11. Define the main problems of the Republic of
Azerbaijan stemming from foreign investments
The flow of foreign investment into Azerbaijani economy started after signing of the
“Contract of the Century” in 1994. Following the agreement, rapid increase was observed in
the rate of the foreign investment into the country. The country has attracted $108 billion
of investments. 43.4% or $46.6 billion came from outside. After signing of ‘the Contract of
the Century’, 31 international contracts related with other fields in the Azerbaijani sector of
the Caspian Sea were signed with other oil companies.
Despite foreign investment comes to country with advantages, several disadvantages
may lead to various problems such as: political risk, negative exchange rate, etc.
Azerbaijan invites foreign investors, generally foreign capital is encouraged in the
country.
The "Azerbaijan Investment Map" prepared by the Ministry of Economy aims to help
foreign investors by informing them about the amount of capital they can invest in the
country. However, attracting foreign capital to the country creates a number of problems.
Foreign investment can have both direct and external effects on the host country's domestic
enterprises and the recipient's economy as a whole.
The main problems caused by foreign investments in Azerbaijan are:
- The increase of the external depth of the country,
- Directing the activities of foreign capital to the easily profitable raw material production
and service industry, not final products
- A small part of investments in many sectors of the country's manufacturing industry,
- As a result of the accumulation of the significantly high percentage of investments in
Absheron region, other regions literally suffer from a lack of foreign investment.
- Raising the level of production and productivity in the real sector against the
macroeconomic stability promised by the loans and advice of the international financial
structures can significantly strengthen the social security of the population and other socioeconomic problems.
-One of the main problems of foreign investments in our country is that 97.5% of foreign
investments in various production areas of the economy are direct investments. The volume
of portfolio investments is very low