According to UNCTAD's 2022 World Investment Report, FDI inflows to Azerbaijan were negative by USD 1.7 billion in 2021. In the same year, the total stock of FDI stood at USD 31.6 billion, around 57.9% of the country’s GDP. Azerbaijan inflows focus on the oil and gas sector, although one of the top priorities of the Azerbaijani Government is to diversify the country’s economy and attract FDI to agriculture, transportation, tourism and information/communication technology. Russia is the main source of FDI, but beyond that the country is part of the customs union between Russia, Kazakhstan, Armenia and Belarus that, in terms of volume, is the most important in the region and is almost exclusively involved in major projects for oil/gas pipelines and related services. According to the latest figures by the Central Bank of Azerbaijan, in the first nine months of 2022, FDI inflows totalled USD 4.57 billion, with the UK holding the biggest share (27.7%) ahead of Turkey (16.4%), Cyprus (13.5%), Russia (8.3%) and Iran (5.6%).
The Azerbaijani Government has stressed the importance of improving the business climate and it does not screen inbound foreign investment. To promote FDIs, Azerbaijan established a single online portal to issue business licenses and permits. This was against a backdrop of slow structural and anti-corruption reforms. Nonetheless, the country was also designated as one of the top 20 reformer countries by the UNCTAD for its efforts in registering property, obtaining credit, protecting minority investors, and enforcing contracts. Russian invests heavily in Azerbaijan's construction, trade, services, banking, insurance, information technologies, transportation and agriculture sectors. The EU has prioritized the construction of the Southern Gas Corridor, which would transport Azerbaijani gas through Georgia, Turkey, and Europe. Under the recently amended Customs Tariff law, entrepreneurs importing capital equipment for priority sectors will be exempted from taxes for up to seven years. Following the release in 2021 of a tripartite ceasefire declaration by Armenia, Azerbaijan, and Russia over the conflict in the Nagorno-Karabakh region, the Azerbaijani government is seeking new investments in the nearby territories that were previously under the control of Armenian-backed separatists. The 2022 budget included an allocation of AZN 2.2 billion (around USD 1.3 billion) for the restoration and reconstruction of these territories, more specifically in the fields of road infrastructure, electricity, gas, water, communications infrastructure, and the education and healthcare sectors, as well as for the pursuit of green energy projects in this region. Azerbaijan is expected to continue to attract investment as an alternative transit route due to the risks associated with the Russian route following the invasion of Ukraine. Nevertheless, the problem of corruption remains unresolved and may act as an impediment to the country's development: Azerbaijan ranked 157th out of 180 countries on Transparency International's Corruption Perceptions Index 2022. Furthermore, a small group of government-connected holding companies dominates the economy, the country remains very dependent on the hydrocarbon sector (which represents on average more than 90% of its exports) and has a fragile dollarized banking system with an underdeveloped private sector credit. Azerbaijan ranks 93rd among the 132 economies featured in the Global Innovation Index 2022 and 75th out of 130 in the 2023 Index of Economic Freedom.
|Foreign Direct Investment||2020||2021||2022|
|FDI Inward Flow (million USD)||507||-1,708||-4,474|
|FDI Stock (million USD)||36,366||34,320||29,436|
|Number of Greenfield Investments*||6||3||9|
|Value of Greenfield Investments (million USD)||344||43||674|
Source: UNCTAD - Latest available data.
Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.
The Foreign Investment Laws stipulate the types of entity in which foreign companies can invest, the rules governing the repatriation of profit and earnings and the general right and gurantees provided to foreign investors. Foreigners can invest in business venture in Azerbaijan in a number of ways, such as:
-Establishing a fully owned subsidiary
-Acquiring shares of an existing company
-Establishing a joint venture with Azerbaijani Companies and individuals
-entering into other acceptable forms of investment agreement.
Foreign citizens, organizations, and enterprises may lease but not own land.
For more information, consult the report "Investment Climate 2018" on the US Department of State's website.
Azerbaijan Export and Investment Promotion Foundation (AZPROMO) gives information on the authorisations required for setting up a company.
For more information, consult the "Investment Climate" Statement on the US Department of State's website.
For more information, consult the website of the Azerbaijan Export and Investment Promotion Foundation (AZPROMO).
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Latest Update: September 2023