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means the willingness and ability to develop, organize and manage a business
or businesses by taking the financial risks in order to make a profit. Before
suggesting the ways to stimulate small entrepreneurship in our country, I
want to figure out the role of entrepreneurship for economic development.
Adam Smith, who is considered to be the father of economics, emphasized that
there is not any significant impact of entrepreneurship in economic
development. According to his theory the important determinants of economic
development are rate of capital and labor. Individuals are led by an
“invisible hand” in pursuing their interests, so their activity lead to the
maximization of output in economy. That’s why the producers are allowed to produce
as much as they like, earn as much income as they can and save as much as
they like (the policy of laissez-faire). Thus, in Adam Smith’s classical
theory of economic development, there is no room for entrepreneurship. And,
economic development seems to be self-regulated. Nevertheless, the economic
history of such presently developed countries, as America, Russia and Japan
tends to support the fact that entrepreneurship causes the development of
economy. So, how entrepreneurs drive economic development? To answer this
question first of all is needed to clarify drivers of entrepreneurs’
emergency in the market. Some entrepreneurs enter the market in response to
unmet needs and demands (they are called “opportunity” entrepreneurs), others
start businesses because of lack of better work opportunities. I ponder that
in any case entrepreneurs are more inspired that conventional employees,
because they have the opportunity to run their own businesses and make high
profits. So, they are more likely to accept high risks and more
responsibility at the job, passionate about work, and this causes labor
efficiency which contributes to economic development. In order to keep
competitive advantage entrepreneurs, engage in deep researches. Being
appropriately informed in their field while getting an opportunity they can
successfully link certain information to the problem and make valuable
decision. So, entrepreneurship leads to critical thinking and creativity,
which in turn leads to innovations. The “Opportunity” entrepreneurs are key
players when it comes to encouraging economic growth, because they enable
access to goods and services that population require. In general,
entrepreneurship contributes to economic growth, job creation, poverty
reduction. So, after these analyses we come to the decision that
entrepreneurship is one of important drivers of economic development.
Particularly for Azerbaijan encouraging entrepreneurship would lead to
diversification the economy away from the oil sector, sustain high growth and
employment. I ponder that even if from one hand the current volatile system
is the reason that has destroyed the country’s economy, from the other hand
it could be the driver to restructure the old oil-based economy to new
diversified economy that relies on ideal entrepreneurship environment. As our
country beard two devaluations, the value of our currency decreased. And I
ponder that this might be a chance for us to get the competitive advantage in
the market that derived from lower exchange rate. Mainly I see the
opportunity for tourism sector, by focusing on medical and health tourism
(Naftalan, DuzDa??). So, encouraging entrepreneurship in this direction would
enable us to enter the market with differentiated and relatively cheap (because
of lower exchange rate) product. Also, I see the opportunity by enhancing the
agricultural business. Our products might be differentiated as more natural
ones, nowadays people value more natural products. One more field that I
would like to suggest for encouragement is IT. We are far from such leader
countries as Scandinavian countries, Switzerland, USA, UK, Republic of Korea,
but still, I have noticed that our young generation is deeply interested in
this field. So, providing them supportive environment might lead to creative
ideas in this field. The ideal entrepreneurship environment consists of five
pillars: access to funding, entrepreneurial culture, supportive regulation
and tax regimes, education system that supports entrepreneurship, coordinating
approach that links the public, private and volunteering sectors. But there
are several factors that hinder entrepreneurship (especially innovativeness
of firms) and general business growth in Azerbaijan. The first things that
frighten entrepreneurs are how to get funding and what are the costs of
bankruptcy. New innovative companies deeply depend on large initial capital
investments during the early stages, because at this period such companies
earn few or no revenues, but have too much expenditures. But companies face
high interest rates and risk-averse lending policies. So, I reckon that in
order to encourage entrepreneurship in our country first of all is required
to provide the environment with various initial capital investment options. That
might be government financing programs, national private investments and
foreign investments. I think that government should make the first step in
providing capital investments in order to encourage both entrepreneurs, by
giving them opportunity to implement their ideas, and private investors, as
they will see the fortunes of entrepreneurs. Such public programs as The
National Fund for Entrepreneurship support (that endeavors to enable more
diverse growth by encouraging non-oil businesses), The Azerbaijan Investment
company (with the purpose to develop non-oil businesses through equity
investments). So, I reckon that such king of programs should be enlarged.
What about the national private and foreign investors? Investors (especially
foreign investors) aren’t likely to provide capital for our firms, because
credit rating for Azerbaijan stands at BB+, which means negative outlook. To
attract foreign investments, Azerbaijani companies need to provide
appropriate financial statements and precise information about companies’
goals and the ways of implementation of those goals to investors. Also, in
order to persuade investors, entrepreneurs must show how much they sure about
the successfulness of their projects. In order to get rid of the problem with
untruthfulness of investors, government should engage in decreasing
corruption in country (for example, double audit expertise) and also engage
in imposing the idea of importance of foreign and private investments for
businesses to get success (for example, by organizing events where are shown
different presentations about the companies that succeed grateful to foreign
investments), so that the Azerbaijani companies would be more likely to
facilitate transparency. In order to increase the confidence of entrepreneurs
in themselves and their ideas (projects) might be organized special trainings
with this concept. Even I think it would be better to educate students in the
way that they would like to be purposeful and confident entrepreneurs
(including, for example, topics about advantages of being your own boss, ways
of realization ideas, leadership to school program, organizing various ideas
competitions and so on). The other obstacle at this stage is lack of
entrepreneurs’ awareness. Even if some funding programs exist, entrepreneurs
are not briefed about it. In order to deal with this issue, I suggest
creating special website for entrepreneurs, where all information about
entrepreneurship in Azerbaijan is shared to registered ones. The problem with
bankruptcy is high costs of it. “Insolvency” is legally defined as the
inability of a debtor to pay its debts, but doesn’t include that the sum of
debtor’s liabilities exceeds the sum of its assets. It causes that viable
business with cash flow problems may be considered insolvent and forced into
bankruptcy. I see the solution of this problem in making changes in law,
providing post-petition decisions. I also think that rising the gig economy
in our country would be step fostering entrepreneurship. Because at first
stage while entrepreneurs are not sure whether their ideas could be
implemented, they might hesitate to quit their job and start their own
business. But when they have flexible job timetable they may combine both of
these engagements, and then if they feel that business is capable enough to
reach its goals, switch to it. Government is also required to provide more
privileges to entrepreneurs for fostering this field. It can be various tax
exemptions, subsidies and transparent business-related services. I think that
one of the very successful steps was the decree of President Aliyev (October
2015) about the suspension of inspections for entrepreneurs for two years.
Also according to this decree business-related services (issuing licenses)
were transferred to State Agency for Public Services and Social Innovation
(ASAN). This was an important step in formulating transparency. Government
also provide various benefits to entrepreneurs (for example agricultural
products are not considered as taxable base). I consider that the policy of
benefits to entrepreneurs and transparency should be extended. I ponder that
further steps might be concentration on encouraging tourism and high tech
companies through benefits. Next obstacle is that government ownership of
companies within the enterprise sector is high. The companies with government
participation have easier access to financial support and dealing with
government regulations. In case if lenders and investors have the opportunity
to provide money to government-owned firms, they even less likely to do that
for SMEs. In addition, government owned companies face fewer visits of tax
officials. In order to deal with this problem needed engaging in antimonopoly
activities, development of fair competition and reduction government
participation within the enterprise sector. Our national firms also have the
problem with lack of access to export markets. In order to get the access to
export markets and compete with foreign companies, firms are pressured to
meet quality standards. The problem is that local firms are lack of requisite
capacity. Government should support them by defraying a portion of the cost
that firms have for acquiring requisite capacity; providing them the
information about how to match the domestic economy with foreign (by
providing information about opportunities in market, identifying partners and
competitors, by matching supply and demand); providing economic incentives
(tax exemptions, subsidies so on); and promoting new technology import to the
country. The main obstacle at the operations stage of entrepreneurs is lack
of industry-related knowledge, which is extremely important for enabling
critical thinking to meet strategic goals. For solving this problem is
required create the environment in the country that highly supports educated
students (providing various scholarship programs, organizing different
competitions). Also, after recruitment is required organizing additional
trainings for employees. Moreover, I ponder that better industry-related
knowledge would also lead to innovations, because the more briefed person is,
the more flexible his/her reasoning, which leads to innovations. So, in order
to become innovative entrepreneurs, have to be active in research and
development. For recruiting innovative candidates, besides application based
on CVs, I suggest creating the link between teachers, university
administration and employers. So, that teachers recommend certain special
students to university administration, and they at their turn recommend those
students to employers. I suggest this way, because sometimes HRs fail with
choosing right candidate according CV (approximately 53% of job candidates
lie to some extend on their resumes). So, these are the problems and
solutions that i see for stimulating small entrepreneurship in Azerbaijan.
Even if we have lots of obstacles in this issue, I believe that our country
is capable of fixing them and in the near future economy of our country will
shift from oil-base to non-oil economy.

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