Azerbaijan Market Entry

Azerbaijan Market Entry

Subchapters:

  • Market entry
  • Forms and conditions of operation on the market
  • Marketing and Communications
  • Issues of intellectual property protection
  • Public procurement market
  • Payment terms, payment ethics and resolution of commercial disputes
  • Visas, fees, specific conditions of travel to the territory
  • Employment of citizens from the Czech Republic
  • Fairs and events

Market entry

Support in the form of a local, financially strong and established sales representative is an absolute necessity for the successful sale of foreign goods on the local market. When selling goods in a country through a local sales representative, a wholesaler-distributor is usually used to supply the sales network. Often, especially with smaller traders, this article is missing and the goods are delivered directly.

According to cheeroutdoor.com, Azerbaijan has a liberal foreign exchange regime and there are practically no obstacles to the exchange and transfer of funds associated with investing in a freely convertible currency legally and at the market rate. The exchange is carried out by the so-called Baku Currency Exchange Market and Organized Interbank Currency Market. An electronic exchange mechanism, The Baku Electronic Exchange System (BEST) has been operating in the country since 2002. It is also possible to exchange foreign currency in banks and their branches. Please note that in January 2016, all exchange offices were closed across the board and, according to available information, their activity is not expected to resume in the future, foreign currency exchange takes place only in expanded bank branches.

Since 2001, the use of foreign currencies in cash transactions has been prohibited. The average time for sending funds abroad is 2-3 working days. In practice, the additional obligation to state the source of funds in case of suspicion of money laundering is consistently applied. In 2007, the Parliament approved an amendment to the Foreign Exchange Act, which abolished additional taxation of cash exports from the country, which is in line with the WTO requirement and was also supposed to help reduce inflationary pressures.

Since the fall of the Soviet Union, Azerbaijan has radically liberalized foreign trade. The first legislation regulating the functioning of foreign trade was adopted in 1992. However, significant restrictions on the export of so-called strategic goods or goods of strategic importance existed until 1994. This included, among other things, all petroleum products. Even today, there is still a fairly limited list of products where approval, certification or licensing is required for export and import to/from the country.

Export restrictions for reasons of national security: goods and technology subject to export in accordance with international agreements; weapons, including weapons of mass destruction and their carriers; so-called dual-use goods that can be used for the production of WMD; explosives and radioactive materials; other goods and services designated by the President of the Republic as goods subject to approval. The export of these products requires a statement from the competent authority of the state.

Import and export based on the decree of the Cabinet of Ministers: weapons and military equipment; explosives; radioactive materials; narcotics; the special kinds of scientific knowledge and technical know-how necessary for the production of weapons; blood and blood products; export of rough diamonds.

Export and import based on the issuance of permits from various state authorities:

Exports: wild animals and plants, especially those protected by international conventions and belonging to endangered species; raw materials from plants and animals for the production of medicines; works of art and antiques; inventions and know-how; narcotics.

Imports: insecticides; drugs and medical devices; veterinary drugs; wild animals and plants; raw materials from plants and animals for the production of medicines; narcotics that are not registered in Azerbaijan.

For more information regarding the categories mentioned above, we recommend contacting the Embassy of the Czech Republic in Baku at the e-mail address: [email protected]

The practice of customs clearance has been the target of criticism in Azerbaijan since the creation of the modern state. However, in connection with the economic problems that Azerbaijan has recently been facing, there is a noticeable effort to improve the situation. Already in 2009, the operation of the so-called one window shop at the customs offices was started, which in practice made it possible to handle the complete customs declaration in one place. According to official data, thanks to this, it was possible to shorten the process of processing it to 15-20 minutes. However, the most important changes were brought about by the presidential decree of January 2016, which greatly clarified the process of determining the amount of duty, eliminated the voluntary-compulsory practice of using the services of customs brokers, and increased the limit for duty-free non-commercial imports from USD 2,000 to USD 10,000. The actual customs procedure takes place on the basis of several legal documents, the most significant of which are the Customs Code (August 2011) and the Decision of the Cabinet of Ministers on Customs Tariffs from 2001. The above legislative documents divide customs duties into three groups: ad valorem (10-25%), specific duties, composite duties (a combination of the two previous duties). Recently, the prevailing tendency is to increase the role of ad valorem customs duties.

Forms and conditions of operation on the market

According to the law, foreign investors can form joint ventures with local partners for the purpose of doing business or create new enterprises, 100% owned by a foreign entity, in the form of a local representative office or branch. Although the government does not formally supervise foreign investments, the process of registering a new company with the Ministry of Justice is a de facto “screening” of the investor and the investment. According to the law, the registration of a company involves only an assessment of the correctness of the submitted documents. When looking for suitable commercial as well as residential premises, we recommend using the services of one of the numerous real estate agencies.

Currently, there is no legal norm mandating a foreign investor to hire local labor, however, discussions on this topic are ongoing in Parliament. An employer must obtain a license from the Ministry of Labor if it chooses to hire a local workforce. Foreigners working in the country must register at the immigration office in their place of residence and obtain a work permit from the Ministry of Labour. Heads of representative offices of foreign companies and their representatives do not need a work permit to work, as they are not considered a so-called migrant workforce.

Marketing and communication

As anywhere else in the world, in Azerbaijan, advertising is an integral part of the sales strategy of any company that wants to operate successfully on the market. Printed advertising (advertisements in the press, advertising banners on the streets and distribution of advertising leaflets) is provided by agencies, mostly with a share of foreign capital. Electronic media of all kinds are also very popular, with Facebook and Instagram clearly leading in the field of social networks.

Compared to European customs, large-scale advertising in the form of billboards is not very widespread.

Issues of intellectual property protection

In Azerbaijan, the rights associated with the use of movable and immovable property are formally recognized. Azerbaijan’s judicial system is characterized by selective efficiency and does not function independently of the executive branch. Poor quality, unreliability, arbitrariness and insufficient law enforcement are obstacles for foreign (and domestic) companies to develop any business in the country. Politically well-connected groups (clans) profit from controlling the most lucrative sectors of the economy. Amendments to the Civil Code from 2007, which allow authorities to forcibly buy up land (supposedly with the aim of faster construction of public buildings) may threaten the investor’s property rights even more.

However, there is some improvement in this area. The government is currently working intensively with the World Bank to improve the property registration system. In 2006, the government centralized the database of all operations on the residential real estate market into a network of notary offices, methodically managed by the Ministry of Justice.

Azerbaijan already started implementing a national system of registration and protection of intellectual property in the mid-1990s. The measures were carried out in cooperation with the World Intellectual Property Organization (WIPO), of which the country is a member. At the same time, legislation was amended in this sense, and thus the Copyright and Related Rights Act was adopted in 1996, the Patent Act in 1997 and the Trademark and Geographical Names Act in 1998. Azerbaijan is a member of the World Intellectual Property Organization (WIPO), a party to the Paris Convention for the Protection of Industrial Property, the Berne Convention for the Protection of Literary and Artistic Works, the Phonogram Convention and both of the so-called WIPO Internet Treaties.

Public procurement market

Public procurement notices are published in the official newspapers of Azerbaijan and Respublika together with the conditions and deadlines for submitting applications. According to the law, all public contracts should also be published on the website www.tender.gov.az. However, tender specifications are mostly published only in the Azerbaijani language.

In 2021, the State Service for Antimonopoly Supervision and Control of the Consumer Market under the Ministry of Economy of Azerbaijan stated that Azerbaijan plans to completely switch to electronic public procurement. The modernization of the portal www.etender.gov.az is planned, work on this portal should be completed in 2022. At the same time, a new draft law on public procurement is expected to be presented, which envisages a 100% transition to electronic procurement. As part of the modernization of the server, tenders should also be translated into English and Russian.

Payment terms, payment ethics and resolution of commercial disputes

According to the experience of Czech companies, the payment morale of local partners is relatively satisfactory.

In general, disputes and disagreements arising between foreign investors and companies with foreign capital, state institutions or enterprises, public organizations or other legal entities are decided by local courts or, upon agreement of the parties involved, by arbitration courts (including foreign ones). A dispute settlement mechanism exists in Azerbaijan, but effective means of protecting and enforcing property and contractual rights are not always guaranteed. The state does not officially interfere with the competence of the courts, but in practice the judicial power has only a very weak position vis-à-vis the executive. Judges often do not have adequate knowledge and experience of modern tax and economic legislation.

Since 2000, the International Arbitration Act has been in force, which introduces the possibility of local arbitration when it comes to contracts with the participation of a foreign entity. However, this is a very rarely used mechanism. Bilateral agreements on the promotion and protection of investments provide foreign entities with better safeguards in case of disputes in this sense. Azerbaijan is a contracting party to the World Bank Convention on the Settlement of Investment Disputes between States and Nationals of the other States, as well as a member of the Multilateral Investment Guarantee Agency and the 1958 New York Convention on the Recognition of Enforcement of Foreign Arbitral Awards.

Local legislation also knows the Bankruptcy Act, but this mechanism is also used very rarely.

Visas, fees, specific conditions for traveling to the territory

Citizens of the Czech Republic are required to have a visa to enter the territory of Azerbaijan.

ATTENTION: When staying in Azerbaijan for more than 15 days, foreigners are required to register with the migration service. Registration can be done online at: http://en.e.migration.gov.az/. If this obligation is not respected, payment of a fine is required when leaving Azerbaijan and, in extreme cases, deportation may occur.

Visas can be obtained:

  • electronically at the Internet address: https://evisa.gov.az/en/; the visa fee is 25 USD, the standard processing time is 3 working days;
  • or, in the case of a longer stay than 30 days, in person at the consular section of the Embassy of Azerbaijan in Prague (Na Zátorce 783/17, 160 00 Prague 6, phone: 246 032 424, fax: 246 032 425, http://prague.mfa.gov.az/ ). The processing of the request takes about 10 days.

For a visa application submitted in person at the consular section, the following must be submitted:

  1. an invitation from an Azerbaijani subject subsequently confirmed by the consular department of the MFA of Azerbaijan;
  2. completed visa application;
  3. valid passport (valid for at least 6 months after the visa application);
  4. two passport size photographs;
  5. proof of payment of the consular fee.

Travel recommendations:

Heydar Aliyev International Airport is connected to the world by a fairly dense network of airlines. From the Czech Republic, in general, the most advantageous connection in the summer months is the direct connection Prague – Baku operated by the national carrier AZAL twice a week, then via Istanbul (AZAL, Turkish Airlines, AnadoluJet, Buta Airways and Pegasus) and Frankfurt (Lufthansa); the Budapest – Baku route is provided by the low-cost company WizzAir. In addition to some international connections, the national airline AZAL also provides flights between Baku and the largest cities of Azerbaijan, including Nakhchivan – the capital of the Nakhchivan Autonomous Republic.

The cheapest connection between the Baku airport and the 28 May metro station in the city center is provided by the comfortable Airport Express bus: the trip costs manats (approx. 16 CZK) if you buy a rechargeable Baku Card for 2 manats, which is also valid on metro lines and public transport buses. A verified taxi company can be contacted at the Azerbaijani number 189 (operators speak English and Russian); you will be informed in advance about the price (the journey from the airport to the center will cost about 15 manats) by text message. Other taxi services are usually more expensive; in the case of their use, it is more than desirable to agree on the price before getting into the car. It is also possible to recommend the service Bolt or Uber (8-10 manats).

The Azerbaijan-Armenian border is closed. It is not recommended to travel to the border areas with Armenia and to areas near the contact line. By entering the territory of the internationally unrecognized Nagorno-Karabakh Republic without the consent of the Azerbaijani authorities, a citizen of a third country commits a violation of the border regime of the Republic of Azerbaijan and will be declared an undesirable person. We also point out that the border between Azerbaijan and the Russian Federation passes through the security-problematic Dagestan on the Russian side. We recommend that you carefully consider a possible trip to/from Azerbaijan via this route.

There are no restrictions on movement within Azerbaijan itself. Increased risks of terrorist attacks are not confirmed. During your stay, it is recommended to respect the basic safety rules of conduct and respect the instructions of members of the armed forces (for example, you cannot move freely in the immediate vicinity of presidential or government buildings). More information.

There are no restrictions on importing foreign currency. A customs declaration must be completed upon arrival. Foreign currency can be exchanged in an extensive network of banks. The use of payment cards is very widespread in Baku, the situation may vary in the regions to which we recommend that you also carry cash when traveling. When exporting objects manufactured before 1960, the exported object is subject to export tax and the export itself requires permission from the Ministry of Culture.

In general, it is recommended to drink bottled water in Azerbaijan, which can be purchased in any store.

When traveling to Azerbaijan, we recommend registering in the Voluntary Registration of Citizens of the Czech Republic when Traveling Abroad (DROZD) system.

Pay close attention to continuously updated travel recommendations related to the COVID-19 pandemic on the website of the Embassy of the Czech Republic in Baku.

Employment of citizens from the Czech Republic

A work visa issued by the State Immigration Service of Azerbaijan is required for employment in the country. Given that the situation, rules and fees in this area change very quickly over time, we recommend contacting the relevant embassy in the Czech Republic before applying for a work visa.

There is no agreement between the Czech Republic and Azerbaijan in the field of health insurance. For this reason, Czech citizens in Azerbaijan are provided with healthcare only for a fee. In the event of a trip to this country, we therefore strongly recommend taking out appropriate travel insurance.

Fairs and events

Several regionally important trade fairs and exhibitions are held in Azerbaijan every year. A fair focusing on Caspian Agro and Interfood Azerbaijan (May), Caspin Oil & Gas and Caspian Power (first week of June), educational fair EduExpo (October), BakuBuild and Aquaterm (October) is organized annually.

You can find more information about the individual fairs held in Baku on the website of the main exhibition organizer Caspian Event Organizers.

More detailed information about the exhibitions is published on the website of the Embassy of the Czech Republic in Baku, BusinessInfo, PaulTrade or the Ministry of Industry and Trade.

The Embassy of the Czech Republic in Baku organizes a number of different activities, in addition to supporting participation in trade fairs, it organizes forums and business missions. One of the most effective tools for export support is the organization of sector-oriented projects to support economic diplomacy in the form of missions of Czech entrepreneurs to Azerbaijan or representatives of Azerbaijani institutions to the Czech Republic.

Azerbaijan Market Entry