Doing business -2010: reforms speed up

Results of the study "Doing Business-2010: Reforming through Difficult Times", developed by the World Bank and International Finance Corporation, confirmed that the reform process in Azerbaijan is in full speed. And unlike last year's ranking, where Azerbaijan was listed as a leader in the field of economic reforms, this year the country was described as a stable reformer. Thus, according to Doing Business 2010, the country retained last year's position amongst 183 countries, but dropped out from the first place among the reformers, and from top ten of such countries.

Compared with last year, the list has expanded by two countries (Cyprus and Kosovo), and therefore, the ratings of all countries for 2009 were revised and corrected in the light of the introduction of changes to methodology, i.e. the introduction of new indicators - employment of workers and social protection. As a result, Azerbaijan's position moved to 38th from 33rd.

Of the CIS countries, Georgia gained 11th position, Kyrgyzstan - 41, Armenia - 43, Belarus - 58, Kazakhstan - 63, Russia - 120. The top ten reformers of the world includes Rwanda, Kyrgyzstan, Macedonia, Belarus, UAE, Canada, Colombia, Tajikistan, Egypt and Liberia. Last year, the leader in this list was Azerbaijan as well.

However, Azerbaijan remains one of the leading countries in Eastern Europe and Central Asia to do business, one of the authors of Doing Business-2010 report Svetlana Bagaudinova said to videoconference on September 10. According to the recent report, in Azerbaijan effective reforms were held in 2008-2009 in such spheres as obtaining loan and international trade. According to Bagaudinova, today Azerbaijan ranks 15th on the indicator of obtaining credit, which is considered quite significant and positive result. "The country has reduced the time required for the implementation of foreign trade operations, with the introduction of the principle of "single window" at customs checkpoints, said Bagaudinova. - This reform is sufficiently long-term, the government began working on it three or four years ago and today the process of implementing "single window" and the computerization of customs checkpoints completed".

As a result of simplification of procedures related to the foreign trade operations, the time spent on the implementation of import operations decreased from 56 to 50 days, export - from 48 to 46 days, and the value of exports (per container) from $3,075 to $2,980. Bagaudinova believes that country's rating on indicator of "trade across the border" can significantly improve. Despite that the position on this indicator is not so high, a dynamic was recorded, which according to her, is a very important factor. "Those reforms that were implemented several years ago, today yield concrete results, that is, we hope that these reforms will continue in order to create more favorable conditions for Azerbaijani businessmen involved in international trade," she said.

However, the report's author noted that the procedure for obtaining building permissions is the most problematic area for Azerbaijan, and this is the figure which pulls down Azerbaijan, and significant reforms have not been implemented in this sphere."

If to consider the details of Azerbaijan's position on the ten indicators of the report, the picture looks like this.

Doing business in Azerbaijan

Starting a business

Figures were given for opening legal activities of limited liability company. Compared with the countries of the region and the OECD, in Azerbaijan there are almost equal number of procedures for opening a company, but unlike other countries in the region, opening a company in Azerbaijan is cheaper.

Dealing with Construction Permits

Shown below are the procedures, time, and costs to build a warehouse, including obtaining necessary licenses and permits, completing required notifications and inspections, and obtaining utility connections. On this point of doing business, Azerbaijan remains behind OECD countries, except target date for licensing.

Employing workers

employing

The difficulties that employers face in hiring and firing workers are shown below. Each index assigns values between 0 and 100, with higher values representing more rigid regulations. The Rigidity of Employment Index is an average of the three indices.

Registering Property

For obtaining property rights in Azerbaijan it needs to pass 4 procedures for 11 days, but it is cheaper than in comparable countries.

Getting credit

Measures on credit information sharing and the legal rights of borrowers and lenders are shown below. The Legal Rights Index ranges from 0-10, with higher scores indicating that those laws are better designed to expand access to credit. The Credit Information Index measures the scope, access and quality of credit information available through public registries or private bureaus. It ranges from 0-6, with higher values indicating that more credit information is available from a public registry or private bureau. 

Protecting Investors

The indicators below describe three dimensions of investor protection: transparency of transactions (Extent of Disclosure Index), liability for self-dealing (Extent of Director Liability Index), shareholders' ability to sue officers and directors for misconduct (Ease of Shareholder Suits Index) and Strength of Investor Protection Index. The indexes vary between 0 and 10, with higher values indicating greater disclosure, greater liability of directors, greater powers of shareholders to challenge the transaction, and better investor protection.

Paying Taxes

The data below shows the tax that a medium-size company must pay or withhold in a given year, as well as measures of the administrative burden in paying taxes. These measures include the number of payments an entrepreneur must make; the number of hours spent preparing, filing, and paying; and the percentage of their profits they must pay in taxes.

Trading Across Borders

The costs and procedures involved in importing and exporting a standardized shipment of goods are detailed under this topic. Every official procedure involved is recorded - starting from the final contractual agreement between the two parties, and ending with the delivery of the goods.

Enforcing Contracts

The ease or difficulty of enforcing commercial contracts is measured below. This is determined by following the evolution of a payment dispute and tracking the time, cost, and number of procedures involved from the moment a plaintiff files the lawsuit until actual payment.

Closing a Business

The time and cost required to resolve bankruptcies is shown below. The data identifies weaknesses in existing bankruptcy law and the main procedural and administrative bottlenecks in the bankruptcy process. The recovery rate, expressed in terms of how many cents on the dollar claimants recover from the insolvent firm, is also shown.

Conclusions

So, in the Doing Business 2010 Report, Azerbaijan was able to maintain last year's position among 183 countries, and hold onto 38th place. During the year 2 significant reforms were recorded in Azerbaijan. However, the country gave up its leader position on reforms in Doing Business 2010. But Azerbaijan has all chances in 2010 to significantly improve its position in the ranking. And it will depend on what reforms will be carried out in 2010.