Study of Small and Medium Enterprises in Azerbaijan - IFC

Box 2.1 Definition of small business units
According to the Cabinet Council Decree of the Azerbaijan Republic on Criteria For Defining Small and Medium Enterprises Based Upon the
Economic Activity #57, dated April 20, 2004, the following legal entities are considered “small business units”:
• Construction and industry: number of employees of less than 40 people and annual turnover of less than AZN 200,000 (~$247,000)
• Agriculture: number of employees of less than 15 people and annual turnover of less than AZN 100,000 (~$123,500)
• Wholesale trade: number of employees of less than 10 people and annual turnover of less than AZN 300,000 (~$370,500)
• Other sectors: number of employees of less than 5 people and annual turnover of less than AZN 100,000 (~$123,500)
The increase in the SME sector reflects its growing importance to the country’s
economy. This is clearly demonstrated in the expanding number of registered entities,
but even more so the increasing number of employees, either hired or formally
registered. Nevertheless, approximately 90 percent of all the labor force within the
entrepreneurship community is employed by IEs.
Table 2.1 Number of employees of IEs and SMEs
2004 2005 2006
No of
subjects
Total No of
employees
No of
subjects
Total No of
employees
No of
subjects
Total No of
employees
Small Enterprises
(legal entities)
17,028 68,565 11,982 73,447 12,232 90,134
Individual Entrepreneurs 144,406 292,654* 166,558 687,848* 171,776 922,215*
Total 161,434 361,218 178,540 761,294 184,008 1,012,348
* Official sources do not contain information on the average number of employees working for individual entrepreneurs (IE). This
calculation was done based upon the empirical evidence, using the formula:
(Average number of employees per small enterprise – 2) x number IE = Total number of employees working for individual entrepreneurs.
According to the State Committee for Statistics’ data and some calculations based
upon these indicators, the role of SMEs in the country’s economy is growing,
particularly in its contribution to the private sector.
Chart 2.2
From 2004 to
2006, the share of
people employed in
small and medium
enterprises from
the total labor force
has increased from
9 percent to 25
percent
30%
25%
20%
15%
10%
5%
9%
20%
25%
0%
2004
2005
2006
34
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