The practice of world business testified that the small enterprises take an important place in the national economy of any state. Indeed, in many respects it determines the rates of economic growth, structure and quality of gross national product. In the developed countries of the world, the small and medium business (SME) have long ago been named the motor of the economy. In the budgets of these countries, significant share fell on SME. And, it is understandable that the governments of these countries in every possible way try to support and develop such enterprises.
The situation in Azerbaijan shows that the conditions, created in the country due to the political and macroeconomic stability for accelerating the development of the small and medium business, are used not completely. The number of entrepreneurs is lower than the available possibilities and the share in the structure of the GDP (Gross Domestic Product) do not reach 10%, while 20-30 percent is considered as normal level.
According to the official statistics, today in Azerbaijan there are more than 59,721 small enterprises and objects, including 8,571 agricultural, 89 fishery, 527 trade, 5,458 processing enterprises, 172 enterprises on production of gas, electric power and water, 7,116 construction organizations, 24,276 enterprises in the wholesale and retail trade, 800 enterprises on hotel services, 1,548 transport and communication enterprises, 491 financial, 6,424 enterprises of real estate, lease, 299 in the sector of education, 946 health-improvement, 2999 communal and private services.
In the national sector the SME still weakly develops, which is important from the strategic point of view. SEM has insufficient impact on the development of export potential and structure of export. It does not correspond to possibilities of regional development of SME, more than half of the enterprises of this sector concentrated in Baku and its outskirts.
Domestic legislation has is already made a number of attempts to bring the legal and organizational provisions of SME to the necessary line of conduct. In particular, "Program of State support SME in Azerbaijan (1997-2000)" and "State development program on SME in Azerbaijan (2002-2005) have been realized. Due to their realization, development of the legal base of this business has been achieved, the regulation of enterprise has significantly changed. The structures, which render educational, information and consulting services, began to more actively work. Measures have been taken to protect the rights and legitimate interests of entrepreneurs. The Government of Azerbaijan also completed the design of the State Entrepreneurship Development Program for the period up to 2013. The Cabinet of Ministers has already presented it to the consideration of the Presidential Administration. This program includes provisions on creation of business incubators, industrial towns in the country and the support to special economic zones.
As positive step in the development of SME in Azerbaijan, it is possible to mention the introduction of the principle "single window" for the registration of business at the beginning of this year. So, since January 2008 the Ministry of Taxes of Azerbaijan has registered 24,000 economic subjects, whereas in 9 months of last year the number of newly registered enterprises composed only more than 3,000. After creation of new system, the period of State registration of new enterprises was reduced by 20 times - to three days, and the number of submitted documents by several times. The number of procedures will be reduced from 13 to five. In the future, after introduction of electronic signature, the process of State registration of business will be possible in the regime of on-line.
Simplifying the procedures of entrepreneurship registration facilitated also the process of presenting tax declarations. The Ministry of Taxes commenced introduction of a system of the electronic declaration from August of the last year. This allowed taxpayers to present tax declarations through Internet, comprise and check them through software, and also check their personal account sheet in the regime of real time.
However, still many serious barriers remain, which are solved by many businessmen with difficulty. The existing unsolvable problems, which restrain SME development, are connected with the instability of gross economic and legal conditions, the difficulties in obtaining investments, accommodations and information for small business, etc.
The corruption, most common problem in the sphere of SME, presents obstacles as well. Organizing small business, its existence are connected with the activity of a large number of inspections, which require bribe. However, after introduction of the principle of "single window" the cases of corruption decreased.
Other basic problem of small business is to open business in the financial plan. Bank percentages for the commercial activity are maximally high (more than 20 percent), but privilege credits in the National Fund are unfortunately sufficient not for all. All these, plus to inflationary development leads to the fact that developing small enterprise is considered a risky matter.
Meanwhile any steps directed toward the development of small business are useful because the activity of small enterprises convinces of their high efficiency. Therefore, with the confidence it is possible to say that the small and medium enterprises have the following advantages.
1. Flexibility, which makes it possible to timely redistribute human and material resources and timely react to changes in the demand.2. Small entrepreneurship offers possibilities of structural re-establishment of economy.3. Small entrepreneurship is an important social tool to combat unemployment.4. The enterprises of the small sector of economy make it possible to decrease the disproportion in the incomes.
5. It provides an opportunity to develop and adapt different forms of new technologies.6. To prepare basis for the future development of industry, in the form of training qualified and semiskilled staffs.7. It reveals talents contributing to the stimulation of economic development.8. It increases mobility, rising the level of use of the natural resources.9. It increases share of SME in the export of the country
Considering above-mentioned factors, special attention must be concentrated on reduction in corruption and rates of taxation. The project of the Ministry of Finance and Ministry of Taxes, which proposes to re-consider the rates of profit tax and VAT, was postponed. The project proposes decreasing the rate of profit tax from present 22% to 20%, and VAT - from 18% to 17%.
Besides the tax relaxations, special importance for the small business is the possibility of simplification in the delivery of account. Thus, for instance, in the West, all enterprises pass tax account in the year, which simplifies work in many respects, whereas Azerbaijani entrepreneurs make this quarterly.
There is other important moment. We expect joining the World Trade Organization (WTO), after which Azerbaijani market will be completely opened for the foreign products. Most probably, the market will be full of imported goods, which will be more qualitative and cheaper, and Azerbaijani producers will not be able to compete with them. It means that Azerbaijan's economy will directly depend on foreign products. Therefore already today Azerbaijan should develop production, make them competitive so that tomorrow when the borders are opened Azerbaijani products could take solid niche in the commodity market of not only Azerbaijan, but also other countries. And certainly significant role in settling this problem belongs to the SME.