EY Azerbaijan will soon announce the winner of this year's 'EY Entrepreneur Of The Year' award. This competition celebrates the most resilient and innovative business owners in the country. It's the second time this prestigious contest has been held in Azerbaijan. Contestants are assessed by the independent jury panel comprised of renowned entrepreneurs, business executives, and representatives of respected international financial institutions. We spoke to Ivana Duarte, country representative of the European Bank for Reconstruction and Development (EBRD), who's been involved in this contest from its inception in 2019.
- Has your involvement in the ‘EY Entrepreneur Of The Year’ contest been interesting or enlightening so far?
It is the second consecutive year that I’ve been involved in the competition as a member of the judging panel representing the European Bank for Reconstruction and Development (EBRD). And I must say that it has been an inspiration for me. I applaud all the participants of this competition for their resilience and determination to innovate and stay motivated and focused, especially in these troubled times.
- Have you in the process come across or found out anything new or inspiring about local Azerbaijani businesses?
Sometimes I think that business people in this country are gifted with what I call an entrepreneurial gene, as they manage to run their businesses and achieve growth, quite often intuitively. But when I meet some of these people and talk to them, I realize that what had seemed as an intuition, is in fact a combination of knowledge, deep engagement in the business, and experience. I see how entrepreneurship is not as much inherent, but rather learned and mastered. And, of course, a key element is passion, and there is an abundance of this, here in the Caucasus.
- How do you think Azerbaijani entrepreneurs fare compared to their counterparts in other parts of Europe?
I think that Azerbaijani entrepreneurs are as innovative and determined to succeed as anywhere else around the globe. What sets them apart is their grit as they face multiple challenges some of which may be stemming from the business environment.
In general, running a business is a challenging activity and people know it too well. Regrettably, Azerbaijan still scores poorly in terms of willingness to engage in entrepreneurial activity. 92% of respondents of our Life in Transition survey said they’d never tried to set up a business. This is higher than the 88% average across the wider region.
The good news is that in 2020 Azerbaijan advanced significantly in the World Bank’s Doing Business rating, scoring among the top 20 most improved economies worldwide.
- What are their strengths and perhaps shortcomings?
To address this question, I would rather look at the overall business environment. We first need to define what makes business people’s lives easier and what makes it more difficult.
In Azerbaijan, the private sector growth continues to be influenced by the non-oil sector’s links with the oil sector and high state involvement in the energy and infrastructure sectors. Perhaps a better use of renewable energy can help direct more natural resources to higher-value export markets, and the progress is being made here with several renewable projects in the pipeline.
The EBRD is supporting the process and is prepared to consider providing financing for well-structured projects. The government has also recently set up Azerbaijan Investment Holding, which aims to ensure more effective governance of 22 state-owned enterprises and their increased accountability and efficiency.
As for the private sector outside of the extractive industry, it continues to be impacted by macroeconomic volatility, remaining informality and governance challenges. That said, I have seen significant improvements here in recent years, and businesses are now more prepared and willing to engage and interact with banks, thus becoming more transparent in the process.
In recent years, some visible improvements have been achieved in such areas as customs, inspections, permits, and licensing. Regrettably, though, some administrative constraints for doing business still remain
Another positive development is that the country’s banking sector has emerged from the previous crisis and is faring quite well so far despite the pandemic and disruptions. Banks, therefore, remain a reliable financing partner for businesses.
- How important do you think is the development of small and medium-sized businesses for Azerbaijan's economic reforms and growth?
The economic potential of SMEs in Azerbaijan is huge and remains largely untapped. According to the OECD, SMEs generated 13.4% of value added and 42.9% of total employment in 2018, compared to 60% of value added and 60-70% of employment in OECD countries. With regard to the non-oil sector of Azerbaijan’s economy, SMEs generated 23.5% of value added and 45% of employment in the same period.
Most Azerbaijani SMEs are concentrated in relatively low value-added activities, such as trade and FMCG, repair of vehicles, transport and storage, and accommodation and catering services. Those willing to innovate will be on track for significant growth in the future.
Part of this innovation is digitalization. Unleashing the power of technology can bring about change for the better and I think the pandemic has already forced this change.
Going digital can be a game-changer for small businesses that are trying to be more competitive and grow. From continuous automation to e-commerce, from the Internet of things to micropayments, digitalization opens up a plethora of opportunities and establishes a level playing field with large firms.
Being small – or even medium-sized – offers the benefit of being agile and easily adaptable to transformation. The EBRD is providing advisory services to SMEs looking to go digital, and sometimes also financing.
Agriculture can become a significant pocket of growth and one of the contributors to economic diversification, once its productivity increases.
Here too digital technologies – from automation of farm machinery to sensors assessing the quality of soil and water – can enable growth.
- Do SMBs stand a chance in these challenging times?
Not only do they stand a chance, I think they ought to withstand the challenge. Accounting for 45% of employment, SMEs staying afloat, surviving the pandemic, and even emerging stronger means providing jobs and livelihoods for millions of people.
Here is one example of such resilience. When strict quarantine measures were introduced, ‘Pizza Mizza’, one of local companies, was very quick to react by introducing a contact-free and round-the-clock home delivery service. They also ran various promotions and discount campaigns allowing the company to stay afloat and even expand. This demonstrates perfectly that a small business can thrive in the face of disruptions by making quick and timely adjustments and showing flexibility in its customer service approach.
The EBRD, with funding from the EU, has provided advisory services to help the company boost the brand awareness and customer loyalty, increasing sales and creating new jobs.
- What would your advice to entrepreneurs be?
Whatever you do, go green, and digital. The European Union calls it a dual transition.
This is the only way to future-proof a business to ensure its relevance and viability.
Becoming green – and using less physical resources – requires digital transformation. But digitalization needs to be implemented in a sustainable way too.
