Author: Fasim ALIZADEH
Azerbaijan has always considered trade and economic cooperation with the European Union as one of the pillars of its foreign policy. Today, this cooperation is more important than ever given that the share of EU companies reaches 42% of Azerbaijan’s total commodity turnover. In addition, Azerbaijan has agreed with 24 countries of the EU to avoid double taxation. We also have signed strategic partnership declarations with nine EU countries, and have 17 intergovernmental commissions and working groups.
Therefore, all participants of economic processes in Azerbaijan are interested to know the opinion of European investors on reforms carried out in the country over the past years and the rating of investment climate. That is why the representatives of all state institutions of Azerbaijan took part in the 4th business forum Azerbaijan-European Union.
According to Deputy Minister of Economy Rufat Mammadov, the volume of EU investments to Azerbaijan has reached $15.3b for the last five years. “Currently, there are 1,500 EU companies working in Azerbaijan. Since 2012, 130 events have been organised with participation of the EU member states,” Mammadov said.
Azerbaijan carries out structural reforms and takes steps to promote non-oil exports, the deputy minister said. “In addition to $2.5b invested earlier, the business community will invest $1.1b. in industrial parks. Investment promotion documents have been issued for the implementation of 276 investment projects worth ₼2.5b,” Mr. Mammadov added.
His colleague, Deputy Minister of Economy, Sevinj Hasanova, focused on statistical data that demonstrate the influence of latest reforms on business activity. “During thirty months since the moratorium on inspections of entrepreneurs, only 194 inspections have been conducted. During the same period before the moratorium, the number of inspections reached 148 thousand. At the same time, the number of required licenses was reduced from 59 to 37. By the way, the permits are issued for perpetual use,” Hasanova said.
In addition, the National Fund for Entrepreneurship Support (NFES) has provided ₼2.2b concessional loans since the beginning of its activity. “Thanks to our fund, the issue of entrepreneurs' access to financial resources was partially resolved,” deputy minister said.
Significant reforms were conducted in accordance with the World Bank’s Doing Business Report. According to CEO of the Centre for Analysis of Economic Reforms and Communications Vusal Gasimly, one needs to undergo two business procedures and two days only, including the registration of employees, to start a business in Azerbaijan. To obtain construction permits through the “one-stop window” procedure, the number of procedures were decreased from 21 to 9, access to power supply from 7 to 2 in 2017, and the number of days from 69 to 20.
In addition, over the past year, issues on tax payments were resolved, VAT refund period reduced from 45 to 20 days, and office checks limited to 30 days. “Reforms in electronic court procedures including electronic payments, electronic protocols, electronic execution of court decrees, electronic cabinet, etc. will strengthen Azerbaijan's position regarding the Enforcing Contracts indicator of the Doing Business report,” V. Gasymly said.
International experts also agreed with the effectiveness of reforms carried out in Azerbaijan. World Bank (WB) Manager for Azerbaijan Naveed Hassan Naghavi noted that macroeconomic situation in Azerbaijan has improved significantly. According to WB forecasts, national economy will grow by 2% in 2018 and 3-4% in 2019. These positive trends are also visible in the growth of non-oil sector given the difficult conditions provoked by low oil prices.
However, certain factors, in particular the still high dependence of the economy on oil, continue to give alarming signals, and therefore it is important not to stop structural reforms. Investment in the development of human capital must be the basis of these reforms. Therefore, Mr. Naghavi considers investment in education necessary.
Lawrence Meredith, Director "Neighbourhood East" in the Directorate-General for Neighbourhood and Enlargement Negotiations (DG NEAR), noted that the EU is ready to assist the reforms in Azerbaijan. The most effective are twinning projects. By the way, Azerbaijan has so far implemented the largest number of twinning projects in the region through various state agencies, which gave positive results in improving the governance structure and bringing the existing legal acts to international standards.
According to Mr. Meredith, the government of Azerbaijan needs to continue measures to diversify economy, including the implementation of innovative projects. “Azerbaijan needs to help develop small and medium-sized businesses. For example, in Europe small enterprises produce 60% of overall production, while in Azerbaijan this indicator is only 10%. The EU is ready to provide Azerbaijan with proper assistance in this direction,” Meredith said.
In general, the EU business representatives are happy with the progress of reforms in Azerbaijan, which is also indicated in the EU Business Climate Report 2018. Thus, 82% of European companies appreciated the launch of the electronic visa portal (e-Visa Portal Service). Thanks to this innovation, period required to obtain visas to Azerbaijan was reduced to three days from the date of application. In the second place (55%), according to the respondents, the decision taken to extend moratorium on business inspections. The third place is occupied by reforms in the customs system (50%), the fourth place is the establishment of the Azerbaijan Food Safety Agency.
Results of the survey regarding the opportunities available to foreign companies to expand business in Azerbaijan are particularly interesting. For example, over 66% of European businessmen are ready to increase investments in Azerbaijan. Another 24% of respondents expect certain reforms, and only 10% do not intend to increase their investments.
In fact, the survey was conducted among 131 respondents. As mentioned above, the EU companies are satisfied with overall progress of reforms in Azerbaijan. Their willingness to continue or even expand cooperation with Azerbaijani partners can be an additional incentive for deepening these reforms.