The Diagnostic assesses the corporate governance of state-owned enterprises (SOEs) in Azerbaijan with a view to supporting the government’s efforts to bolster economic development. Mutually reinforcing recommendations are closely linked and aim to increase accountability across the whole ownership structure of SOEs, from their ultimate owners, the citizens, to their employees.

This Diagnostic was disseminated in November 2017, and aims to build on the priorities outlined by the Strategic Roadmaps for the national economy and main economic sectors of Azerbaijan for 2016-2020, signed by the President of Azerbaijan on December 6, 2016.

Project features

The Diagnostic outlines international good practices, summarizes current practices in Azerbaijan, and indicates areas for consideration to improve SOE corporate governance in Azerbaijan. The Diagnostic was prepared by a World Bank Group team, based on research and consultations during January - October 2017, to (i) analyze current SOE governance frameworks and practices in Azerbaijan and identify main deviations from international good practices; and (ii) develop a series of policy recommendations for further reforms in strengthening SOEs governance and improving their effectiveness. This work may serve as a basis for further collaboration between the World Bank and the Government of Azerbaijan towards SOE reform and related policy considerations. Given the significance of SOEs and a range of important socio-economic and political-economy related factors, improving SOEs governance in Azerbaijan is a significant challenge. Implementation of any of the recommendations contained in the Note should form part of a broader strategy for SOEs linked to economic and sector strategies in Azerbaijan.

Recommendations draw on a range of internationally recognized standards, guidelines, and practices, and the latest available research produced by the World Bank and others. OECD Guidelines on the Corporate Governance of State Owned Enterprises2 (the OECD Guidelines) are the leading benchmark aspired to by OECD member-states. These outline a set of policies aimed at improving SOEs state ownership function while raising efficiency and generating benefits for society in a more transparent and accountable way. The Note is not a comprehensive diagnostic comparing standards and practices in the Republic of Azerbaijan with relevant international benchmarks, but uses the experience of OECD countries and other leading economies of the world to summarize good international experience of governance arrangements for SOEs, and compares these to current practices in Azerbaijan.