EXPORT VECTOR

In the last two years, the global food crisis and rising imported inflation have been a driver accelerating reforms in Azerbaijan's agro-industrial complex (AIC). The goal is to increase agricultural production, strengthen the country's food security, and expand exports. In recent years, the volume of external supplies has been significantly increased, while its geography has been diversified. Today, in addition to the traditional markets of post-Soviet countries, Azerbaijani agricultural products are sold in the Middle East, North Africa, China and Europe. Another step in this direction was the visits of the delegation of the Ministry of Agriculture of Azerbaijan to Poland and Northern Macedonia that ended with the signing of memoranda on cooperation in agriculture and exchange of experience.

Reducing dependency

Structural transformations and technical modernisation of Azerbaijan's agricultural sector have made it possible to substitute food imports by 80%. In the rankings of the UN Food and Agriculture Organisation (FAO), Azerbaijan has been among the prosperous countries for many years. Nevertheless, the recent crisis has revealed a number of serious problems in the sector. Azerbaijan's crop farms are still heavily dependent on imports of elite seeds, pesticides, phosphate and a number of other fertilisers, while livestock and poultry farms are heavily dependent on supplies of fodder, vitamins, vaccines, etc. from abroad. Similarly, domestic processing enterprises, especially meat and dairy enterprises, are experiencing tangible dependence on imports of dried milk, meat, various additives and food chemicals, containers, equipment, and consumables. During crisis periods, the global rise of prices for these goods creates serious problems for the agriculture and food industries, while the rising cost of imported raw materials, components and semi-finished products increases the cost of local production.

The only way to reliably overcome the existing situation is to accelerate the localisation of enterprises manufacturing products for the agriculture and food industries in Azerbaijan. FAO experts have been calling for this for two years. They recommend developing countries to reduce external dependence on food supplies and increase local production as much as possible. According to UN forecasts, the likelihood of recurrence of food crises in the future is very high due to deteriorating climatic factors, shortage of fresh water, reduction of fertile lands and rising production costs in agriculture.

Urgent issues

Some parameters of the FAO recommendations for reforms and transformation of the agro-industrial complex correspond to the problems experienced in Azerbaijan. A large portion of smallholder farms in the country are insufficiently equipped and have difficulties with access to funding. As a result, due to the lack of modern agricultural techniques, insufficient chemicalisation and irrigation, such farms are unable to increase yields to the level of large agricultural parks operating in the country. Moreover, in a number of sectors, the high cost of production in small farms reduces their competitiveness even in the local market.

Negative factors that constrain the development of local agriculture include the desertification that has intensified in the last few years. This has led to a shortage of irrigation water. Azerbaijan uses about 70% of its fresh water potential in agriculture. The key task is to reduce losses in water canals through the introduction of modern insulation technologies and economical irrigation systems in the fields, believes Muhammad Nasar Hayat, head of FAO Partnership and Coordination Office in Azerbaijan. He believes it is necessary to introduce electronic systems of control over the use of water resources and develop digitalisation of the entire chain from growing raw materials, production of the final product to its delivery to consumers. "Digitalisation of agriculture will increase efficiency of production and will also make the agricultural sector more attractive for the young generation of specialists, which is one of the key missions of the five-year country programme developed by FAO," Hayat said.

Important goals

In recent years, Azerbaijan's agro-industrial complex has demonstrated relatively low growth rates. According to the State Statistics Committee, in January-October 2023, the total volume of agricultural products produced in the country worth about ₼10.9b (+3%). This indicator is even lower in the crop production. To overcome the consequences of the global food crisis, the Azerbaijani government decided to intensify agrarian reforms. So, according to the National Priorities for Socio-Economic Development: Azerbaijan 2030, large-scale transformations are expected in the domestic agriculture in the next seven years.

It is planned to increase productivity primarily through the introduction of advanced agricultural technologies, development of economical irrigation systems, digitalisation of industry management, use of green technologies to reduce energy costs in the agro-industrial complex, reduction of losses in processing, etc. It is also planned to apply all these innovations in the development of lands in the Garabagh and East Zangezur economic regions. "Demining agency ANAMA has cleared a total of 44,731 hectares of agrarian lands in the liberated territories. As a result, we have a total of 132,000 hectares of land available for agriculture in 2020-2023," Minister of Agriculture Majnun Mammadov said at the recent public hearing in the Milli Majlis. According to the minister, about 60% of the potentially developable areas are currently used. The remaining farmland cannot be put into operation because of the mine threat.

Increasing the yield of grain products is another key area for improvement in the agro-industry of Azerbaijan, given the unfavourable climatic conditions. In accordance with the presidential decree on measures to increase the level of self-sufficiency in food wheat, it is planned to subsidise the producers of food wheat, to expand the number of specialised grain farms, etc.

Another direction is to reduce costs in the processing and food industries and to expand mass production of export food products. This should be facilitated by the development of over fifty agro-parks, co-operatives, packaging and logistics enterprises.

Export Leaders

Remarkably, the export vector of Azerbaijan's agro-industrial complex is seen as the most effective way to solve the issues of narrow domestic market and expanding production. The country has made tangible progress in this direction. According to the Centre for Analysis of Economic Reforms and Communications, in January-October 2023, exports of domestic agrarian and agro-industrial products reached $733.8m, which is 9.2% higher than in the same period of 2022. However, last year was also very successful in this regard: $912.4m (+11.8%).

Russia and other post-Soviet countries still remain the main market for the sale of agro-industrial products. "Azerbaijan is the leader in the supply of tomatoes, persimmons, apples, and cherries to Russia, and has recently increased exports of peaches, hazelnuts, and strawberries. Thus, as of the end of October 2023, the export of Azerbaijani agricultural products to Russia increased by 11.3%," said the head of Rosselkhoznadzor Sergei Dankvert. Chairman of the State Agency for Food Security of Azerbaijan Goshgar Tahmazli said that agreements have been reached on the export of poultry products, mainly eggs, to the Russian market. This is an extremely important stage in the export strategy of Azerbaijan. According to Tahmazli, the system of food safety control in industrial poultry farming meets international standards.

Azerbaijan co-operates very successfully with Belarus, Kazakhstan and other CIS countries, where exports are steadily growing.

New markets

The most important task is the geographical diversification of Azerbaijani agricultural exports. Azerbaijan has made tangible progress in this area. While seven years ago over 90% of supplies were exclusively to the post-Soviet region, this proportion has started to change. With the active support of the Azerbaijan Export and Investment Promotion Foundation (AZPROMO), exports to non-CIS countries, particularly Türkiye, the Gulf, Middle East and North African states (Tunisia, Egypt), Jordan, Iraq, UAE, Saudi Arabia, Bahrain, Qatar, as well as China, are increasing. "Azerbaijan aims to further diversify export markets for agricultural products. Currently, over 60% of these products go to CIS countries. In the last three years, there has been a steady growth in exports. Currently, Azerbaijan exports 326 agricultural products to 88 countries," Tural Hajili, Advisor to the Executive Director of AZPROMO, said. To expand exports, AZPROMO initiated the development of an extensive system of trade and wine houses. The initiative is supported by trade missions in non-CIS countries. Azerbaijani companies are involved in exhibitions, advertising and promotion campaigns organised in leading trade networks to promote domestic agricultural products under a single brand Made in Azerbaijan.

There are ongoing negotiations on the entry into the European market of pure honey produced in the liberated territories under the common brand Garabagh. The supply of juices and wine made from Azerbaijani pomegranates to the EU countries is being improved. Azerbaijan is one of the leading exporters of persimmons and hazelnuts to the global market. A year ago, Azerbaijan became the second leading exporter of fresh and dried persimmons behind Spain. In turn, according to the International Nut and Dried Fruit Council, in 2022/2023, Azerbaijan became the fourth leading exporter of hazelnuts in the world. The largest buyers of this product are Switzerland, Italy, Poland and other European states. "In January-September 2023, Azerbaijan earned over $110.6m from hazelnut exports. Azerbaijan's hazelnut ranks first in the country among nut crops in terms of export potential. In 2022, the export of raw hazelnuts from Azerbaijan exceeded the figures of 2022 by 48.5%," Azad Jafarli, chief of staff of the Ministry of Agriculture, said at an international conference held in Baku.

Apparently, the European export vector will be key for local agricultural producers in the long term, thanks to the visits of the delegation of the Azerbaijani Ministry of Agriculture to Poland and Northern Macedonia, which ended with the signing of memoranda on co-operation in agriculture, as well as agreements on the creation of working groups to share experience and innovations in the agro-industry.

Ultimately, this will be the main incentive for producers of agro-industrial complex products, motivating them to quickly solve all problems.