In early 2020, Turkey and Azerbaijan have signed a free trade agreement, strengthening both countries’ bilateral relationships. This agreement was in conjunction with the massive trade volume between the two nations since 2019, reaching around USD 2 Billion per year.
Turkey and Azerbaijan’s growing comraderies take in the form of the FDI activities throughout all economic sectors; there are currently more than 2.000 Turkish companies with Azerbaijani capital.
Hopefully, these investments would transfer Turkish agencies’ experience in supporting Small to Medium Enterprises (SMEs) during the post-pandemic period.
The preferential trade deal between Turkey and Azerbaijan has begun as of March 1st, 2021. Turkey has made investments worth USD 12 Billion in Azerbaijan, focusing on the State Oil Company of Azerbaijan Republic (SOCAR).
Simultaneously, Azerbaijan’s Turkey investments reached USD 19.5 Billion, mainly in machinery, mechanical appliances, and construction industries.
During the 2021 Turkey-Azerbaijan Business Forum alone, the two countries formed 11 agreements and a memorandum of understanding worth over USD 100 Million, Making the country the number 1 trade partner of Turkey.
The aim is to provide both countries’ entrepreneurs opportunities for collaborations and overcome the weak market growth, eventually strengthening the nations’ economic level. Turkey and Azerbaijan have set a target of USD 15 Billion trade volume by 2023.
Knowledge and Experience as a Commodity
According to Marketresearchazerbaijan.com, Azerbaijani investment in Turkey is a sign of confidence and good faith towards the nation’s economy. The cooperation element contributes to the principle that shared prosperity is the best way to recover during the post-pandemic volatile market condition.
The Azerbaijani government has expressed a strong hope that these investments would transfer Turkish agencies’ experience in supporting Small to Medium Enterprises (SMEs) during the post-pandemic period.
Moreover, the Azerbaijani and Turkish agriculture ministries have signed a declaration of intent on using technologies and cooperation in agricultural education. The decree outlines issues of modern technologies used by Turkey in Azerbaijan’s agriculture field.
A joint working group and an action plan will facilitate the exchange of experiences with local Azerbaijani specialists and farmers in modern training agricultural methods.
The Revival of the Silk Road
One of the most crucial plans that the countries will make is to prepare Baku as a logistics center that would become a preferred route after Turkmenistan’s border opens. Azerbaijan’s location makes it a reliable transit partner for trade activities; It is the shortest route of the China-Europe line and has a long historical value as the silk road.
The Azerbaijani officials have invested in developing railways, ports, and logistics centers from the Caspian sea to the west.
Turkey’s role in supporting the renewal of the silk road would bring enormous benefits to the country, as Turkish cargos have recently opted for Baku’s route for their deliveries to China. The Baku-Tbilisi-Kars railway has been the priority vector for the transport of China’s goods to Europe since 2017.
The future of Turkey and Azerbaijan’s economic growth relies heavily on the practice of their free trade agreement. The development prospect needs to include a positive sentiment from the public and private sectors, which would lead to a consistent investment climate to other emerging sectors as the nations recover from conflicts and turbulences.