SMEs to push entrepreneurship to new phase

Azerbaijan has entered in a new phase of entrepreneurial development as the economic reforms and programs are underway to turn small and medium-sized enterprises (SMEs) into the backbone of the nation’s economy.

For the recent months, the main task of the Azerbaijani state was to compensate for about three or fourfold loss of the country due to the declined oil prices. The state is keen to regain the lost revenues through the sale of products of export orientation. It can be cotton, which is the best product for sale on world markets, which the country will grow in the amount of 100,000 tons compared to 35,000 tons last year. Or it can be construction mixtures that SIKA Azerbaijan plans to manufacture at the Sumgayit Chemical Industrial Park and export to the neighboring countries including Russia, Kazakhstan, Turkmenistan, Uzbekistan, Kyrgyzstan, Georgia and Iran.

The state also pins great hope on tourism sector, which can bring even more funds to the country along with the fame.The state is going to realize a new tourism strategy that is already on agenda of the Parliament. This strategy can turn Azerbaijan into a new destination of business, medical and leisure tourism.

In a nutshell, Azerbaijan aims to change its economic development model through improving the business environment, increasing export potential, attracting foreign investment and boosting domestic production.

A state support to business activity is the main focus of the State Programs on socio-economic development of regions of Azerbaijan in 2004-2008, 2009-2013 and 20142018.

The experience and the example of the global economic system show that SMEs are the locomotive, which contributed to many nations to overcome the deepest economic crisis in the world. Small business can contribute to the dynamics of the economic sphere and significantly reduce the social and economic challenges. In industrialized countries, more than 50 percent of GDP are ensured by SMEs, and the importance of their social function is evidenced by the fact that they provide up to 60-70 percent of jobs.

Given the fact that every 9 out of 10 jobs are created by SMEs worldwide, improving their access to finance means faster growth, enhanced productivity and internationalization – the core pillars of the country’s sustainability agenda.

To ensure that the private sector could perform this function, the government should create a favorable investment and business environment and apply various incentive measures for the development of entrepreneurship, recently stated Economy Minister Shahin Mustafayev, hinting at necessity of huge investment projects in the territories where the most poor population live.

Over the past 10 years, over 1.2 million new jobs and 55,600 new enterprises have been established in the country. These measures paved the way to increase business activity and gave a strong impetus to the development of small businesses in the regions. One of the main steps in the promotion of SMEs was the es- tablishment of the National Fund for Entrepreneurship, which is engaged in the allocation of preferential loans to SMEs mainly for projects in regions.

For the state, development of small business is the least costly way of creating new jobs, an additional source of the goods and services in the market, stable base of income tax, self-adjusting mechanism of redistributing efficient technologies, equipment and manpower.

SMEs play a very important role in the economy, accelerating scientific and technological progress, supplying required goods to the market, and creating new jobs, that is, these kinds of businesses address many pressing economic, social and other problems. Even at times of general economic stagnation, small businesses are able to develop and grow.

The very SMEs can take on the role of the main locomotive of innovative business while the country will transit to an innovative model of economy.

Theretofore, the development of entrepreneurship in Azerbaijan has become a national priority, and its further development will be ensured through the financial means (preferential loans, subsidies, tax and customs privileges), logistic means (creation of industrial parks, technology parks, hi-tech parks ), support (export credits, tax incentives and tools to support the investments of exports, creation of logistics centers), promotion (goods and services in foreign markets), and informational support (creation of business incubators).

The changes made in the customs policy aimed at reducing the share of imports in the consumer market, providing planned subsidies for industrial production and exports, improving the regulatory framework in the financial sector. Introducing a new lending model is among the positive measures to be taken by the government.

Meanwhile, the development of innovative business requires active, well-educated staff, which in turn will require the organization of specialized training. Also professional trade advisers could help to identify barriers and to provide advice on key objectives and bargaining positions for multilateral and regional trade negotiations, as well as other trade-related issues.

The strengthened IT backup is also necessary as for small businesses, e-commerce and the Internet can reduce transaction costs significantly, while increasing the pool of potential customers.

Establishing a guarantee fund at the National Fund for Entrepreneurship Support can be another boost to help businessmen working in the sphere of production and services, as well as carrying out activities in the countryside. This would allow SMEs' access to finance and carry out timely payments in commercial transactions which in turn will lead to increase of businesses that export and to expand the number of markets and customers served by the SMEs.