Aghdam emerges as Azerbaijan’s new investment hub Industrial Revival in Karabakh

In recent years, the focus of industrial development in Azerbaijan has shifted toward the agro-industrial zones of the Karabakh and East Zangezur economic regions.

Major clusters have been established in the Aghdam Industrial Park and the "Araz Valley Economic Zone," where fiscal incentives have been introduced and production, service, and logistics enterprises with high export potential have been built. Most recently, a tobacco manufacturing facility operated by Tabaterra LLC was inaugurated in the Aghdam Industrial Park with the participation of Azerbaijani President Ilham Aliyev.

For the fifth consecutive year, Azerbaijan has been carrying out large-scale restoration of transport, energy, and utility infrastructure, while also establishing agricultural and industrial enterprises as part of its programme to revitalise the territories liberated from occupation. The city of Aghdam, being developed as the industrial centre of the entire Karabakh region, currently leads in attracting capital to production projects.

In particular, in late May 2021, large-scale development began on a 190-hectare site, including the construction of energy, utility, and transport infrastructure, communication and internet systems, and the establishment of the largest industrial cluster in western Azerbaijan.

One of the key advantages of the Aghdam Industrial Park is its strategic location near major road and railway junctions, which significantly simplifies the transportation of goods — including raw materials for processing and the shipment of finished products. This enables entrepreneurs to benefit from ready-to-use infrastructure funded by the state and to implement their business projects immediately under a "Plug and Play" model.

All these factors — including generous tax and customs incentives, along with reduced utility and rental costs — have fostered a highly favourable business climate in the Aghdam Industrial Park, where, over the span of just a few years, entrepreneurs have launched industrial, processing, and other types of enterprises.

In terms of the number of registered residents, the Aghdam Industrial Park currently ranks second in the country, following the largest — the Sumgayit Chemical Industrial Park. According to the Economic Zones Development Agency under the Ministry of Economy, 30 business entities have been granted resident status in the Aghdam Industrial Zone, while four more companies are registered as non-residents. The total volume of declared investments exceeds 270 million manats ($159 million).

To date, residents of the Aghdam Industrial Park have already invested over 121 million manats ($71 million) in industrial projects, creating more than 650 permanent jobs. In the near future, as more than thirty industrial enterprises come into operation, the total number of new jobs is expected to reach 2,400.

Over 70% of the territory of the Aghdam Industrial Park has already been allocated to entrepreneurs. Currently, nine enterprises are operational, producing power distribution equipment, electrical outlets, and concrete substations; roofing and facade materials; ventilation and fire safety systems; various metal products; automation and telemetry systems; porous construction blocks; as well as wallpaper and various types of footwear.

Most recently, with the participation of the Head of State, a tenth facility was inaugurated in the Aghdam Industrial Park — a tobacco manufacturing plant operated by Tabaterra LLC. During the opening ceremony, the company’s director, Elman Javanshir, announced that 58 million manats ($34 million) had been invested in the 5.5-hectare facility. Equipped with modern machinery, the plant will produce a wide range of tobacco products.

Before the commissioning of its new branch in the Aghdam Industrial Park, Tabaterra LLC had launched its main production facility in the Sumgayit Chemical Industrial Park in November 2019. Built using British, German, and Italian technologies, the factory operates with nine production lines and, at full capacity, is capable of producing 11 billion filtered cigarettes and other tobacco products annually.

In addition to manufacturing products under its own brands, the company also produces licensed goods under international labels such as British American Tobacco, Japan Tobacco International, and Imperial Brands. In total, the enterprise manufactures over 120 types of tobacco products under more than 20 brands, a significant portion of which is exported to the United Arab Emirates, Georgia, Uzbekistan, Iraq, and other countries.

The revival of Azerbaijan’s tobacco industry began in 2017 with the adoption of the State Programme for the Development of Tobacco Growing. Since then, large-scale efforts have been undertaken to expand tobacco plantations and introduce new varieties.

The number of regions cultivating tobacco increased from 3 to 13, and new drying facilities equipped with hundreds of curing chambers were established across the country. At the same time, Azerbaijan began allocating more land to premium and globally sought-after tobacco varieties, including the renowned American Virginia type.

Moreover, the domestic tobacco sector started attracting foreign investment, particularly from Japan. For example, in Azerbaijan’s Oghuz district, a tobacco growing and drying project was implemented with a $2.2 million investment by a Japanese entrepreneur. The mass production of the high-grade Virginia tobacco not only boosted supply to local tobacco factories, but also opened new export opportunities to Russia, Bulgaria, and Belarus. In addition, raw tobacco is now being supplied to markets in Kazakhstan, Poland, and China.

According to data from the Azerbaijani Ministry of Agriculture as of June this year, tobacco is cultivated on 2,625 hectares across the country, with the vast majority—around 98%—located in the Shaki-Zagatala region. The sector involves several hundred farming households.

Azerbaijan’s tobacco-growing industry holds significant export potential, as evidenced by recent statistics. For comparison: in 2023, the country exported 2,860 tonnes of tobacco worth $6.647 million, whereas last year, export volumes and revenue nearly tripled—rising to 6,937 tonnes valued at $22.4 million.

And these figures are far from the limit, given Tabaterra LLC’s intention to support the expansion of the tobacco sector’s raw material base. Notably, Tabaterra Leaf LLC — established for the cultivation and processing of tobacco — won the investment competition for the privatisation of Azertobacco OJSC in 2021 and invested 15 million manats ($8.8 million) in modernising infrastructure and improving the quality of locally grown tobacco.

Currently, Tabaterra Leaf operates in the Shaki, Gakh, Zagatala, and Balakan districts, where it has established tobacco collection and processing points, greenhouses, and a processing plant with an annual production capacity of 3,000 tonnes. Furthermore, starting in 2027, additional investments are planned to develop the necessary infrastructure for tobacco cultivation and processing on a 500-hectare site in the Gubadli district, part of the East Zangezur Economic Region.