Azerbaijan leads CIS in capital investment growth
It's quite positive to see such growth in fixed capital investments. Just wanted to make quick comments:
1. Bank lending plays a very small role in capital formation - only 4.4% of total capital investments in 2009 (14% in 2002). It has probably risen during 2010, but still remains very low. Bank loans are mainly directed to consumption and trading.
2. Domestic capital investment still provides 3/4 of total investments. Although domestic investment has grown in 2010, in nominal terms it's still below 2008 levels.
3. Only 50% of total investment goes into production factors (2010), which was 70-80% during 2002-2005. I guess it's normal, as the government financing of infrastructure grows.
4. As a matter of fact, In 2010, 86% of total investment was spent for construction.
5. State-owned enterprises account for 60% of total capital investment, while this number between 10-25% during 2002-2005. When we subtract foreign investment, local private enterprises account for 20% of total capital investment (2009). It's higher than previous 3 years, but the same as in 2005.
Overall, we see that 2009 was not a good year for capital investments, but 2010 numbers look more promising. The financial system takes a minuscule role in capital formation and state budget/state enterprises account for the largest share in capital formation. I guess this is consistent with government sponsored "neo-state-owned economic model." Nevertheless, I hope the importance of financial system is not forgotten and percentage investment into production factors grows to 2005 levels (in nominal terms, it has passed that level in 2010).
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