A new stage in the development of non-oil and gas exports: how compensation of logistics costs will boost competitiveness

In recent years, the volume and geography of Azerbaijan's non-oil and gas exports have been expanding.

Ensuring the sustainability of this trend and expanding opportunities for exporters are among the key areas of state policy. In this context, the decree "On additional measures to stimulate the export of non-oil and gas goods and to support transportation costs" represents an important step in promoting exports and creating new support mechanisms.

According to the decree, the state will compensate part of the transportation costs associated with the export of non-oil and gas goods of Azerbaijani origin. In particular, up to 70% of such costs will be covered from state funds. This measure will allow entrepreneurs to reduce logistics expenses and increase the competitiveness of local products in foreign markets.

The support mechanism has been applied since September 1 of this year.

The amount of state support paid to entrepreneurs will be determined taking into account the type of transport used for export, the transportation costs incurred, and the customs value of the goods. When calculated on the basis of transportation costs, the compensation will amount to 70% of the actually paid expenses for shipping by rail, air, and sea transport, as well as by vehicles registered in Azerbaijan. For transportation by road vehicles registered abroad, 50% of the costs will be compensated.

When calculated on the basis of customs value, 5% of the value of the goods is taken into account for sea transportation and 15% when other types of transport are used. The smaller of the two amounts obtained as a result of these calculations is paid as state support.

Along with this mechanism, as of September 1 of this year, the state will compensate 70% of the transportation costs associated with the shipment of non-oil and gas goods of Azerbaijani origin produced in the Nakhchivan Autonomous Republic to other regions of the country.

The mechanism will apply to export operations and domestic shipments carried out until September 30, 2036. Entrepreneurs may collect documents confirming export operations or domestic shipments carried out during each quarter and submit them to the Ministry of Economy after the end of the relevant quarter. On the basis of these documents, the amount of state support will be calculated and then paid to the entrepreneur.

In order to expand exports of non-oil and gas products of Azerbaijani origin, starting September 1, 2026, the state will also compensate part of the customs clearance costs. Exporters classified as micro, small, and medium-sized business entities will be able to take advantage of this support. The amount of compensation will be determined on the basis of the customs clearance fee rate applied to the customs value of the exported goods, taking into account the established maximum payment amount for each export declaration.

It should be noted that the mechanism for compensating customs clearance costs for exports will be in effect until September 30, 2031 — for five years.

Additional opportunities for entering new markets

One of the key strategic outcomes of the decree may be encouraging Azerbaijani companies to enter not only traditional but also new, alternative markets. High transportation costs that arise when developing new foreign markets are one of the factors limiting the competitive capabilities of exporters. The complexity of logistics chains and the high share of long-distance transportation costs in the cost of production hinder export diversification both in terms of the range of goods and the geography of deliveries. The new mechanism creates additional opportunities for companies to develop new markets.

For example, if an entrepreneur previously considered exporting to a particular country economically unfeasible due to high logistics costs, the new support mechanism may change the assessment of the profitability of such deliveries. Thus, state support can become an additional economic incentive for a company.

Support mechanism for Nakhchivan

Another important area of the decree is support for the transportation of non-oil and gas goods of Azerbaijani origin produced in the Nakhchivan Autonomous Republic to other regions of the country. This mechanism is of particular importance for expanding production in Nakhchivan. It is no less important to ensure the delivery of products from Nakhchivan to other cities and districts of Azerbaijan at competitive prices. If logistics costs significantly increase the price of goods, products made by Nakhchivan manufacturers may face difficulties in competing in the markets of other regions of the country. Therefore, support for domestic transportation may contribute to expanding the sales geography of products made in Nakhchivan.

The support mechanism provided for Nakhchivan should not be viewed merely as a measure to reduce entrepreneurs' transportation costs. It pursues a broader economic goal — the deeper integration of products made in Nakhchivan into Azerbaijan's domestic market. From this point of view, support for domestic transportation can strengthen both Nakhchivan's production potential and the region's capabilities in the sphere of sales and supply.

Overall, the decree is one of the important elements of state policy aimed at expanding non-oil and gas exports in Azerbaijan. This mechanism is capable of increasing the competitiveness of Azerbaijani products in foreign markets, stimulating entry into new export markets, expanding the geography of deliveries, diversifying the structure of non-oil and gas exports, and creating additional incentives for the use of local logistics opportunities.