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Doing Business in

Doing Business in. AZERBAIJAN. Trade. Azerbaijan is developing trade relations with than 100 partners. Imports: 5708.5 mln $. Imports: machinery and equipment, oil products, metals, food, chemicals. Trade. Oil and oil products remain the major export from Azerbaijan.

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Doing Business in

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  1. Doing Business in AZERBAIJAN

  2. Trade Azerbaijan is developing trade relations with than 100 partners. Imports: 5708.5 mln $ Imports: machinery and equipment, oil products, metals, food, chemicals

  3. Trade Oil and oil products remain the major export from Azerbaijan Exports: $6058.3 mln $ Exports: oil and gas 90%, machinery, cotton, food

  4. GDP - $29.3 billion GDP real growth rate - 25.0% GDP per capita (PPP) - $3473*Source The State Statistical Committee Macroeconomics 2007

  5. FDI Regime The Republic of Azerbaijan is the leading FDI destination in the region Major factors that turned Azerbaijan into a leading FDI destination: • Abundant resources • Favorable location • Competitive cost of production • “High” margins market

  6. FDI and Domestic Investment The “open door” policy for foreign businesses The government of Azerbaijan welcomes foreign direct investment (FDI) in the country. • Gross domestic product growth – 125.0% • Foreign trade turnover growth – 101.0% • “National” regime for FDI • Few restrictions for FDI activities

  7. Private Sector and Entrepreneurship Azerbaijan is the leading economic reformer in the Commonwealth of Independent States (the former USSR). Its economic system is founded on the principles of liberalism, denationalization, support for private entrepreneurship, non-discrimination against foreign businesses and cooperation with international financial institutions. Budget: Revenues – $7150 mln Expenditures – $7213 mln External debt – $2441 bln

  8. Business Start Up A new system of “single window” (one-stop-shop) has been launched from January 2008 • Registration – procedures of business entities are carried out by the Ministry of Taxes.Relevant documents are presented to Local Tax Authorities. • Limited paperwork – 5 or 15 days term for legal entities registration 1) General partnership 2) Limited partnership 3) Limited liability company ("LLC") 4) Joint-stock company (open and close type) • Land Acquisition- liberal regime Liberal regime Private Ownership Property right • Licenses / Permits Circa 50 licenses after 2002 reforms Register of licenses in the Ministry of Economy Development

  9. Taxes Tax policy and collection of taxes in Azerbaijan is carried out by the Ministry of Taxes. Simplified tax is charged at the following rates on the gross revenue of the taxpayers: 4% for taxpayers operating in Baku 2% for taxpayers operating in other regions of Azerbaijan VAT registration Companies with taxable transactions exceeding a certain threshold (currently approximately $25,000 USD per three consecutive months) must register as VAT payers.

  10. Currency regulation The National Bank of Azerbaijan is the currency regulator. The goal of the National Bank's activity is to ensure stabilityof the national currency. • Free repatriation of profits • Limited paperwork for international currency transactions • Currency operations are divided into routine currency operations and operations involving the movement of capital

  11. Foreign trade rules - Accounting Foreign exchange regulations are less restrictive for non-residents. Non-resident legal entities may purchase foreign currency on the domestic foreign currency market. All entities registered in Azerbaijan (Azeri Legal entities, representative offices and branches) are required to maintain their books and records on the territory of Azerbaijan, in local currency, and in accordance with the Azerbaijan accounting legislation (AAL), which is similar International Accounting Standards)

  12. Financial sector/Banking Legislative base of banking activity has been improved and it fully meets international standards • Rapid growth rate in the banking sector goes on • Actives of banking system • Capital of banking system • Development of Bank infrastructure • Reforms in banking system • Banks with Foreign Participation • Insurance

  13. Dispute resolution / Arbitration • Courts Azerbaijan has a three tier court system - courts of first instance, appellate courts and cassation court. • Mandatory enforcement Enforcement procedures set forth in Law on the Execution of Court Orders apply to judgments of Azeri and foreign courts as well as international arbitration and foreign arbitration awards. Azerbaijan recognizes decisions of international arbitrators.

  14. Privatization Under the Privatization Law, the following are considered to be foreign investors: • Azerbaijani legal entities in which participation of foreign investment exceeds 50% of the entity's charter capital • Foreign legal entities and their subsidiaries • Foreign nationals • Stateless persons mln. AZN

  15. Oil and Gas sectors Azerbaijan's number one export is oil. It Azerbaijan has important oil reserves and asignificantagronomic potential based on a widevariety of climatic zones. Since becomingindependent in1991, Azerbaijan hasattracted significant international interest in its oilandnaturalgas reserves. Foreign investors are helping the country develop itsrich oil and natural gas reserves in the Caspian Seabasin, and completion andpossible expansion of newpipelines, especially the BTC (Baku-T’bilisi Ceyhan)pipeline, allowed Azerbaijan to become animportant energy exporter over the next decade. • 13 billion bar proved reserves

  16. Oil Net Exports The shareholders in the largest PSAs (Azeri, Chirag, Guneshli) are : • BP • Unocal • Inpex • Statoil • ExxonMobil • TPAO • Devon • Itochu • Delta Hess • SOCAR

  17. Gas Azerbaijan has proven natural gas reserves of roughly 30 trillion cubic feet (Tcf), and the potential for even larger reserves. The country's oil & gas policy proved extremely successful in opening it up for the international businesses in other sectors. At the moment a number of international service companies, engineers, shippers in the oil related industries successfully do business in Azerbaijan The country's leading natural gas producer.

  18. Agriculture Agriculture sector has a great potential for implementation of renewable energy sources. At the moment agriculture accounts for approximately 12% of the domestic product. The sector is growing rapidly. % years

  19. Transport The transport sector in Azerbaijan, comprising railway, aviation, roads and maritime shipping, amounts for about 10% of domestic output. Transport is a large consumer of fuel and energy Azerbaijan has taken significant steps to implement structural reforms in the transport sector.

  20. Azerbaijan is aiming at promoting itself as a new tourist destination as opposed to traditional "tourist" countries The natural attractions include: rare climatic and terrain diversity, mountains and warm sea, medicinal hot springs, mud volcanoes and natural gas flames areas. Tourism

  21. Energy Azerbaijan's existing power generation capacity, fuel resources and infrastructure is not only able to satisfy domestic needs for energy but can also offer substantial export opportunities for electricity. • Alternative energy sources • In certain areas of the country force of wind varies around 5-20 m/s with duration of 2700-3000 hours annually • Throughout the country annual length of sunny days is around 2600-3000 hours

  22. Construction Growth of Investments The 2004 growth in construction Sector of 37% is largely attributed to the increasing opportunities on this market. Nowadays, we witness construction growth also in industrial, agricultural and transport sectors as a result of positive economical reforms and target programs that are being carried out by the government of Azerbaijan towards the development of non-oil sectors of Azerbaijan economy.

  23. Construction Business opportunities • High end commercial and residential construction (hotels, business centers, “clever” houses) • Production of new types of construction materials • Transfer of new construction technologies • Participation in public investment program • Construction related services

  24. About AZPROMO AZPROMO (Azerbaijani Export & Investment Promotion Foundation) is a joint Public Private Initiative established by the Government of Azerbaijan in 2003. In August 2005 the Foundation, originally only tasked to attract Foreign Direct Investments to the country was also empowered with the mandate to promote export of local non - oil products. Our Contacts: 11 Hasan Abdullayev str.,AZ 1001 Baku, Azerbaijan Telephone: (+994 12) 598 0147, 598 0148Fax: (+994 12) 598 0152Email: office@azpromo.orgWeb site: www.azpromo.org

  25. Welcome to AZERBAIJAN

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