Trade and Industry
Azerbaijan is keen to diversify the economy away from its dependence on oil and gas. Already building up trade links with Turkey, Iran, the UAE, the United States and Europe – and reducing trade with Russia – Azerbaijan is becoming ever more global.
Investment and technology transfer welcomed
After the Second World War, Azerbaijan’s industrial sector specialized in petrochemical-derived products such as plastics, industrial oils, fuels and tires, as well as oil-drilling equipment, cement, processed foods, and textiles. By the 1990s, food production accounted for the largest share of industrial output, followed by light industry (textiles, leather goods, carpets and furniture) and machine building.
A cluster of food processing and cotton textile operations are based in Gyandzha, and the city of Sumgait is the home of the iron and steel industries. The government is keen to attract more investment into industrial production, particularly for technology transfer. To become more competitive Azerbaijan needs to upgrade its equipment and technology.
Azerbaijan has more than one million hectares of arable land, and by the 1990s agriculture directly employed about one-third of the labor force. The major cash crops are grapes, cotton, silk, tobacco, citrus fruits and vegetables. Livestock, dairy products, and wine and spirits are also important farm products.
For several years, the United States has imported art, antiques, apparel, grains, seeds and fruit from Azerbaijan, according to remarks made by Deputy Secretary of State Richard Armitage at the Fifth Annual Conference of the United States-Azerbaijan Chamber of Commerce (USACC) in March 2002.
Ministry of Economic Development
“The time is right for investment.”
Farhad Aliyev, Minister of Economic Development
Azerbaijan’s Ministry of Economic Development, established in 2001 by former President Heydar Aliyev, oversees all facets of the country’s social and economic development. The ministry combines the functions of the former ministries of state property, economy, and trade, as well as the former State Committee for Antimonopoly and Entrepreneurship Support and the Agency of Foreign Investments.
The ministry has an impressive brief: to establish and put into practice state policy concerning Azerbaijan’s macroeconomic essentials, international relations, trade and investment activities, promotion of entrepreneurship, regional development, social services, management of state-owned property, privatization, controls on monopolies and promotion of competitiveness.
One of the ministry’s major accomplishments has been the success of Azerbaijan’s on-going privatization program, which has resulted in the private sector now accounting for 70 percent of the country’s GDP. Remaining state-owned enterprises are set to be privatized in the near future.
As Farhad Aliyev, Minister of Economic Development, explains, economic diversification to reduce reliance on the oil sector, promotion of continued foreign investment in Azerbaijan, and further expansion of the private sector are key goals for the ministry. “Among the ministry’s main objectives are support to small and medium-sized companies, reduce poverty, boost economic development in all regions of the country, increase foreign trade, and promote the growth of the non-oil sector,” he says.
The ministry already works closely with Azerbaijan’s private sector, for example in a drive to eliminate monopolies, and Minister Aliyev is himself chairman of the country’s tariffs council, which is made up of representatives from the private sector as well as the ministry. As for the future, Aliyev says that upgrading Azerbaijan’s less developed areas will continue to be a focus over the coming five years as the government works to improve the lives of citizens throughout the country.
To achieve its ambitious goals, the ministry is strongly promoting foreign investment and has devised a number of incentives to build on the country’s many attractions as an investment target. Azerbaijan offers investors a very stable and supportive government, average GDP growth of a healthy 8 percent to 10 percent over the past few years, low inflation of around 2 percent, a stable and convertible local currency, and the possibility for foreign investors to transfer capital outside the country. In addition, the local population is tolerant and welcoming toward foreigners, and Azerbaijan enjoys an excellent quality of life.
As Minister Aliyev points out, “The main religion here is Muslim but there are no restrictions on other religions, no restrictions on which nationalities can live here. Our people are highly hospitable. Another key point is that there is security here both socially and in terms of business.” Azerbaijan is known for its beautiful landscapes and colorful culture, one reason it offers not only excellent living conditions but also potential as a tourism destination.
Minister Aliyev singles out food products and processing, textiles, telecommunications, tourism and transport as sectors with particularly strong growth potential. The ministry is particularly supporting international trade activities, and wishes to stimulate local industry to reduce imports, particularly of food products.
American investors aiming to establish activities in non-oil sectors are actively being sought and will find strong support from the ministry. Minister Aliyev offers to meet with investors and even to travel to the United States to explain in person all that Azerbaijan has to offer. “This ministry has an open-door policy,” he says.
To potential investors in the United States, Minister Aliyev concludes, “The time is right for investment, with a lot of opportunities and low competition. For business as well as pleasure, all the conditions you could need are in Azerbaijan.”
