Study of Small and Medium Enterprises in Azerbaijan - IFC

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The charts above confirm that the entrepreneurs who find the lending terms restrictive and expensive are at the same time often the very persons who never approached a bank to borrow money. The awareness campaign should thus go beyond an individual bank’s commercials and must be focused on preparing a database that will offer comparative lending terms, which are widely disseminated to the business community – through business associations, for example. A collective effort is required with some leadership from the relevant state authorities to bridge the communication gap between the two economic sectors. Internet portals, booklets, specialized publications, and outreach to the business community though the daily media are the usual means of communicating economic reforms globally. In addition, individual banks should be encouraged to undertake market research and investigate their client profiles, including potential clients. Marketing activities of the banks are still in an embryonic stage and clearly insufficient. To that extent, the public sector may assist in organizing roundtables, seminars, trainings, and conferences that bring the two sectors together and help to build a lasting commercial relationship. Expected Impact All this will help increase the quality of service and client satisfaction, leading to further borrowing and a quicker turnover of the available credit funds, spurring greater economic activity for the SME sector. Improved banking services will in turn result in SMEs maintaining cleaner records and operations, which adds to better tax compliance and improved revenues for the public sector – a “win-win” strategy for every stakeholder in this field. 8.4.5 Set up a credit bureau The country should move away from the incomplete state-run registers and move towards setting up a full-scale, ideally privately managed credit bureau that would include all the financial institutions. Expected Impact Implementation of the proposed measures will help promote in the medium and long-run: • Increase in the total volume of credit to SMEs; • Real growth in number and turnover of SMEs; • Improved conditions for financing, including: lower interest rates, longer maturity periods, introduction of grace periods, and lessening of collateral requirements. 140 St u d y o f Sma l l a n d Me d i u m Ent e r p r i s es in Az e r b a i j a n
9. Foreign Trade The volume of foreign trade in Azerbaijan has increased over the first five months of 2008 in comparison with the same period in 2007 by almost 70 percent in export transactions and 23 percent in imports. However, the recent statistical data provided by the State Customs Committee shows that the role of SMEs in export transactions has decreased by 5 percent, while the volume of import transactions with SMEs participation has increased 8 percent 54 . According to the same source, oil and oil products constituted 98 percent (94 percent crude oil) of Azerbaijani exports in 2008, which indicates that Azerbaijani exports are structured around one single product; furthermore, Azerbaijan exports the raw material so it receives insignificant gain from processing the oil. Main Findings • 66 percent of individual entrepreneurs and 38 percent of SMEs consider import procedures as problematic; • According to the State Customs Committee statistics, 94 percent of exports within the first 8 months of 2008 consisted of crude oil; • Only 2 percent of the survey repondents have carried out export transactions, and 8 percent have carried out import transactions; • Mainly larger companies are engaged in foreign trade. The share of the private sector’s involvement in export transactions is considerably low compared to the public sector. In contrast to export transactions, import operations are mainly managed by the private sector. Despite recent reforms in foreign trade, import and export procedures still need to be improved to encourage engagement of more entrepreneurs. Legal analysis and in depth interviews in fact show that in order to carry out certain import/ export transactions, entrepreneurs have to go through a complicated process of gathering numerous documents and dealing with various government agencies. Also administrative barriers within the supervisory agencies further complicate the overall problems faced by entrepreneurs in import/export transactions. 54 http://az-customs.net/az/statistikaaz.htm. Aze r b a i j a n Bu s i n e s s En a b l i n g En v i r o n m e n t Pr o j e c t 141
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Study of Small and Medium Enterpris
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Study of Small and Medium Enterpris
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5. Business Permits................
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Foreword and Acknowledgements IFC,
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critically examines all areas of op
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of each formality. Special attentio
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Policy Recommendations Business Reg
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Problems Sources of Problem Recomme
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Business Taxation Problems Sources
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Capital: Baku Country’s populatio
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The state, ultimately responsible f
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1. Methodology 1.1 Background The s
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the share of economically active co
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Scope of activity Official statisti
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2. SMEs in Azerbaijan The aim of th
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Meanwhile, the number of small and
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Table 2.2 Statistical information o
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The “typical” small enterprise
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According to the IFC survey, more t
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2.5.3 Legal disputes Most entrepren
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3. Business Registration In January
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According to the law previously in
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3.4 Economic impact estimate Accord
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tion duplicate is addressed to the
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the local tax inspectorate for regi
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3.10.3 Introduce the electronic reg
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3.10.7 Simplify the liquidation pro
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Business registration before ‘one
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Process map of one-stop-shop busine
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Registration for individual entrepr
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4.1 Licensing: the legal framework
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Chart 4.1 Number of activities requ
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While the Rules specify limits for
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Chart 4.6 Economic impact of licens
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Annex 4.1 Checklist of issues for d
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Based on the IFC survey estimates,
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5.2 Permits coverage The Azerbaijan
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Box 5.4 An example of overlapping p
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5.4 Permit expenses Azerbaijani leg
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Chart 5.9 40% Average percentage of
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2.4. Specifying in the law a unifor
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Annex 5.1 Procedure for obtaining c
Page 91 and 92: Annex 5.2 Checklist of issues for d
Page 93 and 94: The most significant legal act in i
Page 95 and 96: 6.1.2 There is no effective mechani
Page 97 and 98: 6.1.4 Entrepreneurs are not aware o
Page 99 and 100: IFC’s analysis showed that only h
Page 101 and 102: 6.2.2.1 The inspections process and
Page 103 and 104: View from an entrepreneur: “The s
Page 105 and 106: Chart 6.11 Average registration in
Page 107 and 108: going in the opposite direction. In
Page 109 and 110: clearly defined circumstances, or a
Page 111 and 112: Annex 6.2 Presidential Decree No. 7
Page 113 and 114: The bulk of individual entrepreneur
Page 115 and 116: Items 1-9 are collected at the firs
Page 117 and 118: The IFC survey reveals that one in
Page 119 and 120: Table 7.5 Main tax obligations of a
Page 121 and 122: Chart 7.3 IFC Survey: Complexity of
Page 123 and 124: 7.3.2 Tax inspections negatively af
Page 125 and 126: 7.3.5 The cumbersome VAT administra
Page 127 and 128: • Introducing clearer and more el
Page 129 and 130: Chart 8.1 Development of Credit Ins
Page 131 and 132: More than 90 percent of entrepreneu
Page 133 and 134: Chart 8.9 The loan interest rates o
Page 135 and 136: Case study of a Baku-based glass an
Page 137 and 138: View from a bank employee: “One p
Page 139 and 140: Box 8.2 Examples of a successful cr
Page 141: Box 8.3 Examples of alternative mec
Page 145 and 146: Box 9.1 Customs regimes under the C
Page 147 and 148: As Chart 9.1 illustrates, 98 percen
Page 149 and 150: Table 9.1 A comparison of the proce
Page 151 and 152: The comprehensive system of mandato
Page 153 and 154: Table 9.2 Average costs for imports
Page 155 and 156: Box 9.5 Customs payments The Custom
Page 157 and 158: Box 9.8 An excessive number of docu
Page 159 and 160: Moreover, due to the underdeveloped
Page 161 and 162: Expected impact More comprehensible
Page 163 and 164: 9.5.6 Accelerate WTO accession of A
Page 165 and 166: Chart 9.5 Goods importable upon app
Page 167 and 168: Azerbaijan has been long pending a
Page 169 and 170: List of Laws 1. The Tax Code of the
Page 171 and 172: Statistical Annexes Aze r b a i j a
Page 173 and 174: Chart A1.3 Individual Entrepreneurs
Page 175 and 176: Chart A1.7 Individual Entrepreneurs
Page 177 and 178: Chart A1.14 Three Major Types of Ob
Page 179 and 180: Registration Chart A2.1 Entrepreneu
Page 181 and 182: Chart A2.8 Three Major Problems Occ
Page 183 and 184: Chart A3.3 Existence of Licenses by
Page 185 and 186: Chart A3.9 Three Major Obstacles to
Page 187 and 188: Chart A4.4 Obtaining of Any Permits
Page 189 and 190: Chart A4.10 Time Required to Obtain
Page 191 and 192: Chart A5.4 Application for Credit o
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Chart A5.12 Average Interest Rate (
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Chart A6.3 Entrepreneurs That Under
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Chart A6.8 Authorities That Made In
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Chart A6.13 Breakdown of Number of
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Chart A6.19 Average Duration of One
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Chart A6.25 Small and Medium Enterp
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Chart A7.3 Small and Medium Enterpr
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Chart A7.8 Reported Share of Busine
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Chart A8.3 Usage of Optional (not c
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Azerbaijan Business Enabling Enviro
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