Azerbaijan Country ReportPresented by the

Ministry of Foreign Affairs

FavorableFavorable locationlocation

Azerbaijan is the country on the crossroads of Eurasia

Basic information

I Establishment: 28 May 1918

I Independence: 18 October 1991

I Official Language: Azerbaijani

I Political system: Presidential

Republic

I Area: 86.6 ths. sq. km.

I Population: 9 million

I Capital: Baku

I Autonomous Republic:

Nakhchivan

I Currency: Manat *

* (0.79 AZN=1 USD)

State budget State budget

Dynamics of budget growth, mln USD

GDP growth rate 5 %

GDP per capita ($) 5,697

Investments ($) 17.3 bln

FDI ($) 3.3 bln

Inflation 5.7 %

Unemployment rate 6%

Poverty level 9.1%

Average monthly salary ($) 406

2010

5 %

GDP growth

12.3%

17.3 bln $

12.1 bln $

2010

Strategic currency reserves

29 bln $

Non-oil investments

Total investments

Income growth rate of population

Macroeconomic figures

pro

du

ctiv

ity

GDP share in the region

I GDP share in the South Caucasus (%)

State Programs

I State Program on socio-economic development of

regions of the Republic of Azerbaijan in 2009-2013

I State Program on Food Security in 2008-2015

I State Program on the development of tourism in the

Republic of Azerbaijan in the years of 2010-2014

I State Program on use of alternative and renewable

energy sources in the Republic of Azerbaijan

Poverty reduction

I State Program on Poverty Reduction and Sustainable Development of the Republic of Azerbaijan in 2008-2015

Poverty reduction dynamics

Economic reforms

Reforms in: - getting credits - trading across borders

Reforms in: - getting credits - paying taxes

Country Ratings

ILong term credit rating: ‘BBB –’(Investment Grade*)

IShort-term credit rating: ‘F3’

IUNDP Human Development Report – 67

IWEF Global Competitiveness Report 2010-2011

– 57 among world and 1st among CIS countries

2010

I Corporate Tax 20%

I Value Added Tax 18%

I Simplified Tax 4% and 2%

I Agriculture Tax

I No limits on the Repatriation of profits

I Inheritance and Gift Tax

I No customs duties on non-oil production imports (specified agricultural products)*

I No VAT on non-oil production imports (specified agricultural products)*

Taxation

*Effective 01.03.2011

Foreign TradeForeign Trade

• More than 40 Free Trade Agreements• 138 trade partners in 2010• GSP, GSP+• WTO negotiations process

Investment ClimateInvestment Climate

Major factors that turned Azerbaijan into a leading FDI destination

National legislation:Law on Investment ActivityLaw on Protection of Foreign InvestmentsLaw on Special Economic ZonesInternational legal regulationsAgreements on Avoiding Double Taxation

WTO membership negotiations (conforming national legislation with the International normative acts)

Institutional support by the Government:AZPROMOAzerbaijan Investment Company National Fund on Support of Entrepreneurship

Investments

FDI3.3 bln

USD

FDI3.3 bln

USD

*2010

FDI Flow

Well-developed Infrastructure• Logistical centers for Asia-Europe, Middle East-CIS• 2nd largest port in Caspian Sea• International passenger & cargo terminal

Rail Infrastructure• Easy access to Black Sea region

• Well established links with neighbouring and former USSR countries

• Baku-Tbilisi-Kars Rail road – the Iron Silkway

Interesting facts

I First Baku ‘oil boom’

I Nobel’s first Kerosene factory

I 1846–first hand-dug oil wells

I First Baku-Batumi Pipeline

I Nobel’s distribution system

I First rail tank cars

I 50% of world oil production in XIX century

I 80% of total Soviet oil production during World War II

Key elements of the energy strategy of Key elements of the energy strategy of AzerbaijanAzerbaijan::

Maintain energy security of the CountryMaintain energy security of the Country;; International cooperationInternational cooperation;; New infrastructure development and New infrastructure development and

upgradeupgrade,, modernization and efficient use of modernization and efficient use of existingexisting infrastructureinfrastructure;;

Optimization of ManagementOptimization of Management;; Oil revenues managementOil revenues management;; Expansion of geography of operations and Expansion of geography of operations and

investments portfolio of SOCARinvestments portfolio of SOCAR;; Diversification of consumer markets and Diversification of consumer markets and

export transportation routes for Azerbaijan’s export transportation routes for Azerbaijan’s hydrocarbon resourceshydrocarbon resources;;

Contribution to the development of Contribution to the development of Southern Energy Corridor strategySouthern Energy Corridor strategy

Azerbaijan – Oil and Gas:trends and perspectives

Energy Strategy of Azerbaijan

Map of oil and gas pipelines “HAPPINESS IS MULTIPLE PIPELINES”

I The power sector has a leading role in the economy of Azerbaijan

I The country is fully electrified, electrical power is the most utilized energy source

I Increased demand for electricity by 4.7% each year until 2015  

I Potential - Renewable Energy Sources

- Solar, wind, water, sea-energy, waste, bio-energy,

I Industry

Alternative and Renewable Energy

STRATEGIC GOALSRenewable Energy Development

The forecast of development of Oil and ICT sectors

Oil Fund income, billion USD

ICT sector revenue, billion USD

Investment Project

I Baku White City

www.bakuwhitecity.com

Armenian-Azerbaijan-NagornoArmenian-Azerbaijan-Nagorno KKarabaarabakkhh conflict-impactconflict-impact onon economic growtheconomic growth

• Military conflict with Armenia (1988-1994) over the territory of Nagorno-Karabakh

• 20% of the territory of the Republic of Azerbaijan is currently under occupation of Armenia

• The cease-fire has been in force since 1994

• Total refugees and IDPs – 1.010.000