Study of Small and Medium Enterprises in Azerbaijan - IFC

entities nationwide from the official statistical data provided by the State Statistical
Committee of the Azerbaijan Republic as of January 1, 2007. The stratification of
the sample was based on: (i) sectors of the economy defined by the State Statistics
Committee; (ii) size and type of enterprise, defined as number of employees; and
(iii) regions. Tables 1.1, 1.2 and 1.3 show the distribution of the official data and the
distribution of the survey sample.
Stratified random sampling is used to capture all the sectors of economic activity,
including firm classification and geographic distribution of the business entities’
universe. In other words, in order to make the sample selection representative of a
sector, firm type and region, the selected sample fully represents the larger economic
picture.
1.4 Firm classification in the Azerbaijani economy
According to decree No. 57 of the Cabinet of Ministries of the Republic of Azerbaijan
on Identification of the Small Entrepreneurship Subjects by Types of Economic
Activity dated April 20, 2004, small businesses are defined as follows according to
sector:
• In the construction and industry – number of employees of less than 40 person
and annual turnover of less than 200,000 Azerbaijani manats (~$247,000);
• Agriculture – number of employees of less than 15 people and annual turnover
of less than 100,000 Azerbaijani manats (~$123,500);
• Wholesale trade – number of employees of less than 10 people and annual
turnover of less than 300,000 Azerbaijani manats (~$370,500);
• Other branches – number of employees of less than 5 people and annual turnover
of less than 100,000 Azerbaijani manats (~$123,500).
There is no official definition of midsize legal entities in Azerbaijan. IEs are classified
as small enterprises while legal entities are further classified as either small or all the
others that make up the SME sector. Therefore except for the large companies, all
other registered businesses fall within the category of SMEs.
In terms of regional coverage, the survey was conducted in the urban areas of eight
regions (Absheron, Ganja-Gazakh, Sheki-Zagatala, Lenkoran, Guba-Khachmaz, Aran,
Yukhari Garabakh, Daglig Shirvan) and the capital city Baku. The survey does not
cover the occupied territories of the Republic of Azerbaijan and Nakhchivan.
In terms of sample size, 873 individual entrepreneurs and 893 legal entities’ were
interviewed during the survey, for a total of 1,776 respondents in the sample. The
respondents were the owners or top managers of private sector small and medium
enterprises and individual entrepreneurs, responsible for decision making.
Since retail and wholesale trade individual entrepreneurs form the largest share of
economic subjects (58 percent of the entrepreneurs), a decision was taken to reduce
their number, since the scope of their business operations is less complex and thus less
informative. Their share was therefore halved. This was done with an aim to increase
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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