CONTOURS OF AN INDUSTRIAL BREAKTHROUGH

Most developing states today are striving to make the leap towards modernization with due regard to national characteristics.  Despite different starting positions, the basic ingredient that ensures consistent economic performance is the development of non-energy branches of industry. Taking this into account, Azerbaijani President Ilham Aliyev has approved a plan of measures to mark the Year of Industry.

The decision to hold the Year of Industry was announced in January at an extended session of the government and was dictated by the real successes achieved in the policy of the new industrialization of the country which has been carried out in the last few years. 

By achieving high rates of socio-economic development in the last decade and a half, Azerbaijan has been able to move beyond the period of transition comparatively quickly and join the category of states with an average rate of development. Today the country faces a new task - to develop competitive, high-tech agricultural and industrial non-energy production providing 80 per cent of the country's GDP and to gradually promote the country's output on world markets. 

In a relatively short period of time a number of multi-purpose industrial estates and business incubators have been set up and over 20,000 enterprises have been commissioned, about 400 of which could be placed in the category of large and medium-size industrial facilities. These include cement factories in Naxcivan, Qaradag and Qazax District, thanks to which cement production has doubled. Substantial achievements have been made in localizing the production of a broad range of building materials - polymeric tubes and accessories, paint materials, roofing tiles, gypsum plasterboard, dry mixtures, finishing materials, and so on. A methanol plant has been commissioned, aluminium enterprises have been updated in Ganca and Sumqayit, a major defence-industry complex has been created, and so on. One of the biggest shipyards in the Caspian region, which has been given a full load of orders from the state oil company and the Caspian Shipping Line for many years ahead, was commissioned recently. The construction of over 90 new enterprises is continuing and a second carbamide plant, as well as a huge steel-casting complex in the north-west of the country, will soon be brought into operation. The foundations of a new steel-smelting plant with a capacity of 750,000 tonnes are being laid near Baku, and the start of construction of one of the biggest petrochemical and gas treatment plants in the South Caucasus in the capital's Qaradaq district is in the pipeline.  

A most important trend has become evident in the country - the development of a science-based industry. There have been definite advances already: in particular, the production of solar batteries, heat generators and LED-lamps is up and running. And the introduction of a tax-preference system to speed up the development of the ICT sector is helping to soon create about 15 plants where it is planned to develop the production and export of communications equipment, computers and peripheral materials, optic fibres, biological and medical equipment, as well as various equipment for the use of alternative energy resources.  

A key trend of the state's new industrial policy will be support for private exporter-companies of non-energy goods and the formation of new, export-oriented industries.

What will the short-term programme of this new industrialization be like and what measures have been planned for this year as part of the Year of Industry?

According to the plan for the Year of Industry, 45 undertakings in four areas are due to be carried out. These areas provide, among other things, for a stepping up of industrial potential, organizational measures and ensuring manpower and scientific back-up, as well as data support. One of the most important areas will be a range of measures to set up state-of-the-art enterprises, as well as updating and re-designing existing industrial facilities. These include finding a consultant to create a metallurgical complex from beginning to end, developing the production of equipment for alternative energy, shaping an infrastructure for a chemical technology park in Sumqayit, preparing for the construction of a petrochemical complex in Qaradaq District, and so on. There are also separate areas concerning the creation of new technology parks in Ganca and Mingacevir, and also attracting residents to the Balakan technology park.

The plan also provides for a number of measures to improve the legislative and regulatory framework. For example, over the year it is planned to draw up a draft law on innovative activity, to expand incentive measures and preferences at industrial and technology parks and to prepare proposals for the creation and functioning of industrial districts. The head of state has also instructed the creation of innovation encouragement groups that will include representatives of state bodies, business structures and science and the formation of industrial working groups uniting state bodies and industrial enterprises. The creation of an internet-portal and a data base in the sphere of industry and an electronic catalogue for enterprises and types of output is also planned. 2014 will also see scientific research being carried out in industry, the organization of various seminars and an international conference on questions of the development of industry in Azerbaijan.

Concurrent with this, a mid-term programme of industrial development to define priority strategic directions is being drawn up in the country jointly with experts from South Korea.

A most important element of the new industrial strategy is the gradual expansion of multi-purpose technology parks, a very effective method of the concentration of modern industrial enterprises with high export potential. The changes in the Tax and Customs Codes, providing for a number of preferences for technology parks, were part of an additional incentive for entrepreneurs. A no less important trend is the improvement of legislation, including the business and investment climate. To this end, experts of the Ministry of Economy and Industry have prepared a package of proposals in eight areas which have taken into account the experience of a number of the world's leading states. In particular, they studied the experience of New Zealand in the question of the registration of business structures and protecting the rights of investors, of Hong Kong in issuing construction permits, of Spain in connection to the power grid, of Georgia in registering property rights, of Singapore in export-import operations, and of Japan in the closure of enterprises.

In implementing its new industrialization policy, Azerbaijan looked very closely at South Korea's wealth of experience in creating special economic areas, technology parks and effective scientific-production structures. What set the Korean economy aside was the formation of vertically integrated mega-holdings, so-called "chaebols". Merging the industrial and banking components into one entity, these structures were able to provide within a very short time a high level of capitalization of such industries as shipbuilding, vehicle manufacture, the machine tool industry, steel production and micro-electronics. The country has the prerequisites for implementing this experience: multi-industrial holding structures have for many years been a key element of Azerbaijan's economic landscape.

Let us hope that the implementation of the country's industrialization programme will help to attract investments and know-how to our non-oil sector and thereby shape a competitive and export-oriented economy.