Agriculture

Diversification & Development

Agriculture

As part of the government's drive to encourage economic diversification, agriculture and agribusiness enterprises have been targeted as potential employment and GDP generators.

The national government, however, recognizes the need to develop agriculture as a key part of its overall development scheme to double national GDP by 2020. In April 2014, President Aliyev signed a decree to improve agriculture through the formation of agro-parks, enhanced laboratory testing of foodstuffs, and various incentives to increase private sector participation in agriculture and boost production and exports. The new program is intended to continue the strides taken under the 2008-2015 agricultural development scheme, which has seen production rise significantly. Fisheries production, for example, has more than doubled in the period with the introduction of new aquaculture methods.

According to the Asian Development Bank (ADB), at present the government heavily subsidizes agriculture, minimizing the sector’s exposure to taxes and exempting various inputs such as seeds, livestock, and fertilizer from customs duties. Such exemptions reduce tax receipts and help keep the budget dependent on oil and gas industry revenues, but with nearly half the population owing their livelihoods to farming, the government’s first priority is to develop agriculture and generate employment.

GROWTH OUTLOOK

The Outlook for Azerbaijan 2014 report of the Asian Development Bank (ADB) forecasts that, “the government will continue its support to agriculture and will extend subsidies and concessional lending to farmers through its company Agroleasing. The authorities are expected to prepare a plan to reclaim unused land for agriculture as two big irrigation projects reach completion. Hence, agriculture is expected to grow by 5.5% in 2014 and 5.7% in 2015, reflecting higher crop production.”

Azerbaijan is blessed with a remarkably diverse topography and climate, with nine distinct climatic zones allowing for the production of crops ranging from tea and hazelnuts, both of which require special conditions, to world-famous pomegranates and grapes. The high quality of the country’s fruit and berry production has enabled Azerbaijan to develop the leading fruit juice industry in the Caucasus. In agribusiness, the food-processing sector makes up approximately 37% of total manufacturing.

According to the latest figures from the State Statistical Committee, Azerbaijan in 2014 has a total of 4.77 million hectares of agricultural land, about half of that being arable. The country has 1.82 million hectares of sown land, with 1.43 million hectares under irrigation. Over half of all agricultural land is pasture, at 53%. The state and local municipalities own 72% of all agricultural land in Azerbaijan, though private farms account for most of the sown land, at 78%. Of the sown land, about 80% is devoted to grain crops. Slightly more than half of agricultural production is accounted for by crop production, with livestock farming comprising the remaining 48%. Land committed to vegetable production totaled 78,000 hectares, nearly half of that devoted to tomatoes and cucumbers. Azerbaijan in 2014 hosts some 11.4 million head of livestock, 90% comprising sheep and goats. Meat production in 2013 totaled 514,000 tons, up 4.2% from the previous year.

Government support of agriculture includes a solid research and development base to aid sectoral development. The National Academy of Sciences has 28 research institutes to bolster the scientific foundation for economic growth in agriculture. The Ministry of Agriculture runs the Azerbaijan Agricultural Science Center, which has 14 research institutes, 40 experimental offices and eight regional centers, in total employing over 2,000 employees. Areas of R&D focus include topics as diverse as beekeeping and veterinary drugs.

PRIVATE SECTOR GROWING

The average size of a private farm in Azerbaijan has more than doubled over the past decade, from 8.4 hectares in 2005 to 17.5 hectares in 2014. The number of private farms has declined slightly, from 2,681 to 2,458 over the same period, but the land allocated to them has nearly doubled, from 22,600 hectares to 42,500 hectares.

The agricultural goods produced in 2013 by private-owner farms, including family farms and households, were mainly grain, at over 2.5 million tons, or 83% of the over three million tons produced in Azerbaijan, which increased 5.7% compared to 2012. At the same time private farms produced 51,800 tons of cotton, 4,200 tons of tobacco, 1.7 million tons of milk, 1.1 million tons of vegetables, 107,000 tons of sugar beet, 806,000 tons of fruits and berries, and 788 million eggs. Agriculture has begun to attract the interest of large holding companies. Ata Holding, for example, in 2012 acquired and upgraded Shamir Poultry, which today accounts for about 10% of Azerbaijan’s total egg production.

Large agribusiness has also entered the fisheries sector, with AZ Group’s Caspian Fish planning to release up to 50 million sturgeon fingerlings into the Caspian by 2020. The company processes caviar, quotas set at 10% of the total fish weight at a farm, and the firm expects this summer’s total weight to top out at 400 tons. The fisheries sector overall in 2013 generated $242 million in revenue, up about 5% year-on-year, while the much smaller forestry sector grew by a like amount, generating $13.6 million in revenue.

According to the UN’s Food and Agriculture Organization (FAO), Azerbaijan continues to import grain to meet domestic demand, with wheat imports topping the list in terms of both weight and value, followed by cigarettes and sugar products. The poorest 20% of Azerbaijan’s people spend 60% of their budget on food, and so are particularly susceptible to food price increases. The ADB reported that in 2013, state-run markets for agricultural goods helped contain inflation, aided by moderating global food prices.

The FAO says that under optimal conditions now, agriculture should employ around 30% of the total labor force and generate higher incomes to reduce poverty and promote growth in rural areas. The World Bank agrees, saying that making finance available in rural parts of the country, and especially using microfinance to reach underserved farmers and other poor households, is important for boosting rural income.

The government’s policy for the agriculture and food processing industry aims not only at the domestic market, but also export markets, and exempts exports of agricultural and food products from customs duties. Azerbaijan has become a major supplier of agricultural products to the CIS market and also benefits from World Trade Organization (WTO) preferences applied by the EU and US, which exempt thousands of Azeri products from import duties.

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