Why Azerbaijan is attractive for Western investors
Azerbaijan is one of few former Soviet republics, which has achieved tangible financial success. Today, the state can be the envy of Russia, Ukraine, Belarus and other countries, which aspire to join the developed international economic community.
Tax system of the republic is constantly being improved, in accordance with the requirements of European and international legislation. Updated the Tax Code of the Republic of Azerbaijan has become a solid foundation for building a modern tax system.
The European Bank for Reconstruction and Development — a famous financial institution — forecasts steady growth for Azerbaijan for the next two years. The GDP growth is projected at 1.5% by the end of the current year. A similar forecast has been retained for 2016. Though official Baku has a lot of oil, the state has no raw-material economy, as against Russia.
What is the secret of the prosperity of a small post-Soviet state
In recent years, Azerbaijan started to actively integrate into the world economy and constantly worked at increasing of intensity of the process. For the period from 1995 to 2011 in state’s economy was injected more than 119 billion U.S. dollars. About 60% of the investments had foreign origin. Only 9 billion dollars came into the country until 2002, but from 2003 to 2011 volume of investments has grown six-fold and amounted to 54 billion dollars. More than half of the money (37.5 billion dollars) went to development of the oil sector, but the remaining amount (25.5 billion dollars) was spent on improving non-oil industries: market, transport, construction and industrial sectors. The most part of joint venture companies are Azerbaijani-Turkish. The rest investments are distributed as follows:
UK – 11.7%
Russia – 6.8%
Iran – 6.2%
USA – 5.9%
Germany – 2.9%
Main advantages of the republic for international investors:
1. High rate of foreign direct investment into the state
2. Legal guarantees for investors
3. Stable annual GDP growth
4. Growth of the market of foreign capital
5. A sufficient level of imports
6. A high level of growth in most areas of the economy
7. Tax concessions to farmers
8. A fertile land and a great number of minerals
9. A favorable geographical position
10. Active involvement in international business initiatives
11. Promotion of Good-Neighbour policy
12. Competitive specialists in the labor market
In recent years, Azerbaijan started to actively integrate into the world economy and constantly worked at increasing of intensity of the process.
Let’s look at all these factors in more detail. A favorable investment climate has emerged in Azerbaijan because of active socio-economic reforms, developed transport and communications infrastructure, as well as gas, oil and other strategic raw materials reserves. In the 2000s, the government took important specialized programs that contribute to active development of business entities in a segment of small and medium business. Tax system of the republic is constantly being improved, in accordance with the requirements of European and international legislation. Updated the Tax Code of the Republic of Azerbaijan has become a solid foundation for building a modern tax system. Also the state is actively taking steps to assist the business sector.
Features of investing in Azerbaijan
Specificity of investments into economy of the republic is the need for a detailed and deep study of a potential investments object. A ticket to success is to obtain the maximum of objective information. An economic situation in the country is favorable, so a size of financial flows in the economy is increasing every month. One of the key benefits of investing in Azerbaijan is a wide range of promising areas for investment. Agriculture, manufacturing and industrial areas are well developed here, in addition to the oil sector. Dozens of successful investment projects have been implemented in these areas.
Active economic reforms act as the main incentive for growth of investments. A main idea of economic strategy of the state is constantly increasing inflow of foreign investments.
Active economic reforms act as the main incentive for growth of investments. A main idea of economic strategy of the state is constantly increasing inflow of foreign investments. Authorities have adopted simple, effective and transparent laws — “On protection of foreign investments” and “On investment activity”. It’s hard to imagine for Russians, that only two documents provide necessary set of conditions for comfort and confidence of potential investors. Another advantage of the state as an object of foreign investment is active participation in international transit traffic. Importance of Azerbaijan in work in this area has significantly increased after construction of new gas pipelines Baku-Erzurum and Baku-Tbilisi-Ceyhan. Also the state’s participation in the project of transport corridor North-South cooperation – which connects Russia with India and Iran via land and sea routes – contributes to development of state’s economy.
Potential investors do not ignore the fact that a republic transport system suitable for the geopolitical situation. We are talking about interaction with the international transport corridor TRACECA, which connects Asia, Caucasus and Europe.
Promising areas for investment
Despite the productive work on attraction of foreign capital, nowadays the country has a number of underfunded industries — a transport sector, petrochemistry, food and light industries, chemical industry and mechanical engineering. All these and many other segments of economy are in need of comprehensive modernization by means of foreign capital.
Investors like Azerbaijan for the high level labor market. When inserting money into the republic, entrepreneurs don’t have to wrestle with a problem of finding the qualified personnel to solve key strategic tasks. High concentration of highly-qualified personnel and a large number of workforce are situated in major cities.
Deposits of valuable metals – copper, silver, gold, cobalt and titanium – are additional factors, that facilitate the process of investing in economy of the state. Mining industry is one of the most promising areas for investment.
Promising areas of agricultural development
Viticulture is one of the key areas of employment of local farmers. The region has ideal climatic conditions for the production of port wines, as well as numerous other varieties of wines that are enjoyed high popularity in the USSR and today is popular with residents of most CIS-states. In Azerbaijan there are several factories that specialize in manufacturing of wines. All of them are open to mutually beneficial cooperation with foreign investors.
Local viticulture is characterized by a high level of profitability, which is due to necessary simplicity of creating jobs, proximity to promising markets (CIS), availability of inexpensive labor and high-quality raw resources.
Development of sericulture is another promising area. This branch of agriculture has centuries-old tradition, and finished products are in demand in many countries. Karabakh, Shirvan and Sheki silk was particularly popular at all times. Until recently, silkworm growing was the main form of income for the majority of population of various areas of the country.
Modern Azerbaijan is one of the most advanced republics of the former USSR for business. Unlike most of post-Soviet states, there are adequate laws and a favorable investment climate here. Hundreds of foreign entrepreneurs have already received positive experience of cooperation with official Baku.