Without Fundamental Economical Changes Press Losses Will Grow

Without being familiar with the internal situation, one may consider strange the fact that against the background of GDP growth and state budget, editorial offices´ profits in Azerbaijan decline. While the officials convince the west in non-professionalism of national media “incapable to do business under conditions of growing opportunities” the closer look to the reality, through the below article of Mehman Aliyev (on the right), reveals completely different picture. (21-May-07)

Written by Mehman Aliyev / Director of TURAN news agency, placed on website by Shahla Ismailova/HRH Baku, photo by Shahla Ismailova
   
The Press Council has proposed the adoption of a state program for support of the press in Azerbaijan. And, of course, the group of state officials that has been pursuing a policy of total control over the media for some time now backs this initiative, because it will not change the situation for the better.

For a long time these officials have justified repressive actions against the mass media, including fines, arrests and physical violence against journalists, by claiming that the press, especially the opposition press, blatantly violates national moral and ethic codes, provoking some censors to take tough measures. This thesis has been espoused for a long period and some official representatives of countries with developed democracy even sympathize with the Azerbaijani officials. They also criticized journalists for misbehavior and call for reporters not to insult the feelings of people, which according to the classification of international organizations and governments, are involved in large-scale crimes and insult the dignity of the majority of citizens of the country.

But these assertions have now been dispelled, and analysis of the real reasons of bad moral and psychological condition of press, its moral decay, replacement of freedom of expression by paid servicing ideology of double standard (for instance, declaring respect for human rights, but in fact suppressing these rights, etc.) have brought results. Now western observes draw more attention to the economic aspect of development of Azerbaijani press as the basis for its qualitative professional, ethical and economic growth. Those supporting the economic approach to the problem of poor development of qualitative free press in Azerbaijan claim that the lack of real opportunities to earn legal money, which would help press to freely develop, be successful, responsible and tolerant, is the main reason of their moral and professional regress.

During the past ten years there has been a clear interconnection between two processes: a sharp reduction in the press´ profit from advertisement and sales on the one side, and moral, professional and qualitative regress of the journalism community and publications on another side.

There are both objective and subjective reasons of economic crisis of the Azerbaijani press. But they both have foreign influence. On the one side it looks strange that against the background of GDP growth and state budget, editorial offices´ profits decline. This gave officials, who paraded great economic successes of oil-dependent country, grounds to accuse journalists of poor self-organization and inability to do business under conditions of growing opportunities. People not familiar with Azerbaijani realities were convinced. But in fact, along with growing profits of the country, mostly at the expense of oil profits, corruption and monopolies were also strengthened, the free competitive business environment for medium and small-size entrepreneurship was eliminated and control over economy acquired totalitarian features. The competitive economy, which arose after the USSR collapse as the main motive force of advertisement and source of media incomes, ceased to exist in 1999. Information of Taxes Ministry about tax payments shows a level of economic monopoly and poor development of small and medium-size business, which is the backbone of the economy of developed countries. 692 of over 120,000 tax-payers are big tax-payers, who pay over 90 percent of all taxes. Nine of these tax-payers pay 70 percent of all taxes. And only about 120,000 tax-payers pay almost 5 percent of all taxes throughout the country. In the form of property of big tax-payers, state enterprises constitute 280, foreign companies 278, joint ventures 47, private 84 and three are owned by international organizations. 

The following figures prove monopolization and unbalanced development of economy:
 
Share of energy resources in GDP (at the current moment) 67%
Share of energy resources in budget 54.4%
Share of energy resources in export  (2006) 84.6%
Share of medium- and small-size business in structure of taxes   5%
 
The subjective factor of lack of advertisement basis is purposeful economic suppression of newspapers and magazines through blocking earnings from advertisements and sales. Advertising accounts were pressured and are still pressured to prevent advertisements in the media, artificial obstacles were created for distribution of periodicals, especially in the regions, and big fines are imposed on media. As a result of this policy Azerbaijani media fell into deep crisis – several newspapers were closed, the staff of editorial offices was reduced, salaries were cut, professional journalists left the country and so on. The crisis continues against the background of rapid growth of illegally financed pro-governmental information resources that have the purpose to establish total control over the information space.

Judging from the statements that were made during presentation of the draft of proposals on state financial support to press, the goal of this proposal is to simply demonstrate care of a corrupt government for the mass media. This could be at best direct support in the form of grants or indirectly in the form of exemption from value added tax (VAT), etc. at the rate of two million AZN. But considering the correlation of opposition, independent, government and pro-governmental media, which constitutes 1 to 10, it becomes clear that the lion´s share of “support” will be handed out to media sponsored by the government, than to the poverty-stricken opposition and independent media. These and other arguments give reason to claim that no “supports” to the press, even those with good intentions, can improve the current situation. Only fair competition of all economic subjects of the country will make it possible to bring everybody out of this crisis that leads the republic to regress.

International experience shows that financial prosperity, dynamic development and high professionalism of the mass media is directly connected with the level of economic freedom in the country in which it works. The lower the level of economic freedom is, the higher the monopoly and corruption is, the worse the situation of press is.

One indicator for economically successful and free development of the media and free economy recognized throughout the world is the volume of media advertisement market in GDP of the country, this figure must constitute more than 1 percent.

In Azerbaijan this index is equal to 0.14 percent, showing that Azerbaijan´s mass media is in a very bad situation and state “support” would be unable to solve this crisis.
 
 

According to comparative analysis, Azerbaijan, which possesses energy resources, is the transport juncture of the region and has possibilities for the development of agriculture, chemistry, machine-building, light and food industry and most of all has a nation that even during the USSR was famous for its entrepreneurship, inclination to business and creation of property. But at the same time the republic has a very small advertisement market, or actually the complete absence of it.

It should be mentioned that the share of the press in the media advertisement market in all free countries constitutes 30-50 percent. In Azerbaijan this index is no higher than 10 percent and the volume of the advertisement market for the print press does not exceed $2 million. In this index our press is 200 times behind of three Baltic countries, which have no oil resources, however with a total population of 7 million people these countries have a press advertisement market worth $400 million. We also have a very small volume of media advertisement per capita – only $3.

Considering that in 2006 Azerbaijan´s GDP totaled $19.9 billion, the volume of the media advertisement market should have totaled at least $200 million, according to international norms. This year this figure had to reach $300 million, of which about half share of press. If we had such resources, our newspapers wouldn´t need any politically motivated gifts.  

It would not be worth forecasting the advertisement market, if the share of the non-oil sector in the GDP would have been equal to oil sector. In 2001 President Heydar Aliyev met with media representatives to discuss media problems and I requested that the president revise the economic policy, to give broad freedom to businesses and to liquidate monopolies. I said, “We are a part of business and we cannot be separated from business and no assistance can help us.”

As a result of the meeting some privileges were given to press – resumption from VAT, liquidation of newspapers´ debts to publishing house and the allotment of credits. These privileges brought nothing during the past five years – the economic situation of the press and business has worsened. But it will not improve without fundamental changes in economic policy and the creation of a free, liberal and competitive economy as the basis for a prosperous and free society and a free press. For this purpose it is necessary to take the following urgent measures:
– liberalization of the economy;
– simplification of the taxation system;
– reduction of tax burden;
– execution of anti-monopoly legislation and the adoption of the Antimonopoly Code;
– stimulation of small and medium entrepreneurship;
– simplification of the system for enterprises´ accounting;
– legalization of the economy;
– liberalization of import;
– stimulation of non-oil export;
– creation of special privileged conditions for business in Azerbaijan for world known brands;
– accessibility of financial resources;
– protection and guarantees of investments;
– reduction of license types and the costs for license activities, extending their terms and so on
 
In the past ten years Azerbaijan´s GDP totaled 54 billion (this is not enough and was achieved mostly at the expense of oil). Considering that the volume of advertisements had to constitute more than 1 percent of the GDP, the volume of the media advertisement market could not be less than $500 million. As the non-oil field is poorly developed, the figure could be higher. The government stole these funds from Azerbaijani journalists. Media´s losses will grow in arithmetical progression, if there are no fundamental changes in economic policy. Without these changes the program for state support to the press is meaningless and lacks perspectives.