Promoting a chemical reaction in Sumgait

By bne IntelliNews September 28, 2012

Jahan Hoggarth in Sumgait -

With the non-oil sectors of Azerbaijan's economy growing rapidly thanks to government subsidies, the frenzied diversification of the economy is filling up Azerbaijan's run-down industries like a swollen river regenerating the dried-up streams.

Beating the drum of Azerbaijan's diversification policy is Azpromo, the state promotion agency, which is hard at work fostering non-oil industries and encouraging investors. And no job is too big or too small; from restoring the production of old favourite sweets at the Guba sugar factory, to pioneering opportunities in solar energy, to reviving in an environmentally and economically sustainable way Azerbaijan's industrial hub Sumgait, located about 30 kilometres from Baku, by turning it into a free economic zone.

Once an industrial centre of the Soviet Union during World War II, Sumgait was a grim example of neglect and environmental degradation resulting from the Soviet-era chemical plants, many of which have been closed down since the 1990s. Yet Sumgait as an industrial centre is the basis of the Absheron economic region, where nearly 90% of the industrial potential of the country was centered, including large petrochemical plants. It's not surprising, therefore, that the city's restoration and industrial revival is high on Azpromo's list. Recently formed, the Sumgait Chemical Industrial Park (SCIP) is a good example of the government's efforts to create new opportunities and a favourable environment to encourage businesses to invest.

Located on a land plot of 163 hectares, SCIP is a one-stop-shop entity created solely to develop Azerbaijan's chemical and petrochemical industry through private investments and foreign know-how. With a minimum investment capital of €1m, investors will be offered zero customs duty, VAT and income tax. SCIP also plans to offer to co-finance projects up to 30% of total costs.

Acting as a "buffer" zone between the government and private companies, SCIP will ensure fast licensing and registration, as well as relief from bureaucratic complications. "We offer access to a wide range of international markets and export opportunities," says Samir Mammadov, business support manager at SCIP. "Russia, Iran, Turkey, Georgia and Europe via Georgian sea ports - all are within easy reach from Sumgait. We can also access Kazakhstan and Uzbekistan via the Caspian sea."

Priding themselves on the availability of highly skilled staff, SCIP plans to open a specialist technical school within the park to offer intensive training in dedicated subjects and will, if necessary, sponsor students to study at European universities to comply with investors' requirements of specialist skills. "Sumgait is full of chemical specialists and we intend to utilise their knowledge and experience," says Mammadov.

Employment opportunities

With the demolition of the old Soviet factories in full swing, SCIP estimates that the park will be open for business in six months time. SCIP's new infrastructure will include railways; the Azerbaijan-Russia motorway; and an industrial seaport. They also plan to develop the park into a living complex with shops, playgrounds, sports centres, and financial services. According to SCIP's estimates, the capacity of new working places could be up to 10,000 people.

With so much on offer, the heads of SCIP are also clear on what they're looking for in a potential investor. "Attracting foreign know-how and latest technology is very important to us. Companies that are unable to bring in new technologies with them will not be able to invest, independent of their investment amount," says Mammadov.

The main investors to be targeted are those involved in the production of plastic materials, the food industry and medical supplies. SCIP is already in talks on a variety of production opportunities, such as compound ink for printer cartridges, plastic door frames and hosepipes. "There isn't much around yet, as we're busy demolishing the old Soviet factories for the time being, but the interest from abroad is huge already. We offer cheap resources, access to oil and gas products, and small investment capital. There are no equivalents to what we're offering in the radius of 1,000 km from Sumgait, and that includes southern Russia and partly Kazakhstan" says Mammadov.

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