Azerbaijan - Country Commercial Guide
Investment Climate Statement

The Investment Climate Statement Chapter of the CCG is provided by the State Department.

Last published date: 2021-09-29

The U.S. Department of State Investment Climate Statements provide information on the business climates of more than 170 economies and are prepared by economic officers stationed in embassies and posts around the world.  They analyze a variety of economies that are or could be markets for U.S. businesses.

Topics include Openness to Investment, Legal and Regulatory systems, Dispute Resolution, Intellectual Property Rights, Transparency, Performance Requirements, State-Owned Enterprises, Responsible Business Conduct, and Corruption.

These statements highlight persistent barriers to further U.S. investment.  Addressing these barriers would expand high-quality, private sector-led investment in infrastructure, further women’s economic empowerment, and facilitate a healthy business environment for the digital economy.  To access the ICS, visit the U.S. Department of State Investment Climate Statement website.

The overall investment climate in Azerbaijan continues to improve, although significant challenges remain.  Over the past few years, Azerbaijan’s government has sought to attract foreign investment, undertake reforms to diversify its economy, and stimulate private sector-led growth.  However, the Azerbaijani economy remains heavily dependent on oil and gas output, which account for roughly 90 percent of export revenue and over half of the state budget.  Real GDP grew 2.2 percent in 2019, primarily due to a ramp up in natural gas exports.  While the oil and gas sector has historically attracted the largest amount of foreign investment, the Azerbaijani government has targeted four non-oil sectors to diversify the economy: agriculture, tourism, information and communications technology (ICT), and transportation.  Measures taken in recent years to improve the business climate and reform the overall economy include eliminating redundant business license categories, empowering the popular “ASAN” government service centers with licensing authority, simplifying customs procedures, suspending certain business inspections, and reforming the tax regime.

Azerbaijan fell from 25th to 34th among 190 countries in the “Doing Business 2020” rating published by the World Bank and the International Finance Corporation.  According to the report published on October 24, Azerbaijan carried out four successful reforms from May 2018 to May 2019, thereby fulfilling four out of five goals.  These reforms were related to registering property, obtaining credit, protecting minority investors, and enforcing contracts.  Due to these indicators, Azerbaijan was featured as one of the top 20 “reformer” countries.  However, progress remains slow on structural reforms required to create a diversified and competitive private sector, and corruption remains a major challenge for firms operating in Azerbaijan.  A small group of government-connected holding companies dominate the economy, enforcement of intellectual property rights is insufficient, and judicial transparency is lacking.

Under Azerbaijani law, foreign investments enjoy complete and unreserved legal protection and may not be nationalized or appropriated, except under specific circumstances.  Private entities may freely establish, acquire, and dispose of interests in business enterprises.  Foreign citizens, organizations, and enterprises may lease, but not own, land.  Azerbaijan’s government has not shown any pattern of discriminating against U.S. persons or entities through illegal expropriation.  The Bilateral Investment Treaty (BIT) between the United States and Azerbaijan provides U.S. investors with recourse to settle investment disputes using the International Center for the Settlement of Investment Disputes (ICSID).  The average time needed to resolve international business disputes through domestic courts or alternative dispute resolution varies widely.