The Government of Azerbaijan has been prioritising economic diversification, private sector development and entrepreneurship over the past years and made significant progress in establishing an institutional framework for SME development. The COVID-19 crisis has given renewed urgency to further strengthen these efforts, in particular to support the digitalisation of SMEs. However, many SMEs lag behind larger firms in the digital transition as a result of important barriers with respect to skills, innovation, infrastructure, regulation and finance, among other things. They are often unaware of the opportunities to increase productivity and competitiveness, cannot clearly identify their digitalisation needs, and lack the financial means to embed digital tools in their operations. The SME digital gap slows productivity growth and increases inequalities among people, firms and places. In addition, SMEs often fail to exploit the opportunities offered by e-commerce and their digital marketing activities lack professionalism and strategic planning.
In this context, the Government of Azerbaijan requested the OECD’s assistance in supporting the design and implementation of strategies and policies to foster the digital transformation of Azerbaijan’s SME sector. The main objective of this project is to promote SME digitalisation by providing tailored guidance to policy makers through a combination of research, analysis, benchmarking of good practices with OECD member countries and targeted capacity building activities.
The main direct beneficiaries of this project are the Ministry of Economy, the Small and Medium Business Development Agency, and other ministries, agencies and key stakeholders involved in the design, implementation and monitoring of SME policies in Azerbaijan. The ultimate beneficiaries are Azerbaijan’s SMEs and entrepreneurs, as well as their employees and customers.
This note, which summarises project findings, served as a basis for discussion during a peer review of Azerbaijan at the OECD Eurasia Competitiveness Roundtable on 23 November 2021 and is structured as follows: Chapter 1 provides an overview of the role of SMEs in Azerbaijan’s economy and the latest SME policy developments. Chapter 2 looks closely at the strategic approach to SME digitalisation policy and the institutional framework for SME development. Chapter 3 assesses the digital infrastructure and regulatory environment as well as digital skills among the population. Chapter 4 offers an analysis of financial and non-financial services to support the adoption of digital technologies by SMEs, and finally, Chapter 5 provides policy considerations to address some of the identified policy barriers.
The work has been carried out with the support of regular meetings of a public-private Working Group to determine policy priorities and identify gaps in reform implementation. In addition, the OECD has carried out an extensive series of bilateral interviews with representatives of the public and private sector.
The project is carried out as part of the multi-country project EU4Business: From Policies to Action – Phase 2, implemented by the OECD in the Eastern Partnership, with the financial support of the European Union under its EU4Business initiative.