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flag Azerbaijan Azerbaijan: Investing

In this page: FDI in Figures | Why You Should Choose to Invest in Azerbaijan | Procedures Relative to Foreign Investment | Investment Opportunities

 

FDI in Figures

In a context where global foreign investment increased by 10.9% in 2013, in particular in Europe (+25.2%) and in Latin America (+17.5%), FDI flows to developing economies reached a new high of US$759 billion. However macroeconomic fragility and policy uncertainties are driving investors to caution.

Foreign direct investments are very important in the Republic of Azerbaijan, especially in the energy sector. The flows of FDI (USD 563 million in 2010) reached over 2 billion USD in 2013. The shares of FDI in relation to the GDP are also increasing, exceeding the 20% threshold since 2009.

The country is part of the customs union between Russia, Kazakhstan and Belorussia, which in terms of volume is the most important in the region and is almost exclusively related to hydrocarbons, with major projects for oil and gas pipelines and related services.

The development of the FDI in 2014 will depend in particular on the economic health of its Russian partner, currently the dominant investor in Azerbaijan.

Information on the 2013 FDI influx in this region can be accessed in the Global Investment Trade Monitor published in January 2014 by the United Nations Conference on Trade and Development (UNCTAD).

 

Country Comparison For the Protection of Investors

  Azerbaijan Eastern Europe & Central Asia United States Germany
Index of Transaction Transparency* 7.0 7.0 7.0 5.0
Index of Manager’s Responsibility** 5.0 5.0 9.0 5.0
Index of Shareholders’ Power*** 6.0 9.0 5.0
Index of Investor Protection**** 6.7 5.9 8.3 5.0

Source: Doing Business - Last Available Data.

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action. **** The Greater the Index, the Higher the Level of Investor Protection.

 
Foreign Direct Investment 201120122013
FDI Inward Flow (million USD) 1,4652,0052,632
FDI Stock (million USD) 9,11311,11813,750
Performance Index*, Ranking on 181 Economies 134--
Potential Index**, Ranking on 177 Economies 83--
Number of Greenfield Investments*** 231933
FDI Inwards (in % of GFCF****) 11.013.316.4
FDI Stock (in % of GDP) 13.816.218.7

Source: UNCTAD - Last Available Data.

Note: * The UNCTAD Inward FDI Performance Index is Based on a Ratio of the Country's Share in Global FDI Inflows and its Share in Global GDP. ** The UNCTAD Inward FDI Potential Index is Based on 12 Economic and Structural Variables Such as GDP, Foreign Trade, FDI, Infrastructures, Energy Use, R&D, Education, Country Risk. *** Green Field Investments Are a Form of Foreign Direct Investment Where a Parent Company Starts a New Venture in a Foreign Country By Constructing New Operational Facilities From the Ground Up. **** Gross Fixed Capital Formation (GFCF) Measures the Value of Additions to Fixed Assets Purchased By Business, Government and Households Less Disposals of Fixed Assets Sold Off or Scrapped.

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Why You Should Choose to Invest in Azerbaijan

Strong Points
The country's strong points are:
- Fast economic growth;
- An interesting geographic location;
- Competitive production costs;
- Cheap and qualified labor;
- The size of its energy sector;
- The signing of numerous bilateral treaties aimed at promoting trade.
Weak Points
The country's main weak points are:
- The poor quality of its infrastructures;
- The high rate of corruption within the administration;
- The slowness of procedures;
- The destabilization risks due to the conflict in Karabakh;
- Other than the oil industry, there are few developed sectors;
- A certain level of Insecurity.
Government Measures to Motivate or Restrict FDI
The country has signed numerous treaties to encourage FDI. It has also put in place legislation facilitating the creation of companies, limiting corporate taxes, and laws to protect FDI.
For more information and to consult the law texts, visit  the Agency for the Promotion of Investment in Azerbaiajan website.
Bilateral Investment Conventions Signed By Azerbaijan
The country has signed conventions with many countries: Austria, Belgium, Bulgaria, China, Egypt, Finland, Georgia, France, Germany, Greece, Iran, etc.

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Procedures Relative to Foreign Investment

Freedom of Establishment
In theory, there is a great amount of freedom for investments, but the bureaucracy and the corruption makes investing difficult outside the energy sector, which is dominated by foreign investments.
For more information, consult the report "Investment Climate 2011" on the US Department of State's website.
Acquisition of Holdings
A majority holding interest in the capital of a local company is legal in Azerbaijan.
Obligation to Declare
The Agency for the Promotion of Foreign Investments in the country gives information on the authorizations required for setting up a company.
Competent Organization For the Declaration
Agency for the Promotion of Investment in the Republic of Azerbaijan
Ministry of Taxes of the Republic of Azerbaijan (for starting a company)
Requests For Specific Authorizations
For certain sectors, specific authorizations are necessary.

For more information, consult the report "Investment Climate 2011" on the US Department of State's website.
For more information, consult the website of the Agency for the Promotion of Investment in the Republic of Azerbaijan.

Learn more about Foreign Investment in Azerbaijan on Globaltrade.net, the Directory for International Trade Service Providers.

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Investment Opportunities

Investment Aid Agency
Agency for the Promotion of Investment in the Republic of Azerbaijan
Ministry of Economic Development of Azerbaijan
Tenders, Projects and Public Procurement
Tenders Info, Tenders in Azerbaijan
Asian Development Bank, Proposed Projects in Asia
Globaltenders, Tenders & Projects from Azerbaijan
DgMarket, Tenders Worldwide
Other Useful Resources
Website of the Azerbaijani government
 
 

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Learn more about Investing in Azerbaijan on Globaltrade.net, the Directory for International Trade Service Providers.

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Last Updates: October 2014