Doing Business in AZERBAIJAN Azerbaijan Export & Investment Promotion Foundation

Geography Geographic coordinates: 40 30 North, 47 30 East Area: 86.600 sq km Sea Line: 800 km Population: 8.6 mln Language: Azerbaijani Border Countries Iran in the south – 765 km Armenia in the west – 1.007 km Georgia in the north-west – 480 km Russia in the north – 390 km Turkey in the south-west – 15 km

Macroeconomics 2007 Investment $ 11.8 billion FDI $ 4.3 billion Trade turnover $ 11.8 billion Inflation 16.7 % External Debt $ 2.4 billion GDP - $ 29.3 billion GDP real growth rate - 25.0 % GDP per capita (PPP) - $ 3473 *Source The State Statistical Committee

Trade (Import) Azerbaijan is developing trade relations with 137 partners. Imports: 5708.5 mln $ Imports: machinery and equipment, oil products, metals, food, chemicals

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

Regional Location Azerbaijan is the country on the crossroads of Eurasia

FDI Regime The Republic of Azerbaijan is the leading FDI destination in the region Major factors that turned Azerbaijan into a leading FDI destination: Physical factors: Abundant resources Favorable location Competitive cost of production “High” margins market Legal Regime: The “open door” policy for foreign businesses “National” regime for FDI Few restrictions for FDI activities

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.

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 – 3 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 Private Ownership Property right Licenses / Permits Circa 50 licenses after 2002 reforms Register of licenses in the Ministry of Economy Development

Taxes Tax policy and collection of taxes in Azerbaijan is carried out by the Ministry of Taxes. 22% - corporate tax rate 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.

Currency regulation The National Bank of Azerbaijan is the currency regulator. The goal of the National Bank's activity is to ensure stability of 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

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.

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.

Azerbaijan's number one export is oil. Oil and Gas sectors Azerbaijan's number one export is oil. Azerbaijan has important oil reserves and a significant agronomic potential based on a wide variety of climatic zones. Since becoming independent in 1991, Azerbaijan has attracted significant international interest in its oil and natural gas reserves. Foreign investors are helping the country develop its rich oil and natural gas reserves in the Caspian Sea basin, and completion and possible expansion of new pipelines, especially the BTC (Baku-Tbilisi-Ceyhan) pipeline, allowed Azerbaijan to become an important energy exporter over the next decade. 13 billion bar proved reserves

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

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

Tourism 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.

Telecom Azerbaijani telecommunications is the second largest recipient of foreign investment after the oil industry. The largest FDI stock is in the mobile telephony At present there are 14 telephone sets per 100 inhabitants There are four mobile operators in the country: Bakcell, Azercell, Azerfon with GSM standards and CATEL with CDMA standards Number of mobile telephone subscribers exceeded 4 million in 2007 and continues to grow

Alternative energy sources 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

Construction Growth of Investments (mln USD) 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.

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 Tel.: (+994 12) 598 0147, 598 0148 Fax: (+994 12) 598 0152 Email: office@azpromo.org Web site: www.azpromo.org

Foreign Companies in Azerbaijan