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The role of business in developing the non-oil and gas potential of Azerbaijan's economy is gaining prominence amidst a slight decline in oil production and the onset of active reconstruction in the liberated territories. Despite a comprehensive suite of entrepreneurial incentives, the government regularly introduces new measures to enhance the investment climate and stimulate business activity. These latest initiatives were unveiled during the conference commemorating the Day of Entrepreneurs and the 25th anniversary of the Confederation of Entrepreneurs of Azerbaijan.

Positive Dynamics

Global economic uncertainty and recession risks have escalated recently, with supply chain disruptions and rising energy and food prices contributing to global inflation. Nonetheless, Azerbaijan's economy has sustained robust growth. In the first quarter of this year, GDP increased by 4 percent compared to the same period in 2023. Moreover, from January to March 2024, industrial enterprises and individual entrepreneurs generated products valued at ₼15.7 billion, marking a 7.8 percent increase in non-oil and gas production over the previous year.

"The non-state sector's contribution to Azerbaijan's GDP has reached 83 percent, with employment surpassing 78 percent. Presently, approximately 99.6 percent of the country's business entities are SMEs, and their contributions to value added, exports, employment, and investment are on the rise. As of April 1, 2024, the number of active taxpayers in the country has grown to over 768 thousand," Deputy Minister of Economy Elnur Aliyev stated.

He highlighted that the expansion of entrepreneurial activity in Azerbaijan, showcasing sustainable development, significantly influences the nation's economic growth metrics, ensuring the persistence of positive economic trends.

Investment activity stimulation, a strategic economic growth driver, has also borne fruit. In the first quarter of 2024, capital investments rose by 4 percent year-over-year to ₼3.8 billion. Notably, investments in the non-oil and gas sector grew by 4.8 percent, with domestic investments accounting for 80 percent of fixed capital, reflecting the burgeoning entrepreneurial landscape.

In the Top of Rankings

Azerbaijan's systematic entrepreneurship development measures have earned top economic rankings from prestigious international organizations in 2023.

In the FDI Intelligence ranking for "The Fastest Growing Cities with Foreign Direct Investment in 2023," Azerbaijan's capital secured an impressive third place, indicative of the country's attractive investment environment.

The Financial Times reported a record number of FDI projects in Baku last year, marking the largest ventures in Azerbaijan since 2017.

"Enhancing effective public-private partnerships and optimally allocating risks and responsibilities between sectors is paramount in today's world. Partnerships are vital for sustainable development, aiming to boost international investment inflows by refining the investment climate," remarked Mammad Musayev, head of the Confederation of Entrepreneurs of Azerbaijan.

Given that 99.6 percent of businesses in Azerbaijan are SMEs, their development is intrinsically linked to the nation's sustainable progress, as noted by Orkhan Mammadov, Chairman of the Small and Medium Business Development Agency (KOBİA).

He observed a 54 percent surge in SMEs over five years, with their contribution to the non-oil and gas sector's value added climbing from 23.5 percent to 27.2 percent. The value added by SMEs soared by over 74 percent to approximately ₼17.2 billion, with SME employment also rising by 31 percent to exceed 370,000 individuals.

"Grant programs for domestic market research, startup certificates with tax benefits, access to major trade networks, and support for local and international exhibition participation are pivotal for business growth," Mammadov explained. He announced plans to extend the reach of SME houses across the country, including in areas reclaimed from occupation.

Reintegration and Green Transition

Private sector reinforcement in the reconstruction of reclaimed territories will dominate future business investment themes. "Our forthcoming efforts will focus on enhancing private sector resilience, digitalization, human capital development, green and innovative transformation, and the economic reintegration of our liberated lands," Deputy Minister E. Aliyev stated.

Economy Minister Mikayil Jabbarov, in his video address, revealed government preparations to introduce special investment resources and additional favourable loans to back entrepreneurial projects in the Garabagh and East Zangezur economic regions. He encouraged entrepreneurs to establish businesses in industrial parks within these liberated areas.

"Today's challenge is more ambitious. Contributing to the revival of territories freed from occupation is our collective moral obligation. Our dream has become reality, making the active involvement of our entrepreneurs crucial. A nation's socio-economic advancement is directly tied to its private sector's growth. The significant annual increase in economic indicators, including entrepreneurial spheres, validates our approach," he added.

Another critical focus is the business sector's "green" transformation, particularly relevant in light of COP29 and the "Year of Solidarity for a Green World." Aliyev emphasised that initiatives for transitioning to a green economy will be expanded. "This is essential for elevating our country's image, enhancing the competitiveness of entrepreneurial activities, and aligning with contemporary standards," the deputy minister concluded.

According to Orkhan Mammadov, employing resource- and cost-efficient technologies, along with integrating green innovations into business operations, significantly enhances cost optimization, productivity, and the competitiveness of SMEs. Concurrently, aligning production processes with environmental standards and generating eco-friendly products bolsters a business's export potential and access to financial resources. "In light of this, we plan to draft proposals this year for the establishment of a new institution and incentive mechanisms to amplify the role of SMEs in the green economy," the KOBİA head announced.

Musayev, in response, pledged the Confederation of Entrepreneurs of Azerbaijan's support for businesses to successfully navigate the "green transition."

In essence, the strategic areas for business focus have been delineated, and support has been assured. The next step is to anticipate entrepreneurial engagement and its subsequent impact on the statistical measures of the nation's economic progress.