n in 1993 brought new legislation concerning
different aspects of development. New governmental structures have also been
established. The general economic policy of Azerbaijan was based on liberalization,
private sector development and moving the country to a market economy as
quickly as possible. The government has taken several measures to lay the foundations for a stable investment climate and is introducing various incentives. Structural economic reforms are making steady progress, a privatization program has been launched and the political situation is increasingly stable. The outlook is now more optimistic than in earlier years and the long term potential is definitely positive. As a result, substantial progress was achieved in not only
stabilization of the macroeconomic situation in the country but also in the
attraction of considerable foreign investment. Some preliminary steps have been taken to encourage much-needed foreign 'investment including the introduction of a foreign investment law, some tax incentives and some price liberalization. In 1994-1998, a total sum of
US$5.7 billion was invested in Azerbaijan, including US$4 billion of foreign
investments. In 1998, more than US$1.4 billion was invested into the economy,
which is 1.13 times more than in 1997. The foreign investment prognosis for
1999 is estimated at US$1.8 billion.
This inflow of large foreign investments into the economy of Azerbaijan
could be explained by the following reasons:
• Potentially rich oil and gas reserves in the Caspian Sea basin.
• The government of Azerbaijan created good opportunities for investment: the
law "On the protection of Foreign Investments" was adopted in 1992, tax
privileges were offered, local documentation requirements were simplified.
• Availability of skilled labor power at competitive costs.
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