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Table of Contents

1. Overview ...... 4 2. Introduction ...... 4 2.1 Azerbaijani Agreements with Other Countries ...... 8 2.2 Import Tariffs ...... 10 3. Certification Standards & Import Regulations ...... 11 3.1 Documentation Requirements ...... 11 3.2 Labeling and Packaging Requirements ...... 12 3.3 Standards Conformity Requirements ...... 13 4. Export Opportunities to ...... 14 5. Conclusion ...... 18 6. References ...... 19 6.1 Further References ...... 23

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1. Overview

This guide has been prepared to assist Dubai-based businesses looking to export to Azerbaijan. It contains information relevant to exporters about Azerbaijan including: tariffs and trade agreements, certification, labeling and other documentation requirements, quality standards required of goods entering the country and specific export opportunities. Links and sources are provided for readers who require more detailed information on topics covered.

Dubai Chamber has opened its first international office in , which promises to be a fast-rising emerging market with substantial room for expansion in its trade position vis-à-vis the United Arab Emirates. Azerbaijan’s opaque market structure raises the necessity to secure a local partner with an ability to navigate otherwise murky waters. Dubai exporters should pay particular attention to minimizing their transportation costs, given that Azerbaijan continues to register import costs far above the regional average. Keeping abreast of local policy and market-impacting changes is of paramount importance to exporters.

2. Introduction

Azerbaijan is heavily dependent on oil exports, and therefore its fortunes are tied intimately with prevailing global oil prices.

Box 1: Azerbaijan's Economic & Trade Highlights

Population (mn, 2013 est.) 9.59 GDP ($ bn current, 2013 frcst.) 78.17 Current account balance ($ bn, 2013 frcst.) 12.56 Trade to GDP ratio (2011) 86.96 Exports to GDP ratio (2011) 62.80 Imports to GDP ratio (2011) 24.16

Local bank transfer delays (months) 2-3 Transfer FX/bank delays (months) 3-4

Merchandise trade by commodity type (%) Exports Imports Mineral products & base metal items 94 14 Machines, vehicles & machinery equipment 1 41 Food & beverages 1 0

Exports by destination (%) Imports by destination (%) Italy 33 Russia 17.4 France 8.7 Turkey 11.7 Israel 8.2 Germany 9.2

Sources: Central Bank of Azerbaijan, State Statistical Committee, IM F & US Census Int'l

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The past decade has seen both extraordinary oil price volatility as well as a fundamental change in the pricing paradigm – to borrow from GMO’s Jeremy Grantham. It still remains to be seen whether such a move is permanent however, especially considering the lackluster state of the global economy and demand for the commodity. The oil industry in Azerbaijan has benefited tremendously given the relative low cost of exploiting existing reserves versus developing new ones in more costly areas. As a result, large oil revenues have entered into the public coffers and trickled down to the rest of the economy. The redistribution of income has largely just started to get underway. Rising average salaries facilitate the expansion of the broader non-oil economy. In January 2013, Azerbaijan’s average real month wage grew by 7.3% according to the State Statistics Committee. With nearly 4.5 million employed workers (out of a population of 10 million) Azerbaijan has a fast- developing consumer market, which is growing at 9-10% per year. Promisingly, the Taxes Ministry recently disclosed that the tax base – accounting for both individuals and businesses – grew by 3.8% in the first quarter of 2013 compared to the same period last year.

The non-oil economy is emergent, albeit growing from a low Source: State Statistics Committee base. That said, the vision is for it to account for 80% of GDP by 2020 according to Minister of Economic Development Shahin Mustafayev. Non-oil sector exports increased by 19.1% over 2012 showing particular promise, yet they only accounted for 5.93% of total exports. Non-oil GDP growth is registering impressive gains that are meant to continue in 2013 – the IMF projects 9% while the government forecasts 11.7%, which is very encouraging given that this grouping accounts for 48.9% of total GDP as of January-February 2013. Despite the expansion in the non-oil economy, there is significant room for more players in the space to make an impact; at the end of 2011, the share of small enterprises in this component was only 5%. Government policy-makers realize the potential and are investing heavily in expanding infrastructure, from roads to fiber optics, to lessen the economy’s dependence on oil and the oil sector. The government has recently set a target to bring non-oil exports per capita up to $5,000 by 2025. This goal is all the more important in light of the recent declines in oil GDP and a gloomy outlook in the sector – barring new discoveries. That said, non-hydrocarbon growth is very much dependent on public outlays – and in the first

5 | P a g e half of 2012 nearly 96% of the state’s revenues came from the sale of hydrocarbon products.

The thrust of the government’s diversification strategy is to construct the groundwork for future expansion across the spectrum and enable the consumer market to take root and thrive. The majority of government investment efforts are concentrating in erecting infrastructure, similar to what Ethiopia is doing (see author’s guide). In addition, the Ministry of Industry and Energy has developed a program of industrialization for the country in association with South Korean experts. Services are also envisioned to grow as the average citizen is able to afford a wider range of tailored amenities.

Transport infrastructure is currently in focus as the country invests in its future. Everything from road, rail, seaports and airports are expanding in scope as the non- oil economy expands. Bridges, junctions and roads are being repaved and rebuilt with the assistance of international lenders such as the Asian Development Bank. Railways are being modernized, the Baku-Tblisi-Kars railway line will soon be in operation and new cars are being brought online in anticipation of the Silk Wind project – with customs clearance procedures also being simplified. The aviation sector is being invested in as airport facilities and fleets are restored to the tune of $1.226 billion in recent years and a new airport is under construction in the northern region to service tourists. As of April 9, 2013 Azerbaijan has commenced issuing e- visas for tourists, which is hoped to attract increased visitors to Baku and the Shahdag tourist complex. The largest seaport of the Caspian Sea in Alat is being constructed to receive loads from Kazakhstan, Turkmenistan and China to transfer for further transport over land to Georgia, Turkey and Western Europe. A transport and logistics center will be built in the coming years to take advantage of the new infrastructure, which is also meant to lower trade transportation costs. At the present time, costs to export and import are higher than the regional average. According to recent data, the cost to import into Azerbaijan stood at 71% higher than the regional average while the cost to export out of Azerbaijan was 66% higher than the regional average (see Box 2 below for details). The overwhelming reason for high transportation costs stem from that fact that Azerbaijan is a land-locked country, although the new railway could provide efficient access to the world’s sea lanes and reduce associated costs.

Broadband internet infrastructure is also receiving warranted attention to enable to expansion of the information and communications technology (ICT) sector. The government is allocating over $130 million in 2013 to further develop fiber optic lines. Private sector companies are increasingly interested in tapping customers beyond the existing 200,000 broadband connections, with 19 operators currently providing services outside Baku. This year has been declared the ICT year with an all-encompassing strategy expected to be unveiled shortly. The creation of high-tech parks, one of which is envisioned to be completed by year end with 20 hectares apportioned to it, should encourage programmers and start-ups to spring up – especially with the support of the State Fund under the ICT Ministry. Foreign investors are already taking note, with Austria now proposing to invest in an

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Azerbaijani telecommunications cable production plant that would serve both the domestic and international market.

While infrastructure improvements are ongoing, a plethora of non-tariff barriers to trade stand in the way of Azerbaijan becoming a regional trade hub. According to the World Bank’s 2012 Ease of Doing Business index, Azerbaijan’s overall performance in terms of ‘trading across borders’ is very poor, ranking 170 out of 183 countries. Transferring of attained profits to outside the country is somewhat problematic given the delays involved of 2-3 days, however no formal restrictions are in place.

Box 2: Non-Tariff Barriers

AzerbaijanRegional AverageOECD Average Documents required for export (number) 8 2 4 Time required for export (days) 38 27 10 Cost to export ($/container) $2,950 $1,774 $1,032

Documents required for import (number) 10 8 5 Time required for import (days) 42 29 11 Cost to import ($/container) $3,405 $1,990 $1,085

Source: World Bank, Doing Business

Additional requirements relating to the disclosure of the source of currency transfers have been imposed in an attempt to reduce illicit transactions. The market-clearing rate that companies are able to obtain through the BEST system is competitive with the Central Bank of Azerbaijan continuously managing the currency – most recently in the first quarter of 2013 to the tune of $560 million. Transfers of profit are therefore not considered to be an issue for Dubai-based firms looking to deposit UAE Dirhams back home.

The Azerbaijani economy is small by comparison to the UAE, but is growing at a rapid pace. As seen in Box 1, the 2013 Azerbaijani GDP is forecasted to amount to $78.17 billion, in comparison to the UAE’s $369.36 billion – almost a fivefold difference. According the IMF’s World Economic Outlook April 2013, the Azerbaijani economy is expected to increase by an average of 4.23% in real terms over the next 5 years while the UAE economy is seen as growing by an average of 3.54% over the same time period. While the non-oil economy has long led expansion in the UAE, in Azerbaijan the trend is just starting as is a massive infrastructure investment program.

Given the country’s strategic location at the crossroads of Europe and Asia and its generous hydrocarbon endowments, Azerbaijan shares many characteristics with Dubai. Azerbaijan is also intent on developing its non-oil sectors to lessen its dependence on oil exports and broaden its tax base. Success has heretofore been promising; however there is still a long way to go. The primary impediment until

7 | P a g e recently was government rules and regulations. Yet the reinvigorated attention to certain sectors such as industry and ICT has seen domestically-sourced urgency for reform to drive the agenda on such issues. If properly seen through, Azerbaijan stands a good chance to not only broaden domestic economic activity, but also help its burgeoning consumer class to expand – and purchase products from Dubai exporters.

2.1 Azerbaijani Agreements with Other Countries

In terms of established relations, Azerbaijan has cultivated close ties to the Commonwealth of Independent States (CIS) in areas of trade, investment and international relations. Azerbaijan is a party in the CIS free trade agreement along with: Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, the Ukraine and Uzbekistan. The country also has signed several bilateral free trade agreements that go above and beyond the regional agreement, including with: Georgia, Kazakhstan, Moldova, Russia, Turkmenistan, the Ukraine and Uzbekistan. There is also some overlap with the Economic Co-operation Organization (ECO), which includes amongst others: Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan. In January 2013, the Azeri Parliament issued ratification of an agreement on the country’s membership in the ECO’s Bank of Commerce and Development. In addition, Azerbaijan is also part of the GUAM Organization for Democracy and Economic Development which includes: Georgia, the Ukraine and Moldova. Besides obvious existing differences with a neighbor, Azerbaijan is a keen regional partner interested in fostering trade and investment relations to encourage economic development.

In the same vein, Azerbaijan has been a member of the Black Sea Economic Cooperation Group since its founding in 1992. The organization aims for regional political and economic cooperation and is composed of the following additional members: Albania, Armenia, Bulgaria, Georgia, Greece, Moldova, Romania, Russia, Serbia, Turkey and the Ukraine.

The process of preparing a document on establishing a Turkic-speaking countries free trade zone started in January 2013 within TurkPA, which would eliminate customs duties and create free zones between member states, including: Azerbaijan, Turkey, Kazakhstan and Kyrgyzstan.

Further afield, relations with the European Union (EU) have been close and continue to be strengthened until the present day. The course was established in 1999 with the signing of a Partnership and Cooperation Agreement and continues to evolve with negotiations on association membership having begun in 2010. It has since been awarded most favored nation (MFN) status with the EU. In January 2013, an EU delegation and Azerbaijan held the first round of negotiations on a common aviation area including the phased introduction of EU aviation rules in the country.

Azerbaijan enjoys the same MFN status with the United States as well. In 2008, Azerbaijan was declared a beneficiary country under the US’s Generalized System of

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Preferences (GSP) program, which extends generous trade privileges. Azerbaijani exports of products covered by the GSP are totally or partially exempt from customs tariffs.

On a global scale, Azerbaijan is continuing to work on accession to the World Trade Organization (WTO); however formally joining does not appear to be in the cards until later in the decade. Negotiations to join the organization began in 2004, with numerous bilateral negotiations having been completed since then. However, remarks by President Ilham Aliyev in December 2012 make it clear that domestic considerations supersede any priority to join the WTO. Specifically, the administration feels that joining could damage the agricultural sector, private enterprise and local production.

Numerous bilateral agreements are under discussion that could expand economic relations beyond those noted above. In April 2013, Poland and Azerbaijan held political consultations and discussions spanned the fields of energy, agriculture, tourism, industry and a number of others. During the same month, Vietnam also held meetings with Azerbaijan to explore ways of strengthening cooperation in the energy sector and beyond. The Ukraine proposed swap supplies of Azeri gas with the participation of Russia, however realizing such a scheme will require lengthy negotiations and a formal agreement is not foreseen until 2014 at the earliest. In March 2013, Hungary and Azerbaijan discussed bilateral cooperation issues on the sidelines of the World Economic Forum meetings. In March 2013, Kazakhstan and Azerbaijan announced the establishment of a joint venture to produce semi-finished foodstuffs in the Kazakh region of Atyrau. That same month, Qatar and Azerbaijan discussed forging closer economic ties. In February 2013, Iran and Azerbaijan discussed establishing free zones at border check points however little progress has been made to date. In January 2013, Iran and Azerbaijan also agreed to intensify meetings in the customs area – now every six months at the highest level and every month at the lower levels – in order to simplify procedures and facilitate increased trade turnover. Also in January 2013, Serbia and Azerbaijan discussed a new economic agreement while Azerbaijan and Slovenia signed five documents to promote bilateral trade. In December 2012, Belarus and Azerbaijan agreed to step up investment cooperation in light of the fact that annual trade turnover exceeds $1 billion. That same month Saudi Arabia and Azerbaijan concluded 12 agreements, including one to finance trade operations through a credit agreement with the Saudi Fund for Development and Amrahbank JSC. In November 2012, a single tariff for transportation of goods within the Silk Wind project was discussed between Kazakhstan, Georgia, Turkey and Azerbaijan. In October 2012, Uzbekistan and Azerbaijan agreed on a three-year program of economic cooperation. In the same month, Bosnia and Herzegovina signed several documents of cooperation.

Relations between the UAE and Azerbaijan have flourished of late. In addition to the Dubai Consulate opening and the Dubai Chamber office in Baku, the UAE- Azerbaijan Business Council was established in December 2012. Over 120 UAE companies operate in Azerbaijan and have invested in excess of $250 million in the non-oil economy.

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2.2 Import Tariffs

Customs duties apply to the majority of goods imported into Azerbaijan and depend on the type of item in question.

As of 2001, imports are subject to uniform rates of 15, 10, 5 or 0.5 percent of the declared customs value – or are duty free. The average applied simple tariff of 9.2% and the import weighted average tariff of 5.1% are not prohibitive and rank lower than an average lower-middle income country but higher than the typical county in Europe and Central Asia according to World Bank data.

Items that are exempt from import duties are primarily those that most impact disposable income to lower income families as well as vital to the state/state’s priorities. The list of goods not impacted by duties include: baby food, electrical power, natural gas, pharmaceuticals, medical/veterinary products, military items, official use goods, approved humanitarian aid – and property/inputs to be used by a foreign investor in a joint venture active in Azerbaijan. The aforementioned military goods are regulated by the Cabinet of Ministers (see section 3).

In addition to customs duties, a value added tax (VAT) of 17 percent is in place since January 2010. Goods from CIS countries (except Kazakhstan) are assessed VAT in their country of origin – not in Azerbaijan. Existing trade agreements detailed in section 2.1 may negate the VAT application depending on the country of origin. Also, importers are subject to the payment of a customs processing fee which varies by the declared value of goods.

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3. Certification Standards & Import Regulations

Import license requirements exist for only a few products. The Cabinet of Ministers regulates the import of arms, nuclear material, narcotics, toxic chemicals (including pesticides) and military-grade goods and information. Import licenses issued by the State Veterinary Committee are required for food products of animal origin. Alcoholic beverages and tobacco products require licenses from the Ministry of Economic Development. A license from the Ministry of Communications is required for the importation of large satellite dishes and other communications equipment.

Import transactions that do not require special licenses, or the use of state guarantees, are able to be processed through local customs offices.

3.1 Documentation Requirements

The majority of imported products do not require import licenses, however all importers are required to provide the seven documents detailed below. Food imports are an exception and require an import permit from the Ministry of Agriculture. In general, it is recommended to comply strictly with the importer’s or shipper’s instructions when additional copies of documents are requested. Information in every pertinent document should match precisely with all others for the same shipment.

1. Signed import contract: This document should also include the contract number

2. Customs declaration: This document should specify what goods are being imported

3. Import permission (if applicable): Should permission(s) from a relevant state entity(-ies) be necessary it is required to include them

4. Bill of lading: The numbers of bills of lading required depend upon the carrier. The contract should specify instructions in this regard. Air cargo shipments require air waybills in place of bills of lading

5. Sales invoice and packing list: This must contain a complete and explicit summary of the shipment

6. Certificate of origin: Should be shipment be originating in Dubai, the following document can be obtained from the Dubai Chamber of Commerce

and Industry

7. Certificate of quality: Required for certain items, primarily to show lack of disease

Imported goods are permitted to be stored in a customs warehouse for up to three years duty-free should they be non-perishable. Once said goods are withdrawn from the warehouse, they are subject to all applicable duties and taxes in addition to charges for demurrage assessed by Customs (should be negotiated beforehand).

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Goods imported for processing and then re-exported are subject to normal duties and taxes at the time of importation; however a drawback can be initiated to recover said fees. At the time of writing, there is no formal procedure for submitting a relevant application. The process is cumbrous but has proven to be fruitful in the past, and must be applied within two years.

If requested to legalize a shipping or legal document, make sure to have them acknowledged by a public notary. All documents must be accompanied by a professional translation into Azerbaijani.

As of the end of January 2013, foreign exporters can now use a digital signature for customs operations in Azerbaijan. The so-called e-signature should help reduce paperwork significantly. Over the course of the year there are further plans that Dubai traders should be aware of that could significantly improve the way of doing business at customs, including:

 Streamlining of the system for receiving documents and requests on preliminary reporting for the clearance of goods and their means of transport through the border;  Online monitoring of customs clearance operations for imported and exported goods and means of transport;  Acceptance of electronic customs declarations for the clearance of goods and their means of transport;  The development and application of electronic payment systems for customs service.

3.2 Labeling and Packaging Requirements

Finished goods that are imported into Azerbaijan for retail sale must satisfy numerous labeling requirements as detailed below, however compliance is poor. There are special new rules for medicines, which are detailed further below. Primarily, Azerbaijani rules pertain to food and agricultural products. All labels must be in Azerbaijani; while English labels are also acceptable so long as information in Azerbaijani is provided as well. The label must include at a minimum: . Name and brand of the product . Name and address of the producing company . Country of origin . Expiration date/ shelf life (see below for more details) . Nutrition and caloric values . Net weight – grams or kilos . Usage instructions, if required . Name and type of packing material . Storage instructions, if required . Licensing and certification information, if required (pertinent to quality certificate) . Special warnings – if applicable

Source: US Commercial Service, Doing Business in Azerbaijan 2010

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All goods of animal or vegetable origin must be accompanied by appropriate sanitary or phytosanitary certificates indicating they are free of disease – or disease carrying pathogens. Most such goods must be inspected at the border prior to entering the country.

Shelf life is of particular concern to regulators, especially considering that food & beverages are the fourth largest import category for Azerbaijan. Fruit products must be universally labeled. If the product in question has an expiration date of less than 3 months, it must include: the day, month and year of when it will go bad. Should the product in question have a shelf life of more than 3 but less than 18 months, the month and year of expiration are required. Another related regulation impacts juices derived from fruit products, and require specification on whether the product contains fruit juice (90-100% concentrate), nectar (25-50% concentrate) or fruit drinks (up to 10% concentrate).

In the case of medicines, additional documentation requirements apply as of April 2013. All items must be labeled with the control mark issued by the relevant executive authority. Intergovernmental coordination is currently underway over the next three months, and within five months the law will be fully enforced.

3.3 Standards Conformity Requirements

The standards in place mirror those in place across Eastern Europe. Azerbaijan uses the metric system for weights and measures. Small appliances use West European standard plugs. The State Veterinary Service is responsible for ensuring basic health standards on imported food and animal products, which also oversee compliance with expiration dates on labeling (see section 3.2). Goods subject to inspection include: plants, foodstuffs, wood and leather.

The State Agency on Standards, Patenting and Metrology oversees patenting and other standards areas. Standards have evolved quickly and no longer resemble defunct Soviet ones, but rather mostly resemble international ones – although this process is not yet complete. The Azerbaijani government has committed to adopting European Union standards in agricultural products over time as part of its negotiations under their Partnership and Cooperation Agreement (see section 2.1).

New national standards are continuing to be formed and international ones adopted, so a keen eye on developments in this space is warranted for all Dubai-based exporters.

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4. Export Opportunities to Azerbaijan

Azerbaijan’s primary imports by product type are machines and electrical equipment, which is promising for Dubai exporters. Dubai firms active in this space are steadily expanding and starting to focus on CIS markets. In addition, there is a ready market for a variety of Dubai-based (re-) exporters given that Azerbaijan imports most of its base metal items and all of its vehicles. The consumer market continues to expand, with private consumption recently outpacing real GDP growth.

Another export opportunity for Dubai-based businesses has emerged from a domestic policy in favor of oil-financed public spending on improving physical infrastructure. Motorways, airports and railways are currently in focus, with inputs and machinery currently being imported on mass scale. Another major ongoing construction project centers on the new International Sea Trade Port Complex, which will be a key priority for years to come. Infrastructure spending - financed both from the government budget and from transfers from the state-owned oil fund - will take center stage over the medium term as economic diversification continues.

A look at UAE- Azerbaijan trade in 2011 reinforces the analysis above. Major export and re-export products include: vehicles other than railway and tramway (HS Code 87), electrical machinery/parts (HS Code 85) and boilers, machinery and parts thereof (HS Code 84). The three aforementioned top performing export/re-export categories account for 70% of UAE outgoing trade to Azerbaijan (see Table 1 below for more details). The overwhelming majority, 91% in fact, of outgoing trade to Azerbaijan is accounting by re-exports. In the future however, locally produced or processed content has the potential to grow in the export mix – starting with articles of iron and steel (highlighted in Table 2 below) and then moving on to plastics and articles thereof (also highlighted in Table 2), building materials and processed foods. For more in-depth observations on trade flow data, please see Trade and Investment Opportunities in Azerbaijan, Project number 10-02-04-12.

Table 1: Major Exports/Re-exports from the UAE to Azerbaijan in 2011

HS Code Chapter Description Value (in AED mn) 85 Electrical Machinery, Sound Recorder and Parts 249 87 Vehicles of other than Railway of Tramway; Parts 102 84 Boilers, Machinery & Parts 76 73 Articles of Iron or Steel 35 94 Furniture, Bedding, Mattresses, Lamps & Fittings 31 39 Plastics and Articles 28 44 Wood and Articles of Wood 24 82 Tools, Implements Cutlery etc. of Base Metal 19 40 Rubber and Articles Thereof 17 69 Ceramic Products 15 95 Toys, Games and Sports requisites and their parts 13 Source: Dubai Chamber based on UAE Ministry of Economy and UAE Federal Customs Authority

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Several products that are processed in Dubai and the UAE stand a good chance of expanding exports to Azerbaijan given the UAE’s current competitive advantage. First among them are construction-related materials for hotels and resorts which Dubai imports in vast quantities and has good knowledge of – particularly now that Azerbaijan is making a concerted effort to expand tourism facilities (see section 2). Furthermore, processed foods are another growth area for Dubai-based firms (highlighted in Table 2 below), which are expanding their scope while Azerbaijani enterprises are limited and depend on imports – currently there are only 531 food processing ventures active while there are 871,220 rural farms. In addition, petrochemicals are another area where UAE-based firms have an advantage (highlighted in Table 2 below) and increasingly are going further downstream to consumer-grade products such as plastics – while Azerbaijan is far behind, they are building a complex, but it will only be ready in 2020 at the earliest.

In addition to the aforementioned opportunities, Dubai Chamber researchers have used an index known as Revealed Comparative Advantage (RCA) to pinpoint trade opportunities. The index compares the contribution of a product, or group of products, to a country’s total exports relative to that product’s share of total worldwide exports. An RCA above 100 indicates that a country’s exports of that particular product are competitive relative to the rest of the world. By calculating RCAs for Dubai exports of numerous products, researchers have identified areas in which Dubai businesses are competitive. These researchers further broke down Dubai exports into three categories – direct exports, direct re-exports, free zone exports and free zone re-exports – and computed RCAs for each of these.

While RCAs as described above indicate particular sectors among Dubai’s global exports that are competitive, it is helpful to elucidate in which specific markets these products have an advantage. Dubai Chamber researchers have constructed country- specific RCAs to identify markets where Dubai exports are viable. While regular RCAs can measure the competitiveness of Dubai’s worldwide exports of a product, country-specific RCAs compare Dubai exports of a certain product (or group) to a country relative to world exports of the same item(s) to that country.

Utilizing this method of analysis, Dubai Chamber research has computed RCAs for Azerbaijan for 2011. Products where Dubai exports are competitive to Azerbaijan are listed below. Dubai exports have been identified as competitive in 76 areas. This includes 23 product chapters where direct exports are competitive; in re- exports, 34; in free zone exports, 6; and in free zone re-exports, 13.

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Table 2: Products Where Dubai Exports to Azerbaijan are Competitive

HS Code Chapter Description RCA Direct Exports Pulp of wood or of other fibrous cellulosic material, waste and 47 scrap of paper or paperboard 9,146.1 57 Carpets and other textile floor coverings 2,609.4 79 Zinc and articles thereof 2,180.1 32 Tanning or dyeing extracts, coloring matter, paints, putty, inks 1,593.3 69 Ceramic products 1,474.2 94 Furniture, bedding, mattresses, cushions, lamps & lighting 1,474.2 83 Miscellaneous articles of base metal 1,071.8 Articles of stone, plaster, cement, asbestos, mica or similar 68 materials 1,037.2 70 Glass and glassware 832.8 Soap, organic surface-active agents, waxes, candles, modelling 34 pastes, etc. 726.8 39 Plastics and articles thereof 439.6 35 Albuminoidal substances, modified starches, glues, enzymes 374.7 Wedding, felt and non woven, special yarns, twine, cordage, 56 ropes aand cables, and articles thereof 347.0 42 Articles of leather or of animal gut, harness, travel goods, etc. 261.1 44 Wood and articles of wood, wood charcoal 257.3 Other made up textile articles, sets, worn clothing and worn 63 textile articles, rags 206.2 73 Articles of iron or steel 175.7 Printed books, newspaper, pictures, manuscripts, typescripts 49 and plans 162.3 64 Footwear, gaiters and the like, parts of such articles 158.8 21 Miscellaneous edible preparations 157.7 76 Aluminum and articles thereof 132.6 61 Articles of apparel and clothing accessories, knitted or crocheted 107.7 Preparations of cereals, flour, starch, milk, pastry cooks' 19 products 101.4 Re-exports Prepared feathers and down, artificial flowers, articles of 67 human hair 19,366.2

Manufactures of straw, of esparto , or of other plaiting 46 materials, basketware and wickerwork 13.909.8 Toys, games and sports requisites, parts and accessories 95 thereof 4,232.5 60 Knitted or crocheted fabrics 3,893.6 61 Articles of apparel and clothing accessories, knitted or crocheted 2,359.4 92 Musical instruments, parts and accessories of such articles 1,625.8 64 Footwear, gaiters and the like, parts of such articles 1,570.6 Other vegetable textile fibers, paper yarn and woven fabrics of 53 paper yarn 1,336.6 96 Miscellaneous manufactured articles 1,003.7 Other made up textile articles, sets, worn clothing and worn 63 textile articles, rags 759.0 82 Tools, implements, cutlery, spoons and forks, of base metal 688.4

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HS Code Chapter Description RCA 42 Articles of leather or of animal gut, harness, travel goods, etc. 609.5 69 Ceramic products 558.2 65 Headgear and parts thereof 529.2 32 Tanning or dyeing extracts, coloring matter, paints, putty, inks 495.4 85 Electrical machinery and equipment and parts thereof 450.6 40 Rubber and articles thereof 412.0 91 Clocks and watches and parts thereof 375.5 Articles of apparel and clothing accessories, not knitted or 62 crocheted 327.0 83 Miscellaneous articles of base metal 284.2 52 Cotton 270.5 94 Furniture, bedding, mattresses, cushions, lamps & lighting 228.9 35 Albuminoidal substances, modified starches, glues, enzymes 224.1 55 Man-made staple fibers 222.1 37 Photographic and cinematographic goods 195.7 57 Carpets and other textile floor coverings 157.1 Pearls, precious or semi-precious stones, precious metals, 71 imitation jewellery, coin 132.0 44 Wood and articles of wood, wood charcoal 130.8 12 Oil seeds, oleaginous fruit, industrial or medicinal plants 124.5 Vehicles other than railway or tramway rolling-stock, and parts 87 and accessories thereof 124.4 09 Coffee, tea, mate, spices 121.7 Articles of stone, plaster, cement, asbestos, mica or similar 68 materials 115.2 Umbrellas, sun umbrellas, walking-sticks, seat-sticks, whips, 66 riding crops and parts thereof 112.7 Essential oils and resinoids, perfumery, cosmetic or toilet 33 preparations 111.6 Freezone Exports 70 Glass and glassware 2,026.9 39 Plastics and articles thereof 1,696.6 24 Tobacco, manufactured tobacco substitutes 965.8 9 Coffee, tea, mate, spices 745.6 Inorganic chemicals, compounds of precious metals, rare-earth 28 metals 336.9 76 Aluminum and articles thereof 177.3 Freezone Re-Exports 37 Photographic and cinematographic goods 6,981.6 92 Musical instruments, parts and accessories of such articles 6,3862 Toys, games and sports requisites, parts and accessories 95 thereof 3,460.6 32 Tanning or dyeing extracts, coloring matter, paints, putty, inks 794.4 Prepared feathers and down, artificial flowers, articles of 67 human hair 516.2 85 Electrical machinery and equipment and parts thereof 481.9 Optical, photographic, cinematographic, measuring, precision 90 instruments and apparatus 239.9 Wool, fine or coarse animal hair, horsehair yarn and woven 51 fabric 215.2 42 Articles of leather or of animal gut, harness, travel goods, etc. 162.8

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HS Code Chapter Description RCA 84 Nuclear reactors, boilers, machinery , parts thereof 152.4 61 Articles of apparel and clothing accessories, knitted or crocheted 127.2 70 Glass and glassware 125.9 64 Footwear, gaiters and the like, parts of such articles 103.9 Source: Dubai Chamber

5. Conclusion

Despite the remote possibility of an outbreak in violence/war over disputed territory, the Azerbaijani economy is expected to expand as the needs of a growing population and an emergent consumer class increases demand for various products and services. This represents an important long-term opportunity for Dubai traders and manufacturers that can position themselves to increase exports to a thriving Caspian market. The information in this guide is meant to highlight opportunities in various sectors and help position Dubai exporters to take advantage of these opportunities. In addition, the Dubai Chamber’s Baku office opening is particularly promising to deliver more material opportunities over the medium term.

The identified headline risk of import costs will remain outstanding in the short run without a concerted effort of the customs authority, port authorities and governmental tariff reforms. The e-signature initiative, concentration on port infrastructure development and progress on multilateral trade agreements are all promising signs that substantial change is on the horizon. In addition, more frequent tourist traffic could increase the amount of air traffic and bring down air cargo prices along with it. As the country proceeds with its industrialization plans, the prospect of reducing tariffs for key inputs looks promising. A thriving bilateral relationship may assist in reducing import costs and time at border control. The advent of the UAE-Azerbaijan Business Council, the Azerbaijan Consulate in Dubai and continued meetings of the UAE-Azerbaijan Intergovernmental Commission are expected to contribute to moving the relationship forward in a positive direction.

Azerbaijani rules and regulations pertaining to trade are in flux as they mature and the non-oil economy expands – and they are subject to change. Businesses looking to export to Azerbaijan are advised to deeply familiarize themselves with relevant regulations and the agencies responsible for them. Contact information for existing regulators is available through the websites detailed in the references section.

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6. References

“Anti-dumping, prevention and special duties can be introduced Azerbaijan,” Trend News Agency, January 25, 2013

“Austria proposes telecommunications cable plant in Azerbaijan,” Trends News Agency, April 11, 2013

“Average salary paid in Azerbaijan has grown by 8.1%,” AZER-Press IA, March 15, 2013

“Azerbaijan aimed at serious development ICT sector,” Trend News Agency, March 30, 2013

“Azerbaijan and Poland hold political consultations,” Trends News Agency, April 13, 2013

“Azerbaijan and Qatar discuss importance of mutual cooperation in economic sphere,” ABC.AZ - Business News, March 19, 2013

“Azerbaijan and Serbia to sign agreement on cooperation in energy sphere,” APA News Agency, November 27, 2012

“Azerbaijan, Bosnia and Herzegovina sign agreements,” Assa-Irada Information Agency, October 18, 2012

“Azerbaijan: EU delegation and Azerbaijan held the first round of talks on aviation space agreement,” Euclid Infotech, January 31, 2013

“Azerbaijani Central Bank buys $560 million to keep manat rate,” Trends News Agency, April 10, 2013

“Azerbaijan completes negotiations on WTO accession with another country,” Trend News Agency, January 17, 2013

“Azerbaijan considers construction of sixth airport,” Trend News Agency, March 29, 2013

“Azerbaijan considers Ukraine’s proposals for swap gas supplies,” Azerbaijan Media Digest, Azerbaijan Oil Gas Press Review, April 8, 2013

“Azerbaijani customs ensures over 13 per cent of budget allocations for 2013,” Trend News Agency, March 28, 2013

“Azerbaijan develops industrialization program,” APA News Agency, April 5, 2013

“Azerbaijan forecasts 18 pct rise in non-oil industry,” Assa-Irada Information Agency, March 18, 2013

“Azerbaijan-German Chamber of Commerce starts operating,” ABC.AZ - Business News, November 13, 2012

“Azerbaijan-Georgia foreign trade tops $1bn,” The Messenger, December 28, 2012

“Azerbaijan, Iran agree to intensify customs meetings,” Trend News Agency, January 31, 2013

“Azerbaijan, Iran to discuss establishing free economic zones,” Azerbaijan Media Digest, February 1, 2013

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“Azerbaijan increases funding of agriculture sector,” AzerNEWS, March 19, 2013

“Azerbaijan invests over $1.2 bn in development of national aviation,” APA News Agency, April 5, 2013

“Azerbaijan, Kazakhstan, Georgia and Turkey to introduce single tariff for transportation of goods,” Trend News Agency, November 22, 2012

“Azerbaijan, Kazakhstan to set up JV to produce food,” AzerNEWS, March 28, 2013

“Azerbaijan: negotiations on WTO membership acquire a concrete nature,” ABC.AZ - Business News, December 20, 2012

“Azerbaijan, Poland sign paper on multilateral cooperation,” Assa-Irada Information Agency, December 19, 2012

“Azerbaijan, Serbia to expand contractual legal base,” Trend News Agency, January 23, 2013

“Azerbaijan, Slovenia sign five documents,” Trend News Agency, January 16, 2013

“Azerbaijan starts giving e-visas for entry,” ABC.AZ - Business News, March 29, 2013

“Azerbaijan’s taxable base exceeds 500,000 taxpayers first time,” ABC.AZ - Business News, April 12, 2013

“Azerbaijani Tax Ministry introduces e-payment system,” Trends News Agency, April 11, 2013

“Azerbaijan to resume association agreement negotiations with EU,” Trend News Agency, January 17, 2013

“Azerbaijan to sign agricultural sector agreements with two Baltic countries,” Trend News Agency, January 22, 2013

“Azerbaijan telecom sector to form 10% of GDP,” ABC.AZ - Business News, March 29, 2013

“Azerbaijan, Vietnam keen on strengthening ties,” Assa-Irada Information Agency, April 12, 2013

“Azerbaijan works over organization of multilateral negotiations on full membership in WTO,” ABC.AZ - Business News, March 29, 2013

Azzam, A., B. Rettab, and M. Morada. "Revealed Comparative Advantage - Where It is Least Expected: Dubai." International Journal of Trade and Global Markets 3(2010):199-216

Baker and McKenzie, Doing Business in Azerbaijan, March 2011

“Belarus, Azerbaijan to step up investment cooperation,” BELTA - News Line, December 20, 2012

“Broadband access rate up over 20 percent in Azerbaijan,” AzerNEWS, March 28, 2013

“CNN airs story about Azerbaijan's new seaport,” Trends News Agency, April 8, 2013

“Creation of Turkic-speaking states free trade zone starts,” Assa-Irada Information Agency, January 28, 2013

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Doing Business in Azerbaijan: 2010 Country Commercial Guide for U.S. Companies, US & Foreign Commercial Service and Department of State, 2010

D&B Country Report: Azerbaijan 2012/13, Dun & Bradstreet Limited, RiskLine Report, October 2012

Dubai Chamber, Trade and Investment Opportunities in Azerbaijan, Economic Research Department, Project Number 10-02-04-12, October 2012

“Dubai hosts UAE-Azerbaijan Intergovernmental Commission’s meeting,” APA News Agency, December 18, 2012

“Exchange commission in e-trading reduced six-fold in Azerbaijan,” Trend News Agency, March 31, 2013

“Foundation of new oil, gas processing and petrochemical complex to be laid in Azerbaijan in September,” APA News Agency, March 26, 2013

“Free economic zone to be established in airport's territory in Baku by 2020,” Trend News Agency, December 13, 2012

“High-tech park to boost Azerbaijani software market,” AzerNEWS, March 19, 2013

“Hungarian minister to discuss bilateral cooperation issues in Azerbaijan,” Trend News Agency, March 28, 2013

“Ilham Aliyev vs Azerbaijan's Accession to WTO,” TURAN Info Agency, December 26, 2012

“IMF forecasts 4.5% GDP growth in Azerbaijan,” Interfax - Russia & CIS Business & Investment, March 29, 2013

“Major road project to be completed in Azerbaijan in Summer 2013,” Trend News Agency, March 29, 2013

“Medicines to be labeled with special control marks in Azerbaijan,” APA News Agency, April 12, 2013

“New Europe: Azerbaijan sees significant growth in country's non-oil sector,” Trends News Agency, April 6, 2013

“Oil and gas production share slightly reduced in Azerbaijan,” Trend News Agency, March 30, 2013

“Prices and Situation in Consumer Market in Azerbaijan,” Trend News Agency, November 12, 2012

“Real average salary in Azerbaijan continues reducing,” ABC.AZ - Business News, March 19, 2013

“Saudi-Azerbaijan ties touching new heights,” Tegara Net, December 16, 2012

“Saudi Fund for Development launches trade finance activities in Azerbaijan,” Trend News Agency, November 29, 2012

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“SOCAR plans to increase oil production by two million tons by 2015,” Trend News Agency, March 30, 2013

“Tech park construction started in Azerbaijan,” Trends News Agency, April 12, 2013

“Tourists wishing to visit Azerbaijan can receive visa online,” Trends News Agency, April 10, 2013

“Tomorrow Azerbaijan to ratify agreement on membership in Trade and Development Bank,” ABC.AZ - Business News, January 31, 2013

“Top diplomat: Azerbaijan interested in developing ties with UAE emirates,” Assa-Irada Information Agency, December 28, 2012

“Tehran-Baku Trade Exchanges to Hit $1bln,” Thai News Service, December 27, 2012

“UAE-Azerbaijan Business Council to be established,” AZER-Press IA, December 20, 2012

“UAE interested in boosting economic ties with Azerbaijan,” Assa-Irada Information Agency, December 19, 2012

“Use of e-signature launched for Azerbaijani customs operations,” Trend News Agency, January 31, 2013

“Uzbekistan and Azerbaijan signed 4-year plan for economic cooperation,” BVV Business Report, October 19, 2012

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6.1 Further References

Dubai Chamber of Commerce and Industry Sanan Nasibli, Head of Office Azerbaijan Kempinski Residence, Office 437 Baku, Azerbaijan O: (994 12) 404 8949 | M: (994 55) 205 5000

Office of the President of the Azerbaijan Republic 19 Istiqlaliyyat Street Baku AZ1066, Azerbaijan Tel: (994 12) 4923154, 4927906 Fax: (994 12) 4983328, 4980822 http://www.president.az

The Cabinet of Ministers 68 Lermontov Street Baku AZ1066, Azerbaijan Tel: (994 12) 4980008, 4927528, 4920212, 4922383 Fax: (994 12) 4926388, 4989786

Ministry of Agriculture Azadlig Meydani / Government House, 3rd floor Baku AZ1016, Azerbaijan Tel: (994 12) 4930884, 4933745 Fax: (994 12) 4945390

Ministry of Communications and Information Technologies 33 Azerbaijan Avenue Baku AZ1139, Azerbaijan Tel: (994 12) 4930004, 4934327 Fax: (994 12) 4987912, 4984285 http://www.mincom.gov.az/

Ministry of Ecology and Natural Resources 100a Bahram Agayev Street Baku AZ1073, Azerbaijan Tel: (994 12) 4380481 Fax: (994 12) 4925907 http://www.eco.gov.az

Ministry of Economic Development The Cabinet of Ministers / 23 Niyazi Street Baku AZ1001, Azerbaijan Tel: (994 12) 4902430 / Switchboard: (994 12) 4924110 Fax: (994 12) 4902408, 4902404 http://www.economy.gov.az

Azerbaijan Investment Promotion & Advisory Foundation

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11, Hasan Abdullayev street 68 Baku AZ 1001, Azerbaijan Tel: (994 12) 598 0147 /48 Fax: (994 12) 4990152 http://www.azpromo.org

Ministry of Finance 83 Samad Vurgun Street Baku AZ1022, Azerbaijan Tel: (994 12) 4044701 Fax: (994 12) 4044720 http://www.finance.gov.az

Ministry of Health 4 Kichik Deniz Street Baku AZ1014, Azerbaijan Tel: (994 12) 4988559 Fax: (994 12) 4930711 http://www.health.gov.az

Ministry of Industry and Energy 88 Hasanbey Zardabi Avenue Baku AZ1000, Azerbaijan Tel: (994 12) 4933824, 4470584 Fax: (994 12) 4319005

Ministry of Taxes 16 Landau Street Baku AZ1073, Azerbaijan Tel: (994 12) 4301656, 4970668; 4038630 Fax: (994 12) 4985407 http://www.taxes.gov.az

Ministry of Transportation 1054 Baku, Azerbaijan Tel: (994 12) 4309941 Fax: (994 12) 4309942 http://www.mintrans.az

Ministry of Culture and Tourism 40 U.Hajibayov str. Government House Baku AZ1000, Azerbaijan Tel: (994 12) 493-43-98, 493-30-02 Fax: (994 12) 493-56-05, 493-65-38

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State Customs Committee 2 Inshaatchilar Avenue Baku AZ1073, Azerbaijan Tel: (994 12) 4388080 Fax: (994 12) 4934067 http://wwww.az-customs.net

State Oil Company of Azerbaijan Republic (SOCAR) 73 70 Baku AZ1004, Azerbaijan Tel: (994 12) 4920685, 4922312, 4921789 Fax: (994 12) 4923204, 4936492, 4971167 http://www.socar.az

State Statistics Committee 136 Inshaatchilar Avenue Baku AZ1136, Azerbaijan Tel: (994 12) 4381171, 4386498, 4389376 Fax: (994 12) 4382442, 4380577 http://www.azstat.org

Azerbaijan State Railway Road Administration 230 Dilara Aliyeva Street Baku, Azerbaijan Tel: (994 12) 4984467, 4994400 Fax: (994 12) 5982648

Baku Sea Port - International Sea Trade 72 Uzeyir Hajibeyov Street Baku AZ1010, Azerbaijan Tel: (994 12) 4930268 Fax: (994 12) 4933672

Caspian State Shipping Company 5 M. A. Rasulzade Street Baku AZ1601, Azerbaijan Tel: (994 12) 4932058, 4935181 Fax: (994 12) 4935339 http://www.caspar.baku.az

National Bank of Azerbaijan 32 Baku AZ1014, Azerbaijan Tel: (994 12) 4931122 Fax: (994 12) 4935541 http://www.cbar.za

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