REGIONAL CORNER: SUMGAIT, AZERBAIJAN

 

By Judith Robinson

 

Azerbaijan’s city of Sumgait was developed between 1948 and 1950 as a showcase Soviet industrial city. Located 35 km. north of the Azerbaijan capital of Baku, Sumgait’s 83,000 sq. km. were devoted to the metallurgy, chemical, petrochemical, and textile industries. The population stands at about 250,000, with over half below the age of 30 and with a very high level of education. Available statistics, which show employment at about 72,000, fail to reflect the significant number of employees on involuntary furlough due to low levels of capacity utilization in the city’s enterprises.

 

Today, this City of Tomorrow, as Sumgait was termed, has become seriously polluted from its aluminum and steel plants, its chemical processing facilities, and unstemmed, untreated agricultural and municipal runoff. These significant environmental problems are barriers to the area’s human and economic development. At the same time, the problems have generated opportunities; environmental improvement in the region requires investment of resources and must be coupled with industrial rehabilitation. The Azerbaijani Government, in cooperation with international financial support and foreign investment entities, is working to improve environmental conditions and ensure that development of Azerbaijan’s oil and gas reserves will generate revenue and support for other local industries, including those in Sumgait.

 

Investment opportunities in Sumgait are most promising in industries that serve Azerbaijan’s growing oil/gas industry: (1) in the metallurgy sector, several companies that manufacture seamless steel pipes and ferrous and nonferrous engineering components  (such as Azerbaijan Tube and Pipe Works, sister to Ukraine’s Seversky Pipe plant, which acts through a holding company, Metallurgiya); and (2) in the petrochemicals/chemicals industry, eight of the country’s 15 plants are located in Sumgait and manufacture polyethylene, synthetic rubber, chemicals, and detergents. Additional opportunities exist in textiles and food processing.

 

Sumgait enjoys local availability of raw inputs: oil, minerals, fibers for textiles, and food crops for food processing. Its location on the Caspian Sea is advantageous for regional exports. There is also a growing domestic market for oil-related production and a domestic consumer goods and food market that will grow as oil revenues create spending power. Weaknesses include low levels of capacity utilization, legal inadequacies and tax and regulatory constraints, a shortage of management skills, a small domestic consumer goods market, outdated technology and a lack of funds for new technologies and equipment, plus a high level of pollution.

 

As first steps toward addressing the environmental situation, Azerbaijan’s federal government and the Sumgait local government have shut down Sumgait’s worst offending facilities, pending the installation of more efficient processes. Plans are in place for upgrading and expanding the city’s municipal wastewater treatment facilities. Sumgait has benefited from international assistance, some of it aimed at environmental management and coordinated economic rehabilitation. The World Bank, United Nations, the European Bank for Reconstruction and Development, and the Islamic Development Bank have all been active in the area, as has the EU’s tacis program. An Azerbaijani Federal Committee for Ecology is in place to develop and carry out a coherent environmental policy countrywide, but is currently handicapped by inadequate environmental laws and enforcement.

 

For more information on Azerbaijan, visit BISNIS Online at www.bisnis.doc.gov/bisnis/country/caucasus.htm#Azerbaijan.

 

Judith Robinson covers Azerbaijan for BISNIS in Washington.