THE STARTING MODE

The manufacturing industry is reviving all over the world. Azerbaijan is no exception. Especially with the government's support to the recovery of non-oil sector, which will soon contribute to the launch of dozens of enterprises nationwide. Thus, it was quite natural that the export of non-oil products has increased by 25%. It is expected that such a progress will continue, as even more enterprises start operations from the beginning of 2018.

The industrial development requires significant financial expenditures, and is impossible without ensuring certain benefits. To solve this problem, many countries create free economic zones, where the residents are offered various tax and customs incentives.

Currently, there are five industrial parks (IP) in Azerbaijan: Sumgayit Chemical, Balakhani, Garadagh, Mingachevir, and Pirallahy. According to the Tax Code, the residents of these IPs are exempted from land tax, property taxes, profits, as well as VAT and customs duties on the imported equipment for seven years.

The zone of the national export potential

Azerbaijani government has prepared for a transition to the post-oil development period before the sharp drop in oil prices. The establishment of the first industrial park in Sumgayit started according to a presidential decree from December 21, 2011, but most companies received the status of residents of the park mainly in the past and current years.

The Sumgayit Chemical Industrial Park (SCIP) covering an area of ​​505 hectares is the largest industrial park in the region. To date, 13 of 25 companies that received the status of residents in industrial parks are located within the SCIP territory and have already invested more than $1.2 billion of the planned $1.8 billion in new enterprises. In total, the SCIP has created 7,500 jobs so far.

The investment map of SCIP is as follows: SOCAR Polymer - $778 million; Azerfloat - $65 million; Baku nonferrous and foundry company - $24.9 million; MST Engineering Services - $2.9 million; SIKA - $3.3 million; Agrochemistry Azerbaijan - $16 million; STP - over $600 million; Tabaterra - $32 million.

Tabaterra is the last company which received the status of a resident this year. It will construct a cigarette factory with a total annual production capacity of 7 billion cigarettes. The work is ongoing on granting the status of a SCIP resident to SOCAR Carbamide. The company will start operating a plant for the production of carbamide and fertilizers in early 2018. New enterprises on the territory of SCIP equipped with advanced and modern technologies will take the export of national non-oil products to a new level.

The textile hub of Azerbaijan

In accordance with a presidential decree dated February 26, 2015, the construction of the Mingachevir Industrial Park (MIP) has started on the territory of ​​14.8 hectares. With the launch of the industrial park, the city of power engineers (Mingachevir) may soon claim to be the centre of the textile industry. At the beginning of 2018, the first of the nine enterprises, Mingachevir Textile LLC for the production of cotton yarn, will start operating at MIP. The new plant will increase production of cotton yarn in Azerbaijan by 115% entirely eliminating dependence on imports and creating large export opportunities. About ten thousand tons of the produced yarn will be exported and attract more than $25 million into the country.

In general, MIP is also planning to produce woollen and acrylic yarn, leather products, socks, and footwear based on the advanced technologies from France, Germany, Italy, and Japan. Total construction investments will reach more than $60 million and more than $150 million for the purchase of equipment and tools. As a result, MIP will create 5,500 jobs.

In the near future, MIP will produce extra three thousand tons of acrylic and woollen yard, respectively, in addition to 70 million pairs of socks and stockings and 1.5 million pairs of leather shoes.

The MIP enterprises will help saving a large portion of the foreign currency thanks to the decreasing import of textile goods and will attract money from the sale of Azerbaijani products under the Made in Azerbaijan brand.

The birth of a new pharmaceutical industry

The establishment of the Pirallahy Industrial Park (PIP) (30 hectares), started in compliance with a presidential decree dated September 14, 2016, has already attracted attention as an innovative zone for the creation of a modern pharmaceutical industry.

Investments in the first pharmaceutical plant Hayat Pharm will reach $74 million with a production expected in 2018. The plant will produce drugs for the treatment of HIV, diseases of the nervous system, as well as antibiotics and drugs against diabetes. In total, the company will produce 89 types of medicines. The annual capacity of Hayat Pharm will reach 22.5 million packs, or 500 million tablets and capsules.

In January 2017, the foundation of the Azerbaijani-Iranian pharmaceutical plant Caspian Pharmed was laid at PIP. Total investment in the first stage of activities reached $20.6 million. Although it is planned to finish the construction works by 2018, the plant will start releasing its first products from the beginning of 2019. At the first stage, it is planned to produce 200 million tablets and capsules annually under 84 titles, including the main types of medicines for the treatment of cardiovascular, infectious and non-infectious diseases, as well as various types of antibiotics and painkillers. By the way, the annual export capacity of the Azerbaijani-Iranian pharmaceutical plant is going to reach almost $100 million.

Finally, on May 26, 2017, the Azerbaijani company Diamed Co LLC, which has started the construction of a plant for the production of disposable syringes, was granted a status of the PIP resident. Total investments will reach $4 million, and it is projected to start the operations in the first half of 2018.

Favourable conditions for doing business promise that new joint ventures will be created at PIP. Moreover, this issue is discussed regularly at various ongoing business fora and governmental meetings. In particular, numerous companies from Turkey, Ukraine, UAE, Japan, South Korea and other countries have expressed their interest in the creation of joint pharmaceutical enterprises at PIP.

Industrial districts

Yet another form of stimulating the development of the national manufacturing industry is the establishment of industrial districts in the regions. The interest of business circles to start a business and become a resident in industrial districts is encouraged by the state, which takes all the costs related to the creation of the necessary infrastructure. According to expert estimates, the expenses of entrepreneurs for creating the necessary infrastructure sometimes reach up to 30% of all commissioning costs.

So far, there are three industrial districts operating in Azerbaijan: Neftchala, Hajigabul, and Masalli.

The Neftchala Industrial District (NID) was established according to a presidential order dated February 2015. The opening ceremony took place on September 24, 2017 in the presence of President Ilham Aliyev. At the time of the opening, nine enterprises and one workshop operated at the NID. NID members have already invested ₼45.3 million in production facilities creating 474 permanent jobs.

President Aliyev also participated at the opening of the Neftchala Fishfood Enterprise with an annual capacity of 25 thousand tons. It is also planned to produce fodder for cattle, as well as other types of agricultural forage there. Total investments in the enterprise reach ₼12 million.

The joint Azerbaijani-Iranian automobile plant Azermash-Iran Khodro OJSC should become the key production facility of the national industry with an annual production capacity of 10 thousand cars. The company will directly employ only 300 people creating jobs in related industries in other regions. The opening of the $15-million plant is planned for early 2018. The plant equipped with state-of-art technologies and mechanisms will produce the following automobile brands: Runna, Samand, Soren, Dena, Peugeot-206, Peugeot-207, Renault-Tondar and Renault-Pickup. During the second stage of development, it is planned to produce joint Azerbaijani-Iranian buses.

It is also worth mentioning the opening of the Balakhany Industrial Park in September 2017 and the start of operations of the five residents doing the "green business", as well as the processing and construction of various vessel classes at the Garadagh Industrial Park.

Considering all the above initiatives, we can expect an upsurge in the manufacturing industry of Azerbaijan in 2018, which will significantly contribute to the progressive development of the national economy during the post-oil period.