AZERBAIJAN：A Very Important Player in the Region under the Belt and Road Initiative

Ambassador: The long-established and rich history of relations between Azerbaijani and Chinese people dates back to the Ancient Silk Road. Our people maintained trade and cultural ties through the Ancient Silk Road even 2500 years ago. Description of the beautiful Chinese lady in the poem called “The Seven Beauties” by the greatest Azerbaijani poet Nizami Ganjavi in the 12th century is also another evidence of close cultural ties between us. 

Diplomatic relations between Azerbaijan and China were established in 1992 and official visit of H.E. Mr.Heydar Aliyev, the national leader and late President of the Republic of Azerbaijan, to China in 1994 laid strong foundation for bilateral relations between our countries. Since then, Azerbaijan and China have been developing bilateral relations in the spirit of friendship, cooperation, mutual benefit and respect, and have strongly supported each other on issues related to the vital interests and major concerns. It is very crucial to note that Azerbaijan fully supports “One China” policy and China, in its turn, supports Azerbaijan with respect to resolution of Armenia-Azerbaijan Nagorno-Karabakh conflict based on principles of sovereignty and territorial integrity of Azerbaijan and implementation of relevant resolutions of UN Security Council.

President Ilham Aliyev’s official visit in 2005 and state visit in 2015 to China once again proved mutual will of both heads of state to further develop and deepen bilateral relations. During those visits many documents were signed, among which “Joint Declaration between the Republic of Azerbaijan and People’s Republic of China” and “Memorandum of Understanding on Joint Encouragement of the Establishment of Silk Way Economic Belt between the Government of the Republic of Azerbaijan and the Government of the People’s Republic of China” are of paramount significance in regard to steadily and rapidly expanding mutual cooperation between our countries and nations.

Our mutual political trust always strengthens and multifaceted cooperation continuously deepens. In this regard, it is worth to emphasize the significance of recent high level reciprocal visits as an indicator of prospering bilateral ties and intensifying political and economic dialogue between Azerbaijan and China. Participation of H.E. Mr.Ilham Aliyev, the President of the Republic of Azerbaijan, in the 2nd Belt and Road Forum for International Cooperation in Beijing this April and an official visit of H.E. Mr.Wang Yi, State Councilor and Minister of Foreign Affairs of the People’s Republic of China, to Baku in May substantiate the fact that the relations between Azerbaijan and China are now evolving into the level of strategic partnership.

Dedicated political dialogue also plays an important role in developing bilateral economic ties and trade. There is a positive dynamic in trade turnover between Azerbaijan and China. It has reached 1.3 billion USD in 2018 and trade turnover with Azerbaijan consisted 43% of China’s total trade turnover with the countries of South Caucasus, making Azerbaijan the main trade partner of China in South Caucasus. Since the announcement of Belt and Road Initiative in 2013, trade turnover between Azerbaijan and China has doubled. 6 export missions with participation of major companies and producers from Azerbaijan have been sent to Beijing, Shanghai, Hong Kong, Guangzhou and Urumqi since 2016. We opened wine houses in Shanghai and Urumqi, and a trade house in Luzhou. 

Azerbaijan pays great attention to the development of tourism industry too and with respect to that, we apply simplified visa regime for Chinese tourists. It is worth to mention that the number of Chinese tourists visiting Azerbaijan has increased by 53% in 2018. Today “Azerbaijan Airlines” operates direct flights from Baku to Beijing and Urumqi, and the number of destinations are planned to be increased in near future. I strongly believe that the “Memorandum of Understanding on Simplifying Group Visits of Chinese Tourists to Azerbaijan between the State Tourism Agency of the Republic of Azerbaijan and the Ministry of Culture and Tourism of the People’s Republic of China” signed in March of this year will undoubtedly contribute to the increasing numbers of Chinese people travelling to Azerbaijan.

Azerbaijan was one of the very first supporters of the Belt and Road Initiative and as a testimony to our aspirations to jointly implement this Initiative, Azerbaijan has invested a lot in infrastructure projects both in the country and in the region in order to become a regional transit and logistics hub as a country located in the crossroads of Asia and Europe. There is no doubt that the Belt and Road Initiative brings about vast opportunities and dividends to the participating countries in terms of infrastructure and transportation. However, it is worth to note that the Initiative does not only create opportunities in transportation but enhances trade, tourism, people-to-people contacts, serve the cause of stability and security and peace in the world. We regularly hold large-scale cultural events in China along with Heydar Aliyev Foundation of Azerbaijan to bring our cultural ties to a higher level and ensure that cultural exchanges between our peoples are improving year by year. In general, thriving relations with China is one of priorities of our foreign policy and we are more than confident that friendly relations between Azerbaijan and China will further develop successfully and strengthen for the prosperity and benefit of our peoples in upcoming years.

Ambassador: Azerbaijan is a politically stable and rapidly developing country with a strong economy. Geographical position of Azerbaijan in the crossroads of Asia and Europe creates extensive opportunities for it to become a transit and logistics hub connecting continents and therefore to evolve into a very important player in the region under the Belt and Road Initiative. 

Continuous reforms and committed long-term economic policies, as well as successful foreign cooperation bring about positive results in terms of progressing business environment and broadening investment opportunities in Azerbaijan. During the first quarter of 2019, GDP grew 3% in our country. According to the latest World Bank’s “Doing Business” report, Azerbaijan was ranked 25th in terms of its business climate and became one of the world’s top 10 most reformist countries. World Economic Forum ranked Azerbaijan 30th according to the level of infrastructure development and 34th with respect to the quality of growth. Azerbaijan’s foreign exchange reserves amounted 45 billion USD and our external debt accounted only for 19% of the GDP last year. 

Taking into consideration that the creation of modern transportation infrastructure is one of the priorities for Azerbaijan as a prospering country in South Caucasus, it has been transformed into one of international transport and logistics hubs linking Asia and Europe, through investments made in infrastructure, energy and many other projects both in the country and in the region. Azerbaijan plays an outstanding role in trade through North-South and East-West transport corridors. The fact that Azerbaijan is developing into a center of active international transport routes is a very critical reason for investors to direct their capital to our country, since being a transit country means future business opportunities and increasing potential in regard to heightening economic performance in a short period of time.

There are quite favorable conditions created for investors to open their factories and offices in the special economic zones of Azerbaijan. The special privileges offered in Sumgait Chemical Industrial Park, Balakhany, Mingachevir, Garadagh and Pirallahi Industrial Parks and the High-Tech Park in Baku are very encouraging for the investors to receive further benefits. As a result of maximally simplified business procedures in industrial parks, residents can register electronically and do many other operations through one-stop shop. The incentives offered to the residents of the industrial parks include exemptions from land, property and corporate income taxes, and VAT and customs duties for imported equipment for the period of 7 years.

Additionally, the process of starting and running business has been facilitated by the government of Azerbaijan through several laws and procedures. The government ensures that all investors have equal rights and opportunities and therefore there is no discrimination between foreign and domestic investors. Azerbaijani law is evolving in accordance with the government’s strategic goal of creating a welcoming environment for foreign businesses. Foreign investments are thus protected by guarantees provided under law. A foreign investor is assured that the laws governing its investment will remain in force for a period of 10 years from the initial investment. Also, foreign investors are guaranteed immediate, adequate and effective compensation in a case of nationalization and requisition. Compensation should be commensurate to the amount of the investment at the time of nationalization or requisition, payable in foreign currency and freely transferable abroad. Foreign investors are as well entitled to compensation for damages, including compensations for lost profits resulting illegal acts of the state authorities. Moreover, they are warranted to repatriate profits derived from foreign investments subject to applicable taxes and duties. More than 450 e-services for businesses (e-registration, e-taxation, e-licensing, e-trade, e-intellectual property, e-payment, etc.) are offered to foreign businessmen operating in Azerbaijan. Consequently, investing in Azerbaijan is quite easy, beneficial and safe since there are no foreign exchange restrictions, no limits on the amount of foreign capital in companies, no technology transfer restrictions and no local counterpart requirement.

Ambassador: Azerbaijan is keen to cooperate with other countries to attract more investment to its open and transparent market where entrance requirements are quite easy and business climate are being continuously improved through diverse set of reforms and policies. Chinese investment is no exception in this regard and deepening cooperation motives especially during the recent period are mere indicators for Azerbaijan’s willingness to have more Chinese companies operating in Azerbaijan. During the last bilateral meeting held between President Ilham Aliyev and Chairman Xi Jinping in April of this year, President Aliyev mentioned that we would like to see more Chinese companies and investors doing business in Azerbaijan and also participating in different projects as contractors. Therefore, we welcome more Chinese investors to our country and we are more than confident that the investment environment created in Azerbaijan is quite convenient and competent for them to operate.

Currently, 119 Chinese companies are registered in our country and China has invested about 804.2 million USD in the economy of Azerbaijan and Azerbaijan, in its turn, has invested about 1.6 billion USD in Chinese economy. Chinese companies have been participating in 15 projects worth of 600.7 million USD in Azerbaijan, which are financed through the government budget of Azerbaijan. Big ICT companies of China such as Huawei and ZTE are also operating successfully in Azerbaijan and it is worth to note that the regional office of Huawei is located in Azerbaijan. China National Electric Engineering Co. Ltd. is involved in the construction of a tire plant in Sumgayit Chemical Industrial Park of Azerbaijan and the project is worth of 300 million USD. China CAMC Engineering Co. Ltd. signed a contract worth of 1.17 billion USD with Azerbaijan Steel Company last year on realization of steel mill project in Ganja, Azerbaijan. These recent developments regarding the attraction of more Chinese investment in Azerbaijan once again proves our advancing relations and Chinese investors’ increasing interests in Azerbaijani economy.

Ambassador: Azerbaijan has rich oil and gas reserves, which helped our economy to expand rapidly in 1990’s and investments made in energy sector of Azerbaijan brought about diverse dividends and opportunities to develop other sectors. One of the priorities before the government of Azerbaijan now is to diversify the economy through improving different sectors, including diversification in energy sector itself, to reduce dependence on hydrocarbon resources. Non-oil sector of Azerbaijan grew 1.8% in 2018 compared to 2017. Industrial production has increased by 1.5%, while industrial production in non-oil sector has increased by 9.1% and agriculture has increased by 4.6% last year.

Taking into account the fact that the government of Azerbaijan is vigorously trying to improve non-oil sectors, foreign investment is quite welcome especially to these sectors as relevant promotion is going on and several privileges are being granted accordingly. There are several non-oil sectors in Azerbaijan, which are developing constantly and offering high returns for the future. These target sectors are agriculture, information communication technologies, transport, tourism, manufacturing and construction. 

Azerbaijan has been one of the region’s strongest agricultural centers since pre-Soviet times. The country’s climatic and ecological diversity allows for differentiation in crop cultivation. Telecommunications industry is also one of the largest sectors in Azerbaijan and a major contributor to the country’s economy. BuddeComm’s “Asian Telecoms Maturity Index”, is an index (on a scale between 0 and 100) that measures and ranks the relative maturity of the telecoms industry in all of the 34 countries in Asia. Azerbaijan is ranked 13th out of 34 with a Telecoms Maturity Index score of 43. This ranks Azerbaijan sixth in the “Market Challengers” category. The construction business has evolved into a very competitive sector in Azerbaijan, with a number of strong local companies providing high-quality services for diverse projects, including the development of residential areas, business offices, hotels, etc. Remarkable performance of this sector can be explained by low base effect and government’s anti-crisis measures. As a result of the global financial crisis, construction had contracted by 8.2% in 2009. However, measures directed to increase liquidity in the local market, slow recovery of mortgage system and Government’s investments into the sector helped to rebound construction by 20.3 %. Considering that Azerbaijan is transforming into a transit and logistics hub in the region, a lot of infrastructure projects are being realized in the country and this paves the way for transport sector to become a very critical target sector for both local and foreign investors.

Ambassador: The government of Azerbaijan is implementing a series of reforms in the country in order to ensure stability and economic growth, which are the fundamentals for attraction of investments. These reforms are also very important for creating a better investment climate for businessmen to operate. The government also participates in big regional and international projects to develop the attractiveness and capabilities of the country. The Belt and Road Initiative is one of that kind of projects.

Azerbaijan has initiated the Trans-Caspian International Transport Route, which is known as one of the corridors of the Belt and Road Initiative, namely the Middle Corridor. Making every effort to develop this transport route and improve its competitiveness, many infrastructure projects have been realized in Azerbaijan during the last 6 years since the announcement of the Belt and Road Initiative. Meanwhile, constructions on international highways passing through Azerbaijan, Baku International Sea Trade Port now-operational in the Caspian Sea, newly established contemporary international airports and Baku-Tbilisi-Kars railway, and many other projects paved the way for Azerbaijan to become a very crucial transit and logistics center in the region. Baku-Tbilisi-Kars railway is able to transport 1 million passengers and 5 million tons of cargo now after completion of the first phase and these numbers will be improved to 3 million passengers and 17 million tons of cargo after completion of the next phase soon. The new Baku International Sea Trade Port is capable of transporting 15 million tons of cargo and 100.000 containers, and it is planned to increase these numbers to 25 million tons of cargo and 1.000.000 containers in near future. 15000 km of roads and highways meeting international standards were built in Azerbaijan during the last 15 years.  

Consequently, the government of Azerbaijan takes strict measures, such as eliminating bureaucratic obstacles for businesses, improving rule of law, sustaining reliable macroeconomic and stable political environment, participating in large-scale projects and promoting the economic potential of the country abroad to attract more foreign investments shortly.