INVESTING IN AZERBAIJAN

December 1, 2024

Azerbaijan has increasingly attracted the attention of foreign investors in recent years, thanks to its promising investment potential. As a result of steps taken to develop the investment and business environment, many foreigners invest in various sectors in Azerbaijan each year.

In this blog post, we will share valuable insights into investment opportunities and general ideas for investing in Azerbaijan. If you need further consultation on investment strategies and plans to ensure successful investments in Azerbaijan, you can contact the DLB Consulting Team. We are confident that our ideas and plans will lead to success in your future investment endeavors.

Reasons to Invest in Azerbaijan

Certainly, there are specific reasons that attract foreign investors to consider investing in Azerbaijan. Naturally, these investors take into account key indicators of Azerbaijan’s business and investment environment, as well as socio-cultural factors, when making their decisions. Based on our experience, we would like to share the key reasons why foreigners choose to invest in Azerbaijan:

Strategic Location

Geographically, Azerbaijan is located in the South Caucasus region of Eurasia, connecting Western Asia and Eastern Europe. Thus, the Trans-Caspian East-West Trade and Transit Corridor serves as the main route connecting two large global economies, China and Europe, with an average length of 5,400 km and a transit time of 15 days. Azerbaijan has made significant investments in road and rail links running north-south (from the Russian border to the Iranian border) and east-west (from the Absheron Peninsula to Georgia and then to Turkey), with most projects either completed or well underway.

Robust Economy with Large Domestic and Regional Markets

The current perspective of the economy of the Republic of Azerbaijan can be characterized as “cautiously optimistic.” The economy, which was seriously affected by COVID-19 prevention measures and the drop in global oil prices, has shown a rapid recovery. Consequently, in 2022, Azerbaijan’s foreign trade turnover amounted to 52.6 billion dollars, a 55% increase compared to 2021. The volume of exports in 2022 was almost 2.6 times larger than imports, reaching the highest amount since 2008. Additionally, non-hydrocarbon exports increased by 12% compared to 2021.

Liberal investment climate and skilled labor force

Bilateral investment agreements concluded with foreign investors in Azerbaijan provide additional guarantees to foreign investors. These contracts aim to create a more liberal and favorable investment environment in Azerbaijan.

According to 2022 statistics, 5.2 million people, or 51 percent of the total population, are economically active in Azerbaijan. The unemployment rate is quite low, at only 5.6%. Although the majority of the population is employed by the private sector, the participation of the public sector is also significant at 20.7%. Notably, the literacy rate in the country is exceptionally high, at 99.8%.

Socio-Cultural Environment

Economic indicators are certainly the primary factor that attracts foreigners considering investing in Azerbaijan. However, it is important to note that socio-cultural factors also play a significant role for those contemplating living in Azerbaijan. Every year, thousands of foreigners invest in Azerbaijan to obtain residence permits and move here, motivated by these socio-cultural reasons.

Investing in the Real Estate Market in Azerbaijan

Real estate investment in Azerbaijan is one of the most promising types of investment, not only within the country but across the entire region. Currently, real estate prices in Azerbaijan are more affordable compared to many other countries; however, they are expected to rise significantly, with some projects demonstrating an average increase of 15-20%. This makes investing in the real estate sector in Azerbaijan a highly lucrative opportunity.

In recent years, Azerbaijan has witnessed the establishment of several large-scale real estate projects. Notable examples include Sea Breeze and Baku White City, which have attracted not only local buyers but also investors from around the world. These projects, along with others, stand out not just within Azerbaijan but on a global scale, reflecting their high standards and appeal.

Furthermore, it is worth mentioning that, due to these developments, many foreigners are considering moving to Azerbaijan. Real estate investment is one of the legal bases for obtaining a residence permit in Azerbaijan. According to Azerbaijani legislation, foreigners who invest a minimum of AZN 100,000 (approximately USD 60,000) in the real estate sector are eligible to apply for a residence permit. This applies to both commercial and residential real estate investments within the country.

Investing in the Business Sector in Azerbaijan

In parallel with the real estate sector, the business sector in Azerbaijan is also experiencing steady growth. The country’s efforts to diversify its economy, which until the last decade was heavily reliant on oil, have significantly contributed to this development. As a result, there has been a noticeable increase in the number of foreigners investing in businesses in Azerbaijan, especially in recent years.

According to the 2020 Doing Business Report, Azerbaijan ranks 9th globally in terms of ease of starting a business. This report emphasizes the simplicity of legal procedures, with minimal bureaucratic requirements for business initiation in Azerbaijan. This simplicity is undoubtedly one of the key factors attracting foreigners to consider starting businesses in the country. However, it is important to note that this ranking primarily reflects the ease of procedures. Foreigners, especially when starting a business in a new country, also evaluate the existing business opportunities and overall market potential.

Business Investment Opportunities in Azerbaijan

As in many countries, there are numerous investment opportunities across various business spheres in Azerbaijan. However, certain business sectors naturally attract more attention due to their potential. Based on our extensive experience, we consider the following business spheres to be particularly promising for investing in Azerbaijan:

Renewable Energy Sector;
Tourism and Hospitality;
Information Technologies;
Healthcare;
Agriculture and Organic Farming.

RENEWABLE ENERGY SECTOR

Azerbaijan is rich in oil and natural gas resources, yet there is a growing interest in renewable energy investments to support sustainable green development. This shift is fueled by the country’s abundant natural energy potential beyond oil and gas reserves. Considering these factors, investing in the renewable energy sector in Azerbaijan represents a highly profitable opportunity.

TOURISM – HOSPITALITY

If you are considering investing in business in Azerbaijan, the tourism and hospitality sector could be one of the most promising fields. Every year, approximately 2 million foreigners visit Azerbaijan, and this number continues to grow annually. Given this trend, it is reasonable to conclude that investments in the tourism sector can generate significant revenue for businesspeople entering this field.

INFORMATION TECHNOLOGIES

Azerbaijan, a country with significant investment opportunities in Information Technologies, has only recently attracted the attention of international investors. Substantial tax concessions and exemptions for certain types of IT businesses have made Azerbaijan an appealing destination for foreign business people. In recent years, there has been a noticeable trend of state institutions and large corporations increasingly seeking professional expertise and services in the IT sector, driven by the growing demand for advanced and high-quality IT solutions.

AGRICULTURE

With fertile lands and a diverse climate, Azerbaijan is an excellent destination for investors looking to invest in the agriculture sector. There is a rising demand for organic and locally sourced produce, not only from local consumers but also from global markets. Additionally, Azerbaijan’s strategic location provides significant opportunities for agricultural exports. Investing in the agriculture sector in Azerbaijan, particularly in organic fruits, vegetables, or specialty products like saffron and hazelnuts, can successfully meet niche demands in both local and regional markets.