Karabakh's industrialisation: Aghdam Industrial Park prospects Analysis by Caliber.Az

Azerbaijan's industrialisation policy has acquired a new vector of development, the key priorities of this strategy today are focused on the formation of the industrial base of the revived Karabakh region. A little over a year has passed since the foundation of the future Agdam Industrial Park was laid, and in August 2022 the first residents of this industrial site will begin construction of industrial enterprises. Judging by the high rates of mine clearance and restoration of road, energy and utility infrastructure in the liberated territories, similar processes are consistently progressing in other regions of the region.

Localisation of industrial enterprises in specialised clusters is designated as a key direction of the industrialisation strategy of Azerbaijan until 2030. Thirteen years ago, the first technopark was opened in Sumgayit, and since then, the country has accumulated a wealth of experience in the development of industry and the establishment of export-oriented production, with the use of various benefits and fiscal preferences. In particular, we are talking about six technoparks, where over 6.1 billion manats [$3.59 billion] have been invested in total, five industrial quarters (two more are at the stage of creation), as well as about 50 agro parks.

It is planned to implement this rich experience during the implementation of industrial and agrarian development projects in the Karabakh and East Zangazur economic regions. The territories liberated from occupation have a rich resource and infrastructure potential, the development of which will significantly accelerate the process of integration of the Karabakh region into the national economy. Moreover, according to most local and foreign experts, the creation of a network of industrial zones and agricultural clusters here, the formation of an effective mechanism for supporting private initiatives on these sites, as well as stimulating competitive exports based on high technologies, is seen as an ideal tool for the development of the economy of the de-occupied regions of Azerbaijan.

"There are a number of benefits for entrepreneurs operating in the liberated territories of Azerbaijan, and the issue of their expansion is currently being considered. It is also planned to extend tax and customs benefits for 15 years, and exemption from customs duties for a number of raw materials. All this will increase the attractiveness of industrial parks created in the territories liberated from occupation," Deputy Chairman of the Board of the Agency for the Development of Economic Zones Elkhan Shiriyev said recently.  

Currently, residents of industrial parks are exempt for 10 years from paying income tax, property and land taxes from the date of their registration, as well as VAT on imported machinery, technological equipment and installations. In addition, residents are exempt from customs duties on imported machinery, technological equipment and installations for a period of seven years. These preferences played a significant role in attracting capital to industrial zones, moreover, only thanks to the VAT benefits on imports and customs privileges introduced in industrial parks, residents were able to save over 426 million manats.

Apparently, this policy will be continued and further strengthened in the territories liberated from occupation. Even taking into account the fact that large-scale rehabilitation works have been carried out here for the last year and a half, territories have been cleared, primary communal infrastructure has been formed, roads have been built, and the foundation of the first administrative, social, residential and other buildings has been laid, the interest of private business in participating in contract and business projects has increased exponentially. Thus, in 2021 alone, 146 small and medium-sized enterprises were created in the Karabakh Economic Region, and at the beginning of this year 32 more. In the East Zangazur Economic Region, there are 44 and seven established enterprises, respectively. Today, many thousands of individual entrepreneurs operate in these economic areas, mainly in the agricultural, service, and trade spheres.

And since August 2022, a new stage of development of the Karabakh region will start, and work on the formation of an industrial and processing base begins here. In particular, we are talking about the beginning of large-scale construction of factories on an area of 190 hectares in the Agdam Industrial Park. The decree on the establishment of an industrial zone in Agdam District was signed by the head of state on May 28, 2021, since then, mine clearance has been carried out here, access roads were built, communications were laid, etc. It should be noted the advantageous location of the Agdam Industrial Park: two highways Baku-Shusha, Aghdam-Aghjabadi pass nearby and a railway line from Yevlakh is being laid here.

All primary works have been successfully completed and today companies wishing to become residents of this zone have presented 15 production projects. Among other things, the applications of the business include the production of ventilation, fire-fighting equipment and metal products, the production of concrete, maintenance of heavy machinery, as well as the restoration and manufacture of some metal spare parts, the production of orthopaedic mattresses, sewage pipes and drinking water. In turn, the Azerbaijani authorities are ready to provide technical assistance to entrepreneurs to invest in the construction of enterprises for the production and processing of leather, as well as broom and tile in Aghdam.

"Currently, nine residents are registered in the Agdam Industrial Park who intend to implement projects with a total investment value of up to 60 million manats. It is already planned to start construction work here from August, and the planned enterprises will create over a thousand permanent jobs," Azerbaijani Economy Minister Mikayil Jabbarov said recently on his Twitter page.

According to preliminary calculations, at the first stage of the development of the industrial zone, it is planned to develop 76 hectares and attract about 30-40 entrepreneurs, whose activities will be focused mainly on the production, processing and logistics of construction materials, packaging, agricultural products, including feed, wine, meat and dairy products, fertilisers and other products with high export potential. In the second stage, the rest of the industrial zone will be developed, investments worth 110 million manats will be attracted and thousands of new jobs will be created.

A production and service cluster of comparable scale will be created in Jabrayil District: preparations for design and construction work on the formation of an industrial park with an area of 200 hectares have also begun here. We are talking about the  Araz Valley Economic Zone, which is assigned the role of a key production hub of the entire East Zangazur Economic Region. So, already in October 2021, the foundation of the future service centre was laid here on an area of 1.5 hectares - a joint venture between the Ganja Automobile Plant and the Russian KamAZ OJSC, where service units for the maintenance and repair of trucks and agricultural machinery will be created. It is expected that the KAMAZ service centre will be put into operation in the second half of 2022. And in the future, the organisation of the technical service centre of the Iveco Truck & Bus company in this industrial zone is not excluded.

In general, since the end of last year, work has started on the creation of primary infrastructure on the territory of the future economy zone of Jabrayil District, previously all areas were completely cleared of mines and unexploded ordnance.

The territory of the Araz industrial park will be divided into agricultural, industrial, social and technical zones. It is planned to create a logistics and shopping centre, warehouse complexes, wholesale and retail outlets, a cargo fleet, gas stations, and repair points for cars and other equipment. In particular, it is planned to invest over 10 million manats only for the creation of a logistics centre with a capacity of 53,000 tons of pallets and 43,000 square metres of enclosed space, and preferential financing will be provided to investors involved in this project. Here, over time, it is planned to create customs warehouses.

In the industrial park, it is planned to organise enterprises for the production of cladding and insulation materials, various additives, metal structures for construction, packaging of agricultural products, production and processing of canned fruits and vegetables, dairy and meat products, wine, feed, fertilizers, silk processing factories, cold storage facilities and various services sectors will also be built here. At the next stage, significant investments are expected in the production of building materials: there are 5 million cubic metres of sand deposits in Jabrayil District, as well as gravel, volcanic ash, sawn stone, and clay for the production of bricks, cement raw materials, gypsum, lime, jasper, etc.

And this is not all: in Zangilan District, on an area of 6,000 hectares, the efforts of the Azerbaijani-Turkish joint venture have been preparing since last year to create an agro park "Dost", specialising in the field of animal husbandry and processing of meat and dairy products, a significant part of which is planned to be exported, including to Türkiye.

In the future, specialized industrial and agricultural clusters will be created in Fuzuli, Gubadli, Lachin, and Kalbajar districts. To support such initiatives and stimulate investors, in all industrial parks being created in the Karabakh region, the costs of infrastructure creation, and construction of industrial, warehouse, and administrative buildings will be financed by the state.