During the oil boom in Azerbaijan, the government has always emphasized that it would invest in the non-oil sectors of the government. Investments totaling 4.5 billion manat ($2.6 billion) were made from 2004-2018 to build factories under the “State Program on Socio-Economic Development of Regions.”
This program was supposed to create new jobs for thousands of Azerbaijanis living in the countryside. But nine factories opened personally by Azerbaijan president Ilham Aliyev are either unprofitable or have been closed. The total investments are over $1 billion (all figures at 2020 exchange rates).
According to the State Statistics Committee, the non-oil sector grew on average 5.6 percent annually between 2003-2012. More recently, President Aliyev said it grew 3.2 percent in the first six months of 2019.
Here’s a look at nine factory projects that are either closed or operating well below capacity. In most cases, the government is the major customer, using taxpayer money to buy goods from factories built with mostly taxpayer money:
Ganja Automobile Factory
The factory was announced in 1986 with plans to build 30,000 cars annually. Due to the collapse of Soviet Union, construction stopped in 1990. After Independence, construction was finished in December of 2004.
The most money was allocated in 2007 (2 million manat/$1.18 million) and 2011 (1.5 million manat/$882,000) .
In addition, a 2017 Chamber of Accounts report states that the factory received 3.48 million manat ($2 million) from the State Budget Reserve Fund for two projects. There is no information in the report on what these projects are.
For several years beginning in 2003, records show the government was giving Lada Oka model cars produced at this factory to war veterans and the families of soldiers killed in the Nagorno Karabakh conflicts.
According to Khanlar Fatiyev, who was head of the Ganja Automobile Plant Production Association in 2016, the factory produced 5,431 tractors in 2006, of which 4,600 were ordered by the government. Prices for MTZ brand tractors ranged from 20,000-40,000 manat ($11,800-$23,600). Prices for heavy duty trucks ranged from 35,000-200,000 manat ($20,000-$118,000)
From 2013-15, the factory produced 2,959 MTZ brand tractors, over 2,000 other farm vehicles, and 925 trucks. Sales for 2013-2015 totaled 200 million manat ($120 million). The state-controlled “Agrolizing” OSC was a major client. In 2007, Agrolizing bought 8,466 out of 10,000 tractors produced. In 2018 they signed a contract for another 1,000 tractors and 700 tractor trailers. Factory director Kamran Nazarov said that in 2015, the factory signed a long-term contract to build 1,500 Russian “KamAz” model cars per year. There were 85 employees when the factory opened. In 2015, Nazarov said there were 500 employees. Now there are about 200.
A 35-year-old former employee who asked to remain anonymous started in 2015 and left in 2018. He says his monthly salary of 250 manat ($147) was reduced to 180 manat ($106) because there weren’t enough orders.
“Most of the departments of the factory were closed; only a couple of them were working,” he said. “As a result, many workers lost their jobs and salaries were reduced. Half the employees are gone.
“It was impossible to live on that salary and I had to quit. I’m supporting a family of four plus my mother. I work as a waiter now and make 450-500 manat ($260-$294) per month.
“The factory is not closed, but it can’t be profitable. It didn’t become a workplace for citizens as it was supposed to be. For awhile there were many jobs, but over time people lost their jobs or had their salaries cut in half. The factory wouldn’t survive without government contracts.”
Shamaki Star LSC
In 2004-2005 Star LSC was built in 2004-05 to produce televisions and household appliances. The government loaned money to private owners. President Aliyev attended the opening ceremony and spoke about the new jobs created.
The government invested 5 million manat ($2.9 million) But according to independent expert-economist Natig Jafarli), over $7 million was invested in this factory. There were over 250 employees and an annual production capacity of 1.2 million units.
According to the State Statistics Committee, 89,700 televisions and 74,200 refrigerators were produced from 2003-12.
In 2013, the last year for which the Statistics Committee printed data, the factory produced 24,372 televisions.
The factory closed in 2016. The doors are locked and there are only a few security guards. One of them said almost nobody comes to the factory:
“They send a person once a month who gives me my salary. I protect not the factory, but the building. The factory has been closed for years and doesn’t produce anything.”
Shamakhi Azsamand car factory
State-controlled Star LSC opened this plant in 2005. The invested $10 million for construction. (http://tarixinstitutu.az/page/100/shamakhi) Production capacity is listed at 2,880 units annually with 900-1,000 employees if the factory worked at full capacity.
In 2012, the last year statistics were published, only 25 cars were produced. The factory is now closed.
“Kür” Electronic Equipment Production LSC
The factory opened in 2005, and according to economist Yadigar Sadigli, it had 110 employees and at full capacity would produce an annual income of 7 million manat ($4.1 million).
The factory is owned by the Ministry of Communications and Information Technology and Sinam, a private Baku-based IT company founded by Elchin Aliyev. He’s the head of the Laboratory of Institute of Management Systems at the National Academy of Sciences. Sinam has several government customers including the President’s Office, the Customs Committee, and the Social Protection Fund. Together they invested $1.5 million.
At present the factory is not operating. According to former director Rizvan Osmanov, there were 100 employees at one time, but only two remain.
“The factory is not closed, but production has stopped. It was privatized in 2018, and the new owner hasn’t restarted production,” says former factory director Rizvan Osmanov. He says he doesn’t know who that new owner is.
Shamil Mammadov worked as a laborer at the factory from 2006-10. He says the factory was most successful when Misir Mardanov was Minister of Education (1998-2013).
“He provided all IT classrooms in schools with our computers,” Mammadov said. “Almost all the orders were coming from the Ministry of Education.”
Mammadov says the factory was in serious trouble for a long time, but no one was talking about it publicly. “In 2018 it was privatized, and employees lost all hope for any better future.” He now distributes goods to markets and makes 600 manat ($353) a month.
Shamakhi Azərelektronika household appliance factory
This 13-hectate factory was built between 2005-2008. 50 million manat ($29.4 million) was invested in this project.
According to the State Statistics Committee, 74,200 refrigerators were produced between 2003-2012. In 2013, 6,662 refrigerators and 9,435 air conditioners were produced. Productivity decreased in 2014: only 3,850 refrigerators and 1,275 air conditioners. In 2015, only 180 air conditioners were produced.
A spokesman for the Shamakhi governor’s office said they don’t know why the factory closed. President Aliyev also attended this opening ceremony. According to a press release, there were 250 workers and the annual production capacity was 600,000 air conditioners. There were plans to also produce refrigerators, vacuum cleaners and other household appliances. Up to 1,000 workers more workers would be hired.“This place has been closed for years. There are only two employees left; one is the director who often visits the factory, and me, the security guy,” said the only man at the factory.
Shamakhi resident Anar Aliyev, 42, worked in the factory for over two years before it closed in 2016.
“A lot of people lost their jobs,” he said. “There were about 200 manual laborers. We were producing high quality refrigerators and air conditioners. It closed unexpectedly. The huge building became an empty and abandoned place.”
Aliyev earned 300 manat ($176) a month at the factory. Now he supports his family of six plus his mother driving taxi and earning 7-12 manat ($4-7) per day.
Nakhchivan Car Factory
This factory opened on January 10, 2010, and was supposed to produce 5,000 cars a year using materials imported from Germany, Belgium and Italy. The factory built trucks and a Lifan model cars. Before devaluation of the manat in 2015, the cheapest car sold for $7,500. Prices ranged from $10,000-35,000.
Chinese-based Chongqing Lifan Industry invested $3.5 million to start production. But demand was low. President Aliyev gave a speech on January, 27, 2016 and suggested government organizations should buy Azeri-built cars to support the economy.
Factory director Musa Abdullayev points out that sales increased after the president’s speech. The Ministry of Education, Caspian Sea Shipping CJSC, The Ministry of Labour and Social Protection of the Population (MLSPP), CJSC Azerbaijan Railways, State Insurance Commerce Company, Azpetrol, SOCAR, and Cahan Holding ordered a total of 270 cars. 270 cars were produced in 2016, but 121 “NAZ-Lifan” model cars were unsold.
Then the factory got a big government order. According to an Account Chamber report, 5.2 million manat ($3 million) was spent on 540 cars which were given to war veterans.
According to 2017 statistics, the Ministry of Labour paid 20 million manat ($11.7 million) to the factory, and 120 cars were given to Karabakh war veterans and survivors of a bloody Soviet crackdown on January 20, 1989. Before that order, factory director Musa Abdullayev said only three cars had been sold in 2017: “At present there is no work.”
In January-October of 2018, the factory produced 610 cars. But that increase still falls far below the annual total of 5,000 in the original business plan.
Ganja “Det-Al”Aluminum Complex
This factory opened in 2012. In his opening ceremony speech, President Aliyev stressed that this plant would play a very important role in the nation’s economy:
“The opening of this plant proves the successful development of our country. All socio-economical programs are being implemented by the country. The government supported the construction of this plant; this is an investment in the non-oil sector. All products produced here will be exported in addition to providing for our growing demands. This is a very profitable project and at the same time it means new jobs for people; over 600 people will work in this plant.”
In 2009, the government allocated 110,527,000 manat ($65 million) to supply energy to the plant. Another 35.6 million manat ($21 million) was allocated in 2010-11 for plant construction. Det-Al was commissioned in 2014. It’s capable of producing 50,000 tons annually. According to the President’s office, 1,400 people were employed.
But Det-Al’s production has dropped greatly. In 2016 all workers were laid off; now about 100 have returned. When contacted, Akif Ibishov said he was no longer plant director and has no information. Det-Al was financed by the International Bank of Azerbaijan, and when IBA declared bankruptcy, the Ministry of Finance assumed responsibility for Det-Al’s debts.
“Dozens of workers lost their jobs,” said one current employee who wishes to remain anonymous. “There are delays in the payment of salaries. I used to earn 230 manat ($135) and now it’s only 180 ($106). The plant is not closed, but it looks pretty much like it.”
Another man earned 240 manat ($141) a month as a manual worker at Det-Al from 2017-2019. “Now we are unemployed,” he said. “The plant doesn’t really operate anymore. If it was going to be closed, why did they spend so much money on it?”
He needs a new job. He has three children and spends about 150 manat ($88) a month on extra afterschool lessons for them in hopes they pass exams and can someday go to the state university.
Ismayilli Bicycle Factory
“All necessary materials are imported from abroad. At present there is no work here due to the absence of materials. There are only 15 employees here. Most of the workers are laid off, and no one knows when they will be called back,” says a security guard.
President Aliyev attended the opening ceremony in 2016. Synergy Group, controlled by Ashraf Kamilov, was listed as the owner, but 7 million manat ($4.1 million) was invested by the government. According to a 2016 OCCRP investigation, Kamilov and members of President Aliyev’s family engineered a series of financial transactions that turned a $64 million profit just before a crippling devaluation of Azerbaijan’s currency in 2015. It was announced that 60 people would be hired at first and more later. The company uses equipment from Bulgaria, Denmark, Netherlands, China and Turkey. The production capacity for five models is up to 30,000 bicycles per year.
But a reporter was told there were never 60 employees. “The director, his deputy, the accountant — and if we count the cleaners — there were never more than 20 people,” one employee said. “Now it’s closed and we sit at home. We don’t know whether they will pay our salaries for this period or not. I doubt it. This already happened once before.” His salary was 214 manat ($126).
“The accountant is in the factory now. She comes for one or two hours and then leaves,” the security guard said.
On May 29, the official webpage of the Ismayilli region executive branch has announced that the factory resumed its operation.
According to the press release, the factory produces 100-150 bicycles per day. They are exported to the local market; the prices vary between 120 to 3,000 manat ($71-1768): “Currently during the pandemic in accordance with quarantine rules 30 employees work in the factory,” reads the statement.
SOCAR Carbamide plant
The government invested 500 million euro in the construction of this nitrogen fertilizer plant between 2011-2016. It’s the biggest non-oil project in the country and its total construction cost was about 800 million euro.
In the beginning the project was financed by the government; then it was financially supported by several international banks, and state oil company SOCAR also invested 100 million euro. According to official reports, it was supposed to create 500-600 jobs.
But the head of one department who wants to remain anonymous told iFact.ge that they are fewer employees. He said foreign workers earn 2,000-3,000 manat ($1,175-$1,765) or more per month. Experienced local engineers get about 800-1,500 manat ($470-880). Operators and manual workers get 2-4 manat ($1.18-$2.36) per hour.
Some economists say the plant has not contributed much to the national economy.
According to a 2019 State Customs Committee report, the plant earned 7.2 million manat ($4.2 million) for selling 44,931.1 tons of carbamide to Turkey (22,193) Ukraine (993.6), Romania (2,825.8), Bulgaria (10,166,6) and Russia (8752.5). It sold for 272 manat ($160) per ton.
In July, 2019, government-controlled Aqrolizing OSC announced it would buy 25,000 tons at the far higher price of 420 ($247) manat per ton, and also pay all transportation costs.
In his 2012 speech at the Ganga Aluminum plant, President Aliyev said $17.6 billion had been invested in the nation’s economy in 2010 and another $20 billion in 2011.
“Every region of the country is developing thanks to these funds. Big programs are being implemented, including specific development projects and other infrastructure projects. We are moving forward solving the problems of unemployment,” the President said.
According to a Turan news agency story, the Statistics Committee in September 2019 calculated unemployment at 42,000 people in the regions in addition to 29,000 in Baku. In reality, thousands more are unemployed or earning below the poverty level, set at 250 manat ($147) on September 1, 2019.