Iran's investment company Ghadir and Azerbaijan's state oil company Socar have signed an agreement to jointly invest in oil and gas projects, a report said.

"Within the next six months, we will witness major developments on Khodafarin. The two sides will first build a dam, and then the construction of the power plant will start," Mohsen Pakaien, Iran's ambassador in Baku was quoted as saying in the Iran Daily report.

A Memorandum of Understanding (MoU) was also signed towards setting up a pharmaceutical factory in Azerbaijan's Sumgait, he revealed.

"Next week a delegation from Iran will come to Azerbaijan to discuss the pharmaceutical factory in the Sumgait Chemical Industrial Park," Pakaien said, noting that the factory will be launched in three phases.

In the first phase, Iranian medicines will be imported while in the second phase, the technology for drug production will be transferred, he explained.

In the final phase, drugs will be produced in Azerbaijan in five years, he added.