Conditions not Fully Used in Azerbaijan for SME Development: Expert

Business Materials 30 August 2008 11:22 (UTC +04:00)
Conditions not Fully Used in Azerbaijan for SME Development: Expert

Azerbaijan, Baku, 30 August / Trend / 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.

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. 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.

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.

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.

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) has 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.

Any steps directed toward the development of small business are useful because the activity of small enterprises, which makes it possible to timely redistribute human and material resources and timely react to changes in the demand. Small entrepreneurship is an important social tool to combat unemployment. It provides an opportunity to develop and adapt different forms of new technologies, prepare basis for the future development of industry, in the form of training qualified and semiskilled staffs.

Understanding these factors, Azerbaijan's concentration should be strengthened to fully engage in devising strategy and programs directed towards developing small and medium enterprise. 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.

Leyla Abdullayeva, expert of Analytic Center of Trend

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