Azerbaijan: Investing in Azerbaijan
According to UNCTAD's World Investment Report 2024, FDI inflows to Azerbaijan stood at USD 253 million, from a negative flow of USD 4.47 billion one year earlier. At the end of the same period, the total stock of FDI stood at USD 32.74 billion, around 42.7% of the country’s GDP. Azerbaijan inflows focus on the oil and gas sector, although one of the top priorities of the Azerbaijani Government is to diversify the country’s economy and attract FDI to agriculture, transportation, tourism, and information/communication technology. Russia is the main source of FDI, but beyond that, the country is part of the customs union between Russia, Kazakhstan, Armenia, and Belarus that, in terms of volume, is the most important in the region and is almost exclusively involved in major projects for oil/gas pipelines and related services. According to the latest figures by the Central Bank of Azerbaijan, FDI inflows totalled USD 7 billion in 2024, of which one-fifth came from the UK, ahead of Turkey (17.3%), Hungary (14.5%), and Cyprus (10.6%).
The Azerbaijani Government has stressed the importance of improving the business climate and it does not screen inbound foreign investment. According to Azerbaijani law, foreign investments receive comprehensive legal protection and are safeguarded against nationalization or appropriation, except in specific circumstances. Private entities have the freedom to establish, acquire, and divest interests in business enterprises. While foreign citizens, organizations, and enterprises can lease land, ownership rights are restricted to Azerbaijani nationals. Foreigners can establish business entities in Azerbaijan through three avenues: setting up a wholly-owned subsidiary, purchasing shares of an existing company, or forming a joint venture with a local partner. Additionally, foreign companies have the option to operate in Azerbaijan without establishing a local legal entity by registering a representative or branch office with tax authorities. Azerbaijan is expected to continue to attract investment as an alternative transit route due to the risks associated with the Russian route following the invasion of Ukraine. Nevertheless, the problem of corruption remains unresolved and may act as an impediment to the country's development: Azerbaijan ranked 154th out of 180 countries on Transparency International's Corruption Perceptions Index 2024. On the negative side, a small group of government-connected holding companies dominates the economy, the country remains very dependent on the hydrocarbon sector (which represents on average more than 90% of its exports) and has a fragile dollarized banking system with an underdeveloped private sector credit. Furthermore, while intellectual property rights enforcement and industrial infrastructure are improving, they remain insufficient, and judicial transparency is still lacking. Azerbaijan ranks 95th among the 133 economies on the Global Innovation Index 2024 and 75th out of 184 countries on the latest Index of Economic Freedom.
Foreign Direct Investment | 2020 | 2021 | 2022 |
FDI Inward Flow (million USD) | 507 | -1,708 | -4,474 |
FDI Stock (million USD) | 36,366 | 34,320 | 29,436 |
Number of Greenfield Investments* | 6 | 3 | 9 |
Value of Greenfield Investments (million USD) | 344 | 43 | 674 |
Source: UNCTAD, Latest available data
Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.
Country Comparison For the Protection of Investors | Azerbaijan | Eastern Europe & Central Asia | United States | Germany |
Index of Transaction Transparency* | 10.0 | 7.5 | 7.0 | 5.0 |
Index of Manager’s Responsibility** | 7.0 | 5.0 | 9.0 | 5.0 |
Index of Shareholders’ Power*** | 8.0 | 6.8 | 9.0 | 5.0 |
Source: Doing Business, Latest available data
Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.
Any Comment About This Content? Report It to Us.
© eexpand, All Rights Reserved.
Latest Update: May 2025