International industrial hub in Azerbaijani way

Baku, Azerbaijan, Dec.11 By Ilaha Mammadli - Trend: In the medium term prospective, Azerbaijan can turn into a major producer and exporter of goods in the region. One can make such a conclusion in connection with the plans of the government to establish an international industrial holding company for the production of export-oriented products, which are similar to the ones produced by the largest industrial groups in Turkey, Canada, South Korea, China, Austria, Germany, Malaysia, France, Italy, Japan and other countries. If we consider the structure of foreign trade turnover of Azerbaijan, it becomes obvious that the largest volume of imports falls on the goods entering the country from Russia, Turkey, the UK, Germany and China. The share of these five countries in total import volume of Azerbaijan amounts to 54.21 percent. Among the major importers of their products to Azerbaijan one can also highlight the US, Italy, Japan, South Korea and France. It will not be difficult to attract the industrial giants in Azerbaijan, which annually improves its position in the comfort of doing business rating “Doing Business” of the World Bank. In addition, they can be given customs and tax benefits in accordance with the experience of creating technology parks and industrial towns. Instead, the country will get advanced technology for industrial production. In addition to export, this will allow Azerbaijan to become the largest industrial logistics hub, given the developed transport infrastructure of the country. In particular, the Baku-Tbilisi-Kars railway will connect the two continents after its commissioning in 2015. Thus, the most convenient and shortest route connecting Asia and Europe will pass through Azerbaijan. Currently, the Caspian basin's largest international trading port, the commissioning of which is scheduled for 2015, is under construction in Azerbaijan. Today, Azerbaijan with the largest economy in the South Caucasus (75 percent of the economies of the three countries accounts for Azerbaijan) carries out the largest volume of domestic investment and is the most attractive country for international manufacturers to establish regional production. Through the establishment of import-substituting products in Azerbaijan, the country will not only provide the accumulation of the budget in the form of tax deductions, but also supply products to the neighboring countries. Azerbaijan can also return its former glory as a center of oil production, because oil engineering in the country was the core of this industry in the former Soviet Union. Up to 70 percent of the equipment for maintenance, current repair and overhaul of wells and oil and gas production for all oil-producing regions of the former Soviet Union was produced in Azerbaijan. Oil engineering products was exported to 35 countries of the world. Petrochemical engineering can also become one of the most leading industries of Azerbaijan. Firstly, due to the fact that it is a potential source of tangible foreign exchange earnings (while oil and gas equipment trade switches to world prices). Secondly, its viability is important to maintain the level of oil production at regular consumers both in Azerbaijan and other foreign countries. The country needs to revive the light industry as well, which was also considered traditional in Soviet times and had a good base. Increase of demand for cotton stimulates farmers to increase production volumes, which today is in decline due to lack of markets and, consequently, low purchasing prices. In order to correct the situation, it is necessary to reduce the prime cost of cotton production in the country, and this will be possible with the use of new technologies, fertilizers and varieties. In this case, Azerbaijani cotton will be competitive on the world markets. Under current conditions, it does not stand up price competition, and in the result, farmers switch to other areas of agriculture, including the cultivation of vegetables, which is more cost-effective. As for Azerbaijani fruits and vegetables, they are now in great demand not only on the Russian market. This is not due to the confrontation between Russia and the West at all. After all, the Arab countries, where there is almost no suitable land, also show interest to the supplies of Azerbaijani agricultural products, and up to 90-95 percent of the agricultural products consumed in the Arab countries, is imported. Azerbaijan has already started the corresponding negotiations on supply of its products on the Arab markets. But probably they need to be speeded up, because there are also other countries that want to export their products to the region. For example, Qatar has a treaty with Italy, according to which Arab country invests in the agriculture of Italy as well, and gets the products in return. Italy receives both necessary investment and a market for its own producers and products. Azerbaijan should think about such application of the corresponding experience as well, according to the government. Given the prospect of increasing markets, Azerbaijan should also establish the packaging production, and in the presence of high-quality products the country should expand the processing of agricultural products using new technologies. In addition, by joining the World Trade Organization, the country will get simplified access to the new markets. At the same time, if the products offered to these markets do not meet certain requirements, they simply will not be allowed. Ilaha Mammadli is Trend’s deputy editor-in-chief for economic issues Follow us on Twitter @TRENDNewsAgency