NEW RULES APPLY

The global agricultural market is facing challenges due to climate change, disruptions to transport and trade chains, and the energy crisis. In an effort to mitigate the impact of these processes on Azerbaijan's agriculture, the country launched large-scale sectoral reforms in May this year at the initiative of the head of state.

The reforms involve the intensive development of the domestic agro-industrial complex, the widespread introduction of water-efficient irrigation, the provision of support for farmers, and the increase in productivity in several sectors. These measures should ensure food security and increase the export of locally produced agricultural goods.

At a meeting of the Milli Majlis Committee on Agrarian Policy, a draft law "On the Agrarian Sector" was considered. This was followed by discussions in Baku at the Third International Agribusiness Forum on the fundamental objectives of agricultural reform.

Legislative framework

Adverse climate changes, in conjunction with external and internal inertial processes, have been hindering the development of Azerbaijan's agriculture for several years. These issues were discussed at a government meeting chaired by President Ilham Aliyev in May. In order to further the implementation of sectoral reforms, a "State Programme for the Development of Agricultural Production and Processing, Fisheries and Aquaculture in Azerbaijan for 2026–2030" was adopted at the initiative of the head of state. According to the programme, total investment in agriculture by the public and private sectors is expected to reach almost ₼6 billion.

The key objectives of the reforms include increasing crop-production productivity through advanced irrigation and other agricultural technologies, using digital management systems to assess land according to soil quality, and increasing yields by planting optimal crops. The plans also include expanding the processing of agricultural raw materials into finished products with high added value, broadening the range and volume of food production through modern technologies, localising production in agro-parks, and establishing the production of new types of fertilisers.

The state programme also includes significant regulatory and legal initiatives in agriculture, fisheries and aquaculture. In June, new laws on seed production and fisheries came into force.

In this context, work on the draft law "On the Agrarian Sector" is nearing completion. This law will define the legal, organisational, social and economic foundations for developing the agro-industrial complex.

At a meeting of the Committee on Agrarian Policy, Agriculture Minister Majnun Mammadov stated that the purpose of drafting this law is to address a gap that has existed in agricultural legislation for many years and to make state support more targeted and transparent.

He stressed that, until now, the agricultural sector had been regulated by laws covering individual areas—grain production, tea growing, cotton production and others. However, there had been no basic document covering the agricultural sector as a whole, nor a single act defining the sector’s participants, the state’s responsibilities and the available support instruments. In practice, this had led to a number of problems. The absence of unified definitions for key concepts such as “farmer”, “agricultural producer” and “primary processing” had created differing interpretations in the application of state support and tax benefits. At the same time, subsidy mechanisms were largely governed by subordinate legislation, while producers’ efficiency was not taken into account.

Under the new law, the minister said, agricultural producers would be divided into two categories: farmers operating for business purposes and other producers, including family and peasant farms.

“From subsidies and preferential loans to insurance and public-private partnerships, the draft law lists 12 support instruments for the first time,” the minister stressed. These instruments include the leasing of agricultural machinery, grants and financial leasing, tax and customs benefits, agricultural insurance, information and advisory services, and the establishment of sales outlets for farmers.

At the same time, Mammadov noted that state support would be provided on the basis of data from the Electronic Agricultural Information System and a digital producer rating that would assess economic efficiency and the targeted use of funds. “This means that public funds will be directed to producers who demonstrate real results,” he said. The document also provides measures to protect producers from unjustified interference.

From extensive to intensive agriculture

The draft law gives particular attention to land and water resources, recognising land as the primary means of production and placing it under state protection. It also provides for reducing the fragmentation of landholdings through unified planting, consolidation and cooperation.

It is worth noting that adverse climate changes have caused enormous damage to the country’s agricultural sector over the past decade. In particular, desertification has led to shortages of irrigation water, soil erosion and salinisation and, consequently, a reduction in the area of fertile arable land and pasture. Against this background, the draft law “On the Agrarian Sector” regulates climate-change adaptation measures in a separate article for the first time. These include the widespread introduction of water-efficient irrigation systems, reducing freshwater losses and applying irrigation standards for specific types of crops.

The document also places particular emphasis on the development of rural areas. Agro-parks, agro-clusters, logistics infrastructure and agrotourism will be regulated on the basis of a unified approach. It defines different types of sales outlets—from farmers’ shops to online platforms—and gives cooperatives the right to organise their own outlets, which will significantly facilitate producers’ direct access to the market.

During a panel discussion held as part of the 100th anniversary Festival of Agribusiness in Aghdam, Agriculture Minister Mammadov said that the main objective of agricultural reform was to create a more productive and competitive system and to shift from extensive to intensive agriculture.

“We must abandon the approach of ‘more planting, more livestock, more resources and more output’. We need to produce more with lower costs, increase the value of our products and ensure production for food security,” the head of the agricultural ministry stressed.

He also identified the development of the agro-industrial processing segment and the expansion of exports of branded products with higher added value as key objectives. This will require high-quality packaging, product storage, logistics, marketing and promotion on foreign markets.

Exports, cooperation and financing

Transformation plans and experts’ proposals were discussed at the Third International Agribusiness Forum held in Baku. The new stage of Azerbaijan’s agricultural reforms has also attracted the attention of international partners.

According to Doğan Başaran, chairman of the Agriculture Union of the Turkic World, Azerbaijan’s agricultural export potential could exceed $10 billion once the necessary infrastructure is fully established. At present, agricultural exports amount to just $1.2 billion. To increase this figure, the Turkish expert believes it is necessary to improve the effectiveness of international cooperation and attract financial resources. Equally important are the expansion of agricultural trade between Turkic states and the development of transport and logistics capacity. Providing farmers with modern technologies, developing agricultural innovation centres and increasing young people’s motivation to enter the agricultural business are also of particular importance.

Alongside expanding production and processing capacity and introducing modern technologies, strengthening cooperation between businesses and government agencies is essential for stimulating investment in Azerbaijan’s agricultural sector, according to Zaur Karimov, executive director of the American Chamber of Commerce in Azerbaijan (AmCham Azərbaycan). In this regard, it is necessary to take businesses’ proposals into account, discuss rural entrepreneurs’ problems jointly with government agencies and develop practical solutions through public-private partnerships.

One of the serious problems facing Azerbaijani farmers is the small size of cultivated areas: for the overwhelming majority of farms, they do not exceed three hectares. Small and fragmented plots create difficulties with planting, irrigation and agricultural work, particularly when machinery is used. This reduces farms’ profitability and makes it more difficult for farmers to access credit. It is recommended that farming enterprises consider cooperation as a potential solution. The state programme has incorporated support mechanisms to address this. The initial pilot projects in this area are scheduled to be implemented in Salyan and Gabala.

Another obstacle to agricultural development is the terms offered by banks, which often fail to take the specific features of agricultural production into account. Elkhan Mikayilov, chairman of AmCham Azərbaycanın Working Group on Food and Agriculture, believes that flexible seasonal repayment schedules, extended loan terms and alternative collateral mechanisms are important steps in improving farmers' access to finance. Such alternative collateral mechanisms could include agricultural products, warehouse receipts and documents relating to future harvests.

Changes in this area have already begun. A draft law on warehouse receipts has been submitted to the Milli Majlis for consideration. This would enable farmers to obtain financing prior to commencing production, utilising commitments pertaining to future harvests as security. The new financial mechanisms are also intended to expand agricultural financing through commercial banks' own funds. The interest-rate subsidy mechanism is a state initiative that provides financial support to farmers cultivating annual crops. The scheme involves covering interest payments of up to 19% on loan facilities for farmers, ensuring their access to affordable financing for their agricultural activities.

Consequently, legislative changes and the state programme are establishing a foundation for modernising the agricultural sector and enhancing the effectiveness of state support. The implementation of these measures will facilitate the transformation of the domestic agro-industrial complex over the next four years, thereby strengthening its export potential and elevating the sector's growth rate to a higher level. The success of the reforms will depend on the speed at which the new mechanisms are made operational and accessible to rural producers.