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The
economy needs the flexible and active private sector for growing, with new
investments made by firms, creating new job vacancies that improving
productivity and promoting growth. Entrepreneurial activities are the basics
to the dynamics of the private sector as the generation of the new businesses
raises the competition and economic growth. This especially relevant to
Azerbaijan, where the government faces a challenge creating condition that
will contribute growth of nonoil sector. Azerbaijan overcame the global
financial crisis relatively well, with solid increase of income and decrease
of poverty. But when it faced the crisis, the situation showed need for
diversified economy, marked based policies, and social services. The rapid
decline in crude oil prices in 2015, which related to the fundamental and
political reasons, caused an economic downturn in many oil exporting
countries reliant on their fuel export like Azerbaijan. So, the year 2015 is
not fortunate for the economy of the country. The government was forced to
abandon the fixed exchange regime. And national currency lost more than 50%
of its value. Furthermore, it declined GDP and GDP per capita significantly.
As the country`s economy has grown before economic crisis, mostly the result
of the oil industry, the number of small and medium enterprises has also
increased. But the growth of the small and medium enterprises didn`t affect
highly to the entrepreneurial sector of GDP. Because the highly growth of oil
sector showed off the impact of non-oil sector almost as free-riders in the
general economic boom. The main objective of Azerbaijan`s development
strategy should be diversifying economy away from oil sector and stabilize
and improve the employment and growth. And encouraging high-growth
entrepreneurship can help the country to achieve these goals. When I analyzed
some researches about SMEs in Azerbaijan, I saw that the entrepreneurial
activities are very low in country and that’s why innovative activities among
firms are low. Several factors affect the business growth and
entrepreneurship like lack of competition among small firms and the lack of
industry relevant skills. Then the financial system is not relevant to
contribute the business development. Because of high interest rate and
risk-averse lending policies, few entrepreneurs receiving funding from the
domestic financial system. Most of them support their businesses with their
own resources. The small entrepreneurships can be stipulated in current
situation with the hands of government. The government could play an
important role in business environment by removing obstacles that against
entrepreneurialism, provide company incentives that favor entrepreneurs with
good ideas, introduce instruments that enable entrepreneurs to access the
capital for startups, ensure flexible labor market policies that enable firms
to expand by attracting best skilled talents from the outside of firms and
country by designing new financial instrument – policies, laws and system
that foster SMEs. And legislation should care the making and management of
these instruments to prevent monopolizing or corruption and promote
efficiency. When I read some articles and researches, I saw some ways that
practiced in different countries and some international laws to enhance the
entrepreneurialism which could be applied also in Azerbaijan. In my opinion,
followings are the most relevant ways that government can apply: – The
government can simplify the expansion of e-services through data sharing between
ministries to increase efficiency in issuing permits. And should ensure that
the number of analyses firm subjected to and methods applying for the firm
for analyses are transparent and available publicly to the others. – Lack of
competition is an issue in Azerbaijan, especially for SMEs. Government
ownership of companies is high rather than EU, and those companies have easy
access to government financial supports, also those companies face few visits
from tax officials. Because of this inequality in the business sector make
additional barrier to enter new enterprises. That’s why government should
accept new competition code which should fit to international best practices
and made by independent organizations, and should establish independent antimonopoly
agency to enforce it. – Almost all new enterprises or startups are funded by
their own resources or money from the relatives or friends, because bank
borrowing is very expensive. Most of the owners believe the interest rate
were very high, and interest rate on credit exceeded the profit rate of the
organizations. And another reason is high requirement of collateral for
loans. Therefore, there is need for such structure that support new venture.
Another way for funding is leasing which is a useful tool for SMEs because it
allows to purchase equipment as they use it, with limited collateral. But
main concern of this tool is the banks are reluctant to provide long-term
financing. A well-organized security transfers may give confidence to lender and
Azerbaijan laws permit to create security interest rate on movable registered
properties. But problem in this system is about non-registered properties.
That’s why all types of movable properties` security interest should be
allowed to register, and electronic registration of collateral for both
movable and immovable assets should be created. – Most of the new innovative
organizations have few or no revenue during early stage and they require
large investment capital to develop their product. And payment of the loans
has high opportunity cost. For this reason, loan is much more appropriate for
the organizations which already have powerful revenue stream. So, the role of
early stage risk capital is more relevant to startups and SMEs. The
government can establish a useful financing program for SMEs with early-stage
risk capital. – Universities and businesses can be linked one another, to be
successful. The economy needs both researchers and entrepreneurs. But there
is no virtually industry-research collaboration in Azerbaijan, even in big
companies R is low. And synergy needs built between industry and
research community is priority area which should be identified by government.
There are some well-known programs like SPREAD in India, which is early stage
development program directed at private enterprises, with an explicit
requirement for collaboration with public research institutes. To respond
such kind of challenges, government should introduce policy instrument to
foster R and innovation in private sector with direct funding, matching
grants, R tax credits etc. So, as I mentioned above government role is
very crucial as its intervention to the market has significant impact on the
all participants of the market. By its hand, stable and reliable market
environment can be established where the entrepreneurs can believe that their
investments will not fail because of market failure. Government should
decrease the asymmetric information, supervise the management of its policies,
help new and existing entrepreneurs in various field etc. In this way, small
entrepreneurship can be developed in our country.

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