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Corruption and Government Transparency

Pervasive corruption – including bribery of public officials – remains a major challenge in Azerbaijan. The prevalence of corruption is the most visible symptom of Azerbaijan’s governance problems as it affects almost all aspects of life. Corruption is said to be particularly high in regards to medical services, education, licenses and the judicial system. Corruption has penetrated most if not all institutions as a result of low transparency, a high degree of discretion in public life and the stark lack of accountability that pervades the system. Most if not all public institutions are insulated from public scrutiny or meaningful citizen oversight. Although anti-corruption legislation is in place, corrupt practices permeate all spheres of public life. Officials from the lowest ranks of the civil service to the top echelons of government are believed to benefit from systemic corruption in the country.

Azerbaijan does not require that private companies establish internal codes of conduct to prohibit bribery of public officials, nor does it provide protections to NGO’s involved in investigating corruption. U.S. firms have identified corruption in government procurement, licensing, dispute settlement, regulation, customs, and taxation as significant obstacles to investment.

Businesses report problems with the reliability and independence of judicial processes in Azerbaijan. While the government promotes foreign investment and the law guarantees national treatment, in practice investment disputes can arise when a foreign investor or trader’s success threatens well-connected or favored local interests. According to Freedom House’s 2017 report, Azerbaijan’s court system is “subservient to the executive.” The U.S. business community has complained about inconsistent application of regulations and non-transparent decision-making.

The Organized Crime and Corruption Reporting Project (OCCRP), based in Sarajevo and Bucharest, has awarded the dubious honor of corruption's "person of the year" to Azerbaijani President Ilham Aliyev. The group specializes in reporting on corruption in the region stretching from Eastern Europe to Central Asia. The OCCRP cited extensive reports and "well-documented evidence" that "the Aliyev family has been systematically grabbing shares of the most profitable businesses" in Azerbaijan for many years. The reports include secret ownership stakes in banks, construction firms, gold mines, and telecommunications firms. Many of the reports about Aliyev were investigated by OCCRP affiliate Khadija Ismayilova, a journalist with RFE/RL's Azerbaijani Service.

"President Aliyev and his family, in fact, along with other persons in his inner circle are involved in so many secret businesses that we uncovered, actually together with Radio Free Europe this year," says Paul Radu, OCCRP's executive director. "We identified hidden companies that were owned by the first family of Azerbaijan in Panama, for instance, or in the Czech Republic. And we identified assets that they owned back in Azerbaijan via these companies."

Laws and regulations that exist to combat corruption have not been effectively enforced. While a new anti-corruption law came into force in January 2005, creating a new commission with the authority to require full financial disclosure from government officials, Azerbaijan has made little progress in implementing this law.

The Azerbaijani government recognizes that corruption is a problem, although it frequently disagrees with the results of international rankings produced by groups such as Transparency International. In 2011, Transparency International ranked Azerbaijan as 143 of 183 countries on its Corruption Perceptions Index, behind neighboring Armenia at 129 and Georgia at 64. Popular opinion identifies the State Customs Committee as the institution of greatest concern to businesses in Azerbaijan, followed by the Ministry of Taxes – though the impression of tax authorities has enjoyed some improvement in the past year as corruption-reducing reforms are implemented.

Transparency’s 2010 Global Corruption Barometer, which examined bribery involved in people’s contact with customs, education, the judiciary, land related services, medical services, the police, registry and permit services, tax authorities and utilities, found that roughly 50 percent of Azerbaijani respondents had paid a bribe to one of the nine service providers in the twelve preceding months. According to the survey, 52 percent of the respondents thought that corruption had increased in 2010, with the most corrupt sector being the police.

With an eye toward the unrest that shook Arab countries, the Azerbaijani government launched a multi-faceted anti-corruption campaign in January 2011. Hundreds of criminal cases were opened against state employees for bribe-taking, over 200 arrests were made and an anti-corruption unit with a hotline for whistleblowers was established in the general prosecutor’s office. The government also incrementally raised civil service salaries. Anecdotal evidence suggests that bribe-taking by traffic police, tax and customs officials dropped significantly at first, but gradually resurfaced over the course of the year. Intermittent and well-publicized anti-corruption actions continue, however. For example, in early 2012, thirty traffic police officers in Baku were fired for accepting bribes. Corruption in property registration reportedly remains especially high.

In May 2011, the government also launched an initiative to automate government services such as business registration, tax payments and applications for documents in order to reduce human interactions and chances for bribery. Implementation of the initiative, however, has been slow and uneven, and may take several years to complete.

In 2009, Azerbaijan became the first participating country to achieve fully compliant status in the Extractive Industries Transparency Initiative (EITI) to promote more transparent management of oil revenues. As part of its obligations under EITI, in June 2011 Azerbaijan published its 14th EITI report disclosing company payments and government revenues from the extractive sector for the period from January to December 2010. The report, prepared by Moore Stephens, covers revenues from the oil, gas, silver and gold industries. It shows that the government received USD 2 billion and in-kind revenues of 215 million barrels of oil and 3.5 billion cubic meters of gas.

Azerbaijan also is a party to the United Nations Convention against Corruption (UN Convention) and a signatory to the Council of Europe Criminal and Civil Law Conventions. Azerbaijan is not currently a party to the Organization for Economic Co-operation and Development Anti-Bribery Convention.