Has the Sovereign Wealth Fund of Azerbaijan (SOFAZ) Been Able to Promote Economic Diversification?

Has the Sovereign Wealth Fund of Azerbaijan (SOFAZ) Been Able to Promote Economic Diversification?

Oil-rich countries have oftentimes been confronted with the challenge of diversifying their economies away from oil dependence given the exhaustible nature of these fossil fuels. Investing in sovereign wealth funds has been one of the most ubiquitous ways of preparing for the post-oil period. Investing in sovereign wealth funds rather than directly injecting the oil revenues in the economy not only precludes the outbreak of the Dutch Disease (which is known for giving rise to an exchange rate appreciation, crowding out non-oil industries and keeping the economy reliant on oil), but it also saves for future generations. Yet, in the case of Azerbaijan, the Sovereign Wealth Fund of Azerbaijan (SOFAZ), founded in 1999, has only increased this reliance on oil. Using the rentier states theoretical framework, this paper will argue that the direct control over SOFAZ exercised by the president and the lack of consultation with the NGOs have made corruption easier, making the task of economic diversification more difficult. This has been possible because through corruption the president has often resorted to oil money to buy peace rather than invest it in economic diversification. As a result, since the foundation of SOFAZ, the country is more reliant, not less, on oil.
 
Full text available at: https://doi.org/10.22215/rera.v8i1.223
 

Yücesoy, Vahid

Canadian Journal of European and Russian Studies; 2013: RERA V8:1 Fall 2013 (backfile abstracts)

2562-8429

10.22215/cjers.v8i1

Centre for European Studies, Carleton University

2013-10-05

info:eu-repo/semantics/article

info:eu-repo/semantics/publishedVersion

Peer-reviewed Article