Azerbaijan, South Korea gearing up for trade reverse From green energy to car import

A prospect has been observed for the development of trade reverse with a gradual increase in the share of Azerbaijani imports amid the recent geopolitical changes in business relations between Azerbaijan and South Korea.

The two countries are exploring opportunities to diversify business ties, including those in non-ferrous metallurgy, transport, green energy, as well as the implementation of investment initiatives. Korean companies are invited to participate in contract projects as part of the revival of the Karabakh region. These and other issues have been recently discussed with the delegation of the Korea Importers Association (KOIMA) in Baku as part of the activity of the Korean buyers’ mission scheduled for the current week.

Baku and Seoul celebrated the 30th anniversary of the establishment of diplomatic relations in autumn 2022. Azerbaijan and Korea rank first in the South Caucasus on the level of trade and economic relations over the past decades. This cooperation is based on a strong foundation of respectful interstate relations and mutual business interests, as well as a strong regulatory framework. Thus, about 70 agreements have been signed between the countries from 2006 up till now, mostly covering trade, economic, investment, transport, and educational spheres. In turn, 77 companies with Korean capital have been registered in Azerbaijan (53 of them are active), operating mainly in industry, transport, construction, trade and service sectors.

During the COVID-19 pandemic crisis, the two countries very quickly restored mutual trade turnover. This testifies to the stable dynamics in business relations. Thus, it reached $227.6 million in 2021, exceeding the record figures of 2018, while trade dynamics reaching $269.15 million in 2022 achieved 18.23 per cent year-on-year growth. The trade is dominated by Korean products, namely, equipment, cars and trucks, tires, electronics and electrical equipment, rolled steel, lubricating oils, medicines, etc. Oil and oil products, including jet fuel, are traditionally exported by Azerbaijan. Nevertheless, Azerbaijani exports also increased by 3.52 times in 2022 thanks to the active support of the Azerbaijan Export and Investment Promotion Foundation (AZPROMO). Domestic food, wine, furniture and other goods from the non-oil sector are supplied to the Korean market. The two countries almost doubled mutual trade in 2023 as a result of the rising prices for raw materials and processed products, as well as new approaches to the export strategy.

“According to our statistics, trade turnover between Azerbaijan and the Republic of Korea last year reached $430 million. Korean cars, which are in great demand, are greatly imported to Azerbaijan,” AZPROMO Executive Director Yusif Abdullayev said at an event in Baku.

He noted that the high dynamics of trade turnover between the two countries is mainly connected with the growth of exports of Korean products. Today the main goal is to increase the share of Azerbaijani exports to Korea, focusing on the non-oil sector. The representatives of the Korean companies who arrived in Baku as part of the KOIMA mission will hold negotiations with Azerbaijani exporters and manufacturers to see Azerbaijan’s agricultural and industrial potential.

“During the current week, South Korean importers will meet with local exporters and manufacturers, visit several big local enterprises in various Azerbaijani economic regions. Numerous meetings will be held,” he added.

In turn, AZPROMO’s delegation and representatives of the Azerbaijani companies will take part in the international food exhibition in the Republic of Korea in June-July 2024 to advertise and promote Azerbaijani agricultural and food products. During several trade missions over the past years, test batches of Azerbaijani wine and brandy, pomegranate juice, canned fruit, honey and other products were supplied to the Korean market. The key task of the organisations operating under the Azerbaijani Economy Ministry is to ensure the consistency of such trade and to supply the goods to leading retail outlets in Korea for a long time.

Moreover, the interest in diversifying the structure of the Azerbaijani-Korean trade is quite mutual. “The Republic of Korea is interested in increasing imports of goods from Azerbaijan. The KOIMA delegation will do everything possible to stimulate the import of Made in Azerbaijan products to Korea. We hope that many Azerbaijani exporters will take part in the Korea Import Fair from July 4 to 6, and this will strengthen the relationship between Korean importers and Azerbaijani exporters,” KOIMA Chairman Kim Byung-Kwan said during the event.

Kim Byung-Kwan noted that Azerbaijani suppliers could export meat, dairy products, and drinks to the Korean market. Being a country rich in natural resources, Azerbaijan could increase supplies of products from the oil and gas sector, and the chemical industry. Korea is also showing interest in purchasing rolled aluminum, metal products, etc. In general, taking into account the negative geopolitical changes in the world, the Republic of Korea is strengthening export control on 1,160 sanctioned goods to prevent the supply of electronics and dual-use equipment through roundabout routes to Russia and Belarus. Korean business is compensating for losses by showing a great interest in strengthening the localisation of production and expanding trade and economic ties in other countries of the post-Soviet region, including Central Asia, South Caucasus due to the shutdown of assembly plants (cars, household appliances) and the cessation of contract work in the above-mentioned countries. This trend is observed in Kazakhstan and Uzbekistan, and also creates the preconditions for strengthening the Azerbaijani-Korean business cooperation.

AZPROMO’s executive director noted that over the past period, very extensive cooperation has been established with KOIMA, as well as with the Korea Trade and Investment Promotion Agency (KOTRA) and the Korea International Trade Association (KITA).

“Thus, thanks to KOTRA's efforts, some Korean manufacturers have shown interest in making investments in expanding enterprises in various Azerbaijani industrial sectors, including aluminium industry. These partnerships in the future will contribute to increasing investments in the domestic economy,” Abdullayev said.

Another important vector of bilateral cooperation is the participation of Korean companies as contractors, consultants, and participants in design and engineering initiatives. Great experience has been gained in this sphere over the past years. Korean contractors participated in the creation of an intelligent transport management system in Baku, as well as in the construction of a plant for the production of carbamide fertilisers in Azerbaijan’s Sumgayit city. The Korean companies were involved in the projects related to telecommunications and IT technologies, the development of the railway and shipbuilding sectors, the construction of power facilities, the implementation of architectural projects in Baku, and also introduced digital technologies in higher education, medicine, agriculture, in the development of intellectual property management systems, statistics, etc. In general,  Korean companies and organisations have carried out the contract work in Azerbaijan for a total amount of about $2 billion over the past decades.

In this regard, Baku welcomes the participation of Korean companies and investors in the projects which are being implemented in Azerbaijan for the digitalisation of the economy, the development of Industry 4.0, as well as in joint initiatives for the capitalisation of agro-industrial complexes and “green” energy within the programme for the revival of the Karabakh region in the future.