BRING THE MONEY

Azerbaijan 2016 | ECONOMY | FOCUS: INTENSIFYING INVESTMENTS

FDI has experienced a marked increase in Azerbaijan over 2015.

During a period in the country's history that is characterized by plummeting oil prices and volatile commodities markets, some may think that a largely energy-reliant country such as Azerbaijan would be struggling to attract foreign investment. In reality, almost the exact opposite is true. Choosing instead to view these trying times as opportunities for future development, foreign investors have dramatically increased their activity in Azerbaijan over 2015. The fact that FDI increased alongside domestic economic turbulence speaks to the high level of investor confidence that emanates from foreign corporations that wish to take their business to Azerbaijan. Thus, despite the temporary economic slowdown, Azerbaijan remains a strong partner and trusted recipient of FDI from all over the world.

In addition to furthering economic activity in Azerbaijan, FDI flows are helping to accomplish other important domestic tasks. More specifically, FDI is helping to increase the economic diversification efforts that are currently a top priority for the country. Although the oil sector still receives the largest amount of FDI, non-oil sector FDI has been steadily growing, particularly as a result of the new and highly advanced parks that cultivate growth and promote advancements in industry, chemicals, and the ICT sector. Azerbaijan, fully aware of the potential benefits of FDI, has successfully worked to create an inviting atmosphere for investors that are looking to do business in the country. For example, investors looking to get involved in one of the country's parks are granted customs and tax breaks, which frees up additional capital to be used during the start-up phases of production and makes projects with high overhead costs more economically viable. Beyond that, Azerbaijan has treated the issue of FDI with utmost importance. In this respect, the government has encouraged many treaties with foreign companies to accelerate the rate of investment growth and even passed legislation designed to protect foreign investments, limit corporate taxes, and make it easier to create new companies within the Republic.

Non-oil sector investments have been focused on the tourism, agriculture, and service industries. As a testament to this growth, in the first half of 2015 alone, investment in these non-oil sectors increased almost six times over. Furthermore, declaring the year 2015 as the “Year of Agriculture” in Azerbaijan helped spur an increase from foreign investors in the arena of agro-investments. The bulk of FDI coming from the UK was focused on agriculture in 2015, for example, highlighting the fact that FDI flows follow closely with important events in the country.

Azerbaijan is no stranger to hosting important and influential events worthy of attracting high levels of FDI. Baku hosted the inaugural European Games, which took place in 2015, the Formula 1 Baku Grand Prix is set for July of 2016, and the Islamic Solidarity Games are coming to Baku in 2017. If 2015 can be used as a benchmark to gauge the future levels of FDI with respect to hosting large-scale international events, continued increases are to be expected.

Focusing on the bigger picture, in the first half of 2015, FDI alone saw over a 40% increase compared to the same time period of the previous year, with domestic fixed asset investment bringing in a total of AZN4.9 billion. These impressive statistics are not as shocking when considering the list of advantageous qualities about doing business in Azerbaijan. Apart from its financial stability and natural resources, the international significance brought about by the unique location of the country is second to none.
From a geographical standpoint in terms of the sources of FDI flows coming to Azerbaijan, the biggest contributor was the UK, which was responsible for supplying 31% of all FDI. Following the UK was Turkey, Norway, Iran, Russia, the US, and Japan. This diverse list of countries further highlights the fact that Azerbaijan is seen as a welcome place for investment from nearly all corners of the globe. Due to the fact that FDI within Azerbaijan is an issue treated with appropriate amounts of stately intelligence and economic tact, it will continue to help the country produce future economic growth.