Rovshan Najaf

Report
Azerbaijan Country Presentation
Basics
Establishment:
28 May 1918
Independence:
18 October 1991
Area:
86.6 thsd km2
Population:
9.48 million
Official Language:
Azerbaijani
Government system:
Presidential Republic
Membership in:
UN, Council of
Europe, OSCE, Non-Aligned
Movement, OIC
Highlights:
1st democratic republic in the Islamic world
1st Opera in the Islamic world
Women voting right in 1918
(while in Italy - 1946; Switzerland - 1971; France – 1944)
Currency:
Manat: 1 AZN = 1.27 USD
1.01 EUR
Characteristics of economy
ECONOMIC
STABILITY
FAVOURABLE
BUSINESS AND
INVESTMENT
CLIMATE
PRIVATE
SECTOR
CLEAR VISION
FOR FUTURE
Economic stability:
Macroeconomy
Nominal GDP, bln USD
66
8th among 148 countries in terms of
48.9
stability of macroeconomic environment
68.7
73.6
52.9
44.3
33.1
21
Source: World Economic Forum
7.3
8.7
13.2
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Strategic currency reserves, bln USD
46
50
40
29.1
18.56 20.3
1.62 2.04
2.4
4.4
7.4
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
2nd fastest growing economy among
179 countries for GDP per capita growth in
2001-2010
Source: The Economist
Economic stability:
Diversification
Structure of GDP
Diversification of economy and
development of non-oil sectors are
key strategic priority
of economic policy
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Non-oil
Foreign investments in non-oil sectors, bln.
USD
Non-oil GDP growth, %
18
16
14
14.9
13.6
4
2
4.6
11.9
10
10
6
5.7
15.9
12
8
Oil
11.4
8.3
7.9
9.4
3.5
9.7
3.2
0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
5.3
4.5
3
2.4
0.3
0.5
0.8
1.3
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Economic stability: Competitiveness
GLOBAL COMPETITIVENESS REPORT 2014-2015
Estonia
Spain
Azerbaijan
Lithuania
Latvia
Poland
Turkey
Malta
Kazakhstan
Russia
Georgia
Ukraine
Moldova
Armenia
Kyrgyzstan
The report assesses the ability of countries to provide high levels of
prosperity to their citizens. This in turn depends on how productively a
country uses available resources. Therefore, the Global Competitiveness
Index measures the set of institutions, policies, and factors that set the
sustainable current and medium-term levels of economic prosperity.
29
35
38
41
42
1st among CIS countries (6 times
running), 38th among 144 countries
43
45
Other indicators (place among 144):
47
50
53
69
76
82
Inflation – 1st
Macroeconomic environment – 9th
Government budget balance – 15th
General government debt – 12th
Labour market efficiency – 33rd
Capacity for innovation – 43rd
Technological readiness – 56th
85
108
Business enabling environment
Reformist business
environment
Firm legal basis and
continuous improvement of
business legislation
Top-reformer of business
regulations according to
Doing Business Report
2009
Decrease of red tape,
simplifying business
permitting and licensing
systems
One-stop-shop for
business
registration
One of the easiest start-up
procedures in the world
2 days for business
registration
Internet registration of
individual entrepreneurs
and local commercial legal
entities
E-filing and e-payment
Corporate tax – 20%;
VAT – 18%;
Simplified tax – 4% and 2%
No agriculture tax
Tax holidays for residents
of industrial and high-tech
parks
428 e-services by state
authorities
Web portal on business
permissions and licenses
(www.icazeler.gov.az) and
B2B facilitation
(www.b2b.az)
One-stop-shop services by
ASAN Service Centers
(State Agency for Public
Service and Social
Innovations)
Competitive tax
system
User-friendly
government services
Business enabling environment
WB Doing Business Report 2014
Economy
Rank
Georgia
8
Kazakhstan
50
Bulgaria
58
Italy
65
Turkey
69
Azerbaijan
70
Romania
73
Czech Republic
75
Croatia
89
Russia
92
Ukraine
112
70th among 189 countries
15th among the 50 economies narrowing the distance to frontier
the most since 2005. The distance to frontier measure shows how far
on average an economy is from the best performance achieved by any
economy on each Doing Business indicator since 2005.
Some sub-indicators:
Starting a business– 10th
Registering property – 13th
Investor protection – 22nd
Enforcing contracts – 28th
Getting credit – 55th
In Global Competitiveness Index 2013-2014 (rank/148):
Hiring and firing practices – 8th
Burden of government regulation – 21st
Strength of investor protection – 25th
Liberal investment climate
No restrictions for any
type of foreign
investment
Incentives for foreign
investors
Guarantees
Guarantee against
adverse changes in the
legislation,
nationalisation and
requisition
No discrimination policy
Guarantee of
compensation of
damages and
repatriation of profits
Sophisticated
legal base
Law on Investment
Activity and Law on
Protection of Foreign
Investments
Party to New York
(1958) and Washington
(1965) Conventions
46 bilateral investment
treaties
45 double taxation
treaty
Institutional
support
Azerbaijan Export and
Investment Promotion
Foundation (AZPROMO)
Azerbaijan Investment
Company
National Fund for
support of
Entrepreneurship
Welcoming policy
National regime for
foreign investors
Liberal investment climate
1995-2013
Non-oil sector
Domestic
64%
88.7 bln USD
Total
Investments
172.4 bln USD
Oil sector
Foreign
36%
83.7 bln USD
Food industry/agriculture
Climatic zones/types – 9 out of 11 existing in the world and fertile
land
Largest employer with up to 40% of employed workforce
Tax breaks and subsidies
Strong comparative advantage in exporting fresh fruits and vegetables
Import substitution and export orientation
Access to the regional markets: FTAs with the CIS countries
Focus on productivity, competitiveness and marketing
Tourism
Unique geografic and climatic conditions
In 2013 number of tourists increased by 3.9 times in comparison with
2003
World Tourism Organisation: Azerbaijan is top 2nd in terms of the
growth of tourist inflow in percentage ratio (+27% in 2012)
Tourism related expenditures of foreingers: in 2003 - $0.577 bln and
in 2013 increased by 2.8 times up to $1.6 bln.
Focus on establishment of modern tourism infrastructure, restoration
of historical, cultural and natural sites and marketing
Potential for the development of almost all types of tourism
The largest project: winter-summer tourism complex in Shahdag – to
be completed in 2016 and able to welcome 10 000 tourists
ICT
Average annual growth rate at 20-25% in the last 10 years
80% of income in ICT belongs to private sector, while mobile
telephony and IT are completely private
Around 2.5 bln USD invested in ICT in the last 10 years, 72% of which
accounts for private sector and foreign investments
First among CIS States on share of internet users according to the WEF
Global Information Technology Report 2013
70% of population uses internet, 50% uses broadband internet
Space industry started with the launch of the first national satellite in
February, 2013
Recent projects: High technologies park, ICT Development Fund, IT
University
Industry
Share in GDP: 46.3%
Intensive industrialization policy: increase of 262% since 2005
Investment (2013): total $9.5 bln – 53.4% foreign, 46.6% domestic
Focus on establishing supply chains and clusters as a driving force for
industrial development
Priorities on heavy industry, mechanical engineering, agroindustry,
construction materials, chemicals, alternative energy, light industry
Establishment of industrial parks: chemicals, waste recycling
New industrial parks to be established
Special zones
Sumgait Chemical Industrial Park (SCIP)
Total area: about 300 ha
Administration:“Sumgait Chemical Industrial Park” LLC
under management of Ministry of Economy and Industry
Priority products: chemicals used in agriculture,
construction, packaging and automotive industries
Infrastructure: All utilities are provided by plug-and-play
concept
Tax holidays (corporate, property and land taxes and VAT on
imported equipment) for 7 years
Key advantage: Availability of in-door raw materials,
increasing domestic demand and close proximity to regional
markets
Special zones
Balakhani Eco-Industrial Park
Total area: 7 ha
Administration: “Tamiz Sheher” OJSC under
management of Ministry of Economy and Industry
Priority areas: Recycling of plastics, tire/rubber,
electronics, accumulators, non-ferrous metals, cabels
and specific types of domestic waste
Infrastructure: Offices, training centers, laboratory, All
utilities are provided by plug-and-play concept
Tax holidays (corporate, property and land taxes and
VAT on imported equipment) for 7 years
Key advantage: Proximity to city waste landfill site,
Material Recovery (waste sorting) Facility and modern
Waste-to-Energy Plant
Azerbaijan Investment
Company
Supporting Non-Oil Sector Development
ABOUT AIC
“Azerbaijan Investment Company” OJSC (AIC) is a state owned equity fund, established by the
Presidential Decree on the 30th of March 2006
AIC serves the purpose of developing non-oil sector of the national economy via termed equity injections
Supervisory Board is the supreme governing body of AIC
OBJECTIVES
Supporting non-oil sector development via termed equity investments in commercially viable
projects and investment funds
Attraction of local and foreign investments into the economy of Azerbaijan
Increase market value and competitiveness of investee companies by integrating new technologies and
know-how, and promoting modernization and innovation
Support development of capital markets in Azerbaijan
KEY INVESTMENT
PRINCIPLES
Investments in all sectors excluding oil and gas industry
Investments into brownfield or greenfield projects
Minority shareholding in the invested projects
INVESTMENT
CRITERIA
Competitive products
IFRS compliance
Independently audited financial statements
Corporate governance best practices
Board member at investee companies
EXIT STRATEGY
Subject to terms of shareholders’ agreement AIC may choose from the following exit strategies:
Divestment via IPOs
Sale to third-party strategic acquirers
Sale to existing shareholders
PORTFOLIO
DISTRIBUTION
6.80%
13.90%
4.10%
Sub - Funds - 6.80%
Agriculture - 13.90%
Food Processing - 4.10%
75.20%
Industry - 75.20%
Azerbaijan Investment
Company
37 Khojali Ave. Baku, Azerbaijan AZ1025
TEL: (+99412) 488 8010
FAX: (+99412) 488 8012
[email protected]
www.aic.az

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