At the conference dedicated to the results of the first year of the “State Program on Socio-Economic Development of Regions for 2019–2023,” President Ilham Aliyev issued directives aimed at increasing non-oil exports. In response to questions about realizing Azerbaijan’s non-oil export potential, Vusal Gasimli, Executive Director of the Center for Analysis of Economic Reforms and Communication (CAERC), commented:

Under the leadership and initiative of the President, four state programs dedicated to regional socio-economic development over the past 16 years have resulted in a 6.4-fold increase in foreign trade turnover, a 7.6-fold increase in total exports, and a 5.2-fold increase in non-oil exports. Non-oil exports grew by 24% in 2017, 10% in 2018, and 14% in 2019, with a cumulative three-year growth exceeding 55%. Supportive measures such as the Azexport.az portal, the Single Window Export Support Center, trade houses, trade representatives, export subsidies, export missions, and participation in international exhibitions have been successfully utilized. Following these achievements, a new era of non-oil exports begins under President Aliyev, aligned with the demands of the Fourth Industrial Revolution.

According to strategic roadmaps, non-oil exports per capita are targeted to rise from USD 200 currently to at least USD 450 by 2025. To achieve this, non-oil exports must grow by approximately 15% annually. Azerbaijan’s average per capita import demand is about USD 1,000. Currently, exports per capita total around USD 2,000, with 90% consisting of oil and gas, whose prices are volatile and value-added is diminishing. Therefore, increasing non-oil exports is strategically critical for economic security and macroeconomic stability. However, growth should focus on quality and profitability rather than quantity. The Cabinet of Ministers’ “Action Plan for the Implementation of Tasks from the 2019 Year-End Meeting under the President” stipulates that a new non-oil export strategy be developed by July 2020.

President Aliyev’s export support policy effectively covers three global approaches: standard trade, global value chains, and cluster-based development.

Firstly, global value chains (GVCs) are increasingly important relative to standard trade. According to World Bank calculations, a 1% increase in value chain participation raises income per capita by more than 1%, compared to 0.2% in standard trade. E-commerce plays a growing role in exports. According to UNESCAP, Azerbaijan leads a broad region from Southeast Europe to China in paperless trade and trade facilitation. Azerbaijan also takes full advantage of standard trade opportunities; for example, last year electricity exports increased 17% by purchasing an additional 800 MW.

When integrating into GVCs, Azerbaijan should focus on production stages where it holds competitive advantages (upstream, midstream, downstream). Bangladesh, Cambodia, and Vietnam provide examples of moving from raw material exports to finished apparel, generating more revenue than exporting raw materials alone. Last year, Azerbaijan exported USD 122 million of raw cotton, which could have generated roughly USD 400 million as finished products. Currently, cotton fiber is sold at around USD 1,500 per ton; spinning into yarn increases revenue to about USD 2,500 per ton. As President Aliyev emphasized, entrepreneurs must invest more in deeper processing, which will increase profits, create jobs, generate added value, boost exports, and expand the tax base. Applying this approach to fruits, vegetables, tobacco, potatoes, grapes, and other agricultural products is essential for both export expansion and import substitution.

Participation in GVCs can occur at the country, sector, or company level, with two primary forms: spider-type and snake-type.

In Azerbaijan, automobile production resembles a spider-type chain: parts from various countries are assembled locally, retaining part of the value domestically. Key focus areas include productivity, market access, and deepening production within the value chain. Snake-type chains can be built along transport corridors. For instance, fiber-optic cables from China to Europe could allow Azerbaijan to process data domestically and export results. Similarly, products from Central Asia could be processed in the Alat Free Economic Zone and exported to Europe.

Countries’ participation in GVCs varies. Europe and East Asia primarily develop GVCs through intra-regional trade, whereas North American chains have a more global character. Azerbaijan’s location between these two regions provides a strategic advantage for integration.

Deep specialization in GVCs is necessary for Azerbaijan’s post-oil economy. Key drivers include tourism, agribusiness, transport and logistics, petrochemicals, ICT, and metallurgy. The next step is selecting and specializing in subsectors; experience from Chile and the Czech Republic suggests a focus on a maximum of six sectors.

Participation in GVCs occurs at four levels: raw materials, limited manufacturing, advanced manufacturing, and services/innovation. Companies integrated into value chains become more productive and capital-intensive, expanding production and employment, and in developing countries facilitating workforce transition from less productive to more productive sectors. Data also shows that joining GVCs accelerates female employment growth.

President Aliyev highlighted cluster development, noting that SOCAR Polymer’s production should serve as the basis for a cluster. The plant produces 300,000 tons annually, 70% of which is exported. By moving from raw materials to finished products, more value remains domestically. SOCAR Polymer is expected to generate USD 6.6 billion in revenue over the project period, with approximately 30% as net profit, yielding USD 400 million in corporate tax and USD 450 million in added-value tax. Polyethylene and polypropylene output enables domestic production of finished goods.

The President also emphasized service exports, noting that foreign tourists spent AZN 4.3 billion in Azerbaijan last year, making tourism the second most profitable sector after oil. Growth in tourism is expected to exceed 30% during 2020–2023, further boosting service exports. In addition, Azerbaijan’s residents can expand export opportunities in ICT, transport and logistics, education, healthcare, finance and banking, construction, and space services.

“Creative exports” are also expanding, with opportunities in film, photography, sculpture, music, literature, media, and other creative industries considered in the new non-oil export strategy.

The President’s primary objectives for non-oil exports are higher profitability, regional participation, geographic diversification, and greater involvement of SMEs.