Study of Small and Medium Enterprises in Azerbaijan - IFC

5. Business Permits
The permit system currently represents a substantial administrative burden for
running a business in Azerbaijan. The overall system has not reformed since the
collapse of the Soviet Union and poses a large burden for entrepreneurs.
Unlike the licensing regime a uniform regime for issuing permits does not exist in
Azerbaijan. As a result, the lack of clear legislative requirements compels entrepreneurs
to use unofficial payments while going through the permit procedure. Official and
unofficial payments in turn generate a substantial burden for business in Azerbaijan.
The aforesaid problems are caused by the absence of an integrated system regulating
the purpose and function of permits: the areas of their application, the agencies issuing
them, the cost of processing, and time periods for issuance and cancellation.
Currently there is neither a clear definition of what a permit is nor a review mechanism
to analyze its legal basis, regulatory purpose, or efficiency. As a result, virtually
any government agency, executive authority or municipality issues permits and their
number is unknown. The right to acquire or lose a permit is anticipated with different
regulations and depends on the operation in question. Generally, the technical procedure
is done in accordance with the Law on General Administrative Procedure, which
is the general systematic law for operating before state agencies when the procedure
for realization of rights and interests is in question 27 .
A non-standardized permits regime poses the following risks:
• Public institutions can use the lack of control over issuance of permits as an
opportunity to supplement the budget of the relevant institution;
• There are often opportunities for unofficial payments.
Main Findings
• About 81 percent of entrepreneurs have at least one permit. On average
entrepreneurs need three permits to conduct business activities;
• Duration of the application procedure and the cost of permits are variable:
– Individual entrepreneurs spend on average 136 Azerbaijani manats
($167) and four working days to obtain one permit;
– Small and medium companies spend on average 250 Azerbaijani
manats ($308) and eight working days to obtain one permit.
• Nearly 30 percent of surveyed entrepreneurs who obtained permits in 2007
resorted to unofficial solutions.
27
For further details see FIAS 2007. Azerbaijan Licensing and Permits System.
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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