Azerbaijan, Kazakhstan to drive Caspian region growth Article by Asia Times

Asia Time has published an article claiming that Azerbaijan and Kazakhstan's cooperative economic strategy represents a significant shift in their post-Soviet economic narrative. Calber.Az reprints the article

Azerbaijan’s economic growth and diversification have played a pivotal role in enhancing stability and security across the South Caucasus and Central Asia regions since the disintegration of the Soviet Union. In recent years, its principal partner in this project has been Kazakhstan.

Initially focused on their oil and gas reserves, both countries have been shifting toward agriculture and trade as key sectors.

These sectors are not only vital for the countries’ respective economic security but also for that of the wider Caspian Sea region.

Faced with Armenia’s military occupation of Karabakh and eight adjacent administrative districts for a quarter-century, now ended, Azerbaijan has shown impressive resilience. Official Baku’s goal for the next decade is first of all to develop the non-oil sector, with the goal of doubling its economic output.

Karabakh’s contribution

As mentioned, Azerbaijan has been rebuilding its economy in Karabakh since 2020, focusing on integrating the area into the national economy. An early-2021 decree set up the Karabakh Revival Fund for this work. Key projects include fixing the regional economy, rebuilding cities, and building infrastructure.

After the 44-day Second Karabakh War, ambitious projects in energy, roads and airports were set in motion, with more than US$3 billion spent so far on these efforts. Azerbaijan has showcased its economic strength with rapid and self-reliant reconstruction in Karabakh as well as formerly occupied East Zangazur.

Karabakh’s development is set to boost Azerbaijan’s economy through resource exploration and investments. The region’s riches in such natural resources as gold, copper, and other valuable minerals will help to spur growth in the region, and throughout Azerbaijan, in other sectors like tourism, agriculture, and industry.

Kazakhstan, equally rich in natural resources, is also focusing on diversifying its economy and attracting both local and foreign investments. Azerbaijan is introducing new ways to attract investors, including special financing and tax benefits that have led to the creation of five industrial parks and more than 50 agro-parks as part of public-private partnerships.

Four major hubs are being built in Karabakh for industry, logistics, mining, and culture. These will greatly help develop Azerbaijan’s economy. Similar projects and efforts are being undertaken in Kazakhstan, with exchanges of best practices, further strengthening the economic ties between the two countries.

Investment and economic cooperation

Azerbaijan and Kazakhstan have also been developing their ICT (information and communication technology) sectors, as the digital economy is predicted to represent 25% of global GDP by 2030.

The ICT sector is expected to play a vital role in their economic diversification; in Azerbaijan, for example, revenues in the ICT sector have been increasing recently at a rate of 30-35% annually. This expansion looks set to continue to represent a significant contribution to strengthening the national economy.

The two countries have been implementing joint projects in the digital field.

For example, in a memorandum of understanding on bilateral cooperation between the Azerbaijani Economic Ministry’s Center for Analysis and Coordination of the Fourth Industrial Revolution and Kazakhstan’s Tech Hub Ltd, plans for exchanges of experiences in promoting the digital economy, conducting joint research, organizing industrial training, and implementing joint projects on artificial intelligence and mobility.

In addition, AzerTelecom and Kazakhtelecom have been partnering to implement the construction of the Trans-Caspian Fiber-Optic data transmission cable line along the bottom of the Caspian Sea. This is one of the key segments of the “Digital Silk Way” project.

Kazakhstan thus continues, with Azerbaijan’s help, to upgrade existing infrastructure and integrate ICT into projects being implemented in different economic sectors.

Infrastructure and digital advances

More broadly, Azerbaijan and Kazakhstan have teamed up in general to boost regional infrastructure and economic projects. Their bilateral trade has jumped. They are cooperating on key international projects, and bilateral trade could reach $1 billion as their economies continue to grow.

Such projects include the plant that Azerbaijan’s ATEF group is building in Kazakhstan for cables and transformers. Another example is the production and logistics centre that Azersun Holding from Azerbaijan is creating in Kazakhstan near the port of Aktau.

In this connection, the two sides have agreed to co-found a logistics company in support of the Trans-Caspian International Transport Route (TITR), which will bypass Russia and speed up shipments between China and Europe. In addition, the transport of oil from Kazakhstan to Europe via Azerbaijan is expected to increase after recent agreements.

Conclusion

In perspective, Azerbaijan’s economic strategy, characterized by diversification and regional cooperation, particularly with Kazakhstan, represents a significant shift in its post-Soviet economic narrative.

The country’s expansion into areas beyond its traditional oil and gas sector, including the development efforts in Karabakh, reveals a broader strategy aimed at sustainable economic growth and regional economic integration.

In cooperation with Kazakhstan, and through exchanges of practical experience, Azerbaijan’s pragmatic approach to attracting investment and developing infrastructure shows a strategic focus on economic resilience.

Such efforts underscore the country’s role in shaping the South Caucasus economic landscape and its potential impact on broader regional economic trends stretching significantly into Central Asia, until the end of the current decade and potentially into the next.