Production of the competitive and high-quality products by attracting of foreign investments, modern technologies and equipment, management experience to the economy of the country is very important part of the economic development strategy determined by Azerbaijan government. During last years Azerbaijan Government pays much more attention to the foreign direct investments into non-oil sector and significance of the role of private sector in the economic and social development of the country. Country governance is interested in the intensification of the dialog with private sector for better understanding of the main problems investors face with in the sphere of the investment activity.

In 2002 during the meetings of President of Azerbaijan Republic with local and foreign businessman, the achievements in the sphere of development of small and middle entrepreneurship and at the same time the existing problems were disclosed. After these meetings the President of the country signed several decrees directed for support of entrepreneurship and improvement of the investment climate in the country, which was a basis for new stage by quality. In the framework of adopted governmental programs for improvement of economy of the country in the sphere of development of the entrepreneurship significant measures were realized, system of governmental financial assistance to the entrepreneurship was improved. Important steps were taken for formation of the entrepreneurship infrastructure, essential technical assistance – consultations to the entrepreneurship, information and structures, providing other services were formed.

In the previous period necessary actions were taken related to protection of investors’ rights and interests, inviolability of the property, creation of the same conditions for local and foreign entrepreneurs, unhampered use of the obtained profit. Unlike neighbor CIS countries all the limits related to converting of profit to other currencies, or reinvestment were reversed in Azerbaijan, and integrated currency rate were formed according to the market economy principles. These actions increased interest of foreign investors, international finance-economic organizations towards Azerbaijan.

Realization of the oil strategy has great significance in the success of the country’s economic development. After signing of the “Contract of the Century” with authoritative foreign oil companies, as a result of the works carried out within the framework of this contract, primary oil was extracted in 1997 and since 1999 profitable oil started to be exported.

State Oil Fund was established on purpose of broadening of the operation of the oil resources of Azerbaijan Republic, for collecting of the oil profits of the country. Use of the means of State Oil Fund is accomplished according to the state investment policy. In the medium term perspectives expenses of the Oil Fund are directed to the projects related to the reduction of level of poverty in the country, as well as financing of the construction and reconstruction of strategically important infrastructure operations. Expenses of the Oil Fund are considered in the volume of the gained percentage profit mainly from the management of the means of Fund. At the same time, reconstruction of the Great Silk Road, TRASEKA projects are being realized. These projects serve not only for economic development of Azerbaijan, but also for broadening of the cooperation between the countries of the region, for rise of economic power of these countries, for prosperous life of the nations living there. At present the main purpose of the Azerbaijan Government is to achieve regular development of the economy and to debar appearance of the “Holland syndrome”.  For this purpose Azerbaijan Government has plans for continuation of economic reforms in the country, improvement of the business environment, consistent realization of actions related to development of the non-oil sectors along side with oil sector. One of the most important means of attraction of the investments to the non-oil sector of Azerbaijan is process of privatization.

Since today investors of Turkey, United States of America, France, Great Britain, China, Iran, Switzerland, Holland and of some other countries participated in the privatization process being realized in Azerbaijan and obtaining at least 51% of the shares they invested big amounts into these enterprises. According to the decrees of the president of Azerbaijan Republic enterprises open for privatization give powerful incentive for inflow of foreign investments to especially attractive for foreign investors’ spheres, such as metallurgy, chemistry, energy, mechanical engineering, transport, communication and others. Cooperation with international organizations for the purpose of increase of attracted to the economy of the country investments widens every year. World Bank, International Financial Corporation, European Bank of Reconstruction and Development, Islamic Development Bank, Asian Development Bank, Black sea Trade and Development Bank and other financial structures deposited credits on cession conditions for realization of the projects in different spheres of economy. Necessary to note, that Azerbaijan is a country that receives less credit per capita among other CIS countries. Amount of foreign debts is on a level of 23% of general internal product and is less than currency deposit of the country. It means that country has reliable financial system.

One of the most priority directions in the development of the non-oil sector found its reflection in the projects of the state programs, such as “State Program for Reduction of the Poverty and Economic Development”, “State Program for Development of Small and Middle Entrepreneurship”, “State Investments Program for 2003-2005”. One of the important measures was establishment of Board of Entrepreneurs including foreign and local businessmen under Azerbaijan Republic. Board of Entrepreneurs plays great role in improvement of the business climate in the country, increase of the support of the government to this sphere, regular necessary actions after analyses of the present problems.

At the same time the law about the simplification of the system of licensing was passed. So, system of licensing was totally changed, number of the types of licensing activities was reduced from 240 to 30, duration of the license prolonged from 2 years to 5 years. Application of the new licensing system will lead to development of free competitiveness, increase of the quality of production and provided service. Procedures of receiving of government registration for juridical persons was also simplified a lot, problems in that sphere were liquidated.

As it is well known, one of the most necessary conditions for improvement of business climate is related to tax regulations. It is necessary to note that every year tax regulations are liberalized according to the Tax Code. So, for last year number of taxes, social insurance payments reduced a lot. Tax levels regularly lower since 1998. At the same time tax administration improves, number of examinations reduced, for the purpose of taking appropriate measures for interference in obstacles for the development of entrepreneurship examination structures were liquidated except tax organs.

Adaptation of the activity of the customs organs to international standards, for simplification and clarity of the procedures International Currency Reserves and Global Customs Organization realize joint program. At present export duties were cancelled, maximum verge of the import duties were determined at 15%. At the same time Tariff Board was established according to the law of the President of the country for development of the legal competitive climate, as well as for systematic regulation of the prices determined by the government.

According to the appeal of the Azerbaijan Government and on the basis of the International Finance Corporation, Foreign Investments Advisory Services (FIAS) of the World Bank conducted monitoring of the investment climate and defined actions plan for the further improvement of the climate. One of the first steps of the carrying out these actions was establishment of the Azerbaijan Investments Promotion and Advisory Foundation. At the same time law projects “About investment activity” and “About special economic zones” were created by the experts of the World Bank. New law “About Investment activity” will replace present two laws – “About Investment activity” and “About protection of foreign investments”. Unlike two present laws, new project reflects most perfect elements of the international experience. Based on the experience of the other countries new law project includes innovations, such as protection of the investments, solution of the disputes occurred during investment activity and other key principal issues. Also, International Investment Conference was held in Baku, in May 2003 and exchange of views on creation of the business activity for potential investors in Azerbaijan was realized. The review of this conference proved that one of the main conditions of the investment activities is provision of the potential investor with necessary information, assistance in choice of the activity direction, determination of the concrete business activity, arrange of the contact with relevant state and private structures.

Now, there are great opportunities for activity in Azerbaijan. First of all, it is necessary to note that advantageous geographic location of Azerbaijan gives an opportunity to export production produced in Azerbaijan to the countries of Central Asia, Iran and other gulf countries, as well as to Russia, and to establish contacts with the companies of these countries. Foreign companies can also participate in the process of privatization being realized in the country. On this purpose clear and transparent mechanisms were determined in the privatization legislation for participation of the foreign companies in this process. In spite of the reforms in the direction of improvement of the investment climate in Azerbaijan and obtained achievements in this sphere, there are still a lot of works to do for attraction of the investments into non-oil sector. The main element of the successfully realized programs in the sphere of the improvement of the investment climate is organization of the dialog between state and private sectors. Today activity of the investment process and problems of increase of its productivity have great importance for the future of Azerbaijan Republic.

The role of the Azerbaijan Investments Promotion and Advisory Foundation as representative of the government of the republic consists of organization of the system of conditions determined by the fertile investment climate, increase of the investment and general culture of the entrepreneurs, realization of the actions directed to the information supply of the investment activity and strengthening of the security and support of the other structures acting in this sphere.