Doing Business in Azerbaijan 2017

 

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Doing Business in Azerbaijan 2017

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2017 DOING BUSINESS IN AZERBAIJAN

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Important notice: This information is provided for general guidance only. Specific legal advice should be sought prior to taking any action in respect of the matters discussed herein. Every possible effort has been made to ensure that the information contained in this book is accurate at the time going to press. Statistical data by: The State Statistical Committee of the Republic of Azerbaijan

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DOING BUSINESS IN AZERBAIJAN 2017

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TABLE OF 08 22 25 50 COUNTRY INFORMATION WHY AZERBAIJAN BUSINESS CLIMATE SECTORS REVIEW Azerbaijan: state, geography and history in brief Economic snapshot 09 Political and economic stability Reformist business environment 13 Attractive investment climate Skilled labour force A perfect hub Fast developing infrastructure Abundant resources 23 Establisihing a legal presence 26 Energy 23 Land and property 28 Chemicals 23 Licensing 29 Agriculture 23 Employment 30 Food processing 24 Foreign trade regulation 32 Textiles 24 Currency regulation and reparia- 34 ICT 24 tion of profits Construction Taxation 36 Machinery and equipment Accounting 44 Transport and logistics Intellectual property 46 Tourism and hospitally Dispute resolution and artbitration 47 Financial services Insurance Industrial parks Agro-Parks High-Technology Parks 52 55 57 60 62 64 66 69 70 73 76 77 78 80 81

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CONTENTS 82 90 99 OVERVIEW OF THE REGIONS GENERAL INFORMATION Absheron Aran Ganja-Gazakh Guba-Khacmaz Daglig Shirvan Sheki-Zagatala Lankaran Nakhchivan Yukhari Garabakh Kalbajar-Lachin 84 Business qtiquette 84 85 85 86 86 87 87 88 88 92 USEFUL CONTACTS 117 ANNEXES & MAP

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ILHAM ALIYEV PRESIDENT OF THE REPUBLIC OF AZERBAIJAN Azerbaijan has managed to maintain its economic sustainability and ensured economic stability in 2016. The drastic and comprehensive economic reforms carried out this year have opened up great horizons and prospects for our future development. Despite all the difficulties, our country’s non-oil industry has grown by 5 per cent and agriculture by more than 2 per cent this year. We have managed to safeguard our currency reserves this year. This is also a very important issue because our economic potential and financial resources precondition both economic and political independence. All social programs were over-fulfilled in 2016. Even though 2016 was a year of crisis, population incomes have increased by 7 per cent. The average wage has risen by 9 per cent. Despite all the difficulties, Azerbaijan continued to develop in 2016. Let me reiterate that the decisions made this year, in particular the steps towards economic diversification, will yield fruit. At the same time, we have taken significant steps to diversify our exports. Year 2016 also brought us great sporting success. Our athletes made a historic achievement in the Rio Olympic Games. By winning 18 medals, Azerbaijan proved yet again that it is a sporting nation and that Azerbaijani athletes are among the best. For the number of medals, Azerbaijan finished in 14th place among 200 countries, seventh in Europe, second among post-Soviet republics and first in the Muslim world. This is a huge sporting achievement for us. At the same time, this victory is a demonstration of the power of our people, our state. This year we also marked the 25th anniversary of our independence. Our servicemen and sportsmen delighted us with their victories on this occasion. Year 2016 was declared a Year of Multiculturalism in Azerbaijan. Our country has hosted a number of prestigious international events this year. Azerbaijan has demonstrated to the world again that representatives of different religions, nationalities and ethnic groups can live together in one country, under the same sky and in dignity. Azerbaijan is a country playing an exceptional role in the promotion of the ideas of multiculturalism in the world.

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COUNTRY INFORMATION 8

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AZERBAIJAN: HISTORY, GEOGRAPHY AND STATE Azerbaijan has a deep heritage, and is one of the oldest cultures in the world. Gobustan, a UNESCO World Heritage Site, located about 70 kms south of Baku, has petroglyphs dating back to the 12th century BC, which puts Azerbaijan history and culture on the same level as sites in Egypt and China. The first recorded states in what is now Azerbaijan date back to the 9th century BC. The states of Manna, Maday and Albania, with their own unique traditions, succeeded one another in the period to follow. Azerbaijan was a strategic meeting point for all of Eurasia, which led to the country being a major focus for trade and migration. This has influenced the country’s ethnic mix. It is a hybrid of Turkic, Persian, European and Caucasian influences, which gives the region a unique history. The Arab conquest of Azerbaijan commenced in the 7th century. The Caliphate prevailed over the Turkic Khazar Kaganate for domination over Azerbaijan and Azerbaijan remained under Arab rule for around three centuries. Caliphate dominance was interrupted for a short period of time, when a large scale Hurammi Freedom Movement, led by the leader Babek, overthrew the Arabs in Azerbaijan and parts of Iran. Azerbaijan is an integral part of the Islamic cultural tradition. Nizami, Nasimi, Tusi and other Azerbaijani poets and scholars are now regarded as among the leading figures of Islamic civilization. Their contribution to the Islamic Renaissance is undeniable. Azerbaijan witnessed some powerful empires during The Middle Ages. These were predominantly Turkic in origin. Some of the mightiest dynasties were of Azerbaijani origin, including the Karakoyunlu, Agkoyunlu and Safavids. Despite the dominance of large neighboring states, northern Azerbaijan (Shirvan) managed to retain some autonomy throughout the whole period, including the hectic times of the Mongols and the Teymurids. In the 18th century, the rise of the Russian Empire in the region led to the occupation of the few autonomous Khanates located in Northern Azerbaijan. After the 1828 Turkmanchay Peace Treaty with Persia, the country was divided and Southern Azerbaijan was left under Persian sovereignty. The period of cultural and economic growth in Azerbaijan started in the late 19th and early 20th centuries. The industrial exploitation of the Azerbaijani oil fields commenced in the 1860’s. This led to the emergence of international businesses involving the Nobel Brothers, Rothschild, Siemens and others. Consequently, the Nobel Brothers made their fortune in Baku, to become one of the world`s richest families. 9

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This economic rise led to a cultural revival. The traditional Islamic & Oriental cultural influence was enriched by growing European and Russian influence. The 19th and 20th centuries were a period of major advancement in Azerbaijani social life. The most notable cultural advances included the first opera in the Muslim world, a national drama theatre, the adoption of a modified Latin alphabet, and the first school for Muslim girls in the Islamic world. Today’s Republic of Azerbaijan is the successor of the Azerbaijan Democratic Republic (ADR) declared on 28th May, 1918 by the first Azerbaijani parliament, the National Assembly (Milli Majlis). Though short-lived, the ADR was the very first democratic republic in the whole Islamic world. Such measures as electoral rights for women, representation of ethnic minorities in parliament, and other progressive initiatives were introduced in the country. These initiatives were ahead of their time, even by European standards. After the short life of the ADR, the 11th Soviet Red Army occupied Azerbaijan in late April 1920. Azerbaijan declared its independence from the Soviet Union in 1991. The collapse of the USSR and Armenian aggression, beginning in 1988, had grave consequences for the new state. Armenian nationalists, backed by the late Soviet administration, launched a separatist movement in Western Azerbaijan (Nagorno-Karabakh). The conflict was further complicated by civil confrontation within Azerbaijan. Several political groups were competing for power in the country. A succession of weak, largely unstable governments ended in 1993 when veteran politician and popular leader Heydar Aliyev was elected President. The leadership of Heydar Aliyev led to a decade of rehabilitation and growth. Heydar Aliyev re-established peace and stability in the country, reinforced state infrastructure, and established civil rule. He launched a robust foreign policy campaign aimed at the recovery of territories illegally annexed by Armenia. On September 20, 1994, a major oil and gas contract with a consortium of oil giants such as BP, Amoco, Total, and others was signed. This is called the “Contract of the Century”. Along with economic rehabilitation, the government of Azerbaijan launched major political reforms aimed at bringing the country up to international standards with regard to the rule of law, democracy, and human rights. The era of Heydar Aliyev ended in December, 2003 with his sad death. But his policies were continued by the ensuing administration, with increasing emphasis on social policies and the creation of a liberal market economy. His successor, Ilham Aliyev, elected president in 2003, 2008, and 2013, continues on this course. 10

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HEYDAR ALIYEV PRESIDENT OF THE REPUBLIC OF AZERBAIJAN IN OFFICE 24 JUNE 1993 - 31 OCTOBER 2003

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ESTABLISHMENT: 28 MAY 1918 INDEPENDENCE: 18 OCTOBER 1991 (II REPUBLIC) CAPITAL: BAKU LANGUAGE: AZERBAIJANI CURRENCY: AZERBAIJANI MANAT (AZN) TERRITORY: Land territory of 86,600 km2 (12% forests, 1.7% water, 55.1% agricultural lands (30.5% of which are pastures) and 31.2% other lands). The territory also includes the Azerbaijani sector of the Caspian Sea. COUNTRY LOCATION: 44˚- 52˚ E, 38˚- 42˚ N NEIGHBOURS: Borders in the south with Iran (765 km) and Turkey (15 km), Russia in the north (390 km), Georgia in the north-west (480 km), and Armenia in the west (1007 km). The coastline of the Caspian Sea shared by Azerbaijan is 825 km. POPULATION: 9,810,000 (53.1 % urban, 46.9 % rural) 12

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POLITICAL SYSTEM FOREIGN POLICY GOVERENMENT FORM Republic LEGAL SYSTEM Civil Law EXECUTIVE BRANCH HEAD OF STATE President HEAD OF GOVERENMENT Prime Minister LEGISLATIVE BRANCH PARLIAMENT Unicameral National Assembly (Milli Mejlis) JUDICIAL BRANCH Constitutional Court, Supreme Court, Court of Appeals, Courts of First Instance DIPLOMATIC RELATIONS With 177 countries MEMBER OF UN, Council of Europe, OSCE, Commonwealth of Independent States, GUAM (Georgia, Ukraine, Azerbaijan and Moldova alliance), Non-Aligned Movement, Organization of the Black Sea Economic Cooperation, Organization of Islamic Cooperation, European Bank for Reconstruction and Development, Asian Development Bank, World Bank, International Monetary Fund, Islamic Development Bank, Black Sea Trade & Development Bank. GDP (B USD) NON-OIL GDP (B USD) ECONOMIC SNAPSHOT 66.0 69.7 74.2 75.2 53 37.8 32.2 2011 37.2 2012 41.6 2013 45.9 2014 23.2 2015 24.9 2016 13

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GDP PER CAPITA (USD) 7285 7594 7977 7986 INFLATION (%) 7.9 1.1 2.4 1.4 EXTERNAL DEBT (B USD) 4.8 5.7 6.1 6.5 TOTAL INVESTMENT (B USD) 21.6 25.8 27.3 27.7 FOREIGN INVESTMENT (B USD) 8.6 10.3 10.5 11.5 DOMESTIC INVESTMENT (B USD) 12.9 15.5 16.8 16.2 FDI (B USD) 4.3 5.4 6 7.6 2011 36.4 33.6 2012 2013 2014 FOREIGN TRADE (B USD) 34.7 31.0 2011 2012 2013 2014 5559 4 6.9 19.4 10.7 8.7 7.5 2015 3927 12.4 6.9 14.3 10.1 4.2 7.3 2016 20.6 2015 17.6 2016 14

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LEADING FOREIGN TRADE PARTNERS (2016) TURKEY 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% RUSSIA 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% ITALY 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% GERMANY 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% CHINA TAIWAN, 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% PROVINCE OF CHINA 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% ISRAEL FRANCE 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% UNITED KINGDOM 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% USA 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 15 13.1% 11.6% 10.7% 5.7% 5.5% 4.6% 3.8% 3.6% 3.1% 3.1%

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