STRUGGLING FOR CAPITAL

The success of any country in attracting free capital to the national economy largely depends on ratings and assessments of international financial institutions.

This year, Azerbaijan was ranked the 57^th among 190 countries in the global rating of Doing Business-2018 Reforming to create jobs prepared by the analysts of the World Bank Group (WB). As follows from the report published in late October, Baku improved its position by eight points.

Azerbaijan's progress in the World Bank's rating list can be explained by the first result of post-oil reforms that improved the business environment in comparison with the last report, when Azerbaijan was only the 65^th in the global business environment assessment.

Large-scale reforms

According to experts, Azerbaijan was able to improve its position when it has become one of the reforming states of Europe and Central Asia, which have achieved notable successes during the past year in carrying out economic reforms.

"Two regional economies of Europe and Central Asia entered the top ten world leaders of the year as far as the improvement of the business climate is concerned: Uzbekistan (five reforms) and Kosovo (three reforms). Azerbaijan and Lithuania (four reforms each), which did not take such high positions in the overall rating, also became one of the reforming countries of the region," reports the Doing Business-2018.

During the last 15 years, Azerbaijan implemented 33 reforms in total. Seven reforms covered the easing of conditions for starting a business, six – loans, five – taxes, and the rest – a number of other reforms.

A reputable image

In recent years, one of the best indicators on business environment remains the first one - the opening of a business. The reforms carried out in business registration ultimately led to the creation of a single window for registration operated by the Ministry of Taxes. As a result, it is required an average of 4.5 days to open a business in Azerbaijan, as compared to 2003, when this period was 105 days.

On the indicator of enterprise creation, Azerbaijan is ranked the 18^th outperforming such developed countries as France, Germany, Italy, and Norway.

By the way, the second highest indicator of Azerbaijan is also connected with the Ministry of Taxes. Azerbaijan is ranked the 35^th on ease of taxation, being ahead of Austria, Belgium, Germany, Kazakhstan, Russia, the U.S., and Turkey.

The most favorable tax system is represented in the number of taxes - there are only six of them (the average number of taxes in Europe and Central Asia is 16.5, and in developed countries included in the Organization for Economic Cooperation and Development, 10.9). At the same time, if in Europe and Central Asia for the payment of all taxes 218 hours are required, in Azerbaijan this is enough for 195 hours.

Over recent years, Azerbaijan has managed to significantly improve the index on property registration, ranking 21^st in the WB report. Progress in this issue is largely due to the development of the ASAN Service, which has significantly simplified the procedure for registration of real estate and other real estate documentation. According to WB research, only three procedures should be completed for registration of rights to real estate in Azerbaijan, on average it will take 5.5 days. Azerbaijan managed to outperform such developed countries as Australia, Austria, Great Britain, Germany, Italy, Canada, the U.S., and Turkey.

WB analysts highly estimated the indicator on protection of minority investors, according to which Azerbaijan took the tenth position. According to the shareholder conflict index, Azerbaijan with the index of 7,7 and the index of the joint-stock management with the index of 7.3 ahead of Belgium, Germany, Denmark, Spain, Italy, France and a number of other countries.

Doing Business is a kind of compass for potential foreign investors who are willing to invest free funds in certain countries, and therefore, governments also pay special attention to weaknesses in the business environment.

Vulnerable positions

The experts of the World Bank indicate that it is required to pay more attention to the weak points of the national economy to further improve the business environment.

Azerbaijan has a low indicator on obtaining loans - 122^nd place. The country was far from a high index in the issue of the effectiveness of legislation on collateral and bankruptcy in terms of expanding access to loans.

It is still not clear what exactly prevents the country from raising the rating on the indicator obtaining construction permits. Azerbaijan is ranked the 161^st on this indicator, which reflects the total number of procedures, time and money costs necessary for the construction of enterprises, including obtaining all necessary licenses and permits. WB experts say that in Azerbaijan, the number of procedures for obtaining a construction permit is 21, and waiting times are 242 days, while in Europe and Central Asia 16 procedures are required to obtain a construction permit, which takes up to 168 days. In OECD countries, the situation is even more favorable - 12.5 procedures in 154 days.

The position of Azerbaijan on the indicator Connecting businesses to energy system looks somewhat better. Azerbaijan was ranked 102^nd on this indicator. It should be noted that the indicator was formed on the basis of the number of procedures that must be completed to obtain a permanent connection to the power supply system, as well as time and costs of the entrepreneur for this process. Thus, an entrepreneur in Azerbaijan will need to go through 7 procedures to connect to the power grid, which will take 69 days, whereas in other countries of Europe and Central Asia, an average of 5-6 procedures for 113 days are required for this. On reliability of power supply and transparency of tariffs, Azerbaijan once again outscored Vietnam, Guatemala, Kenya, Colombia, Mexico, Peru, Tanzania, Ecuador and other countries.

Eliminating the drawbacks

The leadership of Azerbaijan is taking active steps to improve the business climate in the country. For instance, the government decided to extend the moratorium on inspections of entrepreneurs for another three years starting from November 1, 2017.

As it turned out, however, entrepreneurs’ desire to build, for example, a warehouse in Azerbaijan can turn into a serious loss of time and money. Yet the problem with construction permits and connection to power grids can be solved in the same way as difficulties in registering businesses. Azerbaijan has left far behind even many developed OECD countries on this indicator.

Considering the significance of the Doing Business indicators for foreign investors and the strong will of national leadership to attract more capitals to the country, it is expected that the reforms on the weakest indicators will be accelerated. After all, Azerbaijan has a successful experience in implementing reforms in a number of important areas for improving the investment climate. Plus, strategic roadmaps for the development of all sectors are implemented in parallel.