Issue 32 A Word From Executive Director of AmCham Credits Dear members, Welcome to AmCham ’s quarterly business AmCham Executive Director: magazine – IMPACT, devoted to the recent achievements in Natavan Mammadova Taxation & Customs systems of Azerbaijan. This edition is quite remarkable – we are wrapping up our calendar year with lots of fruitful achievements and you will be able to read Editor: opinion on these changes from higher level officials – Minister Aykhan Nasibli of Taxes Mr. and Chairman of the State Customs Committee customs service lieutenant-general Mr. Articles contributed by: Safar Mehdiyev. Nuran Kerimov As you know, tax legislation in Azerbaijan is expected Zaur Gurbanov to undergo substantial changes. As a “voice” of the business community in the country, AmCham is pleased with these encouraging reforms aimed at reducing tax Gumru Eyvazova burden, simplifying tax administration, creating positive behaviors and preventing Ruslan Mirzayev tax evasion. In parallel, the customs system is also introducing lots of positive Yunis Salayev, Sabit Abdullayev changes. These will improve effectiveness of foreign economic activity, strengthen Walid Madhoun state support for domestic production and diversification of oil economy. All these changes will contribute for sustainable development of the business climate in the Advertisers: country. Another successful benchmark of AmCham was preparation of White Paper – BP representing collective thinking of the members about changes that will strengthen Azerfon Azerbaijan’s business environment, and by extension, the country as a whole. The Turkish Airlines document contains recommendations on banking, finance, insurance, tax, customs, Dow Turkey legal, compliance, antimonopoly, labor, migration, tourism, etc. which also contribute The Coca Cola Company to successful implementation of “Strategic Road Maps for the National Economy P&G and Main Economic Sectors”, endorsed by the President H.E. . Iteca Caspian Let me recapitulate that AmCham welcomes such reform initiatives of the Government and always ready to mobilize expertise and best practices among the member companies to make a substantial contribution for enhancing standards in Publisher: the country. American Chamber of Commerce Taking this opportunity, let me thank each of you for being engaged with AmCham in Azerbaijan in 2018 and wish all the very best in 2019. Happy upcoming New Year, Happy Solidarity Day of Azerbaijanis! Tel: (+994 12) 497 13 33 Best regards, Fax: (+994 12) 497 10 91 Natavan Mammadova www.amcham.az www.impact.az Editor’s Comment

Advertising opportunities: Dear friends, dear members. Welcome to 32nd edition of IMPACT Azerbaijan magazine, Please contact the Editor at devoted to recent changes and achievements in taxation [email protected] and customs system of Azerbaijan. Within this edition, we are happy to provide interviews from relevant higher level The articles in IMPACT Azerbaijan government representatives. Herein, the focus has been express the opinions of the authors and on different aspects of the recent changes, which will do not necessarily reflect the position of bring positive impact for development of business climate in Azerbaijan; thus, further contribute for sustainable the American Chamber of Commerce in development of the country. At the same time, member Azerbaijan companies have shared their expertise on important issues touching to the needs and expectations of the private sector.

Please, enjoy reading it!

Sincerely, Aykhan Nasibli contents IN FOCUS 4 20 Reflection of Recent Changes on Introduction of Mediation for Taxation for the Business Community Commercial Disputes in Azerbaijan of Azerbaijan

Special Interview with Minister of Taxes, Ruslan Mirzayev Third-Rank State Tax Councilor Adrem Attorneys Law Firm, Managing Partner Mr. Mikayil Jabbarov 23 7 Beneficial Ownership Disclosure Azerbaijani Customs Authorities are Always in Legal Trade

Yunis Salayev, Sabit Abdullayev Special Interview with the Chairman of State Customs BDO Azerbaijan Committee of the Republic of Azerbaijan, Lieutenant- General of Customs Service Mr. Safar Mehdiyev development & education 11 25 Azerbaijan’s 2019 Tax Reform: Capacity Building: a Vital Factor of Clampdown on Informal Economy Economic Development

Nuran Kerimov Walid Madhoun Partner, Deloitte Partner, Mast Canada 14 AMCHAM AZERBAIJAN Changing Wave of Reforms 29 in Taxation About Us

Zaur Gurbanov Tax Director, EY 30 16 Business Events Azerbaijan and the European Union: Great Potential in Relations

33 Gumru Eyvazova Amcham Members’ Luncheon Legal and External Affairs Executive,BAT member contribution 18 36 Direct and Indirect Impact of Social Events Coca-Cola System to the National Economy of Azerbaijan

Adrian Cernautan 38 Committee Highlights Caucasus Region Manager, The Coca-Cola Company 41 AmCham Legal Update

2 Issue 32 JOURNEY TO THE NEW HOME OF TURKISH AIRLINES

THE AIRLINE THAT FLIES TO MORE COUNTRIES THAN ANY OTHER AWAITS YOU IN THE WORLD’S NEW AVIATION CENTER

ISTANBUL AIRPORT in focus

Reflection of Recent Changes on Taxation for the Business Community of Azerbaijan

Special Interview with Minister of Taxes, Third-Rank State Tax Councilor Mr. Mikayil Jabbarov

relations between the state and taxpayers in carrying out active tax policy as one of the main challenges to be addressed by tax authorities. The main task here is to direct the efforts of the Ministry of Taxes and tax legislation towards boosting economic growth and development of entrepreneurship, as well as effective promotion of private investments. Scaling down the shadow economy is among the main targets too. The year of 2018 has been defined as the transition year in relations with taxpayers; relevant steps are being taken to ensure transition to a new tax system stipulated by the factor of social development, as well as in conformity with the leading global practices. This process is carried out through introducing relevant changes both to tax administration culture and tax legislation without detriment to economic growth, entrenched business habits and business environment. Tax legislation has been significantly amended. The amendments may be classified according to 5 directions. These are support to entrepreneurship, reducing the scale of shadow economy and tax evasion, expanding tax base, streamlining tax administration and increasing efficiency of the existing and new tax incentives. The most notable change to the tax legislation features Minister Jabbarov, lately the tax system has been introduction of tax incentives in respect of taxes from salary going through serious changes and local entrepreneurs income for the citizens employed in non-oil private sector. have many expectations with regards to the proposed According to the change, monthly income up to 8000 manats amendments to the tax legislation. Allow us to start our is fully exempted from income tax, whereas citizens with conversation on the very same issue. What will be the monthly income over 8000 manats, are subject to income tax impact of the proposed amendments to the development at the rate of 14% for the amount exceeding 8000 manats. It of the business in the country? is worth mentioning that, this is a big concession on behalf of Tax policy as part of the social-economic policy pursued in the state which is estimated at hundreds of millions manats. Azerbaijan, is constantly improving to meet the changing The state loses part of its revenues because of this particular demands and growing pace of the economy. This is sustainable reform. We anticipate that following the implementation of process. Tax policy shall be flexible and adaptable to the this reform the shadow economy will be reduced, informal economic situation, as well as support business development employment removed, economic and business activity, and competition environment. Ministry of Taxes strives to especially in private segment of non-oil sector revived and embrace these demands in its activity. accelerated, and citizens’ rights will be protected more President Ilham Aliyev outlined the issue of building reliable thoroughly.

4 Issue 32 in focus

In order to increase confidence to the reform, the introduced. This was triggered by misuse of tax benefits, aforementioned incentive will remain applicable during originally meant for small entrepreneurs, by the persons who 7 years. Taxpayers will have an opportunity to plan their were not eligible for those benefits. In reality, it cut across activities in a long term perspective. Moreover, income tax the principle of equal and fair taxation by violating the rights of natural persons and social security contributions will be of small entrepreneurs. Current amendments, along with tax merged under a single administration that means further administration measures that we plan to carry out next year, simplification of procedure for the employers. are aimed at preventing unfair competition and supporting Here, I would like to underline the fact that granting tax activities of disciplined taxpayers. incentives at such a scale required high level political decision making. In this regard, Mr. President’s support in this matter Support to small and medium entrepreneurship can should be especially noted. I am certain that, entrepreneurs also be found in the roadmaps endorsed by President and citizens of Azerbaijan will duly appreciate this incentive Ilham Aliyev. These documents list the issues related to by taking adequate steps towards ensuring tax compliance, the improvement of tax administration. Which steps are removing informal employment, safeguarding the rights of being taken in this direction? working population and reflecting true salary payments. Ministry of Taxes is the main state agency responsible for the implementation of 5 directions over 3 strategic roadmaps, Do the amendments envisage support to the development whereas it is the participative state agency responsible for the of small and medium business? implementation of 34 directions over 9 strategic roadmaps Support to small and medium entrepreneurship is a priority deriving from the “Strategic roadmaps on the national for the Ministry of Taxes too. Amendments to tax legislation economy and the main sectors of the economy” approved by envisage certain provisions directed at stimulation of activities the relevant decree of President Ilham Aliyev. To this end, the of small and medium businesses. Ministry of Taxes drafted and put in place the Action Plan, The most significant changes include reduction of as well as appointed persons in charge of implementation of simplified tax rates, fast depreciation opportunities for small targets specified in the roadmaps. entrepreneurship, expansion of the scope of flat rate tax The main directions of the Action Plan envisage implementation mechanisms for micro entrepreneurs, as well as substantial of budget-fiscal policy, application of incentivized tools for tax incentives in respect of income, profit and property taxes the development of small and medium entrepreneurship, offered for small and medium entrepreneurship cluster simplification of business procedures, promotion of effective companies and entrepreneurs. tax system for the development of favorable business Small entrepreneurs who are classified as simplified climate, improvement of international rankings of Azerbaijan, taxpayers will be taxed at the rate of 2% instead of previously optimization and implementation of risk based audits at applied 4%, thus benefiting from 2 times less tax burden. At small and medium entrepreneurs, continuation of incentives- the same time, activities under the simplified tax regime have oriented tax reforms in the same area etc. been revised and a new list of eligible activities has been You mentioned the issue of bettering international ranking of

5 in focus

our country. Doing business report rated reforms conducted have discussed the issues and promotion mechanisms that in the tax system high this year… interested entrepreneurs willing to expand their business Comprehensive economic reforms carried out in the country operations. I would like to note that we have been in close ensured advancement of our international ranking and this is communication with public associations of entrepreneurs and well acknowledged by the international community. As to the consultancy companies in drafting current amendments to Doing Business 2019 report, Azerbaijan was listed among top the tax legislation. We also ensured participation of experts 10 countries to improve its position through various indicators, representing “Big four” in preparing the draft with the sole whereas tax reforms have also been rated positively in the purpose of taking entrepreneurs’ interests into account. report. Azerbaijan has improved its ranking from 18 to 9 on I think that round tables, forums, conferences and working “Starting a business” indicator, as well as moved up from 35th level meetings are extremely useful in this sense. During to 28th position on “Paying taxes” indicator. these meetings, conducted in the format of open dialogue, Starting business in Azerbaijan is very simple, transparent all issues of concern to the business community, their and can be realized in a short time. Today, any citizen or an opinions and proposals are carefully studied. Agenda of these entrepreneur willing to establish legal entity can register within meetings also involves broad discussions over improvement few hours using “electronic signature”. Many improvements of business climate and tax legislation in the country. This is a have been made in terms of time required for paying taxes, testimony of cooperation between public and private sectors. the number of payments and tax burden. I consider that tax And this cooperation will be continued. reforms we will be conducting next year will allow us to make further progress in Doing business report and our country will Biography of our guest improve its position accordingly. Mr. Mikayil Jabbarov was appointed Minister of Taxes by the Order of the President of the Republic of Azerbaijan on How does the Ministry of Taxes evaluate its future December 5, 2017. cooperation with business entities and associations? Before this appointment, Mr. Jabbarov was the Minister of Ministry of Taxes attaches high importance to effective Education from 2013 to 2017, Head of State Administration of cooperation with business entities, associations and the Historical and Architectural Reserve of «Icherisheher» under expert community specialized in the fiscal area, since the the Cabinet of Ministers from 2009 to 2013, Deputy Minister of success of every reform is directly linked to public support Economic Development from 2004 to 2009, as well as different and acknowledgement. Moreover, public associations of position both in the government and the private sector. entrepreneurs and business circles are parties to the business Mr. Mikayil Jabbarov carries Master Degrees in Economics processes and therefore the reforms conducted in this field from the Azerbaijan State Economic University and in Law directly affect their interests. We shall discuss with them the from the McGeorge School of Law, University of the Pacific steps we take and we are interested in this. (Sacramento, California, US). Mr. Jabbarov is also member of Through a number of meetings organized in 2018, we the New York State Bar Association since 1999.

6 Issue 32 in focus

Azerbaijani Customs Authorities are Always in Legal Trade

Special Interview with the Chairman of State Customs Committee of the Republic of Azerbaijan, Lieutenant-General of Customs Service Mr. Safar Mehdiyev

granted permits to use the Green Corridor gating system. An exchange of preliminary information on goods and vehicles crossing the state border with , Ukraine, Iran and Turkey was ensured. This allows more rapid and better quality control over the goods and vehicles crossing the state border. It is gratifying that the software and technical measures on the application of TIR-EPD and e-TIR systems, which envisage information exchange in advance on commodities and vehicles imported to the country during the International Freight Shipping within the framework of cooperation between the State Customs Committee of the Republic of Azerbaijan and the International Road Transport Union electronically with customs authorities on the basis of paperless technology, has been completed. The use of this system will become advantageous for a faster and prioritized transportation of vehicles engaged in the International Freight Shipping, through the state border on the basis of efficient risk analysis performed in compliance with the information provided to the customs authorities. Establishment of temporary storage warehouses has been initiated to increase the efficiency of customs control and What steps have been taken towards the further ensure more efficient use of commodities owned by foreign improvement of the tax and customs administration trade participants. The Committee has established a register mentioned in the Strategic Road Map guided by Mr. of temporary storage warehouses. The registry has been President? posted on the website of the State Customs Committee to As you know, structural reforms have been carried out recently inform the participants of the foreign economic activity. At the to ensure the improvement of the quality of management same time, the “VAIS-Warehouse” subsystem for placement in the customs system. Having considered the modern and movement of goods has been put into operation in these standards, the areas of activity of the Committee and the local warehouses. SMS system has been applied to the VAIS. and specialized customs offices included in the Committee At the moment of crossing the state customs border, upon system have been defined, 5 new head offices have been reaching the destination customs office and after the customs established on the basis of the local and specialized customs clearance begins, at all stages of the customs clearance the offices, the structural units of the Committee have been owners of the goods are automatically sent by the system reorganized in line with their areas of activity. SMS on the status of the goods. Pursuant to the Decree of the President of the Republic of The customs system has been completely transferred to Azerbaijan dated May 21, 2016, the implementation of the the system of non-cash payments. VAIS is integrated into Green Corridor and other gating systems for transportation government payment portal, Easy Pay payment system and of goods and vehicles across the customs border has been other payment systems. started. So far around 60 foreign trade participants have been Important steps have been taken in the area of further

7 in focus

betterment of the tax and customs administration, based on the measures defined in the “Strategic Road Map of the Republic of Azerbaijan for the National Economy Perspective” approved by the Decree of the President of the Republic of Azerbaijan dated December 6, 2016. A number of documents were signed between the Ministry of Taxes and the State Customs Committee to ensure the mutual activity of tax and customs authorities, further improvement of tax and customs administration. Note that, on April 23, 2018, the Protocol on the Control of the Activities of the Importing Goods for Third Parties was signed. This document includes issues such as compliance with legislation by third party importers, complete fulfillment of tax obligations and protection of competitive environment among entrepreneurship entities. On August 1, 2018, the Agreement on Protection of Confidential Information was signed. The subject of the Agreement is to determine the terms, conditions of use and protection of the application (entry) of confidential information transmitted during the cooperation between the parties. Moreover, in accordance with the “Action Plan on Improvement of the Imports and Exports Control System” approved by the Order No 260 of the President of the Republic of Azerbaijan dated June 28, 2018, on 1 August of the same year, 3 more documents have been signed between the Ministry of Taxes and the State Customs Committee. Of them - the purpose of the Protocol of the Agreement “On joint control over the means of identification of goods and vehicles crossing the customs border” is to carry out joint identification procedures during customs clearance of goods imported by legal entities importing or exporting goods for third parties and persons engaged in entrepreneurial activity without legal entity in order to ensure the transfer of customs and tax payments to the state budget in the full volume. The purpose of the Protocol of the Agreement on the provision of access to sub information systems on import-export data of “Single Automated Management System of Customs country in the international rankings” approved by the Order Services” of the State Customs Committee of the Ministry of No 2947 of the President of the Republic of Azerbaijan dated Taxes in a timely manner is to provide the Ministry of Taxes June 2, 2017, the Article 7.2.1.1 of the Action Plan on the with access to sub information systems on import-export data Implementation of the Decree No 2199 to adapt the national of the Single Automated Management System of the State legislation to accelerate the implementation of the European Customs Committee in a timely manner on a request basis in New Computerized Transit System (NCTS), and to undertake order to ensure operational efficiency of the legislation. measures to create a transit guarantee system, have been The purpose of the Agreement “On transferring data to the entrusted to relevant government agencies, including the Single Risk Platform (SRP) between the Ministry of Taxes of State Customs Committee. the Republic of Azerbaijan and the State Customs Committee I would like to recall, that in December 2017 a decision was of the Republic of Azerbaijan” is the organization of risk made to grant the Republic of Azerbaijan an informal observer assessment by customs and tax authorities on foreign trade status in the Governing Body of the Convention on Common activities participants, regulating issues related to mutual Transit Procedures and the Convention on the Facilitation exchange of information about owners, carriers or persons of Documentation in Commodity Exchange which forms representing them for the purpose of division of risk groups the legal basis of the European New Computerized Transit System (NCTS). What additional work is planned to be done in the near I hope that our country’s accession to this system will future to improve the customs system? enable the customs clearance chain for transit operations, Decree of the President of the Republic of Azerbaijan “On the minimization of the number of documents required for additional measures to increase the business climate in customs purposes during transit through the use of single the Republic of Azerbaijan and improve the position of our administrative documentation, and the acceleration of risk

8 Issue 32 in focus

One of the main tasks is to expand innovation activities to accelerate the innovative development of the economy, to enhance the role of creative industry in the modern economy and the impact of intellectual property on the information society, as well as the protection of the cultural heritage of the Azerbaijani people. Accordingly, re-processing of the legislative basis for intellectual property rights and improving the registry system are part of the work envisaged to ensure the sustainability of human capital-based innovation economics and the protection of intellectual property rights in the near future. At the same time, facilitating international trade on the basis of the use of existing tools and means by participating in the complex management of the international trade chain and re-processing of the legislative basis on the competent economic operator for the purpose of creating a favorable business climate for foreign trade participants, the development of an authorized economic operator institute, coordinating the activities of foreign trade participants and the further development of mutual relations with those who have obtained this status stand at the core of the main goals.

What does the Memorandum of Understanding with Small and Medium Business Development Agency promise to entrepreneurs of this kind? As you know, the Memorandum of Understanding on analysis and risk assessment through pre-electron exchange cooperation and interaction between the State Customs of information on all transit routes. Committee of the Republic of Azerbaijan and the Small and The application of this system will also allow access of the Medium Business Development Agency of the Republic of goods produced in the Republic of Azerbaijan under the brand Azerbaijan was signed on August 10 this year. name “MADE IN AZERBAIJAN” to the markets of the NCTS In the Memorandum of Understanding, educating member countries in Europe and their delivery to destination. entrepreneurs in the area of granting competent economic At the same time with the support of the European Union operator status, improvement of the activities of micro, Delegation to Azerbaijan in 2017-2018 the project “Support small and medium-sized businesses (SMEs) in import- to the State Customs Committee in the Preparation for joining export operations in the areas of customs control zones the Conventions on the Common Transition Procedure and and other places where customs clearance is carried out, the Facilitation of Documentation in Commodity Exchange, assistance in the proper declaration of goods and vehicles, as well as the Preparation for Joining the European New as well as bolstering cooperation and mutual trust between Computerized Transit System (NCTS)” has been successfully customs authorities and SMEs, establishment of joint completed. “SMEs House-Customs and Logistics Islands” and to further Taking all this into consideration, the current legislation, develop entrepreneurial activity organizing “round tables” for regulatory requirements in conformity with the convention studying proposals on simplification of customs procedures, provisions regarding accession to the European New explanation of customs regulations for countries where goods Computerized Transit System (NCTS), the study of the are exported, including information on customs legislation, requirements of information technology for the application Green Corridor and other gating systems are all covered in of the system, the analysis of the relevant field for the the MOU. purpose of creating a customs guarantee mechanism and There are many pros of the issues mentioned in the MOU becoming a member to the “Convention on the Common for the small and medium-size entrepreneurs. It contains Transit Procedure” and the “Convention on the Facilitation of carrying out activities to organize entrepreneurial satisfaction, Documentation in Commodity Exchange” is one of the main informing entrepreneurs about the services rendered, as well targets. as measures to study international practice on public-private At present, relevant work is underway to introduce the TIR-EPD partnership in the implementation of customs legislation; system in order to present information on goods and vehicles the organization of mutual activities in order to increase the to the customs authorities in advance of the transportation export potential of small and medium-sized businesses, and carried out under the transit procedure regulated by the the performance of relevant measures to implement joint Customs Convention on International Cargo Transportation projects. (1975), with the application of the International Cargo Booklet

9 in focus

to service. One of the main trends is to develop efficient, transparent cooperation with business entities and institutions, along with the development of infrastructure, improvement of customs legislation, strengthening of capacity of employees in the Strategic Road Map drafted for this purpose. The doors of the customs authorities are always open to business representatives. We listen to entrepreneurs at any time of the day and strive to eliminate the problems that they face. Within the last 6 months, numerous meetings were held with entrepreneurs and business entities within the framework of individual and associations. These meetings focused on facilitation of trade, simplification of customs procedures, provision of transparency, and issues related to the projects and measures taken in the field of anti-corruption. It is undisputable that rapid growth in the world, as well as in all spheres, inevitably requires dynamic and flexible governance and innovative projects in the customs system. What additional services (processes) can AmCham Projects implemented by the Azerbaijani customs authorities member companies benefit from? for these purposes, new applications are carried out with It is being a long time since the State Customs Committee the help of entrepreneurs, business entities, consultations, has been carrying out various electronic services over the discussions and inquiries, as well as their feedback and E-Government portal. By using these services, foreign trade suggestions, either at the stage of preparation or at the stage partners may carry out a number of activities of implementation, unlike previous periods. This, in turn, Foreign trade participants may declare their imported and increases the efficiency of customs. exported goods electronically to the customs authorities and You can be sure that the Azerbaijani customs authorities may obtain information about goods arriving at the state are always on the side of legal trade and its subjects. I border crossing the customs border. Also, it can carry out recon that due to mutually beneficial cooperation, steps are all payments on customs operations or customs clearance taken to develop this area. In our next activity, we will do procedures on-line, as well as obtain information on import- our utmost to develop the non-oil sector of the country, to export transactions, including bank payments for these facilitate international trade and to create favorable business transactions. environment for foreign trade partners, and will mobilize all In addition, foreign trade participants may attain a fast pass our efforts to ensure the citizen satisfaction. on the frontier by submitting a brief import declaration to the customs authorities on commodities and means of transport Biography of our guest and may apply to the customs authorities with letters and As of 23 April, 2018 Lieutenant-general Mr. Safar Mehdiyev inquiries, and, if necessary, apply to the Central Customs was appointed the Chairman of the State Customs Committee, Examination Office to carry out customs expertise of imported/ with the Order of the President of the Republic of Azerbaijan. exported goods. They may also receive information on fees Starting the career in 1990, Mr. Mehdiyev has been working and charges applicable to imported/ exported goods and can at State Customs Committee in different positions from 1999. register electronically their contracts with foreign partners. In between of 1999-2004, Mr. Mehdiyev worked as inspector, senior inspector of the Customs Tariff Regulation Department How do you assess cooperation with businesses and of the General Directorate of Financial-Tariff and Currency associations? Control of the State Customs Committee, Head of Customs It is well known, that in the light of the globalization processes Cost Department, Deputy Chief of the General Department. in the world, ensuring the security and sustainability of the From 2004 to February 2006 he was the Deputy Chairman of international trade chain reveals new challenges. One of the State Customs Committee, and from February 2006 the the major missions of modern customs in global scale is to First Deputy Chairman of the State Customs Committee of the ensure that cargo transportation is carried out in an easy and Republic of Azerbaijan. fast way. Mr. Safar Mehdiyev has received distinguishing awards, In order to meet modern demands and challenges, Azerbaijani including the Medal "For Civil Service Honors", Order "For customs authorities take important steps in line with the Service to the Motherland" and honorary title "Honorary Civil reforms carried out by President H.E. Ilham Aliyev in the field Servant". of diversification of the country’s economy, development Lieutenant-general Mr. Safar Mehdiyev is a graduate from Ege of the non-oil sector and the country’s export and transit University, International Economic Relations and Baku State potential. University, Department of Law. At the same time, he carries The philosophy of customs is changing in our country, and Masters degree on Finance from Azerbaijan State University of the customs authorities transfer their work from administration Economics.

10 Issue 32 in focus

Azerbaijan’s 2019 Tax Reform: Clampdown on Informal Economy

Nuran Kerimov Partner, Deloitte Baku President, AmCham Azerbaijan

legitimate economic and taxable domain the businesses that currently manage to stay away from the tax authorities’ reach. The proposed changes are massive and the ‘carrot and stick’ approach seems to be the tactics of the tax authorities this year. The changes are going to offer quite a few meaningful tax preferences, and in parallel, there is a clear trend towards the tougher controls over the tax discipline and penalties. In a country dominated by the petroleum industry, these changes are targeting other sectors of the economy. Taxation of individuals Changes to individual taxation are at the core of this year’s changes. For a very long time, businesses have been pointing to the high rates of personal income tax (PIT) and mandatory social insurance contributions (SIC) as one of the major reasons contributing to unofficial employment and grey salaries. Given this, perhaps the most anticipated change is the reduction of the fiscal burden on the payroll. Effective from 1 January 2019, the monthly income of up to AZN 8,000 (approx. USD 4,705) will be PIT-exempt, and any exceeding amounts will be taxed at a rate of 14 percent2. Over the 18 years of its existence, Azerbaijan’s Tax Code has Similar changes are going to be made to the rates of SIC: been amended virtually every year. 2019 is not going to be an exception: effective from 1 January 2019, major changes SIC Rates3 are going to be made to the Tax Code, the Law “On Social Monthly income Deducted from Insurance”, and the Law “On Unemployment Insurance”. subject to SIC Paid by Total employee`s employer When we look at the economic context driving the 2019 fiscal income reform, the need for immediate actions appears evident. A fragile economic recovery following the 2014 collapse Up to AZN 200 25 percent 3 percent 22 percent in commodity prices, the unbearably high level of the AZN44 + AZN6 manat + 10 shadow economy, low tax discipline, high rate of unofficial 15 percent percent of in- Over AZN 200 25 percent of income employment, inefficient tax audits and tax appeals – these are come exceeding exceeding among the reasons that drive the changes to the existing tax AZN 200 AZN200 regime. In his speech on 13 February 2018, Mikayil Jabbarov, Minister of Taxes, outlined his main strategy for increasing Please note that only the individuals employed by private the tax revenues through ‘…the expansion of the tax base’1. businesses other than in the oil and gas sector will be eligible Expansion here should be interpreted as bringing into the

2. These rates are effective from 1 January 2019 for seven years. 1. http://fed.az/az/news/read/32528 3. These rates are effective from 1 January 2019 for seven years.

11 in focus

for the new rates. Those who work in the oil and gas sector • the simplified tax rate on sales transactions in retail and in the public sector will continue paying PIT at 14 percent business and catering completed with a bank card will be and 25 percent, respectively, and SIC at 25 percent (with 3 reduced by 25 percent p.p. paid by the employee and 22 p.p. paid by the employer). • the dividends received by the shareholders of a resident Once the new rates are approved, the combined PIT and SIC legal entity with revenues of up to AZN 200,000 over burden for the mid-income individual taxpayers is going to consecutive 12 months, not registered as a VAT payer, decrease by 4 p.p. and 7 p.p., respectively (depending on and holding a full record of its revenues and costs, will income level), and for their employers – by 7 p.p. Simple be tax-exempt math shows that a substantial part of Azerbaijan’s working • barbers and tailors will be eligible for the simplified tax population will be paying only 10 percent of their payroll in tax, regime, too. which will make Azerbaijan quite competitive in this respect when compared to other countries of the region. Taxation of corporations The Government believes that the level of tax compliance in Recently, Azerbaijan’s tax authorities have been the petroleum industry and public sector is at an acceptable enthusiastically adopting international best practices to level and there is no need for additional tax preferences. counter the aggressive tax planning. As another step in Conversely, where the Government sees a major tax leakage this direction, the 2019 amendments are going to introduce (private employers outside the oil and gas sector), it hopes thin capitalization rules. Where the foreign borrowing of a that a reduced payroll tax is going to be a major stimulus company is two times (or more) greater than its net asset to keep the salaries transparent and declare them fully for value (the foreign leverage ratio), the part of the interest taxation purposes. relating to the share of the debt exceeding the x2 threshold Consistent with the Government’s economic strategy, new will not be tax-deductible. tax benefits will be introduced for the micro, small, and The definition of the term “dividends” is going to be expanded medium businesses, exempting 75 percent of their income to include the value of the property of a legal entity purchased (individual entrepreneurs classified as micro-business will out of its net profit upon liquidation and the value of shares of also be eligible). Income from the innovative activities of the legal entity purchased back at nominal value and which micro or small entrepreneurs will be exempt from taxation for was formed at the expense of its net profit. three years upon receipt of the startup certificate. Article 13.2.16.14-1, as amended, now envisages a 10-percent withholding tax on direct and indirect payments Redesigning the simplified tax made to entities incorporated in low-tax jurisdictions, including The Ministry of Taxes has long been vocal about the abuse the payments to branches and representative offices in other of the simplified tax regime, and in particular about large countries, as well as transfers to bank accounts in low-tax businesses that would have split until they had met the jurisdictions. revenue threshold of ‘up to AZN 200,000 for consecutive 12 Azerbaijan’s tax administration clearly recognizes a growing months’ to qualify for the simplified taxation regime. role of technologies in tax administration. A new important tool According to the proposed changes, trading exceeding AZN is the track and trace technology. Importation and production 200,000 will be excluded from the list of qualifying activities for of certain goods will be subject to the mandatory labelling. A the simplified taxation regime. Companies with a headcount list of such goods and the rules governing transactions with over five employees engaged in production, wholesale them, as well as the inventory rules, are going to be adopted trade, and supply of services (except where the services are additionally. supplied to individuals who are not registered as taxpayers) The newly introduced Article 65.7-1 will enable the tax will no longer be eligible for the simplified taxation regime, authorities to require that the taxpayer’s bank convert the too. Although this change is going to reduce the number of funds in a foreign currency into AZN to settle the client’s the simplified taxation regime users substantially, as a tax outstanding tax liabilities. policy measure replacing the imputed simplified tax with more One of the popular schemes of extracting cash from the fair income tax, it is clearly a move in the right direction. business in Azerbaijan is making an advance payment to an At the same time, the 2019 amendments to the Tax Code employee for allegedly business purposes (e.g. procuring raw are going to offer additional preferences to the simplified tax materials). In most cases, such amounts are not repaid to the regime users: company. Currently, the authorities cannot recognize such • the simplified tax rate is going to be 2 percent throughout payments as taxable transactions – neither for the business the entire territory of Azerbaijan4 (except for catering, nor for the employee. According to the amendments, such where the simplified tax rate is going to remain at 8 cash advances will be treated as taxable employment income percent) in the hands of the employee.

4. Currently, the simplified tax rates in Baku and other parts of Azerbaijan are different: 4 percent and 2 percent, respectively.

12 Issue 32 in focus

Other changes in tax administration The Ministry for Taxes will take over from the State Social Protection Fund (SSPF) in collecting SIC. As a result, instead of two separate audits of payroll tax and SIC, conducted by the Ministry of Taxes and SSPF, businesses will have to pass only one audit, conducted by the tax authorities. Separate filings with the SSPF will no longer be required, either. As a part of an effort to strengthen the tax controls, the tax authorities are going to promote participation of wider consumer community by offering a cashback of up to 15 percent of VAT paid in retail and catering. Looking forward to the reform Changes to the Tax Code coming into force in 2019 represent a major reform of Azerbaijan’s tax regulation. The willingness to offer substantial tax cuts and set a reasonable tax burden for doing business in the country should be interpreted as the Government’s intention to build more transparent and fair relations with the taxpayers. Remembering that historically the major challenges of Azerbaijan’s tax environment were in the country’s tax administration, the lower tax rates alone may be not enough to improve tax compliance in the country. The tax reform must be accompanied by addressing deficiencies in such important areas as tax audits, appeals system, continued professional training of the Tax Ministry’s employees and interpretation of the law. Concerning the differentiation of individual taxpayers employed in the oil and gas sector and those working in other sectors, setting unambiguous differentiation criteria is extremely important task to avoid undesirable disputes between the taxpayers and the authorities. Tax policy alone cannot eradicate the informal economy: New tax preferences this requires a set of measures, including the promotion The current profit tax exemptions for the agricultural of a compliance culture in the business community, companies are extended until 1 January 2024. implementation of the International Financial Reporting Profit of educational institutions, including those established Standards, mandatory publication of financial reports and for the education of disabled individuals, will be tax-exempt, mandatory audit of financial statements, enforcement of unless paid out as dividends. the anti-money-laundering legislation, and many similar A very progressive change concerns donations to charity: a initiatives. ten-year profit tax exemption will be granted to the companies Author’s biography (except the public companies), donating up to 10 percent of Mr. Nuran Kerimov is a Partner leading the Tax& Legal practice their profit to the educational, medical, sports, and cultural of Deloitte Baku. He has significant experience in advising on organizations, meeting the criteria established by the both international and Azeri companies and individuals on a Government. variety of tax and associated business issues. Mr. Kerimov has In addition, 50 percent of income from the disposal of shares/ participated in numerous projects related to development of participation interest held for at least three years will be corporate structures, including international corporate structures exempt from profit tax. for Azerbaijan based companies, and structuring investments of One of the clear trends in the new approach to tax regulation foreign multinationals into Azerbaijan. His experience is centered is promoting cashless transactions. For three years starting on bank and insurance, energy & resources, pharmaceutical from the next year, profit tax on sales transactions in retail and other industries providing international tax, corporate and business and catering, completed with a bank card, will be individual taxation advice. reduced by 25 percent. Nuran holds Master of Laws (LL.M.) degree from the University The dividends received by the shareholders of a resident legal of Georgia, USA, and Bachelor of Laws degree from the entity with revenues of up to AZN 200,000 over consecutive Voronezh State University, Russia. Nuran is currently serving 12 months, not registered as a VAT payer, and holding a full as the President of AmCham, and a member of the Board of record of its revenues and costs, will be tax-exempt. Directors of Deloitte CIS.

13 in focus

Changing Wave of Reforms in Taxation Zaur Gurbanov Generally, employment taxation for oil and gas and public Tax Director, EY sectors remains as it is – 14% for taxable income up to AZN 2,500, and 25% on the amount above AZN 2,500 + AZN 350. In other words, it is taxation of the non-oil and gas private sector that is expected to undergo fundamental changes. Let us take a closer look at what is planned to happen here. New personal income tax rates The amendments to legislation on employment taxes In accordance with the discussed changes to be made to introduced by the Milli Mejlis (yet to be approved by the the Tax Code of Azerbaijan, for the next 7 years starting 1 President and due to become effective on 1 January 2019) January 2019 personal income tax rates for the non-oil and are among the most important and widely discussed news gas private sector are proposed to be as below: items at the moment. However, what do we really know and what should we know about these changes? Whom do Taxable monthly income Tax rate they impact and how? What is the new personal income tax rate and how do these changes affect both employees and Up to AZN 8,000 0% employers? Above AZN 8,000 14% of the amount above AZN 8,000 In anticipation of the new changes, many different opinions and interpretations could be found in publicly available It is proposed that in cases where, as well as working in oil sources, or even just overheard here and there. There are and gas, the taxpayer is also involved in other, non-oil and plenty of versions, but in this article you will find summarized gas activities, the employer shall keep separate accounting information based on official interviews and press releases of records for those employees working in multiple sectors. Tax Office officials. Otherwise, all employees will be subject to the income tax rates indicated for the oil and gas sector – in other words, What are the new amendments they will pay current income tax rates. The new rates will also apply to personnel providing about? administrative management services, such as accounting, The key point, which sets the tone for all the discussed audit, legal advisory, data analysis and processing services. changes, is that the lawmakers distinguish between the The next proposed change is for the non-taxable basic approach to employment taxation for (i) the oil and gas and allowance to be delinked from the living wage and fixed at public sectors, and (ii) the non-oil and gas private sector. AZN 200 for monthly income below AZN 2,500, and at AZN 2,400 for annual income below AZN 30,000, to be applied to oil and gas as well as government sectors. Meanwhile, the planned amendments can affect the existing tax exemption for life insurance sums paid to policy holders. In comparison to the existing clause of the Tax Code where the whole taxable income of the employee obtained from life insurance is fully exempted after repayment, the new amendments introduce a rule based on which only up to 50% of such income will be exempted. New social insurance contribution rates The discussed amendments also impact social insurance contributions made to the State Social Protection Fund by both employees and employers. Thus, for 7 years from 1 January 2019, social insurance contribution rates for the non-oil and gas private sector are proposed to be applied as follows:

14 Issue 32 in focus

payment of unemployment insurance premiums, collection Gross Taxable Withheld from Paid by Employer of debts, calculation of interest for late payment, and refund monthly income Employee of overpayment is planned to be entrusted to the Ministry of Below AZN 200 3% 22% Taxes and to be regulated by the Tax Code. Below you can see a visual representation of how employment AZN 44 + 15% of AZN 6 + 10% of the taxes for employees working in the non-oil and gas private Above AZN 200 the amount above amount above 200 sector (with income above AZN 2,500 and below AZN 8,000) 200 will change in accordance with the amendments:

The same approach as for personal income tax is envisaged EXISTING RATES by the amendments in respect of taxpayers working in both Employer contribution to SSPF sector groups. As such, it is proposed that employers will have to divide the accounting records for employees working Employee contribution to SSPF in both oil and gas and non-oil and gas sectors in order to Personal income tax apply separate social insurance contribution rates. Employer contribution to unemployment fund It is worth mentioning that the life insurance exemption rule Employee contribution to unemployment fund 62.64% regarding 50% of taxable income also applies to the changes Net Salary in social insurance contributions. 18% Current social contribution rates for the oil and gas and 16% 2% 0.41% government sectors are not planned to change, remaining at 0.4% the rates of 22% payable by the employer and 3% withheld from employees. Nevertheless, the amendments will still affect the oil and gas sector by applying an exemption on social NEW RATES insurance contribution payments for expatriate employees envisaged by the Azeri-Chirag-Guneshli and ShahDeniz .49% 77 Production Sharing Agreements to all existing similar pipeline agreements with respect to the hydrocarbon activities. Unemployment insurance rates remain

the same 13% 9% 0.43% 0.43% The unemployment insurance contribution rate is not planned 0% to be changed under these amendments. That said, 0.5% of the gross salary will still be withheld from employees. Undoubtedly, a huge amount of work has been completed At the same time, monitoring over the calculation and to draft the discussed changes to employment tax rules. As with the adoption of all amendments to legislation, there is still a lot of work to be done with respect to the adoption of the new changes and their implementation. At the moment, there are a number of points still to be determined (for example, defining which types of organization fall under each sector) and they are likely to be gradually clarified after the relevant changes take effect.

Author’s biography Mr. Zaur Gurbanov is a Tax Director at EY Azerbaijan. He joined EY in 2010. Zaur is involved in different tax advisory/ tax compliance/ tax review and tax accounting projects. He has participated in various conferences and forums with speech, joined the discussions with state authorities in connection with changes to the legislation related to tax and social contributions. Zaur has also been involved in a number of EY audit/ assurance/ advisory projects as a tax professional and provided the assistance with different questions/ issues. He has also been involved in preparation of tax policies, as well as technical specification for automation of tax calculation requiring experience in taxation, labor, finance, accounting and various legal issues. Among the clients he works with both international and domestic companies.

15 in focus

Azerbaijan and the European Union: Great Potential in Relations Gumru Eyvazova Code were adopted. The main amendments concern changes Legal and External Affairs Executive, to withholding taxes and the introduction of the transfer British American Tobacco pricing concept. The law became effective on 1 January 2017 and the implementation of the transfer pricing concept will be supported through an EU Twinning project. Furthermore, the Law on “Amendments to the Customs Code” were adopted by the Parliament in June 2017. According to the amendments, most of the applications (e.g. on the classification of goods, The European Union (EU) is considered to be one of the customs value, country of origin, amount of customs fees) significant institutions not only in the region, but also in and notifications sent by the customs authorities may be the World. This organization is one of the leading regional provided electronically. The EU supports the State Customs subjects almost in all spheres, including economy, trade, Committee through TAIEX, technical assistance and grant industry, tourism, etc. For Azerbaijan, which is a young support. independent country, it is important to expand the relations The EU stands ready to cooperate with and support with the EU in trade, tourism, migration, fighting terror and Azerbaijan in all areas of mutual interest, in full respect of all radicalism, fighting for human rights and other areas. the values and commitments shared by both sides. It is better While defining the significance in the current relations to mention the H.E. Ilham Aliyev’s between the EU and Azerbaijan, it would be beneficial to statement: “Azerbaijan intends to be as close as possible to analyze the Cooperation Agreement signed in 1996 between the European Union and today I want to repeat it once more. both sides. This Agreement was a key to build strategic Because it is a matter of strategic importance for us and there cooperation. The mentioned legal document covers various is a great potential of this relationship in the future”. significant spheres while looking through the official statistics. The EU is Azerbaijan’s the first trading partner representing 51% of Azerbaijan’s total trade, as well as, it is considered to be Azerbaijan’s biggest export and import market, with 65% and 33% share in Azerbaijan’s total exports and imports, respectively. Most compelling evidence is that, the EU’s exports to Azerbaijan consist predominantly of machinery and transport equipment, while EU imports from Azerbaijan cover mainly oil and gas (98% of total imports). Current numbers show that bilateral trade amounts to approximately € 14 billion. Specifically, the Parties have attained privileges by giving to one another most-favored-nation treatment in vital custom and trade areas which played a significant role for flourishing Author’s biography respective partnership. On 8 June 2017, the results of the Ms. Gumru Eyvazova is a Legal and External Affairs Executive second EU Business Climate Survey on Azerbaijan were at British American Tobacco Exports B.V. Representative presented at the EU-Azerbaijan Business Forum in Baku. The Office in Azerbaijan. For many years she was experienced in report acknowledges that important reforms were undertaken a banking sector and worked as a Head of Legal Division in in areas of customs, licensing, visa-management and some banks of Azerbaijan. She attended some trainings related business inspections. For instance, 77% of EU businesses to the management as a legal manager and was a Legal positively assess the launch of ASAN visa portal, 67% the Consultant of 2 prominent airline companies in the world such issuing of business licenses by ASAN, while 49% laud the as Austrian Airlines Representative Office and Qatar Airways temporary suspension of business inspections. However, Branch Office in Azerbaijan. She also serves as a Chair of reaching other objectives, such as stabilizing the financial the Board of Directors of local NGO, "Khazrim" Student-Youth sector and improving access to finance for SMEs, enhancing Organizational Public Association. transparency of the tax system, strengthening the rule of law, Recently, she graduated from School of Public and International as well as, increasing the number and availability of skilled Affairs of ADA University (LLM, 2018) as well as School of Law workers in the country’s labor market still require additional of (LLM, 2007) and School of Law of efforts. Also, on 25 December 2016, amendments to the Tax Baku State University (BSc, 2004).

16 Issue 32

member contribution

Direct and Indirect Impact of Coca-Cola System to the National Economy of Azerbaijan

Special Interview with Adrian Cernautan Caucasus Region Manager, The Coca-Cola Company

Cola and AmCham are true partners, which has been the case in Azerbaijan too. I got very excited when I heard about my possible relocation to Azerbaijan from Austria, where I was the Country Manager. Azerbaijan is very well-known in Europe as an interesting tourism destination. Me and my family have heard lots of good things about the country, people, nature and of course, cuisine – very delicious traditional meals that go perfect with chilled Coke. In my current position I am responsible for operations in the Caucasus region, working hand in hand with our bottling partners in this geography to ensure the success of our business.

How long have you been working for Coca-Cola? I joined the Coca-Cola Company 10 years ago. Started as a Commercial Manager in my home country Romania, then continued my career growth in the capacity of General Manager in Moldova, then General Manager in Hungary and finally General Manager in Austria. When the offer came for Azerbaijan, I discussed this new opportunity with my wife and The Coca-Cola Company has recently announced the children and we made the decision. It is a great pleasure for appointment of its new Caucasus Region Manager in me and my family to work and live in Azerbaijan. Azerbaijan, who has succeeded our friend and AmCham Board Member Asad Shirinov. We are delighted to introduce Now let’s move to business matters. How is Coca-Cola to you Mr. Adrian Cernautan. business doing in Azerbaijan? We can now say we have just hit the pre-devaluation sales Mr. Cernautan, thank you for the interview. I think we figures. The last two years were successful recovery years for should start with a short information about yourself. Tell us, for the industry and for the economy as well. With the right us how did you decide to come to Azerbaijan? strategy and a great execution, we showed fast progress. Let me start by greeting all AmCham members on behalf Azerbaijan is amongst the fastest growing businesses among the Coca-Cola family in Azerbaijan. Coca-Cola is an all Coca-Cola markets in the world and we are very proud of active member of AmCham community in many countries. this. Coca-Cola being an iconic American brand and a globally Of course, this progress wouldn’t be possible without the responsible corporate citizen is a great representation economic stability in the country. The growth of our business of American business. This is also part of the mission of is connected to the economic performance of the country and AmCham to represent US business. In other words, Coca- welfare of the people.

18 Issue 32 member contribution

How do you assess the economic performance of the country. As the research has revealed, one job at Coca-Cola country? supported 15 additional jobs in national economy. It means We all know that the country went through a serious shock that the Coca-Cola business in Azerbaijan through direct, several years back. The key achievement of the government indirect and induced impact supports over 5000 jobs in the after the crisis was to ensure macroeconomic stability. country. National currency was stabilized and they well managed to The most interesting part of the study was about the share lower the inflation rate. Now it is time to take measures to of Coca-Cola’s contribution to the economy in the beverage accelerate growth, especially in the non-oil sector. We are sector (both alcoholic and soft drinks). While Coca-Cola very optimistic about forthcoming tax reforms, which are accounted only for 7% of the employment in the beverage aimed at improving business climate and transparency and sector, the study showed, based on the available state eliminating shadow economy. This gives more confidence for statistics, that we accounted for 46.3% of total production in companies like Coca-Cola to invest more into the country. this sector and 48.5% of total GDP generated in 2014 in this segment. You mentioned investments, tell us about investments of Coca-Cola in Azerbaijan. How about CSR projects? We recently conducted a very interesting study assessing The study also touched on the sustainability programs that the contribution of Coca-Cola System to the national Coca-Cola supported in Azerbaijan. In the last 7 years Coca- economy of Azerbaijan. I don’t know of any similar studies Cola has invested over 2,5 mln USD in a number of long done here before. This was done by a group of independent and short-term programs aimed at improving well-being of economists who analyzed the impact of Coca-Cola System communities and the environment. Programs like Coca-Cola to the economy in 2014, the year just before the economic School Cup and Olympic Moves are aimed at development of downturn. The assessment was done based on the input- teens and youth. We have also been partnering with a number output method of famous economist, Nobel Prize Laureate, of organizations on women empowerment, over 4000 women W. Leontieff and assessed the impact on three levels: direct participated in projects that helped rural and urban young (Coca-Cola itself), indirect (Coca-Cola suppliers) and induced women acquire knowledge and confidence to succeed in their level (the multiplier effect) career or business aspirations. As regards the environment, Here are the key findings – total investments of Coca-Cola together with ADA University we planted nearly 50,000 olive to the economy are 164 mln USD and total taxes paid to and pine trees in Baku and surrounding areas. Drip-irrigation the state budget till 2018 are 253 mln AzN. This is one of system installed at the sites ensures that every single planted the largest investments by a foreign company in the non-oil tree gets watered on a regular basis. sector of the country. In other words, Coca-Cola is proud to be refreshing its Another interesting figure that came out of this study is consumers in Azerbaijan with world-class beverages, contribution of Coca-Cola to GDP. Our operations contributed contributing to national economy and helping communities 103.2 mln AzN to the income generation of the economy in and the environment thrive. 2014. This equals to 0.18% of GDP and 0.31% of non-oil GDP in Azerbaijan. This is a substantial contribution by Coca-Cola Our guest’s biography as a beverage producer. Mr. Adrian Cernautan carries 16 years of international In 2014 Coca-Cola contributed 37.2 mln AzN to the state management experience in FMCG sector, having worked for budget as taxes and social welfare payments. This accounted companies like Coca-Cola, Kraft Foods/Mondelez. Adrian for 0.52% of the total tax revenues of the state budget in 2014. speaks English, French, Italian and German. Mr. Cernautan Another interesting finding of the study was the extent of has graduated from the faculty of Economics, Transylvania impact of Coca-Cola operations on the employment in the University of Brasov.

19 member contribution

Introduction of Mediation for Commercial Disputes in Azerbaijan

Ruslan Mirzayev opposite party and thus gain a better view about the Adrem Attorneys Law Firm, court perspective of the case and its potential outcomes. Managing Partner 4. Mediator prevents deterioration of the parties’ relationships. When parties negotiate directly and without participation of a mediator, they usually do not compromise in order to protect their positions and their image of self-confidence and act aggressively. It is the duty of the mediators to prevent situations, when parties Mediation is defined as the “dispute resolution process cannot compromise, by using certain mediation tactics. whereby parties negotiate over the issues in dispute in 5. Mediation is shorter than court litigation and arbitration order to reach an agreement with the assistance of one or (usually mediation takes one day). Such short duration of more mediators”1. Mediators are neutral, independent and mediation reduces expenses of the parties. In addition, professional facilitators of negotiations. The process of usually execution of arbitral and court decisions requires mediation is based on parties’ agreement and autonomy, and lengthy court and execution proceedings. On the other is confidential. Mediations usually start with a joint opening hand, parties usually perform settlement agreements, session including all parties and the mediator, followed by reached during mediation, without delay. As a result, in separate and private meetings between the mediator and mediation parties obtain benefits and resources with the each of the parties. Usually, mediation does not take more present-day value, as opposite to indefinite future value. than one business day. 6. Unlike most court procedures, mediation is confidential. In general mediation has numerous benefits for parties of Such confidentiality in addition to protecting sensitive disputes. Mediation allows parties to learn positions of the information of the parties also keeps confidential the other parties in more detail and thus re-evaluate their own existence of any dispute between the parties and thus positions and explore whether there is any potential for allows the parties to continue their relationships without settlement. Provided that parties to mediation act in good losing their public faces. faith and are interested in a settlement, usually settlement 7. When efficient mediation system operates in a country, percentage in professional mediation sessions is more than mediation reduces the caseload and expenses of courts. 85%. In addition to benefits to private parties, the mediation Thus courts may concentrate more on complicated cases is also very helpful for improving efficiency of judiciary and and improve quality of justice. bailiff services and enhancing investment climate. 8. An effective mediation system will also decrease enforcement cases, as settlement agreements mutually Mediation owes its success inter alia to the following reasons: agreed by the parties will mostly be performed voluntarily. 1. In mediation parties are in control of the resolution of Accordingly, mediation will increase efficiency of their disputes. Due to such control, parties do not face enforcement of court decisions. decisions of third persons (such as judge or arbitrator), 9. On the other hand, availability of effective alternative which are unreasonable from the parties’ perspective. dispute resolution mechanisms reduces operational and Mediation allows the parties to decide what best serves transactional expenses of companies and thus improve their interests. investment climate in a country. Thus, strengthening of 2. Mediation allows companies to control their litigation risks mediation in Azerbaijan may also improve its international and exposures. Companies may evaluate their chances investment climate ranking. at courts and/or before arbitral tribunals, and settle such disputes in advance without taking risks of litigation or arbitration. By mediating disputes, companies will have more predictable and scalable risks in the future. 3. Mediation allows an opportunity with the help of the mediator to re-evaluate their own positions and the position of the opposite party. During mediation, parties learn about legal arguments and evidence of the

1. Recommendation Rec (2002)10 on Mediation in Civil Matters, adopted by the Committee of Ministers on 18 September 2002 at the 808th meeting of the Ministers’ Deputies.

20 Issue 32 member contribution

other settlement agreement under the legislation of the Republic of Azerbaijan. In conclusion, we would like to note that the mediation has proven itself as a reliable alternative to lengthy, expensive and risky court and arbitration proceedings for businesses in many countries around the world. Taking into account its advantages, it is not going take too long for mediation to become one of the most preferred dispute resolution methods for Azerbaijani businesses.

Appreciating the advantages of mediation for business community, “Strategic Roadmap on National Economy and Major Industries of Economy” approved by the President of the Republic of Azerbaijan distinguishes the importance of mediation among alternative dispute resolution mechanisms for small and medium businesses, and sets an objective to improve the indicators of pre-court dispute settlement by small and medium businesses by 2020. In addition, a new Law on Mediation is supposed to be adopted in Azerbaijan. While there is no official regulatory act or law regulating mediation, or providing a formal definition for mediation currently in Azerbaijan, the mediation services are not prohibited and are available in Azerbaijan. The legislation does not prevent parties from entering into an agreement about pre-court dispute resolution mechanisms. The civil procedural legislation states that if the parties have agreed on some type of pre-court dispute settlement proceedings, the courts may in certain cases leave the claim without consideration until the parties follow such proceedings2. We believe one of the types of such pre-court dispute settlement mechanisms is mediation. In addition, while the legislation does not specifically regulate settlement agreements reached in mediation, it governs settlement proceedings in general. Accordingly, settlement agreements reached in mediation are enforceable3 and treated as any Author’s biography Mr. Ruslan Mirzayev is Managing Partner at Adrem Attorneys Law Firm and International Mediator. He is an attorney qualified in the Republic of Azerbaijan and the State of New York, with more than 10 years of general experience, mostly in the practice of alternative dispute resolution, international arbitration, banking and finance laws. Mr. Mirzayev represented parties in multi-million international arbitration cases and in international negotiations. Ruslan is also an international mediator, and has successfully mediated numerous disputes. He has been a fellow at JAMS, one of the largest mediation organizations in the U.S. and the world, and is currently a Senior Fellow at Weinstein International Foundation, a U.S. based foundation dedicated 2. Civil Procedural Code, Article 259.0.1. to mediating major public interest and commercial disputes 3. In this regard, the settlement agreements reached in court proceedings on the one hand and the settlement agreements reached without court proceedings on the other are treated differently. Under throughout the world. Ruslan Mirzayev is also founder of ArbMe the Civil Procedural Code if a judge approves settlement agreement between the parties to a civil Dispute Resolution Center in Azerbaijan. He holds LL.B. degree dispute the judge terminates the proceedings and includes the terms of the settlement agreement in the court decision. On the other hand, the substantive legislation also regulates settlement agree- from Baku State University, LL.M. degree in International ments entered into without court proceedings and without court approval. Under the Civil Code of Commercial Arbitration from Stockholm University and another the Republic of Azerbaijan the parties to a settlement agreement may not refer to previous disputed and uncertain issues that have been settled in the settlement agreement and the parties shall only LL.M. degree in International Law (with concentration in be bound by the terms of the settlement agreement. Thus, a settlement agreement even when not International Dispute Resolution) from the George Washington approved by a court also excludes all previous disputes and allows its parties to bring a claim before courts on the basis of the settlement agreement. University Law School.

21

member contribution

Beneficial Ownership Disclosure Important tool for attracting investors and increasing transparency of taxpayers

Yunis Salayev Sabit Abdullayev Managing Partner, Director for Legal Services, BDO Azerbaijan BDO Azerbaijan

Amid turbulence in oil prices, the government of Azerbaijan What beneficial ownership disclosure explores various options to increase non-oil revenues. On one hand, this can be achieved through attracting foreign investors will help to achieve, if introduced to local economy and, on the other hand, though increasing Beneficial ownership disclosure allows the public to know the transparency of taxpayers. This article suggests to have who owns a company or benefits from a commercial activity. a look at beneficial ownership disclosure as an important tool It makes it easier to do business by contributing to increasing for achieving these goals. The article is based on materials trust and confidence in the companies who are investing in or developed within the project Supporting The Implementation contracting with Azerbaijan’s companies. In addition, it allows Of The Roadmap For Beneficial Ownership Disclosure the government to monitor who is ultimately earning how For The Extractive Industries In Azerbaijan, where BDO much in revenues and to ensure that related taxes, duties, Azerbaijan LLC acts as consultant in a team with UK firms etc. are collected in accordance with applicable laws and Engaged Consulting Ltd and Michael Barron Consulting Ltd. regulations. Also, it will help improve transparency and good governance. Importance of beneficial ownership disclosure Examples of good practice in creating In accordance with the current trends to implement beneficial ownership disclosure internationally recognized measures to prevent tax evasion, corruption, financing of terrorism and money laundering, mechanisms there is more focus on the beneficial ownership of companies Beneficial ownership disclosure is firmly on the international globally. The need for transparency is even more sensitive agenda and is likely to become the norm within a few years. in such areas as extractive industry as subsoil reserves are Many countries are introducing the concept of beneficial generally regarded as the wealth of nations - meaning that all ownership into their domestic legislation and undertaking citizens shall benefit from extraction of natural resources. On efforts to allow disclosure of such information. In most cases, the other hand, there is increased demand for transparency the focus of these efforts is in the context of initiatives to from international investors and finance providers. combat money laundering, corruption, tax evasion and financing of criminal activities. The UK presents an example of international good practice What is beneficial ownership? in many aspects of its beneficial ownership register. Its Beneficial ownership refers to natural persons who directly definition, including reporting thresholds, is based on current or indirectly ultimately own and derive financial benefit from international norms, as is the extent of information collected. a company or commercial activity, which allows stakeholders The register has a statutory basis and is publicly available. to ascertain who really benefits from the generated revenues The UK has also achieved a high level of compliance, in or controls companies involved and enhances accountability. part because the register is based on existing company Beneficial ownership disclosure prevents the true beneficiaries reporting systems. Companies House to which UK-registered from hiding behind opaque shell companies or using complex companies were already obliged to report information corporate or other legal structures to avoid the reporting of maintains the register. However, it has yet to address issues income, to evade tax obligations, to disguise conflicts of of non-compliance and there is no active verification process interest or engage in money laundering activities, corrupt in place. practices, or financing criminal practices or violent activities, Another example is Ukraine which also represents an example including terrorism. of international good practice. Like the UK, its register has

23 member contribution

a statutory basis and the definition is based on current step legal action plan to achieve the required standard of international norms. However, Ukraine has experienced disclosure. As it was initiated through EITI, it is limited to difficulties in ensuring that its register is complete. It also does extractive industry only. not have a verification process in place. However, there are In February 2017, the Asian Development Bank received a a number of factors that limit the usefulness of the Unified request from SOFAZ to support the RBOD implementation by Register for identifying beneficial owners: complementing the above activities (initially to be funded by the register is incomplete and to date only around 70% of SOFAZ) in the areas of identifying international good practices companies are registered; and drafting necessary amendments to Azerbaijan’s existing the information is only available in Ukrainian, so limiting the legislation to enable RBOD implementation. BDO Azerbaijan ability of non-Ukrainian speakers to access the information; LLC, Engaged Consulting Limited, United Kingdom, and and there are issues with identifying foreign owners as the Michael Barron Consulting Ltd, United Kingdom have same name can be transliterated in differing forms. come together for the project to support implementation of Indonesia has demonstrated leadership in beneficial Azerbaijan’s Roadmap for Beneficial Ownership Disclosure. ownership disclosure. It is one of the first Asian countries to The Asian Development Bank is funding the project. The introduce a disclosure regime that applies to all companies project is currently undergoing. All interested parties may registered in the country. The country is taking a staged check reports already published at the website of SOFAZ (to approach by first introducing an obligation for companies be soon migrated to a new website of Azerbaijan’s Extractive to compile information and report it to the government. Industry Transparency Commission) and provide their The government will then use the information to create a comments. database. As is the case with other countries (such as the UK and Ukraine), Indonesia is using existing reporting systems Authors’ biography linked to its company registry to support beneficial ownership Mr. Yunis Salayev has more than 16 years of professional disclosure. background in Azerbaijan, Russia and other CIS countries. He is the CEO of the firm who has established and running BDO in Current state of affairs in Azerbaijan Azerbaijan, developing and implementing company strategies, managing client relationship, service delivery, human resources, At present information not only on the beneficial ownership business processes and risks. but also on direct ownership is restricted from public. Such Yunis is a Fellow Chartered Certified Accountant (FCCA, UK), information is regarded as commercial secret. In order to Certified Fraud Examiner (CFE, US), Certified Internal Auditor achieve compliance to international good practice standards, (CIA, US), Certified Information Systems Auditor (CISA, US) and Azerbaijani legislation shall undergo substantial legal a Member of Chartered Institute for Securities and Investment reforms. In addition, a reliable mechanism on disclosure and (MCSI, UK). His primary specialisation is in audit of IFRS verification of beneficial ownership shall be created. financial statements in accordance with International Standards With regard to the definition, Azerbaijani law already contains on Auditing (ISA), Azerbaijan taxation, and risk advisory. a beneficial ownership definition, first introduced in the Yunis holds MBA with Merit from Imperial College London Law of the Republic of Azerbaijan on the Prevention of the Business School and honors Bachelor and Master degrees Legalization of Criminally Obtained Funds or Other Property from Azerbaijan State Oil Academy. He has been a visiting and the Financing of Terrorism. Although the definition is lecturer at the School of Economics and Management of Khazar quite comprehensive it fails to address certain issues required University in Baku. by international good practice, such as a legal entity being treated as the ultimate beneficial owner, not having a specific Mr. Sabit Abdullayev has over 14 years of legal practice in threshold for reporting individual beneficial owners, whether Azerbaijan and currently in charge of tax & legal services at politically exposed persons or otherwise. The definition BDO. applies only within the anti-money laundering context. Sabit has extensive expertise and experience in areas, as banking and finance, mergers and acquisitions and general business advice on various matters of Azerbaijani law. In Implementation of Azerbaijan’s roadmap particular, he has conducted due diligence of several banks for beneficial ownership disclosure and participated in structuring of transactions on sale of shares In December 2016, the Government of Azerbaijan, acting in local banks. through the Azerbaijan Extractive Industry Transparency Sabit is a member of Azerbaijani Bar Association and has Initiative (EITI) Secretariat established under the auspices of represented clients on a number of high profile litigations. He the State Oil Fund of the Republic of Azerbaijan (SOFAZ), has LL.M. degree in international business transactions from published a Roadmap for Beneficial Ownership Disclosures Central European University, as well as a master degree in law (RBOD) in the extractive industries in Azerbaijan in line with from Baku State University. He is fluent in Azerbaijani, English the 2016 EITI Standard. The roadmap contains a step-by- and Russian.

24 Issue 32 development & education

Capacity Building: a Vital Factor of Economic Development

Walid Madhoun Partner, Mast Canada

The Belt and Road Initiative is the ambitious Chinese led and multinational project to revive and expand the historical Silk Road trade route. Azerbaijan is at the center of this initiative and it stands to realize great economic gains through its new port, highways, and expanding rail network. Economic infrastructure, particularly railroads and ports, generating diversification is central to Azerbaijan’s strategy to end revenue from passing freight will be relatively easy. But what if its reliance on the oil industry. Yet despite investment in Azerbaijan can add value to this new supply chain or develop infrastructure, Azerbaijan will not realize the potential of this its own industrial sector to take advantage of the trade routes grand initiative without a well trained workforce that is able to facilitate the exports of its own goods? Such a move will to provide technical and management skills to internal and exponentially grow the economy and increase the wealth of external investors the country and its people. The mere collection of fees from It is no accident that American corporations spent about passing freight will seem insignificant as compared to what US90 billion dollars on training their staff in 2017; this is a Azerbaijan can potentially earn from a thoughtful strategy 33 % increase from the previous year representing 3.6 % and action plan to develop its manufacturing, agricultural, and of the payroll on average1. A well trained work force is a other non-oil sectors. crucial enabler of economic development. The World Bank Viet Nam provides an ideal example wherethe local industry agrees with this approach and has dedicated about 15% added value toa foreign supply network. The Vietnamese of its operations to Human Capital Projects2. Without such case study is instructive to Azerbaijan as it demonstrates how investment in human capital, resources will flow to an cooperation between multinational corporations and local international workforce taking with it tax revenue, in country firms can give rise to light manufacturing. A useful example is spending, personal savings, and further local investment the motorcycle industry. It turned Viet Nam from an importer to especially through the development of Small and Medium an exporter of the favoured transport mode in South East Asia. Enterprises and real estate. Christine Ngoc Ngo (2017) writes that industrial upgrading On February 15, 2018 Caspian News online reported that was mostly driven by foreign direct investment. Although Azerbaijani officials see their country as being strategically Dr. Ngoc Ngo further notes that market competition among located along the proposed route that connects all of Asia, Japanese and Chinese firms that invested in Viet Nam led Europe, and Africa. Caspian News Online reported that “cargo to significant increase in technical knowledge, what attracted passing from China to Europe is estimated to be around 240 these investors in the first place was the presence of a ready million tons per year, and Azerbaijan is looking to collect a and capable workforce thus reducing the start-up costs and fee from having some of it pass through the country via One increasing the attractiveness of Viet Nam as a destination for Belt, One Road” (OBOR). But OBOR can mean much more investment. It is worthy to note that this experience has had revenue for Azerbaijan than merely the collection of fees from many positive impacts; Viet Nam has been called the smallest passing freight. Asian Tiger and has, in March 2018, been forecasted by Asia The OBOR crosses more than 60 countries, connecting Briefing as being the next Asian manufacturing hub with over the Pacific to the Atlantic, passing through the regions of 44% of Foreign Investment going towards the manufacturing the Mediterranean, Black and Caspian basins via road, rail, sector. and maritime routes – A truly modern Silk Road. With heavy Since joining the WTO in 2007 Viet Nam’s economy Azerbaijani investments in recent years in the country’s has gradually shifted focus from agriculture to industry and services, and international exports continue to grow 1. Training Industry Report. https://trainingmag.com/trgmag-article/2017-training-industry-report/ experiencing some of the fastest growth in recent years3 with 2. World Bank Annual Report 2017.http://pubdocs.worldbank.org/en/908481507403754670/Annual- Report-2017-WBG.pdf 3. IMF: World Economic Outlook Database, October 2018, Viet Nam

25 development & education

expected four-fold value of 85 million dollars in 20186. Coupled with the international relations it is developing, AzerGold is poised to become a model of efficient and effective economic development. Industry and manufacturing are the most interesting and important area of growth for Azerbaijan. In Viet Nam, the sector contributed 40.1% of the GDP in 2004, and employed 12.9% of the workforce. From 1994 to 2004, the industrial sector grew at an average annual rate of 10.3%. The top manufacturing sectors to experience rapid growth include: food processing (presented above under agriculture), cigarettes and tobacco, textiles, chemicals, and electrical goods. Benefits from its proximity to China with lower labor cost, Viet Nam became the new manufacturing hub in Asia, especially for Japanese and Korean electronic firms including Samsung which produces about 40% of its phones in Vietnam7. The opportunity for economic development in sustained growth of around 6.1% until 2025 according to BMI Azerbaijan may be found in the same industrial areas but it is Research. not limited to these given the entrepreneurship of the young Privatization of state-owned enterprises has also played an and enthusiastic Azerbaijani population. There are several important role in attracting FDI. Before 1990 there were only areas of potential growth given Azerbaijan’s deep history not around 200 foreign direct investment (FDI) projects in Viet least of which is the industrial design sector which feeds small Nam valued at US$1.6b. But in 2015, the total value of FDI scale manufacturing. projects was worth US$11.8b made by investors from more This sector is limited only by the imagination of the Azerbaijani than 100 countries. (According to figures from the World entrepreneurs but it needs two important ingredients: the Bank) first is support and promotion through start-up financing. The impact of the Vietnamese strategy has been nothing This is already taking place through the efforts of a number short of stellar: in 2017, Vietnam’s trade as a percentage of facilities and agencies such as AzPromo among others. of GDP reached over 200%4.The proportion of people in The second is the development of technical and managerial extreme poverty fell from above 70% in the early 1990s skills of the Azerbaijani work force. Not unlike Viet Nam to around 10% in 2016. The World Bank credited the jobs where EuroMonitor finds that labor productivity is lower than created by Vietnam’s export sector for this remarkable ideal, Azerbaijan also suffers from shortage of vocational poverty reduction5. The Vietnamese economy depends on skills among the workforce. Both countries have ineffective the performance of four sectors which are driven mostly by higher education and vocational education providers. And like Small and Medium Enterprises (SME), these are: Agriculture, Viet Nam, Azerbaijan is an attractive manufacturing location fishery and forestry; Energy, mining and minerals; industry because of its young workforce and reasonable labor costs. and manufacturing; and service and tourism. Banking and Its people receive a good basic education and literacy levels finance can be added as the sector has attracted important are good. Azerbaijanis are very open-minded, creative and FDI. For example, VietinBank is partly owned by Bank of Tokyo positive-thinking and they are ready to learn. Indeed, the Mitsubishi UFJ (20%) and International Finance Corporation Azerbaijanis in Europe and North America have achieved (10%) while Vietcombank is partly owned by Mizuho (15%). great success and are model students and entrepreneurial Despite the difference in geography there are similarities problem solvers. between Viet Nam and Azerbaijan in the sectors that can The Vietnamese experience has not been without challenges. drive growth, especially in agriculture, mining and minerals, EuroMonitor warns that Viet Nam’s dependence on trade and and manufacturing. foreign investment opens it to vulnerabilities which it cannot Azerbaijan can enjoy growth in its agriculture and fisheries control. Demand from major trading partners, interest rates, sector through the development of fish farms to produce international economic instability all contribute to these risks shrimp, fish, and other exportable species. In terms of and can lead to migration of FDI. The Trans-Pacific Partnership agriculture, Azerbaijan can develop its processing capacity Agreement (TPPA) and its dependence on China makes Viet for export thus adding value to raw food currently being Nam even more vulnerable, especially now with a trade war exported. Azerbaijan is also making significant advancement in full swing between China and the USA. However, Viet Nam in the mining sector. A shining example of this is the strategic is now well versed in making trade arrangements with other efforts of AzerGold that have led growth in the precious countries and with the US directly which may lessen the blow. non-ferrous metalsfrom 20.1 million dollars in 2017 to and Azerbaijan can learn from the Vietnamese experience and

4. https://qz.com/1409407/vietnam-is-the-most-globalized-populous-country-in-modern-history/ avoid its pitfalls. amp/ 6. Azernews: 5 July, 2017 5. https://www.worldbank.org/en/news/press-release/2018/04/05/vietnam-continues-to-reduce- 7. https://www.economist.com/asia/2018/04/12/why-samsung-of-south-korea-is-the-biggest-firm- poverty-according-to-world-bank-report in-vietnam

26 Issue 32 development & education

that have not been blessed with natural resources. Just in time inventory management was a product of companies following cheap labour costs in Asia. The textile and clothing industry is among the pioneers of this method. Sri Lanka was a favoured destination for western clothing companies, as was Bangladesh and China. The Chinese case is most encouraging as the country moved from low skilled labour intensive supply of cheap workers to now being the hub of technological manufacturing with excellent lines of communication and high-tech products such as those emerging from Xiaomi among others. In addition to reasonably priced labour, the most important ingredients necessary for an economy to take part in this global supply chain is proximity to international trade corridors and a highly skilled labour force that can attract middle-tech and high-tech investors from within the country and from abroad. The Road Map speaks of a ‘new economic growth paradigm’ based on strategic choices.The author of the report, Dr. Musayev, points to two models of growth as i) labor-intensive growth model and ii) productivity and efficiency based growth. The author argues that transition to an efficiency growth model for better integration into the global value chain is the strategic choice but that an approach that combines both models in the short term may be necessary. This is true only if there is a concerted investment in the human resources Specifically in the case of Azerbaijan, it is instructive to look capacity of the workforce in the country. While there are many at the Decree Number 964 of the President of the Republic of projects in Azerbaijan investing Technical and Vocational Azerbaijan dated December 26, 2014. The Decree approves Education and Training (TVET) and while the Road Map does the State Program on the development of the industry in address the issue of TVET, there has yet to be buy-in from the Republic of Azerbaijan in the years 2015-2020. It is also the industrial sector and from society at large to fully embrace important to consider the Azerbaijan Economic Reforms the importance of technical skills. Azerbaijan’s investment in Review (2017) produced by Dr. Vusal Musayev and based TVET is now driven by donors, mostly the EU and GIZ who on the Strategic Road Map On National Economy And Key are promoting a dual-like approach to TVET (in-class and in- Sectors Of The Economy Of Azerbaijan. field). Yet this is not enough. To capitalize on the opportunities The priority of the State Program on the Development that are being presented by the OBOR project, the industrial of the Industry is stated as “to increase the economic sector as well as the relevant ministries must invest more competitiveness and to improve the structure of the heavily and strategically in the technical education and economy from the point of the development of industry.” training sector. Technical education and training can no longer The Presidential Decree recognises that industrialisation be seen as the last educational option for students who fail to encompasses social, scientific, and cultural factors of enter university or for uneducated adults who have learned development through increased employment, income through observation and trial and error. Technical education level, urbanisation and/or rural development, and scientific and training must be seen as a lifelong learning opportunity; research and development. The Decree recognizes also the it must be seen as a viable and respected career choice, importance of a skilled workforce to deliver on these promises. and one that is valued as an engine of economic growth The Decree also recognizes economic development requires and prosperity. In short, effort is required to professionalize moving away from an over-reliance on low-tech and labour- the skilled vocations. This view is echoed by Dr. Musayev intensive sectors towards middle-technology sectors such who writes in the Economic Review that the “development of as chemicals, metallurgy, shipbuilding, machine production highly specialized human capital is required” as a prerequisite and eventually to introduce high-technology sectors such as and complement to all other initiatives designed to promote electronics, computer production, pharmaceutics and space economic development. industry. This does not suggest that one must replace the Looking at the UNESCO indicator labelled Government other but that a balance needs to be achieved as any society expenditure on education as a percentage of GDP (%) we see will always need different sectors to function. that Azerbaijan spends about half of what Viet Nam spends The modern economics of supply chain management within on education8. Interestingly, the rate has steadily decreased a globalised world creates new opportunities for countries for Azerbaijan since the 1990s and dipped considerably that have traditionally relied on natural resources or those 8. Data extracted on 10 Oct 2018 11:34 UTC (GMT) from UIS.Stat

27 development & education

because of the financial crisis starting 2008 and is now term non-credit courses or providers such as ILO Training regaining momentum but not sufficiently quickly enough to Centre in Turin among others scattered in Dubai, Europe, and translate into important improvements in the Vocational and North America. These organizations will charge upwards of In-service training sector. US$5,000 for a standard management course in addition to air fare and lodging. The second option is significantly less expensive, and while it is contextualized to Azerbaijan, it lacks the credibility presented by a foreign provider. However, Azerbaijan now has a third option. Universitas International is a new training company established in Azerbaijan in 2016. It brings to the country and region world class training through partnerships with North American and European Universities, Technical Colleges and Polytechnics. Course are designed, delivered and assessed by the professors of these international education institutions. Universitas focuses on active, practical and applied training through a combination of theory and substantial practice through on-hand and on the job training. The courses offered include management, agricultural, industrial, Information Technology, and Cyber Security (policy and technical). In addition to the standard courses, Universitas offers customized training that is designed with the clients to fit their strategic targets – in short, Universitas is a partner in capacity development and not merely a training provider. In addition to bringing world class technical and management training to Azerbaijan, Universitas will attract trainees from Central and Eastern Europe, Africa, the Middle East and Asia positioning Azerbaijan as a world class training hub. Azerbaijan is poised to experience tremendous economic growth as a result of its location on the One Belt One Road Project. To actualize this opportunity, Azerbaijan cannot rely solely on fees collected from passing cargo. Indeed, it can grow such revenue exponentially if it can add value to the supply chain and use the OBOR for the export of its goods. Importantly, Vocational training and in-service training are Geography is an important factor, but it is not enough. Both not strictly a government responsibility. Looking at the US the public and private sectors must invest more strategically example, the spending on in-service training was not made in developing the capacity of the work force not only to make exclusively by the federal and state governments but by the Azerbaijan an attractive destination for foreign investment private sector. This is a key factor in the development of skills. but to give Azerbaijani investors the workforce needed to Most corporations in North America reserve a percentage compete in the world. of their salary mass for staff training. Indeed, the prospect of professional development is a competitive element in Author’s biography attracting the best and the brightest. Importantly, staff training Mr. Walid Madhoun (LL.M) plans, develops, restructures, is not merely a requirement with which to comply, it must and improves the performance of institutions, programs and be responsive to the strategic needs of the country and the projects in Europe, Middle East, Asia, and Africa. Mr. Madhoun companies who employ the staff. This is not happening in a has worked in more than 30 countries advising businesses, strategic way in Azerbaijan and the private sector has yet to governments, and bilateral and multilateral financial embrace the importance of capacity building as a strategic institutions. He has been working on projects in Azerbaijan management factor rather than a perk or compliance. focusing on economic development, education reform, and Azerbaijani companies have two options for in-service legal reform focusing on KPI and Performance Measurement training. Either expensive overseas training programs for and Management. Mr. Madhoun is a member of the Board a very small number of staff or less expensive training in- of Directors of ARPA-Group, an associate member of the country for many employees delivered by the dozens of local American Bar Association, Member of the Canadian Evaluation training delivery providers. There are positive and negative Society, and a Member of the Advisory Board of the Centre factors for each option. The first is expensive, and despite for Governance and Public Management at Carleton University its lack of strict responsiveness to the Azerbaijani context, it in Canada. He completed Post Graduate Studies in Laws at provides an impressive certificate with the logo of the host the University of London specializing in International business, institution. Such institutions can be universities offering short trade and competition law.

28 Issue 32 AmCham Azerbaijan About Us The American Chamber of Commerce in Azerbaijan is a private, non-profit business association supporting and promoting the interests of business in Azerbaijan.

Established in 1996, AmCham is composed of over 280 members and associates­ active in every sector of the Azerbaijani­ economy. We represent 80% of all foreign investment, as well as a significant portion of local investment which allows us to promote American, Azerbaijani and multinational corporations. This includes leading companies in Energy, Banking, ICT, Legislative/ Financial Consulting, Professional Services,­ Education, Real Estate Development, Health, Transportation, Travel and Production fields. An active and positive influence in Azerbaijan, we conduct our mission with integrity and respect for the country, observing all local laws and insisting on the highest ethical standards in all relationships and transactions. To apply Membership

Why join? To apply for affiliation with AmCham, There are two types of affiliation with a candidate must submit a written AmCham: Member and Associate. Key member benefit – application in the form adopted by Member status includes voting best networking opportunities in the Board of Directors. Membership privileges and eligibility for Board and Azerbaijan! applications are available at the committee chairmanships in addition AmCham office or on our website at to the privileges granted to Associates. As a member of AmCham, your www.amcham.az The application For affiliation as a Member, a candidate company has access to a vast network form should be completed and sent to must be a legal entity, registered and of business information and contacts in our office with the company registration doing business in Azerbaijan and be Azerbaijan and in the US government, certificate issued by the Ministry of in good standing in the community, as as well as valuable information on US Justice of Azerbaijan. determined by the Board of Directors. businesses across Europe through A candidate meeting the objective and A legal entity, branch or representative ECACC (European Council of American subjective requirements for affiliation office of a legal entity is eligible to Chambers of Commerce) and US with AmCham is accepted as either a be affiliated with AmCham as an Chamber of Commerce. Member or Associate upon receiving Associate, subject to the Board of an affirmative majority vote of the Directors’ determination of good Additional Member Benefits include: Board of Directors and paying the first standing in the community. year’s fee for the candidate’s category Associates are eligible to participate in • Annual Employee Salary Survey of affiliation. various activities; receive our regular • Quarterly Inflation Survey To maintain affiliation with AmCham, publications, including the Membership • AmCham Membership Directory Members and Associates must Directory, Annual National Employee • AmCham Resource Library continue to meet our eligibility Salary Survey and Quarterly Inflation requirements, be in good standing in Survey. Associates, however, are not For more detailed information please the community, and be current with all entitled to vote or serve on our Board visit our website www.amcham.az financial obligations to AmCham. of Directors.

29 AmCham Azerbaijan

Business Events Meeting with U.S. Deputy Assistant Secretary of State

On October 10 members of AmCham Azerbaijan had a chance to participate in a roundtable discussion with U.S. Deputy Assistant Secretary of State George Kent who is in charge of the U.S. policy on Azerbaijan and the Caucasus region. This closed-format meeting became a unique opportunity for business leaders of the AmCham community to engage directly with a senior State Department official on a range of issues – with a particular focus on the effect of Iran and Russia sanctions.

employers and job seekers together. This opportunity is unique for young people striving to develop themselves. A chance to get a job or internship in one of the leading companies presented here will definitely contribute into the future of the Azerbaijani youth.” In total, more than 900 young people – primarily the ones who started their career as volunteers at Formula 1 Azerbaijan Career Fair “Small Step to a Great Grand Prix and other grand events – took a step closer to the promising job and internship opportunities offered by Opportunity” participant companies and organizations. On October 5, Career Fair - “Small step to a great opportunity”, organized jointly by Baku City Circuit (BCC) and AmCham Azerbaijan. Nearly 40 foreign and local companies presented themselves to offer job and internship opportunities for young people. Ms. Irana Ahmadova, Head of the Human Resource and Workforce Department at BCC, opened the event. Mrs. Natavan Mammadova, AmCham Azerbaijan Executive Director, as well as Ms. Elnara Mammadova, Chair of AmCham HR Committee, greeted participants of the Fair on behalf of the Chamber. “I am pleased to witness that businesses in Azerbaijan are forerunners with implementation of best practices in human resources management, said Mrs. Natavan Mammadova. I am especially happy to note that AmCham HR Committee is among the most active and demanded ones. I do hope that today’s event will help job seekers and employers (most of which are long-standing AmCham members) “get in contact” effectively. Ms. Elnara Mammadova highlighted the importance of organizing such kind of events. “The Career Fair brings

30 Issue 32 AmCham Azerbaijan

HR Forum 2018

AmCham Azerbaijan was pleased to partner the Forum dedicated to “Progressive Azerbaijani experience in Human Resources Management” organized by ABTC, AmCham, ADA University, ASK and HR Society on September 15 at ADA University. On September 14, AmCham Azerbaijan hosted its traditional The aim of the Forum was to share Azerbaijani experience Back-to-Business Cocktail Reception. in human resources management with committed HR The beginning of September signifies the end of summer professionals in Azerbaijan and promote the Azerbaijani holiday and the start of a new business chapter, packed model in this field. All HR managers, HR professionals, HR with lots of events and new opportunities. On this occasion, researchers, trainers and consultants, as well as those who more than 250 members of AmCham community joined us want to be specialized in HR were invited to join the event. to network, enjoy delicious food and drinks, and launch the Mrs. Natavan Mammadova, AmCham Executive Director, business season of 2018-2019 together. made a welcoming speech on behalf of AmCham. Mrs. Traditionally, the Reception became a unique opportunity for Elnara Mammadova, newly appointed Chair of AmCham HR them to come together after a summer break, to share latest Committee, was among key speakers. news and impressions, to get recent updates and finally enjoy the best networking opportunities in Azerbaijan. AmCham Back-to-Business Cocktail Reception

31 AmCham Azerbaijan

Round-table Discussion with Mr. Safar potential. Azerbaijan is already transforming into a logistics center that combines East-West and North-South transport Mehdiyev, Chairman of the State corridors, which is also one of the factors that ensure rapid transit potential of the country. Customs Committee The Chairman of the Committee underlined that the organization of the Annual Assembly and Conference of the International Association of Authorized Economic Operators in Baku on 2-4 May 2018 is a clear example of our country's special position in this area, as well as the international community's commitment in relations with Azerbaijan. Mr. Mehdiyev stated that the implementation of the “Green Corridor”, simplification of customs clearance, compliance with international standards provide conditions for fast and barierless implementation of international trade, improvement of service quality and full transparency of the customs system. Furthermore, Mr. Mehdiyev said that thanks to our successes and achivements, Information Technologies Conference and Exhibition which is the largest event of the World Customs Organization in ICT sector will be held in Azerbaijan. We look forward for your active participation.

On September 11, the representatives of ICT sector member- companies of AmCham Azerbaijan were invited to a round- table discussion with Mr. Safar Mehdiyev, Chairman of the State Customs Committee of the Republic of Azerbaijan. During the meeting, the head of the State Customs Committee, customs service lieutenant-general Mr. Safar Mehdiyev noted that the Customs have always attached special importance to the establishment of mutual relations, effective cooperation with businesses, as well as sincere dialogue between the Customs authorities and AmCham Azerbaijan. It was noted that purposeful and innovative reforms implemented by President H.E. Ilham Aliyev create favorable business environment in the country, develop entrepreneurship and non-oil sector, and boost export

AmCham President, Mr. Nuran Kerimov expressed his confidence for holding the Information Technologies Conference and Exhibition in Azerbaijan, which is a pleasing occasion. Mr. Kerimov also indicated his gratitude for organizing this meeting and highly appreciated for the leadership of State Customs Committee. AmCham Executive Director, Mrs. Natavan Mammadova, said that the reforms in the customs system are carefully monitored, and these reforms already yield positive results. She underlined that the accusations against Customs are not true and carry subjective characteristics. Expressing her gratitude for the business cooperation between the Customs Committee and AmCham Azerbaijan, Mrs. Mammadova see a confidence in further development of cooperation. At the end of the meeting, Ludovic Tanay, Leading Manager from the World Customs Organization on Communication, Events and Technological Innovations Department made a presentation on Information Technologies Conference and Exhibition which will be held in Baku the next year, informed participants about the purpose and its significance.

32 Issue 32 AmCham Azerbaijan

Amcham Members’ Luncheon

The Guest Speaker of the event was Mr. , Minister of Education of the Republic of Azerbaijan. Mr. Jeyhun Bayramov welcomed members of the strongest business community in the country which is represented by AmCham. Minister Bayramov delivered a speech on educational reforms implemented in recent years, achievements, as well as perspectives of the business-education partnership. He spoke about the State strategy on education adopted by the decree of the President of Azerbaijan, H.E. Ilham Aliyev in 2013 and work done to implement this strategy, as well as the achievements in educational system over the past five years. The Minister briefed the participants on the existing

20 November On November 20, AmCham Azerbaijan organized Monthly Luncheon for its members. Mr. Nuran Kerimov, President of AmCham Azerbaijan, and Mrs. Natavan Mammadova, Executive Director of the Chamber, opened the event and passed the floor to the keynote speaker.

models of public-private partnership in the field of education and possible projects in this area. In addition, the Luncheon featured member-presentations, as well as representatives of United Aid For Azerbaijan (UAFA) presented a new social business project to support vulnerable kids in 22 regions of Azerbaijan. More than 150 guests attended the event, including representatives of diplomatic corps.

33 AmCham Azerbaijan

Mr. Suleyman Sozeri, Regional Director of Public Policy at Mastercard – the October Luncheon Hosting Company – took the floor and updated the audience on achievements and plans of company activities in Azerbaijan. He also presented the “Cashless Azerbaijan” project that is being developed by Mastercard in collaboration with the Central Bank of the Republic of Azerbaijan within the framework of the State Program implementation. Afterwards, Mr. Elman Rustamov was invited to the floor. He delivered a comprehensive speech in front of the members of the Chamber on strategic importance of the adopted State Program, in particular, on effects of expansion of digital payments on the macroeconomic situation in the country. In this respect, he touched upon the issues related to macroeconomic stability which is a prerequisite of countrywide sustainable economic growth, as well as necessary steps to be carried out. Mr. Rustamov also emphasized the importance of concerted efforts of fiscal policy along with the monetary for securing the national economy against external shocks. He noted the importance of necessary support for the development of domestic loan market and nevertheless credit activities have been gradually recovered this year, there emerged a necessity of implementation of additional restoration actions in banking sector. Mr. Rustamov emphasized that protection of emerging positive trends, enhancement of macroeconomic stability and growth-promoting effects are overriding priorities of medium- long term. “Realization of optimistic forecasts in medium-

31 October AmCham Azerbaijan organized a Monthly Luncheon for its members with the Guest Speaker – Mr. Elman Rustamov, Governor of the Central Bank of the Republic of Azerbaijan, who delivered a speech on State Program on Expansion of Digital Payments in the Republic of Azerbaijan in 2018- 2020, approved by Decree of the President of the Republic of Azerbaijan on 26 September, its strategic objectives and implementation steps. In addition, the Luncheon featured member-presentations by FA International Trade Events and Junior Achievement Azerbaijan. More than 150 guests attended the event, including representatives of diplomatic corps.

long term requires well-harmonized policy measures and implementation of high-priority economic reforms. Therefore, the Central Bank will take an active part in implementation of countrywide reforms and of economic stability policy pursued”. At the end of his speech, having stressed importance of the role of the Central Bank in business facilitation, Mr. Rustamov expressed his gratitude to AmCham Azerbaijan and representatives of Mastercard once again for creation of an opportunity of direct contact with the business community and for invitation.

34 Issue 32 AmCham Azerbaijan

Minister of Energy of the Republic of Azerbaijan, who delivered a speech on recent and expected changes and reforms in energy sector, alternative energy and investment opportunities. In addition, the Luncheon featured member presentations by PASHA Insurance, FireWorks HRM and Deloitte Azerbaijan. More than 150 guests attended the event, including representatives of diplomatic corps. Mr. Shahbazov acknowledged AmCham members constituting a substantial portion of foreign and local investment committed to the Azerbaijani economy as being instrumental in supporting Azerbaijan’s achievements and progress. The Minister noted that the energy sector is a significant factor in bilateral relations between Azerbaijan and the United States – the first ever area to attract investments from large transnational corporations. In this respect, he particularly stressed that the investments in the country are well protected and guaranteed that create another incentive for the investments to flow into Azerbaijan. Mr. Shahbazov spoke further on renewable energy economic potential, emphasized the role of signing the amended and restated Azeri-Chirag-Guneshli (ACG) Contract as well as the importance of the Southern Gas Corridor project for the development of Azerbaijani economy. At the end of his speech, Minister expressed his gratitude for the opportunity to have a face-to-face dialogue with the business community. He specifically thanked to Mr. Nuran Kerimov and Mrs. Natavan Mammadova – President and Executive Director of AmCham – for invitation as well as representatives of BP – for hosting the event. Importantly, the October Luncheon highlighted the 11 October Extraordinary General Meeting of the Chamber. Members of AmCham Azerbaijan organized its monthly members’ the Chamber in good standing voted in favour of adoption of luncheon with a guest speaker – Mr. Parviz Shahbazov, AmCham Board of Directors eligibility criteria.

35 AmCham Azerbaijan

Social Events Black & White Ball

On November 30, AmCham Azerbaijan hosted the most demanded event of the year – its Annual Black & White Ball – at the gorgeous . This edition of the Ball was dedicated to the Centenary of Azerbaijan Democratic Republic (ADR), the pioneer of democracy in the Muslim world and in the Orient.

This magical and unforgettable place brought together business leaders, high-level government officials, members of Parliament, representatives of the diplomatic corpus in an absolutely unique environment. More than 700 guests had the

36 Issue 32 AmCham Azerbaijan

unique chance to enjoy the atmosphere of early-20 century Azerbaijan mixed with the traditionally gourmet menu, high- class music, and dancing with an amazing show program. With kind support of Platinum Sponsors – SOCAR and BP – as well as Gold Sponsors – Azersun Holding, Gilan Holding, KPMG in Azerbaijan, PASHA Bank, Procter & Gamble and SKN Electrical Services – the Ball has become a fascinating celebration of Azerbaijan’s history.

The evening was full of spectacular performances by Turkish opera diva Derya Kayaalp, Honored Artist of the Republic of Azerbaijan, brilliant voice Samir Jafarov, amazing Rast Band and its headliner – Honored Artist of the Republic of Azerbaijan, Lamiya Kerimova, outstanding pianist and composer, Honored Artist of the Republic of Azerbaijan Isfar Sarabski, People’s Artist of the Republic of Azerbaijan, outstanding mugham singer – Mensum Ibrahimov, Azerbaijani folk dance group led by Tarana Muradova. Traditionally, the culmination of the Ball became a raffle draw with lots of memorable prizes and DJ music with dances till dawn.

37 AmCham Azerbaijan

Committee Highlights Joint Meeting of AmCham Tax & Customs, the participants, thanked to Ms. Piriyeva and AmCham for the meeting and talked briefly about their company approach HR and Legal & Compliance Committees to CSR issues and suggested to begin a new campaign – instead of sending corporate gifts during holidays, funds to be allocated for children. Afterwards, Mr. Kerimov gave the floor to Ms. Vusala Kerimova, Talent Business Partner in Deloitte Azerbaijan, who delivered a presentation on societal impact Deloitte makes in Azerbaijan today. She displayed some examples about the CSR campaigns which were held during holidays by Deloitte. Later, Ms. Nilufer Koyluoghlu, President/ Educational Consultant of NIL International Education Organization, delivered a presentation on “STAR YOUTH PROJECT” (“Academic Year High School Exchange Programs” in the U.S.). Ms. Koyluoglu talked about the main objective of the project, the need for high school exchange programs, application requirements, as well as two success stories of this project. Furthermore, Ms. Piriyeva invited Ms. Sarita Vaid, the Founder On November 22, joint meeting of AmCham Tax & Customs, of Eco Baku project, to give information about the concept HR and Legal & Compliance Committees took place. Ms. of the project. She talked about the project’s mission which Arzu Hajiyeva and Mr. Jeyhun Mammadov, Chairperson is raising awareness on the effects of plastic on us and the and Deputy Chairperson of the Tax & Customs Committee environment and offer solutions. opened the meeting by welcoming participants. Finally, Ms. Rugiya Ashrafli, journalist, public and business Afterward, Mrs. Hajiyeva announced that this meeting was activist, made a speech on power of internal energy in life and devoted to the discussion on draft amendments in legislation in business. The meeting participants asked questions and in respect of employment taxation. She briefed information on shared some cases from their daily life routine. the expected changes to the Tax Code. Then, Mr. Jeyhun Mammadov, Deputy Chair of the Committee, made a presentation on amendments to the legislation in respect of employment taxes. He talked about the changes in the tax legislation – personal income taxes, changes in the law on Social Insurance and amendments to the law on insurance from unemployment. Mrs. Hajiyeva and Mr. Mammadov were answering participant’s questions and encouraged them to share their recommendations on updates which can be a challenge during the work process. Participants were discussing advantages and disadvantages of expected changes, as well as AmCham position on these serious changes. At the end of the meeting, Mrs. Arzu Hajiyeva and Mr. Jeyhun Mammadov thanked members for fruitful discussion and participation. CSR Committee Meeting Human Resources Committee Meeting

On October 10, AmCham CSR Committee hosted its On September 21, AmCham HR Committee hosted its regular regular meeting. Ms. Aynura Piriyeva, CSR Committee meeting. The HR Committee Chair, Mrs. Elnara Mammadova, Chair, welcomed the committee members and expressed welcomed the Committee members and outlining the context gratitude to Deloitte for hosting the meeting. Then, Deloitte of the Agenda. She thanked to SOCAR team for hosting the Azerbaijan Managing Partner, Mr. Nuran Kerimov, welcomed event. In the beginning of the meeting, safety induction by

38 Issue 32 AmCham Azerbaijan

On October 26, AmCham L&C Committee hosted its meeting. The L&C Committee Chair Mr. Ilgar Mehti opened the meeting by welcoming participants and announced the agenda. Then, he introduced activity plan for the next 12 months and encouraged everybody to keep sharing their ideas as we move forward with this plan. Afterwards, he mentioned that some activities in the plan would likely require setting up small working groups. So, he made a call for those willing to participate in these groups. Self-nominations were also accepted. At the end of the meeting, Mr. Mehti thanked everyone for participation.

Tax & Customs Committee Meeting Mr. Orkhan F. Aliyev, Deputy Manager in HR Development & Nationalization Department, was provided to inform all participants on emergency precautions. Then, Mrs. Mammadova invited Mr. Nizami Guliyev, Chief of the Legal department of State Migration Service of the Republic of Azerbaijan, to deliver a speech on the migration related regulations. Afterwards, Mrs. Mammadova invited Mr. Teymur Mahmudov, Deputy GM/ Head of HRD and Nationalization from SOCAR, to make a presentation on “Nationalization as Talent management tool; expectations of employers”. He shared SOCAR’s vision and mission about nationalization strategy, their role in workforce nationalization, benefits and challenges of nationalization. Later, Mrs. Mammadova passed the floor to the speaker from KCA Deutag – Mrs. Gulnar Najafova, to present “Nationalization On September 27, AmCham Tax & Customs Committee priorities, key to success”. She briefed information about conducted its meeting. Mrs. Arzu Hajiyeva, Chair of the their company and explained their nationalization process, Committee, opened the meeting by welcoming participants identifying, development of successors, etc. She also and announced agenda, which was related to the discussion mentioned about future nationalization forecast which is of the work plan for the next busy half of the year. Afterward, providing by KCA Deutag. Mrs. Hajiyeva briefed the update on latest practice, legislative Questions about nationalization, the difficult points during initiatives on tax and social insurance legislation. Participants work process, real stories and other matters were answered were encouraged to share their recommendations on updates by guests. which can be a challenge during the work process. Finally, they decided to request a meeting from government officials Legal & Compliance Committee Meeting to get exact information and to discuss related issues. At the end of the meeting, Mrs. Arzu Hajiyeva and Mr. Jeyhun Mammadov thanked members for fruitful discussion and participation.

FMCG Working Group Meeting

On 18 September, AmCham FMCG Working Group hosted its meeting. The meeting was attended by higher level officials of the Food Safety Agency. AmCham members had an opportunity to get the first-hand information on its mandate and activities of the government organization, the expected changes in legislation and its impact on relevant private sector representatives and the end consumers. The participants also discussed the challenges which they currently face.

39 AmCham Azerbaijan

for medical practices, based on the principles of evidence- based medicine, improvement of the quality of medical services delivered to population via improvement of post- diploma education of medical staff; implementation of other responsibilities in accordance with its operational directions as stipulated by the legislation, etc.

THT Committee Meeting

On November 26, AmCham THT Committee hosted its regular meeting for that month. Mr. Nuran Kerimov, President of the AmCham Azerbaijan, opened the meeting by welcoming the audience, expressed gratitude to Sheraton Hotel for hosting the Committee meeting and announced the agenda. He introduced the guest speaker Mr. Eldar Hajiyev, Vice-President of Azerbaijan Airlines CJSC. HMI Committee Meeting

On September 13, AmCham HMI Committee hosted its first meeting for the new business season. The HMI Committee Chair, Ms. Lala Bilandarli, opened the meeting by welcoming the Committee members. Then Ms. Bilandarli passed the floor to Mr. Gahraman Hagverdiyev, Director of the Public Health and Reforms Center of the Ministry of Health of the Azerbaijan Republic. He informed that the PHRC was established in 2006 and deals with organization of public health services in the country, as well as defines main directions for the development and implementation of health programs, regulation of reforms in medical institutions and methodical justification of implementation of reforms in health financing.

Then, opening remarks were delivered by Mr. Hajiyev to brief the THT Committee members on recent activities and initiatives of AZAL during the latest 3 years. During the meeting he noted that a modern transport infrastructure was created in Azerbaijan, and there is a great potential for expanding cooperation in transport, transit and logistics sectors. He also highlighted that AZAL became a member of AZTA in parallel to the board of the Association, where it will coordinate the activities of air transport. Joining of AZAL to the Board of the Azerbaijan Tourism Association and becoming the member of the Association is an achievement of one of the goals that the Head of State set before tourism sector participants to ensure development of tourism sector and bring it in line with He also explained key responsibilities of the Center which international standards. are justification of health policy and reforms implementation In addition, since June 2016, Open Skies Agreement has from scientific and practical points of view; development been in force between Azerbaijan and the US through which of proposals for improvement of health legislation; operators have been provided with more affordable and formation of single information environment, development efficient passenger and cargo air transportation services. of communication and information technologies in health; Participants of the meeting addressed their questions and development and implementation of necessary organizational shared their opinions. Mr. Farid Isayev, Chairman of the THT activities to resolve issues on protection of the heath of Committee, informed that some of the mentioned problems population, improvement of provision of healthcare services have already highlighted in White Paper and some of them and introduction of family medicine concept in Azerbaijan; are solved/ some changes happened. ensuring the application of standards and clinic protocols

40 Issue 32 AmCham Azerbaijan

AmCham Legal Update

TAX, CUSTOMS, ACCOUNTING AND FINANCE Regulations on declaration of national currency in cash Approval of Charter of Service of Finance Monitoring of and securities in national currency while bringing into the Republic of Azerbaijan and taking out of the Republic of Azerbaijan by residents Charter of the Service has been approved with the Decree and non-residents of the President of the Republic of Azerbaijan dated 18 July The Regulations have been approved by the Resolution of 2018. Main objectives of the Service will be as follows: the Cabinet of Ministers of the Republic of Azerbaijan dated • Monitoring compliance with the legal requirements for the October 10, 2018, No 433. According to the Regulations, prevention of money laundering or terrorism financing in upon declaration to customs authorities, resident and non- the Republic of Azerbaijan; resident legal entities are entitled to bring in and take out • To carry out a single implementation in the relevant area, of the Republic of Azerbaijan the national currency in cash as well as to coordinate monitoring participants, other - banknotes and metal coins (regardless of its amount), persons involved in monitoring, supervision and other securities and commemorative coins in national currency. public authorities, to ensure transparency and efficiency. Resident and non-resident individuals are entitled to bring in The Service relies on advanced international standards while and take out of the Republic of Azerbaijan meeting with the concluding its activities under the Charter. following: • National currency in cash (banknotes and metal coins) Law on Accounting Chamber and securities in national currency up to AZN 20000 With the adopted Law, the following has been regulated: upon verbal declaration to customs authorities. • Legal status, legal basis of activities and management • National currency in cash (banknotes and metal coins), and structure of the Chamber; securities in national currency in the amount of AZN • Objects of external state financial supervision on 20000 and above upon written declaration of the full ensuring state surveillance over use of state assets and amount to customs authorities. other state property legally, reasonably and efficiently, In addition, resident and non-resident individuals and legal and interrelations between other parties. entities are entitled to bring in and take out of the Republic of Azerbaijan the national currency without limitation by transferring through the authorized banks or national postal operators.

41 AmCham Azerbaijan

Amendments to Law on anti-money laundering and for publicly traded legal entities - by 30 December 2022; fighting against financing terrorism 5. With respect to budget organizations: With Amendments, requirements for employees and chiefs of 1. Chief accountants of organizations funded at the finance monitoring authority have been defined. Employees account of centralized expenditure budget – by 30 and head of finance monitoring authority are not liable for December 2021; their actions or non-actions while carrying out official duties, 2. Chief accountants of organizations at the account of provided that it is not proved the actions or non-actions are local expenditure budget – by 30 December 2022. illegal or dishonest. MORTGAGE AND CREDIT New customs fees The Constitutional Court adopted new decision relating The Cabinet of Ministers has amended its resolution on to termination of loan agreements in connection with amount of customs fees. Under these amendments, customs significant change in circumstances clearance (except for special transit customs procedure) On September 7, 2018, in accordance with Article 130 of the of goods, vehicles and the goods not intended for use in Constitution of the Republic of Azerbaijan, the Constitutional commercial or production purposes by individuals is subject Court of the Republic of Azerbaijan (“Court”) considered the to the following customs fees depending on respective case based on application from the Baku Appeals Court to customs value: comment on Article 422 of the Civil Code of the Republic of - For the customs value up to AZN 1,000 (USD 588) – AZN Azerbaijan (“Civil Code”). 15 (USD 9); Article 422 of the Civil Code regulates the issues with regard - For the customs value from AZN 1,000 to AZN 10,000 (from to the change and termination of a contract due to significant USD 588 to 5,882) – AZN 60 (USD 35); change in its circumstances. The change of circumstances - For the customs value from AZN 10,000 to 50,000 (from is deemed significant in the event that the contract would be USD 5,877 to 29,411) – AZN 120 (USD 71); concluded on substantially different terms or would not be - For the customs value from AZN 50,000 to 100,000 (USD concluded at all if the parties could reasonably predict such 29,411 to 58,823) – AZN 200 (USD 118); a change. - For the customs value from AZN 100,000 to 500,000 (USD The Court in its decision resolved that it does not consider the 58,823 to 294,117) – AZN 300 (USD 176); change of Manat’s exchange rate unexpected or unpredictable - For the customs value from AZN 500,000 to 1,000,000 (USD for the parties since according to Article 5.0.3 of the Law of 294,117 to 588,235) – AZN 600 (USD 353); the Republic of Azerbaijan “On Central Bank of the Republic - For the customs value exceeding AZN 1,000,000 (USD of Azerbaijan”, the Central Bank regularly establishes and 588,235) – AZN 1,000 (USD 588). announces the official exchange rate of Manat. In addition, customs fees for issuance of document enabling The position of the Court is that in accordance with Article registration of vehicles brought to Azerbaijan (including those 422 of the Civil Code, the change of exchange rate of Manat brought temporary) has been amended as follows: cannot be considered unexpected for the parties, and cannot - For trucks, passenger cars, buses and microbuses – AZN be regarded as a substantial change due to the fact that 30 (USD 17); the borrower takes the financial risk by borrowing means in - For other vehicles – AZN 25 (USD 14). foreign currency. It should also be noted that the Court, taking into account the Deadline for becoming a Chartered Accountant has been change of exchange rate of Manat, considered appropriate defined that the terms of loan agreements in foreign currency are According to the decree of the Cabinet of Ministers of the changed in the interest of the population depending on the Republic of Azerbaijan # 464, dated 25 October 2018, banks’ financial capacities. deadlines and sequence for becoming Chartered Certified Accountant for chief accountants at state-owned legal Amendments to the Law on Notarial activities entities, other public interest entities except for publicly traded According to the amendments, notary in place of a debtor legal entities, large entrepreneurships, budget organizations should give a notice of execution on the documents defining and public legal entities who publish their annual financial the debt in order to collect money or seize property from statements (consolidated statements) have been defined as the debtor. Notice of execution shall be performed if the following: debt is indisputably proven by the documents provided and 1. Chief accountants at public legal entities who publish their respective period of claim under the Article 373 of the Civil annual financial statements (consolidated statements) – Code has been met, unless other periods have been defined by 30 December 2021; under the law. State bodies, legal and natural persons could 2. Chief accountants at large entrepreneurships – by 30 apply for giving a notice of execution in an electronic way by December 2022; using e-signature. Natural persons could also apply to notary 3. Chief accountants at state-owned legal entities – by 30 in written. Claimant should send the debtor a demand letter December 2022; by certified mail at least 20 days before the date of applying 4. Chief accountants at other public interest entities except to notary, which shows that notice of execution will be given in

42 Issue 32 AmCham Azerbaijan

case of nonperforming obligations. Rules on sending a notice By virtue of the Rules, monitoring participants as well as of foreclosure of mortgage subject and the period for giving other persons participating in monitoring can now, based a notice of execution by notary after providing that notice are on a request and free of any charge, obtain information on regulated under the Law on Mortgage. Notary shall give a founders (shareholders) of commercial legal entities as notice of execution in the period of one business day after well as their respective shares in the charter capital, and receipt of written application from natural persons or via the on owners of securities while carrying out due diligence, e-notary information system of the Ministry of Justice and will enhanced and on-going due diligence measures in cases send e-execution information system of the Ministry of Justice defined under the Rules as well as the Law, which include, for execution. inter alia, establishment of business relations, conducting The debtor may challenge the claim which a notice of transactions (single or series of related transactions) in the execution is given on, before the court, Amendments will value of AZN 15,000 or above, etc. enter into force from the date of 1 January 2019. The Ministry of Taxes of the Republic of Azerbaijan acts as an information holder with respect to founders (shareholders) of CIVIL PROCEDURAL AND CRIMINAL ISSUES commercial legal entities and shares they own in the charter Adoption of the rules on obtaining information with capital, while the National Depositary Center acts as a holder respect to founders (shareholders), their shares in the of information on owners of securities. charter capital of commercial legal entities and owners In order to submit requests on obtaining the aforementioned of securities information, the monitoring participants as well as other On 10 October 2018, the Cabinet of Ministers of the Republic persons participating in monitoring shall register in the of Azerbaijan approved the Rules “On providing information information system of the Ministry of Taxes and Financial to the monitoring participants and other persons participating Markets Supervisory Authority of the Republic of Azerbaijan in monitoring with respect to founders (shareholders) of through using an enhanced electronic signature. commercial legal entities, their shares in the charter capital and owners of securities (“Rules”). Decree of the President of the Republic of Azerbaijan With reference to the Law of the Republic of Azerbaijan “On on ensuring activities of the State Agency for Public Prevention of the legalization of criminally obtained funds or Services and Social Innovations under the President of other property and the finance of terrorism” dated 10 February the Republic of Azerbaijan 2009 (“Law”), monitoring participants include: With the Decree of the President of the Republic of Azerbaijan dated 26 October 2018, the following has been added to the • Credit institutions; list of services provided at ASAN Service Centers: • Insurers, reinsurers and insurance intermediaries; 1. Provision of state extract on reregistration of ownership • Investment companies; rights on land and plan and size of this plot of land; • Legal entities providing leasing services; 2. Provision of legal entities and individuals with archive • Entities and other organizations providing post services references, extracts from archived documents and which are engaged in transfers of funds; certified copies of archived documents; • Pawnshops; 3. Registration of foreigners and stateless persons upon • Investment funds and their managers; place of stay in the Republic of Azerbaijan; • Non–governmental organizations, branches/ 4. Military registration and deregistration of conscripts and representative offices of foreign non-governmental military officials in cases of their registration and de- organizations in the Republic of Azerbaijan as well as registration at the place of residence; religious organizations engaged in receipt, collection, 5. Issuance of certificate on military registration of a citizen; delivery or transfer of the funds as an integral part of their 6. Issuance of certificate to a citizen on granting deferment activities; from immediate active military duty; • Persons that have obtained a license for currency 7. Issuance of certificate to a person on performance of exchange activities. active military duty; 8. Issuance of certificate on sending a person to immediate According to the Law, other persons participating in monitoring active military duty; are comprised of: 9. Registration of food safety operations; • Physical persons or legal entities engaged in the 10. Food safety registration of legal entities operating in the purchase and sale of precious stones, precious metals, food industry and issuance of relevant state registration including jewelry and other household articles made of extract (its duplicate); precious stones or precious metals; 11. Making changes to the data of registered legal entities; • Physical or legal persons providing brokerage services 12. Issuance of food safety certificate; on real estate purchase and sale; 13. Issuance of international veterinary certificate to the • Lottery and sports betting games organizers; exported animals and products of animal origin; • Lawyers, notaries, persons providing legal services as 14. State registration (reregistration) of imported and well as accounting and tax advisory, audit services. produced veterinary products and issuance of registration

43

AmCham Azerbaijan

certificate (re-registration certificate); opening of vacancy or new position. This amendment provides 15. Issuance of phytosanitary (re-exported phytosanitary) certain clarification on volume of reporting since the Old Law certificate for export (re-export) of plant and plant- required employers to report on vacant positions without growing products; clarifying whether this obligation concerns newly opened 16. Issuance of internal quarantine certificate; or empty positions. It should be added that the Presidential 17. Registration of pesticides, biological products Decree on implementation of the Law assigns the Cabinet and agrochemicals and issuance of registration of Ministers to prepare rules and mechanism of electronic (reregistration) certificate; reporting on vacancies and newly created positions. For the 18. Provision of relevant documents (data) to producing time being, rules and mechanism of such reporting is not yet and processing enterprises engaged in the export of determined. food products to the EU countries in order to meet the Under the Old Law, in case of redundancy employers were requirements of the EU import requirements for food required to inform the State Employment Service under the products. Ministry of Labor and Social Protection about contemplated redundant employees at least 2 months prior to their Amendments to Civil Procedural Code of the Republic of termination. In comparison to this, the Law requires employers Azerbaijan to inform on redundancy in accordance with the notice period According to the amendments, rules of order proceeding will envisaged for such employees by the Labor Code. By way of not be implemented on the following claims: background information, under the amendments to the Labor • contracts on rendering licensed telecommunication Code dated 31 may 2017 which have entered into force on 1 services; January 2018, notice period depends on tenure of concerned • credit contracts concluded with credit organizations; employee and varies from the minimum of 2 calendar weeks • payment of consuming household natural gas, water, to the minimum of 9 calendar weeks. electricity or heating. Amendments will enter into force from the date of 1 January 2019. Amendments to Migration Code According to the Amendments, if an administrative penalty Amendments to the Criminal Penalties Execution Code without deportation is imposed on foreigners or non-citizens On 19 October the Law “On amendments to the Criminal due to breach of rules on stay and residence in the Republic Penalties Execution Code” (the “Law) was published. As of Azerbaijan, those persons are obliged to pay the penalty such, the Law establishes provisions governing execution of and additional penny in order to enter the country. Once the the following penalties applicable to legal entities: penalty and respective penny have been paid, those persons - Prohibition to carry out certain activities; may enter the country. With Amendments, foreigners and - Liquidation of a legal entity; non-citizens staying temporary more than 15 days in the - Special confiscation; Republic of Azerbaijan are required to be registered in place - Fine. of residence. As a background information, it should be added that provisions enabling criminal liability of legal entities were DIGITALIZATION AND E-GOVERNMENT enacted to the Criminal Code in March 2012. It was envisaged The State Program on Expansion of Digital Payments in that these provisions shall have effect upon adoption of Azerbaijan is approved respective amendments to the Criminal Procedure Code On September 26, 2018, President H.E. Ilham Aliyev signed and Criminal Penalties Execution Code. With that said, the order on approval of “State Program on expansion of digital respective amendments to Criminal Procedure Code were payments in the Republic of Azerbaijan in 2018-2020”. made on November 2016. Taking the above into account, it The State Program is approved for the purpose of should be outlined that with the Law entering into force legal implementation of the measures for expansion of digital entities became subject to criminal liability. payments defined in the “Strategic Road Map on Development of Telecommunication and Information Technologies in LABOUR AND MIGRATION the Republic of Azerbaijan” approved by the decree of the The Law “On employment” President, dated December 6, 2016. On 29 August the Law “On employment” (the “Law”) entered According to the order, the State Program aims to increase the into force. By entering into force the Law repeals the old Law capacity of non-cash payments between citizens, business “On employment” (the “Old Law”) which was adopted on 2 entities and governmental bodies, to minimize the volume July 2001. We would like to draw your attention to the new of the cash turnover and to strengthen financial resource provisions established by the Law. base of banking sector. For this purpose, the main strategic In accordance with the Law, databank of vacancies is an priorities are strengthening institutional and legal basis of electronic system containing information on vacancies and digital payment services in the country, expanding range, newly created positions. The Law obligates employers to quality and scope of application of the services, as well as reflect information on vacancies and newly created positions promulgating their use by increasing infrastructural facilities. as well as respective salaries within 5 days from the date of In accordance with the order, by providing transparency in

45 AmCham Azerbaijan

economic turnover, expansion of implementation and use of MISCELLANEOUS digital payments will lead to decrease in expenses related New order was signed for support of competitive to cash payments and operations of banks and enterprises, domestic production in non-oil sector which in its turn will boost development of tax base, access of On 19 September 2018, President of the Republic of population and enterprises to financial services, strengthening Azerbaijan H.E. Ilham Aliyev signed order on “The additional of crediting and investing potential of banking sector and measures to support competitive domestic production in non- eventually the economic growth. oil sector.” The program also considers taking significant measures The order aims to increase state support to stimulation of towards reduction of non-formal employment for the production of competitive non-oil products, to upgrade its purpose of strengthening social protection system. In order raw material base, to establish new production areas for to encourage employers and employees to switch to official substitution of import and to expand the export potential, as salaries, relevant measures on the expansion of the insurance well as to provide implementation of activities defined in the system will be undertaken under the State Program. strategic road maps of national economy and main economic The program will also consider setting “minimum labor sectors, approved by the decree of the President, dated standards” to reduce the level of employment with unregistered December 6, 2016. labor agreements in sectors with high indicators of informal In accordance with the order, the Cabinet of Ministers has employment. The Central Bank has been instructed to been instructed to prepare proposals and drafts of normative coordinate the implementation of measures defined in the legal acts on “First in Azerbaijan” investment incentive State Program and to inform the President annually on the mechanism for the production of new competitive products, process. The Center for Analysis of Economic Reforms and state support mechanism to the investigation of internal Communication has been instructed to monitor and evaluate market in order to support the competitive production of micro, the implementation of measures defined in the State Program small and medium entrepreneurs, rules on the regulation of with the order of the Central Bank. mechanisms of “Invest in Azerbaijan”, application of customs privileges for the raw materials used in domestic production Presidential Decree relating to State information and submit them to the President within 3 months. resources and e-government The Ministry of Economy has been instructed to submit The President of the Republic of Azerbaijan has signed the proposals to the President on the involvement of enterprises Decree on approval of Regulations on archiving, integration, operating in the country to the global value chain within operation and formation of State information resources and 3 months, to take measures for attracting foreign direct systems, and certain measures relating to e-government. With investment to the non-oil sector, to present investment the Decree, in order to optimize management of rendering projects open to the alternative financing and to expand e-services to the population, increase the effectiveness of access opportunities of local products to traditional and new data exchange between State information resources and markets and etc. systems, and ensure systemization of the respective data in The Center for Economic Reforms Analysis and the State information resources and systems, the following Communication has been instructed to launch the internet sub-systems of E-government Information System have been portal www.enterpriseazerbaijan.com in order to improve set up: opportunities for attracting foreign direct investment in • Single Information System on Utility Services; Azerbaijan and to increase investment attractiveness, which • Single Information System on Social Services; shall be useful platform for financing of investment projects by • Single Information System on Agricultural Services. local and foreign investors.

Decree of the President on promotion of application of President Decree on additional measures on regulation e-services in the fields of labor, social protection, social of urban planning assurance and employment According to the Decree, local executive powers shall grant a According to the Decree, “Centralized E-information System” permission to construct only if the State Committee for Urban (hereinafter “E-information”) shall be established on the basis Planning and Architecture (“Committee”) has provided an of information databases of the Ministry of Labor and Social opinion on conformity of construction project with the urban Protection of the Population (hereinafter “the Ministry”). The planning documents. In addition, in case the municipalities Ministry shall ensure to set up e-social internet database in and local executive powers allocate the land plots for the 3 months for providing services to the population related to construction purposes (except for land plots accolated for functions of the Ministry. In addition, the Ministry shall ensure the construction of houses in accordance with the informing to establish sub-systems in E-information in 6 months in order procedure), the opinion on conformity of construction purpose to render employment services electronically. The activities (intended to be realized on that land plot) with the urban towards personal data protection and protection of activities planning documents shall be provided by the Committee. conducted on e-social database shall be carried out together with Special State Protection Service of the Republic of Azerbaijan

46 Issue 32 AmCham Azerbaijan

Resolutions of the Cabinet of Ministers on ensuring • Support to local entrepreneurs in acquiring contemporary activities of Patent and Trademark Centre and Intellectual technologies and technological solutions, and Property Rights Centre arrangement of their transfer; Charters of the above-mentioned Centers have been • Support of innovative scientific researches; approved by the Resolutions of the Cabinet of Ministers of • Promoting innovative projects (as well as start-ups) the Republic of Azerbaijan dated October 13, 2018, No 443 and funding them by means of grants, soft loans and and 444. According to the Resolution, Patent and Trademark investment in charter capital (as well as venture funding); Centre has the following primary goals: • Promoting innovative initiatives. • carry out an examination of the claim letters submitted to the Centre in terms of inventions, utility models, designs, trademarks and geographical indications; AZERBAIJAN MOVES 32 STEPS FORWARD IN DOING • conduct other matters related to examination in BUSINESS REPORT accordance with the legislation and participate in the On October 31, 2018, the World Bank Group has released establishment of intellectual property study and culture. “Doing Business 2019: Training for Reform” report. The report ranks 190 economies based on how easy it is to do business Intellectual Property Rights Centre has the following primary there, taking into account trading regulations, property rights, goals: contract enforcement, investment laws, the availability of • ensure and manage the rights of intellectual property credit and a number of other factors. rights; According to the report, Azerbaijan ranks 25th among 190 • participate in the establishment of intellectual property countries and in comparison with last year the country moved study and culture. 32 steps forward. Last year Azerbaijan moved 8 steps forward and ranked 57th. Regulation on Commission on business environment The report states that, Azerbaijani economy is among and international rankings 10 economies with the most notable improvement in The Commission is a collegial body participating in and Doing Business 2019. It further highlights that, Azerbaijan giving opinions, including development of legislation and implemented eight reforms making it easier to do business administration, on the following: in 2017/18, a record number among the 10 top improvers • Building competitive business environment and benefits and globally. Several of these reforms involve institutional for entrepreneurship; changes. Azerbaijan opened a single window at the Baku • Increasing investment attractiveness of the country; City Executive Office for dealing with construction permits, for • Improving the position of Azerbaijan in international example, reducing the time to obtain a building permit by 80 rankings. days and the cost by 12,563 manat (about $7,500). Another one-stop shop—the Asan Communal facility—streamlined President Decree on establishment of the Innovation the process of connecting to the electricity grid. To improve Agency under the Ministry of Transport, Communications access to credit, Azerbaijan established a new credit bureau and High Technologies of the Republic of Azerbaijan and a new unified collateral registry. The President of the Republic of Azerbaijan has signed the In its turn, AmCham Azerbaijan also applauds significant Decree on establishment of the Innovation Agency. The ranking progress of Azerbaijan in Doing Business 2019 report. Agency as being public legal entity will possess the following competencies: New to AmCham Members

Associates

47 AmCham Azerbaijan

Members’ News and Events A Partnership Agreement Signed Between Procter & Gamble and AFFA projects, as well as meaningful partnerships. Supporting sports is an important part of our community impact vision where we focus our efforts on health and hygiene programs where we can make the biggest impact. For us, a healthy society is associated with a large number of children and youth growing up with sport. We intended to endorse this idea by supporting our team at the 2012 London Olympic Games, being an official partner of the First European Games in 2015, and by supporting the Azerbaijan National Olympic team in the 2017 Islamic Solidarity Games. Our goal in partnership with the Association of Football Federations of Azerbaijan is to encourage sports among young people. Within the partnership, we will produce and launch TV commercials for our Gillette and Head & Shoulders brands with the participation of our football players. In addition to supporting the national team, these commercials will promote football even more widely,” said P&G Azerbaijan & Georgia General "The development of football is very important not only Director. in terms of gaining high awards in this sport but also in Regarding another reason for the partnership with AFFA, directing people of different age groups, especially children, Deger Kurtaslanoglu said: "Many of our products help teenagers, and youth, to a healthy lifestyle. It is very good to solve problems that arise in everyday life of people and that the Association of Football Federations of Azerbaijan create a sense of self-confidence in them. We are the official became able to start such an important cooperation with self-confidence partner of the National Team of Azerbaijan. Procter & Gamble to increase the football's popularity and Because all victories are based on self-confidence. You can strengthen its promotion. We appreciate the support of the win the most difficult fights by being so confident in yourself. Procter and Gamble which products are also very popular in We wish our national team success and victory”. our country.” said Elkhan Mammadov, Azerbaijan Football Federations Association (AFFA) General Secretary at the About Procter & Gamble signing ceremony of Procter & Gamble and AFFA partnership P&G serves about 5 billion consumers around the world with agreement which took place on October 1st at Baku Olympic one of the strongest portfolios of trusted, quality, leadership Stadium with the participation of General Director Deger brands, including Pampers®, Tide®, Ariel®, Head & Shoulders®, Kurtaslanoglu of Procter & Gamble Azerbaijan & Georgia, Always®, Pantene®, Fairy®, Blend-a-med®, Oral-B®, Gillette® the trainer of the National Football Team of Azerbaijan Gurban and Safeguard®. The P&G community includes operations in Gurbanov, team members and media representatives. approximately 70 countries worldwide. For more information, It was noted at the event that the contract would cover the UEFA please visit www.pg.com National League and European Championship qualifying games. AFFA General Secretary said that our national team playing in Group D of the UEFA Nations League is vigorously preparing for upcoming games. The Azerbaijani national team will meet with Malta on October 14, and with Faroe Islands teams on November 17. "Support of our partners is important for the development and promotion of football in our country and, therefore, we express our gratitude to everyone supporting the Azerbaijani football" said Elkhan Mammadov. General Director of Procter & Gamble Azerbaijan & Georgia, Deger Kurtaslanoglu said that the partnership between P&G and AFFA is dedicated to P&G’s 20th anniversary of presence in Azerbaijan. "Over the past 20 years, P&G has made a great contribution to Azerbaijan's economic life. However, we have not limited our contribution to only economy, but also focused on improving lives of our people through corporate responsibility and community impact

48 Issue 32 AmCham Azerbaijan

1st Caspian International Real Estate and Investment Fair

The 1st Caspian International Realty and Investment Fair, Caspian Realty, will be held from the 20th to the 22nd of February 2019 at Baku Expo Centre. The exhibition’s objective is to provide an international platform where all participants will be able to establish direct contacts with their target audience, while showcasing their products and services, and to use this unique opportunity for the exchange of international experience. The exhibition enjoys the official support of the State Committee on Property Issues of the Republic of decision makers. Attendance at the event opens unique Azerbaijan, the Azerbaijan Export and Investment Promotion access to information on construction projects in Azerbaijan Foundation (AZPROMO), and the National Confederation of and abroad. In support of the exhibition, the organizers plan Entrepreneurs (Employers) Organizations of the Republic of to hold B2B meetings between participants and their target Azerbaijan. audience. The event will be attended by both local and foreign companies The exhibition invites representatives of investment that build and sell real estate, and provide financial, legal, companies, design and architecture bureaus, real estate consulting and design services; among other attendees agencies, construction companies, government agencies, the exhibition will welcome highly qualified specialists financial organizations, banks, consulting and IT companies, from various real estate sectors, as well as investors and as well as brokers and private entrepreneurs to visit its debut government representatives. Caspian Realty 2019 will event. present commercial, residential, trade and rural real estate, Caspian Realty creates a wealth of lucrative opportunities including various investment projects and design services. for market professionals and independent investors, as Participating companies will find a wide range of opportunities participating companies will make use of a single platform to to bolster their income potential; the exhibition serves as a present the maximum number of profitable and reliable offers venue where participants can meet with potential customers to suit the needs of potential buyers. Detailed information is during three days and establish direct contact with key available on the exhibition website: www.caspianrealty.az AmCham applauds significant ranking progress of Azerbaijan in Doing Business-2019 report aim of developing the business environment in our country, as well as another achievement in the fulfillment of the tasks set out in the Strategic Road Maps.” Mrs. Mammadova said. According to Mrs. Mammadova, the reforms carried out to support entrepreneurship paved the way for positive changes in the private sector, particularly for startups running, obtaining of construction permits, increasing access to finance, tax policy, property registration etc. “The results of the report will pave the way for attracting more foreign investments to our country. We believe that economic reforms will be carried out further towards increasing the competitiveness of the Azerbaijani economy and promoting American Chamber of Commerce in Azerbaijan (AmCham its sustainable development. In the upcoming future, adoption Azerbaijan) applauds the ranking progress of Azerbaijan of the Competition Code and the new Law on Investment to the 25th position among 190 countries in the Doing Activities, as well as the anticipated tax reforms will further Business-2019 report, which is 32 points higher compared contribute to the improvement of the business environment to the last year. of our country and boost rating of Azerbaijan in international Executive Director of AmCham Azerbaijan, Mrs. Natavan reports.” Mrs. Mammadova said. Mammadova, noted that Azerbaijan has implemented a Mrs. Natavan Mammadova also stated that in this respect, record number of reforms this year – 8. This is the highest AmCham Azerbaijan remains committed to cooperation indicator across all the countries. “This is obviously a result of with the government and ready to share the experience and the ongoing reforms being implemented in Azerbaijan with the expertise of the members of the Chamber.

49 WedobelieveourmembersappreciateanopportunitytobenefitfromAmChamM2MDiscountProgram exclusivelydesignedforourMemberCompaniestoobtainaswellasfortheAssociatestoprovidediscounts onawiderangeofproductsandservicesfromthehotelstaystofoodandbeverageoutlets.ThisAmCham initiativeisrecognizedasastrongpromotionalvehicleaimedtoaddmorevaluetocompanies’membership byhelpingtoincreasethevolumeofsalesandtosavecosts.Tobecomeadiscountprovideryouneedto completeM2MDiscountProgramAgreement,printitoutandreturnthesignedcopytous. Thisprogramallowstwo people from each MemberCompanyto obtain discountsin below mentioned companiesuponpresentationofspecialM2Mcards. Currently,ourM2MDiscountProgramencompassesthefollowingoffers:

HOLIDAYINNBAKU џ 10%DiscountonFoodandBeveragesat BOULEVARDHOTELBAKU HolidayInnRestaurantMarina18and џ 15%SPA SagiBar џ 10%Retail/rackpriceofroom TRAVEL,HOSPITALITYANDLEISURE џ 15%DiscountonHolidayINNSpa џ 15%Laundry annualsubscription(fitnesscenterand џ 15%FoodandBeverage swimmingpool) џ 10%Discounton“YourSpecialDay” eventsinclusiveWeddings, Engagements,HennaParties JWMARRIOTTABSHERONBAKU џ 10%discountonallFood&Beverages– Discountisapplicablemaximumfor20 peoplepercard.Thecardcannotbe FOURSEASONSHOTELBAKU appliedformeetings&eventsheldin hotel џ 10%offforZafferanoRestaurant& џ 10%discountonallSpaTreatments– Bentley`sBar Thelimitis20guestspercard.Discount џ 10%offforJalehSPA(treatment,gym doesnotapplyforspaproductsretail offer,retailproducts) џ 30%discountonLaundry&Cleaning– INTOURISTHOTELBAKU Discountisapplicableforminimumon3 daysservice џ 15%SPA џ 10%Retail/rackpriceofroom џ 15%Laundry

PRIVESTEAKGALLERY џ 15%discountonfoodandbeverages *Thediscountdoesnotapplytobreakfast, businesslunch,şarküteriandpakhlava.

THELANDMARKHOTELBAKU

15%discountonFood&Beveragesat: џ CaspianGrill&Terrace(alacarte)Lunch &Dinner HYATTREGENCYBAKU џ BangkokNoi(alacarte)lunch џ 15%discountonrestaurantandbar џ Seto(alacarte)Lunch&Dinner PULLMANBAKU џ 15%discountonlaundryanddry џ Salo(alacarte)lunch cleaning џ ShinShin(alacarte)Lunch&Dinner џ 10%discountonFoodandBeverages, џ 20%discountonSpatreatmentsat џ DolcePausa(regularmenu)Throughout FitnessandSPAservices ArmaitiSpa&Fitness theday џ 10%discountonroomsstays ASPIAGROMMC HILTONBAKU џ 10%discountonbeveragesinSavalan џ 10%discountonHiltonBakurestaurants SIARRESEARCH BoutiqueWineHouse andbars ANDCONSULTINGGROUP џ 10%discountonHiltonBakuSPA џ 10%discountonanumberofservices treatments andprojects *Discountcanbeappliedtoagroupupto9 people EDUCATION *Discountcannotbeappliedincombination withanyotherpromotion

PROFESSIONALSERVICES OFFICESYSTEMS

џ 10%discountforofficechairs џ 15%discountforhardfurniture џ 40%discountforofficepartition

ADAUNIVERSITY PASHAINSURANCE џ 10%onExecutiveEducationCorporate ForallemployeesofAmChamRegular TrainingsPrograms MemberCompanies: џ 15%discountonvoluntaryinsuranceof INTERNETANDCOMMUNICATIONS property џ 5%discountonvoluntarymotor AUTOSTARKAUKASUSGMBHAZERBAIJAN insurance(CASCO) џ 10%discountonallservicesat ForindividualM2MCardholders: Mercedez–BenzServiceCenter џ 20%discountonvoluntaryinsuranceof property џ 10%discountonvoluntarymotor insurance(CASCO) AZQTELLLC

џ 20%discountforSkyPortWireless PARAMEDLASERCLINIC LeasedLine ForallemployeesofAmChamRegular MemberCompanies: џ 10%discount–SilverDiscountCard– SEABAKLLC OTHER forallprocedures џ upto10%onITSupportServices џ FREEmigrationtoCLOUD.AZServices ForindividualM2MCardholders: џ upto5%onITEquipment,Cartridges џ 20%discount–DiamondDiscountCard andSoftwareLicensing –forallprocedures џ upto15%onInternetServicesat AUTOMATICSYSTEM LandMarkandotherbusinesscenters OFBUSINESSCONTROL(ASBC) џ 3%discountoniPhones џ 5%discountonotherproducts(except specialofferproducts) ANTARIS-OFFICE,BANK& SCHOOLSUPPLY џ 15%discountonproductsinAntaris INTERNATIONALBANKOFAZERBAIJAN shops џ 15%discountonproductsinAntaris џ 50%discountonAmexGoldcard NOVCOGROUPOFCOMPANIES branchinBakuBookCenter џ 50%discountonAmexPlatinumcard *Discountcannotbeappliedincombination џ FreeMCWorldElitecard џ 20%discountinMyBrandsnetworkshop withanyotherpromotion AmCham Azerbaijan

AmCham 20 November - Members’ Luncheon 31 October - Members’ Luncheon Calendar of Events 26 October - Legal & Compliance Committee Meeting September 1 - November 30, 2018 11 October - Members’ Luncheon 10 October - Meeting With U.S. Deputy Assistant Secretary Of State

10 October - CSR Committee Meting

30 November - Black & White Ball

26 November - Travel, Hospitality And Tourism Committee Meeting

5 October - Career Fair, Small Step To A Great Opportunity

27 September - Tax & Customs Committee Meeting

21 September - HR Committee Meeting

18 September - FMCG WG Meeting

15 September - HR Forum

14 September - Back-To-Business Cocktail Reception

13 September - HMI Committee Meeting

11 September - Round-Table Discussion With Mr. Safar Mehdiyev, Chairman Of The State Customs Committee

52 Issue 32