Shopping Festival in Baku - More Questions than Answers

It's been six weeks from the order of President Ilham Aliyev "On additional measures to promote tourism," one of the items of which gives effect to the Azerbaijan shopping festival.

According to Turan, the President’s decree on September 1, 2016 ordered the Ministry of Culture and Tourism in cooperation with the Baku Executive Power to provide an annual shopping festival, and the Ministry of Finance, the Ministry of Taxes and the State Customs Committee are to submit proposals on the benefits and rewards that will be applied to the retail trade during the festival.

However, despite the fact that enough time has passed since the signing of the document, from the relevant government agencies there is no intelligible information concerning the proposals for the festival.

Thus, at Turan’s request to the Ministry of Finance it said the discussion of the relevant state bodies regarding tax benefits and incentives is in the completion stage. "At the same time, we study foreign experience", the Ministry said.

And the Ministry of Taxes did not prepare a response by the time of writing this material, despite the fact that the questions had been sent two weeks ago.

Of the officials regarding the shopping festival, only the Minister of Culture and Tourism Abulfas Garayev gave comments. At the end of September he noted at a press conference that the Ministry of Culture and Tourism developed and submitted proposals to the government.

"The exact timing of the Baku Shopping Festival is not yet known, but we are planning to hold two festivals in 2017 - for 10-15 days each," he said.

The Minister noted that the holding of such festivals is an important tool not only to promote the tourist potential, but also to increase the turnover of domestic finance and import finance from outside.

According to Garayev, the festival will not be confined to trade and it will also include cultural events.

More particularly the planned festival was commented by the Chairman of the Board of the Association of Hotels and Restaurants Samir Dubendi. In an interview with the We & World Economics magazine, he stressed that an experienced operator should be selected, which will coordinate all the current issues and be directly responsible for implementing the project.

At the same time, Dubendi believes the first festival could be combined with other events, such as Formula 1, which will now be held every year, too. According to him, thus, it would be possible to save on some of the activities of festive character, due to lower prices for air travel (which is already applied in the Formula period), etc.

"As for the reduction of prices for flights and accommodation in hotels, then, indeed, there are various mechanisms which are designed to meet the needs of the tourist attraction. From experience we can say that the state by reducing taxes, customs and other fees, so to speak, "sacrifices" these charges and expects to profit from the growing trade, catering and so on. Therefore, I am sure that the above measures will justify themselves with a vengeance," he said.

Dubendi said holding a shopping festival is important, and according to him, it is necessary to take into account the huge popularity of shopping among tourists – it now accounts for 35% of total expenditures spent by tourists on goods and services.

"Countries where such festivals are held do not miss the opportunity to extract additional value and develop unique shopping and tourist proposals which enhance the attractiveness of a tourist destination, and sometimes even the whole country. In our view, it is possible to combine a visit to the festival with short trips to different regions of the country, depending on the season," stressed Dubendi.

But there are skeptics, too. The well-known economist N. Jafarli in an interview with Turan said the likelihood of eventual success of the shopping festival in Azerbaijan is very low, since this primarily requires its own production.

"The cost of goods purchased plus logistics costs make the prices unprofitable for the shopping festival. I do not know what tourists can be attracted by such festivals as the tourists can buy the same goods at much lower prices directly in the country of origin," he said.

Citing the example of a shopping festival in Istanbul, he said Turkey's shopping festival is successful, because there is domestic production and discounts up to 50% are applied in the course of the festival.

"Tourists coming to this country buy local products for very low prices," the economist said.

The expert stressed that in addition to this, not only taxes and customs duties, but also the national currency rate form high prices for the shopping festival.

"The AZN rate on this issue is even more important than tax breaks during the festival. Hopes for the lowest prices by using tax incentives are not justified, since all this will be "compensated" by the rate of AZN, whose fate is still not completely clear," Jafarli said.

For our part, we note that the world has a successful experience of shopping festival.

One of the most popular shopping festivals is held in Istanbul.

Istanbul Shopping Fest begins every year in late spring or summer. For about a month Istanbul turns into a world center for shopping and entertainment. The festival is held under the patronage of very serious departments, including the Ministry of Culture and Tourism, the Municipality of Istanbul, the Turkish Council of Exporters, etc. During the festival, the largest shopping centers of the city, such as Kapalycharshi and Mysyr Charshisy, work around the clock. These days are a perfect opportunity to purchase goods at great discount prices (up to 50 percent). Very lucky for foreign tourists is that at the departure from Turkey they can have the tax paid when buying things returned.

Among the bonuses for shoppers there are many events, prize draws, competitions, entertainment, fashion shows, and all kinds of parties.

There is also a Dubai-based practice. Dubai Shopping Festival (DSF), which takes place for already the 22^nd year, is the biggest event in the world of shopping and entertainment in the Middle East. Conducted every year in January, DSF is the longest-running festival of its kind. Dubai Shopping Festival is able to offer not only attractive prices and promotions. During the festival there are performances of celebrities and lots of exciting events dedicated to the favorite hobby of all residents of the emirate. DSF offers entertainment for all tastes from trendy flash mobs to lottery draws. The prizes for the lotteries include both money and cars. -71B-