Managing Investments in Urban Areas: The Case of Azerbaijani Cities

Urban areas in Azerbaijan are experiencing rapid growth and development, fueled by a combination of natural resource wealth, strategic geographic location, and economic reforms. In cities such as Baku, Ganja, and Sumgayit, significant investments have been made in infrastructure, housing construction, and industry. However, effectively managing these investments to achieve sustainable urban development remains a critical challenge. This article examines the policies and strategies for investment management in Azerbaijani cities, learning from both successes and ongoing challenges.

The Rise of Urbanization

Azerbaijan, like many other countries, is experiencing a shift towards urbanization. The capital Baku is the epicenter of this transformation, attracting a large influx of people due to its economic opportunities, modern infrastructure, and cultural opportunities. Other cities, such as Ganja and Sumgayit, are also experiencing growth, albeit at a different pace.

Urbanization in Azerbaijan is driven by three main factors. First, economic opportunities. The oil and gas industry has become an important driver of economic growth in Azerbaijan, attracting both domestic and foreign investment. This has created numerous employment opportunities in urban areas, stimulating rural‑to‑urban migration. Second, improved infrastructure. Significant investments in infrastructure, including roads, public transport, and utilities, have made cities more accessible and livable. Third, educational and healthcare facilities. Improving access to education and healthcare in urban areas is another factor driving urbanization.

Despite the benefits of urbanization, Azerbaijani cities face a number of challenges due to rapid and sometimes uncontrollable growth. Four rise to the mind. First, the concentration of economic activity in urban areas, especially in Baku, has led to regional differences. Second, smaller cities and rural areas lag in development, resulting in uneven economic growth. Third, the rapid influx of people into cities has put a strain on public services such as education, health, and social welfare. Fourth, informal settlements and poor‑quality housing conditions have become pressing issues.

A fifth is equally pressing: increased urbanization has led to environmental degradation, including air and water pollution, loss of green space, and waste disposal problems. Cities such as Baku, Sumgayit, and Ganja are particularly affected by industrial pollution due to their historical development as industrial centers.

To address these challenges and ensure sustainable development, Azerbaijani cities must implement effective urban planning and investment management strategies. Effective land use planning is essential to balance residential, commercial, industrial, and recreational needs. This prevents overcrowding and ensures harmonious development of different parts of the city.

Continued investment in infrastructure such as transportation networks, water supply, sewerage systems, and energy grids is critical to supporting economic activity and improving the quality of life of residents.

Meeting the housing needs of urban populations, especially lowand middle‑income groups, is also vital. This involves developing affordable housing projects and upgrading informal settlements. The establishment of the State Housing Construction Agency under the President of the Republic of Azerbaijan in order to promote the implementation of state policies to improve the quality of life and develop the national economy by meeting the housing needs of Azerbaijani citizens has made a significant contribution to this zone.

Urban planning must include principles of environmental sustainability. This includes preserving green spaces, developing public transport, introducing waste management systems, and introducing renewable energy sources.

Attracting diverse investment to urban areas is essential for economic diversification and sustainability. This involves creating a favorable business environment, providing incentives for investors, and developing sectors that stimulate economic activity.

Providing access to quality educational, health, recreational, and cultural facilities is critical to improving the quality of life of city residents. Investments in social services help create inclusive and vibrant communities.

Three Case Studies

Baku exemplifies both the challenges and successes of urban investment management in Azerbaijan. The country’s capital city has benefited significantly from the oil and gas industry, attracting significant investment in infrastructure, real estate, and trade. The city is developing modern business districts, shopping centers, and residential complexes.

Moreover, significant investments have been made in modernizing Baku’s infrastructure. The Baku metro system has been expanded, new highways have been built, and international standard seaports are being developed in the city.

Despite problems with industrial pollution, Baku has made progress in achieving environmental sustainability. The city has implemented greening projects, including the building of new parks and the restoration of the Caspian seacoast. Waste management systems have been improved and efforts to reduce air pollution continue. Baku has developed several affordable housing projects to meet the housing needs of its growing population. In addition, investments in health and education facilities have improved access to basic services.

The materials of Baku’s new master plan include several major projects that can ensure the sustainable development of the city. The master plan proposes to manage the load of the main node and transport system using a sub‑node system. To meet the needs of urban residents in recreational areas, green areas, green corridors, landscaping, and lake use are proposed.

However, the absence of a working master plan for a long time requires that various solutions be proposed, worked on over many years, and problems that have arisen over time be resolved in order for the new master plan to work as planned.

Ganja, Azerbaijan’s second‑largest city, offers insight into managing urban investment in a smaller city setting. Ganja has focused on diversifying its economy beyond traditional industries. Investments in agriculture, manufacturing, and tourism were prioritized to create new jobs and reduce dependence on one sector of the economy.

The city has invested in modernizing its transport infrastructure, including its road network and public transport systems. Modern utilities and services have improved the quality of life of residents. Ganja has used its rich cultural and historical heritage to attract investment in tourism. The restoration of historical sites and the development of cultural centers have stimulated tourism and created economic opportunities. Investments in health and education facilities have improved access to basic services. The city has also focused on providing affordable housing to accommodate its growing population.

Currently, work continues on a new master plan for Ganja. The main goal of the master plan is the reclamation of unused industrial areas and their waste dumps, which create environmental problems, and their use again as green or multifunctional areas, the transformation of the coastal zone into a recreation area, and the organization of the transition of individual residential buildings into multi‑apartment residential buildings in the city’s settlement system.

In short, Ganja is a city in the spotlight. With proper planning, this focus can be channeled to benefit the city and create a more livable and sustainable city model. Sumgayit, a historically industrial city, faces unique challenges and opportunities in managing sustainable urban investments.

Sumgayit has undergone a transformation from a highly industrialized city with significant pollution problems to a more diversified economy.

Priority is now given to investments in clean industries, technology parks, and environmental restoration. Sumgayit has invested in improving living conditions and modernizing its infrastructure. The city has built new residential areas and improved public services to improve living standards. Efforts to attract a variety of investments included the creation of free economic zones and industrial parks.

These initiatives are aimed at creating new economic opportunities and improving quality of life.

Investment Attractiveness

The attractiveness of Azerbaijani cities for investment depends on several factors. Cities that can effectively manage these factors can attract and retain investment, promoting economic growth and development. The presence of well‑developed infrastructure such as transport networks, communication systems, and utilities is a major factor influencing investment decisions. Investors are looking for locations with reliable infrastructure to support their operations.

A favorable regulatory environment, including clear policies, streamlined processes, and incentives for investors, can significantly increase the attractiveness of urban areas. Reducing bureaucratic hurdles and ensuring legal protection for investors are important considerations.

The size and purchasing power of the urban population also plays a decisive role in attracting investment. Cities with large and affluent populations offer a significant market for goods and services, making them more attractive for business.

The overall quality of life in urban areas, including safety, health care, education, and recreational facilities, can influence investment decisions. Cities that offer a high quality of life are more likely to attract skilled workers and businesses.

Economic stability and growth prospects are important factors for investors. Cities in countries with stable economies, low inflation, and positive economic prospects are more attractive for investment.

Investors are also increasingly considering environmental factors in their decisions. Cities that promote sustainable development, green spaces, and green practices are more likely to attract environmentally conscious investors.

Proximity to natural resources such as water bodies, forests, and minerals can influence investment decisions. Lastly, cities with access to ports, airports, and logistics hubs are attractive for trade and commerce.

Achieving a balance between attracting investments and ensuring sustainable urban development is crucial for the long‑term growth and livability of Azerbaijani cities. This involves crafting policies and strategies that promote balanced development across different urban zones and prevent the over‑concentration of investments in specific areas.

Six such policies and strategies rise to the mind. First, targeted use of urban areas. These include reclamation of unused industrial areas, landfills and state funding of roads, c om mu n ic at ion systems, and green spaces. These produce an increase in investment attractiveness. Unused areas can be transformed into locations that feature interesting and innovative projects, which also has a positive effect on the urban environment.

Second, public‑private partnerships. Collaboration between the public and private sectors is essential for the effective development of the city. Public‑private partnerships (PPPs) can leverage the expertise and resources of the private sector to deliver infrastructure projects, housing, and social services.

Third, incentives for balanced development. Providing incentives