Azerbaijan has been in the business headlines for all the wrong reasons in the past couple of years, while the focus on Turkey is stuck on its seemingly inevitable slide into a recession, with companies up to their necks in debt because of the lira currency crisis—but the near neighbours have emerged as star performers in the latest World Bank Doing Business ranking.
Baku is celebrating an eyepopping leap of 32 places to 25th among the 190 ranked economies in Doing Business 2019 after carrying out a record eight business reforms, while Ankara must be chuffed with a gain of 17 places to 43rd. Turkey was praised by the survey assessors for achieving “top improver” status for the first time, after pushing through a record seven reforms.
Back in early October, Azerbaijan was a bit red in the face as the UK's first ever Unexplained Wealth Order (UWO) was issued in an anti-corruption process brought against Zamira Hajiyeva, wife of Jahangir Hajiyev, a former chairman of state-owned International Bank of Azerbaijan. The past couple of years have also seen the South Caucasus country of 10mn beset by a slew of money laundering allegations including those made as part of the “Laundromat” affair which even led to a rare demonstration on the streets of the capital. The Azerbaijani regime has also been busy fending off persistent allegations that it has paid bribes to burnish Azerbaijan’s image. In May this year, an ex-president of the Parliamentary Assembly of the Council of Europe (PACE) was banned from holding senior posts in the organisation for 10 years following an inquiry into suspected vote rigging in favour of the country.
Now, however, Azerbaijani officials dealing with unsettled foreign investors can instead point to how Doing Business 2019—the data collection for which ended in May this year—determined that their country carried out more business reforms than any other country featuring in the World Bank ranking.
Grid and construction breakthroughs
“Getting electricity in Azerbaijan became faster and cheaper, with a reduction in the time it takes for a business to get connected to the grid from 56 to 41 days,” a World Bank press release on the ranking said.
It added: “The country also improved the reliability of power supply by investing in grid infrastructure and establishing a national regulator to monitor power outages. Dealing with construction permits was made easier, while minority investor protections were strengthened by increasing shareholders’ rights and roles in major corporate decisions, clarifying ownership and control structures and requiring greater corporate transparency.”
Baku’s construction permitting process was streamlined, with permits now issued only by the Baku City Executive Office’s single window, the survey report on Azerbaijan further noted. “As a result, the time necessary to complete all procedures for a business in the construction industry to build a warehouse and the cost associated was reduced from 196 days and 6.6% of the warehouse value to 116 days and 1.9% of the warehouse value,” the report added.
In the survey’s sub-categories, Azerbaijan came 2nd for Protecting minority investors; 9th for Starting a business; 17th for Registering a property; 22nd for Getting credit and 28th for Paying taxes. Its worst position was 84th for Trading across borders, while it was 40th for Enforcing contracts and 45th for Resolving insolvency. Despite the progress in Dealing with construction permits, the country only placed 61st in that sub-category.
Sold on Turkey
In its comments on the Doing Business performance of Turkey—in which Azerbaijan now ranks as the top foreign investor given new gas pipeline investments and the opening of a $6.3bn oil refinery—the World Bank said in a press release that “starting a business in Turkey became easier with the elimination of the minimum paid-in capital requirement”.
It added: “Other improvements involved electronic processing of documents and provision of more information related to payment of taxes and improved access to credit. However, an increase in the cost of transferring property in Turkey made property registration more difficult.”
In the past two years, investors in Turkey have been rattled by both the gradual crumbling of the country’s economic prosperity and the two-year-long state of emergency, which ended in July after the snap elections. Brought in after the failed July 2016 coup, the emergency regime led to massive purges of state workers, the detention of tens of thousands and the seizure by the state of scores of substantial businesses seen as owned by persons with alleged links to the plotters blamed for the attempted putsch.
Badly in need of driving up foreign investment amid the dire economic straits, Turkish officials can now point to respectable placings in Doing Business 2019 including 19th in Enforcing contracts; 26th in Protecting minority investors; 32nd in Getting credit; 39th in Registering a property and 42nd in Trading across borders. There’s more work to be done when it comes to Dealing with construction permits (59th); Getting electricity (60th); Starting a business (78th); Paying taxes (80th) and Resolving insolvency (109th).
The Doing Business project provides objective measures of business regulations and their enforcement across economies and selected cities at the subnational and regional level.
Launched in 2002, it looks at domestic small and medium sized companies and measures the regulations applying to them through their life cycle.
The World Bank says that by gathering and analysing comprehensive quantitative data to compare business regulation environments across economies and over time, Doing Business encourages economies to compete towards more efficient regulation; offers measurable benchmarks for reform; and serves as a resource for academics, journalists, private sector researchers and others interested in the business climate of each economy.