Approved by the Decree dated December 06, 2016

of the President of the Republic of Azerbaijan

Strategic Vision and Roadmap for

Azerbaijan
Agriculture

1
 CONTENTS
1. EXECUTIVE SUMMARY ................................................................................................................... 4

2. GLOBAL TRENDS ............................................................................................................................. 6

3. HIGHLIGHTS ON THE CURRENT SITUATION IN AZERBAIJAN................................................ 9

3.1. CURRENT STATUS OF AGRICULTURAL PRODUCTION AND PROCESSING.................................... 9

3.2. SWOT ANALYSIS FOR AGRICULTURAL PRODUCTION AND PROCESSING ............................... 38

4. STRATEGIC VISION .........................................................................................................................40

4.1. STRATEGIC VISION FOR 2020 .................................................................................................. 40

4.2. LONG-TERM VISION FOR 2025 .................................................................................................. 40
4.3. STRATEGIC VISION FOR POST 2025 ......................................................................................... 43

5. TARGETS ..........................................................................................................................................45

6. STRATEGIC TARGETS....................................................................................................................46

7. STRATEGIC OBJECTIVES ..............................................................................................................47

7.1. STRATEGIC OBJECTIVE 1. INCREASING INSTITUTIONAL CAPACITY FOR ENSURING

SUSTAINABLE FOOD SECURITY ................................................................................................. 47
7.1.1. Priority 1.1. Developing data collection and monitoring system with regard to
sustainable food security and food availability ................................................................... 47
7.1.2. Priority 1.2. Develop mechanisms to ensure reliable food supply for all population
groups ...................................................................................................................................... 49
7.1.3. Priority 1.3. Form a risk-based food safety system along all links of the value chain .. 52
7.2. STRATEGIC OBJECTIVE 2. INCREASING THE POTENTIAL FOR AGRICULTURAL PRODUCTION
ALONG THE VALUE CHAIN .......................................................................................................... 55
7.2.1. Priority 2.1. Increasing the production potential for competitive agricultural production
and processing both in the domestic and international markets. .................................... 56
7.2.3. Priority 2.3. Develop farmer partnerships and cooperation in the agricultural sector ... 66
7.2.4. Priority 2.4. Develop public-private partnerships (PPPs) to implement complex projects
................................................................................................................................................... 68
7.2.5. Priority 2.5. Develop support infrastructure for the growth of agribusiness ................... 72
7.3. STRATEGIC OBJECTIVE 3. FACILITATE ACCESS TO FINANCE .................................................... 76
7.3.1. Priority 3.1. Improve financing mechanisms in agriculture ............................................... 76
7.3.2. Priority 3.2. Develop agricultural insurance ........................................................................ 78
7.3.3. Priority 3.3. Promote agricultural investments .................................................................... 80
7.4. STRATEGIC OBJECTIVE 4. DEVELOP AGRICULTURAL INPUT MARKET AND IMPROVE PROVISION
OF SERVICES ............................................................................................................................. 81
7.4.1. Priority 4.1. Develop the land market .................................................................................. 81
7.4.2. Priority 4.2. Improve irrigation water supply of producers ................................................ 82
7.4.3. Priority 4.3. Improve provision of agricultural machinery, equipment and maintenance
for agricultural producers and develop agricultural service market ................................. 83
7.4.4. Priority 4.4. Develop the seed and sapling market, and increase local production
potential .................................................................................................................................... 85
7.4.5. Priority 4.5. Improve provision of fertilizers and crop protection products ..................... 86
7.4.6. Priority 4.6. Improve provision of compound feed and promote breeding ..................... 87

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 7.4.7. Priority 4.7. Improve provision of veterinary and phytosanitary services for agricultural
producers ................................................................................................................................. 88
7.5. STRATEGIC OBJECTIVE 5. IMPROVE AGRICULTURAL SCIENCE, EDUCATION, AND EXTENSION
SERVICES................................................................................................................................... 90
7.5.1. Priority 5.1. Ensure transition to a new development stage with regard to the quality of
agricultural education ............................................................................................................. 90
7.5.2. Priority 5.2. Plan and conduct agricultural research, and improve mechanisms for
applying research findings..................................................................................................... 92
7.5.3. Priority 5.3. Form extension service network based on agricultural needs .................... 93
7.6. STRATEGIC OBJECTIVE 6. DEVELOP THE AGRICULTURAL MARKET INFRASTRUCTURE AND
FACILITATE PRODUCERS’ ACCESS TO MARKETS ....................................................................... 95
7.6.1. Priority 6.1. Develop agricultural market infrastructure ..................................................... 95
7.6.2. Priority 6.2. Improve the regulatory system of the agricultural market ........................... 97
7.6.3. Priority 6.3. Promote and support agricultural and industrial exports ............................. 99
7.7. STRATEGIC OBJECTIVE 7. ENVIRONMENTAL PROTECTION, SUSTAINABLE UTILIZATION OF
NATURAL RESOURCES, AND MANAGEMENT OF IMPACT BY NATURAL FACTORS ON
AGRICULTURE .......................................................................................................................... 102
7.7.1. Priority impact of climate ..................................................................................................... 103
7.7.2. Priority 7.2. Improve environmental protection mechanisms in agriculture ................. 105
7.7.3. Priority 7.3. Improve mechanisms of sustainable use of agricultural lands and water
resources ............................................................................................................................... 107
7.7.4. Priority 7.4. Development of eco-agriculture .................................................................... 110
7.8. STRATEGIC OBJECTIVE 8. ENHANCE STATE REGULATION OF AGRICULTURE, AND IMPROVE
BUSINESS ENVIRONMENT ........................................................................................................ 112
7.8.1. Priority 8.1. Take action to create enabling agribusiness environment ........................ 113
7.8.2. Priority 8.2. Establish e-agriculture, and improve the registration and statistical system
................................................................................................................................................. 114
7.8.3. Priority 8.3. Strengthen the capacity of regulatory agencies .......................................... 117
7.8.4. Priority 8.4. Improve the state support policy for agricultural producers based on
development objectives ....................................................................................................... 118
7.8.5. Priority 8.5. Design a system to monitor an evaluate agricultural policy outcomes .... 120
7.9. STRATEGIC OBJECTIVE 9. IMPROVE RURAL EMPLOYMENT AND WELFARE ............................. 122
7.9.1. Priority 9.1. Strengthen the potential for the implementation of the socio-economic
development policy in rural areas ...................................................................................... 122
7.9.2. Priority 9.2. Support alternative fields of rural activities .................................................. 124
7.9.3. Priority 9.3. Support local community initiatives for rural development ........................ 125

8. FINANCING MECHANISMS...........................................................................................................127

9. IMPLEMENTATION, MONITORING AND EVALUATION ...........................................................128

10. ACTION PLAN .................................................................................................................................130

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1. Executive summary
The Presidential Decree No 1897, dated March 16, 2016 approving the Main Directions of a
Strategic Road Map on National Economy and Key Sectors of Economy has provided for
relevant tasks to develop the strategic roadmap based on the thorough analysis of existing
economic conditions. In this regard, relevant state agencies, thinks tanks and independent
experts have come together to discuss, evaluate and analyze the existing conditions in
agricultural production and processing and have developed the Strategic Roadmap for
Agricultural Production and Processing in Azerbaijan (hereinafter referred to as “Strategic
Roadmap.”

The current Strategic Roadmap is designed to reflect the strategic vision for development of
country’s agricultural sector by 2020, long-term vision for the period until 2025, and target
vision after the period of 2025, all of these demonstrate that the State is armed with the Road
Map featured with the sequential stages to be carried out to achieve strategic targets for
medium and long-term development of agriculture.

Implementation of the Strategic Roadmap from 2016 to 2020 will ensure realization of 9
strategic targets designed to create enabling environment for fostering competitive agricultural
production and processing based on country’s sustainable development principles. These
targets include improving food security, increasing full-potential of agricultural production along
the value chains, developing the agricultural input market and facilitating access to inputs
including financial resources, provision of academic research and increasing quality of
agricultural education, advancing extension services, developing the market infrastructure and
ensuring free access of producers to markets, establishing mechanisms for sustainable use of
natural resources, creating enabling agribusiness environment, and improving rural welfare.

To realize each strategic target, a series of priorities for 2016-2020 have been defined and
justified. All planned actions related to the implementation of the Strategic Roadmap were
grouped together in accordance with the priority areas. The actions will be measured based
on pre-defined criteria (KPIs), which will form a basis for monitoring and evaluating system of
the Strategic Roadmap.

It is expected that, once achieved the priorities for agricultural production and processing will
have a direct GDP impact of AZN 575 million and indirect GDP impact of AZN 660 million in
real terms in 2020 (totally AZN 1235 million) creating a total of 20000 new jobs. It is estimated
that the required investment will be AZN 1170 million which will be provided through private
and public resources. The key initiatives that are designed to develop agricultural production
and processing will be coordinated by the Ministry of Agriculture of the Republic of Azerbaijan.

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Expected impacts of the actions to be taken within the Strategic Roadmap

Real GDP impact

Employment Investment
No Priorities (million AZN,
(FTE, 2020) (million, AZN)
2020)

Strengthen the full-potential of

competitive agricultural production
2.1 and processing both in local and 450 - 440
international markets

Facilitate Public-Private-
2.4 Partnerships (PPPs) for integrated 130 7250 325
projects

Develop the infrastructure that

2.5
supports agribusiness 355 7725 350

Improve financing mechanisms in

3.1 210 - -
agriculture

Promote and support agricultural

6.3 90 5060 40
production and processing

Develop eco-agricultural
7.4 - - 15
production

Note 1. This table included only the priorities which are designed to create a real GDP
impact of more than AZN 10 million or more than 100 jobs in real terms in 2020.The other
priorities will support the achievement of the planned results.

Note 2. Entities and timelines in the action plan are prepared as preliminary
suggestions. There is need for further comprehensive analysis for each priority area and
specification of numbers before the implementation process.

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2. GLOBAL TRENDS
The “Green Revolution”, which has enjoyed large-scale activities since 1960-1970 and
is characterized by expanded application of mineral fertilizers, pesticides and improved
irrigation systems, high-level mechanization and improved breeding, has led to global
transformations and intensification both in crop production and animal husbandry. The
UN Food and Agriculture Organization reports that crop production has increased 2.3 times
while crop fields have expanded by about 9 % over the last 40 years. On top of that, crop yield
has increased by 70 % in the developing countries. Another example of intensive agriculture
is the per capita crop field decrease from 0.44 Ha to 0.25 Ha against increased production
over the last years. Similarly, global milk production has increased by 61 %, meat production
by 27 % and cattle headcount by 26 % over the last 40 years. Even the developed countries
have decreased total cattle headcount by about 30 % to 35% through purebred cattle farms.

As part of the policy designed to ensure sustainable development of villages and

efficient use of agricultural resources, agricultural land consolidation is another global
trend which is a precondition of intensive production. However, agricultural land
consolidation is typical of highly developed countries with fast-growing industrialization, while
those with poor urbanization and industrialization as well as limited employment opportunities
in non-agricultural industries are characterized by fragmented smaller agricultural lands which
are inherited by legacy principles.

Today, global agriculture is in the process of transitioning from “Green Revolution” to

the “Second Green revolution” or “Biotechnological Revolution.” Intensive production
practices which ensure increased global food production to cope with limited land and water
resources have also had a negative impact on the ecosystem and environment. On top of that,
this factor has necessitated expanding the application of advanced technologies designed for
sustainable agriculture. This is one of the reasons why the present-day biotechnology is used
as a way of reducing negative environmental impact, and ensuring substantial food security.
Biotechnology has yielded a number of plant species that are resistant to drought, heat, cold,
land salination, pests and toxic herbicides, and animal breeds that are resistant to various
diseases and climatic changes. These species and breeds help ensure farm efficiency in
marginal areas, restore degraded lands, and minimize the need for pesticides and mineral
fertilizers. However, establishing an effective national regulation system to assess and manage
the potential negative impacts of biotechnologies on environment and food security is a global
challenge.

Today, there are many advanced technologies like irrigation methods (drip irrigation,
sprinkler system etc.) or efficient planting methods (raised bed planting, zero plowing,
mixed planting, laser harrowing etc.) that are being applied widely in many countries.
These methods help increase efficiency of production and ensure sustainable use of natural
resources.

In addition to the advanced production technologies, most countries, particularly

developed countries have increased focus on automated farm management systems
which necessitates reducing labor-intensity through mechanization of the farms. In other
words, owning to the application of advanced production and management technologies, the

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present-day agriculture is far from being the sector which ensures “relative employment of
surplus workforce.”

Today, processed products, i.e. value-adding products contribute more to the weight
factor of agricultural and food products in global export. According to TRADEMAP global
trade data, in 2015 fresh agricultural products and processed products accounted for 38,4 %
and 61,6% of total exports respectively while they contributed 41,4 % and 58,6 % to the export
market in 2001. In 2001-2015, agricultural exports increased 2.5 times while exports of
processed goods increased 2.9 times.

Total food production will need to be increased by 70% in order to feed world
population, which is expected to grow up to 9.3 billion by 2050.1

Globally, the fast-growing urbanization process has resulted in a leap in urban food
consumption and necessitated the transitioning of traditional agriculture to the “urban
demand – oriented agriculture” approach. As a result, all countries make extensive use of
agro-parks which seek to integrate agricultural producers, processors, suppliers and
distributors in a certain area, and operate as an agri-food supply center and cooperative in the
vicinity of urban areas. In addition, soilless agricultural production, such as hydroponics or
other advanced technologies is widely applied in urban areas.

Modern society is facing challenges in shaping the future of agriculture. These

challenges are based on 2 global trends which can seem different at first sight:

- Globally, the growth rate of demand for agricultural and food products tends to
go down. According to FAO’s estimates, the average demand growth rate has been 2.2
% over the last 40 years; however, this number is expected to drop to 1.1% over the next
40 years. The average demand growth rate for developing countries is estimated at 3.6%
and 1.3 respectively.
- Today, agriculture has a significant role in fostering socio-economic development only
in poorly developed countries. In the countries with developed industries and services or
focused development strategies, the agricultural sector is a way to ensure food security,
employment, and export diversification. There is a good reason why global GDP
contribution of agriculture has decreased from 10% to 4.5% and the share of
economically active world population in agriculture has gone down to 38% from 51 %
over the last decades.
- In 2050, there will be a need to increase global food production and even the
developing countries will have to increase food production twice, as healthy and
quality food captures a greater share in food production due to globally increasing life
standards.

There are certain problems that prevent countries from taking on global challenges in
meeting the increasing demand for global food production because of the growing
world population as well as the gradual improvement of the living standards in
developing countries.

1Source : Food and Agriculture Organization (FAO)

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- Degradation of global land resources has reached a dangerous level and covers
most of the world countries. FAO reports that 1.2 billion hectares of the global land
resources, including 20 % of the crop fields, 30 % of the forests, and 10 % of the pastures
are degraded.25 % (or 1.5 million people) of the world population are directly dependent
on the degraded lands. According to studies, land degradation is mainly caused by poor
land management.
- Agricultural activities should be adapted to global climate changes. Higher
temperatures, changes in rainfall, extreme weather conditions (drought etc.) are the
factors which contribute to low yield in crop production and animal husbandry. It is
important that “climate-based smart agriculture” be promoted to expand the use of
resistant plant varieties and animal breeds.
- Globally, the existing unfair trade practices are one of the important factors which
have a negative impact on food production in developing and poorly developing
countries. Huge subsidized exports of agricultural and food products from developed
countries cause the price of similar products from other countries to go down, and deal
a destructive blow on them, particularly small producers.
- Volatile prices of agricultural and food products challenge food availability in
developing and poorly developing countries, and reduce the efficiency of the
producers. According to FAO, the global food price index for 1980-1989 has dropped,
for 1990-1997 has increased, for 1998-2003 has dropped again, for 2004-2012 has
dropped, and dropped in 2013 against the reference years of 2000-2002. Therefore, the
countries which fail to launch an effective policy to stabilize the price of agricultural and
food products are facing a threat to sustainable food security.
- The developing and poorly developed countries should increase investments in
agriculture and agriculture-related areas in order to increase agricultural and food
production. According to FAO, about 83 billion dollars of annual net investment is
required to increase agricultural and food production in these countries. 24 % of the
investment is needed for crop production, 16% for animal husbandry, and 60% for the
market infrastructure which is designed for agricultural production. Additionally, public
investments should be leveraged to improve and develop agricultural research and
development, agricultural education and extension services, irrigation systems, and
other soft and hard infrastructure in order to develop functional agriculture and create
perfect food security. However, the developing and poorly developed countries don’t
have any investment resources to respond to these needs. Besides, they lack favorable
opportunities to obtain such resources.
- Modern agricultural science, education and extension are viewed as a vital
resource to enhance agricultural competitiveness in the world of widely applied
advanced production and management technologies. However, in requires some
time and efforts to achieve transformations in the agricultural sector in the developing
countries, as they lack the potential for innovation and are more “conservative” in terms
of agricultural reforms.

8
3. HIGHLIGHTS ON THE CURRENT SITUATION IN AZERBAIJAN
3.1. Current status of agricultural production and processing
General development trends

The total agricultural production increased by 7.7 times (2.4 times in real terms) with
actual prices in 1995-2015 and by 3.1 times (38.4 % in real terms) in 2005-2015. In
addition, the actual growth in the production of plant-growing products was 6.6 and 28
times (2.3 times and 25.4 % in real terms respectively), and in the production of animal
products 9,3 and 3,4 times (2,5 times and 53,8 % in real terms respectively) for the same
periods of time (Exhibit 1).
Exhibit 1. Agricultural production (in million AZN)

Cattle breeding Crop production Total agricultural production

Source: State Statistical Committee of the Republic of Azerbaijan

In 2013, Azerbaijan had a higher gross agricultural production index number than the average
worldwide indicator in the indicators of the Gross Production Index Number for the reference
years of 2004-2006 which is calculated based on FAO’s methodology (Table 1).

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Table 1. FAO’s Gross Production Index Number indicators for Azerbaijan and Other
World Countries (2013)

FAO’s Gross Production Index Number World Countries Azerbaijan

indicators

Total agricultural production 121,9 136,9

Food production 122,4 142,1
Cattle breeding 117,0 165,9
Plant-growing 124,7 118,9
Corn production 121,9 135,5
Source: FAO Statistical Database

As it can be seen from the table, Azerbaijan has a lower index number for plant-growing, and
on the contrary, a substantially higher index number for cattle-breeding. Azerbaijan’s index
number for corn production is also higher than the global gross indicator.

In 1995, the share of the crop production accounted for 57,5% of the total agricultural
production dropping to 48,9% in 2015 due to the fall in the production of higher value-added
products as a result of the cereal fields being expanded through extensive methods, and cattle-
breeding growing faster than crop production.

There has been a considerable increase in agricultural processing, particularly through food
and beverage production over the last years in Azerbaijan (Table 2).

Table 2. Agricultural processing (in million AZN)

1995 2000 2005 2010 2011 2012 2013 2014 2015

Food 172,5 657,1 1094,5 1924,6 2107,6 2574,8 2516,2 2596,7 2547,2
production

Beverage 5,0 24,1 72,5 170,2 169,0 175,5 207,7 232,1 194,7
production

Tobacco 7,0 17,7 30,5 22,3 22,8 19,6 13,1 24,6 27,2
production

Textile 148,2 24,6 34,8 29,4 52,3 57,7 51,2 48,7 30,7
industry

Source: State Statistical Committee of the Republic of Azerbaijan

Hence, food production and beverage production increased by 2.3 times and 2.7 times
respectively from 2005 to 2015. However, in 2015, tobacco production and textile
manufacturing decreased by 10.8 % and 11.8 % respectively compared to 2005.

From 2000 to 2010 when the oil sector contributed more to the national economy, the total
GDP contribution of agricultural products dropped to 5.5 % from 16.15%. From 2010 to 2015,
the GDP contribution of agricultural products went up to 6.2 % from 5.5 % (Exhibit 2).

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Exhibit 2. GDP Contribution of Agricultural Products (%)
Agriculture Agri-processing industry

Source: State Statistical Committee of the Republic of Azerbaijan

Hence, following the global trends, the agricultural production in Azerbaijan does not contribute
much to GDP, but it will have a serious GDP impact through increased production of value-
added industrial products as part of agricultural production, and strengthened production
potential in the processing sector.

In Azerbaijan, agriculture has undergone substantial structural changes since the country
gained independence from the Soviet Union and transitioned to market economy. These
changes are shown in the following tables (Table 3, 4, 5 and Exhibit 3).

Table 3. Total Area of Agricultural Crop Fields

Cereals and legumes Industrial plants Potatoes, vegetables Fodder plants
and melons
Years Total area Area Contribution Area Contribution Area Contribution Area Contribution
(thousand (thousand (%) (thousand (%) (thousand (%) (thousand (%)
Ha) Ha) Ha) Ha) Ha)
1985 1371,3 494,0 36,0 318,3 23,2 70,2 5,1 488,8 35,6
1990 1462,5 583,4 39,9 282,1 19,3 74,7 5,1 522,3 35,7
1995 1207,9 609,4 50,5 227,0 18,8 49,4 4,1 322,1 26,7
2000 1041,5 648,2 62,2 118,2 11,3 136,1 13,1 139,0 13,3
2005 1327,9 802,3 60,4 132,0 9,9 179,7 13,5 213,9 16,1
2010 1583,9 968,0 61,1 52,6 3,3 178,8 11,3 384,5 24,3
2011 1608,2 967,3 60,1 66,9 4,2 179,7 11,2 394,3 24,5
2012 1647,1 1031,4 62,6 48,5 2,9 174,5 10,6 392,7 23,8
2013 1684,2 1074,1 63,8 42,2 2,5 171,5 10,2 396,4 23,5
2014 1613,8 1001,4 62,1 43,8 2,7 165,7 10,3 402,9 25,0
2015 1585,4 952,1 60,1 38,7 2,4 166,0 10,5 428,6 27,0
2015/1990* 108,4 163,2 - 13,7 - 222,2 -- 82,1 -
2015/2005* 119,4 118,7 - 29,3 - 92,4 - 200,4 -
2015/2010* 100,1 98,4 - 73,6 - 92,8 - 111,5 -

1. Indicators for 2015 compared to the relevant years (%)

Source: State Statistical Committee of the Republic of Azerbaijan

1. Although the total area of crop fields had decreased by 2000, it has been continuously
expanded since that time through development of the private sector in agriculture and
application of extensive production methods. In 2015, the total area of the crop fields
increased by 8.4 % compared to 1990.

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2. As the structure of the agricultural production was formed based on the demand of the
“National Economy Complex” which was designed back in the Soviet Period, there are
two key factors which have contributed to rapid transformations in plant-growing since
Azerbaijan gained independence from the USSR and transitioned to open market
economy: (a) favorable opportunities to meet the existing domestic market demand for
food products through fresh agricultural products; (b) unfavorable market conditions in
terms of industrial and agricultural production due to the removal of the traditional agro-
industrial integration system. As a result, from 1990 to 2015, the total area of cereal and
legume fields increased by 63% to account for 60% (previously 40 %) of the total
agricultural lands. Similarly, the total area of potato, vegetable and melon fields has
increased by 2.2 times to account for 10% (previously 5%) of the total agricultural lands
over the same period of time. Consequently, the total area of fields planted with industrial
plants has decreased and accounted for 2.4% (previously 20%) of the total agricultural
lands.

3. Although the total area of fodder fields decreased continuously from 1990 to 2000, an
interest in feed production on account of the extensive development of cattle-breeding
has increased since 2000 and the fields were expanded by 3.1 times from 2000 to 2015.

Table 4. Total Area of Perennial Plant Fields (thousand Ha)

Orchards and berry Vineyards Tea plantations Perennials
groves
Years Plantin Productiv Plantin Productiv Plantin Productiv Plantin Productiv
g area e age g area e age g area e age g area e age
1985 138,2 105,9 267,8 218,8 13,4 7,3 419,4 332,0
1990 136,0 113,5 181,4 156,1 13,3 7,9 330,7 277,5
1995 117,8 103,9 97,7 94,7 11,4 9,1 226,9 207,7
2000 83,1 76,7 14,2 13,9 5,4 5,4 102,7 96,0
2005 93,0 84,3 9,6 7,2 2,9 2,9 105,5 94,4
2010 127,7 102,5 15,4 11,2 0,6 0,6 143,7 114,3
2011 130,5 106,0 15,9 12,0 0,8 0,5 147,2 118,5
2012 133,5 108,8 16,3 12,4 0,9 0,5 150,7 121,7
2013 134,2 113,9 16,1 13,1 0,9 0,5 151,2 127,5
2014 138,5 117,2 15,9 13,5 1,0 0,5 155,4 131,2
2015 144,1 123,4 16,1 13,5 1,0 0,5 161,2 131,2
2015/199 106,0 108,7 8,9 8,6 7,5 6,3 47,0 47,3
0
2015/200 154,9 146,4 167,7 187,5 34,5 17,2 147,3 139,0
5
2015/201 112,8 120,4 104,5 120,5 166,7 83,3 108,1 114,8
0

Source: State Statistical Committee of the Republic of Azerbaijan

4. The trends observed in the production of perennials are the same as that of annuals, i.e.
the total area of the orchards and berry groves products of which can be directly sent to
the consumer market expanded fast back in 2005. In 2015, orchards and berry groves
expanded by 6,0% against 1990. However, in 2015, total areas of vineyards and tea
plantations decreased by 8.9% and 7.5% respectively as a result of the rapid decline in

12
 the number of industrial vineyards and tea plantations. Vineyards and tea plantations
were restored in 2005 and 2011 respectively.

5. There has been a stable increase in the number of cattle and sheep, and poultry since
1995 and 2000 respectively (Exhibit 3).
Exhibit 3. Cattle and poultry (1000 head)
Birds Sheep Cattle

Source: State Statistical Committee of the Republic of Azerbaijan

6. As a result, the number of cattle and sheep increased by 47,9 % and 60,1% respectively
in 2015 as compared to 1990. However, although poultry increased by 1.9 times from
2000 to 2015, it has decreased by 5,1% as compared to 1990.

Table 5. Dynamics of Agricultural Production (thousand tonnes)

Years 1985 1990 1995 2000 2005 2010 2011 2012 2013 2014 2015 2015/1990
Cereals total 1297,9 1413,6 921,4 1540,2 2126,7 2000,5 2458,4 2802,2 2955,3 2383,3 2999,4 2,2 d
Potatoes 219,7 185,2 155,5 469,0 1083,1 953,7 938,5 968,5 992,8 819,3 839,8 4,5 d
Vegetables 872,2 856,2 424,1 780,8 1127,3 1189,5 1214,8 1216,2 1236,3 1187,7 1275,3 148,9
Melons 48,6 67,5 41,9 261,0 363,8 433,6 478,0 428,0 429,8 440,9 484,5 7,1 d
Fruits 346,4 367,4 324,4 477,0 625,7 729,5 765,8 810,0 853,8 850,8 888,4 2,4 d
Grapes 1789,6 1196,4 308,7 76,9 79,7 129,5 137,0 151,0 148,5 147,7 157,1 13,1
Sugar beet - - 28,1 46,7 36,6 251,9 252,9 173,8 187,9 173,3 184,3 -
Cotton 787,8 542,9 274,1 91,5 196,6 38,2 66,4 57,0 45,2 41,0 35,2 6,5
Tobacco 60,0 52,9 11,7 17,3 7,1 3,2 3,6 4,3 3,5 2,9 3,5 6,6
Sunflower for - 0,6 0,7 3,7 16,1 15,5 19,6 19,7 17,7 19,8 18,4 30,7 d
animal feed
Tea leaves 31,7 30,7 9,41 1,08 0,73 0,54 0,53 0,57 0,57 0,47 0,58 1,9
Meat 168,0 175,5 109,4 153,6 198,0 244,9 254,9 276,0 286,9 291,2 298,6 170,1
Milk 951,0 970,4 826,5 1031,1 1251,8 1535,8 1597,5 1695,6 1796,7 1855,8 1924,5 198,3
Eggs (million) 947,7 985,3 455,8 542,6 874,6 1178,6 1011,0 1226,7 1401,5 1562,7 1552,9 157,6
Wool 11,2 11,2 9,0 10,9 13,1 15,6 16,0 16,2 16,5 16,8 17,0 151,8
(physical
weight)
Cocoon 5500 4900 1100 66,6 78,0 6,0 4,0 3,0 1,4 0,974 0,236 0,0
(tonne)
Source: State Statistical Committee of the Republic of Azerbaijan

7. Based on the trends of changes in the structure of crop fields and head count of animals,
both plant-growing and cattle-breeding products that are consumer market oriented have

13
 increased considerably as compared to the Soviet time. As a result, cotton, tobacco,
grape, tea and cocoon production has decreased. It should be mentioned that industrial
products like sugar beet and sunflower for animal feed have been already begun to be
considerably produced since it gained independence from the Soviet Union.
Common trends that are observed in agro-processing are almost the same as those
in agricultural production (Table 6).
Table 6. Dynamics of processed products (thousand tonnes)
Years 1995 2000 2005 2010 2011 2012 2013 2014 2015 2015/1995
Sausages 1,9 0,6 1,9 2,1 2,4 4 6 6,6 5 2,6 d
Butter 0,8 12,8 14,2 20,9 21,1 21,8 21,9 23,4 23,9 29,9 d
Cheese and curd 2,3 29,8 33,5 43,3 44,3 45,1 47,3 48 48,5 21,1 d
Flour 407,8 294,6 1374,1 1320,2 1328,1 1381,3 1438 1476 1507 3,7 d
Cream with 6-29% fat 1,1 1,6 1,6 4,2 4,4 4,5 4,6 4,7 5,1 4,6 d
content
Vegetable oil 11,7 10,8 64,1 88,7 80 99,8 100,2 106,9 106,7 9,1 d
Tinned fruit and vegetables 32,8 12,3 23,2 137,1 149,6 147,3 153,3 159,1 147,9 4,5 d
Confectionaries 32,9 23 42,9 43,5 45,7 46,9 47,7 50,1 55,9 169,9
Herbal tea 1,3 1,5 7,5 10,9 11 10,7 7,5 8 6,2 4,8 d
Fermented tobacco 13,5 7,8 2,6 2 2,6 2 2,1 2,4 1,7 12,6
Cigarettes (billion) 1,9 2,4 5 2,2 2 1,8 1 2 1,9 100,0
Macaroni 4,9 0,4 3,5 13 10,7 10,9 7,2 9,3 9,2 187,8
Compound feed 111,6 0,4 0,1 4,8 4,7 18,9 6,5 6,5 12,8 11,5
Sugar 0 535,6 3,6 335,5 334,7 355,7 423,1 410,6 335,6 100
Soft drinks (thousand) 126 4663,7 13361 19866 20978 25362 26658 28269 24885 197,5 d
Vodka (thousand) 130 450,4 484,3 884,9 820,6 696,7 844,9 668 770,7 5,9 d
Grape wine (thousand) 573 623,2 400,5 1162,8 752,1 1063 835,5 1003 1035 180,6
Champagne (thousand) 135 150,4 61,8 27,9 19,5 26,8 16,3 9,2 4,5 3,3
Brandy (thousand) 86 386,1 17,5 81,4 112,7 87,4 132,5 134,2 3,8 4,4
Beer (thousand) 223 710,8 2490,1 3771 3904,5 4757 5215 5149 4197 18,8 d
Cotton, yarn 19,9 0,7 17,7 7,6 9,9 16,6 15,5 11,9 9,1 45,7
Raw cotton 98,5 73,9 56 11,4 14,2 22,9 12,1 13,5 6,6 6,7
Raw silk, tone 0 0 58,4 51,8 8,5 2,1 0 17,9 7,9 100

Source: State Statistical Committee of the Republic of Azerbaijan

There has been a sharp drop in raw cotton and silk production, as well as compound
feed and tobacco production while the production of most of the processed foods has
increased considerably. The fast growth dynamics in food production (over the last 20
years) stems from its competitiveness, and opportunities for increasing production
based on the demand of the domestic and international markets.

Hence, the key trend in agricultural production is the production structure that has been
fundamentally transformed into food-oriented agricultural production since Azerbaijan
gained independence from the Soviet Union and transitioned to market economy. At
the same time, there has been a substantial increase in manufacturing of food-oriented
processing industry products over the last years. However, the ratio of some imports
to local products is relatively high to meet the domestic consumption demand, and the
demand for raw materials in the processing sector.

14
Level of self-sufficiency with food products and food security

In 2015, the focused measures to ensure food security of the country resulted in a high-level
food security with main food products (Table 7).

Table 7. Level of self-sufficiency with food products (2015)

Products Level of self-sufficiency, %
Beef 92,0
Mutton 99,0
Poultry 98,6
Eggs 99,0
Milk and dairy products 80,0
Cereal 60,0
Vegetables 103,0
Potatoes 90,0
Melons 100,0
Fruits and berries 120,0
Grapes 98,0
Sugar and sugar products 170,0
Vegetable oil and margarine 77,0
Butter 60,0
Note: Sugar and butter imports are high.
Source: State Statistical Committee of the Republic of Azerbaijan

There have been positive trends in food consumption of the population over the last 5 years,
that is, potato consumption per capita increased by 21,1%, vegetable and melon consumption
by 17,2%, meat and meat products by 4,7%, egg consumption by 12,3%, fruit and berry
consumption by 13,9%, and vegetable oil and margarine consumption by 12,2%. As a result,
per capita bread consumption dropped by 6,3%, milk consumption by 13,0%, and sugar and
confectionary consumption by 5,6%. Lower bread consumption is linked to the food ration of
the population being improved through other products. Lower milk consumption is related to
the lower use of butter because of wider consumption of vegetable oil and margarine .

Although agricultural and food imports increased considerably in 2015 against 2005 due to
both the growing consumption demand in the domestic market and the demand for agricultural
raw materials in the processing industries in light of global market integration, they tended to
decrease from 2014 to 2015 (Exhibit 4).

Source: State Statistical Committee of the Republic of Azerbaijan

15
Exhibit 4. Import Dynamics for Agricultural and Food Products (in million USD)

Source: State Statistical Committee of the Republic of Azerbaijan

According to the data of the State Statistical Committee of the Republic of Azerbaijan, beef
production increased by 17%, milk and cream production by 21%, potato production by 3.9
times, fresh vegetable production by 66%, fresh fruit production by 2,7 times, wheat production
by 50%, vegetable oil production by 70%, tinned beef and fish production by 40%, raw sugar
and sugar by 92%, sugar products by 34%, while tobacco production decreased by 2.2 times,
and poultry and other meat products by 3,6 times.

Exhibit 5. Products Necessary to Improve Self-Sufficiency through Local Production

 Cream, yoghurt
 Butter
Heavy imports designed  Sausage
for direct consumption  Macaroni
 Confectionaries
 Tobacco products

 Soft wheat
 Raw sugar
Heavily imported raw  Natural tea
and semi fabricated  Raw vegetable oil
products  Feed products
 Raw meat products for
sausage production

Source: Ministry of Agriculture of the Republic of Azerbaijan

According to the official statistical data and market analysis, the existing self-sufficiency with
agricultural and food products need to be improved to meet both the present and future
demand. Exhibit 5 shows the products that are needed to improve self-sufficiency through
local production.

16
Achieving substantial improvements in the food security monitoring system, which is one of
the important elements of food security, is a challenge. Today, there are 8 state agencies which
are responsible for controlling the quality and security of agricultural and food products in
Azerbaijan. Institutional reforms need to be carried out to ensure seamless coordination
between the agencies and address all related issues. On top of that, the control measures
implemented by these agencies at all stages of production, export, import, and sale of the
products are not based on a risk-based approach, but conventional inspections. This approach
increases costs and administrative load for businesses, and is less helpful in terms of
improving food security or meeting export market requirements.

Azerbaijan still needs a preventive-approach-based system that ensures proper division of

responsibilities among all players along the food value chain (production, processing and
delivery links).

Institutional structure of agriculture

That most of the farms are small and poorly institutionalized is one of the pressing issues with
regard to further increasing agricultural producing capacity and productivity indicators.

Although the average area of lands owned by 372 thousand producers who applied to the
Ministry of Agriculture for fuel and engine oil subsidies, is 3.4 ha ,the vast majority of the
producers own even smaller lands. (Exhibit 6).

Exhibit 6. Allocation of lands owned by producers (%)

50 hectares and more

20 - 49,9 hectares

10 - 19,9 hectares

5 - 9,9 hectares

3 - 4,9 hectares

Up to 3 hectares

Source: Ministry of Agriculture of the Republic of Azerbaijan

This is also the case with cattle-breeding. According to the Ministry of Agriculture, average
head count of cattle per farm is 7.7 and about 82 % of the cattle farms have more than 10
head of cattle (Exhibit 7).

Exhibit 7. Head Count of Cattle per Cattle Farms (%)

50 head and more

20 – 49 head

11 – 19 head

5 – 10 head

1 – 4 head

Source: Ministry of Agriculture of the Republic of Azerbaijan

17
Today, small land ownership and smallholding is among the problems which hinder enhanced
agricultural competitiveness in Azerbaijan. As the small farms are poorly organized, both their
access to market and satisfaction of their demands for resources is often challenged. The
prevalence of small farms is one of the core reasons for limited use of advanced and improved
technologies in agricultural production. As the small agricultural producers are poorly
organized, they do not have a chance to get deeply involved in formulating agricultural policies,
which result in reduced efficiency of public incentives implemented in the agricultural sector.

Although most of the producers engaged in agro-processing fall under the category of small
businesses, large producers have gained more power in the market. This is important in terms
of increasing producing and exporting capacity, but also causes certain problems with
enhancing market competitiveness, and ensuring sustainable food security and access of
small agricultural producers to markets. Therefore, it is important that relevant focused
incentives are implemented to ensure that the network of small and medium-sized processing
plants is established by agricultural producers and their unions.

The system of contract farming which acts as one of the forms of agricultural cooperation also
leaves a great deal to be desired. Only few companies have performed contract farming for
production of sugar beets, cotton, tobacco, cocoon, and herbal tea. However, the recent
measures implemented to develop cotton, tobacco and cocoon production has resulted in the
wider use of the contract farming system. Azerbaijan also lacks the practice of voluntary farm
aggregation as the related initiatives haven’t produced necessary results yet.

Given the above-mentioned, it is important that measures are implemented to consolidate

farms through advanced facilities applied in other countries, and develop different forms of
cooperation in agriculture.

Generally, poor agro-industrial integration has resulted in poor development of regional

clusters across the country. Although grape, cotton, tobacco and herbal tea producers are
based in the regions which produce these products, there has never been any reason to form
regional clusters, that is, they were engaged only in preliminary processing of the products
which were either exported or delivered to the businesses operating in the consumer market.

Within the implementation of the state programmes on socio-economic development of the

regions, the network of agricultural processors has expanded considerably and processing
plants have been established that make extensive use of advanced technologies. Recently, a
series of measures have been implemented to develop and transform the network of textile
processors that have suffered a slump over the last decades.

In addition, no efforts are spared to establish agro-parks which have been applied in
agricultural production as a new regional cluster-based business technology since the
beginning of the 21st century.

Providing finance and insurance to agricultural producers

There has been a steady increase in the volume of loans provided to agricultural producers
and processors over the last years. According to the Central Bank, in 2015, the total amount
of loans provided was AZN 508,1 million against 2005 when it was AZN 97,6 million. However,

18
the contribution of agricultural lending to the national economy dropped to 2,3% from 6,8% for
the same period.

Heavy dependence of agricultural production on climatic conditions, low capital flow, and other
factors have resulted in low efficiency as well as limited opportunities for agricultural producers
to make investments or use other financing mechanisms applied in the financial markets.
Therefore, focus has been increased on improving financial conditions for agriculture. From
2005 to 2015, the volume of loans provided by the National Fund of the Azerbaijani Republic
for Entrepreneurship Support for production and processing of agricultural products increased
by 18,1 times. In 2006, the State Service for Management of Agricultural Projects and Lending
under the Ministry of Agriculture began to provide loans for agricultural production. This is
indicative of the fact that the total volume of loans provided to agricultural producers and
processors has actually increased through preferential loans funded by the government.
Today, there are limited opportunities for raising funds based on the commercial conditions of
businesses that are engaged in agricultural production and processing. In addition to the
above-mentioned salient features of agricultural production, this is mainly related to the low
economic potential of small-sized farms, existing problems with the provision of collateral due
to the poorly developed land and property markets operating in rural areas, poor agricultural
insurance, as well as lack of a guarantee mechanism for agricultural lending and other factors.

Agricultural insurance has been supported; however, the insurable events supported by the
government include only a limited list of natural disasters and some unpredictable cases such
as fire, hail, -, flood and frostbite. Hence, agricultural producers are not insured against natural
disasters like drought (particularly in drought-stricken non-irrigable lands) or like pest and
infectious disease damage. The government-insured crops include only wheat, barley, corn,
sunflower (for animal feed production), potatoes, sugar beets, vegetables (except for greens),
fruits, citruses and grapes. It is important that the government support the insurance policy for
cattle, domestic fowls, rabbits, fur-bearing animals, bee families, as well as agricultural
machinery, units, equipment, vehicles and buildings, and other facilities subject to insurable
interest.

Lack of at least 30-40-year old agricultural database on natural disasters, animal and plant
diseases, climatic data as well as other performance indicators for agricultural production, and
absence of relevant insurance funds that are widely applied in the world is a key obstacle to
the development of agricultural insurance policy.

Provision of inputs and services

Land resources

According to the State Statistical Committee of the Republic of Azerbaijan, agricultural lands
account for 55 % or 4,74 million hectares of the total of 8,64 million hectares of land resources
in Azerbaijan. Crop fields account for 1,8 million hectares of the agricultural lands and 181,6
thousand of these lands are under occupation. Azerbaijan ranks among the countries with
limited land resources, that is, per capita land is 0,46 Ha, while per capita land suitable for
agricultural production is 0,19 Ha. Per capita area of pastures and hayfields is even smaller.

19
Except for foothills and the south-eastern part of the country, most of the agricultural lands
need irrigation water as a vital input for agricultural production due to arid and semi-arid
climates across the country (average rainfall is around 200-300 mm). Agricultural production
heavily depends on irrigation because of the low precipitation level.

Today, Azerbaijan has a total of 1434,5 thousand hectares of lands that are irrigated, in other
words, these lands are supplied with water through irrigation networks. 49,3 thousand hectares
of the lands are pastures, meadows and forests. Hence, crop fields constitute 1288,3 thousand
hectares of the irrigation lands, which shows that 71 % of the crop fields are irrigation lands.
Although existing land and climatic conditions allow for expansion of the irrigation lands to 3,0-
3,5 million Ha, it is still impossible to make it happen due to limited water resources.

Water resources and irrigation-amelioration systems

Azerbaijan, which is located in the arid zone, has limited water resources. According to the
Amelioration and Water Management OJSC of the Republic of Azerbaijan, the volume of
surface water is 32,2 billion m3 and in the years of drought the number goes down to 22,6
billion m3.Besides, 70 % of the surface water in Azerbaijan originates from other countries.
The volume of ground water is 5,2 billion m3. 21 billion m3 of existing water resources is stored
in reservoirs and only 12 billion m3of it is used. Agriculture uses 60-70% of the water resources.
Water shortage in the years of normal rainfall is estimated at 3,7 billion m3, However, this
number can be as high as 4,7-5 billion m3 in the years of insufficient precipitation.

There are 135 water reservoirs, including 8 reservoirs with a storage capacity of over 100
million m3, 12 reservoirs with a storage capacity of 10-100 million m3, 42 reservoirs with a
storage capacity of 1-10 million m3 and 73 reservoirs with a storage capacity of less than one
million m3 in Azerbaijan which are designed to respond to irrigation needs. The total length of
the irrigation channels is 51755 kilometers.

A number of large-scale government-supported projects have been implemented to restore

and improve the amelioration and irrigation system. From 2004 to 2015, about 1495
subartesian wells were drilled to meet the demand for irrigation and drinking water. Under the
Project for Restoration of the Samur-Absheron Irrigation System, the Takhtakorpu reservoir,
which has a total storage capacity of 268 million m3 and main irrigation channels with a total
length of 140 km were put into operation. In addition, under the Project for Construction of the
Shamkirchay Storage Pool, the Shamkirchay water reservoir, which has a total storage
capacity of 165 million m3and main irrigation channels with a total length of 60,6 km were put
into operation.

The measures to improve the amelioration and irrigation system have resulted in improving
water supply for a total of 266 thousand hectares of lands and adding about 43 thousand
hectares of lands to the irrigation land stock. On top of that, about 218 thousand hectares of
land was improved.

81,5% of the irrigation channels, 77 % of the collector-drainage network and 72 % of

hydrotechnical facilities that are currently in operation were once owned by collective famers,
Soviet farmers and other agricultural businesses, and their technical and physical conditions
require large-scale measures and activities. According to the existing regulations, the irrigation

20
and collector-drainage networks should be cleaned at least every 3 years (more than 30% per
year), while 25-30% of the hydrotechnical equipment and plants should be maintained or
overhauled every year. However, currently, only 20-21 % of the irrigation systems, 9-10 % of
the collector-drainage systems, 5-6 % of the hydrotechnical facilities are cleaned or
maintained.

More than 90 % of the irrigation and collector-drainage systems cause higher water loss,
mineralized soilwater upflow, and salination as they are open and not lined with concrete.
Besides, most agricultural producers apply flood irrigation or furrow irrigation, while only few
of them use drip or sprinkler irrigation.

Provision of agricultural machinery

Recent measures and government support have improved provision of agricultural machinery
and equipment substantially.

From 2005 to 2015, Agroleasing OJSC procured 1869 wheat harvesters, 7265 tractors, and
other 14507 pieces of agricultural machinery. During this period, a total of 18090 pieces of
agricultural equipment and machinery, including 723 wheat harvesters, 6305 tractors, and
other 11062 pieces of equipment were sold or leased to over 10644 entities and physical
persons.

Despite the growing number of agricultural machinery and equipment being purchased by the
Agroleasing OJSC, there are still some expired ones that need to be replaced, for example,
about half of the 2660 harvesters engaged in wheat harvesting in 2015are worn and fatigued.
There is a need for new machinery and equipment supply to intensify production and transform
the structure of crop fields. Machinery parks (shelters) need to be expanded to increase
mechanization of cotton, potato, vegetable, sugar beet and other fields. It is critical to expand
the network of businesses which provide maintenance services to agricultural producers in
order to enhance competitiveness and quality.

Provision of mineral fertilizers

The recent government support for provision of most of the mineral fertilizes has yielded
positive results.

Thus, according to the Ministry of Agriculture, from 2005 to 2015, mineral fertilizer was
imported twice as much as it did before. At the same time, Agroleasing OJSC increased
subsidized sales of fertilizers to agricultural producers from 68,4 thousand tons to 124,6
thousand tons from 2008 to 2015. As a result, the total area of crop fields provided with the
fertilizers expanded from 296,3 thousand hectares to 727,2 thousand hectares and the number
of the agricultural producers using the fertilizers increased from 40,2 thousand persons to
89,9 thousand persons accordingly.

However, the actual amount of fertilizers applied in the fields is considerably lower than the
demand for them. For example, in 2015 only 152,8 thousand tones of mineral fertilizers were
imported while the demand was 948,9 thousand tones. Obviously, mineral fertilizer imports
accounted for only 16,1 % of the total demand. According to FAO’s statistical data, Azerbaijan

21
ranks among the countries with the lowest mineral fertilizer use per hectare. This is one of the
factors contributing to low yield in crop production.

Provision of seeds

According to the Ministry of Agriculture, about 54 entities and physical persons were registered
and certified as a seed producer in 2015. 23 of them were registered for the first time, while
the rest were registered several times. There are a total of 354 private farms engaged in seed
and sapling production in Azerbaijan. However, the demand for seeds is met through imports.
Despite the fact that wheat grain is the most important part of seed production on all farms, the
local producers meet only 40-50 % of the total demand for seeds, 30-35 of which were certified,
while 10-15% were uncertified. Generally, seed production is challenged by a number of
hurdles including lack of market-based professional management practice of local seed
producing farms, poor material and technical resources, poor development of the seed selling
network, imperfect seed quality control and certification, and uncontrolled import and use of
seeds of unknown origin, poor performance of the Seed Producers Association, infringement
of copyright of breeders, and other problems.

Breeding

It is essential that highly productive animal breeds be increased to boost cattle production,
According to the Ministry of Agriculture, 46,5 % of cows are purebred or improved breeds,
while the remaining 53,5 % are local breeds. 52,7 % of the sheep are purebred or improved
breeds, while the remaining 47,3 % are local breeds. It is known that local breeds are not
productive in terms of milk or beef production, so high-yield breeds are imported from other
countries and increase breeding (artificial insemination) activities through government funding
in order to improve breeds and encourage science-based breeding on cattle farms. From 2009
to 2015, 18252 head of purebred cattle and 5947 sheep and goat were imported through
Agroleasing OJSC to be leased to agricultural producers on preferential terms. About 356 AI
technicians provide AI services in different regions across the country, and about 100000 head
of cattle and sheep are inseminated every year. The Artificial Insemination Center of the
Republic of Azerbaijan has hired experts from France and Germany in order to ensure
continuous training of AI specialists and improve material and technical resources that are
used for that purpose. To increase head count of high-yield animals and encourage producers
to benefit from AI, the government pay every cattle farmer AZN 100 for each calf born through
AI.

In addition to the continued efforts, there is a need for developing relevant infrastructure in
order to apply embryo transfer methods as part of improvements in animal breeding. At the
same time, it is important that poultry breeding be improved in order to enhance
competitiveness in poultry production industries.

Other important issues to be addressed include collecting, studying and preserving the genetic
resources of animals that are produced through conventional methods, and developing
breeding plans for them.

Provision of animal feed

22
Totally, there are 4 sources for cattle feeding in Azerbaijan: (i) natural pastures located mainly
in the countryside and designed to feed cattle. In Azerbaijan, most pastures have a thinner
grass cover due to overgrazing and the hay yield of the winter pastures has decreased 300-
400 kg per hectare. Some pastures are badly affected by erosion; (ii) roughage containing
annual and perennial plants cut from crop fields and hayfields, as well as taken from harvesting
of corn products in the absence of natural pastures. According to the State Statistical
Committee of the Republic of Azerbaijan, from 2005 to 2015, total green grass production of
the fields with annual and perennial plants increased by 36 % (or over 4.7 million tones). The
36 % growth of crop production against the twofold increase of the fields planted with fodder
plants is indicative of extremely low grass production.; (iii) succulent feed containing silage,
haylage, and fodder beet. Succulent feed production is low. In 2015, 23,9 thousand tones of
silage and corn for green fodder were produced, which is twice as much as it produced in 2005.
Every year about 2-3 thousand tones of tuberous fodder plants (root crops) are produced; (iv)
compound feed which is supplied from various sources. Generally, farms use mixtures of
various cereals they produce as compound feed for their cattle, so corn production is of great
importance in terms of increasing animal feed resources. In addition, agricultural by-products
like cottonseed, bran, etc., are used as compound feed. Over the last years, there have
emerged new industrial plants specialized in ration-based feed production, but most of the
demand for animal feed is supplied through imports. In 2015, over 100 thousand tones of
animal feed were imported although 12.8 thousand tones of feed was produced. In addition,
poultry farms produce about 300 thousand tones of compound feed to meet their own demand
every year (raw materials are imported).

Provision of veterinary and phytosanitary services

Large-scale measures are implemented to develop a system of veterinary and phytosanitary

services in order to protect agricultural producers from risks, and prevent or eradicate animal
and plant diseases.

The State Veterinary Control Service of the Ministry of Agriculture of the Republic of Azerbaijan
supports protection of agricultural producers against potential risks such as state-financed
vaccination measures to control diseases like anthrax, brucellosis, foot and mouth disease,
rabies and other infections. It has regional veterinary offices and field veterinarians who provide
state-financed preventive and compulsory vaccinations to control an average of 50 million
head of cattle and poultry across the country every year.

Currently, there are 60 private service providers and 440 veterinarians engaged in regional
trading of veterinary medicine across the country.

However, the State Veterinary Control Service has only 2600 veterinarians to meet only 60 %
of the demand, while 4400 veterinaries are needed to deliver effective services for 3.8 million
head of cattle. Besides, veterinary scientific- research and diagnostic centers are faced with
the shortage of scientists, bacteriologists and virologists trained in veterinary microbiology and
virology.

The ongoing measures to improve state veterinary policy are based on two strategies: i)
focusing on eradicating and controlling epizoic and zoonotic diseases based on effective
methods with respect to food safety and risk management as direct public involvement in

23
veterinary; ii) transferring the delivery of veterinary services to the private sector and
expanding the network of private veterinary service providers.

IPM measures (Moroccan locusts, fall webworms, Colorado beetles, Californian mealy bugs
etc.) are basically funded by the government.

There is a need for establishing a concrete executive and monitoring mechanism of the
provision specified in the existing legislation regarding compensation for damage caused to
individuals and physical entities affected in connection with the implementation of the
quarantine regime or destruction of harmful organisms, similarly, destruction, prophylaxis and
prevention of quarantine diseases of animals.

Generally, there is a need for developing and implementing an integrated action plan to devise
an affective system in order to track and monitor plant and animal health in accordance with
the International Standards for Phytosanitary Measures of the International Plant Protection
Convention (IPPC), and Terrestrial Animal Sanitary-Veterinary Code of the World Organization
for Animal Health (OIE) with the goal of improving the management of risks related to animal
and plant diseases.

Science, education, training and extension services

The Ministry of Agriculture and the National Academy of Sciences of Azerbaijani Republic have
12 scientific and research institutes which are dedicated to doing researches in the agricultural
sector. In addition, the Ministry of Ecology and Natural Resources and the Amelioration and
Water Management Office OJSC have 4 scientific and research institutes to partly address
agricultural issues. However, the management methods and programme priorities employed
by these institutes are not in line with national market economy requirements and the
knowledge of most of the research staff about good agricultural practices leaves a great deal
to be desired. Furthermore, the scientific and research institutes are not equipped with a
sufficient number of laboratories, devices and equipment, highly effective agricultural
machinery, and other advanced material and technical resources to make scientific
achievements in line with the requirements of the national economy, and international
standards.

According to the results of the public survey for 2013, 2.2 % of the agricultural producers are
holders of Master’s Degree, 0.4 % are holders of Bachelor’s Degree, while 4,6 % of them have
received college education, and 3,4 % vocational training. Hence, almost 90 % of agricultural
producers are not trained in any trade but received primary or secondary education.

According to the Ministry of Education, currently, the high schools, technical schools and
vocational schools of Azerbaijan train specialists in agricultural and food production,
processing, storage and other industries (30 specialties in high schools, 6 specialties in
technical schools and 10 specialties in vocational schools).Modernization of the agricultural
education system has been the recent focus of the government. Azerbaijan State Agricultural
University (ASAU), which is the key agricultural training provider, has been furnished with
completely upgraded laboratories, advanced equipment, and new experiment stations. ASAU
is also improving its training programmes and curriculums under partnerships with European
and Turkish universities. To train highly-educated agricultural specialists, the Ministry of

24
Agriculture signed a MOU with ADA University on October 24, 2016, to train 30 students as
MBA in agriculture.

Provision of extension services based on the needs of the agricultural producers leaves a great
deal to be desired. Besides, the network of services designed to deliver market information to
agricultural producers needs to be developed. The measures implemented by local NGOs to
address this issue under donor-funded projects are not consistent and systemized. A series of
institutional reforms have been carried out to effectively meet the needs of agricultural
producers for extension services, and to reinforce and create an extension service network
.Consequently, Azerbaijan Center for Agricultural Science was developed and institutionalized
as the Center for Agricultural Science and Extension Services. Another relevant structural unit
was established in the State Service for Management of Agricultural Projects and Lending
under the Ministry of Agriculture. To provide extension services to the farmers, the State
Service for the Management of Agricultural Projects and Lending under the Ministry of
Agriculture implemented the Farmer House Project with the support of Guba Regional
Agricultural Science and Extension Center in 2015. Under the project, relevant infrastructure
was developed, and advanced information and communication technologies were applied to
provide high-level services to the farmers.

However, there are pressing issues to be addressed in order to increase the capacity of the
Center in terms of provision of extension services, and provide the network of continuous
extension services across the country.

Given that most agricultural producers do not have deep knowledge of any trade in agriculture,
it is very important to develop both formal and informal training networks, that is, to put more
efforts in improving vocational skills of agricultural producers through short-term or periodic
training courses.

As such, preference should be given to improvement of technical, managerial and economic

knowledge through short-term training, transfer of best practices, recommendations and other
practical methods. The government should increase focus on developing and stimulating the
growth of private extension services.

Marketing and export of agricultural and food products

Market infrastructure for agricultural and food products

Although there is a developed sales network for food products, there is still room for improving
market structures and institutes that are engaged in the trade of agricultural products. Market
channels are fragmented and primitive, and the informal sector still dominates agricultural
trading. Consequently, there are still serious problems with providing the access of mostly
small agricultural producers to market who cannot sell products at reasonable prices, that is,
there is a big difference between the farm gate price and the end price on the consumer
market. This problem stems mainly from the poor wholesale and retail network of fruits,
vegetables, and melons.

There are 30 markets engaged in the wholesale trade of fruits, vegetables and melons.
However, 3 Baku markets, especially, Meyvali Trade Center account for 75 % of the total
wholesale nationwide. Generally, Meyvali Trade Center is the only market which is specialized

25
in wholesale trading and practically, dictates the wholesale price of agricultural products. All
other markets engaged in wholesale trading are basically designed for retail trading. It is
important that wholesale market network be developed in order to ensure stable growth of the
agricultural market and improve the access of agricultural producers to markets. For example,
according to studies conducted by the Ministry of Agriculture in 2003, the difference between
the farm gate price of fruits, vegetables and melons and the end price on the consumer market
ranged between 200% and 600% depending on the products; however, the studies for 2014
indicate that after the establishment of Meyvali Trade Center, the maximum difference was
200%. It is essential that new network of adequate market institutes be established to ensure
wholesale trading in fruits, vegetables and melons.

Currently, there are 36 markets operating in 23 towns and regions to engage in the wholesale
of cattle and beef. 10 of them are slaughterhouses and sales centers operating in Baku, while
3 markets are based in Sumgait. The biggest cattle markets are based in Imishly, Aghjabedi,
Barda, Goygol, Salyanand Sabirabad. The main problem with livestock product salesis the
poor slaughter and sales infrastructure which needs to comply with necessary standards.

Currently, adequate slaughterhouses and sales centers are being developed as part of
measures to improve the sales infrastructure for agricultural products. In Baku, locations for 3
sales centers have already been identified and relevant design engineering works have been
completed.

Hence, it needs to increase efforts to create “network of green markets” and to develop
adequate slaughterhouses and sales centers as an alternative to improving the quality of
traditional “collective farm bazaars”, and to develop pilot “farmer stores” under “value chain”
projects in order to improve the sales infrastructure for agricultural products. It is also important
that qualified wholesale agricultural markets be established in all regions across the country.

Currently, there are 212 storages including 103 grain storage barns operating to supply or
store various agricultural products across the country. The total storage capacity of storages
currently operating across the country is 1250 thousand tones (including grain storages with
the total storage capacity of 741 thousand tones and regular or cold storages with the total
storage capacity of 509 thousand tones which are designed to store fruits and vegetables).
Total storage capacity of regular and cold storages designed to store fruits and vegetables
account for 17 % of the total fruit and vegetable production. It should be noted that most of
these storages do not provide storage services to clients and they operate within the
processing plants or trade networks. Most of the grain storage barns are designed to store
public grain reserves. Besides, these storages are not allocated based on the production
capabilities of the regions where they are operating. This is why the producers have no choice
but to sell their produce at low prices during the harvest season.

Currently, there are certain barriers both to domestic and export transport of agricultural
products. For example, high fees are charged for the transport of products from remote
villages, especially, rural areas with poor road infrastructure. This problem still persists in
certain regions despite the recent large-scale measures aimed at reconstructing roads in rural
areas. In general, quality requirements are not fully considered in transporting agricultural
products due to the fact that the market infrastructure for agricultural products is not well

26
developed. Based on the discussions with exporters, we can say that there is still room for
improving the specialized local transport park designed for export market transport.
Consequently, exporters depend on international transport parks, which create obstacles in
maintaining stable and favorable transport conditions.

Domestic market for agricultural and food products

In 2015, retail sales volume of agricultural and food products was AZN 12,9 billion.
Exhibit 8. Real growth rate of agricultural and food products market as compared to
1990 (%)

Source: State Statistical Committee of the Republic of Azerbaijan

From 1990 to 1995, the shrinking volume of the market grew continuously and reached the
level of 1990 in 2003. In 2015, the volume of the market was twice as much as it was in 1990.

Fresh and processed fruits and vegetables, meat and fish account for 42% of the total retail
sales of agricultural and food products, while other products constitute about 8-9% of the sales
(Exhibit 9).

27
 Exhibit 9. Structure of Agricultural and Food Products

Fresh and processed fruits and vegetables

Fresh and processed meat and fish
Bread, flour and macaroni
Sugar and confectionaries
Milk products
Strong and soft drinks, tobacco products
Other products
Animals

Source: State Statistical Committee of the Republic of Azerbaijan

Export of agricultural and food products

Agricultural and food exports increased by 11,1 times from 2001 to 2005, and 2,2 times from
2005 to 2015 (Exhibit 10).

Exhibit 10. Agricultural and Food Exports (in USD million)

Total agricultural and food exports
Total fresh agricultural exports
Total processed agricultural exports

Source: State Statistical Committee of the Republic of Azerbaijan

During this period, exports of fresh agricultural products increased by 8,5 and 1,6 times, while
processed agricultural exports increased by 14,7 and 3,0 times. According to the UN
COMTRADE, Azerbaijan’s contribution to global agricultural and food exports increased from
0,014% to 0,054 % from 2001 to 2015. However, total exports have decreased due to shrinking
processed agricultural exports over the last 2 years.

Fresh agricultural products and processed products respectively account for 44% and 56% of
the total agricultural and food exports from Azerbaijan (Table 8).

28
Table 8. Agricultural and food exports from Azerbaijan (2001-2015) –(in USD)
Products 2001 2005 2010 2011 2012 2013 2014 2015 2015/2005
Fruits 11982 146432 112484 152965 207986 173508 192165 220247 150,4
Vegetables 856 26224 42345 78307 55969 77264 98919 91681 3,5 d
Processed fruits and
2123 16773 21518 21366 18694 21965 17143 10857 64,7
vegetables
Animal and vegetable oil 2957 68418 188255 173757 221766 227884 190335 153335 2,2 d
Sugar and sugar products 0 91 146452 199185 214911 243840 221379 212207 233,2 d
Chocolate 0 398 3157 7924 11942 16268 11868 7648 19,2 d
Tea 3142 14097 32957 32211 37223 43906 30804 18959 134,5
Strong and soft drinks 3403 9401 15142 15727 21041 30947 31875 25829 2,7 d
Cotton 15122 43974 15892 20612 22302 30230 14324 19308 43,9
Leather 1566 2134 11664 10774 13932 16978 23868 12128 5,7 d
Tobacco 11834 5395 5894 9307 7913 10757 12415 7431 137,8
Others 19457 40375 27098 28676 37183 34999 36171 23000 57,0
Total 72442,0 373712 622858 750811 870862 928546 881266 802634 2,2 d

Source: State Statistical Committee of the Republic of Azerbaijan

However, the geographical coverage for the export of primary agricultural products is very
limited, that is, 90 % of the products are exported to post-Soviet countries (except for Baltic
States), particularly, to Russia.

Exhibit 11 shows foreign trade balance for key agricultural products.

29
Exhibit 11. Foreign Trade Balance for Key Agricultural Products (in USD million)

Exhibit: Tobacco and cereals drive imports, while exports are driven mainly by
fresh fruits, nuts, vegetables, and oils
Million USD
Import / Export
Trade Trade balance (net)
Tobacco and tobacco products
Sugar and sugar confectionery
Industrial
Cocoa and cocoa preps
products Manufactured Sugar
Stimulants
tobacco

Meat
Animal and
animals Prepared meat
products Fish and seafood
Prepared fish
Dairy products
Fruits, nuts, Beverages
spices, Fruits and nuts
beverages Prepared fruits and nuts
Spices 64% fruits
Extracts, essences, broths 36 % nuts
Vegetables
Prepared vegetables
Vegetables
Cereals & Cereals
Oilseeds Flour preparations
Oilseeds 75% wheats
Animal feeds 13 % flour
Flowers, foliage preparations
Chemicals
Other Seeds and roots
Vegetable
Textiles
oils
Products of animal origin
Leather products

Source: UN COMTRADE, 2015

As it can be seen, Azerbaijan’s trade for fruit and vegetable has mainly a positive balance.
Russia is already a major market for Azerbaijan crops and agriculture products. Based on an
analysis of other countries’ exports to Russia and Azerbaijan’s top export items, three priority
products emerge: fresh tomatoes, particularly using year-round production in greenhouses;
fresh cucumbers and gherkins; and fresh fruits such as hazelnuts, apples, pomegranates,
persimmons, and melons.

Azerbaijan enjoys a competitive advantage for these products and can increase production
and yield in a short time.

If Azerbaijan captures a considerable share in the Russian export market, it can increase
exports of these crops.

The most important areas in the export of Azerbaijan’s agricultural and food products can be
summarized as follows: (Exhibit 12).

30
 Exhibit 12. Important areas in agricultural and food exports

Vegetable oil,
Fresh and sugar and sugar
processed fruit, products, and tea
vegetable and wine products which depend
products with the on imported raw
highest competitive products
advantage advantage

Industrial raw
cotton, tobacco
and leather
products

Source: State Statistical Committee of the Republic of Azerbaijan

Regulation of the market for agricultural and food products

International practice suggests that establishing a system for regulation of the agricultural and
food market will help producers to generate decent incomes by selling products under
favourable conditions and help them increase production continuously. A new stage of
agricultural reforms aimed at developing relevant mechanisms to ensure systemized
regulation of the agricultural market has been already launched. It makes limited use of 2 tools
to maintain stable prices in the agricultural market. First, the Ministry of Agriculture along with
local executive powers organizes agricultural fairs every weekend or during public holidays in
Baku since 2006. These fairs are designed to allow the producers to offer their products to the
residents at affordable prices. Although the fairs are not effective in improving access of the
farmers to market, they are conducive to affordability of the prices of agricultural products.
Second, the State Grain Reserve Fund, which has been operating since 2009, make
necessary interventions as agreed with competent authorities in order to prevent abrupt price
volatility for cereals on the domestic market.
Supply and Procurement of Food Products OJSC, which was established according to the
Presidential Decree No.1944 dated April 11, 2016, will act as a significant instrument in
ensuring guaranteed agricultural production and making interventions for large market
segments.

“Supply and Procurement of Food Products” OJSC has already started to develop relevant
mechanism to supply agricultural and food products to respond to public needs and ensure
market stabilization.

Regulation of agricultural and food imports in the domestic market

In Azerbaijan, there is a legal framework for applying antidumping, countervailing and other
special duties, as well as quotas for agricultural products. However, it lacks proper institutional

31
mechanisms for applying these tools. Besides, it is required that regular studies be carried out
to investigate domestic market in terms of applying these tools and to assess impacts of the
prices of goods in the country of origin and on domestic production. As such, it needs to build
adequate institutional capacity. Sanitary-phytosanitary and veterinary norms and standards,
and technical requirements are applied as non-tariff regulation methods to protect health and
environment. However, the objectives for protecting the domestic market are not taken into full
consideration in protecting the domestic market while implementing such norms, standards
and requirements. These tools can be used to protect the domestic market as there are well-
developed mechanisms for applying relevant norms, standards and requirements.

Protection of environment, preservation of natural resources, and management of

climatic impacts on agricultural production

Azerbaijan has 9 micro-climates and the mildest winter in the region. Summer months are dry,
hot and bright with the average temperature ranging from 28 °C to 30 °C. Natural climatic
conditions are characterized by 300 hours of sunlight (in summer), which means an opportunity
to develop diversified agriculture and to produce three times in a year.

However, Azerbaijan still has problems with the efficient use of water and land resources
despite the fact that these resources are limited. Environmental and land resources have
deteriorated as a result of the failure to implement necessary measures to ensure soil fertility
by land users, to apply good agricultural practices (G.A.P.) and to comply with or improve
existing norms and regulatory requirements for land conservation, and to ensure compliance
of the existing amelioration and irrigation system with relevant requirements; overgrazing of
pastures and forests due to the increased focus on natural feeding with regard to the growth
of cattle-breeding; and utilization of agricultural lands for other purposes, etc. These problems
will get tougher as the system for sustainable use of land resources is not applied. According
to the existing laws and regulations, the Ministry of Agriculture, the Ministry of Ecology and
Natural Resources, Azerbaijan Amelioration and Water Management OJSC and other local
executive authorities should implement appropriate measures for recovery, conservation and
growth of soil fertility within their competence, however; the existing regulations lack any
specific provisions and guidelines to ensure that certain mechanisms are in place to commit
the agencies to the recovery, conservation and growth of soil fertility. Besides, the regulations
of relevant agencies define overlapping functions in this regard

Irrigation system management is one of the preconditions for efficient use of water resources.
As per existing laws and regulations, the amelioration and irrigation systems may be subjected
to public, private and municipal ownership. However, all irrigation systems are owned by the
government or Azerbaijan Amelioration and Water Management OJSC. 585 Water Users
Associations (WUA) were established under the projects implemented by Azerbaijan
Amelioration and Water Management OJSC through World Bank loans and other projects
implemented by the State Agency for Agricultural Project and Lending Management through
IFAD loans. Although WUAs are operating to distribute irrigation water among consumers,
there is not any practice ensuring long-term use of water resources by these agencies.
Azerbaijan Amelioration and Water Management OJSC sells irrigation water to WUAs on
preferential terms. However, it needs to apply more efficient support mechanisms and to
consider the existing discount mechanism. In addition, it is important that appropriate support

32
measures be implemented to encourage wider application of best irrigation practices as
Azerbaijan is a country with limited water resources. Currently, the only way to make it happen
is the supply of relevant irrigation equipment under a lease through Agroleasing OJSC and on
condition that 40 % of the their value is financed by the government. Incentives are limited in
this respect.

Not only traditional agriculture, but also eco-agriculture should be encouraged to protect
environment. However, development of eco-agriculture leaves a great deal to be desired as it
lacks the system of certifying, the statistical database, and market channels have not been
formed, although some measures e.g. development of the legal framework for regulating these
activities, were taken in this regard.

Making interventions by protecting against hail and regulation of rainfall for agricultural
purposes in order to predict and prevent potential consequences is an important factor.
According to the World Meteorology Organization, global agricultural losses caused by hail is
worth USD 6 billion, including losses worth USD 740 million suffered by CIS countries. The
hail-protection system and facilities inherited by the Soviet Union was handed over to military
base as Azerbaijan was in state of war in the early 90s. Therefore, there is a growing need for
establishing and improving the system based on advanced technologies to make weather
interventions for agricultural purposes.

Regulation of agricultural production and government support

Government support system

A series of measures have been implemented to form, improve, and increase transparency of
the government support system for agricultural producers over the last years (Exhibit13).

33
Exhibit 13. Government Support Measures for Agricultural Production

Common government support measures Government support measures for cattle-

breeding
- exempt agricultural producers from
taxes, - pay 50% of the cost of purebred
- provide preferential loans to agricultural animals imported and leased by
producers, Agroleasing OJSC,
- apply customs credit to most of the - grant subsidies in the amount of AZN
agricultural and processed imports, 100 for each calf produced through
- pay 40% of the cost of the agricultural AI,
machinery and equipment sold or leased - provide relevant infrastructure for AI
to agricultural producers by Agroleasing services,
OJSC, - implement preventive and diagnostic
- pay 50% of insurance for agricultural measures against 13 most dangerous
assets and predicted insurable events. animal and poultry diseases and
infections.
Government support measures for plant-
growing

- provide subsidies worth AZN 50 for

each hectare of crop fields in order to
pay 50% of the cost of fuel and engine
oil consumed for agricultural
production,
- provide subsidies to processors of
AZN 0.1 for each kilogram of sold
cotton and, dry tobacco, and AZN
0,05 for each 10 kilogram of raw
tobacco,
- the price of irrigation water for
agricultural producers is AZN 0,5 per
1000 m3,
- pay 40% of the cost of the modern
irrigation equipment sold by
Agroleasing OJSC,
- pay 70% of the fertilizers, pesticides
and industrial bio-humus,
- provide subsidies for seed and
sapling production and sales,
- provide government funding for the
application of IPM measures and
quarantine for agricultural crops.

34
These support measures are important in terms of supplying inputs for agricultural production,
and increasing opportunities for generating more incomes. The gaps have already been filled
in the provision of agricultural machinery and equipment, increased fertilizer application,
expanded animal breeding farms, and succeeded in optimizing most of the production costs.

The agricultural sector is a priority area in pursuing the policy for providing state-financed
preferential loans for entrepreneurs. This sector accounts for 60% -65 % of the preferential
loans allocated by ANFES. Agricultural producers are exempted from all taxes except for the
land use tax. No doubt, these concessions have a significant part in reducing the costs for
producers and ensuring affordable prices for consumers. The efforts have been launched to
implement more targeted support measures and improve application mechanisms. On top of
that, the applied tax credit policy needs to be reviewed and reconsidered in order to strengthen
linkages between the agricultural producers and processors, and trading networks. It is
important to determine and expand the scope of relevant support measures based on a correct
evaluation of the existing requirements.

Registration and statistical system in agriculture

Currently, the vast majority of agricultural producers are not registered based on officially
required organizational forms. According to the State Statistical Committee and the Ministry of
Agriculture, about 1300 farms are registered as legal entities and 1500 as physical persons
despite the fact that there are 890 thousand agricultural landowners as well as 370 thousand
agricultural producers who have applied for receiving state support for fuel and engine oil
across the country.

Besides, there is no identification system for cattle and lands. One of the challenges in
ensuring an efficient land identification system is the discrepancy between the data contained
in land ownership documents and the actual data based on existing conditions. Most
importantly, lack of the e-cadastre system is a key obstacle to providing e-land registration.

All these problems create challenges in obtaining quality statistical data on agriculture and
result in limited opportunities for making real assessments to justify relevant policies.

Over the last years, complex measures have been implemented to digitalize agricultural
information nationwide. Since 2015, The e-agricultural information system has been initiated
based on the methods applied by EU countries. The e-agriculture information system which is
based on the principles of the EU Integrated Control System (IACS) consists of 7 sub-modules
including modules like land identification, farmer registry, and registration and analysis of
applications for subsidies. Necessary information and communication infrastructure was also
developed to create and manage digital database comprising orthophotographic and satellite
images to contribute to the e-agriculture information system. The Ministry of Agriculture has
built the institutional capacity of relevant structural units, and launched a number of pilot
projects in Guba, Khachmaz, and Goygol.

The terms of reference have been started to be prepared for the development of Animal
Identification and Registration System with the support of international experts.

All annual data on subsidized producers and their lands are completely digitalized and
embedded in the integrated database (including data on the regions and villages where they

35
operate as well as the size of their fields and type of crops) before making sure that the e-
agricultural information system is in place. It should be noted that this information covers about
370 thousand producers subsidized for fuel and engine oil every year and 1,3 million hectares
of respective crop fields which constitute over 80 % of total fields across the country. In
addition, State Veterinary Control Service has created e-database collecting data on all cattle
farms operating across the country in order to be poised for creating the cattle identification
system. State Technical Control Inspectorate has created e-database in the ‘Automated
Information System for State Technical Control” system containing data on over 66 units of
agricultural machinery registered in the country. Within measures of improvement of the
performance of the Agroleasing OJSC, relevant transactions have been transferred to
electronic-registration system by the Company, as well as the System of Automation of Leasing
Transactions- specific software regarding preferential techniques has been developed and put
into operation and reliable database has been established.

Azerbaijan is the first country among the CIS countries to have created the Farmer Data
Monitoring System (FDMS) based on EU practices. The Monitoring System, which provides
for collection and analysis of the basic economic performance of direct agricultural producers,
operates as an important information source for analyzing agricultural impacts on the farm
level, making a systemized need assessment for improvements in the agrarian policy and
addressing other issues. The e-database containing data on about 4 000 farms covering all
agricultural areas and regions has also been created (based on the indicators for 2014 and
2015).

The Ministry of Agriculture and FAO have developed an information portal containing data on
agricultural prices (www.azagro.net), i.e. daily updated wholesale and retail prices for 400
varieties of fruits, vegetables and melons which go under 46 names based on their size.
Currently, the information portal is being updated based on the data on sales prices of fruits,
vegetables, melons, animal products, cereals, industrial products and other crops.

Agricultural employment and welfare

Over the last 5 years, total employment has increased by 6,8 % resulting in 9,3,% and 2,5 %
increases in the processing and agricultural industries respectively. Over the last years the
agricultural sector has contributed less to total employment while the contribution of the
processing industry was 4,8-5,0 %. This indicator was 39,1% for 2000, and 36,4% for 2015.
Despite all, agriculture still remains to be a sector which has the largest share in total
employment.

In 2015, the annual and monthly added value per capita for agriculture was AZN 1993,2 and
AZN l66,1 respectively. Hence, the prevailing smallholders which create small added- value
are indicative of the limited opportunities for pay raise and necessity to increase production
based on intensive methods. Therefore, it is essential that the non-agricultural employment be
increased through rural processing industries and other production and service areas.

Since 2004, state programmes for regional socio-economic development have been
implemented to achieve considerable improvements in the social infrastructure of rural areas

36
where 47% of the population live, thus resulting in enhanced quality of life and welfare of rural
population.

From 2004 to 2015, the regional gas supply increased from 41,0 % to 78,2 %. As a result of
the measures implemented to develop the transport infrastructure, highways have been built
with a total length of 3,1 thousand km and rural roads with a total length of 7,2 thousand km,
as well as 394 bridges and tunnels (81% of them are in the regions), airports in 6 regions.
During this period, 6510 km-long drinking water lines and 3155 km-long drainage lines were
built. The percentage of rural population supplied with drinking water (round-the- clock)
increased from 9% to 41%. There are 34 power plants with a total capacity of 6300 MW, while
there were only 9 power plants (2800 MW) in operation back in 2004. 80% of the power is
generated in the regions.

During this period, the government built or overhauled 2554 school buildings, 409 medical
facilities, as well as 33 Olympic sports complexes and 34 youth centers.

71% (or more than one million) of the new job places were created in the regions under the
regional socio-economic development programmes. The regions also account for 42% (or
29820) of the newly established enterprises, and 68 % (or 202) of hotels.

In addition to the above-mentioned, a number of rural development projects were implemented

jointly funded by the World Bank, International Fund for Agricultural Development (IFAD), EU
and other donor organizations, and implemented by civil society organizations. The project
activities included providing extension services, implementing veterinary and plant protection
measures, providing the producers with seed and saplings, building small supply stations,
providing financial support, etc. in order to help increase rural incomes in addition to developing
and rehabilitating social (health, education, rural roads, etc.) and irrigation infrastructure.

It is important that rural development policies be formulated in line with best practices in the
present-day stage of socio-economic development of the regions across the country. To make
this happen, it is necessary to gradually transition from the regional development policy (which
is aimed at ensuring large-scale and quick implementation of the socio-economic development
measures, achieving one-time solution to the existing problems, and mainly based on the
national planning methodology) to the rural development conception. In this regard, it is critical
to develop relevant database and monitoring system comprising all performance indicators for
rural development, and build institutional capacity for development planning. It is necessary to
develop institutional mechanisms which ensure further development of rural communities and
local executive authorities.

37
 3.2. SWOT Analysis for Agricultural Production and Processing
Strengths Weaknesses
2. Favorable natural resources (soil, water, climate
12. Limited application of best farming practices,
reserves) for development of agricultural lower yield in the production of most of the
production; Formulation of the agricultural policy crops due to the prevailing extensive
based on private farming traditions and market production methods.
economy principles.
13. Existing problems in the supply of irrigation
3. Nascent processing plants network relying on water for most of the crop fields.
advanced technologies.
14. Underdeveloped market infrastructure,
4. Higher global growth rates in terms of especially sales and storage infrastructure.
agricultural and food production.
15. Limited use of existing opportunities to add
5. Increasing self-sufficiency with important food value in production, processing and trading.
products after Azerbaijan gained independence
from the Soviet Union. 16. Prevailing number and poor market
orientation of household farms which rely on
6. High growth dynamics in the volume of exports smallholding.;
of agricultural products;
17. Agricultural policy which is focused on supply
7. Strong government support in providing (production) prevailing over demand
agricultural inputs to agricultural producers and (marketing), and needs to be improved in
fulfillment of the existing demand for the inputs. terms of the value chain approach.

8. Developed government support mechanisms 18. for Lack of farmer cooperation and agricultural
increasing crop and cattle production based on cooperation, as well as agro-industrial
intensive methods. integration;

9. Established agribusinesses based on best 19. Processors relying less on sources of local
farming practices and gradual expansion of this raw materials;
practice.
20. Poor access of producers to finance and
10. Proximity to international markets: Closer poor development of agricultural insurance
proximity to large international markets, like system;.
Russian markets. Relative proximity to
European and Middle East markets. 21. Lack of knowledge and skills in relevant fields
for farmers to carry out activities through
11. Existence of relatively well-developed rural advanced methods;
infrastructure
22. Implementation of agricultural production
without paying enough attention to
environmental protection and sustainable
utilization terms of natural resources;

23. Lack of or poor extension services in

agriculture.

24. Incomplete database (development of

electronic agriculture , electronic a daster
system of lands and identification system of
animals) regarding existing resources in
terms of further increasing of efficiency of
agricultural and food policy;

25. Low competitiveness of grain production as

strategically important product, in particular
due to limited existing natural resources

38
 (absence of large land areas like in wheat
countries;

Incompliance of food safety, quality

management system of agricultural and food
products with the requirements of the
international standards;

Poor coordination of scientific and research

activities on agricultural issues with practice.

Opportunities Threats
Agricultural and food production and processing being a26.
top Existing natural resources (land and water
priority in the national socio-economic development policy. resources) are lower than global indicators
although they are favourable for agricultural
Government support provided to stimulate the growth of production.
agricultural and food production.
27. Lack of coordination between the agricultural policy
Launched efforts to develop agricultural and food market and the principles of environmental protection and
infrastructure and form a system for effective market sustainable use of resources.
regulation.
28. Limited diversification of export markets.
Proximity to efficient export markets and having an
important position in these markets. 29. Desertification and degradation of arable lands:
Improper irrigation and global climate changes will
Launching application of comprehensive encouraging lead to land desertification and degradation
measures to increase access to export markets;
30.
High comparative advantages of production of most
agricultural products; 31. Damped or subsidized imports: That will lead to
unfair competition on the domestic market.
Existence of the chance to improve ecologically-friendly
agriculture; 32. Reduced support for the sector following the
potential WTO accession (amber box);
Lower labor costs and sufficient labor force (this will
reduce costs of production).

Depreciation of the Azeri Manat: The devaluation of the

manat has made locally produced agricultural crops more
competitive on the world market (production costs are
lower in terms of foreign exchange, that is, price
advantage is ensured).

Development of multifunctional agriculture: Considering

the limited job opportunities in rural areas, developing the
rural tourism and expanding the power production (bio,
solar and wind power) may increase incomes of those
who are engaged in agricultural activities and improve
financial opportunities for farmers;

39
4. STRATEGIC VISION
4.1. Strategic Vision for 2020
Strategic targets have been set as vision for agricultural production and processing by 2020 to
create enabling environment for the competitive agriculture and agro-processing sector, which
improves food security and contributes to solution of social problems in rural areas, and
economic diversification.

Interpretation of the strategic vision

Relevant regulating system will be improved, including increasing the effectiveness of state
aids and further development of competitiveness in the market will be achieved and favourable
business environment will be formed. Complex works will be carried out in strengthening the
potential of relevant regulating bodies, adjusting the state aids with development goals,
improving food safety system, enhancing competitive environment in the market of production,
sale and means of production, facilitating the access to financial resources, developing the
extension services, and other directions.

As a result, efficient use of natural resources, fostering the activity of farmers, developing
agricultural and food production according to their value chain of production areas will be
ensured and in doing so, sustainability of food safety, increase of export volume of non-oil
sector will be reached and income generating opportunities of people operating in agricultural
sector will be boosted.

Most of the actions designed for the priorities set in the Strategic Roadmap will be taken post
2020.

4.2. Long-term vision for 2025

Strategic targets have been set as its long-term vision for agricultural production and
processing for 2020 to create competitive agri-business through transition from the long-term
traditional farming to market-oriented, value-added intensive farming.

Interpretation of the long-term vision

The implementation of the Strategic Roadmap will result in increasing the market-orientation
of and consolidating household farms which rely on family labor for personal needs on one
hand, and establishing commercial agro-complexes, strengthening integration between the
processing sector and the agricultural producers, as well as creating adequate producing
capacity through developed market infrastructure on the other hand.

At the same time, yield indicators will be increased by developing the scientific, educational
and consultancy system which will allow application of advanced technologies in agricultural
production and enhancement of expertise and skills of producers.

40
As a result, by 2025 agricultural production will contribute considerably more to the non-oil
sector based on the focused approach adopted to increase agricultural production and
efficiency.

The objective of the long-term vision for 2025 is ensuring full modernization and enhancing
competitiveness of the agricultural sector. This also includes increasing production, producing
value-added crops, and strengthening value chains along agro-processing. Over the next
decade, focus on increasing production of certain crops like fruits, vegetables and nuts and
enhancing competitiveness of the processing sector designed for these crops will be
increased. Azerbaijan will also enjoy a competitive advantage in the production and export of
the value-added industrial crops (for example, cotton, herbal tea and tobacco) with which it
had captured a big share in the international market before. On top of that, incomes will be
increased through reduced dependence on imports, and increased exports. At the same time,
implementation of the actions to increase crop production will ensure that agricultural
processors have a more important role in the value chain. Priority crops will be put on the
domestic and international markets as a value-added crop through processors located in
proximity to key trade routes and transport networks.

Agricultural production and processing will be increased through enhanced competitiveness.

To make this happen, the overall focus will be on establishing intensive farms which rely on
application of good agricultural practices and full automation. In doing that, Each regional
potential will be considered and certain measures will be implemented to establish production
clusters and sub-sectors. In addition to the conventional production methods applied in the
country, the organic production of staple crops will be promoted based on the regulatory
standards established by the government. Agricultural producers will be deeply engaged in all
value-adding links along the value chain through implemented actions aimed at improving
agricultural production and processing.

As a result of implementation of the actions based on the priorities for 2016-2020, all agri-
businesses operating across the country will be a driving force in transforming the agricultural
sector by 2025. This will also result in increased domestic and foreign investment flow in
industries, and competitive production and processing of value-added products. At least, a few
more local agribusinesses will be established through such investments in the agribusiness
sector. These businesses will enhance the number of export markets, by increasing export
potential, including European and Western markets and capture a bigger share in international
markets. During this period, international companies will expand the scope of their activities in
addition to the local agricultural producers and processors. Allowing considerable increase in
investment flow as well as facilitating the presence of the international market players through
complex projects and agricultural cities will be a priority. The Free Trade Zone, which is located
in Alat will have fully operated as a primary processing center by 2025.

In this regard, one of the important issues to be addressed by the government will be fostering
the development of the above-mentioned sectors. To make this happen, access to finance will
be increased through non-material incentives aimed at ensuring efficiency, and increasing
production of local farms. In addition, the challenges will be considered being faced by the
agricultural producers and processors, and facilitate their access to various lending products

41
by enhancing the activities of credit guarantee fund. By 2025, the government will have
considered the issue of providing idle public lands to the private sector and delivered business
advisory services to those who use these lands. The agricultural sector will attract more foreign
investments as a result of the agro-sectors being developed through improved regulatory
framework.

In addition to the reforms designed to establish competitive agricultural industries and to

increase production, actions will be taken to increase the average size of the farms, and to
ensure that they benefit from economies of scale. Building on the measures that have been
implemented since the time of independence, relatively small farms will be consolidated to
become a stronger local market player.

The implemented actions designed for the priorities set to transform the agribusinesses and
industries will allow similar reforms in household farming across the regions. By 2025, a huge
network of cooperatives and contract farming which will allow more active farmer participation
in business associations and sector reforms will have been established. Farm aggregation and
three-pronged interventions (increased access to finance, market, and inputs) will allow more
production of value adding products, wider application of advanced agricultural technologies
and increased agricultural incomes. Most of the farmers will have easier access to high quality
seed and fertilizer markets and enjoy higher potential for making investments. At the same
time, local markets will provide continuous services to small farmers and allow them to capture
a bigger share in the markets.

Under focused programmes, international development funds will maintain presence in

Azerbaijan, huge investments will be made into the irrigation systems, and existing irrigation
systems will be upgraded to ensure compliance with the international standards, to increase
efficiency and reduce water losses. This will result in steady water supply and increase of
agricultural products. As the national industry develops, irrigation systems in the major crop-
producing regions across the country will be expanded.

By 2025, an e-agriculture system will have been established which will allow implementing
stronger policies and decisions. Relevant data will be analyzed to implement sector-related
strategies following the establishment of a large database containing all data on farmers, as
well as their crops and lands. Based on the results of the analyses, a series of incentives will
be implemented to transform agricultural production and processing sectors.

Relevant mechanisms will be used for continuously supporting the long-term development of
the agricultural industry, and create a robust extension service base for providing required
farmer training in order to increase quantity and quality of local production. Proper expert
support and data exchange will be provided to increase production and efficiency. Azerbaijan
will become a primary regional country striving for agricultural research, innovations and
education. On top of that, the nationwide food security system will be upgraded and
modernized through advanced methods and internationally-accredited laboratories which
comply with the international standards. This system will be stimulated by the growth of high-
quality seed and purebred animal markets. By 2025, relevant standards will have been applied
to develop a self-sustainable market which will not rely on active government support.

42
Food security of the population will have been ensured by fostering the development of
agricultural industries by 2025. Apart from that, the nationwide potential for long-term self-
sustainability will be realized through enhancing local production, trade turnover and
opportunities for product storage, including institutional and sound management systems (for
example, information and early warning systems).

Increased efficiency of use of intensive resources for agricultural production will ensure
environmental sustainability. However, relevant control measures will be implemented to
reduce the potential risk of environmental pollution due to increased production. Additionally,
focused control mechanisms and standards will be applied to ensure that water, land and other
resources are not affected by increased farming activities. Sound forest management will also
be a key priority on the government agenda.

By 2025, rural development will have been supported through sweeping changes to
agricultural production and processing. Goal-oriented state programmes which envision
urbanization trends will increase employment and incomes in agricultural industries and other
related sectors. Bigger accomplishments for social parameters will be targeted when
formulating the agricultural policy.

4.3. Strategic vision for post 2025

Strategic targets have been set as vision for agricultural production and processing post
2025to form agriculture based on technological advance which will be in line with
environmental standards, industrialized and efficiently integrated to the global value chain
system.

Interpretation of the target vision

Post 2025, increased agricultural production and processing leading to the presence of its
value-added processed agricultural products in the market will be allowed. It will stimulate the
growth of these sectors by maintaining the stronger presence of best-performing, efficient and
environmentally sustainable processors (for example, grape, tobacco, cotton, etc.), and create
a network of modern processors and refrigerating storage for the production of dried fruit and
vegetable, fruit juice and meat production. Value-added crop producing regions will specialize
in the production and processing of the crops they produce.

In Azerbaijan, increased agricultural production will not only meet the local demand for food
products, but also increase export opportunities to maintain a strong presence in the regional
and international markets. Azeri agricultural producers will create a national brand for their
products in the international markets, and ensure that they are widely recognized in terms of
quality. These companies will operate as a key exporter in the Caucasus region owing to the
developed logistic infrastructure, and maintain a stronger position by expanding their business
in the foreign countries.

The government will make minimum interventions in these actions and act not as an
implementer but as an enabler through a set of incentives. It will provide extension services,
develop the e-agriculture system, create highly competitive environment by making

43
modifications to the regulatory framework, and allow stronger investment flow in the
agricultural industry in order to foster the development of the agricultural sector.

Post 2025, necessary actions aimed at ensuring sustainability of food security will be
continued, and the agricultural sector will be made a major driving economic force in
stimulating rural development. In addition, a properly focused strategy will be implemented to
maintain food ration (for example, protein content) at acceptable levels.

In post 2025, changes will be made to these actions in case of necessity with the focus on
environmental sustainability. It will spare no efforts to make sure that the actions that are aimed
at increasing agricultural production do not have a negative impact on environment. The
development strategies that are designed to shape the future of industries will be based on the
“green” approach, consider the climate changes, and provide for the application of
environmentally-friendly production and processing methods.

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5. Targets
As compared to 2015, these strategic priorities for 2020 in Azerbaijan are estimated to:

 Increase Azerbaijan’s direct and indirect GDP by AZN 575 million and AZN 660
million respectively with a total of AZN 1,235 million in 2020, in real terms;

 Add 20 000 formal direct and indirect job places in the agricultural production and
processing sectors.

The actions designed to develop the agricultural production and processing sectors have the
following major targets for 2020 (as compared to 2015):
 To increase meat and milk production by 30% and 20% respectively;
 To increase cotton production and processing by at least 4 times;
 To increase cocoon production and processing by at least 1000 times;
 To establish a total of 25 small and medium businesses along the relevant value chains
in each region by 2020;
 To facilitate access to finance worth an additional of AZN 665 million;
 To develop at least 100 investment projects for the administrative regions and sectors;
 To increase water supply for agricultural producers by 20%;
 To reclaim unused, but suitable agricultural lands in order to increase the total size of
crop fields by 5%;
 To increase the use of mineral fertilizers by agricultural producers by 25%;
 To increase the use of plant protection means by agricultural producers by 25%;
 To raise the use of certified seeds and nursery plants by agricultural producers up to
90%;
 To increase provision of agricultural machinery and equipment including small
machinery and equipment to agricultural producers by 20%;
 To increase enrollment for agricultural education by 20%;
 To increase private veterinary service providers by 30%;
 To establish 5 “green markets” and 50 “farmer markets” in Baku and other big cities;
 To train 200 farmers in agricultural export by 2020;
 To improve 30 % of the irrigation lands.

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6. Strategic targets
The Strategic Roadmap is generally designed to foster the sustainable and competitive
development of the agricultural sector. To make this happen, the following strategic objectives
will be implemented:
 To ensure regional and areal development of agricultural production with a competitive
advantage, facilitate access to inputs, extension services, and domestic and
international markets, develop farmer partnerships in agriculture, develop agribusiness
and agri-processing, develop the competitive agricultural sector by upgrading
agricultural education and science;
 To increase production of necessary food products for import substitution; develop food
resources, and improve food safety;
 To increase employment and enhance quality of life in rural areas, and improve rural
welfare;
 To foster development of agriculture in line with climate changes in order to protect
environment, land and water resources, and enable sustainable agricultural
development through application of advanced technologies designed to increase
efficiency of the use of land and water resources.

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7. Strategic objectives
7.1. Strategic objective 1. Increasing institutional capacity for ensuring
sustainable food security
Ensuring food security in Azerbaijan is one of the important elements of the agrarian policy
pursued by the government. As food security is a top priority on the government agenda, no
efforts will be spared to ensure steady supply of quality food for its population.

The Strategic Roadmap envisions a number of priorities and actions that are designed to
improve food security, and increase self-sustainability with food products. Necessary
measures will be also implemented to increase the institutional capacity for ensuring
sustainable food security.

Actions will be taken based on 3-pronged priorities: firstly, issues will be addressed concerning
developing the information and monitoring system for food security. This system is designed
to ensure systemized collection and integration of all data on food security of domestic and
international organizations. On top of that, an information portal will be developed to collect
and store data on agricultural production, import, storage and trading in order to facilitate more
effective decision making with regard to food security.

Economic and physical factors will be analyzed contributing to food availability by regularly
monitoring and improving food security and availability.

Secondly, potential needs will be identified and take actions to develop mechanisms for each
region and crop in order to ensure sustainable food provision for all population groups (in
consideration of unpredictable cases and events).

Thirdly, food safety will be improved through simplified control procedures that are applied in
parallel with different state agencies, effective and risk-based approaches, as well as focused
actions aimed at developing a food safety system which covers all lings of the agricultural value
chain, increase accountability of food supply players, and public control mechanisms.

7.1.1. Priority 1.1. Developing data collection and monitoring system with regard to
sustainable food security and food availability
Rationale

To ensure food security, quick and flexible decisions are made based on the objective
evaluation of the real situation, identification of existing and potential problems, and
determination of short, medium and long-term actions to resolve problems. To increase
efficiency and effectiveness of the decision-making and problem-solving process, it is
important to develop a reliable information and monitoring system for food security. Although
the government agencies and organizations have dedicated database of food security, they
still lack a specialized information and monitoring system. The existing systems contain
information about food security, for example, the State Statistical Committee holds information
about sale, selling price, consumption, ration of food products or the Ministry of Ecology and
Natural Resources collects data on weather conditions, precipitation level, land or water

47
conditions, etc. However, there is still a need for bringing these data in line with food security,
and developing an integrated and systemized database. The systemized collection of the
above-mentioned information will allow integrated monitoring of any situation with regard to
food security, and consequently, increase effectiveness of the decision-making process.

Action items

Action 1.1.1: Assess opportunities to establish Food Security Commission

The possibility of establishing Food Security Commission will be looked into in order to ensure
efficiency of activities like food security coordination, monitoring and evaluation, project
development and implementation, emergency response, etc. Members of the commission may
be the representatives of the Ministry of Agriculture, Ministry of Economy, State Statistical
Committee, Ministry of Emergency Situations, and other competent government agencies. It
is anticipated that they will meet at least every three months to discuss international
developments, and take preventive measures in case of necessity. The commission is also
expected to develop an action plan based on the Strategic Roadmap in order to carry out food
security reforms.

Action 1.1.2: Conduct regular monitoring to make risk assessments in terms of

sustainable food security

The 3-pronged monitoring will be conducted based on relevant indicators and methodologies:
I) the level of dependence on suppliers and supply sources with regard to various segments
of the food market; II) risks related to steady food supply in case of emergency; III) availability
of the infrastructure for food resources.

In addition, relevant actions will be taken to improve food ration, as well as food consumption,
and quality of data on the existing and prospective food market.

Generally, the food security monitoring and information system will operate and be integrated
in the other local and international information systems.

Action 1.1.3: Develop a system to regularly analyze and evaluate the volume and
fulfillment of the existing and prospective demand for food products
based on approved rational and physiological norms

To develop public food resources, rational and physiological consumption norms will be
established in compliance with the international standards to determine the consumer market
demand for food products in each region (administrative region) with respect to population
age, gender groups and other factors like pregnancy.

Short, medium and long-term predictions will be made and more vulnerable population groups
and regions will be identified with regard to food security by considering potential impacts of
climate changes, increasing population, and norms and requirements for sustainable food
supply.

Action 1.1.4: Develop a monitoring system to evaluate food availability for various
population groups, and assess related impacts

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A detailed analysis of various factors affecting food availability (price volatility, supply volume,
available resources, etc.) will be made through examinations focused on food availability for
different population groups. To make this happen, impacts of food availability for different
population groups will be regularly assessed and focused actions will be taken (regulation of
subsidies, taxes or customs, development of market infrastructure, regulation of energy prices,
etc.).

Action 1.1.5: Develop an integrated information portal for the production, import,
stocking and trade flow of food products

The possibility for developing an information portal comprising the integrated databases of the
Ministry of Agriculture, the Ministry of Economy, the Ministry of Taxes, the Ministry of
Emergency Situations, the State Statistical Committee, the State Customs Committee, and
Food Supply and Procurement OJSC will be looked into which will allow regular tracking of
product flow in the food market.

Expected results and indicators

As a result of the implementation of the actions, an integrated database system will be formed
to ensure access to systematized information about food security; physiological consumption
norms will be established in line with international standards; short, medium and long-term
predictions will be made to identify more vulnerable population groups and regions with regard
to food security. Apart from that, the system will allow controlling quality of food supply,
determining social and nutrition index, and making timely interventions to prevent potential
risk. The integrated center will coordinate all food security activities.

Required investment

The amount of the initial investment required for the system will be AZN 2 million. AZN 200 000
will be needed annually to ensure continuous operation of the system.

Expected risks

Major potential risks may be related to possible challenges in gaining access to data or poor
information use.

7.1.2. Priority 1.2. Develop mechanisms to ensure reliable food supply for all
population groups
Rationale

Ensuring food availability for food security across the country is an important issue. To make
this happen, it is important to increase actual consumption indices and to make food available
in the amount, volume and quality desired by the population.

Per capita food consumption has increased over the last decades (Exhibit14). It should be
noted that bread consumption has decreased by 12,3 %, which indicates that the population
prefer other products in their food ration.

49
 Exhibit 14. Per capita food consumption for 2006- 2015 (kg/year)

Vegetable oil and margarine

Sugar and confectionaries
Fruits, berries
Eggs, pcs.
Milk and milk products
Fish and fish products
Meat and meat products
Vegetables and melons
Potatoes
Bread

Source: State Statistical Committee of the Republic of Azerbaijan

Evidently, considerable progress has been made in this area to increase food consumption
indices by pursuing a focused economic policy over the last decade. Only milk consumption
has decreased by 2,5 %, which is associated with the consuming habits of the population, that
is, the decrease in butter consumption due to vegetable oil and margarine consumption.

One of the key elements to be considered in improving food supply is the indices related to
population incomes, consumption costs and the share of food costs in total consumption costs
(Exhibit 15). The implemented measures have yielded a considerable increase in these indices
over the last decade, thus leading to improved public welfare in the country.

50
Exhibit 15. Per capita monthly incomes, consumption costs and food costs in families
for 2006-2015 (AZN)

Incomes - total
Food costs
Consumption costs -total

Source: State Statistical Committee of the Republic of Azerbaijan

Data analysis shows that per capita monthly incomes and consumption costs in families have
increased by about 3.2 times, estimated at around AZN 240 over the last decade. During this
period, food costs have increased by 2,4 times.

Interestingly enough, food costs have tended to contribute less to total consumption costs over
the last decade. While food costs accounted for 53,6 % of the total consumption costs in 2006,
this number went down to 40,5 % (by 13,1%) in 2015.

Despite the decreasing contribution of the food costs, this number still remains to be high. In
developed countries, this index varies at around 25%, which is less than that of Azerbaijan.

Given the above-mentioned, actions will be continued to improve the situation, and to increase
consumption indices. To make this happen, complex measures will be implemented to
increase population incomes and to fulfill the demand through maximum use of local
production potential in order to facilitate public access to quality, fresh and cheaper food
products through all periods.

Healthy nutrition is also important for ensuring public health. In this regard, it is important to
ensure that people acquire proper consuming habits to change food ration, and promote fruit,
vegetable and milk consumption and less use of bread in order to promote public health.

Action items

Action 1.2.1: Develop food resources to ensure food availability

More opportunities will be explored to supply the domestic market demand with local food
products in order to ensure food availability and abundance based on the food demand
indicated in Priority1.1. To make this happen, the potential for agricultural production will be
evaluated based on calculated food ration norms considering the existing and prospective food
demand of the nation, the optimum structure of crop fields will be determined to produce food
resources on a regional level, needs for new elevators and grain barns will be assessed, and

51
improvements will be proposed in developing storage infrastructure for demand-based
products. Also, a final report will be developed based on the outcomes of needs assessment,
and other strategic targets will be reached to meet the needs. It is anticipated that the actions
mentioned in Strategic Objectives 2, 6 and 8 of the Strategic Roadmap will be taken to ensure
optimum organization and regulation of food production, storage, transport, and marketing.

Action 1.2.2: Determine mechanisms to improve food supply for all population groups

The possibility of developing focused state programmes together with competent government
agencies will be looked into to improve food supply for all population groups, and issues will
be addressed concerning special food market organization and food bank development in
order to ensure that the population is fed based on all categories of food consumption.

Action 1.2.3: Increase opportunities for supplying food in case of emergency

One of the threats to food supply is undesired situations that may arise from force majeure
events such as wars, earthquakes, mudflow, flood etc.). Under such circumstances, a special
investigation will be launched to devise an operational system for timely provision of food for
victims. This investigation will include conducting risk assessments, identifying risk-sensitive
regions and estimating the volume of food supply for such regions in case of emergency, and
determining the need for developing necessary infrastructure for food storage. Opportunities
for developing relevant mechanisms designed to lay down an action plan will be explored
based on the needs determined in association with relevant government agencies.

Expected results and indicators

As a result of the implementation of the actions, food resources will be developed considering
the existing and prospective food demand of the nation, increase food availability, and ensure
proper nutrition of all social groups based on consumption norms. Necessary mechanisms will
be developed to ensure timely provision of food products to victims in case of emergency.

Required investment

The amount of the initial investment required for the implementation of the actions is estimated
to be around AZN 1 million, as the actions will be investigative.

Expected risks

The key risks with achieving the strategic objectives may be related to potential decrease in
food production due to climate changes both inside and outside the country.

7.1.3. Priority 1.3. Form a risk-based food safety system along all links of the
value chain
Rationale

Bringing the food safety system which is an integral part of food security in line with modern
standards is a key issue. That is, the way the food safety system is provided in Azerbaijan is
considerably different from those that are based on international requirements and best
practices. In Azerbaijan, food safety provision should be in compliance with the requirements
of EU and other international organizations. Azerbaijan has joined the organizations and

52
conventions that are dedicated to establishing international food safety standards, and there
are more opportunities for expanding the scope of their application in this country.

In Azerbaijan, food products are certified by a number of agencies. Products of animal origin,
products of plant origin, and all food products are provided with veterinary, phytosanitary, and
hygienic and conformity certificates respectively. Conformity certificates are granted by the
State Committee for Standardization, Metrology and Patents to confirm compliance with
veterinary, phytosanitary and hygienic standards. Hence, the existing national standardization
system is a part of food certification.

Currently, the State Committee for Standardization, Metrology and Patents oversees
compliance of certified food production with standards. The Ministry of Economy oversees
compliance with standards in the food market. Food production is overseen by a number of
state agencies. Products of plant origin and animals and animal products are controlled by the
State Phytosanitary Control Service and State Veterinary Control Service respectively.

Raw materials and production process is controlled by the Ministry of Health, and the State
Committee for Standardization, Metrology and Patents. Product marketing is controlled by the
State Service for Antimonopoly Policy and Protection of Consumer Rights under the Ministry
of Economy. There seems to be some overlapping of duties fulfilled by the agencies. Besides,
most of the food safety standards including sanitary and phytosanitary norms are inherited
from the Soviet period, and they need to be improved in accordance with the international
requirements.

As food safety control is limited to certification rather than risk management, there is a need
for putting more efforts in risk identification and management in the food safety system.
Applying new and improved mechanisms for risk assessment and management, and
conducting more intensive food safety performance monitoring (pesticides, veterinary
medicine, environmental pollutants, etc.) may help ensure effectiveness of the food safety
system. The need to improve mechanisms for inspecting products during import and export
operations is another key issue. Particularly, product inspection procedures should be
harmonized with WTO (World Trade Organization) requirements.

Action items

Action 1.3.1: Improve the existing legal framework based on international best practice

Opportunities for improvements will be explored by conducting monitoring of the existing laws
and regulations with the support of international experts in order to develop a risk-based food
safety system involving all stages of food safety, and all stakeholders. Based on the outcomes,
relevant amendments and changes will be drafted. The possibility of developing a state
programme will be looked into based on the draft food law.

Action 1.3.2: Eliminate the overlapped activities of the agencies which are responsible
for food safety control, and develop an effective regulatory system

53
A relevant mechanism for effective division and regulation of food safety control functions will
be determined in order to avoid overlapping of roles and responsibilities in food safety. To
make this happen, the institutional mechanisms of the food safety system will be improved
based on best practices, and look into the possibility of ensuring more effective allocation of
roles and responsibilities of the agencies. Based on the allocation process, the food safety
system will be divided among 2 types of agencies: agencies which are responsible for food
safety risk assessment and those which are responsible for food safety risk management.
Establishing Food Safety Agency will be considered in order to ensure integrated and flexible
coordination of the above-mentioned activities, and the possibility of developing an integrated
control system and mechanisms that are designed to ensure that the food value chain players
assume relevant responsibilities for food safety will be looked into.

Action 1.3.3: Harmonize food production, processing, storage, transport and trading
standards with international requirements

No efforts will be spared to bring food safety system in line with the requirements of WTO, EU
and other international organizations, and to increase safety and quality of its products. An
action plan designed to harmonize food regulations and standards with the requirements of
Codex Alimentarius, International Plant Protection Convention (for plant products) and
International Epizootic Bureau (for animal products)will be developed.

Action 1.3.4: Optimize, modernize and accredit food safety laboratories, and improve
the certification system

A raft of proposals will be prepared to modernize food safety laboratories, and in case of
necessity, relevant mechanisms will be developed to establish and accredit new laboratories.
At the same time, mechanisms will be developed to cooperate with private laboratories, and
action will be taken to establish model laboratories.

Forming the network of accredited laboratories will allow optimization of the certification
procedures.

Action 1.3.5: Improving public regulatory mechanisms for food safety

A raft of measures will be implemented to raise public awareness on effective food safety
regulations, and to make all relevant standards available to stakeholders. Relevant
mechanisms will be developed to establish a public regulatory system for food safety.

Action 1.3.6: Promoting healthy nourishment

A healthy diet is an important element of food security. Enriched food ration will be promoted
through TV and radio programmes, and video films that are designed to highlight the
importance of higher food and vegetable consumption instead of bread, as well as seafood
and other alternative energy and calorie sources, and action will be taken to ensure healthy
nourishment of special population groups. A special focus will be on the healthy nutrition of
children, and pregnant or breastfeeding women, as they are important in terms of shaping the
future of the nation. Pilot projects will also be implemented to ensure healthy nourishment of
children, and pregnant or breastfeeding women (for example, fresh milk for schoolchildren or
fresh fruits and vegetables for pregnant or breastfeeding women, etc.). .

54
Expected results and indicators

The actions taken will result in eliminating overlapping functions of various agencies,
increasing coordination of food safety activities, developing a risk-based food safety system
involving all stages of food safety, and all stakeholders, improving monitoring and observations
processes that are targeted at controlling animal and plant health and diseases, and
harmonizing the existing system with the requirements of Codex Alimentarius. Additionally,
slaughterhouses and sales centers will comply with veterinary, sanitary and epidemiological
requirements, and food safety standards will be harmonized with the international standards.
If Azerbaijan accedes to WTO, it will enjoy increased opportunities to maintain a stronger
presence in the international market.

Required investment

The amount of the initial investment required for the implementation of the actions is estimated
to be around AZN 5 million. The costs will include those which are related to the improvement
of the legislative framework, development of institutional reforms and standards, raising public
awareness, promotion of healthy nourishment, and organization of various monitoring
measures. Investments made to improve laboratories and to upgrade equipment will be
estimated separately based on feasibility studies.

Expected risks

Organizational and management reforms that are designed to control food safety, especially
the mechanisms that are applied to ensure accountability of market players may be delayed
for a while.

7.2. Strategic objective 2. Increasing the potential for agricultural production

along the value chain
Azerbaijan enjoys a comparative advantage in terms of agricultural and food production which
allows import substitution and increased exports of competitive products through increased
production. However, all relevant actions that are designed to realize full production potential,
as well as government support measures, are focused on the initial links of the value chain.
However, fostering market development and ensuring access to markets under favourable
conditions is of strategic importance which creates a need for improved market infrastructure
and significant changes. Besides, the mutual relations between the producer and the
processor leave a great deal to be desired and this limits the growth potential of agribusinesses
along all links of the value chain.

Five priorities will be achieved to reach this strategic target.

The first priority will be targeted at increasing the production potential for competitive
agricultural production and processing both in the domestic and international markets.

The second priority will include actions to increase and promote the agricultural production
and processing which is capable of substituting imports.

The third priority will include complex measures to develop farmer partnerships and
cooperation in agriculture.

55
The fourth priority will be aimed at exploring opportunities and measures to develop public-
private partnerships in order to implement integrated projects.

The fifth priority will be aimed at developing the infrastructure to support agribusiness. A raft
of measures and activities will be implemented to create enabling legal, economic and
informative environment to foster the development of agribusinesses.

7.2.1. Priority 2.1. Increasing the production potential for competitive agricultural
production and processing both in the domestic and international markets.
Rationale

A close look at Azerbaijan’s net trade balance will reveal huge opportunities for increasing the
production of a number of primary crops. According to the State Statistical Committee,
Azerbaijan holds considerably high indicators in terms of exports of fresh fruit and hazelnut
products (USD 220,2 million in 2015) and vegetable products (USD 91,7 million).

Opportunities can be also captured to increase the export of certain crops and products such
as tomatoes, gherkins, fresh fruits (persimmons, pomegranates, apples, cherries, and
peaches), green tea leaves, sunflower seed oil, sugar and sugar products, and sunflower
seeds.

Other important production areas include spirits obtained from grape wine, hazelnut
production, margarine production, fruit juice production, products obtained from wild fruits and
berries (sea buckthorn, cold walnut oil, liquorices, etc.) grape production, cotton production,
tobacco production, meat production, and cocoon production.

According to the UN Comtrade, there are several primary crops which can be exported to the
regional and other markets.

This analysis is made based on the total sales of imports from Azerbaijan and other regional
countries. The volume of the regional import markets makes it important for Azerbaijan to
increase production.

Russia has by far the most significant trade potential due to its size and existing imports of
several items produced (as discussed in strategic priority 1.1). In addition to Russia, there are
several other high-potential markets for Azerbaijan, including selected Central Asian countries
of the Commonwealth of Independent States (CIS), the European Union, and Ukraine.

Two major trends have created a window of opportunity for Azerbaijan to increase agricultural
exports with two of its neighbors in the short term: first, the potential to capture more of the
Russian market; and second, the possibility of increased trade with Iran following the removal
of trade sanctions.

Russia is already a major market for Azerbaijan crops and agriculture products. Based on an
analysis of other countries' exports to Russia and Azerbaijan's top export items, the following
priority products emerge:

Fresh tomatoes. In the short term, tomatoes constitute the largest opportunity for an increase
of agricultural products to Russia: its total import of tomatoes increased an average of 4,5

56
percent a year from 2011 to 2015. A portion of this growth has been secured, increasing tomato
exports to Russia by 16 percent a year in that period; in 2015, USD 58 million of fresh tomatoes
to Russia was exported, a relatively small share of Russia's total tomato imports of USD 676
million that year. Turkey currently leads in exports of tomatoes to Russia, claiming USD 346
million (more than 51 percent) of the 2015 total. Gross production can be improved and yielded
to capture a greater share of this market, particularly given the opportunity to implement year-
round greenhouse production.

Fresh cucumbers and gherkins. Russia's imports of cucumbers and gherkins have also been
growing steadily, rising by 12 percent a year from 2011 to 2015: however, decreased by 44
percent in 2015. A greater portion of this market has also been secured, increasing cucumber
and gherkin exports to Russia with a total of USD 10,7 million in this period. However, again
Azerbaijan's total exports (USD 6.6 million in 2015) are a fraction of Russia's total 2015 imports
of USD 160 million. Much of the region competes for Russian imports of cucumbers, with more
than half of the country's cucumbers and gherkins provided by Iran and Turkey. Azerbaijan's
yield is currently the smallest among all of Russia's regional cucumber and gherkin importing
partners, representing a significant opportunity that an increase should be prioritized in
productivity considering the historic relations, geographical proximity between two countries
and existence of potential opportunities for increased productivity.

Persimmons. Persimmon imports have remained stable over the last years. In 2014,

Of Russia’s 2014 import of USD 227 million, USD 73 million (32 percent) of the total
wasprovided by Azerbaijan, making it Russia's biggest trade partner for this product. However,
exports increased up to USD 74,6 million in 2015. Other countries' average yield of 16 tonnes
per hectare contrasted with Azerbaijan's yield of 11 tonnes per hectare reveal an opportunity
to increase yield and by doing so capture more of the Russian market.

Cherries.Although Russia’s total imports of cherries fell from USD 154 million in 2010 to USD
71 million in 2014, this category still has significant potential for Azerbaijan. The country
exported USD 19.6 million in cherries to Russia in 2015, making it the second-ranked source
behind Turkey for this commodity. Azerbaijan has the potential to increase productivity, as its
yield of 8 tonnes per hectare in 2015 is in line with the global average but still is just half that
of Turkey.

Apples. Russia imported USD 385 million of apples in 2015, a drop from the previous year but
still a sizable market. Azerbaijan, which is the region’s top exporter to Russia with USD 14.4
million in 2015, can take advantage of its higher yields compared with other countries.

Hazelnuts. Azerbaijan’s hazelnut exports to Russia were equal to 35 percent of its demand
USD 52 million) that year—a significant increase over 2013, when it met just 28 percent of
Russia's demand. Now Azerbaijan has significant potential to continue to increase its share:
none of its neighbors have surpassed Azerbaijan’s yield of 1.3 tonnes per hectare. In addition,
Europe—particularly France, Germany, and Italy—might be a potential market due to its
production of chocolate and other cocoa preps, a product often processed alongside
hazelnuts. In addition to the above-mentioned, Azerbaijan has the potential for exporting
pomegranates and will take relevant actions to increase pomegranate production.

57
Spirits obtained from grape wine. France is the largest exporter to Russia for this category,
supplying about half of Russia’s imports of USD 114 million in 2014. However, Azerbaijan’s
exports of spirits obtained from grape wine to Russia increased by 60 percent a year from 2013
to 2015. Azerbaijan was tied for third in this category with total export sales of USD 17.6 million.
Grapes are a legacy crop for Azerbaijan, with significant volume in the past, positioning the
country to unlock significant potential.

Fruit/vegetable juices. Poland dominates Russia's fruit/vegetable juice import market, with a
share of 47 percent in 2015. However, Azerbaijan is the second-ranked country, supplying 7
percent of the Russian market that year. Azerbaijan has significant potential to capture a larger
market share in this category given recent increased production; from 2010 to 2014, overall
exports of juices from fresh vegetables and fruits grew by 24 and 12 percent respectively.

With the removal of international economic sanctions to Iran, Azerbaijan has an immediate
opportunity to provide fruits and vegetables that are already among its top exports and Iran's
top imports.

Three items were chosen as priorities based on an analysis of the overlap between Iran's top
imports and Azerbaijan's top exports:

Sunflower seeds. In 2015, Iran imported USD 175 million of sunflower seeds. Azerbaijan's
yield was 17,7 centner per hectare for that year with the gross production of 18,4 thousand
tonnes, but Azerbaijan's gross production was a fraction of Iran's—indicating that sunflower
seeds are a potential priority crop for export to Iran based on total value potential.

Refined sugar cane. Capturing Iran's imports of refined sugar cane represents an opportunity
worth USD 55 million based on 2014 exhibits.

Sunflower oil. Iran's imports of sunflower seed/safflower oil represent an opportunity worth
USD 45 million based on 2014 exhibits. Azerbaijan's higher yield of sunflower seeds, as
described above, also bodes well for increased exports of sunflower seed/sunflower oil to Iran.

Meslin, maize, and barley also emerged as a match between top Iran imports and top
Azerbaijan production crops, but their negative trade balance in Azerbaijan, driven by the
relatively low number of commercial-scale cereal producers, makes them long-term rather than
immediate priorities. In addition, depending on future shifts in trade balance and volume, the
opportunity to export chicken, grapes, hazelnuts and persimmons to Iran could eventually be
capitalized.

In addition, the potential export items may include pomegranates, potatoes, saffron, honey,
wool, and animal hide. According to the State Statistical Committee, USD 20,9 million of fresh
or processed potatoes was exported, and USD 12,2 million of animal hide (except for natural
fur) and leather which provided a significant amount of monetary receipts to the national
budget. The government intends to define support mechanisms to increase export potential
and production for these products.

It is still important to realize full potential for fruit and vegetable processing. Strengthening
production value chains will add value, which has already been proved by certain estimations
(Exhibit 16).

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For example, the value added by processing fresh tomatoes into ketchup can be almost 386
percent. Potato chips and tinned cucumber may allow value addition of 1278 % and 500 %
respectively.

Exhibit 16. End products along the agricultural value chain (AZN/kg)

 imports  local

Cultivation Primary processing Secondary processing

Tomatoes

Open
Greenhouse Pickled Tinned Tomato Ketchup
field
production tomatoes products paste
production

Potatoes

Fresh Potato
potatoes chips

Cucumbers

Open field Greenhouse Pickled Tinned

production production cucumbers products

Source: State Statistical Committee of the Republic of Azerbaijan

As it can be seen, increased production along the value chain will add value as many times
more than production, which necessitates adopting the three-dimensional approach which
embraces the region-product-value link of the value chain in terms of agricultural production
(Exhibit 17).

59
Exhibit 17. Integrated three-dimensional approach involving the region-product-value
links of the value chain

Province/region

Value
chain

Products/agricultural products e.g.

wheat, milk products, poultry…

In addition to the above, the State Statistical Committee reports that 19,5 million dollars of
cotton and cotton products was exported in 2015, which indicates higher export potential for
cotton production.

In addition, tobacco and cocoon production enjoys a comparative advantage which bodes well
for increased production.

Generally, the following strategies will be implemented to increase cotton, tobacco and cocoon
production:

 To increase the production of raw material for exports in a short-term period;

 To substitute imports and increase exports by developing local processing capacity
in the long-term perspective.

To make this happen, to the production of the three crops will be brought to a focus , and
relevant support types and mechanisms will be developed.

The above-mentioned crops are highly competitive in Azerbaijan’s agriculture, and there may
be more opportunities to export them to regional markets. The sixth strategic objective of the

60
Roadmap includes mechanisms designed for domestic sales and export of these crops. Based
on the deep diagnostic analyses, specific programmes will be developed, plans and strategies
regarding the priority crops with the focus on the global and regional developments occurring
in the economic, social and geopolitical environment.

Action items

Action 2.1.1: Promoting intensive orchards (especially, pomegranates, persimmons,

cherries, apples, as well as hazelnuts and other nuts) and grape plantations

This action will be targeted at evaluating opportunities and developing action plans to expand
production of fruits (pomegranates, persimmons, cherries, apples, as well as hazelnuts and
other nuts) and grapes on a regional level.

Action 2.1.2: Supporting fresh potato production

A detailed and comprehensive analysis will be made of the potato-producing regions across
the country with the focus on the most favourable soil and weather conditions, and action plans
will be developed in this regard.

Action 2.1.3: Supporting greenhouse production of early-ripening vegetables

Based on the analysis of the vegetable-producing regions, opportunities for increasing early
vegetable production will be evaluated along with focused action plans designed to establish
greenhouses.

Action 2.1.4: Stimulating the expansion of the network of small and medium-sized fruit
and vegetable processing plants

Based on the diagnostic analyses made of each link of this value chain, the the growth of the
network of small and medium-sized fruit and vegetable processing plants will be stimulated,
and enabling environment will be created for efficient operation of such network.

Action 2.1.5: Supporting increased production of dried and frozen fruits and vegetables

An action plan will be developed to increase production of dried and frozen fruits and
vegetables, and incentives will be provided through various support mechanisms

Action 2.1.6: Promoting cotton, tobacco and cocoon production

Support types and mechanisms will be defined for cotton, tobacco and cocoon production
considering its social and economic benefits, the possibility of increasing the production of
these products will be looked into, and more suitable regions will be identified. After identifying
regions for production, a plan of complex measures will be developed and implemented to
increase the depth of processing in the relevant regions.

Action 2.1.7: Exploring opportunities for export of non-traditional and recently exported
products (purebred animals, dairy products, tinned meat products, barley, etc.) and
other products with export potential (saffron, wool, leather, natural honey, walnut oil,
liquorices, etc.)

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Diagnostic analyses of the recently exported products will be made to clarify whether it will be
a temporary tendency or an economically substantiated trend to increase their production. In
addition, the possibility of increasing production of other agricultural products with export
potential will be looked into, and a diagnostic analysis of their competitiveness on the
international market will be conducted. Based on the results of the analyses, the export
potential for these products will be stimulated and relevant action plans will be implemented.

Expected results and indicators

Competitive, export-oriented agricultural production and processing will be increased. As part

of this priority, the direct and indirect GDP impacts will be AZN 220 million and AZN 230 million
respectively in 2020 with a total of AZN 450 million. These estimates also add the impact of
Priority 2.2.

Required investment

The actions defined in this priority will be subject to separate projects based on the need for
financial resources. The amount of the initial investment required for the implementation of the
actions is estimated to be around AZN 440 million or more including the investments required
under other priorities.

Expected risks

Climate changes and geopolitical situation in the region may have a negative impact on the
implementation of the actions.

7.2.2. Priority 2.2. Increase and promote the production and processing of
products which are capable of substituting imports

Rationale

Important issues include reducing import costs through minimized dependence on a number
of imports, and increasing level of self-sustainability with food.

According to the State Statistical Committee of the Republic of Azerbaijan, of all Azerbaijan's
top 10 imported products, Russia provided the lion's share, at 37 percent, including more than
half of all tobacco cigarettes, durum wheat, and meslin. Indeed, 7 percent of Azerbaijan's top
10 imported products are largely sourced from the surrounding region, suggesting that they
are prime candidates for substitution due to their production in a similar climate, and business
environment(see exhibit).

In 2015, Azerbaijan imported USD 122.1 million in durum wheat, USD 174,7 million in soft
wheat and meslin, and USD 31,2 million in maize. Azerbaijan is not highly competitive in these
cereals due to the country's relatively small average farm size and lower use of mechanization.

Azerbaijan imported USD 287,2 million worth of cigarettes in 2015. Production of raw tobacco
within the country is currently limited, but it could represent a priority area for returning to
legacy production given large regional imports of USD 4.4 billion.

Azerbaijan imported USD 70,3 million worth of processed vegetable oils in 2015, although the
country has a large exports potential for this product. Azerbaijan exported USD 55,9 million

62
worth vegetable oil with sunflower seed/safflower oil accounting 54.5 % of the total vegetable
oil exports. Azerbaijan is competitive in vegetable oils, especially sunflower seed/safflower oil,
and thus has a significant opportunity to reduce import dependency.

Fresh meat (cattle, chicken, and sheep) is the second-largest production item of Azerbaijan,
yet this product does not meet domestic demand. Thus exports are limited to prepared and
preserved meat. Since current processing facilities are modern and demonstrate high labor
productivity, Azerbaijan may have yet another significant opportunity to increase production of
in-demand products by focusing on expanding the size and scale of these facilities.

As seen, processed products contribute more to the agricultural exports from Azerbaijan.
Establishing refining facilities for agricultural products will reduce dependence from the import
of some products such as tobacco, milk, wheat etc..

Generally, based on the analyses, a number of key agricultural and industrial products have
been defined and grouped as follows:

● Animal products: meat, milk, poultry;

● Legumes and cereals: wheat, corn etc.;

● Industrial products: cotton, tobacco, sugar beet, medicinal plants, cocoon, animal
hide.

Azerbaijan intends to develop industrial processing to achieve import substitution in the mid-
term perspective.

Hence, priority crops and products for each group of agricultural products with the potential for
import substitution will be defined, and actions will be taken to increase producing and
processing capacity in order to achieve the priority objective. As part of the Strategic Roadmap,
a deep-dive analysis will be conducted with the focus on global and regional developments
occurring in the economic, social and geopolitical environment, and all-round efforts to
increase agricultural production along the value chain.

Action items

Action 2.2.1: Promote establishment of large cattle breeding complexes based on the
intensive farm model

The establishment of large closed cattle breeding complexes will be promoted and awareness
on intensive cattle farming will raised to increase performance of the cattle farms with the goal
of providing vast opportunities for cattle production and import substitution across the country.
In addition, a raft of incentives will be provided for establishing agrifarms, support Agroleasing
OJSC in providing purebred animals aimed at increasing performance of the cattle breeding
complexes, and efforts will be continued to expand the scope of artificial insemination as part
of intensive cattle breeding.

Action 2.2.2: Spread the practice of establishing household farms designed for beef and
milk production achieved under the pilot projects that have been implemented in
Imishli, Barda and Aghjabedi to other regions across the country

63
Given that the increased potential of household farms is critical in terms of import substitution
for animal products, establishing household farms designed for beef and milk production will
be made a common practice. The practice achieved under the pilot projects that have been
implemented in Imishli, Barda and Aghjabedi will also be applied in other regions across the
country.

Action 2.2.3: Stimulate increased industrial poultry production with regard to the
demand of various segments

As part of this action, additional support mechanisms will be evaluated to foster the
development of broiler farms. An action plan will developed and implemented to promote
production focused on various population groups and the demand of the processing industries
for slow and quick-gaining poultry production.

Action 2.2.4: Support expanding network of small and medium meat and milk
processors in the regions

The key objective is develop different mechanisms for supporting the development of the
network of small (on the rural level) and medium (on the regional level) meat and milk
processing companies in order to make extensive use of the producing potential of all
household farms and other smallholders.

Action 2.2.5: Support development of bee production, fish production, and aquaculture

The growth of bee production, fish production, and aquaculture in rural areas will be
incentivized in order to make extensive use of the producing potential of all household farms
and other smallholders, provide rural employment and increase incomes, and ensure that local
production contributes more to the provision of bee and fish products, and other bio-resources
across the country. Different action plans will be implemented to support farmers who desire
to engage in these production areas.

Action 2.2.6: Support increased production of durum and soft wheat, as well as legumes
for food supply

As part of the actions to increase production of durum and soft wheat, and other legumes and
cereals, the overall focus will be on identifying more suitable regions for cereal production, and
increasing production through maximum intensification and enhanced performance without
expanding the existing crop fields. The possibility of developing and implementing action plans
will be investigated to establish macaroni producing plants in the relevant regions across the
country. In addition, establishing small and medium-sized wheat grain storages in the cereal-
producing regions will be considered as part of the efforts to develop market infrastructure in
the country.

Action 2.2.7: Evaluate opportunities to increase local production of sugar beet and
confectionaries

As part of this action, the government will evaluate the opportunity to increase local production
of sugar beet and confectionaries. The studies will focus on all agricultural lands, production
structure, agricultural production efficiency etc. to evaluate economic efficiency of local sugar

64
beet production. Based on the results of the analysis, a development plan will be implemented
to supply local raw products for the production of confectionaries.

Action 2.2.8: Evaluate the opportunity to increase local production of raw materials
(sunflower seed, corn, olive etc.) that are used for vegetable oil production

Initially, the potential opportunities to increase local production of oil-containing plants that are
used for producing vegetable oils will be investigated. Production of sunflower seeds, corns,
olives and other crops will be evaluated for economic efficiency to draft proposals with the
focus on the establishment of olive groves in the drought-stricken regions across the country.
Based on comprehensive analyses, relevant development plans will be prepared based on the
comparison of economic efficiency between local raw material production and imports.

Action 2.2.9: Stimulate the growth of tea plantations

As part of this action, the government will consider identifying popular demand for local tea
products across the country, and compare local products to similar imports in terms of
performance indicators. Based on the results of the analyses, optimum indicators will be
defined and relevant development plans will be implemented to expand tea plantations.

Action 2.2.10: Stimulate increased tobacco production

As part of this action, the possibility for increasing local production of both tobacco and raw
products will be looked into. The studies will focus on the analysis of various economic
performance indicators in terms of tobacco production for all regions in order to identify
opportunities to supply the need for production with local raw materials or imports. In addition,
relevant action plans will be developed and implemented in this regard.

Action 2.2.11: Develop processing industries for raw cotton, cocoon and animal hide

Based on the directions mentioned in the action plans, a special package of instruments and
incentives for primary crops will be developed. This package will comprise more effective
government facilities and support mechanisms that are designed to identify potential regions
suitable for crop production and animal husbandry. Particularly, the government will develop
different action plans to create the network of small-sized wool processing plants and
tanneries, and create enabling environment for efficient operation of such network.

Expected results and indicators

It is anticipated that the actions will contribute to increasing indicators in terms of production
of potential crops and products that are designed for import substitution. However, these
indicators may vary with a number of natural and economic factors:

- Reduce head count of bovine animals by 10 %, increase milk yield by 50 %,

mead production 10%, and milk production by 30% based on the intensive
farm model;

- Increase meat and milk processing by 25%;

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 - Increase wheat production, yield and quality for food;

- Expand tea plantations twice,

- Reduce tobacco imports by 50%;

- Increase cotton production and processing at least 4 times;

- Increase cocoon production and processing at least 1000 times.

Required investment

The amount of the initial investment required for the implementation of the actions is included
in Priority 2.1 along with the investments required under other priorities.

Expected risks

Climate changes and geopolitical situation in the region may have a negative impact on the
implementation of the actions.

7.2.3. Priority 2.3. Develop farmer partnerships and cooperation in the agricultural
sector
Rationale

In Azerbaijan, fragmented smallholders, which dominate the agricultural sector, is one of the
problems with enhancing the agricultural competitiveness across the country. Problems, which
cause obstacles in agricultural development, include lack of acceptable mutual relations
between the industrial enterprises and agricultural producers, as well as the problems with
integrating the processing industry in agriculture. Among them, the main problem is the lack of
contract farming and cooperatives which are successfully applied as the mechanism for the
agrarian-industrial integration around the world.

Organizations like FAO, the UN International Fund for Agricultural Development (IFAD) and
World Food Program (WFP) have spearheaded the establishment of farmer cooperatives
(associations) in the agricultural sector for a long time. The joint report by the organizations,
declares the year 2012 as International Day of Cooperatives, and highlights the role of
agricultural cooperatives in supporting small agricultural producers, especially targeted social
groups like women and youth. Agricultural cooperatives provide for a constant rural
employment system which provides economic and moral support for the members and is
based on the sustainable business models resistant to negative economic and environmental
impacts. This system provides economic and moral support for the members of the
cooperatives. Making a significant contribution to small agricultural producers, the agricultural
cooperative is dedicated to facilitating access to all kinds of services, resources, technologies,
loans, and procurement centers.

According to the World Cooperative Monitor Report, which has been developed by the
European Research Institute on Cooperatives and Social Enterprises in partnership with the
International Cooperative Alliance, 27 percent of the cooperative organizations are engaged
in agricultural and food production. Total trade turnover of the organizations which are engaged

66
in agricultural and food production is estimated at USD 768 billion accounting for 26 % of total
turnover of all cooperatives operating around the globe. From2011 to 2013, the total turnover
of agricultural and food cooperatives increased by 25%, which indicates higher performance
efficiency. The International Cooperative Alliance reports that 60 % of the rural cooperatives
are agricultural producers, 15 % are agricultural consumers, and 25 % are non-agricultural
cooperatives.

Existing performance indicators of the agricultural cooperatives operating in Azerbaijan leave

a great deal to be desired. According to official statistical data, the number of agricultural
cooperatives dropped from 250 in 2000 to 64 in 2015. As seen, already diminished, these
cooperatives are still declining to suffer negligible performance indicators in terms of
production, sales and human resources in the domestic market.

Contract farming which is a form of agricultural cooperation is not applied extensively in

Azerbaijan and is narrowed down to some companies which are engaged in sugar beet, cotton,
tobacco, silk and tea production. Over the last years, the government has made considerable
achievements in contract farming through the focused measures designed to develop cotton,
tobacco and silk production.

The practice of voluntary aggregation of agricultural producers into areal and regional
associations doesn’t exist in Azerbaijan. The initiatives taken in this regard haven’t produced
any positive results, and even the formal organizations are not well organized to operate and
achieve their missions.

The Azerbaijani government has adopted a number of decisions to develop agricultural

cooperative and create enabling business environment for establishing network of agricultural
cooperatives as part of the policy aimed at developing sustainable agriculture and food
security. The Milli Majlis (National Assembly) of the Republic of Azerbaijan has adopted the
Law in Agricultural Cooperation, which has been drafted based on the Presidential Decree No
152, dated April 16, 2014, on Measures to Improve Agricultural Management and Accelerate
Institutional reforms in Azerbaijan. Based on the law which has been approved by the
Presidential Decree No 996, dated July 18, 2016, the government will implement the State
Program for Development of Agricultural Cooperatives for 2017-2020, which is designed to
improve legislation in terms of development of agricultural cooperatives, develop relevant
mechanisms and incentives, and raise public awareness on the importance of agricultural
cooperatives.

Action items

Action 2.3.1: Improve regulatory framework for developing agricultural cooperation

Based on the international best practice, a package of proposals will be prepared to simplify
the procedures for establishment and registration of agricultural cooperatives, improve the
regulatory framework for contract farming, and facilitate the application of procedures for
aggregation of agricultural producers into areal and regional associations.

67
Action 2.3.2: Consider defining and applying incentives for developing agricultural
cooperatives

A package of proposals will be prepared to implement government support mechanisms for

developing agricultural cooperation (for example, provide incentives for processors to increase
production based on contract farming (preferential loans etc.), develop and implement
dedicated grant programs to develop agricultural cooperation and increase institutional
capacity of areal and regional associations of agricultural producers, implement various
government support measures through consumer unions etc.).

Action 2.3.3: Launch awareness campaigns and provide extension services to develop
agricultural cooperation

The possibility of implementing measures to raise producer awareness on the development of

agricultural cooperation will be considered. These measures will include preparing instructions
for the application of registration procedures, developing model regulations, supporting the
producers in developing business plans, doing presentations for producers, launching legal
and economic awareness campaigns to promote contract farming, raising public awareness
on the advantage of bringing agricultural producers together under areal and regional
association etc.

Expected results and indicators

As a result of the aforementioned actions, there will be stronger cooperation and organization
among the agricultural producers, and larger farms, cooperatives, associations and unions will
grow and spread faster to contribute up to 30 percent to total agricultural production.

In addition, the implemented measures will support achieving GDP growth in real terms in
2020 under real terms.

Required investment

The amount of the initial investment required for the implementation of the actions is included
in Priority 2.1 along with the investments required under other priorities.

Expected risks

Unwillingness of the land owners to cooperate can be a potential risk.

7.2.4. Priority 2.4. Develop public-private partnerships (PPPs) to

implement complex projects
Rationale

Ensuring speedy development of Azerbaijan's agriculture sector requires the establishment of

multiple public-private partnerships designed to promote integration among stakeholders.
From this perspective, the injection of private investments into the agro-processing sector and
implementation of complex projects, that would combine processing enterprises and
agricultural production areas, will fuel growth by allowing the value chain of processing industry
areas to develop coherently.

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Integrated public-private partnerships will offer the opportunity to streamline the agriculture
value chain, develop more processed exports, scale up existing processed exports, address
dependence on imports, and revitalize legacy production.

Azerbaijan will incentivize the creation of integrated public-private partnerships through three
support mechanisms: land, infrastructure, and financing.

Land. The government will conduct a land survey to identify suitable areas to launch this
strategic priority and provide plots of state-owned land for priority crop production and
processing. Azerbaijan’s 50 major commercial farms currently producing cereals provide the
blueprint for this approach. Azerbaijan will also consider the use of underutilized land plots.
The optimal size of land will be identified and general area and average productivity of land at
farmers’ disposal will be ascertained in order to determine the share of local framers in product
stock-up.

Agro-processing facilities in areas with developed infrastructure - including irrigation, energy

access, and transport options - as well as incentivizing investment in these elements to support
the setup of processing facilities in undeveloped areas. in these elements to support the setup
of processing facilities in undeveloped areas. in these elements to support the setup of
processing facilities in undeveloped areas.

Financing. Azerbaijan plans to finance integrated projects in priority industries, chosen to

capitalize on rising exports and potential productivity gains. Once these sub-industries are
identified, the government will implement a legal framework and financial structure. It will
define eligibility criteria, identify potential projects, and prepare an investor pitch (including
financial feasibility).

Streamlining the agriculture value chain An integrated approach has the potential to
create a virtuous cycle by addressing challenges at every stage of agricultural production
and processing (see: Exhibit 18).

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 Exhibit 18. Development trend of integrated projects along the value chains

Exhibit: Integrated approach could address multiple issues along the value chain for
industries with high production value in Azerbaijan

Challenges across the value chain - Case Example: Tomatoes in Azerbaijan

Downstream

Trade and Food and

Agricultural Input Farming beverage /
distribution primary
inputs and land secondary
processing
processing

How does an integrated project address the challenges - Illustrative example

● techniques by the processing company, as the upside is ● end

directly captured

1 Anteja ECG (2014) value chain analysis for Pomegranates, Hazelnuts, and Tomatoes in Azerbaijan

The collocation of both upstream and downstream components can reduce not only costs but
also the level of coordination required throughout the value chain. Instead of using public
money to solve challenges, private sector investments can be directed to support everything
from investing in high-quality inputs and technologies to providing on-site storage facilities to
ensuring end-to-end quality control.

Action items

Action 2.4.1: Confirm support packagefor integrated projects to facilitate public-private-

partnerships (PPPs)

Ministry of Economy and Ministry of Agriculture will conduct a joint project to confirm the
support package for integrated projects to facilitate public-private-partnerships. The project will
include a land survey to identify suitable areas to be included in the support package, scanning
all the public land registry registered to various governmental bodies. The Ministry will then
prioritize available land based on existing and already planned infrastructure. It will also identify

70
regions where new investment in irrigation, roads or energy access would unlock significant
upside.

Action 2.4.2: Define type and level of financial support

Ministry of Economy and Ministry of Agriculture will analyze current and potential production
volumes in identified areas for priority crops, based on agronomic studies, and value potential
in downstream value chain based on provided analysis. Then in coordination with strategic
priority 1.2 and 2.2, it will define set of crops and regions that will be included in the support
package. Two ministries will also conduct interviews and surveys with potential domestic and
international investors to confirm type and level of financing support that would spur
investments in these areas.

Action 2.4.3: Evaluate opportunities to establish a public-private investment fund

Ministry of Economy will conduct analysis on establishment of a public-private investment fund.

If its establishment is considered purposeful, the Ministry of Economy will work with Ministry
of Finance to define the size and structure of the fund with clear return estimations for the
investors, including high level allocation for different type of investments (such as
infrastructure, production and processing) and eligibility criteria for the projects to be funded.

Action 2.4.4: Develop legal and regulatory framework for the support package

Based on the results of the 3 actions, the Ministry of Economy will prepare and publish proposal
for legal and regulatory framework for the support package. This proposal define the support
package and its beneficiary criteria based on the projects conducted. The Ministry will also
conduct necessary legal and regulatory work to provide a proposal on granting public land for
use. Finally, it will define mechanism between Ministry of Economy, Ministry of Agriculture and
other governmental bodies to disburse and monitor the support package.

Action 2.4.5: Prepare an investor pitch for value chains

The Ministry of Economy will prepare an investor pitch for different regions and value chains
to promote the support package and spur investments. It will invite domestic and international
agriculture and food companies for investment, leveraging the investor pitch.

Action 2.4.6: Define milestones for operations

The Ministry of Economy will define milestones for realization of the investments and key
performance indicators for operations (such as total production of crops and processed
products, number of farmers that sell products, etc.). It will continuously support investors to
overcome any barriers to achieve milestones and publish updates on the indicators.

Expected results and indicators

It is anticipated that the support package will be approved in the first half of 2017, and the
investor pitch will be prepared followed by the invitation of domestic and international
agriculture and food companies for investment in the second half of 2017. Following the initial
discussions, the milestones and key performance indicators are expected to be defined in the
first half of 2018. For these indicatorsto be achieved, opportunities have been created for the

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establishment of 15 large scale integrated projects by 2020. It is assumed that 40% of the raw
materials for these projects will come from newly established farms as part of the integrated
projects. The rest will be sourced from local farmers through existing production.

The strategic priority is estimated to bring AZN 70 million direct and AZN 60 million indirect
incremental GDP in 2020 with a total of AZN 130 million, with majority coming from agro-
processing and the rest from agricultural production. The strategic priority is estimated to add
7250 direct and indirect employment.

Required investment

Total investment required will be AZN 325 million for the strategic priority.

Expected risks

Potential risks may include delays in the development and implementation of the projects.

7.2.5. Priority 2.5. Develop support infrastructure for the growth of agribusiness
Rationale

The support infrastructure for the development of agribusiness is targeted at forming and
developing large-scale, centralized and export-oriented agro parks, agribusiness incubators,
and startups that are located in immediate proximity of agricultural production sites and key
trade routes. Developing agro parks will allow increased efficiency of the investments into hard
and soft infrastructure, enhanced competitiveness in the logistic hubs, and increasing
investment flow in food industries and agricultural production sectors in Azerbaijan.

Azerbaijan can increase production of processed and unprocessed exports and stimulate
production of legacy crops, and products for import substitution by developing agro parks,
agribusiness incubators and startups, which will offer more opportunities to adopt a cluster-
based approach in the agricultural sector.

Aqroparks will allow implementing a number of key objectives to create business environment
which will attract local and foreign investors. The agro parkmodel is a more concentrated and
larger-scale processing hub compared with integrated facilities, and is designed with a cluster
approach. With proximity to logistics infrastructure and greater access to domestic and
international markets, an agro park that can also facilitate exports achieves the necessary
scale to attract international investors.

In addition to the value chains identified in strategic priorities 1.1 and 1.2, an agro park also
has the potential to scale up production of existing processed exports, and products designed
for import substitution. A focus on scaling up production and processing of these categories
in proximity to a major trade center could decrease imports of both raw inputs and processed
goods, open new markets for exports of processed goods, and improve Azerbaijan's overall
trade balance.

The decision of where to locate the facility (or facilities) is of utmost importance. Four potential
locations emerge as priorities given their access to major trade routes and to local agricultural
production.

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Baku, Alyat. Baku’s transportation infrastructure offers direct connections to international
market, particularly once the Baku International Sea Trade Port in Alyat opens and Azerbaijan
establishes a free trade zone in Baku (as discussed in the logistics chapter).

Guba-Khachmaz. Located at the northwestern tip of Azerbaijan along the Caspian Sea, Guba-
Khachmaz provides access to the Russian market and is adjacent to major fruit and vegetable
production in Azerbaijan.

Ganja-Gazakh. Located at the northeastern tip of Azerbaijan, with rail and port access to
European Union markets, Ganja-Gazakh is close to major grape, potato, and fruit production.

Lankaran. This region is located at the southern tip of Azerbaijan where it meets the Caspian
Sea. It is proximal to Iran markets and is a region where potato, tomato, and fruit production is
concentrated.

In addition an action plan to develop agribusiness incubators that are of utmost importance in
terms of developing small and medium businesses, and agribusiness startups operating in the
agricultural sector will be implemented.

Action items

Action 2.5.1: Support development of agro park network (including agro-industrial

clusters)

Below are the milestones for the development of agro parks and agro-industrial clusters:

- Plan agro parks. First, the optimal location and size for establishment of the agro
parks will be confirmed for the purpose of planning agro parks. Second, the sub-
industry focus based on data driven analysis of production and market
opportunity of different value chains will be defined. Third, targets for production
levels, type and orientation of facilities such as production, processing, storage,
and support services will be defined. Fourth, it will identify primary directions
public provision (e.g., research services) and private company involvement (e.g.,
financial services) for support services to the facilities.. Last but not least,
architecture and engineering companies will be hired to create project for the
physical layout.

- Define total investment need for agro park network. In the next phase, total public
investment need will be defined, with refined estimations on the potential impact
on the economy. Then, the scope, scale and nature of incentives, including tax
exemptions, will be defined to attract more investors to the agro park

- Prepare an investor pitch for agro park network. Investor pitch will be prepared and
opportunities in value chains and potential benefits of enterprises located in
proximity to the agro park will be identified. It will then prepare a target list of
companies which are active in priority sub-industries identified. This pitch will
help to invite investors based on the target list, secure investments and
cooperate with the investors.

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 - Develop an action plan for agro park network. Milestones for realization of the
investments and key performance indicators for operations will be defined.
Investors will be supported to overcome any barriers to achieve milestones and
publish updates on the performance indicators.

Action 2.5.2: Support establishment of industrial districts

It is planned to establish industrial districts that will be in close proximity to agro parks and
based on agri-processing in order to ensure efficient and effective performance of the agro
parks. The key objective will be to minimize the costs of developing additional infrastructure,
and ensure closer integration of agriculture into industries. In this regard, a plan of proposals
to establish industrial districts in proximity to each agro park (Baku-Alyat, Guba-Khachmaz,
Ganja-Gazakh, and Lankaran) will be developed.While establishing industrial districts,
preference will be given for the PPP-based network of small businesses which are engaged in
one and the same line of production. This will be geared towards each region being specialized
in the production of one or more specific crops. eventually an action plan will be prepared by
defining milestones for the establishment and development of industrial districts.

Action 2.5.3: Support establishment of agribusiness incubators

Agribusiness incubators are of great importance in terms of developing startups, and small and
medium businesses. For that matter, establishing agribusiness incubators will be considered
based on the following milestones:

Improve institutional capacity of agribusiness extension services. In the first place, a the
most appropriate model and value chains for agribusiness will be defined based on the results
of the comprehensive analysis of business environment in the agricultural sector. A total of 10
business incubators are planned to be established (one business incubator for each region)
across the country. Initially, establishing business incubators may start with Absheron,
Lankaran, Guba-Khachmaz, and Ganja-Gazakh regions, where agro parks will be established.
The process of institutionalization will cover several milestones:

- Select crops and products with a comparative advantage for the economic
regions;

- Develop a strategic plan which sets priorities for the operation of agribusiness
incubators;

- Develop training materials;

- Provide training fortrainers.

Improve business skills of startups, small and medium businesses. After the
agribusiness incubators are ready for operation, 50 residents will be selected through
solicitations based on the pre-defined criteria depending on the value chains typical of each
region. For example, the residents for the Guba-Khachmaz region will include input suppliers,
producers, processors, distributors, and traders who are engaged in the value chains involving
apples or other fruits and vegetables. The selected residents will be trained and each of them
will later develop its own business plans. Furthermore, the most successful residents will be

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selected based on their business plans (for example, 25 residents) to receive more intensive
training in business management.

Support for business organization and startup capital. Startup capital will be provided to
the residents, who have completed the training courses successfully and developed a real
business plan (on condition that they pay it back later), and they will be assisted to organize
their business.

Ensure access to finance. It is planned to facilitate access to finance for the persons who
have started business under business incubator and continue to operate such business to
expand it. These support areas will consist of facilitating access to preferential loans. To that
end, potential to develop special mechanisms will be evaluated. In particular, it is planned that
mechanisms as simplification of lending procedures for or providing preferential loans to those
who apply for loans based on the opinion or recommendation of a business incubator.

Ensure continuous operation of business incubators. To ensure continuous operation of

business incubator, the startup capital which is provided to the residents will be subject to
certain amount of extra commission fees over time, which will allow establishing a capital in
addition to the funds allocated to them.

Expected results and indicators

Development of management structure for agro parks and business incubators in 2017,
establishment and commissioning of new agro parks and business incubators by the end of
2018 is planned. Establishment of one Agro park by 2020 can bring AZN 355 million GDP
impact including AZN 135 million direct and AZN 220 million indirect GDP impact for
Azerbaijan. Commissioning of agro park by 2018 is considered to be the main incubator. These
facilities are forecasted to employ around 7725 employees in direct and indirect employment.
In addition, a total of 25 small and medium businesses will have been established along the
value chains typical of each region by 2020.

Required investment

Total investment required will be AZN 350 million for the strategic priority.

Expected risks

Potential key risks may include delays in the establishment and development of agro parks,
industrial districts, and allocation of necessary funds.

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7.3. Strategic objective 3. Facilitate access to finance
It is essential to facilitate access of producers to finance, and improve the mechanisms that
are designed to assess and mitigate or reduce potential risks in order to foster the development
of competitive agriculture in Azerbaijan.

Given the above, three prioritized are chosen for this strategic target. The first priority will focus
on improvements in the agricultural financing mechanisms. The second priority will cover
measures to improve agricultural insurance. The third priority target incentives to attract both
local and foreign investments to the agricultural sector.

7.3.1. Priority 3.1. Improve financing mechanisms in agriculture

Rationale

Despite the recent increase in agricultural lending, agricultural loans account for less of the
total loan portfolio, especially national economy. According to the Central Bank of Azerbaijan,
the total volume of the loans allocated for agricultural production and processing has been
AZN 409,7 million over the first 9 months in 2016, thus accounting for 2,4 % of the loans in
national economy. This is related to the essential features of the agricultural sector, that is,
agricultural lending contribute less to the national economy due to certain factors, such as
dependence on climate, poor capital flow, unfavorable collateral conditions for agricultural
producers, especially for smallholders, lack of adequate mechanisms for credit risk mitigation,
low financial literacy of the agricultural producers etc.

Action items

Action 3.1.1: Define targets for financial needs in agriculture

The Ministry of Agriculture and the Ministry of Finance will together investigate the level of
access to finance by agriculture in overall and its important sub-areas, and will determine the
needs. For this purpose, two ministries will conduct research and set targets to scale up
opportunities for access to finance.

Action 3.1.2: Consider establishing an agricultural lending risk-sharing/guarantee fund

Azerbaijan will explore opportunities to establish a guarantee fund based on risk sharing to
de-risk agriculture finance value chain of credit institutions. This work will include definition of
risk sharing mechanisms for system-wide external shocks (droughts, export market disruption)
affecting producers of agricultural products. This action will be coordinated based on the
Strategic Roadmap for Consumer Production by Small and Medium Businesses in Azerbaijan.

Action 3.1.3: Develop mechanisms for application of innovative and non-collateral loans
in agriculture

The Financial Market Supervisory Chamber, in consultation with Ministry of Agriculture, will
take necessary actions to create legislative and operational base for disbursement of loans
and non-collateral loans. It will conduct a study of the developed countries’ practice (for

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example, ) to define legal and regulatory framework for disbursement of non-collateral and
innovative loans. It will then prepare and publish charter or regulation.

Action 3.1.4: Expand the collateral base for lending

The Financial Market Supervisory Chamber will coordinate with the central agency responsible
for management of moveable collaterals, and ensure proper classification and inclusion of
agricultural assets (such as agriculture machinery) in the databases. In addition, a package
of proposals will be prepared based on international best practice to accept the products that
are stored at storage facilities or to be produced, as collateral for lending.

Action 3.1.5: Increase financial literacy of agricultural producers

Agricultural Science and Information Advise Centers based in the regions will provide training
and workshops regularly to keep agricultural producers updated in access to finance, and
communicate necessary knowledge on the efficient use of financial resources based on their
needs. On top of that, financial institutions will maintain a stronger presence in increasing the
financial literacy of the agricultural producers. These activities will be coordinated based on
Priority 5.3 of the Strategic Roadmap.

Action 3.1.6: Develop mechanisms for managing risks which affect the agricultural
sector

The Ministry of Agriculture will conduct a study to define mechanisms for assessing, reducing
or mitigating potential risks affecting the agricultural sector. The study will be focused on the
careful analysis of major risks, their occurrence frequency and extent, and provide conclusions
on the impact of such risks both on a national and sectorial level. All data that are obtained
from the studies will be collected in a digital database, which will act as a key information
source for making decisions with regard to the agricultural and lending activities carried out by
the credit organizations.

Action 3.1.7: Stimulate agricultural lending by credit organizations

A package of proposals will be prepared based on investigation of international best practice

to raise additional funds for the agricultural sector and increase access to finance by optimizing
the interest rates imposed on the commercial agricultural loans allocated by credit
organizations.

Expected results and indicators

The overall financing mechanism in agriculture, as well as the legal and regulatory framework
for disbursement of non-collateral and innovative loans will be improved. Except for immovable
collaterals, other types of collateral will be defined for lending mechanisms. As a result, non-
active agricultural loans will be reduced, financial literacy of the agricultural producers will be
improved and access to finance will be facilitated. It is anticipated that the following results will
be achieved as a result of the implementation of the priority actions:

- Facilitate access to finance in the amount of additional AZN 665 million;

- Consider establishing the guarantee fund for lending.

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The interventions here are considered as enabling forces for impact mentioned in
other areas of the road map. In addition there will be a total of AZN 210 million GDP
impact including AZN 115 million direct and AZN 95 million indirect impact due to
increased access to finance for capital investments such as agricultural machinery,
greenhouse materials or livestock.

Required investment

The amount of the initial investment required for the implementation of the actions is included
in Priority 2.1 along with the investments required under other priorities.

Expected risks

Lack of knowledge of farmers about innovative financing mechanisms may cause decreased
interest in this area. The unwillingness of credit organizations to provide agricultural loans may
be another risk factor under this priority.

7.3.2. Priority 3.2. Develop agricultural insurance

Rationale

Currently, agricultural producers don’t use insurance services as much as desired. The
Ministry of Finance reports that in 2015 agricultural insurance for plants and animals accounted
for 1,3 % of the total property insurance paid across the country. Agricultural insurance policy
for plants and animals have been pursued mainly by Agroleasing OJSC (for imported purebred
animals), and some large financial and industrial enterprises that are engaged in agricultural
production. Although the government supports agricultural insurance, it has yet to be practical.

These factors show how important it is to carry out sweeping reforms to develop nationwide
agricultural insurance, and improve government support mechanisms in this regard.

Lack of 30 or 40-year old database on natural disasters, animals and plant diseases, climatic
conditions, agricultural performance indicators, and a proper insurance fund which is widely
applied as best practice in agriculture is a key obstacle in developing a proper insurance
system.

Action items

Action 3.2.1: Improve the existing legislation with regard to agricultural insurance

The Ministry of Agriculture together with the Financial Market Supervisory Chamber and other
government agencies will prepare proposals to improve the legislative framework for
developing agricultural insurance based on international best practices. These proposals may
include applying differential insurance (for regions and crops),compulsory insurance (for some
crops and products) etc.

Action 3.2.2: Consider the possibility of establishing an agricultural insurance fund

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With the support of the private insurance companies, the Ministry of Agriculture and the
Financial Market Supervisory Chamber will look into the possibility of establishing an
agricultural insurance fund in order to expand agricultural insurance. They will investigate
international practice in this area and develop reports analyzing potential impact of the fund on
agricultural producers and, generally on the agricultural sector.

Action 3.2.3: Establish Registry for Insurable Events

The Ministry of Agriculture and the Ministry of Ecology and Natural Resources will together
establish a long-term information base which will contain all data on weather conditions,
natural disasters, animal and plant diseases, as well as performance indicators that are
necessary for effective assessment of insurable risks in agriculture.

Action 3.2.4: Develop a mechanism to pay material damages to agricultural producers

due to imposed quarantine

The Ministry of Agriculture and the Ministry of Finance will develop an implementation
mechanism for paying damages to agricultural producers due to imposed quarantine in plant-
growing or eradicated organisms, as well as eradication, prophylaxis and prevention of animal
diseases.

Action 3.2.5: Increase insurance literacy of agricultural producers

The Agricultural Science and Information Advise Centers will launch awareness campaigns to
promote agricultural insurance. A raft of measures will be implemented to increase insurance
literacy of the agricultural producers. These activities will be coordinated based on Priority 5.3.

Expected result and indicators

The legislative framework for developing agricultural insurance based on best practices will be
developed. The agricultural producers will be given detailed information about agricultural
insurance. An implementation mechanism for paying damages to agricultural producers due
to imposed quarantine will be developed. The insurance literacy of the producers will increase.

It is anticipated that the following results will be achieved as a result of the implementation of
the priority actions:

- Establish the Registry for Insurable Events;

- Consider the possibility of establishing the Agricultural Insurance Fund;

- Expand agricultural insurance, i.e. increase the total number of insured

agricultural producers at least 3 times more.

Furthermore, the interventions here are considered as enabling forces for the GDP
impact to be achieved in real terms in 2020 as mentioned in Priority 2.1.

Required investment

The amount of the initial investment required for the implementation of the actions is included
in Priority 2.1 along with the investments required under other priorities.

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Expected risks

Lack of past data may be a potential risk when establishing the Registry for Insurable Events.

7.3.3. Priority 3.3. Promote agricultural investments

Rationale

Despite the recent increase in agricultural investments, total investments in the agricultural
sector are lower than that of other areas of economy. A closer look at the structure of the
decade-long agricultural investments made as working capital will reveal an average of 3.5%
contribution to national economy3. Although the foreign direct investments in national economy
have increased several times over the last years, no foreign investment has ever been made
in the agricultural sector.

Action items

Action 3.3.1: Assess agricultural investment needs and develop investment projects

The Ministry of Economy, with the support of the Ministry of Agriculture and local executive
authorities, will make a comprehensive assessment of investment opportunities and needs
based on the perspectives for developing the agricultural sector in the country. Relevant
investment projects and maps (for administrative regions and areas) will be developed based
on the results of the assessment. In addition, digital and printed materials related to investment
opportunities in agriculture will be prepared to be disseminated in domestic and international
forums, conferences, as well as bilateral meetings with local and foreign investors. Renowned
agricultural and food producers (transnational corporations) will be invited to make investments
in Azerbaijan, and special strategies and programs will be developed, where necessary, to
attract investment by those producers.

Action 3.3.2: Improve investment environment in agriculture

The Ministry of Economy, with the support of the Ministry of Agriculture, will study and analyze
the existing investment environment in the agricultural sector. Based on the results of the
analyses, it will put forward certain proposals for making the investment environment more
enabling and available to agricultural producers. These activities will be coordinated based on
Strategic Objective 6.

Expected results and indicators

Investment projects and maps for administrative regions will be developed, and the existing
investment environment in the agricultural sector be improved. It is anticipated that Azerbaijan
will be integrated into the global value chains through investment made by renowned
agricultural and food producers (transnational corporations) in the country. The volume of
direct agricultural investments will also be increased. It is anticipated that the following results
will be achieved as a result of the implementation of the priority actions:

- Investments in the agricultural sector will be increased twice;

3Source: the Statistical Committee of the Republic of Azerbaijan

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 - At least 100 investment projects will be developed for administrative
regions and areas;

The interventions here are considered as enabling forces for the GDP impact to be
achieved in real terms in 2020 as mentioned in Priority 2.1.

Required investment

The amount of the initial investment required for the implementation of the actions in this
priority is included in Priority 2.1 along with the investments required under other priorities.

Expected risks

The unwillingness of investors, especially foreign investors to make investments in the

agricultural sector may be a potential risk factor.

7.4. Strategic Objective 4. Develop agricultural input market and improve provision of
services

This strategic objective is targeted at 7 priorities designed to facilitate access of agricultural

manufacturers to agricultural inputs.

The first priority includes actions to develop the land market across the country. The second
priority is aimed at facilitating access to irrigation water supply, which is the next important
agricultural input. The third priority is designed to improve provision of all types of agricultural
machinery and equipment. The fourth priority is targeted at increasing the local production
potential, and developing the seed and sapling market. The fifth priority involves actions to
improve provision of fertilizers and plant protection products in the agricultural sector. The sixth
priority is aimed at taking actions to scale up compound feed production. Last but not least,
the seventh priority is designed to improve veterinary and phytosanitary services.

7.4.1. Priority 4.1. Develop the land market

Rationale

It is particularly important to facilitate access of agricultural producers to land resources, and

ensure efficient use of lands as they are considered a key agricultural input in terms of
stimulating agricultural production. Dominating family smallholders are a key obstacle in
enhancing agricultural competitiveness across the country. Despite the recent measures, the
agricultural lands not being used as designated still remains a major problem to be resolved.

Action items

Action 4.1.1: Increase transparency and simplify procedures for the sale, lease and use
of agricultural lands

With the support of the competent government agencies, the Ministry of Agriculture will make
a comprehensive analysis of the sale, lease and use of agricultural lands, and develop a
package of proposals to simplify respective procedures in order to increase transparency in

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this area. Particularly, the possibility of having the land use or lease agreements, which
stipulate more than one year long land use or lease, as well as powers of attorney for lease
and use of those lands in private ownership for a period more than two years approved,
attested or certified by local notary offices. The possibility of applying an electronic registration
system with regard to the sale, lease and use of agricultural lands will also be investigated.

Action 4.1.2: Apply relevant mechanisms to prevent agricultural lands from being kept
out of use

With the support of the competent government agencies, the Ministry of Agriculture will develop
a package of proposals to prepare legal and regulatory framework for reclaiming or unlocking
idle agricultural lands designated for agricultural production and enforce all existing laws and
regulations in this respect.

Action 4.1.3: Take actions to consolidate lands

The Ministry of Agriculture and the competent government agencies will develop a state
program to consolidate agricultural lands based on best international practice.

Expected results and indicators

The sale, lease and use of agricultural lands will be facilitated, legal and regulatory framework
for reclaiming or unlocking idle agricultural lands for agricultural production will be developed,
efficiency of agricultural production through land consolidation will be increased, and the total
size of crop fields will be expanded by 5 by unlocking the idle agricultural lands.

The interventions here are considered as enabling forces for the GDP impact to be
achieved in real terms in 2020 as mentioned in Priority 2.1.

Required investment

The amount of the initial investment required for the implementation of the actions is included
in Priority 2.1 along with the investments required under other priorities.

Expected risks

Lack of interest in the consolidation of farm lands may be a potential risk factor.

7.4.2. Priority 4.2. Improve irrigation water supply of producers

Rationale

Although actions have been taken to improve irrigation water supply recently, there are still
issues to be addressed in this area. Given that most of the agricultural lands are irrigable,
improving the irrigation water supply will increase agricultural production and productivity.

Action items

Action 4.2.1: Assess the need for irrigation water

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The Ministry of Agriculture and Amelioration and Water Management Office OJSC will assess
the need of the agricultural producers for irrigation water and will evaluate their needs in this
regard.

Action 4.2.2: Improve the irrigation water supply

Based on the results of the needs and resources assessment, Amelioration and Water
Management Office OJSC and the Ministry of Agriculture will develop an action plan to
construct small reservoirs, drill artesian wells, and expand the network of irrigation canals.

Action 4.2.3: Expand application of modern irrigation systems

The use of efficient irrigation systems will be stimulated along with the policy aimed at providing
government-supported concessions for the irrigation equipment that is leased or purchased
through Agroleasing OJSC. In addition, relevant proposals will be presented based on the
analysis of best global practices that are aimed at stimulating the use of efficient irrigation
systems.

Action 4.2.4: Expand operation of the water users associations

Amelioration and Water Management Office OJSC will study international best practice to
make proposals for improving and expanding the operation of water users associations, and
consider the possibility of establishing an effective monitoring mechanism for water use
through the associations.

Expected results and indicators

Irrigation water supply for agricultural producers will be increased by 20 %.

The interventions here are considered as enabling forces for the GDP impact to be
achieved in real terms in 2020 as mentioned in Priority 2.1.

Required investment

The amount of the initial investment required for the implementation of the actions is included
in Priority 2.1 along with the investments required under other priorities.

Expected risks

Financial difficulties may be a key risk factor for this priority.

7.4.3. Priority 4.3. Improve provision of agricultural machinery, equipment and

maintenance for agricultural producers and develop agricultural service
market

Rationale

As a result of systemized measures to to improve provision of agricultural machinery and

equipment for agricultural producers, the agricultural machinery park has been transformed
and expanded. Currently, there are some critical issues to be addressed in order to develop
the input market for agricultural machinery and equipment:

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 - Conduct feasibility studies to ascertain if it is necessary to continue
government support measures to replace expired machinery;

- Explore opportunities for upgrading and expanding the physically

outdated and fatigue machinery parks in line with the intensive production
and structural changes made to the crop fields (cotton, potatoes,
vegetables, sugar beet and other fields);

- Conduct feasibility studies for the provision of agricultural machinery and

equipment based on the specific needs of small and medium businesses;

- Expand network of private businesses that provide agricultural services in

order to enhance competitiveness and quality of such services.

Action items

Action 4.3.1: Upgrade agricultural machinery parks

The Ministry of Agriculture will assess the needs for expanding agricultural machinery parks
along all areas of crop production and cattle breeding considering the perspective changes to
be made to the structure of these production areas. In addition, the possibility of replacing or
repairing the old machinery and equipment will be considered.

Action 4.3.2: Improve provision of innovative, also small machinery and equipment

The Ministry of Agriculture will conduct surveys and analyses to reduce losses of small and
medium producers and processors, and assess their need for small agricultural machinery and
equipment in order to increase performance efficiency. Based on the results of the surveys
and analyses, it will present proposals to improve the supply of small agricultural machinery
and equipment with due consideration given to the production of priority crops mentioned in
the Strategic Roadmap by means of small agricultural machinery and equipment.

Action 4.3.3: Develop the agricultural service market

The Ministry of Agriculture and the Ministry of Economy will conduct a thorough analysis of the
areal and institutional structure of agricultural services, and make proposals to increase the
presence of Agroleasing OJSC and private involvement in the market.

Expected results and indicators

Agricultural machinery parks will be developed and upgraded. The government will form the
service (maintenance) structure for agricultural machinery in the regions, and improve the
provision of innovative, also small machinery and equipment.

The provision of agricultural producers with agricultural machinery and equipment will be
increased by 20 %, thus leading to the extensive use of innovative machinery and equipment.
As a result, the companies which provide maintenance services will constitute 70 % of the total
service structure.

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The interventions here are considered as enabling forces for the GDP impact to be
achieved in real terms in 2020 as mentioned in Priority 2.1.

Required investment

The amount of the initial investment required for the implementation of the actions is included
in Priority 2.1 along with the investments required under other priorities.

Expected risks

Potential problems with the competitive environment may hinder development of the markets.
Lack of farmer knowledge about the innovative machinery and equipment may be another risk
factor.

7.4.4. Priority 4.4. Develop the seed and sapling market, and increase local
production potential

Rationale

The seed and sapling market in Azerbaijan is relatively new and has room to be strengthened.
On the demand side, high-quality seeds and saplings may constitute a prohibitively expensive
upfront investment by smallholder farmers. Furthermore, most farmers use their own annual
production to replenish their seed and sapling supply for the next cycle. On the supply side, a
limited set of high-quality seeds and saplings are accessible to farmers, the quality is not
certified. Major portion of demand is satisfied through imported seeds with existing companies
mainly focusing on cereals. Furthermore, few seed and sapling sources exist in Azerbaijan:
seed producer farmers, private seed companies, agricultural input dealers, and Aqroleasing
OJSC.

Action items

Action 4.4.1: Promote seed and sapling production

The Ministry of Agriculture will assess the needs of businesses which are engaged in seed
and sapling production, and lay out an action plan including some proposals to support
operation of such businesses.

Action 4.4.2: Establish a quality control system for seed and sapling production, and
improve mechanisms for certification

The Ministry of Agriculture take measures to align current regulatory framework for seeds and
saplings with international standards. It will also establish an efficient quality control system
with certification for seeds and saplings. This will include preparation and publishing of
regulations to define necessary steps for certification and monitoring system. Relevant
mechanisms will be developed to ensure possible involvement of Seed Producers Association
in the regulation of seed and sapling markets.

Action 4.4.3: Create digital database

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The Ministry of Agriculture will consider the possibility of creating a digital database to provide
detailed information on seed and sapling producers, produced and marketed certified seeds
and saplings, as well as their biological and economic performance.

Action 4.4.4: Improve operation of seed laboratories

The Ministry of Agriculture will consider the possibility of furnishing the existing seed
laboratories with modern equipment, provide training to laboratory specialists through
international experts, and take action to accredit such laboratories.

Expected results and indicators

A certification and quality control systems will be established, a digital database for agricultural
producers will be created. Seed laboratories will be accredited. Seed and sapling use by
agricultural producers will be increased by 90 %.

Required investment

The amount of the initial investment required for the implementation of the actions is included
in Priority 2.1 along with the investments required under other priorities.

Expected risks

Potential problems with the competitive environment may hinder development of the markets.

7.4.5. Priority 4.5. Improve provision of fertilizers and crop protection products

Rationale

Currently, the actual amount of the fertilizers applied in the fields is considerably lower than
what is demanded. According to the Ministry of Agriculture, Azerbaijan imported a total of
152.8 thousand tons of mineral fertilizers against the demand for 948,9 thousand tons of
fertilizers in 2015. As seen, imports of fertilizers to the country supplied only 13.2 % of the
domestic demand. According to FAO statistics, Azerbaijan is one of the countries with the
lowest application of mineral fertilizers per hectare. Limited use of fertilizers and crop
protection products will eventually cause crop losses and low yield.

Action items

Action 4.5.1: Identify the demand level for fertilizers

The Ministry of Agriculture will develop agrichemical maps showing quality of soils across the
regions, and take action to regularly update the maps. These maps will help identify the ideal
demand level for fertilizers. Creating a database to collect all these electronic data will also be
considered.

Action 4.5.2: Promote fertilizer use

The Ministry of Agriculture will conduct a study to identify ideal demand level for mineral and
organic fertilizers, based on crop distribution and targets, and benchmarks from other
countries. It will then review and refine support schemes to private sector for establishment of
fertilizer plants in the country, and launch dedicated campaigns to raise farmer awareness on

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the use and benefits of fertilizers (through information-advisory services). It will also consider
the possibility of expanding the use of biological fertilizers like biohumus.

Action 4.5.3: Improve provision of crop protection products

The Ministry of Agriculture will analyze the provision of crop protection products and set
priorities for development. In addition, it will look into the possibility of applying various
biological methods in plant protection using best practices.

Action 4.5.4: Increase quality control for fertilizers and crop protection products

The Ministry of Agriculture will establish effective mechanisms for controlling the quality of
fertilizers and crop protection products, and develop progress reports regularly.

Action 4.5.5: Promote local fertilizer production

In case of necessity, the Ministry of Agriculture and the Ministry of Economy will consider
supporting the private sector in establishing fertilizer plants (including bio-fertilizer plants). One
of the potential opportunities in oil and gas sector is building fertilizer plants and action
agricultural sector will be coordinated with such opportunities. The efforts are included in the
strategic Objective 3 of the Strategic Roadmap for Development of the Oil and Gas Sector
(including chemical products) of the Republic of Azerbaijan.

Expected results and indicators

Quality fertilizers and crop protection products including biological fertilizers and protection
products will be used extensively to increase agricultural production. The use of mineral
fertilizers by agricultural producers will be increased by 25%, crop protection products by 255,
biological fertilizers by 10%, and biological crop protection products by 10%.

Required investment

The amount of the initial investment required for the implementation of the actions is included
in Priority 2.1 along with the investments required under other priorities.

Expected risks

Potential problems with the competitive environment may hinder development of the markets.

7.4.6. Priority 4.6. Improve provision of compound feed and promote breeding

Rationale

The demand for compound feed has recently become the focus of the agenda due to
increasing production of animal products. Despite the recent initiatives, there is still much to
be done in improve provision of compound feeds in order to meet the needs of cattle breeders.

There is a need to continue efforts to promote and improve animal breeding, and expand
application of the intensive farm model.

Action items

Action 4.6.1: Study and develop the structure of the compound feed market

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The Ministry of Agriculture will evaluate the volume of the existing and prospective compound
feed market, make proposals to improve the provision of raw products, and address other
related issues. Using good practices, it will also look into the possibility of diversifying the feed
resources, and develop an elaborate action plan to improve the quality of total feed reserves.

Action 4.6.2: Expand application of artificial insemination and the embryo transfer
method

Efforts to modernize the Artificial Insemination Center will be continued, and furnishing the
Center with various purebred animals, laboratory equipment, and other special-purpose
machinery and equipment will be kept under focus. The institutional base will be augmented,
the regional artificial insemination centers will be upgraded with various equipment and
materials. On top of that, awareness about benefits of artificial insemination and embryo
transfer will be raised these methods will be promoted.

Action 4.6.3: Support development of poultry breeding

The Ministry of Agriculture and the Ministry of Economy will make a comprehensive
assessment of the needs related to poultry breeding and ensuring steady supply, and will
prepare relevant proposals.

Expected results and indicators

The compound feed market for cattle breeding will be developed and animal breeds will be
improved. The head count of productive animals and compound feed supply level will be
increased by 20 % and 25% respectively.

Required investment

The amount of the initial investment required for the implementation of the actions is included
in Priority 2.1 along with the investments required under other priorities.

Expected risks

Potential problems with the competitive environment may hinder development of the markets.

7.4.7. Priority 4.7. Improve provision of veterinary and phytosanitary services for
agricultural producers

Rationale

As part of the efforts to develop the veterinary and phytosanitary services system, works on
improvement of relevant standards have been started, laboratories have been upgraded and
action have been taken to enhance the full institutional potential of the system in collaboration
with international organizations.

However, it is important to ensure effective delivery of veterinary and phytosanitary services

to agricultural producers, bring the service potential in line with international standards, and
speed up the reforms in order to develop the network of private veterinary and crop protection
service providers across the country.

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Action items

Action 4.7.1: Develop network of private veterinary service providers

The Ministry of Agriculture will put forth proposals and take relevant actions to establish a
mechanism for transferring relevant veterinary services (animal treatment, vaccination against
infectious diseases) to the private sector and developing the private veterinary service network.

Action 4.7.2: Establish an effective system for tracking and monitoring animal health

The Ministry of Agriculture will take action to establish an effective system for tracking and
monitoring animal health based on WAHO (World Animal Health Organization) standards in
order to improve risk management with regard to animal health.

Action 4.7.3: Establish an effective system for tracking and monitoring plant health

The Ministry of Agriculture will take action to establish an effective system for tracking and
monitoring plant health based on International Standards for Phytosanitary Health of
International Convention on Plant Protection in order to improve risk management with regard
to animal health.

Action 4.7.4: Establish and apply integrated pest management systems for crop
protection

Integrated pest management systems for crop protection (agronomic practices, mechanical,
physical and chemical control, quarantine etc.) will be developed and applied.

Action 4.7.5: Modernize veterinary and phytosanitary laboratories

The Ministry of agriculture will continue actions to improve, accredit and modernize veterinary
and phytosanitary laboratories, as well as those operating under the Center of Quarantine and
Examination, and the Center of Toxicology and Quality Control.

Expected results and indicators

The risk management system for animal and plant diseases will be brought in line with
international standards. The network of private veterinary and plant protection service
providers will be expanded, and the number of private veterinary service providers will be
increased by 30%.

Required investment

The amount of the initial investment required for the implementation of the actions is included
in Priority 2.1 along with the investments required under other priorities.

Expected risks

Deep-rooted institutional traditions and procedures may hinder the reforms.

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7.5. Strategic Objective 5. Improve agricultural science, education, and
extension services

3 priorities have been selected to reach this strategic objective. The first priority is aimed at
improving the quality of agricultural science to draw more attention, improve material and
technical resources for agricultural schools, and develop curricula based on best practices.
The second priority is targeted at improving agricultural research and developing mechanisms
for the application of research findings to diversify funding for scientific-research institutes,
develop legislative framework for enforcing intellectual property rights in agriculture, and
maintain stronger relations between the international think tanks and local scientific-research
institutes.

Last but not least, the third priority is designed to form adequate extension service network,
and transfer best practices to agricultural producers. To make this happen, laws regulating
agricultural extension services will be drafted, material and technical resources of public
service providers will be improved, and online advisory services will be developed.

7.5.1. Priority 5.1. Ensure transition to a new development stage with regard to
the quality of agricultural education

Rationale

Azerbaijan has achieved initial positive results by focusing on the substantial modernization of
the agricultural education system over the last years. Nevertheless, agricultural education
hasn’t received a lot of attention, that is, the total enrollment plan for 2016-2017 for State
Agricultural University included a total of 1320, with 660 of them being state ordered agriculture
specialties in 2016-2017, while the enrollment plan for 2015-2016 was targeted at a total of
1275 students with 480 of them studying agriculture. At the same time, a total of 949 students
were enrolled to the university (accounting for 74,4 5 of the total enrollment plan) in the
academic year of 2015-2016, while this number was 1169 (80,8%) in 2016-2017. According to
the Ministry of Education, about 2670 students were enrolled to vocational schools in 20154.
56% of them were received degrees in different areas of agricultural machinery. However,
agro-processing professions had only 40 enrollments in 2015. Hence, meeting the demand for
highly-skilled agricultural specialists is one of the important issues to be addressed.

Action items

Acton 5.1.1: Develop agricultural education

Azerbaijan State Agricultural University will continue developing adequate curricula to improve
the quality of agricultural education. These curricula will allow bringing agricultural professions
in line with demand of the existing domestic labor market. In addition, awareness and
promotion programs will be launched to draw more attention to agricultural education, and will
assist students with employment (for example, through labor fairs). The possibility of
exchanging students and teachers with leading international schools and implementing
“double degree” programs will be investigated. On top of continued efforts to improve material

4Except for students studying textiles

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and technical resources of State Agricultural University, special programs will be developed to
promote participation of students and teachers in international conferences, workshops, and
advanced training courses in order to ensure that they learn best practices and improve their
knowledge. The Ministry of Agriculture and the Ministry of Education will present proposals
analyzing the opportunities for other high schools to provide agricultural education.

Action 5.1.2: Develop vocational education in agriculture

The Ministry of Agriculture and the Ministry of Education will form a working group to
coordinate agricultural-vocational training programs. This group will consist of the scientists,
as well as the representatives of the agricultural and private sectors. The primary function of
the group will be developing a roadmap designed to increase the potential of vocational
schools which provide agricultural education. To make this happen, the TOT (Training of
Trainers) approach will be adopted, and the curricula of vocational schools will be updated
based on international best practices. A raft of important measures will be implemented to
bring and accredit the agricultural-vocational education in line with international standards. In
addition, relevant mechanisms will be established to build partnership between the extension
centers and the vocational schools. These activities will be coordinated through the Roadmap
for Development of Vocational Education and Training in Azerbaijan.

Action 5.1.3: Develop measures to strengthen partnerships between agricultural

education providers, and agricultural producers and processors

Comprehensive actions will be taken to expand cooperation between agricultural education

providers and agricultural producers and processors. Under such cooperation, the number and
skill set of future graduates will be identified through the surveys conducted in the agrarian
science centers, and farms. Focus areas (or professions) and curricula compliance will be
identified through consultations with agricultural producers leading to strengthened
partnerships which will allow increased practical knowledge.

Expected results and indicators

As a result, young people will take a deeper interest in agricultural and vocational education,
thus leading to increased scientific and practical knowledge of the teaching staff and students
in agriculture. Material and technical resources of the educational institutions will be improved,
and the existing curricula will be brought in line with international standards, as well as new
adequate training modules and materials will be developed and published based on
agricultural professions for high schools. It is anticipated that these actions will reach the
following priority indicators:

- Increase enrollment in agricultural high schools by 20%;

- Increase enrollment in agricultural-vocational schools by 20%;

- Increase the number of teachers and researchers attending international

conferences, workshops, and advanced training courses by 30%.

Required investment

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The amount of the initial investment required for the implementation of the actions is included
in Priority 2.1 along with the investments required under other priorities.

Expected risks

Low pay may cause agricultural specialists to seek employment in other sectors. In addition,
the government may provide less financial assistance due to declining budgetary revenues.

7.5.2. Priority 5.2. Plan and conduct agricultural research, and improve
mechanisms for applying research findings

Rationale

There are only few scientific-research institutes conducting agricultural research in the country.
Nevertheless, it is one of the pressing issues to be addressed in order to make rapid
transformations in the scientific-research system to bring agricultural education providers in
line with international standards, and introduce new technologies in agriculture.

Action items

Action 5.2.1: Set priorities and increase outcome orientation for agricultural research

The possibility of establishing the Coordination Council under Agrarian Science and
Information Center will be considered with the support of leading farmers, professional
organizations, university representatives, and independent experts. Members of the council
will meet from time to time during the year to define priorities for agricultural research activities
based on the domestic and international trends.

Action 5.2.2: Establish mechanisms for promoting scientific research

The Ministry of Agriculture will set incentive mechanisms for conducting agricultural research
in priority areas. These incentive mechanisms will include both material and non-material
mechanisms. The Ministry will work with the Scientific Development Fund under the President
of the Republic of Azerbaijan to establish material incentives, conduct interviews among and
award prizes for researchers to promote agricultural research

Action 5.2.3: Upgrade agricultural scientific-research institutes with modern

laboratories, equipment and devices

The Ministry of Agriculture will assess the need of agricultural scientific-research institutes for
laboratories, equipment and devices. Thereafter an action plan will be developed to improve
their material and technical resources. These activities will be coordinated and geared towards
Actions 4.4.4, 4.6.2, 4.7.5 and 7.3.3 of this Strategic Roadmap.

Action 5.2.4: Transfer research findings to farmers through extension service providers

The Agrarian Science and Information Center under the Ministry of Agriculture will establish
mechanisms for transferring research findings (technologies, new plant varieties and animal
breeds, management tools etc.) to farmers through extension service providers. These
mechanisms will stimulate application of innovations and scientific findings in the agricultural
sector.

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Expected results and indicators

Scientific research will be brought in line with international best practice in order to ensure
sustainable development of the agricultural sector. Material and technical resources of the
educational institutions will be improved, efficient use of the material and technical base will
be ensured, and the groundwork for the application of research findings in the agricultural
sector will be laid. As a result, the number of fundamental and practical researches in
agriculture will increase by 20%, the number of scientific articles published in the international
journals will increase by 25 % as of 2018.

Required investment

The amount of the initial investment required for the implementation of the actions is included
in Priority 2.1 along with the investments required under other priorities.

Expected risks

It may require some time to publish the research findings in international journals. Adoption of
the scientific achievements may be hindered by the dominating number of small household
farms.

7.5.3. Priority 5.3. Form extension service network based on agricultural needs

Rationale

The primary goal of the extension service providers and scientific-research institutes which are
operating under the Agrarian Science and Information Center of the Ministry of Agriculture is
to ensure adoption and transfer of agricultural skills and knowledge across the regions.
However, there is a need for an effective system which provides extension services to all the
farmers across the country. According to the results of the surveys and interviews conducted
so far, farmers lack the basic knowledge of good agricultural practices.Best practices related
to soil cultivation, planting, fertility, preservation and irrigation, as well as animal breeding,
feeding, and management are applied in a limited way. Most of the information necessary for
ensuring economic efficiency of the farms is not available to the farmers. Farmers need to
focus on the production of higher value-added crops, as farm yield doesn’t measure up to their
expectations. It is required that clear-cut decisions be made with regard to economic
performance, and skills and knowledge of the agricultural producers be improved.

Action items

Action 5.3.1: Establish mechanisms for regulating the extension services in agriculture

The Ministry of Agriculture will conduct investigations and implement necessary measures to
establish rules and improve the legal and regulatory framework for the provision of extension
services.

Action 5.3.2: Improve performance of the Agrarian Science and Information Center

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The Ministry of Agriculture will develop an annual action plan to implement measures within
the mandate of the Agrarian Science and Information Center, and set priorities for defining the
nature of relations to be established between the center and farmers. These activities will
include establishment of demonstration farms, winter schools, field training and other ways of
delivering information and advice.

Action 5.3.3: Establish network of extension service providers with country coverage

Under the leadership of the Agrarian Science and Information Center, the Ministry of
Agriculture will consider the possibility of establishing the network of extension service
providers involving respective think tanks, veterinary, phytosanitary and seed control agencies,
representatives of professional unions and consulting companies, and independent experts. A
certification system will be established to assess skills and knowledge of the extension agents,
and if necessary, provide training to potential consultants. An electronic database of extension
service providers will be established to improve management. The possibility of cooperating
with educational institutions as well as “Family Business Support Centers” (the FBSC) of the
Agrarian Science and Information Center will be considered when organizing these training
sessions.

Action 5.3.4: Establish the system of electronic, media and publishing services

The Ministry of Agriculture will establish the system of electronic, media and publishing
services in order to facilitate access of agricultural producers to extension services. The
agricultural producers will be able to obtain detailed information about market developments
and practices involving all stages of agricultural production (for example, efficient planting,
cultivation and feeding practices etc.) by entering the online information portal. This will have
positive impact on effective production planning. On top of that, extensive services will be
communicated to the producers more effectively through social media and phone services.
Video clips will be posted on the Internet and aired via TV programs for farmer education. The
Agrarian Science and Information Center will submit proposals to respective agencies for
establishing a farmer’s radio station or farmer’s TV channel. Furthermore, extension posters,
brochures, and other publications will be disseminated among the agricultural producers.

Action 5.3.5: Increase the financial sustainability of extension centers

The Ministry of Education will implement dedicated programs to increase financial

sustainability of the Agrarian Science and Information Center. It will consider the possibility of
increasing the incomes of the center by providing extension services to big agricultural
producers and agribusinesses.

Action 5.3.6: Look into the feasibility of providing extension services to agricultural
producers through input suppliers, processors, and financial institutions

In addition to the Agrarian Science and Information Center, input suppliers, processors, and
financial institutions may be actively involved in providing extension services to agricultural
producers. The Ministry of Agriculture will look into these possibilities, and set forth relevant
proposals.

Expected results and indicators

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A flexible system will be devised which will facilitate access to extension services. Extension
services provided by businesses will cover all the regions across the country. The system of
electronic, media and publishing services will be made available to all agricultural producers.

Required investment

The amount of the initial investment required for the implementation of the actions is included
in Priority 2.1 along with the investments required under other priorities.

Expected risks

Limited use of online extension services by agricultural producers, especially smallholders

may be a potential risk.

7.6. Strategic objective 6. Develop the agricultural market infrastructure and

facilitate producers’ access to markets

Reducing post-harvest losses, improving product quality, and more importantly, facilitating the
producers’ access to markets create the need for improved market infrastructure. The existing
market infrastructure puts certain obstacles in creating favorable conditions for agricultural
producers to enter markets, and sometimes they have no choice but sell their products at lower
prices offered by resellers. Underdeveloped market infrastructure, particularly inefficient
wholesale and retail networks cause the producer prices to plummet 2 or 3 times as low as
the market prices. In developed countries, the wholesale market is key to collecting and
disseminating all necessary data related to trading, logistics and market development, as well
as adding value and controlling the demand and supply.

One of the priorities under this Strategic Roadmap is the implementation of large-scale
measures to increase the access of the agricultural and food producers to export markets.
One of the preconditions for increasing export opportunities is linked to developed market
infrastructure. In this regard, development of domestic agricultural and food market will
stimulate exports. On top of maintaining a strong presence in the traditional export markets,
there is need for complex measures to enter new export markets

3 priority targets will be reached with regard to the above-mentioned issues.

The first priority will include actions to develop the infrastructure of the agricultural market.

The second priority will be aimed at improving the regulatory system of the agricultural market.

The third priority will be targeted at providing guidance for promoting and supporting
agricultural and processed exports. To make this happen, actions will be taken to expand
geographical coverage of agricultural and processed exports, and promote and support
exports for producers with a competitive advantage.

7.6.1. Priority 6.1. Develop agricultural market infrastructure

Rationale

Currently, the agricultural market infrastructure needs to be developed in several directions. In

the first place, new wholesale and logistics centers should be established for agricultural

95
production in the regions along with expanded retail network of agricultural producers in Baku
and other big cities. New slaughterhouses complying with high veterinary and sanitary
standards should also be established in all regions across the country.

It is particularly important to establish a network of fruit, vegetable and grain storages based
on the needs of small and medium producers in the regions.

There is a need to improve transport and shipping services to facilitate the access of the small
and medium producers to domestic and international markets, and improve the regulatory
system for such services in order to offer favorable conditions to the producers.

Considering the scope of the actions, first of all, a feasibility study will conducted, and based
on the outcome of such feasibility study far-reaching reforms will be carried out.

Action items

Action 6.1.1: Establish market infrastructure facilities which provide wholesale and
logistical services to fruit, vegetable, potato and melon producers in the region

Through public-private partnerships and active involvement of “Procurement and Supply of

Food Products” OJSC, new wholesale and logistical centers will be established in the regions
across the country. These centers will operate as an important market infrastructure necessary
for facilitating producers’ access to markets, increasing exports, and carrying out procurement
activities in the regions.

Action 6.1.2: Support establishment of modern adequate slaughterhouses in Baku and

regions

The feasibility of allocating preferential loans will be investigated with the support of competitive
agencies through public-private partnerships for the projects submitted by private investors,
and slaughterhouses that are in compliance with relevant veterinary and sanitary standards
will be promoted.

Action 6.1.3: Support establishment of small and medium-sized cold storages for fruits,
vegetables, potatoes, and melons

The establishment of cold storages with an adequate capacity based on the needs of small
and medium farms will be supported in order to improve storage infrastructure for procurement.
These storages will be used both by the producers and production unions (associations).

Action 6.1.4: Support establishment of small and medium-sized grain storages in the
cereal-producing regions

The establishment of adequate grain storages to be used by processors, suppliers, as well as

the production unions (associations) of small and medium farms will be supported.

Action 6.1.5: Support establishment of the network of “green markets” and “farmer
stores”

The possibility of allocating preferential loans through PPPs for the projects submitted by
businesses to establish adequate “green markets” and “farmer stores” will be considered.

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Action 6.1.6: Improve the digital database containing data on wholesale and retail prices
of agricultural products

The Ministry of Agriculture will improve, update and upgrade the database containing data on
the wholesale and retail prices of fruits, vegetables, potatoes, and melons as well as the
procurement prices of cereals and industrial plants including the selling and procurement
prices offered by processors.

Action 6.1.7: Assess needs and take actions to develop transport services

A package of proposals will be developed based on the results of needs assessment in order
to improve transport services and the regulatory system for compliance with technical
standards, tariffs etc., and facilitate access to domestic and international markets.

Expected results and indicators

As a result of the actions, a well-formed market infrastructure will be established for the
agricultural producers. A network of regional wholesale and logistical centers, and small and
medium grain storages may also be established in major cereal-producing regions. The would-
be modern transport network will ensure timely and safe transport of frequent shipments
(including perishable products and livestock). This will result in ensuring compliance of 90% of
slaughtering with relevant veterinary and sanitary standards, establishing 5 “green markets”
and 50 “farmer stores” in Baku and other large cities, and reaching 30% ratio of general storage
volume to the volume of fruit and vegetable production.

Required investment

The need of each region for storages, cold storages, as well as packaging and logistical
centers will be assessed, an action plan will be implemented and the size of necessary
investments will be defined.

Expected risks

Lack of interest by producers in the services offered by storage, cold storage, packaging and
logistical centers may be a key risk.

7.6.2. Priority 6.2. Improve the regulatory system of the agricultural market

Rationale

State regulation of agricultural production including government support measures are

conventionally focused on the first links of the value chain. Currently, the strategic challenges
with regard to sustainable agricultural development include ensuring effective regulation of the
access of agricultural producers to markets under favorable conditions. In case the market
prices of agricultural products are not affordable, a need arises to make procurement
interventions, protect the domestic market against unfair trade practices, and enhance the
effectiveness of the institutional system to address other related issues.

Action items

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Action 6.2.1. Improve the legal and regulatory framework for trade registration of
agricultural products in the domestic market

The legal and regulatory framework for trade registration of agricultural products will be
reviewed, and the possibility of applying new supervisory facilities will be considered.

Action 6.2.2: Improve agricultural and food supply

The agricultural and food supply system will be developed in two ways. In the first place, in
accordance with the functions of the “Procurement and Supply of Food Products” OJSC, a
centralized supply system will be established to meet public needs, and mechanisms will be
created to coordinate these activities with agricultural producers based on laws and
regulations. In case the market conditions are unfavorable for agricultural producers, the
feasibility of establishing focused mechanisms will be looked into to make interventions in
procurements as part of the development measures targeted at developing the food
procurement system.

Action 6.2.3: Establish the system of interventions in case of unfavorable market

conditions

The system of market interventions will be devised in order to achieve the optimum level of
agricultural prices to ensure profitability for producers, and make food products available to
consumers. In this regard, relevant best practices will be analyzed to consider the possibility
of establishing intervention tools, and information systems related to prices and consumer
costs.

In addition, there will be considered applying mechanisms for stimulating certain imports from
time to time in case it shows a need for providing food to the population under favorable
conditions.

Action 6.2.4: Establish an effective system to effectively regulate imports in order to

protect the domestic agricultural and food market against unfair trade practices

The customs tariff and non-tariff regulation system will be improved to protect the domestic
market from undesired impacts with the focus on the timely imposing of seasonal tariffs on
agricultural imports, and the application of clear-cut procedures geared towards the tariff
escalation policy.

In case of necessity, agricultural imports will be regulated in conformity with quality

requirements including controls on genetically modified organisms (GMOs).

Expected result and indicators

As a result of the actions, the agricultural market regulation system will be improved, and all
agricultural producers will gain easy access to markets. In addition, the difference between the
farm-gate price and the final consumer price will be 50% maximum.

Required investment

Under the priority, an action plan will be laid out for each region and the size of required
investments will be defined.

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Expected risks

Monopolistic forces may have a negative impact on access to markets.

7.6.3. Priority 6.3. Promote and support agricultural and industrial exports

Rationale

Under this priority, Azerbaijan will develop specific strategies to diversify the export market. In
this regard, capturing long and short-term export opportunities for key crops and products
based on the UN Comtrade data will be the major point of focus, and the most suitable markets
in terms of geographical coverage will be chosen.

In choosing target market for short-term two neighboring countries seem to provide more real
and attractive opportunities: first, the potential to capture more of the Russian market; and
second, the possibility of increased trade with Iran following the removal of trade sanctions.
There are real opportunities for maintaining a stronger presence in the both markets by
increasing agricultural production and yield. The key exports with the short-term export
potential for the markets are discussed in detail in the Second Objective of the Strategic
Roadmap.

Second part of the export strategy focuses on identifying target markets and potential products
for those markets proximate to the country (Exhibit 19).

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 Exhibit 19. Potential export markets and key exports

Primary priorities Secondary priorities

Chocolate and cocoa preps Russia

Spirits obtained from grape wine Chocolate and cocoa preps
Russia
Hazelnuts with shell Spirits obtained from grape wine

Hazelnuts with shell

EU2

Hazelnuts with shell

Tomatoes

Ukraine Black tea Cherries

Central Asian Ex-CIS1
Sunflower Ukraine
seed/safflower oil Sunflower
Chocolate and Tomatoes seed/safflower oil
cocoa preps Non-liquid
Black tea
Fruit juice margarine
Sunflower seed/safflower oil
Sugar cane, refined Chocolate and
Non-liquid margarine
cocoa preps
Central
Asian Chocolate and cocoa preps Cherries
Ex-CIS1 Cherries

Azerbaijan

Hazelnuts with shell

Cherries

EU2 Sunflower seed/safflower oil Iran

Chocolate and cocoa preps

Fruit juice
Sugar cane, refined
Gulf3

Chocolate and
Gulf3 Chocolate and cocoa preps cocoa preps

1 Selected Central Asian, former Commonwealth of Independent States countries: Kazakhstan, Turkmenistan, Uzbekistan
2 Austria, Belgium, Denmark, France, Germany, Greece, Hungary, Italy, Netherlands, Poland, Portugal, Spain and UK
3 Saudi Arabia, UAE, Bahrain, Kuwait, Qatar

Russia. There is a potential for the increase of tomatoes, cucumbers and gherkins exports,
which are put under the “Not identified in any source” category by the UN(classified as more
than USD 40 million based on the value of imports from Azerbaijan and from the region
overall).. Spirits obtained from grape wine are also among the items with major upside
potential, while shelled hazelnuts, fresh cherries, and fresh peaches are classified as moderate
potential exports (more than USD 25 million potential).

Central Asian countries. Azerbaijan already supplies 75 percent of this region's imports of
cane/beet sugar. Fresh cherries, sunflower seed/safflower oil and margarine, represent
additional major potential export opportunities. Fresh peaches and fresh fruits, which are put
by the UN under the “not identified in any source” category represent moderate potential
exports.

European Union. The European Union is a gigantic market for agricultural imports. In 2014
the European Union spent a total of USD 1.48 billion in the region—but just USD 37 million
went to Azerbaijan (including top 20 products exported by Azerbaijan). Given this volume, the
European Union represents a largely untapped export market for Azerbaijan. Shelled
hazelnuts, fresh cherries, sunflower seed/safflower oil and single fruit/vegetable juice all
represent major export opportunities, while fresh fruits , cane/beet sugar which are put by the
UN under the “not identified in any source” category are moderate export opportunities.

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Ukraine. Ukraine imported USD 44 million in fresh tomatoes from the region in 2014—but
none from Azerbaijan. Fresh tomatoes thus represent the biggest export opportunity with
Ukraine. Black tea in packages less than three kilograms and spirits obtained from grape wine
also represent opportunities with moderate upside potential.

In addition to identifying major export markets, incentivizing export of economically more

favorable products with higher competitive potential in international markets is one of the major
tasks. In this regard, in line with the products indicated in this priority, export of the export-
oriented products described in priority 2.2 will also be incentivized..

Action items

Action 6.3.1: Provide support for geographical expansion of the export markets, and
maintaining a stronger presence in the traditional export markets

Regular marketing investigations will be conducted in the existing and prospective export
markets for agricultural production and processing, proposals will be made, and the producers
will be kept updated on the results of the investigations.

Action 6.3.2: Promote the “Made in Azerbaijan” branding

A national marketing campaign will be launched in target international markets, building

national products as a brand. First, budget for the marketing campaign will be secured,
providing business case for the investment. Second, campaign strategy and execution plan
will be designed by using the services of international marketing companies, based on national
priorities in different value chains. Then, it will execute marketing campaign in target markets
and track regular indicators for the impact, and optimize marketing spend mix according to the
initial results.

Branding and promotion efforts will also capitalize on a country’s attributes and characteristics
to emphasize its distinctive products in the marketplace. In this context, launching a national
marketing campaign in targeted international markets will be considered to brand selected
Azerbaijan products.

A council responsible for spearheading advertizing-promotion campaigns with the overall focus
on target markets will be established. The council will identify target regions and countries for
selected products, and launch focused advertizing measures promoting these products.
Characteristic features of Azerbaijani products will be advertized and promoted in news
bulletins, and websites. “Azerbaijan Airlines” OJSC will treat passengers as well as foreign
visitors with Azerbaijani products in trade conferences, international fairs and other events.

In addition, efforts will be continued to create an internet portal containing information about
local products and producers in order to promote the “Made in Azerbaijan” brand across the
world. Producers of the products will launch promotion campaigns to post such information in
the portal, and disseminate information about the portal through mass media.

Action 6.3.3: Keep farmers informed about potential export markets

Farmers will be informed about the potential export markets which will be identified based on
marketing investigations. To make this happen, the farmers throughout the regions will receive

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training and attend workshops, and will be provided with reference books, information bulletins,
and other hand-outs.

Action 6.3.4: Identify potential exporter-farmers

Based on the results of the workshops and awareness campaigns, potential exporter-farmers
with export potential who possess skills and knowledge in relevant exports (for example 200
farmers) will be identified.

Action 6.3.5: Improve the certification system, and ensure compliance with international
standards

The certification system will be improved in order to ensure that the exports comply with the
requirements of international markets, and farmers will be supported in obtaining international
certificates.

Action 6.3.6: Provide support for obtaining export documents

Building on the previous actions, support mechanisms will be established to help farmers
obtain relevant export documents. A flexible mechanism will be established to effectively solve
the issues with export documentation.

Expected results and indicators

As a result of these measures, agricultural producers will acquire the habit of producing export-
oriented products, which will lead to the expansion of agricultural export geography, increase
agricultural exports, achieve the real direct GDP impact worth AZN 35 million, and indirect
impact of AZN 55 million (a total of AZN 90 million) in 2020. This priority is expected to bring
in 5060 direct and indirect jobs. About 200 farmers will have specialized in agricultural exports
by 2020.

Required investment

Within this priority, the amount of the required investment is estimated at AZN 40 million.

Expected risks

Escalating tensions both in the domestic and international geopolitical situation may obstruct
the achievement of the results.

7.7. Strategic objective 7. Environmental protection, sustainable utilization of natural

resources, and management of impact by natural factors on agriculture

Agriculture depends on natural factors, that is, it suffers significant damage from floods, hail,
drought, frost, mass spread of pests and diseases etc. every year. To top that off, poorly
organized agricultural activities exert a serious impact on land and water resources, and
climate. For example, according to official statistical data of 2015, the total volume of
greenhouse gas emissions was 3.1 million tons of CO2 in non-energy industries, while it was
7.2 million tons of CO2in agriculture. Also, the improper application of good agricultural
practices, overdosing of chemicals, inefficient use of irrigation water, lack of fully-functional
collector-drainage networks, and other factors contributed to land degradation. Formation of

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deserts, land salination, erosion, lack of land layers suitable for cultivation, shrinking natural
grass layers, improper use of winter and summer pastures, failure to implement necessary
measures have caused most of the pastures to degrade.

Actions to be taken in this field over the next years will be based on 4 priorities. In the first
place, proper mechanisms to mitigate the negative impact of climate changesand other factors
on agriculture will be established, and an action plan for adequate adaptation will be
developed.

As part of the priority actions to improve environmental protection mechanisms, adequate

indicators to be achieved will be provided in order to ensure compliance with environmental
standards in the agricultural sector, greenhouse gas emissions will be reduced based on the
results of evaluations, protective forest belts will be established, and other relevant actions will
be taken.

As part of the measures to improve mechanisms for sustainable use of land and water
resources, targeted mechanisms to modify land designation will be established, pasture
management and irrigation lands will be improved, land salination will be prevented, and other
problems impeding sustainable development of the agricultural sector will be resolved.

The last priority of the strategic objective will foster the development of eco-agriculture.

7.7.1. Priority impact of climate

Priority 7.1. Establish mechanisms for mitigating the negative changes and other natural
factors

Rationale

Climate changes are characterized by gradual average temperature increases (the global
average annual temperature is expected to rise by 40 C in 2080), uneven distribution of
precipitation5, 1,2-1,6-time increase in the physical evaporation of water and lands, changing
wind intensity and direction, increasing storms and hurricanes, droughts, diminishing number
of forests and shrubberies, and other factors. Crop fields and pastures may suffer extensive
damage from lack of humidity due to the falling level of atmospheric precipitation. Official
statistical data indicate that more than 80% of the agricultural crops are grown in irrigation
lands in Azerbaijan. Hence, agricultural producers may face serious challenges due to
shrinking water resources, and climate changes.

It is important to increase effectiveness of the field and pasture management, and improve the
legal and regulatory framework in order to reduce the damage to agricultural producers from
climate changes and ensure maximum adaptation of agricultural production to such changes.
To make this happen, an action plan will be developed to make an impact assessment of
climate changes, and “large-scale smart agriculture” will be promoted. More efforts will be put
in growing high-yield plant species that are resistant to biotic and a biotic stress, and an
advance agri-meteorological system for agricultural production will be formed. This system will
be designed to establish cooperation with farmers, insurance companies, and other think tanks

5Report on Climate Changes, Water and Food Security by the UN FAO, 2011

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operating in the agricultural sector. The application of “large-scale smart agriculture” will be
stimulated to ensure sustainable development of the agricultural sector, and relevant actions
will be taken to mitigate the negative impact of climate changes and other natural factors on
agricultural production.

Action items

Action 7.1.1: Assess the impact of climate changes on agricultural production, and
develop an adequate adaptation plan

Impact of climate changes on agriculture will be assessed, vulnerability levels will be defined,
and an adequate adaptation and mitigation plan will be developed to minimize potential losses.
The regions that are most affected by climate changes will be identified, and the volume of
investments necessary for covering initial damages caused by such changes will be defined.

Action 7.1.2: Improve the agri-meteorological database

More efforts will be put into expanding the use of agri-meteorological data in agriculture,
preparing a summary of bulletins, disseminating agri-meteorological comments and
summaries through communication media, examining pastures and crop fields, and organizing
expeditions to study the agri-hydrological properties of soils.Agri-meteorological methods will
be improved, and efforts to observe soil moisture ad evaporation in the crop fields and pastures
will be increased. This information will be made available to agribusinesses.

Action 7.1.3: Look into the feasibility of building an intervention and protection system
against adverse weather conditions and hail for agricultural purposes

International practice suggests that agricultural interventions are made in order to deal with
potential consequences of adverse weather conditions including hailing, reducing or
increasing the precipitation based on the interests of communities, forestry departments, and
utility companies etc. Based on the needs of the country, activities to establish a proper
intervention and protection system for agricultural purposes will be carried out.

Action 7.1.4: Strengthen coordination between the competent authorities, and improve
the legal and regulatory framework

The existing legal and regulatory framework will be improved taking into account the problems
that may arise when taking actions. Furthermore, the possibility of establishing an agency
responsible for coordinating the activities of the relevant authorities will be considered, and the
impact of climate changes on agricultural production will be mitigated.

Expected results and indicators

As a result of these actions, an impact assessment of climate changes will be made; an

adequate adaptation plan to mitigate the negative impact of such changes will be laid out,
“large-scale smart agriculture” will be promoted, high-yield plant species that are resistant to
biotic and abiotic stress will be grown, and an advance agri-meteorological system for
agricultural production will be formed.

Required investment

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Given the scope of action within this priority, the amount of the required investment is
estimated at AZN 7 million.

Expected risks

Lack of highly skilled specialists in assessing the impact of climate changes in terms of
potential risks, and providing funds for the intervention and protection system may be a
potential risk.

7.7.2. Priority 7.2. Improve environmental protection mechanisms in agriculture

Rationale

With a focus on environmental protection, studies will be conducted to reduce greenhouse gas
emissions from crop production and cattle breeding, apply waste-free technologies in agri-
processing, and minimize environmental impact. Delays in the implementation of control
measures in limiting the application of harmful chemicals may cause grave environmental
concerns with regard to ensuring compliance of agricultural production with environmental
standards. These priority actions will be targeted at establishing protective forest belts, and
growing cost-effective plant species (almonds, pistachios, pomegranates, mulberries, figs,
apricots etc.) for landscaping. At the same time, continued efforts to protect agricultural-
biological diversity and proposed alternatives for establishing gene banks will help achieve the
goal. This also shows a need for use of alternative energy in providing heat to greenhouses.

Action items

Action 7.2.1: Establish indicators and make assessments of agricultural compliance

with environmental standards

The possibility of making an integrated assessment of agricultural compliance with

environmental standards will be considered. If it is decided to make such assessments, the
need for promoting the application of waste-free technologies in agriculture, limiting the use of
toxic chemicals in agricultural production, augmenting state quality control measures through
all periods of pesticide application, and relying heavily on biological control measures against
pest and weeds will be assessed and proposals will be prepared.

Action 7.2.2: Reduce CO2 emissions in the agricultural sector

To reduce greenhouse gas emissions in crop production and cattle breeding, the feasibility of
promoting the use of methane produced by animal manure will be considered as an alternative
energy source. All cattle breeding activities will be brought in line with greenhouse gas
emission reduction measures.

Action 7.2.3: Establish protective forest belts

Establishing multi-layered protective forest belts along the crop fields will be supported, and
the respective action plan will be developed by 2025. It will involve international donors in
establishing protective forest, field and water belts.

Action 7.2.4: Adopt an economic approach to environmental protection

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Use of cost-effective plant species (almonds, pistachios, pomegranates, mulberries, figs,
apricots etc.) will be supported for landscaping. The existing terraces will be planted with
various fruit trees and perennials in order to prevent land erosion in foothills and highlands.
Cost-effective plants will be grown in the non-agricultural lands for landscaping purposes with
an overall focus on expanding the application of dry farming in the areas that are highly
sensitive to exogenous processes. On top of that, the impact of extensive use of plastic bags
on plants, animals, and land and water resources will be assessed, and a specific action plan
to abate pollution be laid out.

Action 7.2.5: Protect agricultural-biological diversity

Action will be taken to protect agricultural bio-diversity, and to put more efforts in establishing
gene banks. Work to collect, study, and protect genetic resources of local plants and animals
will be expanded.

Action 7.2.6: Evaluate the transition to “green economy” in agriculture, and use
alternative energy sources in providing heat to greenhouses

The transition process to “green economy” in agriculture will be evaluated, and the application
of organic compost in greenhouses will be promoted. The possibility of using solar collectors,
biogases and thermal water resources will be investigated for providing heat to greenhouses.

Expected results and indicators

In case the result of the feasibility study is positive, agricultural compliance with environmental
standards will be assessed, the application of waste-free technologies in agricultural
production will be expanded, the use of toxic chemicals by agricultural producers will be limited,
CO2 emissions in crop production and cattle breeding will be reduced, protective forest belts
along the crop fields will be established, cost-effective plant species for landscaping will be
grown, contamination caused by plastic bags abated and an action plan to protect agricultural
and biological diversity will be laid out. Totally, the application of toxic chemicals will be reduced
by 30 %, carbon emissions will be reduced in plant growing and animal breeding, while the
use of cost-effective plants will be increased by 30% and use of alternative energy sources in
greenhouse heat supply will be increased by 20%.

Required investment

The amount of the required investment will be based on the result of the feasibility study.

Expected risks

The result of the feasibility study will decide if the priority action will be taken. If the result is
positive, the potential risks will include the willingness of producers to make more money
without complying with environmental standards, challenges in obtaining alternatives for toxic
chemicals, unexpected gaps in the operation of the state control agency, increase in use of
plastic bags and lack of interest in the use of alternative energy sources.

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7.7.3. Priority 7.3. Improve mechanisms of sustainable use of agricultural lands
and water resources

Rationale

It is important that a package of relevant proposals be developed to increase efficient utilization

of agricultural lands, reclaim lands exposed to salination, and preserve and enrich the
vegetation cover of pastures and haylands. There is a need for regular and thorough
monitoring of land resources, comprehensive mapping of the chemical structure of crop fields,
stimulation of technologies and methods designed to reduce land degradation while expanding
the application of farming practices. It is essential to apply and improvement and recultivation
practices in order to restore and reclaim salinated, bogged and contaminated lands.

To ensure sustainable use of land and water resources is a key issue to be addressed.
Azerbaijan lags behind the developed countries in terms of freshwater resources, i.e. per capita
freshwater reserve is less than 1000 cubic meters during the years of drought.

The mineralization level of the Kura and Aras rivers has gone up in recent years due to
contamination with heavy metals and other toxic substances. Most of the rivers across the
country have suffered a dramatic drop as a result of anthropogenic activities. They dry out in
the summer, but get restored to cause raging floods and mudflow during spring and winter
months. The irrigation channels, collector-drainage networks, and hydro-technical facilities
which were constructed back in the 1950s and 1960s, are physically corroded and fatigued
now.

According to the Amelioration and Water Management Office of the Republic of Azerbaijan,
currently, about 6430 million cubic meters of water is consumed, and used for irrigation in
Azerbaijan.

In 2014, one third of the water was lost before it reached the consumers. Most of the water
losses come from agricultural lands. The truth of the matter is that agriculture accounts for 89
% of the total water supply or one fourth of the water losses. Inefficiency of the unlined irrigation
channels (especially, in rural areas) is the main cause of the water losses.

To increase water use efficiency, investments will be made in the reconstruction of old irrigation
pipes with expired useful life (the pipes which cause huge water losses during water passage);
clean the unlined channels every 2-3 years; invest in the irrigation channels instead of unlined
ones, and lay out a development plan to avoid over-irrigation of fields in rural areas.

According to the Amelioration and Water Management Office, huge investments have been
made in the nationwide irrigation system over the last years to make considerable
improvements in the supply of material and technical resources, construct or reconstruct
thousands of kilometers of irrigation channels and collector-drainage networks, provide water
to over 266 thousand hectares of irrigation lands, improve over 218 thousand hectares of
agricultural lands, reclaim about 43 thousand of irrigation lands for agricultural production, drill
1493 sub-artesian wells, and embank a total of 1000 kilometers of soil along the Kura, the
Aras, and other mountain rivers.

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It should be noted that some of the agricultural irrigation lands are affected by salination.
According to the report by the Amelioration and Water Management Office (January 01, 2016),
16.8 %, 8.4% and 3.3 % of the irrigation lands are affected by low, moderate and high
salination respectively.

Exhibit20. Salination level of irrigation lands in Azerbaijan (Ha)

Saline
Low salination
Moderate salination
High salination

Source: Amelioration and Water Management Office

Currently, 495166 hectares of irrigation lands in Azerbaijan need to be meliorated. To make

this happen, there is a need to investigate the possibility of taking large-scale actions to
improve condition of the land and prevent its re-salination.

To ensure efficient use of water resources, the advanced irrigation technologies should be
applied extensively. In this regard, it is intended to conduct a feasibility study to expand the
application of efficient irrigation systems and equipment (such as drip irrigation, sprinkling
etc.),reinforce the irrigation and drainage network, conduct monitoring of water resources,
construct new irrigation channels and reservoirs, ensure effective management of floodwater
in mountain rivers, minimize the destructive impact on the environment and rural areas,
improve the irrigation network, and use the drainage system in the saline areas. Land
improvement measures will be matched with the perspective development plans with the
increased focus on the use of rainwater in drought-stricken lands.

To achieve the priority goal of improving the mechanisms for ensuring efficient use of
agricultural lands, the following actions will be analyzed economically, and if the result of the
analysis is positive, they will be taken in a way as mentioned in the roadmap.

Action items

Action 7.3.1: Establish the mechanism of conducting environmental impact assessment

with regard to changed land designation

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The structural changes made to agricultural production have created the need for land
designation. Expanding the application of the intensive farm model will allow reducing the need
for massive grazing, and offer the opportunity to turn pastures into crop fields. However, factors
like environmental impact and sustainable use of land resources should be considered
changing the land designation. To make this happen, legal mechanisms will be established
based on the results of the environmental impact assessment.

Action 7.3.2: Take action to ensure efficient use of land resources, and re-cultivate
lands

Complex measures will be taken to reclaim low-fertility or idle lands for agricultural production.
In the first place, actions for land improvement and amelioration will be continued, and a
program will be implemented to identify land salinity levels and reclaim barren lands. On top
of that, it will consider the possibility of establishing greenhouses based on soilless
technologies, and set forth respective proposals, and develop programs designed to fertilize
lands with high salinity levels (for example, application of gypsum, use of special seeds etc.).

Action 7.3.3: Perform chemical soil tests

Agri-chemical laboratories will be modernized and soil tests will be performed. To make this
happen, agri-chemical land maps providing a detailed description of the agricultural lands will
be prepared. Based on the maps, fertilizer use will be promoted in line with the yield level of
soils, and plant requirements.

Action 7.3.4: Improve pasture management

An inventory of lands will made, and more intensive actions will be taken to enrich the
vegetation cover of pastures through the application of advanced technologies and satellite
images. Considering the per-hectare yield and types of pastures and haylands, as well as the
degree of difficulty in the use of pastures due to soil structure, action will be taken to determine
specific use fees per hectare, and establish funds to improve pastures. It will also build up
simple pasture and hayland stocks and establish cultural pastures in order to enrich and
preserve the vegetation cover of all pastures.

Action 7.3.5: Reduce water losses to consumers

Competitive authorities will be regularly tasked with cleaning unlined irrigation channels.
Investments will be made in the reconstruction of irrigation channels in order reduce water
losses. An investment plan will be developed to prevent over-irrigation in rural areas.

Action 7.3.6: Ameliorate and prevent re-salination of irrigation lands

Action will be taken to construct or reconstruct collector-drainage networks. It will increase

efficiency of the actions and implement innovative projects to improve saline lands.

Action 7.3.7: Provide information based on the evaluation of water resources

T Monitoring of water resources will be conducted for proper evaluation and management. A
water use plan will be prepared. Current situation of waste water treatment will be studied and
this practice will be expanded. Timely provision of hydro-meteorological data will be ensured

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in a manner as defined by the agricultural departments in order to efficiently use the irrigation
lands and water resources.

Action 7.3.8: Improve water use in drought-affected regions

Action will be taken to construct new irrigation channels and reservoirs, and maximize efforts
to ensure efficient use of rainwater in the drought-affected regions. New water reservoirs and
water catchments will be constructed to collect rainwater and regulate water flow. More efforts
will be put in applying new technologies in order to use non-tradition water, i.e. seawater,
collector-drainage water, industrial and household waste etc. for irrigation purposes.

Action 7.3.9: Mountain river management

Action will be taken to effectively manage floodwater in the mountain rivers, and minimize its
impact on the environment. Considering the importance of expanding the irrigation lands over
time, artificial lakes (water catchments) will be created in order to ensure efficient use of
floodwater and mudflow.

Expected results and indicators

If the results of the feasibility studies are acceptable, the irrigation lands will be improved, the
idle lands will be reclaimed for agricultural production, crop rotation will be expanded,
mechanisms for pasture management will be established, the vegetation cover of the pastures
will be enriched, regular and thorough monitoring of land resources will be conducted, a large
database of land resources will be created, agri-chemical maps providing a detailed
description of the chemical structure of crop fields will be developed, and appropriate methods
and technologies will be applied to mitigate land degradation. In addition, the use of efficient
irrigation systems and equipment in the crop fields will be expanded. Furthermore, regular
quarterly monitoring of water resources will be conducted to effectively manage flood water in
the mountain rivers, minimize negative impacts on the environment and rural areas, and action
will be taken to use rainwater in the drought-affected regions. Generally, crop rotation will be
increased by 15%, the vegetation cover of the pastures will be enriched by 25%, and 30% of
the irrigation lands will be improved.

Required investment

If as a result of feasibility study realization of this priority is ascertained, he amount of the

investment required to take action will be defined based on the results of the feasibility study.

Expected risks

Potential risks include farmers’ unwillingness to apply crop rotation, lack of funds to intensify
the measures against land salination, insufficiency of laboratories, and shortage of skilled
labor.

7.7.4. Priority 7.4. Development of eco-agriculture

Rationale

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According to the International Federation of Organic Agriculture Movements (IFOAM), about
2.3 million farmers are currently engaged in organic agriculture in 172 countries across the
world.

Azerbaijan laid the groundwork for eco-agriculture in the 1990s. The Law on Eco-Agriculture
of the Republic of Azerbaijan, which was adopted on July 13, 2008, provided the legal and
regulatory framework for this field of agricultural activity. Eco-agriculture offers opportunities to
effectively address the social, economic, and environmental concerns. The above-mentioned
issues make the development of eco-agriculture a priority. These priority actions will be taken
to coordinate eco-agricultural activities and implement pilot projects for organic agricultural
production. Furthermore, social and economic incentives for the development of eco-
agriculture will be expanded.

Actions will be taken to implement state programs for the development of eco-agriculture, and
organize agricultural fairs for agricultural producers.

Action items

Action 7.4.1: Improve the legal framework for eco-agricultural production and look into
the possibility of developing state programs for that purpose

The issues related to the improvement and harmonization of the legal framework for the
development of eco-agriculture in line with international laws and regulations will be
addressed. Specific actions will be taken to establish mechanisms of certifying organic
agricultural products. A state program for the development of eco-agriculture will be developed
in order to scale up organic crop or cattle production.

Action 7.4.2: Promote eco-products

Farmer training and education programs will be developed for eco-agricultural production.
Specialists will be trained in eco-agriculture, and this training will incorporate some of the
important elements of the agricultural training. Local and international scientific conferences
will be organized to evaluate the application of research findings in eco-agricultural production,
as well as training and education courses, and permanent vocational training centers will be
established to train specialists in the relevant field of work. Extension brochures and other
related materials on eco-agricultural production will be printed to raise farmer awareness on
its advantages.

Action 7.4.3: Establish eco-agricultural farms

The possibility of establishing farms specializing in eco-agriculture will be considered. If the

results of the studies allow, actions will betaken to produce and apply inorganic fertilizers which
are fundamental to eco-agriculture. Moreover, incentives will be set for expanding the fields
where crops are grown organically. Eco-agriculture will be promoted through the supply of
agricultural inputs like seeds and planting materials. Pilot projects designed for eco-agricultural
development will be implemented.

Action 7.4.4: Develop eco-agricultural market

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Support will be provided for the development of the eco-agricultural market. In addition, eco-
agricultural fairs for consumers will be organized, “pilot markets” or “pilot bazaars” will be
developed for eco-agricultural products, focused programs will be implemented to increase
consumer interest in such products, more efforts will be put in promoting the achievements
made in eco-agriculture through national and international trade shows, and eco-agricultural
exports will be supported.

Expected results and indicators

To achieve this priority objective, eco-agricultural activities will be coordinated through a

dedicated system and pilot projects will be implemented to organize such activities. On top of
that, eco-agricultural fairs will be organized in Baku and other regions across the country.
Developing a state program for eco-agricultural production will be considered. Total number of
the farmers engaged in eco-agricultural production will be increased by 50% and eco-
agricultural production will be doubled.

Required investment

Given the scope of the actions, the amount of the required investment is estimated at AZN 15
million.

Expected risks

Lack of farmer interest in eco-agriculture, lingering process of establishing the rules,

insufficiency of local human resources, and loopholes in the certification process are
considered key risks.

7.8. Strategic objective 8. Enhance state regulation of agriculture, and

improve business environment

The Presidential Decree on the Acceleration of Institutional Reforms and Improvement of

Agricultural Management, No 152, dated April 16, 2014, lays the groundwork for identifying
new challenges with regard to top priorities in agriculture, improving the institutional structure
and agricultural management, stimulating the innovations, and transitioning to a new phase in
terms of quality. Improving the state regulation of agriculture in this phase is preconditioned
by continued integrated agricultural measures.

On top of improving agricultural management, it is important to improve state support policy

for agricultural producers in line with development objectives, and harmonize these
improvements with WTO requirements, and new circumstances. The first of the 5 priorities to
achieve this strategic objective is designed to continue actions in order to create enabling
agribusiness environment. In this respect, the licensing, authorization and certification system
will be improved, unfair competition will be prevented, and anti-monopoly control will be
enchanced. The next priority action will help establish e-agriculture, and address a number of
issues concerning the improvement of the registration and statistical system. To make this
happen, the Land Cadastre and Registration System will be designed, the E-Agriculture
Information System will be completed, the subsidization system will be enabled to operate
through these facilities, and further actions will be taken to achieve this objective.

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By achieving the priority objective of building the capacity of authorities, it will help develop an
action plan for the Ministry of Agriculture and its subordinates, and strengthen the potential of
the regional offices of the Ministry.

The other priority is targeted at improving the state support policy for agricultural producers in
line with development objectives. The last priority of the strategic objective is aimed at
monitoring and evaluating the results of the agricultural policy, and developing respective
reposts, and improving the performance of the Farm Data Monitoring System.

7.8.1. Priority 8.1. Take action to create enabling agribusiness environment

Rationale

Integrated measures are taken to expand businesses, and enhance competitiveness and
create more enabling business and investment environment in the Republic of Azerbaijan.
Based on the Law on the Suspension of Inspections in Businesses, dated October 20, 2015,
all inspections of businesses had been suspended for 2 years since November 01, 2015
(except for tax inspections and the inspection of cases which may pose a threat to human
health and life, state security, and economic interests). Based on the Presidential Decree No
920, dated may 21, 2016, the State Customs Committee has developed a relevant
infrastructure for the application of “Green Corridor” and other clearance systems. As of August
01, 2016, businesses can use the ‘Green Corridor” and other clearance systems. The
Presidential Decree in the Approval of Tax Reforms for 2016 and Improvement of Tax
Administration, No 2257, dated August 04, 2016, is a critical step towards enhancing mutual
confidence and transparency between the taxpayers and tax authorities, and creating enabling
environment for businesses.

However, this shows a need for increasing efforts to prevent unfair competition in the
agricultural and food market, and procurement in order to create enabling agribusiness and
trade environment for agricultural producers.

It is also important to continue improvements in increasing the anti-monopoly control, licensing

and authorization of agribusinesses and agricultural producers. No doubt, the “Family
Business Support Centers” (FBSC), which were established based on the Presidential Decree
No 1047, dated September 23, 2016, will significantly contribute to the process. These centers
will be organized based on the “single point of contact’ principle for product certification. To
achieve the objective, these priority actions will also include making changes and modifications
to the taxation system in order to improve the agricultural investment environment, and
promoting foreign direct investments in the agribusiness sector,

Action items

Action 8.1.1: Improve the licensing, authorization and certification system in agriculture

Proposals will be set forth to analyze and simplify administrative procedures for the production,
processing, storage, transport and trading of agricultural products, and the feasibility of
creating an integrated e-database containing all information about such procedures will be
investigated. Efforts to improve and simplify the licensing, authorization and certification
system in agriculture will be continued, “Family Business Support Centers” (FBSC) will be

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organized based on the “single point of contact’ principle for product certification, and outreach
campaigns will be launched to ensure that small and medium businesses make maximum use
of these opportunities.

Action 8.1.2: Prevent unfair competition trends and increase anti-monopoly controls

Regular monitoring agricultural and agribusiness competitiveness will be conducted and

reports will be prepared thereon. Anti-monopoly controls will also be increased.

Action 8.1.3: Monitor access of businesses to product market and availability of inputs,
and develop reports

Monitoring access of agribusinesses to markets will be conducted and reports will be

developed on availability of inputs.

Action 8.1.4: Establish a risk-based inspection system

Based on the study of international best practice, the possibility of establishing a risk-based
inspection system embracing all integrated inspections that are designed to take precautions
will be considered, potential risks which may pose a threat to human health and life, state
security, and economic interests will be mitigated and prevented.

Expected results and indicators

All respective laws and regulations in this area will be improved, unfair competition trends in
the agricultural and food market will be prevented, anti-monopoly control will be increased, the
licensing, authorization and certification system in agriculture will be improved and simplified
based on the “single point of contact’ principle for product certification, and foreign direct
investments in the agribusiness sector will be increased by creating an enabling environment.

Required investment

In addition to the funds allocated from the state budget for the actions under this priority, the
amount of the required investment is estimated at AZN 9million.

Expected risks

Potential risks include delays in the improvement of laws and regulations, prevention of unfair
competition trends, and other cases that may cause the unwillingness of foreign investors to
make investment in the sector.

7.8.2. Priority 8.2. Establish e-agriculture, and improve the registration and
statistical system

Rationale

It is important to design an “e-agricultural” information system in order to increase efficiency

and transparency in modern management. Currently, Azerbaijan is taking practical and critical
steps towards establishing the Subsidy and Policy Information System, which is the
combination of the land identification system, farmer registry, business analyses and reporting,
document management, application processing, payment permit, and risk analysis modules.

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The Land identification System, which is based on the identification of the current status of
agricultural lands, type of planting and cultural crops and geographical information systems,
the Farm Registry, which is designed to register agricultural producers, and the Application
Processing Modules, which register and analyze the applications filed for subsidization have
already been established and tested.

Azerbaijan has already started to establish the Land Cadastre System, which will contain
cadastre indicators of lands divided among the producers, and allow eliminate discrepancies
between the actual and cadastre indicators. This system will improve the state mechanism of
land management, increase efficiency of state controls, stimulate the growth of land markets,
ensure transparency of operations, and act as an information base for reclaiming or unlock
non-agricultural lands for agricultural production. Regulating the land market through this
system will help discover and use hectares of unused non-agricultural lands. To make it
happen, it is important to complete the proposed activities as planned. Although there are
facilities built in pastures and fields, they are still registered as designated pastures in old
documentation. Therefore, the proposed activities should be carried out only when all
necessary arrangements are made.

It is particularly important to identify the problems facing agricultural producers, improve the
state control, registration and statistical systems in order to ensure effectiveness of the
implemented measures both in crop production and animal husbandry, and take action in order
to identify and register cattle, sheep, and poultry. Given the above, a raft of actions will be
taken to provide training in order to promote recordkeeping among agricultural producers,
conduct complete registration of crop fields, as well as cattle, sheep, and poultry, and the
registration system for summer pastures will be updated and upgraded.

Action items

Action 8.2.1: Establish Land Cadastre System

Azerbaijan is planning on e-cadastre registration of all lands across the country, preparing
digital land maps, and creating a perfect land bank and automated cadastre information
system. The Land Cadastre System will play a significant role in developing the National Space
Information Infrastructure in line with best practices. The system will ensure development of
the geo-space infrastructure, and establish efficient and transparent linkages between the
government authorities and businesses. Currently, all lands, pastures and haylands are
studied to draw topographic maps in order to establish the Land Cadastre System, which will,
at the same time, eliminate discrepancies between documented land indicators and the actual
ones. Efforts will be made to establish the Geographical Information System (GIS) of degraded
lands.

Action 8.2.2: Complete the “E-Agriculture” Information System, and manage

subsidization through the system

After the completion of the E-Cadastre Registration System, it will be integrated into the “E-
Agriculture” Information System based on the ownership of agricultural lands, and
management of the subsidization process will be carried out through this system.

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Action 8.2.3: Consider the possibility of establishing the legal and regulatory framework
for the registration of agricultural producers through the “E-Agriculture” Information
System

The feasibility of establishing the legal and regulatory framework for the registration of
agricultural producers through the “E-Agriculture” Information System will be looked into in
order to facilitate services provided to the producers.

Action 8.2.4: Develop statistical reports on the possible involvement of producers in

contract farming and farmer unions

This Strategic Roadmap will provide for the development of statistical reports on the possible
involvement of producers in contract farming and farmer unions in order to assess the impact
of actions outlined in Priority 2.3 with regard to fostering farmer partnerships in agriculture.

Action 8.2.5: Develop statistical reports and examine backyard crops

Backyard crops such as fruits, grapes, vegetables, melons, potatoes, fodder plants, and others
will be examined and statistical reports will be developed.

Action 8.2.6: Group orchard crop data based on traditional, intensive and super-
intensive orchards

Although we have information about the total size of orchards, it is yet to be grouped based
on traditional, intensive and super-intensive orchards. A report on the grouping of vineyards
will be developed with regard to the production of table and wine grapes.

Action 8.2.7: Collect statistical data of cattle breeding and make examinations

This priority action is aimed at collecting and developing statistical data on the operation and
performance of cattle breeding complexes, and animal breeding and fattening farms.
Furthermore, reports will be developed based on the examination of animal breeds.

Action 8.2.8: Identify and register cattle and sheep

The possibility of implementing an action plan will be investigated to establish an animal

identification system which will allow complete control of animal replacement and diseases.
Best practices applied in the identification and registration of cattle and sheep will also be
studied, and appropriate measures will be implemented to make it happen.

Action 8.2.9: Establish e-database containing information about veterinary and

phytosanitary control services

Currently, there is no e-database providing information on veterinary and phytosanitary control

services delivered to farmers. The database will be created and operated as of 2017.

Action 8.2.10: Promote recordkeeping among the agricultural producers

Agricultural producers demonstrate unwillingness to keep records as they are exempted from
all taxes other than land use tax. Primary recordkeeping will be promoted among the
producers, their awareness will be raised and they will be provided with training.

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Expected results and indicators

This priority will allow establishing the Land Cadastre System, and operating the nationwide
“E-Agriculture” Information System, identifying and registering the cattle and sheep, increasing
the number of farmers who do recordkeeping of their farms, and creating the database of all
cattle, sheep, poultry, and crop fields. The primary recordkeeping will be done by at least 10
% of the agricultural producers.

Required investment

The amount of the required investment will be determined when the groundwork is laid for the
implementation of the priority measures.

Expected risks

Key risks may include the improper basis for the implementation of the priority actions,
problems that may arise when providing funding for the establishment of the Land Cadastre
System, and the nationwide “E-Agriculture” Information System, lack of human resources, and
unwillingness of the agricultural producers to do primary recordkeeping.

7.8.3. Priority 8.3. Strengthen the capacity of regulatory agencies

Rationale

In the current phase of agricultural reforms, integrated measures are being implemented to
improve state regulation of agricultural production. Recent structural changes to the
institutional capacity of the Ministry of Agriculture, establishment of regional offices of the
Ministry etc. provides a striking example of achievements. After implementing a number of
priority measures in the coming years, the organizational capacity of state regulation system
will be improved to continue the actions started, and trainings will be provided and international
cooperation will be strengthened to avoid overlapping duties, and enhance practical skills of
the Ministry’s employees.

Action items

Action 8.3.1: Design a strategic development plan for the Ministry of Agriculture and
other agencies attached to it

A strategic development plan will be laid out for the Ministry of Agriculture and its agencies by
2020. This plan will serve to strengthen the organizational capacity of the state regulation
system.

Action 8.3.2: Develop and disclose annual reports on the activities of the Ministry of
Agriculture and its agencies

Annual reports on the activities of the Ministry of Agriculture and its agencies will be developed
and disclosed to the public. This process will be continued in the coming years.

Action 8.3.3: Strengthen the capacity of the Ministry of Agriculture in strategic analysis,
planning and evaluation

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The Ministry of Agriculture will work with international partners to implement joint projects in
order to strengthen the capacity in strategic analysis, planning and evaluation

Action 8.3.4: Strengthen the capacity of regional (town) offices of the Ministry of
Agriculture

Action will be taken to strengthen the capacity of regional (town) offices of the Ministry of
Agriculture considering the fact that they are newly established. Training sessions will be
organized to enhance the skills of the employees of the regional offices in reporting,
information gathering and disclosure, computer use etc. The Ministry will also be supported in
improving the language skills of its employees.

Expected results and indicators

This priority action will be taken to strengthen the organizational capacity of the state regulation
system, eliminate overlapping duties, broaden international cooperation of the Ministry of
Agriculture, and improve the computer skills of its employees. All of the employees of the
Ministry will acquire computer skills, and half of them will be able to speak foreign languages.

Required investment

No additional investment is required.

Expected risks

Key risks may include lack of experience of state agencies in strategic planning, incomplete
formation of the regional (town) offices of the Ministry, lack of interest of government officials
in training and workshops.

7.8.4. Priority 8.4. Improve the state support policy for agricultural producers
based on development objectives

Rationale

It is important that agricultural producers be differentiated based on regions and products

during the coming years. Particularly, drafting and adopting a law to provide the legal and
regulatory framework for such activities, and improving government support mechanisms in
order to form differential subsidization, provide imported purebred animals to agribusinesses
as well as provide agricultural producers with high-yield seeds, saplings and breeding animals,
machinery, equipment and agrochemicals should be considered.

It is also essential to improve and clarify mechanisms of granting discounts to agricultural

producers for the sale of irrigation water, increase efficiency of tax or customs concessions,
lay out and implement an incentivization plan for farms located in highlands and winter
pastures, offer incentive package for sheep breeders (for example, improving lands along with
the farmers provided that they are partially exempted from leasing obligations etc.), promote
grape and tea plantations, and conduct feasibility studies to continue subsidization of elite seed
growers.

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Action items

Action 8.4.1: Make assessments and present proposals to improve subsidization

Assessments will be made and proposals will be put forward for the differentiation of
agricultural subsidies based on regions and crop fields, and opportunities will be considered
for granting the subsidies based on finished products through production unions. Based on the
results of these assessments, proposals will be set forth for establishing mechanisms of
differential subsidization considering the regional and areal characteristics.

Action 8.4.2: Present proposals for improving the customs policy set for tax credits
applied to agricultural producers, and the import of various agricultural inputs

The proposal to improve tax credits applied to agricultural producers will be considered,
cooperation between the agricultural producers, and processors and trade networks will be
strengthened, and the customs policy applied to the import of agricultural inputs will be
evaluated and improved.

Action 8.4.3: Set forth proposals to provide state support for stimulating the growth of
greenhouses

The projects to expand greenhouses across the country by considering their high export
potential will be developed, and feasibility studies for implementing government support
measures will be conducted.

Action 8.4.4: Conduct a feasibility study for the discount sale of irrigation water to
agricultural producers

Currently, irrigation water is sold to agricultural producers at a much lower price. This shows
a need for improving the mechanism of selling the irrigation water to agricultural producers at
discount prices. To make this happen, a focused feasibility study will be conducted.

Action 8.4.5: Develop the proposal to provide state support for the growth of cattle
breeding

The possibility of selling imported purebred animals to local producers under favorable
conditions, and continuing to grant subsidies for each calf produced through artificial
insemination will be considered. Providing incentives for the existing farms located in highlands
and winter pastures will also be considered, a feasibility study for the mechanism of providing
state support for sheep breeders will be conducted, farmers’ participation in the efforts to
improve lands will be ensured, and projects aimed at partially exempting the farmers,
complying with environmental requirements, from taxes will be developed. In addition,
feasibility studies will be conducted to ensure provision of the state support for the farmers who
are engaged in animal fattening.

Action 8.4.6: Stimulate the growth of perennials

The possibility of developing proposals to implement state support measures to align state-
supported preferential loans with the characteristics of the orchards, vineyards, and tea
plantations will be considered. Feasibility studies will be conducted to establish a mechanism

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of providing long-term loans or covering some of the costs in order to promote establishment
of orchards.

Expected results and indicators

If the priority actions are taken as a result of consultations with competent authorities,
differential subsidization will be evaluated, more crops will be included into the list for
subsidization, a mechanism of differential subsidization will be established based on the
regional characteristics, an incentivization plan will be laid out to promote farms located in
highlands, providing imported purebred animals to agribusinesses will be continued, support
mechanism for agricultural producers will be improved and made more transparent, and
establishment of orchards will be promoted. It is anticipated that the total size of newly
established orchards and greenhouses will be increased by 50%.

Required investment

If the actions are agreed upon, the amount of the required investment will be determined.

Expected risks

Key risks may include potential budget cuts or the suspension of subsidization in case
Azerbaijan accedes to WTO.

7.8.5. Priority 8.5. Design a system to monitor an evaluate agricultural policy

outcomes

Rationale

Azerbaijan needs a wide information network which makes all reliable data available to regions
in order to conduct a thorough analysis of farm efficiency. Lack of such network causes
problems and challenges in making development decisions, studying the impact of land
salination on the crop yield, and conducting state monitoring of the agricultural sector.

To solve these problems, a system will be designed to monitor and evaluate the outcomes of
the agricultural policy. To achieve this goal, it is important that the Farmer Data Monitoring
System (FDMS) of the Ministry of Agriculture cover the entire country. It is also possible to
conduct analyses and prepare outlines based on the data collected from the agricultural
producers through the system. Such data may be used:

- to monitor approved agricultural programs:

- to analyze and evaluate farm efficiency;

- to present proposals to increase profitability and productivity;

- to evaluate efficiency of the implemented agricultural policy measures;

- to conduct other economic analyses regarding agricultural production;

- to assess the impact of tax credits and subsidies on agricultural production.

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The Farmer Data Monitoring System (FDMS) will offer a number of benefits to the agricultural
producers. That is, the farmers who are involved in the system will be assisted in doing initial
recordkeeping, and the farmers will receive information about the outcomes of the annual
economic analyses every year. The farmers will be provided with the results of the economic
analyses of the country and regional level and this will allow them to compare the performance
indicators of their farms to those of other farms. To make this happen, the possibility of
establishing the Farmer Data Monitoring System (FDMS) will be considered.

Action items

Action 8.5.1: Establish a system and methodology to monitor and evaluate the
outcomes of the agricultural policy

With the support of the competent state authorities and international experts, the Ministry of
Agriculture will design a system of indicators designed to evaluate the outcomes of the
agricultural policy considering the social, economic and environmental issues. This system will
help collect data, conduct monitoring, and establish procedures regarding periodicity,
responsible agencies etc.

Action 8.5.2: Develop reports on the evaluation of the agricultural policy outcomes

Based on the defined indicators and methodology, reports on the monitoring and evaluation of
the agricultural policy outcomes will be developed and these reports will be used to develop
proposals to make needs assessment to improve the agricultural policy.

Action 8.5.3: Improve performance of the Farmer Data Monitoring System

The Farmer Data Monitoring System of the Ministry of Agriculture will continue to operate as
an important tool to evaluate the agricultural policy outcomes in all regions (except for
Nakhchivan Autonomous Republic) across the country. Action will be taken to improve
performance of the system (for example, to assign competent authorities the task of
developing reports, to extend the system to cover Nakhchivan Autonomous Republic etc.).

Expected results and indicators

This priority will enable to obtain real data in order to analyze and evaluate farm efficiency,
and make information available for evaluating effectiveness of the implemented agricultural
measures.

Required investment

Considering the scope of the priority actions, the required investment is estimated at AZN 300
thousand.

Expected risks

Key risks include failure to provide funding for the system, and lack of interest of agricultural
producers in the surveys.

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7.9. Strategic objective 9. Improve rural employment and welfare

Agriculture is not only an economic activity, but also a deep-rooted farming tradition cherished
by our nation for centuries. Although the primary function of the agriculture sector is to produce
food and raw products, it also serves to foster the socio-economic development and improve
living conditions in rural areas.

The Strategic Roadmap, which adopts an integrated approach to agricultural development, is

designed to address the issues concerning the improvement of rural life and employment.

It is particularly important to develop small and medium businesses in order to increase rural
employment in non-agricultural areas. The newly established “Family Business Support
Centers” (FBSC) public legal entity will ensure active involvement of citizens in the social and
economic development of rural areas. In addition to supporting the operation of family
businesses, the center will create additional opportunities for stimulating the growth of small
and medium businesses.

To achieve the strategic target, 3 priorities have been set. The first priority is aimed at
strengthening the rural potential for socio-economic development. To make this happen, the
government will implement pilot projects to contribute to the integrated development of rural
areas, and establish the statistical database and monitoring system for rural development.
Local municipalities will be on the front line to increase their role in contributing to rural
development and employment, preserving the rural architecture and traditions, and improving
living conditions in rural areas etc.

The second priority is targeted at supporting the development of alternative fields of rural
activities, and stimulating the growth of rural tourism, eco-tourism and other non-agricultural
areas.

The last priority is designed to support rural development initiatives. To make this happen, the
sectors which account for most of the rural incomes will be promoted, and active involvement
of women and youth in the social and economic life of the communities will be ensured.

7.9.1. Priority 9.1. Strengthen the potential for the implementation of the socio-
economic development policy in rural areas

Rationale

Currently, the rural development measures are implemented as part of the regional
development policy which is based on the national planning methodology. Azerbaijan has
achieved important socio-economic results through large-scale activities carried out to develop
the soft and hard infrastructure, and improve the welfare of the nation both in the regions and
rural areas.

The next phase of the activities will ensure more active involvement of communities and local
municipalities in the planning of rural development measures, and efficient use of rural
resources.

Action items

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Action 9.1.1:Develop and implement pilot projects for integrated rural development

Through the joint funding provided by the Government of Azerbaijan and international
organizations, pilot projects across all economic regions will be developed and implemented
based on the practice of the “Integrated Rural Development” projects which are implemented
by the Ministry of Economy and the Ministry of Agriculture. These projects will entail
coordinated support measures aimed at developing the soft and hard infrastructure in the pilot
areas, and increasing the rural incomes. To make this happen, legal framework will be
established, and proposals to improve the rural development policy will be set forth based on
the practice of the pilot projects.

Action 9.1.2: Establish the statistical base and monitoring system for rural socio-
economic development

As part of the measures for the improvement of the rural socio-economic development policy,
a systemized comprehensive information base and monitoring system will be established for
rural areas. The information base will cover the issues like rural welfare, employment structure,
social services, development of infrastructure etc., enable to develop short, medium and long-
term rural development plans, and ensure active involvement of local communities,
municipalities, and local executive authorities in the process.

Action 9.1.3: Improve the existing legislation with regard to rural socio-economic
development

Proposals will be developed by identifying the need for the improvement of laws and
regulations related to the improvement of short, medium and long-term rural development
plans, active involvement of local communities, municipalities and local executive authorities
in this process, establishment of mechanisms for the implementation of rural development
measures etc.

Action9.1.4: Develop a state program for rural socio-economic development

A new state program will be developed based on the conception of rural development following
the implementation of the state program for rural socio-economic development in 2018.

Expected results and indicators

Implementation of the priority action will result in strengthening the institutional capacity for
rural socio-economic development, coordinating rural development measures through national
planning, and honing the practice of the implemented pilot projects. The an information base
and monitoring system will be established to address rural development issues, develop short,
medium and long-term rural development plans, and increase the number of the pilot rural
development projects up to 50.

Required investment

The investment required to implement the priority actions will be estimated by the competent
authorities.

Expected risks

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Key risks will include dependence of most of the actions on the state budget, and lack of
relevant institutional capabilities.

7.9.2. Priority 9.2. Support alternative fields of rural activities

Rationale

Developing the competitive agricultural sector in Azerbaijan is one of the key targets. This
sector will help reduce the contribution to employment and increase incomes in agriculture.
Currently, the average nominal monthly pay in agriculture is twice less than the average
nominal monthly pay. As part of the policy to be implemented in the coming years, it is planned
to bring the average nominal monthly pay in agriculture up closer to the average nominal
monthly pay.

At the same time, it is important to help those who will lose their jobs as a result of the formation
of competitive agriculture. To make this happen, it is essential to develop alternative fields of
activities in order to increase rural employment, and stimulate the growth of non-agricultural
employment. This will eventually offer vast opportunities for increasing rural incomes, and
encourage the youth to stay and work in the rural areas.

In the coming years, the possibility of developing rural tourism and different service areas,
implementing focused projects to increase the role of non-timber forestry, adopting specific
programs for vocational training and increasing woman employment will be considered, and
startups in rural areas will be expanded.

Action items

Action 9.2.1: Develop rural tourism and eco-tourism

Rural tourism and eco-tourism will be developed, and rural projects in the areas with tourism
potential in line with the tourism policy will be pursued across the country. This is more detailed
in the Strategic Roadmap for the Development Specialized Tourism Industry in the Republic
of Azerbaijan.

Action 9.2.2: Develop non-agricultural production areas

Non-agricultural production will be developed in rural areas.To make this happen, preferential
loans will be provided and rural startups will be expanded. Given the Action 9.2.1, the
development of various fields of traditional activities will be supported based on the needs of
the tourism industry such as carpet weaving, tinkering, tinning, pottery, garden tools, popular
musical instruments, toys, souvenirs, household items made from cane and reed, ornamental
work on ceramic items, household items made from wood, matting, national embroidery,
national clothes etc.

Action 9.2.3: Develop service areas in rural areas

Rural service areas will be developed, and small and medium businesses will be supported in
developing business plans. It will focus on vocational training in various service areas, that is,
community residents will be able to meet their own needs for construction work or craftsmen.

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In addition to Actions 9.2.1 and 9.2.2, different projects designed to develop tourism service
areas will be implemented.

Action 9.2.4: Increase woman and youth employment in rural areas

Vocational training of women in rural areas will be strengthened and a special program will be
developed to create more jobs for them. A particular focus will be on increasing woman
employment in traditional areas of rural tourism like carpet weaving, the making of souvenirs
etc. Also, a raft of measures will be implemented to ensure active youth involvement in the
innovative agricultural projects, address rural employment issues, and develop special
programs for youth who live in the communities near the front line.

Action 9.2.5: Improve housing conditions for new young families

Action will be taken to encourage rural life and particularly, make rural housing more available
to young families and specialists ensuring that young families living in rural areas benefit more
from social mortgages. A special approach will be adopted to solve housing problems of young
families living close to the frontline.

Expected results and indicators

This priority action will result in the development of rural tourism and eco-tourism as well as
increasing the number of tourists twice, the number of non-agricultural production areas and
employees by 30%, and the number of woman employees by 20%.

Required investment

The investment required to implement the priority actions will be estimated by the competent
authorities.

Expected risks

Key risks may include preference of city residents for more affordable tourism destinations,
low quality rural services, and lack of experience in establishing rural startups.

7.9.3. Priority 9.3. Support local community initiatives for rural development

Rationale

The Ministry of Agriculture has constructed road and water pipelines at the request of local
communities under the Second Agricultural Investment Project, which has been implemented
for more than 10 years to lay the groundwork for about 1800 social and economic infrastructure
projects giving some experience to the communities.

Further action will be taken to support local community initiatives for rural development,
enhance youth involvement, increase the municipal commitments for social and economic
growth in rural areas, and support their initiatives for socio-economic rural development in
order to ensure inclusiveness in the coming years. It will also implement focused programs to
ensure active involvement of women and youth in the social and economic rural life, and
encourage the youth to return and work in rural areas after receiving education in the cities.

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More efforts will be put in developing the skills and knowledge of young farmers, and
supporting local community initiatives for rural development.

Action items

Action 9.3.1: Increase municipal commitments for socio-economic development in rural

areas

Municipal initiatives for socio-economic development in rural areas will be supported, and an
action plan to increase their active role in this area will be developed. A rural development
model will be established and applied based on the choice of the pilot community
municipalities.

Action 9.3.2: Promote and support profitable community sectors in rural areas

Profitable community sectors in rural areas will be promoted and supported through respective
agencies in order to enhance the performance of rural communities.

Action 9.3.3: Ensure active involvement of women and youth in the socio-economic life
in rural areas

Programs will be implemented to ensure active involvement of women and youth in the socio-
economic life in rural areas.

Expected results and indicators

This priority action will help the municipalities with active involvement in the socio-economic
life of communities, create new jobs, increase the number of programs aimed at ensuring
active role of women and youth in the socio-economic life in rural areas, and result in growing
number of young people who return to communities after receiving education. The number of
jobs created by the municipalities will grow by 30%, and youth development programs will
increase 3 times.

Required investment

The investment required to implement the priority actions will be estimated by the competent
authorities.

Expected risks

Key risks may include insufficiency of funding for the actions, lack of interest of women and
youth in the social and economic life in rural areas, low pays, and low employment in the non-
agricultural sphere.

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8. FINANCING MECHANISMS
To reach the defined strategic targets, it is required that AZN 1170 million be invested. The
actions included in the Strategic Roadmap will be implemented through the following financial
sources:

- Public budget;

- Non-budgetary funds;

- Funds provided by the State Service for Management of Agricultural Projects and
Lending under the Ministry of Agriculture;

- Funds provided by ANFES;

- Funds provided by Azerbaijan Investment Company;

- Local budgets;

- Funds provided by local companies, businesses and organizations irrespective of type

of ownership;

- Direct foreign investments;

- Securities including shares, bonds, and derivative financial instruments;

- Local loans and grants;

- Loans, grants and technical assistance provided by international organizations and

other countries;

- Other sources not prohibited by laws and regulations.

Budgets will be developed based on the result-oriented budgeting process in order to ensure
efficient use of funds for the defined priorities. Most of the required funds will be provided
through budget restructuring, as well as joint funding by private sector and other investors.

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9. IMPLEMENTATION, MONITORING AND EVALUATION
Implementation of Strategic Roadmap

Oversight and governance: Accelerated decision making, clear accountability and additional
execution capacity will ensure appropriate oversight and governance.
- A mechanism for accelerated decision making at the highest political level will be set up
for the Strategic Roadmap. This mechanism will enable clearly visible guidance for other
main decision makers to emphasize the importance of implementation. Decisions about
implementation priorities and concrete targets will be made using this mechanism.

- Individual leaders will assume responsibility for each strategic priority in the sectors and
ministers will define and commit to ministerial targets for every sector. In addition,
working groups will be set for each priority under the leadership of competent agencies
as mentioned in the action plan and reporting meetings will be held by the agencies
quarterly to discuss implemented activities. The working groups will operate based on
the action plan. Regular meetings will mainly be held at the key implementer’s office
upon proposal by the responsible person. The key implementer will divide tasks for the
groups and allow for their continuous operation. If required, some steps will be taken to
receive technical assistance provided by external experts.
- A dedicated central delivery unit will be established to monitor the implementation of the
roadmap and provide central execution support in areas such as in problem solving or
coordination across institutions. The unit’s work will serve to create stronger organization
across the institutions, processes, and technology required for implementation.
Furthermore, it will be responsible for ensuring that the involved institutions arrange for
the required financial and human resources, and empowered to inject additional
resources when needed.

Strategic alignment and financing: To allow for an efficient implementation process that
avoids wasted resources and conflicting objectives, strategic vision and roadmap will be fully
integrated into other sectoral plans and existing budgets.

- All relevant strategic documents at the ministry or agency level will be harmonized with
the roadmap and the mandates of key existing state agencies will be realigned to the
objectives wherever necessary. This alignment work will include developing transparent,
measurable implementation targets, which will be communicated publicly and used to
track progress.
- Detailed implementation plans will be developed for all strategic priorities, based on
provided actions, to guide implementation and provide transparency regarding the
resources required and expected impact. While the assigned leader will bear overall
responsibility for developing the implementation plan, all the most important institutions
participating in implementation – including private sector organizations – should be
involved.

128
Stakeholder mobilization platform: We will mobilize domestic and international partners
from both the public and private sectors to join in the execution of the roadmap.
- Steps will be taken to identify and attract core strategic partners. The involvement of
multiple organizations and stakeholders is required for the successful implementation
each strategic priority. To ensure alignment of objectives and proper coordination, we
will form advisory councils and working committees with the private sector and state
owned enterprises (SOEs) as well as with critical international partners, such as
international financial institutions.

- Civil society will be mobilized and engaged to generate broad support for the roadmap.
This vision document marks the start of the ongoing communication of the jointly agreed
narrative regarding Azerbaijan’s economic development. Going forward, active
communication, transparency and inclusiveness will help to mobilize the public and
private sectors, society as a whole, and other relevant stakeholders.

Monitoring and evaluation of the Strategic Roadmap

The strategic Roadmap will be monitored and evaluated to ensure successful implementation
of the required tools and processes. The monitoring and evaluation process will focus on the
actions, expected outcomes of each priority, indicators, and compliance based on the practices
developed in accordance with international methodology.

The annual action programs of the working groups will be approved by the key implementer
and submitted to the coordination agency. The meetings of the working groups will be held in
the presence of the members of the coordination agency.

The progress report will be submitted by the key implementer to the coordination agency at
least 10 days before the meeting takes place. The coordination agency will consider the
outcomes of all discussions made at the meeting, as well as the detailed analysis and
evaluation to submit the outcomes of monitoring and its recommendations to the key
implementer within 10 days of the meeting. The coordination agency and key implementer will
take necessary measures to make sure that the outcomes of monitoring and its
recommendations be considered by the working groups.

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10. ACTION PLAN
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Strategic objective 1. Increase institutional capacity for ensuring sustainable food security

1.1. Develop data collection and monitoring system with regard to sustainable food security and food availability
Assess opportunities to
1.1.1. establish Food Security Cabinet of Ministers Responsible state agencies 2017
Commission
- developing an integrated and
systemized database on food
Ministry of Economy, security;
Conduct regular monitoring Ministry of Agriculture,
to make risk assessments Ministry of Emergency, - ensure access to systemized
1.1.2. Cabinet of Ministers 2017-2020
in terms of sustainable food State Statistical Committee, data on food security;
security State Customs Committee,
local executive authorities - establish physiological
Develop a system to consumption norms based on
regularly analyze and Ministry of Health, international standards;
evaluate the volume and Ministry of Agriculture,
fulfillment of the existing Ministry of Labor and Social - make short, medium and long-
1.1.3. Cabinet of Ministers Protection term predictions across the 2018
and prospective demand
for food products based on Ministry of Economy, range and volume of food
approved rational and State Statistical Committee,
products considering for
physiological norms local executive authorities
sustainable food supply for

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Ministry of Economy, Ministry of regions and administrative

Agriculture, Ministry of Labor regions
Develop a monitoring and Social
1.1.4. system to evaluate food Ministry of Economy, - Coordinate food security 2018
availability for various Ministry of Taxes, activities through an
population groups, and State Statistical Ministry of Emergency, integrated center
assess related impacts Committee State Customs Committee, local
executive authorities
Ministry of Economy,
Develop an integrated Ministry of Taxes,
information portal for the Ministry of Emergency,
Ministry of State Statistical Committee,
1.1.5. production, import, stocking 2017
Agriculture State Customs Committee ,
and trade flow of food
products Supply and Procurement of
Food Products OJSC, local
executive authorities

1.2. Develop mechanisms to ensure reliable food supply for all population groups

Ministry of Economy, Ministry of

Agriculture, - develop food resources based
Develop food resources to Ministry of
1.2.1 Supply and Procurement of on the exiting and perspective 2017-2020
ensure food availability Emergency
Food Products OJSC, demand of Azerbaijan;
local executive authorities
- ensure that all social groups
Determine mechanisms to Ministry of Economy, Ministry of of population are fed based on
1.2.2 improve food supply for all Cabinet of Ministers Labor and Social Protection, 2017
population groups food consumption norms.
Supply and Procurement of

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Food Products OJSC, local

executive authorities
Ministry of Economy, Ministry of
Increase opportunities for Agriculture, Supply and
Ministry of
1.2.3 supplying food in case of Procurement of Food Products 2017-2020
Emergency
emergency OJSC, local executive
authorities

1.3. Form a risk-based food safety system along all links of the value chain
Improve the existing legal Ministry of Agriculture, - Eliminate overlapping duties in
1.3.1 framework based on Cabinet of Ministers Ministry of Health, food safety control; 2017-2018
international best practice local executive authorities - increase coordination in food
Eliminate the overlapped safety;
activities of the agencies - Form a risk-based food safety
which are responsible for Ministry of Agriculture, system along all links of the
1.3.2 Cabinet of Ministers Ministry of Health, value chain; 2019
food safety control, and
develop an effective local executive authorities - expand plant health and pest
regulatory system control, monitoring and
observation;
Harmonize food - - improve animal health and
State Committee for
production, processing, Ministry of Agriculture, disease control, monitoring
Standardization,
1.3.3 storage, transport and Ministry of Health, and observation; 2019-2020
Patents and
trading standards with local executive authorities - - ensure harmonization with
Metrology
international requirements
Codex Alimentarius with
Ministry of Agriculture, respect to food products;
1.3.4 Optimize, modernize and Cabinet of Ministers - ensure establishment of 2017-2020
Ministry of Health,
accredit food safety slaughterhouses and sales
local executive authorities

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laboratories, and improve centers in compliance with
the certification system veterinary, sanitary and
epidemiological requirements;
Ministry of Agriculture, - Bring food security standards
Improve public regulatory Ministry of Health,
1.3.5 mechanisms for food Cabinet of Ministers in line with international 2019-2020
State Support Council for standards;
safety NGOs - offer vast opportunities to have
local executive authorities access to international markets
Ministry of Economy, Ministry in case Azerbaijan accedes to
Promote healthy
1.3.6 Cabinet of Ministers of Agriculture, WTO 2018-2020
nourishment
local executive authorities

Strategic objective 2. Increase the potential for agricultural production along the value chains

2.1 Increase the production potential for competitive agricultural production and processing both in the domestic and
international markets
Promote intensive orchards
(especially, pomegranates,
persimmons, cherries, Ministry of Ministry of Economy, - the direct and indirect GDP
2.1.1 2017-2020
apples, as well as Agriculture local executive authorities impacts will be AZN 220
hazelnuts and other nuts) million and AZN 230 million
and grape plantations respectively in 2020 with a
Support fresh potato Ministry of total of AZN 450 million.
2.1.2 Ministry of Economy, 2017-2020
production Agriculture local executive authorities

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Support greenhouse
Ministry of Ministry of Economy,
2.1.3 production of early-ripening 2017-2020
Agriculture local executive authorities
vegetables
Stimulate the expansion of
the network of small and
2.1.4 medium-sized fruit and Ministry of Economy Ministry of Economy, 2017-2020
vegetable processing local executive authorities
plants
Support increased
production of dried and Ministry of Economy,
2.1.5 Ministry of Economy 2017-2020
frozen fruits and local executive authorities
vegetables

Promote cotton, tobacco Ministry of Ministry of Economy,

2.1.6 2017-2020
and cocoon production Agriculture local executive authorities

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Explore opportunities for

export of non-traditional
and recently exported
products (purebred
animals, dairy products,
2.1.7 tinned meat products, Ministry of Ministry of Economy, 2017-2018
barley etc.) and other Agriculture local executive authorities
products with export
potential (saffron, wool,
leather, natural honey,
walnut oil, liquorices etc.)

2.2. Increase and promote the production and processing of products which are capable of substituting imports

Promote establishment of
large cattle breeding Ministry of Ministry of Economy,
2.2.1 2017-2018
complexes based on the Agriculture local executive authorities
intensive farm model - reduce head of cattle by 10%,
increase milk yield by 50, milk
Spread the practice of production by 30%, and meat
establishing household production by 20% through
farms designed for beef the intensive farm model;
2.2.2. Ministry of Ministry of Economy, 2017-2020
and milk production
Agriculture local executive authorities
achieved under the pilot
projects that have been
implemented in Imishli,

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Barda and Aghjabedi to - increase production by 25% in
other regions across the meat and milk processing
country industries;
Stimulate increased
industrial poultry production Ministry of Agriculture,
- increase food wheat
2.2.3. Ministry of Economy production by enhancing 2017-2020
with regard to the demand local executive authorities
of various segments quality and yield performance;

Support expanding network - expand tea plantations twice;

of small and medium meat Ministry of Agriculture,
2.2.4. Ministry of Economy - reduce tobacco imports by 2017-2020
and milk processors in the local executive authorities
regions 50%;

- increase cotton production

Support development of and processing at least 4
2.2.5. bee production, fish Ministry of Ministry of Economy, times; 2017-2020
production, and Agriculture local executive authorities
aquaculture
- Increase silk production and
processing at least 1000
Support increased times.
2.2.6. production of durum and Ministry of Ministry of Economy, local 2017-2020
soft wheat, as well as Agriculture executive authorities
legumes for food supply

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Evaluate opportunities to
2.2.7. increase local production of Ministry of Economy, 2017-2018
sugar beet and Ministry of Economy
local executive authorities
confectionaries

Evaluate the opportunity to

increase local production of
2.2.8. raw materials (sunflower Ministry of Economy, 2017-2018
seed, corn, olive etc.) that Ministry of Economy
local executive authorities
are used for vegetable oil
production

2.2.9. Stimulate the growth of tea Ministry of Ministry of Agriculture, 2017-2020

plantations Agriculture local executive authorities

2.2.10. Stimulate increased Ministry of Agriculture, 2017-2020

tobacco production local executive authorities

Develop processing
2.2.11. industries for raw cotton, Ministry of Agriculture, 2017-2020
Ministry of Economy
cocoon and animal hide local executive authorities

2.3. Develop farmer partnerships and cooperation in the agricultural sector

- expand cooperation and 2016,

Adopt the Law on National Assembly
2.3.1 Ministry of Economy, organization among
Agricultural Cooperation of the Republic of
local executive authorities agricultural producers across implemented
Azerbaijan
different areas;

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Improve regulatory - Accelerate establishment of

framework for developing Ministry of Ministry of Economy, big farms; 2017
agricultural cooperation Agriculture local executive authorities - accelerate establishment of
cooperatives, associations,
and unions;
Consider defining and
applying incentives for - increase contribution of these
2.3.2 Ministry of Ministry of Economy, 2018-2020
developing agricultural farms to agricultural
Agriculture local executive authorities
cooperatives production by 30%.

Launch awareness
campaigns and provide
2.3.3 extension services to Ministry of Ministry of Economy, 2017-2020
develop agricultural Agriculture local executive authorities
cooperation

2.4. Develop public-private partnerships (PPPs) to implement integrated projects

Confirm support package - bring AZN 70 million direct

for integrated projects to Ministry of Agriculture, and AZN 60 million indirect
2.4.1 Ministry of Economy 2017-2018
facilitate public-private- local executive authorities incremental GDP in 2020 with
partnerships (PPPs) a total of AZN 130 million in
2020 in real terms
Define type and level of Ministry of Agriculture, - Create 7250 jobs both directly
2.4.2 Ministry of Economy and indirectly 2017-2018
financial support local executive authorities

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Evaluate opportunities to Ministry of Finance,

2.4.3 establish a public-private Ministry of Economy Ministry of Agriculture, 2018
investment fund local executive authorities

Develop legal and Ministry of Finance,

2.4.4 regulatory framework for Ministry of Economy Ministry of Agriculture, 2019
the support package local executive authorities

Prepare an investor pitch Ministry of Finance,

2.4.5 Ministry of Economy Ministry of Agriculture, 2019
for value chains
local executive authorities

Define milestones for Ministry of Finance,

2.4.6 Ministry of Economy Ministry of Agriculture, 2020
operations
local executive authorities

2.5. Develop support infrastructure for the growth of agribusiness

Support development of
agropark network Ministry of Finance,
2.5.1 - develop the management 2017-2020
(including agri-industrial Ministry of Economy Ministry of Agriculture,
structure for agroparks and
clusters) local executive authorities
business incubators in 2017;

Support establishment of Ministry of Finance, - finalize all necessary actions

2.5.2 Ministry of Economy Ministry of Agriculture, to establish and operate 2017-2020
industrial districts
local executive authorities

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agroparks and business

incubators until 2018;
- bring AZN 135 million direct
and AZN 220 million indirect
incremental GDP in 2020 with
a total of AZN 355million in
2020 in real terms for one
Support establishment of Ministry of Finance,
2.5.3 agropark; 2017-2020
agribusiness incubators Ministry of Economy Ministry of Agriculture,
local executive authorities - operate agroparks until 2018
and create 7725 jobs directly
and indirectly;
- establish a total of 25 small
and medium businesses along
the value chains typical of
each region until 2020

Strategic objective 3. Facilitate access to finance

3.1 Improve financing mechanisms in agriculture

Define targets for financial Ministry of Ministry of Economy,

3.1.1. Ministry of Finance, local 2017
needs in agriculture Agriculture
executive authorities
Consider establishing an Financial Market Ministry of Agriculture,
3.1.2. agricultural lending risk- Supervisory Ministry of Economy, 2017-2018
sharing/guarantee fund Chamber Ministry of Finance,
local executive authorities

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Develop mechanisms for Ministry of Agriculture,
Financial Market
application of innovative Ministry of Economy,
3.1.3. Supervisory 2017-2018
and non-collateral loans in Ministry of Finance,
Chamber
agriculture local executive authorities - facilitate access to finance
Ministry of Agriculture, worth an additional AZN 665
Financial Market
Expand the collateral base Ministry of Economy, million
3.1.4. Supervisory 2017-2018
for lending Ministry of Finance,
Chamber
local executive authorities
Ministry of Economy,
Increase financial literacy of Ministry of Financial Market Supervisory - consider establishing the risk-
3.1.5. 2017-2020
agricultural producers Agriculture Chamber sharing/guarantee fund;
local executive authorities
Develop mechanisms for Financial Market Ministry of Agriculture,
3.1.6. managing risks which affect Supervisory Ministry of Economy, 2017-2018
the agricultural sector Chamber Ministry of Finance, - ensure more than AZN 115
local executive authorities million direct and AZN 95
million indirect GDP impact (a
Stimulate agricultural Financial Market Ministry of Agriculture,
total of AZN 210 million)
3.1.7. lending by credit Supervisory Ministry of Economy, 2017-2020
organizations Chamber Ministry of Finance,
local executive authorities

3.2. Develop agricultural insurance

Improve the existing Financial Market Ministry of Finance,
3.2.1. legislation with regard to Supervisory - Establish Registry for 2017
Ministry of Agriculture,
agricultural insurance Chamber Insurable Events ;
local executive authorities

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Consider the possibility of Financial Market - Consider establishing the

Ministry of Finance, agricultural insurance fund;
3.2.2. establishing an agricultural Supervisory Ministry of Agriculture, 2018
insurance fund Chamber local executive authorities - increase the total number of
insured agricultural producers
Establish Registry for Ministry of Ministry of Ecology and Natural at least 3 times.
3.2.3. Resources 2017-2018
Insurable Events Agriculture
local executive authorities
Develop a mechanism to
pay material damages to Ministry of Ministry of Finance,
3.2.4. 2017
agricultural producers due Agriculture local executive authorities
to imposed quarantine

Ministry of Economy,
Increase insurance literacy Ministry of Financial Market Supervisory
3.2.5. 2017-2020
of agricultural producers Agriculture Chamber, local executive
authorities

3.3. Promote agricultural investments

Assess agricultural
investment needs and Ministry of
- increase agricultural
3.3.1. Ministry of Economy, investments twice; 2017-2018
develop investment Agriculture local executive authorities
projects - develop at least 100
investment projects for
Improve investment Ministry of Ministry of Economy, administrative regions and
3.3.2. 2017-2020
environment in agriculture Agriculture local executive authorities areas.

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Strategic Objective 4. Develop agricultural input market and improve provision of services

4.1. Develop the land market

Adopt amendments to the

Law on Notary of the National Assembly 2016,
Republic of Azerbaijan to of the Republic of
Azerbaijan implemented
simplify procedures for
4.1.1. agricultural land use;

Increase transparency and

State Committee on Ministry of Justice,
simplify procedures for the 2017-2018
Property Issues Ministry of Agriculture,
sale, lease and use of - expand the total size of crop
local executive authorities
agricultural lands fields by 5 % by unlocking and
reclaiming idle agricultural
Apply relevant mechanisms Ministry of Agriculture, lands
to prevent agricultural State Committee on Ministry of Ecology and Natural
4.1.2. 2017-2018
lands from being kept out Property Issues Resources
of use local executive authorities
State Committee on Property
Take actions to consolidate Ministry of Issues, Ministry of Ecology and
4.1.3. Natural Resources, 2017-2020
lands Agriculture
local executive authorities

4.2. Improve irrigation water supply of producers

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Assess the need for Ministry of Amelioration and Water

4.2.1 Management Office OJSC, 2017
irrigation water Agriculture
local executive authorities
Improve the irrigation water Amelioration and Ministry of Economy,
4.2.2. Water Management Ministry of Agriculture, 2017-2020
supply
Office OJSC local executive authorities - increase irrigation water
supply for agricultural
Expand application of Ministry of Agroleasing OJSC producers by 20%
4.2.3. 2017-2020
modern irrigation systems Agriculture local executive authorities

Expand operation of the Amelioration and

4.2.4. Ministry of Agriculture, 2017-2020
water users associations Water Management
local executive authorities
Office OJSC

4.3. Improve provision of agricultural machinery and equipment, and maintenance for agricultural producers and develop
agricultural service market
Upgrade agricultural Ministry of Agriculture,
4.3.1 Agroleasing OJSC Ministry of Economy,
- increase provision of 2017-2020
machinery parks agricultural machinery,
local executive authorities
equipment, as well as small
Improve provision of Ministry of Agriculture, machinery and equipment to
4.3.2 innovative, also small Agroleasing OJSC Ministry of Economy, 2017-2020
agricultural producers by 20%;
machinery and equipment local executive authorities
- increasing the contribution of
private agri-service providers
Develop the agricultural Ministry of Agriculture, by 70% through extensive use
4.3.3 service market Agroleasing OJSC Ministry of Economy, of innovative machinery and 2017-2020
local executive authorities equipment

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4.4. Develop the seed and sapling market, and increase local production potential

Promote seed and sapling Ministry of

4.4.1 production Local executive authorities - establish a unified certification 2017-2020
Agriculture system;
Establish a quality control - accredit the seed
system for seed and laboratories;
sapling production, and Ministry of
4.4.2 Local executive authorities - create digital database for 2017-2020
improve mechanisms for Agriculture
certification agricultural producers;
- establish a unified quality
control system;
Create digital database Ministry of
4.4.3 Local executive authorities 2018
Agriculture - increase the use of certified
seeds and saplings by
Improve operation of seed Ministry of agricultural producers up to
4.4.4 laboratories Local executive authorities 90%. 2017-2020
Agriculture

4.5. Improve provision of fertilizers and crop protection products

Identify the demand level Ministry of Agriculture,
4.5.1 Agroleasing OJSC 2017
for fertilizers local executive authorities - increase the use of mineral
fertilizers and biological
4.5.2 Promote fertilizer use Ministry of 2017-2020
Local executive authorities fertilizers by agricultural
Agriculture
producers by 25% and10%
Improve provision of crop Ministry of Agriculture, respectively;
4.5.3 Agroleasing OJSC 2017-2020
protection products local executive authorities

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Increase quality control for - increase the use of crop

4.5.4 fertilizers and crop Ministry of protection products by 25%; 2017-2020
Local executive authorities
protection products Agriculture
- increase the use of biological
Promote local fertilizer crop protection products by
4.5.5 Ministry of Economy Local executive authorities 10%; 2017-2020
production

4.6. Improve provision of compound feed and promote breeding

Study and develop the
structure of the compound Ministry of Local executive authorities 2017-2020
4.6.1
feed market Agriculture
- increase provision of
Expand application of compound feed by 20%; -
artificial insemination and Ministry of increase the number of high-
4.6.2 Local executive authorities 2017-2020
the embryo transfer Agriculture yield breeds by 25%
method

Support development of Ministry of Ministry of Economy,

4.6.3 2017-2020
poultry breeding Agriculture local executive authorities

4.7. Improve provision of veterinary and phytosanitary services for agricultural producers
Develop network of private Ministry of Ministry of Economy,
4.7.1 veterinary service providers Agriculture - bringing the animal and plant 2018-2020
local executive authorities
disease risk management
Establish an effective Ministry of system in line with
4.7.2 system for tracking and Agriculture Local executive authorities international standards; 2018-2019
monitoring animal health

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Establish an effective Ministry of - increase the number of private

4.7.3 system for tracking and Agriculture Local executive authorities veterinary service providers by 2018-2019
monitoring plant health 30%.
Establish and apply
integrated pest Ministry of
4.7.4 management systems for Agriculture Local executive authorities 2018-2019
crop protection
Modernize veterinary and Ministry of
4.7.5 phytosanitary laboratories Agriculture Local executive authorities 2018-2019

Strategic Objective 5. Improve agricultural science, education, and extension services

5.1. Ensure transition to a new development stage with regard to the quality of agricultural education
Develop agricultural Ministry of
5.1.1 Ministry of Education - increase the number of those 2017-2020
education Agriculture who receive agricultural
education by 20%;
Develop vocational Ministry of
5.1.2 education in agriculture Ministry of Education - increase the number of those 2017-2020
Agriculture
who receive agricultural
Develop measures to education across all areas by
strengthen partnerships 20%;
between agricultural Ministry of
5.1.3 education providers, and Ministry of Education - increase the number of 2017-2020
Agriculture teachers and researchers of
agricultural producers and
processors agricultural institutions who
participate in international

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conferences, workshops and

advanced training by 30%.

5.2. Plan and conduct agricultural research, and improve mechanisms for applying research findings

Set priorities and increase Ministry of

5.2.1 outcome orientation for 2017-2020
Agriculture
agricultural research

Establish mechanisms for Ministry of

5.2.2 promoting scientific Ministry of Finance - increase the number of 2017-2020
Agriculture
research fundamental and practical
agricultural research by 20%;
Upgrade agricultural - increase the number of
scientific-research Ministry of scientific articles published in
5.2.3 institutes with modern 2017-2020
Agriculture international journals (as of
laboratories, equipment 2018) by 25%.
and devices

Transfer research findings Ministry of

5.2.4 to farmers through Local executive authorities 2017-2020
Agriculture
extension service providers

5.3. Form extension service network based on agricultural needs

Establish mechanisms for

Ministry of - design a functional extension
5.3.1 regulating the extension 2017
Agriculture system in agriculture;
services in agriculture

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Improve performance of - ensure that extension service

Ministry of providers operate across all
5.3.2 the Agrarian Science and 2017-2020
Agriculture regions;
Information Center
- establish a system of digital,
Establish network of Supply and Procurement of media and publishing services
Ministry of
5.3.3 extension service providers Food Products OJSC, local available to producers. 2017-2020
Agriculture
with country coverage executive authorities

Establish the system of

Ministry of Supply and Procurement of
5.3.4 electronic, media and 2017-2020
Agriculture Food Products OJSC
publishing services

Increase the financial

Ministry of
5.3.5 sustainability of extension Ministry of Finance 2017-2020
Agriculture
centers

Look into the feasibility of

providing extension
Supply and Procurement of
services to agricultural Ministry of
5.3.6 Food Products OJSC, local 2017-2020
producers through input Agriculture
executive authorities
suppliers, processors, and
financial institutions

Strategic objective 6. Develop the agricultural market infrastructure and facilitate producers’ access to markets

6.1. Develop agricultural market infrastructure

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Establish market
infrastructure facilities
Supply and
which provide wholesale Ministry of Economy, Ministry of
Procurement of
6.1.1 and logistical services to Agriculture, local executive 2017-2020
Food Products
fruit, vegetable, potato, and authorities
OJSC
melon producers in the
region
- perform 90% of the
Support establishment of slaughtering operations at
modern adequate Ministry of Agriculture, slaughterhouses which
6.1.2 Ministry of Economy 2017-2020
slaughterhouses in Baku local executive authorities comply with veterinary and
and regions sanitary standards;

Support establishment of - establish 5 “green markets”

Ministry of Agriculture,
small and medium-sized and 50 “farmer stores” in Baku
Supply and Procurement of
6.1.3 cold storages for fruits, Ministry of Economy and big cities; 2017-2020
Food Products OJSC
vegetables, potatoes, and
local executive authorities
melons - bring the ratio of storage
capacity to the volume of fruits
Support establishment of and vegetables produced up
small and medium-sized Ministry of Agriculture, to 30%.
6.1.4 Ministry of Economy 2017-2020
grain storages in the local executive authorities
cereal-producing regions

Support for establishment

of the network of “green Ministry of Agriculture,
6.1.5 Ministry of Economy 2017-2020
markets” and “farmer local executive authorities
stores”

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Improve the digital

database containing data
Ministry of
6.1.6 on wholesale and retail 2017-2018
Agriculture
prices of agricultural
products
Ministry of Agriculture,
Assess needs and take
Ministry of Transport,
6.1.7 actions to develop Ministry of Economy 2017-2020
“Azerbaijan Railway” OJSC,
transport services
local executive authorities
6.2. Improve the regulatory system of the agricultural market

Improve the legal and

regulatory framework for Ministry of Economy, Ministry of
6.2.1 trade registration of Ministry of Taxes Agriculture, local executive
- Improve the regulatory system 2017-2018
of the agricultural market;
agricultural products in the authorities
domestic market
- facilitate all agricultural
Presidential
Establish Supply and producers’ access to markets; 2016,
Administration of the
Procurement of Food
Republic of Implemented
Products OJSC
Azerbaijan
- to reduce the difference
6.2.2
between the farm gate price
Supply and
Ministry of Agriculture, and the end consumer price
Improve agricultural and Procurement of
Ministry of Economy, by 50% in the maximum. 2017-2020
food supply Food Products
local executive authorities
OJSC

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period

Establish the system of Ministry of Agriculture,

interventions in case of Supply and Procurement of
6.2.3 Ministry of Economy 2017-2020
unfavorable market Food Products OJSC,
conditions local executive authorities

Establish an effective
system to effectively
regulate imports in order to
Ministry of Agriculture,
6.2.4 protect the domestic Ministry of Economy 2017-2018
State Customs Committee
agricultural and food
market against unfair trade
practices

6.3. Promote and support agricultural and industrial exports

Provide support for

geographical expansion of
the export markets, and
- 200 farmers specialized in
6.3.1 Ministry of Economy Ministry of Agriculture agricultural export until 2020; 2017-2020
maintaining a stronger
presence in the traditional
export markets
- ensure more than AZN 35
million direct and AZN 55
Promote the “Made in
6.3.2 Ministry of Economy Ministry of Agriculture million indirect GDP impact (a 2017-2020
Azerbaijan” branding
total of AZN 90 million) in real
terms in 2020;
Keep farmer informed
Ministry of
6.3.3 about potential export Ministry of Economy 2017-2020
Agriculture
markets

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Identify potential exporter- Ministry of - create 5060 jobs directly and

6.3.4 Ministry of Economy indirectly; 2017-2020
farmers Agriculture

Improve the certification State Committee for

system, and ensure Standardization, Ministry of Agriculture , Ministry
6.3.5 2018-2019
compliance with Patents and of Economy
international standards Metrology

Provide support for Ministry of Agriculture,

6.3.6 Ministry of Economy 2017-2020
obtaining export documents State Customs Committee

Strategic objective 7. Environmental protection, sustainable utilization of natural resources, and management of impact by
natural factors on agriculture

7.1. Establish mechanisms for mitigating the negative impact of climate changes and other natural factors

Assess the impact of

The Ministry of Ecology and
climate changes on
Natural Resources, - assess the impact of climate
7.1.1 agricultural production, and Cabinet of Ministers 2017-2018
Ministry of Agriculture, local changes
develop an adequate
executive authorities
adaptation plan
- develop an adequate
Ministry of Ecology
Improve the agri- adaptation plan for mitigation;
7.1.2 and Natural Ministry of Agriculture 2017-2018
meteorological database
Resources

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period

Look into the feasibility of

building an intervention and
Ministry of Ecology Ministry of Finance,
protection system against
7.1.3 and Natural Ministry of Agriculture, 2017-2018
adverse weather conditions
Resources local executive authorities
and hail for agricultural
purposes

Strengthen coordination Ministry of Ecology and Natural

between the competent Resources, Ministry of
7.1.4 authorities to improve the Cabinet of Ministers Agriculture, State Committee on 2017-2018
legal and regulatory Property Issues,
framework local executive authorities

7.2. Improve environmental protection mechanisms in agriculture

Establish indicators and

Ministry of Ecology and Natural
make assessments of Ministry of
7.2.1 Resources, ANAS, 2017-2018
agricultural compliance with Agriculture - reduce application of
local executive authorities
environmental standards chemicals in agriculture by
30%;
Ministry of Ecology
Reduce CO2 emissions in Ministry of Agriculture,
7.2.2 and Natural 2017-2020
the agricultural sector local executive authorities
Resources - reduce CO2 emissions in crop
production and animal
Ministry of Ecology husbandry;
Establish protective forest Ministry of Agriculture,
7.2.3 and Natural 2017-2020
belts local executive authorities
Resources

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period

Adopt an economic Ministry of Ecology - expand protective forest belts

Ministry of Agriculture, and the use economically
7.2.4 approach to environmental and Natural 2017-2020
local executive authorities efficient plant varieties in
protection Resources
landscaping by 30%;
Ministry of Ecology Ministry of Agriculture,
Protect agricultural-biological
7.2.5 and Natural ANAS, 2017-2020
diversity - Increase the use of alternative
Resources local executive authorities
energy sources in
Evaluate the transition to greenhouses by 20%;
“green economy” in State Agency for Ministry of Agriculture,
agriculture, and use Alternative and Ministry of Ecology and Natural
7.2.6 2018-2020
alternative energy sources Renewable Energy Resources
in providing heat to Sources local executive authorities
greenhouses

7.3. Improve mechanisms of sustainable use of agricultural lands and water resources

Establish the mechanism of Ministry of Ecology and Natural

conducting environmental Resources, Ministry of
7.3.1 impact assessment with Cabinet of Ministers Agriculture, State Committee on - increase the total size of crop 2017-2018
regard to changed land Property Issues, fields with crop rotation by
designation local executive authorities 15%;
Amelioration and Water
Take action to ensure - enrich the grass cover of
Management Office OJSC,
efficient use of land pastures by 25%;
7.3.2 Cabinet of Ministers Ministry of Agriculture, 2018-2020
resources, and re-cultivate
Ministry of Ecology and Natural
lands
Resources

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period

State Committee on Property - improve 30% of the irrigation

Issues, lands.
local executive authorities,
recommended to municipalities
State Committee on Property
Ministry of Issues,
7.3.3 Perform chemical soil tests 2017-2020
Agriculture ANAS,
local executive authorities
Ministry of Agriculture,
Ministry of Ecology and Natural
Improve pasture
7.3.4 Cabinet of Ministers Resources, State Committee on 2017-2020
management
Property Issues,
local executive authorities
Ministry of Agriculture,
Amelioration and
Reduce water losses to State Committee on Property
7.3.5 Water Management 2017-2020
consumers Issues,
Office OJSC
local executive authorities
Ministry of Agriculture,
Amelioration and
Ameliorate and prevent re- State Committee on Property
7.3.6 Water Management 2017-2020
salination of irrigation lands Issues,
Office OJSC
local executive authorities
Ministry of Agriculture,
Provide information based Amelioration and
7.3.7 on the evaluation of water Water Management Ministry of Ecology and Natural 2017-2018
resources Office OJSC Resources, local executive
authorities
Amelioration and Amelioration and Water
Improve water use in
7.3.8 Water Management Management Office OJSC, 2017-2020
drought-affected regions
Office OJSC Ministry of Agriculture,

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period

local executive authorities

Ministry of Ecology and Natural
Amelioration and
Mountain river Resources, Ministry of
7.3.9 Water Management 2017-2020
management Agriculture,
Office OJSC
local executive authorities
7.4. Development of eco-agriculture

Improve the legal

framework for eco- Ministry of Agriculture,
agricultural production and State Committee on Property
7.4.1 Cabinet of Ministers 2017-2018
look into the possibility of Issues, ANAS,
developing state programs local executive authorities
for that purpose
Ministry of Ecology and Natural - increase the number of eco-
Resources, Ministry of agricultural producers by 50%;
Ministry of
7.4.2 Promote eco-products Economy, local executive 2017-2020
Agriculture
authorities, recommended to
municipalities - increase eco-agricultural
Ministry of Economy, production twice.
State Committee on Property
Establish eco-agricultural Ministry of
7.4.3 Issues, local executive 2017-2020
farms Agriculture
authorities, recommended to
municipalities
Ministry of Agriculture,
Develop eco-agricultural
7.4.4 Minister of Economy local executive authorities 2017-2020
market
recommended to municipalities

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period

Strategic objective 8. Enhance state regulation of agriculture, and improve business environment

8.1. Take action to create enabling agribusiness environment

Improve the licensing, Ministry of Agriculture,

authorization and Ministry of Economy,
8.1.1 Cabinet of Ministers “ABAD” public entity, 2017-2018
certification system in
agriculture local executive authorities

Prevent unfair competition - grant licenses, authorizations

8.1.2 trends and increase anti- Ministry of Economy and certificates based on the 2017-2020
Ministry of Agriculture, “one stop shop” principle in
monopoly controls
local executive authorities agriculture;
Monitor access of
businesses to product Ministry of Ministry of Economy, local - improve laws and regulations
8.1.3 2017-2020
market and availability of Agriculture executive authorities in agriculture.
inputs, and develop reports
Ministry of Justice, State
Establish a risk-based Committee on Property Issues,
8.1.4 Ministry of Economy 2017-2018
inspection system Ministry of Agriculture,
local executive authorities
8.2. Establish e-agriculture, and improve the registration and statistical system
Ministry of Ecology and Natural
Establish Land Cadastre
8.2.1 State Committee on Resources, local executive 2017-2018
System
Property Issues authorities

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period

Complete the “E-

Agriculture” Information
8.2.2 System, and manage 2017
subsidization through the
Ministry of
system
Agriculture
Consider the possibility of
establishing the legal and
regulatory framework for
Ministry of Agriculture, - establish Land Cadastre
8.2.3 the registration of 2017-2020
local executive authorities System
agricultural producers
through the “E-Agriculture”
Information System
Cabinet of Ministers
- establish “E-Agriculture”
Information System;
Develop statistical reports
on the possible involvement State Statistical Ministry of Agriculture,
8.2.4 - organize primary 2017-2018
of producers in contract Committee local executive authorities
recordkeeping for 10 of the
farming and farmer unions
agricultural producers.
Develop statistical reports
State Statistical Ministry of Agriculture,
8.2.5 and examine backyard 2017-2018
Committee local executive authorities
crops

Group orchard crop data

based on traditional, State Statistical Ministry of Agriculture,
8.2.6 2017-2018
intensive and super- Committee local executive authorities
intensive orchards

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period

Collect statistical data of

Ministry of
8.2.7 cattle breeding and make Local executive authorities 2017-2018
Agriculture
examinations

Identify and register cattle Ministry of State Statistical Committee,

8.2.8 2017-2018
and sheep Agriculture local executive authorities

Establish e-database
containing information
Ministry of
8.2.9 about veterinary and Local executive authorities 2017-2020
Agriculture
phytosanitary control
services

Promote recordkeeping
Ministry of State Statistical Committee,
8.2.10 among the agricultural 2017-2018
Agriculture local executive authorities
producers

8.3. Strengthen the capacity of regulatory agencies

Design a strategic
development plan for the
Ministry of - expand international
8.3.1 Ministry of Agriculture and 2017
Agriculture cooperation of the Ministry of
other agencies attached to
Agriculture;
it

Develop and disclose Ministry of - ensure that 100% of the

8.3.2 2017-2020
annual reports on the Agriculture employees of the Ministry of

160
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period

activities of the Ministry of Agriculture acquire computer

agriculture and its agencies skills and knowledge;

Strengthen the capacity of

- increase the number of the
the Ministry of Agriculture in Ministry of
8.3.3 English speaking employees 2017-2020
strategic analysis, planning Agriculture
of the Ministry of Agriculture
and evaluation
by 50%.
Strengthen the capacity of
Ministry of
8.3.4 regional (town) offices of Local executive authorities 2017-2020
Agriculture
the Ministry of Agriculture

8.4. Improve the state support policy for agricultural producers based on development objectives
Ministry of Agriculture,
Make assessments and
Ministry of Economy,
8.4.1 present proposals to Cabinet of Ministers 2017-2018
Ministry of Finance,
improve subsidization - extend the list of crops subject
local executive authorities
to subsidization;
Present proposals for
improving the customs Ministry of Agriculture,
policy set for tax credits Ministry of Economy,
- form a differential
subsidization system based
8.4.2 applied to agricultural Cabinet of Ministers Ministry of Finance, Ministry of 2017-2018
on regional characteristics;
producers, and the import Taxes, State Customs
of various agricultural Committee
inputs - develop a plan of incentives
for farms located in highlands;
Ministry of Agriculture,
8.4.3 Set forth proposals to Cabinet of Ministers Ministry of Economy, 2017
provide state support for Ministry of Finance,

161
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recommendations
period

stimulating the growth of local executive authorities - increase the total size of
greenhouses newly established orchards
and greenhouses by 50%.
Ministry of Economy, Ministry of
Conduct a feasibility study
Agriculture,
for the discount sale of
8.4.4 Ministry of Finance Amelioration and Water 2017
irrigation water to
Management Office OJSC,
agricultural producers
local executive authorities
Develop the proposal to
Ministry of Agriculture,
provide state support for
8.4.5 Cabinet of Ministers Ministry of Economy, 2017-2018
the growth of cattle
local executive authorities
breeding
Ministry of Agriculture,
Stimulate the growth of
8.4.6 Cabinet of Ministers Ministry of Economy, local 2017-2020
perennials
executive authorities
8.5. Design a system to monitor and evaluate agricultural policy outcomes

Establish a system and

methodology to monitor Ministry of
8.5.1 State Committee on Property Issues 2017-2018
and evaluate the outcomes Agriculture - ensure availability of
of the agricultural policy information to evaluate
efficiency of the implemented
Develop reports on the agricultural policy measures
Ministry of State Committee on Property
8.5.2 evaluation of the 2017-2020
Agriculture Issues, local executive authorities
agricultural policy outcomes

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period

Improve performance of the

Ministry of
8.5.3 Farmer Data Monitoring 2017-2020
Agriculture
System

Strategic objective 9. Increase rural employment and welfare

9.1. Strengthen the potential for the implementation of the socio-economic development policy in rural areas

Develop and implement Concerned central and local

9.1.1 pilot projects for integrated Ministry of Economy executive authorities, 2017-2020
rural development Recommended to municipalities
Ministry of Labor and Social
Protection,
Establish the statistical
Ministry of Agriculture,
base and monitoring
9.1.2 Ministry of Economy State Committee on Property 2017-2018
system for rural socio-
Issues - Establish the statistical base
economic development
State Statistical Committee, and monitoring system for
local executive authorities rural socio-economic
development
Improve the existing
legislation with regard to Concerned central and local
9.1.3 Ministry of Economy 2017-2018
rural socio-economic executive authorities
development

Develop a state program

Concerned central and local
9.1.4 for rural socio-economic Ministry of Economy 2017
executive authorities
development

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period

9.2. Support alternative fields of rural activities

Ministry of Economy, Ministry of
Develop rural tourism and Ministry of Culture Agriculture,
9.2.1 2017-2020
eco-tourism and Tourism local executive authorities
Recommended to municipalities
Ministry of Agriculture,
Ministry of Labor and Social
Develop non-agricultural
9.2.2 Ministry of Economy Protection, 2017-2020
production areas
local executive authorities
- increase the number of rural
Recommended to municipalities
tourists twice;
Develop service areas in local executive authorities
9.2.3 Ministry of Economy 2017-2020
rural areas Recommended to municipalities
- increase the number of non-
State Committee for Family,
agricultural production areas
Women and Children Affairs,
and employees by 30%;
Ministry of Youth and Sport
Increase woman and youth
9.2.4 Ministry of Economy 2017-2020
employment in rural areas Ministry of Labor and Social
- increase the number of
Protection, local executive
woman employees working in
authorities, recommended to
non-agricultural areas by 20%.
municipalities
Ministry of Labor and Social
Protection, State Committee for
Family, Women and Children
Improve housing conditions
9.2.5 Cabinet of Ministers Affairs, Azerbaijan Mortgage 2020
for new young families
Fund,
local executive authorities
recommended to municipalities

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period

9.3.Support local community initiatives for rural development

Increase municipal
commitments for socio- Ministry of Economy, local
9.3.1 Ministry of Justice 2017-2020
economic development in executive authorities
rural areas
- increase the number of rural
Promote and support Ministry of Agriculture,
jobs created by municipalities
9.3.2 profitable community Ministry of Economy local executive authorities 2017-2020
by 30%;
sectors in rural areas recommended to municipalities

Ministry of Labor - increase the number of

and Social woman and youth
Ensure active involvement Protection, State development projects in rural
of women and youth in the Committee for Local executive authorities areas 3 times.
9.3.3 Family, Women and 2017-2020
socio-economic life in rural recommended to municipalities
areas Children Affairs,
Ministry of Youth
and Sport

165