A NEW AGE

Azerbaijan 2016 | INDUSTRY & MINING | FOCUS: A NEW INDUSTRY

Playing a vital role in diversification, the industrial sector is achieving unprecedented levels of growth both in terms of production and in the number of enterprises operating in the sector.

Diversification within the Azerbaijani economy has been reinforced largely through the increase in industrial activity in the country. Coming off the heels of 2014 as the Year of Industry, the steady growth and increase in this sector will continue to play an important role. One of the most important factors to bear in mind when analyzing the industrial advances made in the country is that the private sector owns over 75% of the market share in industrial production. In a speech delivered by President Aliyev to his Cabinet members, he pointed out that the industrial production of the country increased by 2.4% over the year 2015.

Highlighting the true progress made in the industrial capacity of the country, Minister of Economy and Industry Shahin Mustafayev reported that, in the year 2015 alone, “up to 270 industrial enterprises, including technical equipment, metal structures, concrete products plants, and textile factories commenced activity.” This is in addition to the more than 230 industrial enterprises that began activity over 2014, which brings the total to over 500 enterprises starting activity in the industrial sector in the last two years alone. The mining capacity of the country has also increased in terms of output and percentage of the national GDP. Anglo-Asian Mining, the leading mining company of Azerbaijan, commenced activity in a new gold mine in 2015 and reported record gold output from its Gedabeck mine in 2015. The steel industry has been expanding as well, with plans for a new steel production complex to be built in Ganja. This new complex will have an annual output of 1.5 million tons. Azerbaijan is soon set to become completely self-sufficient in steel and the abundance of iron ore reserves will keep the country comfortable for 80-100 more years. The new industrial era that is being initiated by the country is the manifestation of a smart governance policy relating to the business practices of industrial players. Moreover, the Minister included that the government has taken many steps to assist the growth of industry from the legislative side as well. The government now offers various tax and customs breaks to businessmen that are looking to import machinery and equipment into the country for the purpose of investment in priority areas of the economy. They are completely exempt from customs duties for seven years, for example

The central strategy of the industrial efforts of the country revolves around import-substitution efforts, with the eventual pivot towards exporting goods once the industry reaches that capability. Many industries have already made such a leap and export high volumes of industrial goods abroad. The company Azertechnoline, a resident of a domestic industrial park, has recently signed an agreement to export 60 thousand tons of pipes worth $45 million, for example. In addition, the Baku Shipyard company recently inked a $400 million contract for building various sea vessels. Cement production has reached a level at which the country no longer needs to import cement. In addition, President Aliyev declared that he wants to see industrial zones realized in all regions of Azerbaijan, signing an official decree for the creation of an industrial estate in Neftchala. To date, the country already has many advanced technical, chemical, and technological parks throughout the regions of the country. Besides providing thousands of jobs for citizens in the regions, these parks in Sumgait, Balakhani, Mingachevir, and Garadagh align with the national vision to bring further economic development to the regions as well.

These facts work to decenter the narrative that Azerbaijan is a nation that relies solely on its energy resources and is just now making meager strides toward meaningful diversification. In fact, over $450 million in FDI has been allocated into the various industrial projects of the country, while cutting-edge technology and collaborations with industrially advanced countries are abundant. Adding to this, the transport sector has rapidly developed as well, ensuring that the export potential created by the industrial sector will have sufficient means to enter new, international markets.