Attracting foreign investment to Azerbaijan plays an important role in the general policy of the President and the Government of Azerbaijan, aiming to ensure the sustainable development of the knowledge-based, diversified, export-oriented and internationally competitive economy. To contribute to this strategic mission and to accelerate the development of the non-oil sector of the economy, Alat Free Economic Zone (AFEZ) and the Alat Free Economic Zone Authority (AFEZ Authority) were established by the decree of the President and Government of the Republic of Azerbaijan dated 22nd of May 2020. AFEZ’s strategic geographic location will serve as a regional investment hub and boost competitiveness in international transport corridors, attracting local and foreign investment to the country’s non-oil sector.
STRATEGIC INTENT
The task of planning, developing, and managing AFEZ has been entrusted to the AFEZ Authority, which has been established for this purpose. The AFEZ Authority will focus on, and meet the needs of, investors by delivering a world class place to do business with its strategic geographic location, multi-modal transport connections and an investor-friendly regulatory, operating and business environment.
Consequently, AFEZ will serve the needs of national and foreign investors who will engage in high value-added and export-oriented manufacturing and internationally traded services, using innovative technologies and approaches to work in accordance with best international standards; and that generate additional value to Azerbaijan’s non-oil sector.
LEGAL BASIS FOR AFEZ
The legal framework for the development, operation, and governance of AFEZ is based on the “Law of the Republic of Azerbaijan on the Alat Free Economic Zone” (AFEZ Law) adopted by the Parliament and signed by the President of Azerbaijan as a prevailing law of the Republic of Azerbaijan and internal regulations of AFEZ, issued by the AFEZ Authority. AFEZ Law declares that AFEZ legislation takes precedence over base economy legislation.
BENEFITS FOR INVESTORS
The business-friendly environment and access to large international markets available from AFEZ’s multi-modal location creates real value for investors. In addition, and in line with international benchmark locations, the AFEZ Authority will offer a package of fiscal and non-fiscal incentives to businesses established in AFEZ, such as:
• TAX EXEMPTION: a qualified business in AFEZ is not required to pay a value-added tax, withholding tax or any other corporate taxes, employees will be exempted from personal income tax (up to 8,000 manats, or approx. US$4,700 a month). Import and export of any products or services by AFEZ legal entities are exempt from customs duties and taxes, including value-added taxes. Social security payments for foreign skilled personnel are optional and for local personnel are obligatory, and other benefits.
• NO RESTRICTION ON FOREIGN OWNERSHIP: there is no restriction on foreign ownership of AFEZ legal entities, meaning that a foreign parent company can own 100% of the shares in the AFEZ legal entity and successfully carry on business without a requirement for a local partner.
• ADDITIONAL BENEFITS: these include, but are not limited to, a trade facilitation-based customs regime; immunity of investor property from nationalization or other restrictions, no restrictions on foreign currency or profit repatriation, ease of access to visas for foreign nationals, full investor protection, full protection of intellectual property rights, independent regulatory authority and continuing investor support.
INVESTOR - FRIENDLY PROPERTY SOLUTIONS
In addition to business-friendly services and incentives, AFEZ will provide to investors and legal entities established by them, a modern and fit-for-purpose-built environment and property solutions. AFEZ will initially occupy a total site area of approximately 719 ha, spread over three zones. In total, 6500 ha of territory has already been allocated to AFEZ by the Government of Azerbaijan, while an additional over 1000 ha of area has been reserved for the future expansion.
Moreover, to meet the needs of AFEZ’s customers in logistics-transportation services, there will be two logistics-transportation centers established: one on the territory of 50,000 square meters for goods, transported by road and the second on the territory of 210,000 square meters for goods transported by rail. Furthermore, in order to meet the needs of AFEZ legal entities and any other interested parties in cargo transportation, there will be a Cargo Airport on the territory of AFEZ. The implementation of this project has already started. It is expected that the Cargo Airport will be operational not later than the first quarter of 2026 with the capacity of 500,000 tons annually at the first stage, and with further gradual increase reaching up to 1.5 million tons per year.
GREEN AGENDA
AFEZ takes the impact on the environment very seriously. During the analysis of the submitted investment proposals, special attention is paid to environmental sustainability of each project, and we request companies to adhere to the best internationally recognized standards.
Currently, there is a great interest in AFEZ from renewable energy companies that wish to produce solar panels, wind turbines and blades within AFEZ, as well as to build renewable energy power stations.
In particular, the production of wind towers and blades will be advantageous in AFEZ, as it will allow to avoid high transportation costs and shipping difficulties, as well as allow for more cost-effective electricity production due to the benefits and incentives of AFEZ.
Moreover, AFEZ Authority suggests legal entities registered in AFEZ to install solar panels on the roofs of their production facilities, which will allow for cost savings in terms of energy prices.
In addition to this, the AlatBay Logistics Center, operating within AFEZ, has been awarded the EDGE ADVANCED GREEN certificate. EDGE is an innovative methodology implemented by the International Finance Corporation (IFC) in the field of green investments.
