PRODUCTION ZONE

In recent years, Azerbaijan has implemented large-scale legislative and administrative reforms to encourage investment in agribusiness processing and industrial production while expanding non-oil exports. These efforts include reducing the fiscal burden, optimising preferential financing mechanisms, introducing investment incentive certificates, and developing a subsidy mechanism for non-oil sector exporters. However, the cornerstone of the government’s new industrialisation policy has been the establishment of a network of industrial parks and zones.

The achievements and future prospects of the country’s industrial clusters were highlighted at a press conference hosted by the Agency for the Development of Economic Zones (İZİA).

Export and Import Substitution

According to the long-term document "Azerbaijan 2030: National Priorities for Socio-Economic Development," developed in early 2021, and the medium-term strategy for 2022–2026 based on it, the agribusiness processing and non-oil industries have been identified as key drivers of sustainable economic growth. This large-scale diversification of the national economy encompasses the development of green energy, digitalisation, and the adoption of Industry 4.0 elements, along with clustering high-potential non-resource-based industries to enhance import substitution efficiency.

Thanks to the measures taken in recent years, the growth rate of the non-oil sector in Azerbaijan has significantly outpaced overall GDP growth. In 2023, the non-oil sector grew by 6%, while non-resource-based industrial production increased by 7%.

"In 2011, the non-oil sector accounted for 49% of GDP, whereas by 2024, its share had risen to 68%. This transformation is the result of efforts to diversify the economy and create a more balanced and sustainable economic model," stated Shahmar Movsumov, Head of the Economic Affairs and Innovation Policy Department of the Presidential Administration of Azerbaijan, during the Baku presentation of the World Bank's 2024 "World Development Report."

These efforts must now be intensified, as the government faces the critical challenge of revitalising external trade activity.

Unfortunately, non-oil export figures have shown little significant growth over the past two years.According to data from the Centre for Economic Reforms Analysis and Communication, Azerbaijan's total non-oil exports in 2024 amounted to $3.4 billion, reflecting a marginal year-on-year growth of 0.3%.However, some sectors have demonstrated strong performance. Exports of agricultural and food products rose by 11.3%, reaching $1.03 billion, while the highest industrial sector growth was seen in precious metals, with exports increasing by 29.2% to $215.3 million. Chemical industry exports also saw an 18.3% rise, reaching $293.7 million.

Azerbaijan’s key objective is to rapidly increase production in the non-oil sector by enhancing profitability and competitiveness through production optimisation and cost reduction. "According to the medium-term strategy for 2022–2026, Azerbaijan aims to increase non-oil exports 1.8 times, non-oil GDP 1.3 times, and raise the private sector’s share of GDP to 88% by the end of 2026. Average annual GDP growth is expected to remain in the 3-4% range until the end of 2026," noted Huseyn Huseynov, Head of the Sustainable Development and Social Policy Department at the Ministry of Economy and Secretary of the National Coordination Council for Sustainable Development.

Earlier, the Ministry of Economy set a priority goal of raising total non-oil exports to $5.3 billion by early 2027 as part of its medium-term strategy.

Export-Oriented Production

To achieve these export targets, the country must expand production, with diversified clusters across different regions serving as the most effective mechanism. The effectiveness of these industrial zone initiatives is beyond doubt. Resident businesses benefit from extensive tax, customs, and utility incentives, while government investments have facilitated necessary infrastructure and access to transport networks.

"Currently, 152 businesses with a combined investment portfolio of ₼7.9 billion have been granted resident status in Azerbaijan’s industrial zones, while 10 operate as non-residents," stated İZİA Chairman Seymur Adigozalov. "Entrepreneurs have already invested ₼6.9 billion in these zones, establishing 84 enterprises and creating over 10,700 permanent jobs."

According to İZİA, between 2015 and 2024, industrial zones produced goods worth ₼15.4 billion, of which approximately one-third (₼4.9 billion) was exported. In 2024 alone, industrial zone sales reached ₼3.3 billion, with ₼1 billion attributed to exports—a year-on-year increase of 8.1%.

"Products manufactured in Azerbaijan’s industrial zones are exported to over 70 countries, including polymers, urea, lubricants, construction glass, steel pipes, power cables, sulphuric acid, tobacco products, ceramic tiles, yarn, wallpaper, and more. Industrial clusters accounted for 17.6% of non-oil industrial production and 26% of non-oil exports in 2024," the İZİA chairman added.

Industrial clusters are also playing a key role in localising automobile production. Between 2018 and 2024, vehicles worth ₼442.5 million were manufactured in these zones. In 2023, the Hajigabul Industrial Park assembled 3,761 vehicles worth ₼107.5 million, while 2,182 passenger cars worth ₼54.65 million were produced in the Neftchala Industrial Zone—a 34% increase in total vehicle production compared to the previous year.

This trend is set to continue in 2025. The Chinese company BYD plans to launch an electric bus manufacturing plant in the Sumgayit Chemical Industrial Park, investing ₼29 million. Additionally, the Hajigabul Industrial Park is set to complete construction of a joint venture factory with Uzbekistan (₼88 million), capable of producing up to 30,000 vehicles annually and creating over 1,200 jobs.

Regional Clusters

These developments reflect the positive impact of Azerbaijan’s new industrialisation strategy. İZİA forecasts over ₼1 billion in investments in industrial clusters during the next phase, creating more than 8,000 permanent jobs. In the near term, newly registered companies plan to invest ₼224.6 million, generating over 2,600 jobs. Future projects include pharmaceutical manufacturing, metal fabrication, furniture production, and construction materials.

"Industrial zones significantly contributed to job creation in 2024 and expanded manufacturing and export opportunities. Last year, 10 new enterprises invested ₼48.6 million and created 389 permanent jobs," noted Adigozalov. "Most of these new businesses are located in the Aghdam Industrial Park."

İZİA continues to attract investors to industrial clusters, with particular interest in parks established in liberated territories. The Aghdam Industrial Park currently hosts nine operational enterprises with over ₼107 million in investments and 457 jobs. Overall, the park has registered 29 resident businesses and four non-residents, planning to invest over ₼276 million and create more than 2,400 jobs.

Meanwhile, the Araz Valley Economic Zone Industrial Park in Jabrayil District has 16 resident businesses and two non-residents, with over ₼29.6 million invested. An additional ₼130 million investment is planned in 2025, expected to create at least 1,800 permanent jobs.

Industrialisation plans for the Nakhchivan Autonomous Republic (NAR) are also promising, with the planned establishment of a special customs zone and logistics centres to develop a regional trade hub. A free economic zone, an industrial park, and the Sharur Industrial Quarter are in the pipeline. The first stage of infrastructure development in the new Nakhchivan Industrial Park has already received ₼500,000 in funding from the Presidential Reserve Fund.