IMPROVING STATE FINANCIAL SUPPORT FOR THE DEVELOPMENT OF SPECIAL ECONOMIC ZONES IN AZERBAIJAN

Abstract

Special Economic Zones (SEZs) in Azerbaijan face significant challenges due to inadequate and inconsistent state financing, exacerbated by competing budgetary priorities such as post-conflict reconstruction and economic crises. The over-reliance on state funding has led to delayed development, stagnation in most SEZs, and disproportionate dependence on a single successful zone (Sumgait Chemical Industrial Park), which accounts for over 80% of national SEZ performance. Existing bureaucratic barriers, legislative rigidity, and the absence of private or hybrid financing models further constrain SEZ growth, limiting their potential to attract diversified investments, reduce unemployment, and drive economic diversification. This article aims to propose a reformed financial and management framework to address these systemic challenges. This study employs systematic analysis, quantitative analysis techniques, and generalization to investigate the operations of industrial parks and industrial districts in Azerbaijan and analyze their current performance indicators. It also compares Azerbaijan’s SEZ financing mechanisms with foreign practices to evaluate their prospects and applicability. The results indicate that the improvement of state financing for SEZs in Azerbaijan could lead to enhanced development. Based on these findings, the article recommends reforms to strengthen state financing mechanisms by implementing hybrid public-private financing models. Additionally, it suggests legislative reforms and increased private-sector participation to establish sustainable funding strategies, reduce reliance on state budgets, and improve SEZ performance metrics, such as economic diversification, export growth, and unemployment reduction, thereby fostering a competitive and corruption-resistant business environment.

JEL: H21, H39, H54.