EXPORT EXPANSION

Diversification of the economy, in particular, its export potential, is one of the main objectives of the Azerbaijani government in the coming years. In this context, it has been said many times at a high level that a serious bid is made on the export potential of the country's agricultural sector and that it will become the main driving force of our economy in the future. President Ilham Aliyev places special emphasis on this issue and issues instructions to make sure that all obstacles to the production and export of quality food products are resolved within a short period of time. There is some progress in this area already, albeit there are still many problems as well.

Several agricultural holdings and large enterprises are operating efficiently in Azerbaijan that are capable of producing high-quality products and exporting their brands to the foreign market. Data available shows that over 25 types of products are already exported to CIS and other foreign countries. The brands are high quality, organic and enjoy great demand among foreign consumers.

Agricultural exports are mainly vegetables, fruits, potato, black tea, and grapes. Currently, there are more than 80 companies operating in the country that specialize in the processing of fruits and vegetables, and their aggregate capacity makes it possible to produce 750m standard cans of canned fruits and vegetables a year. Last year, exports of fresh vegetables and fruits totalled 291m dollars, which is a 16.1-per-cent increase on 2013. Imports of the same products decreased by 13.5 per cent to just 25.2m dollars.

Accordingly, agencies to coordinate the expansion of Azerbaijani export have been set up. These are the National Fund for Entrepreneurship Support (NFES), the Export and Investment Promotion Foundation (AZPROMO), and the open-type joint-stock Azerbaijani Investment Company. They support the establishment of logistics centres and transit points to facilitate export of perishable foods. For example, an agricultural logistics complex has opened in Kazakhstan's Aktau port with support from AZPROMO and private investors, and three transshipment centres, which are designed to process 110,000 t of agricultural products, are being built on the Abseron Peninsula. An enormous food and logistics centre, Meyvali, which entirely specializes in wholesale sale and export of fruits and vegetables, has opened in Baku's Qaradag district. Last November, foundations were laid of the country's first agricultural park - the production and intermediary company Aqropark Samkir. In addition, convenient storage facilities for fruits and vegetables have been built in all regions. Their construction was financed on soft loans issued by the National Fund for Entrepreneurship Support.

However, to conquer markets in CIS and other foreign countries it is also very important that domestic entrepreneurs should be willing to produce output that is good enough to be exported, and in this regard it is necessary to make efforts to develop brands and packaging design and to conduct proper advertising campaigns. According to Imran Cumsudov, an expert at the Azerbaijani Agriculture Ministry, fruit exports to CIS and European countries alone could earn the country tens of millions of dollars. "It's just that farmers need to be helped, and conditions need to be created for packaging, storing and transporting. It will make it possible to export tens of thousands of tonnes of apples, pomegranates, persimmons, and grapes," he said.

He said there is no doubt that the taste of domestic products will attract foreign companies to cooperate with the private sector. "In order to keep quality under control, we need to create our own laboratories and standards and to train people. In addition, the lack of packaging material in this country significantly reduces export potential," Cumsudov added. Also, unfortunately, many farmers are not well-informed on international standards, there are no export subsidies, there are few agricultural joint ventures established with foreign capital, and international scientific and technical cooperation in the production of agricultural output is not sufficiently developed.

Incidentally, the absence of agricultural export subsidies is somewhat puzzling. After all, subsidies have been issued to farmers in Azerbaijan since 2007, not to mention the fact that their operations are almost completely exempt from taxes. Lately, state support for the agricultural sector has been growing rapidly altogether. Suffice it to recall the order issued by the Azerbaijani president to grant 40-per-cent discounts towards the purchase of sets of irrigation systems and equipment and a 25-per-cent increase in the amount of aid allocated from the state budget for the purchase of fuel and motor oils that are used by manufacturers of agricultural products. Also, 30 to 40 per cent of the cost of high-yielding seeds grown at research institutions is paid by the state. Farmers buy fuel on a 50-per-cent discount and fertilizers on a 50- to 75-per-cent discount.

Recently, the Agriculture Ministry submitted to the government of the country proposals towards improvement of the subsidizing mechanism. Deputy Agriculture Minister Ilham Quliyev said state subsidies for the agricultural sector will be merged into one annual issue. "This will help ensure the efficiency and transparency of this process," he said.

That is to say, on the one hand, the government very willingly provides all kinds of privileges to the agricultural sector, while, on the other hand, it is tight-lipped on subsidizing of export of finished products.

According to some information available, the reason lies in the negative experience in this field in foreign countries, where the application of the system of state support for export even led to the emergence of the term "fictitious export". "Fictitious export" is sale of goods for a higher price indicated in documents. This mostly has to do with the system whereby the government gives back VAT on finished products. Concern about possible massive fraud stops the government from introducing additional support for export of agricultural products. Albeit, some experts believe that if intelligent leverages of control were developed, they would help resolve this problem, while subsidies could help significantly expand the export map of Azerbaijani agricultural products. One way or another, recently, Azerbaijan's Economy and Industry Ministry circulated a statement about the possibility of improving the export promotion mechanism, which was discussed at an expanded meeting of the board of the ministry. The proposals package may deal with the issue of support for an important segment such as agricultural export as well.

At the moment, the geography of sales markets is limited, and Russia remains the most advantageous area. A large number of very lucrative offers continue to come in from many regions of the neighbouring country. 

In brief, to achieve tangible results, that is to say, to implement most of the existing potential for agricultural export, to expand the supply geography, and for entrepreneurs and the country's state budget to receive tangible profits, a lot of problems are yet to be overcome. The main thing is that specific tasks and objectives have been identified at the highest level, which means that control over their achievement will be tough enough, and this gives us hope that issues will be addressed promptly and actively.