Investment climate in Azerbaijan

Elmira Tariverdiyeva, Baku. Exclusively to VK

Interest to cooperation with Baku by the Western countries means favorable investment climate in Azerbaijan. Such a conclusion might be made after the Azerbaijani-German business forum which was held in Baku.

“The Federal Land Rhineland-Pfaltz is interested in development of economic cooperation with Azerbaijan. Rapid economic growth is observed in Azerbaijan, and development of Rhineland-Pfaltz depends on export,” the head of the Chamber of Commerce of the federal land, Harold Aukter, said.

According to the representative of the Economic Development Ministry of Azerbaijan, Husein Pashayev, in January-July the turnover between Azerbaijan and Germany was $936 million. The general turnover of Azerbaijan in this period is $19.8 billion, $14.5 billion of which – export, $5.3 – import.

It is natural for the country with rich energy resources that first of all investments come to the oil and gas sector. The government of Azerbaijan in recent years has established maximal comfortable conditions for investors interested in investments into energy. Thus, the oil and gas sector is a more attracting sphere for investments than the non-oil sector.

Production sharing Agreement is an agreement, according to which Azerbaijan provides an investor with unique rights for exploration and development of mineral resources at a certain place for fee and a limited term. The investor has to implement the works at his own risk. The agreement defines all necessary conditions connected with using of resources, including sharing of products between the sides. That is why many foreign investors are ready to invest into the oil and gas sector.

However, of course there are some problems connected with investment. Official Baku admits that reforms are needed for improvement of the investment climate in Azerbaijan. However, we cannot deny success of the fulfilled works. In recent years Azerbaijan achieved a breakthrough in the sphere of anti-corruption struggle. Azerbaijan was the first country which signed EITI which guarantees that all expenses and revenues in the energy sector are published.

As for Russian investors, they develop the market easier than Western companies, as the system within the country is close to the Russian reality. Moreover, development of the legal base of the bilateral cooperation is taking place, and it makes life of Russian investors easier. The governments of Azerbaijan and Russia agreed 70% of the project of the intergovernmental agreement On Encouragement and Mutual Security of Investments. Probably the sides will find a compromise decision this year. Since 2004 to 2010 233 enterprises with Russian capital were registered in Azerbaijan. The Russian side has invested $400 million into Azerbaijani economy in recent years. Azerbaijan is interested in intensification of investment activity of its companies in Russia, including the North Caucasus region.