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Why Azerbaijan should be your next new market

Now it has established itself as a major oil producer with big cash reserves, Azerbaijan is desperate to diversify its economy. The building sector is taking up the challenge – spearheaded by cash from Azerbaijan’s $34bn state oil fund, construction was responsible for nearly 9% of GDP in 2013, and is likely to keep this performance up.

Here are four reasons why Azerbaijan’s building market is doing so well:

1.Big construction projects

Building projects don’t get much bigger than the world’s tallest skyscraper - the Azerbaijan Tower is currently under construction in Baku, and when it is finished around 2019 it will top out at over a kilometre tall. The tower is actually part of a bigger project to create a development of artificial islands, the Khazar Islands, where $100bn is being spent on housing and facilities for 1 million people.

As well as this, Azerbaijan is busy preparing for several sporting events it will host in the next few years, including the 2016 European Grand Prix (which needs seating and facilities for visitors), a game of the 2020 UEFA European Championship, and the 2017 Islamic Games. All these will need facilities to be built.

A third area seeing big spending is transport facilities. Construction on the new Alat international sea trade port began in 2010, and the government has announced this January that it will commission a new roll on-roll off terminal for the port in 2015.

Finally, a growth in tourism means Azerbaijan’s builders are spending a lot of money on putting up accommodation and hotel complexes. Projects include the Shahdag winter and summer complex in northern Azerbaijan with more than 3,000 rooms, a health and recreation centre in Naftalan, and the $200m Water and Fire centre in the southern Lenkoran region.

2.Small construction projects

That being said, Azerbaijan’s building growth is based on more than headline-grabbers. Housebuilding grew by 12% in 2013, when 2.4 million sqm of space was finished, and the amount of houses built per year has tripled since 2002.  Cement production rose by 34% from 2011 to 2013 and brick production also grew dramatically, as local suppliers struggle to meet the demand.

There is also real potential for growth in the interiors market. Azerbaijan’s paint consumption per capita is just 5kg, behind Russia and Kazakhstan and well under the global average of 11.2 kg, and this is sure to rise as more and more houses are built and need to be decorated.

3.Growth in the economy

Azeris are getting more and more disposable income to furnish these new houses with – Azerbaijan officially became a middle-income country in June 2014, and per capita income has increased 400% since 2005. Mortgage lending is also on the rise – the Azerbaijan Mortgage Fund reported a 29% growth in its lending in 2014.

4.Improvement in the business environment

For any companies that like the look of Azerbaijan so much they want to set up permanently there, the country offers an attractive environment for doing business. It takes just five days to set up a business there, putting it in 12th place globally, and the economy is now the 38th most competitive in the world, up eight places on its previous position. While corruption remains a problem, Azerbaijan is also continuing its rise up the World Bank’s Ease of Doing Business rating, now sitting in 80th position.

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