Economic Development and Prospects

Azerbaijan’s economy remains heavily dependent on the oil and gas industry despite diversification efforts. The government is increasingly focusing on renewable energy, digitalization, and infrastructure development to promote economic growth and reduce reliance on fossil fuels. Investments in the energy sector, particularly in solar and wind power projects, aim to diversify energy production and reduce environmental impact. The establishment of the Azerbaijan Renewable Energy Agency (AREA) is a significant step in coordinating these efforts.

In addition to the energy sector, the government is promoting the digitalization of the economy. The Azerbaijan Digital Hub Program and the trans-Caspian fiber optic connections are key projects aimed at making the country a digital hub between Europe and Asia. These initiatives aim to modernize telecommunications infrastructure and integrate new technologies to enhance Azerbaijan’s global competitiveness.


Renewable Energy

Azerbaijan is investing heavily in the development of renewable energy to increase the share of green energy in its energy mix. Projects for the utilization of solar and wind power, along with the establishment of the Azerbaijan Renewable Energy Agency (AREA), aim to significantly increase the share of renewable energy. A new law on the use of renewable energy sources and planned tenders for wind and photovoltaic parks underscore this trend and offer attractive opportunities for investors.

The government aims to support the expansion of renewable energy through various measures, including the gradual privatization of small hydropower plants and the development of a green energy zone in the new economic regions of Karabakh and East Zangezur. These initiatives aim not only to reduce CO2 emissions but also to create new jobs and promote economic development in these regions.


Digitalization and ICT

The country is accelerating the digitalization of its infrastructure, particularly through the Azerbaijan Digital Hub Program and the development of trans-Caspian fiber optic connections. These initiatives are intended to establish Azerbaijan as a digital hub between Europe and Asia. The expansion of broadband and satellite communication is also being promoted to bridge the digital divide and modernize the economy.

With projects like the Digital Silk Road, which connects Europe and Asia through Azerbaijan and Georgia, the country positions itself as an important player in the global digital network. Collaboration with international partners and investments in modern technologies are key elements of this strategy, aimed at enhancing Azerbaijan’s competitiveness in the digital age.


Transport and Logistics

Azerbaijan plays a key role in the new Silk Road and the Middle Corridor, which serves as an alternative route for goods traffic between China and Europe. Investments in transport infrastructure, including road and rail projects, are central elements of the country’s economic strategy. The expansion of the North-South rail corridor and the construction of new lines in the Karabakh region are particularly noteworthy.

Azerbaijan’s geographical location enables it to become a hub for international freight transit. The modernization of ports and the expansion of cargo handling capacities contribute to increasing the efficiency of the transport sector. These measures aim to establish Azerbaijan as a significant hub in global trade and maximize economic opportunities.


Pharmaceutical Industry

In the Pirallahi Industrial Park, incentives are being created for investments in the pharmaceutical industry. Tax advantages and duty-free imports of equipment are designed to attract foreign investors. Initial successes are already visible, with companies from Turkey and India showing interest and some projects already being implemented. The industrial park, like other publicly funded business parks, offers attractive conditions for investors.

The government has launched several initiatives to promote local pharmaceutical production and reduce dependency on imports. The expansion of the pharmaceutical industry is intended not only to improve healthcare but also to create new jobs and advance economic diversification. Among the new players in Azerbaijani pharmaceutical production is Parla Pharmaceuticals, which has ambitious expansion plans.


Competitiveness and Economic Freedom

In the 2021/22 Global Competitiveness Index of the World Economic Forum, Azerbaijan ranks 58th out of 137 countries, showing improvement in the Central Asia region. This index evaluates the competitiveness of countries based on various factors such as infrastructure, macroeconomic stability, and innovation capability. Azerbaijan has made progress in several areas, including public institutions and market size, but lags behind in other areas such as labor market dynamics and innovation capability.

In the 2021 Index of Economic Freedom, Azerbaijan ranks 44th out of 178 countries. This index assesses economic freedom based on criteria such as property rights, government integrity, tax burden, and regulatory efficiency. Despite this solid ranking, challenges remain, particularly in combating corruption and improving regulatory frameworks to create a more favorable business environment.


Insurance and Refinancing Options

According to the OECD country rating, insurance and refinancing options for businesses in Azerbaijan are available. Economic stability is strengthened by diversifying the economy and investing in new sectors. Companies operating in Azerbaijan can receive support from various government programs and international financial institutions to secure and refinance their investments.

These insurance and refinancing options are particularly important for foreign investors entering the Azerbaijani market. By collaborating with international partners and utilizing global financial instruments, Azerbaijan can further diversify its economy and strengthen investor confidence.

Hidir Demir

Hidir Demir
+49 (0) 2361 99 188 38

Adnan Icemer

Adnan Icemer
+90 (532) 468 47 58