Middle Corridor enables Azerbaijan to become more attractive to global value chains

Commentary Materials 28 December 2022 10:14 (UTC +04:00)
 Antonio Nucifora
Antonio Nucifora
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BAKU, Azerbaijan, December 28. Middle Corridor still lacks some pieces of infrastructure and some of its parts are not developed, Antonio Nucifora, Practice Manager for the Macroeconomics, Trade and Investment in Europe and Central Asia Region of the World Bank Group, said in an exclusive interview with Trend.

"Most of the trade between China and Europe was happening through the Northern Corridor, which eventually goes through Russia. And now with the war in Ukraine and the sanctions on Russia, significant part of this trade shifts towards the Middle Corridor, which essentially passes through Central Asia and the Caucasus, again, linking China to Europe. The geographical location on the East-West trade route, connecting Europe and China, opens up a lot of opportunities for Azerbaijan. The first one is of course, related to transit shipments. The transport and logistics, the demand for services in this sphere can contribute to economic growth in Azerbaijan. The strategic location on the Middle Corridor also enables Azerbaijan to become more attractive to global value chains, and be able to be better integrated in global value chains," he said.

Nucifora went on to add that in a globalized world, there are some leading firms that invest in countries, which they use as a hub for production to access global markets.

"Different pieces of products are produced in multiple countries and then assembled together. Now some of these big foreign investors may be encouraged to come to Azerbaijan, taking advantage of this country’s connection to the global markets, China and Europe," he explained.

Nucifora believes that the geographical advantage will help Azerbaijan attract investment and get more integrated into the global market.

"Indeed, the Middle Corridor is not functioning very well at present. That's why most of the traffic in the past was passing through the Northern Corridor. The reason is that the Middle Corridor still lacks some pieces of infrastructure and some of its parts are not developed. So, in order to reduce the costs of using the Middle Corridor for trade, Azerbaijan will need to coordinate with major partner countries such as Georgia and Kazakhstan, to invest in the infrastructure needed to make the corridor more operational. Secondly, Azerbaijan also needs to look very carefully at reducing the barriers for trade in terms of the procedures at the borders, especially for transit shipment. This in fact is part of the bigger issue related to the importance of a new growth model based on a dynamic private sector. Because in order to achieve that, there is going to be a need for Azerbaijan to act in at least three directions. First, it is about creating by all means an environment for private sector to flourish, ensuring a level playing field, where markets are contestable. The second one is an environment where you can attract investments. Of course, Azerbaijan has a strong track record, when it comes to attracting investors in the energy sector," he said. The third is about integration into the global markets, according to Nucifora.

"There is no country in the world that has achieved high income status without being integrated into global markets. When you are a small country, you have a small domestic market with a relatively limited population size. Having access to global markets to be able to sell to a much bigger scale remains fundamental. Therefore, to develop globally, smaller countries need to have integration into global markets, which becomes an engine, a pathway to growth," he added.


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