Azerbaijan extends moratorium on business inspections for another year Ten years of reduced bureaucracy

Azerbaijan has made significant strides in creating a business-friendly environment in recent years, with one of the key initiatives being the implementation of modern anti-corruption measures. This includes the full digitalisation of tax and customs systems, the digitisation of state procurement and employment contract registration, and streamlined business registration processes, all of which have helped reduce direct interaction with bureaucracy.

A pivotal moment in safeguarding businesses came with the introduction of the "Law on Suspension of Inspections in the Field of Entrepreneurship" in October 2015. Just last Monday, President Ilham Aliyev approved a new law extending the suspension of most business inspections for an additional year.

A highly diverse global experience in protecting entrepreneurs from counterproductive interference by regulatory state structures and unfair competition includes numerous options and solutions. This, in particular, concerns the legislative framework and administrative mechanisms for protecting businesses from the influence of state structures (such as natural monopolies) on market pricing processes or lobbying interests of large corporations and other players seeking government contracts or winning tenders for "priority" market participants.

In particular, the practice of establishing business ombudsmen, empowered to protect the rights of entrepreneurs, including foreign investors, is quite active in the USA, Canada, Australia, New Zealand, as well as in Pakistan and Georgia. In turn, tax ombudsmen and ombudsmen in the field of public procurement also operate in these and a number of other countries. Each of them addresses specific tasks within their respective areas, and these bodies are also tasked with mediation functions, providing alternative dispute resolution, and more.

In Azerbaijan, where recent years have also seen the adoption of relevant anti-corruption standards and mechanisms that meet both international requirements and national goals, an effective system for protecting entrepreneurs from bureaucratic red tape and other abuses is being developed. One of the key features of the domestic anti-corruption system is the minimisation of entrepreneurs' contact with state structures, from the business registration stage to tax payments and customs duties, as well as the implementation of digital control systems for the operation of cash registers, etc. In this regard, it is worth mentioning large-scale initiatives in the area of transitioning the entire system of public services to an electronic format under the State Program "Electronic Azerbaijan," which contributed to the creation of an extensive e-Government portal.

An essential resource for comprehensive support of entrepreneurship has been the activities of various structures of the Small and Medium Business Development Agency (KOBİA), including nearly forty KOB Dostu branches. The creation of the ASAN Service Centers, launched in December 2012, has also had a significant anti-corruption impact. This system has provided both ordinary citizens and entrepreneurs with online and offline access to several hundred public services from dozens of government agencies in a transparent manner through the "one-stop shop" mechanism. The practice over the past fifteen years shows that the maximum digitalisation of certificates, document processing, and electronic document flow with fiscal authorities has significantly simplified business relations with state bodies, overcoming the prevalent corruption negativity of the past.

It is important to recall that ten years ago, at the initiative of President Ilham Aliyev, Azerbaijan adopted the "Law on the Suspension of Inspections in the Field of Entrepreneurship." This document, consisting of 10 chapters and 38 articles, is aimed at eliminating unnecessary inspections and interference in entrepreneurs' activities, and has proven to be an effective step in supporting business activity within the framework of the state-private sector partnership strategy. Equally significant is the fact that this decision was made in 2015, which coincided with the peak of the global energy market collapse, leading to the devaluation of the manat and a financial crisis. During this challenging period, the law on the moratorium on business inspections became a straightforward, cost-effective, yet efficient method of supporting the country's business community.

The list and procedure for conducting inspections were determined by the relevant executive authority – the Ministry of Economy, and all control measures are carried out with the consent of this body and are recorded in a unified information registry. The Ministry of Economy ensures the prompt investigation of complaints and claims from entrepreneurs received through the "hotline," and in cases of violations, the relevant information is forwarded to the Prosecutor General's Office.

In recent years, the direct monitoring of business activities has been assigned to the State Tax Service (STS), which also conducts customs audits. According to Article 2.1 of the law, a limited list of inspections in business entities has been approved, and these are permitted only in cases that pose a serious threat to the life and health of people, state security, and the economic interests of the country. However, this law does not apply to inspections conducted by the Prosecutor General's Office in the course of investigating corruption-related crimes. 

Control over financial market entities is allowed, including under the law "On Counteracting the Legalisation of Assets Acquired through Criminal Means and Financing Terrorism," as well as state oversight in construction, private healthcare institutions, and the safety of medicines and food products. Another exception is the inspection of businesses regarding interference with electricity, water, heat, and gas meters, as well as their illegal connection to utility lines.

Despite these exceptions, the moratorium on business inspections has had a significant positive effect, freeing domestic entrepreneurs from excessive and often harmful "supervision" by state structures, narrowing opportunities for extortion and other forms of pressure.

A key step in protecting the interests of businesses was the increase in fines for violations of legislation regarding the regulation of inspections in the field of entrepreneurship and the protection of entrepreneurs' interests. According to amendments to the Administrative Offenses Code, adopted more than two years ago, officials who conduct inspections in the field of entrepreneurship without registering them in the unified information registry will be fined between 2,000 and 3,000 manats ($1,176-1,764). Legislative reforms to support entrepreneurship continued thereafter: in June 2023, amendments were made to the law "On the Regulation of Inspections in the Field of Entrepreneurship and Protection of Entrepreneurs' Interests," introducing greater consistency and transparency in managing business risks.

At the beginning of February, during the plenary session of the spring session of the Milli Majlis, it was noted that the successes achieved over the past ten years in implementing the moratorium on inspections clearly demonstrate the effectiveness of this initiative. Just before that, President Ilham Aliyev approved amendments to the law "On the Suspension of Inspections in the Field of Entrepreneurship," extending its validity for another year, until January 1, 2026.