journal N2 2025 

Annotation. The post-conflict areas of Azerbaijan (especially Karabakh and East Zangezur) have significant investment potential in terms of economic, social and infrastructure development. The article discusses the rehabilitation and reconstruction work carried out in Karabakh and East Zangezur and analyzes the investments directed to the post-conflict areas of Azerbaijan. The need for specific approaches, investment management strategies and efficient use of resources for the economic rehabilitation of these areas is emphasized.

Keywords: post-conflict areas, Karabakh, East Zangezur, rehabilitation and reconstruction, investment activity, investment management strategies. 

İntroduction

Economic recovery in our post-conflict areas is of paramount importance for the long-term development of Azerbaijan after its independence. The economic security of the Karabakh and East Zangezur regions is directly linked to the diversification of the non-oil sector. Post-war recovery activities are not limited to the repair of infrastructure, but are also of great importance in terms of the creation of new economic opportunities. This approach links the goal of recovery not only with the restoration of physical infrastructure, but also with the development of human capital. Without a doubt, one of the most important obstacles delaying the recovery and reconstruction process in our liberated territories is the contamination of the territory with mines.

Main part

Chart 1.shows the observed figures for areas cleared of mines and unexploded ordnance during 2021–2024, clearly showing how the scale and intensity of the process have changed. In 2021, the cleared area was 22,846.6 hectares, which is an indication of the activities carried out in the initial phase. In the following year, i.e. 2022, this figure increased sharply to 41,019.5 hectares, a jump of approximately 89.6% compared to the previous year [8]. In 2023, the cleared area increased to 53,693.8 hectares, with a growth rate of 26.6%. This is a reflection of some stabilization after the high growth of the previous year and a transition to more complex areas. In 2024, the cleared area reached 62,023.9 ​​hectares, with a growth rate of 15.6%. It is clear from this that although the volume of cleared area increases each year, the growth rate is gradually decreasing. This is explained by the clearing of easier and more accessible areas in the initial stage, while as the process progresses, demining activities are carried out in areas that are risky and technically difficult. 

Chart 1. Areas cleared of mines in our post-conflict areas

Source: Compiled by the author based on information from MTM (https://mtm.az/).

Overall, the total area cleared of mines and unexploded ordnance increased by more than 171% from 2021 to 2024, which indicates significant achievements in the direction of security and land restoration across the country. The indicators show that the clearance work is being carried out systematically, consistently and on a large scale, and the continuation of this process is of great importance from both humanitarian and socio-economic perspectives. An analysis conducted by the Mine Action Agency of the Republic of Azerbaijan (ANAMA) based on official data released by it shows that 179,186 hectares of land have been cleared of mines and unexploded ordnance over the past 4 years (2021-2024). According to the Action Plan of the “I State Program on the Great Return to the Liberated Territories of the Republic of Azerbaijan”, it is noted that by the end of 2026 the area of ​​demined areas in the liberated territories will reach 280 thousand hectares. Based on this, we can say that currently 64% of this work has been completed.

Table 1. Completed highways in our post-conflict areas

Source: Compiled by the author based on data from AAYDA (http://www.aayda.gov.az/).

Currently, in accordance with the "First State Program on the Great Return to the Liberated Territories" and the orders signed by President Ilham Aliyev, work is continuing to reconstruct the road infrastructure in the liberated regions. Within this framework, the design and construction of 45 highways with a total length of 3,382.6 kilometers is being carried out. To date, the construction of 7 highways from these projects has been fully completed, and their total length is 315.9 kilometers. In addition, the construction of a 24.2-kilometer section of the Shukurbayli-Jabrail-Hadrut highway, which is planned to be 39.7 kilometers long, has already been completed [6]. According to current data, a significant increase in the number of hydroelectric power stations in Karabakh and East Zangezur is observed by “Azerenergy” OJSC. By the end of 2024, 32 hydroelectric power stations were commissioned in the region, and a total of up to 550 million kilowatt-hours of environmentally friendly, renewable “green energy” were produced through these stations. Next year, i.e. in 2025, an additional 11 new hydroelectric power stations are planned to be commissioned [3].

These facts show that “Azerenergy” OJSC continues its activities in a systematic and phased manner towards the formation of green energy zones, which contributes to the expansion of sustainable and environmentally friendly energy production in the region. According to information as of January 2025, the process of phased resettlement of the population to the territories liberated from occupation in the post-conflict period continues. To date, a total of 2,708 families, i.e. 10,665 people, have permanently settled in these territories. The largest number of resettlements was recorded in Fuzuli district - 822 families (3,132 people) were resettled here. 368 families (1,386 people) were resettled in Shusha city, and 570 families (2,090 people) were resettled in Lachin. 44 families (169 people) were resettled in Khojaly city, 357 families (1,483 people) in Jabrayil, 20 families (90 people) in Talish village of Aghdara district, 175 families (871 people) in Aghaly village of Zangilan district, 59 families (215 people) in Sus village of Lachin district, and 217 families (823 people) in Zabukh village were permanently resettled. Also, 76 families (406 people) were resettled in the village of Ballıca in the Khojaly region [7].

These indicators reflect the planned and consistent implementation of the Great Return process. At the same time, reconstruction and restoration works are being carried out at a high pace in a total of 100 settlements, including 8 cities, 8 settlements and 84 villages, within the framework of the “First State Program on the Great Return”. In addition, the foundations of 4 major industrial and agropark projects have been laid in the Karabakh and East Zangezur economic regions and their construction continues. These projects include the “Araz Valley Economic Zone” Industrial Park in Jabrayil, the “Agdam Industrial Park” in Agdam, the “Lachin Agro and Industrial Park” in Lachin and the “Dost Agropark” in Zangilan. In addition, modular medical institutions, schools and kindergartens are being built in the liberated territories to develop social infrastructure. All these steps are aimed at creating a sustainable living environment in the region and improving the well-being of the population. The volume of work carried out in the post-conflict areas of our republic in 2021-2023 is very large. It should be noted that our republic is carrying out these reconstruction and restoration works at its own expense, without any financial support from abroad.

Diagram 1 depicts the investments directed to our liberated territories in 2021-2023. Karabakh and East Zangezur received $1.29 billion in 2021, $2.41 billion in 2022, and $3.71 billion in 2023. The volume of investments directed to our post-conflict territories increased by 87% in 2022 compared to the previous year, and by 54% in 2023 [2].

 Diagram 1. Fixed capital investments in our post-conflict areas (in billions of US dollars)  

Source: Compiled by the author based on the indicators of the Statistical Bulletin "Construction in Azerbaijan" / 2024.

Looking at Diagram 2, we can see that investments in post-conflict areas in the period 2021–2023 demonstrate a rapid growth dynamics overall. This growth varies both by sector and by year. While investments in agriculture per sector were $7,637.1 thousand in 2021, they increased to $204,922.5 thousand in 2023. This is an increase of approximately 27 times and indicates a significant increase in interest in agriculture. This increase is associated with the clearance of land from mines and the realization of agricultural potential. While investments in the industrial sector were $67,664.8 thousand in 2021, this figure increased 8 times to $540,523.8 thousand in 2023. This reflects steps aimed at building industrial potential and supporting local production. The construction sector is one of the areas experiencing the greatest growth. While $149,748.0 thousand was invested in this area in 2021, it increased by about 5 times in 2023 to $750,426.1 thousand. This is mainly due to the restoration and construction of infrastructure - roads, buildings, social facilities. Investments in the field of trade and repair of vehicles have been unstable. In 2021, $1,300.0 thousand was invested, in 2022 this figure decreased to $117.6 thousand (an approximately 11-fold decrease), but in 2023 it increased to $6,932.8 thousand (an approximately 5.3-fold increase compared to 2021). This change is explained by the fact that in the initial years the main focus was on infrastructure and production. The area that attracted the most investment is the transport and warehousing sector. In 2021, $960,404.0 thousand, in 2022, $1,904,656.9 thousand, and in 2023, $2,001,266.1 thousand were invested [2]. The stable and high growth in this area indicates that the establishment of transport links and the development of logistics infrastructure in the liberated territories is a priority.

One of the important turning points in terms of accelerating economic development in post-conflict regions is the widespread use of digital technologies. The development of digital infrastructure in the liberated territories of Azerbaijan will make a significant contribution not only to the realization of economic potential, but also to the promotion of foreign investment [3]. 

Diagram 2. Investments in sectors of the economy in post-conflict areas (in thousand US dollars) 

Source: Compiled by the author based on the indicators of the Statistical Bulletin "Construction in Azerbaijan" / 2024.

At the same time, the basis of economic revival in post-conflict regions is purposeful and sustainable development plans. Diversification of the economic structure and the application of innovative approaches play a key role in ensuring the long-term economic stability of Karabakh and East Zangezur. This recovery process should include the implementation of strategies aimed not only at solving current problems, but also at ensuring future economic sustainability. In addition, the efficient use of existing resources in areas such as industry, agriculture and tourism is also the main basis for development [4]. The transition to renewable energy sources is of strategic importance from both an ecological and economic perspective. The steps taken by Azerbaijan in the field of alternative energy will not only strengthen domestic energy security, but also regional and international energy cooperation. This approach not only enhances the country's position and geostrategic importance in the international arena, but also stimulates its participation in large-scale energy and transport projects [5].

In general, the development of the investment climate in the post-conflict regions of Azerbaijan is not limited to the restoration of physical infrastructure. The development of human resources, digitalization, stimulation of alternative energy sectors and the introduction of innovations are the main factors ensuring the sustainable economic growth of these territories. Coordinated activities in the indicated directions will make these regions even more attractive for both local and foreign investors. In this regard, there is a need to develop investment management strategies in the post-conflict regions of Azerbaijan to increase the efficiency of investment activities and attract foreign investments to our liberated territories.

Formation of investment management strategies in the post-conflict regions of Azerbaijan

In the liberated territories of Azerbaijan, the development of effective investment management strategies is of particular relevance in terms of ensuring economic revival, reintegration of these regions into the national economy and realization of sustainable development. As a result of long-term occupation, these territories have been almost completely destroyed in terms of infrastructure, socio-economic activity has been minimized, and investment attractiveness has been seriously damaged. In such conditions, complex and strategic approaches are needed to restore investor confidence and ensure a continuous flow of capital. First of all, it is important to improve the legal and institutional framework. The creation of a legal system that reliably protects the rights of foreign investors, ensures the resolution of disputes through international arbitration mechanisms, and minimizes risks is the main condition for confidence in the investment environment. For this purpose, it is necessary to bring the existing investment legislation into line with international standards and introduce administrative mechanisms operating on the principle of a "single window" for investors. At the same time, it is important to develop effective investment promotion mechanisms. Investors’ financial risks can be reduced through instruments such as tax and customs incentives, state guarantees, insurance programs, interest-free or low-interest loans. These incentive mechanisms should include ongoing support not only at the initial stage, but also during the implementation of projects. Investment models based on sustainable development and green technologies should be selected as a priority direction in the rehabilitation of post-conflict areas. The rehabilitation process should not be limited to the reconstruction of physical infrastructure alone, but should be consistent with concepts such as preserving ecological balance, “smart villages” and “green energy zones”. In this context, cooperation with foreign technological partners is of great importance for wind, solar and hydropower projects [1]. Expanding regional and international cooperation can contribute to the faster development and integration of post-conflict areas. The geo-economic importance of these areas can be increased, especially through the creation of joint economic zones with business entities of neighboring countries, the activation of regional trade routes and the establishment of joint logistics centers. At the same time, technical and financial support from international donor organizations should be widely used. Modernization of infrastructure plays a fundamental role in the development of the investment climate. The establishment of high-quality highways, railways, energy and water supply systems, digital communication and logistics networks will increase the effectiveness of investment projects by reducing the technical and operational costs of investors. The formation of human capital and the efficient use of local resources should be at the forefront of strategic investment management plans.

Conclusion

As a result of professional training of the local population, the launch of higher education institutions in the region, the establishment of research centers and the promotion of innovative entrepreneurship, the domestic market will also become attractive for foreign investments. A single “Regional Investment and Innovation Strategy” should be adopted for the post-conflict regions of Azerbaijan, and a special “Investment Map” should be prepared within the framework of this strategy. This map should present sectoral advantages, available resources, and investment opportunities in detail for specific areas, and digital platforms that provide real-time information to investors should be put into use. Consequently, the formation of an investment climate in the post-conflict areas of Azerbaijan is a multifaceted and complex process. Steps taken in such areas as improving the legal framework, introducing innovative and green technologies, regional cooperation and restoring infrastructure will not only ensure economic revival, but also condition the sustainable development of these areas in terms of social well-being and regional stability. 

REFERENCES

1. Burhanzade, J. (2024). Foreign investment sources for the "Green Energy" sector in Azerbaijan’s post-conflict territories. The role of the National Leader Heydar Aliyev in the environmental restoration in Azerbaijan. Scientific-Practical Conference on Environmental Restoration in Azerbaijan, 312-314.
2. Burhanzade, J. (2024). Analysis of investment activity in the post-conflict territories of Azerbaijan and directions for increasing investment attractiveness. Economic Growth and Public Welfare, (3), 114–119.
3. Hajiyeva, N., Aliyeva, L., & Rustamov, E. (2023). Digital transformation and investment attraction in Karabakh. Journal of Regional Development, 11(1), 45–60.
4. Macid, A., Mammadli, Z., & Huseynov, R. (2023). Innovative strategies in post-conflict economic recovery. Post-Conflict Economics Journal, 9(3), 78–92.
5. Gasymly, R. (2023). Resource efficiency and sectoral development in liberated territories. Economic Studies Quarterly, 14(2), 115–132.
6. http://www.aayda.gov.az/
7. https://idp.gov.az/
8. https://mtm.az/