BAKU, Azerbaijan, Feb.2
By Sadraddin Aghjayev – Trend:
The sphere of small- and medium-sized entrepreneurship (SME) in Azerbaijan is at a low level, Vusala Ahmadova, an expert on economic and legal issues, told Trend.
According to Ahmadova, most of the local entrepreneurs prefer to import goods instead of organizing domestic production.
"The project of the Cabinet of Ministers of Azerbaijan on exemption of entrepreneurs and legal entities from taxes on profits and incomes is generally aimed at promoting the production of innovative products and services," she added. Besides, the expert noted that there is dependence on imports in many areas of entrepreneurship.
"If we look at the local production capacities in the non-oil sector, we see that at most of these enterprises everything, from raw materials to final packaging and even labels, is imported. First of all, it’s necessary to ensure the production of products with high added value,” Ahmadova noted. “Creation of high added value in the economy means the production of goods and services with a higher margin (Additive Margin), since there is a direct relationship between value-added and the gross national product.”
“High value-added means a high GDP, and therefore, the more activities have conducted that increase the value of the goods with its production, the greater are the benefits of the product for the consumer," she stressed.
According to the expert, the production of goods with high added value is the most important factor in eliminating the foreign trade deficit.
"The less imported funds are used to produce a product, the more the export of that product increases the national income. In other words, when producing a product, it’s important that the resources and funds used throughout the entire process, from the supply of raw materials to the final stage of production, are local," she added.
As Ahmadova further said, other ways to create added value are a new design, research, and development, rebranding, the use of information technology, specialization in the production of goods.
"Enterprises that don’t have sufficient risk capital more often apply for the transfer of innovations (trade agreements, transfer of know-how) abroad. Low investment levels prevent small and medium-sized enterprises from innovating,” noted the expert. “To create higher added value, it’s important to create innovations at the expense of national resources, instead of their integration from abroad. For this reason, opportunities should be opened for small and medium-sized businesses, which form the basis of the economy. Today you know that most of the loans offered by commercial banks are consumer loans.”
“Some 40 percent of all loans account for consumer loans, 10 percent – for microloans and 4-5 percent – for agricultural loans. I think that this project, to be implemented by the Cabinet of Ministers, will encourage the development of small and medium-sized enterprises, the production of innovative products, and the attraction of foreign investments," summed up Ahmadova.
On January 30, 2021, the Azerbaijani Cabinet of Ministers has approved the criteria for determining a startup and the rules for maintaining a register of innovative projects open to the public and issuing a start-up certificate. According to the criteria for determining a startup, legal entities or individuals that meet the criteria and have received a special startup certificate will be exempted from taxes in accordance with the Tax Code of Azerbaijan.
Besides, the criteria envision exempting holders of such certificates from paying income tax on innovative activities from the moment they receive a startup certificate. Legal entities that are subjects of micro or small businesses will be exempted from income tax and individuals operating as individual entrepreneurs - from income tax for a period of 3 years.
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