Increasing the role of entrepreneurship in ensuring sustainable economic development in Azerbaijan, in particular, the transformation of small and medium businesses (SMBs) into a key driving factor, is one of the top priorities of implemented economic reforms led by President Ilham Aliyev.At the conference dedicated to the results of the first year of implementation of the "State Program on socio-economic development of regions of the Republic of Azerbaijan for 2019-2023," the head of state stressed that development of small and medium business is one of the key priorities and gave instructions in this regard.
On February 7, House for Small and Medium Business (Khachmaz SMB House) in Khachmaz was launched as a continuation of government support for SMBs, which serves as a convenient platform to improve public services for entrepreneurs, provide a single space, comfortable, unobstructed and transparent access to the services. Orkhan Mammadov, Chairman of the Board of Small and Medium Business Development Agency (SMBDA) of the Republic of Azerbaijan, answered our questions about the activities of Khachmaz SMB House and services provided to entrepreneurs locally, as well as proposed new mechanisms to support SMBs.
Mr. Mammadov, would you share with us the purpose of SMB Houses and its benefits for entrepreneurs.
SMB House is a single space where government-to-business ("G2B") and necessary business-to-business ("B2B") services are provided for business entities according to principles of efficiency, courtesy and flexibility and innovations. Single space principle ("non-stop shop”) means improvement of service quality, time and cost savings, efficiency and satisfaction in all sectors where it is applied. The experience of advanced countries also shows that the provision of services to small and medium businesses in a single space brings positive results. The main advantage for SMBs is the reduction of time and operational costs, transparent and efficient organization of services, the provision of G2B and B2B services in a single space, as well as scalability of the level of services provided to SMBs. All these contribute to entrepreneurial satisfaction and the formation of enabling business ecosystem, and entrepreneurs focus more on developing their business.
What was the reason behind SMB house launch in Khachmaz?
Creation of the first SMB house in Khachmaz, in the Guba-Khachmaz economic region, is not accidental. In general, this economic region is characterized by its economic activity and great economic potential and likewise known as a tourism region. Guba-Khachmaz region specializes in fruit and vegetable production and is located on the border with Russia, which stipulates active import-export operations. There is also a large number of SMB entities operating here. Thus, more than 3,500 micro, 182 small, 70 medium businesses, as well as about 53,000 business entities engaged in individual entrepreneurship without establishing a legal entity, were registered in the economic region.
At the same time, before Khachmaz SMB House was established, a survey on needs assessment was conducted among export companies operating in the region. 56% of survey respondents indicated they face a loss of time during the clearance of export operations, and 6% of them noted they encounter loss due to operating costs. 24% of respondents said they had problems with logistics services, 14% with documentation, 10% with excess expenditure, 8% with of bureaucratic obstacles, and 44% had other difficulties during export operations. As for the expectations from the activities of the Khachmaz SMB House, 88% of the respondents said they expect the services to be implemented in a single space, 32% expect the efficiency, 18% transparency, and 6% courtesy.
In general, Khachmaz SMB House is mainly specialized in export operations and provides entrepreneurs with a variety of government and necessary business services.
We believe the SMB House will not only facilitate entrepreneurial activity in Khachmaz and surrounding areas, but also stimulate the development of small and medium businesses in the region and the establishment of new SMBs, and it will be crucial in realizing the economic potential of the region to the fullest.
What services are provided to entrepreneurs in Khachmaz SMB House?
The list of services provided to micro, small and medium businesses at the SMB Houses approved by Decree dated 26 June 2018 of the President of the Republic of Azerbaijan “On ensuring the activity of the Small and Medium Business Development Agency of the Republic of Azerbaijan.” As the Guba-Khachmaz economic region is primarily specialized in the export of agricultural products, business services are mainly provided in this field.
At present, Khachmaz SMB House provides entrepreneurs with approximately 300 services on four business processes, about 200 of which are public services and 100 are services provided by business entities. The SMB House provides entrepreneurs with the services such as the development of business plans, work with startups, improvement of business knowledge, incubation, etc., on a business planning process. To start a business, Khachmaz SMB House provides services such as registration of entrepreneurs, granting licenses and permits banking, insurance and other services. The stage of operating a business provides entrepreneurs with services such as taxation and reporting, access to import-export operations, logistics and infrastructure networks, etc. The stage of business development provides SMBs with services such as access to domestic and foreign markets, promotion of exports and investments, access to financial resources, and many more.
The 25 service windows operate in Khachmaz SMB House: 15 of them are customs, tax, property, utilities, food safety, agriculture, e-commerce, postal, advertising, as well as certificate of origin, licenses and permits provided by government agencies; 10 of them are banking, leasing, insurance, brokerage, logistics, translation, stamp and seal preparation and other services presented by private organizations. There are also service offices, meeting rooms and conference halls. ATMs of different banks, services of payment terminals are available at the SMB House.
In the future, the number of the public and business services provided by Khachmaz SMB House may increase given the requests and proposals from entrepreneurs.
The SMB Development Center has been launched in the Khachmaz SMB House as well. What services does the Center provide to increase the business knowledge and implement the ideas of entrepreneurs?
Khachmaz SMB Development Center provides services such as support for innovative entrepreneurship, startups and family businesses, encouraging entrepreneurship among women, people with disabilities and young, awareness-raising of SMBs, organization of training events, seminars and internship programs. In 2020, SMB Development Center is planning to organize more than 150 training and networking events, render various consulting services, and create new SMB entities.
By the way, this year, three more SMB Development Centers are planned to be established in Baku and regions.
The Business Incubation Center for Youth and Women will also be launched at the SMB Development Center soon. The Business Incubation Center is created to support entrepreneurial initiatives in Guba-Khachmaz economic region, build new business and employment opportunities, and expand the scope of state support measures provided to entrepreneurs. Residents will be provided with services such as the development of business projects, access to financial resources and financial management, mentorship, and so on.
Last year in December, the Small and Medium Business Development Agency announced a competition to select incubation Center participants and selected 35 residents in the manufacturing and service sectors. Residents will be provided with business premises equipped with the necessary equipment at the Business Incubation Center on concessional terms, and they will have the opportunity to benefit from all kinds of services.
Taking this opportunity, I encourage all micro, small and medium businesses operating in the Guba-Khachmaz economic region to actively use the services of the SMB House, as well as the SMB Development Center and the Business Incubation Center.
On February 7, besides the launch of the Khachmaz SMB House, a meeting of the Supervisory Board of the SMBDA was held. The activities of the Agency in 2019 and the work to be done in 2020 were presented to the Supervisory Board.
In 2019, SMBDA implemented several measures toward regulation, promotion, protection of interests, awareness-raising, and establishment of new support mechanisms.
As you know, one of the main areas of activities of the Agency is to participate in the regulation process of micro, small and medium businesses. Last year, 15 regulatory documents were drafted in this direction, of which seven were already approved. Among these documents, I would like to emphasize the government compensation mechanism for a significant portion of the incurred expenses on domestic market research for SMBs approved by the relevant Decree of the President of the Republic of Azerbaijan. We believe this mechanism is one of the significant supports for SMBs in the process of promoting and planning business. Another document is "On Coordination of Projects Financed by Foreign Countries and International Organizations to Support Entrepreneurship." The document is important for effective coordination of projects to support entrepreneurship.
Another important aspect of SMBDA's activities is the promotion and support of entrepreneurship. In 2019, the Agency received 16 applications from SMBs to conduct domestic market research to support competitive production and made a positive decision on eight of these applications and funding is underway. SMBDA also supported the participation of SMBs in exhibitions for free to gain access to sales markets and their promotion. Most of over 150 entrepreneurs whose participation at the exhibition was supported last year, represent particularly vulnerable categories, including people with disabilities, women and young entrepreneurs.
Improving the level of the service infrastructure to entrepreneurs is one of the other areas of activities of SMBDA. To this end, the Agency has set up SMB Houses in major cities and regions of the country. As we have already mentioned, the first SMB house was opened in Khachmaz. At present, work is being carried out to create Baku SMB house, which will provide more public and business services.
Organization of the Agency’s activity is accompanied by the introduction of new management models based on the level of the requirements set. To this end, “Small and Medium Business Friend” Network (“SMB Friend”) was established to facilitate the implementation of the President's strategic course "The state is the best partner for the entrepreneur," and the scope and activities of this mechanism are expanding. Activities of SMBDA in the regions are carried out through this network based on the requirements of entrepreneurs and in close cooperation with them. The 21 “SMB Friends” were launched, including ten last year. In 2019, about 1,600 applications and proposals were reviewed through the “SMB Friend” network, and 34 field meetings were held with entrepreneurs from 14 territorial units.
The analysis of inquiries received by SMBDA, as well as surveys shows there is a strong need to improve the knowledge and skills of SMBs. To this end, the Agency is holding a series of events across various platforms. One of them is to create a public-private dialogue through the online platform with the participation of relevant government agencies. Other platforms include training events and seminars, roundtables and professional development courses on various and relevant topics. In total, last year, Agency established a dialogue with 8000 business entities at 46 events, including 23 training courses, 9 online awareness-raising events, 7 seminars and 7 roundtables organized by SMBDA. In 2019, 39 business entities took professional training courses in Germany.
Last year, the Agency received about 800 applications related to the protection of interests of SMBs. 30% of these applications were resolved positively, and 40% were given appropriate recommendations by explaining the requirements of the legislation.
Last year, SMBDA representatives visited 14 countries, signed 7 memorandums of understanding and 4 protocols of intent, defining the framework of cooperation with relevant organizations to study international experience, to establish cooperation with similar foreign institutions and international economic organizations.
Approximately 100 volunteers were involved in "Volunteering Program" implemented by the agency which allowed to ensure employment for 15 volunteers, three of which have been hired by SMBDA.
What other support mechanisms will be available for SMBs, and what kind of innovations are expected in this area?
In 2020, SMBDA will focus on further improving numerous state support mechanisms provided to micro, small and medium businesses, informing SMBs on these mechanisms, and encouraging to use them more. At the same time, new support mechanisms will be developed and presented for service of SMBs, taking into account the needs of entrepreneurs. Several such mechanisms are already underway. This year, it is planned to provide entrepreneurs with e-SMB House portal and online training platform which covers the provision of services to entrepreneurs through a single platform electronically. The technical works on G2B (state-to-business) electronic register are nearing completion.
This year, the Baku SMB House is expected to be launched. Given the numerous applications of entrepreneurs and the effectiveness of the mechanism, it is planned to launch SMB Friends in 10 more cities and regions of the country.
Work is underway to provide access of SMBs to large trade Centers and regulate relations in this area, as well as facilitate entrepreneurs' access to financial resources and to use alternative sources in this area.
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