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This publication is available at https://www.gov.uk/government/publications/exporting-to-azerbaijan/exporting-to-azerbaijan
1. Azerbaijan export overview
Azerbaijan has been the world’s fastest growing economy in recent years mainly due to its oil and gas development and the liberalisation of its trade system.
Contact a Department for International Trade (DIT) Azerbaijan export adviser for a free consultation if you’re interested in exporting to Azerbaijan.
The UK is already the single largest investor in Azerbaijan and is well placed to increase business.
There are currently more than 450 UK companies doing business in Azerbaijan. In addition to oil and gas, UK companies have been successful in areas such as construction management and design, retail and education.
Benefits for UK businesses exporting to Azerbaijan:
- high government spending on infrastructure projects
- diversification strategy
Strengths of the Azerbaijan market:
- rapidly changing country
- strategic location is a gateway between Europe, the Middle East and Asia
- lack of transparency
- inconsistent application of regulations
- inconsistent procedures relating to licensing or certification requirements
- double registration of trademarks can lead to legal disputes
- ranked 80th in the World Bank’s ‘Ease of Doing Business’
- not a member of the World Trade Organization (WTO), causing customs issues
- few companies have comprehensive English language websites
- many companies don’t have audited accounts
- ranked 126 out of 174 in the 2014 Corruption Perception Index
You should ensure you take the necessary steps to comply with the requirements of the UK Bribery Act.
3. Growth potential
The World Bank estimated Gross Domestic Product (GDP) growth for 2014 at 2.8%. It forecasts 1.5% growth in 2015.
The government aims to further develop the economy through diversification of the economy.
Azerbaijan’s GDP is generated by:
- industry (58.3%)
- services (36 %)
- agriculture (5.7 %)
Unemployment has decreased significantly over the last decade. It dropped to 5% in 2014. 8.5% inflation is forecast by the International Monetary Fund (IMF) for 2015.
Azerbaijan withstood the global financial crises relatively well. The government’s economic strategy ‘Azerbaijan 2020: Vision into the future’ aims to:
- diversify the economy
- increase exports
- reduce poverty
4. UK and Azerbaijan trade
Total value of UK exports to Azerbaijan in 2014 reached nearly £730 million.
Main exports from the UK include:
- engineering equipment and oil machinery
5. Opportunities for UK businesses in Azerbaijan
DIT provides free international export sales leads from its worldwide network. Search for export opportunities.
The USD 40 billion Southern Gas Corridor project offers huge opportunities for British supply chain companies. BP is the major foreign player in Azerbaijan’s important oil and gas sector.
Shah Deniz gas will travel from Azerbaijan and Georgia on to Turkey through the Trans Anatolian Pipeline (TANAP). It will then go through Greece, Albania and Italy through the Trans Adriatic Pipeline (TAP).
Opportunities flowing from this project will cover nearly every sector from design to education.
Contact DIT Azerbaijan for more information on opportunities in Azerbaijan’s energy sector.
The diversification strategy will open up opportunities across many industry sectors for UK companies. There are plans for huge public and private development projects. Multi-million dollar projects include:
- extension of Baku metro
- regional infrastructure development ranging from wastewater treatment to tourism growth
- restoration and reconstruction of the main highways
- new rail and road links to Georgia and Turkey
- privately built power generation
The annual Caspian International Road Infrastructure and Public Transport Exhibition in Baku provides an opportunity to network and meet contacts in the infrastructure sector.
Contact DIT Azerbaijan for more information on opportunities in Azerbaijan’s infrastructure sector.
5.3 Financial and professional services
The Azeri banking sector is underdeveloped, with little foreign ownership.
The financial sector consists of 181 licensed institutions which can grant loans including:
- 43 banks
- 108 credit unions
- 30 other Non‐Bank Credit Institutions (NBCIs), most of which are Monetary Financial Institutions (MFIs).
This whole area of the economy is opening up rapidly, partly due to the government’s industry diversification strategy, concentrating on development of non-oil sectors.
There is scope for UK companies/organisations to support development and share experience/knowledge.
Contact DIT Azerbaijan for more information on opportunities in Azerbaijan’s financial and professional services sector.
5.4 Information and Communications Technology (ICT)
USD 4 billion investment is expected to develop the ICT sector in Azerbaijan by 2020. The Azerbaijani government is looking for UK partners in:
- cyber security
- creation of high technology parks and a ‘Tech City’ type development
Contact DIT Azerbaijan for more information on opportunities in Azerbaijan’s ICT sector.
There are some mid-range and high end shopping malls in Baku. Another 2 are due to open shortly.
There are opportunities for the supply of both luxury and mid-range brands in all areas.
Contact DIT Azerbaijan for more information on opportunities in Azerbaijan’s retail sector.
Education is one of the priority sectors for Azerbaijan. A state scholarship programme financed by the State Oil Fund encourages students to study engineering, computer science, law at top-rated universities abroad.
There are opportunities for:
- joint programmes between higher education institutions
- Technical and Vocational Education and Training (TVET)
- upgrading of TVET institutions
- overseas study
- consultancy services
Contact DIT Azerbaijan for more information on opportunities in Azerbaijan’s education sector.
5.7 Global sports
Azerbaijan successfully delivered the First European games in June 2015. It will also host Formula One and the Islamic Games in 2017. Infrastructure is mostly already in place, but there will be opportunities around the delivery of these events.
Baku is one of 13 cities appointed by the UEFA to host games at EURO 2020. Opportunities will emerge when tenders are issued.
It’s also a possible bidder for 2024 Summer Olympic Games.
Contact DIT Azerbaijan more information on opportunities in Azerbaijan’s global sports sector.
6. Start-up considerations
There are 2 main routes to market in Azerbaijan. These include:
- establishing a local presence through a representative office, branch or company legal entity
- approaching the market through local representation in the form of an agent or distributor
6.1 Setting up a company
Branches and representative offices of foreign commercial legal entities should register with the Ministry of Taxes. Branches and representative offices of foreign non-commercial legal entities should register with the Ministry of Justice.
There are a number of company legal entities that a foreign company may choose from. They include:
- Joint Stock Company (JSC) which can be open or closed type
- Limited Liability Company
- partnership (general and limited) which are regulated by the Civil Code of Azerbaijan
Shares in JSCs must be registered with the State Securities Committee.
You should conduct proper due diligence before entering into any sort of partnership or joint venture with Azerbaijani companies. Contact DIT’s team in Azerbaijan for advice.
7. Legal considerations
Azerbaijani law is based on a civil (continental) law system.
Foreign investment is regulated by a number of international treaties and agreements, and domestic legislation. The main laws are:
- Law on Protection of Foreign Investment (the Foreign Investment Law)
- Law on Investment Activity
- Privatization Law
- Second Privatization Program
- Law on Banks
International treaties prevail over local law (except for the Constitution and acts adopted by referendum) regulating the same issue.
Azerbaijan acceded to the New York Convention on the enforcement of foreign arbitral awards in 1999. Azerbaijan also passed a law on international arbitration.
The Central Bank of Azerbaijan is the central regulatory body for the banking sector.
Contact the DIT’s team in Azerbaijan to help find tax and legal advisers before entering into agreements.
7.1 Standards and technical regulations
The State Committee for Standardization, Metrology and Patent has responsibility for standards and technical regulations.
7.2 Intellectual Property Rights
The State Copyright Agency and the State Committee for Standardization, Metrology and Patent has responsibility for registering intellectual property rights.
Disputes related to industrial property rights are considered by the Appellate Board of the Patent Committee. Their decisions can be challenged in Azerbaijani courts.
The right to a trademark is based on registration with the Patent Committee. Researching trademarks is challenging due to lack of computerisation. This can result in the double registration of the same trademark by different claimants, and then disputes over ownership.
8. Tax and customs considerations
The UK and Azerbaijan have signed a double taxation agreement.
Azerbaijan’s tax system consists of 3 taxation regimes:
- statutory tax regime governed by the Tax Code
- Production Sharing Agreements (PSAs)
- 2 Host Government Agreements (HGAs) relating to the main oil and gas export pipeline and the South Caucasus pipeline
8.1 Statutory tax regime
Taxes and payments affecting foreign investors operating under the statutory regime include:
- corporate profit tax
- personal income tax
- Value Added Tax (VAT)
- withholding tax
VAT is charged at 18%. It is imposed on all companies involved in commercial activities and foreign companies importing goods and services into Azerbaijan.
8.2 Profit tax
The general profits tax rate is 20%.
Entities subject to the profits tax include:
- Azerbaijani companies, with or without foreign ownership
- branches of foreign legal entities
- representative offices of foreign enterprises undertaking commercial activities in Azerbaijan
The State Customs Committee of the Republic of Azerbaijan has responsibility for customs legislation and guidance.
You can find more about import tariffs in the Market Access Database.
9. Business behaviour
The official language is Azerbaijani. However, Russian is also still widely used and most people in Baku are bilingual. English is also quite widely spoken and understood in Baku.
It can be difficult to do business with Azerbaijan remotely. Azerbaijani companies will often not respond to emails or phone calls.
Personal relationships are very important in this market. Many local companies will have some form of political patronage to provide protection from the difficult business climate.
Azerbaijan is an Islamic Country, but secular and liberal in comparison to some of its neighbours. When exchanging greetings, men should wait and see if a woman extends her hand. If they do, shake it lightly.
Family is a very important part of Azeri culture so greetings should include a reference to this.
10. Entry requirements
You must obtain a visa in advance of traveling to Azerbaijan. Contact the Visa Centre for more information on visa requirements and place of stay registration.
If you plan to work in Azerbaijan, you must obtain a work permit and a temporary residence permit. Contact the State Migration Service for information on obtaining the required permits.
10.1 Travel advice
If you’re travelling to Azerbaijan for business, check the Foreign & Commonwealth Office (FCO) travel advice beforehand.
Contact the DIT team in Azerbaijan for more information and advice on opportunities for doing business in Azerbaijan.