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Unofficial payments, barriers to trade, and other obstacles to running a business in Azerbaijan

Mohammad Amin's picture

Editor's Note: The following post was submitted jointly by Mohammad Amin and Arvind Jain, both of the World Bank Group's Enterprise Analysis Unit.

The Enterprise Analysis Unit at the World Bank recently put out a short Country Note on the current state of the business climate in Azerbaijan. The note is based on newly collected firm-level data on various aspects of the business climate and experiences of a statistically representative sample of firms (Enterprise Surveys). The data also contain information on various measures of performance and the structure of the firms. Some of the important findings discussed in the note are summarized below.

Between 2005 and 2009, there were significant improvements in Azerbaijan’s business environment, particularly in terms of increased access to finance and reductions in tax payment-related bribery. Firms interviewed in 2005 and 2009 reported increased use of credit-financed investments and increased sales on credit. Nevertheless, firms faced many severe constraints, including corruption and a business environment that was not conducive to international trade. For example, 32 percent of the firms in Azerbaijan reported unofficial payments to public officials to get things done compared with an average of 17 percent in Eastern European and Central Asian (ECA) countries. Female participation in ownership was the lowest in the ECA region (figure 1). Firms in Azerbaijan were also less likely to export their products, have their own website, and use email to communicate with their clients than firms in the rest of ECA region.

The note goes on to suggest areas of improvement for Azerbaijan. Streamlining regulation in order to diminish opportunities for bribe collection and expanding opportunities for international trade are highlighted as the most important reforms going forward. For those who want more details, you can do your own analysis using the full data at the Enterprise Surveys website.



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