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Is “monopolization” in local construction production possible?

Is “monopolization” in local construction production possible?
Experts say we have sufficient potential in this field

There has been a serious growth in the construction industry in the recent years in Azerbaijan. Large-scale construction work is undergoing in many parts of the country with many new schools, kindergartens, sports and residential complexes, administrative buildings being built. Construction of social homes has also increased the interest in this sector. This growth, in turn, affects the development and expansion of the country’s economy. And this makes construction even more a prospective sector. While it is partially due to the increased financial capabilities of the state, the other reason for it is the existence of the free business environment. Under these circumstances, construction sector is not only attractive for local entrepreneurs but also for foreign investors. 

According to Trend, deputy minister of Economy Niyazi Safarov has stated that Azerbaijan intends to fully provide itself with construction materials at the IV EU-Azerbaijan business Forum. According to Safarov, development of the construction industry in recent years had led to the creation of modern enterprises as well as ensured self-sufficiency when it comes to construction materials. He noted that Azerbaijan is fully self-sufficient in the production of cement, brick and many other construction materials: "In recent years, production of raw materials for construction has grown by 47% including 24% increase in cement, over 60% growth in construction-concrete plants, 48% increase in brick and 96% increase in ready mixed concrete mixture production”. 

We should note that, the head of the state is particularly interested in this issue. At a meeting with a delegation led by Wolfgang Buchel, the chairman of the German Committee for the Economy of Germany, president Ilham Aliyev said that Azerbaijan had gone from being a country that imports cement to one that exports cement in the past eight years. Bringing up the construction materials sector in Azerbaijan, President Ilham Aliyev pointed out that large cement plants were built in our country. 

We tried to find out how realistic it was to meet the demand for construction materials with the domestic production and what advantages would it bring if it were to happen. 

Economist Vugar Bayramov said that our country had sufficient potential in that sector: "Self-sufficiency in the production of construction materials is very important. At the moment, Azerbaijan meets the considerable part of the demand for construction goods through imports. Certainly, the production of some materials, especially brick and cement, takes place in our own country. But other construction equipment is being imported from abroad. Consequently, our currency is transferred to another country. In general, Azerbaijan has the ability and potential to provide building materials. But I do not think it is possible to fully meet the demand for wood product in the near future. However, the potential for the organizing the production of other materials and meeting our country's demand for this material through domestic production is quite high. 

We also asked what kind of advantage increasing domestic production would bring. The economist says the main advantage will be eliminating of Azerbaijan's dependence on imports: "Elimination of dependence on imported goods first and foremost mean that the currency would stay in our country. It will also allow domestic production to be available at a cheaper and more affordable price. The fall in construction materials prices may impact the gradual price regulation in real estate. Increasing domestic production will also lead to an increase in employment. Moreover, the elimination of imports will increase the revenue to the state budget".

Chairman of the Azerbaijan Appraisers' Association, Property Expert Ramil Osmanli says it is difficult to increase the production of some construction materials: "The forest cover in Azerbaijan isn't able to meet the demand for wood production so far. At the same time, there is a serious shortage of raw materials on iron and iron products. In addition, there are many building materials that are being produced, but their competitiveness is very low. But there are enough raw materials in our country to produce some construction materials. Yes, if we look at the last five years, we would see that the local production exceeded import in Azerbaijan. The ratio was 70%: 30% a few years ago. Today, even though it's still not 100%, 70-75% the construction demands is met by domestic production"
We asked the expert how the increase in local production would affect the real estate market: "Research shows that in recent years, local production has not seriously affected the price reduction in the real estate market. Entrepreneurs apply adequate pricing policies to those imported to domestic production. I think that even if domestic production fully met the demand for construction materials, it still wouldn't have a significant impact on the real estate market under current circumstances".

Gunel AZADA

 


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