Development of logistics market in Azerbaijan: Prospects and challenges-ANALYTICS

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The global crisis caused by the coronavirus epidemic and the sharp drop in oil prices threatens the further development of the economies of countries tied to one sector of the economy. Even though Azerbaijan is an oil and gas producing country and the primary source of income is profit from the export of these products, government has started diversification of economy in recent years. The government allocates considerable amount of funds to stimulate the development of such industries as agriculture, alternative energy sources, tourism, and various areas of industrial production. Azerbaijan has joined and initiated such transport routes of regional and international significance as Baku-Tbilisi-Kars, North-South, Trans-Caspian International Transportation Route, “One Belt-One Road” and others. These multi-million dollar projects involve the development of the logistics market in Azerbaijan.

In this regard, the participation of representatives from the private sector plays an irreplaceable role. Several factors determine the development of the market. Report asked the opinion of representatives in companies dealing with logistics services in Azerbaijan about the prospects and barriers to the growth of this market for the private sector.

Huseyin Hajiyev, Director of UTEP, a website that allows customers of transportation services and cargo owners to find each other on its platform, believes that the Azerbaijani logistics market needs “technological renewal” and additional funding.

“There are some problems with road transport. There are many companies today engaged in forwarding, which does not have their own cars. We also do not have our own cars, but we are engaged in freight forwarding, we take cars from individuals and companies. However, we faced problems when drivers cannot receive money to a Bank card, due to the lack of money or because they are supporters of cash payments. On the other hand, there are enough car parks, but with old cars. And, of course, we need some finance to update them. And to have finances, we need efficient work, so that cars work efficiently, transport goods at favorable rates and earn money. In this way, they will register own TIN, receive money on the card and pay taxes, and not turn to companies that provide them with these services for a definitely high price. We, in turn, want to solve this problem by supporting drivers. In this regard, it would be appropriate to create an agency to support them in terms of regulating financial issues”, – he said.

The expert believes that the development of the industry, especially the search for finance, depends on the tariffs for carriers’ services and the number of flights during the month.

“We can also promote this [development] by facilitating procedural issues. Moreover, banks should be interested in financing this business and offer favorable leasing terms and loan rates for this category of individuals and companies. In general, we need support and control over this business. Of course, we have the organization called ABADA (Azerbaijan International Road Carriers Association), which is only engaged in issuing permits for the purchase and operation of trucks. Many drivers do not have enough education to deal with online payment, keep records, and other documentation (accounting). On the other hand, there are intermediary companies and dispatchers.”

He said they were in business from a personal standpoint: “They do not care about the development of the market and the welfare of drivers. Therefore, it is advantageous for them to keep everything in hand. They don’t even have specific offices; they contact drivers by phone and give them an order on their terms. But it’s not effective. You can’t go far in this way. You need to treat the market professionally to develop it. Against the background of the latest situation in the world, I mean the fall in oil prices and the economic situation on world markets, we need to take a new approach to this area. For example, to develop the agricultural sector, it is necessary to establish logistics, since it is a component of this area. A supply chain must be established, and quality transportation ensured.”

One of the companies that provide postally, courier, and other logistics services around the world is American FedEx. To date, the company has merged with another similar company – TNT. Shaig Garibzade, Director of Azerieexpress, and also representing the interests of FedEx-TNT in Azerbaijan, is confident that the prospects for the development of the country’s logistics market are very feasible and extremely profitable. Still, there are specific barriers that hinder progress.

“We are mainly engaged in air transportation. Recently, online shopping deliveries, for example, from Turkey, have been developing very rapidly in Azerbaijan. From this standpoint, erroneous opinion exists that these companies are our competitors, and, accordingly, the attitude of customs to us is the same. We have a slightly different direction, we are mainly engaged in corporate clients, we work door-to-door. It happens that government agencies require us to make specific changes in the system. In this situation, we can’t explain that we are not an “X” company from Azerbaijan, which can make changes in the system at any time, we are a representative office of international companies. For this purpose, it is necessary to adopt a corresponding resolution in Azerbaijan. Only then can we request changes to the system, and they do. We can’t refer to any advice or what we were told about it,” he said.

According to Garibzade, a lot of solutions exist to solve this problem. One of the more optimal ones is the division of the warehouse, located on the territory of the Heydar Aliyev international airport: “This warehouse should belong to the state, not to a private person. Since in most countries, the warehouses at the airport work on weekends and holidays. However, this is not the case in our country. Since its mode of operation depends on the contractor company. We want to explain that we cannot receive mail for 10 public holidays, we are express delivery. We can’t explain this to our customers. They don’t understand us.”

The interlocutor admits another solution to this problem: “either the customs take full control of the warehouse and does not depend on the contractor. In this way, ensure its operation according to international standards, or we are ready, together with other major companies, to build a similar warehouse on the territory of the airport at our own expense and even pay salaries to its employees. This will significantly facilitate our work and increase the efficiency of the warehouse, and we will not waste time in huge queues. Again, similar companies and we are express delivery companies. You can imagine that you have sent millions of dollars’ worth of tender documents. You are late on the deadline, and your mail is either in the queue at the warehouse, or you can’t send it because of the holidays.

Today, such a service of logistics companies as economy service is popular and in high demand all over the world. Its difference from express is that if the first offer air transportation, the second makes delivery by land freight, most often by trucks. Thus, due to the time difference, we get a relatively significant difference in prices. Garibzade notes that even though this service is very developed in Europe, it faces challenges in Azerbaijan.

“Companies without problems can deliver goods via Economy service to the Georgian border with Azerbaijan, and then difficulties arise. Look, Economy service works as follows: a car, for example, begins its journey in Europe, while collecting goods from various customers, and the final delivery point is Azerbaijan. The problem is that according to the customs legislation of Azerbaijan, the cargo of motor transport can be unpacked only if let say, 50 people – the owners of the cargo-are present. You understand that this is impossible. We are not allowed to pick up all the goods and make door-to-door delivery. And the key offer of Economy service is precisely the combination of affordable prices with delivery to the address.”

But the process is different in the similar warehouses located, where the goods unloaded to the warehouse. Then the representative of the delivery company has a document that indicates that he has the right to pick up this product, and the names of recipients of this or that product from one shipment are marked under it. He takes all the goods and delivers them to the customer. And it is up to a customer to decide when to clear it. The later, the higher the duty, and the more benefit the state will get.

In the case of cargo transportation, customs offers to record the entire product in the name of one person, in this case, the deliverer. So that you understand, is not possible from financial opportunities for companies. The solution, in our opinion, in this case, is the introduction of the above – mentioned system inland transport,” he said.

Summarizing his opinion, Shaig Garibzade emphasized that today Azerbaijan indeed fully ensured transparency in the customs system, but it is time for the next stage – development!