AZERBAIJAN COMPETITIVENESS AND TRADE (ACT) PROJECT ACT Progress Report for FY2011 Quarter 4, July 1 – September 30, 2011 and Year 1: October 2010 - September 2011

The project's primary objective is to enhance the country's economic growth and development by promoting a favorable business climate, liberalizing trade, and improving targeted agricultural value chains. Domestic Business Environment Improved The project's Component 1 focuses on improving the domestic business environment through various interventions. Public-private dialogue was established to facilitate communication between the government and private sector stakeholders. Commercial and other legislation was appraised, and public investment proposals were evaluated to ensure alignment with the country's economic development goals. The Competition Code was revised, and the Tax Code and administration reform were implemented to reduce bureaucratic barriers and promote a more favorable business climate. Key accomplishments in Year 1 include the development of a more rigorous project appraisal practice at government agencies, the institutionalization of knowledge, and the central bank's support for improved anti-money laundering measures. Commercial bank support was also provided to enhance the capacity of the financial sector. However, issues and constraints were identified, including the need to build and sustain the case for economic reform in Azerbaijan. Liberalized, More Transparent Trade Environment Developed Component 2 of the project focuses on developing a liberalized and more transparent trade environment. Key accomplishments in Year 1 include the initiation of the WTO accession process, legislative support for improvements in the trade environment, and institutional capacity building. Public-private dialogue on trade was also established to facilitate communication between the government and private sector stakeholders. The project also supported the government in improving the trade environment through legal and institutional reforms. Sanitary and phytosanitary standards were harmonized with international best practices, and procedures and mechanics for WTO accession were developed. However, issues and constraints were identified, including the need to support the government in improving the trade environment. Targeted Agricultural Value Chains Improved Component 3 of the project focuses on improving targeted agricultural value chains. Key accomplishments in Year 1 include the identification of sub-sectors with potential for competitive growth, such as the production of fruits and vegetables. Improved competitiveness was achieved in targeted sectors, including the development of value chain specifics. Planned Activities for the First Quarter of Year 2 The project has planned several activities for the first quarter of Year 2, including building and sustaining the case for economic reform in Azerbaijan, facilitating changes to business-related laws, regulations, and administrative procedures, and enhancing the capacity of the central bank to maintain stability within the private sector. The project will also support the government in improving the trade environment through legal and institutional reforms, and will continue to improve targeted agricultural value chains.