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Azerbaijan's economic renaissance: Transformative projects reshape liberated territories

30 May 2024 08:30 (UTC+04:00)
Azerbaijan's economic renaissance: Transformative projects reshape liberated territories
Nazrin Abdul
Nazrin Abdul
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Azerbaijan, in its pursuit to reclaim territorial integrity and sovereignty, has launched ambitious projects aimed at sustainable settlement and economic revitalization in the liberated areas. These endeavors are supported by substantial state funding and encompass various initiatives, such as tunnel construction in Garabagh and Eastern Zangazur, the development of crucial international corridors, the establishment of airports, and the implementation of diverse industrial projects.

The Great Return Program, dedicated to restoring all liberated territories, is making significant progress. Emerging towns, cities, and modern trade hubs in Garabagh and Eastern Zangazur reflect this success, showcasing contemporary urban planning with smart cities and villages leveraging cutting-edge technologies.

Concurrently, substantial strides are being taken to develop industry and diversify the non-oil and gas sector. This includes the establishment of competitive modern production facilities to bolster industrial capacity, alongside infrastructure enhancements and various incentive schemes fostering increased production and sectoral growth.

President Ilham Aliyev's leadership has seen notable efforts towards non-oil sector development and the enhancement of export potential. Favorable conditions and the establishment of industrial parks and neighborhoods have enabled Azerbaijan's non-oil industry to produce competitive, export-oriented products, with high-tech enterprises in industrial zones playing a pivotal role, particularly in polymers, rubber, cables, and aluminum-based products.

Amidst rapid construction and reconstruction in long-occupied regions, extensive economic recovery and reintegration measures are underway in Karabakh and Eastern Zangezur. The focus on restoring Karabakh's industrial potential contributes to economic reintegration and employment generation. Notably, industrial parks in Agdam and the "Araz Valley Economic Zone" in Jabrayil district have been established, fostering favorable conditions for entrepreneurial ventures and business activities.

In these designated zones aimed at reviving business activity, favorable conditions have been established to facilitate entrepreneurs' access to various concessions, thus stimulating business growth.

In his comment to Azernews on the issue, economic expert Rashad Hasanov highlighted that within a year, enterprises in these zones collectively produced products valued at four billion manats.

He emphasized the significant contribution of completed investment projects in industrial parks and districts to the economic growth of Azerbaijan, particularly in the processing industry. Hasanov pointed out that around 50-55 percent of the products manufactured in these zones are directed towards exports, significantly impacting the expansion of non-oil exports. Notably, industries such as polymer, rubber, cable products, and aluminum-based products have seen substantial growth in exports.

Hasanov projected that with the commencement of operations by residents in the upcoming years, these industrial zones will continue to play a vital role in economic development, particularly in export activities. He highlighted ongoing processes in two industrial parks in the liberated territories, emphasizing the potential influx of new residents and businesses in the near future, along with the opportunity for entrepreneurs to leverage various benefits.

Aghdam and the "Araz Valley Economic Zone" industrial parks, along with other existing industrial parks nationwide, offer a conducive investment environment for entrepreneurs. Residents are provided with pre-built infrastructure at state expense and are exempted from property tax, land tax, income or profit tax for a decade from registration, as well as VAT during the importation of machinery and customs duties for ten years.

Moreover, recent amendments to the Tax Code, effective from January 1 of this year, introduce additional benefits for entrepreneurs operating in liberated territories. These include subsidies for social insurance fees, granting extra vacation days to professionals residing in liberated territories, monthly salary supplements, a one-time allowance, simplified work permit procedures, and exemption from labor migration quotas for foreign specialists.

Additionally, entrepreneurs engaged in production activities in the liberated territories will receive financial assistance equivalent to 20 percent of their monthly utility service payments for ten years.

Hasanov stressed that these concessions would further optimize product costs, thus enhancing the competitiveness of domestically manufactured products in foreign markets.

He also noted the importance of modern technology in facilitating competitive product manufacturing and emphasized that while technology plays a crucial role, price competitiveness remains equally significant.

Looking ahead, Hasanov highlighted the potential for creating new industrial zones in liberated territories, particularly in Khankendi, Kalbajar, and Zangilan, where favorable conditions exist for attracting investments and establishing infrastructure to support industrial development.

Khankendi boasts both the potential and infrastructure for manufacturing light and heavy industrial products, making it an ideal location for establishing an industrial park in this sector. Additionally, experts suggest that Kalbajar could host an industrial park focusing on the food industry.

However, it's crucial to consider the long-term impact alongside short-term gains. While industrial zones may stimulate the economy initially, over-reliance on them could potentially limit overall economic competitiveness. Maintaining a balance, especially considering Azerbaijan's relatively small market size, should be a priority in industrial zone policies. Nonetheless, exploring new approaches to expand this sector remains an option worth considering.

Rashad Hasanov also highlights the significant role of the tourism industry in the economic development of liberated territories. Predictions suggest that the share of tourism services in these regions could increase by 3-3.5 times compared to the main economy. To harness this potential, creating specialized zones such as tourism-free zones and tourism recreation areas becomes crucial. Establishing numerous tourist centers and recreational zones aligns with long-term goals, aiming to bolster service exports and effectively utilize the region's resources.

Currently, Azerbaijan operates seven industrial parks (including the "Araz Valley Economic Zone" in Sumgayit Kimya, Garadag, Pirallahi, Mingachevir, Balakhani, Aghdam, and Jabrayil districts) and five industrial districts (Hajigabul, Masalli, Neftchala, Sabirabad, and Sharur).

Notably, the Agdam Industrial Park, covering 190 hectares, was established by the decree of the President of the Republic of Azerbaijan on May 28, 2021. Similarly, the "Araz Valley Economic Zone" was created by a decree on October 4, 2021, spanning an area of 200 hectares. Both industrial parks have undergone complete demining operations, and mobile settlements have been set up to ensure the comfort of residents.

According to the Economic Zones Development Agency, since 2013, 142 business entities have been granted resident status in industrial zones, with a total investment volume of 7.79 billion manats. Entrepreneurs have injected over 6.7 billion manats into these zones, generating more than 10,500 permanent jobs. Moving forward, an additional 1 billion manats will be invested in industrial zones, creating over 6,500 new jobs in the next phase of existing projects.

In the first quarter of 2024, industrial zone residents recorded product sales totaling 640.3 million manats, with exports amounting to 223.6 million manats. Notably, sales by industrial park residents surged by 20.6 percent last year, with exports increasing by 10.8 percent.

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