Future of business in Karabakh
Focus on agriculture and industry

ANALYTICS  29 June 2024 - 12:46

In Azerbaijan's long-term strategy for developing its non-oil sector, a key trend is the formation of an agro-industrial cluster in the Karabakh region. Significant progress has been made in this direction this year, with residents of the largest Aghdam Industrial Park in the region soon to commission their first industrial enterprises, beginning production and exporting goods.

Discussions at the recently concluded two-day forum in Shusha focused on the prospects for entrepreneurship in the Karabakh and East Zangazur economic regions, aspects of public-private partnerships, and the provision of financial incentives and fiscal preferences to businesses.

A short time has passed since the Azerbaijani army liberated the destroyed and looted towns and villages of the Karabakh region from nearly thirty years of occupation. Over the past three and a half years, significant infrastructure transformations have been achieved here: key transport, energy, and communal facilities have been restored. According to the first phase plan of the “Great Return to the Liberated Territories of Azerbaijan” State Program, mass residential construction is underway, and citizens have begun returning to their native homes.

The key objective of the "Great Return" government program is to provide employment for future residents of revitalized towns and villages, and to create a favourable business climate on liberated lands to attract investors and develop industrial, processing, and service enterprises. The most intensive efforts are underway in Aghdam, where since the second half of 2021, the largest industrial zone in the region, Aghdam Industrial Park, has been developing on a 190-hectare site. Currently, 25 business entities have resident status in the industrial park, with an additional six companies registered as non-residents, collectively investing more than 216 million manats ($127 million).

"The Aghdam Industrial Park is established to facilitate the production of competitive industrial goods in the Karabakh region and to ensure a favourable business environment for investors. In terms of the number of registered residents, Aghdam Industrial Park ranks second in the country after the Sumgayit Chemical Industrial Park (SCIP)," stated Seymur Adigozalov, Chairman of the Board of the Economic Zones Development Agency (EZDA), speaking at the forum " New Opportunities for Entrepreneurs: Let's Revive Karabakh Together."

According to the head of EZDA, residents have already invested more than 35 million manats ($20 million) in industrial projects, creating approximately 300 permanent jobs to date. In the near future, as other enterprises in the Aghdam Industrial Park come into operation, around two thousand jobs are expected to be generated.

Reminder, about ten of the registered residents in the Aghdam Industrial Park have completed construction and installation works and are currently installing and testing equipment. It is expected that the first enterprises of various profiles will start operating in the near future. Specifically, the industrial park plans to establish production of construction materials such as pipes, metal products, facade plaster, insulation materials, wallpapers, reinforced concrete structures, and roofing materials. Additionally, facilities for ventilation and fire equipment, footwear and tobacco factories, wallpaper production, and automation and telemetry equipment (railway signalling equipment) are scheduled to commence operations, among others.

"At present, the best conditions for business are being created for Azerbaijani entrepreneurs," stated Azerbaijan's Minister of Economy Mikayil Jabbarov during an event in Shusha. "Residents of industrial parks in liberated territories will receive significant tax incentives: they are exempt from profit tax, property tax, and land tax for 10 years from the registration moment. In turn, the state undertakes the creation of necessary infrastructure, including provision of electricity, natural gas, drinking and technical water, as well as high-speed internet."

At the same time, liberated territories benefit from a preferential mechanism for using utilities, exempt from customs duties and taxes on the import of a range of materials and raw materials used in production, as well as subsidies for social insurance contributions and other additional benefits.

In particular, by the end of this year, the Ministry of Economy plans to complete and launch initiatives aimed at providing entrepreneurs access to additional financing, including resources from the Entrepreneurship Development Fund and the Azerbaijan Investment Company. It is quite evident that current entrepreneurs in Karabakh will also have access to additional sources of preferential financing. The Minister of Economy also emphasized that the primary goal of these initiatives is the restoration and reconstruction of liberated territories: “Thousands of jobs have been created here, the majority of which belong to the private sector.”

It is worth noting the highly advantageous location of the Aghdam Industrial Zone near automotive and railway junctions, significantly simplifying the transportation of goods — both raw materials and finished products manufactured at the enterprises. The aforementioned preferences and benefits are also provided for the industrial-logistics cluster “Araz Valley Economic Zone,” being formed in the Jabrayil district.

“In the industrial park of the Araz Valley Economic Zone, 10 residents and 2 non-residents are registered, with investors expected to gradually invest over 83.4 million manats [$49 million] into this industrial zone, creating more than 700 jobs. As of today, over 14 million manats [$8.2 million] have been invested in the Araz Valley, creating more than 20 jobs,” noted Adigozalov, adding that entrepreneurs show great interest in both industrial clusters."

It is pertinent to note that high-tech agricultural enterprises are also being developed in the Eastern Zangilan Economic Zone. For instance, a “green” agro-complex has been established in the 'smart' village of Aghali in Zangilan district, and a similar facility is under construction in the village of Dovletyarli in Fuzuli district. In October 2022, the first phase of the Azerbaijan-Turkish agropark “Dost” was launched in the Zangilan district, providing facilities for 3,500 cattle and establishing a feed and processing base.

As noted by Aydin Karimov, the special representative of the President of Azerbaijan in the Shusha district participating in the forum, conditions have been created in the rapidly revitalizing Shusha for the activities of around twenty entrepreneurs, both individuals and legal entities.

In the "pearl" of Karabakh, hotels are being built, construction continues on 10 buildings, and soon operations will commence for food service establishments, retail, and service enterprises. Additionally, construction has begun on a permanent filling station (gas station) by SOCAR Petroleum in Shusha, complementing the already operational modular filling station of Azpetrol in the city.

During the two-day forum, which involved over a hundred representatives from the business community of the Republic, activities were also held to acquaint participants with the economic potential of Khankendi City. Alongside the restoration of buildings and infrastructure, measures are being taken here to expand business activities and attract investments into industrial clusters.

The forum presented promising investment projects, highlighted the export potential, and discussed the logistical capabilities of the Karabakh region. Additionally, in Shusha, meetings were held in a Government-to-Business (G2B) format, focusing on prospects for public-private partnerships.

Caliber.Az