Small and medium business climate in azerbaijan
The practice of world business testified that the small and medium entrepreneurship (SME) takes 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.
According to the data provided by the State Statistics Committee of Azerbaijan, as of January 1, 2009, 65,986 small enterprises function in Azerbaijan, including 9,420 agricultural enterprises, 94 - fishery, 591 - trade, 6,039 - processing enterprises, 167 enterprises on electricity, gas and water production, 8,118 - construction organizations, 25,667 enterprises of wholesale and retail trade, 879 - hotel services, 1,696 - transport and communication, 512 - financial, 7,423- real estate, 341 - education, 961 - health-improvement, 4,072 - communal and private services.
Today, when in the world and the CIS countries significant number of enterprises stops their activities due to the global financial crisis, their number increases in Azerbaijan as well. According to the data by the State Statistics Committee, 8.8 percent increase is observed in the number of legal entities (as of the beginning of year their number composed 86,100), and physical entities - 6.1 percent (275,000).
As a result measures taken within the State Program on Socio-Economic Development of Regions, it was possible to enlarge the activity of regional SME structures.
All these are the results of the economic policy of Azerbaijan in support and development of enterprises. Today State provides large support, financial and non-financial resources to the entrepreneurs. This policy is successfully pursued, including entire package of measures for the improvement of the legislative base, improvement of business climate, rendering financial support to enterprises, strengthening competitive ability and export potential of private sector and providing entrepreneurs with information resources.
In this regard, the National Fund for Entrepreneurship Development at the Ministry of Economic Development of Azerbaijan renders great assistance, providing financial support to the entrepreneurship, especially small and medium business.
When the banks can not propose advantageous credits, but entrepreneurs' demand for the financial resources grows, the Fund provides credits on preferential conditions, i.e., with the interest rate lower than market and with the privilege period. Preferential credits of the Fund are granted to the entrepreneurs through 30 authorized commercial banks, one non-banking credit organization and four credit unions, with not higher than 7 percent.
Today nearly 200 credits have already been provided to the entrepreneurs by the authorized credit organizations. Only on March 26, projects of 60 entrepreneurs were re-financed in two regions of Azerbaijan in line with the Fund. The projects are realized with regards to industrial and agricultural production. Nearly 100 new jobs are expected to be created as a result of realization of these projects. In general, more than 350 new workplaces are planned to be opened due to the projects re-financed this year.
Being introduced since January 2008, the system of 'single window' principle for registration of legal entities played a significant role in support of entrepreneurship. The system provided an opportunity to reduce the number of procedures by three times and period of registration by ten times. Formerly 15 procedures and 30 days were required for registration of a new business. But now, three days are enough for registration within the 'single window' principle. As a result, the number of new business increased 30 percent in January 2008. However, calculations show that the conditions, created in the country to accelerate development of small and medium business, need to be improved.
The existing problems, which prevent SME development, are connected with the difficulties in the way of the small and medium enterprises to obtain necessary investments, lack of information and existence of corruption cases. So the question of starting capital sharply stands. But the level of taxation of the enterprises has always served as the indicator of their development in the entire world.
The joint project of the Ministry of Finances and Ministry of Taxes of Azerbaijan, which proposes to reduce the rates of the profit tax and VAT, has postponed yet. According to initial information, the profit tax is proposed to be decreased from the current 22 percent to 20 percent, and VAT - from 18 percent to 17 percent. Besides the tax relaxations, simplification in the delivery of account assumes special importance for the small business. Thus, for instance, in the West, all enterprises pass tax account yearly, which simplifies work in many respects. All these and the processes connected with the financial crisis lead to the fact that establishing small enterprise is considered risky.
A project of State Entrepreneurship Development Program in Azerbaijan in 2008-2013 has been devised for further systematization and increasing of the effectiveness in the work on the development SME in Azerbaijan. Considerable attention in the program was paid to the improvement of the business climate in the country. Special priority is given to the introduction of the newest information and communication technologies.
In addition, works will be continued to train and provide information to people who intend to begin entrepreneurship activity. Periodically business trainings, English and computer courses are held in the training centers established in the regions.
Work has already begun on the stimulation of the innovation activity of entrepreneurs. Electronic database of the patented inventions of the Azerbaijan scientists, which can be interesting for the private sector has been created. This year it is intended to take a number of measures with the participation of the authors of inventions and entrepreneurs in order to create foundation for their future co-operation and to stimulate investments into the innovation projects. Work will be carried out in other directions.
Currently the National Confederation of the Entrepreneurs of Azerbaijan (NCEA) develops a State program on anti-crisis measures, directed toward giving a boost to the entrepreneurship activity in the country.
All these and other works, undoubtedly, will contribute to the development of enterprises, which in their turn, will contribute to the progress of the Republic. In the developed countries, the small and medium business has been long ago called the motor of the economy. The significant share in the budgets of these countries falls on the profits from the SME. And, it is understandable that the governments of these countries try to, in every possible way, support and develop such enterprises.