Azerbaijan is a dynamically developing economy endowed with skilled human capital and rich natural resources. The country is a regional leader in economic growth with 5% GDP growth in 2010 (Table: Azerbaijan’s macro-economic statistics). From 1995 to 2010 investments in Azerbaijan’s economy totaled USD 97bn. Last year the cumulative FDI was USD 12 bn. Although the bulk of FDI has been historically directed towards the energy sector, the Government has been successful in ensuring that economic diversification gains pace with adequate development of other sectors. For consecutive three years, domestic investments exceed 70% of total investments.
Azerbaijan prides itself on having one of the most favorable legal frameworks for investment activities. The Government succeeded in opening up economy for international business and introducing investment-friendly legislation. A foreign investor is welcome to enter the Azerbaijani market with a “green-field project”. This is particularly attractive bearing in mind the geographic location of the country as the transportation hub for the Caspian region and Central Asia and the proximity of regional markets.
Azerbaijan has successfully implemented the process of de-nationalization of state-owned enterprises and property – the private sector accounts for 84.5% of the country’s GDP and employs 70% of population. Currently, the second stage of privatization is underway and covers medium and large-scale enterprises in the strategic sectors of economy such as transport, communication, construction, chemical and heavy engineering industry etc. The State Committee on Property Issues is in charge of the privatization process.
“One-stop shops” introduced in taxation and customs clearance have led to a substantial reduction of the costs and paperwork associated with setting up a new business as well as handling goods crossing the customs check-points in Azerbaijan. Persons wishing to engage in business operations can file all necessary documents with the Ministry of Taxes required to complete registration within three business days.The State Customs Committeeis the single authority responsible for conducting the phyto-sanitary and veterinary inspection of the goods that enter the territory of Azerbaijan and issuing transport permits for international road transportation of goods.
The Government has also declared supporting the economic development of regions as one of priority issues of its domestic policy agenda. There are 10 economic regions in Azerbaijan endowed with diverse resources and skilled workforce State Programs on socio-economic development of the regions (2009-2013) and on poverty reduction and sustainable economic development (2008-2015) both run by the Ministry of Economic Development , are important policy documents that encourage an active participation of local and foreign entrepreneurs in untapping the country’s non-oil potential.
In line with the priority of economic diversification, the Azerbaijan Investment Company (AIC)a state-owned joint-stock company, has been set up with a primary goal of facilitating the FDI flow in the non-oil sector in Azerbaijan through various forms of partnerships with international shareholders.
As a bridge between foreign investors, local producers and the Government, the Azerbaijan Chamber of Commerce and Industry and the Azerbaijan Investment and Export Foundation (AZPROMO)play a key role in enhancing the public-private dialogue and establishing cooperation with foreign companies willing to engage in production and trade activities.
Azerbaijan has an extensive network of trade partnerships with over 140 countries (Table: Azerbaijan’s external trade).Two important factors have contributed to this: exports of increasing amounts of Azerbaijani crude and oil products and the expanding internal market which led to the rise in imports of manufacturing equipment and consumer goods in the country. In recent years an average annual growth in foreign trade exceeds 20%. In 2010, the weighted average import tariff in Azerbaijan was 5.8 % i.e. significantly below the international average. Exported goods are not subject to any customs duties and restrictions. Regulations exist for the export of strategic commodities such as electricity, petrol, cotton and non-ferrous metals.
Azerbaijan also has a well-developed legal and policy framework on environmental protection. The country is a party to most multilateral environmental agreements.The Baku-Tbilisi-Ceyhan oil pipeline, the Baku-Tbilisi-Erzurum (the South Caucasus) gas pipeline and the Baku-Tbilisi-Kars railroad projects provide an excellent framework for a broad international cooperation in crucial areas of energy and transport. Azerbaijan is one of the founders of the Organization for Democracy and Economic Development – GUAM , Organization of the Black Sea Economic Cooperation (BSEC) and the Transport Corridor Europe-Caucasus-Asia (TRACECA) . The country is also in the process of accession negotiations to the World Trade Organization (WTO).
