By Amina Nazarli
The European Union is the main foreign trade partner of Azerbaijan. This 28 member states union with a total population of more than 500 million people is Azerbaijan´s biggest economic partner providing country’s 38 percent of foreign trade share.
Economy Minister Shahin Mustafayev announced about this at the Azerbaijan-EU business forum in Baku on June 8, further adding that the EU is also the biggest investor in country’s fixed capital.
“Over the past time, EU investments in Azerbaijan’s fixed capital amounted to about $20 billion or 46 percent of the total volume of investments. Meanwhile, EU countries invested $3 billion in the non-oil sector of Azerbaijan’s economy, which accounts for 35 percent of total investment volume in this sector,” said Mustafayev.
Currently, more than 1,300 European companies operate in Azerbaijan. Along with the good relations with the Union itself, Azerbaijan’s bilateral relations with various EU member states are also developing.
“Until today, Azerbaijan signed agreements on eliminating double taxation with 23 countries of the EU, agreements on expanding and protecting investments – with 17 countries,” the minister mentioned.
Mustafayev said that Azerbaijan has joint intergovernmental commissions with 13 EU countries.
“Moreover, we have already signed agreements on strategic partnership with seven EU countries,” noted the minister adding that over the past five years, 123 business forums and business meetings were held with EU countries.
Speaking about the opportunities Azerbaijan offers to foreign businessmen and investors, Mustafayev touched upon the Free Trade Zone being created in Alat, noting that expertise of a bill “On Free Trade Zone (FTZ)” in Azerbaijan will be completed soon.
“The master plan of the FTZ, its feasibility study, as well as the bill “On Free Trade Zone” are ready,” he noted. “A special commission has been set up to carry out the expertise of legal framework, and the commission should soon submit a final version of the draft law to Azerbaijan’s leadership.”
The free trade zone covering the territory of the Baku International Sea Trade Port in the Alat township of Baku’s Garadagh District is being created in accordance with a presidential decree dated March 17, 2016.
The 11-man task force will work to speed up the establishment of free economic zones. Under the presidential order, the task force shall submit – within three months – a final draft law on the creation of free economic zones to the head of state.
Mustafayev added that the volume of cargo transportation through the Baku International Sea Trade Port grew by 23 percent in January-April 2017. “The volume of oil transportation increased by 21 percent and non-oil – by 35 percent in January-April 2017 as compared to the same period of 2016. Moreover, the volume of road freight increased by 46 percent,” he said.
The minister also invited European companies to invest in the development of the country’s non-oil sector.
“Azerbaijan and the EU have great potential for expanding cooperation in industry, transportation, agriculture, IT, tourism, education and healthcare,” the minister said.
The minister further spoke of industrial parks of Azerbaijan, saying that as much as $800 million have been invested in five operating industrial parks of the country so far.
At present, about 5,000 new jobs have been created thanks to the industrial parks.
The minister noted that 154 investment promotion documents have been issued so far, which makes it possible to invest about 1.5 billion manats in Azerbaijan’s economy.
Currently, the work is underway in Azerbaijan to establish plants and enterprises in the Sumgait Chemical Industrial Park, industrial parks in Balakhani, Garadagh, Mingachevir and Pirallahi settlements, Sumgait and Mingachevir high technology parks, as well as Neftchala and Masalli industrial districts.
Residents of Azerbaijan’s industrial parks are exempt from taxes on real estate, land, profits and VAT on equipment imports for seven years.
The minister said Azerbaijan attaches special attention to development of human capital. The development of human capital is the main direction of social and economic policy pursued in the country under the leadership of Azerbaijan’s president, added Mustafayev.
He emphasized that political stability, rich natural resources, economic potential, favorable business and investment environment, modern infrastructure, favorable geographical location, rich culture, and being a reliable partner on international arena have turned Azerbaijan into a country attractive for investments.
The minister stressed that the EU-Azerbaijan cooperation in the energy sector remains promising.
So far, the second stage of the project to develop the major Shah Deniz gas and condensate field has been completed by 93 percent, while the work on the expansion of the South Caucasus Pipeline has been completed by 85 percent, he said.
Touching upon the South Caucasus Pipeline, Mustafayev said that construction works on the pipeline progress on schedule.
The minister emphasized that the South Caucasus Pipeline Expansion Project has been completed by 85 percent, while the Trans-Anatolian Natural Gas Pipeline (TANAP) has been constructed by 72 percent and Trans-Adriatic gas pipeline project - by 42 percent.
“We are in close cooperation with the EU countries in the implementation of the SGC pipeline project,” the minister said, emphasizing that Azerbaijan is a reliable partner in ensuring energy security of EU countries.
The Southern Gas Corridor is one of the biggest construction projects with a value of $40 billion which aims to improve the energy security of the EU and diversity its energy supply routes, and creates 30 thousands new jobs for host countries.
At the initial stage, the gas to be produced as part of the Stage 2 of development of Azerbaijan's Shah Deniz field is considered as the main source for the Southern Gas Corridor projects. Other sources can also connect to this project at a later stage.
The next round of talks on the new strategic partnership agreement between the European Union and Azerbaijan will be held in Baku on June 13-14, said Malena Mard on the sidelines of the Forum.
“We have talks regularly ongoing. Already next week in Baku I will have two delegations discussing the new agreement, including one delegation especially from DG Trade (Directorate General for Trade of the European Commission),” added Mard.
Mard reminded that the EU Commissioner for Neighborhood Policy and Enlargement Negotiations Johannes Hahn will visit Azerbaijan on June 16.
"A wide range of fields of activity will come together according to a new agreement, which is expected to be signed between the European Union and Azerbaijan," Azertac quoted Mard as saying.
"The sides are currently collaborating on the base of Cooperation and Partnership Agreement, however a lot has happened after the signing of the document. We should come together and work to build a new legal framework. This agreement will enable us to take maximum advantage of new opportunities. The economic cooperation will also be included in the agreement.”
The new agreement should replace the 1996 partnership and cooperation agreement and should better take account of the shared objectives and challenges the EU and Azerbaijan face today.
The agreement will follow the principles endorsed in the 2015 review of the European Neighborhood Policy and offer a renewed basis for political dialogue and mutually beneficial cooperation between the EU and Azerbaijan.
The new agreement envisages the compliance of Azerbaijan’s legislation and procedures with the EU’s most important international trade norms and standards, which should lead to the improvement of Azerbaijani goods’ access to the EU markets.
Mard further noted that the EU is eager to be Azerbaijan's partner in the non-oil sector, adding that significant reforms are being carried out to develop the non-oil sector in the country.
“We are organizing the 3rd EU-Azerbaijan business forum. As you see, we have over 400 participants from over 300 companies. Of course, I think, this is a very clear signal that there is a large interest between the EU and Azerbaijan to even further enhance trade and economic cooperation,” she said.
Mard pointed out that the EU is the largest trade partner and the major investor including in the non-oil sector in Azerbaijan.
“Of course, we want to work with Azerbaijan on the diversification and reform agenda,” she added.
Director “Neighbourhood East” in the Directorate-General for Neighbourhood and Enlargement Negotiations (DG NEAR) Lawrence Meredith, speaking at the forum, said that the volume of direct investments from the European Union to Azerbaijan amounted to seven billion euros.
More than 2.5 billion euros out of this amount were directed to the non-oil sector of the Azerbaijani economy, he said.
“We see that Azerbaijan is aimed at diversifying its economy. Despite the fact that energy is a key sector in our relations, we also welcome new directions of mutual cooperation,” noted the EU official.
Meredith mentioned that currently, the sides are holding negotiations as part of the new strategic partnership agreement.
“We are holding negotiations now on signing of a new agreement on cooperation,” he noted adding that this is very important both for Azerbaijan and the EU. “Currently, we are discussing priorities of our cooperation, one of main directions of which will remain the Southern Gas Corridor project and similar projects.”
Attracting EU investment for export production
The production of export-oriented products, where investments from the EU can be involved, is one of the directions for the further development of the relations between Azerbaijan and the EU in the field of agriculture, according to Deputy Minister of Agriculture Seyfaddin Talibov.
The volume of agricultural products turnover between Azerbaijan and the EU amounted to $240.7 million in 2016, the deputy minister said.
“About $167 million fell on imports of agricultural products from EU countries, and agricultural exports to European countries amounted to just over $73 million. The imported products are pedigree animals, alcoholic and non-alcoholic beverages, canned vegetables and other commodities. Over 96 percent of agricultural exports fell on refined hazelnuts, and 1.7 percent on pomegranate juice,” he said.
In turn, President of Italy-Azerbaijan Chamber of Commerce Manuela Traldi confirmed that agriculture is one of the most developing and investment-attractive spheres of Azerbaijan.
"Currently, Azerbaijan is actively developing its agriculture, this sphere is one of the most attractive in terms of investment not only for the EU countries but also for other countries. Many of our companies note the opportunities created for investment, joint ventures and so on,” noted Traldi.
Deputy Economy Minister Sahil Babayev, for his part, noted that despite the growth of non-oil exports, oil export still prevails in Azerbaijan’s trade relations with foreign partners.
“Non-oil exports rose by 26 percent in the first four months of 2017,” he said. “But export of oil and oil products still accounts for 85 percent of the total volume of Azerbaijani exports. Therefore, we need to diversify our exports.”
Azerbaijan’s foreign trade operations amounted to $5.6 billion in January-April 2017, which is 11.35 percent more than in the same period of 2016, according to Azerbaijan’s State Customs Committee.
Economic reforms implemented in Azerbaijan are already yielding tangible results.
In January-April 2017, non-oil industry grew by 2.8 percent, with agriculture growing by 3.2 percent in. The country’s trade turnover with other countries rose by 11.5 percent during the period. Exports increased by 41 percent, including a 23-percent increase in non-oil exports.
During the first four months of 2017, currency reserves of Azerbaijan increased by $1.3 billion and reached $39 billion.
Azerbaijan is ranked 37th among 138 countries in the Global Competitiveness Report for 2016-2017, and has been ranking first among CIS countries for several years.
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