Azerbaijan Country Report Presented by the Ministry of Foreign Affairs

Favorable location Azerbaijan is the country on the crossroads of Eurasia

Basic information I Establishment: 28 May 1918 I Independence: 18 October 1991 I Official Language: Azerbaijani I Political system: Presidential Republic I Area: 86.6 ths. sq. km. I Population: 9 million I Capital: Baku I Autonomous Republic: Nakhchivan I Currency: Manat * * (0.79 AZN=1 USD)

State budget State budget Dynamics of budget growth, mln USD

GDP growth rate5 % GDP per capita ($) 5,697 Investments ($) 17.3 bln FDI ($) 3.3 bln Inflation5.7 % Unemployment rate6% Poverty level9.1% Average monthly salary ($) % GDP growth 12.3 % 17.3 bln $ 12.1 bln $ 2010 Strategic currency reserves 29 bln $ Non-oil investments Total investments Income growth rate of population Macroeconomic figures

productivity GDP share in the region I GDP share in the South Caucasus (%)

State Programs I State Program on socio-economic development of regions of the Republic of Azerbaijan in I State Program on Food Security in I State Program on the development of tourism in the Republic of Azerbaijan in the years of I State Program on use of alternative and renewable energy sources in the Republic of Azerbaijan

Poverty reduction I State Program on Poverty Reduction and Sustainable Development of the Republic of Azerbaijan in Poverty reduction dynamics

97 Economic reforms Reforms in: - getting credits - trading across borders Reforms in: - getting credits - paying taxes

Country Ratings I Long term credit rating: ‘BBB –’ ( Investment Grade* ) I Short-term credit rating: ‘F3’ I UNDP Human Development Report – 67 I WEF Global Competitiveness Report – 57 among world and 1 st among CIS countries 2010

I Corporate Tax20% I Value Added Tax18% I Simplified Tax4% and 2% I Agriculture Tax I No limits on the Repatriation of profits I Inheritance and Gift Tax I No customs duties on non-oil production imports (specified agricultural products)* I No VAT on non-oil production imports (specified agricultural products)* Taxation *Effective

Foreign Trade Foreign Trade More than 40 Free Trade Agreements 138 trade partners in 2010 GSP, GSP+ WTO negotiations process

Investment Climate Investment Climate Major factors that turned Azerbaijan into a leading FDI destination National legislation: Law on Investment Activity Law on Protection of Foreign Investments Law on Special Economic Zones International legal regulations Agreements on Avoiding Double Taxation WTO membership negotiations (conforming national legislation with the International normative acts) Institutional support by the Government: AZPROMO Azerbaijan Investment Company National Fund on Support of Entrepreneurship

Investments Total Investments 17.3 bln USD Oil sector 5.2 bln USD Foreign 8.2 bln USD Domestic 9.1 bln USD Non-oil sector 12.1 bln USD FDI 3.3 bln USD FDI 3.3 bln USD *2010

FDI Flow

Well-developed Infrastructure Logistical centers for Asia-Europe, Middle East-CIS 2 nd largest port in Caspian Sea International passenger & cargo terminal

Rail Infrastructure Easy access to Black Sea region Well established links with neighbouring and former USSR countries Baku-Tbilisi-Kars Rail road – the Iron Silkway

Interesting facts I First Baku ‘oil boom’ I Nobel’s first Kerosene factory I 1846–first hand-dug oil wells I First Baku-Batumi Pipeline I Nobel’s distribution system I First rail tank cars I 50% of world oil production in XIX century I 80% of total Soviet oil production during World War II

Key elements of the energy strategy of Azerbaijan:  Maintain energy security of the Country;  International cooperation;  New infrastructure development and upgrade, modernization and efficient use of existing infrastructure;  Optimization of Management;  Oil revenues management;  Expansion of geography of operations and investments portfolio of SOCAR;  Diversification of consumer markets and export transportation routes for Azerbaijan’s hydrocarbon resources;  Contribution to the development of Southern Energy Corridor strategy Azerbaijan – Oil and Gas: trends and perspectives Energy Strategy of Azerbaijan

Map of oil and gas pipelines “HAPPINESS IS MULTIPLE PIPELINES”

I The power sector has a leading role in the economy of Azerbaijan I The country is fully electrified, electrical power is the most utilized energy source I Increased demand for electricity by 4.7% each year until 2015 I Potential - Renewable Energy Sources - Solar, wind, water, sea-energy, waste, bio-energy, I Industry Alternative and Renewable Energy

STRATEGIC GOALS Renewable Energy Development

The forecast of development of Oil and ICT sectors Oil Fund income, billion USD ICT sector revenue, billion USD

Investment Project Project Consultants : ATKINS (UK) Project Consultants : ATKINS (UK) Foster & Partners (UK) Foster & Partners (UK) F&A Architects (USA) Project Specifications: 221 ha development 10 districts residents 4.5 mln sq m gross built area residential and commercial units workplaces (upon completion) parking places 39 ha landscape Project Consultants : ATKINS (UK) Project Consultants : ATKINS (UK) Foster & Partners (UK) Foster & Partners (UK) F&A Architects (USA) Project Specifications: 221 ha development 10 districts residents 4.5 mln sq m gross built area residential and commercial units workplaces (upon completion) parking places 39 ha landscape I Baku White City

Armenian-Azerbaijan-Nagorno Karabakh conflict-impact on economic growth Armenian-Azerbaijan-Nagorno Karabakh conflict-impact on economic growth Military conflict with Armenia ( ) over the territory of Nagorno- Karabakh 20% of the territory of the Republic of Azerbaijan is currently under occupation of Armenia The cease-fire has been in force since 1994 Total refugees and IDPs –