URBAN VILLAGE FORMAT

Azerbaijan, like most of the developing states in the world, is striving to kick-start modernisation, focussing attention on the non-oil sector of the economy. The formation of research and technology parks of various profiles and business incubators have been chosen as one of the tools in the government's industrial strategy. From this year onwards, on the initiative of the Ministry of the Economy and Industry, urban industrial villages are to be set up in Baku and other cities.

For the next 10 years

Having attained high rates of socio-economic development over the past decade, Azerbaijan has been able to get through the transitional period relatively quickly and join the category of medium developed states. Thanks to the implementation of a number of state programmes, in particular those relating to the development of the regions, almost all the regions in the republic have been embraced by the new industrialisation processes. The industrial capacities in the country have been privatised and radically upgraded in a comparatively short period, and more than 20000 new enterprises have been commissioned. In the last four years alone, more than 4bn manats have been invested in 20 major enterprises in the non-oil sector. The fact that in the first quarter of this year alone, approximately 100 large- and medium-sized industrial, agricultural, processing and service facilities have been commissioned in the regions and on the whole throughout the country and the construction of something like 500 enterprises is under way, is evidence of this ongoing trend.

In declaring 2014 as the Year of Industry, Azerbaijani President Ilham Aliyev formulated the strategic goals in developing the country's economy. In the next 10 years competitive, high-tech production should take shape, which will ensure 80 per cent of the country's GDP, with a considerable increase in the share of industrial output in Azerbaijan's total exports.

What will the mechanisms and tactics in the government's industrial policy look like in the future? To what extent will this strategy fit in with the dominant trends in the world?

Azerbaijan, like many states of the former Soviet Union, underwent large-scale de-industrialisation in the 1990s.

Owing to its obsolete equipment, a large part of the USSR's heavy industry was not called for on the world market and was largely unfit for modernisation. Although, on the other hand, this meant that the country managed to avoid the expenses involved in maintaining unproductive, out-of-date sectors and enterprises.

The lion's share of the capital investments over the last 15 years was invested in creating modern means of production, whose share accounts for more than two-thirds of Azerbaijan's overall industrial potential today.

The policy of fundamental modernisation of Azerbaijan's industrial potential will be most clearly apparent in the next five years. The government is employing principally new mechanisms involving the concentration of industrial capacities: several industrial parks of various profiles and business incubators have been set up in the country. These structures are moreover aimed at resolving excellent tasks. Thus, the research and technology parks are intended first and foremost to bring together comparatively large plants and factories, which are intended for mass production and calculated to produce goods for export. The aim of the business incubators is somewhat different. These are supposed to roll out projects intended for the development of the information and communications [IT] sector, small scale science-intensive production or the start-up of novel projects in the service sector, scientific research and so forth.

The third element

Finally, from this year onwards, on the initiative of the Ministry of Economy and Industry, another component in the industrial triad will go into operation, namely the formation of urban industrial villages. Unlike the research and technology parks and the business incubators, it is intended that production and service facilities belonging to small and medium businessmen should be grouped together in the urban industrial villages. . In the main, these will be firms engaged in repairs and construction work, offering services, small workshops producing building materials, engineering firms, food production facilities, firms producing small batches of textiles and footwear and so forth. As a rule, these businesses aim to satisfy the domestic market and, owing to the insignificant volume of their output, they are extremely sensitive to rent prices, outlays on the communal infrastructure, access to credit and so forth.

Properly speaking, in attracting private enterprises into the urban industrial villages, the state is planning to cover the costs of setting up the necessary infrastructure, including the provision of electricity, gas, water, sewerage disposal and so forth, out of the state budget. Moreover, residents of these urban villages will be offered discounted loans, and a number of other measures will be implemented to boost their potential, such as free advisory services and the organisation of training and seminars. Depending on the project, residents may be offered plots of land for the installation of industrial equipment within the limits of the urban industrial village. 

Entrepreneurs will be able to obtain special permits more easily, their time and transport costs will be reduced, since the urban industrial villages will be set up in direct proximity to major transport hubs.

According to preliminary information, the Ministry of the Economy and Industry is planning to set up the first urban industrial villages in the Sabuncha district of Baku, in Sumgayit, Ganca and Mingacevir, as well as in Sirvan and the country's Siyazan district, This experience will subsequently be copied in other settlements in Azerbaijan. What is more, it cannot be ruled out that in time, some of these urban villages will be able to boost their industrial potential to a high level so that they will be able to become fully-fledged research and technology parks.

Entrepreneurs who are interested in grouping their operations together in urban industrial villages need to submit their business plans to the Ministry of  Economy and Industry before 1 June this year. This information will be used in drawing up projects for future urban industrial villages, in defining the infrastructure needs, and finally they will help in grouping the potential residents together in keeping with the production activity.

It is noteworthy that Azerbaijan's staking on the development of research and technology parks, business incubators, and now urban industrial villages fits in completely with the current global trend. In spite of the lengthy period that the de-industrialisation of the densely populated megapolises took, today in a number of major cities in Europe and the USA, a tendency for industrial revival can be seen, but in a qualitatively different form. According to the research data of the Brooklyn Institute Locating American Manufacturing, approximately 80 per cent of the production workers' jobs in the USA are still to be found in the 100 largest megapolises. When it comes to the most high-tech production facilities, this figure is as much as 95 per cent.

But the new industrial revolution does not envisage the return of big "smokey" factories or chemical combines to the cities of the West. Large-scale traditional production remains the lot of the poorest developing countries just as before.

A new type of production is coming to European and American cities - the high-tech mini-factories producing sets of components for major assembling enterprises, accessories for the furniture industry, building materials and any other end products. These facilities employing no more than 50 people, can be located everywhere, even in an area of 200 sq m. The English and German language economic media are already using the terms "microproduction", "urban production", "light production" and so forth.

The experts at the Brooklyn Institute have named these urban industrial villages "innovation districts"; these are dense clusters offering both the physical and social infrastructure. Unlike the traditional research and technology parks or office centres, the urban industrial villages are forming a concentration of educational structures, businesses, and laboratories. Naturally public spaces are retained here, offering eateries and convenient pedestrian precincts. Clusters like these are actively taking shape in Barcelona [Spain], Boston and Philadelphia [USA], Hamburg [Germany] and other cities.

It remains to be hoped that precisely an environment like this will be selected as a model for the formation of urban industrial villages in our country.