Azernews.Az

By Aynur Karimova

President Ilham Aliyev's decree on creation of a free trade zone type special economic area in the Alat settlement of Baku’s Garadagh district represents a milestone of Azerbaijan's policy to strengthen the country's position as a regional logistics and transportation hub.

President Aliyev signed a decree on March 17 on measures to establish a special economic area in the Alat settlement, which will also include the territory of the new Baku International Sea Trade Port.

The decree has been signed for ensuring sustainable economic development, increasing the competitiveness and creating a multi-vector transport infrastructure in Azerbaijan.

Once established, the Free Trade Zone (FTZ) will bring huge revenues to Azerbaijan's state budget. The profitability of FTZ has many examples in the world; FTZ in Hong Kong or in Dubai turned both cities into a center of attraction for investors from all around the world, and paved the way for inflow of huge funds to the countries.

The establishment of FTZ will also bring a large amount of foreign investment in Azerbaijan, as well as open the country's doors to new investors. As Taleh Ziyadov, Director General of the Baku International Sea Trade Port said this free trade zone will attract up to $1 billion just in the first few years.

This will become possible thanks to the special tax and customs policy, which will be pursued in the territory of the FTZ. The privileges can cover the income tax, VAT, tax of profit and property tax.

FTZ residents engaged in business activities will pay taxes at a rate of 2 percent of turnover (funds earned from offered goods and services) in accordance with the country’s legislation. The residents will pay customs payments for excise goods imported to the country in accordance with the Azerbaijani legislation.

Not only residents, but also Azerbaijani consumers will benefit from the establishment of the FTZ as the range of goods produced in the country will be expanded.

Growth of rivalry and absence of duties will lead to a reduction in price of certain products. Rivalry will also force local producers to improve the quality of products.

FTZ needs to have a modern infrastructure, which usually brings more benefits than tax privileges. It also requires large capital investments in the modernization of roads, railways and ports, which is currently being done in Azerbaijan.

The Ro-Ro terminal is of significant importance for the FTZ, and Ziyadov said that the Ro-Ro terminal in the territory of the Baku sea trade port will be inaugurated by late 2016, while the first phase of construction of the port will be completed before the end of 2017.

It is also planned to increase the speed of movement of trains in the territory of Azerbaijan to 80-120 kilometers per hour in two years.

All the above-mentioned measures will contribute to increase of attention of global carriers operating between China, India and Europe to Azerbaijan.

There are too much works ahead to be done, the completion of which will eventually bring more revenues and investments to Azerbaijan and turn the Baku FTZ into the largest logistics and commercial center at the crossroads of east-west and north-south.

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Aynur Karimova is AzerNews’ staff journalist, follow her on Twitter: @Aynur_Karimova

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