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Azerbaijan BEE Project

Azerbaijan Business Enabling Environment Project

The project works to improve the business enabling environment in Azerbaijan for small and medium enterprises (SMEs) by addressing key regulatory barriers.

The project is funded by State Secretariat for Economic Affairs (SECO) of Switzerland and BP on behalf of its co-venturers. The project value is $ 4.5 million. The duration of the project is 5 years.

The main objectives of the project are:
- Reduce regulatory burden to business by streamlining and simplifying for SMEs the following areas:

    a) business registration
    b) business permits and licenses
    c) business inspections
- Monitor the business environment through surveys of the SME sector with the involvement of the government
- Increase legal awareness of entrepreneurs through outreach campaign and advocacy work

The Challenge

Despite impressive reforms Azerbaijan has undertaken, for the country to remain internationally competitive and attractive for investment, it has to undergo a number of key changes. Reforming the area of business permits and further strengthening the licensing system would position Azerbaijan yet again as a reform leader globally. A well-renowned tool used in a large number of developed as well as developing countries – the regulatory review may represent the optimum tool for the reform and would result in swift and measurable changes, saving costs to entrepreneurs and government alike.

IFC estimates that, according to the survey, the Government of Azerbaijan earns AZN 12.5 million on formal permits fees annually, while it costs the Government in total 16.3 million to run the system of permits (this includes the total amount of associated informal payments, as an 'opportunity cost' for the government). Clearly, maintaining the excessive permits system costs the government more than relaxing it.

Meanwhile, according to the survey, the business sector annually spends some 35 million in direct, indirect and opportunity costs to receive all the permits necessary. If only a third of these costs are to be relieved by the cuts in permits, the private sector would be saving 11.6 million each year. Likewise, the government would have direct savings of almost 5 million on associated labor costs.

Possible other savings include costs of inspecting enterprises, where only a single percent of related direct costs reduced (due to the simpler permits system) leads to significant monetary savings to the private sector.

The Approach
The project works with the government of Azerbaijan to reform the entire systems of business permits, inspections and technical regulations in order to bring Azerbaijan practice in line with international best practice and contemporary European models. The project also cooperates with permit-issuing and controlling agencies to improve their internal procedures.

To monitor the impact of government reforms and provide concrete information on improving the business climate, the project conducts an annual survey of the SME sector to identify the main administrative and regulatory obstacles to SME development. To increase the awareness of SMEs about their rights, the project provides entrepreneurs with easy-to-understand information on regulatory procedures and on their rights and responsibilities as market participants.


For detailed information about several components of the projects, please click on the links below:
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