Bet on investments: Baku, Ankara synchronize watches
Caliber.Az review

ANALYTICS  22 December 2023 - 19:00

For three decades Azerbaijan and Türkiye have been key partners in the implementation of the region's largest energy and transportation projects. After the 44-day Patriotic War for the liberation of Karabakh, the brotherly nations have become even closer: preferential trade agreements have been signed, and the efforts by business circles of the two countries are aimed at the development of non-oil sector and expansion of investments. New joint endeavors on construction of railroad communications and gas pipeline in Nakhchivan, partnership in "green" energy, development of industry and agro-industrial complex in the Karabakh region are also on the way. The successes of this integration and further joint business endeavors were discussed at the Azerbaijani-Turkish Investment Forum that started in Baku the previous day.

The Azerbaijani-Turkish strategic alliance formed in the recent history is based on a solid economic foundation - participation in joint and international energy and transportation projects, as well as multi-billion mutual investments in petrochemical and mining industry, construction sector, food, agrarian, textile, telecommunications, tourism, restaurant business and many other sectors of the economy. Currently, about two thousand Azerbaijani companies operate in Türkiye, while the number of Turkish firms in Azerbaijan is more than two times higher. "According to available data to date, the number of commercial organizations with Turkish capital registered in Azerbaijan is about 5,670, of which more than 4,000 are active," chairman of the board of the Small and Medium Business Development Agency (KOBİA) under the Ministry of Economy Orkhan Mammadov said recently.

According to the KOBİA head, Türkiye has invested $15.2 billion in Azerbaijan's economy, of which $11.7 billion was in the oil and gas sector and $3.5 billion in non-oil sectors. At the same time, over half a thousand large infrastructure and construction contracting projects totaling $16 billion have been implemented by Turkish companies in our country over the past two decades.

Domestic business tries not to lag behind - its total investments in the Turkish economy by the end of the current year almost approached $20 billion. Moreover, in terms of foreign direct investment (FDI) over the past two decades, Azerbaijan has been steadily among the top 10 countries in the world participating in the capitalization of the Turkish economy.

"In terms of Azerbaijan's investments in foreign countries, Türkiye unambiguously ranks the first, which is clearly evidenced by the level of development of investment partnership between our countries: thus, from 1995 to mid-2023, our country has invested $19.9 billion in Türkiye. It is gratifying that Türkiye also takes the first place among the countries investing in the non-oil sector of Azerbaijan," Azerbaijani Economy Minister Mikayil Jabbarov said, addressing the opening ceremony of the Azerbaijani-Turkish Investment Forum.

According to the minister, Türkiye is the second most important trade partner of Azerbaijan, for 11 months of 2023 mutual trade turnover reached $7.2 billion, and compared to the same period last year the growth amounted to 33 per cent. At the same time, Azerbaijani exports to Türkiye increased by more than 52 per cent and amounted to $5.1 billion. In general, this is quite good trade dynamics: according to last year's data of the State Customs Committee of Azerbaijan, Azerbaijani-Turkish trade turnover at the end of 2022 amounted to $5.842 billion. A notable part of Azerbaijani supplies to the Turkish market falls on the share of oil and gas raw materials, fuel, petrochemical products, electricity and agricultural raw materials, but recently Azerbaijan has been consistently increasing exports of non-oil products to the Turkish market.

In turn, Turkish supplies to our country are almost entirely represented by non-oil products: clothing and footwear, food and medicines, electrical equipment, electronics, cars, furniture, household utensils and other consumer goods. Apparently, imports of Turkish consumer products will increase very dynamically in the next period, taking into account the depreciation of the exchange rate of the Turkish national currency against the Azerbaijani manat, which reached 17.16 liras by December 21. An important factor supporting the high dynamics of trade turnover was the preferential trade regime in force since March 2021, within the framework of which zero customs duty rates were introduced for mutual supplies of a number of goods between Türkiye and Azerbaijan. All these factors contribute to the realization of Ankara's and Baku's plans to increase the level of mutual trade turnover to $15 billion a year in the next few years.

However, the expansion of the investment component and the creation of new joint ventures in the real sector of the economy were identified as the key driving force for expanding economic ties between the two countries in the future. Such mutual interest is evidenced by the participation of more than 600 representatives of state institutions and private sectors from both countries in the Azerbaijani-Turkish Investment Forum in Baku, as well as the signing of a number of investment agreements and memorandums of cooperation. The event, dedicated to the 100th anniversary of the birth of national leader Heydar Aliyev and the establishment of the Republic of Türkiye, was jointly organized by Azerbaijan’s Export and Investment Promotion Agency (AZPROMO) and the public association "Entrepreneurs and Industrialists of Türkiye and Azerbaijan" (TÜİB). The forum also included panel sessions covering sectors of investment, trade, agriculture, defense industry, green energy, health tourism, etc.

"Joint projects implemented by private companies of the two brotherly countries play an important role in the development of our economies, contributing to the development of the non-oil sector, opening new jobs and improving the welfare of citizens, as well as the manufacturing of competitive products," Minister Jabbarov said during the forum, stressing that Azerbaijan has created favorable opportunities for attracting foreign investment, including with the participation of the Azerbaijan Investment Company (AIC) under the public and private partnership. In this regard, AIC has been negotiating with Turkish colleagues and a joint project for the restoration of five small HPPs in Azerbaijan’s liberated territories was developed in 2023.

"In 2021-2023, about $7 billion was allocated from Azerbaijan’s state budget for construction and rehabilitation works in the Karabakh and East Zangazur economic regions. It is indicative that Turkish companies take the most active part in these projects, and as of today they have signed contractor agreements worth $3.4 billion," Jabbarov emphasized.

Apparently, Azerbaijani-Turkish investment partnership and joint venture efforts will expand rapidly in the coming years. In particular, immediately following the forum, AZPROMO and TÜİB signed an Action Plan for 2024, which envisages an increase in trade and investment between the two countries. In turn, DO-DEM and Multipak Ambalaj signed a contract providing for the construction of a paper packaging factory in Azerbaijan. Another agreement was signed between Azerbaijani company Diplomat LTD and Turkish company Dogru Holding, which reached an agreement on the construction of a high-level hotel in Azerbaijan.

During the Baku Investment Forum, as well as the Azerbaijani-Turkish "Meeting of the Business World" event held on December 19, new joint infrastructure and investment projects were discussed in the field of transport (Kars-Nakhchivan railroad construction project), laying foundation of the Iğdır-Nakhchivan natural gas pipeline, as well as the prospects of attracting Turkish logistics and manufacturing companies as residents in the Alat Free Economic Zone. Turkish business is also involved in investment projects in Karabakh: a joint venture - cattle-breeding agro-park has been formed in Zangilan district, Turkish residents participate in the development of mining deposits (gold) in Kalbajar district, in the recreational sector, etc. Baku and Ankara are also preparing to form a special working group to create an energy interconnector through Nakhchivan Autonomous Republic to Türkiye. Currently, cooperation between “Azerenerji” and “Turkiye Elektrik Iletim Anonim Sirketi” is carried out under the road map for 2023-2025.

The prospective business agenda between the two countries will be considered more substantially in February 2024 in Ankara during the next meeting of the Azerbaijani-Turkish Intergovernmental Commission on economic cooperation. Turkish Vice President Cevdet Yilmaz noted the other day during a meeting with businessmen in Baku that the commission meeting is likely to be held in the second half of February and the preparation of a new roadmap aimed at expanding trade and economic relations between the two countries will be discussed on the sidelines of this meeting.

Caliber.Az