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Azerbaijan’s geo-economic expansion prospects: Conventional or emerging markets?

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In the background of global geo-economic shifting, nation states confront significant challenges in terms of appropriate positioning. In case of Azerbaijan, these challenges are also related to regional geopolitical imbalances as well as structural problems existing in the national economy.

Throughout its independence, Azerbaijan has pursued the way to formulate its foreign economic relations through maximizing its economic benefits in the context of achieving relevance to its national interests. Indeed, country’s geographical location and economic strength gained thanks to oil boom gave birth to the possibility of formulation of Azerbaijan as a regional geo-economic pivot.

Azerbaijan iscurrently conducting multi-vectorial geo-economic development strategy in order to maximize its geographic advantages as well as maintaining better positioning in the framework of massive realignments observing in global economic architecture.Looking through of the policy frameworks which encapsulate country’s medium and long-term economic vision, it becomes obvious that Azerbaijan will continue to adjust these strategies to the “new game rules” of geo-economic shifting.

However, it should also be mentioned that in some cases, Azerbaijan’s geographic location takes part as an impediment rather than advantage.Referring to conventional understanding of the concept of “space”, Azerbaijan has only limited number of spaces in which geo-economic sustainability can be realized. However, shifting from geopoliticsrelying on the dominance over geographic basins to the geo-economics which relying on controlling financial and trade flows creates an excellent opportunity for Azerbaijan to tackle with this problem. In this regard, it should be emphasized that successful realization of trade-logistics and energy transport projects in recent years have created a sound ground to continue geo-economic expansion in the new stage of economic development. But the question currently standing in front of this expansion strategy is that which markets or “geo-economic spaces” should be main target?

Assessment of trans-regional projects initiated or supported by Azerbaijan during last two decades indicate that these initiatives are mainly directed to mitigate EU’s dependence on several routes or building an appropriate infrastructure to bolster these countries’ trade relations with Central Asian countries. This factor was strategically and economically beneficial for Azerbaijan in terms of getting better access to European markets and eliminating infrastructural backwardness inherited from Soviets. However, as aforementioned, current realignments in geo-economic landscape make it necessity to add new directions and quality features to the geo-economic expansion strategy of the country.

In this regard, Strategic Road Map for the perspectives of the national economy which approved by President Ilham Aliyev in late 2016 can be accepted as a reliable guide to find answer to the question put above. It is not secret that in recent years, we are observing geo-economic shifting from Euro-Atlantic region to the Asia-Pasific. This shifting is gradual and time-consuming process and cannot be constrained only by Chinese economic expansion or South Korean success story.

According to the World Bank, over the next three years the $75 trillion global economy will expand by more than $6.5 trillion in size. It is also estimated that China and India will be among Top 3 contributors to real GDP growth predicted for 2018-2020 while Turkey, Indonesia, South Korea and Japan will be also among major contributors.Furthermore, emerging and developing Asia seems will be achieved to quadruple its share in global GDP based on PPP during 1980-2020.

In the light of these figures, it can be put forward that Azerbaijan can take more benefits through getting better access to these emerging Asian markets. Furthermore, taking into consideration country’s medium and long-term economic vision in which acceleration of joining to global value chains has been mentioned as one of the strategic targets,integration to these markets promise more economic gains. The scale of these gains will not be constrained only in the framework of monetary or financial units. Particularly, significant progress achieved in realization of North-South and East-West transport corridors in recent years, additionally much brighter prospective transport projects which are expected to be realizedin the near future will lead to increase Azerbaijan’s geo-economic importance. This achievement can be accepted as a result of continuous efforts made by Azerbaijan during last two decades. As mentioned by President Aliyev, situated between Europe and Asia, Azerbaijan will continue to use wisely its geographical location to become one of the leading transportation hubs in Eurasia. Pursuant to his opinions, it is highly predictable that Azerbaijan geo-economic expansion will continue in accordance with regional and global economic landscape movements.

Getting efficient positioning in regional integration movements which dominantly shaping under priority of national interests is one of the key directions of Azerbaijan’s geo-economic expansion strategy.In this regard, preserving independence in integration processes is one of the significant imperatives in Azerbaijan’s foreign economic and trade relations.It is worth to mention that Azerbaijan, unlike to some of other region countries, still preserves independence in making choices regarding with integration movements. Therefore, Azerbaijan’s current stance lets us put forward the idea that consistence of joining to such type of integration movements with the country’s strategic foreign and domestic economic targets is more deterministic imperative rather than nominal participation.This hypothesisalso involves some insights regarding with the issue that in which direction geo-economic expansion ought to be continued in the following years.

On the macroeconomic and foreign trade perspective, it is worth to emphasize that Azerbaijan has achieved significant growth rates during 2004-2014. After some adverse effects of oil price crunch after 2014 Azerbaijan economy is currently in the process of adjusting new equilibrium points.This process is conducting not only through improving macroeconomic indicators, but also through making changes in geographic orientation of the country’s foreign trade relations. According to the official figures, the share of Asian markets is averagely 38% in exports and 39% in imports. However, analyzing of commodity structure of this trade turnover exhibits that in exports low value-added commodities dominate while in imports particularly medium and high value added ones take the lion share. This structure of trade relations with Asian countries brings forth some challenges in terms of diversifying commodity structure of exports as well as increasing turnover with these emerging economies. Therefore, in the context of geo-economic expansion, it would be more reasonable for Azerbaijan to pay much attention to join global value chains appearing in these markets. Additionally, thanks to already finished and prospective  trade-logistics and transportation projects, Azerbaijan’s opportunities to benefit from new trade reality which involves geographical fragmentation of production is increasing. This new reality offers to accelerate diversification of economy with limited resources avoiding from conventional barriers existing in small economies such as Azerbaijan.

Finally, Azerbaijan seems very determined to become a geo-economic pivot in its region relying on its comprehensive and continuous development strategies and rising international economic competitiveness which achieved during recent years. This deterministic stance will continue through shifting beyond a new quality stage of geo-economic expansion in the era of formulation multipolar global economic order. This shifting additionally requires revision of geographic expansion postulates of the country’s geo-economic development strategies. The characteristics of this revisionwill be determined by systemic realignments in the global economy.

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Economy

New UNWTO Report Helps Cities Manage Impact of Tourism

MD Staff

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A new World Tourism Organization (UNWTO) report aims to help manage growing urban tourism flows and their impact on cities and residents. ‘Overtourism’? Understanding and managing urban tourism growth beyond perceptions’, was launched today during the 7th UNWTO Global Summit on Urban Tourism, in Seoul, Republic of Korea (16-19 September 2018).

The report examines how to manage tourism in urban destinations to the benefit of visitors and residents alike. It proposes eleven strategies and 68 measures to help understand and manage visitor growth. The report is the result of collaboration between UNWTO, the Centre of Expertise Leisure, Tourism & Hospitality (CELTH), Breda University of Applied Sciencesm and the European Tourism Futures Institute (ETFI) of NHL Stenden University of Applied sciences.

The recent growth of urban tourism requires the sector to ensure sustainable policies and practices that minimize adverse effects of tourism on the use of natural resources, infrastructure, mobility and congestion, as well as its socio-cultural impact. Increased reports of negative attitudes among local populations towards visitors, due to perceived overcrowding, noise and other issues, have led to the spread of terms such as ‘overtourism’ and ‘tourismphobia’ in the media.

“Governance is key. Addressing the challenges facing urban tourism today is a much more complex issue than is commonly recognized. We need to set a sustainable roadmap for urban tourism and place tourism in the wider urban agenda,” said UNWTO Secretary-General Zurab Pololikashvili. “We must also ensure local communities see and benefit from the positive aspects of tourism”, he added.

To better understand visitor management challenges in urban contexts, particularly the relationship between residents and visitors, the report includes an analysis of residents’ perceptions towards tourism in eight European cities – Amsterdam, Barcelona, Berlin, Copenhagen, Lisbon, Munich, Salzburg and Tallinn.

“There is no one-size-fits-all solution to deal with overtourism. Instead tourism needs to be part of a city-wide strategy for sustainable development”, Dr. Ko Koens of the Centre of Expertise Leisure, Tourism & Hospitality (CELTH) and Breda University of Applied Sciences concludes. The report recommends a common strategic vision among all stakeholders involved, bringing residents and visitors together and adopting careful planning which respects the limits of capacity and the specificities of each destination. “The involvement and support of local residents is key in achieving sustainable tourism”, Professor Albert Postma of CELTH and NHL Stenden University of Applied Sciences explains. “Building shared responsibility amongst stakeholders directly or indirectly involved in tourism development is a key for ensuring long-term sustainability”, involved researcher Bernadett Papp concludes.

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Economy

The Geopolitical Impact of Petro-Yuan

Lorenzo Beriozza

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A few months ago, a piece of news shook the global oil future market: yuan-denominated oil contracts have begun trading for the first time in Shanghai on March 26, 2018. By widening the gaze beyond the next few years, this fact is poised to change how oil (a potentially other commodities and hard assets) are traded globally. It is obvious to register this will enhance the role of the yuan as a global trading currency, and compel investors to increase their allocations to Chinese financial assets.

Some facts to begin with: China became the world’s largest oil consumer at the end of 2016 (source: Bloomberg). As a consequence of this achievement, China is progressively manifesting a strong desire to pay for its huge import bill in its own currency, rather than resorting to employ USD. Additionally, China’s quite open aspiration with this new oil trading plan is to promote the internationalization of yuan and it intends to achieve this goal by aggressively promoting a wider adoption of the yuan as a global trading currency. Switching to yuan payments for major imports is a fundamental cornerstone of this process and the internationalization of the yuan is clearly one of the main priorities now for People’s Bank of China and other Chinese regulators.

Shall this plan be successful (at least to a certain degree in the short run), China can start thinking about replicating this model for other commodities purchases. Furthermore, the Chinese are, according to a number of sources, planning to devise active measures to persuade oil exporting countries to accept payment for their crude oil in yuan, which would be the logical next step from the new futures contract.

The emergence of petro-yuan revenues collected by the world’s largest oil producers is a natural development from this process and it is expected to become the third global price benchmark alongside Brent and West Texas Intermediate crude. As evidence of the seriousness of the Chinese new policy, a few top global energy traders, such as Glencore and Trafigura, have decided to start trading in the new contracts.

Carl Weinberg, chief economist and managing director at High Frequency Economics, in a recent interview stated: “Moving oil trade out of dollars into yuan will take right now between $600 billion and $800 billion worth of transactions out of the dollar… (That) means a stronger demand for things in China, whether it is securities or whether it is goods and services. It is a growth plus for China and that’s why they want this to happen”.

Obviously, the petro-yuan will encounter many challenges on its way of various nature: the most evident is the exchange policy designed by China in the past two decades. In 1994 the Chinese Yuan was pegged to the US Dollar, and it was only in 2005 that the country shifted to a “managed float” system and was allowed to appreciate. It now fluctuates in the forex market in accordance with a basket of major foreign currencies, and the Chinese government has always been very keen to keep the yuan undervalued as it is understandably a means of promoting the country’s exports.

Arguably, in order to be able to gain the investor confidence and to sustain the even greater capital inflows, Chinese policy maker might have to be forced to reconsider China’s exchange rate policy to render it more sustainable and, equally important, insulated from external shocks. This state of affairs may prove to be unattainable given the theorem of the “Impossible Trinity” which states that it is impossible, for any given country, to maintain the following three at the same time: a fixed foreign exchange rate, a regime of free capital movement (or absence of capital controls), and an independent monetary policy.

On the other side of the world, the most relevant oil actor, Saudi Arabia, seems to remain firmly committed to the dollar peg for its currency, the riyal, which has been in place for more than 30 year, and to the continued dominance of the US dollar as the medium of payment for its main export. However, the petro-yuan future contract represents an unplanned and (possibly) uncontrollable variable in Aramco’s long-term strategic planning. Aramco is the Saudi’ state controlled oil company the value of which is estimated in several hundreds of US billions

On the other hand, Saudi Arabia may benefit from the introduction of the petro –Yuan future contract in the light of the magnitude of its commercial partnership with China: the petro-yuan may ensure the establishment of a long-term eastern market for crude oil in the world’s biggest oil-consuming economy and furnish a hedge against the surge in American oil exports triggered by the shale boom.

Similarly Russia, the largest oil producer in the world, has welcomed the petro-yuan future contract with one of the national champions, Gazprom, having already made the switch from the US dollar to the yuan and other Asian currencies. The diffusion of the petro-yuan future contract will greatly benefit the Russian state politically as it allows her to further reduce its dependency on the United States (and capital denominated in US dollars) and weakens the US’ ability to wage economic war and conduct currency wars.

Nonetheless, in the long term, the petro-yuan future contract may offer a win-win solution for the two contenders on the ongoing trade and tariff war (namely, USA and China).

Let’s explore the underpinning reasons why it could turn out to be a good deal for both countries:

  • Despite the good premises and the warm welcome it has received so far, it will take many years for Chinese oil futures to establish themselves as an alternative benchmark in the oil market.
  • If the prediction above is correct, the petro-yuan future contract will have an insubstantial impact on the US economy in the short term; nonetheless, it could help to lower the value of the US dollar against other foreign currencies.
  • A slightly weaker US dollar may, in turn, make US dollar denominated exports more competitive in global markets, thus allowing the US to narrow their trade deficit, particularly with China.
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Machines Will Do More Tasks Than Humans by 2025

MD Staff

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The world is going through a workplace revolution that will bring a seismic shift in the way humans work alongside machines and algorithms, according to new research by the World Economic Forum. By 2025 more than half of all current workplace tasks will be performed by machines as opposed to 29% today. Such a transformation will have a profound effect on the global labour force, however in terms of overall numbers of new jobs the outlook is positive, with 133 million new jobs expected to be created by 2022 compared to 75 million that will be displaced.

The research, published today in The Future of Jobs 2018, is an attempt to understand the potential of new technologies to disrupt and create jobs. It is also seeks to provide guidance on how to improve the quality and productivity of the current work being done by humans and how to prepare people for emerging roles.

Based on a survey of chief human resources officers and top strategy executives from companies across 12 industries and 20 developed and emerging economies (which collectively account for 70% of global GDP), the report finds that 54% of employees of large companies would need significant re- and up-skilling in order to fully harness the growth opportunities offered by the Fourth Industrial Revolution. At the same time, just over half of the companies surveyed said they planned to reskill only those employees that are in key roles while only one third planned to reskill at-risk workers.

While nearly 50% of all companies expect their full-time workforce to shrink by 2022 as a result of automation, almost 40% expect to extend their workforce generally and more than a quarter expect automation to create new roles in their enterprise.

The report presents a vision of a future global workforce that provides grounds for both optimism and caution. Compared to a similar study by the Forum in 2016 to understand the impact of the Fourth Industrial Revolution on jobs, the outlook for job creation today is much more positive as businesses have a much greater understanding of the opportunities made available by technology. At the same time, the huge disruption automation will bring to the global labour force is almost certain to bring with it significant shifts in the quality, location, format and permanency of roles that will require close attention from leaders in the public and private sector.

“It is critical that business take an active role in supporting their existing workforces through reskilling and upskilling, that individuals take a proactive approach to their own lifelong learning, and that governments create an enabling environment to facilitate this workforce transformation. This is the key challenge of our time,” said Klaus Schwab, Founder and Executive Chairman of the World Economic Forum.

Among the set of roles set to experience increasing demand across all industries are data analysts and scientists, software and applications developers, and ecommerce and social media specialists, all of which roles that are significantly based on or enhanced by technology. Roles that leverage distinctly ‘human skills,’ such as sales and marketing professions, innovation managers and customer service workers, are also set to experience increasing demand. Jobs expected to become redundant include routine-based white-collar roles, such as data entry clerks, accounting and payroll clerks.

Jobs Outlook 2022

Within the set of companies surveyed, respondents predicted a decline of 984,000 jobs and a gain of 1.74 million jobs between now and 2022. Extrapolating these trends across those employed by large firms in the non-agricultural workforce of the 20 economies covered by the report suggests that 75 million jobs may be displaced by a shift in the division of labour between humans, machines and algorithms, while 133 million new roles may emerge that are more adapted to this new division of labour.

While we expect net positive job growth, there will be a significant shift in the quality, location, format and permanency of new roles. In fact, businesses are set to expand their use of contractors doing task-specialized work, engage workers in more flexible arrangements, utilize remote staffing, and modify the locations where their organization operates to ensure access to talent.

Workers will require new sets of skills as the division of labour between humans and machines continues to evolve. Surveyed companies report that today, 71% of total current task hours are performed by humans, compared to 29% by machines. By 2022, this average is expected to shift to 58% task hours performed by humans, 42% by machines.

Change Management Strategies

All industries expect to have sizeable skills gaps, with average skills instability of 42%, highlighting the scale of the challenge in preparing today’s workers for changes within their current roles and the emerging jobs of the future. Technology proficiency, such as technology design and programming, and distinctly human skills, such as creativity, critical thinking and persuasion, are among the competences that will be sharply increasing in importance.

“Companies need to complement their automation plans with comprehensive augmentation strategies. For businesses to remain dynamic, differentiated and competitive in an age of machines, they must in fact invest in their human capital. There is both a moral and economic imperative to do so. Without proactive approaches, businesses and workers may lose out on the economic potential of the Fourth Industrial Revolution,” said Saadia Zahidi, Head of the Centre for the New Economy and Society at the World Economic Forum.

An augmentation strategy takes into account the broader spectrum of value-creating activities that can be accomplished by workers, machines and algorithms in tandem. Fulfilling this potential will require workers to have the appropriate skills for the workplace of the future, and will require business and policymakers to lead complementary and coordinated efforts to invest in human capital.

Respondents reported three main strategies for coping with the challenges of the new world of work: hire wholly new permanent staff with the skills relevant to new technologies; automate work tasks completely; and retrain existing employees. A smaller but significant number of companies expect to allocate the work to specialist contractors, freelancers and temporary workers.

While large-scale, multistakeholder action will be needed to tackle existing and impending skills needs, 85% of companies reported that they plan to rely mainly on internal specialized departments within their organization to provide reskilling opportunities, compared to half expecting to work with public education institutions. Only 34% of the training to be delivered directly by employers is expected to result in an accreditation recognized outside of the company in question.These findings highlight both the future role of companies as learning organizations and the range of untapped reskilling and upskilling collaboration opportunities.

The Future of Jobs Across Industries

The future of jobs is not singular, and disparate impacts will be felt across industries depending on initial starting conditions, skills availability, technology adoption and adaptability of the workforce.

While there is an overall net positive outlook on the future job market, the balance of workforce expansion and contraction looks different across industries. The level of displacement is expected to vary considerably. For example the share of companies projecting jobs losses in the mining and metals, consumer and information and technology industries is higher than companies in professional services. Declining roles and skills in one industry are growing in other industries. These findings point to potential opportunities for coordinated job transition strategies across industries.

All industries expect to have sizable skills gaps, with the Aviation, Travel & Tourism industry projected to have the highest reskilling needs in the 2018-2022 timeframe. Skills gaps are also a particular concern in the Information & Communication Technology, Financial Services & Investors, and Mining & Metals industries. The broad mobility sector is least likely to look to reskill their current employees, while business leaders in the Global Health & Healthcare, Chemistry, Advanced Materials & Biotechnology sectors are most likely to retrain their workers.

“Knowing which occupations are growing and declining globally is a starting place for policymakers, educators, and employers to start conversations on how to transition the global workforce to the jobs and skills of tomorrow,” says Allen Blue, Co-founder of LinkedIn. “To help people connect to economic opportunity on the individual level, it’s important to map and understand today’s labor market dynamics at scale.”

If managed well, a combination of reskilling and the augmentation of a range of tasks today can create the opportunity for new, higher productivity growth. For example, administering and physical tasks are projected to be significantly replaced by mechanized labour, leaving room for humans to focus on higher productivity tasks.

The Future of Jobs Across Regions

The impact of automation on jobs will also vary across countries and regions, especially as global companies consider a number of strategic factors in choosing where to locate specific job roles and economic activities. 74% of companies cited the availability of skilled local talent as their foremost consideration in determining job locations. More than half of companies surveyed for this report expect that by 2022, they would consider adjusting the composition of their value chains in response to the adoption of new technologies, and just under half expect to target new talent by modifying the location of their operations. These findings point to the potential impact of workforce management strategies on the geography of jobs across the global economy.

The report finds variation among the demand for roles across regions. Region-specific roles expected to be in growing demand include Financial and Investment Advisors in East Asia and the Pacific and Western Europe; Assembly and Factory Workers in Latin America and the Caribbean, Middle East and North Africa, South Asia and Sub-Saharan Africa; and Electrotechnology Engineers in North America. Across all countries and regions, employers expect that significant reskilling will be needed by a large share of the global workforce over the 2018-2022 period. Remaining competitive in a global context and taking advantage of emerging job creation opportunities will require a well-skilled local workforce bolstered by national lifelong learning ecosystems.

Shaping a Human-Centered Future of Jobs

Harnessing the transformative potential of the Fourth Industrial Revolution will require coordinated efforts among stakeholders in all industries and regions to formulate a comprehensive workforce augmentation strategy ready to meet the challenges of this new era of change and innovation. Business, government and workers must proactively plan and implement a new vision for the global labour market.

For governments, there is an urgent need to address the impact of new technologies on labour markets through upgraded education systems aimed at raising both technical and soft skills among the future workforce; social policies aimed at supporting an ecosystem of lifelong learners; safety nets for managing the social impact of workforce transformations; and stimulating job creation taking into account local and global demand for emerging roles and skills. For industries, it will pay to support the upskilling of their current workforce toward new and higher-skilled roles as competition for skilled talent intensifies and becomes more costly over the coming years. Industries will also need to consider how these efforts may also apply to the gig, temporary and online workforces they increasingly plan to rely on. For workers, there is a need to take personal responsibility for their learning trajectory through the current transition and developing a higher degree of comfort with the concept of lifelong learning.

Methodology

The latest edition of the Future of Jobs Report aims to support individual workers, businesses, and policymakers understand the impact of automation on talent gaps, skills churn, job displacement and change management strategies for navigating the new world of work. The 2018 employer survey that formed the basis of the report gathered the views of business executives at the frontlines of the changing workforce, especially Chief Human Resource Officers, Chief Strategy Officers and Chief Executives. It covers over 300 global companies from a wide range of industry sectors. Survey responses represent more than 15 million employees, and 20 developed and emerging economies which collectively represent about 70% of global GDP. In addition to the aggregate analysis, the report contains 12 industry profiles and 29 country or regional profiles, providing detailed information for projections through to 2022. The Report also included a unique data contribution from LinkedIn, showing the key emerging and declining roles in the recent past across several industries and geographies.

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