Hazar Raporu - Issue 02 - Winter 2012

Most of the states of Central Eurasia are
landlocked, and they depend on each
other’s transportation infrastructure.
Building highways, railways, ports, and
airports is a necessary part of Azerbaijan’s
hub strategy, but it is not a sufficient
one. Without a bird’s-eye approach and a
coherent policy, which will view all these
projects as components of a single strategy,
the transportation and infrastructure
projects are likely to have outcomes that
will be insufficiently efficacious, because
they would lack complementarity. For
Central Eurasia to produce the “Dubais”
and “Singapores” of the 21st century, the
compartmentalized regional mindset has to
give way to an integrated common vision
that will direct each project towards a
shared goal.
Azerbaijan of 2030 or 2050 will be the
product of today’s concept sketches.
The core of a successful hub strategy for
Azerbaijan must include Free Economic
Zones (FEZ) development, on the basis
that FEZs are prerequisites for generating
trade and attracting Foreign Direct
Investment (FDI). The current FEZ law
in Azerbaijan falls short of the Production
Sharing Agreement (PSA) legal framework,
effectively utilized by Azerbaijan to
promote its oil and gas projects. Although
the non-oil sector may not be as attractive
or compelling as the oil sector, given the
right strategy and incentives, it could still
bring in high levels of FDI, with multibillion
dollar ventures across various sectors
of the non-oil economy.
This report recommends focusing on
two projects that are directly linked to
Azerbaijan’s grand hub strategy and
that could generate significant FDI in
the non-oil sector and raise the stakes
in the country’s FEZ development.
This means that the two key projects
– the Port of Alyat and Baku Heydar
Aliyev International Airport – should
be incorporated into the FEZ concept,
which in turn should be constructed on a
flexible and effective legal framework (i.e.
Production Sharing Agreement). This
approach will produce two marketable
projects that could result in a “Contract
of the 21 st Century” in Azerbaijan’s
non-oil sector, similar to the “Contract
of the Century” signed in the energy
sector in September 1994. At a regional
level, Azerbaijan needs to harmonize its
transport strategy with that of neighboring
states, particularly Georgia, Turkey and
the Central Asian countries along the
East-West axis, and Russia and Iran in the
North-South direction.
Other Key Recommendations
Strategic Issues
The Azerbaijani government
needs to align all its major development
projects in the non-oil sector under a
single overarching objective.
A coherent and integrated
vision for Azerbaijan’s future hub must
be developed. This strategy or a master
plan should integrate and encompass all
110 108