On 26 August, the World Bank published their Enterprise Survey, a firm-level survey of a representative sample of an economy’s private sector, for Azerbaijan and Georgia. The surveys cover a broad range of business environment topics including access to finance, corruption, infrastructure, crime, competition, and performance measures. The surveys were conducted between July 2019 and March 2020 in both countries.

Azerbaijan

The total sample for Azerbaijan were 225 firms of which 53 were in the manufacturing sector, 58 in retail and 114 classified in other services. 116 of the firms were classified as small-sized (5-19 workers), 73 as medium (20-99) and 36 as large (100+). Most of the surveyed firms were from Baku or the Absheron region (186).

The annual employment growth within the surveyed firms in Azerbaijan stood at 7.5% and real annual sales growth at 2.6%. When it comes to their trading activities, 70% of the surveyed Azerbaijani firms used inputs of foreign origin and only 9% exported directly. When it comes to finances,  78% were financed internally and 22%  were financed by equity.

In the field of crime and informality, 97.1% of the surveyed firms stated that they were registered when starting operations , with 29.9% saying that they face competition from informal firms. The waiting time for  import licence in the country is at 38 days, construction permit 33 days and an operating licence 14 days. 12% of the firms reported at least one case of bribery incidents, which is above the regional average of 9%.

The biggest constraints for the business environment in the country were: practices of the informal sector (28%), access to finance (24%) and an inadequately educated workforce (15%).

Georgia

The total sample of Georgian firms were 581, of which 107 were in the food sector, 114 in retail, 107 hotel industry, 98 manufacturing and 155 in other services. 270 firms were classified as small, 220 as medium and 91 as large, with a fairly even regional representation.

The annual employment growth within the surveyed firms in Georgia stood at 6.8% and real annual sales growth at -0.6%. When it comes to their trading activities, 75% of the surveyed Georgian firms used inputs of foreign origin and only 12% exported directly. When it comes to finances, 70% were financed internally and 20% by banks, 5% by supplier credit and 3% were financed by equity.

In the field of crime and informality, 99% of the surveyed firms stated that they were registered when starting operations, with 22% saying that they face competition from informal firms. The waiting time for  import licence in the country is at 3 days, construction permit 100 days, and an operating licence 3 days. 1% of the firms reported at least one case of bribery incidents, which was one of the lowest scores worldwide.

The biggest constraints for the business environment in the country were: political instability (30%), access to finance (26%) and inadequately educated workforce (15%).

Georgia’s results sparked even a public praise from the World Bank Regional Director for South Caucasus Sebastian Molineus. “The country has a favourable business environment and the progress that Georgia has made in fighting corruption is obvious,” he said, adding that some challenges remain to be solved, mainly related to infrastructure, obtaining construction permits, access to funding and labour resources with good education.

He also pointed out that the World Bank published an additional study for the country which summarized the impact of Covid-19 on private companies. “80% of firms experienced a decrease in demand for goods and services. 61% of them reported difficulties in purchasing raw materials to produce. Almost 70% of firms closed at some point, though most of them later resumed operations. About 3% of enterprises had to shut down. In particular, small firms in the field of food and services, including in Tbilisi. It is very important to note that a large number of firms have been able to adapt successfully. In particular, the enterprises that managed to switch to online activities (about 20-30% of firms) were able to increase sales by even 15-20%, which is a very favourable trend in terms of improving the situation,” he stated.