Azerbaijan-Kyrgyzstan business priorities: Advancing trade, energy, transport initiatives Review by Caliber.Az

Azerbaijan and the Central Asian countries are consistently creating a strategic alliance based on joint trade, energy and transport initiatives.

Kyrgyzstan is also involved in the implementation of these joint projects. Baku and Bishkek greatly increased cargo transportation and trade turnover and intend to expand cooperation in the investment process in 2022–2023.

Another step in this sphere was President of Kyrgyzstan Sadyr Japarov’s two-day state visit to Azerbaijan. The second meeting of the Interstate Council was held, and several bilateral documents were signed.

Along with the traditional partnership in energy transit, the Caspian littoral countries have been recently intensifying cooperation on the transshipment of non-oil cargo within the Middle Corridor by using its key components, namely, the Transport Corridor Europe-Caucasus-Asia (TRACECA), the Trans-Caspian International Transport Route (TITR), as well as Lapis Lazuli Corridor.

Azerbaijan plays a leading role in these projects due to its favourable geographical location. The strategy promoted by Azerbaijan to revive the Great Silk Road and develop the Middle Corridor is highly compatible with the Chinese concept of implementing the Belt and Road Initiative, and this vector is fully supported by the Central Asian countries.

Kazakhstan and Turkmenistan, which have seaports on the Caspian Sea, also play a key role in these transport projects, and landlocked Uzbekistan is very active here. And recently, Kyrgyzstan has begun to pay close attention to the Trans-Caspian transshipment.

In this regard, Bishkek considers Azerbaijan’s transport and logistics capabilities as the optimal option for expanding trade, including transit trade. The positive developments in the Azerbaijan-Kyrgyzstan trade and economic ties that have emerged since 2022 testify to this.

Thus, as of 2022, cargo transportation between the two countries increased by almost 1.7 times, and transit transshipment of goods doubled. These positive trends intensified even more in 2023. According to the Azerbaijani State Customs Committee, trade turnover between Azerbaijan and Kyrgyzstan amounted to almost $65 million, which is over six times more than the year before ($10.81 million).

Azerbaijani exports dominate in mutual trade. During the reporting period, Azerbaijan exported products worth $59.338 million, thereby exceeding the previous year’s figures by 12.5 times. This is a very good beginning, but, apparently, Baku and Bishkek hope for a further multiple increase in trade, and also plan to jointly attract Chinese transit cargo traffic and develop investment-oriented business projects.

 “Azerbaijan and Kyrgyzstan are actively cooperating in the trade and economic sphere. Today, the figures of a several-fold increase in trade turnover were announced. Although the absolute figures are not very large yet, the trend towards increasing potential exists,” Azerbaijani President Ilham Aliyev said in a joint press conference with President of Kyrgyzstan Sadyr Zhaparov.

“The visit of the President of Kyrgyzstan to Azerbaijan will contribute to strengthening the friendly and brotherly relations between the two countries,” President Aliyev said.

“Emphasizing the signing of bilateral documents, the head of state highlighted their importance in determining the future development of bilateral relations. “Each of them holds great importance. I would particularly like to highlight the joint Declaration that we signed with Sadyr Nurgozhoevich,” President Ilham Aliyev added.

A total of 18 documents were signed during the visit, including those of particular importance for further economic cooperation between the two countries. Among these documents are the Memorandum of Understanding on energy cooperation; Additional Agreement on Changes to the Agreement on the Establishment of the Azerbaijan-Kyrgyzstan Development Fund; agreement on the elimination of double taxation in connection with taxes on income; protocol on cooperation in exchange of information on mutual trade statistics, as well as the agreement on cooperation and mutual assistance to improve customs administration (between the customs bodies of the two countries); memorandum of understanding between the State Agency for Public Service and Social Innovations under the President of Azerbaijan (ASAN Service) and the Ministry of Digital Development of Kyrgyzstan on the promotion of public service centres in the Kyrgyz Republic.

The second meeting of the Interstate Council of Azerbaijan and Kyrgyzstan was held in Baku in the presence of the presidents of the two countries. Many issues of bilateral interaction were discussed in the presence of representatives of ministries and departments of the two countries, and promising directions of the economic agenda were outlined during the meeting.

“Today, we have already discussed the prospects for cooperation in the sphere of investments, and, as I have already mentioned, we are increasing the funds of the Azerbaijani-Kyrgyz Development Fund, as there are a lot of applications from business people who want to take advantage of these opportunities. In other words, I think this will be an important tool for cooperation in the sphere of investments,” the Azerbaijani President said.

“The charter capital of the Azerbaijan-Kyrgyzstan Development Fund has been quadrupled to $100 million. We increased the charter capital four times—from $25 million to $100 million,” emphasised the Azerbaijani President, adding that $100 million is not the limit.

The information went viral during the meeting of the Interstate Council that over 40 applications worth about $80 million have already been received by the Fund for the implementation of investment projects in Kyrgyzstan, accordingly, the growth of the Fund’s capitalisation in the future may be revised upward.

The agreement on the creation of the Development Fund was signed on October 11, 2022. The headquarters is located in Bishkek, and its funds are planned to be used for the implementation of production, infrastructure, service and other important spheres. The decisions on the implementation of projects worth up to $1 million will be accepted by the board of the Fund while above this amount - by the board of directors of the Fund.

One of the joint investment projects envisages the construction of a five-star hotel on the shores of Issyk-Kul. Kyrgyzstan will finance the construction of access roads and all the necessary infrastructure around the recreational facility. Azerbaijan has committed to build the hotel within three years. This project will be exempt from taxes for the next 10 years, while the land plot on which the hotel will be built will be transferred to Azerbaijan for use for a period of 49 years with the right to extension.

The renewable energy sources are seen as an important sphere of the Azerbaijani-Kyrgyz business cooperation.

“Energy cooperation has also been discussed. There is immense potential of Kyrgyzstan and an interest of Azerbaijani companies to work in the field of renewable energy. Both Kyrgyzstan and Azerbaijan are implementing large infrastructure projects in the transportation sector, and joining and coordinating our actions are extremely important for the opening of new corridors and creation of new transport arteries,” the Azerbaijani President said.

Kyrgyzstan through China’s financial support is preparing to implement the construction of the China–Kyrgyzstan–Uzbekistan railway. There will be a stable transit flow through Kyrgyzstan as a result of the construction of the Balykchy–Kochkor–Kara-Keche branch to Makmal and its inclusion in the Belt and Road Initiative. The expansion of the railway infrastructure will facilitate the transfer of local cargo to the Caspian Sea through the Kazakh ports.

In particular, the Kyrgyz Temir Zholu railway operator is participating in the implementation of a project to create a multimodal trade corridor, mainly for transshipment of container trains, which will connect China, Kyrgyzstan, Uzbekistan, Turkmenistan, Azerbaijan, Türkiye, Georgia by railway with a route to Europe. For the same purposes, the Kyrgyz ministries intend to join the processes of automation and digitalisation of customs and cross-border procedures already being implemented in Azerbaijan and Kazakhstan.

On the second day of the visit, the presidents will take part in a secondary school foundation capsule laying ceremony in Khydyrly village of the Aghdam district, the construction of which is being financed by Kyrgyzstan. The cross-cultural Days of Kyrgyzstan and Azerbaijan were held as part of the state visit. A solemn opening ceremony of the monument to famous Kyrgyz writer Chingiz Aitmatov was held in Baku.