Study of Small and Medium Enterprises in Azerbaijan - IFC

More documents

Recommendations

Info

As indicated in the survey, it is simpler for entrepreneurs to operate in the formal economy as individual entrepreneurs for a number of reasons: 1) The registration process is simpler for the individual entrepreneurs than for legal entities; 2) The expenses for the registration process, license and permits are much lower for individual entrepreneurs; 3) In businessmen’s opinion, individual entrepreneurs are more often checked by the local or regional branches of the inspection services compared to SMEs, since the headquarters of ministries and agencies do not have a list of registered IEs. Legal entities must register with ministries and agencies’ headquarters; therefore, they are checked by these government structures, with whom it is not always easy to come to reach an informal settlement. In 2007, one in four entrepreneurs on average invested in fixed assets of his enterprise using mainly internal sources of financing (personal savings/family capital). The low investment level can be partially explained by the limited access to external financing sources (see chapter Access to finance), as well as by insufficient confidence in the business environment. As the country’s overall economy grows, this corresponds to an increase in income for entrepreneurs. If the growing income on the one side increases consumer income, then on the other side it creates the financial foundation for the development of individual and small-scale entrepreneurship, which, in turn, should cover the growing consumer’s needs. Thus, during the 2004-2006 period (according to official data from the State Statistics Committee), the number of individual entrepreneurs grew significantly (the aggregate average annual growth was, on average, 6 percent), and at the beginning of 2006, there were about 171,000 IEs. Chart 2.5 The aggregate average annual growth of individual entrepreneurs was 6 percent (manats) Number of Individual entrepreneurs (1000 people) 200 150 100 144 171 50 0 2004 2006 Individual entrepreneurs represent the largest category of SMEs in the country, as far as the quantity and share of income are concerned. 36 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
Table 2.2 Statistical information on IE activity Average annual turnover AZN 42,000 $51,000 Average profit AZN 10,450 $13,000 Employees number 3 people (full and part-time) Average monthly salary AZN 150 $185 The economic opportunities in Baku, employment shortages in some regions, and low profitability in agriculture create seasonal employment and migration. According to official data, the population of Baku is slightly more than two million people, but this figure does not include people formally registered in other places in the country, yet living in the capital. Some experts believe that a more realistic figure of Baku’s population is twice the official indicator, or four million. Hence Baku, followed by Sumgayit and Ganja, remain the most populated cities in the country. The proportions of individual entrepreneurs and SMEs favor the three most populated cities of the country; the total number of individual entrepreneurs in Baku, Sumgayit, and Ganja equals 42 percent of the whole country. These entrepreneurs work mainly in the consumer market, i.e. the dominating share is employed either in the trade area, or in the services area. Chart 2.6 Total number of individual entrepreneurs in Baku, Sumgayit, and Ganja equals 42 percent (Sumgayit is included into Aran region, Ganja is included into Ganja- Gazakh region) Indicators on IE 50 40 34 30 33 20 20 20 20 15 22 28 Distribution by regions, in % IE number per 1000 residents 26 22 17 10 0 Baku Aran 13 Ganja- Gazakh 7 Lankaran 6 Sheki- Zagatala 6 Absheron 6 Guba- Khachmas 5 Nakhchivan 3 Dagliq Shirvan 6 1 Yukhari Garabakh Individual entrepreneurs are predominantly involved in activities requiring minimal investments and giving quick income, especially trade. Only a small number of individual entrepreneurs are involved in manufacturing, requiring high initial investments, which bring income after a relatively long period of time. Individual entrepreneurs hire on average three employees on either full or part-time basis, paying them an average monthly salary of $185. 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 37
Page 1 and 2: Study of Small and Medium Enterpris
Page 3 and 4: Study of Small and Medium Enterpris
Page 5 and 6: 5. Business Permits................
Page 7 and 8: Foreword and Acknowledgements IFC,
Page 9 and 10: critically examines all areas of op
Page 11 and 12: of each formality. Special attentio
Page 13 and 14: Policy Recommendations Business Reg
Page 15 and 16: Problems Sources of Problem Recomme
Page 19 and 20: Business Taxation Problems Sources
Page 25 and 26: Capital: Baku Country’s populatio
Page 27 and 28: The state, ultimately responsible f
Page 29 and 30: 1. Methodology 1.1 Background The s
Page 31 and 32: the share of economically active co
Page 33 and 34: Scope of activity Official statisti
Page 35 and 36: 2. SMEs in Azerbaijan The aim of th
Page 37: Meanwhile, the number of small and
Page 41 and 42: The “typical” small enterprise
Page 43 and 44: According to the IFC survey, more t
Page 45 and 46: 2.5.3 Legal disputes Most entrepren
Page 47 and 48: 3. Business Registration In January
Page 49 and 50: According to the law previously in
Page 51 and 52: 3.4 Economic impact estimate Accord
Page 53 and 54: tion duplicate is addressed to the
Page 55 and 56: the local tax inspectorate for regi
Page 57 and 58: 3.10.3 Introduce the electronic reg
Page 59 and 60: 3.10.7 Simplify the liquidation pro
Page 61 and 62: Business registration before ‘one
Page 63 and 64: Process map of one-stop-shop busine
Page 65 and 66: Registration for individual entrepr
Page 67 and 68: 4.1 Licensing: the legal framework
Page 69 and 70: Chart 4.1 Number of activities requ
Page 71 and 72: While the Rules specify limits for
Page 73 and 74: Chart 4.6 Economic impact of licens
Page 75 and 76: Annex 4.1 Checklist of issues for d
Page 77 and 78: Based on the IFC survey estimates,
Page 79 and 80: 5.2 Permits coverage The Azerbaijan
Page 81 and 82: Box 5.4 An example of overlapping p
Page 83 and 84: 5.4 Permit expenses Azerbaijani leg
Page 85 and 86: Chart 5.9 40% Average percentage of
Page 87 and 88: 2.4. Specifying in the law a unifor
Page 89 and 90:
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 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 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
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
Page 212:
Azerbaijan Business Enabling Enviro
show all

Study of Small and Medium Enterprises in Azerbaijan - IFC

Create successful ePaper yourself

Delete template?

Save as template?