Entrepreneurs flourish again in Azerbaijan
‘To really live our independence, we need American investment here’

For centuries, Azerbaijan has been at the crossroads between East and West. Long before Marco Polo was entranced by the mysterious gas fires burning naturally on the beaches of the Caspian near Baku, the geography of this region made Azerbaijan a natural route to travel. Empires swept across it, religions engulfed it, and whole populations migrated into it and through it.

Caravans of traders and merchants traversed the region, stayed at the karavan-sarayas (inns for camel caravans), and plied their goods. These visitors needed hospitality - food, housing, water, wine. And so Azerbaijan became a nation of traders, merchants and providers of services that businesspeople need.

The Soviets suppressed that innate business ability. So it’s not surprising that when independence came again in 1991, capitalism should re-emerge like the first daffodils of a Washington spring.

The membership growth of ASK, the National Confederation of Entrepreneurs in Azerbaijan, mirrors how fast business growth has been. Launched in March of 1991, the organization now boasts more than 700 members, about 80 percent of Azerbaijan’s private sector. The organization was formed in order to protect the rights of businessmen, lobby in the parliament, and stimulate investment in Azerbaijan.

ASK President A. Mammadov says that simply advancing the image of a businessman is a confederation goal. “For seventy years under the Soviets, business activity was prohibited. A businessmen, that is, the capitalist, was painted as Public Enemy Number One. Many people still have that mentality, and we are working to change that.”

While changing the mentality of Azerbaijanis about business and business people is one objective, the organization also finds that it needs to change the mentality of the large foreign firms who come to Azerbaijan.

“Our members often find it is difficult to do business with these big companies. Foreign companies don’t know what high quality capabilities our members can offer. They tell our firms who could supply them with, say, computer services, at a fraction of the cost: ‘No thanks, we’ll use this or that firm in Munich, or London, or New York,” Mammadov says. “Or, they may offer us a token small contract. But we don’t want charity. We want business! We want to work with and for the big foreign companies so that we can learn ourselves.”

That’s the common theme that emerges in interviews and conversations with Azerbaijani entrepreneurs - so many formed their own companies so that could partner with American firms to bring American technology and methods and innovation into Azerbaijan. Others want to do business with or for American companies so they can learn how to meet international standards and sell Azerbaijani products and services to American companies.

These firms have what it takes - enthusiasm, willingness to take risks, highly trained and educated people, and a country that wants America as its partner. Whether it’s high-quality dairy products, champagne and wine, trucking, oil services, installation of satellite and fiber optic communication systems, construction of earthquake-proof skyscrapers, personal computers or world-class travel services, there is an Azeri company that can produce to international standards.

Here are just a few examples:

AZEL (Azerbaijan Electronics)- Igor I. Yakovenko, President
Igor I. Yakovenko’s strategy was to build his computer business by forging partnerships with leading hardware, software and peripheral manufacturers. He started in 1991 with a doctorate in computer sciences in hand, and a desire to own his own business. Today, in one of Azerbaijan’s equivalents to the Hewlett Packard Silicone Valley garage startups, AZEL is one of Azerbaijan’s largest computer retailers and service companies. The company employs more than 100 highly trained technicians and office staff; many have been trained in the US or in regional centers in Europe. This summer AZEL opened a large, new showroom in downtown Baku, and has three other business centers.

AZEL's staff includes system analysts, programmers, and electronic engineers able to provide any types of information systems. AZEL successfully combines the business of distributor and system integrator, supplying software and hardware products, and providing regular service support and complex solutions in the information technology field.

Promtekh Bank- Faig Huseynov, Chairman of the Board
Formed in 1994, Promtekh Bank is now one of the top 10 banks in Azerbaijan in terms of profitability and return on equity. Faig Huseynov has a two-pronged strategy - find and finance those entrepreneurs who want a life-long relationship with a personal banker on the one hand, and set up strategic relationships with international banks on the other.

That strategy led Promtekh to win a tender from the German bank, KFW, to support small and medium enterprises. Promtekh will act as bank agent for the financing program; since March 1 the bank has already lent more than $300,000. Promtekh is also lending to a diverse set of clients in the manufacturing, trade, telecommunications, computers and construction fields. Huseynov is also looking to help finance value-added investment in the agricultural sector.

Huseynov says that over the last five years, there have been great improvements in Azerbaijan. He would like to see the government make adjustments in a number of laws that would help businesses. Like other bankers in Azerbaijan, he believes the tax rate should be lowered. Huseynov also supports the creation of “Economic Free Trade Zones,” and says there are not enough American companies in Azerbaijan.

UGÜR 97 - Azay Khasay
Gadjimorat, President
Mokhnatov Azay started in 1990 doing small-scale commercial construction. Today his company is literally changing the face of Baku with solid, graceful 20-story luxury apartment buildings boasting the kind of lavish leisure features that would appeal to any American urbanite.

What is most appealing about UGÜR 97 buildings is that Azay manages to incorporate a bit of the old eclectic architectural charm that gives Baku its unique sense of place. “My aim is to combine Western building technology with an Azerbaijani appearance,” he says. He keeps the exterior appearance simple, but the inside finish he makes rich.

A new 17-story luxury apartment house UGÜR 97 has built, called Aqua Park, is fully constructed to Western tastes and standards. The building contains almost any kind of family fun facility imaginable. There are Olympic-sized pools, water slides for children, saunas, separate fully-equipped exercise rooms for men and women, bars, an excellent restaurant, a video game room, a day care center and a beauty salon. There’s also a supermarket and a laundry in the building. With a gift for understatement, Azay simply says, “such a building concept was not known in Soviet times.”

He has six more high-rise office and apartment buildings either planned or already under construction, and has carefully thought out his business strategy for the next five years. In those buildings under construction this year, he plans to incorporate Western seismic technology to make his buildings earthquake proof - something never done before in this earthquake-prone area.

Azay is now planning construction of a large resort complex to be built in northern Azerbaijan, in a picturesque district “where the mountains meet the sea.”

S.I. Travel, Ltd - Suad Fataliyev, General Partner and Managing Director
“I was lucky in 1980,” recalls Suad Fataliyev. “ I had a chance to visit West Germany when very few people from the Soviet Union could. I thought it was incredible! I wanted Azerbaijan to attain that level of service and efficiency. But I didn’t want to stay in Germany. I wanted to make it happen in my own country.”

In 1995 Fataliyev got his chance. Then a general sales agent for British Airways, he was offered a chance to establish his own business. He decided to start a travel agency. “In 1995, we had three people and one client. We grossed about $2000 that first year, “ he recalls.

In 1996, he partnered with American Express Travel Services. Today, S.I. Ltd has more than 60 corporate clients, including many local companies. It is now one of the largest travel services companies in Azerbaijan. Last year the company grossed several million dollars.

“We have been lucky with our relationship with American Express,” Fataliyev says. “I am grateful to them, because we could always contact them, and there was always immediate support.”

The staff of S.I. Ltd is a100 percent Azerbaijani. “I have the best trained team in the Caucasus,” Fataliyev proudly boasts. “We became what we are because of our people’s work.”

The company’s inbound tourist travel has now grown to the point where SI Ltd has set up a separate department to handle the load. Fataliyev notes tourism traffic is increasing by about a 15 percent a year, with the main market being Taiwan, Japan, Scandinavia, and the US. Some travelers arrive as part of a regional tour, which includes visits to Georgia and Armenia. They usually spend four to five days in Azerbaijan, but Fataliyev says, ”We’re finding now that people on these tours are telling the operators they want more time in Azerbaijan.”

McDonald’s Azerbaijan - Maksud V. Mirzoyev, Managing Director
The young man from Baku stood in awe as he looked at the operations of McDonald's first restaurant in Moscow.

“I saw the good service. I saw the clean restaurant. I saw how the staff worked together to serve people so quickly with good food. Right then I wanted to bring such a restaurant to Azerbaijan. It became my dream.” So recalls Maksud V. Mirzoyev, in a decision that changed his life forever.

Mirzoyev was then a diplomat, holding the rank of second secretary, when he decided to abandon that prestigious and highly secure profession to begin his new business career. He located some trusted business partners, and together they set off to obtain a McDonald's franchise. They didn't expect what awaited them.

“I started by mopping floors!” Mirzoyev proudly laughs. “My family was aghast.”

McDonald's began the establishment process in Baku in 1996, undertaking market surveys and beginning the long negotiation process. By 1999, after two years of hiring and training abroad of its first 15 employees, the American fast food giant began construction of its first Baku restaurant. On opening day, the lines from the restaurant stretched for blocks down Baku's famous Fountain Square in the city center.

Now, just two years later, McDonald's is firmly established as an Azerbaijan entity. “People here have come to trust us," Mirzoyev says. “This is because we have emphasized the four McDonald's pillars -- quality, service, cleanliness and value.”

Azinshaat Company - Natig Shirinzadeh, President
Natig Shirinzadeh had dreamed of owning his own company for several years, but Azerbaijan’s economy in the mid-1990s was only beginning to settle down. With stability clearly returning, and with the government instituting important economic reforms, Shirinzadeh felt the time had come in 1999 to move ahead. Last year, he registered his construction company, Azinshaat, and began operations. He’s successful, and is already planning to start other companies to get involved in opportunities he sees in other sectors. But the lack of American investment in Azerbaijan troubles him.

“ I myself, being the president of my company, always wanted to work with American companies so that they would integrate ideas and innovation into Azerbaijan. But right now, the US is only interested in the oil sector. Azerbaijan has opportunities in other sectors, such as petrochemicals for construction materials, for example, and agriculture.”

“The oil boom also brought a construction boom,” he continues. “Now we have a lot of work. People have needs. They want to live in good housing, for example. And implementing new technology in housing, building to international standards, is an ongoing issue here. I would like to see US construction companies investigate and study the Azerbaijan market, and come here and work with us.

Azerbaijan Dairy Corporation Ilham Rzaev, Chairman of the Board
Poor handling and hygienic practices coupled with inadequate refrigeration of dairy products means that 90 percent of people in the CIS states use milk powder instead of fresh milk. Just as scarce as fresh milk in the Soviet era were good tasting fruit juices. Ilham Rzaev started the Azerbaijan Dairy Corporation in 1999 to fill this market niche. Today, his is the only company in Azerbaijan producing whole, pasteurized milk that meets Western standards.

He imports orange juice concentrate from the US, cartons from the Middle East and other juice concentrates from Denmark, Australia and New Zealand. Germany, Indonesia and Turkey. His factory is now the largest in the Caucasus, and the firm employs 150 workers and 15 administrative staff. The company markets 25 dairy products, 14 juices and water.

Prices for products made to these high standards are still above what most Azerbaijanis can pay, and competition from others willing to sacrifice quality for price is strong. So Rzaev targets the expatriate community and Baku’s growing middle class.