Investment in Azerbaijan

Azerbaijan has great transit opportunities as a bridge between Europe and Asia. Thus, the roads leading from East to West and West to South that bypass Azerbaijan, substantial road infrastructure of the country, as well as, newly built Baku International Sea Port transform the country into strategic logistical hub of the region.

In recent years, large-scale Infrastructure projects have been implemented in Azerbaijan. The country has expanded its external economic ties as a result of newly built Baku International Sea Port, modern airports, construction of internationally important roads, East-West and North-South transport corridors.

The construction of Baku-Tbilisi-Kars railway will further increase the importance of Azerbaijan as a transit country. This is the shortest route linking Asia and Europe and it is expected to transport 30 million tons of cargo each year. For 2 thousand years, the Great Silk Road was a trade route linking East and West. This road passed through several countries and played an important role in their economic and cultural development. Azerbaijan at that time was a part of this huge trade and transportation hub. "Historical Silk Road" is expected to be restored and the main strategic objectives are:

Develop of economic and trade relations in the region
Development of transport ties, international cargo and passenger transportation
Favorable conditions for transits
Reduction of the duration of cargo transportation
Relevant policy-making in transportation
Transit rates and benefits
Transport tariffs and concessions
Regulation of relations among different transport types
Coordination of policies of international and internal tariffs in cargo and passenger transportation
The project of restoration of the Great Silk Road is called TRACECA (Transport Corridor Europe Caucasus Asia). The project was adopted by the Council of Europe with the consent of the newly independent states of the South Caucasus and Central Asia in May 1993. The restoration process of the historic Silk Road began on August 2014. The first trial container train travelled 4768 km (including 4258 kilometers by rail and 510 kilometers by sea) from China to Baku Port via International Trans-Caspian transport route. Later it took direction to Europe via Georgia and Turkey. After the restoration of Silk Road transit cargo transportation is increasing each year in the region, as well as, in Azerbaijan. Thus, between January-June 2014 149.4 million passengers and 28.1 million tons of cargo (49,7% (14 million tons) by road, 33,9 % (9,5 million tons) by railway, 16,4 (4,6 million tons) by water)) were transported via the "Silk way" transport corridor in Azerbaijan. The revenues from transportation reached 242,5 million manats from cargo and 52,3 million manats from passenger transportation. In comparison with 2013, this figures increased by 7,1% and 12,6% accordingly. At the same time, this corridor accounts for more than 4/5 of hydrocarbon transit from Caspian basin countries to Europe. In 2014, Ukraine also joined the Trans-Caspian international transport corridor and transported 10 coaches and 20 container trucks cargo to China. The trial train has reached Poti Sea Port of Georgia via Black Sea, later by railroad to Baku and after via Caspian to Aktau Port of Kazakhstan and finally China.

After the successful trial of the route Ukraine and Lithuania signed a memorandum on joining the “Viking” container to the Trans-Caspian international transport corridor. It indicates that along with Ukraine, Georgia, Azerbaijan, Kazakhstan, China, European Union countries are interested in joining the transport corridor. it is expected that in the future South Korea will also benefit from this cost-effective transport corridor.

Currently, estimated time spent on Ukraine-Georgia-Azerbaijan-Kazakhstan-China route road approximately is 11 days. However, it will be reduced to 10 days. On January 14, 2014 Azerbaijan, Kazakhstan, Georgia and Ukraine signed an agreement on the determination of competitive preferential tariffs for transcaspian internation route which is the strategic part of the TRACECA corridor and accounts for 15 million tons cargo transportation annually.

Air transportation is also actively being used. For instance, “Silk Way West Airlines” Airline Company of Azerbaijan in 2014 opened direct cargo airline from Baku to Japanese Komatsu city. The plane's first flight took 34 tons of commercial cargo from Heydar Aliyev International Airport to Komatsu airport. "Silk Way West Airlines" will carry out cargo flights regularly by modern "Boeing Freighter 7478F" planes twice a week. In order to establish Azerbaijan Logistics Center transport ferries, tankers and dry cargo ships, planes have been purchased. Trade-purpose transport routes through Azerbaijan bring political and economic dividends. In future, this factor will contribute to the prosperity of the whole Eurasian region.


The climate, nature and resources of the Republic of Azerbaijan

9 out of 11 existingclimate zonesare observed in Azerbaijan. The main climate forming factors are geographical latitude and atmospheric circulation. The country has a rich climatic resources which allow to gather products in plain areas in two times of the year and to grow crops such as cotton, olive, tea, citrus fruits which have heating demand. The active temperatures inAbsheron, Kur-Araz, Samur-Davachi, Lankaran lowlands, Ganikh-Eyrichay basin are higher than 4,000 ° C andithas a positive impact on the development of plant-growing.The quality of agricultural products increases and sugar level in fruits rises.

The country has a rich recreational resources. Here are included both natural and recreational resources (Mountain forests in Major and Minor Caucasus, Talysh Mountains,fine sandy beaches of the Caspian Sea coast, mineral springs) as well as a notable cultural and historical objects (“Old City”, Gobustan rock carvings, various forts in our regions, archaeological monuments, etc.). These resources will enable the development of tourism.

Curative mud and waters of the lakes in Absheron, curative oil of the Naftalan, Nakhchivan salt caves are belong to the balneological resources of the country.

Although there are different types of rich natural resources in Azerbaijan, at present oil and gas reserves is considered the most important. 70 % of Republic area has oil and gas reserves. Caspian shelf, Absheron, Gobustan, South-East Shirvan are much richer with oil and gas.

In September, 1994 the agreement has been signed in Baku named as "Contract of the Century" due to its tremendous importance.Production Sharing Agreement related to the development of “Azeri – Chirag - Guneshli” deepwater oil fields.13 companies (Amoco, BP, McDermott, Unocal, SOCAR, LukOil, Statoil, Exxon, TPAO, Pennzoil, Itochu, Ramco, Delta) from 8 countries (Azerbaijan, USA, Great-Britain, Russia, Turkey, Norway, Japan, Saudi Arabia) have participated in signing of the Contract of the Century. This Contract has paved the way towards to the signature of other 26 contracts with 41 oil companies from 19 countries.

The agreement on "Shah Deniz" field being another large oil and gas deposit was signed on June 4, 1996. At present, the work continues on plans to supply European countries with natural gas at the expense of the proved gas reserves of the "Shah Deniz" field.Azerbaijan has achieved preliminary agreements on gas export pipeline installation TAP (Trans Adriatic Pipeline) and TANAP (Trans-Anatolian Gas Pipeline) with a number of European countries Greece, Albania, Italy).

On these contracts it has been expected to be produced 1 billion tons of oil and 350 billion cubic meters of gas from the fields of Caspian Sea in the Azerbaijani sector.

With regard to natural resources ore reserves are superior in the western regions of the country.Dashkesen iron ore deposits which is the most important in the Caucasus region, Zaylik alunite deposit which takes2nd place for its reserves in the world after China,Gadabay copper reserves, Nakhchivan, Balaken, Agdara polymetallic deposits, Kalbajar, Nakhchivan, Dashkasan, Gadabay gold deposits and other non-ferrous metals give an opportunity to develop black and non-ferrous metallurgy. It may be mentioned widely circulated various non-ores such as limestone,gypsum, gravel, marble, travertine, clay, sand and so on.

The country's copper reserves are mainlyconcentrated in ore regions Balakan-Zagatala, Gadabay, Karabakh and Ordubad.The main reserves of copper in Balakan-Zagatala ore region are concentrated incopper-pyrite, pyrite-polymetallic types of deposits, in Minor Caucasus and ore regions of Nakhchivan folded zone the main reserves of copper are concentrated in copper-porphyry, molybdenum-copper-porphyry and gold-copper-pyrite types of deposits.

There is a copper-porphyry deposit (Karadag copper-porphyry deposit), approved industrial reserves in the republic and this is consist 4.7% of the total ore reserves.

The approved industrial reserves of cobalt which was registered in the balance of state are concentrated in theDashkesen region ore deposits,Filizchay pyrite-polymetallic deposit in the Balakan-Zagatala ore region.

It should be noted that, during the operation of the Dashkesen deposit there were collected 30 million tons of wastes in Qoshqar River valley, and in content of these wastes there are a large amount of valuable cobalt. The need to establish high-quality steel production base in the Republic makes it necessary to carry out geological exploration works to cobalt ore.

With the earlier exploration works carried out in the country Zaylik alunite ore deposit has been discovered and exploration works carried out. The deposit is located in Dashkesen region. The ores are mainly consist of alunite and quartz. The amount of alunitin varies between 10-80%, and the avarage number on deposit is 53%. Alunite ores consist 29.7% of the total ore reserves in the Republic.

Azerbaijan has a colorful fauna which is an important component of biological resources. These include fish reserves of rivers, Caspian sea, mainlyanimals of different species spreading in mountainous areas, reptiles spreading in low-lying areas (especially Caspian adder which has very valuable poison), a large number of birds, and so on.

Nearly 920 animal species live in the Caspian Sea.There are 79 species of vertebrates.Besides, there are 101 fish species in the Caspian Sea. There are sturgeon, stellate, barbel sturgeon, white salmon, salmon, Caspian herring, sea pikeperch, Ziyad, laughing, chub and five other species of fish in the Caspian Sea. 1809 species and subspecies of animals live in the Caspian Sea and 1609 of its are free-living invertebrates,325 species of its are parasites and 415 species of its are vertebrate animals. The Caspian seal is the only mammals animal of the Caspian Sea.

The flora of the Caspian Sea consist of 755 species and and subspecies of which 5 species are supreme plants. The supreme plants are living in lands, seas and freshwaters. The plants growing in the Caspian sea are included: sea-grass, comb-shapedchickenpox, ruppia in 2 types. Supreme plants feed chiefly on fish and water birds. A lot of fish spawn their caviar on them.

In the Caspian Sea phytoplankton live both freshwater and saline water algae.This is due to the lack of salinity of sea. In the phytoplankton of the Caspian Sea 450 species of algae have been recorded: 163 species of them is diatom algae, 102 species - blue-green algae, 139 species - green algae, 39 species - dinofit algae, 2 species - golden algae, 5 species - evglen algae.There are 47 species of seaweed, 66 species of water algae, 74 species of saltish - fresh water algae, 210 species of fresh water algae and 52 species of other algae in phytoplankton of the Caspian Sea.

At the same time the cattle-breeding is the rapidly developed field in the Azerbaijan Republic.There are different types of cattle-breeding in our country, such as breeding cattle, buffalo, sheep breeding, contagiousness, horse breeding, poultry, rabbit-breeding, beekeeping, fishing. From these the cattle breeding, sheep breeding, poultry and beekeeping is an important in the production of livestock products.

Construction sector


“Heydar Aliyev Center”, “Flame Towers”, “Baku Crystal Hall”, “Baku White City” projects has been implemented in Azerbaijan which can be considered as masterpieces of modern world architecture. In recent years, 755 new schools have been built in the country, 344 school buildings have been renovated, modern diagnostic centers and other health care facilities, Olympic sports complexes in full compliance with European standards, hundreds of high-rise residential buildings has been put into operation. In the last 3 years, 13 road intersections, 23 pedestrian crossings has been built, 9 pedestrian crossings repaired, 77 road bridges and overpass, dozens of cars and road facilities has been put into operation in the country. Out of the total volume of construction work 63.1% accounted for new construction, renovation and expansion, 18.2% accounted for capital repair, 6% for current repair, and 12.7% accounted for the rest. At the same time, local construction companies started to enter the international markets. Now, the local construction companies participate and win tenders in Russia, Ukraine, Kazakhstan, Georgia, Libya and other countries by the creation of databases and using the latest achievements of scientific and technical progress, in line with World Bank and other international financial institutions.

Privatization

Recently, the new wave of privatization will start in Azerbaijan in order to support the development of non-oil sector of the economy, to accelerate the previous privatization process, improve the structure of the economy, to create the competitive business environment and the group of private owners as the economic basis of market relations and to attract foreign direct investment. In this regard, industry, agriculture, construction, service sector, infrastructure, health care, telecommunications, transport and other areas are priority sectors for privatization. The major goals of privatization include attracting strategic foreign investor, increasing economic activity, as well as, production of competitive export driven enterprises, creating new jobs and attracting skilled workers. 50 000 state owned enterprises have been privatized since the beginning of privatization. 1600 small and large state enterprises transformed into open joint ventures and then privatized. Since the start of privatization, 600 million manats revenue achieved from privatization and the revenue has been spent for the social-economic well being of the country. 100 state enterprises privatized through investment competitions and good investment environment has been introduced for investors. The winners of the investment competitions introduced new technologies estimated 550 million investment, created new jobs and brought management experience.

Privatized state enterprises in trade, services, construction, consumer goods, and foods processing industries contributed to meeting local demand in relevant fields and brought new technologies, as well as, management experience. As a result of privatization relevant fields have been transferred from the public sector to more flexible and efficient private sector. The next stage of the privatization encompassed privatization of much more strategic enterprises. Cooperation with strategic investors has been established in order to meet the investment needs of mechanical engineering, metallurgy, petrochemical, chemical industries.




Legislation and Foreign Direct Investment

Social, economic and legal conditions of investment activity and legal and economic principles of foreign direct investment are defined by “The Law of the Azerbaijan Republic on Investment Activity” and “The Law of the Azerbaijan Republic on Protection of Foreign Investments” accordingly within the territory of Azerbaijan Republic.

The state is providing the following legal guarantees:

Guarantees against changes in legislation. Investment legislation will be valid for 10 years by the moment of implementation of investments.

Guarantees against nationalisation and requisition. Foreign investments in the Azerbaijan Republic are not subject to nationalisation except for exclusive cases causing damage to the people and state interests of the Azerbaijan Republic. Whenever measures on nationalisation and requisition are taken, foreign investor will immediately receive adequate and urgent compensation.

Compensation of losses to foreign investors Foreign investors have the right for compensation of losses including loss of profits as a result of acts of state bodies or officials thereof contradicting legislation of the Azerbaijan Republic.

Repatriation of profit. Repatriation of profit after the payment of relevant taxes is allowed.

State registration

State registration of legal entities includes general information about legal entities and their founders. According to the Civil code, registration of legal entities is announced to be open and interested sides could obtain the copies of required documents. State registration is completed in 5 days. The legal entity should be registered in the Ministry of Justice as well as in the Ministry of Taxes and State Statistical Committee of the Republic of Azerbaijan.

Monetary regulation

National Bank of Azerbaijan has been authorized for conducting monetary policy of the country. In the absence of a special license from the National Bank, all payments are held in manat. Monetary restrictions on the advances paid by residents and non-residents for the import of goods and services to Azerbaijan have been canceled by the National Bank. Despite the abolition of restrictions, commodities must be delivered within 180 days after the date of delivery of advances.

Customs

According to legislation on the import of commodities recognizes several customs regimes:

Transit
Customs storage
Customs warehouse
Temporary import
Entry and exit customs zone
The goods imported are subject to custom’s duty (ad valorem duties - 0-15% - in line with numbers and measurement). Excise tax is applied to some types of goods (tobacco and alcohol products). Azerbaijan has accepted the principle of VAT (currently 18%), which is the customs value of goods (depending on the applicable customs regulations, import duties and excise taxes as well). Some of the categories and types of goods are not subject to VAT or 0% is applied. Exports (exports of metal) are exempt from state taxes. Production Sharing Agreement (PSA) contractors, their agents and subcontractors can unrestrictedly import to and export from Azerbaijan oil and gas industry commodities without paying import duty. 0% VAT is applied to MBS regime import.

(http://privatization.az/)

(privatization.az)