THE USAID PRIVATE SECTOR ACTIVITY (PSA)

Monthly Progress Report

Project Year 5. October 1 – October 31, 2023

Prepared for review by the United States Agency for International Development under USAID Contract No. 72011219C00001. The
USAID Private Sector Activity (PSA) is implemented by CNFA.
 2

The USAID Private Sector Activity (PSA)

Monthly Progress Report

October 1 – October 31, 2023

Submitted by: Matthew Weber, Chief of Party (COP)

CNFA

USAID Contract

72011219C00001

Submitted to:

USAID/Azerbaijan

Samir Hamidov, Contracting Officer’s Representative (COR)

Submitted on November 3, 2023

 3

Table of Contents
Acronyms.......................................................................................................................................................4

PROGRAM ACTIVITIES.............................................................................................................................5

Component 1: Developing a More Diversified Non-Oil Economy...........................................................5

Berry Value Chain.................................................................................................................................5

Hazelnut Value Chain............................................................................................................................5

Perishable Vegetable Value Chain.........................................................................................................6

Pomegranate/Persimmon Value Chain..................................................................................................7

Grain Value Chain.................................................................................................................................8

Component 1 Cross-Cutting Activities................................................................................................10

Component 2: Business Enabling Environment......................................................................................13

Middle Corridor...................................................................................................................................13

Administrative Barriers........................................................................................................................14

Additional Engagement with Stakeholders..........................................................................................15

 4

Acronyms
ABA Azerbaijan Banks Association
AFSA Azerbaijan Food Safety Agency
AIA Azerbaijan Insurer Association
ARWA Azerbaijan Rural Women’s Association
ASAU Azerbaijan State Agricultural University
AzPromo Azerbaijan Export and İnvestment Promotion Agency
AZN Azerbaijani Manat
B2B Business-to-business
BHCD Baku Head Customs Department
BSU Baku State University
CA24 Caspian Agro 2024
CCEO Central Customs Examination Office
CLDP Commercial Law Development Program
CNFA Cultivating New Frontiers in Agriculture
COR Contracting Officer’s Representative
DAIM State Agricultural Development Centers of the Ministry of Agriculture
DQA Data Quality Assurance
EAS Expert Agro Services LLC
EDGE USAID Enterprises for Development, Growth, and Empowerment Fund
EGP USAID Georgia Economic Governance Program
EU European Union
FY Fiscal Year
GAP Good Agricultural Practices
GLOBALG.A.P. Global Good Agricultural Practices
GoAJ Government of Azerbaijan
Ha Hectares
HQ Headquarters
LLC Limited Liability Company
MoA Ministry of Agriculture
MOU Memorandum of understanding
MT Metric Ton
PoP Platform of Platform
PSA USAID Private Sector Activity
PY Project Year
RFQ Request for Quotations
SCC State Customs Committee
SMB Small and Medium Business Development Agency
SME Small and Medium-Sized Enterprise
SOW Scope of Work
STS State Tax Service
TA Technical Assistance
TCA USAID Trade Central Asia Activity
TRACECA Transport Corridor Europe Caucasus Asia program
TTF Technology Transfer Fund
U.S. United States
USAID United States Agency for International Development
WDEG Women’s Development and Enterprise Group
 5

VAT Value Added Tax

 6

PROGRAM ACTIVITIES
Component 1: Developing a More Diversified Non-Oil Economy

Berry Value Chain

In October, the USAID Private Sector Activity (PSA) conducted group training and provided Technical
Assistance (TA) for forty-three strawberry farmers on strawberry cultivation in Jalilabad and
Lankaran. PSA additionally conducted an annual berry harvest survey in four cold storages in order to
collect all statistical information related to this strawberry season for fiscal year (FY) 2023.

Table 1: Berry Training Sessions and TA Conducted in October 2023

Topic of Training Location Number of Participants

Technical assistance on Masalli, Jalilabad, Lankaran 14
cultivation and fertilization
practices
Cultivation practices Lankaran, Vilvan, Ramin Javadov’s farm 10
Cultivation practices Lankaran, Vilvan, Iskandar Sharifov’s 9
farm
Cultivation practices Jalilabad, Strawberry sapling office 10

Hazelnut Value Chain

During the reported period, PSA continued the year-round

training and TA program in the hazelnut value chain. Seasonal
training topics included hazelnut harvest and post-harvesting
processes such as dehusking, drying, and storing. Trainings also
focused on post-harvest management of hazelnut orchards,
including weed control, and cleaning the orchard bed. PSA
continues training participants in proper hazelnut kernel storage
practices and extending the produce’s shelf-life. PSA also
conducted annual harvest surveys with hazelnut producers from
Gakh, Zagatala, Balakan and Khachmaz districts.
Figure 1. Training on post-harvest
management of hazelnut orchards in Alibeyli
Table 2: Hazelnut Training Sessions Conducted in October 2023 village, Gakh

Topic of Training Location Number of Participants

Pruning practices Bahmatli, Zagatala 13
Technical assistance Mollayev Mahmud, Yukhari Tala, 1
Zagatala
Pruning practices Gakh, Alibayli 11
Post-harvest handling Local municipal building in 12
procedures Gadasoba, Khachmaz
Post-harvest handling Mirzammad, Khachmaz 11
procedures
Alternative irrigation methods Female entrepreneur’s demonstration 3
 7

using a cultivator and motor- plot in Mirzammad, Khachmaz

driven pressure pump

Orchard Value Chain

Adverse weather conditions posed unforeseen challenges within the stone fruit sector. Unfavorable
weather, particularly during the crucial cherry vegetation period, led to a substantial reduction in
productivity per hectare. Consequently, farmers who had anticipated a substantial portion of their sales
from cherries witnessed the diminished output. The average price per kilogram for cherries ranged from 5
to 6 AZN. In contrast, nectarines and peaches remained largely unaffected by productivity issues and
retained stable sales prices, with an average price range of 1.2 to 1.5 AZN per kilogram.

PSA conducted training for seven farmers on tube cleaning of pipes in the peach and nectarine orchards in
Davachikend village, Shabran. PSA also conducted training for 12 farmers on disease and pest
management on apricot orchards in October in Gandov village, Shabran. PSA also conducted an annual
harvest survey for stone fruit orchards among 19 producers in Shabran and Guba.

In the orchard value chain, PSA has been working with Ruslan Salmanov, German Shikhiyev, and
Asbandar Abdullayev to develop their Technology Transfer Fund (TTF) project documents and begin
procurement processes. Salmanov and Shikhiyev submitted initial TTF project applications to the Activty
and are under review. The Request for Quotations (RFQ) was prepared and posted for Asbandar
Abdullayev’s TTF project. An RFQ was also prepared for German Shikhiyev’s TTF project and is
currently under review.

The vendor of Hamid Hakimov’s TTF project handed over all

agricultural machinery and tillage equipment after inspection.
The handover process was carried out with PSA’s
participation.

PSA executed its annual harvest survey for stone fruits (all
districts) and persimmon (only in western districts) within the
targeted TTF recipient regions, encompassing Guba, Gusar,
Samukh, Shamkir, and Agshu districts. PSA gathered data
about the production volumes earmarked for export to Russian
and non-Russian markets, in conjunction with insights into the
Figure 2. Handover of Hamid Hakimov's TTF employment figures, encompassing full-time and temporary
project
staff. In this survey, PSA surveyed 17 medium-sized
enterprises specializing in the provision of a wide array of services, including but not limited to fresh fruit
reception, cooling, calibration, packaging, storage, and container stuffing. These state-of-the-art storage
facilities built with PSA support are equipped with precise temperature controls and possess the
adaptability and agility required to meet the ever-changing seasonal demands of the market.

The MOU for Rafail Mehdiyev’s demonstration plot in Gimilgishlaq village in the Khachmaz district has
been signed. After posting an RFQ, PSA conducted an evaluation of the bid and selected the vendor.
Currently, the procurement memorandum is under HQ review.

Perishable Vegetable Value Chain

The retail price of tomatoes has been over 6 AZN/kg for the last two weeks in the domestic market. This
is related to problems caused by the production of central regions.
 8

PSA conducted a field group training on tomato pruning and bee pollination at Gabil Mammadov’s 2-
hectare greenhouse in the Samukh region with 20 participants. PSA also conducted a field group training
on pest and disease management in Dallarjayir village, Shamkir with 14 participants.

PSA executed its annual harvest survey among the TTF recipients, including Barakat Tokhum Taravaz
Cooperative, Shafa Women’s Group, and Fatima Women’s Group. PSA gathered data about the vegetable
and vegetable seed production volumes, sales values, and earnings obtained from the provision of
agricultural machinery services. PSA also recorded the number of village farmers and cooperative
members benefiting from improved agricultural machinery services.

Pomegranate/Persimmon Value Chain

Within the Shamkir and Samukh districts, TTF recipients have commenced preparations for the reception
and storage of persimmons. The exploration of an alternative export destination, Ukraine, is of particular
interest. Farmers have expressed a preference for Ukraine as a destination for persimmon exports, as one
of Azerbaijan's primary persimmon competitors in the Russian market, Uzbekistan, does not export to
Ukraine. This unique market dynamic has increased the appeal and sales potential of Azerbaijani
persimmons in Ukraine. Given the substantial shelf life of persimmons, they reach Ukraine in excellent
condition, even when only partially ripened, often taking more than a week to arrive. Last season,
spanning from October 2022 to March 2023, persimmons experienced an unforeseen and significant
upsurge in price, resulting in unexpectedly substantial profits for firms involved in the trade. During this
time, persimmons were priced 2.5 AZN per kilogram on average.

PSA conducted a field group training on general pomegranate cultivation for 12 growers in Akhtachi
village in the Kurdamir region. The village of Akhtachi has 98 pomegranate growers that each own an
approximately one-hectare pomegranate orchard. PSA additionally conducted a field group training on
pomegranate Good Agricultural Practices (GAP) to 15 growers in Akhatachi village of Kurdamir region.

PSA met with Elnur Beydullayev for the 2.5-

MT-capacity cold storage facility in Goychay
and agreed to develop a GAP training for its
leading suppliers. As the harvest period
started, Beydullayev’s cold storage suppliers
included over a hundred growers and traders.
He recommended using his facility as the
location to conduct the training. Beydullayev
improved its 1,000m2 sorting and packaging
area and the outdoor area around the cold
storage facility. He also renovated the
administrative building and kitchen area for
his employees. Following this initial Figure 3. Group training on persimmon GAP at Elnur Beydullayev's
cold storage facility in Goychay
agreement, PSA conducted a field group
training on persimmon GAP and general cultivation to 12 suppliers at Elnur Beydullayev’s cold storage
facility in Kurdamish, Goychay.

Ahmad Rahimov, the owner of a 4,000-MT-capacity of cold storage, also agreed to conduct the GAP
training for key persimmon fruit suppliers in his cold storage during the harvest period that will continue
till the end of November 2023.
 9

In order to assist the current PSA Agronomist Consultants with conducting trainings and improve training
reach to new potential participants, PSA developed the Scopes of Work (SOW) for a Pomegranate
Agronomist Assistant/Mobilizer and a Persimmon Agronomist Assistant/Mobilizer. PSA plans to solicit
consultant applications for the two positions shortly.

PSA attended a Zoom meeting with representatives of the U.S. Department of Labor Bureau of
International Labor Affairs. During the call, PSA fielded questions on the level of mechanization for
various agricultural value chains (including Pomegranate and Persimmon) and asked about the presence
of child labor in Azerbaijan.

Grain Value Chain

Throughout October, PSA held several sessions of training and TA in the grain value chain:

 PSA visited Farzali and Slavyanka villages of the

Gadabay region to provide TA to 23 wheat producers on
evaluating weed density, identifying weeds and their
types propagated in wheat fields and preceding crops of
wheat, using techniques for weed control before sowing
winter wheat, and selecting the appropriate herbicide to
control specific weeds.
 PSA visited Aliushagi village in Samukh to provide
technical assistance to wheat producer Verdiyev Seylan
on his farm on land preparation and soil tillage for winter
wheat. The Activity also evaluated the infrastructure of Figure 4. Technical Assistance for a wheat
the farm for organizing demonstration plots, especially producer in Gadabay
wheat seed trials.
 PSA engaged with wheat producers, Shahbulag Women’s Development and Enterprise Group
(WDEG) members, and Ulduz WDEG members to identify locations and select farmer leaders for
organizing demonstration plots. The Activity selected the targeted recipients for Special
Interested Wheat Groups for future training. These activities were held in Garayusifli village of
Barda region and Fakhrali village of Goranboy.
 PSA also provided group training on selecting the best wheat varieties and seedbed preparation
for winter wheat. An interactive training was conducted for 30 female wheat producers, the
members of Pohre WDEG in the municipality of Girili village of Agstafa. The main purpose of
this training was to improve the knowledge and skills of wheat producers on the principles for
selecting the best wheat varieties and evaluating the quality of seeds, as well as in seedbed
preparation for winter wheat and GAP in land preparations.
 Another training on selecting the best wheat varieties and calculating the right rate of seed was
held for Gulshan WDEG in Birinji Ashigli village of Beylagan. This training targeted improving
the knowledge and skills of wheat producers on the principles of selecting the best wheat varieties
and evaluating the quality of seeds.
 PSA provided TA on organizing the comparative demonstration plots and seedbed preparation for
testing the introduced wheat varieties together with local durum and aestivum wheat varieties.
The Activity introduced cultivation techniques for several varieties, including Lucilla
(Tr.aestivum), Midas (Tr.aestivum), Massacio (Tr.aestivum), Cesare (Tr.durum) together with
local durum and aestivum wheat varieties. During several instances of TA, PSA tested traditional
heavy Shirvan harrow machines with ridged tines and rototiller (rotor harrow) for seedbed
preparation and evaluated the impact of these methods on the heavy soil clods on the surface.
 10

This TA was provided to Jalal Alakbarov in Karayeri village of Samukh, Asif Yusifov in
Dashsalahli village of Gazakh, and Eldaniz Karimov in Alimardanli village of Tovuz.
 PSA advised wheat seed recipients in Samukh, Goygol, and Gadabay districts on selecting the
best wheat varieties, evaluating seed quality, and seedbed preparation for winter wheat via the
WhatsApp platform.

PSA assisted Elkiyar LLC, a seed producer company, and its director Ikram Ziyadov in drafting
documentation for obtaining seeds from a Turkish company, Progen. PSA organized contact between
Elkiyar LLC and Progen and coordinated the payment transfer. The seeds passed through the Georgian
border and were successfully cleared at the Yevlakh customs post and delivered to Barda, where Ikram
Ziyadov is located. Ziyadov has agreed to share the collected seed material with the other producers
throughout the country in support of PSA and according to PSA allocation. PSA will divide the seeds
among 25 different recipients in 15 regions. In the first year of operation, there will be 25 PSA
demonstration plots covering the central grain-growing districts from Ismailli to Kurdamir and from
Tovuz to Agstafa.

To identify new wheat demonstration plots in the Central regions, PSA traveled and met with several
large grain growers and proposes adding four potential recipients to the list of PSA-supported
demonstration plots. The locations are Kand Karlar village of the Kurdamir region, Gubakhalilli village
of the Ismailli region, and Bighir and Garamaryam villages of the Goychay region. To help assist with
the identification of new wheat demonstration plots, PSA contract Dr. Amor Yahyaoui as an
international wheat consultant. Dr. Yahyaoui traveled to Azerbaijan from October 24 to November 11,
2023. The main purpose of Dr. Yahyaoui’s visit is to engage in planting at the targeted locations on
demonstration plots, assess the adaptation of the seeds to different growing conditions, and assess for
disease and insect issues in order to eventually recommend the appropriate control methods to achieve
high yields.

A portfolio of candidates for selecting farms to organize demonstration plots was created during the
reporting period. PSA met with key personnel from Havas Agro to discuss future collaborations, and
three technical assistances and three trainings were provided to wheat producers in Fakhrali and
Slavyanka villages of Gadabay district, Aliushagi village of Samukh village, Quzanli village of Agdam
district, Garayusifli village of Barda district, and Fakhrali village of Goranboy district. PSA also
conducted industry and market research identifying machinery and equipment for future demonstration
plots. PSA aims to support the demonstration plot recipients through equipment for soil management and
irrigation at the demonstration grain fields. PSA identified over ten large grain producers and planned the
technical response to each recipient’s specific need. The Activity prepared a budget proposal including a
towed tractor trailer and equipment such as laser levelers, various irrigation systems, pesticide sprayers,
rotary harrows, bed planting seeders, subsoil rippers, field rotors, and chisel cultivators.

PSA initiated cooperation with a leading global manufacturer and distributor of irrigation and
infrastructure equipment and technology, Lindsay Corporation, represented in Azerbaijan by 4S LLC.
PSA discussed a proposal to jointly deploy pivot irrigation on Azerbaijan State Agricultural University
(ASAU)’s ten hectares of experimental grain fields. Lindsay expressed their interest in a joint
memorandum of understanding (MOU) for further implementation. PSA then traveled to Ganja to
propose establishing an irrigation demonstration plot at the premises of ASAU with the Rector and
management of ASAU. This cooperation would imply contribution to the curriculum development, as well
as capacity building and enhancing the organizational functionality of ASAU students and faculty.

ASAU leadership embraced the offer with enthusiasm and informed the Activity that it first needed to
obtain permission from the Ministry of Agriculture (MoA). In the meantime, Lindsay informed PSA that
the company is currently estimating the budget for a two-span pivot, pipeline, electrical pump, electrical
 11

cable, and pivot pad. Lindsay proposed cost-sharing the project between PSA, ASAU, 4S LLC, and
Lindsay.

Component 1 Cross-Cutting Activities

Women’s Groups and Associations

The Azerbaijan Rural Women’s Association (ARWA) organized the opening ceremony of Bahar and
Gizyurdu Women’s Groups’ tailoring businesses in Chakhirli and Hishkadara villages of Masalli. The
Masalli Executive Committee, relevant villages’ municipality heads, Women Resource Center
representatives, and other women’s groups’ representatives operating in the southern regions attended the
ceremony in addition to two PSA representatives. Both ceremonies started with opening remarks and
continued with demonstration of tailoring operations.

Figure 5. Opening of the Gizyurdu Women's Group's tailor shop

PSA developed the initial draft plan of the Women’s Groups’ Capacity Building Program and shared
the draft plan for ARWA’s review. The Women’s Groups’ Capacity Building Program aims to expand its
reach by introducing with more women groups and topics of additional training needed.

With USAID support, Unikal Women’s Group started operations and opened a bakery and small café in
Garaxhanli village of Tovuz. The company produces 100-120kg of bakery products (bread and sweets)
every day. All produced bakery products are sold on time at a reasonable price. However, the Unikal
Women’s Group identified a problem with the steam mechanism in the oven, and they notified PSA and
the vendor of this challenge. The vendor and PSA will visit the group soon to verify and if necessary,
repair the machine.

Chinar Women’s Group started construction of the facility for fruit drying, which is planned to be
completed by the end of November 2023. The group leader requested PSA to wait for the delivery of
equipment until November so that they can finalize the facility construction prior to delivery.
 12

Agronomist Training

PSA conducted its annual training for its field

staff/Agronomists and the Activity staff in the PSA-
supported demonstration plot and training center of Zaur
Hajiyev in Goychay. The session began with a detailed
discussion on the indicators that PSA reports to USAID,
emphasizing the importance of Performance Indicator
Reference Sheets to ensure clarity and accuracy in
reporting. The participants were engaged in
comprehensive discussions about these indicators and
how they could be effectively achieved and tracked. The
team reviewed and discussed these targets in-depth,
aligning them with the Activity’s overarching goals.
Figure 6. Annual training for PSA agronomists and the Participants discussed the indicators about the number
staff of farmers that apply improved management practices
and technologies in detail. The frequency of data collection was another critical point of the training,
given that regular and consistent data collection is imperative to maintain the integrity of PSA’s
evaluation and reporting. The Activity staff have been informed about the recent data quality assurance
(DQA) conducted by the USAID COR and the decisions made as a result of it, including the involvement
of the CNFA HQ Monitoring and Evaluation department and the establishment of the Knack database for
PSA that will begin in November after the finalization of the annual report.

PSA shared the outcomes of PSA activities on the elimination of small and medium enterprises (SME)-
related administrative barriers and discussed newly identified export-related barriers of agribusinesses.
According to the PSA’s recent research, new export-related barriers of agribusinesses include:

 Delay by Azerbaijan Food Safety Agency (AFSA) of the issuance of export enclosed documents
(phytosanitary);
 Complex requirements of national insurance companies for providing the cargo insurance policy;
 Lack of factoring services in the financial market for financing export contracts; and
 Challenges with recruitment, registration, and dismissal of seasonal workers in the farms.

During the discussions, the Agronomists focused on obstacles related to recruitment, registration, and
dismissal of seasonal workers. To prevent complications with the State Tax Service (STS), farms are
increasingly entering into daily contracts with seasonal workers, which significantly add to the
administrative burden. Agronomists recommend adopting a system where the businesses make daily tax
payments for each seasonal worker instead of relying on temporary registrations. Furthermore,
Agronomists shared with PSA the following barriers and constraints that they observed on the farms:

1. During the payment of the value of the seed purchase contract, Kapital Bank required local
importers to use the Bank’s template contract instead of the already signed agreement. It created
an additional challenge for the local importer to discuss it again with the seller and sign.
2. During the seeds import at the cross-border, the State Customs Committee (SCC) requires a short
custom declaration and AFSA phytosanitary ID number. Due to new requirements implemented
in 2023, obtaining the AFSA phytosanitary ID number takes two days. During this delay, the
cargo will be kept in customs for additional payment.
3. The mandatory soil analysis that State Agricultural Development Centers of the Ministry of
Agriculture (DAIM) annually require from farmers with larger than five hectares does not serve
soil quality improvement due to the absence of follow-up monitoring activities. The analysis
service fee is 30 AZN per five hectares and the price increases for every additional five hectares.
 13

Without soil analysis, farmers cannot receive MoA subsidies, however good monitoring and
rewarding systems should serve as additional subsidies for large farmsers.

These obstacles require PSA’s detailed research through its meeting with AFSA, SCC, Kapital Bank, and
MoA representatives. The research will be completed within the upcoming weeks.

Export Promotion

PSA organized an Azerbaijan

pavilion at Anuga 2023 in Cologne
with the sponsorship of USAID and
USAID Enterprises for Development,
Growth, and Empowerment (EDGE)
Fund. Five Azerbaijani companies
(Avrora LLC, AHEC, Balakn Foods
LLC, Siracoglu Farmer Company
LLC, and Goychay Sud LLC) and one
Georgian company (V Enterprise)
exhibited at the pavilion. During the
fair, there was intensive interest in the
products demonstrated by companies
in the Azerbaijan pavilion, and there
were many business-to-business
(B2B) meetings with potential buyers
from different EU countries. Parties
agreed to continue discussing Figure 7. Azerbaijan Pavilion at the Anuga Exhibition 2023
pricing and delivery terms right
after the fair. PSA will continue to support participants with assistance on packaging, labeling, and
logistics for export to alternative markets.

Last week, PSA contacted GULFOOD 2024 organizers to book a booth at the exhibition from February
19-23, 2024. They have recently completed their rebooking process with 2023 exhibitors and are at
capacity. According to the requirements, PSA sent an official application form, and the organizers have
added PSA to the waiting list and will get in touch if they are able to allocate space for PSA’s stand.

PSA investigated the possibility of exhibiting at Caspian Agro 2024 (CA24) and shared the best option
for efficient exhibiting (better location and price) with the input suppliers.

Facilitating U.S. – Azerbaijan Business Linkages

In October, PSA met with Etibar Aghalar, the founder and CEO of Expert Agro Services LLC (EAS) to
discuss the potential business relationship between U.S. companies such as EAS, and Trécé Inc. EAS
already received the trial shipment for 14 ha for pest control against Tuta absoluta and shared it with
greenhouses to check the quality of products and to demonstrate the results of Trécé products. EAS plans
to order this item for about 100 ha. EAS is waiting for trial products for orchards, which they plan to share
with growers to check the quality and demonstrate the products’ results in orchards. PSA additionally
discussed the alternative U.S. companies that might be interested in building up relationships with and
agreed that PSA would share information about the Gowan Co., Rooted Leaf Agritech, and BRANDT.
PSA will encourage Trécé to accelerate the shipping process for items for orchards and the information
for the new items that EAS is waiting for to register in Azerbaijan.
 14

During the reporting period, PSA received a phone call from a compliance officer at Trident Group
Global, LLC to thank the PSA team for their technical assistance regarding the identification of a
prospective business partner in Azerbaijan and the licensing agreement reached between Marriott
International, Inc. and Pasha Group, LLC.

PSA facilitated a meeting between Kaben Smallwood of Symbiotic, LLC and Khalid Bayramli, Adviser
to Baku State University (BSU) Rector, to discuss logistics of the purchase, a timeline to assemble, ship
and install four Symbiotic aeroculture replica systems for education and academic research purposes. The
parties agreed to the payment and delivery terms. Symbiotic will be able to assemble and ship equipment
before the end of January 2024. As part of the deal, Symbiotic will provide guest lectures to BSU groups
about organic food production in controlled environment agriculture. Symbiotic representatives plan to
visit Baku in November or December 2023.

Access to Finance

In October, PSA met with Renat Humbetov, a member of the management board at Access Bank, to
discuss the financial literacy training agenda for Project Year (PY) 5 and areas for cooperation and
collaboration. In PY5, PSA will not involve short-term local independent Finance Literacy Training
Consultants, so PSA requested that Access Bank provide its own trainer for the training sessions. PSA and
Access Bank representatives agreed to start with sessions in Goychay from November 20 to 30, 2023,
before continuing in Ganja, Goygol, and Samukh. The parties also discussed a potential MOU between
USAID Azerbaijan and Access Bank, which PSA will draft and share with Access Bank for their review.
PSA will arrange an online meeting with a broker from an insurance company that offers agri-related
insurance products as Access Bank is willing to develop new alternative products for its customers.

Food Safety

PSA conducted TA on food protection and food fraud policies to develop new procedures for Guba
Agro. As a result of the TA, Guba Agro adopted procedures on irrigation water and soil analyses,
organized the first aid and emergency situation training for employees, and designated an area for waste
utilization. Additionally, PSA developed the two procedures (maintenance of facility and maintenance of
territory) on ISO 22000 for Ice Food Group in order to implement the standard properly.

Component 2: Business Enabling Environment

Middle Corridor

During the reporting period, PSA engaged with the Transport Corridor Europe Caucasus Asia program
(TRACECA) and World Bank representatives. During the joint meeting, TRACECA informed parties
that the organization will review the Platform of Platform (PoP) concept (technical solutions for the
digitalization of the Middle Corridor) at the TRACECA Corridor Digitalization Working Group. The
Working Group consists of specialists from the Ministries of Transport of the member states and will
review the concept from the following perspectives:

 Possibility for using PoP's technical solutions for e-CIM/SMGS testing along with track and trace
initiative;
 Pilot testing of developed technical solution (such as location or estimated time of arrival); and
 Adaptation to the developed solution (e.g., to make it suitable for testing of electronic information
exchange on e-CIM/SGMS consignment note) and test it.
 15

TRACECA informed the World Bank and PSA that testing a federated approach for establishing a digital
corridor requires a joint action plan which should include testing and supporting involved partners and
institutions to move in a consensus direction.

PSA informed the World Bank that Commercial Law Development Program (CLDP) and USAID
programs, including PSA, USAID Trade Central Asia (TCA) activity, and USAID Economic Governance
Program in Georgia, support the TRACECA initiative for reviewing transport legislation of Kazakhstan,
Azerbaijan, and Georgia for working out an intergovernmental agreement on the implementation of e-
CIM/SGMS consignment note. The World Bank supports the TRACECA initiative to set up joint work on
developing legal framework/legislative requirements (multilateral agreement between member states)
considering necessary norms required to launch the digital corridor approach, including Digital Hubs at
the national level.

During a TRACECA-initiated meeting with the PSA, EGP, TCA, and CLDP, the parties discussed follow-
up activities related to transport legislation, specifically the applicability of electronic transport
documents. TRACECA requested PSA, EGP, and TCA to assist an organization with the involvement of
local transport specialists from Azerbaijan, Kazakhstan, and Georgia. CLDP had earlier been requested to
engage an international consultant to unify deliverables and develop recommendations for TRACECA.
The final report CLDP aims to create, will be branded under the TRACECA, USAID, and CLDP logos.
PSA shared TRACECA’s request with USAID to obtain follow-up instructions.

In October, Turkmenistan officially became the 14 th full member of TRACECA. The participation of
Turkmenistan as a full member of TRACECA will enhance the organization's opportunities to strengthen
the interaction between member states for the development of the East-West Transport Corridor.

Administrative Barriers

Administrative Barriers #3, #4, and #5: In the official letter to the Small and Medium Business
Development Agency (SMB), the STS informed SMB that STS accepted the majority of the SMB-PSA
Working Group's 25 proposals regarding the SMEs’ Tax Reporting, Tax Audit, and Tax Procedure
challenges. Twenty-five proposals were worked out according to the outcomes of the 70 SMEs surveyed
by professional audit companies FAM Group Audit LLC and Ekvita. Administrative Barriers #3, #4, and
#5 have been effectively resolved through this action on the part of STS.

Administrative Barrier #7: The SMB informed PSA that the SCC accepted the SMB-PSA Working
Group’s fourth proposal related to Administrative Barrier #7 - Improving SMEs Customs Clearance and
Customs Operation Procedures. The Working Group proposed streamlining vehicle placement in private
warehouses based on the Commitment Document, potentially eliminating the need for the importer to
obtain an expert opinion from the Central Customs Examination Office (CCEO) when declaring imported
goods at the Baku Head Customs Department (BHCD). This could save importers from incurring storage
fees that might accrue over 20 days of waiting for the CCEO’s opinion. To prevent these costs, SCC is
planning to issue a Commitment Document allowing importers to store their goods in their own
warehouse until they obtain an expert opinion and declare their goods and services. Currently, importers
can obtain a Commitment Document from SCC to store their goods without additional expenses. The
Working Group submitted seven proposals under Administrative Barrier #7, four of which have already
been accepted.
 16

Identification of New Barriers: During the visit to the Goychay, Aghdash, and Samukh districts of
Azerbaijan, PSA surveyed Elnur Beydullayev (cold storage service provider, pomegranate and
persimmon producer and exporter), “Goychay Sud” OJSC (producer of dairy products, fruits juices, and
apple concentrate), “Goychay Soyuducu Anbar Kompleksi” LLC (provider of cold storage service), “AZ
FRONT LLC” (pomegranate producer) and Ata Aqro LLC (greenhouse, potato, and wheat producer). The
objectives of the survey were to identify agribusinesses’ administrative barriers, focusing on challenges
related to agricultural production export. During the meeting, the agribusinesses shared the following:

1. The Government of Azerbaijan (GoAJ) does not protect the domestic agricultural market from the
expansion of Russian and Iranian agricultural products (grain and vegetables). Thus imported
products are often cheaper than domestic production;
2. The State Grain Fund (under the Ministry of Emergency Situation) does not purchase grain from
all local producers;
3. Due to a lack of MoA forecasts for production, the agricultural production and mass planting of
intensive orchards in Azerbaijan farmers’ wholesale prices for some fruits significantly dropped.
This is one of the main causes of reductions in fruit plantations for the last few years;
4. Prices for fertilizers, seeds, agricultural machinery, and tariffs for utilities are extremely high;
5. There is a lack of regulatory framework on drone usage for spraying plants with pesticides;
6. There is a lack of customs privileges for importing second-hand agricultural machinery;
7. There is a lack of strict policy for price regulation in the internal agricultural markets;
8. The level of access to finance is low and collateral requirements are often prohibitive, effectively
excluding those people needing loans but not having significant assets that can be collateralized.
9. Due to the lack of a certificate of ownership on facilities and structures constructed on
agricultural lands, farmers cannot register them as a loan collateral;
10. Challenges with processed agricultural product export remain and including additional
certifications from the Azerbaijan Food Safety Agency. This takes time and has additional
cost; and
11. Chain stores like Araz, Bravo, and Rahat are delaying suppliers’ payments for at least 4-5
months.

After a detailed analysis of the obtained information and depending on industry importance, PSA will
proceed with several identified barriers according to the USAID approval.

Additional Engagement with Stakeholders

In the meeting with the Azerbaijan Insurer Association (AIA), PSA discussed the lack of cargo
insurance products, especially in carrying agricultural products. The AIA’s position was that Azerbaijani
insurance companies provide cargo insurance services for exporters and have no legal obstacles. In
follow-up questioning with the 13 non-life insurance companies, the perceived lack of insurance products
related to agricultural goods export was echoed in this data. In the survey, PSA asked 13 insurance
companies the following questions:

1. Does the insurance company provide cargo insurance service for export goods? (YES/NO)
2. If yes, does the company provide the same service for agricultural products? (YES/NO)
3. Are cargo insurance policies applicable for the transportation of goods via vessels? (YES/NO)

To obtain more detailed information, PSA clarified tasks for the insurance companies as follows:

1. Agricultural products will be packaged in plastic boxes and loaded in containers without a special
temperature regime;
2. The estimated time for delivering the container is 14 days (October 25 – November 6, 2023);
 17

3. For prompt delivery, the container will be delivered by truck from Ganja to the Port of Poti; and
4. The value of agricultural goods loaded in the container is $18,000 USD.

The results of the survey are shown below in Table 2 below:

Table 3: Insurance Company Survey on Providing Cargo Insurance Services for Agricultural Products

Does the Insurance Company If YES, does the company Are cargo insurance policies
Insurance provide cargo insurance provide the same service for applicable for the transportation of
# service for export goods? agricultural products? goods via vessels?
Companies
YES/NO YES/NO YES/NO
1. Aqrar Sigorta NO NO NO
2. Mega Sigorta YES NO YES
3. Ipek Yolu Sigorta YES NO YES
4. Az Sigorta YES NO YES
5. Dovlat Sigorta YES NO YES
Shirkati
6. ATA Sigorta YES NO YES
7. A-Qrup Sigorta NO NO NO
8. Azerbaycan Senaye YES NO YES
Sigorta
9. Atashgah Sigorta YES YES YES
10. Baku Sigorta YES YES YES
11. Pasha Sigorta YES NO YES
12. Qala Sigorta YES NO YES
13. Xalq Sigorta YES YES YES

As shown in Table 2 above, 10 (77%) of the 13 insurance companies provided insurance services for
exported goods, and only 3 of them (Atashgah Sigorta, Baku Sigorta, and Xalq Sigorta) provided a
similar service for agricultural products. Furthermore, PSA met with Atashgah Sigorta to clarify more
specific details and conditions related to the cargo insurance policy. Following the Atashgah Sigorta’s
policy, the exported agricultural products can be insured under the following conditions:

Warranties:
1. Warranted goods must be fully and properly packed in accordance with international packing
standards, fastened, sealed, and secured;
2. The vehicle carrying the insured property must be fully covered, properly closed, and equipped
with an alarm system and locked when left unattended. The vehicle carrying the insured cargo
must not be parked in an unsecured area at night; and
3. Temperature regime should be applied according to the description of the cargo in refrigerators.

Otherwise, the insurer has the right to refuse to pay the insurance. The insurer has the right to refuse to
pay the insurance if it is discovered that the above conditions are not met.

Additional Exclusions:
1. Damage to the cargo for an unknown reason is not covered;
2. Any damage as a result of ordinary vibration or shaking of any carrying vessels/vehicles is not
covered by this insurance; and
3. Terrorism, war, civil unrest, strike, or lockout are not included in the coverage.

Under the aforementioned conditions, the cargo insurance premium for a container of fruits estimated at
$18,000 USD is $108 USD. According to the outcome of the survey, agribusinesses have access to cargo
 18

insurance services for exporting agricultural products, although only some insurance companies provide
it. Despite the insurance premium for cargo policy not exceeding one percent of the value of the
consignment, the insurance companies require highly strict conditions for insurance of exporting
agricultural products.

PSA continued research on complex requirements of national insurance companies for providing the
cargo insurance policy and requested Baku Sigorta to work out cargo insurance for a party of fresh apples
that can be delivered from Gusar, Azerbaijan to Jeddah, Saudia Arabia. The cargo itinerary is from Gusar
to Mersin by a refrigerator truck and from Mersin to Jeddah by sea. PSA is researching the requirements
of an insurance company for the cargo insurance policy to figure out constraints and obstacles related to
the issuance of the mentioned policy.

In the meeting with the Azerbaijan Banks Association (ABA), PSA discussed recently identified
barriers related to the absence of factoring services for financing export contracts. During the discussions,
it was revealed that the barrier consists of two sub-barriers:
1. Offset of value added tax (VAT) between the seller, buyer, and bank if factoring operation parties
are local companies; and
2. There is no VAT offset in the export operations; however, local banks do not provide factoring
services for export contracts (when a buyer is a non-resident company).

Elimination of the first sub-barrier requires amendments to the Tax Code and Civil Code of Azerbaijan.
However, the second challenge should be discussed with the participation of commercial banks. PSA
offered ABA the SMB-PSA Working Group platform for submission amendments to the Tax Code and
Civil Code of Azerbaijan and requested the ABA to arrange commercial banks’ representatives meeting at
the ABA office for discussions of export-support financial tools.

PSA, ABA, and commercial banks’ representatives discussed obstacles related to the implementation of
factoring services for financing export contracts. During the meeting, PSA found out that only Pasha
Bank has practical experience in financing export contracts through factoring services. The challenges for
broad implementation of factoring service are the following:
 Azerbaijani Bank should become a member of the Factoring Chain International Organization to
minimize the risk of payment delays from foreign buyers;
 A cargo insurance policy should cover all risks during cargo transition on the route;
 Foreign banks sometimes reject cooperation with Azerbaijani banks on financing export
contracts;
 Exporters are not always informed regarding the factoring financing;
 Foreign buyers must have a sustainable credit rating; and
 The exporter must run the debit turnover through the bank account to persuade a bank to provide
factoring financing.

The commercial banks highlighted that they need additional support from Azerbaijan Export and
İnvestment Promotion Agency (AzPromo) for the mitigation of risk factors. AzPromo should provide some
guarantees to commercial banks on export operations and exporters. Unfortunately, despite preliminary
confirmation, AzPromo could not join the meeting. It was agreed to hold meetings between commercial
banks and agro-exporters to explain the advantages of these services and involve AzPromo in this process.
ABA and commercial banks are supportive of continuing cooperation with PSA to develop the factoring
service in Azerbaijan.

During the meeting at the “One Window” Export Support Center, PSA discussed delays in the issuance
of export enclosed documents with the representative of AFSA. AFSA faces challenges in issuing prompt
 19

phytosanitary or veterinary certificates due to the high number of applications that the AFSA receives
daily. The working process of AFSA central and regional offices is not adopted for the prompt issuance of
the certificates. Moreover, according to the Cabinet of Ministers’ resolution, AFSA can issue certificates
within 14 days. For the development of working processes and organizing prompt certificate issuance,
AFSA should adopt the “ASAN” model for SME application handling. For a detailed exploration of
AFSA's working processes, PSA will visit the central office of AFSA.