Completion of Alat FEZ is just around the corner In the midst of the transit boom

Transport flows in the Eurasian space toward the "Middle Corridor" creates unique advantages for the operation of the free economic zone (FEZ) established within the framework of the port complex in Alat. This cluster is being formed as an export-oriented production and logistics hub, focused on attracting cargo carriers and investors from the Caspian region, as well as EU countries, Asia, and the Middle East. The other day, Azerbaijani President Ilham Aliyev took part in the commissioning ceremony of the first stage of the Alat FEZ, where plots for investors have already been prepared, the necessary infrastructure has been created, and a Business Centre has been erected.

Projects for the creation of free economic zones (FEZ) were discussed in detail by the Government of Azerbaijan back in 2009, at the same time the parliament adopted the primary regulatory framework for production and logistics zones. However, in the following years, the main efforts of the state were aimed at building and attracting investors to production clusters, i.e. almost a dozen and a half technoparks, industrial districts, etc. The development of such industrial structures was fully justified, as it allowed for a relatively short time to form the processing and industrial core of the country's economy.

The final decision to create a FEZ near the Baku International Sea Trade Port (BISTP) was made in 2017, and the corresponding law was approved a year later. Despite the tangible economic problems associated with the negative consequences of the coronavirus pandemic, as well as despite certain financial difficulties, on July 1, 2021, with the participation of the head of state, the foundation of the Alat Free Economic Zone was laid. This decision was justified not only by the strategically important geographical location of the FEZ, located near the largest seaport of the Caspian Sea at the intersection of global transport corridors. It is very important that by the time the final decision on the construction of the FEZ was made, there was a need for such a resource, since the Baku-Tbilisi-Kars railway was launched in October 2017, and next year a large-scale transshipment of multimodal cargo through Azerbaijan began as part of the Trans-Caspian International Transport Route (TMTM). And in 2019, another route of the "Middle Corridor", Lapis lazuli, was launched, and most importantly, within the framework of the large-scale "One Belt, One Road" program, China initiated the transshipment of non-oil cargo, including through container block trains in transit via the countries of Central Asia and the South Caucasus. All the listed routes between East and West are somehow connected with Alat port, and the volume of cargo transportation of which has increased many times over the past few years. Accordingly, there is a demand in the port zone for services on storage, sorting, partial processing, and re-export of moved cargoes, and it is these functions that the FEZ is called to provide at the first stage of its activity.

"We have great expectations regarding the future activities of the Alyat FEZ, which has a solid legal basis, and the rules of the zone, I think, should be very attractive to investors. The works on the first stage of the FEZ are being completed," Azerbaijani President Ilham Aliyev said in early May in Shusha during the fourth international conference on "The formation of the geopolitics of Greater Eurasia: from the past to the present and the future".

For about two years since the beginning of the laying of the Alat FEZ, the total area of which reaches 850 hectares, work has been carried out on the arrangement of primary energy and communal infrastructure, optical communication lines were laid, and automobile and railway access roads were built. In particular, land plots with a total area of 297 thousand sq/m, intended for leasing to investors, are already ready for construction work, and connection points to water, sewer, electric, gas, and telecommunications networks have already been equipped here. At the same time, construction was carried out on the territory of 60 hectares as part of the first stage of the Alat FEZ (Zone 1, Stage 1): customs checkpoints and buildings for customs inspection were built at the main entrance to the territory of Zone 1.

The other day, President Ilham Aliyev visited the FEZ and viewed the work carried out here, including a visit to the constructed building of the Business Centre with a total area of 16 thousand sq/m, consisting of three functional parts and equipped with all necessary office furniture, IT equipment, communications. The office of the Authority of the Alat EZ will operate in this complex, as well as offices where services will be provided to investors on the "one-stop shop" principle, and other premises where the management structures of investors and customs officers attached to them will be located.

The chairman of the board of the authorized structure of the Alat FEZ, Valeh Aleskerov, informed the head of state about the work done. It was noted that design work is underway as part of the next stage of development of the zone intended for standard production enterprises and logistics centers, which will be located on 138 hectares, and earthworks will soon start on new sites. An area of 211 hectares intended for heavy industry enterprises is also being designed.

It is expected that at the next stages, an automated logistics base will be launched in the FEZ, where storage facilities will be created, and in the future, a platform for servicing 100 thousand standard containers will be located.

The main advantages of the Alat FEZ, along with the advantageous location and formation of an extensive primary infrastructure, engineering, and communication systems, and a multifunctional Business Centre, include the presence of a unique legislative framework that provides potential resident investors with tax, customs, and certain non-fiscal benefits. In particular, companies investing in the FEZ are exempt from VAT, withholding tax, income tax, and any other corporate tax, as well as from customs duties and taxes on imports and exports from the zone. In turn, employees of the Alat zone, whose monthly salary does not exceed 8 thousand manats, are not charged income tax on wages, and for highly qualified foreign specialists, social insurance payments are voluntary. Another option for foreign legal entities and individuals is the absence of restrictions on ownership of property on the territory of the FEZ, as well as foreign investors do not need to have local partners and be a shareholder. There are no restrictions on currency transactions or repatriation of profits in the Alyat zone, in addition, the property of investors cannot be nationalized under any circumstances. Finally, it provides full protection of the intellectual property rights of investors.

World practice shows that the exemption of entrepreneurs from most of the fiscal and customs payments reduces the cost of production by 40% or more, which, in turn, increases export potential, boosting competitive opportunities in various markets and ultimately allowing multiple increases in turnover. So the preferential regime is very attractive for turning the FEZ into the largest logistics and production hub of the Caspian region, which will serve not only transit traffic but also allow storing and processing cargo (repackaging for local markets) for their subsequent sale in third countries, increasing the added value of goods. At the same time, it is planned that local and foreign investors will use innovative technologies in the FEZ to establish the production of goods with high added value, over 75% of which is planned to be sold in foreign markets. According to several experts, after the implementation of the subsequent stages of logistics and production projects, the FEZ can attract about $1 billion of foreign and local investments.

All these advantages are very attractive for investors, entrepreneurs, and forwarding companies from Central Asian states, Türkiye, Europe, China, Pakistan, and several other Asian countries planning to invest in projects of the formed FEZ. In September last year, the opportunities of the FEZ were presented to several German profile companies, including SAP and Siemens Mobility, presentations were also organized at the Federal Association for Economic Development and Foreign Trade of Germany, the Association of Independent Industrialists and Businessmen (MUSIAD Berlin), etc. And at the beginning of this year, the potential of the Alat FEZ was presented to the relevant interested structures of Poland, and a memorandum of intent on cooperation with the Walbrzych Special Economic Zone "INVEST-PARK" was signed. One of the first foreign residents of the Alat FEZ was the Israeli pharmaceutical company BioPharmax, which plans to fully provide the domestic market of Azerbaijan by localizing production in the free economic zone, but also expanding the supply of its medicines (about 50 items) throughout the Caspian region.