Petrodollars could hurt Azerbaijan

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26.4% in 2005, 34.5% in 2006 and 21% expected this year are the figures representing the real GDP growth for Azerbaijan. Receipts from oil fueled the highest growth in the world but also rampant double-digit inflation. The Economist explains why growth alone isn't everything:

[Azerbaijan's] physical and financial infrastructure is underdeveloped and/or dilapidated, and this puts the non-oil economy at a huge disadvantage… Country's business environment is hazardous and getting worse and this makes life close to impossible for the private sector. The headline problems include: rampant corruption on the part of state officials, particularly in the tax and customs departments, […] At present it is more a matter of hope than expectation that the private sector will be allowed sufficient space to develop.

Our investment climate survey found tax administration, tax rates and corruption to be the top three constraints to entrepreneurship in the country. Check out also the Doing Business in Azerbaijan report for a fuller view.

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