Leading trade, economic coop in SC: Baku, Seoul on same page Review by Caliber.Az

Azerbaijan and the Republic of Korea, which celebrated the 30th anniversary of their diplomatic relations in the fall of 2022, take first place in the South Caucasus regarding trade and economic cooperation. There has been a trend in Baku and Seoul's relations in recent years to diversify business ties with the prospect of increasing investment.

In particular, Korean companies are exploring the possibility of participation in infrastructure projects to restore the Karabakh region; ICT, transportation, "green" energy, tourism, etc. are also in the priority sphere. These and other cooperation vectors were recently discussed in Seoul, where the third meeting of the Joint Commission on Economic Cooperation between the governments of Azerbaijan and Korea was held.

Sustainable business cooperation between Azerbaijan and Korea is built on a solid foundation of respectful interstate relations and mutual interest of business circles and a specific legal and regulatory framework. In particular, the two countries have signed almost 70 agreements on trade and economic, investment, transport and education spheres since 2006.

The countries consistently expand mutual trade turnover, which peaked in 2018 at $227 million and after a slight decline during the coronavirus pandemic, went up again in 2021, exceeding the previous record achievement - $227.6 million.

According to the information provided by Caliber.Az in the Economy Ministry, the trade dynamics between the countries grew even stronger in 2022, reaching $269.15 million with year-on-year growth of 18.23 per cent.

Korean products - equipment, cars and trucks, tires, electronics and electrical appliances, rolled steel, lubricants, pharmaceuticals, etc - still dominate in trade ties. However, the trade reverse is gradually expanding: last year Azerbaijani exports increased 3.52 times.

Despite the fact that the basis of Azerbaijani exports traditionally consists of oil and oil products, including jet kerosene, in recent years with the active support of the Export and Investment Promotion Fund (AZPROMO) domestic food, wine products, furniture and other non-oil goods are sent to the Korean market.

In the prosperous year of 2019, relations in the field of tourism were very successful as well - about ten thousand visitors from Korea arrived in Azerbaijan. As the consequences of the pandemic crisis have been overcome, the key objective of the talks in recent years has been to give impetus to ties in the recreational sector.        

Judging by preliminary calculations, this year we can expect to achieve another breakthrough in bilateral trade: in January-April 2023, trade turnover between Azerbaijan and Korea amounted to 100.08 million, an increase of 31.6 per cent over the same period last year. And this time Azerbaijani exports have increased by 7.39 times.

The growth of bilateral trade is certainly a positive fact, however, the business cooperation between the two countries is developing in the transfer of technology and joint industrial initiatives just as successfully. For example, over the past two decades, many joint initiatives have been implemented with the support of South Korean companies: Korea National Oil Corporation (KNOC) has now a 20 per cent stake in the development of the Inam field in the Azerbaijani sector of the Caspian Sea, Korean companies have participated in the creation of an intelligent transport management system in Baku, in the construction of a urea fertiliser plant in Sumgait.

Contractors, equipment suppliers and consulting firms from the Morning Light Country have been active in the multiple projects implemented in Azerbaijan in the field of telecommunications and IT technologies, development of the railway, shipbuilding and electric power potential of the country. Korean companies participated in the implementation of architectural projects in Baku, as well as ensuring the introduction of digital technologies in higher education, medicine, agriculture, the introduction of intellectual property management systems, statistics, etc.

According to the data provided by Caliber.Az, today a total of 77 companies with Korean capital are registered in Azerbaijan (53 of them are active), operating mainly in industry, transport, construction, trade and services. From 1995 to 2022, the volume of Korean investments in Azerbaijan amounted to $196.1 million. In this regard, the activity of Azerbaijani business is much higher: during the reported period, Azerbaijani investments in Korea reached $672.4 million. A significant part of the investments in the country falls on the State Oil Fund of Azerbaijan (SOFAZ), which acquired real estate in Seoul.

At the same time the current state of investment activity between the two countries, given the vast business opportunities, cannot be called satisfactory. Thus, Korean companies and investors could take a more active part in projects on the digitalisation of the economy, development of Industry 4.0, joint undertakings on capitalisation of agricultural complexes and "green energy", including within the framework of the Karabakh region revival program, implemented in Azerbaijan.

The Korean business, which possesses high technologies and know-how, is attractive not only as an investor but also as a supplier of technology and design solutions and a contractor. The experience of such cooperation between Baku and Seoul is noteworthy: over the last decades, Korean companies and organisations have carried out $2 billion worth of contract work.   

All these promising areas were discussed at the third meeting of the Joint Commission on Economic Cooperation between the governments of Azerbaijan and Korea held in Seoul. Prospects for cooperation in investment, industry, trade, agriculture, energy, education, health, culture and tourism were discussed.

Speaking at the meeting, Azerbaijan's co-chairman of the Intergovernmental Commission, Deputy Digital Development and Transport Minister Samir Mammadov informed the forum participants of the country's macroeconomic indicators and the volume of trade turnover between the two countries.

Touching upon the potential opportunities for bilateral cooperation with Korea, the deputy minister talked about the reconstruction of the liberated territories, the creation of towns and villages on the basis of the "smart city" and "smart village" concepts, as well as projects under the "green energy" zone being formed in Karabakh.

Bear in mind that Azerbaijan is cooperating with the Korea International Cooperation Agency (KOICA) and Korea Trade and Investment Promotion Agency (KOTRA) ready to support "smart city" projects.

At the initiative of AZPROMO and the Korean International Trade Association (KITA) an Azerbaijani-Korean business forum was also organised in Seoul, which was attended by Korean companies from the fields of IT, energy, construction, engineering, chemical industry, healthcare, pharmaceuticals, etc.

The participation of Korean forwarding companies in transportation through the "Middle Corridor," which will strengthen the transit potential of the entire region after the launch of the Zangazur Corridor was also recognised as one of the perspective areas. Korean businessmen were informed about benefits provided to investors in Alyat FEZ, as well as in industrial and technological clusters of the republic, as the country is interested in attracting Korean best practices and technologies there.

"Azerbaijan is the largest trade partner of the Republic of Korea in the South Caucasus region, and strengthening contacts and holding such events create new opportunities for expanding economic ties and mutual investments between the two countries," Mammadov emphasised.