Strategies of the Development of Entrepreneurship and SME

increase of unfair competition, strengthening of monopolism, largening of “shadow economy”and decrease the direct foreign investment.The legislative base of entrepreneurship development is not sufficient; there are a lot ofcontradictions in accepted legislative acts, the laws are violated by officials and there is nooperating mechanism of accepted laws. The participation of representatives of nongovernmentalorganizations in preparation, adoption and execution of legislative acts coveringsocial-economic sphere isn’t ensured.The another problem of entrepreneurs is lack of financial resources. So, the creditsoffered by private banks are not sufficient and the rate of these credits is 18-28% which is highenough for the entrepreneurs. But, the financial resources allocated by state budget forentrepreneurship development is not enough and not all entrepreneurs can use this support.But, the rate of this credit is 7% a year which is suitable for them.The infrastructure isn’t well developed in the country. So, the situation in the regions isnot satisfied. The problems with water supply, sewerage system, electricity and etc. decreasethe interest of investors interested in investment in the regions. The branches of commercialbanks in Azerbaijan are not sufficient in the regions and this problem creates difficulties insolution of financial problems of regional entrepreneurs.The reforms on entrepreneurship development in Azerbaijan are being implemented asa state policy in the country. The State Program on “Small and medium sized entrepreneurshipdevelopment in the Azerbaijan Republic” (2002-2005) has been successfully implemented. Atthe moment within the State Program on “Social-economic development of the regions ofAzerbaijan Republic” (2004-2008) a lot of works have been done in the regions to open newenterprises and work places. State support mechanism for entrepreneurship development hasbeen established, local production has been increased, and export potential of the country hasbeen improved.Due to the economic reforms in the country the share of 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 the previous year. 71% of employment and 53% of statebudget income was ensured by the private entrepreneurial subjects.The place of SME sector in Azerbaijan economyTable 22.2000 2003 2005 2006Share of private sector in GDP (%) 70.8 73.3 77.8 81Share of private sector in employment (%) 65.5 68.5 68.1 68The number of legal entities engaging with the entrepreneurial activity was 55503 and74.5% of this were small enterprises in 2006. Small enterprises are operating in the fields suchas trade (42.8%), agriculture (15.4%), construction (10.7%), real property (10.1%) andprocessing 9.5%.99