Study of Small and Medium Enterprises in Azerbaijan - IFC

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9.5.4 Removal of the barriers to foreign trade related to technical regulation (standardization and certification) by: • Separating the standardization and certification functions; • Reviewing the list of standards and abolish the ones not necessary on the grounds of health and safety in a market economy; • Considering the possibility to adopt international standards to avoid the “maintenance cost” of the system; • Applying the risk-based approach by determining which goods and services need to be certified in order to exclude non-risky categories and services from mandatory certification, while making the standardization of other goods voluntary; • Shifting from end-product certification to process certification; • Abolish the requirement that each consignment of products must be certified; and • Creating internationally required laboratory facilities to certify Azerbaijani commodities according to internationally adopted standards to facilitate their export. Expected impact Reduction of the coverage of certification would result in additional cost savings for entrepreneurs. As a result of adoption of international standards “maintenance cost” for the authorities responsible for elaboration of standards would be reduced. Possibility to certify Azerbaijani commodities with internationally accepted standards would allow Azerbaijani exporters easier access to international markets. Process certification would allow identification of risky components at the early stages of product development and will thus increase efficiency of certification. Improvement of technical regulation will increase competitiveness of Azerbaijani goods and will create a possibility for entrepreneurs to market their products in compliance with international standards. 9.5.5 Rationalize customs tariff rates and other customs payments by: • Approximating customs tariffs for similar type of goods, raw materials and fullyprocessed goods not to discourage import/export of any of them or introducing uniform tariff rate; • Introducing uniform tariff rates for similar types of goods; and • Eliminating VAT exemptions to avoid distortions it causes. Expected impact As a result of these reforms, possible distortions caused by excessive tariffs will be eliminated. Approximation of customs tariffs or establishment of a uniform tariff rate alongside the abolishment of VAT exemptions will reduce the incentives and ability of customs officials to trade between classes of goods or apply “preferential treatment” in exchange for unofficial payments. Moreover, these measures will also ease calculation of customs payments. 160 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
9.5.6 Accelerate WTO accession of Azerbaijan by bringing the legislation in line with WTO requirements and institutionalization of business participation in the WTO accession process WTO accession will have substantial positive impact on the development of foreign trade in Azerbaijan by increasing foreign parties’ confidence in Azerbaijani businesses. Annex 9.1 Main Legislative Acts Regulating Foreign Trade • The Customs Code of 1997; • Presidential Decree No. 609 On Further Liberalization of Foreign Trade in the Republic of Azerbaijan dated June 24, 1997 (hereinafter the “Decree on Foreign Trade”); • Law No. 772-IIQ On Export Control dated October 24, 2004 (hereinafter the “Law on Export Control”); • Law On Customs Tariffs of 1995; • Resolution of the Cabinet of Ministers No. 91 On Import-Export Duty Rates dated April 22, 1998; • Resolution of the Cabinet of Ministers No. 11 On the List of Imported Goods Exempt from Value Added Tax dated January 31, 2005; • Resolution of the Cabinet of Ministers No. 20 On Approval of Excise Tax Rates Applicable to Goods Imported into Azerbaijan dated January 19, 2001; • Resolution of the Cabinet of Ministers, No. 80 On Import-Export Duty Rates and the Fees for Customs Clearance Operations dated April 12, 2001; • Resolution of the Cabinet of Ministers No. 135 On Rules for Issuing Quality Certificates for Foodstuffs Exported to the EU Countries dated July 13, 2005; • Resolution of the Cabinet of Ministers No. 185 On Stimulation of Export in Certain Business Activities dated July 26, 2006; • Law No. 430-IQ On Culture dated February 6, 1998; • Presidential Decree No. 782 On Improvement of Regulations of Issuing Special Permits (Licenses) for Certain Types of Activities dated September 2, 2002; • Presidential Decree No. 218 On Regulation of Export of Foodstuffs to the EU Countries dated April 1, 2005 (“Decree on Foodstuffs”); • Rules On Determination of Country of Origin of Goods approved by Resolution of the Cabinet of Ministers No. 190, dated November 29, 2007; • Presidential Decree No. 12 On Implementation of One-Stop-Shop Principle in the Inspection of Goods and Vehicles Passing through the State Border Checkpoints dated November 11, 2008. 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 161
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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
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Annex 5.2 Checklist of issues for d
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The most significant legal act in i
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6.1.2 There is no effective mechani
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6.1.4 Entrepreneurs are not aware o
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IFC’s analysis showed that only h
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6.2.2.1 The inspections process and
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View from an entrepreneur: “The s
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Chart 6.11 Average registration in
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going in the opposite direction. In
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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 and 142: Box 8.3 Examples of alternative mec
Page 143 and 144: 9. Foreign Trade The volume of fore
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: Expected impact More comprehensible
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
Page 193 and 194: Chart A5.12 Average Interest Rate (
Page 195 and 196: Chart A6.3 Entrepreneurs That Under
Page 197 and 198: Chart A6.8 Authorities That Made In
Page 199 and 200: Chart A6.13 Breakdown of Number of
Page 201 and 202: Chart A6.19 Average Duration of One
Page 203 and 204: Chart A6.25 Small and Medium Enterp
Page 205 and 206: Chart A7.3 Small and Medium Enterpr
Page 207 and 208: Chart A7.8 Reported Share of Busine
Page 209 and 210: Chart A8.3 Usage of Optional (not c
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Azerbaijan Business Enabling Enviro
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