State Department: Investment climate in Azerbaijan is improving, but corruption remains serious problem

Baku/04.08.22/Turan: The US State Department's website has published reports on the investment climate in 2022 for more than 160 countries and economies of specific countries, prepared by economists working in US embassies and representative offices around the world, including Azerbaijan.

The small reports reflect issues that are crucial for maintaining high standards of attracting investments, such as labor protection, responsible business conduct, environmental issues, openness to investment, legal and regulatory systems, protection of real estate and intellectual property rights, situation in the financial sector and corruption problems.

"A favorable investment climate can help attract high-quality and reliable investments and support the global recovery of economies after the COVID-19 pandemic. The reports highlight areas in which countries have improved investment conditions, as well as the remaining barriers that may hinder business opportunities for US companies," the State Department clarifies.

As for the investment climate in Azerbaijan, the following is noted on the website ( https://www.state.gov/reports/2022-investment-climate-statements/azerbaijan /):

"The overall investment climate in Azerbaijan continues to improve, although serious problems remain. The Azerbaijani government has sought to attract foreign investment, implement reforms to diversify its economy and stimulate private sector-led growth. However, Azerbaijan's economy is still heavily dependent on oil and gas production, which accounts for approximately 88% of export revenues and more than half of state budget revenues," the report says.

The State Department notes that Azerbaijan's economy grew by 5.6% year-on-year in 2021 as  compared to 4.3% reduction in GDP in 2020. Growth in the oil and gas sector was 1.7%, in the non—oil sector - 7.2% as the economy continued to recover after the pandemic.

"Although the oil and gas sector has historically attracted the largest share of foreign investment, the Azerbaijani government has also chosen four non-oil sectors to diversify the economy: agriculture, tourism, information and communication technologies (ICT) and transport/logistics," the State Department said.

Measures to eliminate unnecessary types of permits (licenses) for doing business, transfer of a number of functions for registering to ASAN, simplification of customs procedures, reform of the tax regime, suspension of some business inspections were assessed as positive.

"Despite significant efforts to develop the business environment, the structural reforms necessary to create a diversified and competitive private sector are still slow, and corruption remains a serious problem for companies operating in Azerbaijan. The economy is dominated by a small group of state-linked holding companies. The protection of intellectual property rights is also insufficient, although it is improving. There is no transparency in the judicial system," the State Department emphasized such negative aspects.

In general, according to American experts, "foreign investments enjoy full and unconditional legal protection in Azerbaijan, assets cannot be nationalized or appropriated, except in special circumstances."

"Individuals can freely create, acquire and dispose of shares in commercial enterprises. Foreign citizens, organizations and enterprises can rent, but not own land. The Government of Azerbaijan has not demonstrated any manifestations of discrimination against individuals or legal entities of the United States through illegal expropriation. The Bilateral Investment Agreement (BIT) between the United States and Azerbaijan provides American investors with the opportunity to settle investment disputes with the help of the International Center for Settlement of Investment Disputes (ICSID)," the report says.

It also reflects the post-conflict situation.

"After the publication in November 2020 of the trilateral (peaceful) declarations between Armenia, Azerbaijan and Russia, which put an end to the intense fighting in the Nagorno-Karabakh conflict, the Azerbaijani government is looking for new investments in the territories around Nagorno-Karabakh, which were previously under the control of pro-Armenian separatists," the State Department notes.

"The budget of Azerbaijan for 2022 provides for the allocation of 2.2 billion manats (1.3 billion US dollars) for the restoration and reconstruction of these territories. These funds will be used to restore road infrastructure, electricity, gas, water supply, communications infrastructure, education and healthcare, as well as the restoration of cultural and historical monuments. The Government is also implementing clean energy projects in the region. It is expected that the reconstruction will continue in the coming years, along with the preservation of special budget allocations provided for the restoration and settlement of these territories. The demining of these territories as a part of the restoration work remains a priority of the Azerbaijani government," the report emphasizes.--0--