Alat Free Economic Zone: Ambitious development plans
By Sabina Alizade
The Alat Free Economic Zone (FEZ) continues to attract the attention of investors and experts with its ambitious development plan, which includes the construction of a modern cargo airport.
The cargo airport planned for construction in the Alat FEZ is undoubtedly set to become a key element of Azerbaijan's and the region's logistics infrastructure. Its strategic geographical location at the crossroads of international transport routes and its proximity to the Baku International Sea Trade Port make it an ideal point for multimodal cargo transportation.
In the first phase, its capacity will be 500,000 tons per year, which will significantly increase the volume of cargo transportation in the region. In the next phase, the capacity is planned to be increased to 1.5 million tons per year, further strengthening Alat FEZ's position as an important logistics hub.
However, there are certain requirements for investors and manufacturers who wish to work within this project. According to statements from the Alat FEZ administration, the primary focus is on investors capable of providing high added value through export-oriented products and adherence to relevant international quality standards and innovative technologies.
Interestingly, at least 75% of the products manufactured within Alat FEZ must be exported. Although this requirement has faced criticism in some circles, it is based on strategic goals aimed at stimulating export-oriented investments and protecting the domestic market. It is important to note that such measures are intended to support regional economic development and create new opportunities for business growth.
The establishment of the cargo airport in Alat FEZ opens up broad prospects for the development of logistics, manufacturing, and trade in the region. However, the implementation of this project also presents a number of challenges for both investors and the government, including attracting quality investments, ensuring compliance with international standards, and addressing export strategy issues.
Overall, the construction of the cargo airport in Alat FEZ is a significant step towards modernizing infrastructure and stimulating economic development in the region. Given its strategic geographical position and state support, this project has the potential to become a key element in the development of Azerbaijan's transport and logistics industry.
Free economic zones (FEZ) are special areas where companies can operate with minimal restrictions and tax obligations. These zones offer various incentives to investors, such as preferential tax regimes, ease of doing business, and access to infrastructure. While many successful FEZs around the world have been created with state investment, the possibility of involving foreign companies in the financing and management of such zones should not be excluded.
Historical experience shows that FEZs based on state investment achieve success. Examples include zones in Ireland, Singapore, China, and other countries. However, there have also been unsuccessful experiments with private companies taking over the management of FEZs.
Why are private companies not always willing to take the risk of investing in free economic zones? One of the main reasons is the high level of risk. Investing in such projects requires significant financial resources, and there is no guarantee of the project's successful completion. Private companies typically require the guarantees and stability that can be provided within the context of state-owned FEZs.
Despite these challenges, it is worth noting that there are already companies registered and operating in Alat FEZ. Some of them plan to start production within a few years. It is important to understand that establishing a successful manufacturing complex takes time, so it is necessary to support investors and create comfortable conditions for them.
The advantages of Alat FEZ include the presence of a legislative framework that ensures the extraterritoriality and independence of the Alat FEZ Authority, as well as the provision of land plots with ready infrastructure to investors. This makes the area attractive to potential investors.
In an interview with News.Az, lawmaker and economic expert Vugar Bayramov stated that the opening of the first phase of the Alat Economic Zone took place in June 2023. It is expected that the entire infrastructure of the zone will be fully established and operational in the coming months. Intensive efforts are being made in this regard, and the full launch of the Alat Economic Zone may happen in the near future.
"Overall, the Alat Economic Zone aims to attract more investments. There are special incentives for attracting investments, including exemptions from almost all taxes. The goal, naturally, is to attract as much investment as possible. In this context, the Alat Economic Zone offers several advantages. The main advantage is that a separate law has been enacted for the zone. This means that the zone's activities are regulated by a specific law, in line with the PCA principle, which ensures the regulation of the zone's activities through a dedicated law, rather than the existing legislation. This is crucial for attracting foreign investment and ensuring the protection of investments," he said.
Vugar Bayramov also highlighted the geographical advantages of Alat FEZ, noting that having an airport, as well as access to the sea and the largest airport in the region, creates export advantages. The geographical location is highly advantageous, as it also holds significant benefits in the context of international freight transportation.
"This region, located on the Middle Corridor, naturally allows for greater investment attraction to the Alat Economic Zone. Utilizing the integrated airport for the Alat Economic Zone will enhance the transportation capabilities of the Middle Corridor. This also presents an opportunity for the Middle Corridor, as it will ultimately increase the volume of cargo transported through Azerbaijan," the expert noted.
Vugar Bayramov emphasized that the primary goal of the Alat Economic Zone is to attract foreign investment, innovation, and technology. The zone, by attracting foreign investment, will contribute to the growth of non-oil and gas sector manufacturing. Additionally, the zone will make it possible to create new jobs by attracting foreign investment, thus contributing to employment. It will also create new opportunities for the employment of skilled personnel and the dissemination of innovation and technology.
"Furthermore, state support plays a crucial role in attracting foreign investment. Creating a favourable business environment, tax incentives, and other investment incentives help convince companies to invest in free economic zones. Different countries' experiences have been considered in the preparation of this concept, including the experiences of Ireland, Singapore, and Kazakhstan.
The main advantage of the Alat Economic Zone over other economic zones is that it is regulated by a separate law. Regulation by a separate law means that the Alat Economic Zone guarantees investment protection under a specific law or British law. The primary difference from other economic zones in the region is precisely in the mechanism for guaranteeing investment, which involves the adoption of a specific law and regulation within this framework. This, of course, is the main difference, and it is characterized as a new opportunity for attracting investment," the expert concluded.
Similar news
