A NEW DAY IS DAWNING

The Ministry for Economic Development and other state departments have drawn up a special draft document on the introduction of the one-stop shop principle to starting a business as part of their work to carry out the Azerbaijani president's 30 April 2007 decree "On steps to develop entrepreneurship in the Azerbaijani Republic". The successful introduction of this principle will allow entrepreneurs to use a simplified procedure to register their business more quickly and with one state department. 

A single system of codification is also to be introduced. Today businesses have different codes for different types of activity (tax codes, statistics codes, social insurance codes), but the new system will enable the use of a single, unified code. This is, of course, a complex process from both the organizational and technical points of view. First there is the question of cooperation between different state departments, coordinating certain aspects of their work. Second is the question of delivering the programme, administering and managing it. "However, we think that the stated purpose and effect of the mechanism outweigh all the difficulties and inconvenience of meeting this objective," Azerbaijan's deputy minister for economic development, Mikayil Cabbarov, told R+ in an interview. This is what he said during our conversation.

- Which state body do you think could be given the job of registering businesses?

- The Ministry for Economic Development does not have a specific position on the issue, as it is the prerogative of the relevant bodies of executive authority, in particular the head of state and Cabinet of Ministers. The package of documents submitted to the government does not contain recommendations or proposals on which state body should be responsible for registration. I can just say that irrespective of who will do this, it is obvious that the introduction of this system calls for coordination and close work between a large number of state bodies, the creation of a single platform for the successful implementation of this project. What is most important is that we have the political will to make the idea effective, which has been expressed in the form of the presidential decree. If the need arises to draw in external resources to implement the project, we will do so.

- How likely is that the one-stop shop system will be introduced in 2007?

- We probably will not manage to introduce the single codified system this year. But if circumstances are in our favour we can try a pilot project from 1 January 2008. This might be in Baku, but that's not definite. These are just preliminary estimates and a great deal will depend on the speed at which documents are drawn up and passed. 

- To what extent will the new system boost Azerbaijan's rating in the International Finance Corporation's report, Doing Business, by improving the business climate?

- The rating is not the main aim of this project. Our main objective is the constant improvement of conditions for new business in the country, cutting the costs and time taken to start a business and improve the business climate. Of course, all these steps must not be ignored and will probably have an influence on Azerbaijan's rating in this report. It should also not be forgotten that there is constant competition in the world between countries. Like Azerbaijan, other countries are also improving conditions for new businesses, both for domestic and foreign investors. Accordingly, liberalization of this sector is under way everywhere.

The president's decree has two provisions, which is another consideration. The second is no less important and concerns the different types of permission given for construction, which is a major, important part of business activity both in Azerbaijan and abroad. In this regard a package of proposals has also been drawn up on a one-stop shop system to improve and simplify the work of businessmen to obtain different types of permission. 

- How long will it take to register a business under the one-stop shop system?

- We calculate that after the system has been introduced, it will take literally just a few days to start a business. At present state registration does not take a great deal of time - five days, but in order for the body that carries out state registration (the Justice Ministry) to take its decision, the businessman has to collect different types of documents from different departments, from the temporary statistical code to the preliminary registration with the tax authorities of the document on opening a bank account. According to the figures in the report you mentioned earlier, the entire process took around 53 days in 2005. According to our estimates, it takes around three weeks. Anyway, we agree that bearing in mind new technology and the speed of business, this is a long time. The aim is that the businessman can operate under the one-stop shop principle and process all his documents in one place without having to go round all the state departments.

- In other words, war has been declared on bureaucracy?

- You could put it like that. After the registration process has been simplified, everything will be completely transparent and we are not ruling out electronic ways of presenting information. In any case the system that will be drawn up has to include this capability. This will cut the chances of misuse by officials and bureaucrats to a minimum.

- Recently Azerbaijan has stepped up work to hold business forums and present the country's investment opportunities. Could you assess how effective this work has been?

- It is difficult to assess the quantitative effect of business forums in any country. I think that the question needs to be taken as a whole and it should be remembered that business forums give entrepreneurs the opportunity to make contact with business circles from other countries. Business forums are usually attended by investors who already have an interest in a country or who would like to work here but do not have enough information. So they have several aims at these forums: first, finding out as much as possible about the economy and opportunities of a country and its development trends and, second, meeting the active business sector of the country; third, foreign companies use business forums to present projects to state officials that they are planning to carry out in Azerbaijan.

We constantly see that the higher the level of business forum, the more representative its participants and the more tangible the effect. Often the companies that get information about the country at such events decide to visit Azerbaijan, to study the opportunities on the ground for investment in different sectors of the economy. We measure the results by the economic indicators at the end of the year, by the overall volume of investment.

Sometimes when companies have known one another for quite a long time, business forums are used as a place to announce the results of their work and to conclude major commercial contracts. Very often business forums are attended by representatives of international financial institutions that themselves make loans to projects in Azerbaijan. Today Azerbaijan represents very interesting projects and areas for foreign investors. There are not so many countries in the world where stable economic growth has continued for 10 years and has been explosive in the last three. This is an unusual phenomenon and of course business and investors are interested in being part of an economy that is developing so rapidly. You have to understand that with the expansion of the European Union into central and Eastern Europe, the significance and attractiveness to investors of countries such as Azerbaijan, Ukraine, Georgia, Kazakhstan and the Central Asian states continues to grow, as there are fewer and fewer new countries where it is still possible to carry out major projects with a major return. It is very difficult to find projects that bring the American or European investor annual income of 50 to 70 per cent and sometimes even 100 per cent. The role of business forums is very important in this respect and the main thing is how we use them.

- Are there really companies in Azerbaijan that make so much money?

- Yes, I think there are. It's inevitable. If a bank charges interest on a loan at 20-22 per cent, then the project's income must be higher, otherwise the banks would not be able to provide corporate loans. Of course, there is a dual opportunity for Western and even local investors who have access to cheaper money over a longer period.

- Investors from which countries show most interest in the non-oil sector?

- Of course, there are countries that because of their own lack of resources have no experience of work in the oil sector, but they have highly developed economies and many companies that have the interest and potential to develop abroad. South Korea, for example. As a result of successful political relations today we can see a surge of interest from South Korean companies interested in working in the non-oil sector. 

We can also see quite strong interest from European, specifically Austrian, companies in projects in the energy sphere, domestic waste utilization and the financial sector. It is more difficult with Scandinavian companies but there is one shining example here, the Swedish-Finnish company TeliaSonera, a major active investor in Azerbaijan's telecommunications sector. Of course, we should not forget the USA, Great Britain, Turkey and Germany who have always been and will continue to be over the next few years the main sources of direct foreign investment in Azerbaijan. I think that specific niches and segments in the Azerbaijani economy will open for us in future too. This issue is very significant in terms of Azerbaijan joining the World Trade Organization, as the main idea is the liberalization of international trade, i.e., lifting restrictions, protective mechanisms, giving up export subsidies in the first instance. Accordingly, a country that has more efficient, high-quality and cheap production will be able to sell it. It is quite obvious that we cannot be competitive in all areas.

- In the process of Azerbaijan's accession to the WTO how far can the government defend its positions, in particular on retaining agricultural subsidies?

- Subsidies in agriculture are permissible if they are not individual but targeted at improving the overall infrastructure. Subsidies are banned if they are made to a specific businessman to up production, if they are direct cash infusions. Here's an example for you. If the state implements a programme to build an irrigation channel which all the farmers will have access to, and as a result irrigation will cost them less, this is not a subsidy in the WTO understanding. This applies to laying electricity cables, building roads, which reduce costs in transporting agricultural produce, as they are an improvement of the infrastructure. 

- What are the priority markets for investment for Azerbaijan in the light of the latest statements by the National Bank about plans to liberalize the movement of capital out of the country?

- International experience shows that when companies planning to enter international markets are expanding their business they usually begin with their own region, as it is close geographically and there are already established economic interests. There is a greater understanding of how to conduct business in that country. Another element, from the point of view of Azerbaijani companies, could be the use of the fact that Azerbaijan has gradually turned into one of the leading economies of the region. First, this means that our companies can implement major projects which other countries of the region could not manage to accomplish with internal investment. I think that that we can see this trend now, our companies have already entered certain markets. These include the State Oil Company, the International Bank of Azerbaijan and private Azerbaijani investment too. In time we are seeing the expansion of the activity of private Azerbaijani companies abroad. The speed of Azerbaijan's economic growth will lead inevitably to the emergence of such players. We welcome these processes, as they help to increase the competitiveness of our companies.