Dear AmCham members and friends, On 25th of April we are going to celebrate the 1st anniversary of “Entrepreneurs Day” in Azerbaijan, which was signed by HE Ilham Aliyev in 2016. Majority share of the economy is represented by the private sector. The government is putting serious steps further towards further developing position of this sector and diversifying economy – improving business conditions, increasing export potential, attracting investment and many others. As a first rank advocacy and business growth professional association in the

country, we are honored to contribute to further improvement of business climate in Azerbaijan and strengthening the competitive economy to make Azerbaijan a better home for businesses. In our magazine, we do our best to highlight developments in various profit-gaining sectors of the economy aimed to ensure further sustainable economic growth. This time, within 25th edition of IMPACT, AmCham brings the position of diverse stakeholders on innovative approaches to the development of agriculture sector, which is one of the most promising sectors of the economy and is among 10 sectors described in the Strategic Road Map approved by H.E. President Ilham Aliyev. Agriculture is the traditional, as well as a new business behavior for Azerbaijan. People living in this territory, have engaged in this sector for a long period of time. However, thanks to innovations and existence of high technology, nowadays it requires a new approach; which brings change in perception and behavior of people. This paradoxical outlook has been revealed from different angles by governmental higher level officials and experts. You will be able to read interesting contributions from the Deputy-Minister of Agriculture, leaders of business associations, Head of Food and Agriculture Organization as well as member companies. They reveal different aspects and successful case studies towards agriculture development. Happy "Entrepreneurs Day" and best wishes in your business endeavor.

Kind regards,Natavan Mammadova

Dear friend,

Welcome to the 25th edition of “IMPACT Azerbaijan” magazine, devoted to achieving higher productivity with application of in-novative approaches in agriculture. During the process of diversification of economy, agriculture is considered to be one of the promising sectors in Azerbaijan. Thanks to geographic location and climate condition, there is an existence of big room and opportunity for further development of agriculture. Recently, public discourse has been dominated by legislative changes, new mechanisms and behaviors, as well

as focus of investors to the regional part of the country. In this regard, this edition carries rich content with two major focus.First of all, officials and leading people of this sector have contributed with an interview or article covering recent activities, short term achievements and perspectives of agri-culture in Azerbaijan. Secondly, with stock of international expertise and best practices, member companies have provided fresh vision and future steps towards sustainable development. Overall, this edition will be very interesting to read and find potential for your businesses. Herein, it is my pleasure to appreciate one more time for interviewed officials, authors of articles, as well as for the companies who see deep value to advertise their business in IMPACT, including Azerfon, Mosaik Printing, PASHA Insurance, Azersun Holding, PMD Hospitality, Turkish Airlines and ITECA.

Keep reading and enjoying! Sincerely,Aykhan Nasibli

A Word From Executive Director of AmCham

Editor’s Comment

CreditsAmCham Executive Director:Natavan Mammadova

Editor:Aykhan Nasibli

Articles contributed by:Mammad Musayev Elman AlaskarovSuleyman Kalashov Ashraf HajiyevSeymur Niftaliyev Javid Mammadov, Borchali ArazNargiz Karimova, Orkhan Rajabov & Gunel FarajovaVugar Babayev Bahar Kavuzova

Advertisers:AzerfonMosaik PASHA InsuranceTurkish Airlines Azersun HoldingPMD Hospitality ITECA

Publisher:American Chamber of Commerce in Azerbaijan

Tel: (+994 12) 497 13 33Fax: (+994 12) 497 10 91www.amchamaz.org

Advertising opportunities:Please contact the Editor ateditor@amchamaz.org

Tel: (+99412) 497 1333

The articles in IMPACT Azerbaijanexpress the opinions of the authors and do not necessarily reflect the position of the American Chamber of Commerce in Azerbaijan

Issue 25

contents

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64

62

AmCham Calendar of Events

Members’ News and Events

55AmCham Legal Update

43About Us

50Committee Highlights

AMCHAM AZERBAIJAN

MEMBER CONTRIBUTION

5Special Interview with Deputy Minister of Agriculture, Mr. Ilham Quliyev

25The Perspectives of Remote Sensing Application Products for Increase of the Efficiency in Agriculture

Elman Alaskarov, Azercosmos

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Value-added Agricultural Products: Run Away From Laziness

Modern Technology and Innovations are Applied in Agriculture Sectorthe

4A Word From the President of AmCham Azerbaijan

Nuran KerimovPresident of AmCham Azerbaijan

14Active Engagement of FAO to Agricultural Development of Azerbaijan

Melek Cakmak, FAO in Azerbaijan

18From Know-how Production Technologies to Higher Productivity

Savash UzanAzersun Holding

20The EU Market is Open to Azerbaijani ProductsDr. Olaf Heidelbach, European Union Delegation to Azerbaijan

22The Current Situation and Development Perspectives of Agriculture in Azerbaijan

Suleyman Kalashov, Azerbaijan Micro-finance Association

10Diversification and Development of Agriculture Remain High Priority for Azerbaijan

Mammad Musayev, National Confederation of Entrepreneurs (Employers`) Organizations of Republic of Azerbaijan

Ashraf HajiyevSIAR Research and Consulting Group

Vugar BabayevGanja Agribusiness Association

40Working Time Challenges inOil & Gas Industry

Bahar KavuzovaPwC Azerbaijan

PHUKET 21.6x28cm ING.indd 1 14.03.2017 11:12

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A Word From thePresident of AmCham Azerbaijan

First of all, using this opportunity, I would like to express my gratitude to the members of AmCham for their trust and selecting me as new President of the organization. Over the years AmCham has become a hugely successful organization. AmCham is special. What makes our organization special is its purpose and mission. This is a unique group of people united by common values of ethics in business and fair competition. This business association is driven by goals of making Azerbaijan a better place for doing business, contributing to mutual trade between the United States and Azerbaijan. Starting from 2016 the Government of Azerbaijan has commenced substantial economic reforms, and taking active

part in economic transformation is going to be one of top priorities for AmCham. Our organization enjoys great level of cooperation with the President and the Government of Azerbaijan, and we consider it very important to continue this dialog. We will continue working hard in connecting the private sector with the Government with the purpose of improving business climate in Azerbaijan. We have been consistently producing the White Paper with our recommendations around improving business climate in Azerbaijan, and we look forward to delivering our new proposals reflecting new economic realities. AmCham brings together many businesses not just from US but from different countries. Among our members we have a great number of Azerbaijani companies. The Board and the management team of AmCham will continue creating exceptional business opportunities and supporting our members in advancing their commercial interests. We are going to continue working hard on delivering greater value for our members by introducing new member services, through the work of our committees and organizing various events. We find it very important that more members are involved in numerous initiatives and programs organized by AmCham.In the end, on behalf of the Board of AmCham let me wish a very happy Novruz to all our members, and I look forward to working closely with them.

Nuran KerimovPresident of AmCham Azerbaijan

Photo: New AmCham Board of Directors

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Special Interview with Deputy Minister of Agriculture, Mr. Ilham Quliyev

Agriculture is a traditional economic area with great potential in Azerbaijan. Recently, new reforms have been launched to further develop the sector. What do You think about the extent agriculture will have an impact on the GDP growth as a continuation of the current growth dynamics?Since 2014, the political decisions adopted by the President regarding the contemporary phase of agricultural reforms have addressed the establishment of a base for transition to a new stage of development in this area in parallel to promotion of complex measures aimed at the improvement of mechanisms for institutional, economic and technological development of the agricultural sector in the country. It necessitates the strengthening of institutional capacities in accordance with modern requirements to ensure sustainable development above all.In this context, measures have been implemented to improve the management in agriculture starting from the year of 2014. First of all, regional and city offices of the Ministry of Agriculture have been established to ensure the effective implementation of agricultural policies. Moreover, rooted structural changes have been initiated to improve the result-oriented and efficient activity of the administration and subordinate agencies of the ministry, and to contribute to the innovative development.Increase of the competitiveness of any field is, of course,

associated with science and education in modern times called the “Knowledge Age”. In this regard, the curricula and educational plans of Azerbaijan State Agricultural University, the country’s staff training center in agriculture, are being improved in collaboration with leading universities of the world, all the labs have already been completely renovated and equipped with modern facilities and new experiment bases have been established in the university. In parallel, an international master's program on “Business management in agriculture” has been launched within a project co-implemented by the Ministry of Agriculture and ADA University in order to further expand the qualified staff training in various fields of agriculture since 2016. Institutional reforms have been performed in the direction of empowering the agricultural research institutes and transforming those institutions into an information and consulting network, Azerbaijan Agricultural Science Center has been restructured as Information and Consulting Center for Agricultural Sciences and the structure of scientific research institutes operating under the center has been optimized. The regional “Farmer house” pilot project was implemented in 2015 under the Regional Information and Consulting Center for Agricultural Sciences to provide information and consulting services to farmers in Guba district. The reforms are underway towards the fundamental modernization of the agricultural science and education system.Comprehensive measures have been carried out to improve the targetness and effectiveness of subsidies extended to agricultural producers. Thus, the amount of rebates provided for mineral fertilizer sold to producers have been increased up to 70 percent and the rebates have covered sales of natural fertilizers (biohumus), as well. Furthermore, the rebates have been applied to pesticides up to 70 percent. The amount of state subsidies provided for fuel and engine oils used for the planting of each hectare has been increased by 25 percent and the subsidy policy has been applied to final products in cotton and tobacco growing for the first time. Additionally, a 40 percent discount has been applied to the amount of agricultural machinery and modern irrigation systems leased or sold through leasing to producers by the “Agroleasing” OJSC.The state support activities targeting long-term development goals have yielded successful outcomes in a short period of time. So, the utilization of fertilizers and pesticides increased by 2 times in 2016 compared to 2013. Also, 40 percent of agricultural machinery, including 36.2 percent of grain

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harvesters, 100 percent of cotton harvesters, 42 percent of tractors and 39 percent of other equipment sold during a 12-year period in which the “Agroleasing” OJSC has operated were purchased in 2014 to 2016. Thus, the issues related with the provision of agricultural machinery to farmers and the problem of equipment shortage was resolved in recent years.It has been started to establish specialized seed companies that meet modern requirements to improve the provision of agricultural producers with high conditioned seeds and seedlings.All the above was an overview of the large-scale activities performed in recent times. As for the question regarding the additional effect of agriculture based on the current dynamics, we should, first of all, have a short look at the trends observed over the past period.Agricultural production grew entirely by 2.4 times, including plant-growing by 2.3 times and cattle-breeding by 2.5 times during the past 20 years of the commencement of the first phase of agricultural reforms in Azerbaijan. The production of grain increased from 1.018 mln. tons to 3.065 mln. tons (growth by 3 times), potatoes from 214.6 thousand tons to 902,4 thousand tons (growth by 4.2 times), vegetables from 570 thousand tons to 1.269 mln. tons (growth by 2.2 times), horticultural products from 52 thousand tons to 464.5 thousand tons (growth by 9 times), meat products from 115.7 thousand tons to 303.8 thousand tons (growth by 2.6 times), dairy products from 843.3 thousand tons to 2.009 mln. tons (growth by 2.4 times) and eggs from 477 mln. pieces to 1,6 bln. pieces (growth by 3.4 times) in 1996 to 2016.As You know, the “Strategic Roadmap for the production and processing of agricultural products in the Republic of Azerbaijan” was approved by the Decree dated December 6, 2016 of the President of the Republic of Azerbaijan. The priorities to be carried out in the agricultural production and processing sector are expected to increase the actual GDP directly by 575 mln. manat, indirectly by 660 mln. manat, totally by 1235 mln. manat in 2020 within the implementation of the Roadmap targeting the fulfillment of 9 strategic objectives in order to create a favorable environment for the formation of a competitive agricultural production and processing sector relying on the principles of sustainable development in the country.

What are the 3 highest priorities set forth by the government to develop the agriculture?The priorities set by the government are clearly stated in the “Strategic Roadmap for the production and processing of agricultural products in the Republic of Azerbaijan” aiming to achieve competitiveness and sustainable development of the agricultural sector in the country. In this respect, the development of market infrastructure for agricultural products, the improvement of agricultural insurance and financial system and the fundamental modernization of agricultural science and education system can be considered as 3 important priorities of the government.

What should be done to widely attract banks and insurance companies to this sector?As I mentioned above, the improvement of agricultural financing and insurance mechanisms is currently acting as a priority, because the existing situation is not satisfactory in this area for a number of objective and subjective reasons. Thus, factors such as high dependence of agricultural production on climatic conditions, low rate of capital turnover, etc. lead to a lower rate of savings, which consequently reduces the ability of agricultural producers to make investments at their own funds and ensure appropriate funds from financial markets. In line with the abovementioned, the situation stems from the poor economic potential of mostly small-sized farms, problems related with collateral assurance for the acquisition of loans due to the insufficient development of land and property market in rural areas, poor development of agricultural insurance, as well as lack of a guarantee mechanism for agricultural credits and other reasons.The key elements impeding the development of agricultural insurance system include natural disasters, animal and plant diseases, climate data and lacking database of the last 30-40 years. Also, the absence of a relevant insurance fund widely applicable in global experience in the field of agriculture has a negative impact on the development of the sector.Extensive measures have been considered for the improvement of financing and insurance mechanisms for agriculture within the Strategic Roadmap. Thus, measures are planned to be implemented in the fields of exploring possibilities to establish “Loan Guarantee Fund” for agricultural loans, elaborating mechanisms for the application of innovative and unsecured loans in agriculture, improving financial literacy of agricultural producers, etc. Regarding the

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development of agricultural insurance system, the intended measures include the improvement of a risk management mechanism for agriculture, the assessment of opportunities to establish an insurance fund for agriculture, the elaboration of the insurance events registry and other activities.

What about the trend of recent years for agricultural products? What products have a comparatively high competitive advantage in the global market?The level of participation of our country in export markets significantly increased thanks to the strengthened capacity of domestic production in recent years. For instance, the volume of exports of agricultural and food products increased by 11.1 times, including that of exports of primary agricultural products by 8.5 times and processed agricultural products by 14.7 times in 2001 to 2015. According to the reports on international trade of goods, Azerbaijan’s share in the global exports of agricultural and food products increased from 0.014 to 0.054 percent in this period. Presently, higher growth dynamics are observed in the exports of agricultural products. So, the level of exports of key agricultural products increased by 20.7 percent in 2016, whereas by 69.7 percent in the first two months of 2017.Agricultural products exported from Azerbaijan in 2016 included fruit (57 percent), vegetables (30 percent), cotton, tobacco, and leather stuff (10 percent). These products have high competitive advantages in the group of primary agricultural products. Particularly, fruits with comparatively high competitive advantages include nuts, dates, pomegranates, apples, pears, strawberries, cherries and peaches, while vegetables with comparatively high competitive advantages include tomatoes, potatoes, onions and cucumber.It would be better to note that the comparative advantages of traditional agricultural products such as cotton, tobacco and raw silk are also high in Azerbaijan. This is why, great success have been achieved in the direction of increasing the production of those products since 2016. For example, production of cotton products increased by 2.5 times and cocoon products by 300 times within a year. Azerbaijan’s participation in the world market will also be expanded owing to the increase in the production of these products.

Domestic agricultural products are traditionally exported to neighboring countries, namely Russian Federation. What measures are being taken to get access to the EU market on a large scale?At present, Russia and CIS countries import 76 percent, European countries import 17 percent, Turkey and Middle East countries import 1 percent, China and other countries import 1 percent of agricultural and food products exported from Azerbaijan. 99 percent of agricultural and food products exported to European countries includes hazelnut kernel and pomegranate juice.The diversification of export markets for agricultural and food products, including increase of exports to large and expensive European markets is, of course, amongst the priorities of the country, as the President has set specific tasks before the government with this respect. In this context, one and perhaps most urgent of the particularly important issues is to ensure the compliance of standards for quality control of agricultural and food products with international requirements.As You know, a decision was recently adopted by the President regarding the conduction of comprehensive reforms in the food safety and quality control system in Azerbaijan. One of the main objectives set under the reforms is to ensure the compliance of food safety standards of the country with international requirements, including those of the Codex Alimentarius Commission.At the same time, a mechanism was created for state support to the expansion of participation of local entrepreneurs in export markets and for establishment and strengthening of the "Made in Azerbaijan" brand in 2016. In addition, electronic databases were created to contribute to the promotion and sale of Azerbaijani products in the world market.

Which areas of agriculture can be attractive for foreign investors? Also, what stimulating conditions are available for attraction of foreign investors in the country’s agriculture?Currently, it is quite profitable to make investments in agriculture in several directions. For instance, the development of market infrastructure for agricultural products. From this point of view, we can underline the construction of wholesale and retail sale points in accordance with modern standards for

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agricultural products, the organization of logistics, including packaging services for fruit and vegetables in the regions, the construction of meat-cutting facilities compatible with the relevant sanitary norms and technological standards, and the establishment of small- and medium-sized grain warehouses.Moreover, significant market potential is available for investments in export-oriented and import-substituting areas of agriculture.For example, it is very beneficial to invest in the establishment of fruit orchards and grape farms by intensive method, the increase of early potato production, the increase of hasting in greenhouses, the expansion of the network of small and medium-sized fruit and vegetable processing enterprises, including the increase of the production of dried and frozen fruit and vegetables as areas with highly comparative advantages in Azerbaijan.Also, there is great potential for the establishment of large livestock complexes compatible with the intensive farm model ensuring import substitution and the development of livestock products processing industry and areas of feed production by industrial method.The development of cotton, tobacco, silk, leather and wool clusters is promising in terms of both domestic and international market demand.Stimulating conditions for investments in agriculture are quite favorable, as well. For example, the agricultural sector is exempt from all taxes. Investments over 400 thousand manat in the above areas are granted extra tax and customs incentives.Azerbaijan has concluded large scale free trade agreements with Russia and CIS countries.It should be pointed out that agricultural investment maps and projects will be drafted for each administrative district and additional activities will be implemented to further improve the investment environment in agriculture as considered in the

Strategic Roadmap. The main goal of those activities is to achieve the acceleration of integration of the country to the global value chain through attraction of investments by world famous agricultural and industrial, as well as food producers to the country.

What is the level of integration of ICT to agriculture?According to the policy of expansion of e-government as a means of improving transparency and effectiveness in management, large scale activities were implemented in the country towards the establishment of an “E-Agriculture” system based on the principles of the Integrated Administration and Control System (IACS) compatible with European practice in short time. Relevant software has already been created with 7 sub-modules through the involvement of international experts. Graphical data have been prepared on 4.87 mln. hectares of agricultural lands, including 1.59 mln. hectares of ploughed fields, 104 thousand hectares of perennial gardens, 1.60 mln. hectares of pastures and other agricultural areas in quality compatible with European standards and inserted in a map-based geographical information system. At the same time, relevant measures are being implemented on the issues such as vegetation cover, calculation of productivity, soil fertility conditions, etc. based on the images of the satellite “Azersky” and tests are being conducted in selected pilot areas in this regard. The applications of producers for subsidy will be realized via the “E-Agriculture” system starting from the current year.Additionally, the transition of relevant operations carried out by “Agroleasing” OJSC to an electronic registry system has been successfully completed within the alignment of activity of “Agroleasing” OJSC with international leasing standards.Applications are being accepted online through the information system created via the official websites on the services of “Agroleasing” OJSC.The “State technical supervision automated information system” of the Main State Technical Supervision Inspectorate of the Ministry of Agriculture has already been commissioned. The accounting, registration and unregistration of agricultural machinery, tractors and mechanical vehicles are carried out electronically via the information system.A daily updated electronic price information system for agricultural products within the project jointly implemented with FAO

Our guest’s biographyMr. Ilham Quliyev is Deputy Minister of Agriculture of the Republic of Azerbaijan. He has been in this position since 2005. Before the appointment, he has worked in different leading positions at the Ministry, including Chief of Supervision Department, Deputy Chief of the Office at Technical Progress and Agrarian Services, as well as Chief Inspectorate at State Technical Supervision.Mr. Guliyev carries degrees from The Academy of Public Administration under the President of the Republic of Azerbaijan on State and Municipality Governance and from Azerbaijan University of Architecture and Construction on Industrial and Civil Construction.

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Diversification and Development of Agriculture Remain High Priority for Azerbaijan

Historical return of national leader of Azerbaijan, Heydar Aliyev, created basis for fundamental changes in all spheras of life. The scope and influence of Heydar Aliyev's reforms, as well as ability to have an impact to overall view of life of the country made urgent the need for establishment of a new society.Currently, comprehensive stage of development is blooming under the leadership of Ilham Aliyev. The main charateristic feature within economic policies implemented by the President

is coverage of social aspects, as well as prioritization of economy in solution of all problems. Implementation of all state programs, orders and decrees provide an opportunity for accelerating economic development; thus, create an opportunity for increasing role and position of private sector. Successful implementation of recent state programs and activities, influence sustainable development of non-oil economy, growth of entrepreneurship climate, increase of investment climate, opening of new companies and new job places. It should be also mentioned that activities within the socio-economic development of Azerbaijan created foundation for sustainable development in process manufacturing and created a room in access to job market. Formalization of free business climate enabled development of entrepreneurship sector.

Actions and real changesOn January 10, during the meeting of Cabinet of Ministers devoted to socio-economic development of 2016 and upcoming steps, agriculture was one of the areas within the focus of President Ilham Aliyev. Head of the state mentioned

Mammad MusayevNational Confederation of Entrepreneurs (Employers`) Organizations of Republic of Azerbaijan, President

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upcoming years, it is planned to implement activities towards development of traditional manufacturing areas, including cotton growing, tobacco, silkworm, carpet weaving and other crafts. The last 13 years have results with fundamental economic changes, sustainable growth and modernization. Within this period national economy grew by threefold, foreign direct investment increased and international economic integration has deepened. The development of non-oil sector, especially, small and medium entrepreneurship, is the top priority for the country leadership. Existence of diverse benefits for farmers, having no taxation in this sector (in exception of land taxation), providing access for low interest loans, receiving various subsidies from the government create an important role for development and increase of efficiency of agriculture sector. The works done enabled the agriculture sector, primary part of non-oil economy, to increase its share in the overall economy in 2016. Programs and orders signed in 2016 play a fundamental role in this process. Snapshot to agro fieldsIt should be mentioned that the previous year was a turning point in diversification of agriculture. The value of agriculture products went up to 5.6 billion manat, in comparison with the previous year, 2.6% of increase. Having such a general increase was vivid in most of the products. Increase for cocoon was over 300 times, soybeen 2.8 times, cotton 2.5 times, green tea leaves 75%, subar beet 73%, wheat 9.8%, potato 7.5%, etc. For this reason, the growth rate of agriculture products significantly exceeded the growth rate of country population; and this created increase in level of self-sufficiency for separate products. Export of goods increased by 73 million or 20.7% in comparison with 2016; thus, reached to 426 million USD. In exception of potato and onion, export of all other products have increased. For the first time, barley was exported in worth of 2.6 million USD. All these prove correctness of Presidential decisions and orders towards diversification of economy with agriculture development and preserving competitiveness of locally produced goods. Development of cotton growing is in progress. There is an existence of subsidy for farmers by 0.1 azn for each kg.

on this concluding speech: “the previous year non-oil sector developed by 5% and agriculture by 2.6%. For this reason, it was an important event.” I assume this year growth will be even high. I would like to shed light to various directions of agriculture. We have brought glory of cotton growing. Despite of being a bit late, we have achieved to good results. If we compare with 2015, we have cultivated cotton in over 51.000 ha (compared to 18.000 ha). If in 2015 around 35 thousand tons of cotton was supplied, this year the statistics is expected to move up to 90 thousand tons. We have got lots of plans for this year. They will be reflected at Azerbaijan State Investment Program. This year we have to increase area for cultivation of cotton. If during the previous year we have allocated around 51 thousand ha available for cotton, this year it should be at least 120.000 ha.” In 2016 we aimed to protect foreign currency reserve and thanks to 8 billion USD foreign and 3.7 billion national investments, we have achieved to our aim. Unlike some oil abundant countries, SOFAZ provides a room for efficient use of resources. As Mr. President indicated, all activities implemented in Azerbaijan are appreciated highly by international financial institutions and Davos Economic Forum considers competitiveness of Azerbaijani economy on N37 globally, with more than 100.000 permanent jobs opened this year. As it was indicated by the President on 30 January, 2017, devoted to the implementation of 3rd year result of “State Program on Socio-economic Development of Regions of the Republic of Azerbaijan in between of 2014-2018”, 2004 is a historic period and achievement when this program has been launched. This state program has contributed substantially for enterpreneurship development within the agriculture sector. In 2016 The National Fund for Entrepreneurship Support has allocated 190 million manat for 2500 entrepreneurs. As a result, more than 8100 new job places has been opened. Around 74% of the loans targeted the regional parts. This year it is planned to allocate 150 million manat thanks to received interest payments from the previous loans. Within the mentioned State Program, in the last 13 years 1.4 million job places has been opened, in which 1 million is a permanent job. In order to increase employement in the

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area, cultivation of hazelnut has increased substantially. Within the efficient land-climate zone in 13 thousand areas, new hazelnut orchards have been plated. This means increase of current orchards by 37% within a year. One of the plant-growing products, in 2016 cultivation of corn has increased to 37 thousand ha within the country. The previous year only in Zagatala region (composed of 6 thousand ha), 33 thousand ton product has been achieved. Herein, in comparison with the previous year, the cultivation of corn has increased substantially; thus, on average 55 sentener of granular corn per ha has been acquired. In exception of feed production, the corn is useful in cultivation and production of other products. For example: CPC LLC operating in Oguz region achieved for 5.6 tons of glucose and other products in 2016 by utilization of 9.5 ton corn. Currently, entrpreneurs and farmers are exploring new areas for cultivation of corn. Only in 2016, individuals and entrepreneurs have cooperated and traded with partners globally – exported products to 116 countries and imported products from 177 countries. The trade turnover was 21650,8 million USD, including 13118,4 million USD in export and 8532,4 million USD in import; thus, achieved for trade surplus by 4586,0 million USD. The previous year, the amount of exported non-oil products were 1237,1 million USD and in comparison with 2015, it is less by 16.4% in real amounts. Herein, export of agriculture products deserves a special attention. In comparison with 2015, in 2016 among top products, export of fresh fruits increased by 23.9%, fresh vegetables by 49.5%, potato by 4.1%, metal tubes – 5.3 times, cotton cord – 11%; import of sugar decreased by 50.9%, vegetable oils – 56.3%, tea – 73.5%. Based on calculations of FAO of UN, in order to cover demand of food by people, it is important to cultivate additional 120 million ha land by 2050. In these reports, in addition to new areas, it is also important to mention development of new irrigation systems and efficient utilization of pastures. Thanks to allocation of resources from the reserve funds of the President of the Republic of Azerbaijan, in between of 2013 and 2016, 657 artesian wells were drilled within 524 settlements for providing access to water the cultivated lands where 1.2 million inhabitants in 40 cities and regions of the

Currently, in 24 regions of Azerbaijan, cotton growing is successfully progressing. During the previous year over 90 thousand cotton was grown in 457 villages within 24 regions. 4300 cotton farmers received more than 40 million manat and they will be receiving over 9 million subsidy. It is expected to have more than 250-500 thousand tons of cottong this year and the number is targeted even high for upcoming years. Only this year more than 70 thousand people were employed. The next year it is expected to increase by more than twofold, which will enable 150 thousand people engaged to cotton growing. 2016 was successful year in cultivation of cocoon. Within a year 70 tons were produced and in order to provide good foundation, around 1.5 million items of mulberry sapling were allocated to 37 regions for free. Shaki silk factory restored its production, hundreds of people got an access to jobs. In the upcoming 2-3 years it is expected to produce 1000 tons of cocoon. In the future it is expected to have wider coverage; thus, enable us to export ready products. For increasing efficiency of such works, the government has allocated 3.5 million manats. Even more, the government provides subsidy to fresh cocoon by 0.05 manat per kg for producers on the basis of “State Program Support to Sericulture” decree signed by the President of Azerbaijan. It must be also mentioned that according to the Presidential order, 5000 boxes of silkworm seed is expected to be imported and allocated for free among the relevant producers. Furthermore, tobacco growing will create new opportunities for our country. It is conducted in 14 regions. This year the production outcome doubled in comparison with the previos year, and in the near future it is expected to increase up to 10 thousand dry tobacco. Obviously, organization of subsidy from the government created additional stimulus for development of this sector. According to the Presidential Order of the Republic of Azerbaijan, in order to continue support to this area, governmental subsidy is allocated for tobbaco which are sold to processing plants; 0.05 manat for 1 kg of dry or 10 kg of wet tobocco. It should be also higlighted that currently cultivation of green leaves tea has increased by 75%, up to 1020 tons, based on result of governmental support. As the main export oriented

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country live. Fortunately, currently Azerbaijani population can afford locally cultivated agriculture and industrial products. We sustain ourselves with all vegetables and fruits by 100%, even export them. Furthermore, 97.9% for grapes, 90% for potatoes, 92.4% for meat (98% for chicken) and 99.7% for eggs are composed of local products. When we touch to industrial products, some products are even exported, including fruit and vegetable juices, goods produced by sugar and sugar related components. Based on additional measures of Presential Order of the Republic of Azerbaijan in stimulation of export of non-oil products, it is expected to get back 3% of exported amount indicated on customs declarations to entrepreneurs. Current worksDevelopment of industrial and agricultural parks are capturing attention within the country. Industrial parks and agroparks create an impact for development of agriculture, as well as production areas and implementation of state policies on innovations. Agriculture carries substantial weight for implementation of priority tasks, including contribution to export, competitiveness of goods, access to job market, attracting investments and other technologies. It is expected that such agro parks will create a room for development of small and medium entrepreneurship in the country, creation of new production lines, further development of non-oil sector and production of export oriented and competitive products.Today, one of the debatable issues among the people, including entrepreneurs, is Strategic Road Map document of the national economy and major sectors of the economy, which is signed by the President, H.E. Ilham Aliyev, on December 6, 2016. This document is unique in its importance and responding for upcoming requirements, as of political independence of Azerbaijan. During preparation of the Strategic Road Map, approximately 400 local and international experts have participated, around 150 meetings have been organized with 4000 people and more than 1000 recommendations have been provided. International Monetary Fund forecasted growth of Azerbaijani economy by 2-3%

until 2025. Obviously, this is not enough for the upcoming generations in providing access to job places and achieving targets. For this reason, during the cheap oil price period, with new foundation the economy should bring higher benefits. This is the main goal of “The Strategic Road Map for prospects of the national economy of the Republic of Azerbaijan”. This document which consists of 10 sections, 14 points and 11 parts, calculate short, medium and long-term goals. It covers not only development purposes, but also global trends in one direction, 360-degree diagnosis of economy and required investment performances. By implementing the objectives in Strategic Road Map, we will be able to achieve for short-term priorities, as well as lay down the foundations for medium and long-term economic development. The document provides opportunities for all factors causing economic development, as well as for communication and cooperation of local and international private sector representatives. In order to achieve for indicated successes, special role of Azerbaijan enterpreneurs should be noted. Our contributionToday, for development of non-oil sector, The National Confederation of Entrepreneurs (Employers') Organizations of Republic of Azerbaijan is building its business based on involvement of healthy forces among private sector representatives, expands the scope of services provided to entrepreneurs, holds trainings, seminars, conferences on modern day topics and regularly conducts the work on protection of rights and obligations of entrepreneurs. Taking into account the role of Azerbaijani enterpreneurs in development of national economy, 25th of April is marked as “Entrepreneurs Day” by the Order of the President of Republic of Azerbaijan, H.E. Ilham Aliyev. Entrepreneurs demonstrating loyalty to the President believe that under the leadership of H.E. Ilham Aliyev, a new phase of success within Azerbaijani Model of Development will ensure protection of the country from global crisis and become a ground for sustainable development being outstanding with its achievements.

Our guest’s biographyMr. Mammad Musayev is the President of the National Confederation of Entrepreneurs (Employers’) Organization of the Republic of Azerbaijan (ASK), as of 2009. In this position, he is providing support for improving business conditions and providing a platform of cooperation between the government and the business sector for sustainable development of the country, as well as, improving relationship of local entrepreneurs with the global market players and business representatives.Mr. Musayev carries successful experience in banking sector of Azerbaijan. He has started his banking career in 1976 and hold diverse positions in the last four decades. In 1987, he was awarded with “Bank Superior” badge by the USSR State Bank. Since 2001, he is the Chairman of the Management Board of “Aqrarkredit” CJS non-banking credit organization.Mr. Mammad Musayev received “Candidacy for Economics Science” degree.

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14 Issue 25

Active Engagement of FAO to Agricultural Development of Azerbaijan

Can you tell us about the FAO Azerbaijan Partnership?FAO appreciates the high-level relations established between the Government of Azerbaijan and FAO, and the strong support and contribution of the Ministry of Agriculture. This is important for joint programming and implementation in all agricultural sectors: crops, livestock, fisheries, and forestry.We also have collaboration with the Ministry of Ecology and Natural Resources in the forestry sector, which we are interested in further strengthening.FAO has been partnering with the Azerbaijan Amelioration and Water Management Joint Stock Company in the irrigation sector through investment planning and water management.I would like refer to milestone in our collaboration which is the establishment of the FAO Partnership and Liaison Office in 2015 with a Partnership Agreement (2026-2020).This is a new modality implemented in countries with both agricultural and financial potentials, and Azerbaijan is among the pioneer countries. Our Office is responsible for delivering technical assistance in expanded partnerships. In this regard, FAO has a strategic partnership with the Heydar Aliyev Foundation and with IDEA. We receive excellent support from Ms. Leyla Aliyeva, who is an FAO Goodwill Ambassador, in communicating FAO’s messages and overall assistance.

What is the state of agriculture in the world and in Azerbaijan?Trends in world agriculture showed signs of change since the start of the 21st century. For example, price hikes in 2008 and 2010 fueled changes in productivity, prices and trade flows. Declining R&D expenditures in developed countries during the last two or three decades slowed down increases in agricultural productivity.The sector has become a major player in the provision of energy, and the share of agricultural trading in financial markets has increased dramatically. A long-lasting trend of low agricultural commodity prices ended in 2008. Although the prices have declined since 2010, price levels are expected to remain higher than the pre-2008 long-term average.Developing countries started to increase their share in world agricultural commodity exports. The food bill of food-importing developing countries increased significantly as a result of commodity price hikes.Food security, sustainability and climate change adaptation are the main issues to be addressed in the next decades. Sustainability, increasing resilience to climate change effects and adaptation measures require not only global efforts, but serious regional and country-specific efforts.In Azerbaijan, the agricultural sector has retained its importance to the national economy. Although the share of agricultural value added has declined to 6 percent in 2015, the sector still provides employment to more than one third of the total workforce. The sector dominates the rural economy both in value added creation and provision of employment. The dualistic structure of production has all the basic traits of a developing economy with a dominant share of production concentrated in small holdings, co-existing with commercial producers.The performance of the agricultural sector is encouraging. According to USDA calculations, productivity in Azerbaijan’s agricultural sector reached a 2.0% average annual growth rate during the last decade, following negative growth rates

Melek CakmakFAO Representative and Head of Partnership and Liaison Office in Azerbaijan

©FAO/Alessandra Benedetti

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the seed sector, small ruminant production, and artificial insemination and others.There is no doubt that this partnership will strengthen Azerbaijan’s role as an emerging donor country in FAO and the world. I believe that Azerbaijan can offer development support to the region and the world where the country has accumulated expertise in partnering with FAO within the South-South Cooperation framework.

What are the priority issues for FAO in the world and in the Region?The overall priorities are set forth by the 2030 Agenda – the new internationally agreed set of sustainable development goals. From ending poverty and hunger to responding to climate change and sustaining our natural resources, food and agriculture lies at the heart of the 2030 Agenda.FAO will assist Azerbaijan in monitoring and reporting, particularly on its achievements vis-a-vis FAO-related goals. We will also take part in advocacy of the Sustainable Development Goals, or SDGs.As for the Europe and Central Asia region where Azerbaijan sits geographically, we will continue delivering FAO assistance in line with regional priorities identified with the member countries – focusing in particular on three areas: empowering smallholders and family farms, improving agrifood trade, and climate change.

What do you have planned for Azerbaijan on environmental issues and climate change?Azerbaijan and the international community took responsibility for a sustainable future by adopting the 2030 Agenda and signing the Paris Agreement on climate change.Hunger and poverty have to be eradicated by addressing climate change. That requires a profound transformation of agricultural systems without jeopardizing the capacity of the agriculture sector to meet the world’s food needs.Global food demand in 2050 is projected to increase by at least 60 percent above 2006 levels, driven by population

prior to 2000.However, the sector still needs to be given priority to reach its production potential and increase its contribution to the national economy. I am happy to see that the recently approved Road Map and Strategy position agriculture as one of the priority sectors.What is the state of food security and the priorities in Azerbaijan? According to FAO’s 2016 State of Food and Agriculture report, Azerbaijan has no food insecurity problem. FAO appreciates the Government’s success in achieving Millennium Development Goal target 1 on hunger. This came down from 1.8 million people in 1990-92 to a figure that is statistically insignificant, less than 5 percent.FAO’s current Country Programming Framework (2016-20) with Azerbaijan puts forward six priorities: 1) animal health and plant protection, including transboundary animal and plant disease control; 2) supporting investments in agriculture, food security and rural development; 3) capacity development, including agricultural education, research and extension; 4) strengthening the policy and institutional framework for agriculture and rural development; 5) improved crop, fisheries and livestock production; and 6) sustainable, equitable and efficient forestry, land and water resource management. FAO assistance should concentrate on these priorities.

What is the implementation status of the FAO-Azerbaijan Partnership Program?The major milestones in FAO-Azerbaijan collaboration came in 2015, with establishment of the FAO Partnership and Liaison Office and signing of the Partnership Programme for the 2016-2020 period. I am pleased to inform that we are proceeding with the implementation of the programme.We have great potentials and challenges before us. Transforming agriculture from subsistence to an export-oriented sector will require major changes, technical capacities, and appropriate policy and legal frameworks.Azerbaijan has been very successful in upgrading its agricultural infrastructure. We will continue to focus on development of technical capacities, institutional structuring and accompanying policies and regulatory frameworks in

©FAO24 May, 2015 Baku, Azerbaijan - FAO Director-General Jose Graziano da Silva meeting President of the Republic of Azerbaijan Ilham Aliyev during his Official Visit to Azerbaijan.

©FAO/Giulio Napolitano07 June 2015, Rome, Italy – FAO Director-General Jose’ Graziano da Silva awarding Azerbaijan. Special Event: Award Ceremony - Completing the MDG round – recognizing achievements in the fight against hunger. FAO Confer-ence, 39th session, FAO Headquarters (Plenary Hall).

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and income growth, as well as rapid urbanization. We know that diversification and better integration of food production systems into complex ecological processes create synergies with the natural habitat instead of depleting natural resources.Agroecology and sustainable intensification are examples of approaches that improve yields and build resilience through practices such as green manuring, nitrogen-fixing cover crops and sustainable soil management, and integration with agroforestry and animal production. More resilient agriculture sectors and intelligent investments in smallholder farms can deliver transformative change, and enhance the prospects and incomes of the world’s poorest while buffering them against the impacts of climate change.The Ministry of Agriculture and FAO are planning to work on “Climate-Smart Agriculture” in the near future. Currently, we have a project proposal on forestry inventory with the Ministry of Ecology and Natural Resources.In addition, our various projects take into consideration of future water scarcity and drought risk. We will continue introduction of innovative technologies and techniques such as water-saving irrigation systems in our organic agriculture project, and further dissemination of conservation agriculture techniques in Azerbaijan.

What do you mean by social protection and food security linkage?Food security has four major dimensions: food availability, access, utilization and stability. In the past, economic growth was the answer to all problems. Yet, we have been talking about inclusive growth and poverty reduction for some time now. Social protection systems have been critical in fostering progress towards hunger and poverty targets in a number of developing countries. Social protection systems directly contribute to the reduction of poverty, hunger and malnutrition by promoting income security and access to better nutrition, health care and education. By improving human capacities and mitigating the impacts of shocks, social protection fosters the ability of the poor to participate in growth through better access to employment. Social transfers can also contribute to

production via small investments in rural areas.

What is the role of FAO in implementation of the SDGs? How are you going to assist Azerbaijan?FAO is planning to support the Ministry of Agriculture, the Ministry of Ecology and Natural Resources, the Ministry of Economy as the Secretariat of the SDG Council as well as the State Statistics Committee on the identification of their needs related to 21 indicators for which FAO is custodian. FAO can provide technical assistance to strengthen the technical capacities related to monitoring and evaluation of SDG indicators within its mandate. In addition, FAO will act together with the UN Country Team to advocate for the SDGs locally. Ms. Leyla Aliyeva, FAO Goodwill Ambassador, has expressed interest in supporting FAO in the area of advocacy.

Can you please tell us about Antimicrobial Resistance (AMR) and what FAO is doing globally and for Azerbaijan?Increasing global Antimicrobial Resistance – or AMR – is a major threat to human and animal health. It endangers modern human and veterinary medicine and undermines the safety of our food and environment. Antimicrobials play a critical role in the treatment of diseases of farm animals (aquatic and terrestrial) and plants. Their use is essential to food security, to our well-being, and to animal welfare. However, the misuse of these drugs – associated with the emergence and spread of antimicrobial- resistant micro-organisms – places everyone at great risk.The risk appears particularly high in countries where legislation, regulatory surveillance and monitoring systems on the use of antimicrobials – and the prevention and control of antimicrobial resistance – are weak or inadequate.This is where FAO plays a key role in supporting governments, producers, traders and others to move towards the responsible use of antimicrobials in agriculture. The FAO Action Plan on AMR is designed to help reduce antimicrobial resistance in agricultural systems.

Our guest’s biographyMelek Cakmak a Turkish national, was named FAO Representative and head of FAO’s new Partnership and Liaison Office in Azerbaijan in April 2016. Cakmak had served FAO’s Subregional Office for Central Asia as a field programme support and monitoring officer since 2008. In addition to her duties in the field programme unit, she worked as a focal point to integrate gender considerations in FAO programmes and projects. She began her career with FAO as consultant to a project on community forestry. She played a major role in the establishment and development of the subregional office for Ankara while also serving as Assistant FAO Representative in Turkey during the period 2003-2008.She holds a B.A degree in economics from the Middle East Technical University, Ankara, Turkey, and an M.A degree in agricultural economics from Stanford University, USA where she also worked in both the sociology department and the registrar’s office.

@FAO/ Woman cooking (Sabina Rustamova)One FAO project in Azerbaijan works for equal access to rural services for women, and helps sensitize agricultural extension personnel to gender issues. The initiative is a three-way collaboration among Azerbaijan, Turkey and FAO.

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From Know-how Production Technologies to Higher Productivity

We would like to start with a general question. What is the position of agriculture against the world economic processes and situation of Azerbaijani companies nowadays?At present, during the global economic crisis, there is a need for further expansion of non-oil sector of Azerbaijan. Development of this sector (with large oil and gas capacity) has become very important issue. This is obviously an important issue for various reasons. Herein, the potential of agriculture sector in overall GDP of Azerbaijan is quite promising. For supporting economic development and diversification, "Azersun Holding" carries out wide range of reforms and activities in agricultural sector. Being Azerbaijani company, "Azersun Holding" is actively involved for import and export dynamics within the country.

Recently, lots of steps have been taken towards exporting products under “Made in Azerbaijan” brand. How do you see the position of "Azersun Holding" as a leading company?I would like to note that Azerbaijan has already turned from the importing country to the exporting country. This has been reflected in various sectors of agriculture. In line with these processes, “Azersun Holding” carries high reputation internationally – with its high-quality exported products. The company has taken key decisions and steps. On top of all, we should say that all products are processed with a care and comply to international standards.For this reason, as a leading company, "Azersun Holding" makes significant contributions to the export potential of the country. In recent years, the company consolidated its share in local and foreign markets on the basis of new factories and plants which are put into operation, as well as, innovative approaches with wide range of new products mix.

Based on your solid experience, how local companies should contribute towards the promotion of “Made in Azerbaijan” brand?For increasing local production and export of products, President of the Republic of Azerbaijan, H.E. Ilham Aliyev, signed a decree – with an intention of promoting “Made in Azerbaijan” brand in foreign markets. This has been a turning point for stimulating entrepreneurship climate in the country. However, there are lots of steps to bear in mind for the businesses. First of all, Azerbaijani products must be high quality in order to carry this name. This is the pre-requisite before the entire business process. Secondly, foreign markets and opportunities should be analysed and purposeful steps should be taken in accordance with demand. Third, in relevant businesses areas, international certificates for manufactured products should be obtained. Local businesses might find partner companies in host countries to manage the processes smoothly. Last, but not the least, national companies should actively participate at exhibitions and festivals held in foreign countries. This will enable them to introduce and present products to international audience.

Savash UzanAzersun Holding, CEO

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How would you evaluate the potential of Azerbaijani climate advantages in production of agricultural products?Favourable climatic conditions are one of the most important factors in development of agriculture sector. Azerbaijan is located in a favourable geography. This plays a major role in development of agro businesses, especially in terms of achieving higher productivity. At the same time, it is possible to grow products in different kinds and in huge ranges in diverse zones of the country. As it is known, the factories and plants of "Azersun Holding" continue to function successfully in different regions of the country. Herein, location in an effective climate zone(s) plays an important role.

Does “Azersun Holding” apply modern technologies in agricultural production; if yes, then how do you find relevant personnel?From the first day of operations, "Azersun Holding" showed great importance for use of modern technologies. For this reason, factories and plants within the Group of companies are equipped with know-how production technologies and techniques, as well as, constantly renewed."Azersun Holding” is also very sensitive to the choice of personnel. Therefore, we have started to cooperate closely with a number of vocational schools for preparing and training personnel in agriculture. Recruitment department within the Human Resources department carefully analyses job applications. Potential employees take an exam in relevant work fields. However, there is always a need for the personnel specialized in the field of agriculture. For this reason, we have an ongoing and sustainable training program targeting relevant personnel.

Among your agricultural products, could you please tell which are flagman and which are lagging behind of competition among foreign brands?Obviously, it is not so easy to keep superior position in global market, with an existence of tough competition. However, "Azersun Holding" gained consumers’ sympathy with its honest toil and high-quality products. Certainly, a consumer is always looking for innovation and diversity. Herein, consumer’s opinion and expectations are always important for us. We are always ready to compete. And the products we manufacture are competitive which meets international standards.In this respect, I do not think we are lagging behind of competition. However, being a pioneer in this field does not soothe us. On the contrary, it denotes that our responsibility is even great. Therefore, "Azersun Holding" is aware of this responsibility and will continue to offer new products and innovations to its consumers.

Biography of our guestMr. Savash Uzan is CEO of “Azersun Holding” in Azerbaijan since 2013 and member of the Board of Directors since 2008. Before joining to “Azersun Holding”, Mr. Uzan has been working for Wellington Marketing FZE Dubai as General Manager from 2002 till 2013 in commodities business. In between of 1994 and 1998 he was been working in different oversees positions with Intersun Group of Companies, including General Manager of Etsun in Moscow and GM ofIntersun group in Dubai. He joined to Azersun Trade and Distribution Company in 1998 as General Manager and worked until 2002. Mr. Savash Uzan is a graduate of Engineering faculty from Yildiz University, Istanbul.

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“The EU Market is Open to Azerbaijani Products…”, says Representative of EU Delegation to Azerbaijan

Your vision and current goals for development of agriculture sector in Azerbaijan and which support functions do you provide for development of local businesses or diversification of economy in the regions? One of the main objectives of EU cooperation projects in Azerbaijan is to support the diversification of the economy. Agricultural and rural development projects are the main instruments in supporting the rural economy and reducing the development gap between Baku and the regions.But we are not only working on classical rural development, such as productivity improvements of certain crops and supporting value-chains, but also on improving the legal and regulatory framework, as well as helping the Ministry of Education in improving the vocational education and training

system of the country, as agricultural specialists at all levels are needed that have been trained based on modern curricula.We have been working on the improvement of the food safety control system, by proposing new legislation and institutional structures, as well as, building laboratory capacity. The new economic roadmap and a recent presidential decree on the reform of the system in line with EU standards and the planned establishment of a food safety agency are promising developments that can pave the way for more Azerbaijani food exports to the EU market and a better food safety for Azerbaijani consumers at the same time. What are the main challenges Azerbaijani business people face during exporting to Europe? And what is the comparative advantage of Azerbaijani products in Europe?As you know, the EU is Azerbaijan’s most important trade partner, but the majority of Azerbaijani exports to the EU consists of oil and gas.The EU market is open to Azerbaijani products, but highly competitive.It is undisputed that some Azerbaijani agricultural products have a competitive advantage. According to a study commissioned by us that takes into account factors, such as international import and export prices and transport costs, the most competitive Azerbaijani products are mainly fruits and vegetables.However, in order to compete on the EU market, products, and in particular agricultural products have to fulfil certain quality and safety standards. Azerbaijan’s main agricultural export in terms of monetary value are hazelnuts, but regularly export batches are being rejected at EU borders because of food safety problems, in particular aflatoxins, a fungi

Dr. Olaf HeidelbachEuropean Union Delegation to Azerbaijan

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that is developing on the nuts due to wrong storage and transport conditions on the one hand and an inefficient food safety control system on the other hand. Fortunately, there is a political will to address the second challenge. The first challenge can be partly solved by capacity building along the value chain and better access to finance for farmers, processors and logistical companies to enable them to invest in better storage and transport infrastructure. The EU is ready to provide its support to address both challenges. What are the main challenges European businesses face when investing in Azerbaijan? Foreign direct investments, particularly in the non-oil sector are of utmost importance for Azerbaijan in diversifying its economy. According to a 2016 survey among 300 European Companies (100 responded) that are active in Azerbaijan, the top three priorities to be addressed by the government should be: 1) eliminating corruption and ensuring transparency, 2) improving tax and custom procedures, and 3) mitigating the skill mismatch on the labor market.With the Economic Roadmap that outlines the reforms until 2025 and beyond, the Government has prepared a strategy that could provide the basis for profound economic reforms in the years to come. However, there are questions that

remain unanswered and in particular it is not clear where the 27bn AZN investments that the reforms are estimated to cost will come from. The EU and other donors are ready to look into financing some of the actions as they are in line with the objectives of ongoing and future projects, but additional funding has to be attracted in order to implement the envisaged reforms.One important guiding principle that is missing in the roadmap is the rule of law, which is key for any future investor in the country, be it a multinational from Europe or a start-up from Azerbaijan.Another important step would be working towards WTO accession. This would be an important sign for foreign investors that the Government is ready to liberalize the economy and work towards international trade standards. Which support functions do you provide for stimulation of export of Azerbaijani economy?Besides the different sector support projects some of which I have mentioned above, we are concretely supporting the Ministry of Economy in preparing for the WTO accession and AZPROMO in export promotion. We also support through our Twinning instrument Azerbaijan's approximation to a wide range of EU standards and best practices. As a permanent measure potential exporters can consult the EU Export Helpdesk in case of questions regarding export requirements and procedures. We have also regular high-level and working-level discussions with Azerbaijan in the framework of the EU-AZ Sub-Committee on Trade and Investment and are also organizing regularly EU-AZ business fora. Last year we had about 500 participants and we are expecting the same number in June when our third event of this kind will take place.

Biography of our guestSince September, 2012, Dr. Olaf Heidelbach is the responsible program manager at the EU Delegation to Azerbaijan for the sectors agriculture/rural development and budget support operations/public financial management and has acted as Head of Cooperation.Before coming to Azerbaijan, Dr. Heidelbach has been working at the EU Delegation to the Kyrgyz Republic and has managed numerous projects and sector policy support programs in Central Asia on good governance, education, and rural development involving civil society and government institutions in between of 2007 and 2012. At the same time, he has been an Associate Professor lecturing risk management and analysis in the MBA Program of the American University of Central Asia in 2008 and 2009.He studied Agricultural Economics and Development Studies at the University of Hohenheim (Germany) and the Norwegian University of Life Sciences in As (Norway). In 2007 he defended his doctoral thesis on innovative risk management instruments in Kazakhstan's agricultural sector at the Martin Luther University in Halle (Saale), Germany.

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In Azerbaijan after the oil sector, the most important and high priority one is agriculture. All countries are engaged to agriculture. Around the world, about 50% of economically active population works in agriculture sector. Development of this sector is very important from the standpoint of food security, as well as social activism and having export-oriented product.9 out of 11 climatic zones do exist in our country and due to 54% of arable land, 38% of economically active population works in agriculture. After gaining the independence, with replacement of a system, carrying out agrarian reform with relevant legislation formed new property relations. In this case while developing their activities, landowners faced with challenges which delayed agriculture development. The revival and development of agrarian sector was taken to the fore as a matter of priority by the government and some State Programs have been adopted.In modern period, intensification of production is the main direction of economic development. Intensive development of planting area is an existence practice globally, with various tools, such as providing subsidies in terms of production and

export, tax incentives, low-interest loans, increase of demand by the government, creation of agro parks, import restrictions, and creation of cooperatives. Certain steps have been taken in each of these directions in Azerbaijan.Activities related to the Social-economic development of Regions of the Republic of Azerbaijan, and measures taken in this sector paved the way for development of agriculture in the country. Agricultural product producers are exempt from all types’ of taxes, with an exception of land tax. Farmers and entrepreneurs have access to concessional loans, seed, fertilizer, equipment and cattle breeding. At the same time, the government provides subsidies for fuel used in crop cultivation area.In particular, a number of adopted programs and orders in 2016, is of particular importance for development of agriculture. Subsidies are granted to producers of cotton, tobacco, silk, nuts and livestock breeding with the orders of President Ilham Aliyev, on the basis of state support programs for development of cotton-growing, tobacco-cultivation, sericulture and nut-growing and improvement of the breed of cattle.One of the issues that attracted further attention to our economy

The Current Situation and Development Perspectives of Agriculture in Azerbaijan

Suleyman KalashovChairman of the Board, Azerbaijan Micro-finance Association

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is establishment of agro parks. Agricultural parks play an important role in intensive production of agricultural products, transportation, and storage, as well as in organization of sales. Farmers are free from the concerns, such as Product sales organization, storage, reproduction by the setting up agro parks. At the same time, farmers in agricultural parks will be provided with scientific and technical support which will ultimately lead to an increase in productivity and earnings. Thus, along with an abundance of products in the market, it will enable creation of a competitive environment, increase of quality and artificial decline of prices. Also, opening of new jobs offer necessary facilities for reducing unemployment and welfare of the people living in regions. Khachmaz (Yalama) agro park was opened up, Shamkir and Khizi agro parks are expected to be launched soon.If we refer to Azerbaijan Republic State Statistical Committee reports, we can see that grain and potato crop production increased by 2 times, fruit and berry increased by 1.9 times, melons and wine-growing increased by 1.8 times, vegetables increased by 1.6 times, cotton production decreased by 2 times and tobacco plant decreased by 4.8 times in the last 15 years. In the production of livestock, meat and milk increased by 2 times, eggs increased by 3 times, wool production increased by 1.5 times.It is important to expand the profitable production in the country. First of all, it is needed to increase planting area of crops (cotton, tobacco, etc.) and their productivity. This area is cost-effective, as well as, high labour-intensive area. The second area is nut-growing development that Azerbaijan ranks 4th place in production and export. This area is more profitable and export-oriented than other sectors.Despite of implementation of all measures undertaken in 2016, the share of agriculture in GDP was only 5.6%, and this is very low figure. Today, only 1.3% of all exports account for agriculture, and for the potential of the country it is very low.Only 2.7% of the total loan portfolio of the country is accounted for agriculture. 85% of loans is allocated and invested in Baku. Considering the cities like Gandja and Sumgait, this figure reaches to 90%. As you can see, there are problems in loan investments in diversification of sectors and regions.For majority of economically active population living in

regions, more attention should be given to development of profitable areas and establishment of processing enterprises in the regions, such as cotton-growing, tobacco-cultivation, wine-growing, fruit-growing and vegetable-growing.The other issue is the challenge of people in access to financial resources in rural areas. Of course, this leads to lower production and productivity. Mainly there is a need for microcredit loans in the regions. Microfinance institutions play a major role in this topic. In our country, microfinance is still young, and it helps to low-income families, refugees, internally displaced people, individuals affected by the war, as well as small entrepreneurs for about 16 years. Microfinance along with development program of our country have been great contributors to overcome economic backwardness in the regions. For today, non bank credit organizations (NBCOs) are of special importance in development of microfinance.It is known that banks provide mainly large corporate loans, but NBCOS are mostly available for landowners and vulnerable population. They are conducive to the development of farms by providing people and small enterprises’ (enterprises or individuals) with access to financial resources in the regions. While small farms are developing, their production capacities expand; thus, regional economic development is accelerated, new jobs in the country are created and food security of the population is improved.For today, operation of 48 NBCOs, with 219 branches within the country, plays a special role in rural areas, especially in microfinance sector and financing small businesses. It should be noted that in 2003, only 2 NBCOs, with 18 branches, were operating in the country and their total credit portfolio was 35 million manat. However, as of 31 December, 2016 this indicator increased to 473.4 mln. manat.Depending on climatic conditions, agriculture is a complex and very risky area, and development of this area makes it necessary to carry out systematic and comprehensive measures. Despite of comprehensive development of agricultural sector within the State Programs, shortcomings during the execution created obstacles to provide rapid progress. In this regard, contribution of relevant executive bodies should be substantial. Only in this case our economy

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can further develop, be competitive and dynamic.The following factors are impeding the development of agriculture in the country.1. Lack of infrastructure (rural roads, drinking and economic value water system) in agriculture sector, especially in rural areas2. Existence of unused land areas. Low soil fertility of unused lands for a long time and ineffective use of lands3. Lack of enough financial resources and investment to agriculture4. Lack of qualified and experienced specialists in agriculture5. Low level of economic knowledge and skills of farmers. Violation of agro technical rules, unawareness about agricultural diseases and improper inspection against them6. Growing poor seed varieties in the regions of the country, and for this reason exporting them with high price7. Weak composition of livestock cattle breed and the measures for artificial insemination8. Weak setting for produce-process-sale value chain in agriculture9. Launching the establishment of cooperation in agriculture10. Small number of agro parks11. Inability to meet the modern day requirements of agricultural insurance mechanism12. Other factorsSolution of these problems will stimulate development of agriculture in Azerbaijan, implement a reliable supply of population with food products, as well as increase the competition in the economy, and stimulate exports.In rural areas, adequate level of social infrastructure (water, gas, electricity, communications, paved roads, etc.) is a key factor for people to work and live there. Expansion of irrigation in agriculture improves plant productivity and product quality. Special attention should be paid to allocation and investments of funds for agricultural soil fertility improvement.There is a need to increase the number of professional staff and grow high reproductive seed varieties in agriculture. Herein, enhancing capacity of universities involved to agriculture should be the most important issue. Regular courses and seminars should be delivered for farmers in order

to increase their knowledge and skills, follow agro technical rules and information about agricultural diseases.Establishment of agricultural cooperatives and joint cooperation system create an opportunity to application of modern agricultural technique and technologies; thus, productivity and profitability of production areas will increase. This will eventually support to solve the problems of unemployment in rural areas, use resources efficiently, achieve competitiveness, provide food security and strengthen production-processing-sales value chain.As agriculture is risky area, development of insurance mechanisms means mitigation of risks in this sector. This will obviously enable increase of lending to agriculture. As a result, the share of agriculture will increase in portfolio of banks, as well as other private companies.

Biography of our guestMr. Suleyman Kalashov is Chairman of the Board at Azerbaijan Micro-finance Association since 2010. At the same time, since 2002 he is Board member and Director of Strategic Planning, Marketing and International Relations department of “AgrarCredit”, non-bank credit organization. Mr. Kalashov carries strong professional experience in banking and agriculture sectors. In 1978-1995 he worked as economist at State Statistics Committee and head of its Agriculture Statistics Department. Later on, he joined to Agro-Industrial Bank (currently “AgrarCredit”) and worked in diverse leading positions. Mr. Kalashov carries masters degree in finance and statistics from the Azerbaijan State Economic University.

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Agriculture is one of the important industries in economy of Azerbaijan. Nowadays the main objectives of the agro-industrial policy of the government are to make this sector highly efficient and profitable, as well as to focus on exporting local agricultural products.With privatization of lands, emergence of a large number of landowners and availability of agricultural manufactures of different ownership forms, the management of the agricultural products’ production is getting more difficult. Since there are many cases, when land areas are misused or are not used at all, there is a need to take drastic measures. These will contribute to solution of this problem, which is not possible without establishing the governmental management system of land resources, based on the usage of results of land monitoring. Land monitoring is a system that tracks the state of land foundation for detecting the early changes, their evaluation, forecast, prevention and elimination of the results of negative processes.In recent years, the wide range of governmental and commercial organizations demonstrated interest in the usage of remote sensing capabilities for acquiring information, which is necessary to make timely and reasonable decisions in the field of agriculture. The global experience for more than 25 years confirms that space imagery provides opportunities not only for improvement of the agricultural statistics collection, increase of the accuracy, uniformity, objectivity and the frequency of observations, but also helps to develop the methods of operational control of seeding conditions and crop yield forecasting significantly. Governmental, as well as information-marketing services use remote sensing of agricultural areas in many countries (Canada, USA, EU countries, India, Japan, China, etc.). For example, MARS System (Monitoring of Agriculture with Remote Sensing)

providing services to the European Union, allows defining the seeding area and crop productivity of agricultural vegetation, starting from the country level and up to the individual farms. The results of the analysis are used for optimization of agricultural production management, as well as for control of production volume within the governmental programs supporting the agricultural manufactures. The similar system is applied by the Department of Agriculture of the USA.Modern remote sensing images obtained with the imaging equipment installed on various space vehicles, have the technical characteristics, which allow solving the wide range of tasks in the agricultural production, from borders mapping of the fields to the analysis of land usage level and the conditions of crop productivity on the large areas. This is possible due to the large coverage of satellite imageries, the presence of spectral channel in the diapason relevant to the spectral characteristics of plant cover and allowing producing the automated calculation of plant indexes, which reflects the current conditions of agricultural areas. The usage of products of different times makes it possible to track the dynamics of

The Perspectives of Remote Sensing Application Products for Increase of the Efficiency in Agriculture

Azersky satellite image of agricultural crops areas in Beylagan region, Azer-baijan

Elman AlaskarovSenior Remote Sensing SpecialistAzercosmos

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changes in plant cover and agro technical works, to identify the areas affected by natural disasters, as well as to solve many other problems.It is obvious that, not only manufactures and leaseholders of agricultural areas, but also the regional administrative offices and governmental bodies are interested in the methods of monitoring of agricultural areas. Monitoring of agricultural areas includes the systematic observation of the condition and the usage of crop rotation areas, the parameters of soil fertility, the changes of plant cover in the plowed fields, fallow lands, hayfields, pastures, etc.The next stage is the introduction about the precision agriculture. We may give the following definition of precision agriculture without going into deep scientific terminology: it is the management of crops’ productivity, with consideration of the local features of each field. In other words, this is the optimal management of plant production on each square meter in order to get maximum profit by saving the economic and natural resources. Modern agricultural equipment controlled with an on-board computer, devices for precise point positioning, technical system detecting the landscapes’ heterogeneity, yield accounting automatic systems, precise sensing controlled systems, and computer programs for displaying and analyzing of data are required.

Electronic maps of the fields are prepared based on the satellite images. The productivity of different areas is analyzed according to the results of harvest. The chemical composition of soil is studied by using special technologies. According to the results of these researches, the scientists make recommendations to farmers. It is important that they give detailed recommendations to manufacturers on saving, which they call as precise and optimal application of fertilizer in terms of environmental safety. So, the differences between remote sensing and ground-based researches are following: speed, accuracy and the ability to analyze what is happening

on the ground quickly. However, the ground-based researches still play an important role. Together with space monitoring, they allow to correlate the methods of crop recognition on the agricultural fields and their heterogeneity. It is possible to understand agro-technical condition of fields by using information about the changes of spectral brightness of plants during the vegetation period and index NDVI (Normalized Difference Vegetation Index), while decoding.Precision agriculture is introduced with the help of gradual mastering of qualitatively new agro-technologies based on highly effective and environmentally safe technical and agrochemical means.Constant monitoring on plant conditions plays primary role in precision agriculture. Timely detection and localization of areas with spoiled vegetation in the fields, which can be caused by various factors, such as damage of plants by pests, preponderance of perennial weeds, etc., is an important component of precision agriculture.For Azerbaijan, having own space segment, with the imaging devices that meet the requirements listed above, provides opportunity to receive information promptly, excluding the dependence on foreign data providers with value added prices.

Equipment devised with special installation for precision agriculture

NDVI image of the area

Author’s biographyMr. Elman Alaskarov is Senior Remote Sensing Specialist at Azercosmos OJSC. He has valuable experience in remote sensing, GIS and photogrammetry. Mr. Alaskarov is responsible for Azersky image processing and application. Before joining Azercosmos, he was a leading engineer and scientist in National Aero-cosmic Agency. He took part in implementation of various international projects as a local expert. Mr. Alaskarov carries Master of Technology in Remote Sensing & GIS, Andhra University, Visakhapatnam (India) and BA in Computer engineering from Azerbaijan Polytechnic Institute

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The President of the Republic of Azerbaijan, by his Order from 12 January 2015, announced 2015 the year of agriculture.1 The purpose was to stimulate and expedite further development of agricultural sector in Azerbaijan. In his numerous speeches, the President has raised importance of agricultural sector in Azerbaijan’s economy and in ensuring food security in Azerbaijan. According to the economic indicators, agricultural sector amounts more than 5% of GDP in Azerbaijan, which, according to World Bank data, is less than in several developing countries such as Turkey (8%), Malaysia (8.9%), China (9.1%) and others.2 This indicates possibility for further potential growth of this area’s proportion within Azerbaijan’s economy.In this article, we will cover the main steps made by Azerbaijani government to ensure agricultural development, global trends in agricultural sector and analysis of water issues in Azerbaijan and propositions on how these issues can be allocated.

AccomplishmentsDuring the last several years, Azerbaijani government has taken numerous steps in order to improve agricultural sector. This includes various tax incentives, state subsidies for farmers, adopting various legislative acts for further regulation of this sector and others. Strategic RoadmapOne of the main documents adopted is Strategic Roadmap on Production and Processing of Agricultural Products in the Republic of Azerbaijan (“Strategic Roadmap on Agriculture”).3 This Roadmap envisages main priorities/strategic goals for development of agricultural sector in Azerbaijan. These priorities include:

• Strengthening institutional potential to ensure sustainability of food security;

• Ensuring easier access to financing;• Development of science, educational and informational

1 Order of the President of the Republic of Azerbaijan, 12 January 20152 http://data.worldbank.org/indicator/NV.AGR.TOTL.ZS3 Approved by the Decree of the President of the Republic of Azerbaijan, dated 6 December 2016

consulting systems within the agricultural sector;• Ensuring easier access of agricultural products to

markets;• Other strategic goals.

Agricultural CooperationThe other important step by the Azerbaijani government was adoption of the Law “On Agricultural Cooperation”.4 The named Law focuses on establishing agricultural cooperatives with the purpose of stimulation of development of agricultural sector in Azerbaijan as well as to create large-scale agricultural enterprises and to increase competitiveness of agricultural products. The Law stipulates that cooperatives may be requested to produce and supply agricultural products for state (public) needs. It also states that municipalities shall adopt local and regional development programs for cooperatives. Cooperatives shall also benefit from certain stimulating measures, including low interest credit and leasing terms as well as from the creation of credit guarantee fund. Tax IncentivesYet another important step in favor of the agricultural sector in Azerbaijan was introduction of numerous amendments to the Tax Code of the Republic of Azerbaijan.It is important to note that in Azerbaijan individuals are exempt from personal income tax on the earnings made from the sale of agricultural products.5 Enterprises are exempt from profit tax from the earnings made on the sale of agricultural produce until 1 January 2019.6

Previously there was a significant ambiguity in the tax

4 Approved by the Decree of the Republic of Azerbaijan, dated 18 July 20165 Article 102.1.11 of the Tax Code6 Article 106.1.14 of the Tax Code

Efficient Water Supply as the Mainstream for the Development of the Agricultural Sector

Seymur NiftaliyevManager, Law Practice, KPMG

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treatment of the production and sale of the agricultural products as there were no clear-cut definitions for these in the Tax Code. The recent amendments introduced definition of a production of agricultural products which is defined as:

• feeding and breeding of animals and birds (including in a special farms, automated stall systems, etc.);

• acquisition of products (in its original form, without changing chemical composition and canning) from livestock;

• cultivation of plants. In the meantime, sale of agricultural products is defined as the sale of livestock, products obtained from livestock (in its original form, without changing its chemical composition), plant products (without changing their natural form or composition, without canning). Moreover, according to the recent amendments to the local tax legislation VAT shall be calculated from trade mark-up during retail sale of agricultural products manufactured in the Republic of Azerbaijan. To benefit from such privileges, manufacturers should keep a separate record of the agricultural products. Other stepsOver the past few years, Azerbaijan has signed several agreements with other countries in the area of agriculture. These include agreement with Israel on cooperation in the area of agriculture and memorandum of understanding with Qatar in relation to cooperation in the area of agriculture. Global trendsIn the era of globalization, trends in various sectors, including agriculture, may influence similar sectors in other countries. Azerbaijan is no exception. While improving separate areas of agricultural sector or amending the legal framework for this sector, global trends shall be taken into account and their deeper analysis will be helpful. Therefore, in order to better understand the potential future of agricultural sector, we need to get familiarized with global trends in this sector. According to the analysis of main drivers of global agriculture by KPMG, there are nine megatrends that will define the world’s agricultural landscape for future decades. These megatrends are:7

(1) Growing demand for basic agricultural productsThe main factor for such growth is an increase of world’s population, which is estimated to rise up to 10 billion people by 2050. Based on estimations and calculations, which includes income growth forecasts, dietary allowance and growth of population, the demand in food will grow by 60-70% by 2050.(2) Urbanization and growth of middle classIt is expected that an average GDP per capita will grow to USD 28,000 by 2040 from USD 14,000, according to OECD. Following such growth, population of developing countries will change its dietary patterns, which will include a greater share of grain crops, sugar, vegetables, meat and other. Therefore, total energy value of consumed

7 https://assets.kpmg.com/content/dam/kpmg/ru/pdf/2016/12/ru-en-services-for-agri-companies.pdf

food is expected to grow to 3000 kcal from 2619 kcal per person per day.(3) Technological digitalization of agricultural productionIt is expected that in the future, agricultural producers will use relevant data from satellites, drones, weather stations and etc. Agricultural robots will take greater role in product processing and packaging processes. Product processing will probably use nanotechnologies and 3D food printing.(4) Biotechnology as growth factorDevelopment of new technologies that will allow using fewer resources to increase agricultural production is one of the main trends in the present. In addition, genetic improvements will be crucial in order to boost the production, without implying the creation of genetically modified organisms – GMOs. (5) Limitation of land resourcesIntensive use of land in the last 50 years has resulted in degradation of soil, water and biological resource. Approximately 25% of global land used today is degraded. As a result, the price of land is increasing.(6) Growth of biofuel consumptionThe main driver for increase of consumption level of biofuel are the regulating measures taken by governments. Such regulations depend on the willingness of governments to reduce carbon dioxide emissions and create additional income for agricultural producers. It is estimated that demand for sugar cane and vegetable oil for bio fuel will

grow by 28% and 14% respectively.(7) GlobalizationIn the period of globalization, the level of competition rises, which implies that the competitors have to be big enough to compete on the global stage. Therefore, it is expected that such competition, including in agricultural sector, will further force agricultural producers to merge.(8) Climate changeAs a result of global warming, the number of extreme climatic events grows. This will possible create risks agricultural business including return on investment risks.(9) Restricted global tradeMost governments actively support their agricultural industry. In order to ensure the free trade, countries will need to enter into bilateral agreements on free trade with other countries, as WTO agreements do not effectively liberalize the trade among countries.

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establish irrigation associations (“IA”). In 2011, the new Irrigation Associations Law was enacted, which redefined the status of IAs from “local administration associations” to “public legal entities”, subjecting them to an administrative and technical audit and opening the possibility of the relevant state authority taking back the management of IAs and either exercising management itself or outsourcing it to the private sector by selling irrigation canals to private enterprises.13

Therefore, Azerbaijani government shall look at water sector (for agricultural purposes) as a separate industry, not as a supporting sub sector for other industries. ConclusionAs seen from the above, the Government of Azerbaijan has taken numerous steps in order to support and stimulate development of agricultural sector. Among others, one of the main steps is approval of Strategic Roadmap on Agriculture. This Roadmap includes strategic goals and priority steps until 2025 and strategic view on the further period. Notwithstanding to the undertaken steps, water issues need more attention and requires institutional changes. Therefore, further involvement of private sector in this area accepting water issues as a separate industry will be helpful for addressing water matters in the agricultural area, as irrigation is a vital component of agricultural production in most developing countries, where use of technology is more limited than in developed countries.In the meantime, the global trends need to be carefully analyzed. Azerbaijan has an ambition of becoming one of the leading countries in agricultural area, therefore the main trends within agriculture and related spheres need to be tracked.

13 Law on Irrigation Association, Republic of Turkey

Author’s biographyMr. Seymur Niftaliyev is a Manager at the Law Practice of KPMG in Azerbaijan. He is currently involved in advising clients with legal assistance on corporate, banking, agricultural, FATCA, migration, contract and other areas. Seymur was also involved in development of various internal policies for leading companies, including conflict of interests, procurement and other policies.Mr. Niftaliyev holds LL.M. in International Commercial Law from City University London and Bachelor degree in International Public Law from Baku State University.

Water issuesWater resources are vital for sustainability and development of agricultural industry. According to OECD, farming accounts for approximately 70% of water used today.8 Currently, effective management of water resources remains a major challenge for most of countries. The major concerns in relation to water management are:9

• increasing competition for access to water;• decreasing water quality;• need to expand access to safe drinking water;• deteriorating groundwater supplies;• threat from global warming.

Considering the vital role the water resources play for agriculture industry, in order to achieve further development of agricultural sector in Azerbaijan, the closer look into water issues shall be ensured. As such, water issues were not missed in the Strategic Roadmap on Agriculture. Improvement of water supply and creation of mechanisms for sustainable use of water resources were included as priorities within the named roadmap.Government’s support with regards to water issues has intensified in the later years, as new artesian/sub artesian wells were ordered by the President to be built.10

Water relations are regulated with number of legislative acts, including the Water Code of the Republic of Azerbaijan (“Water Code”). According to the Water Code, ownership over water objects can be state, municipal and private.11 Although, the Water Code allows private ownership of water objects, there are limitations with regards to such ownership. More specifically, the Water Code states “Small water reservoirs, situated on the private land areas, not having hydraulic connection with the other water objects and flows, can be given in private ownership…”12, which limits participation of private businesses in the wider range of water relations, such as ownership of larger water objects. For the purposes of this article, one of the proposed ways to develop agricultural sector is to establish water industry as a business, which may be regulated by the government through OJSC Azerbaijan Melioration and Water Administration. It will determine relationship between businesses and consumers, ensure fair distribution of water to farmers and other industries. Involvement of private businesses to the broader water relationship, granting these businesses with more access to water objects will, probably, add competition to this sector and will enable easier access for farmers and small agriculture companies to water resources. In addition, private businesses will be interested in effective delivery of water to the end consumer with the minimum loss or leakage, as such leakages will result in financial losses for these businesses. Moreover, involvement of private sector will promote innovation and will result in use of new technologies within the water sector. Similar process is currently implemented in Turkey, where, similar to Azerbaijan, water consumers

8 http://www.oecd.org/environment/wateruseinagriculture.htm9 http://www.oecd.org/environment/resources/Council-Recommendation-on-water.pdf10 http://president.az/articles/1717411 Article 15, the Water Code12 Article 14, the Water Code

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measures than ever in order to ensure the sustainable supply of agricultural products to the world’s population.Local and global trends necessitate a well-designed strategic development plan for the agricultural sector, and taxation of this sector is an inseparable part of this plan, which must be effectively implemented in order to achieve positive outcomes in this conventional, yet extremely vital sector for humanity and the world economy.

Major agricultural tax reforms undertaken in AzerbaijanThe decision of bringing the agricultural sector under the umbrella of tax exemptions dates back to 2001. According to the official studies done by the Ministry of Economy, as a result of the exemptions from 2001 until 2016 farmers managed to save AZN 1.4 billion, hence the agricultural sector has grown by 4.4 times5. By comparing the total value of agricultural goods produced until 2001 with the indicators of 2016, we can see that the value of agricultural products was just 1.3 billion until 2001; however, that figure equaled AZN 5 billion in 20166. Until 2000 there was a decreasing trend in the size of agricultural lands, after the year 2000 such lands were expanded and in 2015 agricultural lands were 8.4 percent larger than in the 1990s.

Current level of taxation of the agricul-tural sector in AzerbaijanThe Tax Code of the Republic of Azerbaijan envisages sev-eral agriculture-related provisions. Most of these provisions stipulate temporary and permanent exemptions covering a major proportion of the agricultural sector. As mentioned before, the exemptions related to the taxation of agriculture started in 2001, however, the highlight of all changes is the latest amendment made to the Tax Code on 23 December 2016 by the Azerbaijani Parliament. According to magnitude and impact, those changes are the most substantial since the adoption of the Tax Code in 2000. Before the recent changes, there were several provisions that were not clearly defined. The most crucial one was the understanding of what consti-tutes “producers of agricultural goods”. The missing definition of such an important term under the Tax Code led to a num-ber disputed between taxpayers and the authorities. A clear definition of the “producers of agricultural goods” brought a lot of clarity as VAT exemptions are applied to the sale of ag-ricultural goods by the producers of such agricultural goods.The sale of agricultural goods is also explained with a clear definition under the Tax Code. Individuals’ income from the

5 The Strategic Road Map for the manufacture and processing of agricultural products in Azerbaijan6 The Strategic Road Map for the manufacture and processing of agricultural products in Azerbaijan

Agriculture is commonly rated as the hardest to tax of all hard-to-tax sectors. The difficulty of taxing agriculture is of relatively minor concern in developed countries, where agriculture accounts for a minor share of the GDP1. However, it does matter for countries like Azerbaijan where agriculture still preservers its importance for the domestic economy. The share of agricultural products in the GDP of Azerbaijan decreased from 16.1 percent to 5.5 percent during the rise of the oil sector in 2000-2010. However, it increased from 5.5 percent to 6.2 percent between the years of 2010-20152. Moreover, between the years of 2005-2015 Azerbaijan experienced a significant increase in the importation of agricultural products3. Currently, Azerbaijan has been experiencing a declining trend with regard to the importation of agricultural products after 2015.What do all these figures and facts tell us? The significant rise in the importation of agricultural products to Azerbaijan tells us about the increasing consumer demand for agricultural products. This shows that Azerbaijan has promising potential for the further development of its agricultural sector. However, factors supporting the importance of agriculture for Azerbaijan are not limited to statistical figures only. The geographical location and climate of Azerbaijan allows the country to develop various sub-sectors of agriculture. The need for a more intent approach regarding not only taxation, but also all aspects of agriculture is prevalent all over the world. According to the Food and Agriculture Organization of the United Nations, the world population will increase up to 9.3 billion by 2050, for which there will be a need to increase food production by 70 percent4. The increasing focus of the world community on food security urges us to take more effective

1 Where agriculture is negatively taxed on balance; the net subsidy to agriculture in the 30 countries of the OECD amounts to 3.9 percent of tax revenues (OECD Agricultural Outlook and Revenue Statistics). The share of tax revenue sourced from agriculture is not known, but is unlikely to exceed 3.9 percent, implying negative net taxation of agriculture.2 The Strategic Road Map for the manufacture and processing of agricultural products in Azerbaijan3 The Strategic Road Map for the manufacture and processing of agricultural products in Azerbaijan4 Food and Agriculture Organisation of the United Nations

Importance of Agriculture in Azerbaijan’s Economy

Araz BorchaliTax Consultant, Deloitte Azerbaijan

Javid MammadovTax Senior, Deloitte Azerbaijan

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direct production of agricultural goods is also exempt from taxation. In addition, legal entities engaged in the production of agricultural goods are exempt from taxation of their income from such activities until 2019. Currently, the VAT base during the retail sale of agricultural goods is considered as a mark-up amount. Previously, such base was the full price of the ag-ricultural goods, which used to lead to an extra burden on the end consumers of those products. In order to achieve the de-sired level of improvement of the agricultural sector in Azer-baijan, exemptions on domestic sale are not enough as the usage of the latest technologies and other related materials is necessary to ensure the complex development of this sector.Importation and sale of the following are also exempt from VAT:

• Various pedigree livestock• Seeds and seedlings• Mineral fertilizers and pesticides• Equipment used for seed breeding, poultry farming and

beekeeping, as well as laboratory equipment and equip-ment for cleaning, sorting or calibration of seeds, grains and dry beans

• Veterinary drugs for disease prevention, diagnosis and treatment of agricultural animals and birds

• Irrigation systems and other installations, machinery, equipment and technology for the direct use of agricul-tural designation

Currently, the Tax Code requires the retailers of agricultural goods produced in Azerbaijan to carry a separate record of such products. In case of non-compliance with this require-ment, the VAT amount will be calculated from the total turn-over of the sale of such products instead of the mark-up amount. Such a requirement intends to prevent the misuse of preferential treatment for domestically produced agricultural products to be applied to imported agricultural products.Agricultural and fertile land and facilities are essential parts of a successful agricultural sector in any country. Encouraging the use of such lands and properties is another part of the story. To ensure this, the Tax Code also envisages five years of exemption from property tax starting from 2014 for legal en-tities and individuals engaged in the production of agricultural goods for property used solely for such activities. The owners of agricultural lands are subject to this preferential treatment under the Tax Code.Besides profit taxpayers, simplified taxpayers’ revenue from the sale of agricultural products produced directly by them is not considered as a taxable base until 2019. This is a good sign of the will to enlarge the coverage of exemption to as many taxpayers as possible that are engaged in the produc-tion and sale of agricultural goods.

Analysis of current taxation of the agri-cultural sector in AzerbaijanUndoubtedly, current exemptions have a positive effect on the development of agriculture and the share of this sector in the country’s economy. However, there are several shortcomings of the provisions related to such tax exemptions and their ad-ministration and regulation by the tax authorities. Below we highlight some of them:• Currently, the earlier discussed exemptions on the pro-

duction of agricultural goods are not applicable to the taxpayers processing the agricultural products. This in turn creates a certain number of obstacles for the or-ganization of agriculture-related industry and its further development. Taxpayers engaged in the processing of agricultural goods are producing final goods from the processed products and putting them on wholesale. Hence, they become an important and inseparable part of the agricultural production chain and contribute to the country’s economy. It would be expedient to apply the current tax exemptions (except VAT: please see below) to enterprises engaged in the processing and wholesale of agricultural products for a certain period. This would have a robust and positive effect on the development of the agricultural production.

• As mentioned previously, the turnover of the sale of ag-ricultural goods directly produced by producers of agri-cultural products is exempt from VAT. This disables the producers to offset the VAT amount paid in relation to the raw materials and equipment purchased that is nec-essary for the production of goods. Consequently, the producers loose the VAT amount and this leads to a rise in product price. It would be more beneficial to apply VAT at zero percent to the turnover of the producers or pro-cessors of agricultural goods from the wholesale of such products. This would allow taxpayers to offset the above-mentioned VAT amount and would result in lower prices, a better competitive atmosphere, and higher consumer purchasing power parity.

• Registration and organisation of documentation by the producers of agricultural goods and especially by indi-viduals are not at the desired level. Currently, the major-ity of subjects engaged in the production of agricultural products do not have proper registration in Azerbaijan. According to the State Statistical Committee and Min-istry of Agriculture, there are approximately 890k own-ers of agricultural lands. The number of applicants for state subsidies for fuel and engine oil is 370k. Moreover, only 1,300 legal entities and 1,500 private entrepreneurs are registered for agricultural purposes. This in turn cre-ates diffculties for processeors and sellers of agricultural products in conducting proper record keeping and leads to tax incompliance We should not consider our mission completed by granting tax exemptions to this sector. Proper documentation and record keeping are the areas that need more stringent supervision and control.

On top of all these issues, we need to assess the effective-ness of the undertaken measures for the agricultural sector in specifics and for the whole country’s economy in general. The previously mentioned exemptions are effective in the short-term. However, in the long-term such exemptions may lead to certain problems for the domestic economy and state

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financing. The favored treatment of agricultural production in contrast with non-agricultural production may contribute to sectoral and inter-sectoral distortions. The current level of the wide range of exemptions for the agricultural sector makes it attractive for potential investors. However, this might lead to over-investment in the agricultural sector and divert a sig-nificant proportion of domestic finance from other potentially beneficial sectors for the Azerbaijani economy.Paradoxically, the current exemptions for the agricultural sec-tor may also reduce the incentives for owners of agricultural lands for higher profitability through the effective use of such lands. That is to say, the absence of any tax burden on agricul-tural landowners reduces their sense of responsibility to earn more profit by ensuring better use of their lands. Because of this, agricultural lands are not used effectively enough. These are the issues that we could potentially face in the long-term.In fact, the government encountered these potential scenar-ios and enacted the majority of such exemptions on a tem-porary basis. Nevertheless, the agricultural sector is one of the most challenging sectors of the economy in terms of the difficulty of ensuring supervision over its taxation and regula-tion at the desired level. It is most likely, after the end of the exemption periods or after the implementation of preferential taxation for this sector, that supervision and regulation of this sector’s taxation will be very difficult and will require higher administrative costs to be undertaken by the tax authorities. Furthermore, the costs to farmers and producers of agricultur-al goods will significantly increase. In case of tax exemption prolongation, the above-mentioned “over-investment”, “lack of incentives for more profit” and other negative issues may affect the economy.Considering all of these matters, it is possible to apply al-ternative taxation mechanisms such as “presumptive taxa-tion”, which is widely used in international practice. Presump-tive taxation is employed primarily when specific groups of taxpayers are hard to tax and administrative resources are scarce. Presumptive taxation has traditionally been used as a way to obtain some tax revenue from taxpayers who might otherwise go completely untaxed. These systems calculate the tax base via easy-to-obtain indicators or other methods, instead of relying on taxpayer self-assessment. This method of taxation can accomplish two things: it can reduce the cost of compliance by the taxpayer as its tax base is easier to calculate than that of the personal income tax or profit tax, and once the system is determined it reduces the costs of tax administration. Presumptive taxation is often regarded as a stepping-stone to a regular tax system, such that a taxpayer would be subject to this simplified regime for a limited period of time and then become part of a regular tax system.The usual approach of presumptive taxation in agriculture is to base the tax on the area of land and its quality. An estimate is made of the normal income that can be earned, given the productivity of that type of land, average costs of production, and the prices of agricultural products. The fixed single agri-cultural tax replaced all taxes previously paid by agricultural producers–profit tax, land tax, value added tax, contributions to the Social Protection Fund, contributions to the Pension Fund, and any other taxes. The presumptive tax rates should be comparable to those under the regular regime of taxation. Incomparability will create distortions between and within dif-ferent sectors of the economy. The tax can be paid monthly/quarterly, but the payment rates vary on a quarterly basis in

order to take into account seasonal variations in cash flow and liquidity in agriculture. The current application of tax ex-emptions and taxation of agricultural lands, depending on their proper use for agricultural purposes under the regular taxation system, is conceptually very similar to the “presump-tive taxation” mechanism. However, the application of a well-designed presumptive taxation system can bring the following benefits:

• Unlike the regular system of taxation, the single agricul-tural tax leads to simplification of taxation, bookkeeping, and reporting;

• The introduction of presumptive taxation may effectively reduce the tax burden on agriculture as it coincides with a reduction in tax rates;

• The introduction of presumptive taxation may initially in-crease government tax revenues despite the associated reduction in the tax burden, because increased compli-ance will probably outweigh the reduction in tax rates. However, total tax revenues will likely decline in the long-run, especially if resources shift from other sectors into agriculture in order to take advantage of lower taxation there;

• The primary goal of most governments that introduce presumptive taxation is to broaden the country’s tax base. However, presumptive taxation may undermine this goal if taxpayers remain in presumptive taxation re-gimes indefinitely or regress from regular taxation to pre-sumptive taxation. Thus, this goal may be accomplished by imposing a time limit regarding presumptive taxation of agriculture.

In the later stages of the development of a country’s econo-my, and depending on the level of readiness of agricultural goods’ producers, a gradual shift from presumptive taxation to regular taxation may be undertaken.

Author’s biographyJavid Mammadov is a Senior Consultant at the Tax & Legal department of Deloitte Azerbaijan. He has been with Deloitte since April 2012 and have more than 5 years experience on a variety of tax and appropriate business issues.Javid is specializing in tax review and advisory services provided to both multinational and local companies. He has been in-charge of a large number of tax reviews covering corporate income tax, withholding taxes, payroll taxes, income tax and social contributions. He has advised clients on international taxation, production sharing agreements, host government agreements and tax due diligence investigations.He holds a bachelor and master degree in Finance. Currently he is pursuing PhD degree on “Domestic Fiscal Policy and Public Finance” at Azerbaijan State University of Economics.Araz Borchali is a Tax Consultant at Deloitte Azerbaijan. He joined Deloitte in 2015. Araz has experience in advising local and multinational companies on different direct, indirect and individual tax issues. He was involved in performing tax reviews covering corporate income tax, withholding taxes, payroll taxes, income and social contributions.Araz graduated with a Bachelor of Arts in International Relations from Azerbaijan University of Languages. He received his first Master degree from ADA University in Diplomacy and International Affairs and MSc in International Political Economy from London School of Economics and Political Science.

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After a long month full of meetings, I thought to have some short 3-days break in one of the mountainous, but economically quite active villages of Azerbaijan. Being a passionate researcher, during such trips I usually spend a lot of time talking to people and asking questions about their lifestyle, businesses, etc. And this getaway of mine was not exclusion: ethnography mode was turned on.So on the first day I coupled my morning workout with a talk with one family and one local grocery store manager. And besides other things, I learned that the family was selling bulk milk without preparing any value-added product out of laziness, and they told me that almost all (except maybe 5-10 families) are not involved into production of cheese, butter, etc. Likewise the store manager was expectedly not selling any local dairy product: even yoghurt was a packed one brought from one of the plants located in Baku.One could say that such a behavior of households may have some economic grounds and pure laziness is only an additional driving factor. Taking this into account I am bringing some figures on gate prices: bulk milk is sold to collectors at 0.5 manats per liter, yoghurt is priced approximately 2 manats per liter, cheese and sour cream are offered at 6 and 10 manats per kilo, respectively, and finally retail price of butter is a minimum of 10 manats per kilo as well. I understand that there are other inputs too (like electricity, water, own time, and others), but nevertheless I do tend to think that for local households production and sales of processed products is more an attractive business model as opposed to bulk milk trading. So then I thought: “What other business models could also be applied in villages of Azerbaijan? What are the success cases in other countries that could be used as a benchmark?”And below you may see some of the discovered ideas:

• Bee-friendly goods: check www.thehivebox.com, which offers a monthly subscription for a box, containing honey, beeswax candles, handmade soap and beauty products, artisan candy and bee-themed paper or decor.

• Healthy nutrition: a chain of stores offering healthy nutrition delivered in a fast manner directly from region. Idea is especially grounded by rather low prices for village households’ products (as compared with imported ones and some factory-produced local ones), as well as witnessed increase of importance of health and sports.

• Rent of animals: here the models are quite different, for instance, one can rent a cow (instead of buying and keeping it) and sell its milk. And a very interesting alternative to it was offered by Swiss farmers: for a fee of 385 USD (level of 2010) for 4-months-season subscribers get special rates for produced cheese, access to farm, certificate of sponsorship, photo with rented cow, etc. Similar approach is offered by Rent Mother Nature (www.rentmothernature.com) from Vermont, which at a lease price of 59.95 USD offers a guaranteed minimum yield of three 8 oz. wheels of Cheddar cheese.

• Private club approach: a farm in Pennsylvania called “Miller’s Organic Farm” (http://www.millersorganicfarm.com/) offers long list of its own and its partners’ organic products at special prices to members of its Club. Only members are allowed to buy them and avail themselves of various delivery options: weekly, bi-weekly, monthly, etc.

• Agricultural tourism: a potentially great direction for Azerbaijan in terms of agricultural development. For instance, in Spain they offer such agritourism activities as learning how to feed animals, milk the cows, collect chicken eggs, look after the horses, water the plants, grow organic products, make wine, cheese, honey, yoghurt, natural decorations and aromatic oils (see http://www.agroturismonavarra.org/en/).

Each and every idea may appear to be great. Just research it. And certainly there are a number of useful research methods that may be of help: desk research, concept tests, pricing optimization, market potential understanding, export potential understanding, segmentation, positioning, advertisement and promotion research, brand switching, loyalty-based segmentation, package tests, and many others.

Value-added Agricultural Products: Run Away From Laziness

Ashraf HajiyevResearch Director and Partner,SIAR Research and Consulting Group

Author’s biographyMr. Ashraf Hajiyev is Research Director and Partner at SIAR Research and Consulting Group. He is responsible for various research projects and development of SIAR activities in Azerbaijan, Georgia, Central Asia, Moldova, Russia and Ukraine. As Research Director, Ashraf is strongly focused on quality of research and bringing international methodologies and techniques. His experience includes retail audit, studies covering FMCG, tourism and hospitality, services, finance, construction, durables, healthcare, automotive, social and healthcare research, and other sectors. Since 2015 Ashraf has also been elected to be a country representative for ESOMAR (World Association of Research Professionals) in Azerbaijan. Mr. Hajiyev obtained BA on Economical Cybernetics from Baku State University (2001) and MA in Economics from the Central European University (2003).

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Climate change (also called global warming) is not a new concept in the Earth’s history. There is a climate cycle that occurred 7 times during the last 650,000 years, which lead to the ice age that is afterwards succeeded by the recovery warming. These changes in the climate occur due to the alterations in the amount of the received solar energy by the Earth, and actually one of these cycles 7,000 years ago lead to the creation of human civilization (NASA, 2017).However, global warming that we have been witnessing since last century is getting intense 10 times faster than the average recovery warming processes, because of the increased amount of anthropogenic greenhouse gases (GHGs) in the atmosphere, namely carbon dioxide, methane and nitrous oxide.

A tremendous increase in the level of carbon dioxide can be seen in the above graph, which lead to the rise of sea level, shrinking of the ice sheets, ocean acidification and extreme weather events, such as tsunami, intense rainfalls and so on.Unfortunately, the issue with the rising level of emissions is not the only problem the humanity faces today. The population of the world will increase from 7 billion to 9 billion by 2050. This means, food demand of the earth will increase as well leading to more demand for dairy, meat, fruit and vegetables. Though, the world’s leading international organizations have been trying to find the solution for the indicated problems since last century, hence not much success have been acquired in this direction on a global scale. At the same time, protecting the environment is crucial and issues like global warming, resource scarcity, soil degradation and loss of biodiversity

should be addressed without compromising food security for the earth population. Therefore, Sustainable Agriculture has been put forward within the frame of Sustainable Development concept to help policy makers, businesses to ensure permanent food supply and preserve the environment at the same time.

Agriculture and Climate ChangeAccording to World Resources Institute, agriculture is the world’s second-largest emitter after the energy sector, generating 6 billion tonnes of GHGs each year (Russell, 2014). In 2014, the third-largest contributor to climate change after fuel combustion was agriculture that was responsible for 9.9% of GHG emissions in the EU (Eurostat, 2016). The picture below demonstrates different sources of emissions in the farming, the amount of which depends on the type of products, methods of farming and the environment.

Paris AgreementAs climate change is not the problem of one country only, but of the whole world, it was necessary to include all nations in the process to improve the current situation. For this purpose, the Paris Agreement was adopted in 2015 at the 21st Conference of the Parties of the United Nations Framework Convention on Climate Change, which is going to deal with GHGs mitigation. Each party is required to prepare Nationally Determined Contributions (NDCs) and regularly report on the

Sustainable Agriculture as a Solution to Climate Change

Nargiz KarimovaPartner, Assurance services, Ernst & Young Azerbaijan

Gunel FarajovaSenior consultant, Ernst & Young Azerbaijan

Orkhan Rajabov Manager, Ernst & Young Azerbaijan

Source: NASA, 2017

Source: NASA, 2017

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amount of generated emissions in the country and undertaken actions to reduce them (UNFCC, 2017). According to the submitted NDCs, 118 countries included agriculture as one of the sectors where they are planning to reduce the amount of produced emissions (CCAFS, 2016).Azerbaijan also ratified the Paris Agreement on January 9, 2017 and according to NDC our target is to reduce the level of GHG emissions by 35% by 2030, 1990 being a base year. Mitigation activities are going to take place in various sectors, including waste, transport, energy, oil and gas sectors and agricultural.Agricultural sector was included in Azerbaijan’s NDC as well. The State Statistical Committee of the Republic of Azerbaijan reveals that since 2005, the second largest contributor after the energy sector to climate change has been agriculture sector. According to submitted NDCs, mitigation actions in this sector are going to be “collecting methane gas from manure of livestock and poultry, use of alternative sources of energy and modern technologies”.

Sustainable Development Goals – Goal#2Sustainable Development Goals (SDGs), which were adopt-ed in 2015 and officially came into force in 2016, also cover the topic of agriculture. Goal #2 is “End hunger, achieve food security and improved nutrition and promote sustainable ag-riculture”. The problem that is associated with the agriculture is not only its adverse effects on climate change, but also the fact that the current way of producing food is not capable of providing nutrition for all 7.5 billion people on the earth and

currently, 795 million people in the world are malnourished. The first target of SDG #2 is to ensure access to food by all people by 2030, which can only be achieved through sustain-able agriculture (UN, 2015).

The term ‘food security’ means that ev-ery person is able to have enough food to sustain healthy and active lifestyle.

Sustainable AgricultureAccording to the National Sustainable Agriculture Information Service in the USA, “sustainable agriculture is one that pro-duces abundant food without depleting the earth’s resources or polluting its environment”.However, without considering environmental, social and eco-nomic dimensions at the same time, or focusing only on one of them, it is not possible to obtain the desired results. Sus-tainable agriculture tries to develop a self-sustaining system, which will not harm the environment, will be capable of pro-ducing more healthy food and will support rural communities. Industrialization that took place in agriculture in 20th centurydeteriorated soil and water, decreased biodiversity, which is essential for food security, and left considerable number of small farmers without a job. Therefore, environmentalists, ag-ricultural scientists and farmers have begun to find new ways of producing food that will give people an opportunity to have a healthy diet and will not leave future generations undernour-ished (Earles, 2005).Different programmes are developed by different international organizations to help countries to achieve sustainability in ag-riculture. Food and Agriculture Organization of the UN (FAO) has pub-lished several documents that are aimed to help countries on their way to sustainable agriculture. “Building a common vision for sustainable food and agriculture” is the set of prin-ciples and approaches for policy makers that are based on FAO’s long experience in developing sustainability concepts in this sphere. Another document, which is “Sustainability As-sessment for Food and Agriculture Systems Guidelines”, was published in 2014 and its aim is to introduce assessment pro-cesses of impact of food and agriculture operations on people and the environment (FAO, 2014).For instance, the UN Global Compact in partnership with Min-istry of Food, Agriculture and Husbandry, local Turkish uni-versities and some other associations introduced Sustainable Agriculture Programme for Turkey. The targets of this pro-gramme is to enhance the quality management and resource-efficiency, sustainably enlarge supply area of locally grown products and support farmer families. Sustainable farmers from all over the world have already be-gun to adopt agricultural practices that improve soil health, reduce water and energy use and decrease amount of pollut-ants generated by the farm. Some of them even went further and established new sustainable trend like “Permaculture” that turned out to be not only very promising self-sustaining system, but also a lifestyle.

Source: The State Statistical Committee of the Republic of Azerbaijan, 2015

Source: IPCC, 2014

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Permaculture As was stated by the father of permaculture Bill Mollison, “Permaculture is a philosophy of working with, rather than against nature; of protracted and thoughtful observation rath-er than protracted and thoughtless labor; of looking at plants and animals in all their functions, rather than treating any area as a single-product system”. Concept of permaculture was developed in 1978 and implies reproduction of models and elements, which can be observed in the nature, in so-cial, agricultural and even economic systems. By following the principles of permaculture, people are able to contribute to the sustainable future of the planet and get more out of life (Permaculture, 2014). One of the most famous practitioners of permaculture is Geoff Lawton, for whom permaculture is already a lifestyle and he constantly promotes this idea by educating other people and designing permaculture projects in different countries. He has established Permaculture Research Institute where everyone can find related courses, articles about innovations in perma-culture and interact with other people around the world who are also interested in this subject.

“You can solve all the world’s problems in a garden.” Geoff Lawton

Potential of sustainable agriculture in AzerbaijanTaking into account current economic situation in the country and in the world, sustainable agriculture seems to be an aus-picious solution to decrease dependency on oil sector, reduce expenses, as sustainable agriculture implies minimum use of fossil fuels, and increase exports of agricultural products.In 2016, FAO in cooperation with the government of the Re-public of Azerbaijan developed Country Programming Frame-work (CPF) 2016-2020. The programme focuses on the na-tional development plans and strategies as well as supports FAO’s regional priorities. It is planned to cooperate with the national stakeholders who are interested in promotion of sus-tainable agriculture and development of rural areas. The CPF also includes recommendations on implementation, monitor-ing and reporting stages and already conducted cost-benefit analysis. Moreover, with the technical support from FAO, the Ministry of Environment and Natural Resources prepared “National Forestry Program 2015-2030” that is targeted on the promotion of sustainable development of the country’s forests and introduction of the methods to coordinate the for-est management policies and government policy instruments (FAO, 2016). Growing producing products in a sustainable manner by applying innovative solutions in agriculture and raising awareness about it not only in Azerbaijan but in other countries as well, will increase market demand for agricultural products from Azerbaijan, as people all over the world are be-coming more concerned about the environmental impact gen-erated by the products they consume. Moreover, supporting sustainable agriculture will secure stable income of people who work in this sector, decrease internal migration, which results in degeneration of small towns, and strengthen rural

communities. Not to mention that abandonment of pesticides and reduction in fuel usage will improve environmental condi-tions in the country and health of the population.

ConclusionComing from all above said, it is clear that, to be able to pro-vide food security and preserve the planet for next genera-tions, we must think about sustainable agriculture that em-braces innovative technologies, as being one of the solutions that can bring us to the solution of current socio-economic-environmental problems. As it was mentioned by Bill Mollison: “Though the problems of the world are increasingly complex,the solutions remain embarrassingly simple”.

ReferencesAgriculture’s prominence in the INDCs: data and maps. (2016). CCAFS.Climate change evidence: How do we know? (2017). NASA. Retrieved March 12, 2017, from https://climate.nasa.gov/evidence/Earles, R. (2005). Sustainable Agriculture: an Introduction. The National Sustainable Agriculture InformationService.FAO. (2014). Building a Common Vision for Sustainable Food and Agriculture.FAO. (2014). Sustainability Assessment for Food and Agriculture Systems Guide-lines.FAO. (2016). Country Programming Framework for Azerbaijan 2016-2020.Greenhouse gas emission statistics. (2016). Eurostat.Hunger and food security - United Nations Sustainable Development. (n.d.). UN.Information to the United Nations Framework Convention on Climate Change (UN-FCCC) on the IntendedNationally Determined Contribution (INDC) of the Republic of Azerbaijan.Kowitt, B. (2016). Big Agriculture Gets Its Sh*t Together. FORTUNE Knowledge Group.Russell, S. (2014). Everything You Need to Know About Agricultural Emissions. World Resources Institute.United Nations Framework Convention on Climate Change. (2017). Status of ratifica-tion. Retrieved March12, 2017, from http://unfccc.int/paris_agreement/items/9485.phpWhat is permaculture? (2014). Retrieved March 12, 2017, fromhttps://www.permaculture.co.uk/what-is-permaculture

Author’s biographyNargiz Karimova is an assurance partner at EY Baku office. She joined EY in 2002. Nargiz holds Bachelor and Master degreein International Economic Relations from Azerbaijan State Economic University. She has more than thirteen years of work experience at EY Baku practice, with focus on IFRS, US GAAP and Azerbaijani statutory, and PSA audits. Nar-giz is a member of the Association of Certified Chartered Ac-countants.Orkhan Rajabov leads Cleantech and Sustainability Ser-vices in Azerbaijan and specializes in sustainability reporting assurance and advisory. Orkhan holds a Bachelor degree in Accounting and Audit and an MBA in Finance from Azerbaijan State Economic University as well as MSc in Finance from Durham University. Orkhan specializes in sustainability stra-tegic advisory and sustainability reporting assurance and ad-visory. He is taking an active part in forming the professional sustainability community in Azerbaijan.Gunel Farajova is a senior consultant at Cleantech and Sus-tainability services in EY Azerbaijan. She holds Bachelor and Master degree with distinction in European Studies from Azer-baijan University of Languages, and MBA from Universityof Durham. Gunel specializes in waste management / Ex-tended Producer Responsibility and sustainability reporting assurance and advisory.

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Ganja Agribusiness Association (GABA) started implementation of the Smart Azerbaijani Farm (SAF) project in July 2016. Funded by the United States Agency for International Development (USAID), SAF target areas are the Western Economic Region (Ganja-Gazakh) administrative districts. These districts are known for its agricultural production, their farming practices, and cultural traditions throughout the country.SAF’s overall goal is to achieve sustainable agricultural development of the Western Economic Region through

Modern Technology and Innovations are Applied in Agriculture Sector

the improvement of value chain and modern technology application and innovations. This will eliminate dependence to the oil sector and ensure the expansion of the agricultural sector, where 40 percent of the population is employed. To identify SAF project goals and objectives, GABA conducted a situation and location analysis of the target region. USAID’s objectives and the goals outlined in Azerbaijani government’s programs were taken into consideration as well:

• The Azerbaijan State Program on Regional Socio-economic Development for 2014-2018 advocates the reduction of regional disparities through investments in agricultural processing units, as well as in new technologies; it further propagates export-oriented production along with dissemination of required international standards.

• The project is fully aligned to the non-oil sector development and food security component of the "Azerbaijan 2020: Vision to the Future" Development Concept that is to ensure sustainable economic development and increase

Vugar BabayevChairman of Board of Directors ofGanja Agribusiness Association

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income-generating opportunities for the poorest strata of the population.

• The adopted Law on Cooperatives will introduce cooperative elements into agriculture. The Law regulates the creation of cooperatives and associations (for production, marketing, and credit) in order to stimulate the agricultural sector and defines their legal, organizational, and economic status. Basic principles are voluntary membership, as well as open, transparent, and democratic governance.

• The implementation of the 2016-2020 Strategic Road Map includes nine strategic objectives that are expected to be met for ensuring a favorable environment in terms of achieving the establishment of competitive agricultural production and processing sector in the country. These strategic objectives strengthen sustainable food security, increase the capacity of agricultural value chain production, market development in the agricultural sector, and ensure easy access to resources and finance, improve the quality of education in agriculture, develop a consulting and information services system, develop market infrastructure. This will ensure easy market access for producers, the establishment of mechanisms for sustainable use of natural resources, improving the business environment in the agricultural sector and rural prosperity.

Herein, each of the 12 established model farms in the target economic region during 2017-2019 will be provided with computer and internet access, an innovative portable laboratory to conduct soil, plant and water analysis. Moreover, farmers will be able to join GABA’s available SMS and HOT-LINE Extension Service system.Meanwhile, SAF farms will be supplied with all the modern equipment, such as automatically controlled drip irrigation system, sprayer for plant protection, aeration system, shading system, thermometer, humidity indicator, trellis, heating and humidity regulation system, the automated pest and disease control system, and honey extractor, special protective clothing, smoker, winter temperature control cover

and frames for beekeeping farms.The products of the 12 model farms will be diverse due to soil and climatic condition, production experience and traditional analysis of the target region: open field and greenhouse vegetable growing farm models, apple and berry (raspberry) farm models and beekeeping (honey and other beekeeping products) farm model.In general, SAF project will work to achieve the following results:

• 12 Smart farm models will be developed through the application of modern technologies and innovations, and two of them will be managed by women;

• Sustainable agricultural productivity and high income will be provided by establishing 45 agricultural producer groups, including 3-5 women in each;g

• Reliable and sustainable agricultural product marketing will be provided through the development of new sales channels;

• Support farmer access to input suppliers and service providers through the development of a workable value chain model.

Training will be conducted for the project participants in order to achieve the above-mentioned project results. Farmers will be provided with consulting services by project experts, and meetings will be held to exchange experiences.Direct project beneficiaries include 2,500 active farmers, producers, processors, suppliers, and trade organizations. Activities include trainings, demonstration field days and rendered consulting services. It is also expected to have 22,500 community members as final beneficiaries of the project, including agricultural suppliers and retailers, group members, demonstration field day participants and family members.As a result of transfer innovation and ICT application in the agricultural sector, producer groups will be developed in accordance with their production sphere. It will deepen sustainable relationships among suppliers, producers, traders, processing enterprises, and financial institutions. Therefore, we are sure that SAF project will make great contributions to the sustainable development of the agricultural sector in the western region of Azerbaijan, as well as that the experience of applying modern technologies and innovations in agriculture will be successfully utilized in other regions of the country.

Author’s biographyDr. Vugar Babayev is the Chairman of Ganja Agribusiness Association since 2011 and Head of Innovations department at Azerbaijan National Academy of Sciences as of 2014. At the same time, he carries over 10 years of experience as Board member at various magazines, including "Perm Agrarian Journal" (Russia), "Annals of Agrarian Science" (Georgia) and "Organic Farming" (Azerbaijan). Previously, Mr. Babayev worked in leading position at various non-bank credit organizations, various civil society organizations and cooperated with the World Bank. He carries a degree from Azerbaijan Agriculture Academy on Economy and Management, as well as PhD on agrarian sciences.

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Azerbaijan, being one of the world’s oldest oil-producing countries and a crucial oil and gas supplier in the Caspian Sea region, makes wide-scale use of diverse workforce. Job sites that used to be run by a single company nowadays often have dozens of smaller contractors with sometimes over 100 workers each performing the work, which significantly adds complexity.Furthermore, a range of additional statutory restrictions and applicable laws imposed specifically on the oil and gas industry, justified by its dangerous nature and difficult living conditions on offshore sites make it more vulnerable to noncompliance incidents and related sanctions. The state labour inspection continuously examines potential HSE, compensation, rest and working regime violations associated with oil and gas operations and applies corresponding enforcement actions all throughout the country.Adding to that, international standards adopted by Azerbaijan with the aim to ensure a safe and healthy working environment and to guarantee the employees’ adequate rest and leisure time complement the local laws and regulations.The combination of these factors do not always ease the companies’ business, but instead cause practical challenges for their operational performance, which in turn can adversely affect their financial bottom line.The following analysis provides a concise but comprehensive overview of the restrictions and challenges faced by employers in Azerbaijan, specifically in the oil and gas industry and draws conclusions regarding the need of modernization of labour legislation.

Regular working hoursBeing a member of the International Labour Organization, Azerbaijan has mandated a maximum on regular hours (pre-overtime), defining it in the amount of 40 hours per week1.Several foreign countries have a proviso for allowing an extension of the 40 hours’ regular limit by: collective bargaining (Mozambique), upon employee’s request (Senegal), for specific industry (Cameroon), self-determination for managerial and supervisory employees (Japan), offshore

1 C047 - Forty-Hour Week Convention, 1935 (No. 47)

employees (Paraguay)2.Azerbaijani laws do not provide any kind of temporary or permanent exemptions for extension of such limits, but admit the cumulative calculation, which is originally contemplated for employees who are not able to leave their work places due to long distance or continuity of operations. The metrics can be different depending on the calculation cycle –record period and average monthly working limits, adopted annually by the relevant state authority3.

Overtime workSeeking the most flexible legislation governing overtime issues, one can see that the metrics vary considerably across countries. The member states of the European Union, which adjusted their legal regulations on total working time (regular and overtime) to EU directive limit them either by legislation (i.e. Scandinavian and Southern European countries), or by collective bargaining (i.e. Germany and Denmark). In the United Kingdom, limits are determined at the company level; in Central Europe, mainly as a consequence of the socialist legacy, overtime is still regulated to a large extent by state legislation. In contrast, the federal law in the United States contains no legal restriction on the total amount of overtime work allowed. Norway defines that overtime may be up to 48 hours per week in average of 8 weeks, but only if there is an exceptional and time-limited need4. Legislation in Kazakhstan is much more rigid in this regard, stipulating that overtime cannot be more than 2 hours per day, 12 hours per month and 120 hours per year5.In Azerbaijan, the limits are governed by legislation, which mandates maximum 4 hours of overtime within two consecutive working days.The procedural rules, which employers must undergo before making use of overtime, also vary from country to country. In Azerbaijan, employers do not need to get approval from the government authority, (which is the case in Norway) but are restricted to request overtime work only under exceptional circumstances i.e. urgent works resulting from unforeseen circumstances.It is noteworthy that local laws do not distinguish between overtime that the employee is obliged to perform and that over which they can exercise a choice. At the national level,

2 Working time laws: A global perspective - Findings from the ILO’s Conditions of Work and Em-ployment Database, DeirdreMcCann Chapter 1- Normal hours limit3 Article 96 of the Azerbaijani Labour Code4 Working time laws: A global perspective - Findings from the ILO’s Conditions of Work and Em-ployment Database, DeirdreMcCann Chapter 2 – Overtime Work5 Article 78 of the Kazakhstani Labour Code

Working Time Challenges in Oil & Gas Industry

Bahar KavuzovaSenior Legal Consultant,PwC Azerbaijan

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all employees have a right to refuse to work overtime and their consent is required for each occurrence of overtime work. In extreme examples, this could theoretically lead to potential industrial accidents, e.g. in case of pipe burst or pump malfunction all the employees are free to leave the workplace if it is the end of working day, even if the employer asks them to cooperate for prevention of industrial accident.A more practical solution in this regard is implemented in Kazakhstan where the regulations state that overtime work is mandatory and non-rejectable in case of force majeure involving a danger or accident, but voluntary for production or business needs6.There is also a specific release from overtime for employees working under extra difficult and hazardous conditions, pregnant women, a parent taking care of a child younger than 3 years of age, as well as employees below 18 years of age. Employees working under difficult and hazardous conditions are also subject to a specific limitation, which is up to 2 hours within two consecutive days.Despite the international standards providing optional compensation of overtime either by remuneration, or (and) equivalent rest period, the local laws strictly prohibit replacement of overtime with extra time off. Nevertheless, the remuneration rules stipulate only minimums, they do not restrict employer to define higher rates that may be negotiated upon conclusion of the employment contract.Although the Azerbaijani laws set the rates for calculation, they are silent about compensatory timing, which is in practice usually made at the end of each month together with monthly salary. The local laws also lack provisions regulating overtime hours in other specific contexts, such as coinciding with night shifts, performed on weekly rest days, public holidays and

6 Article 77 of the Kazakhstani Labour Code

during business trips that in our opinion should be mandated separately by application of specific rates.Thus, under the weekly limit of 40 hours and normal working conditions, the maximum duration of weekly working hours including overtime should not exceed 52 hours (5 working day per week) or 54 hours (6 working days per week) per week.

Rest periodsInternational standards provide for a weekly rest day(s) to secure a substantial rest period during the working week and ensure employees’ work-life balance7. Local legislation requires the employer to provide employees with a meal break and uninterrupted rest with period of at least 12 consecutive hours per day.However, whilst comparing local and foreign labour laws, one can see that the Azerbaijani legislation lacks specifics in this regard such as:

• maximum (Estonia – one hour, Russia – two hours, Guinea Bissau – three hours) and minimum (Kazakhstan, Norway – 30 minutes) duration of meal break;

• minimum shift length for entitlement to rest breaks (Norway - 30 minutes’ break for every 5.5 hours);

• longer breaks when daily hours are extended (Japan and Finland);

• extended breaks for exceptional industries (mining, drilling, retail) and

• division of breaks by leaving their determination to the discretion of employer8.

The picture regarding weekly rest time in Azerbaijan is relatively brighter, since the legislation allows its adjustment to the chosen working regime e.g. one day per 6 days’ working week, two days per 5 days’ working week, and the number of days stipulated by shift schedule. Herewith, the local laws do not define specific days to be chosen as working (as it is in Spain either Saturday, or Monday) or not to be chosen as working (i.e. Friday in UAE), leaving it open to the discretion of parties. Generally, these days are Saturday and Sunday.Many countries, including Azerbaijan, allow urgent work and continuous production (in certain industries, such as retail, catering, telecommunication, transportation and other service providers) to be performed during the weekly rest days. In this case, the employer provides compensation in addition to the ordinary salary for the work performed on a weekly rest day. Such compensation can take the form of a pay premium, compensatory rest or both9.

Production Sharing AgreementsProduction Sharing Agreement, being a regulator of the legal and commercial relationship between the government of Azerbaijan and international oil companies, reckons for implementation of regulatory framework based on the best

7 C014 - Weekly Rest (Industry) Convention, 1921 (No. 14)8 Working time laws: A global perspective - Findings from the ILO’s Conditions of Work and Em-ployment Database, DeirdreMcCann Chapter 4 – Rest periods9 Article 164 of the Azerbaijani Labour Code

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experience and judgment of employers, which are familiar with international oil and gas operations. Therefore, it does not prescribe any specific clauses with regard to employment issues and leaves the determination of such frames to the discretion of employer. Summarizing the above, one can conclude that the labour laws of Azerbaijan by comparison is very protective of employee’s rights on one hand and on the other hand, it does provide employers with enough flexibility to adjust existing labour law requirements to the operational needs. Despite this, there is an abundance of violations and penalties for employers turning up during the state labour inspections, of which a significant portion can be attributed to the lack of clarity and misunderstanding rather than intentional wrongdoing. It proves that there is a number of ambiguous provisions to be clarified and gaps to be fixed by legislators

in order to catch up with the rapid rhythm of developments related to oil and gas industry. The practical challenges and lack of clarity sometimes induce employers to bypass statutory requirements by underreporting hours, labeling the employees as independent contractors, determining flat-day-rate payments, exclusion “off the clock” hours etc. which in fact do not deprive the employees of the right to recover the owing compensation. Therefore, in our opinion, a reform adding a separate chapter describing particularities of oilfield employment to the Labour Code should be conducted. Furthermore, it is crucial for employers to consider best practices in addition in order to prevent violations and penalties resulting from lack of clarity or misinterpretation.

10 Labour Code of the Azerbaijan Republic11 Labour Code of the Kazakhstan Republic12 Labour Code of the Russian Federation13 Act relating to working environment, working hours and employment protection, etc. (Norwegian Working Environment Act)14 Employment Rights Act and Regulation 4 of the Working Time Regulations15 Fair Labour Standards Act

COUNTRY REGULAR WORKING

HOURS

MINIMUM BREAK MAXIMUM OVERTIME REGIME applicable to

oilfield

Azerbaijan108 hours a day 40 hours a week Not specified 4 hours within two days

Cumulative calculation: 12

hours a day Duration of shift

is not specified

Kazakhstan1140 hours a week 30 minutes

2 hours a day

12 hours a month

120 hours a year

Cumulative calculation: 12

hours a day 15 or 30 day’s

shift

Russia12 40 hours a week 30 minutes Cumulative calculation: 12

hours a day 30 day’s shift

Norway13

9 hours per day 40 hours

per week

(a number of exemptions

applies)

30 minutes

20 hours a week, 50 hours within 4 weeks (a number of exemptions applies)

Normal working hours may be extended up to 12,5 hours per day and 50 hours per week as long as, on average over a reference period of 52 weeks, they do not exceed nine hours per day and 40 hours per week

United Kingdom14 40 hours a week 20 minute breaks for each

6 hours

8 hours per week Cumulative calculation: 12

hours a day 14 day’s shift

USA15 40 hours a week 30 minutes No limitation

No US labour laws directly

address the issue of 12-

hour work shifts. There is

no limit on work hours, but

employees must receive

overtime pay after 40 hours

per week.

Author’s biographyBahar Kavuzova is leading employment and migration practice in PwC Azerbaijan. She carries seven years’ experience in both public and private sectors two of which are associated with American Bar Association. Bahar holds a bachelor degree in Law from Baku State University and currently studying Business Law at Chicago Kent Colleague of Law.

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Established in 1996, AmCham is com-posed of over 250 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 corpora-tions. This includes leading companies in Energy, Banking, ICT, Legislative/ Financial Consulting, Professional Ser-vices, Education, Real Estate Develop-ment, 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.amchamaz.org

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.amchamaz.org. 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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Tax Conference on “Together towards Transparency” Tax Conference on “Together towards Transparency” jointly organized by American Chamber of Commerce in Azerbaijan (AmCham) and the Ministry of Taxes took on March 10, 2017.Mrs. Natavan Mammadova, Executive Director of American Chamber of Commerce opened the event and expressed her satisfaction at constructive dialogue with state authorities of the Republic of Azerbaijan, and emphasized the conference as an another stark example in this direction. She also stated that Chamber includes over 250 local and foreign companies and represents 80% of investments in the country. Mrs. Mammadova added that it was a pleasure to observe positive changes at national level which will strengthen economic sustainability to external shocks, provide more competitive and transparent business environment and as a result, give incessant support to the Government of Azerbaijan in terms of reforms towards more powerful, diversified, and export-oriented economy.Chairman of the Standing Commission of the Milli Mejlis (Parliament) on Economic Policy, Industry, and Entrepreneurship, Mr. Ziyad Samadzade, touched on the issues of flexible tax system set up in Azerbaijan and the

respective reforms. Fundamental changes have been introduced to the Tax Code in order to enhance the tax legislation. Speaking about on-going measures for systematic development, he stated the prominence of tax system for growing the economy and fostering the might of national taxation. Academician Z. Samadzade also emphasized that tax reforms will lead to growing scale of business activities and improving tax collection rate in the non-oil sector.Mr. Fazil Mammadov, Minister of Taxes and 1st rank state tax councillor, welcomed the participants and extended his gratitude for their contribution to economic growth in Azerbaijan. He emphasized that the Ministry of Taxes places a great emphasis on discussions with public associations of entrepreneurs for the purpose of developing the tax policy and tax administration, providing new services to taxpayers, improving the business climate as a whole, as well as considering views and proposals by local and foreign businesses while making changes to legislation. Attracting the attention to traditional nature of tax conferences conjunctly organized by AmCham and Minister of Taxes, he said that such events play an exceptional part in promoting the partnership between businesses and tax authorities and raising the taxpayers’ compliance.According to Mr. Mammadov, relationship between the Ministry of Taxes and AmCham is build on principles of effective partnership. AmCham member companies are

Business Events

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entities exchanged their views at the panel discussions.Mr. Natig Shirinov, General Director of Department on Analysis and Control Over Tax Risks of the Ministry of Taxes (“tax service: Reforms and targets”), CEO of Azersun Holding Mr. Savash Uzan and Tax Director of Deloitte & Touche Mr. Emil Garayev (“Transparent taxation accounting”), Country Manager of Mastercard Mr. Alper Merich and Senior Tax Manager of EY Azerbaijan Mr. Zaur Gurbanov (“Cashless payments and their benefits”), BP’s Regional Tax and Customs Manager Mr. Jeyhun Mammadov and PwC’s Country Managing Partner Mr. Movlan Pashayev (“Advance tax ruling and Voluntary compliance”) made presentations on respective topics during the panel on “Role of tax service in reforms” moderated by Mr. Bakhtiyar Aslanbayli, Vice President of BP for Communications, External Affairs and Strategy for Azerbaijan-Georgia-Turkey region.At the next panel moderated by the Head of the Representative Office at Societe Generale Banking Group in Azerbaijan and Kazakhstan Ms. Teyba Guliyeva, Advisor to Minister of Taxes – General Director of Taxpayers’ Service and Transparent Tax Partnership Department Mr. Alakbar Mammadov (“Tax services as locomotive in ongoing tax reforms”), CEO of Rabitabank Mr. Elchin Gadimov and Partner, Head of Tax and Legal Department of KPMG in Azerbaijan Mr. Mushfig Aliyev (“Implication of tax regulation on financial sector”),

General Manager of Tax and Legal services of “Baker Tilly Azerbaijan” Mr. Azar Akbarov (“Transfer pricing”), Director of Legal Services of “BDO Azerbaijan” Mr. Sabit Abdullayev (“Prevention of tax evasion: practical challenges”) made further tax-related presentations.At the conclusion of the conference, the Ministry of Taxes, Chamber of Auditors of the Republic of Azerbaijan, “Deloitte & Touche”, “EY Azerbaijan”, “PwC Azerbaijan”, and “KPMG Azerbaijan” signed a Memorandum of Understanding.The event was attended by AmCham members, representatives of diplomatic corps, senior officials of the Ministry of Taxes, and representatives of the mass media.

extensively represented in growing economic life of our country and play an important role in this regard.He also stressed that name of tax conference as “Towards the transparency” which symbolizes modern challenges and the position of the Ministry with its intention in maintaining transparent and cooperative relations with business entities for developing the national business climate and improving the tax legislation.Speaking about the reforms for upgrading and transforming organizational structure of tax administration, Mr. Fazil Mammadov stated that current tax administration has been built on a modern vision resting upon two significant principles. The first and foremost is the principle of “individual approach”. The main task before the tax administration is to create relevant approaches with respect to taxpayers falling under each category. The basic approach is separating the working principles of small and medium-sized enterprises (SMEs) from those of large enterprises, as well as taxpayers with special regime, individually approaching to each business group, ensuring proper distribution of fiscal and administrative burden. Furthermore, “establishing and reinforcing partnership relations” with business entities is another important principle and he added that although the process has already been launched for several years, new approach focuses on strengthening these relations on specific basis, precise determination of taxpayers’ liabilities and delivery of modern and innovative taxpayer services.Stating his satisfaction with the level of cooperation with the Ministry of Taxes, President of AmCham Mr. Nuran Kerimov underscored that development of tax legislation which will contribute to growth of national business environment is in the best interest of AmCham. As a result of existing cooperation with the Ministry of Taxes, for more than 6 years, the Chamber has been conducting conferences on tax partnership, holding discussions on important taxation-related topics and putting forward specific proposals. Mr. Kerimov stated that the aim of today’s meeting is to discuss issues of reforms in national tax system, changes to the Tax Code, development of partnership relations between business structures and tax authorities and so forth. Later on, representatives of business

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First ever AmCham Azerbaijan Trade Mission to the USA 2017On March 1-2, 2017 the first ever AmCham Azerbaijan Trade Mission to the USA 2017 successfully took place. It was organized by the American Chamber of Commerce in Azerbaijan (AmCham) in cooperation with the United States-Azerbaijan Chamber of Commerce (USACC) in juncture with the Annual Conference on U.S.-Azerbaijan relations: Looking Ahead: Diplomacy, Business, Trade & Investment held in Washington D.C.

The event brought together 38 distinguished speakers, over 250 participants representing American and Azerbaijani government agencies and companies, leading American think-tanks, international organizations, America’s Fortune 500 companies, large investment banks and funds as well as members of diplomatic corps.USACC Executive Director Susan Sadigova and Co-Chairman Reza Vaziri opened the conference, welcomed the guests and recalled the importance of 25 years of friendship and successful partnership between the United States and Azerbaijan in various fields, including energy, trade and business and USACC’s role in maintaining these relations over the past two decades. USACC Honorary Advisor, former Governor of New Hampshire, former Chief of Staff of President George H.W. Bush and well-known American politician John Sununu also delivered his congratulations on the occasion of 25th anniversary of bilateral relations, praised cooperation with Azerbaijan, stressed the strategic importance to the United States and prospects of moving the bilateral relations forward.Ambassador of Azerbaijan to the United States, Elin Suleymanov, set the tone for the rest of the conference by commending the occasion of 25th anniversary of relations, outlining key issues that both countries face today and emphasized the importance of future strategic relations. Ambassador then read the congratulatory letter to USACC members from His Excellency Ilham Aliyev, President of Azerbaijan.Deputy Minister of Economy of Azerbaijan, Sahib Mammadov, delivered the next keynote remarks by touching upon the

history of economic development in the country over the past 25 years. He highlighted the importance of economic diversification away from oil and gas and noted that Azerbaijan is the largest trade partner of the United States in the South Caucasus. According to Deputy Minister, the importance of the trade partnership is reflected in the number of trade missions of American companies to Azerbaijan, organized on a regular basis.Next keynote speaker Mary B. Warlick, Acting Special Envoy and Coordinator for International Energy Affairs at U.S. Department of State, called Azerbaijan a reliable partner and touched upon the third meeting of the Advisory Council of the Southern Gas Corridor (SGC), recently held in Baku. She then delivered the message from U.S. Secretary of State Rex Tillerson that reinforced the full support of the United States for SGC, and highlighted the priority role of Azerbaijan in diversification of energy routes, bringing additional gas sources and volumes to Europe and progressing relations with Azerbaijan.Ambassador of the United States to Azerbaijan, Robert Cekuta, congratulated the conference participants on the occasion of 25th anniversary, touched upon the historic relationship between the two countries and potential for further strategic cooperation.Principal Deputy Assistant Secretary of Commerce Holly Vineyard also highlighted the importance of economic diversification and the role that American companies can play to support the country. Ms. Vineyard added that the United States is ready to support the modernization and diversification of Azerbaijan’s economy.Keynotes were followed by six sessions throughout the day. Regional Strategic Goals session with participation of former special envoy of U.S. Department of State, Amos Hochstein, former Deputy Assistant Secretary of U.S. Department of Defense (Pentagon) and others discussed the role of Azerbaijan in ensuring regional energy diversification, security and transit potential.New Regional Energy Map session with the participation of SOCAR VP, Vitaliy Baylarbayov, BP VP, Bakhtiyar Aslanbayli, Statoil VP, Al Cook, and others discussed the importance of SGC not only for energy diversification, but also its overall role in political transformation of the region.The following sessions on Banking and Finance, Doing Business in Azerbaijan, Public-Private Partnerships and Investments Beyond Oil featured an exciting line-up of speakers representing PASHA Bank, ExIm Bank, BNY Mellon, Center for Analyses of Economic Reforms and Communications, OPIC, Azersun Holding, Gilan Holding, SOFAZ, Cisco, the EBRD, the World Bank, Azerbaijan Investment Company, U.S. Chamber of Commerce, Azerbaijan State Committee on Property Issues, Baker McKenzie, Dentons, Deloitte, PwC, Maroon Capital Group and other leading companies and entities.Day 2 of the conference continued with closed roundtable meetings with the participation of Azerbaijani delegation and American companies.

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AmCham Annual General Assembly MeetingOn February 24, AmCham in Azerbaijan held its Annual General Meeting for electing the President and new members to the Board of Directors.Initially, all candidates presented their platforms. According to the current position of the Board, 6 seats out of 10 were

vacant. Mr. Gunduz Karimov, Managing Partner in Baker McKenzie’s was guiding the elections procedure and announced six newly elected Board of Directors: Mr. Vugar Aliyev, Managing partner of KPMG Azerbaijan; Mr. Bakhtiyar Aslanbayli, Vice President for communications, government affairs and strategy of BP Azerbaijan, Georgia and Turkey; Mr. Taleh Kazimov, Chairman of the Executive Board and CEO of PASHA Bank; Mrs. Nargiz Nasrullayeva-Muduroglu, Director of business operations of Landmark Business Centre; Mr. Asad Shirinov, Caucasus Region Manager of the Coca-Cola Company and Mr. Ilgar Veliyev, Country Managing Partner of ERNST & YOUNG Azerbaijan.Then, per result of the presidential elections, Mr. Nuran Kerimov, Managing Partner of Deloitte Azerbaijan had been elected as the new President of the American Chamber of Commerce in Azerbaijan.

Conference on Benefits of Hosting Major Sports Events

On February 15, the Conference on Benefits of Hosting Major Sports Events took place, which was organized by the Baku City Circuit Operations Company in partnership with AmCham.The event become a platform where businesses united to learn about opportunities and challenges that major sports events create and received valuable tips from the speakers on potential benefits.The Conference was opened by Mrs. Nigar Arpadarai, Head of Marketing and Communications, Baku City Circuit. Then, within the Intro panel, “What opportunities and challenges do major sports events create for businesses?”, Mr. Azad Rahimov, Minister of Youth and Sports of the Republic of Azerbaijan, Mr. Nazim Samadov, Deputy Minister of Culture and Tourism of the Republic of Azerbaijan, Mr. Ilgar Veliyev, President of the American Chamber of Commerce in Azerbaijan, as well as Mr. Movlan Pashayev, Managing Partner of PricewaterhouseCoopers Azerbaijan delivered speeches.The second part of the event highlighted the Real-life Business Cases. The speakers were from Bahrain International Circuit, F1 Russian Grand Prix, PASHA Travel, Hilton Baku and Shah Palace Hotel who presented their experience and ideas on how to benefit from major sports events.The Conference was attended by over 150 people from a variety of business and government structures of Azerbaijan.

Joint meeting of the members of AZPROMO’s Exporters Club and AmCham Presentation of “Made in Azerbaijan”On February 14, AmCham in Azerbaijan, in cooperation with AZPROMO, organized a presentation of “Made in Azerbaijan”.On October 5, 2016 President of the Republic of Azerbaijan issued the decree on promotion of “Made in Azerbaijan” trade mark. AzPromo provide companies with the wide range of services in order to help them produce worldwide competitive Azerbaijani products. The purpose of the project is organization of export missions, research of foreign markets and promotion of “Made in Azerbaijan” as a brand in foreign markets, facilitation in getting certificates and patents in foreign countries by local companies etc.Mr. Sahil Babayev, Deputy Minister of Economy, stated that the government has been continuously taking steps to improve the business environment. For example, the number of licenses for conducting business activity has decreased substantialy and reforms were carried out in the customs sphere. Among such steps, he also highlighted introduction of the investment promotion mechanism. This mechanism envisages various privileges for investors. Furthermore, the government managed to reduce export costs, reduced the time required to obtain a certificate of origin to one day. “Moreover, we are conducting analysis of target markets, which is also important for the exporters,” he added. Over

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the last three months, almost 590,000 manats were returned to entrepreneurs as part of the export promotion mechanism, and a major part of this amount [80%] was obtained by wine exporters.As a follow up, Mr. Ilgar Veliyev, President of AmCham, highlighted importance of “Made in Azerbaijan” brand, which will take a special place in the world market for developing Azerbaijan’s non-oil sector. Then, Mr. Rufat Mammadov made the presentation of “Made in Azerbaijan”. Then, Mrs. Natavan Mammadova, Executive Director of AmCham, Ms. Narmina Safarova, Executive Director of Azerbaijan-France Chamber of Commerce, Mr. Farhad Sattarov, Executive Director of Azerbaijan-Russia Business council, Mr. Badraddin Hasratov, Chairman of Azerbaijan Beekeepers association, Mr. Elchin Madatov, Chairman of Azerbaijan Association of producers and exporters of wine and Mr. Ismayil Novruzov, Chairman of Azerbaijan hazelnut association delivered information about their associations and latest achievements.The event was followed by presentation of export reimbursement certificates and active Q&A session.

“Meet Your Candidate” Cocktail 2017On February 6, AmCham hosted a remarkable cocktail dedicated to the upcoming elections to AmCham Board of Directors. During the event each candidate to the Board presented their election platforms with the audience. This year, six out of ten seats at the Board of Directors were vacant and candidates were the following:1) Bakhtiyar Aslanbayli, Vice President for communications, government affairs and strategy of BP’s Azerbaijan, Georgia and Turkey region2) Farid Ismayilzada, Founder and CEO of GoldenPay3) Ilgar Veliyev, President of AmCham, Country Managing Partner of Ernst & Young Azerbaijan4) Jana Krimpe, Founder and CEO of B.EST SOLUTIONS5) Nargiz Nasrullayeva-Muduroglu, Director of business operations of Landmark Business Centre6) Mahru Norton, Founder and Director of Ness Co7) Taleh Kazimov, Chairman of the Executive Board and CEO of PASHA Bank

8) Vugar Aliyev, Managing partner of KPMG AzerbaijanCandidate speeches were followed by networking in a friendly ambiance.

Presentation Ceremony of Web Portal Azexport.azOn December 20, 2016, the Center for Analysis of Economic Reforms and Communication in cooperation with AmCham Azerbaijan presented www.Azexport.az portal, created according to the order of the President of the Republic of Azerbaijan, H.E. Ilham Aliyev, signed on September 21, 2016 “On creation of the unified database of goods produced in the Republic of Azerbaijan”.

Mr. Vusal Gasimli, the Executive Director of the Center for Analysis of Economic Reforms and Communication informed about goods produced in Azerbaijan and need of this platform to sale in domestic markets: “Azexport.az integrated with the world’s most popular electronic sales networks, showcases Azerbaijani goods to the world. The leading transport and logistics companies and payment systems in Azerbaijan and in the world were integrated to Azexport.az in favorable conditions for selling Azerbaijani goods. “Made in Azerbaijan” brand is regularly updated, easy to use, accessible, safe, fast, convenient, everywhere and always approaches customers via Azexport.az”.Then Mr. Zaur Gardashov, the Manager of Azexport.az portal, made a presentation about capability merits and functionality of the portal, the working principle of a single database of Azerbaijani manufactures, as well as additional opportunities offered by the portal to exporters. Mr. Gardashov informed about the national and international payment systems integrated into the portal, transportation and logistics services, real time translation service and the placement opportunities of Azerbaijani products provided on international trading platforms.Then, Mr. Ziyad Samadzade, Chairman of the Standing Commission of Milli Mejlis (Parliament) emphasizing that the development of entrepreneurship is one of the main objectives of the new economic policy. Herein, expansion of exports, promoting production of non-oil products under Azerbaijan brand and sale to foreign countries are key principles. “In accordance with the President’s instructions,

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a range of measures are taken by government bodies to promote competitive and exportable local products in foreign markets under the name of “Made in Azerbaijan” brand. In this respect, Azexport.az site will carry out a significant mission”.As a follow up, Mr. Seyfeddin Talibov, Deputy Minister of Agriculture of the Republic of Azerbaijan said that Azexport.az portal is an important tool to increase export potential of the country, especially in agriculture sector.Later, Mr. Ilgar Veliyev, the President of AmCham stated that “Now the owners will be able to lead their products more conveniently to foreign markets. The same portal will play an invaluable role to promote “Made in Azerbaijan” “brand and strengthen country’s export position.”Mr. Abdollbari Goozal, Chairman of the Executive Board of "Azersun Holding" also highlighted importance of this portal, which will promote sales in volume of local products and contribute substantially to rise of export potential. Lastly, CEO of “Golden Pay”, Mr. Farid Ismayilzada revealed their interest not only by supporting the portal, but also share of experience, technical and other facilities. Finally, video clip dedicated to web portal Azexport.az was shown.

Meeting between AmCham and Deputy Minister of Culture and Tourism of Azerbaijan

On December 16 2016, the representatives of AmCham had a meeting with the Deputy Minister of Culture and Tourism, Mr. Nazim Samadov.During the meeting “The business climate observations and recommendations for improvement” known as AmCham “White Paper”, as well as tasks of mutual cooperation on suggestions submitted therein have been discussed. In particular, AmCham Executive Director Mrs. Natavan Mammadova mentioned the importance of visa procedures simplification for the development of tourism in the country and several other essential issues in the application of the principle of the open sky, as well as the proposals suggested by local companies regarding the tourism sector.Mr. Samadov stressed upon the work done for the comprehensive and sustainable development of the industry, as defined in “Strategic Road Map for the development of the

tourism industry in the Republic of Azerbaijan”. He noted that the process of simplification of visa policy will be enhanced due to the implementation of ASAN Visa system since January 2017.Finally, the prospects for fruitful and effective cooperation between the Ministry of Culture and Tourism of Azerbaijan and AmCham in Azerbaijan for the development of tourism sector in a country were discussed.

Monthly members luncheon31 JanuaryDuring this monthly luncheon, AmCham Azerbaijan organized an event featuring participation of Mr. Sahil Babayev, Deputy Minister of Economy. Special guest, Mr. Babayev spoke about reforms and achievements in 2016. He also noted that for a long time oil and gas was the main sector in Azerbaijan. However, during the past years, there is a necessity to diversify the economy with export of products.According to the deputy minister, trade representatives, alongside with trading houses, are appointed to promote Azerbaijani products abroad. The President of the Republic of Azerbaijani, H.E. Ilham Aliyev signed a decree to appoint trade representatives in Embassies and Consulates. Trade representatives will carry out measures to increase Azerbaijan’s trade and economic relations with foreign countries and protect the republic’s economic interests. Mr. Sahil Babayev noted that diversification of export will be Azerbaijan’s main priority in the next few years. He reported about the changes of import procedures of certain goods to protect the domestic production.Moreover, Mrs. Natavan Mammadova, Executive Director of AmCham, updated guests about the past hard work in 2016 and upcoming events for 2017. Later on, Mrs. Mammadova passed the floor to member presentations by representatives of Baku City Circuit, McDermott Caspian and PMD Group, who delivered information on portfolio and the activity direction of their companies.The event was concluded by Mr. Ilgar Veliyev, the leaving President of AmCham. He extended thanks to all members, Board of AmCham and Amcham staff, who supported him all six years.

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3.The most discussed topic in the meeting was the challenges and gaps observed in labor legislation. Majority of attendees agreed that the Labor Code of the Republic of Azerbaijan (Labor Code) predominantly protects employees, even in cases where employer must be given preference. Industry suffers from such provisions, specifically regulating termination of employment agreements due to redundancy, in respect of protected employees and disciplinary actions. Trade unions are not actively present, although broad range of their activities is stipulated in the Labor Code. 4.Another important issue was the absence of certain civil contracts (for instance, subscription agreements) in Civil Code of the Republic of Azerbaijan. Sometimes it delivers difficulties in working with foreign persons or entities. Lack of regulations on these contracts halts development of both theoretical and practical approaches to certain legal relations. 5.Enforcement of arbitral awards is another significant issue to be improved. Despite being a member state of Convention on Recognition and Enforcement of Foreign Arbitral Awards, Azerbaijan has certain implementation problems in this field. Especially the Supreme Court and Ministry of Justice of the Republic of Azerbaijan need reforms in order to avoid such issues.At the end of the meeting attendees agreed on inviting several government officials to subsequent meetings for face to face discussions of pressing issues and developed a to do list presented below.

To-do list1. To come up with the ideas about future works to be done by the meeting;2. To find main challenges, problems and gaps in legislation and business practice and produce ideas on their solution during future meetings.

THT Committee’s MeetingOn February 22, AmCham THT Committee has been gathered. Mr. Farid Isayev, the Deputy Chairman of the THT Committee opened the meeting and gave the floor to Ms. Nigar Arpadarai, Head of Marketing and Communications Department of Baku City Circuit who delivered presentation on “The outcomes of the conference on Benefits of Hosting Major Sports Events 2017 and Call For Action”.Mr. Isayev briefed members about the activities of THT committee leadership during the past 1-2 months. It was noted that THT leadership, along with AmCham Executive Director, held meetings with the Ministry of Tourism officials. The subject was implementation of AmCham’s White Paper recommendations. He also pointed out that The Roadmap “On Development of Tourism Industry in Azerbaijan” was approved by Mr. President and currently the Ministry is

Legal Working Group’s MeetingPreliminary meeting of legal professionals from member companies of AmCham as well as non-member representatives was held on March 2, 2017.Attendees included legal professionals and some industry representatives within the membership of AmCham (banking sector, insurance, oil and gas) as well as non-member representatives.Rashid Mammadov, Legal & Policy Officer of AmCham opened the meeting, passing the floor on to Ilgar Mehti, Managing Partner of EKVITA, who highlighted the purpose of the meeting and opened discussions. It was noted that this meeting will be a good platform to share and discuss problems of the legal profession and business. Input to AmCham White Paper was proposed as one of the main future activities of the Committee.1. Development of Code of Conduct on legal profession and its potential place in client-lawyer relations. This Code would allow for voluntary adherence and appear as a uniform

professional ethics guideline for all lawyers working in Azerbaijan. One of the main goals of such Code would be clarification of clients’ confidentiality matters.2. Another pressing challenge of companies operating in energy law sector is obtaining VAT and customs duty exemption certificates for PSA subcontractors. This is not an issue with direct contractors, but when it comes to indirect subcontractors, relevant state authorities tend to reject issuance of such certificates quite often. Raising this question before respective state authorities can bring potential solution to the problem.

Committee Highlights

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working on its implementation. Then, Mr. Isayev informed the members about two newly created bodies which operate in tourism industry:1. Tourism Council: aimed to analyze the situation in Azerbaijan’s tourism sector and to take necessary measures to address the problems in this sphere;2. National Tourism Promotion Bureau.

HR Committee Meetings• On March 13, 2017 AmCham HR Committee hosted its regular meeting. Ms. Zibeyda Haji opened the meeting and gave the floor to Ms. Ophelia Abdullayeva, Of Counsel in Dentons Baku office, who delivered presentation on “Hiring, Disciplinary Process, and employment termination procedures”. Throughout the discussions the issue of management order and its compulsory enforcement, problems with registration the employee hiring on exact date have been raised. Besides, the need for work book, required

documents for hire like children birth, marriage, refugees and disability certificates, as well as content of employment contract were talked. The second part of the presentation was dedicated to disciplinary process and types of disciplinary penalty. Specifically, its timelines (2 years from when the offense was committed where the offense was revealed as a result of an audit of the financial and economic activity) have been discussed. Next topic of discussion was grounds of termination, to be exact, mutual consent and mutual agreement of the parties was compared with details.

• On February 17, AmCham HR Committee hosted its regular meeting. HR Committee Chair, Ms. Leyla Novruzova, has opened the meeting and gave the floor to Ms. Ilfana Panahova from Saffron Restaurants and Absheron Hotel Group, who delivered presentation on “HR in Hospitality industry”. The presenter talked about structure of hospitality.The next presentation was by Mr. Taleh Gasimov from PSG Management Systems and it covered “Change & HR Management”. He talked about statistics on success of change, complexity and dynamics of the change process, using change equation and definition by Gleicher, Beckhard, Harris and Kubler-Ross models.Later, Ms. Novruzova announced Ms. Laura Hamidova, Director of FireWorks as new deputy chairman of HR Committee.

• On January 27, AmCham HR Committee hosted its regular meeting. HR Committee Chair, Ms. Leyla Novruzova, has opened the meeting and gave the floor to Ms. Lala Abdurahmanova, Partnering Consultant in Fircroft, who delivered presentation on “Communication and engagement during change with combination of ‘cultural aspect’”. The presenter talked about challenges of organizational change, shared different techniques and examples. Later, Ms. Novruzova presented “HR Committee Program 2017”.The next presentation was made by Vladas Stankevicius and Clare Farley with Ethics & Compliance in BP and it was about “Code of Conduct: processes and procedures to ensure the code is adhered to”. They talked about benefits of an E&C Program, Key Elements of BP’s Ethics & Compliance and Code of Conduct, Policies and Network and BP’s ABC Program.

• On December 16, HR Committee hosted its regular meeting. HR Committee Chair, Ms. Leyla Novruzova, has opened the meeting and highlighted key meetings and trainings which took place in 2016 within the Committee scope.Then, representatives from Ministry of Education, Ms. Mehriban Nazarova and Mr. Shahin Seyidzade, delivered presentation on “SABAH project”. Ms. Nazarova talked about advantages, aims and targets of SABAH, about students and lecturers, extracurricular opportunities and SABAH Career Academy. Later, Mr. Nuran Kerimov, Managing Partner

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of Deloitte & Touche LLC, made a presentation on “Global Human Capital Trends 2016. The new organization: Different by design”. The Committee meeting was concluded by Fidan Farzaliyeva, Employee/Industrial Relations and Emergency Response Manager of BP, who made presentation about “HR Emergency Response Preparedness”.

Tax&Customs Committee Meetings• On February 18, AmCham T&C and BFI Committees hosted regular meeting. Chairman Mr. Bakhtiyar Aslanbayli gave information about the upcoming tax conference and introduced moderators: Ms. Narmin Aslanova from Deloitte, Mr. Zaur Gurbanov, Ms. Arzu Hajiyeva from EY and BFI committee’s chairman Ms. Ayten Rustamova.Mr. Zaur Gurbanov provided an overview to the last changes in the Tax Code in two directions: banking and finance. Representative of Total underlined that Contractor Parties and Foreign Subcontractors operating under the PSAs in Azerbaijan are exempted from all taxes not specifically mentioned under the respective PSAs. However, IBAR implements simplified tax of 1% on cashing out operations. Ms. Arzu Hajiyeva suggested adding this issue to the agenda of the upcoming tax conference. Mr. Bakhtiyar Aslanbayli summarized this discussion by agreeing with the interpretation that new simplified tax (1%) shall not be applicable to PSA Contractor Parties and Foreign Subcontractors, yet, he mentioned that legislation do not offer a clear mechanism for banks how differentiate PSA and non-PSA activities of Foreign Subcontractors.The second issue was regarding the blacklisted offshore countries, prepared by the Ministry of Taxes, 10% fee on the transactions and ways of how banks should withhold it. Mr. Zakir Nuriyev raised the issue of deposits and additional taxation of interests; thus, 10% withholding tax on interests, plus 10% fee create collision between two articles in the Tax Code. He also noted that they sent the letter to the Ministry

of Taxes on this issue. Ms. Narmin Aslanova clarified the Ministry’s position. Then, Ms. Arzu Hajiyeva suggested concretizing transactions to the blacklisted countries with all the details in the Tax Code.The third discussed issue was concerning the cashless payments. Entrepreneurs do not have the precise mechanism of cashless limit, sanctions and payments. Mr. Zaur Gurbanov explained the articles of “Cashless Payments” law. It was agreed to raise this issue as well during the upcoming Tax Conference.Later, there were discussions regarding audit and e-commerce. Mr. Ali Verdiyev from JTI raised the issue of having a theme on cashless sale of tobacco products in Azerbaijan at the Tax Conference. Under the Presidential Decree on Rules of circulation of excisable products in the Republic of Azerbaijan, this requirement was applied and cancelled three times in 2016. It was re-introduced in January 2017 and is still in force.

• On January 18, AmCham T&C Committee hosted its regular meeting. Chairman Mr. Bakhtiyar Aslanbayli opened the meeting and passed the floor to our guest speaker Mr. Zaur Gurbanov, Manager of Tax & Law in ERNST & YOUNG. Mr. Gurbanov welcomed everybody and delivered presentation on “Recent changes of practical aspects”. The main topics of presentation were: tax advantage, amortized cost, non-cash taxes, online trade, online invoice, taxes on payments to countries with preferential tax system, non-cash payment, transfer pricing.

ICT Committee’s MeetingOn February 15, AmCham ICT Committee hosted its regular meeting. AmCham Executive Director Mrs. Natavan Mammadova and AmCham ICT Committee Chairman Mr. Murad Seyidov welcomed the participants and introduced the Meeting guests- Prof. Reyhan Huseynova, Azerbaijan Future Studies Society, Eileen McGinnis, Human Interaction Technology Consultant and Brock Hinzmann, Technology Navigator. Prof. Reyhan Huseynova informed about Azerbaijan Future Studies Society, past and future works and projects, “Azerbaijan State of the Future Index 2011” report presented to the President of Azerbaijan, etc.Later on, committee guest speakers Ms. Eileen McGinnis and Mr. Brock Hinzmann delivered presentation on “Introduction to Silicon Valley”. They started their speech with the topic of Disruptions, which make scalable business. Also, Mr. Hinzmann talked about venture capitals requests in business plans, connections, crowdfunding and foreign companies in Silicon Valley.Furthermore, Mr. Seyidov raised a number of issues for discussion, such as, application of new technologies in education, agriculture and medicine; venture capital, investments and Silicon Valley experience; problems in business climate in Azerbaijan and possible ways to solve them;

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Joint ICT and BFI Committees MeetingOn January 17, joint meeting of Information and Communication Technologies (ICT) and Banking, Finance and Insurance (BFI) Committees took place. AmCham Executive Director Mrs. Natavan Mammadova and AmCham ICT Committee Chairman Mr. Murad Seyidov welcomed the participants and introduced guest speaker – Mr. Christian Rupp, Special Plenipotentiary for Digitization of the Austrian Federal Economic Chamber Organization. Mr. Rupp started

his speech with the topic of institution-building initiatives in service sector. He outlined four major issues that have to be clarified while elaborating a particular e-strategy in any country: what is technologically possible; what is legally allowed; whether there is a political will; and finally, what are expectations of a customer. Having analyzed the e-services, and particularly e-commerce “environment” in Azerbaijan, he found out several obstacles to its effective development. First, it’s the lack of common standards (for example, as far as electronic signatures are concerned), which are crucial for e-business as a matter of trust. Second, it’s the issue of bilateral trust between entrepreneur and customer and related to this e-payment solution. Third, there is a huge problem with coding of services which requires joint efforts of relevant ministries multilaterally from the one side and businesses from the other side. Finally, Mr. Rupp advised to pay attention to introducing special e-trainings for developing applicable e-skills, as well as, the necessity of surveys, market researches in order to get acquainted with the current needs in the field. Besides, Mr. Rupp mentioned that joining e-signature is a mandatory prerequisite to start a new business in Europe and it is necessary to have a political will to introduce this change. AmCham ICT Committee Chairman Mr. Seyidov highlighted importance of business awareness (awareness among C-level executives) to promote digital signature as a main tool for data integrity, authentication and non-repudiation.Furthermore, AmCham BFI Committee Deputy Chairman Mr. Teymur Akhundov raised a number of issues for discussion,

such as: recent changes in tax legislation which affected IT and banking sectors, Merchant Category Codes Classification problems, etc. The topics have been discussed with the participation of Deputy Executive Director of State Fund for Development of IT under the Ministry of Communications and High Technologies of the Republic of Azerbaijan, Mr. Azar Bayramov.

ICT Committee’s MeetingOn December 23, AmCham Information and Communication Technologies (ICT) Committee meeting took place. The Committee Chairman Mr. Murad Seyidov welcomed everybody and reported about the productive meeting on December 19, with the Minister of Communications and High Technologies of the Republic of Azerbaijan, Mr. Ramin Guluzade. It was a very fruitful and open-minded discussion on different problems. During the meeting Mr. Quluzade expressed his positive attitude to AmCham ICT Committee, White Paper and proposed to setup such meetings on regular (monthly) basis. Then, Mr. Seyidov passed the floor to Prof. Muhammadou M.O. Kah, Vice Rector for Technology and Innovation, Founding Dean, School of IT and Engineering at ADA University. He delivered presentation about School of IT & Engineering and Undergraduate Programs.

Healthcare & Medical Insurance (HMI) Committee Meetings• On February 10, AmCham HMI Committee hosted its regular meeting for this month. The HMI Committee Chair Ms. Lala Bilandarli has opened the meeting and invited Ms. Gulnar Agayeva, PhD, MD, president of Azerbaijan Gastroenterologists and Hematologists Association, who delivered a presentation on “Problems of viral hepatitis in modern society”. She talked about statistic of hbv virus in Azerbaijan. Also Ms. Agayeva gave information about conference “Unite for Victory”, which will be held in 2018 in Azerbaijan. The Committee meeting was concluded by discussion of price regulation of drugs, meeting with Tariff Council etc.

• On January 23, AmCham HMI Committee hosted its regular meeting. The HMI Committee Chair Mrs. Lala Bilandarli invited Mr. Isa Aliyev, Head of Monitoring Analyses and IT development department from State Agency for Mandatory Health Insurance under the Cabinet of Ministers of Azerbaijan, who delivered presentation on “Implementing Mandatory Health Insurance in Azerbaijan”. He talked about the main goals of MHI in Azerbaijan (increase access to care, elevate quality of care, ensure sustainability of health financing and improve transparency), also about core principles, overview of Benchmark Countries and health financing system. The Committee meeting was concluded by Mr. Elnur Guliyev, Head of Novartis Pharma Services AG. He gave brief

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ProjectsAmCham Azerbaijan, Index of PricesThe new edition of Consumer Price Index (CPI) covers the 4th quarter of 2016 (October – December, 2016). The Consumer Price Index (CPI) is designed to measure the change in the average level of prices paid for consumer goods and services by private households. AmCham members will find it useful in setting pay increases, product prices, etc. The CPI can also be used to determine the value of a sum of money from the past at today’s level.Over the last year (the base is 100 at 31 December 2015) the AAIP rose by 12.77 percent for Azerbaijani consumers and 13.24 for Expatriate consumers. In average Annual Indexes (over the last four quarters) rose by 19.98 percent for Azerbaijani consumers and 21.25 for Expatriate consumers. In the 4th quarter of 2016 the AAIP rose by 3.62 percent for Azerbaijani consumers and 4.11 for Expatriate consumers. The largest upward effect on the AAIP rate came from Fruits & Vegetables, where Index of Prices rose by 16.79 percent.The survey is conducted collecting the prices of a fixed representative group or ‘basket’ of goods and services every quarter. These prices are then compared to the prices of the same goods and services from the previous quarter and the price change calculated. The prices of these goods and services are then combined into a single index measuring the overall level of prices. Different ‘weights’ are attributed to the various goods and services to reflect the average expenditure by households.

information from the last meeting with Tariff Council, where they discussed price regulation, parallel import and drug list.

CSR Committee’s MeetingOn December 21, CSR Committee organized its regular meeting. The Committee Chairperson Ms. Aynura Piriyeva opened the meeting and passed the floor to Ms. Gunel Farajova, senior consultant within Cleantech and Sustainability Services at EY Baku, who delivered presentation on “Sustainability as a key driver for innovation and cost saving”. The presentation was about economic consequences of climate change for Azerbaijan, innovations of last 3 years, product design: packaging and the main barriers to innovation in Azerbaijan. Afterwards, special guest, Mr. Fariz Ismailzade, Vice Rector for External, Government and Student Affairs at ADA University, Curator of CSR Committee, suggested to change meetings format, to make more agitation and to work with three groups of stakeholders: Policy makers, Media organizations, as well as startupers and young businessman. During the discussions Mr. Javid Zamanov from Bos Shelf

The sample of representative goods and services for which prices are collected each period is held constant and the set of weights is fixed to reflect the importance in the typical household budget of the particular good or service. It is possible that, following the trial period. First ‘basket’ was represented by AmCham Azerbaijan in 2006. In 2012 the weights were adjusted and ‘basket’ was reviewed.The entire report is available on AmCham web-page.

suggested to invite students and volunteers to the meetings, and to prepare videos for promoting CSR. Then, Ms. Jamila Talibzadeh from BCP Caspian offered to create food bank, which is popular in other counties.

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TAX AND CUSTOMSWriting down tax penaltiesAzerbaijani President has signed a decree on application of the law “On regulation of taxpayers’ taxdebts as of January 1, 2017” (“Law”) effective as of January 1, 2017. The Law stipulates writing downinterest and financial sanctions accrued for late payment of tax liabilities as of January 1, 2017.Cancellation of the financial sanctions will be carried out in the following way:

• 70% of the outstanding financial sanctions will be can-celed, if 30% of liability is paid by the taxpayer during January 2017;

• 50% of the financial sanctions will be canceled, if 50% of such financial sanctions is paid by the taxpayer during January-February 2017;

• 30% of the financial sanctions will be canceled, if 70% of such financial sanctions is paid by the taxpayer during January-March 2017.

This Law will still apply even if a court decision requiring the payment of the above mentioned liabilities has already been made, but the payment is pending as of 1 January 1, 2017.

Changes to the list of state officials entitled to access commercial (tax) secretThe Presidential Decree signed on 1 February 2017, ap-proved the new list of state officials who are permitted to ob-tain commercial (tax) secret which include:1. Minister of Taxes of the Republic of Azerbaijan;2. First Deputy Minister of Taxes of the Republic of Azerbai-

jan;3. Deputy Ministers of Taxes of the Republic of Azerbaijan;4. General Director of Department on Tax Policy and Stra-tegic Researches of the Ministry of Taxes of the Republic of Azerbaijan;5. General Director of Department on Internal Security of the Ministry of Taxes of Republic of Azerbaijan;6. General Director of Legal Department of the Ministry of Taxes of the Republic of Azerbaijan;7. General Director of Tax Risks Analysis and Control Depart-ment of Ministry of Taxes of Republic of Azerbaijan;8. General Director of Work with Territorial Tax bodies Depart-ment of Ministry of Taxes of Republic of Azerbaijan;9. General Director of Services to taxpayers and transparent tax partnership Department of Ministry of Taxes of Republic of Azerbaijan;10. General Director of International Cooperation and tax monitoring in financial institutions Department of Ministry of Taxes of Republic of Azerbaijan;11. General Director of Control on execution of tax liabilities Department of Ministry of Taxes of Republic of Azerbaijan;12. General Director of Control on execution of Tax legislation Department of Ministry of Taxes of Republic of Azerbaijan;13. General Directors of departments and territorial tax de-partments under the Ministry of Taxes of the Republic of Azer-baijan;14. General Directors of territorial tax offices and regional tax departments;15. Head of the Section for Fight Against Organized Crimes in the Economic Sphere within the Primary Investigation

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of Tax Crimes Department of the Ministry of Taxes of the Republic of Azerbaijan.

EXPORT AND IMPORT OF PRODUCTS/GOODSAmendments to the customs duties’ degree on export-import operationsThe customs duties for refined copper blanks used for wire production, refined copper blanks used for rolling, other re-fined copper, copper based ligatures, refined copper rods and profiles, rods and profiles from other copper alloys export goods have been established at the level of 10 (ten) percent,not being less than USD 300 per 1000 kg. The duties will remain effective for the period of 5 (five) years.Amendments to the Rules of export-import operations in Azerbaijan According to the amendments, export of goods (works, services) by legal entities and individuals by way of consignation must be declared to the customs authority. Ex-port of goods (works, services) by way of consignation must be paid in accordance with the contract signed with foreign entities within a timeframe noted in the contract. Legal entities and individuals should remit money to the bank account of foreign legal entity, opened with a bank in Azerbaijan, within 180 days from the declaration date of export by way of con-signation of goods (works, services).

ECONOMICAL, FINANCIAL AND BANKINGNew Rules on Conducting Foreign Currency Operations by Residents and Non-residents in AzerbaijanOn 28 November 2016 the Central Bank of Azerbaijan ap-proved the new Rules on Conducting Foreign Currency Operations by Residents and Non-residents of Azerbaijan (hereinafter, the “Rules”). Rule No. 12 dated 27 May 2002, previously regulating the foreign currency transactions of resi-dents and non-residents, was annulled with the adoption of the new Rules. For the purposes of the Rules, “bank account” is defined as any current, credit, deposit or other account opened within a bank. The Rules further provide for the defi-nition of “imported services” as services and works provided by non-residents within the territory of Azerbaijan as well as services and works provided for the benefit of residents out-side of the country. The Rules provide guidelines on foreign currency transactions with and without opening a bank ac-count as described below.

Foreign currency transactions without opening a bank ac-count According to the Rules, only resident and non-resident individuals may conduct a foreign currency transfer within or outside of Azerbaijan without opening a bank account. Legal entities are not allowed to transfer foreign currency without opening a bank account.The amount of the transfer of foreign currency without open-ing a bank account may not exceed the equivalent of USD 1,000 per day and the equivalent of USD 10,000 per month for both resident and non-resident individuals.Foreign currency transactions conducted through bank ac-counts Remittance of foreign currency (in cash or via transfer) to the foreign currency bank accounts of residents and non-residents may be conducted freely. The transfer of currency outside of Azerbaijan from bank accounts may be conducted for the following transactions:1. Transfer of payments for goods or services imported to the country by residents and nonresidents, including advance payments. As per the newly established rules, if payment for the importation of goods or services is made in advance, supporting documents attesting the customs clearance of the goods and provision of services must be submitted to the bank within 180 days.2. The following transactions have not been significantly af-fected by the introduction of new rules:

• Payments for re-export of goods and services;• Advance payments of contracts that have not been ex-

ecuted;• Transactions of resident legal entities with a branch or

representative offices abroad (by stating the purpose of transfers);

• Payments of debts obtained abroad;• Payments for courts, notaries, state fees, other mandato-

ry payments, scholarships, pensions, aliments and other similar or related payments;

• Payments of dividends to non-residents from residents.3. Additionally, according to the rules, the transfer of foreign currency for the following activities may be carried out upon submission of the relevant agreement, invoice or digital com-mercial notification indicating the amount and purpose of the transaction:

• Payment of participation fees for international events, conferences and exhibitions;

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• Payments of subscription fees and fees for advertise-ments to foreign publication products, libraries, data cen-tres;

• Payments for education and medical treatments;• Payments for the use of author rights, patent and fran-

chising fees.4. Transfers for personal purposes:

• Transfer of resident physical persons to their close rela-tives not exceeding USD 10,000 a month;

• Transfer of money previously brought into the country in cash or by bank transfer by providing the necessary documents proving the aforementioned;

• Any other transfer that does not exceed USD 1,000 a day and USD 10,000 a month.

5. Repatriation transfer of investments made by foreign com-panies to the economy of Azerbaijan by non-residents.6. Transfer of revenue from investment projects carried out in Azerbaijan by non-residents,including compensations and payments related to losses.7. Transfer of the salaries of foreign employees who have en-tered into employment agreements with residents and non-residents.8. Transfer of the following cash flows by resident and non-resident individuals and legal entities with the respective doc-umentation:

• Transfer of foreign currency for contribution to the charter capital of legal entities established outside of Azerbaijan;

• Transfer of foreign currency to acquire securities;• Payments related to the fees for ownership rights of

properties as well as other rights related to properties.

New Law “On Cashless Settlements”The Law “On Cashless Settlements” was approved on 16 De-cember 2016 by the President of the Republic of Azerbaijan (hereinafter, the “Law”). The Law aims at ensuring the trans-parency of transactions and settlements, protection of con-sumer rights, replacement of cash settlements with cashless ones and the development of the banking system in Azerbai-jan. The Law defines the following settlements as cashless:

• Settlements through bank transfers, including transfers via payment means or devices (payment cards, payment orders, mobile phones, computers, etc.);

• Settlements through payment terminals;

• Cash settlements to the seller’s bank account.According to the Law, cashless payments within settlements between parties that are tax payers can be performed only through bank transfers, including transfers via payment means or devices.Settlements within a calendar month in excess of AZN 30,000 performed by VAT registered taxpayers and taxpayers within the trade or public catering industry, whose taxable transac-tions during one month (months) of any consecutive twelve month period exceed AZN 200,000, and settlements of any other taxpayers within a calendar month in excess of AZN 15,000 shall be performed only by cashless means. This requirement will come into force on 1 January 2017 for VAT registered taxpayers and taxpayers within the trade or public catering industry, whose taxable transactions during one month (months) of any consecutive twelve month period exceed AZN 200,000 and on 1 April 2017 for other taxpayers. Regardless of the above, the following settlements must be performed by only cashless means:

• Payment of taxes, customs duties and levies, administra-tive fines, financial sanctions and interests, repayment of debt amounts under leasing transactions and issuance of credits;

• Payments defined under the laws of the Republic of Azerbaijan “On insurance activity” and “On compulsory insurance”;

• Payment of service fees and other payments made to government agencies, state-owned legal entities or legal entities, in which the state owns control package, public legal entities and budget enterprises;

• Payment of salaries and other payments defined by the legislation and paid to employees by employers, except those engaged in retail trade, public catering and the service industry, whose taxable transactions during one month (months) of any consecutive twelve month period are up to AZN 200,000;

• Pensions, scholarships, financial aid, bonuses (including one-time bonuses), compensation and benefits;

• Payment of landline phone services and utility costs;• Payment and repayment of interest-free cash funds (ex-

cept where such funds are provided by non-taxpayers) and other money allocations;

• Utilisation/expenditure of funds received under public

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procurement contracts;• Payment of tuition fees;• Payments made to tour agents.

The following commodities can be sold and purchased by tax-payers from individuals who are nottaxpayers by using cash:

• Obtaining agricultural products from the producers of ag-ricultural products;

• Obtaining non-ferrous and ferrous scrap metal;• Obtaining paper, glass and plastic products for recycling

and other purposes;• Obtaining used tires for recycling purposes.

New rules for foreign exchange auctionAzerbaijan cancelled the 4 (four) percent margin for setting exchange rates for commercial banks.According to the new rules dollar will be sold to commercial banks in the organised market on a “best offer” basis. Auc-tions will be held on Mondays, Wednesdays and Fridays.

Presidential Decree on Strategic Roadmaps of National Economy Strategic Roadmap for Logistics and Trade De-velopmentThe main aim this Strategic Roadmap follows is to make the country the most attractive in the region from the logistics and trade investments perspective by 2025 by improving the infra-structure and regulating incentives. In order to reach this aim three goals have been defined for the period of 2016-2025:

• creation of a favourable environment to increase trade turnover going through Azerbaijan;

• introduction of a mechanism to implement goals in logis-tics and trade;

• getting a higher added value from transit trade.According to the document it is planned to increase Azerbai-jan’s share in the field of maritime cargotransportation:

• via the Central Asia-Black Sea route to 40%;• via the Central Asia-Europe route to 25%;• via the China-Europe route to 3%;• via the Russia-Iran route to 40%;• via the Iran-Black Sea route to 25%.

Strategic Roadmap for Development of Telecommunica-tion and Information Technologies The main goal of Strategic Road Map is to ensure an efficient activity of public sector, development and improvement of ICT infrastructure for digitalization of economy and increase of ICT sector’spotential. In addition, the strategic goals cover the following:

• improvement of the structure and regulatory framework of ICT sector by improving the state regulation;

• expansion of scope of broadband Internet services infra-structure for ICT implementation.

Moreover , the document envisages creation of the indepen-dent regulatory body which will shape

the telecommunication market, ensure the development, con-duct assessments for determination ofthe number of participants demanded in the market, and reg-ulate following matters:

• release of licenses;• transparent distribution of national frequency spectrum;• allocation of numerical resources to market participants;• delivery of numbers among operators.

INDUSTRIAL, BUSINESS, SERVICESAmendment on regulations on trade, public catering, household services and other type of servicesAmendment defines agricultural cooperative market as the market of agricultural products regulated by legal entity reg-istered by the state as agricultural cooperative. The trading places to the agricultural cooperatives will be provided on the basis of a contract signed between market owner and agricul-tural cooperative. In order to sign such contract agricultural cooperative has to submit its request to the market owner. The market owner will consider the request within ten (10) working days and make a decision (consent or substantiated refusal). In order to obtain a plot of land for use or lease for organization of sale networks (agrarian shops, green mar-kets, agricultural cooperative markets and wholesale centres) agricultural cooperatives must apply to the local executive bodies or municipal authority. Then, the local executive bod-ies or municipal authorities take into consideration the land use planning documents including engineering and commu-nications support and infrastructure opportunities and adopt a decision (consent or substantiated refusal) regarding the request within a period of one (1) month. In order to obtain a building or a nonresidential area for use or lease agricultural cooperatives apply to the superintendent of state property – State Committee on Property Issues or municipal authorities. The State Committee on Property Issues will consider the re-quest within twenty (20) day period and adopt a resolution regarding this request.The municipal authority will consider the issue of use or lease of its own facilities within twenty (20) day period and provide official response. The agricultural cooperatives should deter-mine the working regime at the sale networks, the types and places of the products to be sold, provide the sellers with the trading places and measuring devices and render other ser-vices in the area (area clean-up operations, veterinary and phytosanitary surveillance and disease control measures and etc.).

Regulations on categorisation of lands and their transfer from one category to another Categorisation of lands and their transfer from one category to another implemented by the resolution of the Cabinet of Ministers. According to the new rules:

• lands belonging to aquaculture category must be pre-served in their current category;

• sale, purchase, mortgaging and performing other trans-

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actions that may lead to the expropriation of forestlands and of other lands of this category, which may result in the use of these lands for other purposes, and may trans-fer them to another category is not allowed;

• areas used agriculturally are specifically protected and their transfer to another category for non-agricultural pur-poses is allowed only in exceptional cases.

Categorisation of lands and the basis for their transfer from one category to another consist of the following:

• construction of ports, railways and motor roads;• creation of borderland for reliable protection of the state

border;• creation of industrial facilities, areas (quarters and parks);• necessity to use the reserve fund lands;• involvement of surrounding territories to cultivation cycle

for creation of agro parks, farms and agricultural enter-prises using advanced technologies;

• transfer of surrounding territories to the forest lands for creation of forest belts and green spaces;

• provision of surrounding territories for specifically pro-tected areas of nature (including national parks, state reserves, preserves etc.) to preserve biodiversity;

• construction of the main line engineering and communi-cation support systems, amelioration and water econo-my facilities and hydro technical devices;

• substitution of lands of residential settlements subject to exogenous geologic processes;

• allocation of surrounding territories in accordance with area planning documents for the building of new residen-tial quarters (settlements) or development (enlargement) of existing residential settlements;

• creation of historical and cultural, natural reserves and recreation areas, population recreation organization, development of tourism, construction of sport and other social facilities;

• requests of the owners related to more efficient econom-ic use of lands in private ownership.

Presidential Order on taking additional actions directed to acceleration of a tourist flow to AzerbaijanPresident instructed the State Customs Committee and the State Border Service to create a relevant organization that will establish a fast track routes for foreigners and stateless persons on the state borders with the Russian Federation, the Republic of Georgia, the Islamic Republic of Iran and theRepublic of Turkey. The Order also instructs the State Agency on Public Service and Social Innovations under the President of Azerbaijan Republic to establish ASAN Payment and ASAN Visa terminals on all state border checkpoints, to enable for-eigners and stateless persons to obtain their electronic visas right on the border checkpoints. President also gave instruc-tions to the State Sea Administration of Azerbaijan Republic, Azerbaijan Caspian Shipyard CJSC and Baku International Sea Trade Port CJSC to negotiate organization of Caspian Sea ship tours with Caspian Sea littoral countries.

Presidential Decree on additional measures to enforce the position as Digital Commerce Hub and foreign trade transactionAccording to the decree, Digital Trade Hub of Azerbaijan sec-tion will be created on www.azexport.az portal within 4-month period. This section will enable the preparation of documents required to regulate relations between individual entrepre-neurs and their foreign partners, including preparation and signing of electronic form of contracts as well as provision of transboundary electronic services in a real-time regime. The Ministry of Transport, Communications and High Tech-nologies, the Ministry of Taxes and the Ministry of Foreign Affairs through the diplomatic missions and consulates of the Republic of Azerbaijan will work to enable the creation of e-signature and provide ASAN signature certificate via Digital Commerce Hub section within 4-month period.

MISCELLANEOUSAmendments to Law on MedicinesAccording to the amendments medicines sold without a prescription, equipment authorised for use by the relevant executive body, treatment, prevention, diagnosis and re-habilitation methods can now be advertised. Advertiser of the medicines sold without a prescription, equipment authorized for use by the relevant executive body, treat-ment, prevention, diagnosis and rehabilitation methods must present to a producer and distributor of an advertise-ment a certificate of compliance issued by the accredited by the state body organization, instructions for the use of this medicines, the registration certificate of medicines, results of medical researches (if they are mentioned in an advertise-ment). If there are any side effects arising from the use of advertised medicines sold without a prescription, equipment authorized for use by the relevant executive body, treatment,prevention, diagnosis and rehabilitation methods they must be acknowledged in advertisement, as well as the necessity of the consultation with doctor prior to usage of advertised medicine.Medicines or medical equipment requiring training for use may only be advertised in the specialized publications and distributed to pharmacists, medical staff during the special events. Free distribution of medicines, sale, accompanied by provision of medical services (paid or unpaid) in advertising campaigns is prohibited.

Amendment to the Law on State LanguageAccording to the amendment, foreign languages can be used in a text of an advertisement used in the advertisement instal-lations with the request of an advertiser. In these cases, text in foreign languages has to be put under the text in Azerbai-jani, must take less space than the text in Azerbaijani and should not exceed the one-third of advisement’s total area. Trademarks and geographical indicators used in a foreign language may be used in an advertisement in a form speci-fied by the relevant executive body.

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Innovation to Asan ImzaImza Asan Imza (strengthened mobile e-signature service) is integrated to www.azexport.az portal.This innovation gives broad opportunities to entrepreneurs, who want to register their products and services on www.azexport.az internet resource. Asan Imza holders became able to use the internet resource without additional registra-tion.

Amendments to the Law On Electronic Signature and Electronic DocumentAccording to the Law, certificate (identification of Electronic signature holder) can now be also granted on the basis of application request of relevant state authority for verification of ID cards (previously, Electronic signature certificate could only be granted on the basis of a written contract).

Amendments to the Criminal CodeAmendment introduces a more accurate description of crimi-nal activities in the field of financial securities. According to the amendments, adoption of disinformation or misrepresen-tation to prospectus of securities (Information Memorandum), as well as statement of disinformation or misrepresentation to prospectus of securities (Information Memorandum), causing damage in the significant amount, shall lead to the criminal liability.

Production Calendar for 2017The Board of the Ministry of Labour and Social Protection of Population of the Republic of Azerbaijan has approved the “Norm of working time (“Production Calendar”) for 2017” by the Resolution No. 10 dated 15 December 2016. Based on the Labour Code of the Republic of Azerbaijan and Resolu-tion of the Cabinet of Ministers of the Republic of Azerbaijan No. 483 dated 25 November 2016 regarding the “Novruz, Ra-madan, and Gurban holidays in 2017” (“Resolution No. 483”), the following days have been defined as non-working days:

• 1, 2 January (New Year holiday)• 20 January (Day of National Mourning)• 8 March (International Women’s Day)• 20, 21, 22, 23, 24 March (Novruz holiday)• 9 May (Victory Day)• 28 May (Republic Day)• 15 June (National Salvation Day of Azerbaijan)• 26 June (Armed Forces Day of Azerbaijan)• 26, 27 June (Ramadan Holiday)• 1, 2 September (Gurban Holiday)• 9 November (Day of the State Flag of Azerbaijan)• 31 December (Day of Solidarity of World Azerbaijanis)• According to the Resolution No. 483, the following days

will also be considered as non-working days due to cer-tain holidays falling on weekends:

• 3, 4 January, 29 May, 28 June, 4 September with respect to a five-day work week

• 3 January, 29 May with respect to a six-day work weekPursuant to the Production Calendar, the annual norm of working hours for 2017 has been established as 1,922 hours for a 40 hour work week and will be applicable with respect to both fiveday and six-day work weeks.

Amendment to the “Law on Lotteries”On 15th of February 2017, President of the Republic of Azer-baijan signed a Decree, amending the “Law on Lotteries”. Amendments to the law are concerning advertisement of lot-teries. According to the amendments, it is allowed to place advertisements on lottery tickets. Additionally, the name of winner of lottery cannot be announced in advertisements without his written consent. The followings are prohibited in advertisement of lotteries:

• To address to children;• Promotion of idea that participation in lottery is a way to

gain reputation within society;• Guarantying earnings from lottery;• Discredit people who do not participate in lotteries.

Advertisements on lotteries can be placed in telecommuni-cation and mass media devices, as well as transportations and advertisement banners in open spaces. Advertisements on lotteries cannot be displayed on advertisement carriers that are situated closer than 100 meters to establishments for children and educational institutions. Additionally, terms of lottery, its time and duration, prize fund, place and time of provision of prizes, terms of receiving thereof and information about organizer have to be indicated or sounded in the adver-tisements on lotteries. Beverages containing more than 5% of alcohol, tobacco and tobacco products cannot be offered as a prize of lottery.Conduction of a lottery with the purpose of promotion of sales of beverages containing more than 5% alcohol, tobacco and tobacco products is prohibited. Organization of lotteries that are not duly registered or are prohibited by law cannot be advertised.

Regulations on “Licenses and permits” PortalOn 21st of January 2017, President the President of the Re-public of Azerbaijan signed a new decree approving the Reg-ulations of “Licenses and permits” Portal (“Portal”). The Portal shall ensure the provision of the following e-services:

• Submit, receive, process, address the applications on provision, re-registration, termination, renewal and re-vocation of the licenses and permits on entrepreneurial activities, as well as on provision of their duplicates and addendums.

• Conduction of a single register of licenses and permits on entrepreneurial activities;

• Ensure free usage of the Portal, and access to the data from the integrated information systems.

AmCham Azerbaijan

62 Issue 25

Members’ News and EventsA major regional forum of agricultural producers, the 11th Azerbaijan International Agriculture, CaspianAgro 2017 exhibition will take place from 17th to 19th of May in Baku. CaspianAgro has served as a platform for bringing together many foreign, as well as national visitors from more than 20 countries to interact with the leading international agriculture technology companies.Agriculture is a major point of interest to the Government of Azerbaijan. For several years in a row, the President of the Republic of Azerbaijan, H.E. Ilham Aliyev, has been attending the exhibition, and has become acquainted with new products offered by the manufacturers and distributors to the Azerbaijan market. At the conference, devoted to the success of the third year of implementation of the State Program on Regional Socio-Economic Development (2014-2018), it was noted that the agricultural sector has shown a successful pace of development, growing by 2.6% compared to the previous year. It was further noted that significant measures would be undertaken to preserve this positive dynamic in the future.Over the years, the Ministry of Agriculture of the Republic of Azerbaijan has not only provided invaluable active support to the CaspianAgro exhibition, but has also actively taken part in this event. The exhibition is also supported by the Azerbaijan Export and Investments Promotion Foundation, AZPROMO and the National Confederation of Entrepreneurs’ (Employers’) Organization of the Republic of Azerbaijan. The exhibition is organised by Caspian Event Organisers, CEO.The CaspianAgro 2017 exhibition reflects the results of agrarian reforms implemented in Azerbaijan that promotes the dynamic development of agriculture and the exhibition will enjoy a 20% increase in interest compared to last year. The CaspianAgro 2017 exhibition will bring together both manufacturers and distributors of agricultural products and equipment from Azerbaijan, Belarus, China, Italy, Turkey, Russia and Sri Lanka, as well as other countries. Georgia will take part with National pavilion in the Exhibition. The Netherlands has become a partner country as a result of

many successful years of participation by Dutch companies at the CaspianAgro exhibition. Registration sponsor of the CaspianAgro 2017 exhibition is the company Grand Motors from Azerbaijan.In general, the exhibition will cover the most relevant fields of the agricultural sector and will provide an opportunity to get acquainted with a number of innovations - equipment for poultry farms, greenhouse equipment and the turnkey construction of greenhouses, as well as kit for the livestock industry, substrates, foods for pets and fish, seeds, fertilisers, agricultural machinery, etc. The following sectors will be extended to include irrigation systems and agricultural machinery for cotton which has recently enjoyed great growth in Azerbaijan. The Laboratory Equipment sector will present microscopes, apparatus, laboratory instruments and equipment required to increase productivity and regularly study the crops - from weight to determining the extent of any plant infestations by harmful substances through moisture content and more.It is encouraging that companies from Azerbaijan will take part in these sectors on a par with foreign manufacturers. In general, Azerbaijani companies will make up 40% of exhibitors. In addition, traditional infotours for entrepreneurs and farmers from Azerbaijani regions will be organised at the CaspianAgro exhibition to help them learn about the latest equipment and machinery.Thus, the CaspianAgro 2017 exhibition provides a unique platform to showcase products, services and technology from Pre Harvest to Post Harvest. It also offers networking opportunities between targeted groups and high ranking agriculture officials to identify and explore business, as well as investment opportunities in the Caspian Region. CaspianAgro is a neutral platform where farmers, companies, Government departments, researchers and all stakeholders from agriculture industry are equally beneficial.

Book your calendar - CaspianAgro 2017, from 17th to 19th of May

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Petr Sergutin, Head of Valuation at Deloitte Azerbaijan

Petr is leading the Valuation Services practice of Deloitte both in Azerbaijan and in Georgia. He has been with Deloitte since 2010 and joined the Deloitte Azerbaijan team at the end of 2016. Petr has 6+ years of experience in Corporate Finance Advisory in Moscow, where he managed projects in the fields of valuation, financial modeling, feasibility study, economic advisory. Over the years in Deloitte Petr advised primarily to top-tier CIS-based companies in the sectors of power & utilities, oil & gas, transport, metals & mining, banking and others. Apart from that, Petr has been actively engaged in research, leading the macroeconomics projections unit of Deloitte and being a co-developer of a number of unique internal and industry-specific tools.Petr holds BSc Economics degrees from the Higher School of Economics in Moscow and the London School of Economics and Political Science. He is a Master of Applied Economic Sciences from the University of Antwerp.

Kelli Allin, Audit Partner of Deloitte Azerbaijan

Kelly is a senior partner in Deloitte CIS Audit practice, recently appointed as Audit leader in the Baku office, and serves clients in Russia, Azerbaijan, Kazakhstan, and Ukraine. He is a Canadian Chartered Accountant and has more than twenty years professional experience predominantly in public accounting, complemented by several years as the Finance Director and acting CFO of a Canadian public company. As a senior financial executive, he had extensive involvement with Boards and Audit Committees, and worked with commercial banks and investment banks to raise both debt and equity. He has spent more than fifteen years in the CIS in various capacities. Further, Kelly is the Independence Leader for Deloitte CIS, where he plays a key role in ensuring Deloitte maintains their independence and objectivity to all of their audit clients, and therefore upholding the public trust.Kelly has had primary responsibility for the audit of many of the CIS firm’s largest Energy and Resource projects. In Azerbaijan, Kelly will soon take on the role of Audit Partner for BP, as part of the awarding of the Global BP Audit to Deloitte, beginning in 2018.Kelly is passionate about sports, and the importance of teams. He has run a hockey program for children in Moscow for the past eight years; was a commissioner of a youth football program; coaches his children’s baseball teams; is an active ice hockey player together with a mixed group of ex-professional players and businessmen; and represents the Deloitte partners as the pitcher on the Deloitte baseball team.

New Appointments

AmCham Azerbaijan

64 Issue 25

AmCham Calendar of Events15 December 2016 – 15 March 2017

16 December - HR Committee Meeting

16 December - Meeting between AmCham and Deputy Minister of Culture and Tourism of Azerbaijan

27 January - HR Committee Meeting

31 January - Monthly Members’ Luncheon

6 February - “Meet Your Candidate” Cocktail 2017

10 February - Healthcare & Medical Insurance (HMI) Committee Meeting

14 February - Joint meeting of the members of AZPROMO’s Exporters Club and AmCham Presentation of “Made in Azerbaijan”

20 December - Presentation Ceremony of Web Portal Azexport.az

21 December - CSR Committee Meeting

17 January - Joint ICT and BFI Committees Meeting

15 February - ICT Committee Meeting

23 December - ICT Committee Meeting

15 February - Conference on Benefits of Hosting Major Sports Events

18 January - Tax & Customs Committee Meeting

17 February - HR Committee Meeting

23 January - Healthcare & Medical Insurance (HMI) Committee Meeting

18 February - T&C Committee Meeting

22 February - THT Committee Meeting

24 February - AmCham Annual General Assembly Meeting

1-2 March - First ever AmCham Azerbaijan Trade Mission to the USA 2017

2 March - Legal Working Group Meeting

10 March - Tax Conference on “Together towards Transparency”

13 March - HR Committee Meeting