Economy

Azerbaijan Needs Fresh Strategies To Change Investment Into Political Clout

Fuad Muxtarlı Analysis 8 November 2019
Azerbaijan Needs Fresh Strategies To Change Investment Into Political Clout

The government of Azerbaijan has been exploiting new and smart strategies to alter the crucial influence of investments abroad into political support. The young nation with the Soviet past and inherited problems is in a dire need of political backing in the de-occupation of Nagorno-Karabakh problem and ensuring territorial integrity.

Azerbaijan, once in severe need of foreign investments, has been recently heavily investing in foreign economies across the globe. Although investments in Turkey, Georgia, Ukraine, Russia, eastern European countries are not surprising for economists, Azerbaijan’s investment in developed economies is astonishing.

Moreover, these investments are made not only in underdeveloped or developing countries, but even in the most developed countries of the world. This was once again emphasized at the Azerbaijani-Swiss business forum in Baku.

Yusif Abdullayev, acting head of the Export and Investment Promotion Foundation in Azerbaijan (AZPROMO), who opened the forum, noted that over the eight months of this year, trade between Azerbaijan and Switzerland has grown five-fold compared to last year and amounted to $1.3 billion. He noted that Switzerland invested $861 million in Azerbaijan, and investments from Azerbaijan into Switzerland amounted to $2.7 billion.

Only two digits, and they cause a lot of questions. Of course, it is gratifying that our trade relations have so sharply increased. But the growth in trade by five times at once in one year alone, moreover, with the country with which Azerbaijan has never had particularly close trade ties, deserves attention.

No matter how hard it is to believe it, but it is. For eight months of 2019, trade between Azerbaijan and Switzerland has really amounted to $1.3 billion. And according to the results of last year, the trade turnover between our countries amounted to 648 million dollars, of which, 135 million was exported, and 513 million - import of Azerbaijan.

Of course, we really want the positive balance in mutual trade between the countries to be in Azerbaijan’s favor, although taking into account the difference in the degree of development; they are clear - it’s too early to think about it today. But taking into account the pace of development, it seems that we will not wait longer. Threefold excess of Azerbaijani investments in this country also speaks of this.

In addition, the bulk of Switzerland's investments in the economy of Azerbaijan fell on the non-oil sector of the economy. In particular, Switzerland invested $861 million in the economy of Azerbaijan, of which $794 million went to the non-oil sector, and only $66 million to the oil sector. And sooner or later, part of the Swiss investment will result in the growth of Azerbaijani exports to this country.

Azerbaijan, on the contrary, directed most of its investments precisely in the oil sector of Switzerland. In particular, out of $2.7 billion of the Azerbaijani investments in the Swiss economy, $ 1.9 billion was directed to the oil sector. And only $760 million was invested in the non-oil sector. And, of course, this is due primarily to the "daughter" of the State Oil Company of Azerbaijan - SOCAR Trading, Director General of the Swiss Chamber of Commerce Vincent Subila said. He added it is SOCAR that plays a special role in the development of cooperation between the two countries, thanks to the company's filling stations in Switzerland, its citizens use Azerbaijani products. He expressed gratitude to the company for this. True, Azerbaijan Airlines CJSC (AZAL) also operates flights from Baku to Geneva, which is very important for the development of bilateral business relations.

But soon this picture promises to change. Switzerland expressed a desire to cooperate with Azerbaijan in the field of medicine and infrastructure. The Swiss bank Banque Cantonale de Genève (BCGE) intends to enter our financial services market, in particular, it offers capital management and financial services in Azerbaijan. BCGE plays an important role in the Swiss economy, with a turnover of 22 billion Swiss francs. “There are great opportunities in Azerbaijan,” said BCGE Executive Director Mario Al Jaburi.

The Swiss company SA Integral Petroleum expressed a desire to expand cooperation with Azerbaijan. Previously, this company participated in installation works at the SOCAR’s urea plant. The company is also engaged in container transportation from Turkmenistan, for which, it uses the Baku-Tbilisi-Kars railway. Now it is seeking broader cooperation with Azerbaijan.

For this purpose, a regional office of the company across the Caspian has been opened in Baku. But this does not limit the prospects for the development of bilateral relations. Azerbaijani Energy Minister Parviz Sahbazov has offered Swiss companies cooperation in the field of renewable energy sources (RES). He noted that an effective mechanism is being developed to attract foreign investment in RES, and there are great opportunities for cooperation with Swiss companies in this direction.

And there are really great prospects in this area. The share of electricity production in Azerbaijan through traditional energy sources today is 91.9%, and electricity production from renewable energy sources is 8.1%. Taking into account the capacities of large hydropower plants, the share of renewable energy sources in electricity production today is 17%, which corresponds to generating capacities of 1,276,000 MW.

The potential of RES generating capacities in the country totals 26,000 MW. And the Ministry of Energy is faced with the task of increasing the share of renewable energy sources in electricity production by 2030 to 30%. In addition, every billion kWh of electricity due to RES will save 200 million cubic meters of natural gas.

Azerbaijan is building foreign economic relations with the most developed countries of Europe on equal terms. Yes, on an equal footing. Among them, even the leading countries of the European Union, France and Germany. And now Switzerland has joined this system. Of course, for obvious reasons, it is not correct to compare the leading economies of the world with Azerbaijan.

At the same time, it is gratifying that Azerbaijan, unlike many post-Soviet countries, does not act as a petitioner in negotiations with them. Baku has a surplus in foreign trade relations with most of them; in terms of mutual investments, we are also ahead of developed European countries. This allows the government to conduct an independent policy with a clearly defined foreign policy and determine the priorities of its own economy.

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