Azerbaijan could gain big from agricultural commodity exports to Russia

By Gulgiz Dadashova

The issue of non-oil export has attracted increasing attention within industry and government circles, as Azerbaijan, the largest economy in the South Caucasus, seeks to diversify its economy.

Since revenues from energy exports decreased following the sharp drop in oil prices in 2014, the government of the energy rich Azerbaijan began to view agriculture as another driver of economic growth.

The Russian market, which has traditionally been an importer of Azerbaijan goods, gained more importance when the Russians imposed a full ban on certain agricultural products, foods, and raw materials from countries that in turn sanctioned Moscow.

The real delivery of goods between Azerbaijan and Russia rose by more than 50 percent in the first half of 2015, despite a slight drop in turnover, reaching a historical high of $4 billion in late 2014.

Azerbaijan has a good chance to gain a foothold in the Russian consumer market by increasing the supply of fruit and vegetable products and expanding the construction of modern greenhouses there, believes Nariman Agayev, of the Center for Sustainable Development Research.

Agayev said Azerbaijan is not making full use of its potential to supply of fruits and vegetables to Russia.

“Since 2008, we actually lost the Russian market. Uzbekistan, China, and other countries captured the market then. The problem is that they import more products at slightly cheaper costs. The fact that labor cost is much lower in these countries also contributes to this,” he explained.

However, Agayev assures that the time has come for Azerbaijan to regain its share in this vast market. Through Russia, Azerbaijani goods could also enter Eastern Europe.

Expert Ogtay Hagverdiyev shares this view, saying that Azerbaijan could greatly increase trade turnover with Russia through agriculture export.

“We can not export our fruits and vegetables to the European market because they do not meet EU standards yet. Therefore, during the Soviet period, Azerbaijan mainly sent its fruits and vegetables to Russia. "

The expert also added that these products have been exported not only to Moscow but also to other cities, as Russians seem to love Azerbaijani agriculture products.

“Some of the goods from Azerbaijan have become a brand in Russia. For example, in Russia they say the most delicious tomatoes are Azerbaijan’s. Azerbaijani tomatoes have become a brand in Russia. But as for the engineering and other spheres, trade relations are not developed in these sectors,” he said.

In this regard, the recent Russian-Azerbaijani Interregional Forum in Yekaterinburg can be a good medium for encouraging entrepreneurs from the two countries to cooperate. At the event, the Russian council on the development of foreign trade and economic relations and the Azerbaijan Export and Investment Promotion Foundation inked to deal to work on this.

Nariman Agayev believes Azerbaijan needs to open joint ventures together with its northern neighbor to invest in the construction of greenhouses to boost agriculture exports.

About 24 modern greenhouse complexes will soon appear in Azerbaijan’s capital city Baku aimed at increasing exports of fruits and vegetables to Russia, but it is still much more profitable to build them in Russia, he claims.

“Azerbaijan has long had the opportunity to begin to engage in the development and construction of greenhouses both inside the country and abroad. All unused land area of at least 100 hectares should be used for greenhouses. The situation concerning climate change and the relocation of some people simply obliges us to grow, produce in abundance,” he said adding that investment in this sector will bring revenues within five years.

Through the National Entrepreneurship Support Fund of Azerbaijan, entrepreneurs were able to build 24 modern greenhouses in the settlements of Baku over the past few years using preferential loans worth a total of 61.4 million manats ($58 million).

Azerbaijan’s exports of fruits and vegetables to different countries rose slightly this year. In the first seven months of 2015, exports of fruit and vegetables amounted to $136.9 million, which is 1.1 million manat, or 0.8% more compared to the same period last year, according to the State Customs Committee of Azerbaijan.

Nariman Agayev repeated once more that Azerbaijani entrepreneurs should accelerate the construction of modern greenhouses in hopes of exporting to Russia. Moreover, Azerbaijani entrepreneurs could make active use of soft loans through the NFES.

For example, modern greenhouses with a capacity of 2,300 tons of vegetables are currently being constructed in the Turkan settlement of Baku’s Khazar district using NFES soft loans. The construction of modern greenhouse complexes will not only increase the export of fruits and vegetables to neighboring countries, but will also by saturate the domestic market with fresh vegetables to prevent a sharp rise in prices during the winter period, he said.

Moreover, the construction of modern greenhouses would create new jobs and thus address issues of employment. The NFES, operating in Azerbaijan since 1992, issued loans worth 145.4 million manats since early 2015, estimated to create about 9,000 new jobs.

Meanwhile, Sverdlovsk Region Governor Yevgeny Kuyvashev announced that a logistics center for imported Azerbaijani fruits and vegetables will be constructed in the region

He said that the relevant agreement was signed at the İnnoprom-2015 expo and plans are underway to pick a location for the center.

“We are also looking for a partner to head the project on the Russian side,” he said. “In general, we are ready to start the construction even now.”

The trade turnover between Russia’s Sverdlovsk Oblast and Azerbaijan hit $443 million in 2014, which exceeds the figure for 2014 by 2.4 times, according to the Ural Customs Committee data.

Russia is the only country, whose federal subjects have direct economic contact with Azerbaijan. The country has so far inked economic agreements with 78 Russian regions.

Also, Azerbaijan’s Azersun Holding has established a joint venture in Saint Petersburg intended to export Azerbaijani agricultural products to Russia, according to Elgiz Kachayev, the chairman of economy committee in Petersburg.

The sanctions on the Russian economy contributed to a growth of interest in the supply of food to St. Petersburg from the CIS countries, including Azerbaijan, he said in Baku on October 2.

Noting that St. Petersburg is now very much in need of quality Azerbaijani products, he added that CTC Holding of Azerbaijan would soon begin delivering cheese to St. Petersburg.

He said the company has already received permission to supply products from the Federal Service for Veterinary and Phytosanitary Surveillance (Rosselkhoznadzor).

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