TODAY.AZ / Business

Azerbaijan's tourism potential amidst changing economic landscapes [COMMENTARY]

15 March 2024 [16:44] - TODAY.AZ
By Azernews

Ulviyya Shahin

Before the emergence of issues like global warming and climate change, the world economy heavily relied on oil for its development. With many countries transitioning towards industrialization, recreational spaces such as tourism were diminishing.

However, as global challenges intensified, there arose a need to explore alternative avenues for economic growth. Expanding tourism emerged as a healthy and secure option in this regard, with Azerbaijan positioned as a country with promising prospects in the field. The liberation of over 20% of territories and corresponding infrastructure projects have significantly influenced the sector's growth.

Statistics indicate that between January and August 2023, Azerbaijan welcomed over 1.3 million travelers. Projections suggest that tourist inflow could reach 4 million by 2026, with a notable 50% increase compared to the previous year. Yet, challenges persist, particularly concerning closed land borders hindering tourist arrivals.

In the period of January-October 2023, Azerbaijan experienced a significant surge in tourist arrivals from Central Asian countries, with notable increases from Kazakhstan, Uzbekistan, Turkmenistan, Kyrgyzstan, and Tajikistan. This uptick is largely attributed to events like the 30th TURKSOY, underscoring Azerbaijan's commitment to promoting shared Turkic heritage and cultural integration.

Overall, these developments underscore Azerbaijan's growing appeal as a tourist destination, with concerted efforts to foster tourism growth and strengthen ties with Turkic countries contributing to increased visitor numbers in recent years.

Here poses two questions: How can foreign and domestic investments be attracted for the development of tourism in Azerbaijan?

Speaking to Azernews Gulnar Mustafayeva, Head of the Media and public relations sector of the State Tourism Agency, said that currently, investors interested in Azerbaijan's tourism sector can benefit from many mechanisms that encourage investment in non-resource sectors.

"For instance, investors can obtain investment promotion documents to benefit from tax and customs duty incentives, utilize favorable loans from the Entrepreneurship Development Fund (SIF), and access state guarantees and interest subsidies for loans offered by the Mortgage and Credit Guarantee Fund. It's worth noting that, according to data up to October of last year, tourism projects accounted for 1.5% of all investment promotion documents issued, while 8% of favorable loans provided by SIF in 2023 were allocated to tourism projects."

"In addition to the aforementioned incentives, entrepreneurship entities in the tourism sector can also benefit from various general tax incentives depending on their size and volume of activity. These include simplified tax regimes based on turnover, voluntary participation in simplified tax regimes independent of catering establishment turnover, a 75% income and profit tax exemption for micro-entrepreneur entities, and a 100% property tax exemption. Furthermore, institutions providing placement services in regions can benefit from a 75% property tax exemption over the three years covering 2024-2026," she added.

According to her, tourism-related investment projects implemented in the liberated territories can enjoy broader benefits over a period of 10 years starting from 2023. Investors contributing to these areas are exempted from income, profit, land, and property taxes.

"Additionally, in order to optimize business fiscal expenses, entrepreneurs will gradually be relieved of their mandatory state social insurance obligations over the period from 2023 to 2033. Moreover, state guarantees are provided for loans attracted for projects, significant portions of interest expenses on these loans are subsidized, and even 20% of expenses for utility services are compensated from state funds."

Mustafayeva noted that first and foremost, awareness among local and foreign investors about the aforementioned incentives and supportive tools should be increased, and all these opportunities, especially business support platforms, should be communicated to a wider audience.

"The Agency continues its enlightening activities in the relevant direction within its capabilities and authorities. Nevertheless, we invite various professional associations, including business associations, to participate more actively in this field."

"Furthermore, the State Tourism Agency continues its policy of improving cooperation with relevant government agencies to increase the attractiveness of the business environment in the tourism sector and ensure the continuity of investment flows into the sector," official of the agency concluded.


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