Republic of Azerbaijan: Corporate Governance and Ownership of State Owned Enterprises

This Technical Note 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. The Note outlines international good practice, summarizes current practices in Azerbaijan, and indicates areas for consideration to improve SOE corporate governance in Azerbaijan. The Note 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 this Note should form part of a broader strategy for SOEs linked to economic and sector strategies in Azerbaijan. This Note 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. The Roadmaps re-affirm Azerbaijan's priorities in diversification of its oil-dominant economy, reduce the State's participation in the existing state-owned enterprises, and enable more private sector led growth.