Supporting Azerbaijan’s SME reform agenda

Baku skyline

With the support of the OECD within the EU4Business initiative, Azerbaijan has embarked on the implementation of a wide-ranging reform agenda aimed at diversifying the economy and enhancing the contribution of small and medium enterprises to employment, domestic production and exports.

The fall in oil prices in 2015, combined with an economic slowdown in key regional trade partners, led to a sharp contraction in 2016-17 and highlighted the importance of ensuring a sustainable and stable growth path for Azerbaijan by developing the non-oil economy. 

Against this backdrop, Azerbaijan in December 2016 adopted a 'Strategic Roadmap for the production of consumer goods at the level of small and medium entrepreneurship' (the 'SME Roadmap'), demonstrating the government’s commitment to the SME sector. The SME Roadmap aims to strengthen the role and competitiveness of SMEs in the economy, enhance the business environment, improve the regulatory framework for entrepreneurial activity, enhance access to financial resources and strengthen institutional support for SMEs. 

Since the adoption of the Roadmap, the government has made significant progress in implementing the reforms outlined in this strategic document. For example, the establishment of a dedicated SME Development Agency in December 2017 represents a major milestone in shaping the SME support infrastructure in Azerbaijan. Other important initiatives implemented within the SME Roadmap include the establishment of the Mortgage and Credit Guarantee Fund, the State Registry of Movable Assets, an online one-stop-shop for SMEs, and 15 export associations with the objective of increasing production in a number of sectors, including agriculture, textiles and tourism. The government has also taken steps to streamline administrative procedures for businesses.

“The development of small and medium-sized businesses is a priority for the government of Azerbaijan,”says Vusal Gasimly, Executive Director of the Centre for Analysis of Economic Reforms and Communication, which has been entrusted with the monitoring and evaluation of the SME Roadmap"Working in close co-operation with the OECD has contributed to better implementation of Azerbaijan’s ambitious reform agenda that aims to diversify the economy and bring SMEs to the centre of economic development. In addition, engagement in OECD peer review processes has helped anchor our policy reforms and align them with international standards.”

While the full impact of these reforms on the business community in Azerbaijan is yet to be seen, Azerbaijan’s journey from policies to action shows that political commitment, a sound strategic framework and strong institutions are instrumental in implementing a comprehensive reform agenda and delivering tangible results for the real economy. The government’s efforts were also reflected in the 2019 edition of the World Bank’s 'Doing Business' indicators, which lists Azerbaijan as one of the top 10 reformers among 190 economies, improving its position to 25th, up from 57thin 2018.

EU4Business: From Policies to Action

Support for Azerbaijan’s SME sector reform was provided by the OECD as part of the EU-funded multi-country programme 'EU4Business: From Policies to Action', under which the OECD provides targeted advice for the design and implementation of SME policy and business environment reforms. Through thematic workshops, policy reviews and public-private consultations, the OECD assists the Ministry of Economy and the Centre for Analysis of Economic Reforms and Communication in implementing selected policy actions outlined in the SME Roadmap and in building a results-based monitoring system which will enable the government to track progress in the implementation of the SME reform agenda. The initial results of the work were discussed during the first-ever peer review of Azerbaijan in an OECD forum, at the OECD Eurasia Competitiveness Roundtable (19-20 November 2018) at OECD HQ in Paris, France.