Rebuild Karabakh exhibition reveals investor interest in Karabakh development
Review by Caliber.Az

ANALYTICS  20 October 2022 - 15:46

It has been almost two years since the victory in the Second Karabakh war, and for this relatively short period, Azerbaijan has managed to develop a broad scale of construction work on the liberated lands. In addition to other industrial sectors, this gave an impetus to the domestic construction sector and the production of building materials. It is noteworthy that Azerbaijan has attracted an impressive number of contractors from countries friendly to Azerbaijan to develop highways, and airports, and restore energy and utility infrastructure and communications systems. The number of foreign firms willing to participate in such projects is growing rapidly, which was confirmed by the II Azerbaijan International Exhibition for the restoration, reconstruction, and development of Karabakh - Rebuild Karabakh-2022, which was launched on October 19.

The three-day forum, organized by Caspian Event Organisers LLC, is taking place at the Baku Expo Center along with the traditional 27th Azerbaijan International Construction Exhibition BakuBuild-2022 and 14th international exhibition for heating, ventilation, air conditioning, water supply, plumbing and swimming pools, Aquaterm Baku-2022. This year, the number of exhibitors increased by 10%, and a total of 300 companies were involved in the three exhibitions, with almost half of the stands represented by foreign companies. The Rebuild Karabakh exhibition and construction forum will provide an opportunity to learn about the latest solutions for security, mining, information technology, road infrastructure, energy, new materials and technologies for the construction sector, and more.

The genuine interest of foreign partners in participating in the regeneration of the liberated territories of Azerbaijan is also shown by the fact that companies exhibiting at Rebuild Karabakh and BakuBuild from Türkiye, Germany, Sweden, Italy, Hungary, Poland, Romania, Iran, India, UAE, Russia, Belarus, Kazakhstan, Uzbekistan, and Georgia - totalling 17 countries - are represented by national and regional stands, which means that alongside private initiative, interests at a national level are also evident here.

The latter is not surprising given the unprecedented scale of the 'Great Karabakh construction project' in the Caspian region. In 2021-2022 alone, over 4.4 billion manats were allocated from the budget for infrastructure and other works, and the amount was further increased after the revision of the revenues part of the budget in June this year - 1.447 billion manats were additionally reserved. The allocated funds are actively applied. Thus, the total investment in fixed capital (construction of buildings, infrastructure, industrial facilities) and in the development of Karabakh and East-Zangazur economic regions amounted to 1.76 billion manats in the first half of 2022.

The volume of state funding for Karabakh recovery will not decrease for quite a long time, and future tranches are estimated to amount to many billions of US dollars. And it is not only about direct budgetary injections: today the construction of industrial zones and agro-parks in Aghdam, Zangilan, and Jabrayil districts has already started in the liberated territories, and local investors are involved in these business initiatives, and in the future foreign companies and international donor structures. Thus, the total amount of private investments in Karabakh is expected to reach 300 million manats by the end of this year alone. Accordingly, for many years to come, large construction projects in Karabakh will create ample opportunities for local and international construction contractors, suppliers of equipment and building materials, and consulting and design firms.

"Large-scale reconstruction work is underway in the Karabakh region, and this creates huge opportunities for entrepreneurs, companies, particularly small and medium-sized businesses, to participate in these projects," said Orhan Mammadov, chairman of the Small and Medium Business Development Agency (KOBIA), which is participating in the exhibition. The positive effect of the injections in the Karabakh region has already led to a recovery of the domestic construction sector from years of a prolonged recession. By the total of January-September 2022, the share of the construction sector in the GDP of the republic increased by 13% in comparison with corresponding indicators of last year. Another precise indicator is the sphere of manufacture of building materials, which has appreciably risen due to orders on Karabakh projects. Thus, according to the State Statistics Committee, in January-September this year the country produced building materials to the amount of 808.9 million manats, which is 17% more than during the same period last year.

The potential of construction companies and building material producers, as well as investment opportunities and demand for contracting in the Karabakh and East Zangazur economic regions, was clearly presented at the three exhibitions and associated conferences which began on October 19. A panel discussion entitled "Business and Investment Opportunities in Karabakh" was held on October 19, and a photographic exhibition entitled "Urbicide in Karabakh" was launched on the same day. The participants also watched a short documentary film titled "Crisis Relief and Rehabilitation in Cities" about the reconstruction of the village of Aghali and other settlements liberated from the occupation.

Attending the opening ceremony, Deputy Economy Minister Sahib Mammadov emphasised the importance of holding international exhibitions, including exhibitions in the construction sector, as they promote business development, held business talks, and attracted investors. "We are sure that the forum will have a positive impact on the expansion of business ties between our business entities both at local and international levels," Sahib Mammadov said, emphasising that this trend is very important for the acceleration of the reintegration processes in the Karabakh region which has huge production and industry potential.

Actually, this process is growing even today: the number of proposals from businesses to participate in the restoration of Karabakh increased up to 1300, and 460 applications from the total number fall on the share of foreign companies. The leading companies here are Turkish companies planning to develop the mineral resources of the Karabakh region, including gold and copper deposits, as well as to develop the sphere of tourism, agricultural processing, production of clothing and consumer goods, building materials, construction services, etc. About 65 applications were received from Kazakhstani companies wishing to realize business initiatives in Karabakh, there is a number of proposals from entrepreneurs from Hungary, Uzbekistan, Great Britain, Israel, and Pakistan - in total from 40 countries of the world.

The readiness of foreign partners to take part in these projects is of paramount importance as it will enable the implementation of all undertakings in the most transparent manner, with clear technical parameters and timeframes, and, most importantly, ensure the transfer of modern technologies. The participation of foreign investors is an important condition for attracting grants from international donor structures, technical and consulting assistance, and venture capital.

Sahib Mammadov underlined that favorable conditions have been created in the liberated territories to entice foreign investors and contractors. In particular, economic zones are already functioning in Aghdam and Jabrayil, where the first residents have recently registered and started building their enterprises. Such residents are provided with significant preferences, including exemption from income tax, property tax, land tax, as well as VAT on imported machinery, technological equipment, and installations for 10 years from the date of their registration. In addition, the residents are exempt from customs duties on imported machinery, technological equipment, and installations for a period of seven years. "Moreover, a new package of incentives and support is being developed additionally for entrepreneurs and investors who are interested in the restoration of Karabakh," Mammadov said.

The Ministry of Agriculture is also developing its own package of benefits and preferences that will be provided to farmers and processors operating in the liberated territories. In particular, a package of measures has been developed for livestock farms, which will provide additional subsidies.

Caliber.Az