THERE IS AN old adage that says countries should never let a good crisis go to waste. For Azerbaijan, the recent global upheaval has forced new thinking on two interconnected aspects of its economy: how to diversify away from its oil dependency and in the process how to shore up its fragmented banking system.
The choices it makes will define the future of the country for decades. Diversifying an economy is difficult because just sitting back and letting all the oil money flow in is so easy. To establish domestic business and an economic life that is not dependent on hydrocarbons requires a great deal of commitment.
Many bankers and international observers operating in the country say that commitment is definitely there. The question is what will Azerbaijan end up looking like? Will it go the way of Dubai and spend all its limited oil money on loss-making vanity projects? Or will it emulate Norway and keep its oil money offshore in a professionally managed fund while developing a fully functioning onshore economy? Or will it end up more like Singapore or Switzerland, where it acts as a rich outpost to much larger neighbours?
The result will largely be decided by the actions being undertaken now, at a time when the Azerbaijani economy has the necessary slack to make difficult decisions.