Doing BusinessDoing Businessinin AZERBAIJAN AZERBAIJAN

Azerbaijan Export & Investment Azerbaijan Export & Investment Promotion FoundationPromotion Foundation

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

GeographyGeography

GDP - $ 29.3 billion GDP real growth rate - 25.0 % GDP per capita (PPP) - $ 3473 *Source The State Statistical Committee

Macroeconomics 2007Macroeconomics 2007

2004 2005 2006 2007

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GDP in bln. USD

Investment $ 11.8 billion

FDI $ 4.3 billion

Trade turnover $ 11.8 billion

Inflation 16.7 %

External Debt $ 2.4 billion

Trade (Import)Trade (Import)

Azerbaijan is developingtrade relations with 137 partners.

Imports: 5708.5 mln $

Imports: machinery and equipment, oil products, metals, food, chemicals

7.3%

7.1%5.3% 4.2% 3.8%

22.4%

2.4%8.6%

7.1%

Russia Italy UKTurkey Germany JapanUkraine China USA

Trade (Export)Trade (Export)

Exports: 6058.3 mln $

Exports: oil and gas 90%, machinery, cotton, food

Oil and oil products remainthe major export from Azerbaijan

6.1%

10.7% 4.6%

44.7%

5.5%5.4%

4.5%

Italy France Russia TurkeyGeorgia Israel Iran Indonesia

Regional LocationRegional LocationAzerbaijan is the country on the crossroads of Eurasia

FDI RegimeFDI Regime

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

The Republic of Azerbaijan is the leadingFDI destination in the region

Private Sector and EntrepreneurshipPrivate 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.

Private sector share in GDP

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Business Start UpBusiness Start Up

RegistrationProcedures 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 partnership3) Limited liability company ("LLC")4) Joint-stock company (open and close type)

Land AcquisitionLiberal regimePrivate Ownership Property right

Licenses / Permits Circa 50 licenses after 2002 reforms Register of licenses in the Ministry of Economy Development

A new system of “single window” (one-stop-shop)has been launched from January 2008

TaxesTaxes

22% - corporate tax rate

Simplified tax is charged at the following rates on the gross revenue of the taxpayers:4% - for taxpayers operating in Baku2% - for taxpayers operating in other regions of Azerbaijan

VAT registrationCompanies with taxable transactions exceeding a certain threshold (currently approximately 25,000 USD per three consecutive months) must register as VAT payers.

Tax policy and collection of taxes in Azerbaijan is carried out by the Ministry of Taxes.

Currency regulationCurrency regulation

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

The National Bank of Azerbaijan is the currency regulator.

Foreign Trade Rules - AccountingForeign 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 / ArbitrationDispute 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.

Oil and Gas sectorsOil 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 becomingindependent in 1991, Azerbaijan has attracted significant internationalinterest 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

AgricultureAgriculture 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.

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TransportTransport

Transport is a large consumer of fuel and energy

The biggest transport sectors

Pipline 27%

Automobile 46%

Railway 20%

Maritime 7%

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.

TourismTourism

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.

TelecomTelecom

• 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

EnergyEnergyAzerbaijan'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

ConstructionConstruction

Growth of Investments (mln USD)

The 2004 growth in The 2004 growth in Construction Sector of 37% Construction Sector of 37% is largely attributed to the is largely attributed to the increasing opportunities on increasing opportunities on this market.this market.

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Nowadays, we witness construction growth also in industrial, agricultural Nowadays, we witness construction growth also in industrial, agricultural and transport sectors as a result of positive economical reforms and and transport sectors as a result of positive economical reforms and target programs that are being carried out by the government of target programs that are being carried out by the government of Azerbaijan towards the development of non-oil sectors of Azerbaijan Azerbaijan towards the development of non-oil sectors of Azerbaijan economy.economy.

About AZPROMOAbout AZPROMOAZPROMO (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 0148Fax: (+994 12) 598 0152Email: office@azpromo.org

Web site: www.azpromo.org

Foreign Companies in AzerbaijanForeign Companies in Azerbaijan