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After facing something of a slowdown with regards to finance activity over the past couple of years, it would appear that the Azerbaijani market is continuing its steady comeback. Although nowhere near as strong as the pre-crisis peak of 2007, lending is starting to become more prevalent again, as one partner says: "We are seeing the big finance transactions coming back now....

After facing something of a slowdown with regards to finance activity over the past couple of years, it would appear that the Azerbaijani market is continuing its steady comeback. Although nowhere near as strong as the pre-crisis peak of 2007, lending is starting to become more prevalent again, as one partner says: "We are seeing the big finance transactions coming back now."

"Investment is trickling back, although I would say there is a cautious atmosphere overall," says another, reflecting the attitude in the country at the moment.

The government itself is still trying to foster this growth by encouraging diversification in the economy, an aim which has been around for some time. "The socioeconomic policy implemented in Azerbaijan ensures sustainable economic development," said Niyazi Safarov, the Deputy Economic Development Minister, at a conference earlier this year.

Not everyone is convinced that this is what is happening though, amid concerns that the country is too reliant on its oil and gas sector. As one partner puts it, "The government talks about diversifying but I would say at least 85-90% of our work is still in oil and gas, or at least related to disputes or financing of that sector."

One area that is experiencing a boom is construction, with a number of large projects going into development in and around Baku. These include a new airport terminal building, new port facilities and a handful of brand-new luxury hotels going up in the city. Project finance lawyers won't get to see much of this action though as the companies that are overseeing these constructions are cash rich and hence do not need to raise outside funding.

An extremely interesting development in the market is the rise of Islamic finance. Previously downplayed at government level, it is now being seen as viable option for raising capital. "The Islamic Corporation for Development of the Private sector is establishing an Islamic insurance body and there is also an interest in Islamic finance products," comments one partner. "It is a way of drawing investment from the Gulf region. It is not an ideological thing I think at all, it is just about the money."

In the drive for foreign investment there have also been a number of trade agreements and other pledges of cooperation signed with other countries, such as Germany. As it happens though, not everyone is enthused by these developments, with one partner remarking, "These agreements are all about PR, and pretty meaningless really."

Despite this negativity, progress has been made in this direction, with the two countries formally agreeing to set up a joint chamber of foreign trade in July 2011. Furthermore, since the introduction of these measures, it is said around $200 million has been invested into the Azerbaijan economy by the Federal Republic of Germany.

The banking system has worked closely with international financial institutions in making the switch to International Financial Reporting Standards. The effect of this is that one of the requirements for being listed on the Baku Stock Exchange is now the transition to this system, which should increase investors' trust in the market.

Another more practical problem is actually getting into Azerbaijan itself. "There is a definite issue with permits and visas in this country. It is difficult to get in, as you can't get a visa at the airport," says one Baku lawyer.

This measure came in just before last year's elections with the stated intention being to control the entry of the media, political observers and, now, illegal migrant workers into the country. However this did lead to some red faces at times: "I know a hedge fund manager who tried to bring a delegation of businessmen over to Baku and was very upset when he was turned away at the airport," said one partner and this isn't an isolated complaint.

Another partner however had some sage, though practical, advice for those wanting to travel to the country: "Just arrange the visa before you travel. It's easy."

Lastly, the Special Economic Zones brought in a couple of years ago are still not up and running. As one partner says, "The Special Economic Zones are still on the paper, and are not functioning properly yet." These zones were legislated for in 2009 with the express aim of "accelerating the development of business and economy in the Republic of Azerbaijan, introducing new competitive manufacturing and service areas on the basis of a special legal regime and modern technology." They include provisions to help protect investments and profit made.