Helping Azerbaijan Avoid Oil Dependence by Improving its SEZ Law

The current Baku Port, Azerbaijan

Locus helped review the Azerbaijani special economic zone (SEZ) law under a contract with the World Bank. Azerbaijan's 2009 SEZ law intends to promote manufacturing industries to diversify the economy away from oil production. The law establishes a special tax and customs regime, as well as special operational rules.

In 2016, the government announced that it would be making improvements to the SEZ law and designating a new zone in Alat, which would include a new Baku International Sea Trade Port.

Since Locus Economica’s World Bank intervention, as of 2019, 23 investments in Azerbaidjan’s SEZs totalled $5.5 billion having created 9,000 jobs, including $452 million in 2018 alone. Sumgait SEZ broke ground in 2013, and now has 19 tenants. Balakhani SEZ, a successful PPP, was opened in 2017; it now has 8 operational and 9 more committed investors, having invested $24 million and created 400 jobs. Mingachevir SEZ broke ground 2016 and hosts 2 operational yarn producers. Pirahalli SEZ currently has 4 operational pharmaceutical tenants, with more tenant facilities under construction, and total investments of $74 million. 8 new investments in the SEZs are to be launched in 2019, investing an additional $400 million and creating an additional 1,600 jobs. Four “special districts” have created a further 2,000 jobs; Neftchala Special District (with 9 tenants including Peugeot, 500 jobs and $26 million in investments as of 2019), and Hajigabul and Masalli Special Districts (with 9 tenants, having invested $19 million as of 2018).