Azerbaijan, which celebrated its 25th anniversary as an independent nation in this year, has quickly emerged as one of the leading and most dynamic states in the wider Caspian region and beyond. Azerbaijan has a vibrant economy endowed with skilled human capital and rich natural resources. The country is a regional leader in economic growth. With GDP reaching $75.2 billion in 2014, Azerbaijan represents some 75% of the South Caucasus economy. Azerbaijan’s strategic location with key links to Europe, Russia, the Middle East, and Central Asia makes it an important transportation hub for the entire region. To make the country a key point on the resurgent Silk Road, Azerbaijan is implementing major infrastructure projects to upgrade the country’s highways and railroads as well as its air and maritime facilities. The Bakı-Tbilisi-Kars railway is nearing completion, and negotiations over the best export route for Azerbaijani gas to Europe seem to be coming to a conclusion.
As the next logical step in Azerbaijan’s success story, efforts to promote economic diversification have seen significant growth also in the ICT, agriculture, and construction sectors. The Azerbaijan Investment Company (AIC), a state-owned joint-stock company, has been set up with a primary goal of facilitating the FDI flow in the non-oil sector in Azerbaijan through various forms of partnerships with international shareholders.
Azerbaijan prides itself on having one of the most favorable legal frameworks for investment activities. The Government succeeded in opening up economy for international business and introducing investment-friendly legislation. A foreign investor is welcome to enter the Azerbaijani market with a “green-field project.” This is particularly attractive bearing in mind the geographic location of the country as the transportation hub for the Caspian region and Central Asia and the proximity of regional markets.
Azerbaijan has successfully implemented the process of de-nationalization of state-owned enterprises and property – the private sector accounts for 84.5% of the country’s GDP and employs 70% of population. Currently, the second stage of privatization is underway and covers medium and large-scale enterprises in the strategic sectors of economy such as transport, communication, construction, chemical and heavy engineering industry etc.
Azerbaijan has an extensive network of trade partnerships with over 140 countries. Two important factors have contributed to this: exports of increasing amounts of Azerbaijani crude and oil products and the expanding internal market which led to the rise in imports of manufacturing equipment and consumer goods in the country. In recent years an average annual growth in foreign trade exceeds 20%. Exported goods are not subject to any customs duties and restrictions.
Azerbaijan also has a well-developed legal and policy framework on environmental protection. The country is a party to most multilateral environmental agreements. Azerbaijan is also in the process of accession negotiations to the World Trade Organization (WTO).
Azerbaijan’s population of 9.5 million and already well-established education sector mean the quality of human capital is also ticking all the right boxes for foreign investors. Azerbaijan has a young and steadily urbanizing population, with an average age of only 28 years and an urbanization rate of 52%. Expenditure on education reforms and incentives aim at transferring know-how to the Azerbaijani people and creating sustainable jobs for locals through a more active collaboration between businesses and universities.
Politically stable and economically diverse, Azerbaijan is in a strong position to play off its strengths— including reserves of $42 billion—to carve a path towards a future without a heavy reliance on the oil and gas sector.