Azerbaijan stimulates economy through boosting entrepreneurship

The competition between the liberal economy in the West which was dominated by SMEs and the centralized economy in the USSR which was made up of big and mega enterprises resulted in the victory of formers after 70 years. It was not just a competition between the two ideologies which were totally opposite each other, but also a means to prove some economic theories.

As is known, the Soviet Union established mega enterprises which employed thousands of people. However, in Western countries, SMEs dominate in economy. They witnessed several economic crises and stagnations but they were able to surmount both problems. In comparison, for example, an economic collapse in a country in the West has subsequently spurred that country's rise. However, this development did not have a positive effect within the Soviet Union. One crisis in 70 years was enough to dismember the big country into 15 places. It proved that SMEs are more flexible and viable than big enterprises. They can handle risks more easily and find ways to continue production but big enterprises do not have such luxuries. For example, most of the former Soviet mega enterprises have not been able to re-establish.

So, Azerbaijan has taken a lesson from the fate of the former USSR which the country was a part of it. The country pays special attention to the establishment and development of SMEs and they are an important source of employment, but their full potential remains untapped.

It has implemented several projects so far. One of such projects was held by Azerbaijan’s Labor and Population Social Protection Ministry and it was called self-employment. Through this project, the government granted equipment to establish workshops worth up to AZN 10,000. Besides, the Ministry hosted training how to establish a business and how to use the equipment. With the help of this project, hundreds of workshops were established and thousands of people were provided with permanent jobs. Thanks to this project, a revival was observed in the service and textile sector in a short period of time. The project covered rural areas as well. The Ministry granted animals and equipment to manufacture dairy products.

Besides, the Government established a public legal entity called ABAD - Ail? Biznesin? Asan D?st?k (Easy Support for Family Business) on September 23, 2016 under the State Agency for Public Service and Social Innovations. ABAD started as a pilot project with 7 family farms in Masalli, Azerbaijan. Currently, the number of families included in the support program has exceeded 553 .

Based on the order, a tranche of 1,000,000 manats was received for the establishment of ABAD . Since the project is a public legal entity, it operates on a self-financing system. Support and construction of new centers is carried out thanks to funds allocated by donors and partners.

ABAD support program includes various services. This includes services such as marketing, branding, design, accounting services, equipment supply, legal assistance, transportation, packaging, logistics, one-stop certification and end-of-sale arrangements. In addition, a bank account and TIN are opened in the name of the ABAD, and when the sale takes place, the funds are transferred to the ABAD's bank account. If necessary, through our donors and partners, "ABAD" members can be given equipment or preferential microcredit.

In addition, in December 2017, Azerbaijan established the Small and Medium Business Development Agency of the Republic of Azerbaijan (abbreviated: KOBIA ). It is a public legal entity that supports the development of micro, small, and medium businesses (SMEs) in the country and it provides a number of support and services to entrepreneurs, and coordinates and regulates the services of state bodies in this field. It provides grants and market research. Besides, KOBIA holds training for entrepreneurs to start businesses and to write business plans. Providing business credits with little interest is among the future plans of KOBIA.

It is worth noting that since 2018, Azerbaijan has made significant efforts to boost SME development through the establishment of its KOBIA, a major milestone towards systematically delivering tailored support for SMEs. The agency provides its services in Baku and across the country through 21 SME Development Centres.

Despite all the efforts of Azerbaijan, SMEs encountered big problems during the COVID-19 pandemic. However, as we told above, SMEs were able to overcome the emerging problems. Thus, COVID-19 has given renewed urgency to strengthen SME support with a particular emphasis on promoting digitalization. In response to lockdown measures, many SMEs turned for the first time to digital solutions and experienced the benefits digital tools can bring to boost company performance and strengthen productivity growth. On average, 66% of SMEs in Azerbaijan started or increased their online business activity and 37% started or increased remote work.

Generally, in 2020, Azerbaijan’s SMEs generated 42% of total employment but contributed to only 17% of value added (24% in the non-oil sector). Their overall contribution to economic development is significantly lower than in OECD countries where SMEs account for about 53% of value-added and 65% of employment.

So, Azerbaijan intends to increase economic activity in the country through SMEs. For this purpose, the country does it is best and has started to reap the yields of its effort. The country provides help to the startups via several different organizations and no doubt the number of organizations will enhance.