CBN, September 15, 2006

BAKU - Azerbaijan has been placed 99th in the World Bank and IFC Doing Business 2007 report. Last year, Azerbaijan was ranked 100th. The report explores the government's activity in creating a good business environment and covers ten areas.

This fourth annual Doing Business report from the World Bank and the IFC was published on Sept. 6, and ranks the ease of doing business in 175 economies. The report identifies the top reformers of business regulations and describes best practices in how to reform. It measures quantitative indi­cators on business regulations and compares their enforcement across 175 economies-from Afghanistan to Zimbabwe-as well as over time. This year the report ranks Singapore first on the ease of doing business.

According to the report, Azerbai­jan has improved in four out of ten areas; "starting a business" (+8), "employing workers" (+2), "register­ing property" (+1) and "paying taxes" (+3). However, the country has lost ground in areas such as "dealing with licenses" (-1), "getting credits" (-2), "protecting investors" (-4), "enforcing contracts" (-1) and "closing a business" (-3). There has been no change in the area "trading across borders" (0).

Gubad Ibadoglu, an economic expert, said that although Azerbaijan has some positive points in the report, the business environment has problems.

"As the report shows, Azerbaijan has problems in five areas. The coun­try has problems protecting investors. In 2005, Azerbaijan scored 114 in this area, but over the last year has lost 4 points and been given a score of 118, which means that the situation has worsened. The main reason for this is pressure that has been put on some investors and the parliamentary elec­tions held last year," Ibadoglu said. After the parliamentary elections, some local entrepreneurs involved in steel and plastic pipe production were put under pressure. Foreign investor Barmek Azerbaijan also ceased its activity in Azerbaijan.

Ibadoglu said that the worsening of the situation in "getting credit" is led by gaps in legislation and non-trans­parent auctions. "The purchase of state property is not transparent enough, tenders are not being held openly. This also affects Azerbaijan's position" Gubadoglu said.

From the Commonwealth of Inde­pendent States (CIS), Georgia has been ranked as the top reformer this year. The report showed that Georgia has improved its ranking in six out of 10 areas. Georgia was ranked 112 in 2004. This year it is. ranked 37th. This year's report finds that 85 per­cent of reforms to improve the ease of doing business took place within 15 months of a new government tak­ing office. This holds true across all countries-poor, middle-income, or wealthy.

A joint World Bank-IFC product, Doing Business is based on the analy­sis of more than 5,000 local experts-business consultants, lawyers, accountants, government officials, and leading academics around the world that carry out a methodological review. Since its launch in 2004, the Doing Business project has been credited with inspiring some 48 reforms around the world. A high ranking on the ease of doing business means that a government has created a favorable regulatory environment conducive to operating a business.

However, rankings on the ease of doing business do not tell the whole story. The indicator is limited in scope: it covers only business regula­tions. It does not account for a coun­try's proximity to large markets, the quality of its infrastructure services, the security of property from theft and looting, the transparency of gov­ernment procurement, macroeconomic conditions or the underlying strength of institutions.

Meanwhile, the EIU - Economist Intelligence Unit (owned by the Economist magazine) included Azerbaijan in the list of East European states with developing economies. According to the EIU's analysis, Azerbaijan takes 14th place in the 16 East European countries, which have good perspectives in GDP growth and purchasing capacity.