**REGIONAL CORNER: SUMGAIT,AZERBAIJAN**

 

By Judith Robinson

 

Azerbaijan’s city of Sumgait was developed between 1948 and1950 as a showcase Soviet industrial city. Located 35 km. north of theAzerbaijan capital of Baku, Sumgait’s 83,000 sq. km. were devoted to themetallurgy, chemical, petrochemical, and textile industries. The populationstands at about 250,000, with over half below the age of 30 and with a veryhigh level of education. Available statistics, which show employment at about72,000, fail to reflect the significant number of employees on involuntaryfurlough due to low levels of capacity utilization in the city’s enterprises.

 

Today, this City of Tomorrow, as Sumgait was termed, hasbecome seriously polluted from its aluminum and steel plants, its chemicalprocessing facilities, and unstemmed, untreated agricultural and municipalrunoff. These significant environmental problems are barriers to the area’shuman and economic development. At the same time, the problems have generatedopportunities; environmental improvement in the region requires investment ofresources and must be coupled with industrial rehabilitation. The AzerbaijaniGovernment, in cooperation with international financial support and foreigninvestment entities, is working to improve environmental conditions and ensurethat development of Azerbaijan’s oil and gas reserves will generate revenue andsupport for other local industries, including those in Sumgait.

 

Investment opportunities in Sumgait are most promising inindustries that serve Azerbaijan’s growing oil/gas industry: (1) in themetallurgy sector, several companies that manufacture seamless steel pipes andferrous and nonferrous engineering components  (such as Azerbaijan Tube and Pipe Works, sister to Ukraine’sSeversky Pipe plant, which acts through a holding company, Metallurgiya); and(2) in the petrochemicals/chemicals industry, eight of the country’s 15 plantsare located in Sumgait and manufacture polyethylene, synthetic rubber,chemicals, and detergents. Additional opportunities exist in textiles and foodprocessing.

 

Sumgait enjoys local availability of raw inputs: oil,minerals, fibers for textiles, and food crops for food processing. Its locationon the Caspian Sea is advantageous for regional exports. There is also agrowing domestic market for oil-related production and a domestic consumergoods and food market that will grow as oil revenues create spending power.Weaknesses include low levels of capacity utilization, legal inadequacies andtax and regulatory constraints, a shortage of management skills, a smalldomestic consumer goods market, outdated technology and a lack of funds for newtechnologies and equipment, plus a high level of pollution.

 

As first steps toward addressing the environmental situation,Azerbaijan’s federal government and the Sumgait local government have shut downSumgait’s worst offending facilities, pending the installation of moreefficient processes. Plans are in place for upgrading and expanding the city’smunicipal wastewater treatment facilities. Sumgait has benefited frominternational assistance, some of it aimed at environmental management andcoordinated economic rehabilitation. The World Bank, United Nations, theEuropean Bank for Reconstruction and Development, and the Islamic DevelopmentBank have all been active in the area, as has the EU’s tacis program. An Azerbaijani Federal Committee for Ecologyis in place to develop and carry out a coherent environmental policycountrywide, but is currently handicapped by inadequate environmental laws andenforcement. 

 

*Formore information on Azerbaijan, visit **BISNIS**Online at www.bisnis.doc.gov/bisnis/country/caucasus.htm#Azerbaijan.*

 

*JudithRobinson covers Azerbaijan for **BISNIS**in Washington.*