BAKU, Azerbaijan, May 6. Small and medium-sized enterprises (SMEs) in Azerbaijan are an important source of employment, but their full potential remains untapped, the Organization of Economic Co-operation and Development (OECD) told Trend, as it presented the report on Promoting Enterprise Digitalization in Azerbaijan.
OECD noted that in 2019, Azerbaijan’s SMEs generated 43.7 percent of total employment but only 14.9 percent of gross value added. By way of comparison, SMEs in OECD countries account for about 60 percent of value added and 60- 70 percent of employment. In part, this structure is a natural by-product of Azerbaijan’s specialization in capital-intensive extractive sectors, but its SMEs are largely concentrated in low-value added sectors – trade and repair of vehicles, transport and storage, and food service activities.
“During the past five years, Azerbaijan has made significant progress in improving its business environment and fostering SME development. In 2015, the government launched a plan to enable a transition to a more diversified economy by adopting 12 Strategic Roadmaps for the National Economy and Main Economic Sectors, detailing goals for a number of economic policy reforms, including the development of the SME sector. As part of its Strategic Roadmap for the Production of Consumer Goods at the Level of Small and Medium Enterprises in the Republic of Azerbaijan 2016-2020 (SME Roadmap), the government streamlined administrative procedures, expanded e-government services and launched a number of policy initiatives to stimulate private sector growth. The government also introduced tax exemptions for start-ups and individual entrepreneurs. It also introduced a new SME definition in December 2018, distinguishing between micro, small, medium and large enterprises,” said the OECD.
The organization believes that Azerbaijan could further improve the business environment by prioritizing enforcement of competition rules to create level-playing-field conditions for all businesses, implementing measures to promote alternative dispute resolution and strengthening private-to-public litigation.
“Further efforts are also needed to improve the institutional and regulatory framework for SME policy, by improving co-ordination, strengthening public-private dialogue and ensuring that institutions responsible for SME development have appropriate resources to provide tailored services for SMEs. The government should also build on the skills intelligence approach using data collection instruments to target the needs of specific groups and sectors. The government will need to improve SME access to finance by supporting uptake of alternative sources of financing and fin-tech and making an effort to extend financial services to smaller enterprises, especially ones in rural areas,” said OECD.
Follow the author on Twitter: @Lyaman_Zeyn