Azerbaijan intends to build a major trading hub close to its capital as a tax-free zone, with the expectation that other countries in the region will replicate the example and give a boost to the entire Eurasia region, Taleh Ziyadov told euractiv.com in an exclusive interview.
Taleh Ziyadov is the director-general of the new Baku International Sea Trade Port in Alyat, which is located 65 kilometres south of the capital, with an annual capacity of 25 million tons.
He spoke to EURACTIV’s Senior Editor Georgi Gotev.
We are speaking in Brussels, where you came to present your project, which you compare to a new Silk Road. Can you explain?
You have to go to the roots of the Silk Road. And if you go there, you will find out that the Silk Road was not only about routes, it was about hubs. Ancient caravanserais, or caravans of camels, used to travel about 40 kilometres a day. And at every 40 kilometres, you needed to stop. The small stops were like one-star hotels. And every 200 kilometres there were small townships, those were the 3-star hotels. And every 1000 kilometres there used to be 5-star hotels.
But the action really took place in the 5-stars. Bukhara, Samarkand, Baghdad. Aleppo, Istanbul, Jerusalem, all these places were 5-star hubs. Those were the Silicon Valleys of the time. Arabs, Russians, Chinese, Turks, would all come, mix and mingle in these hubs, they would bring something, and value-added would be done in these hubs. A Chinese never travelled to Europe, maximum they travelled to Bukhara. And Europeans rarely travelled all the way to China. Maximum thy ended up in Istanbul, Jerusalem, Venice. Marco Polo was a different case. He didn’t travel as a regular trader.
All I’m saying is the key for the success of the Silk Road strategy is built on five-star hubs.
Is your aim to build one?
We are standing on the verge of emerging hubs of the 21st century. Look at the map with emerging hubs Poti (Georgia), Turkmenbashi (Turkmenistan), Aktau (Kazakhstan), Khorgas (China), Bandar Abbas (Iran), Mersin (Turkey) and on the other side Varna (Bulgaria), Constanta (Romania), Ilichevsk (Ukraine). Baku stands in the middle of this hub development. All those emerging hubs are going to be connected with each other and Baku who stands in the middle of it is going to become the hub of hubs.
The concept of the hub is very interesting because a hub is a win-win concept. And because we are landlocked, I am inherently interested in making sure that Turkmenbashi and Aktau grow, so that they feed me. All these emerging hubs will be linked to each other. In the past, they used to compete. But in the meantime, they specialised in certain things and they fed each other. Bukhara was specialised in something, Baghdad in something else, same with Istanbul. There were certain things you could only find in Istanbul. Similar things are going to emerge in these hub developments across Eurasia.
Then the question is how you do it.
In Azerbaijan, we will develop it under a model similar to our oil sector. In the last 25 years, the most successful case-study in the oil sector has been our oil sector development. Our oil sector is a de facto tax-free zone. It has proved to be a successful case, that was left by the late president [Heydar Aliyev], and the production-sharing was embedded in a law in 1994, a year before our new constitution was adapted. This required a lot of political will, in these difficult circumstances, with the conflict with Armenia and the collapse of the Soviet Union. This guaranteed the success of our oil sector. There are four requirements for success. The first is to have a product or a project that big international investors are interested in. Second, big companies should be interested to share their technology and know how, and be ready to invest. Third, in developing countries like ours, patronage is the key.
Patronage – what do you mean?
It’s political patronage, meaning that to avoid all kinds of interest group mingling, and to give confidence to the investors, the oil sector was directly under the review and supervision of the president. This gave confidence to the investors. It created an environment where investors feel very comfortable. But the most important factor, the fourth factor, is the production-sharing agreement, which is a legal regime which guarantees your multi-billion dollar investment , that tomorrow, if we have an issue, we will not go to a district court to Baku, but to London to arbitrate, or somewhere else. These four factors guaranteed the success in our oil sector.
And you want to replicate this for the Baku hub?
Exactly. Because our offer in not just a port. Our port is not open to the wide seas, the Caspian Sea is landlocked. But our port is not just a port. If you want to become a 5-star hub, you need a value-add component. Such as the free trade zone. Our port is located at 65 kilometres from downtown Baku, at the crossroads of the main routes East-West and North-South, railways, highways, also potentially a future cargo airport could be built. When you put this all together, a port, a free zone, an urban development, an airport, you got a very interesting product in your non-oil economy. Big companies, from Chinese to Arabs, to Russians, to Turks, all of them are interested in investing into a free-trade zone that has strong guarantees for the long-term. It will be under the patronage of the president, and we believe this will easily become his brand in the non-oil economy. And we are developing a law that is going to govern this particular territory.
Free trade means?
Free trade zone. There will be no tax and it will be guaranteed by law. In a developing country, like Bulgaria, it is very difficult to reform it, because you have an institutional burden etc. So how do you do reform, if you want to do it without delay? You create an island. As we did in our sector. It is an island within our general economy. And it has proven to be successful.
But the nearest hubs, like Turkmenbashi, Poti – are they going to follow up?
Yes, they will. Because this is a project that is going to benefit everyone, that is going to change the entire Eurasia. You cannot change the entire Afghanistan right away. But if you decide to make Mazar-i-Sharif a hub, you can do so.
I have been in Mazar-i-Sharif and I agree that it’s a thriving city, unlike other places in Afghanistan, which seems to have such a potential.
You have been there, you know. It’s much easier to make Turkmenbashi a hub, rather than the entire country. It’s much easier to do Aktau a hub, rather than the entire Kazakhstan. But Kazakhstan are on the right path and they are doing Aktau a hub, Turkmens are also following, with a new development in the port an also a free zone. Azeris are driving this transformational process. I’m proud to say that this is an Azerbaijan initiative, this is a very unique policy which is going to have a positive impact in the entire region. It is a policy to be duplicated and copied.
And you must be proud to be the head of the Baku hub project. Tell us about yourself.
I spent most of my life in academia. I started in the USA, worked in the ‘States a little bit, and came back to Azerbaijan to help with the creation of the Azerbaijan diplomatic academy. And I got engaged in this research work, whether Baku could become a Dubai-like hub in Eurasia. So I spent almost three years researching this. And then it eventually happened that when the candidacy for director general of the port was discussed, my name came up and the president appointed me.
This is not surprising, given that the project is your brainchild…
Possibly, yes. But my idea was more in the context of the port and the free zone. Obviously, the president’s idea was larger.
When you realise you have political support, it probably helps you think big. But does the world know about the initiative?
We are starting promoting it. On 7 September we signed an advisory consultancy agreement with DP World, one of the world’s largest terminal port operators. So they are helping us in drafting the law, the feasibility study and master plan. By next year we hope to start the registration of residence and the entire process of the free zone.