What Thatcher government. The result was a fast

What
can stimulate small entrepreneurship in Azerbaijan in volatile situation? The
core objectives of the development strategy of Azerbaijan are to diversify
the economy away from the oil sector and sustain high employment and growth
rates. Entrepreneurship activity is important to the continued dynamism of
the private sector, as the creation of new businesses foster competition and
boost economic growth. Development of small and medium entrepreneurship
(hereinafter referred to as the SME) in Azerbaijan is essential to facilitate
economic diversification, increase competitiveness, employment, as well as to
meet demand for consumer goods and ensure economic development using local
resources. However, there are some impediments for promoting SMEs which in my
opinion, can be successfully resolved with the intervention of timely and
effective government policies and help to can stimulate small
entrepreneurship activities in current volatile situation. First of all, free
market mechanism should be enhanced in order to facilitate the easy entrance
of small entrepreneurs to the market. There must be open market in Azerbaijan
for easy entering. At the most basic level, effective government policies can
create an institutional base that establishes openness to trade. Lack of
competition is in some industries particularly for small and medium
enterprises. If in any sector there is monopoly, lack of competition, it will
be difficult to enter to this sector. There is a need to undertake analysis
of other legislation that affects the competition environment in the country
and undermines the level playing field for businesses. It is obvious from the
basic principles of macroeconomy that public investment usually crowds out
private investment since government-owned firms have better access to
additional financial support and have easier time dealing with government
regulations. Instead in order to help small entrepreneurs to enter easily to
the industries that were previously led by state companies, the government
should continue the privatization program which has begun lately. The most
prominent example could be the case of Britain when more than 50 companies
were sold or privatized under Thatcher government. The result was a fast
productivity growth and high and new level of competition all over the
country. Secondly, in most cases it is hard for entrepreneurs to find enough
capital, needed for their businesses. Limited amount of capital and expensive
bank borrowing are one of the major barriers that limit small
entrepreneurship activity in the country. Nearly all small firms had been
established with personal savings or funds borrowed from friends or families.
Companies usually cite high interest rates and risk-averse lending policies
requiring high levels of collateral as substantial hindrances to expansion.
As a result of insufficient borrowing opportunities, entrepreneurs must rely
on their own capital or on retained earnings for investments to support
development of their businesses. Also due to information asymmetry problems
lenders are reluctant to lend money to these small entrepreneurs. Information
asymmetries are the most significant structural factor contributing to the
higher cost and lower availability of credit for small entrepreneurs and can
be a real barrier to competition in SME lending. Limited or no access to
information for potential entrants in SME lending increases the cost of
establishing small entrepreneurship lending operations. This is especially
true for new entrants since due to lack of information with the new customers
lenders are less likely to lend to newer businesses. Lenders typically have
limited knowledge about a new borrower’s financial position, the financial
performance of the business and the financial behavior of the business owner.
In addition, the small entrepreneurship sector is extremely diverse, so
lenders may have limited knowledge of the conditions in, and prospects for,
particular industries. The interest rate levied on small business loans is
greater than normal. In the same way, lending institution will only lend some
degree of amount on small business loans. The government could play an
important role by removing bottlenecks that impede entrepreneurialism
entrepreneurship in general business environment as well as by designing new
financial policy instruments that foster entrepreneurship and innovation. In
doing so, the government needs to exercise care that the design and
management of these instruments prevent corruption, promote efficiency, and should
ensure efficient and cost-effective access to financial resources in order to
establish sustainable network of the SMEs. During the early stages of new
entrepreneurs, the government could establish favorable financing programs
for entrepreneurs through commercial banks. Government could also arrange
facilities that provide direct financing to small businesses, subsidies or
guarantees on loans. Third, the government should try to simplify laws and
regulations in order to facilitate new business entries. For doing this
government can make additional improvements, particular in implementing more
advanced tools such as an improved business registry, online application
forms, and automatic registration. Because it is hard to new entrants to
carry burden of high taxes. The government may also consider possible tax
reforms in order to decrease tax burden on the entrepreneurs and facilitate
new business entries. Recently, the government has implemented various state
programs in order to support small entrepreneurship activity in the country.
For example, The National Entrepreneurship Fund, The Azerbaijan Export and
Investment Promotion Foundation, The Baku Business Center under the Ministry
of Economic Development, The Azerbaijan Investment Company support services
provided by different entrepreneurs all over the country. These services
needs to be scaled up. It will stimulate entrepreneurs to enter market if
they have information about these services. Then there should be close
research collaboration and in firm research and development (R).
Research and development (R) is regarded as a core factor for the
long-run performance of both large enterprises (LEs) and small and
medium-sized enterprises (SMEs). There is virtually no industry-research
collaboration in Azerbaijan. There is a need built relationships between the
industry and research communities, and firms must be incentivized to conduct
more in-house R. In-house R means companies engaged in innovative
R activities related to the line of their business, such as development
of new product/ technologies, design and engineering, improvements in
process/ product/ design, developing new methods of analysis and testing,
research for increased efficiency in use of resources such as capital
equipment, material and energy, pollution control, effluent treatment and
recycling of waste products or any other areas of research. For effective
collaboration, the government can provide incentives for industry and
researches. The government can provide grants and subsidies, R tax
credits for entrepreneurs and it can create innovation. Another method to
stimulate small entrepreneurship activity relies on more open and fair trade
policies. Internationalization of the SMEs and improvement of their access to
foreign markets is essencial. Government should expand financial services for
international trade deals of the SMEs and promote foreign direct investments.
Foreign trade policies, such as tariffs and import quotas, can be lowered or
eliminated to encourage foreign trade activity. Relaxed trade restrictions
and free-trade zones can allow local export oriented businesses to realize
significant cost savings, allowing them to increase their bottom lines. The
ability to outsource labor and manufacturing to lower-cost markets in
addition to sourcing cheaper materials helps to increase profit margins,
encouraging business expansion. It means internationalized SMEs can exchange
our goods and services with other countries and they can get cheaper
materials, inputs from international markets and grow. Also the government
can encourage entrepreneurship activities through establishing business ties
with them. Government should enhance public-private partnership. For example,
the government can sign a contract with the third party to do a public work
rather than creating internal departments for this activity. Moreover, the
government should also invest more on education. High quality education
system will produce the more educated and successful entrepreneurs. We should
provide business education in our high-school and universities. Encouraging
high-growth entrepreneurship can help Azerbaijan achieve these goals as it
moves towards new opportunities in value added tradable sectors. In
conclusion, the government and other legislative institutions can support
entrepreneurship in a variety of ways, by boosting competition, increasing
access to information, simplifying ways to access to finance, simplifying
legal and regulatory framework and enhances knowledge flows and learning. The
recent efforts by the government in order to improve the current business
environment is indeed noteworthy, however further steps should be carried out
for more desirable outcomes.