AMCHAM’S WHITE PAPER

The process of major reforms designed to give a new breath to the national economy is in full swing.

It is about practical measures aimed at developing individual sectors of the non-oil sphere, including cotton production, sericulture, animal husbandry, the establishment of free economic zones, promoting the production of export-oriented products, and the development of a large-scale road map to determine main directions of development of the national economy.

The opinion of entrepreneurs, who can give suggestions for improvement of the business climate based on their practice, is very interesting in this regard.

One of the most authoritative institutions in this area is the American Chamber of Commerce in Azerbaijan (AMCHAM), which is preparing recommendations for the improvement of the business environment once in two years. The sixth edition of the White Paper entitled "Observations and recommendations on the improvement of the business environment in Azerbaijan" presented a few days ago is relevant in the light of these reforms. AMCHAM unites 270 companies, which have invested more than 80% of foreign investment in the country.

"It is important to inform the Government about the vision of the private sector and changes in the business environment. With this in mind, the new edition of the White Paper covers the positive steps that have been taken by the Government to strengthen the various sectors of the economy, as well as the issues that must be addressed for the future development of the business environment", said the Executive Director of AMCHAM, Natavan Mammadova.

Debates Serve the Cause of Truth

In particular, AMCHAM calls on the Azerbaijani government to pay more attention to transparency and to implement the ongoing policies in all sectors of the society. Among the recommendations of the Chamber is the provision of clear information about the nature and purpose of the newly adopted laws and decisions that could be explained in accessible language by senior management of the state administration to the masses through the media.

It is recommended to conduct round tables to discuss major issues involving both local and international experts.

AMCHAM also advises to eliminate contradictions between the statements of the officials and the subsequent actions observed in the past two years.

Holding interactive forums would be useful in terms of providing the citizens with an opportunity to directly ask their questions to the authorities. This proposal, incidentally, is actively progressing in Azerbaijan, when the heads of individual ministries in the regions recieve the citizens trying to solve their problems. Expansion of this practice can contribute to a greater public awareness about the reforms.

Legislative Initiative

The White Paper notes that the business community in Azerbaijan joins the legislative process at a later stage. In this regard, AMCHAM believes that the business community should promptly join the legislative process and provide recommendations regarding the new legislation at an early stage of development or primary discussions. In some cases, this can dramatically improve the final versions of the bills.

Analysis of problems at legislative level would allow using the best international practices, involving international companies in most of the cases, and identifying the difficulties that can take place during the implementation phase. In addition, businesses could adapt to new directions of the government faster if informed earlier.

The AMCHAM stressed that there was a notable progress in attracting business to the legislative process in recent years, but in some cases it would be useful to begin a dialogue at an early stage.

Banking sector

The existing state of the national currency and the situation in the banking system were also a focus of foreign business circles.

The devaluation of the national currency has seriously affected the banking sector. The customers shifted their savings into US dollars and experience difficulties in repaying loans, especially in foreign currency.

AMCHAM also recommends the development of tools for the translation of dollar loans in the national currency for re-lending. To ensure the sustainability of the business, corporate customers are required to provide credit lines for working capital. To encourage small and medium enterprises (SME), it is necessary to ensure long-term financing. In order to maintain demand and the real economy, consumer lending in the national currency must continue.

Meanwhile, there is a significant gap in the mechanism of lending and debt collection through litigation in Azerbaijan. Despite the conformity of lending mechanism with international practice (loans are issued just within a week), the litigation process regarding the return of bank loans may take a year.

Therefore, AMCHAM recommends to reduce the period of trials for credit cases up to 15 days. To save the time required for the delivery of notices and judicial decisions, it is recommended to use e-mail and couriers, which generally corresponds to the plans for the development of e-government.

It is also recommended to create specialized courts (on intellectual property, tax disputes, specific foreign investments, etc.).

Attraction of Foreign Investments

The government of Azerbaijan has made significant achievements in attracting foreign direct investment (FDI) in the oil and gas sector. Given the emphasis on the development of non-oil sector, it is important to intensify efforts on attracting foreign sectors in this area.

AMCHAM recommends the creation of a single agency with direct subordination to the President of Azerbaijan to resolve all operational issues between the government and foreign investors (similar to ASAN Service or under its auspices).

Such an agency will help to bypass bureaucratic obstacles and will allow Azerbaijan to appear a more favorable country for business.

Another important point for foreign investors may be the establishment of a "guaranteed" tax regime (similar to the Production Sharing Agreement (PSA), operating in the oil sector) for a specified period.

Finally, using the most successful international experience in Azerbaijan, the separation of powers between ministries, regulatory bodies and state-owned companies should be ensured.

AMCHAM’s proposals certainly deserve the attention of the Azerbaijani government. The companies operating in Azerbaijan for several years are quite capable of rationalizing these proposals to improve the business environment.

All these recommendations and proposals combined with the government's efforts will improve the investment climate for both domestic and foreign companies.