As a heavily oil-reliant country, Azerbaijan’s economy fluctuates greatly with the price of oil. Moreover, since public investment is the key driver of non-oil growth, declines in oil profits spill over into reduced public spending, which in turn slows growth in all areas of the economy. According to the World Bank, the key steps necessary to continue poverty reduction in Azerbaijan are reforms to facilitate private-sector growth and improvements to the labor market.

Azerbaijan has taken some steps to encourage more private-secotr investment. In 2008, the country introduced a “one-window” principle that reduces registration requirements, allowing businesses to only register once, with the Ministry of Taxes. In February 2016, the government introduced amendments to the Tax Code that provide benefits for certain activities, including up to 7 years of tax exemptions for 50% of business income.  

Azerbaijan adopted a special economic zones bill in 2009 and in 2016, the President signed a decree to create a free trade zone in the Alat township of Baku’s Garadagh district.

Since Locus Economica’s World Bank intervention, as of 2019 23 investments in Azerbaidjan’s SEZs totalled $5.5 billion having created 9,000 jobs, including $452 million in 2018 alone. Sumgait SEZ broke ground in 2013, and now has 19 tenants. Balakhani SEZ, a successful PPP, was opened in 2017; it now has 8 operational and 9 more committed investors, having invested $24 million and created 400 jobs. Mingachevir SEZ broke ground 2016 and hosts 2 operational yarn producers. Pirahalli SEZ currently has 4 operational pharmaceutical tenants, with more tenant facilities under construction, and total investments of $74 million. 8 new investments in the SEZs are to be launched in 2019, investing an additional $400 million and creating an additional 1,600 jobs. Four “special districts” have created a further 2,000 jobs; Neftchala Special District (with 9 tenants including Peugeot, 500 jobs and $26 million in investments as of 2019), and Hajigabul and Masalli Special Districts (with 9 tenants, having invested $19 million as of 2018).

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