Page 99 - Azerbaijan State University of Economics

Orkhan Dadashov: The Effect of Foreign Direct Investment on Azerbaijan’s Non-Oil GDP

Opportunities:
• Azerbaijan is investing in non-oil sectors, such as tourism, agriculture, and
technology, which can provide opportunities for foreign investors.
• The government is working to improve the education system and increase the
number of skilled workers, which can benefit foreign investors looking to establish
operations in the country.

• Azerbaijan has established trade agreements with several countries in the region,
including Turkey and Russia, which can provide access to larger markets.
Threats:
• The global economic uncertainty and political instability in the region can impact
the FDI inflows into the country.
• The government's reliance on the energy sector can pose challenges to
diversification efforts and economic development.
• The ongoing conflict with Armenia over Nagorno-Karabakh can create
geopolitical risks for foreign investors in the region.

Azerbaijan offers several strengths for foreign investors, such as its strategic location,
abundant natural resources, and favorable tax regime. However, the country's heavy
reliance on the energy sector and infrastructure development outside of Baku are
weaknesses that need to be addressed. The government's efforts to invest in non-oil
sectors, improve education and increase the number of skilled workers, and establish
trade agreements with other countries provide opportunities for foreign investors.
However, global economic uncertainty and political instability in the region, the
ongoing conflict with Armenia over Nagorno-Karabakh, corruption and lack of
transparency remain threats that need to be considered. Overall, Azerbaijan has
potential for FDI, but continued efforts to diversify the economy, address weaknesses,
and mitigate threats are necessary for sustained growth and development.
How Azerbaijan's Tax and Regulatory System Affects Attractiveness the of
Foreign Direct Investment

Foreign Direct Investment plays a crucial role in the economic development of
countries, providing access to capital, technology, and management expertise.
However, the attractiveness of a country as an investment destination depends on
various factors, including taxes and regulations. In recent years the government
stimulated the flow of new investments into the country by making fundamental
changes in a number of legislative acts and also in the tax legislation in the direction
of increasing foreign direct investments in the non-oil sector.

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