Study of Small and Medium Enterprises in Azerbaijan - IFC

The state, ultimately responsible for assuring competitiveness of domestic markets
combined with an investment-friendly business environment, faces transformation
from a traditional role of micromanager into that of a facilitator of business activities.
This is not an easy transformation: beginning in the 1990s, many states have successfully
reduced the scope of state functions in economic development while strengthening
their administrative capacity to reduce the costs of doing business and exposing
businesses to domestic and external competition. Indeed, institutions creating a level
playing field for business under stable regulatory conditions are critical to economic
development. This in turn is what constitutes good economic governance.
Business climate in Azerbaijan
In 2008, Azerbaijan was cited as a top 10 reformer by the IFC/World Bank’s Doing
Business report, with improvements on seven out of 10 indicators of business
environment reform. Azerbaijan started operating a one-stop-shop in January 2008
that halved the time, cost, and number of procedures to start a business: registrations
increased by 40 percent in the first six months. Azerbaijan also eliminated the
minimum loan cutoff of $1,100, more than doubling the number of borrowers
covered at the credit registry. Taxpayers can now file and pay their taxes online.
Azerbaijan’s extensive reforms moved it far up the ranks, from 97 th to 33 rd , in the
overall ease of doing business.
The Global Competitiveness Report 2008-2009 ranks Azerbaijan 69 th of 134 countries
examined with the score of 4.1 out of 7. Labor market efficiency and macroeconomic
stability have been rated as the key strengths, while the report prioritizes corruption,
inflation and tax rates for further reform focus. (Source: Country profile: Azerbaijan,
The Global Competitiveness Report 2008-2009, World Economic Forum, 2008,
http://www.weforum.org/documents/GCR0809/index.html.
Another comparable index ranks Azerbaijan somewhat more critically: the Index
of Economic Freedom 3 score for Azerbaijan is 58, making its economy the 99 th
freest in the 2009 Index. Its overall score is 2.6 points higher than last year, reflecting
notable improvement in business and labor freedom. Azerbaijan is ranked 17 th out of
41 countries in the Asia–Pacific region, and its overall score is slightly less than the
world average.
As a transforming economy, Azerbaijan still faces substantial challenges. Financial
freedom, investment freedom, property rights, and corruption remain a significant
challenge, and an underdeveloped judicial system is inadequate to efficiently protect
intellectual property rights, according to the Heritage Foundation.
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The heritage Foundation: http://www.heritage.org/index/Country/Azerbaijan.
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 25