Sites of Plenty

Nearly 100,000 people are listed as working in the construction sector by Azstat, out of a total labor force of 4.4 million. The state estimates total spending on construction at about $20 billion per year, 83% of the expenditures coming from public projects and the remainder private investment. The construction sector accounts for about 10% of Azerbaijan’s GDP. The volume of housing construction in the country reached 2.1 million sqm in 2013, a 10% increase over the previous year.

According to the Azerbaijan Press Agency (APA) during the first three months of 2014 the government devoted nearly half of state expenditures to construction ($931 million) to projects related to social development such as schools and sports facilities; and $1.87 billion for the construction and rebuilding of basic infrastructure, from roads and water mains to communications facilities and urban gas pipelines. Total government expenditures for the quarter were $6.3 billion. Projects completed in 1Q2014 include a new health center in Baku, the National Conservatory in Sumgait, and three factories in the Goy-Gol region: a paper and cardboard factory, an oil processing plant, and a copper processing plant. The state completed in 1Q2014 an Olympic sports facility and youth center in Gabala and the first phase of Tufan, an alpine ski resort and summer recreation complex, as well as a 200-bed hospital and several secondary schools and pre-schools.

CONSTRUCTION MATERIALS

Extrapolating from the latest official figures for the value of construction materials production in Azerbaijan, the sector will produce around $600 million worth of various materials in 2014, from cement to rebar. The country imports all of its plate glass for windows, though does manufacture glass bottles. In 2012, Azerbaijan imported $86 million worth of glass used for construction projects, while exporting only $1.5 million of glassware. The country is currently importing about $10 billion more in materials and services than it exports.

According to the Turan Information Agency, Azerbaijan increased its cement production by 3.8% in 2013, to over 2 million tons per year, an historic high that meant domestic production met about 44% of demand. With all the grand projects underway in the country, from Khazar Islands to White City, plus the expected Southern Gas Corridor pipeline and other energy industry infrastructure, demand for cement is seen rising to 5.5 million to 6 million tons per year.

Production is dominated by the three top cement manufacturers: Holcim, Akkord, and Norm. Holcim is the country’s largest cement producer and until recently was the only company to produce clinker, with total output just over 1 million tons annually. Norm runs the largest cement plant in the South Caucasus and plans to increase total capacity to 2 million tons per year, and in early 2014 began producing clinker. Akkord also in 2013 announced plans to increase its annual production capacity to 3 million tons.

Deputy Economic Development Minister Niyazi Safarov was quoted by AzerNews at the Eurasian Cement Forum in Baku in October 2013 as saying that domestic cement production had increased 2.3 times over the last decade, and that in the same period the number of companies producing construction materials had increased nearly 12-fold. The Minister added that the various plans to expand production capacity means that Azerbaijan will be able to meet its own cement demand by as early as 2015. The country imported about 1 million tons of cement from neighboring Georgia in 2013, as well as lesser amounts from Turkey and Iran.

In the first two months of 2014, Azerbaijan registered a 49.7% increase in rebar production over the same period a year earlier, producing 48,000 metric tons of rebar, for a pro-rated annual output of 288,000 tons.

MEGAPROJECTS

Azerbaijan boasts some of the largest construction projects in the world, both in the energy sector and in urban planning. On the oil and gas side, few projects can compete in size with the plan, led by BP, to create a new Southern Gas Corridor to carry Caspian gas to Europe via an extended Trans-Anatolian Pipeline (TANAP). This $45 billion-pipeline project in 2014 has the formal backing of both the Turkish and Azerbaijani governments to start in 2015 and ultimately will connect to the Trans-Adriatic Pipeline (TAP) that crosses Greece and Albania into Italy.

Baku is changing faster than most cities on Earth, with billions of dollars committed to various megaprojects—the metro system alone will see 164 kilometers of tunnels dug over the next two decades and the building of more than 50 stations. The master plan for Baku 2030 also calls for other new modes of mass transit, such as metro-buses, light rail, and elevated monorails in a bid to improve the quality of life and reduce air pollution.

Recently completed projects in Baku include the Heydar Aliyev Center, designed by British-Iraqi architect Zaha Hadid, the Flame Towers project, and the Port Baku Towers. The grand development of Baku is to cover some 34,000 hectares, including both the city center and plans to reclaim thousands of hectares of former industrial areas along the Caspian shore. The main project on the waterfront, White City, will extend the Baku Boulevard seafront promenade by 1.3 kilometers and build a total of 18,000 residential and commercial spaces. International architectural and design firms such as Atkins, Foster & Partners, F+A, DLR Group, UN Studio, and WSP are partnering on the Baku White City project.

The Khazar Islands project, led by billionaire Ibrahim Ibrahimov, will cover a planned 55 artificial islands and aims to provide an entirely new city for up to a million people. The organizers estimate the total project will cost about $100 billion. The project’s Azerbaijan Tower, at 1,050 meters, would be the world’s tallest building—a fitting tribute to the world-class ambitions of the pearl of the Caspian.