PROFITABLE TANDEM

The 5th Azerbaijan-Russia Forum on Interregional Cooperation, which ended in Qabala recently, outlined key trends in relations between the two states. Judging by the results of the latest meetings, representatives of the government sector and, of course, the business community expressed a mutual desire to raise bilateral trade and economic relations to a qualitatively new level of development. These measures envisage maximum opening of markets for trade and mutual penetration of investment capital, especially at the regional level, as well as a consistent policy on the development of transport and logistics infrastructure.

Economic cooperation with the Russian Federation has been one of the priorities of Azerbaijan's foreign policy for many years. In the more than two decades of independence, both countries have come a long way, reaching a multiple growth in mutual trade and investment development activity. In recent years, the trade turnover between the two countries has been increasing rapidly: In 2013 alone, it grew by 10.5 per cent and amounted to approximately 2.6bn dollars. Foreign trade with Azerbaijan involves more than 500 companies and organizations from more than 70 Russian regions. Their number is increasing rapidly, and in the coming years, both countries plan to increase bilateral trade to 4bn dollars.

Entrepreneurs of the two countries are showing interest in mutual investment as well. For example, about 570 companies with Russian capital are operating in Azerbaijan, while investment in the economy has almost reached 1.8bn dollars. In turn, Azerbaijani investment in Russia has exceeded 1bn dollars in recent years. However, these figures do not fully reflect the existing potential. Therefore, the two governments intend to make every effort for the development of the investment component. Among other things, the agenda includes a number of projects to build logistics centres and jointly produce railway wagons and equipment for oil and gas production and transportation. For this purpose, it is planned to use the financial capacity of the State Oil Fund of Azerbaijan and the National Welfare Fund of the Russian Federation, as well as the Azerbaijan Investment Company and the Russian Direct Investment Fund. And given the untapped potential, particularly in high technology manufacturing and the ICT sector, banking and tourism sectors, agricultural industry and power industry, entrepreneurs of both countries are able to increase the volume of mutual investments several times over.

However, to achieve the goals that have been set, Russia and Azerbaijan need to agree on a number of issues in the legislative arena. This primarily concerns the interstate agreement "On the Promotion and Reciprocal Protection of Investments", which is expected to be signed in the near future.

It is noteworthy that work to harmonize mutual positions in the economic sphere, and above all, to intensify Russian-Azerbaijani intergovernmental contacts has become especially active in recent months. This trend manifested itself most clearly during the 5th Azerbaijani-Russian Forum on Interregional Cooperation: New Opportunities for Growth, which was held in Qabala and ended in the signing of more than a dozen commercial agreements and memoranda. Among them is a Memorandum of Understanding between the Azerbaijani Ministry of Economy and Industry and the Russian Ministry of Regional Development, between the Azerbaijan Export and Investment Promotion Foundation (AZPROMO) and the Russian Investment Agency "Invest in Russia", etc.

In addition, the Azerbaijan Tourism Association (AzTA), the Astrakhan Tourist Union and the Ural Tourist Association agreed on cooperation in the tourism sector. Azerbaijani companies and their partners from Dagestan and Rostov Region signed contracts for a number of projects in the field of building materials, furniture, etc.

It became clear from the discussions at the forum that at this stage, the entrepreneurs of the two countries are more interested in mutual investment in promising manufacturing sectors. The Russian Minister of Regional Development Igor Slyunyaev said that the Russian side has offered 18 projects in which the participation of Azerbaijani entrepreneurs is possible. They include projects in the agricultural sector, as well as construction contracts within the framework of preparations for the World Cup, which will be held in Russia in 2018. "Over the past year alone, Azerbaijan has hosted about 30 business forums with the participation of Russian companies, which indicates the interest of the Azerbaijani side in contacts with our Russian partners in all fields," AZPROMO President Rufat Mammadov said.

During the forum, "round tables" were held in various areas of economic relations between the two countries. In particular, discussions between representatives of the banking and financial sector revealed that today 35 Azerbaijani banks have correspondent relations with Russian banks, and their total turnover exceeds 550m dollars. Although the field of remittances is dominant here, there is quite successful experience in the activities of subsidiaries and representative offices of leading Russian banks in Azerbaijan and vice-versa.

"We are ready to provide full support for the arrival of Azerbaijani banks in the Russian market. And from our side, we are interested in expanding the activities of Russian banks in Azerbaijan," said the deputy chairman of the State Duma Committee on Financial Markets, Dmitriy Savelyev. According to him, in Russia, where there are about 800 banks today, serious work is currently underway to revoke licences. "This year will see a record number of licences revoked. But this applies only to banks that do not operate in good faith," Savelyev said, noting that this will not affect Azerbaijani banks if they come to the Russian market, because experience shows that the activities of foreign banks in Russia are more careful. "So, these issues should in no way affect the decision of Azerbaijani banks and branches to come to the Russian market, which we really want and expect. As the leader of the Azerbaijan-Russia group of friendship in the State Duma, I would really like to help the banking sector of Azerbaijan to open and start work on the territory of Russia," he said.

Meanwhile, Director General of the Central Bank of Azerbaijan (CBA) Rasad Orucov stressed that the banking systems of Azerbaijan and Russia should think about the mutual use of resources. "Some Azerbaijani banks are going to study the fiscal space of the Russian Federation for presence on this market, and the Central Bank is ready to fully support this issue," he added. Following discussions, the parties agreed to cooperate in the exchange of information between the two countries' credit registries.

Another series of discussions was held around the situation in the transport sector, which remains the main point of economic relations between the two countries. For example, in the first quarter of this year, 22,000 passengers and 250 tonnes of cargo were transported between the two countries. But there are problems, and the main problem is the waste of time at border crossing points, as well as the need to simplify the passage of Azerbaijani vessels in inland waters of Russia. According to Russian Deputy Minister of Transport Sergey Aristov, the parties are also considering building logistics centres in the two countries and increasing transit traffic by road and rail. Projects are being evaluated to establish ferries, specifically between the ports of Baku and Olya, and to restore Baku-Astrakhan flights.

The above aspects of the results of the forum and the expansion of the number of its participants (this year more than 500 delegates from Russia) reaffirm the need to continue discussions in such a wide format. Incidentally, the same idea was reiterated in the appeal from participants in the 5th forum to the presidents of Azerbaijan and Russia - Ilham Aliyev and Vladimir Putin. The appeal says that inter-regional forums held on the joint initiative of the presidents since 2010 have already become a good tradition and make a significant contribution to the development of economic and cultural cooperation between the two countries. And such events can significantly help to use the full potential of economic relations between the two countries.

AT FIRST HAND

"There is now great potential for the development of trade-economic and humanitarian cooperation between Azerbaijan and the regions of the Russian Federation. The firm partnership and favourable investment climate in our countries create the appropiate conditions for more active involvement of the private sector in the interregional economic relations."

Azerbaijani President Ilham Aliyev's address to the forum's participants

"It is important that your well-represented forum, that turns 5 this year, is increasing its authority and has remained a highly needed venue for contructive dialogue in all pheres of cooperation between the two countries' regions. It provides an excellent opporutnity for the development of our cooperation in the transport, energy and bank fields as well as in the  spheres of investments, agriculture, education and tourism. "

Russian President Vladimir Putin's address to the forum's participants