AZERBAIJAN INVESTMENT PROMOTION AND ADVISORY FOUNDATION

AZERBAIJAN INVESTMENT PROMOTION AND ADVISORY FOUNDATION Your Reliable Guide in Azerbaijan

Azerbaijan Investment Promotion and Advisory Foundation • Azerbaijan Investment Promotion and Advisory Foundation started its activities on July 22, 2003. Main goals of the Foundation are: • Achieve balanced development of the economy of the country both from sector and regional perspectives • Implement measures necessary for the attraction and promotion of inflow of investments for creating within framework of the poverty reduction strategy new jobs in the country, and particularly in its rural regions.

Azerbaijan Investment Promotion and Advisory Foundation • One of the activity directions of the Foundation is presenatation of economic data by sectors and regions. • Hereby we kindly present brief info on the agricultural sector of the economy of the Republic of Azerbaijan.

Agriculture the Republic of Azerbaijan General information • Development of one of the traditional and main fields of Azerbaijan economy i.e. agriculture and process industry are factors seriously affecting socio-economic situation in the country. • more than half of country population lives on rural area. • 40 % of active labor force of the Republic. Thus a/c sector is the main employer in Azerbaijan • agricultural sector accounts for 13,1 % of GDP

Agriculture of the Republic of Azerbaijan General information • Starting from 90s of the last century and in the first years of the XXI century farming and a/c industry are characterized by independent activities in the new political, social & economic conditions. • transition to market economy; • liquidation of central planning system in farming; • conducting of agrarian reform in the countryside; • privatization of formerly public land and property; • legalization of product sale at market price; • overall liberalization of economy.

Agriculture of the Republic of Azerbaijan General information During the Soviet time the country was a flagman of agricultural development among the former soviet republics. Notwithstanding somewhat upward distortion inherent in the economic system of USSR the figures demonstrate to some extent the level the sector achieved. Azerbaijan was one of the leaders in the production of

Agriculture of the Republic of Azerbaijan General information Following the decline of early 90-s starting from 1995 the agricultural sector of the country started to gradually recover. Ever since the sector demonstrates stable growth. Agriculture products (all categories of holdings)

Agriculture of the Republic of Azerbaijan General information If during 1992-1995 years the volume of gross domestic production in agriculture decreased annually on average 12 % since 1996 the index increased every year in 2002 - 6,4 % in 2003 - 8 %. In 2003 in comparison with 2002 the volume of stock-raising products grew by 6,3 %, crop production by 8,3 %.

Agriculture of the Republic of Azerbaijan General information The main reason of agriculture’s particular weight loss in country’s GDP during last 5 years is characterized by development of other spheres of national economy and especially oil & gas sector

Agriculture of the Republic of Azerbaijan General information Agricultural yield (thousand tons)

Agriculture of the Republic of Azerbaijan General information Despite emerging of a positive trend in covering domestic demands (import replacement) there are still gaps and also need in development of the a/c export potential of the country. It is important to emphasize that the structure of the agricultural sector has changed substantially due to the new environment e.g. loss of most of the former USSR markets, more emphasize on domestic needs, cessation of central planning and command distribution system, lack of fertilizers and virtually no state subsidies for more than a decade. As the result decline in several positions was very substantial while some other production grew substantially. As demonstrated in the charts below the most affected by the new environment were the sectors requiring most capital investments and state support.

Agriculture of the Republic of Azerbaijan General information The ban for production and sale of spirits in the end of 80s and beginning of 90s in the USSR affected production of grape and vine.

Agriculture of the Republic of Azerbaijan General information

Agriculture of the Republic of Azerbaijan General information The volume of grain production increased in all regions, especially in Guba-Khachaz, Nakhchivan, Ganja-Gazakh, Absheron economic regions. In Dagliq Shirvan economic region production of grain, barley and vine per capita substantially exceeded average level in the Republic. Zaqatala economic region – grain, barley and fruits, Ganja-Gazakh – potato, vegetables, fruits and vine, Nakhchivan – barley, vegetables, truck crops, fruits and vine, Kur economic region – grain, barley and truck crops, Middle Kur – grain, barley, vegetables, truck crops and fruits, Lankaran-Astara – production of potato and vegetables greatly exceeded mean level by Republic.

Agriculture of the Republic of Azerbaijan General information By the end of 2002 agriculture sown area increased in comparison with 2001 by 60 thsd hectares or 5,2 %. In 2002 total sown area of agriculture plants formed 1222,9 thsd hectares, including: cereals and grain crops - 821,9 thsd hectares (increase 8,0 %) potato - 60,05 thsd hectares (increase 8,8 %) vegetables - 70,24 thsd hectares (icrease 5,8 % ) truck crops - 30,36 thsd hectares (increase 5,2 % ) fruit-gathering - 87,56 thsd hectares (increase 4,0 %)

Agriculture of the Republic of Azerbaijan Animal breeding sector • Animal breeding sector is dynamically developing for last decade • distribution of privatized cattle stock from collective farms to inhabitants; • gradual rehabilitation of the activities of processing enterprises; • organization of exchange relations positively influenced increase in the volume of production.

Agriculture of the Republic of Azerbaijan Animal breeding sector By the end of 2002 99,2 % of present cattle stock, 96,5 % of sheep and goat, 77,3 % of pigs and 83% of birds belonged to population and farms.

Agriculture of the Republic of Azerbaijan Animal breeding sector Production of main livestock products (all categories of agricultural holdings) By January 1, 2004 there were 2241,8 thsd cattles, 7280,1 thsd sheep and goats and this is 2,9 % and 4,2 % growth relatively to January 1, 2002.

Agriculture of the Republic of Azerbaijan Animal breeding sector

Agriculture of the Republic of Azerbaijan Animal breeding sector Meat production (all categories of agricultural holdings, carcass weight, thsd tons)

Agriculture of the Republic of Azerbaijan Animal breeding sector

Agriculture of the Republic of Azerbaijan Import and export of agriculture products • Despite the advancement in supply in order to satisfy domestic demand by inclination of local farmers to corresponding market niches, in 2002 in comparison with 2001 • the import of agriculture and food products increased by 1,7 % to 234,9 mlns USD, • the export of same products increased 34,1 % to 89,7 mlns USD.

Agriculture of the Republic of Azerbaijan Import and export of agriculture products

Agriculture of the Republic of Azerbaijan Food-processing The total volume of production in food-processing sphere by the end of 2002 was 4,6 % more than that in 2001. The production increased in: meat - 5,5 %, sausage products - 47,8 %, milk - 4,1 %, butter - 4,5 %, margarine - 91 %, tinned fruits - 0,6 %, vegetable oil - 47 %, bread and bread products - 1,2 %, natural tea - 13,9 %.

Agriculture of the Republic of Azerbaijan Cotton-growing sector • Important role in agrarian sector of economy. • Developed since 1970s. Large industrial potential. • Peak cotton production was n 1981 - 831,2 thousand tons • with capacity of processing industry - 1 million tons. • Since 1989 cotton manufacture decreased year by year due to: • - unstable social and political situation in Azerbaijan, • - the collapse of Soviet Union, • - infringement of former trade relations.

Agriculture of the Republic of Azerbaijan Cotton-growing sector • Basic directions of development cotton-growing (government’s strategy): • attraction of local and foreign investments for the development of cotton growing; • delivery of credit facilities to manufacturers of cotton; • implementation of actions for manufacture of a productive and high-quality cotton; • organization of insurance farms activity; • support for creation of pits for sale of raw material and ready made products after processing; • creation of a/c information services with the purpose of delivery of modern technology to cotton-growers, manufacturers, processors and marketing agents in the sector.

Agriculture of the Republic of Azerbaijan Cotton-growing sector • Creation of following modern competent service spheres for development and increase of cotton production: • Agro technical service. • Technique and leasing service. • Agro chemical and biological conservation services. • Creation of Association of «Cotton-grower farms» (with free acting private services under its auspices ). • Creation of centralized terminal of cotton pit.

Agriculture of the Republic of Azerbaijan Cotton-growing sector The programme of cotton planting and production in Azerbaijan in 2002-2006 years

Agriculture of the Republic of Azerbaijan Cotton-textile industry Currently all cotton processing plant are privatized. Raw cotton is directly purchased by cotton cleaning plants. It shows that plant owners are interested in processing sufficient amount of cotton for appropriate price. The raw cotton is a very important export good. In 1997 the share of cotton export was 62 % in total agricultural and agro-processing industry. This ratio fell to 22 % in 2001. Another vital point is efficient cooperation with the spinning industry of the country. Spinning mills are currently can not compete with imported products and the volume of goods sold decreases each year. This situation also decreases the demand for raw cotton and cotton refined from seeds. Thus the pre-processing industry is not able to use the potential of domestic market in full.

Agriculture of the Republic of Azerbaijan Silkworm breeding sector Sericulture is one of the ancient craft forms in Azerbaijan. Thank to its high quality Azeri silk was always in the centre of attraction of historians, farmers and merchants. In regions such as Zangilan, Gubadli, Daglig Karabakh, Jabrail, Fizuli and Agdam 1,100 tones of silkworm were processed annually. The reasons of depression in silkworm breeding sector are broken ties with Ordubad silkworm opening plant as a result of blockade of Nakichevan remaining of Khankendi silkworm-opening plant under occupation. The other reason is that the only purchaser of raw silkworm ‘Sheki-Silk’ Joint Stock Company didn’t cover the cost of products purchased from head silkworm drying houses in region during 1995-1996. As head silkworm drying houses were not able to pay for silkworm seed plants producing silk worm stopped their activity (except Sheki Silkworm Seed Plant).

Agriculture of the Republic of Azerbaijan Viticulture and Winemaking • Until 1990-s viticulture and winemaking complex occupied the major place in the country’s economy and was one of the most profitable sector in agriculture. It accounted for 27-30% of total profit. • Destruction of saplings by former USSR government • Loss of traditional markets • Deterioration of equipment • Led to crisis in the sector. • Currently there are 126 pre-processing and processing enterprises (all private) • Lack of domestic production of raw material is the reason half of them (circa 60) are not sufficiently effective

Agriculture of the Republic of Azerbaijan Viticulture and Winemaking • Winemaking plants in Azerbaijan produce • Vodka & liqueur products • Red table varieties • Sparkling vine • Brandy

Agriculture of the Republic of Azerbaijan Viticulture and Winemaking • The processing plants are engaged in • Pre-processing of grape • Production of raw spirit • Production of brandy alcohol • Wine-making • Bottling • Winemaking is one of the sectors which has prolificacy capabilities. Investment put in one deciliter is able to give profit of 200-300 %. • During 70-80-s of last century as plants of the republic were capable to sell at USSR market, they had 200-300% profit.

Agriculture of the Republic of Azerbaijan Viticulture and Winemaking Although collapse of the USSR led to loss of markets for products of the winemaking industry it played the main role in export of agrarian industry products till 1998. The share of alcoholic beverages in agrarian industry products export was 50%. The highest export volume - 15,4 USD million (1997) Starting from 1998 export decreased and was 3 million USD in 2001.

AZERBAIJAN INVESTMENT PROMOTION AND ADVISORY FOUNDATION