LIVING IN SPACIOUSNESS

The intensive development of manufacturing, vast budget investments in the road building and forming the community infrastructure, as well as several waves of housing boom over the past decade generated a stable market demand for services of construction companies and facilitated the localisation of the production of construction materials. This market trend, in particular, helped to form a modern and technically equipped construction sector, which numbers today some 1,500 companies and more than 60,000 employees. 

The Azerbaijani market of construction materials is going through another surge against the third consecutive year of growth in the economy's construction sector. The 19th international exhibition Baku Build-2013 that recently started in the Baku Expo Centre visibly showed this positive trend.    

Still ahead 

Over the past 15 years the construction sector accounted for almost 20 per cent of direct foreign investment in the Azerbaijani economy. Over the past three years the growth rate of the construction market was within the 25-30 per cent range and even higher. The private sector does three quarters of the entire volume of the construction work. In terms of development of the construction sector Azerbaijan has long since surpassed the figures for the relatively favourable pre-crisis year of 2008. This tendency is most visible in the residential housing construction segment.

According to the State Statistics Committee, in 2011 the volume of housing construction in Azerbaijan reached 1.922m sq.m, which can be considered an absolute record of the past decade. In 2012 the tempo somewhat decreased, at 1,757,000 sq.m, which is partly explained by the oversupply of the new housing relative to the real purchasing power of Baku's population. However, judging by the figures for January-July 2013, the construction complex began to confidently make up the lost ground: some 1,181,000 sq.m were put into operation, 28.1 per cent higher than for the similar period in 2011. Overall, in the three quarters of 2013 the volume of construction work (residential and industrial segments) is valued at 5.68bn manats, which is 9.5 per cent higher than the volume of capital investment for the similar period in 2011.

These figures show that the Azerbaijani construction industry is capable of increasing the volume of production despite the global negative trends. It seems that the builders can be safe from the threat of unemployment for the nearest 10-15 years. This is guaranteed by the long-term plans depicted in the relatively new general plan of development for the capital and its suburbs until 2030. It is expected that over the next 17 years the population growth in Baku will stand at 745,000 and increase to 3.5m people. Consequently, the housing fund is forecast to double, to 64,147m sq.m, and there will be an average of 25 square metres of accommodation per person, as opposed to the current 17.3 sq.m. Already today the housing deficit in Baku alone is 15m sq.m. Given the current rate of construction, the housing problem in Azerbaijan will take no less than a decade to resolve, thus ensuring that builders have stable work.

But housing construction is not the only direction where the national construction sector will be engaged. The construction of more than 30 metro stations, taking the industrial facilities out of the capital, major upgrade of the Baku port and also the possible transition of a number of large education facilities to the out-of-town university campuses, reconstruction of the disorganized low-rise buildings and typical five-storey buildings of the 1960-1970s - this is not an exhaustive list of measures envisaged in the new general plan for Baku's development. Considering the scale of community and road reconstruction and modernisation of social facilities in more than 20 regional centres, we can say with confidence that a bust in the construction sector is hardly possible in the foreseeable future.

Cement for ages 

It is quite obvious that the intensive development of industry and the construction boom of the past decade were catalysts for the market demand for construction materials and thus facilitated the creation of a powerful industry to process the construction raw materials.

"Currently the private sector accounts for 77 per cent of the volume of production of construction materials. In addition, the rate of growth in this sector increased 2.5 times over in the past decade and the number of companies engaged in it increased almost 12-fold," Rufat Mammadov, head of the Azerbaijani fund for encouraging export and investment said at the Baku Build-2013 exhibition's opening. "Comprehensive state supports allows to maintain such high rates of growth. Over the past year the national fund for supporting entrepreneurship alone allocated discount loans for 82.6m manats for more than 500 producers of construction materials". Over the past decade the cement production in Azerbaijan increased 2.3 times, of ready concrete products 11 times, of bricks - 4 times.

Azerbaijan also attained significant progress in the localisation of the production of a large range of construction materials: plastic pipe and fittings, paint products, tiles, plasterboard, dry mixes, and various decorative materials and so on.

The success of the sector can be best seen by following the dynamics of development of the basis cement industry: the overall capacity of the cement producers in Azerbaijan until recently did not exceed 1.8-2m t per year.

Meanwhile, the annual demand of Azerbaijan in this strategically important construction material is met through importing more than half of it. According to expert evaluations, the domestic demand for cement will grow in stages and by 2016 the market demand may reach 5m t per year. The market situation thus determined the major trend of development of the cement industry in Azerbaijan: building in the country three powerful plants with the entire cycle of production: development of commodity pits, roasting clinker production and the final product - dry mixes.

"In near future Azerbaijan will be able to independently and fully meet its demand in cement and even stop its import," the deputy minister for economic development, Niyazi Safarov, said. "According to data for the end of 2012, the national producers of clinkers and dry mixes satisfied only 44 per cent of the domestic demand. However, in two or three years, as the new plants began to operate at full power, this figure will rise to 100 per cent".

Thus, already by 2016 the overall production of the three large cement plants in Azerbaijan will reach an approximate volume of 5m t, with the prospect of further growth to 6.5m t. This will not only completely meet the domestic demand, but also allow the export of the excess of cement and clinker.

Along with the increase in the production, the cement industry is also reaching the modern level of quality, using the environmentally friendly technology of "dry" production, as well as introducing for the first time in the Caspian region revolutionary methods of energy efficiency. For example, at one of the plants recycled materials are to be used instead of fuel: old tires, oil-contaminated land and drill cuttings, household and industrial waste. These measures will help save about 9 per cent, and in the subsequent period up to 15 per cent of natural gas burned in the ovens, while helping to clean up the contaminated sites.      

Minimizing import 

No less promising are the plans concerning the production of metal fittings, steel wire rods, various building profiles and pipes. To a large extent, the production of these products is concentrated in the Sumqayit Technology Park: the production lines for the manufacturing of spiral tubes, producers of power cables, plastic pipes and other types of building materials. The production of a variety of metal products and metal tiles has begun at the Mingacevir machine engineering plant.

With the April directive of the head of state a powerful steel complex, the Azerbaijani steel production complex CJSC, began to form in Azerbaijan. Its work is expected to involve about 100,000 specialists. As part of this decision the entire process chain will be recreated: extraction of ore in local deposits, processing of iron in the concentrate and, finally, the smelting of steel located in the district of Ganca and Daskasan plants with the use of the latest technology. After a few years the steel produced here will be used to make pipes - the most expensive metal product in the market. In addition, the complex will produce fittings, as well as other profile metal products used in the construction industry. In this context also fits the construction project of a new steel plant with the capacity of 750,000 t in Hovsan, planned for the coming year. Germany's Siemens AG will take part in its design and technical supply.

The Azerbaijani construction material manufacturers already control a considerable part of the market for many products. In particular, in the production of paint materials the share of the three large domestic companies is over 70 per cent. Four other leading manufacturers of dry mixes and finishing materials almost completely control the market and, moreover, successfully export surplus products to Kazakhstan, Uzbekistan, Georgia, Ukraine, Russia and even Turkey

Azerbaijan is dynamically developing the segment of the glass industry, and together with ordinary window glass construction the production of a special bullet-proof glass was launched this year. Three- and five-layer laminated glazing confidently stop pistol and assault rifle bullets. This product has passed international certification and is designed for use in jewellery stores, banks, exchange rates and so on.

   The examples above only partially illustrate the scale and technological capabilities of the national construction sector. In terms of the number of participants - 490 companies from 32 countries and a 20 per cent increase of the total area of the exhibition - the current Baku Build forum was an absolute record.