**CHAPTER 1: OVERVIEW**

** **

 

Locatedat a strategic crossroads between Russia and the Middle East, and betweenCentral Asia and Europe Azerbaijan is one of three Caucasus Mountain republics,the other two countries being Georgia and Armenia. Russia borders the north,Iran the south and the Caspian Sea, the east. About half the country ismountainous. Azerbaijan’s 500-mile long Caspian coastline has three largeprojections: the Absheron Peninsula, the Sara Peninsula and the Kura Sand Bar.The adjacent area of Iran across the Araz River, also known as Azerbaijan,shares a common language and religion, and a common history until Azerbaijan(modern day) became a part of the Russian Empire in the early 19thcentury. The Nakhichevan Autonomous Republic of Azerbaijan is cut off from thecountry by a strip of Armenian land, and provides a narrow border with Turkey.The Nagorno-Karabakh region is an enclave of about 150,000 Armenians, and isthe site of a bitter and long conflict between Azerbaijan and Armenia. 

 

Azerbaijandeclared independence from the Soviet Union on August 30, 1991, and is now aconstitutional republic with a strong presidency. Azerbaijan's political systemhas remained stable for the past three years. Its system of government grantsbroad powers to the President, Heydar Aliyev, who was recently re-elected tooffice. The president's New Azerbaijan Party, along with other parties loyal tothe President and independent deputies loyal to the president, has a largemajority in the parliament. The elected parliament closely follows initiativesfrom the president's office. Opposition parties hold less than 10 percentof  parliamentary seats, butcriticize the government openly and maintain a lively, albeit partially censored,opposition press. All major parties and most minor parties support closepolitical relations and economic cooperation with Western countries, includingthe United States. Although the government allows many opposition parties tofunction, it banned the Islamic Party in 1996. 

 

**Population**:  7.95 million (July 1998 est.); 51% female, 49% male; 54%urban, 46% rural

**Capita**l: Baku on the western shore ofthe Caspian Sea (population 1.8 million)

**Size:** Approximately 86,600 sq. km.(33,400 sq. m.), about the size of Maine

**Population density**: 90 per sq. km., 232per sq.m. 

**Languages**: Azerbaijani and Russian. TheAzerbaijanis are culturally and historically linked to both Turkey and Iran andspeak a Turkic language (Azerbaijani).

 

**Labor force:** About 2.8 million, 32%agricultural and forestry, 26% industrial and construction, 42% other includingservices. 

**Literacy:** Almost 97%, about 85% of thepeople have university, technical school or high school diplomas - about equalin each category.

**Employment**: About 54% of the populationare of working age. Employment has dropped from some 34% of that group to acurrent 20% in the last five years, with the government employing almost aquarter of the working people.

**Ethnic Profile**: Azerbaijani 83%,Armenian 6% (Christian, Nagorno-Karabakh), Russian 6% (Orthodox),  other 4%. 

**Religions**: Muslim 93.4% (3/4 Shiite,1/4 Sunni, but not an official religion), Russian Orthodox 2.5%, other 4.1%.

 

**Government**: Republic

**President**: Heydar Aliyev

**Prime Minister**: Artur Rasizade

 

**Total oil reserves**: widely varyingestimates - 100-200 billion barrels of oil total Azerbaijani/Kazakhstanioffshore Caspian region, with about 60 billion barrels discovered.

**Recoverable proven oil reserves**: 781 MT- 1998 output 11.42 MT w/condensate

**Recoverable proven natural gas reserves**:383.4 bcm - 1998 output 5.59 bcm

**Condensate**: 15 MT 

 

**EXTERNAL RELATIONSHIPS**

 

Azerbaijan’sneighbor, Iran, has criticized Azerbaijan's close relations to Westerncountries and Israel. Iran also criticized President Aliyev for allowingWestern oil companies to participate in exploiting offshore Caspian oildeposits. Azerbaijan continues to resist Russian attempts to bring it moreclosely into CIS security arrangements; however Russian economic interestspursue a more commercial and cooperative approach to Azerbaijan. The principalsecurity issue for Azerbaijan is the conflict with Armenia over Nagorno‑Karabakh.A tenuous cease‑fire has been in effect for about four years. The United Statesthis year joined Russia and France as co‑chairmen of the OSCE Minsk Group,which recently intensified efforts to achieve a peace settlement. 

 

TheUnited States has good relations with Azerbaijan and supports its independenceand sovereignty. The United States maintains close political and economicrelations, and maintains a dialogue on security issues with Azerbaijan.Azerbaijan eagerly seeks closer cooperation with the United States. PresidentAliyev made an official visit to the United States in April 1999, presiding atthe signing of three major oil/gas contracts with U.S. companies. 

 

U.S.relations with Azerbaijan are complicated by Section 907 of the Freedom SupportAct of 1992, which forbids any U.S. Government assistance to the Government ofAzerbaijan until the U.S. president certifies that Azerbaijan has ceased"all blockades and other offensive uses of forces against Armenia andNagorno- Karabakh." Azerbaijan sees this legislation as U.S. support forthe Armenian side in the conflict over Nagorno‑Karabakh. The administrationopposes Section 907 and has called on Congress to repeal it.  Beyond the ban on assistance toAzerbaijan, Azerbaijanis point to the extensive U.S. assistance to Armenia asevidence of U.S. support for the Armenian side of the conflict. 

## CHAPTER 2: ECONOMIC PROFILE

 

 

The Azerbaijani economy declined significantly afterindependence in 1991 due to war with Armenia, disruption of trade ties withinthe former Soviet Union, and the collapse of large parts of the statemanufacturing sector that stemmed from supplier disconnects. The economy beganto recover in the second half of 1996, with real GDP growing 5.8 percent in1997 and 10 percent in 1998 (official Azerbaijani estimate). This growth issupported by a highly skilled workforce, abundant oil, a strategic location inthe Caspian region, and above all by massive foreign investment in oil andrelated services sectors.  

 

As impressive as Azerbaijan’s economic recovery has been,the country is heavily dependent on oil revenues and, beginning in the fall of1998, these revenues have fallen along with world oil prices. 

 

**RECENT DEVELOPMENTS**

 

Azerbaijan was minimally affected by the 1998 Russian rublecrisis, and the falling world oil prices in the second half of 1998 severelycurtailed investment by oil and oil related companies. Nevertheless,January-March 1999 showed a growth in GDP of 6.2 percent and an increase of 4.1percent in industrial production over the same period in 1998.

 

Economic reform moved forward in 1998, with variousestimates placing GDP growth between 8.5 percent and 10 percent. Inflationstood at less than 1 percent, and the manat remained a stable currency. Foreignexchange reserves were healthy. Fourteen production-sharing agreements (PSAs)were signed with foreign oil companies by December 1998, resulting in $1.6billion in foreign investments and contract bonuses. Basic laws for the termsand protection of foreign investment were in place. A new tax code, currentlyin draft form, should improve collections and tighten overall taxadministration. New oil and gas related legislation was enacted in February1999 providing basic regulation of the country’s oil and gas operations. 

 

Privatization has been slow, with most medium and largeenterprises remaining in the state sector. However, the Azerbaijanigovernment’s privatization program raised about $36.6 million in 1998. Byyear-end 1998, 6,654 small state enterprises were privatized, and 967 jointstock companies were established from medium and large state enterprises, 211from the Ministry of Agriculture. About 90 percent of the nation’s farmland wasprivatized, although agricultural production is only half its Soviet-eralevels, and virtually all small companies are private. The state oil companySOCAR, remained a state-owned enterprise. 

 

**The Oil Sector**

The oil sector has played a crucial role in Azerbaijan’srecovery since the mid-1990s, with 74 percent of foreign direct investment. Oiland oil products exports in 1998 accounted for $418 million of the total $606million in Azerbaijani exports, about two-thirds of the total, in part due tothe startup of several new offshore wells. Oil equipment imports made up $435million of the almost $1.1 billion in total Azerbaijan imports in 1998.Oil-related revenue brings in nearly 50 percent of budget revenues, including57 percent of total indirect taxes. 

 

Seventeen PSAs have been signed, three in 1999. Three of the17 are for onshore development and the rest offshore. Two of the PSA consortia,CIPCO and NAOC, were terminated in 1998 for lack of yield. Three new PSAs weresigned in late spring 1999 in Washington.

 

Azerbaijan produced 70 percent of the Soviet Union'soilfield equipment, and is trying to attract foreign investment into thissector so that it can become the dominant supplier both domestically and forexport. Agronomic potential is strong, but economies of scale are lacking andthe domestic market is undeveloped.

 

**Non-Oil Sectors**

Outside of oil exploration and production, the growth ofBaku's expatriate community and a monied class of Azerbaijanis are generatingtax revenue and a demand for recreation, entertainment, and retail services inBaku (temporarily curtailed by the fall in oil prices). 

The national infrastructure, however, is in poor condition.It was built in the Soviet period. Since independence, there has been inadequate public investment in, andmaintenance of, public infrastructure. Roads are inadequate and deteriorating.The electrical generation and distribution system is in poor condition. Eightypercent of arable land is irrigated, but the irrigation system is collapsing.Baku experiences shortages of gas, water, and electricity. Elsewhere in thecountry electricity supply is inadequate, and gas is almost nonexistent. Publicutilities are financially crippled by their inability to secure payment fromtheir customers.

 

**ECONOMIC STATISTICS**

 

**Currency Manat (AZM):**3.869/$l average exchange rate for 1998, up from 1997's 3.985, and 1996's4.298  

 

**GDP: **15,930 AZM ($4.1 billion). Growthrate in 1998 was 10 percent as a result of strength in fourth quarter, with theconstruction sector, linked to oil growth, dominating recovery. Agriculturerecovered after a 1997 decline. In 1998, industrial production = 22.3 percentof GDP, construction (16.4 percent), transportation & Communications (12.9percent), trade (5.7 percent), agricultural production (20.3 percent).

 

**Industrial Production**:2.2 percent growth in 1998, up from .3 percent and -6.9 percent in two prioryears.

 

**AgriculturalProduction:** 3.9 percent growth in 1998, up from -6.9 percent and 3 percentfrom two prior years. 

 

**Private sector:**represented 55 percent of 1998 GDP. 141.7 billion manats ($36.6 million) camefrom all forms of privatization in 1998. 

 

**Inflation:** 1998was negative (-7.6 percent), grew 4 percent in 1997.

 

**Foreign debt**: Inthe first three quarters of 1998, loans to the Azerbaijani economy were lessthan half those received in 1997 ($81 million versus $194 million), and adecreasing part came from the IMF. These were loans made to the government, andconstitute only 12 percent of FDI.

 

**Total InternationalReserves:** $448.7 million in January 1999 (January 1998 were $467.5million). Net international reserves decreased from October to December 1999mainly due to Russian crises leading Azerbaijani National Bank to sell U.S.dollars for AZM to avoid a depreciation of the AZM. 

 

**Oil/Gas Production:**Crude production fell from 12.5 million tons in 1990 to 9 million tons, 1997,and grew to 11.4 million tons in 1998, of which roughly 85 percent wasoffshore. Production of natural gas continued its gradual decline from 1998's5,963.9 mcm to 5,589.6 mcm of which roughly 94 percent was offshore. 

 

**Exports:** 1995:$637 m, 1996: 631 m, 1997: $781 m, and 1998: $606m. Principal exports wereoil/oil products, cotton, chemicals/petrochemicals/plastics, foodstuffs, andmachinery. Main destinations of exports were Turkey (22 percent), Russia (18percent), Georgia (12.4 percent), Iran (7 percent), and Ukraine (2 percent).

 

**Imports:** 1995 -$668 m, 1996 - $961 m, 1997 - $1.2 b, 1998 - $1.077b. Principal Imports weremachinery & equipment, foodstuffs, metals, oil products,chemicals/petrochemicals, and tobacco products (No. 1 export in 1998 fromU.S.). Exports came from Turkey (20 percent), Russia (18 percent), Ukraine (9percent), UAE (4 percent), and Iran (4 percent).

 

**INVESTMENT **

 

The Government of Azerbaijan’s policy is to encourage andwelcome foreign investment, with legal, tax, and regulatory reforms tofacilitate this investment. Experts have estimated that around $15 billion ininvestment is needed for modernization of the country’s outdated industry overthe next 20 years. Because the annual income of the state budget is around$600-650 million, the Government of Azerbaijan will not be able, with foreigninvestment at current rates, to make the full volume of needed core industrialrevamps within the next two decades. 

 

In 1998, Azerbaijan signed economic cooperation agreementswith the United Kingdom, Austria, France, the OSCE, and Kazakhstan. It alsocontinued to sign and ratify new PSAs with world oil companies (3 new ones sofar in 1999), and on November 24, 1998, passed a Law on Energy. Total loansfrom international financial institutions and foreign countries amounted to$1.444 billion by October 1998, of which 43.8 percent has been used. The bulkcame from the IMF and IDA ($535 million), followed by ICEF and EBRD ($170m and$111.6m, respectively). About $884 million has been assigned to investmentprojects, mostly in infrastructure and environment.

 

**FOREIGN DIRECTINVESTMENT**

 

Foreign participation is possible through joint ventures withlocal companies, wholly owned enterprises, and representative offices. Foreigndirect investment (FDI) was estimated at a cumulative $2.1 billion at end 1998.FDI in 1993 totaled $15m, 1994 - $30 million, 1995 - $155 million (6.4 percentof GDP), 1996 - $591 million (18.6 percent of GDP), 1997 - $1051 million (27.3percent of GDP), and 1998 - $1077 million. 

 

At 3Q 1998, FDI was only $674 million (24.1 percent of GDP).Growth in FDI since 1995 has been largely due to investment by foreign oilcompanies. The oil sector accounted for 74 percent of total FDI in 1997 and 81percent in 3Q 1998. Therefore, total FDI was affected heavily by the 1998decrease in world oil prices.

 

During January-April 1999, $370 million was invested intothe Azerbaijani economy, pointing to an investment year exceeding even 1997.Oil and gas investment amounted to 77.4 percent of the total, as opposed to49.5 percent in 1994. 

—90 percent of this amount was directed to production units.

—75 percent of this amount was foreign investment. 

—Only 1 percent of this amount came from the state budget. 

 

Investment of Azerbaijani citizens in 1998, and duringJanuary-April of this year, has fluctuated between 14 and 16 percent, mainly toconstruction sector. 

 

**INVESTMENT IN THE OILSECTOR**

 

Since 1994, 17 production-sharing agreements (PSA) have beensigned, with 7 in 1998 and 3 in 1999.

 

**1998 INVESTMENT BY FOREIGN OIL COMPANIES(NEW PROJECTS)**

 

Projects               TotalAmount of Investment ($ billions)    ForeignParticipation (percent)

                 1. Kurdashi field                                       2                                                          50

  2. SouthGobustan field                                             0.8                                                            80

  3.Kyursangi and Karabahli fields                              n/a                                                            50

               4. Inam                                                         3.8                                                                              50

               5. Muradkhanli, Geferli, Zerdab                   1.2                                                                   50

               6. Araz, Alov, Sherg                                       9                                                                                   60

               7. Ateshgah, Yanantava                                n/a                                                           50

 

**FOREIGN TRADE**

 

Azerbaijanhas consistently run a negative trade balance mainly as a result of imports ofoil and oil related (including construction, telecommunication, medicalservices, transport, hotels) machinery, products and services. The currentaccount deficit is expected to continue until oil export revenues rise tosignificant levels, around 2005. 

 

Onethird of Azerbaijan’s exports went to the CIS, and Azerbaijan bought 37.6percent of its imports from the CIS. Turkey is its largest single trade partnerwith Russia second, and, outside the CIS, Iran.

 

U.S.turnover with Azerbaijan almost doubled in 1998 to a total $127.3 million from$67.7 million in 1997. Azerbaijan broadened its negative balance ($117.5m)importing $122.3 million worth of goods and selling $4.9 million. U.S.machinery and parts exports mostly bound for oilfields or oilfield sitesamounted to $26.2 million, up from $21.9 million in 1997. But the big U.S.products were cigarets, cigars and other tobacco products, which captured firstplace among U.S. exports at $66.5 million up from 1997's third place ($7.2million). Other exports were meat, and tools/cutlery which grew, and electricalmachinery and optical/medical equipment which fell.

 

 

**CHAPTER 3: LEGAL FRAMEWORK FORFOREIGN TRADE AND INVESTMENT**

** **

Legal measures taken by the Government of Azerbaijan toproduce an environment conducive to foreign investment include the Law onProtection of Foreign Investments (1992), and certain tax incentives thatreduce corporate taxes on foreign shares of profits. The Privatization Law(1993) allows for foreign participation in the privatization

 

The 1992 Law on Protection of Foreign Investments providesthe foreign investor with protection against nationalization (except inspecified cases, and then only with compensation), subsequent disadvantageouslegislation, and treatment less favorable than that accorded to Azerbaijanicitizens. This legislation is supported by a U.S.-Azerbaijani Bilateral TradeAgreement that also provides for binational commercial dispute settlement inother fora than the Azerbaijani courts. Other laws passed since the inceptionof the Republic include corporate laws (on joint stock companies and limitedliability companies), employment, a new energy law (1999), and others. However,old Soviet laws are still in force in some areas. Interpretations and/orwording may be unclear. There is no PSA law; the huge oil/gas contracts areratified and passed as separate laws by the Legislature. 

 

A new tax code is in draft. Accounting standards and taxadministration lag international standards and are barriers to foreign tradeand investment. 

 

Foreign investors may do business and invest in Azerbaijanthrough simple sales, through the purchase of companies, buildings andsecurities, by acquiring rights to land and natural resources use, or throughthe establishment of: 

 

(1) Joint ventures with Azerbaijani partners, taking theform of open or closed joint stock companies (regulated by the law on jointstock companies), full or limited partnerships, or limited liability companies,or 

(2) Wholly foreign-owned companies in Azerbaijan, or

(3) Branch or representative offices. 

 

Tax and other treatment of these business types varies,mainly based on their status as resident versus nonresident, or profit-makingversus marketing and promotion.  

 

**CORPORATE LAW**

 

The laws on joint stock companies and limited liabilitycompanies define the types, status and rights of corporate vehicles for foreigninvestment. A foreign investor may establish on-site presence in Azerbaijanthrough a joint venture with an Azerbaijani partner, a wholly foreign-ownedAzerbaijani corporation, or a representative or branch office. Tax and otherregulations affecting these entities differ.

 

**Regulations forOpening an Office in Azerbaijan**

The Registration Department of the Ministry of Justice isresponsible for registering all Azerbaijani legal entities, including thosefully‑ or partly‑owned by foreign companies. 

 

# Registering a Branch or Representative Office

The Registration Department requires the following documentsfor registration by a foreign legal entity (FLE) of a company branch orrepresentative office:

(1) A letter from the FLE signed byits president and representative applying for registration (one copy); 

(2) A decision of the managementboard of the FLE stating its intention to open an office in Azerbaijan (twocopies);

(3) A notarized power of attorneyissued by the FLE to the head of the company's branch or representative office(2 copies);

(4) Two copies of the head'sidentification document (passport) and photo;

(5) Two copies of the charterdocument of the parent company and certificate of the company's registration.Both sets of copies must be certified by the consular section of theAzerbaijani Embassy in the U.S.;

(6) Bank statement from thecompany's bank (one copy);

(7) Basic principles of the branchor representative office signed and sealed by the head of the legal entity (5copies);

(8) Receipt for payment of thestate registration fee ‑Azerbaijan Manat 825,000 for a branch and U.S. $2,000for a representative office (payment should be made to the state budget fund atthe National Bank of Azerbaijan, account 30100062, code 501004);

            (9)Forms of the registering company's seal and stamps (two copies);

(10) Identification code; and

(11) A document certifying thecompany's legal address in Azerbaijan.

 

Documents 1 through 6 should be submitted in both Englishand Azerbaijani. Documents 7‑11 should be in Azerbaijani.

** **

*Registering a WhollyForeign‑owned or Joint Venture Company*

A company applying for registration of a wholly foreign‑ownedor joint venture company must provide documentation listed above in 1, 2, 5, 6,8‑11. In addition, these companies should also submit five notarized copies ofthe company's charter approved by the founder of the company. If there are twoor more entities establishing a company, then notarized copies of the minutesof the general meeting establishing the company, signed and sealed by eachfounder, are required.       For joint ventures, the RegistrationDepartment also requires two copies of the founding contract.

 

If there is any problem with a company's submittedapplication materials, the Registration Department must issue a letter withinfive working days describing the problem. Otherwise, the application of thecompany goes directly to the board of the Ministry and should be approved atthe next registration board meeting. Following board approval, the Ministrywill issue a registration certificate.

              Registration Contact: Chief ‑ Registration Department

              Ministry of Justice

              Tel: +994 (12) 988‑223

** **

** **

**TAXATION**

 

The current tax burden falls heavily on the larger,state-owned firms, and including highly visible  taxes owed to the central government include: 

 

– Corporate profit taxes levied on all legal entitiesregistered in Azerbaijan and levied on taxable income - 32 percent

– Dividend withholding tax - 15 percent applied to foreigninvestors when dividend transferred out of Azerbaijan

– Taxes on other income: management fees and lease payments20 percent; interest 15 percent and freight revenue 6 percent.

– Property tax .5 percent

– Personal taxes: graduated, levied on foreign permanentresidents (present 183 days), and for others on income received from Azerbaijanisources 12-40 percent

– VAT - 20 percent, and excise taxes on selected luxurygoods

– Royalties on natural resources recovery

– Employment and employee social fund contributions

 

Local taxes are:

– Land 3,000-186,000 manats/hectare

– Road tax .03 percent

– Vehicle registration 2 percent, and for legal entities anownership tax annually based on engine size.

 

Oil consortia under the PSAs are subject to a separateregime as defined in the Tax Article of a given PSA and negotiated TaxProtocols defining the procedures for filing and payment. These regimes applyto the operating companies, the contractor parties, and also addresssubcontractors

 

Azerbaijan has no Double Taxation Avoidance Treaty with theUnited States, also taxation by contract applied through the PSAs and in otherinstances can address this issue.

 

Tax laws are currently ambiguous leaving the Tax Police widelatitude for interpretation. Local inspectors are not always aware of specialprovisions. 

 

**REGULATION OF FOREIGNTRADE**

 

Azerbaijan’s foreign trade regulation are based on theDecember 17, 1996, decree "On Further Development of Foreign TradeRegulation," which replaced a number of earlier laws and regulations, andprohibits other restrictions on foreign trade beyond those mentioned in the

text of the decree. The decree addresses four key areas oftrade regulation: imports, exports, barter trade, and controlled goods. Itattempts to shield Azerbaijani companies from the less scrupulous foreign firmsthat sometimes prey on less‑experienced local companies. The new rules makedoing business in Azerbaijan easier than before, but patience is stillessential.

 

**IMPORT OPERATIONS**

 

Azerbaijani companies are prohibited by the decree frommaking advance payments to foreign

partners for the importation of goods or services. Thisrequirement is intended to protect local companies from unscrupulous foreignsuppliers who take payment "in advance" and then fail to deliver therelevant goods in return.

 

Importers are required to open an irrevocable letter ofcredit with a local bank to effect payment for foreign goods. The Ministry ofForeign Economic Relations (MFER) can authorize advance payments forexceptional cases that are not defined in the text of the decree. A number oflocal

and foreign banks perform trade finance services.

 

All import operations not requiring special licensing or theuse of state guarantees can be processed at local customs offices. MFER generalimport price regulations establish maximum and minimum prices for many importedgoods, and the decree requires importers to observe these prices. MFER mustapprove import contracts whose prices exceed these limits. Importers purchasinggoods and services on consignment terms may convert local currency into foreignexchange at local exchange bureaus for subsequent payment to the consignor.

 

**Import Documentation**

Importers are required to provide customs authorities with:(1) a signed import contract; (2) a customs declaration specifying what isbeing imported; (3) an invoice for the imported goods; (4) permission from therelevant Ministry if imports include pesticides, medicines, or weapons andammunition; (5) the bill of lading; (6) a certificate of origin; and (7) acertificate of quality for the imported merchandise.

 

Poultry products: The State Veterinary Committee ofAzerbaijan and the U.S Government are working toward an acceptable exportcertificate for poultry products entering Azerbaijan.

 

**Import Duties**  

Azerbaijan announced on June 16 that it was unifying itscustoms rates, in accordance with Azerbaijan's IMF agreement. According toCabinet of Ministers Decree #62, all imported goods are subject to a 15 percentimport tariff, unless specifically identified as dutiable at 5 or 0 percent.Customs authorities have eliminated most previously allowed exemptions. Theseregulations entered into force on July 1, 1997.

 

Decree #62 supersedes earlier regulations that provided forduty‑free entry of capital and intermediate goods. The earlier regulationlacked transparency and was open to abuse because there was no defined list ofgoods subject to duty‑free treatment. Duty‑free treatment was based on theintended use of goods as determined by the customs inspector. This new decreewill lead to some enterprises, including U.S. investors, making higher tariffpayments on imports of capital goods and inputs. Foreign investors are stillrelatively favored, however, compared to domestic   investors, because of the duty‑free treatment of theircharter capital.

 

**VAT and Excise Taxes**

A value-added tax (VAT) of 20 percent is imposed on certainimports. Exemptions to VAT include certain foodstuffs, salts, crude oil,nonorganic chemicals, pharmaceuticals, fertilizers, detergents, rubber‑basedtechnical and surgical products, tannery raw materials, paper related rawmaterials, children's clothes, ceramic items, certain ferrous and nonferrousmetal articles, and certain industrial machinery. In addition, capitalequipment for foreign direct investment is generally exempt from the VAT.

 

Excise duties are levied on beer and wine - 90 percent,tobacco products - 50 percent, and liquor - 65 percent.

 

**EXPORT OPERATIONS**

 

Selected goods can only be exported for cash includingpetroleum and petroleum products, electrical energy, nonferrous metals, and rawcotton. Credit and consignment agreements are prohibited for trading in thesegoods. For unlisted goods, an entity may export on a credit or consignmentbasis after filing a contract with MFER or the local customs agency. No exportwill be allowed without either full advance payment or the opening of anirrevocable letter of credit at a designated bank for the full export valueunless specific instructions are provided in the text of the contract(consignment, barter, credit exports).

 

Firms that are 30 percent or more state‑owned must submitexport contracts to MFER for registration; other entities may file with theirlocal custom offices. For consignment contracts, both state‑owned and privateexporters are required to complete sales, including collection of all debts,within 180 days or recover all of the exported product. If a state‑owned firmproduces the consigned goods and a non‑state firm exports them, however, theexporter must pay the contract value of the export to the producing firm beforeexport can occur.

 

**Export Duties**

As of January 1, 1997, all products exported from Azerbaijanare exempt from export duties. However, an export duty of 70 percent is leviedon oil and oil products, high pressure polyethylene, sulfonyl, caustic soap,aluminum, steel pipe, iron concentrate, bronze products, raw cotton and caviar.According to Article 3 of the Foreign Investment Law, goods produced fromforeign materials as well as goods produced by foreign investors in Azerbaijan,are exempt from the duty. 

 

The following commodities/transactions are exempt from theexport duty: commodities exported under intergovernmental agreements; export ofprocessed products made from imported raw materials (re‑export operations);export of raw materials for processing abroad and subsequent re‑import intoAzerbaijan.

 

**Barter**

Firms that conclude barter contracts must both register thecontracts with MFER and file them with their local customs office. Theprincipals establish a 90‑day time limit for barter transactions. If a bartertransaction is not completed within this period, the Azerbaijani party mustinsure return of the resources in monetary form to a bank in Azerbaijan. If thefull value of the export is not returned to Azerbaijan in monetary or commodityform within 90 days, the Azerbaijani party will be liable as a legal entity forconcealing income from the state in accordance with the laws of Azerbaijan.

 

**LICENSING AND OTHERDOCUMENTATION**

 

Transactions involving a number of goods must be cleared bythe Cabinet of Ministers before an export contract can be legalized. Othergoods and services require MFER approval and registration before a foreigntrade contract can be signed. MFER will coordinate with the appropriateministries and state agencies in making its decision. No credit or consignmentagreements are allowed for export of these goods. 

 

U.S. companies exporting to Azerbaijan must submitcertificates of origin, quality, and identity for the product exported toinsure prompt processing of the trade authorization. The decree stipulates thatfollowing document submission, MFER must complete the registration procedurefor the contract in three days and the local customs agency must process thecustoms authorization within 24 hours. Companies trading in alcoholic beverages‑‑exceptbeer‑‑and tobacco products must apply to MFER for a license. 

 

**CHAPTER 4 - BANKING AND CURRENCY**

 

The Azerbaijani banking system is small, underdeveloped andplays a minimal role in the economy, which mostly functions on cash. Azerbaijan=s banking system is a twotiered one, with the National Bank of Azerbaijan (NBA) operating as aregulatory agency, most recently imposing tightened capitalization requirementson the country=scommercial banks, and in general ensuring that the Azerbaijani banks met not onlycapital adequacy, but also short and medium term liquidity and minimum risk andcapital requirements.  Minimumcapital requirement for all new banks is now $5million.  

 

Second tier banks are dominted by four state‑owned banksdating from the Soviet era and about 70 private commercial Azerbaijani banks,and six foreign‑owned banks.  

 

The most popular banks among Western business people for useby their locally-based businesses are the International Bank of Azerbaijan, thehealthiest state‑owned bank, or British Bank of the Middle East's Baku branch,a subsidiary of the HSBC Group. Both of these have correspondent relationshipswith U.S. banks. Western businesses generally use local banks only forpayments.   Of the four state‑ownedbanks, only International Bank is a fully‑functioning commercial bank. Theother three are going through a World Bank‑designed restructuring program, andare unable to lend money.  The number of private banks declined following the increase of minimumcapital. Some of the stronger ones do business with foreign companies, and havecorrespondent relationships with U.S. banks. These include Rabitobank andDemiryol Bank.

 

**INTERNATIONALFINANCING**

 

The International Monetary Fund is in operation and hasoffices in Baku.  Planned IMFprograms for 1999 include strengthening the regulatory framework for theissuance, registration and trading of corporate securities.  A securities commission was establishedin December 1998.  Up until thenthere had been no stock exchange or other capital markets. 

 

The World Bank and The European Bank for Reconstruction andDevelopment ( EBRD) are both active in financing public infrastructure projects in Azerbaijan.  The World Bank=s International Finance Corporation (IFC)alone has approved over $230 million in investments in oil and gas projects,but also in bottling facilities, private and public banks, and equipmentleasing.    EBRD has beenoperating in Azerbaijan since 1994, and had by beginning 1999, committed $225million in project financing in oil, electric power, municipal utilities,transportation and financial institutions.   The European Union, through TACIS, has been activelysupplying technical assistance in Azerbaijan. 

 

** **

**U.S. InternationalFinancing and Assistance**

** **

The U.S. Special Advisor to the President for CaspianAffairs, a new position highlighting U.S. focus on that area, has set out aU.S. policy in the area, including and especially Azerbaijan: strengtheningindependence and prosperity of the Caspian countries, supporting U.S. commercialopportunities there, free flow of oil and gas from the regions (for U.S. energysecurity, and use of economic prosperity and linkages to resolve regionalconflicts.  In line with thispolicy, the U.S. opened early in 1999, a Caspian Finance Center in Ankara,Turkey to coordinate U.S. efforts to assist U.S. investors in the Caspian area,including Azerbaijan. Representatives of the Overseas Private Investment Corporation (OPIC),U.S. Export-Import Bank, and the U.S. Trade and Development Agency (TDA) arenow permanently stationed at the new Center.  All three agencies will assist U.S. investors in virtuallyany civilian sector.

 

OPIC  has beenfully exempted from the restrictions of Section 907 of the Freedom Support Act(restricting U.S. assistance to Azerbaijan) and is fully open for business inAzerbaijan in the three traditional OPIC areas for emerging markets: finance,political risk insurance and investment funds.  OPIC had by end 1998, 14 registrations for new projectsthere.  OPIC through its InvestmentFunds program has supported a new $92 million Caucasus Fund, a private equityfund that will invest in smaller projects in Azerbaijan and elsewhere in theCaucasus, concentrating in real estate, agribusiness, transport and services -not oil and gas.  

 

 

Effective October 1998, U.S. EximBank opened its doors tosupport of short and medium term sovereign financing in Azerbaijan.  Eximbank=sloan guarantee program covers repayment of two to five year commercial loans,and is used to support capital purchases in the public sector, to whichAzerbaijan has also committed its full faith and credit.  Repayment is guaranteed up to 85% ofthe value.  Usually buyers mustwork with banks or financial institutions that have a Master GuaranteeAgreement with Eximbank.   Inthe short term, Eximbanks=sexport credit insurance program will support sales of consumer goods, rawmaterials and spare parts, also agricultural commodities and capital goods onterms of six months to a year. Eximbank as of yet, remains closed to private sector transactions inAzerbaijan, but has signed a limited Project Incentive Agreement for structuredfinancing arrangements, under which loan repayment can be accomplished throughoffshore collateral accounts.  

 

The Trade Development Agency is now actively considering thefinancing of a number of feasibility studies in Azerbaijan.

 

**CURRENCY**

 

In fall 1998, the Russian ruble crisis resulted inintervention and a tightening of liquidity by the ANB to keep the exchange rateand restore confidence in the manat. In succeeding months, the manat has gradually appreciated , due in partalso to heavy inflows of foreign currency.  

 

There are no restrictions on converting or transferringfunds associated with an investment into a  freely usable currency and at a legal market clearingrate.   Nor is theredifficulty in obtaining foreign exchange at more than six hundred differentforeign exchange shops throughout Baku.

 

 Enterpriseswith a foreign capital share may freely transfer profits from their business in

 Azerbaijan totheir home country with no charges. The average delay for remittance of

 investmentprofits is two to three banking days.   

 

Foreign investors may be required to put 15 to 25 per centof their operating capital into a

"reserve fund" which cannot be withdrawn from thecountry while operations are ongoing in

Azerbaijan. The GOAZ has frozen bank accounts of companieswhich have not met all their tax

obligations.

 

The Baku Interbank Currency Exchange holds interbankauctions of foreign exchange. It also has conducted auctions of Treasury bills for the Ministry of Finance.Development of a secondary  marketin T‑bills has been prevented by the GOAZ's reliance on thirty‑day bills.

  

 

**CHAPTER 5 - OPPORTUNITIES ANDTRADE BARRIERS**

** **

**I.  OPPORTUNITIES**

** **

Oil/gas, construction, infrastructure projects, environmentand agriculture are the sectors most often cited as offering the best foreigninvestment opportunities, when reference is made to a need in the Azerbaijanimarketplace.   The key factor,however, is the availability of funding for each and any projectundertaken.  ****

** **

**EXPORTS ANDINVESTMENT - BEST U.S. PROSPECTS**

 

According to the U.S. Commercial Office in Baku, the bestU.S. opportunities are found in the following sectors:

 

              1 ‑Oil/gas field machinery: Fifteen consortia are currently working in Azerbaijandeveloping Caspian offshore and several onshore fields.   With projected investment bythese consortium in the double digit billions of dollars over the next tenyears, their purchases of foreign equipment and foreign investment in jointventures with local equipment producers present viable opportunities.  

              2 ‑ Oil, gas, mineral production/exploration services: Very few of thecurrent consortia are at the production stage of their oil and gasoperations.   International interest in obtaining exploration and development rightsto new  reserves is keen, and requirementsfor exploration services and subsequent production services will grow.

              3 ‑ Oil-gas-related construction machinery/equipment: with the majorpipeline activities underway, there will be a  market for construction machinery and equipment. Theexisting stock dates from the Soviet era but American companies will face stiffcompetition, and sometimes local content requirements  from Russian, Japanese and European firms. New pipelines from Baku to the Black seacoast and to Turkey areprojected to carry Caspian oil to Western Export Markets.

              4 ‑ Pollution control equipment: Azerbaijan faces extremely seriouspollution problems on the Apsheron peninsula.   Each of the consortia is expected to purchase state‑of‑the‑artpollution abatement equipment for its operations. Smaller oil companies mayinvest in pollution control equipment under terms of their contracts.  International funding is forthcomingfor environmental remediation.

              5 ‑ Telecommunications: Azerbaijan is still working to establish acommercially viable internet node, and has established a National Program forDevelopment of Telecommunications for 1997-2010, focused on upgradingexchanges.  The U.S. - AzerbaijaniCaspian-American Telecom LLC was just signed in spring 1999. 

              6 ‑ Construction of hotels, apartments, office blocks is needed.  Turkish and British construction firmsare operating in Azerbaijan. Although foreign firms have encountered some tax problems (a problem notlimited to this sector), the construction industry is thriving in Baku.American construction equipment exports will face stiff competition fromEuropean and Asian manufacturers.

 

7 ‑ Agricultural equipment: As agricultural land isprivatized, farmers will be looking to improve production through theintroduction of advanced technology and equipment.   The European Union is  already offering substantial aid programs in theagricultural sector through its TACIS program (which maintains offices in theMinistry of Agriculture).

              8 - Electrical Power Infrastructure:  Azerbaijan must replace most of the

electrical generation system within the next few years. Thisproject will cost about $500 million and require imported equipment;

   9 - Drugs/pharmaceuticals: Azerbaijan faces a chronic shortage of basicdrugs.. Imports by humanitarian organizations, the Government of Azerbaijan,and private individuals have been heavy in the past.  

  10 - Other: Transport Infrastructure: Airports, portfacilities, rail and road links and associated facilities; health careequipment and services.  

 

**II.   TRADE BARRIERS**

             

Despite the country's desire to see more foreign investment,the combination of an inadequate legal system,  highly bureaucratic regulatory structures and the uncertainpolitical situation (Nagorno-Karabakh, Section 907, succession) makes investingin the economy precarious.  Other barriers include:

 

--- Azerbaijan=stax structure and legal regime are major barriers to trade.  Taxes are high enough to be consideredinvestment disincentives. Commercial laws are developing slowly, as are accounting standards andcapricious tax administration.  

 

--- Licensing and regulatory practices are characterized bylack of transparency.   

 

--- Finding marketing mechanisms, identifying localpartners, contracting and corruption, as in other countries of the CIS presentchallenges.

 

--- Bureaucracy is a barrier to foreign investment,particularly the difficulties with contacts and communications, access toinformation, and slow processing of required paperwork.  

 

   **APPENDIX A: LISTSOF REGULATED GOODS**

 

**Goods allowed fordirect export only on cash terms with credit and consignment agreementsprohibited:**

              ‑‑Petroleum and petroleum products

              ‑‑Electrical energy

              ‑‑Non‑Ferrous metals

              ‑‑Raw cotton

 

**Goods whoseexport/import is regulated by the Cabinet of Ministers**:

              ‑‑Arms, weapons, military equipment, and related products 

   ‑‑Nuclear material, equipment,technology, special non‑nuclear material, radioactive sources 

              ‑‑Narcotics and chemical toxins 

              ‑‑Some types of scientific and technical information related to militaryproduction 

 

**Goods which requireMinistry of Foreign Economic Relations approval and registration prior toentering into foreign  trade contract:**

              ‑‑Steppe animals, wild plants, and bones found in archeology research 

              ‑‑Raw material from wild plants and animals for producing medicine,animal venom 

              ‑‑Inventions and the results of scientific research 

              ‑‑Works of art, collectibles 

              ‑‑Chemicals for plant protection 

              ‑‑Medicine for veterinary use and related biological products 

              ‑‑All medicines and medical supplies 

              ‑‑Construction and reconstruction service 

              ‑‑Leasing of foreign transportation equipment

              ‑‑International postal and communication services

              ‑‑Legal services

 

**Commodities Subjectto 5% Import Customs Duty:**

              Live Animals (except breeding stock)

              Grain products

              Ores

              Organic and non‑organic chemical products

              Explosive materials

              Wood and wood products

              Paper and cardboard products and wastes

              Textiles

              Cotton and chemical fibers and fabric

              Ferrous metals

              Copper

              Nickel

              Lead

              Zinc

 

Tin and articles thereof

              Nuclear reactors

              Mechanical and electric devices

              Railroad locomotives and carriages

 

**Exempt goods (0percent import customs duties)**

 

‑ seeds, fertilizers, forage, breeding animals, medicines,medicines for veterinary use, biologic preparations and veterinary

supplies, packaged baby food, syringes and pharmaceuticalgoods;

 ‑ goods andproperty for official use by diplomatic missions and equivalent missions inAzerbaijan and for private use by

diplomatic and administrative employees of these missionsand their resident family members;

‑ humanitarian aid for free distribution delivered byproperly registered humanitarian organizations and by other legal entities andby physical persons under the permission of the state commission oninternational humanitarian aid;

 ‑technicalequipment including raw materials and parts for their production, to be usedfor prophylaxis and treatment of disability (except for automotive transport);

‑ goods to be transferred to state property on the basis ofconfiscation, lack of owner or inheritance right; 

‑ property to be used as contribution of a foreign investorto the charter fund of a joint venture or for the creation of an enterprisefully owned by a foreign investor;

‑ goods delivered to Azerbaijan for a limited term and to bereturned unchanged to the country of origin under pre‑defined conditions (VATshall be paid at entrance and reimbursed at exit of said goods);

  ‑ transitgoods (under the control of customs);

 ‑ goods to besold in duty‑free shops;

 ‑ property offoreign employees of enterprises with foreign investment in Azerbaijan forprivate use;

‑ currency, cash, bills in legal turnover (not fornumismatic purpose), official state document letterheads and forms, passportsand securities, delivered on the basis of approving document issued by theNational Bank or the Ministry of 

‑ goods imported temporarily for processing and re‑export(VAT shall be paid at the entrance and returned at the exit of  said goods);

‑ goods imported on the account of the state budget

‑ fish and fish articles produced in the Caspian basinwithin the quota for Azerbaijan and delivered to Azerbaijan.

 

**APPENDIX B - GOLD KEYSTRUCTURE FOR BAKU, AZERBAIJAN**

 

COST:  $250.00 First Day/$250.00 EachAdditional Day

 

PAYMENT:  First Days' Payment in Advance  (NO REFUND IF TRIP IS CANCELLED)

                     Make Check Payable to:  U.S.EMBASSY - BAKU/FCS

 

ADVANCENOTICE:  4 WEEKS  (From receipt of product/serviceliterature for

prequalification.)

 

NUMBEROF APPOINTMENTS:  Varies, maximum 5per day

 

ADDITIONALINFORMATION:  A Letter ofInvitation (NOT issued by the Embassy)

anda VISA are  required to travel toAzerbaijan.  There are noguarantees

whenappointments are requested with Federal, State and Local Azeri

Officials.  A FCS staff member will accompany U.S.client on ALL

appointments.  Transportation and other servicesavailable at market rates

tobe paid by the U.S. client.

 

Ifthere are any questions, please contact Senior Commercial

Officer,U.S. Commercial Office, Baku at:

TEL:  (994-12) 98 03 35

FAX:  (994-12)  98 61 17

 

 

 

 

 

 

 

 

 

 

 

**APPENDIX C - USEFUL CONTACTS AND INFORMATION FOR AZERBAIJAN**

 

                U.S. Embassy Baku:

                Ambassador: The Honorable Stanley T. Escudero

               

                Commercial Section

                Commercial Officer: Michael Lally (as of August 1999)

                BISNIS Representative: Seymour Khalilov

                Time: EST Plus 9 hours

 

                83 370007 Azadliq Prospect

                Baku, Azerbaijan 

                Tel: (994‑12) 980‑335, 980‑336, 980‑337

                Fax: (994‑12) 98‑37‑55

                Address from the U.S.: 

                American Embassy Baku

                Department of State

                Washington, D.C. 20521‑7050

 

                Embassy of the Republic of Azerbaijan

                Ambassador: The Honorable Hafiz Pashayev

                927 15th Street, N.W.

                Suite 700

                Washington, D.C. 20005

                Tel: 202‑842‑0001

                Fax: 202‑842‑0004

 

                **BUSINESS ASSISTANCE ORGANIZATIONS**

 

                United States ‑ Azerbaijan Chamber of Commerce

                Executive Director: Galib Mammad

                1030 15th Street, N.W.

                 Suite520

                Washington, D.C. 20005 

                Tel: 202‑898‑0900 E-mail: [email protected];Web site: www.usacc.com

                Fax: 202‑898‑0015

 

 

                

 

 

 

 

     U.S. ‑ Azerbaijan Council

                1010 VermontAvenue, NW

                Suite 814

                Washington DC 20005

                Tel: (202) 662‑1343

                Fax: (202) 371‑2299

                E‑mail: [email protected]

 

                American Chamber of Commerce in Azerbaijan

                4th Floor, IDOGD Bldg.

                Academy of Sciences

                33 Huseyn Javid Street

                370143 Baku, Azerbaijan

                Tel: (994‑12) 938‑624, 938‑501, 975‑022

                Fax: (994‑12) 975‑023

 

                Sumgait Investment Promotion Agency (SIPA)

                Contact: Allon Speiser, Ben Shahar Associates

                Sumgait Mayor's Office (temporary location)

                Azerbaijan Ave. 9

                373200 Sumgait, Azerbaijan

                Tel: (994‑164) 200‑74 (Sumgait)

                (994‑12) 928‑378 (Baku)

 

                Chamber of Commerce and Industry of Azerbaijan

                First Vice President: Rauf S. Vezirov

                31/33 Istiglaliyat St.

                370601 Baku, Azerbaijan

                Tel: (994‑12) 927‑998

                Fax: (994‑12) 989‑324

                Telex: 142211 EXPO AI

 

                **INTERNATIONAL FINANCIALINSTITUTIONS**

 

                International Monetary Fund (IMF)

                 6 Samed Vurgun Street

                Baku 370000

                Tel: 994-12‑93‑56‑72

                Fax: 994-12‑93‑72‑68

 

               

 

 

 

 

     European Bank for Reconstruction andDevelopment (EBRD)

                Murat Yildran, Senior Banker for Azerbaijan

                5 Sabir Street

                Baku 370004

     Tel: 994-12-97-10-14

                Fax: 994-12-97-10-19 

                1 Exchange Square

                London, EC2A 2EH, U.K. 

                Tel: 44‑171‑338‑6812 - Thomas Bley, Associate Banker, Azerbaijan

                 Tel: 44-171-338 - 7164 - Olivier Descamps, Country Team Director,Transcaucasus 

                Fax: 44‑171‑338‑6599

 

                World Bank

                Resident Representative: Kutlay Ebiri

                Tel: 994-12-92-28-87

                Baku, Azerbaijan

 

                IFC - Baku

                Mirza Mansur Street, 91-93

                Icheri Sheher, Baku

                Aliya Nuriyeva, Investment Associate

      Tel: 994-12-92=19-412

 

                United Nations Industrial Development Organization

                (Sumgait Special Economic Zone Project)

                Program Officer: Anne Caroline Volz

                3, UN50th Anniversary St.

                Baku 1, Azerbaijan

                Tel: (994‑12) 921‑991

                Fax: (994‑12) 983‑235

                Tlx: 142 469 UN AZ AI

                E‑mail: [email protected]

 

                EU TACIS Co-ordinating Unit

                Tel: 994-12-93-60-18, -14

                Fax: 994-12-93-12-76

 

**                FREIGHT FORWARDERS**

 

                Murphy International

                Rrasul Rza St. 8, Apt. 28/15, Baku, Azerbaijan

                Tel: (9‑9412) 98‑01‑51

                Fax: (9‑9412) 93‑50‑15

                Contact: Graeme Jamieson, Resident Manager

 

                Bertling Caspian Limited

                Aeadlig Avenue 13/15, Baku, Azerbaijan

                Tel: (9‑9412) 98‑40‑61/98‑58‑65/93‑95‑08

                Fax: (9‑9412) 98‑07‑36

                Contact: Fiona Thorp, General Manager

 

                Interdean Baku

                Huseyin Javid St. 35/15

                Tel/fax: (9‑9412) 98‑63‑18

                Contact: Azad Tamrazov, Regional Manager

                Trans‑Oceanic Shipping

                67 Neftchiler Prospect, Apt. 30, Baku, Azerbaijan

                Tel: (9‑9412) 92‑34‑64

                Fax: (9‑9412) 98‑20‑82

                Contact: Bill Frankinburger, Resident Manager

 

                Trucat International, Ltd.

                101/103 M. Magomayev St., Baku 370004, Azerbaijan

                Tel: (9‑9412) 93‑78‑40

                Fax: (9‑9412) 98‑99‑60

                Contact: Matthew L. Authenment, Southern CIS Director

 

                Dialog Freight International

                Hagani St. 39/8, Baku, Azerbaijan

                Tel: (9‑9412) 98‑67‑46

                Fax: (9‑9412) 98‑87‑46

                Contact: Robert Klein, CIS Market Development Manager

 

                **OTHER**

 

                Azerbaijan International Operating Company

                Contracts and Procurement Officer ‑ Baku: Nick Rouse

                2 Neftchilar Avenue

                370004 Baku, Azerbaijan

                Tel: (713) 482‑0004 (Houston tie‑line)

                Tel: 9‑9412‑914170 or 914180 or 926396

                Fax: 9‑9412 988494

 

                PUBLICATIONS AND FURTHER INFORMATION ON AZERBAIJAN

                Azerbaijan International

                P.O. Box 5217

                Sherman Oaks, CA 91413

                Tel: (818) 785‑0077

                Fax: (818) 997‑7337

                E‑mail: ai@artnet. net

 

                US‑Azerbaijan Council - See above

                 CaspianBusiness Report, Caspian Crossroads

               

                US‑Azerbaijan Chamber of Commerce - See above

                Azerbaijan Investment Guide - 1999

               

                Victor Kamkin, Inc.

                Assa‑Irada ‑Azerbaijan International Independent News Agency

                James Beale

                Director, Periodicals Division

                4956 Boiling Brook Parkway

                Rockville MD 20852 USA

                Tel: 301‑881‑5973 

                Fax: 301‑881‑1637

 

                UNDP/UNIDO

                Sumgait ‑ The City of Tomorrow:

                ‑Private Sector Development and Bottlenecks in the Business Environment

                ‑Joint Action Programme

                 ‑InvestmentGuide to Azerbaijan and the Sumgait SEZ

                ‑Development Prospects and Business Opportunities

                3, UN 50th Anniversary St.

                Baku 1, Azerbaijan

                Tel: (994‑12) 921‑991

                 Fax: (994‑12) 983‑235

                Tlx: 142 469 UN AZ AI

                E‑mail: [email protected]

 

                TRAVEL INFORMATION

                Visas: A passport and visa are required to enter Azerbaijan. Visas canbe obtained 

                ofthe Republic of Azerbaijan. The following are required:

from the Consulate of the Embassy

                1) Completed visa application form.

                2) Original passport or reentry permit (no copies accepted).

                3) One passport‑size photograph attache to application form.

                4) (For business travelers): An invitation from the interestedAzerbaijani organization.

                (For tourists): Telex confirmation from hotel where visitor hasreservation.

                Fees: There is no fee for issuing visas. For express handling (less thanfive days for  

                days for tourist visas), there is a fee of forty dollars.

business visas; less than fifteen

                Mail application to: Embassy of the Republic of Azerbaijan

                PO Box 28790

                Washington, D.C. 20005

                Phone: 202/842‑0001

 

                Tourist Advisory Information:

                24‑hour State Department Travel Warnings: Call (202) 647‑5225

                world wide web: http://travel.state.gov/travel_warnings.html

                or Write:

                Citizens Emergency Center

                Room 4800

                Department of State

                Washington, D.C. 20520‑4818

                (Write "Azerbaijan" on outside of envelope)

 

                Medical Advisory Information:

                Centers for Disease Control International Travelers Hotline: (404) 332‑4559or on the 

world wide web:

                 http://www.cdc.gov/travel/travel.html

 

**CONSULAR INFORMATION SHEET**

 

              1. Country description: Azerbaijan is a nation undergoing profoundpolitical and economic change. tourist facilities are not highly developed, andhotel space in Baku is limited. Many goods and services taken for granted inother countries are not yet available. Public disturbances may occur withoutwarning.

 

                2. Entry requirements: a passport and visa are required to enterAzerbaijan. Travelers with valid

Georgian visas are permitted to enter Azerbaijan for a stayof up to five days. Thereafter, they must

include a letter of invitation from an individual ororganization in Azerbaijan when applying for a visa.

for additional information on visa requirements, contact theembassy of Azerbaijan, 927‑15th street,

N.W., suite 700, Washington, DC 20005; telephone (202) 842‑0001.

 

                3. Areas of instability: as a result of conflict in the Nagorno‑Karabakharea of Azerbaijan, twenty per cent of Azerbaijani territory (in the southwestalong the borders with Iran and Armenia) is occupied by

insurgent forces. A cease‑fire has been in effect since1994, although reports of armed clashes along the cease‑fire line and along theborder with Armenia continue. Anti‑personnel mines are a danger in areas closeto the front lines. It is not possible to enter the self‑proclaimed"republic of Nagorno‑Karabakh" from Azerbaijan. Travelerscontemplating entering Nagorno‑Karabakh are advised that because of theexisting state of hostilities, consular services are not predictably availableto Americans in Nagorno-Karabakh. Travelers, therefore, are cautioned to avoidtravel to Nagorno‑Karabakh and the surrounding occupied areas.

 

                4. Travel information: train travel in the Caucasus region is notsecure. Public transportation in general is overcrowded and poorly maintained.The embassy strongly discourages use of the Baku metro.

travelers on airlines among the countries of the Caucasusmay experience prolonged delays and sudden

cancellations of flights. In addition to routine delays,flights are often overcrowded with passenger without seats standing in theaisle along with excess unsecured cabin luggage. Even basic safety features

such as seat belts are sometimes missing. Air travel toAzerbaijan on international carriers via the United Kingdom, the Netherlands,Germany, and Turkey is generally more reliable.

 

                5. Road conditions/traffic safety: within the capital city of Baku,roads are extremely poor driving hazards such as open manholes, debris, andpotholes are common. Drivers pay little heed to traffic regulations, signals,lanes, or other drivers.  Driversoften travel at extremely high rates of speed and accidents are frequent.Driving within Baku should be considered extremely hazardous. Outside of

the city, where roads are present, conditions are similar.They are often in poor repair, unlit, and

lack lanemarking, traffic signs, and warnings. Many ruralroads are unpaved and rarely traveled.

 

                6. Medical facilities: medical care in Azerbaijan is extremely limited.There is a severe shortage of basic medical supplies, including disposableneedles, anesthetics, and vaccines against communicable

diseases. Doctors and hospitals often expect immediate cashpayment for health services. U.S.

medical insurance is not always valid outside the UnitedStates. Further information on health matters can be obtained from the centersfor disease control and prevention's international travelers' hotline,tel:(404) 332‑4559 or visit the CDC home page on the internet athttp://www.cdc.gov.

 

                7. Crime information: although Azerbaijan has a low rate of violentcrime, incidents of street crime and assaults on foreigners are increasing. Theloss or theft abroad of a U.S. passport should be reported immediately to thelocal police and the nearest U.S. embassy or consulate. The department ofstate's pamphlet "a safe trip abroad" provides useful information onguarding valuables and protecting personal security while traveling abroad.Additional information on the region can be found in the brochure

“Tips for Travelers to Russia and the Newly IndependentStates." Both publications are available from the superintendent ofdocuments, U.S. government printing office, Washington DC 20402. The consularsection of the embassy in Baku can provide additional information on the crimesituation including safety

tips and contact numbers for the local police.

 

                8. Currency regulations: Azerbaijan is a cash only economy. Traveler'schecks and credit cards are not accepted. The local currency is the manat. U.S.dollars are required in most hotels and preferred in many restaurants.

 

                9. Drug penalties: u.s. citizens are subject to the laws of the countryin which they are traveling.

penalties for possession, use, or trafficking in illegaldrugs are strict and convicted offenders can

expect jail sentences and fines.

 

                10. Registration and embassy location: Americans are encouraged toregister at the consular section of the U.S. embassy and obtain updatedinformation on travel and security within Azerbaijan. The U.S. embassy inBakuis located at prospect Azadlig 83. The telephone numbers are (9) (9412) 98‑03‑35,(9) (9412) 98‑03‑36, or (9) (9412) 98‑03‑37.