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Ilkin Aliyev: "Domestic market research is of great importance in the context of risk assessment " 07.09.23

One of the state support measures rendered to entrepreneurs is assistance in the research of the domestic market, provided by the Small and Medium Business Development Agency (KOBİA). Ilkin Aliyev, Head of the support department for SMBs' access to financial resources of the Business Services Department of the Business Services Department of the Business Administration, addressed our questions on the benefits of domestic market research for entrepreneurs and the application rules for becoming beneficiaries of this support.

- What is domestic market research and what sort of support is provided to micro, small and medium business entities in this field?

- An effective outcome in organizing any production or service, expanding the existing business activities, also depends on the level of awareness of the business entity in the relevant field. For objective reasons, in many cases, micro and small business entities are not provided with essential resources for conducting analysis and research. In this sense, domestic market research is regarded as a significant source of information, and state support is rendered for conducting such research in our country.

Domestic market research – is an activity to be carried out in order to lower the costs of SMBs in production, Labor force, logistics, conformity assessment, certification, licenses and permits, marketing, advertising and other fields, as well as to define the current state of the domestic market in the field of manufacture and development of a new product or service to stimulate competitive production.

For the purpose of providing state support to SMBs in studying the current state of the domestic market, the Decree of the President of the Republic of Azerbaijan dated May 29, 2019 approved the "Rule for the provision of state support to domestic market research to stimulate the competitive production of micro, small and medium businesses". Pursuant to this rule, support measures for conducting domestic market research are taken by the Small and Medium Business Development Agency (KOBİA).

Domestic market research is conducted in two forms - individual or collective applications of SMBs, as well as at the initiative of KOBİA. The primary benefit of this support tool for SMBs is the presentation of real indicators of the current situation and demand of the domestic market. The application of state support for domestic market research allows SMBs to adjust their production activities to the domestic market and demand, without any extra costs and time wasted.

While SMB entity seeks to explore the current situation and development avenues of the domestic market in the relevant field applies for state support for the domestic market research, the scope of the research is defined by KOBİA in agreement with the applicant, and the goals of the research are drawn up. At the next stage, tender procedures are performed pursuant to the requirements of the Law "On Public Procurement" for the engagement of professional services for conducting domestic market research. A contract is concluded between the winning service provider, the applicant SMB and KOBİA. The form, content, areas to be covered and other requirements for the report (reference, opinion, etc.) are defined by that contract.

When the applicant SMB entity expresses satisfaction with the compiled domestic market research report, a corresponding act is drafted and a part of the cost of the rendered services is covered by KOBİA. The rules specify that market research reports drawn up at the request of micro and small entrepreneurs cannot be assigned to other entrepreneurs.

Meanwhile, based on the outcomes of surveys conducted in the territory of the country, and other approved strategy and program documents regarding the development of the country's economy, market research is also conducted at the initiative of KOBİA for the business entities to benefit from them. Reports of such domestic market research are placed on the official website of KOBİA (www.smb.gov.az) and any business entity are encouraged to benefit from this report free of charge.

- How to assess the availability of state support for domestic market research of SMBs and the benefits they derive from it?

- It is quite simple to benefit from state support on domestic market research. Any SMB entity that meets the criteria defined by the "Rule for the provision of state support to domestic market research to stimulate the competitive production of micro, small and medium businesses" are encouraged to apply to benefit from this support tool by filling out the application form posted on the website of KOBİA. Each application will be assessed for compliance with the criteria and the applicant will be notified of the outcome within 10 working days at the latest.

- Based on which grounds is the priority of domestic market research defined and for what purposes are its outcomes used?

- The focus of domestic market research is set by the fields specified in the individual or collective applications of SMBs, and the market research conducted at the initiative of KOBİA is defined based on the outcomes of the surveys conducted by the Agency among entrepreneurs, as well as the documents accepted on the socio-economic development of the country.

The domestic market research is primarily aimed at providing financial and informational support to the study of the current state of the domestic market for the purpose of stimulating the competitive production of SMBs, expanding the manufacture of products in the private sector, and achieve the goal of the establishment of new enterprises and facilities that produce competitive products. Domestic market research is of great importance for initiating and expanding production or service in the relevant field, as well as for assessing the risks that might face the entrepreneur and making the right decision.

Furthermore, in accordance with the Decision of the Cabinet of Ministers dated December 21, 2018 on the approval of "Criteria for the determination of micro, small, medium and large businesses", any SMB entity that is a micro, small or medium business entity and meets the criteria of the “Rule for the provision of state support to domestic market research to stimulate the competitive production of micro, small and medium businesses” approved by the Decree of the President of the Republic of Azerbaijan dated May 29, 2019 are encouraged to benefit from state support for domestic market research.

Exceptions were made for some types of activities with the “Rule for the provision of state support to domestic market research to stimulate the competitive production of micro, small and medium businesses”. These include professional participants of the securities market, pawnbrokers, people involved in business activities in gaming and betting, SMBs that perform the distribution (sale, advertising, promotion, etc.) of imported products (distribution service), one of the primary types of activity is real estate leasing, persons referred to as non-residents by the Law of the Republic of Azerbaijan "On Currency Regulation" and others.

When making a decision to provide state support for domestic market research, the primary criterion is the production potential of the applying SMB entity for the relevant product or service.

- What is the amount of support advanced for conducting domestic market research and how is this amount calculated?

- Pursuant to the Law of the Republic of Azerbaijan "On State Procurement", specialized local and foreign legal and natural persons (individual entrepreneurs) are engaged in conducting domestic market research according to concluded contract. The maximum amount of support paid for each domestic market research is 20,000 manats. 80 percent of the cost of each domestic market research conducted based on the application of a micro business entity, 50 percent of the cost of each domestic market research conducted based on the application of a small business entity receives state funding, and the remaining part is paid by the applicant business entity.

The amount of support depends primarily on the scope and complexity of the research requested. To effectively benefit from the financial resources regarding conducting domestic market research, the selection of a professional service provider for each research is identified through a bidding in accordance with the Law of the Republic of Azerbaijan "On Public Procurement".

- How many SMBs have benefited from domestic market research so far?

- From 2019, when the implementation of the domestic market research mechanism was commenced, 26 domestic market studies have been conducted at the initiative of KOBİA, and 23 at the request of SMBs. Detailed information on these studies is posted on the KOBİA website www.smb.gov.az. To assess the expedience of reports, entrepreneurs who have benefited from state support for domestic market research are periodically contacted, and according to the opinions of most entrepreneurs, the research outcomes had a positive impact on their correct decision-making.

It should be highlighted for further information that the "2022-2026 socio-economic development strategy of the Republic of Azerbaijan" also stipulates the use of the domestic market research mechanism to support SMBs. Therefore, to expand the existing business activities of SMBs and undertake their diversification initiatives into new areas, it is planned to support for conducting at least 10 domestic market studies every year until 2026.

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