The Azerbaijani government has reached its goal to promote investments to the non-oil sector of the country. The investments to the non-oil sector increased by 89.5% as compared to the same period of 2007, the State Statistics Committee said. During the first half-year of 2008, the investments to the non-oil sector totaled to 61.5% (AZN 2,239,000,000) and investments to the development of oil sector - 38.5% (AZN 1,404, 400,000).
In 2007, the larger proportion of investments focused on the development of oil sector of economy and though there was a drop as compared to the previous years, it amounted to 55.3% or AZN 3,297,800,000 and that of to the non-oil sector - 44.7% or AZN 2,665,800,000 with a rise of 57.8% in for a year.
At present, though great part of the foreign investors focus on the oil sector of Azerbaijan, there is drop in investments to the oil and gas projects as they are being realized at the moment. The largest project is Baku-Tbilisi-Ceyhan which has already been launched and gas produced from Shah Deniz gas-condensate field has already reached its consumers.
According to the State Statistics Committee, in the first half of the year, the percentage of investments to the Azerbaijani economy made up 46%. The investments dropped by 6.8% as compared to the same period of 2007 and it totaled to AZN526,558,000,000. In January to June, 93.6% (AZN1,070,500,000) of investments to the Azerbaijani economy by the foreign countries and international organizations, accounted for investors from Great Britain, US, Japan, Norway, Turkey and South Korea.
Investor country Mln manats Percentage
US247.701 21.7%Drop by 17.2%
Japan AZN126,838, 000,000 11.1%Drop by 18.9%
NorwayAZN79,199,000,0006,.9 %Drop by 19.2%
TurkeyAZNN62,768,000,0005.5 %Drop by 18.7%
Korea AZN27,390,000,0002.4 %
France 1.1 %Increase by 2.7 times
Iran AZN9,349,000,0000.8 %Drop by 23.5%
Germany
AZN8,819,000,0000.8%Drop by 52.3%
Russia AZN2,954,000,0000.3%Increase by three times
Source: State Customs Committee
The World Bank accounts for the largest part of investments - AZN 15,692,000,000 with rise of 47.4% and percentage of 1.4%. The Asian Development Bank has invested AZN 5,512,000,000 (0.5%) in the first half year with drop of 40.1%, EBRD - AZN5, 442,000,000 (0.55) with drop of 14.7%, Islamic Development Bank - AZN 2,991,000,000 (o.3%) with drop of 16.3%, and Kuwait Development Fund - AZN 2,446,000,000 (0,2%) with a rise of 35.5%.
There is also rise in the investments from domestic sources. A total of 68.6% (AZN 2,499,700,000) account for the domestic investments. It has increased by 67.6% as compared to the first half year of last year. This tendency is also due to the completion of major investments on the important international projects in the oil and gas sector and it is indicator of improvements in the domestic sources.
The Azerbaijani government believes that the key source of economic growth for the recent years is the domestic investments. The government is carrying out its domestic investment policy through Azerbaijani Investment Company (AIC) Joint Stock Company, founded by the presidential decree of 30 March 2006. The company aims at encouraging inflow of investments and domestic investments for the projects implemented within the country.
It is worth mentioning that AIC has been established with an authorized capital stock of AZN90mln ($101.7mln) provided by the State Oil Fund of Azerbaijan. Apparently, the government will undertake the role of active creditor of the national economy instead of passive investment of the strategic reserves in the deposits of foreign banks. The stocks of AIC are managed by the Ministry of Economic Development with the Supervisory Board being led by the minister of economic development. As a result of the focus of AIC on non oil sector, salt iodination plant, waste recycling plant, cement producing plant and oil terminal are being built at present and petrochemical complex and ship-building company have already been built. AIC is also studying several investment projects in agriculture and manufacturing industries in agriculture. The company is also interested in the introduction of advanced technology in order to grow vegetables, fruits and flowers and manufacturing industries in agriculture.
Thanks to encouraging investments to the country in a right way, Azerbaijan is a leader among the states in the Caspian region for the inflow foreign investments. The key reason is the 96% economic growth for the last four years. During this period, the public budget increased more than 10 times and cash income per head - by 33%.
Pattern of Export in January to May 2008
Description of goodsPercentage in Export, %As compared to January to May 2007
Crude oil90.3114.9 раз
Oil products5.89177.39
Aluminum 0.36152.49
Fruits and vegetables 0.30178.66
Animal and plant oil 0.35146.73
Ferrous metals и their produce0.28138.91
Chemicals 0.37188.65
Cotton 0.0455.42
Strong and soft drinks0.0687.20
Tobacco and its produce0.0142.50
Others 2.04
Source: State Customs Committee
Judging from the pattern of export of Azerbaijan which supplies goods to a number of countries, it is obvious that the high indicator of export of oil products is still maintained, the percentage of which is 96.2% as compared to the last year.
However, given the rise in investments to the non-oil sector, the non-oil products, namely products of food industry, agriculture and metal manufacture, etc are most likely to become the key export items in several years. Also given the fact that new alternative energy sources have appeared and they are widely used in developed countries, the traditional motor transport will be given preference which will result in the drop in the global oil demand. Consequently, there is a need to further direct oil revenues to the non-oil sector.