Entrepreneurship in Azerbaijan
Azerbaijan is located in the South Caucasus region of Eurasia, straddling Western Asia and Eastern Europe. The Caspian Sea, whose shoreline forms a natural boundary to the east; the Greater Caucasus mountain range and Russia to the north, Georgia to the North-West, Turkey and Armenia to the West and Iran to the South. Having proclaimed independence from the Russian empire in 1918, Azerbaijan remained a part of the USSR (Soviet Union) until 1991 and became independent of the Soviet on 30 August 1991.
The energy sector based on the large reserves of crude oil and natural gas is the prime source of economic growth. Volatilities in the Oil and gas sector has ensured the government takes necessary steps to develop the economy with a focus on non- oil sectors. According to the world bank doing business report 2019, Azerbaijan moved its rank in the ease of doing business from 57 to 25.
Drivers of Entrepreneurship
Lack of jobs and finding opportunities to capitalise on, are fuelling entrepreneurship in Azerbaijan. Small and medium businesses form a major portion of the commercial enterprises. This is due to a generally smaller appetite for risk amongst entrepreneurs, and the difficulty in securing credit and/or funding for larger enterprises.
Trends in Entrepreneurship Ahead
Although Oil has been a major natural resource and contributor to the GDP of Azerbaijan, the government is working on reducing its dependency on oil due to the volatility in recent times and the steady shift to electric vehicles from the conventional combustion engines over the coming years amongst most countries, which is bound to hit the oil demand.
Besides transportation many other sectors are also looking at developing renewable sources of energy for their operations. The Entrepreneurship Development Fund has been set up that provides financing at attractive terms for development of non-oil initiatives. The focus is to develop trade, manufacturing, engineering, infrastructure, tourism and finance sectors in Azerbaijan.
Social Entrepreneurship is also a key area of focus to address environmental and social issues and the Baku Idea Lab that was established in 2017 is providing a base for many entrepreneurs to work on their social businesses.
Tech based startups are trending across sectors that include e-commerce, gaming, logistics, education, finance, agriculture, hospitality and travel.
Developing an entrepreneurial ecosystem would require the government to not only focus on building physical infrastructure to house those startups, but will also have to build the foundational infrastructures such as universities and institutes that can produce the talent required for running high tech or engineering companies.
Heavy regulation on enterprises by the government needs to be checked. It hinders the growth in new and of existing enterprises. Regulation should be such that it facilitates free market-based economy and not restrict it.
Depolarisation of wealth and investments. Post the soviet dissolution, although Azerbaijan became a democratic country, the regime adopted was quite authoritarian, which ensured most enterprises were state run and investments in private or tech enterprise either limited or non-existent.