6 March 2021

Saturday, 17:33

CURRENCY

RISING FROM THE ASHES

Agriculture, tourism and mining to be the three pillars of economic development on the liberated territories of Azerbaijan

Author:

01.12.2020

Large-scale works on the socio-economic restoration of Garabagh start in Azerbaijan. Along with infrastructure projects, it is planned to implement a series of projects in the construction of housing and social facilities. The region will attract billions of dollars of state, private and foreign investments for the development of agriculture, tourism, mining, production of building materials, etc. Experts and state authorities have already announced the primary plans for the restoration of communications and the development of the economy of Garabagh in the near future.

 

Old new infrastructure

Currently, the territories liberated from the occupation, including Shusha and other settlements in Daghlig Garabagh, is cleaned from debris, damaged armored vehicles, mines and unexploded weapons with the support of the Azerbaijani army, other law enforcement agencies, the Ministry of Emergency Situations to create necessary conditions for the implementation of infrastructure projects. One of the priorities is the reconstruction of existing roads, as well as the construction of new ones. The construction of the Ahmedbeyli-Alkhanli-Fizuli-Shusha highway (101.5 kilometres) is ongoing. The projects of paramount importance include the construction of an electric power infrastructure, including transmission lines, 330/220/110 and 110/35/10 kV substations, distribution lines, and transformer stations. The state-run energy companies Azerenerji and Azerishig have already developed relevant projects followed by the selection of specialists to restore the power systems in Fuzuli, Jabrayil, Gubadli, Zangilan, Aghdam and other regions of the region, where the infrastructure of power grids has been completely destroyed.

The Ministry of Transport, Communications and High Technologies, as well as mobile operators are restoring the TV and radio broadcasting systems, installing base stations to provide telecommunications services.

The minimum conditions required for the normal operation of transport communications, stable power supply, as well as access to communication services and the Internet. Otherwise it is impossible to implement any serious economic projects in the region.

The specialists of state-run Azersu, Azerigaz and other agencies will start similar works in the near future. In particular, Azersu plans to start an inventory and assessment of the technical conditions of reclamation and irrigation facilities in the liberated territories for their early reconstruction and commissioning. The water potential of the region is quite extensive: there are 9 reservoirs, 7 collectors, 6,426 km of irrigation networks, 2 hydropower facilities, 330 km of collector and drainage networks, 803 hydraulic structures, 88 pumping stations, 1429 sub-artesian wells. In general, there are 125,800 hectares of irrigated lands in Garabagh.

“Today, our priorities are the issues related to the management and safety, including demining operations, eliminating biological and environmental violations that pose a direct threat to life, the organization of the work of the Border Service, police, and other state bodies,” Deputy Minister of Economy Niyazi Safarov said.

 

The mega return

Primary infrastructure projects will be implemented in parallel with the demining of the territories, which is a very large-scale project indeed. According to the director of Azerbaijan National Agency for Mine Action (ANAMA) Gazanfar Ahmadov, it will take about 13 years to completely clear the territory, including at least 5-6 years for the detection and elimination of unexploded ordnance. ANAMA director noted that the agency is developing a road map for clearing the territories. According to the document, initially it is planned to clear approximately 14,000 sq. Km of lands, including 3,000 sq. km of paved roads. The situation is further complicated by the Armenian Armed Forces leaving the occupied regions with the mined civil objects, such as power transmission towers, water reservoirs, road infrastructure, as well as settlements and even cemeteries, which significantly complicates the work of sappers.

Nevertheless, the planning and preparation works for the implementation of business projects, restoration of settlements, development of the natural potential of the liberated territories have begun in Azerbaijan. An important step in this direction was the decree signed by President Aliyev on the establishment of a Coordination Centre to address in a centralised manner all the socio-economic, humanitarian, organisational and other urgent issues in the liberated territories. Interdepartmental Centre within the centre is charged with performing communication functions, as well as providing the necessary analytical and organisational support to the new structure.

The Centre will receive all projects prepared by state departments for the restoration of the infrastructure in Garabagh. It will then determine the sequence of operations, and coordinate the issues of attracting public, private and foreign companies to the implementation of these projects.

Currently, the government and state departments are developing a program for the economic development of the liberated territories, as well as for the development of a phased plan for the implementation of the planned activities by industries and specific areas. A mega-program will include individual state programs that cover the projects implemented in agriculture, mining, communications, tourism, production of building materials and other industries. The classification and scope of works to ensure the socio-economic development of the region will be determined as part of these sectoral packages. It is also planned to develop specific projects, including the timing for their implementation.

At the same time, the State Committee for Urban Planning and Architecture of Azerbaijan has started works on developing master plans and other documents on territorial planning, which form the basis for the restoration and future development of the liberated cities and other settlements. Also, the State Committee for Refugees and Internally Displaced Persons is developing a program for the return of Azerbaijani citizens to the liberated lands. As part of this document, the mechanisms of tax preferences and concessional lending are provided in order to stimulate future residents of the returned territories.

 

Financing package

According to the plan of actions, a number of components of the above-listed programs will be implemented starting as early as next year. As noted by the Minister of Finance Samir Sharifov, it is planned to make certain amendments to the draft state budget for 2021 to reserve funds for infrastructure, socio-economic, energy, utilities and other projects as part of restoration works in Garabagh.

The bulk of funds for the restoration of basic infrastructure, construction of social, utilities and administrative facilities will be provided from the state budget and funds of the State Oil Fund, with the possible attraction of loans and grants from international financial organisations. To a large extent, state aid will be required in the housing construction. Obviously, the Entrepreneurship Development Fund, the Agency for Agricultural Credit and Development and other state funds will contribute to financing business projects and supporting small and medium-sized businesses. It is assumed that most of the investment in the development of agriculture, industrial and tourism projects will be provided by the private sector, including both local and foreign investments. "The end of the Daghlig Garabagh conflict will create favourable conditions for attracting private investment in the region," economist Eldaniz Amirov said. According to him, Azerbaijan has a unique experience in attracting foreign investments. Thanks to political stability and security in the country, as well as an effective business climate, macroeconomic stability, regulatory mechanisms, a relatively large domestic market, it is possible to attract private capital for the above restoartion projects.

According to the Minister of Economy Mikayil Jabbarov, the ministry is negotiating with Turkey on the participation of Turkish companies in joint projects for the development of agriculture, tourism, and extractive industries in Garabagh. Iran and Russia have also expressed interest in the supply of building materials, construction contracts, road construction and infrastructure rehabilitation in the liberated territories. In general, it is planned to involve a number of member countries of the Organization of Turkic-speaking States in these works.

Among the long-term plans are the creation of a free economic zone, a small prototype of the Silicon Valley, the development of start-ups and, of course, the establishment of technology and industrial parks. At the same time, thanks to the gradual inflow of local and foreign capital to the area, it will be possible to create a new industrial core of the region. Obviously, in order to stimulate the participation of business in the development of an industrial cluster in potential FEZs and industrial towns, a system of wide fiscal preferences, benefits for utilities and logistics services will be introduced. It is expected to provide a long period of exemption from property and land taxes, reduce corporate income tax, zero the customs duties and VAT for the import of machinery and technological equipment for production purposes, etc.

 

Main directions

According to experts, given the natural features of the region and the available resources, the agriculture, tourism and mining projects can ensure a relatively quick return of investments.

In particular, the Ministry of Agriculture and specialists of the Institute of Soil Science and Agrochemistry of the Academy of Sciences plan to develop grain growing, silkworm breeding, cotton growing, viticulture, horticulture, vegetable growing, tobacco growing in the lowlands of the region, fruit processing enterprises, wineries, cotton ginning factories and enterprises for the production of vegetable oil. Thanks to abundant moisture and vast meadows in the foothills and the elevated parts of the region, there are ideal conditions for the development of animal husbandry, beekeeping, the collection and processing of wool, the production of environmentally friendly dairy products, the collection and packaging of medicinal plants, etc.

Considering the magnificent mountain landscapes, rich flora and fauna, numerous monuments of history and culture, the development of tourism in the area seems very promising. So, only the total forest area of the region is almost 246,700 hectares, including 13,200 hectares of valuable forests with the red-listed Oriental plane trees. In general, the mountainous region of Garabagh has ideal natural opportunities for the development of sports and extreme types of tourism - mountaineering, horseback riding and cycling along mountain trails. The pearl of Garabagh–the city of Shusha and its environs with enchanting nature and views are ideal for the development of a tourist cluster. Some hotel chains are already planning to create hotels and entertainment centres here similar to the existing international resorts Shahdag and Tufandag in the districts of Gusar and Gabala.

The region is also famous for its rich reserves of mineral waters, including Yukhary and Ashaghi Istisu, Baghirsagh, Keshdak in Kalbajar, Ilighsu, Minkend in Lachin, etc. The liberated territories have about 120 deposits of mineral waters of various gas and chemical composition, medicinal value (about 39.6% of the total geological reserves of medicinal springs in Azerbaijan). This makes it possible to create a number of balneological resorts and recreational areas in the region.

Finally, the most large-scale and capital-intensive works will be implemented for the development of the region's mineral resources. According to experts, there are 155 deposits of various types of minerals, including gold, mercury, copper, lead, zinc, facing stone, cement raw materials, pumice and volcanic ash, clay, gypsum, perlite and obsidian, coloured and decorative stones, marble, etc. It is not difficult to guess what multiplier effect the development of these resources will have on the development of the domestic sector of building materials followed by their further processing and export.

The potential of ore raw materials (several dozen) is no less impressive. This resource base will provide the domestic non-ferrous metallurgy with raw materials for many years.

Thus, the development of the natural potential of the Garabagh region can become a driver behind the further development of the national non-oil economy, a source attracting foreign investments and a resource base for creating new jobs and increasing social welfare of the population.



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