Dear members,Welcome to AmCham Azerbaijan’s quarterly business magazine – IMPACT, devoted to the recent achievements in Taxation & Customs systems of Azerbaijan. This edition is quite remarkable – we are wrapping up our calendar year with lots of fruitful achievements and you will be able to read opinion on these changes from higher level officials – Minister of Taxes Mr. Mikayil Jabbarov and Chairman of the State Customs Committee customs service lieutenant-general Mr. Safar Mehdiyev.As you know, tax legislation in Azerbaijan is expected

to undergo substantial changes. As a “voice” of the business community in the country, AmCham is pleased with these encouraging reforms aimed at reducing tax burden, simplifying tax administration, creating positive behaviors and preventing tax evasion. In parallel, the customs system is also introducing lots of positive changes. These will improve effectiveness of foreign economic activity, strengthen state support for domestic production and diversification of oil economy. All these changes will contribute for sustainable development of the business climate in the country.Another successful benchmark of AmCham was preparation of White Paper – representing collective thinking of the members about changes that will strengthen Azerbaijan’s business environment, and by extension, the country as a whole. The document contains recommendations on banking, finance, insurance, tax, customs, legal, compliance, antimonopoly, labor, migration, tourism, etc. which also contribute to successful implementation of “Strategic Road Maps for the National Economy and Main Economic Sectors”, endorsed by the President H.E. Ilham Aliyev.Let me recapitulate that AmCham welcomes such reform initiatives of the Government and always ready to mobilize expertise and best practices among the member companies to make a substantial contribution for enhancing standards in the country.Taking this opportunity, let me thank each of you for being engaged with AmCham in 2018 and wish all the very best in 2019. Happy upcoming New Year, Happy Solidarity Day of Azerbaijanis!

Best regards,Natavan Mammadova

Dear friends, dear members.Welcome to 32nd edition of IMPACT Azerbaijan magazine, devoted to recent changes and achievements in taxation and customs system of Azerbaijan. Within this edition, we are happy to provide interviews from relevant higher level government representatives. Herein, the focus has been on different aspects of the recent changes, which will bring positive impact for development of business climate in Azerbaijan; thus, further contribute for sustainable development of the country. At the same time, member companies have shared their expertise on important issues

touching to the needs and expectations of the private sector.

Please, enjoy reading it!

Sincerely,Aykhan Nasibli

A Word From Executive Director of AmCham

Editor’s Comment

Credits

AmCham Executive Director:

Natavan Mammadova

Editor:

Aykhan Nasibli

Articles contributed by:

Nuran Kerimov

Zaur Gurbanov

Gumru Eyvazova

Ruslan Mirzayev

Yunis Salayev, Sabit Abdullayev

Walid Madhoun

Advertisers:

BP

Azerfon

Turkish Airlines

Dow Turkey

The Coca Cola Company

P&G

Iteca Caspian

Publisher:

American Chamber of Commerce

in Azerbaijan

Tel: (+994 12) 497 13 33

Fax: (+994 12) 497 10 91

www.amcham.az

www.impact.az

Advertising opportunities:

Please contact the Editor at

editor@amchamaz.org

The articles in IMPACT Azerbaijan

express the opinions of the authors and

do not necessarily reflect the position of

the American Chamber of Commerce in

Azerbaijan

Issue 32

contents

2 Issue 32

IN FOCUS

DEvElOpmENt & EDUCAtION

38

41

Committee Highlights

AmCham legal Update

30Business Events

33

36

Amcham members’ luncheon

Social Events

29About Us

AmCHAm AZERBAIJAN

4

7

Reflection of Recent Changes on taxation for the Business Community of Azerbaijan

Azerbaijani Customs Authoritiesare Always in legal trade

11Azerbaijan’s 2019 tax Reform: Clampdown on Informal Economy

20

23

25

Introduction of mediation forCommercial Disputes in Azerbaijan

Beneficial Ownership Disclosure

Capacity Building: a vital Factor ofEconomic Development

14Changing Wave of Reformsin taxation

Azerbaijan and the European Union:Great potential in Relations

16

Special Interview with Minister of Taxes,Third-Rank State Tax Councilor Mr. Mikayil Jabbarov

mEmBER CONtRIBUtION18

Direct and Indirect Impact ofCoca-Cola System to the NationalEconomy of Azerbaijan

Adrian CernautanCaucasus Region Manager, The Coca-Cola Company

Ruslan MirzayevAdrem Attorneys Law Firm, Managing Partner

Yunis Salayev, Sabit AbdullayevBDO Azerbaijan

Walid MadhounPartner, Mast Canada

Zaur GurbanovTax Director, EY

Gumru EyvazovaLegal and External Affairs Executive,BAT

Nuran KerimovPartner, Deloitte Baku

Special Interview with the Chairman of State Customs Committee of the Republic of Azerbaijan, Lieutenant-General of Customs Service Mr. Safar Mehdiyev

J O U R N E Y T O T H E N E W H O M E O F T U R K I S H A I R L I N E S

T H E A I R L I N E T H A T F L I E S T O M O R E C O U N T R I E S T H A N A N Y O T H E RA W A I T S Y O U I N T H E W O R L D ’ S N E W A V I A T I O N C E N T E R

I S T A N B U L A I R P O R T

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Minister Jabbarov, lately the tax system has been going through serious changes and local entrepreneurs have many expectations with regards to the proposed amendments to the tax legislation. Allow us to start our conversation on the very same issue. What will be the impact of the proposed amendments to the development of the business in the country?Tax policy as part of the social-economic policy pursued in Azerbaijan, is constantly improving to meet the changing demands and growing pace of the economy. This is sustainable process. Tax policy shall be flexible and adaptable to the economic situation, as well as support business development and competition environment. Ministry of Taxes strives to embrace these demands in its activity.President Ilham Aliyev outlined the issue of building reliable

relations between the state and taxpayers in carrying out active tax policy as one of the main challenges to be addressed by tax authorities. The main task here is to direct the efforts of the Ministry of Taxes and tax legislation towards boosting economic growth and development of entrepreneurship, as well as effective promotion of private investments. Scaling down the shadow economy is among the main targets too.The year of 2018 has been defined as the transition year in relations with taxpayers; relevant steps are being taken to ensure transition to a new tax system stipulated by the factor of social development, as well as in conformity with the leading global practices. This process is carried out through introducing relevant changes both to tax administration culture and tax legislation without detriment to economic growth, entrenched business habits and business environment. Tax legislation has been significantly amended. The amendments may be classified according to 5 directions. These are support to entrepreneurship, reducing the scale of shadow economy and tax evasion, expanding tax base, streamlining tax administration and increasing efficiency of the existing and new tax incentives. The most notable change to the tax legislation features introduction of tax incentives in respect of taxes from salary income for the citizens employed in non-oil private sector. According to the change, monthly income up to 8000 manats is fully exempted from income tax, whereas citizens with monthly income over 8000 manats, are subject to income tax at the rate of 14% for the amount exceeding 8000 manats. It is worth mentioning that, this is a big concession on behalf of the state which is estimated at hundreds of millions manats. The state loses part of its revenues because of this particular reform. We anticipate that following the implementation of this reform the shadow economy will be reduced, informal employment removed, economic and business activity, especially in private segment of non-oil sector revived and accelerated, and citizens’ rights will be protected more thoroughly.

Reflection of Recent Changes on taxation for the Business Community of Azerbaijan

Special Interview with Minister of Taxes,Third-Rank State Tax CouncilorMr. Mikayil Jabbarov

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In order to increase confidence to the reform, the aforementioned incentive will remain applicable during 7 years. Taxpayers will have an opportunity to plan their activities in a long term perspective. Moreover, income tax of natural persons and social security contributions will be merged under a single administration that means further simplification of procedure for the employers. Here, I would like to underline the fact that granting tax incentives at such a scale required high level political decision making. In this regard, Mr. President’s support in this matter should be especially noted. I am certain that, entrepreneurs and citizens of Azerbaijan will duly appreciate this incentive by taking adequate steps towards ensuring tax compliance, removing informal employment, safeguarding the rights of working population and reflecting true salary payments.

Do the amendments envisage support to the development of small and medium business? Support to small and medium entrepreneurship is a priority for the Ministry of Taxes too. Amendments to tax legislation envisage certain provisions directed at stimulation of activities of small and medium businesses. The most significant changes include reduction of simplified tax rates, fast depreciation opportunities for small entrepreneurship, expansion of the scope of flat rate tax mechanisms for micro entrepreneurs, as well as substantial tax incentives in respect of income, profit and property taxes offered for small and medium entrepreneurship cluster companies and entrepreneurs. Small entrepreneurs who are classified as simplified taxpayers will be taxed at the rate of 2% instead of previously applied 4%, thus benefiting from 2 times less tax burden. At the same time, activities under the simplified tax regime have been revised and a new list of eligible activities has been

introduced. This was triggered by misuse of tax benefits, originally meant for small entrepreneurs, by the persons who were not eligible for those benefits. In reality, it cut across the principle of equal and fair taxation by violating the rights of small entrepreneurs. Current amendments, along with tax administration measures that we plan to carry out next year, are aimed at preventing unfair competition and supporting activities of disciplined taxpayers.

Support to small and medium entrepreneurship can also be found in the roadmaps endorsed by President Ilham Aliyev. These documents list the issues related to the improvement of tax administration. Which steps are being taken in this direction?Ministry of Taxes is the main state agency responsible for the implementation of 5 directions over 3 strategic roadmaps, whereas it is the participative state agency responsible for the implementation of 34 directions over 9 strategic roadmaps deriving from the “Strategic roadmaps on the national economy and the main sectors of the economy” approved by the relevant decree of President Ilham Aliyev. To this end, the Ministry of Taxes drafted and put in place the Action Plan, as well as appointed persons in charge of implementation of targets specified in the roadmaps.The main directions of the Action Plan envisage implementation of budget-fiscal policy, application of incentivized tools for the development of small and medium entrepreneurship, simplification of business procedures, promotion of effective tax system for the development of favorable business climate, improvement of international rankings of Azerbaijan, optimization and implementation of risk based audits at small and medium entrepreneurs, continuation of incentives-oriented tax reforms in the same area etc. You mentioned the issue of bettering international ranking of

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our country. Doing business report rated reforms conducted in the tax system high this year…Comprehensive economic reforms carried out in the country ensured advancement of our international ranking and this is well acknowledged by the international community. As to the Doing Business 2019 report, Azerbaijan was listed among top 10 countries to improve its position through various indicators, whereas tax reforms have also been rated positively in the report. Azerbaijan has improved its ranking from 18 to 9 on “Starting a business” indicator, as well as moved up from 35th

to 28th position on “Paying taxes” indicator. Starting business in Azerbaijan is very simple, transparent and can be realized in a short time. Today, any citizen or an entrepreneur willing to establish legal entity can register within few hours using “electronic signature”. Many improvements have been made in terms of time required for paying taxes, the number of payments and tax burden. I consider that tax reforms we will be conducting next year will allow us to make further progress in Doing business report and our country will improve its position accordingly.

How does the Ministry of Taxes evaluate its future cooperation with business entities and associations?Ministry of Taxes attaches high importance to effective cooperation with business entities, associations and expert community specialized in the fiscal area, since the success of every reform is directly linked to public support and acknowledgement. Moreover, public associations of entrepreneurs and business circles are parties to the business processes and therefore the reforms conducted in this field directly affect their interests. We shall discuss with them the steps we take and we are interested in this. Through a number of meetings organized in 2018, we

have discussed the issues and promotion mechanisms that interested entrepreneurs willing to expand their business operations. I would like to note that we have been in close communication with public associations of entrepreneurs and consultancy companies in drafting current amendments to the tax legislation. We also ensured participation of experts representing “Big four” in preparing the draft with the sole purpose of taking entrepreneurs’ interests into account. I think that round tables, forums, conferences and working level meetings are extremely useful in this sense. During these meetings, conducted in the format of open dialogue, all issues of concern to the business community, their opinions and proposals are carefully studied. Agenda of these meetings also involves broad discussions over improvement of business climate and tax legislation in the country. This is a testimony of cooperation between public and private sectors. And this cooperation will be continued.

Biography of our guestMr. Mikayil Jabbarov was appointed Minister of Taxes by the Order of the President of the Republic of Azerbaijan on December 5, 2017.Before this appointment, Mr. Jabbarov was the Minister of Education from 2013 to 2017, Head of State Administration of the Historical and Architectural Reserve of «Icherisheher» under the Cabinet of Ministers from 2009 to 2013, Deputy Minister of Economic Development from 2004 to 2009, as well as different position both in the government and the private sector.Mr. Mikayil Jabbarov carries Master Degrees in Economics from the Azerbaijan State Economic University and in Law from the McGeorge School of Law, University of the Pacific (Sacramento, California, US). Mr. Jabbarov is also member of the New York State Bar Association since 1999.

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What steps have been taken towards the further improvement of the tax and customs administration mentioned in the Strategic Road Map guided by Mr. President? As you know, structural reforms have been carried out recently to ensure the improvement of the quality of management in the customs system. Having considered the modern standards, the areas of activity of the Committee and the local and specialized customs offices included in the Committee system have been defined, 5 new head offices have been established on the basis of the local and specialized customs offices, the structural units of the Committee have been reorganized in line with their areas of activity.Pursuant to the Decree of the President of the Republic of Azerbaijan dated May 21, 2016, the implementation of the Green Corridor and other gating systems for transportation of goods and vehicles across the customs border has been started. So far around 60 foreign trade participants have been

granted permits to use the Green Corridor gating system.An exchange of preliminary information on goods and vehicles crossing the state border with Georgia, Ukraine, Iran and Turkey was ensured. This allows more rapid and better quality control over the goods and vehicles crossing the state border.It is gratifying that the software and technical measures on the application of TIR-EPD and e-TIR systems, which envisage information exchange in advance on commodities and vehicles imported to the country during the International Freight Shipping within the framework of cooperation between the State Customs Committee of the Republic of Azerbaijan and the International Road Transport Union electronically with customs authorities on the basis of paperless technology, has been completed. The use of this system will become advantageous for a faster and prioritized transportation of vehicles engaged in the International Freight Shipping, through the state border on the basis of efficient risk analysis performed in compliance with the information provided to the customs authorities.Establishment of temporary storage warehouses has been initiated to increase the efficiency of customs control and ensure more efficient use of commodities owned by foreign trade participants. The Committee has established a register of temporary storage warehouses. The registry has been posted on the website of the State Customs Committee to inform the participants of the foreign economic activity. At the same time, the “VAIS-Warehouse” subsystem for placement and movement of goods has been put into operation in these warehouses. SMS system has been applied to the VAIS. At the moment of crossing the state customs border, upon reaching the destination customs office and after the customs clearance begins, at all stages of the customs clearance the owners of the goods are automatically sent by the system SMS on the status of the goods.The customs system has been completely transferred to the system of non-cash payments. VAIS is integrated into government payment portal, Easy Pay payment system and other payment systems.Important steps have been taken in the area of further

Azerbaijani Customs Authorities are Always in legal trade

Special Interview with the Chairman of State Customs Committee of the Republic of Azerbaijan, Lieutenant-General of Customs Service Mr. Safar Mehdiyev

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betterment of the tax and customs administration, based on the measures defined in the “Strategic Road Map of the Republic of Azerbaijan for the National Economy Perspective” approved by the Decree of the President of the Republic of Azerbaijan dated December 6, 2016.A number of documents were signed between the Ministry of Taxes and the State Customs Committee to ensure the mutual activity of tax and customs authorities, further improvement of tax and customs administration.Note that, on April 23, 2018, the Protocol on the Control of the Activities of the Importing Goods for Third Parties was signed. This document includes issues such as compliance with legislation by third party importers, complete fulfillment of tax obligations and protection of competitive environment among entrepreneurship entities.On August 1, 2018, the Agreement on Protection of Confidential Information was signed. The subject of the Agreement is to determine the terms, conditions of use and protection of the application (entry) of confidential information transmitted during the cooperation between the parties.Moreover, in accordance with the “Action Plan on Improvement of the Imports and Exports Control System” approved by the Order No 260 of the President of the Republic of Azerbaijan dated June 28, 2018, on 1 August of the same year, 3 more documents have been signed between the Ministry of Taxes and the State Customs Committee.Of them - the purpose of the Protocol of the Agreement “On joint control over the means of identification of goods and vehicles crossing the customs border” is to carry out joint identification procedures during customs clearance of goods imported by legal entities importing or exporting goods for third parties and persons engaged in entrepreneurial activity without legal entity in order to ensure the transfer of customs and tax payments to the state budget in the full volume.The purpose of the Protocol of the Agreement on the provision of access to sub information systems on import-export data of “Single Automated Management System of Customs Services” of the State Customs Committee of the Ministry of Taxes in a timely manner is to provide the Ministry of Taxes with access to sub information systems on import-export data of the Single Automated Management System of the State Customs Committee in a timely manner on a request basis in order to ensure operational efficiency of the legislation.The purpose of the Agreement “On transferring data to the Single Risk Platform (SRP) between the Ministry of Taxes of the Republic of Azerbaijan and the State Customs Committee of the Republic of Azerbaijan” is the organization of risk assessment by customs and tax authorities on foreign trade activities participants, regulating issues related to mutual exchange of information about owners, carriers or persons representing them for the purpose of division of risk groups

What additional work is planned to be done in the near future to improve the customs system?Decree of the President of the Republic of Azerbaijan “On additional measures to increase the business climate in the Republic of Azerbaijan and improve the position of our

country in the international rankings” approved by the Order No 2947 of the President of the Republic of Azerbaijan dated June 2, 2017, the Article 7.2.1.1 of the Action Plan on the Implementation of the Decree No 2199 to adapt the national legislation to accelerate the implementation of the European New Computerized Transit System (NCTS), and to undertake measures to create a transit guarantee system, have been entrusted to relevant government agencies, including the State Customs Committee.I would like to recall, that in December 2017 a decision was made to grant the Republic of Azerbaijan an informal observer status in the Governing Body of the Convention on Common Transit Procedures and the Convention on the Facilitation of Documentation in Commodity Exchange which forms the legal basis of the European New Computerized Transit System (NCTS).I hope that our country’s accession to this system will enable the customs clearance chain for transit operations, the minimization of the number of documents required for customs purposes during transit through the use of single administrative documentation, and the acceleration of risk

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analysis and risk assessment through pre-electron exchange of information on all transit routes.The application of this system will also allow access of the goods produced in the Republic of Azerbaijan under the brand name “MADE IN AZERBAIJAN” to the markets of the NCTS member countries in Europe and their delivery to destination.At the same time with the support of the European Union Delegation to Azerbaijan in 2017-2018 the project “Support to the State Customs Committee in the Preparation for joining the Conventions on the Common Transition Procedure and the Facilitation of Documentation in Commodity Exchange, as well as the Preparation for Joining the European New Computerized Transit System (NCTS)” has been successfully completed.Taking all this into consideration, the current legislation, regulatory requirements in conformity with the convention provisions regarding accession to the European New Computerized Transit System (NCTS), the study of the requirements of information technology for the application of the system, the analysis of the relevant field for the purpose of creating a customs guarantee mechanism and becoming a member to the “Convention on the Common Transit Procedure” and the “Convention on the Facilitation of Documentation in Commodity Exchange” is one of the main targets.At present, relevant work is underway to introduce the TIR-EPD system in order to present information on goods and vehicles to the customs authorities in advance of the transportation carried out under the transit procedure regulated by the Customs Convention on International Cargo Transportation (1975), with the application of the International Cargo Booklet

One of the main tasks is to expand innovation activities to accelerate the innovative development of the economy, to enhance the role of creative industry in the modern economy and the impact of intellectual property on the information society, as well as the protection of the cultural heritage of the Azerbaijani people. Accordingly, re-processing of the legislative basis for intellectual property rights and improving the registry system are part of the work envisaged to ensure the sustainability of human capital-based innovation economics and the protection of intellectual property rights in the near future.At the same time, facilitating international trade on the basis of the use of existing tools and means by participating in the complex management of the international trade chain and re-processing of the legislative basis on the competent economic operator for the purpose of creating a favorable business climate for foreign trade participants, the development of an authorized economic operator institute, coordinating the activities of foreign trade participants and the further development of mutual relations with those who have obtained this status stand at the core of the main goals.

What does the Memorandum of Understanding with Small and Medium Business Development Agency promise to entrepreneurs of this kind? As you know, the Memorandum of Understanding on cooperation and interaction between the State Customs Committee of the Republic of Azerbaijan and the Small and Medium Business Development Agency of the Republic of Azerbaijan was signed on August 10 this year.In the Memorandum of Understanding, educating entrepreneurs in the area of granting competent economic operator status, improvement of the activities of micro, small and medium-sized businesses (SMEs) in import-export operations in the areas of customs control zones and other places where customs clearance is carried out, assistance in the proper declaration of goods and vehicles, as well as bolstering cooperation and mutual trust between customs authorities and SMEs, establishment of joint “SMEs House-Customs and Logistics Islands” and to further develop entrepreneurial activity organizing “round tables” for studying proposals on simplification of customs procedures, explanation of customs regulations for countries where goods are exported, including information on customs legislation, Green Corridor and other gating systems are all covered in the MOU. There are many pros of the issues mentioned in the MOU for the small and medium-size entrepreneurs. It contains carrying out activities to organize entrepreneurial satisfaction, informing entrepreneurs about the services rendered, as well as measures to study international practice on public-private partnership in the implementation of customs legislation; the organization of mutual activities in order to increase the export potential of small and medium-sized businesses, and the performance of relevant measures to implement joint projects.

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What additional services (processes) can AmCham member companies benefit from?It is being a long time since the State Customs Committee has been carrying out various electronic services over the E-Government portal. By using these services, foreign trade partners may carry out a number of activitiesForeign trade participants may declare their imported and exported goods electronically to the customs authorities and may obtain information about goods arriving at the state border crossing the customs border. Also, it can carry out all payments on customs operations or customs clearance procedures on-line, as well as obtain information on import-export transactions, including bank payments for these transactions.In addition, foreign trade participants may attain a fast pass on the frontier by submitting a brief import declaration to the customs authorities on commodities and means of transport and may apply to the customs authorities with letters and inquiries, and, if necessary, apply to the Central Customs Examination Office to carry out customs expertise of imported/ exported goods. They may also receive information on fees and charges applicable to imported/ exported goods and can register electronically their contracts with foreign partners.

How do you assess cooperation with businesses and associations?It is well known, that in the light of the globalization processes in the world, ensuring the security and sustainability of the international trade chain reveals new challenges. One of the major missions of modern customs in global scale is to ensure that cargo transportation is carried out in an easy and fast way.In order to meet modern demands and challenges, Azerbaijani customs authorities take important steps in line with the reforms carried out by President H.E. Ilham Aliyev in the field of diversification of the country’s economy, development of the non-oil sector and the country’s export and transit potential.The philosophy of customs is changing in our country, and the customs authorities transfer their work from administration

to service. One of the main trends is to develop efficient, transparent cooperation with business entities and institutions, along with the development of infrastructure, improvement of customs legislation, strengthening of capacity of employees in the Strategic Road Map drafted for this purpose. The doors of the customs authorities are always open to business representatives. We listen to entrepreneurs at any time of the day and strive to eliminate the problems that they face.Within the last 6 months, numerous meetings were held with entrepreneurs and business entities within the framework of individual and associations. These meetings focused on facilitation of trade, simplification of customs procedures, provision of transparency, and issues related to the projects and measures taken in the field of anti-corruption.It is undisputable that rapid growth in the world, as well as in all spheres, inevitably requires dynamic and flexible governance and innovative projects in the customs system. Projects implemented by the Azerbaijani customs authorities for these purposes, new applications are carried out with the help of entrepreneurs, business entities, consultations, discussions and inquiries, as well as their feedback and suggestions, either at the stage of preparation or at the stage of implementation, unlike previous periods. This, in turn, increases the efficiency of customs.You can be sure that the Azerbaijani customs authorities are always on the side of legal trade and its subjects. I recon that due to mutually beneficial cooperation, steps are taken to develop this area. In our next activity, we will do our utmost to develop the non-oil sector of the country, to facilitate international trade and to create favorable business environment for foreign trade partners, and will mobilize all our efforts to ensure the citizen satisfaction.

Biography of our guestAs of 23 April, 2018 Lieutenant-general Mr. Safar Mehdiyev was appointed the Chairman of the State Customs Committee, with the Order of the President of the Republic of Azerbaijan.Starting the career in 1990, Mr. Mehdiyev has been working at State Customs Committee in different positions from 1999. In between of 1999-2004, Mr. Mehdiyev worked as inspector, senior inspector of the Customs Tariff Regulation Department of the General Directorate of Financial-Tariff and Currency Control of the State Customs Committee, Head of Customs Cost Department, Deputy Chief of the General Department. From 2004 to February 2006 he was the Deputy Chairman of the State Customs Committee, and from February 2006 the First Deputy Chairman of the State Customs Committee of the Republic of Azerbaijan.Mr. Safar Mehdiyev has received distinguishing awards, including the Medal "For Civil Service Honors", Order "For Service to the Motherland" and honorary title "Honorary Civil Servant".Lieutenant-general Mr. Safar Mehdiyev is a graduate from Ege University, International Economic Relations and Baku State University, Department of Law. At the same time, he carries Masters degree on Finance from Azerbaijan State University of Economics.

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legitimate economic and taxable domain the businesses that currently manage to stay away from the tax authorities’ reach.The proposed changes are massive and the ‘carrot and stick’ approach seems to be the tactics of the tax authorities this year. The changes are going to offer quite a few meaningful tax preferences, and in parallel, there is a clear trend towards the tougher controls over the tax discipline and penalties. In a country dominated by the petroleum industry, these changes are targeting other sectors of the economy.

taxation of individualsChanges to individual taxation are at the core of this year’s changes. For a very long time, businesses have been pointing to the high rates of personal income tax (PIT) and mandatory social insurance contributions (SIC) as one of the major reasons contributing to unofficial employment and grey salaries. Given this, perhaps the most anticipated change is the reduction of the fiscal burden on the payroll. Effective from 1 January 2019, the monthly income of up to AZN 8,000 (approx. USD 4,705) will be PIT-exempt, and any exceeding amounts will be taxed at a rate of 14 percent2.Similar changes are going to be made to the rates of SIC:

Please note that only the individuals employed by private businesses other than in the oil and gas sector will be eligible

2. These rates are effective from 1 January 2019 for seven years.3. These rates are effective from 1 January 2019 for seven years.

Over the 18 years of its existence, Azerbaijan’s Tax Code has been amended virtually every year. 2019 is not going to be an exception: effective from 1 January 2019, major changes are going to be made to the Tax Code, the Law “On Social Insurance”, and the Law “On Unemployment Insurance”.When we look at the economic context driving the 2019 fiscal reform, the need for immediate actions appears evident. A fragile economic recovery following the 2014 collapse in commodity prices, the unbearably high level of the shadow economy, low tax discipline, high rate of unofficial employment, inefficient tax audits and tax appeals – these are among the reasons that drive the changes to the existing tax regime. In his speech on 13 February 2018, Mikayil Jabbarov, Minister of Taxes, outlined his main strategy for increasing the tax revenues through ‘…the expansion of the tax base’1. Expansion here should be interpreted as bringing into the

1. http://fed.az/az/news/read/32528

Monthly income subject to SIC

SIC Rates3

TotalDeducted from

employee`s income

Paid by employer

Up to AZN 200 25 percent 3 percent 22 percent

Over AZN 200 25 percent

AZN6 manat + 10 percent of in-

come exceeding AZN 200

AZN44 + 15 percent of income exceeding AZN200

Azerbaijan’s 2019 tax Reform: Clampdown on Informal Economy

Nuran KerimovPartner, Deloitte BakuPresident, AmCham Azerbaijan

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for the new rates. Those who work in the oil and gas sector and in the public sector will continue paying PIT at 14 percent and 25 percent, respectively, and SIC at 25 percent (with 3 p.p. paid by the employee and 22 p.p. paid by the employer).Once the new rates are approved, the combined PIT and SIC burden for the mid-income individual taxpayers is going to decrease by 4 p.p. and 7 p.p., respectively (depending on income level), and for their employers – by 7 p.p. Simple math shows that a substantial part of Azerbaijan’s working population will be paying only 10 percent of their payroll in tax, which will make Azerbaijan quite competitive in this respect when compared to other countries of the region.The Government believes that the level of tax compliance in the petroleum industry and public sector is at an acceptable level and there is no need for additional tax preferences. Conversely, where the Government sees a major tax leakage (private employers outside the oil and gas sector), it hopes that a reduced payroll tax is going to be a major stimulus to keep the salaries transparent and declare them fully for taxation purposes.Consistent with the Government’s economic strategy, new tax benefits will be introduced for the micro, small, and medium businesses, exempting 75 percent of their income (individual entrepreneurs classified as micro-business will also be eligible). Income from the innovative activities of micro or small entrepreneurs will be exempt from taxation for three years upon receipt of the startup certificate.

Redesigning the simplified taxThe Ministry of Taxes has long been vocal about the abuse of the simplified tax regime, and in particular about large businesses that would have split until they had met the revenue threshold of ‘up to AZN 200,000 for consecutive 12 months’ to qualify for the simplified taxation regime.According to the proposed changes, trading exceeding AZN 200,000 will be excluded from the list of qualifying activities for the simplified taxation regime. Companies with a headcount over five employees engaged in production, wholesale trade, and supply of services (except where the services are supplied to individuals who are not registered as taxpayers) will no longer be eligible for the simplified taxation regime, too. Although this change is going to reduce the number of the simplified taxation regime users substantially, as a tax policy measure replacing the imputed simplified tax with more fair income tax, it is clearly a move in the right direction.At the same time, the 2019 amendments to the Tax Code are going to offer additional preferences to the simplified tax regime users:• the simplified tax rate is going to be 2 percent throughout

the entire territory of Azerbaijan4 (except for catering, where the simplified tax rate is going to remain at 8 percent)

• the simplified tax rate on sales transactions in retail business and catering completed with a bank card will be reduced by 25 percent

• the dividends received by the shareholders of a resident legal entity with revenues of up to AZN 200,000 over consecutive 12 months, not registered as a VAT payer, and holding a full record of its revenues and costs, will be tax-exempt

• barbers and tailors will be eligible for the simplified tax regime, too.

taxation of corporationsRecently, Azerbaijan’s tax authorities have been enthusiastically adopting international best practices to counter the aggressive tax planning. As another step in this direction, the 2019 amendments are going to introduce thin capitalization rules. Where the foreign borrowing of a company is two times (or more) greater than its net asset value (the foreign leverage ratio), the part of the interest relating to the share of the debt exceeding the x2 threshold will not be tax-deductible.The definition of the term “dividends” is going to be expanded to include the value of the property of a legal entity purchased out of its net profit upon liquidation and the value of shares of the legal entity purchased back at nominal value and which was formed at the expense of its net profit.Article 13.2.16.14-1, as amended, now envisages a 10-percent withholding tax on direct and indirect payments made to entities incorporated in low-tax jurisdictions, including the payments to branches and representative offices in other countries, as well as transfers to bank accounts in low-tax jurisdictions.Azerbaijan’s tax administration clearly recognizes a growing role of technologies in tax administration. A new important tool is the track and trace technology. Importation and production of certain goods will be subject to the mandatory labelling. A list of such goods and the rules governing transactions with them, as well as the inventory rules, are going to be adopted additionally.The newly introduced Article 65.7-1 will enable the tax authorities to require that the taxpayer’s bank convert the funds in a foreign currency into AZN to settle the client’s outstanding tax liabilities.One of the popular schemes of extracting cash from the business in Azerbaijan is making an advance payment to an employee for allegedly business purposes (e.g. procuring raw materials). In most cases, such amounts are not repaid to the company. Currently, the authorities cannot recognize such payments as taxable transactions – neither for the business nor for the employee. According to the amendments, such cash advances will be treated as taxable employment income in the hands of the employee.

4. Currently, the simplified tax rates in Baku and other parts of Azerbaijan are different: 4 percent and 2 percent, respectively.

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Other changes in tax administrationThe Ministry for Taxes will take over from the State Social Protection Fund (SSPF) in collecting SIC. As a result, instead of two separate audits of payroll tax and SIC, conducted by the Ministry of Taxes and SSPF, businesses will have to pass only one audit, conducted by the tax authorities. Separate filings with the SSPF will no longer be required, either.As a part of an effort to strengthen the tax controls, the tax authorities are going to promote participation of wider consumer community by offering a cashback of up to 15 percent of VAT paid in retail and catering.

looking forward to the reformChanges to the Tax Code coming into force in 2019 represent a major reform of Azerbaijan’s tax regulation. The willingness to offer substantial tax cuts and set a reasonable tax burden for doing business in the country should be interpreted as the Government’s intention to build more transparent and fair relations with the taxpayers.Remembering that historically the major challenges of Azerbaijan’s tax environment were in the country’s tax administration, the lower tax rates alone may be not enough to improve tax compliance in the country. The tax reform must be accompanied by addressing deficiencies in such important areas as tax audits, appeals system, continued professional training of the Tax Ministry’s employees and interpretation of the law. Concerning the differentiation of individual taxpayers employed in the oil and gas sector and those working in other sectors, setting unambiguous differentiation criteria is extremely important task to avoid undesirable disputes between the taxpayers and the authorities.Tax policy alone cannot eradicate the informal economy: this requires a set of measures, including the promotion of a compliance culture in the business community, implementation of the International Financial Reporting Standards, mandatory publication of financial reports and mandatory audit of financial statements, enforcement of the anti-money-laundering legislation, and many similar initiatives.

New tax preferencesThe current profit tax exemptions for the agricultural companies are extended until 1 January 2024.Profit of educational institutions, including those established for the education of disabled individuals, will be tax-exempt, unless paid out as dividends.A very progressive change concerns donations to charity: a ten-year profit tax exemption will be granted to the companies (except the public companies), donating up to 10 percent of their profit to the educational, medical, sports, and cultural organizations, meeting the criteria established by the Government.In addition, 50 percent of income from the disposal of shares/ participation interest held for at least three years will be exempt from profit tax.One of the clear trends in the new approach to tax regulation is promoting cashless transactions. For three years starting from the next year, profit tax on sales transactions in retail business and catering, completed with a bank card, will be reduced by 25 percent.The dividends received by the shareholders of a resident legal entity with revenues of up to AZN 200,000 over consecutive 12 months, not registered as a VAT payer, and holding a full record of its revenues and costs, will be tax-exempt.

Author’s biographyMr. Nuran Kerimov is a Partner leading the Tax& Legal practice of Deloitte Baku. He has significant experience in advising on both international and Azeri companies and individuals on a variety of tax and associated business issues. Mr. Kerimov has participated in numerous projects related to development of corporate structures, including international corporate structures for Azerbaijan based companies, and structuring investments of foreign multinationals into Azerbaijan. His experience is centered on bank and insurance, energy & resources, pharmaceutical and other industries providing international tax, corporate and individual taxation advice.Nuran holds Master of Laws (LL.M.) degree from the University of Georgia, USA, and Bachelor of Laws degree from the Voronezh State University, Russia. Nuran is currently serving as the President of AmCham, and a member of the Board of Directors of Deloitte CIS.

in focus

14 Issue 32

Generally, employment taxation for oil and gas and public sectors remains as it is – 14% for taxable income up to AZN 2,500, and 25% on the amount above AZN 2,500 + AZN 350.In other words, it is taxation of the non-oil and gas private sector that is expected to undergo fundamental changes. Let us take a closer look at what is planned to happen here.

New personal income tax ratesIn accordance with the discussed changes to be made to the Tax Code of Azerbaijan, for the next 7 years starting 1 January 2019 personal income tax rates for the non-oil and gas private sector are proposed to be as below:

It is proposed that in cases where, as well as working in oil and gas, the taxpayer is also involved in other, non-oil and gas activities, the employer shall keep separate accounting records for those employees working in multiple sectors. Otherwise, all employees will be subject to the income tax rates indicated for the oil and gas sector – in other words, they will pay current income tax rates.The new rates will also apply to personnel providing administrative management services, such as accounting, audit, legal advisory, data analysis and processing services.The next proposed change is for the non-taxable basic allowance to be delinked from the living wage and fixed at AZN 200 for monthly income below AZN 2,500, and at AZN 2,400 for annual income below AZN 30,000, to be applied to oil and gas as well as government sectors.Meanwhile, the planned amendments can affect the existing tax exemption for life insurance sums paid to policy holders. In comparison to the existing clause of the Tax Code where the whole taxable income of the employee obtained from life insurance is fully exempted after repayment, the new amendments introduce a rule based on which only up to 50% of such income will be exempted.

New social insurance contribution ratesThe discussed amendments also impact social insurance contributions made to the State Social Protection Fund by both employees and employers.Thus, for 7 years from 1 January 2019, social insurance contribution rates for the non-oil and gas private sector are proposed to be applied as follows:

The amendments to legislation on employment taxes introduced by the Milli Mejlis (yet to be approved by the President and due to become effective on 1 January 2019) are among the most important and widely discussed news items at the moment. However, what do we really know and what should we know about these changes? Whom do they impact and how? What is the new personal income tax rate and how do these changes affect both employees and employers?In anticipation of the new changes, many different opinions and interpretations could be found in publicly available sources, or even just overheard here and there. There are plenty of versions, but in this article you will find summarized information based on official interviews and press releases of Tax Office officials.

What are the new amendments about?The key point, which sets the tone for all the discussed changes, is that the lawmakers distinguish between the approach to employment taxation for (i) the oil and gas and public sectors, and (ii) the non-oil and gas private sector.

Taxable monthly income Tax rate

Up to AZN 8,000 0%

Above AZN 8,000 14% of the amount above AZN 8,000

Changing Wave of Reforms in taxation

Zaur GurbanovTax Director, EY

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Gross Taxable monthly income

Withheld from Employee Paid by Employer

Below AZN 200 3% 22%

Above AZN 200 AZN 6 + 10% of the amount above 200

AZN 44 + 15% of the amount above

200

The same approach as for personal income tax is envisaged by the amendments in respect of taxpayers working in both sector groups. As such, it is proposed that employers will have to divide the accounting records for employees working in both oil and gas and non-oil and gas sectors in order to apply separate social insurance contribution rates.It is worth mentioning that the life insurance exemption rule regarding 50% of taxable income also applies to the changes in social insurance contributions.Current social contribution rates for the oil and gas and government sectors are not planned to change, remaining at the rates of 22% payable by the employer and 3% withheld from employees. Nevertheless, the amendments will still affect the oil and gas sector by applying an exemption on social insurance contribution payments for expatriate employees envisaged by the Azeri-Chirag-Guneshli and ShahDeniz Production Sharing Agreements to all existing similar pipeline agreements with respect to the hydrocarbon activities.

Unemployment insurance rates remain the sameThe unemployment insurance contribution rate is not planned to be changed under these amendments. That said, 0.5% of the gross salary will still be withheld from employees.At the same time, monitoring over the calculation and

payment of unemployment insurance premiums, collection of debts, calculation of interest for late payment, and refund of overpayment is planned to be entrusted to the Ministry of Taxes and to be regulated by the Tax Code.Below you can see a visual representation of how employment taxes for employees working in the non-oil and gas private sector (with income above AZN 2,500 and below AZN 8,000) will change in accordance with the amendments:

Undoubtedly, a huge amount of work has been completed to draft the discussed changes to employment tax rules. As with the adoption of all amendments to legislation, there is still a lot of work to be done with respect to the adoption of the new changes and their implementation. At the moment, there are a number of points still to be determined (for example, defining which types of organization fall under each sector) and they are likely to be gradually clarified after the relevant changes take effect.

Author’s biographyMr. Zaur Gurbanov is a Tax Director at EY Azerbaijan. He joined EY in 2010. Zaur is involved in different tax advisory/ tax compliance/ tax review and tax accounting projects. He has participated in various conferences and forums with speech, joined the discussions with state authorities in connection with changes to the legislation related to tax and social contributions. Zaur has also been involved in a number of EY audit/ assurance/ advisory projects as a tax professional and provided the assistance with different questions/ issues. He has also been involved in preparation of tax policies, as well as technical specification for automation of tax calculation requiring experience in taxation, labor, finance, accounting and various legal issues. Among the clients he works with both international and domestic companies.

EXISTING RATES

Employer contribution to SSPF

Employee contribution to SSPF

Personal income tax

Employer contribution to unemployment fund

Employee contribution to unemployment fund

Net Salary

18%

2%

16%

0.4%

0.41

%

62.64%

NEW RATES13

%

9%

0% 0.43

%

0.43

%

77.49%

in focus

16 Issue 32

The European Union (EU) is considered to be one of the significant institutions not only in the region, but also in the World. This organization is one of the leading regional subjects almost in all spheres, including economy, trade, industry, tourism, etc. For Azerbaijan, which is a young independent country, it is important to expand the relations with the EU in trade, tourism, migration, fighting terror and radicalism, fighting for human rights and other areas.While defining the significance in the current relations between the EU and Azerbaijan, it would be beneficial to analyze the Cooperation Agreement signed in 1996 between both sides. This Agreement was a key to build strategic cooperation. The mentioned legal document covers various significant spheres while looking through the official statistics. The EU is Azerbaijan’s the first trading partner representing 51% of Azerbaijan’s total trade, as well as, it is considered to be Azerbaijan’s biggest export and import market, with 65% and 33% share in Azerbaijan’s total exports and imports, respectively.Most compelling evidence is that, the EU’s exports to Azerbaijan consist predominantly of machinery and transport equipment, while EU imports from Azerbaijan cover mainly oil and gas (98% of total imports). Current numbers show that bilateral trade amounts to approximately € 14 billion. Specifically, the Parties have attained privileges by giving to one another most-favored-nation treatment in vital custom and trade areas which played a significant role for flourishing respective partnership. On 8 June 2017, the results of the second EU Business Climate Survey on Azerbaijan were presented at the EU-Azerbaijan Business Forum in Baku. The report acknowledges that important reforms were undertaken in areas of customs, licensing, visa-management and business inspections. For instance, 77% of EU businesses positively assess the launch of ASAN visa portal, 67% the issuing of business licenses by ASAN, while 49% laud the temporary suspension of business inspections. However, reaching other objectives, such as stabilizing the financial sector and improving access to finance for SMEs, enhancing transparency of the tax system, strengthening the rule of law, as well as, increasing the number and availability of skilled workers in the country’s labor market still require additional efforts. Also, on 25 December 2016, amendments to the Tax

Code were adopted. The main amendments concern changes to withholding taxes and the introduction of the transfer pricing concept. The law became effective on 1 January 2017 and the implementation of the transfer pricing concept will be supported through an EU Twinning project. Furthermore, the Law on “Amendments to the Customs Code” were adopted by the Parliament in June 2017. According to the amendments, most of the applications (e.g. on the classification of goods, customs value, country of origin, amount of customs fees) and notifications sent by the customs authorities may be provided electronically. The EU supports the State Customs Committee through TAIEX, technical assistance and grant support.The EU stands ready to cooperate with and support Azerbaijan in all areas of mutual interest, in full respect of all the values and commitments shared by both sides. It is better to mention the President of Azerbaijan H.E. Ilham Aliyev’s statement: “Azerbaijan intends to be as close as possible to the European Union and today I want to repeat it once more. Because it is a matter of strategic importance for us and there is a great potential of this relationship in the future”.

Azerbaijan and the European Union:Great potential in Relations

Gumru EyvazovaLegal and External Affairs Executive, British American Tobacco

Author’s biographyMs. Gumru Eyvazova is a Legal and External Affairs Executive at British American Tobacco Exports B.V. Representative Office in Azerbaijan. For many years she was experienced in a banking sector and worked as a Head of Legal Division in some banks of Azerbaijan. She attended some trainings related to the management as a legal manager and was a Legal Consultant of 2 prominent airline companies in the world such as Austrian Airlines Representative Office and Qatar Airways Branch Office in Azerbaijan. She also serves as a Chair of the Board of Directors of local NGO, "Khazrim" Student-Youth Organizational Public Association.Recently, she graduated from School of Public and International Affairs of ADA University (LLM, 2018) as well as School of Law of Baku State University (LLM, 2007) and School of Law of Baku State University (BSc, 2004).

member contribution

18 Issue 32

The Coca-Cola Company has recently announced the appointment of its new Caucasus Region Manager in Azerbaijan, who has succeeded our friend and AmCham Board Member Asad Shirinov. We are delighted to introduce to you Mr. Adrian Cernautan.

Mr. Cernautan, thank you for the interview. I think we should start with a short information about yourself. Tell us how did you decide to come to Azerbaijan?Let me start by greeting all AmCham members on behalf the Coca-Cola family in Azerbaijan. Coca-Cola is an active member of AmCham community in many countries. Coca-Cola being an iconic American brand and a globally responsible corporate citizen is a great representation of American business. This is also part of the mission of AmCham to represent US business. In other words, Coca-

Cola and AmCham are true partners, which has been the case in Azerbaijan too.I got very excited when I heard about my possible relocation to Azerbaijan from Austria, where I was the Country Manager. Azerbaijan is very well-known in Europe as an interesting tourism destination. Me and my family have heard lots of good things about the country, people, nature and of course, cuisine – very delicious traditional meals that go perfect with chilled Coke. In my current position I am responsible for operations in the Caucasus region, working hand in hand with our bottling partners in this geography to ensure the success of our business.

How long have you been working for Coca-Cola?I joined the Coca-Cola Company 10 years ago. Started as a Commercial Manager in my home country Romania, then continued my career growth in the capacity of General Manager in Moldova, then General Manager in Hungary and finally General Manager in Austria. When the offer came for Azerbaijan, I discussed this new opportunity with my wife and children and we made the decision. It is a great pleasure for me and my family to work and live in Azerbaijan.

Now let’s move to business matters. How is Coca-Cola business doing in Azerbaijan?We can now say we have just hit the pre-devaluation sales figures. The last two years were successful recovery years for us, for the industry and for the economy as well. With the right strategy and a great execution, we showed fast progress. Azerbaijan is amongst the fastest growing businesses among all Coca-Cola markets in the world and we are very proud of this.Of course, this progress wouldn’t be possible without the economic stability in the country. The growth of our business is connected to the economic performance of the country and welfare of the people.

Direct and Indirect Impact of Coca-Cola System to the National Economy of Azerbaijan

Special Interview with Adrian CernautanCaucasus Region Manager,The Coca-Cola Company

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How do you assess the economic performance of the country?We all know that the country went through a serious shock several years back. The key achievement of the government after the crisis was to ensure macroeconomic stability. National currency was stabilized and they well managed to lower the inflation rate. Now it is time to take measures to accelerate growth, especially in the non-oil sector. We are very optimistic about forthcoming tax reforms, which are aimed at improving business climate and transparency and eliminating shadow economy. This gives more confidence for companies like Coca-Cola to invest more into the country.

You mentioned investments, tell us about investments of Coca-Cola in Azerbaijan.We recently conducted a very interesting study assessing the contribution of Coca-Cola System to the national economy of Azerbaijan. I don’t know of any similar studies done here before. This was done by a group of independent economists who analyzed the impact of Coca-Cola System to the economy in 2014, the year just before the economic downturn. The assessment was done based on the input-output method of famous economist, Nobel Prize Laureate, W. Leontieff and assessed the impact on three levels: direct (Coca-Cola itself), indirect (Coca-Cola suppliers) and induced level (the multiplier effect)Here are the key findings – total investments of Coca-Cola to the economy are 164 mln USD and total taxes paid to the state budget till 2018 are 253 mln AzN. This is one of the largest investments by a foreign company in the non-oil sector of the country.Another interesting figure that came out of this study is contribution of Coca-Cola to GDP. Our operations contributed 103.2 mln AzN to the income generation of the economy in 2014. This equals to 0.18% of GDP and 0.31% of non-oil GDP in Azerbaijan. This is a substantial contribution by Coca-Cola as a beverage producer.In 2014 Coca-Cola contributed 37.2 mln AzN to the state budget as taxes and social welfare payments. This accounted for 0.52% of the total tax revenues of the state budget in 2014.Another interesting finding of the study was the extent of impact of Coca-Cola operations on the employment in the

country. As the research has revealed, one job at Coca-Cola supported 15 additional jobs in national economy. It means that the Coca-Cola business in Azerbaijan through direct, indirect and induced impact supports over 5000 jobs in the country.The most interesting part of the study was about the share of Coca-Cola’s contribution to the economy in the beverage sector (both alcoholic and soft drinks). While Coca-Cola accounted only for 7% of the employment in the beverage sector, the study showed, based on the available state statistics, that we accounted for 46.3% of total production in this sector and 48.5% of total GDP generated in 2014 in this segment.

How about CSR projects?The study also touched on the sustainability programs that Coca-Cola supported in Azerbaijan. In the last 7 years Coca-Cola has invested over 2,5 mln USD in a number of long and short-term programs aimed at improving well-being of communities and the environment. Programs like Coca-Cola School Cup and Olympic Moves are aimed at development of teens and youth. We have also been partnering with a number of organizations on women empowerment, over 4000 women participated in projects that helped rural and urban young women acquire knowledge and confidence to succeed in their career or business aspirations. As regards the environment, together with ADA University we planted nearly 50,000 olive and pine trees in Baku and surrounding areas. Drip-irrigation system installed at the sites ensures that every single planted tree gets watered on a regular basis.In other words, Coca-Cola is proud to be refreshing its consumers in Azerbaijan with world-class beverages, contributing to national economy and helping communities and the environment thrive.

Our guest’s biographyMr. Adrian Cernautan carries 16 years of international management experience in FMCG sector, having worked for companies like Coca-Cola, Kraft Foods/Mondelez. Adrian speaks English, French, Italian and German. Mr. Cernautan has graduated from the faculty of Economics, Transylvania University of Brasov.

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20 Issue 32

Mediation is defined as the “dispute resolution process whereby parties negotiate over the issues in dispute in order to reach an agreement with the assistance of one or more mediators”1. Mediators are neutral, independent and professional facilitators of negotiations. The process of mediation is based on parties’ agreement and autonomy, and is confidential. Mediations usually start with a joint opening session including all parties and the mediator, followed by separate and private meetings between the mediator and each of the parties. Usually, mediation does not take more than one business day. In general mediation has numerous benefits for parties of disputes. Mediation allows parties to learn positions of the other parties in more detail and thus re-evaluate their own positions and explore whether there is any potential for settlement. Provided that parties to mediation act in good faith and are interested in a settlement, usually settlement percentage in professional mediation sessions is more than 85%. In addition to benefits to private parties, the mediation is also very helpful for improving efficiency of judiciary and bailiff services and enhancing investment climate.

Mediation owes its success inter alia to the following reasons:1. In mediation parties are in control of the resolution of

their disputes. Due to such control, parties do not face decisions of third persons (such as judge or arbitrator), which are unreasonable from the parties’ perspective. Mediation allows the parties to decide what best serves their interests.

2. Mediation allows companies to control their litigation risks and exposures. Companies may evaluate their chances at courts and/or before arbitral tribunals, and settle such disputes in advance without taking risks of litigation or arbitration. By mediating disputes, companies will have more predictable and scalable risks in the future.

3. Mediation allows an opportunity with the help of the mediator to re-evaluate their own positions and the position of the opposite party. During mediation, parties learn about legal arguments and evidence of the

1. Recommendation Rec (2002)10 on Mediation in Civil Matters, adopted by the Committee of Ministers on 18 September 2002 at the 808th meeting of the Ministers’ Deputies.

opposite party and thus gain a better view about the court perspective of the case and its potential outcomes.

4. Mediator prevents deterioration of the parties’ relationships. When parties negotiate directly and without participation of a mediator, they usually do not compromise in order to protect their positions and their image of self-confidence and act aggressively. It is the duty of the mediators to prevent situations, when parties cannot compromise, by using certain mediation tactics.

5. Mediation is shorter than court litigation and arbitration (usually mediation takes one day). Such short duration of mediation reduces expenses of the parties. In addition, usually execution of arbitral and court decisions requires lengthy court and execution proceedings. On the other hand, parties usually perform settlement agreements, reached during mediation, without delay. As a result, in mediation parties obtain benefits and resources with the present-day value, as opposite to indefinite future value.

6. Unlike most court procedures, mediation is confidential. Such confidentiality in addition to protecting sensitive information of the parties also keeps confidential the existence of any dispute between the parties and thus allows the parties to continue their relationships without losing their public faces.

7. When efficient mediation system operates in a country, mediation reduces the caseload and expenses of courts. Thus courts may concentrate more on complicated cases and improve quality of justice.

8. An effective mediation system will also decrease enforcement cases, as settlement agreements mutually agreed by the parties will mostly be performed voluntarily. Accordingly, mediation will increase efficiency of enforcement of court decisions.

9. On the other hand, availability of effective alternative dispute resolution mechanisms reduces operational and transactional expenses of companies and thus improve investment climate in a country. Thus, strengthening of mediation in Azerbaijan may also improve its international investment climate ranking.

Introduction of mediation for Commercial Disputes in Azerbaijan

Ruslan MirzayevAdrem Attorneys Law Firm,Managing Partner

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Author’s biographyMr. Ruslan Mirzayev is Managing Partner at Adrem Attorneys Law Firm and International Mediator. He is an attorney qualified in the Republic of Azerbaijan and the State of New York, with more than 10 years of general experience, mostly in the practice of alternative dispute resolution, international arbitration, banking and finance laws. Mr. Mirzayev represented parties in multi-million international arbitration cases and in international negotiations. Ruslan is also an international mediator, and has successfully mediated numerous disputes. He has been a fellow at JAMS, one of the largest mediation organizations in the U.S. and the world, and is currently a Senior Fellow at Weinstein International Foundation, a U.S. based foundation dedicated to mediating major public interest and commercial disputes throughout the world. Ruslan Mirzayev is also founder of ArbMe Dispute Resolution Center in Azerbaijan. He holds LL.B. degree from Baku State University, LL.M. degree in International Commercial Arbitration from Stockholm University and another LL.M. degree in International Law (with concentration in International Dispute Resolution) from the George Washington University Law School.

Appreciating the advantages of mediation for business community, “Strategic Roadmap on National Economy and Major Industries of Economy” approved by the President of the Republic of Azerbaijan distinguishes the importance of mediation among alternative dispute resolution mechanisms for small and medium businesses, and sets an objective to improve the indicators of pre-court dispute settlement by small and medium businesses by 2020. In addition, a new Law on Mediation is supposed to be adopted in Azerbaijan. While there is no official regulatory act or law regulating mediation, or providing a formal definition for mediation currently in Azerbaijan, the mediation services are not prohibited and are available in Azerbaijan. The legislation does not prevent parties from entering into an agreement about pre-court dispute resolution mechanisms. The civil procedural legislation states that if the parties have agreed on some type of pre-court dispute settlement proceedings, the courts may in certain cases leave the claim without consideration until the parties follow such proceedings2. We believe one of the types of such pre-court dispute settlement mechanisms is mediation. In addition, while the legislation does not specifically regulate settlement agreements reached in mediation, it governs settlement proceedings in general. Accordingly, settlement agreements reached in mediation are enforceable3 and treated as any

2. Civil Procedural Code, Article 259.0.1.3. In this regard, the settlement agreements reached in court proceedings on the one hand and the settlement agreements reached without court proceedings on the other are treated differently. Under the Civil Procedural Code if a judge approves settlement agreement between the parties to a civil dispute the judge terminates the proceedings and includes the terms of the settlement agreement in the court decision. On the other hand, the substantive legislation also regulates settlement agree-ments entered into without court proceedings and without court approval. Under the Civil Code of the Republic of Azerbaijan the parties to a settlement agreement may not refer to previous disputed and uncertain issues that have been settled in the settlement agreement and the parties shall only be bound by the terms of the settlement agreement. Thus, a settlement agreement even when not approved by a court also excludes all previous disputes and allows its parties to bring a claim before courts on the basis of the settlement agreement.

other settlement agreement under the legislation of the Republic of Azerbaijan. In conclusion, we would like to note that the mediation has proven itself as a reliable alternative to lengthy, expensive and risky court and arbitration proceedings for businesses in many countries around the world. Taking into account its advantages, it is not going take too long for mediation to become one of the most preferred dispute resolution methods for Azerbaijani businesses.

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Amid turbulence in oil prices, the government of Azerbaijan explores various options to increase non-oil revenues. On one hand, this can be achieved through attracting foreign investors to local economy and, on the other hand, though increasing the transparency of taxpayers. This article suggests to have a look at beneficial ownership disclosure as an important tool for achieving these goals. The article is based on materials developed within the project Supporting The Implementation Of The Roadmap For Beneficial Ownership Disclosure For The Extractive Industries In Azerbaijan, where BDO Azerbaijan LLC acts as consultant in a team with UK firms Engaged Consulting Ltd and Michael Barron Consulting Ltd.

Importance of beneficial ownership disclosureIn accordance with the current trends to implement internationally recognized measures to prevent tax evasion, corruption, financing of terrorism and money laundering, there is more focus on the beneficial ownership of companies globally. The need for transparency is even more sensitive in such areas as extractive industry as subsoil reserves are generally regarded as the wealth of nations - meaning that all citizens shall benefit from extraction of natural resources. On the other hand, there is increased demand for transparency from international investors and finance providers.

What is beneficial ownership?Beneficial ownership refers to natural persons who directly or indirectly ultimately own and derive financial benefit from a company or commercial activity, which allows stakeholders to ascertain who really benefits from the generated revenues or controls companies involved and enhances accountability. Beneficial ownership disclosure prevents the true beneficiaries from hiding behind opaque shell companies or using complex corporate or other legal structures to avoid the reporting of income, to evade tax obligations, to disguise conflicts of interest or engage in money laundering activities, corrupt practices, or financing criminal practices or violent activities, including terrorism.

What beneficial ownership disclosure will help to achieve, if introducedBeneficial ownership disclosure allows the public to know who owns a company or benefits from a commercial activity. It makes it easier to do business by contributing to increasing trust and confidence in the companies who are investing in or contracting with Azerbaijan’s companies. In addition, it allows the government to monitor who is ultimately earning how much in revenues and to ensure that related taxes, duties, etc. are collected in accordance with applicable laws and regulations. Also, it will help improve transparency and good governance.

Examples of good practice in creating beneficial ownership disclosure mechanismsBeneficial ownership disclosure is firmly on the international agenda and is likely to become the norm within a few years. Many countries are introducing the concept of beneficial ownership into their domestic legislation and undertaking efforts to allow disclosure of such information. In most cases, the focus of these efforts is in the context of initiatives to combat money laundering, corruption, tax evasion and financing of criminal activities.The UK presents an example of international good practice in many aspects of its beneficial ownership register. Its definition, including reporting thresholds, is based on current international norms, as is the extent of information collected. The register has a statutory basis and is publicly available. The UK has also achieved a high level of compliance, in part because the register is based on existing company reporting systems. Companies House to which UK-registered companies were already obliged to report information maintains the register. However, it has yet to address issues of non-compliance and there is no active verification process in place.Another example is Ukraine which also represents an example of international good practice. Like the UK, its register has

Beneficial Ownership DisclosureSabit AbdullayevDirector for Legal Services,BDO Azerbaijan

Yunis SalayevManaging Partner,BDO Azerbaijan

Important tool for attracting investors and increasing transparency of taxpayers

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24 Issue 32

a statutory basis and the definition is based on current international norms. However, Ukraine has experienced difficulties in ensuring that its register is complete. It also does not have a verification process in place. However, there are a number of factors that limit the usefulness of the Unified Register for identifying beneficial owners:the register is incomplete and to date only around 70% of companies are registered;the information is only available in Ukrainian, so limiting the ability of non-Ukrainian speakers to access the information; and there are issues with identifying foreign owners as the same name can be transliterated in differing forms.Indonesia has demonstrated leadership in beneficial ownership disclosure. It is one of the first Asian countries to introduce a disclosure regime that applies to all companies registered in the country. The country is taking a staged approach by first introducing an obligation for companies to compile information and report it to the government. The government will then use the information to create a database. As is the case with other countries (such as the UK and Ukraine), Indonesia is using existing reporting systems linked to its company registry to support beneficial ownership disclosure.

Current state of affairs in AzerbaijanAt present information not only on the beneficial ownership but also on direct ownership is restricted from public. Such information is regarded as commercial secret. In order to achieve compliance to international good practice standards, Azerbaijani legislation shall undergo substantial legal reforms. In addition, a reliable mechanism on disclosure and verification of beneficial ownership shall be created.With regard to the definition, Azerbaijani law already contains a beneficial ownership definition, first introduced in the Law of the Republic of Azerbaijan on the Prevention of the Legalization of Criminally Obtained Funds or Other Property and the Financing of Terrorism. Although the definition is quite comprehensive it fails to address certain issues required by international good practice, such as a legal entity being treated as the ultimate beneficial owner, not having a specific threshold for reporting individual beneficial owners, whether politically exposed persons or otherwise. The definition applies only within the anti-money laundering context.

Implementation of Azerbaijan’s roadmap for beneficial ownership disclosureIn December 2016, the Government of Azerbaijan, acting through the Azerbaijan Extractive Industry Transparency Initiative (EITI) Secretariat established under the auspices of the State Oil Fund of the Republic of Azerbaijan (SOFAZ), published a Roadmap for Beneficial Ownership Disclosures (RBOD) in the extractive industries in Azerbaijan in line with the 2016 EITI Standard. The roadmap contains a step-by-

step legal action plan to achieve the required standard of disclosure. As it was initiated through EITI, it is limited to extractive industry only.In February 2017, the Asian Development Bank received a request from SOFAZ to support the RBOD implementation by complementing the above activities (initially to be funded by SOFAZ) in the areas of identifying international good practices and drafting necessary amendments to Azerbaijan’s existing legislation to enable RBOD implementation. BDO Azerbaijan LLC, Engaged Consulting Limited, United Kingdom, and Michael Barron Consulting Ltd, United Kingdom have come together for the project to support implementation of Azerbaijan’s Roadmap for Beneficial Ownership Disclosure. The Asian Development Bank is funding the project. The project is currently undergoing. All interested parties may check reports already published at the website of SOFAZ (to be soon migrated to a new website of Azerbaijan’s Extractive Industry Transparency Commission) and provide their comments.

Authors’ biographyMr. Yunis Salayev has more than 16 years of professional background in Azerbaijan, Russia and other CIS countries. He is the CEO of the firm who has established and running BDO in Azerbaijan, developing and implementing company strategies, managing client relationship, service delivery, human resources, business processes and risks.Yunis is a Fellow Chartered Certified Accountant (FCCA, UK), Certified Fraud Examiner (CFE, US), Certified Internal Auditor (CIA, US), Certified Information Systems Auditor (CISA, US) and a Member of Chartered Institute for Securities and Investment (MCSI, UK). His primary specialisation is in audit of IFRS financial statements in accordance with International Standards on Auditing (ISA), Azerbaijan taxation, and risk advisory.Yunis holds MBA with Merit from Imperial College London Business School and honors Bachelor and Master degrees from Azerbaijan State Oil Academy. He has been a visiting lecturer at the School of Economics and Management of Khazar University in Baku.

Mr. Sabit Abdullayev has over 14 years of legal practice in Azerbaijan and currently in charge of tax & legal services at BDO.Sabit has extensive expertise and experience in areas, as banking and finance, mergers and acquisitions and general business advice on various matters of Azerbaijani law. In particular, he has conducted due diligence of several banks and participated in structuring of transactions on sale of shares in local banks.Sabit is a member of Azerbaijani Bar Association and has represented clients on a number of high profile litigations. He has LL.M. degree in international business transactions from Central European University, as well as a master degree in law from Baku State University. He is fluent in Azerbaijani, English and Russian.

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The Belt and Road Initiative is the ambitious Chinese led and multinational project to revive and expand the historical Silk Road trade route. Azerbaijan is at the center of this initiative and it stands to realize great economic gains through its new port, highways, and expanding rail network. Economic diversification is central to Azerbaijan’s strategy to end its reliance on the oil industry. Yet despite investment in infrastructure, Azerbaijan will not realize the potential of this grand initiative without a well trained workforce that is able to provide technical and management skills to internal and external investorsIt is no accident that American corporations spent about US90 billion dollars on training their staff in 2017; this is a 33 % increase from the previous year representing 3.6 % of the payroll on average1. A well trained work force is a crucial enabler of economic development. The World Bank agrees with this approach and has dedicated about 15% of its operations to Human Capital Projects2. Without such investment in human capital, resources will flow to an international workforce taking with it tax revenue, in country spending, personal savings, and further local investment especially through the development of Small and Medium Enterprises and real estate.On February 15, 2018 Caspian News online reported that Azerbaijani officials see their country as being strategically located along the proposed route that connects all of Asia, Europe, and Africa. Caspian News Online reported that “cargo passing from China to Europe is estimated to be around 240 million tons per year, and Azerbaijan is looking to collect a fee from having some of it pass through the country via One Belt, One Road” (OBOR). But OBOR can mean much more revenue for Azerbaijan than merely the collection of fees from passing freight. The OBOR crosses more than 60 countries, connecting the Pacific to the Atlantic, passing through the regions of the Mediterranean, Black and Caspian basins via road, rail, and maritime routes – A truly modern Silk Road. With heavy Azerbaijani investments in recent years in the country’s

1. Training Industry Report. https://trainingmag.com/trgmag-article/2017-training-industry-report/2. World Bank Annual Report 2017.http://pubdocs.worldbank.org/en/908481507403754670/Annual-Report-2017-WBG.pdf

infrastructure, particularly railroads and ports, generating revenue from passing freight will be relatively easy. But what if Azerbaijan can add value to this new supply chain or develop its own industrial sector to take advantage of the trade routes to facilitate the exports of its own goods? Such a move will exponentially grow the economy and increase the wealth of the country and its people. The mere collection of fees from passing freight will seem insignificant as compared to what Azerbaijan can potentially earn from a thoughtful strategy and action plan to develop its manufacturing, agricultural, and other non-oil sectors.Viet Nam provides an ideal example wherethe local industry added value toa foreign supply network. The Vietnamese case study is instructive to Azerbaijan as it demonstrates how cooperation between multinational corporations and local firms can give rise to light manufacturing. A useful example is the motorcycle industry. It turned Viet Nam from an importer to an exporter of the favoured transport mode in South East Asia. Christine Ngoc Ngo (2017) writes that industrial upgrading was mostly driven by foreign direct investment. Although Dr. Ngoc Ngo further notes that market competition among Japanese and Chinese firms that invested in Viet Nam led to significant increase in technical knowledge, what attracted these investors in the first place was the presence of a ready and capable workforce thus reducing the start-up costs and increasing the attractiveness of Viet Nam as a destination for investment. It is worthy to note that this experience has had many positive impacts; Viet Nam has been called the smallest Asian Tiger and has, in March 2018, been forecasted by Asia Briefing as being the next Asian manufacturing hub with over 44% of Foreign Investment going towards the manufacturing sector.Since joining the WTO in 2007 Viet Nam’s economy has gradually shifted focus from agriculture to industry and services, and international exports continue to grow experiencing some of the fastest growth in recent years3 with

3. IMF: World Economic Outlook Database, October 2018, Viet Nam

Capacity Building: a vital Factor of Economic Development

Walid MadhounPartner, Mast Canada

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sustained growth of around 6.1% until 2025 according to BMI Research.Privatization of state-owned enterprises has also played an important role in attracting FDI. Before 1990 there were only around 200 foreign direct investment (FDI) projects in Viet Nam valued at US$1.6b. But in 2015, the total value of FDI projects was worth US$11.8b made by investors from more than 100 countries. (According to figures from the World Bank)The impact of the Vietnamese strategy has been nothing short of stellar: in 2017, Vietnam’s trade as a percentage of GDP reached over 200%4.The proportion of people in extreme poverty fell from above 70% in the early 1990s to around 10% in 2016. The World Bank credited the jobs created by Vietnam’s export sector for this remarkable poverty reduction5. The Vietnamese economy depends on the performance of four sectors which are driven mostly by Small and Medium Enterprises (SME), these are: Agriculture, fishery and forestry; Energy, mining and minerals; industry and manufacturing; and service and tourism. Banking and finance can be added as the sector has attracted important FDI. For example, VietinBank is partly owned by Bank of Tokyo Mitsubishi UFJ (20%) and International Finance Corporation (10%) while Vietcombank is partly owned by Mizuho (15%).Despite the difference in geography there are similarities between Viet Nam and Azerbaijan in the sectors that can drive growth, especially in agriculture, mining and minerals, and manufacturing.Azerbaijan can enjoy growth in its agriculture and fisheries sector through the development of fish farms to produce shrimp, fish, and other exportable species. In terms of agriculture, Azerbaijan can develop its processing capacity for export thus adding value to raw food currently being exported. Azerbaijan is also making significant advancement in the mining sector. A shining example of this is the strategic efforts of AzerGold that have led growth in the precious non-ferrous metalsfrom 20.1 million dollars in 2017 to and

4. https://qz.com/1409407/vietnam-is-the-most-globalized-populous-country-in-modern-history/amp/5. https://www.worldbank.org/en/news/press-release/2018/04/05/vietnam-continues-to-reduce-poverty-according-to-world-bank-report

expected four-fold value of 85 million dollars in 20186. Coupled with the international relations it is developing, AzerGold is poised to become a model of efficient and effective economic development.Industry and manufacturing are the most interesting and important area of growth for Azerbaijan. In Viet Nam, the sector contributed 40.1% of the GDP in 2004, and employed 12.9% of the workforce. From 1994 to 2004, the industrial sector grew at an average annual rate of 10.3%. The top manufacturing sectors to experience rapid growth include: food processing (presented above under agriculture), cigarettes and tobacco, textiles, chemicals, and electrical goods. Benefits from its proximity to China with lower labor cost, Viet Nam became the new manufacturing hub in Asia, especially for Japanese and Korean electronic firms including Samsung which produces about 40% of its phones in Vietnam7. The opportunity for economic development in Azerbaijan may be found in the same industrial areas but it is not limited to these given the entrepreneurship of the young and enthusiastic Azerbaijani population. There are several areas of potential growth given Azerbaijan’s deep history not least of which is the industrial design sector which feeds small scale manufacturing. This sector is limited only by the imagination of the Azerbaijani entrepreneurs but it needs two important ingredients: the first is support and promotion through start-up financing. This is already taking place through the efforts of a number of facilities and agencies such as AzPromo among others. The second is the development of technical and managerial skills of the Azerbaijani work force. Not unlike Viet Nam where EuroMonitor finds that labor productivity is lower than ideal, Azerbaijan also suffers from shortage of vocational skills among the workforce. Both countries have ineffective higher education and vocational education providers. And like Viet Nam, Azerbaijan is an attractive manufacturing location because of its young workforce and reasonable labor costs. Its people receive a good basic education and literacy levels are good. Azerbaijanis are very open-minded, creative and positive-thinking and they are ready to learn. Indeed, the Azerbaijanis in Europe and North America have achieved great success and are model students and entrepreneurial problem solvers.The Vietnamese experience has not been without challenges. EuroMonitor warns that Viet Nam’s dependence on trade and foreign investment opens it to vulnerabilities which it cannot control. Demand from major trading partners, interest rates, international economic instability all contribute to these risks and can lead to migration of FDI. The Trans-Pacific Partnership Agreement (TPPA) and its dependence on China makes Viet Nam even more vulnerable, especially now with a trade war in full swing between China and the USA. However, Viet Nam is now well versed in making trade arrangements with other countries and with the US directly which may lessen the blow.Azerbaijan can learn from the Vietnamese experience and avoid its pitfalls.

6. Azernews: 5 July, 20177. https://www.economist.com/asia/2018/04/12/why-samsung-of-south-korea-is-the-biggest-firm-in-vietnam

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Specifically in the case of Azerbaijan, it is instructive to look at the Decree Number 964 of the President of the Republic of Azerbaijan dated December 26, 2014. The Decree approves the State Program on the development of the industry in the Republic of Azerbaijan in the years 2015-2020. It is also important to consider the Azerbaijan Economic Reforms Review (2017) produced by Dr. Vusal Musayev and based on the Strategic Road Map On National Economy And Key Sectors Of The Economy Of Azerbaijan.The priority of the State Program on the Development of the Industry is stated as “to increase the economic competitiveness and to improve the structure of the economy from the point of the development of industry.” The Presidential Decree recognises that industrialisation encompasses social, scientific, and cultural factors of development through increased employment, income level, urbanisation and/or rural development, and scientific research and development. The Decree recognizes also the importance of a skilled workforce to deliver on these promises. The Decree also recognizes economic development requires moving away from an over-reliance on low-tech and labour-intensive sectors towards middle-technology sectors such as chemicals, metallurgy, shipbuilding, machine production and eventually to introduce high-technology sectors such as electronics, computer production, pharmaceutics and space industry. This does not suggest that one must replace the other but that a balance needs to be achieved as any society will always need different sectors to function.The modern economics of supply chain management within a globalised world creates new opportunities for countries that have traditionally relied on natural resources or those

that have not been blessed with natural resources. Just in time inventory management was a product of companies following cheap labour costs in Asia. The textile and clothing industry is among the pioneers of this method. Sri Lanka was a favoured destination for western clothing companies, as was Bangladesh and China. The Chinese case is most encouraging as the country moved from low skilled labour intensive supply of cheap workers to now being the hub of technological manufacturing with excellent lines of communication and high-tech products such as those emerging from Xiaomi among others.In addition to reasonably priced labour, the most important ingredients necessary for an economy to take part in this global supply chain is proximity to international trade corridors and a highly skilled labour force that can attract middle-tech and high-tech investors from within the country and from abroad.The Road Map speaks of a ‘new economic growth paradigm’ based on strategic choices.The author of the report, Dr. Musayev, points to two models of growth as i) labor-intensive growth model and ii) productivity and efficiency based growth. The author argues that transition to an efficiency growth model for better integration into the global value chain is the strategic choice but that an approach that combines both models in the short term may be necessary. This is true only if there is a concerted investment in the human resources capacity of the workforce in the country. While there are many projects in Azerbaijan investing Technical and Vocational Education and Training (TVET) and while the Road Map does address the issue of TVET, there has yet to be buy-in from the industrial sector and from society at large to fully embrace the importance of technical skills. Azerbaijan’s investment in TVET is now driven by donors, mostly the EU and GIZ who are promoting a dual-like approach to TVET (in-class and in-field). Yet this is not enough. To capitalize on the opportunities that are being presented by the OBOR project, the industrial sector as well as the relevant ministries must invest more heavily and strategically in the technical education and training sector. Technical education and training can no longer be seen as the last educational option for students who fail to enter university or for uneducated adults who have learned through observation and trial and error. Technical education and training must be seen as a lifelong learning opportunity; it must be seen as a viable and respected career choice, and one that is valued as an engine of economic growth and prosperity. In short, effort is required to professionalize the skilled vocations. This view is echoed by Dr. Musayev who writes in the Economic Review that the “development of highly specialized human capital is required” as a prerequisite and complement to all other initiatives designed to promote economic development.Looking at the UNESCO indicator labelled Government expenditure on education as a percentage of GDP (%) we see that Azerbaijan spends about half of what Viet Nam spends on education8. Interestingly, the rate has steadily decreased for Azerbaijan since the 1990s and dipped considerably

8. Data extracted on 10 Oct 2018 11:34 UTC (GMT) from UIS.Stat

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because of the financial crisis starting 2008 and is now regaining momentum but not sufficiently quickly enough to translate into important improvements in the Vocational and In-service training sector.

Importantly, Vocational training and in-service training are not strictly a government responsibility. Looking at the US example, the spending on in-service training was not made exclusively by the federal and state governments but by the private sector. This is a key factor in the development of skills. Most corporations in North America reserve a percentage of their salary mass for staff training. Indeed, the prospect of professional development is a competitive element in attracting the best and the brightest. Importantly, staff training is not merely a requirement with which to comply, it must be responsive to the strategic needs of the country and the companies who employ the staff. This is not happening in a strategic way in Azerbaijan and the private sector has yet to embrace the importance of capacity building as a strategic management factor rather than a perk or compliance.Azerbaijani companies have two options for in-service training. Either expensive overseas training programs for a very small number of staff or less expensive training in-country for many employees delivered by the dozens of local training delivery providers. There are positive and negative factors for each option. The first is expensive, and despite its lack of strict responsiveness to the Azerbaijani context, it provides an impressive certificate with the logo of the host institution. Such institutions can be universities offering short

term non-credit courses or providers such as ILO Training Centre in Turin among others scattered in Dubai, Europe, and North America. These organizations will charge upwards of US$5,000 for a standard management course in addition to air fare and lodging. The second option is significantly less expensive, and while it is contextualized to Azerbaijan, it lacks the credibility presented by a foreign provider.However, Azerbaijan now has a third option. Universitas International is a new training company established in Azerbaijan in 2016. It brings to the country and region world class training through partnerships with North American and European Universities, Technical Colleges and Polytechnics. Course are designed, delivered and assessed by the professors of these international education institutions. Universitas focuses on active, practical and applied training through a combination of theory and substantial practice through on-hand and on the job training. The courses offered include management, agricultural, industrial, Information Technology, and Cyber Security (policy and technical). In addition to the standard courses, Universitas offers customized training that is designed with the clients to fit their strategic targets – in short, Universitas is a partner in capacity development and not merely a training provider. In addition to bringing world class technical and management training to Azerbaijan, Universitas will attract trainees from Central and Eastern Europe, Africa, the Middle East and Asia positioning Azerbaijan as a world class training hub.Azerbaijan is poised to experience tremendous economic growth as a result of its location on the One Belt One Road Project. To actualize this opportunity, Azerbaijan cannot rely solely on fees collected from passing cargo. Indeed, it can grow such revenue exponentially if it can add value to the supply chain and use the OBOR for the export of its goods. Geography is an important factor, but it is not enough. Both the public and private sectors must invest more strategically in developing the capacity of the work force not only to make Azerbaijan an attractive destination for foreign investment but to give Azerbaijani investors the workforce needed to compete in the world.

Author’s biographyMr. Walid Madhoun (LL.M) plans, develops, restructures, and improves the performance of institutions, programs and projects in Europe, Middle East, Asia, and Africa. Mr. Madhoun has worked in more than 30 countries advising businesses, governments, and bilateral and multilateral financial institutions. He has been working on projects in Azerbaijan focusing on economic development, education reform, and legal reform focusing on KPI and Performance Measurement and Management. Mr. Madhoun is a member of the Board of Directors of ARPA-Group, an associate member of the American Bar Association, Member of the Canadian Evaluation Society, and a Member of the Advisory Board of the Centre for Governance and Public Management at Carleton University in Canada. He completed Post Graduate Studies in Laws at the University of London specializing in International business, trade and competition law.

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Established in 1996, AmCham is composed of over 280 members and asso ciates active in every sector of the Azer baijani economy. We represent 80% of all foreign investment, as well as a significant portion of local investment which allows us to promote American, Azerbaijani and multinational corporations. This includes leading companies in Energy, Banking, ICT, Legislative/ Financial Consulting, Professional Ser vices, Education, Real Estate Development, Health, Transportation, Travel and Production fields. An active and positive influence in Azerbaijan, we conduct our mission with integrity and respect for the country, observing all local laws and insisting on the highest ethical standards in all relationships and transactions.

Why join?Key member benefit – best networking opportunities in Azerbaijan!

As a member of AmCham, your company has access to a vast network of business information and contacts in Azerbaijan and in the US government, as well as valuable information on US businesses across Europe through ECACC (European Council of American Chambers of Commerce) and US Chamber of Commerce.

Additional Member Benefits include:

• Annual Employee Salary Survey• Quarterly Inflation Survey• AmCham Membership Directory• AmCham Resource Library

For more detailed information please visit our website www.amcham.az

to applyTo apply for affiliation with AmCham, a candidate must submit a written application in the form adopted by the Board of Directors. Membership applications are available at the AmCham office or on our website at www.amcham.az The application form should be completed and sent to our office with the company registration certificate issued by the Ministry of Justice of Azerbaijan. A candidate meeting the objective and subjective requirements for affiliation with AmCham is accepted as either a Member or Associate upon receiving an affirmative majority vote of the Board of Directors and paying the first year’s fee for the candidate’s category of affiliation. To maintain affiliation with AmCham, Members and Associates must continue to meet our eligibility requirements, be in good standing in the community, and be current with all financial obligations to AmCham.

About Usthe American Chamber of Commerce in Azerbaijan is a private, non-profit business association supporting and promoting the interests of business in Azerbaijan.

membershipThere are two types of affiliation with AmCham: Member and Associate.Member status includes voting privileges and eligibility for Board and committee chairmanships in addition to the privileges granted to Associates. For affiliation as a Member, a candidate must be a legal entity, registered and doing business in Azerbaijan and be in good standing in the community, as determined by the Board of Directors. A legal entity, branch or representative office of a legal entity is eligible to be affiliated with AmCham as an Associate, subject to the Board of Directors’ determination of good standing in the community. Associates are eligible to participate in various activities; receive our regular publications, including the Membership Directory, Annual National Employee Salary Survey and Quarterly Inflation Survey. Associates, however, are not entitled to vote or serve on our Board of Directors.

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meeting with U.S. Deputy Assistant Secretary of State On October 10 members of AmCham Azerbaijan had a chance to participate in a roundtable discussion with U.S. Deputy Assistant Secretary of State George Kent who is in charge of the U.S. policy on Azerbaijan and the Caucasus region. This closed-format meeting became a unique opportunity for business leaders of the AmCham community to engage directly with a senior State Department official on a range of issues – with a particular focus on the effect of Iran and Russia sanctions.

Career Fair “Small Step to a Great Opportunity”On October 5, Career Fair - “Small step to a great opportunity”, organized jointly by Baku City Circuit (BCC) and AmCham Azerbaijan. Nearly 40 foreign and local companies presented themselves to offer job and internship opportunities for young people.Ms. Irana Ahmadova, Head of the Human Resource and Workforce Department at BCC, opened the event. Mrs. Natavan Mammadova, AmCham Azerbaijan Executive Director, as well as Ms. Elnara Mammadova, Chair of AmCham HR Committee, greeted participants of the Fair on behalf of the Chamber.“I am pleased to witness that businesses in Azerbaijan are forerunners with implementation of best practices in human resources management, said Mrs. Natavan Mammadova. I am especially happy to note that AmCham HR Committee is among the most active and demanded ones. I do hope that today’s event will help job seekers and employers (most of which are long-standing AmCham members) “get in contact” effectively.Ms. Elnara Mammadova highlighted the importance of organizing such kind of events. “The Career Fair brings

Business Events

employers and job seekers together. This opportunity is unique for young people striving to develop themselves. A chance to get a job or internship in one of the leading companies presented here will definitely contribute into the future of the Azerbaijani youth.”In total, more than 900 young people – primarily the ones who started their career as volunteers at Formula 1 Azerbaijan Grand Prix and other grand events – took a step closer to the promising job and internship opportunities offered by participant companies and organizations.

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HR Forum 2018

AmCham Azerbaijan was pleased to partner the Forum dedicated to “Progressive Azerbaijani experience in Human Resources Management” organized by ABTC, AmCham, ADA University, ASK and HR Society on September 15 at ADA University.The aim of the Forum was to share Azerbaijani experience in human resources management with committed HR professionals in Azerbaijan and promote the Azerbaijani model in this field. All HR managers, HR professionals, HR researchers, trainers and consultants, as well as those who want to be specialized in HR were invited to join the event.Mrs. Natavan Mammadova, AmCham Executive Director, made a welcoming speech on behalf of AmCham. Mrs. Elnara Mammadova, newly appointed Chair of AmCham HR Committee, was among key speakers.

AmCham Back-to-Business Cocktail Reception

On September 14, AmCham Azerbaijan hosted its traditional Back-to-Business Cocktail Reception.The beginning of September signifies the end of summer holiday and the start of a new business chapter, packed with lots of events and new opportunities. On this occasion, more than 250 members of AmCham community joined us to network, enjoy delicious food and drinks, and launch the business season of 2018-2019 together.Traditionally, the Reception became a unique opportunity for them to come together after a summer break, to share latest news and impressions, to get recent updates and finally enjoy the best networking opportunities in Azerbaijan.

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potential. Azerbaijan is already transforming into a logistics center that combines East-West and North-South transport corridors, which is also one of the factors that ensure rapid transit potential of the country.The Chairman of the Committee underlined that the organization of the Annual Assembly and Conference of the International Association of Authorized Economic Operators in Baku on 2-4 May 2018 is a clear example of our country's special position in this area, as well as the international community's commitment in relations with Azerbaijan.Mr. Mehdiyev stated that the implementation of the “Green Corridor”, simplification of customs clearance, compliance with international standards provide conditions for fast and barierless implementation of international trade, improvement of service quality and full transparency of the customs system. Furthermore, Mr. Mehdiyev said that thanks to our successes and achivements, Information Technologies Conference and Exhibition which is the largest event of the World Customs Organization in ICT sector will be held in Azerbaijan. We look forward for your active participation.

AmCham President, Mr. Nuran Kerimov expressed his confidence for holding the Information Technologies Conference and Exhibition in Azerbaijan, which is a pleasing occasion. Mr. Kerimov also indicated his gratitude for organizing this meeting and highly appreciated for the leadership of State Customs Committee.AmCham Executive Director, Mrs. Natavan Mammadova, said that the reforms in the customs system are carefully monitored, and these reforms already yield positive results. She underlined that the accusations against Customs are not true and carry subjective characteristics. Expressing her gratitude for the business cooperation between the Customs Committee and AmCham Azerbaijan, Mrs. Mammadova see a confidence in further development of cooperation.At the end of the meeting, Ludovic Tanay, Leading Manager from the World Customs Organization on Communication, Events and Technological Innovations Department made a presentation on Information Technologies Conference and Exhibition which will be held in Baku the next year, informed participants about the purpose and its significance.

Round-table Discussion with mr. Safar mehdiyev, Chairman of the State Customs Committee

On September 11, the representatives of ICT sector member-companies of AmCham Azerbaijan were invited to a round-table discussion with Mr. Safar Mehdiyev, Chairman of the State Customs Committee of the Republic of Azerbaijan.During the meeting, the head of the State Customs Committee, customs service lieutenant-general Mr. Safar Mehdiyev noted that the Customs have always attached special importance to the establishment of mutual relations, effective cooperation with businesses, as well as sincere dialogue between the Customs authorities and AmCham Azerbaijan.It was noted that purposeful and innovative reforms implemented by President H.E. Ilham Aliyev create favorable business environment in the country, develop entrepreneurship and non-oil sector, and boost export

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20 NovemberOn November 20, AmCham Azerbaijan organized Monthly Luncheon for its members. Mr. Nuran Kerimov, President of AmCham Azerbaijan, and Mrs. Natavan Mammadova, Executive Director of the Chamber, opened the event and passed the floor to the keynote speaker.

The Guest Speaker of the event was Mr. Jeyhun Bayramov, Minister of Education of the Republic of Azerbaijan. Mr. Jeyhun Bayramov welcomed members of the strongest business community in the country which is represented by AmCham. Minister Bayramov delivered a speech on educational reforms implemented in recent years, achievements, as well as perspectives of the business-education partnership. He spoke about the State strategy on education adopted by the decree of the President of Azerbaijan, H.E. Ilham Aliyev in 2013 and work done to implement this strategy, as well as the achievements in educational system over the past five years. The Minister briefed the participants on the existing

models of public-private partnership in the field of education and possible projects in this area.In addition, the Luncheon featured member-presentations, as well as representatives of United Aid For Azerbaijan (UAFA) presented a new social business project to support vulnerable kids in 22 regions of Azerbaijan. More than 150 guests attended the event, including representatives of diplomatic corps.

Amcham members’ luncheon

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Mr. Suleyman Sozeri, Regional Director of Public Policy at Mastercard – the October Luncheon Hosting Company – took the floor and updated the audience on achievements and plans of company activities in Azerbaijan. He also presented the “Cashless Azerbaijan” project that is being developed by Mastercard in collaboration with the Central Bank of the Republic of Azerbaijan within the framework of the State Program implementation.Afterwards, Mr. Elman Rustamov was invited to the floor. He delivered a comprehensive speech in front of the members of the Chamber on strategic importance of the adopted State Program, in particular, on effects of expansion of digital payments on the macroeconomic situation in the country. In this respect, he touched upon the issues related to macroeconomic stability which is a prerequisite of countrywide sustainable economic growth, as well as necessary steps to be carried out. Mr. Rustamov also emphasized the importance of concerted efforts of fiscal policy along with the monetary for securing the national economy against external shocks.He noted the importance of necessary support for the development of domestic loan market and nevertheless credit activities have been gradually recovered this year, there emerged a necessity of implementation of additional restoration actions in banking sector.Mr. Rustamov emphasized that protection of emerging positive trends, enhancement of macroeconomic stability and growth-promoting effects are overriding priorities of medium-long term. “Realization of optimistic forecasts in medium-

long term requires well-harmonized policy measures and implementation of high-priority economic reforms. Therefore, the Central Bank will take an active part in implementation of countrywide reforms and of economic stability policy pursued”.At the end of his speech, having stressed importance of the role of the Central Bank in business facilitation, Mr. Rustamov expressed his gratitude to AmCham Azerbaijan and representatives of Mastercard once again for creation of an opportunity of direct contact with the business community and for invitation.

31 OctoberAmCham Azerbaijan organized a Monthly Luncheon for its members with the Guest Speaker – Mr. Elman Rustamov, Governor of the Central Bank of the Republic of Azerbaijan, who delivered a speech on State Program on Expansion of Digital Payments in the Republic of Azerbaijan in 2018-2020, approved by Decree of the President of the Republic of Azerbaijan on 26 September, its strategic objectives and implementation steps. In addition, the Luncheon featured member-presentations by FA International Trade Events and Junior Achievement Azerbaijan. More than 150 guests attended the event, including representatives of diplomatic corps.

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11 OctoberAmCham Azerbaijan organized its monthly members’ luncheon with a guest speaker – Mr. Parviz Shahbazov,

Minister of Energy of the Republic of Azerbaijan, who delivered a speech on recent and expected changes and reforms in energy sector, alternative energy and investment opportunities. In addition, the Luncheon featured member presentations by PASHA Insurance, FireWorks HRM and Deloitte Azerbaijan. More than 150 guests attended the event, including representatives of diplomatic corps.Mr. Shahbazov acknowledged AmCham members constituting a substantial portion of foreign and local investment committed to the Azerbaijani economy as being instrumental in supporting Azerbaijan’s achievements and progress. The Minister noted that the energy sector is a significant factor in bilateral relations between Azerbaijan and the United States – the first ever area to attract investments from large transnational corporations. In this respect, he particularly stressed that the investments in the country are well protected and guaranteed that create another incentive for the investments to flow into Azerbaijan. Mr. Shahbazov spoke further on renewable energy economic potential, emphasized the role of signing the amended and restated Azeri-Chirag-Guneshli (ACG) Contract as well as the importance of the Southern Gas Corridor project for the development of Azerbaijani economy.At the end of his speech, Minister expressed his gratitude for the opportunity to have a face-to-face dialogue with the business community. He specifically thanked to Mr. Nuran Kerimov and Mrs. Natavan Mammadova – President and Executive Director of AmCham – for invitation as well as representatives of BP – for hosting the event.Importantly, the October Luncheon highlighted the Extraordinary General Meeting of the Chamber. Members of the Chamber in good standing voted in favour of adoption of AmCham Board of Directors eligibility criteria.

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Black & White Ball

On November 30, AmCham Azerbaijan hosted the most demanded event of the year – its Annual Black & White Ball – at the gorgeous BUTA Palace. This edition of the Ball was dedicated to the Centenary of Azerbaijan Democratic Republic (ADR), the pioneer of democracy in the Muslim world and in the Orient.

This magical and unforgettable place brought together business leaders, high-level government officials, members of Parliament, representatives of the diplomatic corpus in an absolutely unique environment. More than 700 guests had the

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unique chance to enjoy the atmosphere of early-20 century Azerbaijan mixed with the traditionally gourmet menu, high-class music, and dancing with an amazing show program.With kind support of Platinum Sponsors – SOCAR and BP – as well as Gold Sponsors – Azersun Holding, Gilan Holding, KPMG in Azerbaijan, PASHA Bank, Procter & Gamble and SKN Electrical Services – the Ball has become a fascinating celebration of Azerbaijan’s history.

The evening was full of spectacular performances by Turkish opera diva Derya Kayaalp, Honored Artist of the Republic of Azerbaijan, brilliant voice Samir Jafarov, amazing Rast Band and its headliner – Honored Artist of the Republic of Azerbaijan, Lamiya Kerimova, outstanding pianist and composer, Honored Artist of the Republic of Azerbaijan Isfar Sarabski, People’s Artist of the Republic of Azerbaijan, outstanding mugham singer – Mensum Ibrahimov, Azerbaijani folk dance group led by Tarana Muradova. Traditionally, the culmination of the Ball became a raffle draw with lots of memorable prizes and DJ music with dances till dawn.

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Joint meeting of AmCham tax & Customs, HR and legal & Compliance Committees

On November 22, joint meeting of AmCham Tax & Customs, HR and Legal & Compliance Committees took place. Ms. Arzu Hajiyeva and Mr. Jeyhun Mammadov, Chairperson and Deputy Chairperson of the Tax & Customs Committee opened the meeting by welcoming participants.Afterward, Mrs. Hajiyeva announced that this meeting was devoted to the discussion on draft amendments in legislation in respect of employment taxation. She briefed information on the expected changes to the Tax Code.Then, Mr. Jeyhun Mammadov, Deputy Chair of the Committee, made a presentation on amendments to the legislation in respect of employment taxes. He talked about the changes in the tax legislation – personal income taxes, changes in the law on Social Insurance and amendments to the law on insurance from unemployment.Mrs. Hajiyeva and Mr. Mammadov were answering participant’s questions and encouraged them to share their recommendations on updates which can be a challenge during the work process. Participants were discussing advantages and disadvantages of expected changes, as well as AmCham position on these serious changes.At the end of the meeting, Mrs. Arzu Hajiyeva and Mr. Jeyhun Mammadov thanked members for fruitful discussion and participation.

CSR Committee meetingOn October 10, AmCham CSR Committee hosted its regular meeting. Ms. Aynura Piriyeva, CSR Committee Chair, welcomed the committee members and expressed gratitude to Deloitte for hosting the meeting. Then, Deloitte Azerbaijan Managing Partner, Mr. Nuran Kerimov, welcomed

the participants, thanked to Ms. Piriyeva and AmCham for the meeting and talked briefly about their company approach to CSR issues and suggested to begin a new campaign – instead of sending corporate gifts during holidays, funds to be allocated for children.Afterwards, Mr. Kerimov gave the floor to Ms. Vusala Kerimova, Talent Business Partner in Deloitte Azerbaijan, who delivered a presentation on societal impact Deloitte makes in Azerbaijan today. She displayed some examples about the CSR campaigns which were held during holidays by Deloitte.Later, Ms. Nilufer Koyluoghlu, President/ Educational Consultant of NIL International Education Organization, delivered a presentation on “STAR YOUTH PROJECT” (“Academic Year High School Exchange Programs” in the U.S.). Ms. Koyluoglu talked about the main objective of the project, the need for high school exchange programs, application requirements, as well as two success stories of this project.Furthermore, Ms. Piriyeva invited Ms. Sarita Vaid, the Founder of Eco Baku project, to give information about the concept of the project. She talked about the project’s mission which is raising awareness on the effects of plastic on us and the environment and offer solutions.Finally, Ms. Rugiya Ashrafli, journalist, public and business activist, made a speech on power of internal energy in life and in business. The meeting participants asked questions and shared some cases from their daily life routine.

Human Resources Committee meetingOn September 21, AmCham HR Committee hosted its regular meeting. The HR Committee Chair, Mrs. Elnara Mammadova, welcomed the Committee members and outlining the context of the Agenda. She thanked to SOCAR team for hosting the event. In the beginning of the meeting, safety induction by

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Mr. Orkhan F. Aliyev, Deputy Manager in HR Development & Nationalization Department, was provided to inform all participants on emergency precautions.Then, Mrs. Mammadova invited Mr. Nizami Guliyev, Chief of the Legal department of State Migration Service of the Republic of Azerbaijan, to deliver a speech on the migration related regulations.Afterwards, Mrs. Mammadova invited Mr. Teymur Mahmudov, Deputy GM/ Head of HRD and Nationalization from SOCAR, to make a presentation on “Nationalization as Talent management tool; expectations of employers”. He shared SOCAR’s vision and mission about nationalization strategy, their role in workforce nationalization, benefits and challenges of nationalization.Later, Mrs. Mammadova passed the floor to the speaker from KCA Deutag – Mrs. Gulnar Najafova, to present “Nationalization priorities, key to success”. She briefed information about their company and explained their nationalization process, identifying, development of successors, etc. She also mentioned about future nationalization forecast which is providing by KCA Deutag.Questions about nationalization, the difficult points during work process, real stories and other matters were answered by guests.

legal & Compliance Committee meeting

On October 26, AmCham L&C Committee hosted its meeting. The L&C Committee Chair Mr. Ilgar Mehti opened the meeting by welcoming participants and announced the agenda. Then, he introduced activity plan for the next 12 months and encouraged everybody to keep sharing their ideas as we move forward with this plan.Afterwards, he mentioned that some activities in the plan would likely require setting up small working groups. So, he made a call for those willing to participate in these groups. Self-nominations were also accepted.At the end of the meeting, Mr. Mehti thanked everyone for participation.

tax & Customs Committee meeting

On September 27, AmCham Tax & Customs Committee conducted its meeting. Mrs. Arzu Hajiyeva, Chair of the Committee, opened the meeting by welcoming participants and announced agenda, which was related to the discussion of the work plan for the next busy half of the year. Afterward, Mrs. Hajiyeva briefed the update on latest practice, legislative initiatives on tax and social insurance legislation. Participants were encouraged to share their recommendations on updates which can be a challenge during the work process. Finally, they decided to request a meeting from government officials to get exact information and to discuss related issues.At the end of the meeting, Mrs. Arzu Hajiyeva and Mr. Jeyhun Mammadov thanked members for fruitful discussion and participation.

FmCG Working Group meetingOn 18 September, AmCham FMCG Working Group hosted its meeting. The meeting was attended by higher level officials of the Food Safety Agency. AmCham members had an opportunity to get the first-hand information on its mandate and activities of the government organization, the expected changes in legislation and its impact on relevant private sector representatives and the end consumers. The participants also discussed the challenges which they currently face.

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for medical practices, based on the principles of evidence-based medicine, improvement of the quality of medical services delivered to population via improvement of post-diploma education of medical staff; implementation of other responsibilities in accordance with its operational directions as stipulated by the legislation, etc.

tHt Committee meetingOn November 26, AmCham THT Committee hosted its regular meeting for that month. Mr. Nuran Kerimov, President of the AmCham Azerbaijan, opened the meeting by welcoming the audience, expressed gratitude to Sheraton Hotel for hosting the Committee meeting and announced the agenda. He introduced the guest speaker Mr. Eldar Hajiyev, Vice-President of Azerbaijan Airlines CJSC.

Then, opening remarks were delivered by Mr. Hajiyev to brief the THT Committee members on recent activities and initiatives of AZAL during the latest 3 years. During the meeting he noted that a modern transport infrastructure was created in Azerbaijan, and there is a great potential for expanding cooperation in transport, transit and logistics sectors. He also highlighted that AZAL became a member of AZTA in parallel to the board of the Association, where it will coordinate the activities of air transport. Joining of AZAL to the Board of the Azerbaijan Tourism Association and becoming the member of the Association is an achievement of one of the goals that the Head of State set before tourism sector participants to ensure development of tourism sector and bring it in line with international standards.In addition, since June 2016, Open Skies Agreement has been in force between Azerbaijan and the US through which operators have been provided with more affordable and efficient passenger and cargo air transportation services.Participants of the meeting addressed their questions and shared their opinions. Mr. Farid Isayev, Chairman of the THT Committee, informed that some of the mentioned problems have already highlighted in White Paper and some of them are solved/ some changes happened.

HmI Committee meetingOn September 13, AmCham HMI Committee hosted its first meeting for the new business season. The HMI Committee Chair, Ms. Lala Bilandarli, opened the meeting by welcoming the Committee members.Then Ms. Bilandarli passed the floor to Mr. Gahraman Hagverdiyev, Director of the Public Health and Reforms Center of the Ministry of Health of the Azerbaijan Republic. He informed that the PHRC was established in 2006 and deals with organization of public health services in the country, as well as defines main directions for the development and implementation of health programs, regulation of reforms in medical institutions and methodical justification of implementation of reforms in health financing.

He also explained key responsibilities of the Center which are justification of health policy and reforms implementation from scientific and practical points of view; development of proposals for improvement of health legislation; formation of single information environment, development of communication and information technologies in health; development and implementation of necessary organizational activities to resolve issues on protection of the heath of population, improvement of provision of healthcare services and introduction of family medicine concept in Azerbaijan; ensuring the application of standards and clinic protocols

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TAX, CUSTOMS, ACCOUNTING AND FINANCEApproval of Charter of Service of Finance Monitoring of the Republic of AzerbaijanCharter of the Service has been approved with the Decree of the President of the Republic of Azerbaijan dated 18 July 2018. Main objectives of the Service will be as follows:

• Monitoring compliance with the legal requirements for the prevention of money laundering or terrorism financing in the Republic of Azerbaijan;

• To carry out a single implementation in the relevant area, as well as to coordinate monitoring participants, other persons involved in monitoring, supervision and other public authorities, to ensure transparency and efficiency.

The Service relies on advanced international standards while concluding its activities under the Charter.

Law on Accounting ChamberWith the adopted Law, the following has been regulated:• Legal status, legal basis of activities and management

and structure of the Chamber;• Objects of external state financial supervision on

ensuring state surveillance over use of state assets and other state property legally, reasonably and efficiently, and interrelations between other parties.

Regulations on declaration of national currency in cash and securities in national currency while bringing into and taking out of the Republic of Azerbaijan by residents and non-residentsThe Regulations have been approved by the Resolution of the Cabinet of Ministers of the Republic of Azerbaijan dated October 10, 2018, No 433. According to the Regulations, upon declaration to customs authorities, resident and non-resident legal entities are entitled to bring in and take out of the Republic of Azerbaijan the national currency in cash - banknotes and metal coins (regardless of its amount), securities and commemorative coins in national currency. Resident and non-resident individuals are entitled to bring in and take out of the Republic of Azerbaijan meeting with the following:• National currency in cash (banknotes and metal coins)

and securities in national currency up to AZN 20000 upon verbal declaration to customs authorities.

• National currency in cash (banknotes and metal coins), securities in national currency in the amount of AZN 20000 and above upon written declaration of the full amount to customs authorities.

In addition, resident and non-resident individuals and legal entities are entitled to bring in and take out of the Republic of Azerbaijan the national currency without limitation by transferring through the authorized banks or national postal operators.

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Amendments to Law on anti-money laundering and fighting against financing terrorismWith Amendments, requirements for employees and chiefs of finance monitoring authority have been defined. Employees and head of finance monitoring authority are not liable for their actions or non-actions while carrying out official duties, provided that it is not proved the actions or non-actions are illegal or dishonest.

New customs feesThe Cabinet of Ministers has amended its resolution on amount of customs fees. Under these amendments, customs clearance (except for special transit customs procedure) of goods, vehicles and the goods not intended for use in commercial or production purposes by individuals is subject to the following customs fees depending on respective customs value:- For the customs value up to AZN 1,000 (USD 588) – AZN 15 (USD 9);- For the customs value from AZN 1,000 to AZN 10,000 (from USD 588 to 5,882) – AZN 60 (USD 35);- For the customs value from AZN 10,000 to 50,000 (from USD 5,877 to 29,411) – AZN 120 (USD 71);- For the customs value from AZN 50,000 to 100,000 (USD 29,411 to 58,823) – AZN 200 (USD 118);- For the customs value from AZN 100,000 to 500,000 (USD 58,823 to 294,117) – AZN 300 (USD 176);- For the customs value from AZN 500,000 to 1,000,000 (USD 294,117 to 588,235) – AZN 600 (USD 353);- For the customs value exceeding AZN 1,000,000 (USD 588,235) – AZN 1,000 (USD 588).In addition, customs fees for issuance of document enabling registration of vehicles brought to Azerbaijan (including those brought temporary) has been amended as follows:- For trucks, passenger cars, buses and microbuses – AZN 30 (USD 17);- For other vehicles – AZN 25 (USD 14).

Deadline for becoming a Chartered Accountant has been definedAccording to the decree of the Cabinet of Ministers of the Republic of Azerbaijan # 464, dated 25 October 2018, deadlines and sequence for becoming Chartered Certified Accountant for chief accountants at state-owned legal entities, other public interest entities except for publicly traded legal entities, large entrepreneurships, budget organizations and public legal entities who publish their annual financial statements (consolidated statements) have been defined as following:1. Chief accountants at public legal entities who publish their

annual financial statements (consolidated statements) – by 30 December 2021;

2. Chief accountants at large entrepreneurships – by 30 December 2022;

3. Chief accountants at state-owned legal entities – by 30 December 2022;

4. Chief accountants at other public interest entities except

for publicly traded legal entities - by 30 December 2022;5. With respect to budget organizations:

1. Chief accountants of organizations funded at the account of centralized expenditure budget – by 30 December 2021;

2. Chief accountants of organizations at the account of local expenditure budget – by 30 December 2022.

MORTGAGE AND CREDITThe Constitutional Court adopted new decision relating to termination of loan agreements in connection with significant change in circumstancesOn September 7, 2018, in accordance with Article 130 of the Constitution of the Republic of Azerbaijan, the Constitutional Court of the Republic of Azerbaijan (“Court”) considered the case based on application from the Baku Appeals Court to comment on Article 422 of the Civil Code of the Republic of Azerbaijan (“Civil Code”).Article 422 of the Civil Code regulates the issues with regard to the change and termination of a contract due to significant change in its circumstances. The change of circumstances is deemed significant in the event that the contract would be concluded on substantially different terms or would not be concluded at all if the parties could reasonably predict such a change.The Court in its decision resolved that it does not consider the change of Manat’s exchange rate unexpected or unpredictable for the parties since according to Article 5.0.3 of the Law of the Republic of Azerbaijan “On Central Bank of the Republic of Azerbaijan”, the Central Bank regularly establishes and announces the official exchange rate of Manat.The position of the Court is that in accordance with Article 422 of the Civil Code, the change of exchange rate of Manat cannot be considered unexpected for the parties, and cannot be regarded as a substantial change due to the fact that the borrower takes the financial risk by borrowing means in foreign currency.It should also be noted that the Court, taking into account the change of exchange rate of Manat, considered appropriate that the terms of loan agreements in foreign currency are changed in the interest of the population depending on the banks’ financial capacities.

Amendments to the Law on Notarial activitiesAccording to the amendments, notary in place of a debtor should give a notice of execution on the documents defining the debt in order to collect money or seize property from the debtor. Notice of execution shall be performed if the debt is indisputably proven by the documents provided and respective period of claim under the Article 373 of the Civil Code has been met, unless other periods have been defined under the law. State bodies, legal and natural persons could apply for giving a notice of execution in an electronic way by using e-signature. Natural persons could also apply to notary in written. Claimant should send the debtor a demand letter by certified mail at least 20 days before the date of applying to notary, which shows that notice of execution will be given in

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case of nonperforming obligations. Rules on sending a notice of foreclosure of mortgage subject and the period for giving a notice of execution by notary after providing that notice are regulated under the Law on Mortgage. Notary shall give a notice of execution in the period of one business day after receipt of written application from natural persons or via the e-notary information system of the Ministry of Justice and will send e-execution information system of the Ministry of Justice for execution.The debtor may challenge the claim which a notice of execution is given on, before the court, Amendments will enter into force from the date of 1 January 2019.

CIVIL PROCEDURAL AND CRIMINAL ISSUESAdoption of the rules on obtaining information with respect to founders (shareholders), their shares in the charter capital of commercial legal entities and owners of securitiesOn 10 October 2018, the Cabinet of Ministers of the Republic of Azerbaijan approved the Rules “On providing information to the monitoring participants and other persons participating in monitoring with respect to founders (shareholders) of commercial legal entities, their shares in the charter capital and owners of securities (“Rules”).With reference to the Law of the Republic of Azerbaijan “On Prevention of the legalization of criminally obtained funds or other property and the finance of terrorism” dated 10 February 2009 (“Law”), monitoring participants include:

• Credit institutions;• Insurers, reinsurers and insurance intermediaries;• Investment companies;• Legal entities providing leasing services;• Entities and other organizations providing post services

which are engaged in transfers of funds;• Pawnshops;• Investment funds and their managers;• Non–governmental organizations, branches/

representative offices of foreign non-governmental organizations in the Republic of Azerbaijan as well as religious organizations engaged in receipt, collection, delivery or transfer of the funds as an integral part of their activities;

• Persons that have obtained a license for currency exchange activities.

According to the Law, other persons participating in monitoring are comprised of:• Physical persons or legal entities engaged in the

purchase and sale of precious stones, precious metals, including jewelry and other household articles made of precious stones or precious metals;

• Physical or legal persons providing brokerage services on real estate purchase and sale;

• Lottery and sports betting games organizers;• Lawyers, notaries, persons providing legal services as

well as accounting and tax advisory, audit services.

By virtue of the Rules, monitoring participants as well as other persons participating in monitoring can now, based on a request and free of any charge, obtain information on founders (shareholders) of commercial legal entities as well as their respective shares in the charter capital, and on owners of securities while carrying out due diligence, enhanced and on-going due diligence measures in cases defined under the Rules as well as the Law, which include, inter alia, establishment of business relations, conducting transactions (single or series of related transactions) in the value of AZN 15,000 or above, etc.The Ministry of Taxes of the Republic of Azerbaijan acts as an information holder with respect to founders (shareholders) of commercial legal entities and shares they own in the charter capital, while the National Depositary Center acts as a holder of information on owners of securities.In order to submit requests on obtaining the aforementioned information, the monitoring participants as well as other persons participating in monitoring shall register in the information system of the Ministry of Taxes and Financial Markets Supervisory Authority of the Republic of Azerbaijan through using an enhanced electronic signature.

Decree of the President of the Republic of Azerbaijan on ensuring activities of the State Agency for Public Services and Social Innovations under the President of the Republic of AzerbaijanWith the Decree of the President of the Republic of Azerbaijan dated 26 October 2018, the following has been added to the list of services provided at ASAN Service Centers:1. Provision of state extract on reregistration of ownership

rights on land and plan and size of this plot of land;2. Provision of legal entities and individuals with archive

references, extracts from archived documents and certified copies of archived documents;

3. Registration of foreigners and stateless persons upon place of stay in the Republic of Azerbaijan;

4. Military registration and deregistration of conscripts and military officials in cases of their registration and de-registration at the place of residence;

5. Issuance of certificate on military registration of a citizen;6. Issuance of certificate to a citizen on granting deferment

from immediate active military duty;7. Issuance of certificate to a person on performance of

active military duty;8. Issuance of certificate on sending a person to immediate

active military duty;9. Registration of food safety operations;10. Food safety registration of legal entities operating in the

food industry and issuance of relevant state registration extract (its duplicate);

11. Making changes to the data of registered legal entities;12. Issuance of food safety certificate;13. Issuance of international veterinary certificate to the

exported animals and products of animal origin;14. State registration (reregistration) of imported and

produced veterinary products and issuance of registration

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certificate (re-registration certificate);15. Issuance of phytosanitary (re-exported phytosanitary)

certificate for export (re-export) of plant and plant-growing products;

16. Issuance of internal quarantine certificate;17. Registration of pesticides, biological products

and agrochemicals and issuance of registration (reregistration) certificate;

18. Provision of relevant documents (data) to producing and processing enterprises engaged in the export of food products to the EU countries in order to meet the requirements of the EU import requirements for food products.

Amendments to Civil Procedural Code of the Republic of AzerbaijanAccording to the amendments, rules of order proceeding will not be implemented on the following claims:• contracts on rendering licensed telecommunication

services;• credit contracts concluded with credit organizations;• payment of consuming household natural gas, water,

electricity or heating. Amendments will enter into force from the date of 1 January 2019.

Amendments to the Criminal Penalties Execution CodeOn 19 October the Law “On amendments to the Criminal Penalties Execution Code” (the “Law) was published. As such, the Law establishes provisions governing execution of the following penalties applicable to legal entities:- Prohibition to carry out certain activities;- Liquidation of a legal entity;- Special confiscation;- Fine.As a background information, it should be added that provisions enabling criminal liability of legal entities were enacted to the Criminal Code in March 2012. It was envisaged that these provisions shall have effect upon adoption of respective amendments to the Criminal Procedure Code and Criminal Penalties Execution Code. With that said, the respective amendments to Criminal Procedure Code were made on November 2016. Taking the above into account, it should be outlined that with the Law entering into force legal entities became subject to criminal liability.

LABOUR AND MIGRATIONThe Law “On employment”On 29 August the Law “On employment” (the “Law”) entered into force. By entering into force the Law repeals the old Law “On employment” (the “Old Law”) which was adopted on 2 July 2001. We would like to draw your attention to the new provisions established by the Law.In accordance with the Law, databank of vacancies is an electronic system containing information on vacancies and newly created positions. The Law obligates employers to reflect information on vacancies and newly created positions as well as respective salaries within 5 days from the date of

opening of vacancy or new position. This amendment provides certain clarification on volume of reporting since the Old Law required employers to report on vacant positions without clarifying whether this obligation concerns newly opened or empty positions. It should be added that the Presidential Decree on implementation of the Law assigns the Cabinet of Ministers to prepare rules and mechanism of electronic reporting on vacancies and newly created positions. For the time being, rules and mechanism of such reporting is not yet determined.Under the Old Law, in case of redundancy employers were required to inform the State Employment Service under the Ministry of Labor and Social Protection about contemplated redundant employees at least 2 months prior to their termination. In comparison to this, the Law requires employers to inform on redundancy in accordance with the notice period envisaged for such employees by the Labor Code. By way of background information, under the amendments to the Labor Code dated 31 may 2017 which have entered into force on 1 January 2018, notice period depends on tenure of concerned employee and varies from the minimum of 2 calendar weeks to the minimum of 9 calendar weeks.

Amendments to Migration CodeAccording to the Amendments, if an administrative penalty without deportation is imposed on foreigners or non-citizens due to breach of rules on stay and residence in the Republic of Azerbaijan, those persons are obliged to pay the penalty and additional penny in order to enter the country. Once the penalty and respective penny have been paid, those persons may enter the country. With Amendments, foreigners and non-citizens staying temporary more than 15 days in the Republic of Azerbaijan are required to be registered in place of residence.

DIGITALIZATION AND E-GOVERNMENTThe State Program on Expansion of Digital Payments in Azerbaijan is approvedOn September 26, 2018, President H.E. Ilham Aliyev signed order on approval of “State Program on expansion of digital payments in the Republic of Azerbaijan in 2018-2020”.The State Program is approved for the purpose of implementation of the measures for expansion of digital payments defined in the “Strategic Road Map on Development of Telecommunication and Information Technologies in the Republic of Azerbaijan” approved by the decree of the President, dated December 6, 2016.According to the order, the State Program aims to increase the capacity of non-cash payments between citizens, business entities and governmental bodies, to minimize the volume of the cash turnover and to strengthen financial resource base of banking sector. For this purpose, the main strategic priorities are strengthening institutional and legal basis of digital payment services in the country, expanding range, quality and scope of application of the services, as well as promulgating their use by increasing infrastructural facilities.In accordance with the order, by providing transparency in

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economic turnover, expansion of implementation and use of digital payments will lead to decrease in expenses related to cash payments and operations of banks and enterprises, which in its turn will boost development of tax base, access of population and enterprises to financial services, strengthening of crediting and investing potential of banking sector and eventually the economic growth.The program also considers taking significant measures towards reduction of non-formal employment for the purpose of strengthening social protection system. In order to encourage employers and employees to switch to official salaries, relevant measures on the expansion of the insurance system will be undertaken under the State Program.The program will also consider setting “minimum labor standards” to reduce the level of employment with unregistered labor agreements in sectors with high indicators of informal employment. The Central Bank has been instructed to coordinate the implementation of measures defined in the State Program and to inform the President annually on the process. The Center for Analysis of Economic Reforms and Communication has been instructed to monitor and evaluate the implementation of measures defined in the State Program with the order of the Central Bank.

Presidential Decree relating to State information resources and e-governmentThe President of the Republic of Azerbaijan has signed the Decree on approval of Regulations on archiving, integration, operation and formation of State information resources and systems, and certain measures relating to e-government. With the Decree, in order to optimize management of rendering e-services to the population, increase the effectiveness of data exchange between State information resources and systems, and ensure systemization of the respective data in the State information resources and systems, the following sub-systems of E-government Information System have been set up:• Single Information System on Utility Services;• Single Information System on Social Services;• Single Information System on Agricultural Services.

Decree of the President on promotion of application of e-services in the fields of labor, social protection, social assurance and employmentAccording to the Decree, “Centralized E-information System” (hereinafter “E-information”) shall be established on the basis of information databases of the Ministry of Labor and Social Protection of the Population (hereinafter “the Ministry”). The Ministry shall ensure to set up e-social internet database in 3 months for providing services to the population related to functions of the Ministry. In addition, the Ministry shall ensure to establish sub-systems in E-information in 6 months in order to render employment services electronically. The activities towards personal data protection and protection of activities conducted on e-social database shall be carried out together with Special State Protection Service of the Republic of Azerbaijan

MISCELLANEOUSNew order was signed for support of competitive domestic production in non-oil sectorOn 19 September 2018, President of the Republic of Azerbaijan H.E. Ilham Aliyev signed order on “The additional measures to support competitive domestic production in non-oil sector.” The order aims to increase state support to stimulation of production of competitive non-oil products, to upgrade its raw material base, to establish new production areas for substitution of import and to expand the export potential, as well as to provide implementation of activities defined in the strategic road maps of national economy and main economic sectors, approved by the decree of the President, dated December 6, 2016.In accordance with the order, the Cabinet of Ministers has been instructed to prepare proposals and drafts of normative legal acts on “First in Azerbaijan” investment incentive mechanism for the production of new competitive products, state support mechanism to the investigation of internal market in order to support the competitive production of micro, small and medium entrepreneurs, rules on the regulation of mechanisms of “Invest in Azerbaijan”, application of customs privileges for the raw materials used in domestic production and submit them to the President within 3 months.The Ministry of Economy has been instructed to submit proposals to the President on the involvement of enterprises operating in the country to the global value chain within 3 months, to take measures for attracting foreign direct investment to the non-oil sector, to present investment projects open to the alternative financing and to expand access opportunities of local products to traditional and new markets and etc.The Center for Economic Reforms Analysis and Communication has been instructed to launch the internet portal www.enterpriseazerbaijan.com in order to improve opportunities for attracting foreign direct investment in Azerbaijan and to increase investment attractiveness, which shall be useful platform for financing of investment projects by local and foreign investors.

President Decree on additional measures on regulation of urban planningAccording to the Decree, local executive powers shall grant a permission to construct only if the State Committee for Urban Planning and Architecture (“Committee”) has provided an opinion on conformity of construction project with the urban planning documents. In addition, in case the municipalities and local executive powers allocate the land plots for the construction purposes (except for land plots accolated for the construction of houses in accordance with the informing procedure), the opinion on conformity of construction purpose (intended to be realized on that land plot) with the urban planning documents shall be provided by the Committee.

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Resolutions of the Cabinet of Ministers on ensuring activities of Patent and Trademark Centre and Intellectual Property Rights CentreCharters of the above-mentioned Centers have been approved by the Resolutions of the Cabinet of Ministers of the Republic of Azerbaijan dated October 13, 2018, No 443 and 444. According to the Resolution, Patent and Trademark Centre has the following primary goals:• carry out an examination of the claim letters submitted to

the Centre in terms of inventions, utility models, designs, trademarks and geographical indications;

• conduct other matters related to examination in accordance with the legislation and participate in the establishment of intellectual property study and culture.

Intellectual Property Rights Centre has the following primary goals:• ensure and manage the rights of intellectual property

rights;• participate in the establishment of intellectual property

study and culture.

Regulation on Commission on business environment and international rankingsThe Commission is a collegial body participating in and giving opinions, including development of legislation and administration, on the following:• Building competitive business environment and benefits

for entrepreneurship;• Increasing investment attractiveness of the country;• Improving the position of Azerbaijan in international

rankings.

President Decree on establishment of the Innovation Agency under the Ministry of Transport, Communications and High Technologies of the Republic of AzerbaijanThe President of the Republic of Azerbaijan has signed the Decree on establishment of the Innovation Agency. The Agency as being public legal entity will possess the following competencies:

• Support to local entrepreneurs in acquiring contemporary technologies and technological solutions, and arrangement of their transfer;

• Support of innovative scientific researches;• Promoting innovative projects (as well as start-ups)

and funding them by means of grants, soft loans and investment in charter capital (as well as venture funding);

• Promoting innovative initiatives.

AZERBAIJAN MOVES 32 STEPS FORWARD IN DOING BUSINESS REPORT

On October 31, 2018, the World Bank Group has released “Doing Business 2019: Training for Reform” report. The report ranks 190 economies based on how easy it is to do business there, taking into account trading regulations, property rights, contract enforcement, investment laws, the availability of credit and a number of other factors.According to the report, Azerbaijan ranks 25th among 190 countries and in comparison with last year the country moved 32 steps forward. Last year Azerbaijan moved 8 steps forward and ranked 57th.The report states that, Azerbaijani economy is among 10 economies with the most notable improvement in Doing Business 2019. It further highlights that, Azerbaijan implemented eight reforms making it easier to do business in 2017/18, a record number among the 10 top improvers and globally. Several of these reforms involve institutional changes. Azerbaijan opened a single window at the Baku City Executive Office for dealing with construction permits, for example, reducing the time to obtain a building permit by 80 days and the cost by 12,563 manat (about $7,500). Another one-stop shop—the Asan Communal facility—streamlined the process of connecting to the electricity grid. To improve access to credit, Azerbaijan established a new credit bureau and a new unified collateral registry.In its turn, AmCham Azerbaijan also applauds significant ranking progress of Azerbaijan in Doing Business 2019 report.

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48 Issue 32

members’ News and Events

"The development of football is very important not only in terms of gaining high awards in this sport but also in directing people of different age groups, especially children, teenagers, and youth, to a healthy lifestyle. It is very good that the Association of Football Federations of Azerbaijan became able to start such an important cooperation with Procter & Gamble to increase the football's popularity and strengthen its promotion. We appreciate the support of the Procter and Gamble which products are also very popular in our country.” said Elkhan Mammadov, Azerbaijan Football Federations Association (AFFA) General Secretary at the signing ceremony of Procter & Gamble and AFFA partnership agreement which took place on October 1st at Baku Olympic Stadium with the participation of General Director Deger Kurtaslanoglu of Procter & Gamble Azerbaijan & Georgia, the trainer of the National Football Team of Azerbaijan Gurban Gurbanov, team members and media representatives.It was noted at the event that the contract would cover the UEFA National League and European Championship qualifying games. AFFA General Secretary said that our national team playing in Group D of the UEFA Nations League is vigorously preparing for upcoming games. The Azerbaijani national team will meet with Malta on October 14, and with Faroe Islands teams on November 17. "Support of our partners is important for the development and promotion of football in our country and, therefore, we express our gratitude to everyone supporting the Azerbaijani football" said Elkhan Mammadov.General Director of Procter & Gamble Azerbaijan & Georgia, Deger Kurtaslanoglu said that the partnership between P&G and AFFA is dedicated to P&G’s 20th anniversary of presence in Azerbaijan. "Over the past 20 years, P&G has made a great contribution to Azerbaijan's economic life. However, we have not limited our contribution to only economy, but also focused on improving lives of our people through corporate responsibility and community impact

projects, as well as meaningful partnerships. Supporting sports is an important part of our community impact vision where we focus our efforts on health and hygiene programs where we can make the biggest impact. For us, a healthy society is associated with a large number of children and youth growing up with sport. We intended to endorse this idea by supporting our team at the 2012 London Olympic Games, being an official partner of the First European Games in 2015, and by supporting the Azerbaijan National Olympic team in the 2017 Islamic Solidarity Games. Our goal in partnership with the Association of Football Federations of Azerbaijan is to encourage sports among young people. Within the partnership, we will produce and launch TV commercials for our Gillette and Head & Shoulders brands with the participation of our football players. In addition to supporting the national team, these commercials will promote football even more widely,” said P&G Azerbaijan & Georgia General Director.Regarding another reason for the partnership with AFFA, Deger Kurtaslanoglu said: "Many of our products help to solve problems that arise in everyday life of people and create a sense of self-confidence in them. We are the official self-confidence partner of the National Team of Azerbaijan. Because all victories are based on self-confidence. You can win the most difficult fights by being so confident in yourself. We wish our national team success and victory”.

About Procter & GambleP&G serves about 5 billion consumers around the world with one of the strongest portfolios of trusted, quality, leadership brands, including Pampers®, Tide®, Ariel®, Head & Shoulders®, Always®, Pantene®, Fairy®, Blend-a-med®, Oral-B®, Gillette® and Safeguard®. The P&G community includes operations in approximately 70 countries worldwide. For more information, please visit www.pg.com

A partnership Agreement Signed Between procter & Gamble and AFFA

AmCham Azerbaijan

49

The 1st Caspian International Realty and Investment Fair, Caspian Realty, will be held from the 20th to the 22nd of February 2019 at Baku Expo Centre. The exhibition’s objective is to provide an international platform where all participants will be able to establish direct contacts with their target audience, while showcasing their products and services, and to use this unique opportunity for the exchange of international experience.The exhibition enjoys the official support of the State Committee on Property Issues of the Republic of Azerbaijan, the Azerbaijan Export and Investment Promotion Foundation (AZPROMO), and the National Confederation of Entrepreneurs (Employers) Organizations of the Republic of Azerbaijan.The event will be attended by both local and foreign companies that build and sell real estate, and provide financial, legal, consulting and design services; among other attendees the exhibition will welcome highly qualified specialists from various real estate sectors, as well as investors and government representatives. Caspian Realty 2019 will present commercial, residential, trade and rural real estate, including various investment projects and design services.Participating companies will find a wide range of opportunities to bolster their income potential; the exhibition serves as a venue where participants can meet with potential customers during three days and establish direct contact with key

American Chamber of Commerce in Azerbaijan (AmCham Azerbaijan) applauds the ranking progress of Azerbaijan to the 25th position among 190 countries in the Doing Business-2019 report, which is 32 points higher compared to the last year.Executive Director of AmCham Azerbaijan, Mrs. Natavan Mammadova, noted that Azerbaijan has implemented a record number of reforms this year – 8. This is the highest indicator across all the countries. “This is obviously a result of the ongoing reforms being implemented in Azerbaijan with the

decision makers. Attendance at the event opens unique access to information on construction projects in Azerbaijan and abroad. In support of the exhibition, the organizers plan to hold B2B meetings between participants and their target audience.The exhibition invites representatives of investment companies, design and architecture bureaus, real estate agencies, construction companies, government agencies, financial organizations, banks, consulting and IT companies, as well as brokers and private entrepreneurs to visit its debut event.Caspian Realty creates a wealth of lucrative opportunities for market professionals and independent investors, as participating companies will make use of a single platform to present the maximum number of profitable and reliable offers to suit the needs of potential buyers. Detailed information is available on the exhibition website: www.caspianrealty.az

aim of developing the business environment in our country, as well as another achievement in the fulfillment of the tasks set out in the Strategic Road Maps.” Mrs. Mammadova said.According to Mrs. Mammadova, the reforms carried out to support entrepreneurship paved the way for positive changes in the private sector, particularly for startups running, obtaining of construction permits, increasing access to finance, tax policy, property registration etc.“The results of the report will pave the way for attracting more foreign investments to our country. We believe that economic reforms will be carried out further towards increasing the competitiveness of the Azerbaijani economy and promoting its sustainable development. In the upcoming future, adoption of the Competition Code and the new Law on Investment Activities, as well as the anticipated tax reforms will further contribute to the improvement of the business environment of our country and boost rating of Azerbaijan in international reports.” Mrs. Mammadova said.Mrs. Natavan Mammadova also stated that in this respect, AmCham Azerbaijan remains committed to cooperation with the government and ready to share the experience and expertise of the members of the Chamber.

1st Caspian International Real Estate and Investment Fair

AmCham applauds significant ranking progress of Azerbaijan in Doing Business-2019 report

TRAVEL,HOSPITALITYANDLEISURE

JWMARRIOTTABSHERONBAKU

џ 10%discountonallFood&Beverages–Discountisapplicablemaximumfor20peoplepercard.Thecardcannotbeappliedformeetings&eventsheldinhotel

џ 10%discountonallSpaTreatments–Thelimitis20guestspercard.Discountdoesnotapplyforspaproductsretail

џ 30%discountonLaundry&Cleaning–Discountisapplicableforminimumon3daysservice

HYATTREGENCYBAKU

џ 15%discountonrestaurantandbarџ 15%discountonlaundryanddry

cleaningџ 20%discountonSpatreatmentsat

ArmaitiSpa&Fitness

џ 10%offforZafferanoRestaurant&Bentley`sBar

џ 10%offforJalehSPA(treatment,gymoffer,retailproducts)

FOURSEASONSHOTELBAKU

џ 15%SPAџ 10%Retail/rackpriceofroomџ 15%Laundryџ 15%FoodandBeverage

BOULEVARDHOTELBAKU

џ 15%SPAџ 10%Retail/rackpriceofroomџ 15%Laundry

INTOURISTHOTELBAKU

WedobelieveourmembersappreciateanopportunitytobenefitfromAmChamM2MDiscountProgramexclusivelydesignedforourMemberCompaniestoobtainaswellasfortheAssociatestoprovidediscountsonawiderangeofproductsandservicesfromthehotelstaystofoodandbeverageoutlets.ThisAmChaminitiativeisrecognizedasastrongpromotionalvehicleaimedtoaddmorevaluetocompanies’membershipbyhelpingtoincreasethevolumeofsalesandtosavecosts.TobecomeadiscountprovideryouneedtocompleteM2MDiscountProgramAgreement,printitoutandreturnthesignedcopytous.Thisprogramallows twopeople fromeachMemberCompany toobtaindiscounts inbelowmentionedcompaniesuponpresentationofspecialM2Mcards.Currently,ourM2MDiscountProgramencompassesthefollowingoffers:

HOLIDAYINNBAKU

џ 10%DiscountonFoodandBeveragesatHolidayInnRestaurantMarina18andSagiBar

џ 15%DiscountonHolidayINNSpaannualsubscription(fitnesscenterandswimmingpool)

џ 10%Discounton“YourSpecialDay”eventsinclusiveWeddings,Engagements,HennaParties

THELANDMARKHOTELBAKU

15%discountonFood&Beveragesat:џ CaspianGrill&Terrace(alacarte)Lunch

&Dinnerџ BangkokNoi(alacarte)lunchџ Seto(alacarte)Lunch&Dinnerџ Salo(alacarte)lunchџ ShinShin(alacarte)Lunch&Dinnerџ DolcePausa(regularmenu)Throughout

theday

PRIVESTEAKGALLERY

џ 15%discountonfoodandbeverages*Thediscountdoesnotapplytobreakfast,businesslunch,şarküteriandpakhlava.

PULLMANBAKU

џ 10%discountonFoodandBeverages,FitnessandSPAservices

џ 10%discountonroomsstays

HILTONBAKU

џ 10%discountonHiltonBakurestaurantsandbars

џ 10%discountonHiltonBakuSPAtreatments

*Discountcanbeappliedtoagroupupto9people*Discountcannotbeappliedincombinationwithanyotherpromotion

PROFESSIONALSERVICES

PASHAINSURANCE

ForallemployeesofAmChamRegularMemberCompanies:џ 15%discountonvoluntaryinsuranceof

propertyџ 5%discountonvoluntarymotor

insurance(CASCO)

ForindividualM2MCardholders:џ 20%discountonvoluntaryinsuranceof

propertyџ 10%discountonvoluntarymotor

insurance(CASCO)

SIARRESEARCHANDCONSULTINGGROUP

џ 10%discountonanumberofservicesandprojects

SEABAKLLC

џ upto10%onITSupportServicesџ FREEmigrationtoCLOUD.AZServicesџ upto5%onITEquipment,Cartridges

andSoftwareLicensingџ upto15%onInternetServicesat

LandMarkandotherbusinesscenters

INTERNATIONALBANKOFAZERBAIJAN

џ 50%discountonAmexGoldcardџ 50%discountonAmexPlatinumcardџ FreeMCWorldElitecard

ADAUNIVERSITY

џ 10%onExecutiveEducationCorporateTrainingsPrograms

EDUCATION

AZQTELLLC

џ 20%discountforSkyPortWirelessLeasedLine

INTERNETANDCOMMUNICATIONS

PARAMEDLASERCLINIC

ForallemployeesofAmChamRegularMemberCompanies:џ 10%discount–SilverDiscountCard–

forallprocedures

ForindividualM2MCardholders:џ 20%discount–DiamondDiscountCard

–forallprocedures

OTHER

NOVCOGROUPOFCOMPANIES

џ 20%discountinMyBrandsnetworkshop

ASPIAGROMMC

џ 10%discountonbeveragesinSavalanBoutiqueWineHouse

OFFICESYSTEMS

џ 10%discountforofficechairsџ 15%discountforhardfurnitureџ 40%discountforofficepartition

AUTOSTARKAUKASUSGMBHAZERBAIJAN

џ 10%discountonallservicesatMercedez–BenzServiceCenter

AUTOMATICSYSTEMOFBUSINESSCONTROL(ASBC)

џ 3%discountoniPhonesџ 5%discountonotherproducts(except

specialofferproducts)

џ 15%discountonproductsinAntarisshops

џ 15%discountonproductsinAntarisbranchinBakuBookCenter

*Discountcannotbeappliedincombinationwithanyotherpromotion

ANTARIS-OFFICE,BANK&SCHOOLSUPPLY

AmCham Azerbaijan

52 Issue 32

AmCham Calendar of Events

September 1 - November 30, 2018

30 November - Black & White Ball

26 November - Travel, Hospitality And Tourism Committee Meeting

20 November - Members’ Luncheon

31 October - Members’ Luncheon

26 October - Legal & Compliance Committee Meeting

11 October - Members’ Luncheon

10 October - CSR Committee Meting

5 October - Career Fair, Small Step To A Great Opportunity

27 September - Tax & Customs Committee Meeting

21 September - HR Committee Meeting

18 September - FMCG WG Meeting

15 September - HR Forum

14 September - Back-To-Business Cocktail Reception

13 September - HMI Committee Meeting

11 September - Round-Table Discussion With Mr. Safar Mehdiyev, Chairman Of The State Customs Committee

10 October - Meeting With U.S. Deputy Assistant Secretary Of State