Page 96 - Azerbaijan State University of Economics

THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE, V.77, # 1, 2020, pp. 92-99

preparing these manufacturing centres for international competition which does not
require much investment and resource.

When it comes to the role of the state, the state has to simplify the regulations for
entrepreneurs entering the foreign market and improving all the conditions in the country
to ensure competition and doing business. Regarding the heavy industry, it is necessary to
conduct a cost-effectiveness audit of existing businesses and evaluate international sale
opportunities. Government have to stop to support for industrial enterprises with no
prospects in the long run which leads to an inefficient economy. Majority of these
businesses will stop or operate inefficiently in the post-oil era. Supporting these businesses
is a huge risk and leads to the emergence of a national economy-dependent pseudo-
industry. It is important to monitor which enterprises work efficiently and which do not.
State’s permanent support to these companies is a big obstacle.

Regarding SMEs, the analysis shows that most businesses in Azerbaijan are engaged
in the production of goods that are largely aimed at meeting the needs of consumers
across the country. Local consumers buy their goods with lower quality indicators.
As a result, these companies are not interested in the production of competitive
goods and lose income from foreign trade. This, in turn, reduces the interest of
producing better quality products through the use of technology and innovation to
produce competitive products. Big holding companies produce products to meet the
needs of such a major local market and have little interest in foreign markets. This
trend is seriously hampering the development of local businesses. There is a lack of
management skills, a business philosophy that is relevant to foreign market growth
of local businesses. The biggest challenges in the development of entrepreneurship
include weak linkages between the private sector, low management skills, low
access to financial resources, and lack of competition (2016: 11).

In addition to this, President Ilham Aliyev underlined the importance of good governance
in Azerbaijan and introduced a series of structural reforms. He said in Davos: “The future
is not about oil and gas; they will be exhausted one day. The future will consist of state
support for innovation, technology, good governance, transparency and entrepreneurship”
(President.az, 2018). A new reform has been launched to improve the competitive
environment and good governance in Azerbaijan since 2019. SME Development
Agency of Azerbaijan (KOBIA) was established in 2019. Furthermore, Mr President has
entrusted the Ministry of Economy of the Republic of Azerbaijan with the task of creating
a favourable environment for entrepreneurship development.

In addition, Azerbaijan started to support startup incubation centres to operate. The
biggest obstacle to entrepreneurship development in Azerbaijan is to consolidate the

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