Wherever We’re Needed

How has the Azerbaijan Investment Company (AIC) contributed over the past year to national development?

Overall, 2013 was immensely successful for Azerbaijan. We saw the launch of our first telecommunications satellite earlier in the year. Some 20% of the 3.2—ton satellite’s capacity will be used to meet local demand, whereas the remaining 80% will be offered up for international commercial purposes. As recently as December 17, Azerbaijan hosted an official signing ceremony following an agreement over the construction of the $45 billion Trans-Adriatic Pipeline (TAP) for natural gas deliveries to Europe, a 520-kilometer Southern Gas Corridor to carry natural gas from Azerbaijan through Turkey, Albania, and Greece to Italy, which will serve to enhance Europe’s energy security. The TAP, a project of Norwegian Statoil, Swiss Axpo, and German E.ON Ruhrgas, is due for completion in 2019. The total cost of the project is approximately $2.2 billion. The annual capacity of the pipeline will be 10 billion cubic meters (bcm), with the possibility of expansion to 20 bcm in the future. The jewel in the crown for AIC, though, was Baku Shipyard Company LLC, a new 62-hectare shipyard jointly owned and developed by the State Oil Company of the Azerbaijan Republic (SOCAR), AIC, and Keppel Offshore & Marine Ltd. (Keppel O&M), a Singapore-based world leader in the maritime industry. It was inaugurated by the President of Azerbaijan, HE Ilham Aliyev, on September 20, 2013. The new yard is designed to undertake the construction of a wide range of specialized vessels and merchant ships including subsea vessels, anchor handling tug and supply vessels, and multi-purpose offshore support vessels such as platform supply vessels, as well as tankers and cargo vessels. The yard also has ship repair and conversion capabilities. Although Keppel O&M owns just a 10% stake in the yard, it has full responsibility for management and operation. The largest shareholder, at 65%, is SOCAR, followed by AIC, which owns 25% of the company’s equity. Phase I of the yard was built at a cost of $470 million. When operating at full capacity, it is able to undertake up to 100 repairs and conversions per annum and is estimated to achieve an average annual steel output of 25,000 tons. Plans for Phase II include the construction of a graving dock with added facilities for offshore projects. With highly skilled human resources, world-class expertise, and the right know-how, as well as well-structured capital investments, we will not have to wait too long to see the shipyard become a globally recognized center of excellence in shipbuilding, repair, and conversion. Baku Shipyard Company LLC will not only be serving local demand in Azerbaijan, but also that of the littoral countries of the Caspian basin, as well as becoming an important production hub for maritime industries in the region.

In what ways is the government helping to support agricultural producers in Azerbaijan?

The state has established a strong institutional mechanism aimed at sustaining economic growth and stimulating production and development in the non-oil sector of the national economy. To promote the further development of business in this sector the state has been encouraging the introduction of a range of financial and non-financial schemes. Agricultural producers do not pay taxes besides land tax, which varies depending on the quality and location of the land in question. Businesses engaged in the food processing industry are subject to the statutory tax regime, which is still quite competitive. All companies registered in Azerbaijan, even those that are 100% foreign owned, may benefit from numerous subsidies, discounts, and other privileges provided by the state. Such subsidies and discounts can scale up to 70% of the value of goods, products, and services producers may require in the line of their business. Recent disbursements of soft loans in the agricultural sector by the National Entrepreneurs Support Fund total over $930 million. As another part of the institutional mechanism, the establishment of the AIC was a showcase of one of the government’s first public-private partnership (PPP) initiatives. Projects in agriculture add great significance to the structure of our portfolio, coming second only to industry, and representing nearly one-fifth of our total investments. So far, AIC has invested over $28 million in various projects in the sector. One such project is Aghstafa Agroservice. Launched in 2012, and with an overall value of just under $6 million, one-quarter of which is owned by AIC, the project serves the purpose of establishing an advanced agro-technical services facility to help improve productivity and the efficient use of soil. Having partnered with RAO Global Group GmbH on this project, we at AIC are pleased to have been able to facilitate local access to modern technology and machinery for daily use. Another project AIC has invested in is Davachi Broyler, a poultry production facility with an overall value of more than $60 million. The AIC investment of about $15 million back in 2010 helped with the renovation and capacity expansion of one of the largest poultry production farms in Azerbaijan. The facility today occupies 135 hectares of land and employs over 800 people, who contribute to the production and processing of poultry products in excess of 13,000 tons a year. Azertokhum is one of the greenfield projects AIC joined in 2010. The $24 million investment was aimed at the construction of the first modern seed processing plant and granary, as well as the cultivation of highly reproductive, elite, and super-elite seeds using advanced technologies. Three years later, Azertokhum today occupies a 70,000-sqm area in central Azerbaijan. It has a production capacity of 86,400 tons of seeds per annum. The plant also has dry and wet grain silos, and a drying tower with a capacity of 36 tons, as well as a 10 ton-per-hour packing unit. These, and other new projects that we are currently considering, help to put AIC in a privileged position as a part of the mechanism established to support the non-oil sector of the national economy.

Azerbaijan has reached out to a number of relatively new partners in 2014. What are your expectations regarding the contribution of foreign investment and trade to economic diversification?

This year has been particularly productive in terms of building new partnerships with foreign investors. Here, I would like to refer to a famous quote by Mark Zuckerberg, who defined the basis for Facebook’s partnership strategy as: “We build the social technology, they provide the music.” In Azerbaijan, we offer mutually beneficial investment opportunities and a dependable partnership in return for globally attested and recognized new technology, know-how, and innovative ideas that will serve our goal of fostering development in the non-oil sector of the national economy.

Azerbaijan will be the host of the first European Games in 2015. What will that mean in terms of investment in the economy?

The forthcoming European Games is just another success story in Azerbaijan’s drive to assert its well-deserved reputation as a host country for large-scale international events. Every such event opens up new development avenues, including the construction of multiple venues for various sports and games, such as a new football stadium with a retractable roof to house 65,000 spectators, the state-of-the-art National Gymnastics Arena with a seating capacity extending to 12,000 people, the new Baku Aquatic Centre, athletics villages, roads, and other related infrastructure. The government has not been sparing in the provision of resources in developing this infrastructure, which will continue to serve local people and attract a good number of returning visitors, helping to boost tourism in the years beyond 2015.