Azerbaijan ready to boom, says AmCam
Despite problems, groundwork now set for rapid business expansion

By Jonelle Glosch, Executive
Director, American Chamber of Commerce in Azerbaijan
When it comes to ranking the most difficult places in the world to do business, Azerbaijan doesn't hesitate to claim its place in the top of the list. Groups like Transparency International, the venerable World Bank and the IMF have all wrung their collective hands at the lack of transparency in the government of Azerbaijan.

Azerbaijan has its share of problems. However, looking at Azerbaijan in the context of the former Soviet Union, and in the perspective of where it has come from, you have to give Azerbaijan its due credit as well. Much of this credit goes to President Heydar Aliyev, the aging post-Soviet leader. He has skillfully managed to lay the foundation for an emerging democracy within the framework of a Russian-Iranian power struggle.

Acknowledgement also has to be given to the advisors and framers of Azerbaijan's economic policy. They have put many of the contracts and guidelines into place, allowing the country some breathing room. That's a luxury that many other less fortunate republics don't have.

So, what really makes Azerbaijan different? Why is it possibly the single best option for doing business in the former Soviet Union? What factors are working in Azerbaijan's favor? These are not easy questions for which there are any pat answers. There are, nonetheless, some indicators that support the assumption that Azerbaijan may indeed be the next hot market.

Geopolitically, what makes Azerbaijan different is the pro-Western stance that its government adopted right from the start. A democratic constitution has been adopted guaranteeing many of the fundamental rights we in the United States take for granted. Enforcement is open to interpretation and still needs time to solidify, but it exists.

Azerbaijan is the Western ally standing between Russia and Iran. Azerbaijan, with Turkey, is trying to hold onto Georgia to make the Baku-Tbilisi-Ceyhan pipeline an economic link to stability, while giving the oil resources a place to flow free of adverse political pressure.

Azerbaijan also is strategically important in that it is sitting on arguably rich deposits of oil and gas. How much, and in what ratios, is being determined at the moment, but no one disputes that there is a large reserve waiting for exploitation. Pipeline shipment across the region would bring transit tariff revenues to the countries that could most benefit, thereby increasing the region's stability through economic comfort. Azerbaijan is the key.

These factors should be enough to entice even the most conservative of investors.

After all, Azerbaijan:
– has a key geographic position.
– is one of the most Western-oriented of the former Soviet republics.
– actively encourages foreign investment.
– has a fully convertible currency.
– has a skilled yet underpaid labor force.
– possesses abundant natural resources for agribusiness.
– boasts direct access to markets of some 12 million in the Caucasus region alone.

When you add to the mix an established infrastructure built up and improved over the last ten years, and a business advocacy group like the American Chamber of Commerce, with its high level access to the Azerbaijani government,the conditions become enticing indeed.

The factors that make Azerbaijan a good bet for investment include genuine needs waiting for entrepreneurs, a population eager to change, open dialogue with the government, avenues for recourse in the event of dispute, and world interest in the region.

Azerbaijan is about to boom based upon the need for support workers to get the BTC pipeline built over the next five years. The numbers needed range from the low thousands to mid-tens of thousands. However, no one denies that even a low estimate of 5,000 workers brought to Azerbaijan would have a tremendous impact on the economy.

The American Chamber of Commerce in Azerbaijan (AmCham) draws members from 14 different sectors of the economy. Surveys show that there is a lack of capacity in all of these sectors. This means that in order to deal with the increase in population required to fulfill the BTC pipeline project, or full field development for the "Azeri-Chirag-Guneshli" oilfield, all sectors could use additional operations.

Food products and services will be needed, personal services will be in demand, automotive parts and servicing will be in short supply, even entertainment options will be stretched thin. In short, AmCham Azerbaijan views this as a threshold of opportunity for investors.

In order to attract and maximize the success rates for new investments, AmCham is actively engaging the government's key ministries in open dialogue through high-level Working Groups. Through these Working Groups and quarterly open roundtable sessions, the ministries are involved in idea sharing, and investors can ask questions and receive answers in a non-confrontational environment. Ministry personnel can also make recommendations about how to achieve goals defined in thelaws, while still enabling business to operate.

To date, seven Working Groups are in place, covering Taxation, Customs, Banking/ Finance/ Insurance, Economic Development (the Trade & Investment/ Privatization "Super Ministry"), Justice/ Legal, Labor, and Agriculture. The Working Groups are comprised of AmCham members and ministry contacts (usually department leaders). They are co-chaired by the ministers themselves, ensuring adequate input and decision-making ability from both sides.

A certain amount of success has been achieved in the 18 months since most of these Working Groups were established. Temporary import issues have been resolved, and tax inspections have been refined. AmCham now shares information with its members about what to expect and what is not allowed. Notary laws have been changed for lending.

In the government's privatization program for state-owned corporations, AmCham is taking an active role in helping to formulate a plan for "investor information packets." These will enable the Ministry to better attract and inform potential investors.

Even with the successes that can be claimed, Azerbaijan is a long way from a sure bet. Caution, prudence and well-planned ventures are still the order of the day. But, smart investing combined with an information and advocacy group like the American Chamber of Commerce can further the odds of success in Azerbaijan in a very tangible way.