Business Opportunities in Azerbaijan | Investment Opportunities in Baku
Since oil-boom in Azerbaijan since 2005, the economy has grown to a great degree, with major public infrastructure investments and large construction projects. Moreover, the recently expanded agriculture and tourism industry has attracted many related businesses, with diverse business opportunities in Azerbaijan.
Gross Domestic Product was 41.37 USD billion in 2017, then it increased 5.57 billion dollars in 2018 and reached 46.94 billion US dollars.
For the first quarter of 2019, Gross Domestic Product is 26.16 billion and GDP per capita is 2646 USD. So, Azerbaijan ranks 73rd in the world by GDP.
In 2018, the share of small and medium enterprises in GDP were 4
percentage.But, the State has a target to increase the share of small and
medium enterprises in GDP to the level of 60-70% after 2025. In order to
encourage SME the government creates tax privileges and methods of
business promotion.
İnflation rate is another macroeconomic indicator which those who want to
set up a business should take into account. Inflation, impact the cost of
living, the cost of doing business, borrowing money, mortgages and every
other facet of the economy. The inflation rate in Azerbaijan was recorded at
6.7 % in 2018. Considering oil-dependent economy in Azerbaijan, this
inflation rate is quite acceptable.
There is World Bank statistics about doing business ranking for 2018 and
2019. This statistic shows that how the regulatory environment is more
flexible regarding the starting and operation of a company. According to
these annual ratings, Azerbaijan is ranked 25 among 190 economies in the
ease of doing business.
What are the main business opportunities in Azerbaijan?
Before listing and providing some ideas about business opportunities in Azerbaijan, let's start with main directions of import and export. When we provide ideas about Azerbaijani business opportunities and investment opportunities, we mainly imply involvement in daily business operations. Therefore, passive investment in Azerbaijan is a different topic, which only requires buying of shares and obtaining interest annually. It must be clear that in passive investment, mainly in companies in Baku, the main element and criterion is net profit annually and return on investment over the shares - this is distinct financial analysis with proper due diligence.
It must be noted that small and medium businesses in Azerbaijan are incentivized by the government, enjoying various tax exemptions, tax rates as low as 2%. Therefore, any small business not listed in our article shall not be automatically disapproved. Particularly in Baku, small businesses are usually successful and many people come up with innovative small business ideas in Baku as well as general Azerbaijan.
Exports in Azerbaijan
Currently, with the exception of oil-gas products, the most ordered goods and products by foreign countries from Azerbaijan are (these are exports of Azerbaijan):
· Cotton fibre and lit;
· Onion;
· Tobacco;
· Wine;
· Pomegranate juice;
· Tea leaves;
· Confectionery products;
· Canned vegetables;
· Cosmetics;
· Flowers;
· Construction materials;
· Frozen chicken.
The above list provide general and initial ideas about the mainly exported goods from Azerbaijan. Naturally, the list in much more than the above one, therefore, similar goods which are not listed above shall be considered as being among the mostly exported ones.
Imports in Azerbaijan
Due to underdeveloped domestic manufacturing, and non-diversified economy which is mostly based on oil-gas products, Azerbaijan heavily relies on imports. Virtually, Azerbaijan imports everything from around the world.
In Azerbaijan, most imported products are:
· Machinery, electrical goods, equipment;
· Vehicles and their parts;
· Garments and clothing accessories;
· Meat and dairy products, tea leaves, wheat, rice;
· Tobacco;
· Pharmaceutical products
It must be noted that in under-developed industry areas, Azerbaijan provide tax-incentives, such as: Investent Promotion Certificate
This certificate gives opportunities to company and individual enterpreneurs to get exemptions for seven years from several types of taxes:
-50 percent exemption on personal income tax is considered for individuals and profit tax for companies;
-Full exemption on land and property tax.
-Exemption of VAT and other customs duties on import of machinery, technology and equipment
Analyzing the above import and export date, we can list following business opportunities in Azerbaijan:
- Manufacturing of goods which are mostly imported (see above for ideas - but there many imports which are not listed aboe);
- import of goods with reference to the above import date, as alternative markets of import, local competition relies on traditional ways of business approach, therefore, any innovative and alternative supply of goods would attract great demand
- Export oriented production and goods: from mainly based on chemical industry and agriculture. It must be noted that Azerbaijan has free trade agreements (FTAs) with Russia, Ukraine, Georgia, Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan, Moldova and Belarus. Under the FTAs, goods can be imported from those countries free of customs duties. Therefore, competitive goods producted in Azerbaijan with focus on exporting to foreign countries shall be considered.
- Hospitality and tourism: As one the booming industries, recent Azerbaijan investment opportunities focus on this direction, hotesl, hostels, guest houses, rent-a-car service, tourism companies and travel services, and related tourism supportive services are of great demand.
- Restaurants and cafe: Due to tourism industry boom, and also changing habit of youth about eating outside, cafes and restaurants are also among very good investment opportunities in Azerbaijan. Newer restaurant chains and mainly eastern foods are growing in popularity. Baku is the main focus are of this business opportunity.
- Agriculture: Production of agriculture is exempt from taxation. Agricultural traditions have great role in Azerbaijan, with sun-rich resources vast variety of fruits and vegetables are among goods ideas of production, for local and export markets. Moreover, diary, meat export, especially to Gulf countries are among new trends.
- IT and high tech: ICT industry is underdeveloped in Azerbaijan, vast variety of ICT and IT services, including innovative IT solutions are needed in Azerbaijan. Many recently set-up IT businesses grow rapidly, which is a sign for need in local market. Baku is the focus area of this industry.
- Construction and real estate: This industry has always been strong and competitive in Azerbaijan, however, experienced companies and professionals would benefit from the local construction tradition, as well as need for innovation construction and designs, with various real estate services, including agency and real estate development consultancy.
- Business Services: Various certification, technical consultancy, business consultancy, financial consultancy services are among the areas in demand.
The above are just ideas for thought and any business format with solid background and proper plan would be successful, provided that detailed market research is conducted.
Investment Opportunities and choosing business in Azerbaijan (Baku)
Several market research and calculations must be conducted before choosing a business in Azerbaijan, among the available opportunities.
The factors to be considered shall be:
- Experience of the foreigner, company owner or businessman in specific area;
-Initial budget: small investment opportunities in Azerbaijan are among the mostly required ones. Small businesses with focused operations provide competitive advantage, lowering costs and focusing on the quality.
- competitiveness of local market
- target market- local or export oriented, as well as Baku or regions
- place of business: employee costs are low in the regions, unlike Baku. In overall, average employee salaries, costs of electricity, gas, transportation are much cheaper in Azerbaijan in comparison with similar markets.
- Team: Who will do what in the business? You shall not fully rely on foreign employees, since if local workmanship exists in a specific area (positions) it would be difficult to obtain work permit.
- timing: timing is also vital in business - particularly in seasonal businesses, such as cafes/restaurants.
You can contact us for questions and obtaining our services regarding analyzing business opportunities in Azerbaijan.
