ADDITIONAL SUPPORT

The past decade has seen the Azerbaijani government take a number of steps to liberalize the rules and procedures regulating business activity. In particular, they introduced a one-stop system, electronic registration of individuals and legal entities and a unified state-run website for electronic services. Over the past few years, many export duties have been cancelled, the maximum level of customs import duties have been reduced to 15 per cent and the profit tax rate to 20 per cent. The Income tax rate has also been significantly relieved. Fiscal preferences have also been offered to industrial parks and business incubators being set up in this country. 

One of the most important manifestations of the policy to support the private sector is also a decree signed by Azerbaijani President Ilham Aliyev on the application of the law "On protection of the interests of entrepreneurs and regulation of inspections carried out in this sphere" published in August last year. In particular, it established uniform rules for control over the sphere of business including reduced and optimized inspections by government agencies. The main provisions of that regulation came into force on 1 March 2014 making the frequency of scheduled checks selective. Business entities will be divided into groups of high, medium and low risk. Businesses from these three groups may be checked no more than once in one, two or three years. 

In general, the large-scale economic reforms resulted in the creation of an entrepreneurial class in this country. Their numbers increased by a factor of 2.4 over the period from 2003 till 2012. The private sector's share in this country's GDP has reached 83 per cent. Companies and firms set up by entrepreneurs provide employment for 73.9 per cent of the workforce today and account for about 57 per cent of total tax revenues to the state budget. The business-friendly environment created in Azerbaijan and its open door policy aimed to increase the influx of foreign companies has brought about an important result: 150bn dollars has been invested in the economy with foreign investments accounting for about half this amount. 

At the same time, while embarking on a new and higher stage of its socio-economic development, Azerbaijan is faced with a tough challenge: the key target of this decade is to double its aggregate GDP by 2020. This is to be achieved by building a high-tech industry and developing the sphere of innovative services, especially in the ICT sector, capable of making high added value products. And it is planned to increase the competitiveness of most segments in the non-oil sector to export level. 

It is these particular goals that the decree on additional measures for the development of entrepreneurship signed by Azerbaijani President Ilham Aliyev is called to serve. The key objective of this paper is to form an even more favourable investment climate and improve state regulation of business activity with implementation of best international practices in this area. 

In particular, it is envisaged to cut down the amount of procedures and time required for electronic registration of legal entities and individuals using the one-stop principle. The upcoming legislative changes will reduce the procedures and time needed to issue building permits, they will help digitize the reception of documents required for connection to the power grid and reduce the costs and the time spent on these procedures. State registration of real estate rights will be made much simpler and cheaper. The activity of institutions having an impact on the loan issuance process will also be improved. The number of documents, the time and the costs involved in import-export operations will be reduced. Finally, the regulatory reform will affect the sphere of corporate management and investor protection. The law "On Insolvency and Bankruptcy" will also be improved. 

"According to data from the Doing Business Report of the World Bank (WB), Azerbaijan has for a long time held a strong position on the issue of the developing one-stop electronic business registration. Thus, in terms of the business start indicator, the country ranked 10th in the world: now the number of procedures required for the legal registration of companies has been reduced to three while the time spent on processing all required documents does not exceed one week," said Vuqar Bayramov, chairman of the Centre for Economic and Social Development. According to him, the new decree will help shorten the time spent on business registration and reduce the number of operations involved in the process to two. The country also has a very good standing in the domain of state registration of real estate placing 13th in the world, according to data from the World Bank. Following the recent transfer of all realty registration rights to ASAN service, the country is expected to considerably simplify and speed up the processes in this area.

Yet the greatest effect is expected from reforming the sphere of building permit issuance and connecting private facilities to the power network. Thus, according to data from the Doing Business Report, this country is number 180 in the world in terms of the building start indicator. In particular, to obtain relevant permits, companies have to go through 28 legal procedures taking an average of 212 days. The situation is similar as regards connecting facilities to the grid. It takes nine operations and 241 days' waiting to obtain registration in this area and, accordingly, the country ranks 181st in the world. "Compare this to member states of the Organization for Economic Cooperation and Development (OECD) where entrepreneurs have to undergo an average of 13 procedures to obtain building permits which takes about 148 days. Accordingly, the figures for connection to the grid in the OECD countries are five operations and 80 days, respectively," Bayramov said. According to him, digitization of the document acceptance will not only simplify and significantly accelerate the process of issuing building permits and connection to the power network but also reduce the possibility of any negativity and red tape to zero. 

Serious reform is also envisaged for legislation regulating import and export operations and the lending sector in which, according to World Bank indicators, we hold, respectively, the 168th and 55th positions in the world. 

In general, the business and expert communities share the view that the new presidential decree will significantly simplify and optimize the relationship between the government's regulatory agencies and businesses and contribute to transformation of the private sector into a locomotive of economic development in this country.