World Bank urges Azerbaijan to accelerate reforms to attract private investment

The World Bank has recommended that Azerbaijan intensify reforms aimed at improving its business environment and attracting greater private investment, Azernews reports, citing the Bank’s latest report.

The institution emphasised the need to enhance tax policy predictability, ensure a level playing field for businesses, and strengthen judicial mechanisms to foster investor confidence.

According to the report, Azerbaijan’s Socio-Economic Development Strategy for 2022–2026 prioritises diversifying the economy, reducing dependence on hydrocarbons, and expanding the role of the private sector. “The success of these goals depends on boosting investment levels — particularly private investment in the non-hydrocarbon sector,” the report noted.

World Bank experts said increasing private investment outside the energy sector will require structural reforms to remove barriers to doing business. “The Azerbaijani government continues to make consistent efforts to support the private sector by improving the business climate,” the report added.

Analysts highlighted that regular consultations between the public and private sectors are key to resolving investment challenges. One proposal is the adoption of a medium-term tax framework that would inform businesses in advance about planned tax changes, a step the Bank believes would enhance predictability and reduce uncertainty for investors.

To create equal conditions for market participants, the Bank recommended strengthening the legal and institutional base for competition and adopting regulations to ensure compliance. It also suggested promoting competition neutrality and separating the state’s regulatory and operational roles, especially in sectors dominated by state-owned enterprises, to enable greater private participation.

The World Bank further advised developing a state aid control framework to limit market distortions arising from government support for specific enterprises or industries.

The report stressed the importance of establishing a long-term commitment to targeted business climate reforms, with participation from both public and private stakeholders, to enhance policy predictability and reduce market uncertainty. It also called for stronger institutional support for SMEs through agencies such as SMBDA, AZPROMO, and AzExport, helping them expand access to domestic and international markets.

In addition, the Bank encouraged Azerbaijan to continue implementing judicial reforms and address gaps in the legal framework, including dispute resolution mechanisms for intellectual property rights.

“Implementing structural reforms that remove these constraints can stimulate private investment inflows and further support the diversification of Azerbaijan’s economy,” the World Bank concluded.