DIVERSIFIED EXPORT

According to data from the State Customs Committee, Azerbaijan's foreign trade volumes over the past 7 months exceeded the figures for the same period last year by 3.4 %. The country still retains a good positive balance in its foreign trade turnover. At the same time the geographic scope of Azerbaijani exports underwent a tangible change.

General outline

The number of Azerbaijan's foreign partners and its trade volume has visibly increased over the past 10 years. Thus for instance its trade turnover has increased 8.8 times, aggregate foreign export turnover 11 times and oil export 6.5 times. "Speaking about export geography, it should be recalled that, compared with 10 years ago when Azerbaijan cooperated with 80 countries, their number has practically doubled by now reaching 155," Rufat Mamedov, president of the Azerbaijani Fund for Export Promotion (Azpromo), has announced.

The cited statistics confirms the successes of the domestic industry which has managed within a comparatively short period to ensure Azerbaijan's adequate participation in international labour division and enter sales markets in quite remote parts of the globe.

Due to external reasons, energy resources exported mainly to Europe account for a lion's share in Azerbaijan's export. All the largest international transport projects of the past decade are in this geographic sector. And so are the recent accords to build the Transanatolian (TANAP) and Transadriatic (TAP) gas pipelines called to ensure long-term energy security for the Old World and provide Azerbaijan and subsequently other states of the Caspian Sea region with capacious and stable sales markets.

At the same time the past few years have seen Azerbaijan effectively expand its oil trade geography advancing into the dynamically developing region of South-East Asia and simultaneously forming a stable sale base in some Middle East states.

Foreign trade in oil products calls for special consideration: its share in the total export volume is still small and it is basically represented by products of the farming sector, the processing and chemical industry and building materials with their sales markets located mainly in the post-Soviet space.

The above-said general outline of Azerbaijan's export pattern is clearly corroborates statistical data from Azerbaijan's State Customs Committee. Thus for instance in January-July Azerbaijan carried out export-import transactions with 141 states worth a total of $20,045 bln. Azerbaijan still features one of the Former Soviet Union's best ratios of positive balance ($7,682 bln) to aggregate volume of foreign trade and the ratio of its share to the aggregate GDP.

In the past 7 months, more than 5/6 of the entire volume of foreign trade was with countries outside the former Soviet Union, above all Italy, Indonesia, Russia, Germany, Thailand and Turkey followed by France, India, Israel and Greece.

Geographic spread

As can be seen, the geographic spread of exports is fairly wide. As was indicated above, especially remarkable is the unprecedented increase in commercial relations with so-called "non-aligned" states that belong neither to the EU nor to the CIS. In this case we mean not only Israel forming its fuel balance largely by the use of Azerbaijani energy resources. Mentioned in this context first of all must be Indonesia, Thailand and partly South Korea, Vietnam and other neighbouring states actively buying Azerbaijan's energy supplies via oil terminals built at Singaporean and Korean seaports by SOCAR Trading, a subsidiary of the State Oil Company of Azerbaijan. For the first time in contemporary history, South East Asian states accounted for more than $9 bln or above 45 % of this country's foreign trade turnover. This trend is a graphic proof that the government was right choosing the policy to diversify foreign trade, namely shift it towards the dynamically developing states of Indochina and South East Asia.

Indonesia is a good case in point showing how promising this trend is for Azerbaijan's export strategy. Their joint trade reached $1,629 bln over the 7 months of 2013 accounting for more than 8 % of this country's aggregate turnover. Azerbaijan supplied crude oil worth $1.7 bln to Indonesia in 2011. In 2012 figure nearly reached $2bn making Azerbaijan second biggest oil supplier, after Saudi Arabia, ensuring Jakarta's energy security. "Trade turnover between Azerbaijan and Indonesia may reach $2-3 bln. If Baku takes part in a promising project to build an oil refinery in Indonesia, their joint trade volumes may increase even more," said Indonesian Ambassador to Azerbaijan Prayono Atiyanto.

Yet this does not mean at all that Azerbaijan is radically shifting export market accents: like in previous years, the European Union still remains its most important trade partner. Despite a decline in trade turnover with the EU observed since last year, the Old World region accounts for $8.67 bln, or more than 43 % of Azerbaijan's entire foreign trade volume. Over the 7 months, the country increased trade with EU states by 9.3% and confidently retains its positive trade balance ($4,52bn).

"The EU is today Azerbaijan's major trade partner. Moreover, direct investments made by EU states over the past 10 years in the fixed assets of Azerbaijan's energy industry and non-oil sector totalled 51 % and 36.5 % of aggregate foreign investments respectively," Shakhin Mustafiyev, the economic development minister and chairman of the State Commission for Integration of Azerbaijan into Europe, said in his speech at the IV meeting of the commission.

According to him, reciprocal taxation has been cancelled with 20 EU states, accords on encouraging investments and their mutual protection have been signed with 17 states and intergovernmental commissions have been set up with another 13 states. All these numerous agreements with European states will not only stimulate expanding mutual trade relations but also promote Azerbaijani investment in the Old World states.

The third most important sector of Azerbaijan's foreign trade includes the longstanding markets of the post-Soviet states. Over the first 7 months of this year, the volume of trade turnover with the CIS states totalled $2,389 bln, or 11,5% of this country's aggregate foreign trade. It is noteworthy that Azerbaijan managed to increase exports in this sector by 29,77%. The latter is utterly important considering the fact that the core of our export to CIS markets traditionally consists of non-oil sector products. In particular an increase has been registered there in the export of alcoholic beverages, juices, mineral water, canned and fresh fruit and vegetables, vegetable oils, cotton fibre, aluminium and chemical products.

The post-Soviet region still dominates as the sale market for non-oil products. However Azerbaijani companies have expanded their export geography in the past few years. The new markets are not only in neighbouring Iran, Turkey and other Middle East states but also in the USA, Canada, Australia and New Zealand, Japan South Korea and others.

Building up the volumes of non-oil export remains the main and still partially untapped opportunity. Yet the current development of this trend - aggregate export is up 9,9% on January-July 2012 - will in time radically change the country's trade prospects making it less dependent on fluctuations in the world raw materials situation.

In keeping with this trend, practically all government decisions of the past 4 years are aimed at developing non-raw materials sectors of the economy and first and foremost export-oriented products of industry and agriculture. This is just the purpose for which a "new industrialization" plan is being implemented in Azerbaijan. Under the plan, several technoparks of different specializations have been built, modern ferrous and non-ferrous metallurgy enterprises, cement plants and a shipyard are being built; the agroindustrial complex is launching new processing facilities and so on. The results of this policy are visible already today: products of the said sectors are not only successfully substituting their imported equivalents but are ever more actively penetrating the world market.