5.3 DEVELOPMENT OF THE <strong>SME</strong> SECTOR IN AZERBAIJAN 36Today <strong>the</strong> main direction <strong>of</strong> <strong>the</strong> political <strong>and</strong> economic transformation <strong>of</strong> any country intransition period is <strong>the</strong> creation <strong>of</strong> private sector, development <strong>of</strong> entrepreneurship,establishment <strong>of</strong> small <strong>and</strong> medium-sized enterprises, elimination <strong>of</strong> unfair competition,protection from monopoly, etc.A lot <strong>of</strong> reforms in different sectors <strong>of</strong> economy were implemented in <strong>the</strong> republic in1991, after its independence. All property relations remained from Soviet period was replacedwith new relations related to new free market economy. Only private property forms related tomarket economy were created in <strong>the</strong> republic <strong>and</strong> <strong>the</strong> base <strong>of</strong> entrepreneurship system werefounded.USD 17.4 billion GDP was produced in <strong>the</strong> current year, which is 32.5 % (USD 4.2billion) more than it was last year. 72.8% <strong>of</strong> GDP has been created in production sector <strong>of</strong> <strong>the</strong>economy. 2,027.5 USD or 30.6% more product per capita was produced this year incomparison with <strong>the</strong> relevant period <strong>of</strong> last year. The output <strong>of</strong> products in industry sector hasbeen increased by 32.7% <strong>and</strong> run up to USD 14.4 billion <strong>and</strong> its share in GDP was 60.9% incomparison with <strong>the</strong> relevant period <strong>of</strong> last year. 78.8% <strong>of</strong> industrial products was produced byprivate sector <strong>and</strong> has been increased by 46.5% in comparison with <strong>the</strong> relevant period <strong>of</strong> lastyear. The population income has been increased by 39.7% <strong>and</strong> run up to USD 9.4 billion <strong>and</strong>its amount per man has been increased by 38.1% <strong>and</strong> run up to USD 1,127.5.3.1. <strong>SME</strong> sector developmentThe priority sectors <strong>of</strong> Azerbaijan economy which are suitable for establishment <strong>of</strong>business relations are production <strong>of</strong> agricultural products, processing <strong>and</strong> packaging,construction <strong>and</strong> construction products, tourism, transport, textile, communication <strong>and</strong> etc.The beginning <strong>of</strong> economic achievements in <strong>the</strong> Republic was 20 September 1994 when<strong>the</strong> “Contract <strong>of</strong> Century” was signed in Baku. The conclusion <strong>of</strong> this contract was a signal forsocial <strong>and</strong> economic stability in <strong>the</strong> country <strong>and</strong> this process had a great role in attraction <strong>of</strong>direct foreign investment into <strong>the</strong> country economy. The volume <strong>of</strong> investment into <strong>the</strong>Azerbaijan economy from 1991 till 2007 is USD 42 billion. 70% <strong>of</strong> this belongs to <strong>the</strong> foreigninvestment. Generally, USD 4 billion was invested into <strong>the</strong> economy during 6 months <strong>of</strong> 2007.The structure <strong>of</strong> investment on forms <strong>of</strong> enterprisesTable 21.2004 2005 2006Small enterprises (%) 3,2 3,2 3,2Medium <strong>and</strong> big enterprises (%) 96,8 96,8 96,8But, besides all <strong>the</strong>se achievements <strong>the</strong>re are a lot <strong>of</strong> problems in entrepreneurshipdevelopment which are waiting to be solved. They are monopolism, bureaucracy, illegalinspections, unfair competition, lack <strong>of</strong> financial resources, gap in legislative acts,unemployment <strong>and</strong> etc. Besides, <strong>the</strong> dependence <strong>of</strong> courts, lack <strong>of</strong> transparency in <strong>the</strong> activity<strong>of</strong> state organs, weakness <strong>of</strong> public control, insufficient application <strong>of</strong> antimonopoly legislation<strong>and</strong> o<strong>the</strong>r problems cause to burdening <strong>of</strong> population welfare, discrimination between people,36 Prepared by Pr<strong>of</strong>. Alakbar MAMMADOV, President <strong>of</strong> <strong>the</strong> National Confederation <strong>of</strong> Entrepreneurs (Employers)Organizations <strong>of</strong> Azerbaijan Republic98
increase <strong>of</strong> unfair competition, streng<strong>the</strong>ning <strong>of</strong> monopolism, largening <strong>of</strong> “shadow economy”<strong>and</strong> decrease <strong>the</strong> direct foreign investment.The legislative base <strong>of</strong> entrepreneurship development is not sufficient; <strong>the</strong>re are a lot <strong>of</strong>contradictions in accepted legislative acts, <strong>the</strong> laws are violated by <strong>of</strong>ficials <strong>and</strong> <strong>the</strong>re is nooperating mechanism <strong>of</strong> accepted laws. The participation <strong>of</strong> representatives <strong>of</strong> nongovernmentalorganizations in preparation, adoption <strong>and</strong> execution <strong>of</strong> legislative acts coveringsocial-economic sphere isn’t ensured.The ano<strong>the</strong>r problem <strong>of</strong> entrepreneurs is lack <strong>of</strong> financial resources. So, <strong>the</strong> credits<strong>of</strong>fered by private banks are not sufficient <strong>and</strong> <strong>the</strong> rate <strong>of</strong> <strong>the</strong>se credits is 18-28% which is highenough for <strong>the</strong> entrepreneurs. But, <strong>the</strong> financial resources allocated by state budget forentrepreneurship development is not enough <strong>and</strong> not all entrepreneurs can use this support.But, <strong>the</strong> rate <strong>of</strong> this credit is 7% a year which is suitable for <strong>the</strong>m.The infrastructure isn’t well developed in <strong>the</strong> country. So, <strong>the</strong> situation in <strong>the</strong> regions isnot satisfied. The problems with water supply, sewerage system, electricity <strong>and</strong> etc. decrease<strong>the</strong> interest <strong>of</strong> investors interested in investment in <strong>the</strong> regions. The branches <strong>of</strong> commercialbanks in Azerbaijan are not sufficient in <strong>the</strong> regions <strong>and</strong> this problem creates difficulties insolution <strong>of</strong> financial problems <strong>of</strong> regional entrepreneurs.The reforms on entrepreneurship development in Azerbaijan are being implemented asa state policy in <strong>the</strong> country. The State Program on “Small <strong>and</strong> medium sized entrepreneurshipdevelopment in <strong>the</strong> Azerbaijan Republic” (2002-2005) has been successfully implemented. At<strong>the</strong> moment within <strong>the</strong> State Program on “Social-economic development <strong>of</strong> <strong>the</strong> regions <strong>of</strong>Azerbaijan Republic” (2004-2008) a lot <strong>of</strong> works have been done in <strong>the</strong> regions to open newenterprises <strong>and</strong> work places. State support mechanism for entrepreneurship development hasbeen established, local production has been increased, <strong>and</strong> export potential <strong>of</strong> <strong>the</strong> country hasbeen improved.Due to <strong>the</strong> economic reforms in <strong>the</strong> country <strong>the</strong> share <strong>of</strong> private sector in GDP has beenincreased from 30% in 1995 to 81% in 2006. The GDP production in non-oil sector has beenincreased 12.1% in comparison with <strong>the</strong> previous year. 71% <strong>of</strong> employment <strong>and</strong> 53% <strong>of</strong> statebudget income was ensured by <strong>the</strong> private entrepreneurial subjects.The place <strong>of</strong> <strong>SME</strong> sector in Azerbaijan economyTable 22.2000 2003 2005 2006Share <strong>of</strong> private sector in GDP (%) 70.8 73.3 77.8 81Share <strong>of</strong> private sector in employment (%) 65.5 68.5 68.1 68The number <strong>of</strong> legal entities engaging with <strong>the</strong> entrepreneurial activity was 55503 <strong>and</strong>74.5% <strong>of</strong> this were small enterprises in 2006. Small enterprises are operating in <strong>the</strong> fields suchas trade (42.8%), agriculture (15.4%), construction (10.7%), real property (10.1%) <strong>and</strong>processing 9.5%.99
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1. SME DECLARATION AND WORKING GROU
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While comparing the BSEC and EU doc
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cooperation with the United Nations
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GENERAL ASSESSMENT OF THE BSEC WG O
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“Armenia's new law introduces a n
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(iii)Share of the labor force of SM
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The following data represents some
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RankDocuments for export(number)Tra
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3.1.4. FINANCING SMEsProf. Dr. Sela
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• the loan is secured with movabl
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3.1.4.3. Mutual and loan guarantee
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introduction of e-signatures, only
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The Code of Conduct for Civil Serva
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Trading Across Borders Enforcing Co
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as with all non-governmental organi
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Bulgarian SMEs obtain additional ca
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• Project BG 2004/016-711.11.04 -
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usiness is not approaching them oft
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• Romanian citizens are recognize
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The preparatory project of the NDP
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• To support participation in eco
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ROMANIASTRENGHTWEAKNESS• Stabilis
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REPUBLIC OF SERBIASTRENGHT• Longe
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UKRAINESTRENGTHS• Well educated l
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In compliance with the Resolution m
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1. Please provide definition of SME
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7. Did you establish a dedicated bo
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11. Do you have any suggestions for