Azerbaijan Capital Baku Currency Manat (AZM) Language Azeri Population 7.96 million EU status Non-member GDP 2006 $14.05 billion Employment 98.8% (offical, may be lower) Exports $12.51 billion f.o.b. (2006 est.) Imports $5.176 billion f.o.b. (2006 est.)

Setting up business Number of days to start business 53 Cost (% of income per capita) 9.5% Nonwage labor cost (% of salary) 22% Total tax rate (% profits) 44.9%

 

Azerbaijan

Baku port – center for oil export

Azerbaijan is one of the fastest-growing states in the Caucasus region, with GDP growth in 2006 estimated at a remarkable 32.5%. An ex-Soviet economy that has made considerable moves towards modernization, Azerbaijan owes much of this growth to its wealth of natural resources, including substantial oil and gas reserves.

These have attracted major investors such as BP, which currently has four projects running in the country, and other subsidiary industries that provide the technologies and equipment required by the extraction industries. Now, the government hopes to use the economic boost given by the extraction industries to promote other sectors of the economy.

There have been major investments in the chemical, machinery and textile sectors, and there is also increasing activity in the business services and ICT sectors. According to data from consulting company Locomonitor, foreign investors are operating some 17 business service projects, and 12 ICT projects in Azerbaijan: a sign that the country is beginning to diversify its economy with a view to long-term sustainability. The current high level of FDI is expected to tail off after initial investments in the oil and gas infrastructure are complete, and development of the service sector is in line with government plans to ensure that the economy continues to expand after this point.

Encouraging Investment

Long-term foreign investment is seen as key to developing a robust private sector in Azerbaijan; accordingly, establishing an international-standard legal system is a government priority. Corruption and lack of transparency remain a major concern, but anti-corruption measures were put in place at the beginning of 2005, and new accounting standards will become mandatory in 2008, with the aim of ensuring business transparency.

Energy for the Future

Azerbaijan is believed to have some of the largest untapped oil and gas deposits in the world, accessible both on land and in the Caspian sea. It currently produces some 700,000 bbls oil per day, according to BP, exported through the Baku- Tbilisi-Ceyhan pipeline. At present, most investment has concentrated on Azerbaijan’s oil. However, there is expected to be considerable growth in the gas industry, and the country may join the NABUCCO pipeline project supplying gas to Europe via Turkey in 2012, by which time it is expected to produce some 20 million cubic meters of gas per annum.

Investment in oil and gas extraction has largely been responsible for Azerbaijan’s position within the top third of FDI destinations worldwide. However, Azerbaijan is also looking to develop the use of renewable energy and has recently signed contracts for the development of hydro and wind energy.

Expanding the Outlook

At present, most industry is connected with the oil and gas sector, including production of equipment for extraction. However, diversifying Azerbaijan’s economy as a means to protect against fluctuations in the global oil price is one of the government’s major objectives. It is also keen to support regional social and economic development. The Ministry of Communications and Information Technologies has recently commissioned a feasibility study on setting up a regional innovation zone dedicated to the development of electronics, software and communications equipment, amongst other technologies.

International Relations

Azerbaijan remains in negotiations over entry to the WTO. However, according to Azerbaijan’s Minister of Economic Development, Heydar Babayev, there is a lot of work to be accomplished before this goal can be achieved. “First and foremost, liberalization of trade and implementation of international trade transactions should be ensured. This means bringing the prices on goods and services to international levels,” he said.

Establishing a Company

In the last 10 years, a thriving private sector has developed, and now accounts for 74% of domestic output, with the government planning further privatization in future. Azerbaijan permits 100% ownership of an enterprise by a foreign country, and full repatriation of profits is possible, subject to a 10% repatriation tax.

 

Contact Information

American Chamber of Commerce in Azerbaijan
ISR Plaza, 6th Floor
340 Nizami Street
Baku 1000
Azerbaijan
Tel: +994 12 497 1333
E-mail: amcham@amchamaz.org
Website: www.amchamaz.org

 

Useful websites

www.azembassy.com	Azerbaijani Embassy in the US
economy.gov.az	Government guide to the Azerbaijani economy, including investment opportunities
www.azerinvest.com/eng	Invest in Azerbaijan website — includes visa application form

 

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