Study of Small and Medium Enterprises in Azerbaijan - IFC

6.1.2 There is no effective mechanism for monitoring
inspection activities
Despite many sector directives, the legal acts do not define the rules on inspections
that would bring the on-site check-ups in line with commonly used international
standards. These standards typically define common principles, reasons, and frequency
of inspections by the state agencies, as well as establish complaints procedures at
higher levels. However, in the case of Azerbaijan, each related authority refers to a
different variety of legal acts, which in turn results in a different inspection regime by
each agency. As a result, several inspectors check the same business entity.
Entrepreneurs’ responses appear to confirm significant issues in the area of inspections.
For example, based upon the IFC’s end-2007 results, 79 percent of all enterprises
questioned were subjected to inspections at a minimum of once per month. The list of
most frequently visited inspections include: the Tax Ministry, Ministry of Emergency
Affairs, Labor and Social Protection Ministry, Ministry of Economic Development
(MED), and Health Ministry.
Box 6.1 The Rules on MED Representatives’ Participation in the Inspections
The Rules on MED Representatives’ Participation in the Inspections of the Entrepreneurs’ Activity by State Authorities (Excluding Tax Authorities),
dated December 6, 2002, were adopted to perform the President’s Decree #790, dated September 28, 2002,. These rules define the
procedure of MED participation in the inspection process in relation to the business entity. According to the rules, the state authority, planning
to conduct an inspection, must notify MED on the place, date, and purpose of the inspection three days before the inspection. In the course
of inspection, the MED representative must control the process of due inspection execution in accordance with the existing legislation.
Results of the survey showed that a great deal of attention should be paid to the
entrepeneurs’ knowledge increase in the area of inspections. Despite the Presidential
order which requires all entrepreneurs to be provided with registration handbooks,
26 per cent of entrepreneurs still do not use this tool for inspection registration.
Moreover, majority of inspections are carried out without the presence of MED
representative, which contradicts the requirements of relevant legal documents.
According to the rules, the MED representative must control the process of due
inspection execution in accordance with the existing legislation. However, given
the lack of clarity over what the legislation governs the conduct of inspection, the
assistance the MED representatives can provide the businesses with during the
inspections remains somewhat limited.
6.1.3 Absence of an effective mechanism for the inspection
planning
A significant step in eliminating of the cause of concerns related to the quantity
and extent of the inspections may be taken by introducing a structured system into
inspection planning. The trade and catering sector are more exposed to inspections
than any other areas of the economy. In most other countries, the inspections
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 93