The BTK
railway transport corridor project included construction of the new
Kars-Akhalkalaki branch with a length of 98 km, of which 68 km would stretch
through Turkey and 30 km through Georgia. Construction of the International Sea Port in Alyat was under way, and the first part of the construction is to be completed
by 2015.

There were many
notable events in Azerbaijan's energy sector during 2013. The
Intergovernmental Agreement between Turkey and Azerbaijan on the
Trans-Anatolian pipeline was ratified by Turkey in January (with Azerbaijan having ratified it the previous year). In June, the Shah Deniz II (SD II)
shareholders' consortium selected the Trans-Adriatic Pipeline as the European
supply route for SD II gas. In September, long-term gas sales agreements
were signed with nine European companies to supply 10 bcm/year of SD II
gas to Italy, Greece and Bulgaria. The signature of these agreements marked an
important step towards the Final Investment Decision, which was concluded in
December at a ceremony attended by Commissioner
Oettinger and several heads of state and government.

Azerbaijan
participated in negotiations with Turkmenistan and the EU on the construction
of the Trans-Caspian Pipeline. Azerbaijan actively supported the conduct of an
Environmental Scoping Study on the Trans-Caspian Pipeline and in December
hosted the second meeting of the Study’s Steering Group Committee.

A third meeting
under the EU-Azerbaijan Memorandum of Understanding (MoU) in the field of
energy took place in Baku in February. The European Commission submitted an
action plan to continue implementation of the MoU for endorsement by the
Ministry of Industry and Energy. The planned areas of cooperation are greater
legal consistency, oil and gas, electricity, renewable energy sources and
energy efficiency.

In February, the
State Agency for Alternative & Renewable Energy Sources (RES) was
re-established as an entity independent of the Ministry of Industry and Energy.
Concurrently, the Azalternativenerji company was created under the Agency’s
responsibility to design, produce, build, operate, and provide infrastructure
for the development of alternative and renewable energy sources. The Agency
organised a roundtable in November devoted to the first renewable power
generation at Gobustan Hybrid Power Station, and confirmed plans to adopt a RES
strategy to align Azerbaijan’s RES and energy efficiency targets with the those
of the EU.

In April, the
Ministry of Industry and Energy confirmed that work was continuing on draft
laws on gas and electricity, prepared as part of the twinning project. However,
the draft laws would still require agreements of the Ministry of Justice, the
Ministry of Economic Development, Bakielektrikshebeke JSC and SOFAZ.

An EU-funded
twinning project in the field of radiation safety began in January.

Following a
break of almost four years after the companies concerned reached agreement,
Tengizchevroil resumed oil deliveries to the world markets via the
Baku-Tbilisi-Ceyhan pipeline. Up to four million tonnes a year of Kazakh oil is
expected to be pumped via the pipeline, in addition to the ongoing shipments of
Turkmen oil (of which three million tonnes were transported in 2012).

In September,
President Aliyev opened a new shipyard near Baku that is designed to serve the
needs of both the Azerbaijani energy and maritime transport sectors.

New EU-funded climate
change regional projects to assist Azerbaijan were launched in 2013, including
Clima East and Climate Forum East.

In the area of civil
protection, Azerbaijan was intensively involved in the regional flagship
Programme for Prevention of, Preparedness for, and Response to natural and
man-made disasters (PPRD East). Through the programme the country became better
acquainted with the EU Civil Protection Mechanism and improved its connection
with the Emergency Response Coordination Centre of the European Commission.

The Ministry of Environment
made clean and drinkable water a priority in the country. A national target was
set to reach good status in 50% of their waters by 2015. Azerbaijan is also concerned by land degradation, and developed reforestation actions along
highways. Capacity-building to strengthen environmental governance in the
country is provided by technical assistance through the twinning instrument and
through EU regional programmes and initiatives which cover adaptation to
climate change, trans-boundary river management, water, environment information
systems, forest law enforcement and air quality.

On information
society, Azerbaijan declared 2013 the Year of ICT, aiming to further
develop its ICT market and e-government services. An Information Technologies University was established in early 2013 and the first student admission was held
for the 2013-2014 academic year. In February, Azerbaijan launched its first
telecoms satellite ‘Azerspace-1/Africasat-1a’ aiming to provide voice, data,
Internet, TV and radio broadcasting services covering eastern Europe, the Caucasus,
central Asia and north Africa. In April, a Regulation on the State Foundation
for Development of Information Technologies (SFDIT) was approved. SFDIT aims
amongst others to provide support to entrepreneurship in the area of ICT,
including through the development of a High Technologies Park. A new internet
portal (www.e-gov.az) was created for providing e-services to the public, with
more than 40 public entities currently connected and 187 types of services
offered. In September, the UN General Assembly passed a resolution supporting Azerbaijan’s initiative for the establishment of a Eurasian Connectivity Alliance with the
International Telecommunication Union (ITU) as a way to improve the development
of regional telecommunications transit routes in the Trans-Eurasian region. The
implementation of the Trans-Eurasian Information Super Highway (TASIM) project
continued

Regarding audio-visual
policy, no progress was made as regards signature and ratification of
relevant Council of Europe instruments.

On research
and innovation, Azerbaijan increased its participation in the Seventh
Framework Programme (FP7) to 25 projects, with a total EU contribution of EUR
1.66 million. A new FP7 project (R2I — Research to Innovation) involving the
Cleaner Production and Energy Efficiency Centre was selected for EU funding of
around EUR 1 million. It aims to foster research-industry
partnerships in the field of energy-efficiency, supporting Azerbaijani
innovation capacity and facilitate the commercial use of research results. A
new FP7 regional project, the INCONET EaP, involving the National Academy of
Sciences was launched in September for a three-year period to prepare for the
transition to Horizon 2020 and promote the opportunities for cooperation of
this new programme.

Azerbaijan indicated also its willingness to boost the country’s participation
in the upcoming Horizon 2020 programme through the establishment of a network
of National Contact Points and the organisation of a Horizon 2020 launch event
in Baku in early 2014.

7.
PEOPLE-TO-PEOPLE CONTACTS, EDUCATION AND HEALTH

Azerbaijan continued to focus on improving its education system, and
education reforms were identified as one of the three priority areas of the
2014-2017 European Neighbourhood Instrument for bilateral cooperation with Azerbaijan. A new Education Minister was appointed in April, who started by introducing
structural changes in the Ministry to ensure efficiency and improve management.
Departments for licensing and quality control, internal control, and student
exchanges and educational development programmes were established.

A state strategy
for the development of education was adopted in October with the aim of
improving the quality of education, inter alia by introducing new
teaching methods and new approaches to assessment, and giving a stronger focus
to the needs of the private sector.
As of 1 September, the monthly standard salaries for
employees of educational institutions and scholarships for students in
specialised secondary schools and higher educational institutions increased by
10 %. Measures were also taken
to improve the quality of school textbooks. The strategy should also increase
participation rates for early childhood education, which remains low outside the bigger cities, as well as for vocational education and training (which
only benefits 11 % of young people). The Ministry of Education established a centre for career planning
for students who received education as part of the State Programme on
Azerbaijan Youth Education Abroad, in an effort to link
education to the labour market. Since 2007, 2 612
students from Azerbaijan have gone abroad for education, of which 787 students
in the 2013-2014 academic year.

No substantial
modifications in the Azerbaijani higher education system took place, as
the Minister was appointed in April 2013 and staff are still being appointed. Azerbaijan is currently involved in 30 Tempus projects. 13 projects, out of which
three projects coordinated by Azerbaijani universities, were selected under the
last project call. There is strong Azerbaijani participation in multi-country
projects, mainly involving Georgia and Ukraine. In 2013, students and staff
from Azerbaijan benefited from 157 scholarships to study at a European higher
education institution, under nine new Erasmus Mundus partnerships. In
addition, eight Masters students were awarded scholarships to take part in
Erasmus Mundus joint masters courses of excellence. These included seven
additional scholarships awarded under a special window for EaP countries. Since
2007, three institutions and one individual researcher benefited from Marie
Curie Actions supporting researchers’ training, mobility and career
development.

In March, Azerbaijan officially joined the ‘eTwinning plus’ project for schools supporting
collaboration through the use of ICT. 29 schools and 90 teachers from Azerbaijan are registered, and 18 schools are involved in projects so far.

Azerbaijani youth
and youth organisations continued to participate in the Youth in Action
programme. For 2013, additional funds were again provided to boost cooperation
and exchanges among youth, youth workers and youth organisations in the form of
an ‘Eastern Partnership Youth Window’. 222 projects
were selected in 2013 involving 718 young citizens of Azerbaijan.

Azerbaijan continued to play an important role as
a bridge for intercultural dialogue. Baku hosted the World Forum on
Intercultural Dialogue in May and the third World Humanitarian Forum in
October.

The main
developments in health sector reform were the Ministry of Health’s adoption of
rules for recruitment of doctors on a centralised competitive basis, and
the appointment of a seven-member Commission to oversee this process.
Parliament amended the law on public health protection, passing measures
aimed at discouraging corruption.

Policy-makers
from Azerbaijan also participated in a TAIEX multi-country workshop on the EU acquis
on prevention and control of communicable diseases.

[1]
Figures are from the national statistical office, the central bank, the IMF or
Commission Staff estimates, as indicated in the Statistical Annex. When other
data sources are used these are then indicated.

[2] Data for 2013 was not available at the time of writing.

[3]
Comparison is made with the ‘Doing Business 2013’ ranking, which was adjusted
for changes in methodology and any revision of data due to corrections. For
more information, see http://www.doingbusiness.org.

[4] Resolution A/66/209 of 22 December 2011.