Commission staff working document - Accompanying the Communication from the Commission to the European Parliament and the Council - Taking stock of the European Neighbourhood Policy (ENP) - Implementation of the European Neighbourhood Policy in 200: Progress Report Azerbaijan {COM(2010) 207 final} {SEC(2010) 513 final} {SEC(2010) 514 final} {SEC(2010) 515 final} {SEC(2010) 516 final} {SEC(2010) 517 final} {SEC(2010) 518 final} {SEC(2010) 520 final} {SEC(2010) 521 final} {SEC(2010) 522 final} {SEC(2010) 523 final} {SEC(2010) 524 final} {SEC(2010) 525 final}
Date: 2010-05-04
Institutions: European Commission
Subjects: Azerbaijan, European neighbourhood policy, democracy, economic integration, energy policy, environmental protection, geographical mobility, human rights, legal system, political cooperation, report, settlement of disputes

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EUROPEAN COMMISSION  

Brussels, 12.5.2010 
SEC(2010) 519 final 

COMMISSION STAFF WORKING DOCUMENT 

Accompanying the 

COMMUNICATION FROM THE COMMISSION  
TO THE EUROPEAN PARLIAMENT AND THE COUNCIL 
Taking stock of the European Neighbourhood Policy (ENP) 

Implementation of the European Neighbourhood Policy in 200: 
Progress Report Azerbaijan 

{COM(2010) 207 final} 
{SEC(2010) 513 final} 
{SEC(2010) 514 final} 
{SEC(2010) 515 final} 
{SEC(2010) 516 final} 
{SEC(2010) 517 final} 
{SEC(2010) 518 final} 
{SEC(2010) 520 final} 
{SEC(2010) 521 final} 
{SEC(2010) 522 final} 
{SEC(2010) 523 final} 
{SEC(2010) 524 final} 
{SEC(2010) 525 final} 

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1. 

BACKGROUND AND OVERALL ASSESSMENT 

Azerbaijan  and  the  EU  first  established  contractual  relations  in  1996  through  a  Partnership 
and  Cooperation  Agreement  which  entered  into  force  in  1999.  On  this  basis,  the  EU-
Azerbaijan ENP Action Plan was approved in November 2006 for a period of five years.  

EU-Azerbaijan meetings took place at the level of the Cooperation Council, the Cooperation 
Committee and of the two subcommittees. The strengthening of the EU Delegation in Baku, 
established in 2008, contributed to the enhancing the EU-Azerbaijani bilateral relations.  

This  document  reports  on  progress  made  on  the  implementation  of  the  EU-Azerbaijan  ENP 
Action Plan between 1 January and 31 December 2009, 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. In addition, for information on 
regional and multilateral sector processes, please refer to the sectoral report. 

The EU and Azerbaijan agreed to move forward with deepening and broadening of the EU-
Azerbaijan relations. In parallel and within the Eastern Partnership framework the EU started 
preparations  for  upgrading  contractual  relations  with  Azerbaijan.    Negotiating  directives  for 
an Association Agreement were adopted by the EU in May 2010.  

Overall,  Azerbaijan  made  some  progress  in  the  implementation  of  the  ENP  Action  Plan, 
notably in areas related to economic and social governance. It maintained a low inflation rate 
compared  with  the  previous  year  and  stable  un/employment  levels.  The  country  fared 
comparatively  well  during  the  year  despite  the  global  financial  crisis,  which  allowed  the 
government to increase social spending and capital investment.  

While  efforts  towards  economic  diversification  continue,  energy  remains  the  main  revenue 
basis  for  Azerbaijan.  Good  progress  was  made  on  energy  cooperation  with  the  EU  on  the 
basis of the Memorandum of Understanding on a strategic partnership in the field of energy. 
Progress  was  also  made  through  Azerbaijan’s  support  for  development  of  the  Southern  gas 
corridor including Nabucco. Progress was made in the field of aviation through the signature 
of  the  horizontal  air  services  agreement.  Good  progress  was  made  on  fighting  money 
laundering with the adoption of the new Anti-Money Laundering law. A financial intelligence 
unit  became  operational.  However,  Azerbaijan  has  made  only  limited  progress  as  regards 
negotiations on its accession to the World Trade Organisation (WTO). 

To meet Action Plan commitments, further efforts are needed in the field of political dialogue 
and  reforms.  Further  reforms  in  the  justice  sector  and  the  strengthening  of  the  rule  of  law, 
notably the independence of judiciary, and proper implementation of adopted legislation in all 
areas would be of key importance. So would be continued efforts to fight corruption, notably 
by enforcing the relevant legislation.  

The  dialogue  for  negotiating  a  peaceful  resolution  of  the  Nagorno-Karabakh  conflict 
intensified considerably at the highest level.  

The Azerbaijani civil society representatives participated actively and had a constructive input 
to the multilateral framework of the Eastern Partnership, in particular through open dialogue. 
The overall strengthening of EU-Azerbaijan relations and reinforcement of the follow-up on 

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the  priorities  of  the  ENP  Action  Plan  was  enhanced  through  the  Azerbaijani  authorities’ 
contributions to the bilateral elements of the Eastern Partnership.  

2. 

POLITICAL DIALOGUE AND REFORM  

Democracy and rule of law  

Amendments  to  the  Constitution  were  adopted  by  national  referendum  in  March  2009.  The 
amendments inter alia removed the limits on the presidential term of office and extended it in 
a state of war, which strengthened the power of the executive against the prevailing European 
practice  and  signalled  a  serious  setback  on  Azerbaijan’s  road  to  consolidated  democracy. 
Very limited public debate took place in the media before the referendum and some political 
interest groups refrained from participating in the vote. Azerbaijan requested advice from the 
Council of Europe’s Venice Commission on the draft law on the status of municipalities in an 
effort to bring secondary  legislation  into line with  the Constitutional amendments. Issues of 
concern were raised by the Venice Commission that will need to be addressed. 

A small delegation from the Parliamentary Assembly of the Council of Europe monitored the 
vote on the referendum day and gave an overall positive assessment of the technical process. 
However,  there  are  reports  of  voting  irregularities  and  of  a  lower  turnout  than  the  official 
figure of 71% announced by the Central Election Committee.  

Local  elections  held  in  December  2009  were  characterised  as  generally  peaceful  and  well 
administered  by  the  Election  Commission  but  saw  a  low  official  turnout  and  reported 
irregularities  during  the  process  leading  to  the  election  day.  The  absence  of  real  political 
campaigns  and  the  uneven  allocation  of  media  time  between  candidates  were  reported  as 
weaknesses. The limited role and autonomy of the local authorities may explain the general 
lack  of  interest  in  the  local  elections.  The  number  of  women  winning  seats  in  municipal 
councils rose sharply, as a result of a conscious effort by both ruling and opposition parties to 
increase female participation.  

Some  progress  was  made  on  development  of  the  civil  service.  In  September  and  October 
2009, new legislation and rules were approved on competition-based recruitment including on 
organisation and conduct of tests, evaluation rules and passing scores.  

In  the  area  of  judicial  reform,  progress  was  made  on  selection  of  judges,  training  of 
prosecutors, judge candidates and judges and the selection procedure of the Bar Association. 
Some initiatives were implemented to enhance human resources in the judicial sector and to 
upgrade  court  infrastructure.  Improvements  were  reported  in  execution  of  court  rulings  and 
the  regional  legal  advice  centres  established  by  the  Ministry  of  Justice  are  expected  to 
improve  people’s  access  to  free  of  charge  professional  legal  aid.  Despite  the  insufficient 
number  of  lawyers  in  the  country,  in  the  medium  term,  these  new  developments  should 
impact positively on the level of professionalism of the system as a whole. However, the lack 
of  independence  of  the  judiciary  remains  a  serious  concern  which  needs  to  be  addressed. 
Illustrating  this  phenomenon,  in  October  2009,  the  Law  on  the  Prosecutor  General  was 
amended,  lifting  the  limits  on  the  number  of  terms  of  the  Prosecutor  General  and  Military 
Prosecutor, as well as for their counterparts in Nakhchivan Autonomous Republic, who can 
now serve for more than two consecutive terms.  

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Some  progress  was  made  in  the  fight  against  corruption.  The  authorities  are  becoming 
increasingly  aware  of  the  need  and  benefits  to  address  corruption  and  a  series  of  anti-
corruption  measures  were  taken  in  the  field  of  provision  of  energy  and  water,  of  inter-
institutional cooperation and awareness-raising. Efforts were made to strengthen the capacity 
of  authorities  to  deal  with  corruption  cases  and  to  train  civil  servants  on  prevention  of 
corruption.  Direct  reporting  of  corruption  cases  has  been  introduced  but  in  order  to  comply 
with  Action  Plan  commitments,  whistleblower  protection  should  be  improved.  Azerbaijan 
slightly  improved  its  standing  in  terms  of  perceived  corruption  in  comparison  with  other 
countries,  but  corruption  remains  widespread  at  all  levels  of  society  and  would  require 
additional efforts to combat. 

Human rights and fundamental freedoms 

Progress was made through the ratification and entry into force of the UN Convention on the 
Rights of Persons with Disabilities and its Optional Protocol in January, and of the Optional 
Protocol to the Convention against Torture and Other Cruel, Inhuman or Degrading Treatment 
or Punishment in February 2009 (see last year’s report: SEC(2009) 512). The Commissioner 
for  Human  Rights  (Ombudsman)  was  designated  to  perform  the  function  of  National 
Preventive  Mechanism  under  the  Optional  Protocol  to  the  Convention  against  Torture 
following  a  Presidential  decree  in  January  2009.  The  office  of  the  Ombudsman  took  up  its 
work,  which  inter  alia  included  the  examination  of  proposals  from  state  agencies  and 
international  organisations,  analysis  of  international  experience  of  NPMs  and  listing  of 
penitentiary institutions. The OSCE provided support for capacity building.  

No  progress  was  made  on  issuing a standing invitation to UN special procedures. In March 
2009,  Azerbaijan  was  subject  to  the  Universal  Periodic  Review  of  the  UN  Human  Rights 
Council and accepted most of the resulting 32 recommendations. In 2009, the country had no 
overdue reports to UN treaty bodies. 

The Azerbaijani authorities’ decision in November 2009 to publish the report of the Council 
of  Europe’s  anti-torture  committee  after  its  2008  visit,  and  the  continuing  upgrading  of 
detention  conditions,  including  refurbishment  and  construction  of  new  jails,  reflects  an 
acknowledged need to make further improvements to the penitentiary system.  

Nonetheless,  allegations  of  widespread  and  routine  use  of  torture  of  suspects  and  other 
detainees, failure to bring perpetrators to justice, restricted access or no access of detainees to 
medical  care  and  legal  safeguards  are  some  examples  which  have  been  raised  as  causes  for 
concern by the UN Committee against Torture during its November 2009 session.  

In March 2009 the Parliament adopted an Amnesty Act allowing for 9,000 persons, including 
some  opposition  journalists,  either  to  be  released  (if  they  had  less  than  one  year  of  their 
overall  prison  term  left)  or  having  their  prison  term  sentences  reduced,  while  libel  charges 
against  a  human  rights  defender  were  dropped.  A  pardoning  decree  was  adopted  by  the 
President in December covering 99 persons including some journalists. 

The State support fund for mass media was created in April 2009. Members of its supervisory 
council  were  appointed  by  the  president  in  May.  In  addition  the  government  publicly 
committed in 2009 to decriminalise defamation and draft legislation to that end was discussed 
in  the  parliament  at  the  end  of  the  year.  Despite  these  efforts,  freedom  of  expression  and 
media  freedom  deteriorated  during  the  reporting  period.  In  January  2009,  broadcasting  by 
foreign  radio  stations  on  national  FM  frequencies  was  banned,  thus  depriving  the  public  of 

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alternative  sources  of  information.  In  March  2009,  the  law  on  mass  media  was  amended 
without prior consultation with journalists or non-governmental organisations, extending the 
grounds  to  suspend  the  activities  of  media  outlets.  The  amendments  allow  interference  by 
government  with  the  media  in  ways  that  are  not  compatible  with  OSCE  commitments  on 
media freedom. Further restrictive amendments were adopted on the law on TV and Radio in 
April 2009, limiting media pluralism and including the activities of foreign broadcasters. 

Cases  of  harassment  continue  to  be  reported  of  political  activists  expressing  independent 
views. The EU expressed concern over prison sentences and noted doubtful legal proceedings. 
Cases of intimidation of journalists through defamation court proceedings, imprisonment and 
threats continued to be reported and were criticized by the international community including 
the EU. In March 2009, the Council of Europe Parliament Assembly appointed a Rapporteur 
on political prisoners in Azerbaijan. The EU continues to raise these cases with Azerbaijani 
authorities.  

Efforts  were  made  to  improve  implementation  of  the  Law  on  access  to  information  and  an 
action plan was elaborated in cooperation with the OSCE. However, further efforts are needed 
in order to comply with ENP Action Plan commitments. Refusals or inadequate responses by 
public  authorities  to  requests  for  information  and  disregard  of  deadlines  were  reported  as 
common problems. The work of public relations departments of public authorities needs to be 
improved.  The  institution  of  the  Information  Ombudsman  was  not  established  as  foreseen. 
During  the  reporting  period,  the  Constitutional  law  on  the  Ombudsman  was  amended, 
introducing the possibility of re-election of the holder of the post, despite earlier criticism by 
the  Venice  Commission.  The  legal  proceedings  of  amending  the  Constitutional  law  on  the 
Ombudsman were questionable with regard to the work of the current post holder over several 
months without a legal mandate.  

Uneven developments were observed regarding civil society. Despite the positive signal sent 
by  the  increase  in  funding  available  to  non-governmental  organisations  (NGOs)  from  the 
Council of State Support to NGOs, which should however ensure independence of action by 
recipient NGOs, restrictive amendments to the Law on non-governmental organisations were 
passed  in  June  2009,  including  with  respect  to  the  establishment  of  foreign  NGOs  and  the 
NGO financial reporting. In addition, new rules regarding the registration of grants came into 
force in December 2009, complicating the administrative procedures for NGOs. A number of 
NGOs  continued  to  be  denied  registration  by  the  Ministry  of  Justice  on  unclear  grounds. 
Restrictions on freedom of assembly remained a cause for concern. 

Existing legislation addresses protection of minorities. However, Azerbaijan has yet to ratify 
Protocol  12  to  the  European  Convention  on  Human  Rights  on  the  general  prohibition  of 
discrimination and the European Charter for Regional or Minority Languages.  

The  Law  on  Religious  Freedom  was  amended  in  June  2009,  introducing  in  particular  the 
requirement  for  religious  groups  to  re-register  by  the  end  of  2009  and  the  prohibition  of 
religious  activities  outside  foreseen  places.  Moreover,  the  closure  of  several  mosques  and  a 
number  of  closed  court  trials  involving  alleged  religious  extremists  took  place  during  the 
reporting period. In December 2009 the police intervened in the village of Bananyar to put an 
end to the celebration of the Shia’a festival of Ashura. The situation in the region remained 
tense for several weeks after the events.  

Efforts  were  made  to  promote  gender  equality  and  empowerment  of  women.  While 
women’s participation in political life remains low, with only 11% of parliamentarians being 

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women, the percentage of women elected in the last municipal elections increased from 1.2% 
to 26%. Women represented nearly half the economically active population in January 2009. 
The  State  Committee  on  Family,  Women  and  Children’s  issues  carried  out  a  number  of 
awareness-raising  activities  in  April  2009.  Women  entrepreneurs  also  benefited  from 
advantageous credits from the National Entrepreneurship Support Fund. Nonetheless, further 
efforts are needed on gender equality, gender violence, trafficking in women, early marriages 
and other areas, as noted in the concluding observations of the Committee on the Elimination 
of Discrimination against Women in August 2009. 

As  regards  labour  law  and  rights  at  work,  some  progress  was  made  in  the  form  of  the 
amendments  to  the  Labour  Code  in  February  2009  on  prohibition  of  termination  of 
employment contracts in a number of specific cases (see also under Employment and social 
policy).  Azerbaijan  benefits  from  the  assistance  of  the  Council  of  Europe  to  foster  social 
dialogue and collective bargaining on the basis of the European Social Charter. However, no 
specific  progress  can  be  reported  on  improving  the  implementation  of  the  International 
Labour Organisation (ILO) Core Conventions. 

Some progress was made on local governance, notably with the considerable reduction of the 
number  of  municipalities  in  2009.  However,  the  division  of  powers  between  the 
municipalities and local executive authorities needs to be defined better. Amendments to the 
Constitutional provisions on local self-government adopted in March 2009 were criticised by 
the  EU  and  international  organisations  with  respect  to  the  potential  for  compromising  the 
independence  of  local  self-government.  In  December  2009,  the  Venice  Commission  noted 
that the proposed implementing measures were limited and incomplete.  

Cooperation on foreign and security policy; conflict prevention and crisis management 

Azerbaijan  pursued  cooperation  with  the  UN,  the  Organisation  of  the  Islamic  Conference, 
GUAM, and the Organisation for Democracy and Economic Development, participated in the 
NATO  Partnership  for  Peace  programme  and  cooperated  with  experts  from  United  Nations 
Office  on  Drugs  and  Crime  (UNODC),  INTERPOL,  the  World  Customs  Organisation,  CIS 
and CoE, in exchanging information on terrorism issues. Azerbaijan is cooperating with the 
United  Nations  Counter-Terrorism  Committee  (CTC)  established  under  UN  SC  Resolution 
1373. 

Since June 2007, Azerbaijan has been invited to align with  CFSP declarations on a case by 
case basis. In 2009, Azerbaijan aligned with 56 out of 138 CFSP declarations to which it was 
invited to join. There was good political dialogue with the Azerbaijani government in 2009, 
including  through  two  Political  and  Security  Committee  Troika  meetings  in  February  and 
December 2009, and an EU Foreign Ministers' Troika visit to Azerbaijan in July 2009. 

No  developments  took  place  towards  accession  to  the  Rome  Statute  of  the  International 
Criminal Court (ICC). 

A draft Law on participation in peace operations was prepared and is expected to be adopted 
in the 2010 spring session of the Parliament. The draft foresees Azerbaijan's participation in 
peace-keeping operations in line with the UN Charter.  

Strengthening regional cooperation  

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The  Southern  Caucasus  Integrated  Border  Management  (SCIBM),  promoted  by  the  EU 
among  Armenia,  Azerbaijan  and  Georgia,  was  to  start  in  January  2009  but  was  delayed  to 
address  issues  raised  by  Azerbaijan.  The  conditions  for  implementation  have  now  been 
accepted by all three countries and implementation started in March 2010 (See chapter 5 on 
cooperation on justice, freedom and security). 

The South Caucasus Anti-Drugs Programme (SCAD V) came to an end in 2009. Discussions 
continue on how best to bring forward the results of the action and pursue regional efforts in 
the fights against illegal drugs. 

The new management (a Troika consisting of Armenian, Azerbaijani and Georgian executive 
directors) of the Regional Environmental Centre for Caucasus (REC) took office in January 
2009. It consolidated the REC both financially and in terms of internal organisation. The REC 
carried  out  regional  activities  in  2009  notably  in  the  fields  of  information  and  public 
participation,  environmental  policy  and  local  environmental  action  plans,  the  protection  and 
sustainable  development  of  mountain  regions.  It  is  an  important  tool  to  promote  regional 
cooperation and stability for the future of the South Caucasus.  

In  the  area  of  higher  education,  universities  from  Armenia,  Azerbaijan  and  Georgia 
cooperated  together  on  a  distance  and  e-learning  project.  This  is  the  first  time  that  such 
regional cooperation emerged under the Tempus programme. 

Contribute to a peaceful solution of the Nagorno-Karabakh conflict 

Negotiations  within  the  Minsk  Group  on  the  peaceful  settlement  considerably  intensified  in 
2009  and  contributed  to  enhanced  dialogue,  with  the  Presidents  of  Armenia  and  Azerbaijan 
holding six bilateral meetings during the year. In  addition, the Foreign Ministers of the two 
countries met a number of times, including during the OSCE Ministerial Council in December 
2009 in Athens. Courageous steps by both sides will be necessary to find a resolution to the 
conflict. 

A joint statement by the OSCE Minsk Group at presidential level during the G8 Summit in 
L’Aquila  in  July  2009  urged  "the  presidents  of  Armenia  and  Azerbaijan  to  resolve  the  few 
differences  remaining  between  them  and  finalize  their  agreement  on  these  Basic  Principles, 
which  will  outline  a  comprehensive  settlement."  However,  overall  tensions  remain  and  the 
situation  continues  to  be  fragile.  Incidents  of  exchange  of  fire  and  casualties  on  the  line  of 
contact continued to be reported and are cause for concern. 

3. 

ECONOMIC AND SOCIAL REFORM 

Macroeconomic framework and functioning market economy  

Following strong growth in 2008, of 11% of GDP, on the back of rising oil prices, economic 
expansion moderated in 2009 due to the impact of the global financial and economic crisis. 
However  Azerbaijan  was  much  less  affected  than  other  countries  in  the  region.  The  global 
crisis  has  mainly  affected  exports,  through  waning  energy  demand,  and  investment  due  to 
heightened risk aversion towards emerging markets in general. On the other hand, long-term 
energy export contracts and an expansionary fiscal stance have cushioned the negative impact 
of the crisis. In 2009 the overall GDP grew by 9.3 % and the industrial sector, which accounts 
for  almost  half  of  GDP,  continued  to  grow  strongly.  Construction  was  the  only  sector  that 
experienced  a  fall  compared  to  2008  while  investment  as  a  whole  is  likely  to  recover 

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gradually.  The  relatively  small  services  sector,  approximately  30%  of  GDP,  also  expanded 
strongly mainly driven by the hotel, restaurant and communications sectors. 

Inflation  plummeted  to  2%  (annual  average)  in  2009,  due  to  the  base  effect  of  very  strong 
inflation in 2008 (21%), the tighter monetary policy, the decline in international commodity 
prices  and  the  weaker  private  consumption  growth.  The  slowdown  in  private  consumption 
growth would have been sharper without the offsetting effect of increased government social 
expenditure. 

The  Central  Bank  took  significant  measures  to  loosen  monetary  policy  and  ease  liquidity 
conditions  as  restricted  access  to  global  capital  markets  and  falling  deposits  obliged  the 
banking  sector  to  scale  back  lending.  The  Central  Bank  reduced  the  refinancing  rate  by  13 
percentage  points  to  2%,  and  reduced  the  reserve  requirement  on  banks  to  5%  to  support 
lending. The Manat remained stable against the Euro and the US dollar even as oil prices fell. 
After declining by nearly 20% at the beginning of 2009, foreign currency reserves stabilised 
during the later part of the year.  

The Government’s 2009 budget targeted higher social spending and capital investment than in 
2008. Revenue was constrained due to the impact of lower oil prices given that the State Oil 
Company of the Azerbaijan Republic (SOCAR) is the main contributor to the budget. While 
expenditure was lower than in 2008, it was supported by transfers to the state budget from the 
State Oil Fund of the Republic of Azerbaijan. Excluding these transfers, the budget deficit for 
2009 was estimated at 9% of GDP. 

Employment and social policy 

In October 2009, 6.1% were officially registered as unemployed, of which 44% were women. 
Measures to contain unemployment consisted essentially of tightening conditions to employ 
foreign  workers.  In  June  2009  Azerbaijan  adopted  rules  on  determining  labour  migration 
quotas. The Azerbaijani Entrepreneurship Support Fund increased regularly over the reporting 
period the amount of its soft loans. The loans reportedly helped creating more than 3,400 jobs. 

As  regards  the  social  situation  and  reduction  of  poverty,  the  State  programme  on  socio-
economic development for the years 2009-2013 was adopted in April 2009. It aims inter alia 
at  diversifying  the  economy  and  at  improving  the  quality  of  public  services  and  living 
standards  of  the  population.  According  to  the  State  Statistical  Committee,  the  poverty  level 
fell from 13.2% in 2008 to 11% in 2009.  

On  social  inclusion  and  protection,  the  State  Programme  on  the  development  of  the 
insurance and pension system in 2009-2015 was adopted by a Presidential Decree issued in 
December  2009,  aiming  at  improving  the  system  in  accordance  with  EU  standards.  The 
Parliament  approved  amendments  to  the  Law  on  pension  in  October  2009  including 
provisions  on  the  raise  of  the  pension  age,  the  number  of  children,  the  insurance  pension 
period and the pension indexation. According to official data from June 2009 the pensions of 
civil  servants  were  three  times  higher  than  those  in  the  private  sector.  A  survey  conducted 
throughout  the  country  over  the  reporting  period  to  evaluate  the  targeted  social  assistance 
mechanism showed that it was oriented at the poor and the poorest groups of the population: 
86% of the beneficiaries who receive 90% of targeted social assistance represent the poorest 
40% of the society. 

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In  the  case  of  agriculture,  the  implementing  provisions  for  a  law  on  organic  farming  were 
approved in January 2009. Extensive support was provided to the agricultural and agro-food 
sectors by means of projects and credit from the National Entrepreneurship Support Fund, the 
Agricultural Development and Credit Project, the North East Project and by non-bank credit 
institutions.  The  Government  also  took  measures  to  include  fruit  into  the  government-
supported insurance schemes. 

4. 

TRADE-RELATED ISSUES, MARKET AND REGULATORY REFORM 

As regards bilateral trade, in 2009, as a result of the global slow-down in economic activity 
due  to  the  financial  crisis,  EU  exports  to  Azerbaijan  declined  by  22.1%  compared  to  the 
previous year, while exports of Azerbaijani products to the EU decreased by 31.2%. The EU 
nevertheless continued over the reporting period to be Azerbaijan’s main trading partner. In 
terms of commodity structure, Azerbaijani exports to the EU still consist almost exclusively 
of mineral fuels – 98.8 % in 2009. 

From  the  beginning  of  2009  until  the  end  of  2011  Azerbaijan  qualifies  for  the  special 
incentive  arrangement  for  sustainable  development  and  good  governance  under  the  EU 
Generalised  System  of  Preferences  –  GSP+.  Benefitting  from  these  enhanced  preferences 
should  contribute  to  diversifying  of  Azerbaijan’s  export  structure  and  improving  its  export 
performance. 

Limited progress can be reported on Azerbaijan’s accession negotiations to the World Trade 
Organisation (WTO).  The last Working Party meeting and bilateral consultations with the EU 
were  held  in  July  2009  and  did  not  bring  much  new  development.  Azerbaijan  continued  to 
request  to  be  considered  as  a  developing  country,  which  would  have  direct  implications  for 
the  application  of  a  number  of  WTO  provisions  to  Azerbaijan,  particularly  in  the  area  of 
agriculture. Successful accomplishment of Azerbaijan's accession to the WTO is the first and 
foremost pre-condition for the EU to start considering the possibility to enter into negotiations 
with Azerbaijan on a bilateral Deep and Comprehensive Free Trade Area.  

the  process  of 

implementation  of 

The  revised  Customs  code  has  yet  to  be  adopted.  A  Presidential  decree  of  February  2009 
introduced  new  provisions  on  customs  valuation  in  order  to  harmonise  national  legislation 
with  WTO  rules.  Implementing  provisions  were  adopted  in  April  2009.  The  customs 
authorities  continued 
the  EU-compatible  Single 
Administrative  Document  (SAD).  They  also  made  efforts  to  upgrade  their  relations  and 
cooperation with the trading community. Based on the Single Window control procedure (see 
last report), since January 2009 the customs authorities carried out preliminary, documentary 
and physical checks at the border on behalf of the other services. Work also advanced in the 
area  of  computerisation:  an  IT–based  pilot  project  on  the  Single  Window  system  was 
launched at road border crossing points and an interagency information exchange system was 
put in place between Customs and the Ministry of Health, the State Veterinary Service and the 
State Phytosanitary Control System. Customs ethics as well as cumbersome control practices 
not based on proper risk analysis remain among the main causes of concern. 

Azerbaijan made some progress on free movement of goods and technical regulations. In 
June  2009,  the  State  Committee  for  Standardisation,  Metrology  and  Patents  adopted  new 
standards of defining properties in the fields of cement and food production. The same month, 
a  Presidential  decree  established  a  single  State  Service  for  Anti-monopoly  Policy  and 
Protection of Consumers’ Rights under the Ministry of Economic Development. This unified 

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regulator  has  already  prepared  basic  principles  for  an  accreditation  system.  It  established  a 
Technical Council of Standardisation and a Technical Regulation with a view to developing a 
national standardisation system in line with regional and international standards. Just after the 
reporting  period,  in  January  2010,  Azerbaijan  became  an  affiliate  member  of  the  European 
Committee for Standardisation (CEN). 

Azerbaijan  continued,  in  the  sanitary  and  phytosanitary  (SPS)  area,  preparation  for 
accession to the WTO and the Codex Alimentarius, which included also some approximation 
with  EU  rules.  It  developed  several  food  standards  on  milk  and  canned  meat  and  advanced 
work on amendments of the food safety and hygiene laws. Azerbaijan continued to upgrade 
its  laboratories  under  the  2008-2010  “Programme  for  a  security  system  development  of 
products  of  animal  and  vegetable  origin”.  In  2009,  the  European  Commission  authorised 
Azerbaijan to export caviar to the EU as from 2010, thereby replacing a transitional bilateral 
regime. To meet ENP Action Plan objectives, facilitate trade and prepare for a possible deep 
and comprehensive free trade area with the EU, Azerbaijan would have to make considerable 
further  progress  particularly  in  respect  of  approximation  of  legislation,  its  effective 
implementation and enforcement and strengthening of administrative capacity.  

In August 2009 the Ministries of Finance and of Education approved an "Action Plan on the 
re-organisation  of  education  on  accounting  and  audit  at  high  and  secondary  schools  and 
application  of  a  certification  system  verifying  the  professional  level  of  education  in  2010-
2012  in  view  of  transition  to  the  international  and  national  accounting  standards",  which 
includes among other things training for trainers from major education institutions. This is the 
last stage of the reform of the accounting system in Azerbaijan, launched in 2003. 

In  order  to  minimise  the  impact  of  the  financial  crisis  in  the  financial  services  sector,  the 
Central  Bank  tightened  regulatory  requirements  for  banks  and  took  measures  to  support 
liquidity. The planned adoption of a new capital framework law, based on Basel II principles 
for effective banking supervision, was delayed due to the financial crisis. The Central Bank 
changed  its  system  of  domestic  banks’  prudential  reporting.  Progress  was  also  made  in 
information  disclosure  and  market  discipline.  In  October  2009,  a  system  of  guarantees  was 
created  with  the  involvement  of  the  Central  Bank  to  stimulate  and  foster  internal  financial 
markets at the Organised Interbank Credit Market.  

Other key areas 

The  implementation  of  the  Automated  Tax  Information  System  is  continuing.  A  Code  of 
Conduct  for  tax  officials  was  adopted,  but  integrity  still  remains  one  of  the  main  causes  of 
concern.  Specific  tax  arrangements  for  Special  Economic  Zones  (SEZ)  came  into  force  in 
June  2009,  stipulating  notably  that  SEZ  residents  shall  be  subject  to  simplified  tax  of  0.5% 
payable on gross sales and non-sales revenues. Provisions concerning the procedures for the 
registration  of  residents  in  SEZ  and  related  certificates  were  adopted  in  December  2009. 
However, the SEZ legislation contains certain provisions that are subject to interpretation and 
could pose risks for investors. Therefore, it is expected to be revised by Parliament in 2010. 

In  June  2009,  the  Azerbaijani  Parliament  passed  a  package  of  46  amendments  to  the  Tax 
Code  aimed  at  strengthening  protection  of  taxpayer  rights,  strengthening  tax  administration, 
improving  tax  control  and  reducing  the  tax  burden  on  taxpayers,  including  individual 
businesses with low turnover.  

Draft amendments to the competition law were discussed in Parliament with a third reading 
planned for spring 2010. In June 2009, a presidential decree was issued on the improvement 

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of  anti-monopoly  policy  and  the  protection  of  consumer  rights.  A  single  State  Service  for 
Anti-monopoly Policy and Protection of Consumers’ Rights under the Ministry of Economic 
Development  was  created.  This  new  service  deals  with  prevention  of  monopolies  in  the 
economy. It also aims to upgrade state management in the field of consumer protection (see 
above under free movement of goods and technical regulations). 

In  the  area  of  intellectual  property  rights,  the  law  on  trademarks  and  geographical 
indications was amended in April 2009 to facilitate trademark registration. It also contained 
provisions on the infringement of trademark rights. The Parliament ratified amendments to the 
Law  on  patents  in  October  2009  to  improve  the  enforcement  infrastructure  and  align  the 
enforcement  legislation  with  European  Union  standards.  Draft  amendments  to  the  Criminal 
Code were also prepared during the reporting period. In May 2009 a bilateral agreement was 
signed with Georgia on cooperation in the field of protection of intellectual property. There is 
still no coordinating body to supervise enforcement activities, which remain weak and need to 
improve significantly.  

In  the  area  of  public  procurement,  no  progress  can  be  reported  on  ensuring  equal 
opportunities  for  foreign  and  domestic  suppliers.  Guidelines  on  the  legitimacy  of  bids  for 
products (goods and services) and the correct execution of these contracts were submitted to 
the Ministry of Justice. 

The regulation and a new structure for the State Statistical Committee were adopted in June 
2009, with a view to improving the standards and legislation relating to statistical activities. A 
twinning  was  launched  in  December  2009  to  support  upgrading  of  official  statistics  by 
introducing new compilation methodologies, in line with European Union standards. 

On enterprise policy, the State Programme on Socio-Economic Development for 2009-2013 
took  measures  to  promote  development  of  entrepreneurship,  including  Small  and  Medium-
Sized  Enterprises  (SMEs),  and  sustainable  business  development.  In  October  2009,  the 
President  adopted  the  Statute  and  Rules  of  use  of  the  National  Fund  for  Entrepreneurial 
Support, which is managed by the Ministry of Economic Development. Public-private sector 
cooperation is still limited in Azerbaijan. A law on special economic zones entered into force 
in June 2009 (see above under Tax).  

A  gap  analysis  and  draft  PIFC  (public  internal  financial  control)  Policy  Paper  were 
produced  in  2008  with  technical  assistance  financed  by  the  World  Bank.  However,  in  2009 
the  Ministry  of  Finance  decided  that  it  had  no  need  for  foreign  support  to  implement 
Azerbaijani public reforms in the area of public internal control despite the fact that the need 
for improved inspection systems and capacities is deemed urgent. 

5. 

COOPERATION ON JUSTICE, FREEDOM AND SECURITY 

Azerbaijan continued participating in the Southern Caucasus Integrated Border Management 
(SCIBM) regional programme, formally agreed between Armenia, Azerbaijan and Georgia in 
2007. The programme aimed at enhancing inter-agency cooperation, training and capacity of 
customs  and  border  guard  services  in  line  with  agreed  regional  standards  and  EU  norms. 
Despite  the  regional  character  of  this  programme,  Azerbaijan  chose  to  pursue  cooperation 
only through its bi-lateral component with Georgia, which delayed the start of implementation 
until  March  2010.  Nevertheless,  in  the  framework  of  SCIBM,  Azerbaijan’s  customs  and 

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border  guard  services  participated  in  preparatory  training  sessions  in  Austria,  Croatia,  Italy 
and Slovenia alongside representatives from Armenia and Georgia. 

Further  training  was  provided  for  border  and  patrol  police  including  cross-border  seminars 
with border officials from both Georgia and Armenia in cooperation with the OSCE.  

The State Migration Service, which became fully operational in 2008, was granted the status 
of  a  law  enforcement  body  in  April  2009.  A  third  regional  branch  was  set  up  in  November 
2009. The number of migrants deported has decreased: a total of 598 foreigners were deported 
from the country in 2009 (970 in 2008). A working committee on readmission under the State 
Migration  Services,  bringing  together  a  number  of  Government  institutions,  was  set  up  and 
drafted a readmission strategy. This is currently being reviewed by the Cabinet of Ministers.  

On the issue of the fight against organised crime and terrorism, a Presidential decree on the 
application  of  the  law  on  the  approval  of  the  International  Convention  against  Nuclear 
Terrorism was issued in January giving effect to the ratification of the same convention by the 
Azerbaijani Parliament in December 2008. In addition, a cooperation agreement with Romania 
in the area of cross-border organised crime and international terrorism was signed. 

The  national  legal  framework  against  trafficking  in  human  beings  was  improved  and 
relevant mechanisms, such as a National Action Plan to Fight against Trafficking in Human 
Beings  (2009-2013),  the  National  Referral  Mechanism  for  victims  of  Trafficking  in  Human 
Beings and Rules (Indicators) for the identification of victims of trafficking were adopted, in 
February, August and September 2009, respectively. In addition, a shelter for children victims 
of  trafficking  was  opened  in  October  2009  and  an  Inter-agency  Commission  on  Combating 
Trafficking  in  Human  Beings  was  formed.  Azerbaijan  signed  the  2005  Council  of  Europe 
Convention  on  Action  against  Human  Trafficking  in  February  2010.  Ratification  is  still 
pending. 

Progress was made on the fight against money laundering with the adoption of a new Anti-
Money  Laundering  law  in  February  2009.  A  financial  intelligence  unit  has  become 
operational  under  the  Central  Bank.  In  September  2009  the  Council  of  Europe  Moneyval 
committee issued a public statement highlighting continuing deficiencies in Azerbaijan in this 
field, but it then withdrew the statement in December in the light of the implementation of the 
new law and of the work of the financial intelligence unit. Azerbaijan has now moved up in 
the  Moneyval  rating.  However,  the  Council  of  Europe  Convention  on  Laundering,  Search, 
Seizure  and  Confiscation  of  the  Proceeds  from  Crime  and  on  the  Financing  of  Terrorism 
remains  to  be  signed  and  ratified.  With  regard  to  cooperation  in  criminal  and  civil  law 
matters,  no  further  developments  took  place  on  Azerbaijan’s  accession  to  the  1980  Hague 
Convention on the Civil Aspects of International Child Abduction. Moreover, Azerbaijan has 
not  signed  or  ratified  the  Additional  Protocol  to  the  Council  of  Europe  Convention  on  the 
Transfer  of  Sentenced  Persons.  As  in  2008,  no  progress  was  registered  with  regard  to  the 
development  of  a  network  for  enhanced  cooperation  with  EU  judicial  and  law  enforcement 
authorities. 

As regards data protection, Azerbaijan did not sign the 1981 Council of Europe Convention 
on the Protection of Individuals with regard to Automatic Processing of Personal Data nor its 
Additional Protocol on supervisory authorities and trans-border data flows. 

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6. 

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

In the field of transport, the World Bank and Azerbaijan signed in December 2009 a Loan 
and  Project  Agreements  for  a  EUR  328  million  Railway  Trade  and  Transport  Facilitation 
Project  for  Azerbaijan.  The  main  objective  is  to  improve  railway  services,  as  well  as  the 
competitiveness,  financial  sustainability,  operating  and  cost  efficiency  and  capacity  of  the 
Azerbaijan  Railways  in  particular  along  the  transport  corridor  towards  Georgia  (east-west 
corridor).  

In  the  aviation  sector,  in  July  2009  Azerbaijan  signed  the  horizontal  air  services  agreement 
which  brings  all  existing  bilateral  air  services  agreements  between  EU  Member  States  and 
Azerbaijan  into  line  with  EU  law.  At  the  same  time,  a  working  arrangement  on  safety 
cooperation  was  signed  between  the  European  Aviation  Safety  Agency  and  the  Azerbaijani 
authorities to  strengthen their regulatory cooperation with the Agency and progress towards 
convergence with European safety standards. In order to fulfil the Action Plan commitments, 
the Civil Aviation Authority needs further reinforcement.  

In  the  maritime  sector,  Azerbaijan  started  constructing  an  International  Sea  Trade  Port 
Complex  at  Baku-Alyat  in  order  to  increase  the  capacity  of  the  Baku  port  and  to  meet 
increasing freight and passenger transport demands. 

Azerbaijan  and  the  EU  pursued  energy  cooperation,  notably  on  the  basis  of  the  2006 
Memorandum of Understanding on a strategic partnership in the field of energy. Azerbaijan, a 
key hydrocarbons producer and transit country for Caspian resources, repeatedly confirmed at 
the highest level its commitment to play a significant role in the EU’s energy security. In this 
context, Azerbaijan continued to support development of the Southern gas corridor including 
Nabucco  and  the  trans-Caspian  transportation  project.  In  May  2009  President  Aliyev 
participated  in  the  Prague  Summit  on  the  Southern  Corridor.  Furthermore,  Azerbaijan 
participated  in  the  ongoing  EU  study  for  a  Caspian  Development  Corporation,  the  central 
purpose of which is to aggregate gas demand in support of the said Corridor’s development.  

Azerbaijan continued to increase hydrocarbons production including on the basis of its ‘Gas 
programme’.  It  sustained  hydrocarbons  exports  notably  through  the  Baku-Tbilisi-Ceyhan 
(Turkey)  oil  pipeline  and  the  Baku-Tbilisi-Erzurum  (Turkey)  gas  pipeline.  In  2009  the 
country reinforced cooperation with, inter alia, Kazakhstan on oil exports through Baku and 
the Black Sea. In July 2009, energy companies from Azerbaijan, Georgia, Lithuania, Poland 
and  Ukraine  completed  a  study  on  the  Euro-Asian  Oil  Transportation  Corridor  Project.  In 
November  2009,  Azerbaijan  and  Bulgaria  agreed  to  explore  supply  options  for  compressed 
natural gas across the Black Sea to the EU.  

Azerbaijan furthermore developed plans for liquefied natural gas (LNG) exports to Romania 
from  a  Georgian  Black  Sea  terminal.  In  2009,  SOCAR  (state  oil  company)  and  Gazprom 
agreed  to  0.5  billion  cubic  meters  up  to  larger quantities  of  gas  to  be  exported  to  Russia  in 
2010. Azerbaijan strengthened its cooperation on gas with Iran including by the signature of 
an export contract. Azerbaijan strengthened the security of oil and gas export pipelines inter 
alia  by  adopting,  in  April  2009,  an  updated  operational  plan  for  emergency  situations. 
Azerbaijan  continued  active  participation  in  the  Extractive  Industry  Transparency  Initiative, 
which aims at transparency of oil and gas revenues. 

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Azerbaijan  further  implemented  its  energy  sector  policy,  framed  in  the  state  programme  on 
fuel-energy  complex  development  for  2005-2015.  For  example,  it  advanced  work  towards 
new  energy  sector  legislation,  which  aims  at  a  measure  of  approximation  with  EU  rules.  In 
July  2009,  the  Tariff  Council  increased  gas  tariffs.  Also  in  July,  Azerigas,  the  national  gas 
company,  was  integrated  into  SOCAR.  In  2009,  Azerbaijan  further  rehabilitated  electricity 
and  gas  infrastructure,  put  new  electricity  generators  into  operation  and  progressed  on  the 
reduction of network losses. Azerbaijan commissioned a second electricity link with Iran and 
continued to work towards an Azerbaijan-Georgia-Turkey electricity interconnection. 

Azerbaijan  has  also  confirmed  at  high  political  level  its  commitment  and  policy  priority  to 
engage  the  country  more  forcefully  into  the  development  of  Renewable  Energy  Sources 
(notably wind, solar and hydro), and of Energy efficiency. 

Azerbaijan  continued  to  train  nuclear  experts  with  a  view  to  possibly  building  a  nuclear 
research  reactor.  It  strengthened  the  State  Agency  for  Atomic  and  Radiological  Activity 
Control. The country continued implementing the state programme on the use of alternative 
and  renewable  energy  2004-2013.  Azerbaijan  established  a  state  agency  of  alternative  and 
renewable energy sources. The President issued a decree on additional measures regarding the 
use of alternative and renewable energy sources. The measures aim in particular at studying 
opportunities  for  the  use  of  wind,  solar,  hydro,  biomass  and  geothermal  energy.  Azerbaijan 
commissioned a 50 MW wind farm and continued the development of projects particularly in 
the area of wind power and small hydro. 

In  the  field  of  climate  change,  Azerbaijan  continued  preparing  its  Second  National 
Communication to the UN Framework Convention on Climate Change, which will include a 
greenhouse gas inventory, mitigation and adaptation measures and vulnerability assessments.  

Azerbaijan  took  steps  to  prepare  further  Clean  Development  Mechanism  (CDM)  projects, 
even  if  so  far  no  CDM  project  has  been  registered  at  UN  level.  Azerbaijan  has  not  yet 
associated itself with the Copenhagen Accord and is therefore encouraged to do so as soon as 
possible  and  to  provide  information  on  the  targets  or  actions  that  it  will  implement.  The 
European Commission continued to support Azerbaijan to implement the Kyoto Protocol.  

Azerbaijan continued to implement its 2006-2010 environment state programme and started 
to  prepare  its  second  phase.  The  legislative  framework  continues  to  require  further 
development,  in  particular  as  regards  implementing  legislation.  A  decree  was  adopted  on 
measures to improve drinking water supply. Legislation on environmental impact assessment 
and amendments of legislation related to hazardous waste are under  preparation. The action 
plan  on  approximation  of  legislation  with  that  of  the  European  Union,  adopted  in  autumn 
2009, foresees amendments to the law on access to information related to environment as well 
as  revisions  of  existing  legislation  on  pollution  prevention  and  control.  Amendments  to 
existing  legislation  on  waste  management,  in  particular  with  regard  to  hazardous  waste,  are 
under  preparation  as  well  as  proposals  designed  to  strengthen  management  of  chemical 
substances. 

Steps  were  taken  to  improve  water  and  waste  management,  including  continued  work  to 
develop  a  waste  strategy  for  Greater  Baku.  Continued  attention  is  required  to  implement 
existing strategies and plans and to further enhance monitoring and enforcement. 

The  Ministry  of  Environment  and  Natural  Resources  set  up  a  scientific  centre  for  hydro-
meteorological and ecological research in the North-Eastern shoulder of the Great Caucasus 

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Mountains. The centre's objective will be to study the ecosystems of high mountain territories, 
as well as the impact of climate change on environment and biological diversity of mountain 
territories.  The  statute  of  the  State  Commission  on  Water  Issues  was  developed  and 
appointment is underway. Further strengthening of administrative capacity at all levels of the 
country  remains  a  major  challenge.  Coordination  between  authorities  continues  to  require 
attention. Some actions were taken to promote the integration of environmental considerations 
into other policy sectors such as energy and transport.  

Azerbaijan  has  not  published  comprehensive  state-of-the-environment  reports  since  2002.  It 
nevertheless continued to carry out some other activities to provide information to the public. 
Concerning access to information and public participation, strengthening of the three Aarhus 
Centres continued, and some preparatory action was taken to open an additional centre. (For 
the  Regional  Environmental  Centre  for  the  Caucasus,  please  see  the  section  on  regional 
cooperation). 

Some  steps  were  taken  to  strengthen  capacity  for  conducting  strategic  environmental 
assessments.  Procedures  and  consultation  with  the  public  in  the  context  of  environmental 
assessments continue to require particular attention.  

Some  steps  were  taken  towards  accession  to  the  Protocol  on  Strategic  Environmental 
Assessment  to  the  UNECE  Convention  on  Environmental  Impact  Assessment  in  a  Trans-
boundary Context. However, there were no significant developments as regards accession to 
the  Protocols  to  the  UNECE  Convention  on  Long-Range  Transboundary  Air  Pollution. 
Furthermore,  the  implementation  of  several  already  ratified  agreements  requires  particular 
attention.  Azerbaijan  participated  in  regional  cooperation  under  the  Framework  Convention 
for the Protection of the Marine Environment of the Caspian Sea, the Caspian Environment 
Programme  as  well  as  the  EU  Water  Initiative,  where  it  presented  a  request  for  a  national 
policy dialogue. 2010 has been made the national Year of Ecology. 

Cooperation and exchanges of information took place between the European Commission and 
Azerbaijan,  including  on  water,  forestry,  waste  management,  environmental  data,  nature 
protection and air quality.  

In the field of civil protection, Azerbaijan participated in the December 2009 in the launch of 
the Eastern Partnership flagship initiative on prevention on, preparedness of and response to 
man-made-made and natural hazards.  

As  regards  the  Information  Society,  the  Ministry  of  Information  and  Communications 
granted in 2009 the first Third Generation mobile communications (3G) licence to a mobile 
operator,  which  started  to  provide  3G  services  in  Baku  and  several  other  cities.  The 
Government  announced  plans  to  privatise  some  of  its  holdings  in  the  telecommunications 
sector. 

Azerbaijan has yet to sign the Council of Europe Convention on Transfrontier Television.  

Investment  and  capacity  in  research  continue  to  remain  modest.  Azerbaijan  continued  to 
increase  the  numbers  of  applications  submitted  to  the  7th  Framework  Programme  (FP7), 
although the overall number of applications remains relatively low. Applications involving 12 
Azerbaijani research groups were successful, as of November 2009, receiving EUR 414,000 
in EU support. 

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Azerbaijan  continued  to  participate  actively  in  the  International  S&T  Cooperation  Network 
for Eastern European and Central Asian countries (FP7 IncoNet EECA project), which aims 
to support a bi-regional EU-EECA policy dialogue on science and technology and to increase 
EECA participation in FP7. 

7. 

PEOPLE-TO-PEOPLE CONTACTS, EDUCATION AND HEALTH 

In June 2009, the new education law was adopted by the Parliament, re-organising the levels 
and types of education including preschool, general schooling and vocational training. Higher 
education  was  organised  as  a  three-degree  structure  (bachelors,  masters  and  a  two-level 
doctorate)  approximating  relevant  provisions  of  the  Bologna  Process.  A  new  State 
Programme  on  the  reform  of  higher  education  for  the  period  2009-13  was  approved  by  the 
Cabinet in May 2009 including the listing of specialisation programmes for bachelor degree 
with its monitoring overseen by the Ministry of Education. 

In  September  2009,  this  same  new  education  law  was  signed  by  Presidential  decree, 
establishing  a  regulatory  basis  for  all  education  and  training  activities  in  Azerbaijan.  It  is 
presented as a framework law providing the basis for more specific legislation and regulatory 
acts  and  includes  provisions  on  the  division  of  competences  within  the  national  education 
system  as  well  as  definition  of  main  education  principles.  Education  is  a  priority  in  the 
country. 

Although a signatory of the Bologna Declaration since 2005, Azerbaijan’s ability to match its 
commitment to align higher education to the Bologna principles remains weak. Much work 
remains to be done on the introduction of a Diploma Supplement. The Ministry of Education 
did  not  make  full  use  of  the  HERE  (higher  education  reform  expert  team)  funded  under 
Tempus during 2009. Thanks to EU and other donor-funded projects, some faculties in some 
universities, mainly those in Baku, began implementing the European Credit Transfer System 
(ECTS)  as  well  as  some  quality  assurance  measures  in  certain  study  programmes.  Higher 
education  reform  in  Azerbaijan  continued  to  benefit  from  cooperation  under  the  Tempus 
programme with three projects selected under the second Call for Proposals of Tempus IV. A 
Tempus Information Day was held in December 2009.  

to 

this  end.  The  Ministry  accelerated  work  on 

In the area of vocational training, the President signed a Decree on Additional Measures on 
strengthening  of  the  logistical  base  of  vocational  training  schools  in  September  2009, 
providing  additional  funding 
the 
implementation  of  the  2007-2012  State  Programme  for  development  of  vocational  training 
education  in  the  area  of  construction  and  reconstruction  of  vocational  training  schools.  In 
support of EU assistance, the European Training Foundation (ETF) reviewed reform-oriented 
concept notes developed under the earlier TACIS support programme. Significant delays were 
encountered  in  the  development  of  the  national  qualifications  framework  for  Azerbaijan.  In 
terms of sector focus for training, tourism remains a priority alongside agriculture and rural 
development. The Labour Market Review undertaken by ETF for the Black Sea region, in the 
context of the Eastern Partnership, requires further work in Azerbaijan. 

Three  Azerbaijani  students  and  one  scholar  received  scholarships  for  Erasmus  Mundus 
Masters Courses under Erasmus Mundus Action 1 for the academic year 2009-10. Academic 
and student mobility was further facilitated under Erasmus Mundus Action 2 during the same 
period  through  the  award  of  33  mobility  grants.  Azerbaijani  universities  are  encouraged  to 
participate in the Jean Monnet programme. 

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In the area of culture, Azerbaijan ratified the 2005 UNESCO Convention on the Protection 
and  Promotion  of  the  Diversity  of  Cultural  Expressions  in  November.  In  parallel,  it  also 
ratified the Convention for the Protection of the Architectural Heritage of Europe. The Ministry 
of  Culture  and  Tourism  continued  work  on  a  draft  Culture  Concept  of  the  Republic  of 
Azerbaijan as well as a draft law on the creative worker and creative unions in the context of 
inter-departmental consultations and public debates. While formal measures have been taken 
to review activities in the cultural field particularly in the context of the Eastern Partnership, 
there  is  an  absence  of  clarity  regarding  the  cultural  policy  model  that  is  being  pursued.  To 
advance  its  regional  cooperation  in  the  framework  of  the  Eastern  Partnership  and  the  Kyiv 
Initiative, Azerbaijan is encouraged to ratify the 2000 European Landscape Convention and to 
sign and ratify the 2005 Council of Europe Framework Convention on the Value of Cultural 
Heritage for Society. 

Azerbaijani young people and youth organisations continued to benefit from the opportunities 
offered by the Youth in Action Programme, through exchanges, voluntary service and youth 
cooperation  activities  in  non-formal  education.  A  study  visit  on  youth  work  reality  in 
Azerbaijan took place in October, co-organised by the Ministry of Youth and Sport and the 
SALTO Eastern Europe and Caucasus Resource Centre. 17 participants visited youth policy 
makers and youth organisations in Baku and in Gandja. 

Azerbaijan  continued  health  reform  with  the  aim  of  improving  the  sector’s  organisation, 
enhancing quality and increasing efficiency. Emphasis was also put on rolling out health care 
to vulnerable groups and to the rural areas. The country continued the implementation of the 
“Concept  of  reforming  the  healthcare  financing  system  and  implementation  of  compulsory 
medical  insurance”  and  the  related  action  plan  for  the  period  2008-2012.  Its  full 
implementation should contribute to reducing out-of-pocket payments by citizens. Compared 
with  2008,  Azerbaijan  considerably  increased  health  sector expenditure  in  2009.  Azerbaijan 
took  several  measures  to  combat  influenza  A  (H1N1)  including  by  the  adaptation  of  a 
preparedness plan and a vaccination campaign. It continued to address the challenges posed 
by  communicable  diseases  such  as  HIV/AIDS  and  tuberculosis.  In  2009,  the  European 
Commission  invited  Azerbaijan  to  participate  in  the  newly  established  EU  enlarged  health 
information committee. 

8. 

FINANCIAL COOPERATION – 2009 KEY FACTS AND FIGURES 

The  European  Neighbourhood  and  Partnership  Instrument  (ENPI)  envelope  for  Azerbaijan 
under  the  National  Indicative  Programme  2007-2010  was  initially  envisaged  at  the  level  of 
EUR  92  million.  This  indicative sum was  however  slightly  decreased  and  the  final  amount 
totalled EUR 88 million.  

The  programme  is  geared  towards  supporting  the  achievement  of  key  policy  objectives  as 
outlined in the EU-Azerbaijan ENP Action Plan and  pursues three priorities: 1) Support  for 
democratic  development  and  good  governance;  2)  Support  for  socio-economic  reform  (with 
emphasis  on  regulatory  approximation  with  the  EU  acquis),  fight  against  poverty  and 
administrative  capacity  building;  3)  Support  for  legislative  and  economic  reforms  in  the 
transport,  energy  and  environment  sectors.  Each  Annual  Action  Plan  (AAP)  is  divided  into 
two parts. The first and financially more substantial part consists of a Sector Budget Support 
(SBS)  programme  whose  focus  varies  from  year  to  year.  To  date,  SBS  Programmes  in  the 
fields of Energy, Justice, and Agriculture were developed for the AAPs 2007, 2008, and 2009 

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respectively. The SBS Programmes for AAPs 2007 and 2008 were signed by the Government 
of Azerbaijan in 2008 and 2009 respectively. The request for the payment of the first tranche 
of the AAP 2007 SBS on Energy was received in January 2009. The request for the payment 
of the first tranche of the AAP 2008 is expected during second quarter 2010. The signature of 
the AAP 2009 is also expected in the second quarter 2010, after which implementation will 
commence.  

The  2009  Annual  Action  Programme  amounts  to  EUR  20  million  and  focuses  on  two 
priorities: socio-economic reform (EUR 14 million) programmed in a form of Sector Budget 
Support,  particularly  for  agriculture  rural  development;  and  good  governance  and 
administration reform (EUR 6 million), for which twinning projects will be identified during 
2010. 

An  indicative  financial  envelope  of  EUR  122.5  million  will  be  available  to  support  co-
operation  activities  in  Azerbaijan  in  period  2011-2013,  based  on  a  European  Commission 
decision of March 2010. 

In  addition  to  the  bilateral  allocation,  Azerbaijan  also  benefited  from  cooperation  activities 
financed  under  the  ENPI  multi-country  and  regional  programmes,  as  well  as  horizontal 
thematic  programmes,  such  as  the  European  Instrument  for  Democracy  and  Human  Rights 
(EIDHR)  and  the  Non-State  Actors  and  Local  Authorities  in  Development  programme 
(NSA/LA). At the end of the year, the EU Delegation monitored 21 EIDHR – NSA contracts. 

Under  the  Neighbourhood  Investment  Facility  (NIF),  in  2009,  the  Board  approved 
contributions  to  three  projects/programmes  from  which  Azerbaijan  could  benefit.  The  total 
NIF  contribution  to  these  projects  was  EUR  24  million.  These  NIF  grants  are  expected  to 
leverage  around  EUR  600  million  in  loans  from  European  Finance  Institutions.  EBRD 
manages and implement two and KfW one of the three above-mentioned projects/programmes 
which  aim  at  addressing  major  challenges  in  the  energy,  financial  and  SME  sector  in  the 
region. 

In  November  2009,  the  process  of  ‘deconcentration’  (transfer  of  responsibilities  for  signing 
financial  contracts  from  European  Commission  headquarters  to  the  EU  Delegation)  was 
completed.  

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