Study of Small and Medium Enterprises in Azerbaijan - IFC

Based on the IFC survey estimates, business sector annually spends some 35
million Azerbaijani manats ($43.2 million) in direct, indirect and opportunity
costs to obtain the necessary permits. If only a third of these costs are to be
relieved by the cuts in permits, the private sector would be saving 11.6 million
Azerbaijani manats ($14.3 million) each year. Likewise, the government would
have direct savings of almost 5 million Azerbaijani manats ($6.17 million) on
associated labor costs 28 .
5.1 Permits: the legal framework
According to the Civil Code of the Republic of Azerbaijan, legal entities can
start their activity from the date of their state registration, with the exception
of activities requiring a special permit – a license 29 . However, the survey data
shows that in practice entrepreneurs must also obtain a number of permits to
start their business activity.
A permit is a document that gives the applicant a right to undertake a specific
action. The Azerbaijani legislation does not provide for a unified definition of
permit. For the purposes of this report, a permit is used to refer to any type of
permit documents as defined in Box 5.1 30 . The absence of a legal definition creates
confusion, both among issuing agencies and entrepreneurs. Furthermore,
entrepreneurs often confuse permits with licenses, which is a special permit to
conduct an activity on a regular basis 31 .
Box 5.1 Definition of a permit document
A permit document means a decision made and issued to a business entity by designated bodies in any form granting the right to any act
or specific activities to be performed in the course of a business process.
Permit document can be in the form of permission, approval, and opinion or in the form of any other document which is issued for the
above purposes:
1. Permission – authorization of the issuing agency giving the applicant the right to accomplish an action and/or realize an activity;
2. Approval – consent of the issuing agency with the accomplishment of the activity and/or realization of activity;
3. Opinion – a resolution based on an authorized agency’s examination or analysis of goods/products, regarding the possibility to perform
an activity and/or realization of activity;
4. Any other legal form serving the abovementioned purposes (certification, authorization, conformity assessment, permissions or payment
of fees for any business activity, or any legal document giving official permission to carry out a business activity).
28
Azerbaijan Business Permit Reform Strategy, IFC, Baku October 2008.
29
Articles 44.1 and 44.2 of the Civil Code dated September 2000 (with further amendments).
30
Small and Medium Enterprise Department, The World Bank Group. 2006. Business Licensing Reform: A
Toolkit for Development Practitioners. Washington, D.C.: The World Bank.
31
President’s Decree No. 782 dated 2 September 2002 on Improvement of Regulations of Granting Special
Permits (Licenses) for Some Types of Activities (with further amendments).
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 75