40609 Poverty and Social Impact Analysis AZERBAIJAN Enterprise Restructuring and Labor Redeployment VOLUME II RESULTS OF THE SURVEYS CONDUCTED IN MINGACHEVIR CITY IN AZERBAIJAN REPUBLIC JANUARY 20 , 2005 Human Development Sector Unit Europe and Central Asia Region Contents ANNEX II. SOCIAL MONITORING OF THE DISPLACED WORKERS -3 ANNEX III. SOCIAL MONITORING OF THE WORKERS IN BIG ENTERPRISES -18 ANNEX IV. FOCUS GROUP SURVEY OF LOCAL EMPLOYERS -32 ANNEX V. EMPLOYMENT AND JOB VACANCY SURVEY -47 ANNEX II SOCIAL MONITORING OF THE DISPLACED WORKERS IN MINGECHEVIR CITY, AZERBAIJAN REPUBLIC, July 2004 The sample of unemployed was built on the database of the local employment bureau, and reflected the randomly selected redundant workers, mainly from 11 big SOEs that have undergone restructuring in recent years. These include former employees of the textile factory, glass factory, factory of technical rubber, two construction companies, and similar enterprises (Annex 2). Around 30 percent of the unemployed who were surveyed said they previously worked in other firms and organizations. An initial sample of 1,000 people was selected from the roster of the employment bureau. The actual survey sample was reduced to 831 individuals, after culling vacant residences, incorrect addresses, and respondent refusals. I. SOCIO-DEMOGRAPHIC CHARACTERISTICS OF THE INTERVIEWED PERSON AND HIS/HER FAMILY 1. NAME OF THE FORMER COMPANY/FIRM Number Percent Textile combine 345 41,5 HEPS* 30 3,6 Factory 'Izolit' 19 2,3 Glass factory 42 5,1 Azerkabel 6 0,7 Factory 'Azyolmash' 23 2,8 Fish factory 4 0,5 Factory of ferro-concrete products 8 1,0 Factory of technical rubber 32 3,9 Agricultural facilities 18 2,2 Department of taxes 9 1,1 The specialized repair-assembly 9 1,1 management (XTQM) The building assembly 21 2,5 management Secondary school 8 1,0 Other 257 30,9 Total 831 100,0 HEPS ­ hydroelectric power station 2. GENDER Number Percent Female 411 49,5 Male 420 50,5 Total 831 100,0 3. AGE Years Number Percent <30 73 8,8 31-40 300 36,1 41-50 368 44,3 51-61 79 9,5 >=62 11 1,3 Total 831 100,0 4. EDICATION Education Number Percent Primary, or does not have a primary 2 ,2 Incomplete secondary 19 2,3 Secondary general 437 52,6 Lyceum 108 13,0 Secondary special (college) 179 21,5 Incomplete higher 6 ,7 Higher 80 9,6 Total 831 100,0 5. NUMBER OF RESIDENTS IN YOUR HOUSEHOLD (MEMBERS OF THE FAMILY LIVING TOGETHER AND SHARING A BUDGET) Number of Number Percent household members 1 42 5,1 2 51 6,1 3 97 11,7 4 290 34,9 5 221 26,6 6 86 10,3 7 24 2,9 8 12 1,4 9 2 0,2 10 2 0,2 11 4 0,5 Total 831 100,0 5.1. OF WHICH AT THE AGE OF 0-6 Number of children in Number Percent household 1 117 14,1 2 40 4,8 3 6 0,7 4 3 0,4 5 2 0,2 Total 168 20,2 System 663 79,8 Total respondents 831 100,0 5.2. OF WHICH AT THE AGE OF 7-15 Number of children in Number Percent household 1 191 23,0 2 173 20,8 3 35 4,2 4 4 0,5 9 2 0,2 Total 405 48,7 System 426 51,3 Total respondents 831 100,0 5.3. OF WHICH AT THE AGE OF 16-62 age Number of adults at Number Percent able-bodied age 1 66 7,9 2 326 39,2 3 99 11,9 4 170 20,5 5 120 14,4 6 35 4,2 7 7 0,8 8 2 0,2 9 1 0,1 Total 826 99,4 System 5 0,6 Total respondents 831 100,0 5.4. OF WHICH AT THE AGE OF 63 YEARS AND OVER Number of individuals Number Percent at age 63 and over 1 40 4,8 2 17 2,0 Total 57 6,9 System 774 93,1 Total respondents 831 100,0 6. MARITAL STATUS Number Percent Registered marriage 672 80,9 Cohabiting but marriage not registered 8 1,0 divorced 44 5,3 Widower, widow 35 4,2 Have never been married 72 8,7 Total 831 100,0 7. WHY WERE YOU LEFT WITHOUT YOUR JOB? Number Percent Bankruptcy or liquidation of the 230 27,7 company Sale of the company 39 4,7 Other structural transformation 209 25,2 Other reasons 353 42,5 Total 831 100,0 7.1. OTHER REASONS OF UNEMPLOYMENTS Number Percent Enterprise is idle 268 32,3 Family reasons 12 1,4 The contract has ended 4 0,5 Due to illness 9 1,1 Resigned voluntarily 24 2,9 At will of the owner 6 0,7 In connection with conscription 3 0,4 Retired 2 0,2 Personal reasons 11 1,3 Other 9 1,1 Total 348 41,9 System 483 58,1 Total respondents 831 100,0 8. HOW MUCH TIME HAS PASSED SINCE YOU LOST YOUR JOB IN THAT COMPANY/FIRM? Number Percent Up to 3 months 33 4,0 3-6 months 38 4,6 6-9 months 15 1,8 9-12 months 17 2,0 12-18 months 24 2,9 18-24 months 35 4,2 24 and more months 669 80,5 Total 831 100,0 9. HOW MANY MEMBERS OF YOUR FAMILY ARE EMPLOYED ON PERMANENT BASIS Number Percent None 645 77,6 Only one member 163 19,6 2 members 20 2,4 More than 3 2 0,2 members Total 830 99,9 System 1 0,1 Total respondents 831 100,0 10. HOW MANY MEMBERS OF YOUR FAMILY ARE EMPLOYED ON PART TIME BASIS OR ON TEMPORARY BASIS? Number Percent None 510 61,4 1 person 295 35,5 2 persons 20 2,4 More than 3 members 3 0,4 Total 828 99,6 System 3 0,4 Total respondents 831 100,0 11. HOW MANY MEMBERS OF YOUR FAMILY RECEIVE INCOME (SALARY, PENSION, CHILD ALLOWANCE, SOCIAL BENEFIT, BENEFIT FOR THE UNEMPLOYED) Number Percent None 417 50,2 Only one member 253 30,4 2 members 81 9,7 3 members 31 3,7 More than 3 49 5,9 members Total 831 100,0 12. YOUR FAMILY LIVES IN: Number Percent Own apartment 322 38,7 Own house 44 5,3 Rented apartment or house 15 1,8 State provided apartment or 19 2,3 house Dormitory 421 50,7 With relatives 10 1,2 Total 831 100,0 13. DOES YOUR FAMILY OWN A SUMMER HOUSE OUTSIDE TOWN? Number Percent Yes 28 3,4 No 803 96,6 Total 831 100,0 14. DOES YOUR FAMILY OWN LAND: FARM, ORCHARD : Number Percent Yes 58 7,0 No 773 93,0 Total 831 100,0 II. FEATURES OF THE JOB BEFORE DISMISSAL 15. YOU WOULD DESCRIBE YOUR JOB AS: Number Percent Worker in process of production 458 55,1 Worker engaged in maintenance of 62 7,5 machines Service personnel 135 16,2 Administration 29 3,5 Manager 43 5,2 Public health services 14 1,7 Education 21 2,5 Something else 69 8,3 Total 831 100,0 16. DID YOU WORK IN PRIVATE OR PUBLIC SECTOR? Number Percent Private sector 58 7,0 State sector 773 93,0 Total 831 100,0 17. WHAT WAS THE APPROXIMATE NUMBER OF EMPLOYEES IN THE COMPANY WHERE YOU WORKED PRIOR TO DISMISSAL? Number Percent Less than 100 227 27,3 100-500 person 168 20,2 501-1000 person 39 4,7 1001 and more 350 42,1 I do not know 47 5,7 Total 831 100,0 18. WAS THIS YOUR FIRST EMPLOYMENT? Number Percent Yes 485 58,4 No, this was my second 219 26,4 employment No, this was my third employment 72 8,7 No, this was my fourth employment 27 3,2 More than fourth employment 28 3,4 Total 831 100,0 19. WITH YOUR EMPLOYER, DID YOU HAVE Number Percent A written termless employment 134 16,1 contract A written fixed-term employment 44 5,3 contract A written contract for doing a specific 66 7,9 work No written labor agreement 587 70,6 Total 831 100,0 20. WHAT WAS THE AMOUNT OF YOUR SALARY BEFORE LOSING YOUR JOB (WE THINK HERE OF THE NOMINAL VALUE, REGARDLESS OF THE FACT IF THE WHOLE SALARY WAS RECEIVED/PAID OUT Number Percent Up to 100,000 manat 400 48,1 100 000 - 200 000 manat 274 33,0 200 000 - 300 000 manat 83 10,0 300 000 - 400 000 manat 35 4,2 400 000 - 500 000 manat 15 1,8 Over 500,000 manat 24 2,9 Total 831 100,0 21. DID YOU RECEIVE THE SALARY "IN ENVELOPE"? Number Percent Sometimes 9 1,1 Every month 2 0,2 Part of my salary was paid "in 1 0,1 envelope" Never 813 97,8 Do not wish to say 6 0,7 Total 831 100,0 22. IN ADDITION TO YOUR MAIN JOB, DID YOU HAVE ANY OTHER OR SECONDARY JOB? Number Percent No 817 98,3 Yes 14 1,7 Total 831 100,0 23. DO YOU FULFILL SOME OF THE CONDITIONS FOR RETIREMENT? Number Percent Yes 66 7,9 Yes, but contributions to the pension fund have not been 12 1,4 paid. Otherwise, I have sufficient years of working experience No, I do not have sufficient years of working experience 31 3,7 No, I do not have sufficient years of age 484 58,2 I have neither sufficient age or experience 238 28,6 Total 831 100,0 24. BEFORE YOU LOST YOUR JOB, DID YOUR FORMER COMPANY PAY ALL THE REQUIRED CONTRIBUTIONS AND TAXES, SUCH AS SOCIAL INSURANCE TAX, AND INCOME TAX? Number Percent Yes, it did 708 85,2 It paid some of them 38 4,6 It did not 24 2,9 I do not know 61 7,3 Total 831 100,0 25. HOW MANY YEARS OF WORKING EXPERIENCE DID YOU HAVE BEFORE LOSING YOUR JOB? Number Percent Less than 2 years 65 7,8 3-10 year 217 26,1 11-25 year 419 50,4 Over 25 years 130 15,6 Total 831 100,0 26. BEFORE YOU LOST YOUR JOB, WHAT WAS THE AVERAGE MONTHLY INCOME OF YOUR FAMILY, EVERYTHING INCLUDED (SALARY, PENSION, SOCIAL BENEFITS, INCOME FROM AGRICULTURE)? Number Percent Up to 100,000 manat 256 30,8 100 000 - 200 000 306 36,8 200 000 - 300 000 139 16,7 300 000 - 400 000 64 7,7 400 000 - 500 000 29 3,5 500 000 - 750 000 22 2,6 750 000 - 1 000,000 7 ,8 Over 1,000,0000 manat 8 1,0 Total 831 100,0 III. BEING INFORMED ON THE SITUATION AND TRANSFORMATION IN THE COMPANY 27. WERE YOU INFORMED ON TIME ABOUT THE TRANSFORMATIONS? Number Percent Yes, I was formally informed all the time about the course of the 427 51,4 transformation by my management I was given informal information through some of my colleagues 82 9,9 No, no one informed me 322 38,7 Total 831 100,0 28. ARE YOU INFORMED ABOUT THE GROUNDS ON WHICH YOU RECEIVED THE SEVERANCE PAY? Number Percent Yes 586 70,5 No 245 29,5 Total 831 100,0 29. HAVE YOU BEEN PAID THE FULL AMOUNT OF THE SEVERANCE PAY? Number Percent Yes 491 59,1 No 340 40,9 Total 831 100,0 30.. WHAT DID YOU USE THE SEVERANCE PAY? Number Percent I tried to start a business of my own by 12 2,4 buying tools and equipment I spent it for living 466 94,9 Other 13 2,6 Total 491 100,0 31. WERE YOU OWED SALARY PRIOR TO DISMISSAL BY YOUR COMPANY? Number Percent No 613 73,8 Yes 218 26,2 Total 831 100,0 31.1. IF YES, DURATION OF WAGE ARREARS Months Number Percent 1 14 6.5 2 17 7.8 3 19 8.8 4 13 6.0 5 89 41.0 6 17 7.8 7 5 2.3 8 5 2.3 9 1 0.5 10 5 0.9 12 3 1,4 13 1 0.5 14 2 0.9 15 3 1,4 18 2 0.9 20 1 0.5 21 1 0.5 24 12 5.5 30 1 0.5 36 2 0.9 44 1 0.5 48 2 0.9 72 1 0.5 Total 217 100.0 32. HAVE YOU BEEN PAID THE FULL AMOUNT OF WAGE ARREARS OWED TO YOU BY YOUR COMPANY? Number Percent Yes 607 73,0 No 224 27,0 Total 831 100,0 32.1. IF YES, DURATON OF WAGE ARREARS Months Number Percent 1 16 7,1 2 22 9,8 3 20 8,9 4 14 6,2 5 90 40,0 6 17 7,6 7 5 2,2 8 4 1,8 9 1 ,4 10 5 2,2 12 2 ,9 13 1 ,4 14 1 ,4 15 4 1,8 18 2 ,9 20 1 ,4 21 1 ,4 24 12 5,3 30 1 ,4 36 2 ,9 44 1 ,4 48 2 ,9 72 1 ,4 Total 225 100,0 33. WERE YOU A MEMBER OF A TRADE UNION? Number Percent Yes 779 93,7 No 52 6.3 Total 831 100,0 34. WERE THERE ANY COLLECTIVE AGREEMENTS IN YOUR WORKPLACE? Number Percent Yes 81 9,7 No 295 35,5 I do not know 455 54,8 Total 831 100,0 IV. LOOKING FOR JOB, AFTER BEING DISMISSED 35. WHAT KIND OF A JOB ARE YOU LOOKING FOR? Number Percent Similar to my former job 406 48,9 Different from my former job 134 16,1 It is all the same to me 230 27,7 I am not very active 20 2,4 I am employed 36 4,3 I am not looking a job 5 0,6 Total 831 100,0 36. HOW ARE YOU INFORMED ABOUT VACANCIES? Number Percent Through colleagues from the 164 19,7 company Through friends and relatives 343 41,3 Through mass media, public notice 51 6,1 Through the Employment Bureau 191 23,0 Through other means 33 4,0 I do not look for job 49 5,9 Total 831 100,0 37. HOW LONG DO YOU THINK IT WILL TAKE YOU TO FIND A JOB? Number Percent Next 6 months 19 2,3 Next 12 months 18 2,2 I do not know when I will find a job 560 67,4 I do not expect to find a job 203 24,4 I am employed 31 3,7 Total 831 100,0 38. WERE DO YOU EXPECT TO FIND A JOB? Number Percent In the same firm 392 47,2 In another firm 227 27,3 I do not expect to find a job 172 20,7 I am employed 40 4,8 Total 831 100,0 39. WHAT IS THE BIGGEST OBSTACLE TO FINDING A JOB? Number Percent Lack of qualifications, education 130 15,6 Lack of skills knowledge 72 8,7 Females/males are not being 3 ,4 I can't move to another town 15 1,8 People of my age are not being 38 4,6 hired Something else 412 49,6 I don't have any problems finding a 128 15,4 job I am employed 33 4,0 Total 831 100,0 40. ARE YOU READY TO MOVE ANOTHER PLACE? Number Percent Yes, with my family 345 41,5 Yes, but alone 124 14,9 No 362 43,6 Total 831 100,0 41. HOW MANY MONTHS HAVE YOU BEEN LOOKING FOR A JOB? Number Percent Less than 3 months 24 2,9 3-6 months 25 3,0 6-9 months 11 1,3 9-12 months 19 2,3 12-24 months 33 4,0 Over 24 months 330 39,7 Waits for the firm to restart 360 43,3 I am employed 29 3,5 Total 831 100,0 42. HAVING LOST YOUR JOB, DID YOU TRY TO OBTAIN RETRAINING? Number Percent Yes 25 3,0 No 802 96,5 I am employed 4 0,5 Total 831 100,0 43. IF NO, THEN WHY NO? Number Percent It is useless, even with the new retraining I will not find a job 112 14,0 This requires money and I have none 391 48,8 I don't know where to obtain retraining 66 8,2 I don't know what other retraining to take 95 11,8 Other 50 6,2 The firms shall be reactivated 65 8,1 I am employed 23 2,9 Total 802 100 44. WHAT OTHER THINGS YOU CAN WORK IN ACCORDANCE WITH YOUR SKILLS, KNOWLEDGE, QUALIFIATIONS, EXCEPT WHAT YOU HAD ALREADY WORKED AT YOUR JOB? Number Percent I would work anything 344 41,4 Any kind of physic al work 35 4,2 Agriculture, farming 23 2,8 Doorman, cleaning... 30 3,6 Production crafts 48 5,8 Services 68 8,2 The job I used to do, with my qualification 254 30,6 Administration, bookkeeping 21 2,5 Other 5 0,6 Without answer 3 0,4 Total 831 100,0 45. WHEN DID YOU MOST ACTIVELY LOOK FOR A JOB? Number Percent Immediately upon my dismissal from work 579 69,7 Now, that is, several months after my 110 13,2 dismissal I have been looking for a job in the whole 77 9,3 period I am notlooking for job 65 7,8 Total 831 100,0 46. HAVE YOU TRIED ACTIVELY, ALONE OR WITH ANOTHER PERSON, TO START SOME PRIVATE BUSINESS, IN ORDER TO ENGAGE YOURSELF? Number Percent Yes 125 15,0 No 706 85,0 Total 831 100,0 47. IF NO, THEN WHY NO? Number Percent I do not have money, material 431 61,0 means I do not have interest,; I do not want 79 11,2 to work in private business Are physically incapable, invalid 17 2,4 Are old, at retirement age 14 2,0 Tried to start a private business 68 9,6 Without answer 97 13,7 Total 706 100,0 48. IF YOU WERE OFFERED AN APPROPROATE JOB NOW, COULD YOU BE ABLE TO BEGIN IMMEDIATELY? Number Percent Yes 828 99,6 No 3 0,4 Total 831 100,0 49. HAVE YOU BEEN INCLUDED IN SOME OF THE PROGRAMS FOR EMPLOYMENT? Number Percent No 638 76,8 Yes 131 15,8 I receive(d) unemployment benefit 62 7,5 Total 831 100,0 49.1. IF YES, IN WHAT? Number Percent Training or retraining 46 35,1 Employment counseling 47 35,9 The public works' program 38 29,0 Total 131 100,0 50. WHAT IS THE PRESENT AVERAGE MONTHLY INCOME OF YOUR FAMILY, EVERYTHING INCLUDED (SALARY, PENSION, SOCIAL BENEFITS, INCOME FROM AGRICULTURE)? Number Percent Up to 100,000 manat 400 48.1 100.000-200.000 234 28.2 200.000-300.000 100 12.0 300.000-400.000 46 5.5 400.000-500.000 10 1.2 500.000-750.000 3 0.4 750.000-1.000.000 2 0.2 Over 1,000,0000 manat 11 1.3 No reply 25 1.3 Total 831 100.0 51. FOLLOWING THE LOSS OF YOUR JOB, DID YOU HAVE TO SELL SOME PART OF YOUR PROPERTY (CAR, HOUSE, APARTMENT,LAND, HOUSEHOLD DURABLES) IN ORDER TO MAKE ENDS MEET? Number Percent Yes 533 64,1 No 207 24,9 I don't have any property for sale 91 11,0 Total 831 100,0 51. HAVE YOU RECEIVED ANY HUMANITARIAN OR SOCIAL ASSISTANCE? Number Percent Yes, regularly 205 24,7 Yes, from time to time 17 2,0 No 609 73,3 Total 831 100,0 52. HAVE YOU APPLIED FOR ANY HUMANITARIAN OR SOCIAL ASSISTANCE? Number Percent Yes, and I receive it 207 24,9 Yes, but I was refused 16 1,9 I would like to, but I don't know where 458 55,1 No 150 18,1 Total 831 100,0 53. ARE OTHER MEMBERS OF YOUR EXTENDED FAMILY OR YOUR FRIENDS SUPPORTING YOU OR YOUR FAMILY? Number Percent No 666 80,1 Yes, regularly 59 7,1 Yes, occasionally 106 12,8 Total 831 100,0 ANNEX III SOCIAL MONITORING OF THE WORKERS IN BIG ENTERPRISES IN MINGECHEVIR CITY, AZERBAIJAN REPUBLIC, September 2004 The sample of enterprises from which the surveyed workers were selected was determined based on meetings with the city administration and staff of the local employment bureau. As a result, seven large SOEs were selected that were undergoing restructuring, and 10 percent of the randomly selected workers, or 477 people, ultimately comprised the survey population. I SOCIO-DEMOGRAPHIC CHARACTERISTICS OF THE INTERVIEWED PERSON AND HIS/HER FAMILY 1. NAME OF THE COMPANY/FIRM Number Percent Textile combine 47 9,9 HEPS* 200 41,9 Factory 'Izolit' 36 7,5 Glass factory 50 10,5 Azerkabel 50 10,5 Factory of technical 48 10,1 rubber Water-sewer 46 9,6 department Total 477 100,0 HEPS ­ hydroelectric power station 2. GENDER Number Percent Female 190 39,8 Male 287 60,2 Total 477 100,0 3. AGE Years Percent <30 11,3 31-40 20,1 41-50 48,6 51-61 17,2 >=62 2,7 Total 100,0 4. EDICATION Number Percent Primary, or does not have a primary 3 0,6 Incomplete secondary 18 3,8 Secondary general 135 28,3 Lyceum 38 8,0 Secondary special (college) 116 24,3 Incomplete higher 2 0,4 Higher 165 34,6 Total 477 100,0 5. NUMBER OF RESIDENTS IN YOUR HOUSEHOLD (MEMBERS OF THE FAMILY LIVING TOGETHER AND SHARING A BUDGET) Number of Number Percent household members 1 18 3,8 2 22 4,6 3 62 13,0 4 193 40,5 5 101 21,2 6 54 11,3 7 14 2,9 8 10 2,1 9 2 0,4 10 1 0,2 Total 477 100,0 5.1. OF WHICH AT THE AGE OF 0-6 Number of Number Percent children in household 1 54 71,1 2 18 23,7 3 2 2,6 5 2 2,6 Total 76 100,0 5.2. OF WHICH AT THE AGE OF 7-15 Number of Number Percent children in household 1 90 42,9 2 99 47,1 3 20 9,5 4 1 ,5 5 210 100,0 Total 90 42,9 5.3. OF WHICH AT THE AGE OF 16-62 Number of adults Number Percent at able-bodied age 1 38 8,0 2 160 33,8 3 70 14,8 4 117 24,7 5 60 12,7 6 22 4,6 7 6 1,3 8 1 ,2 Total 474 100,0 5.4. OF WHICH AT THE AGE OF 63 YEARS AND OVER Number of individuals Number Percent at age 63 and over 1 43 74,1 2 13 22,4 5 1 1,7 6 1 1,7 Total 58 100,0 6. MARITAL STATUS Number Percent Registered marriage 372 78,0 Cohabiting but marriage not 13 2,7 registered Divorced 12 2,5 Widower, widow 16 3,4 Have never been married 64 13,4 Total 477 100,0 7. HOW MANY MEMBERS OF YOUR FAMILY ARE EMPLOYED ON PERMANENT BASIS Number Percent Only one member 311 65,2 2 members 137 28,7 3 members 24 5,0 More than 3 members 5 1,0 Total 477 100,0 8. HOW MANY MEMBERS OF YOUR FAMILY ARE EMPLOYED ON A PART TIME BASIS OR TEMPORARY BASIS? Number Percent None 361 75,7 Only one member 89 18,7 2 members 23 4,8 3 members 4 ,8 Total 477 100,0 9. HOW MANY MEMBERS OF YOUR FAMILY RECEIVE INCOME (SALARY, PENSION, CHILD ALLOWANCE, SOCIAL BENEFIT, BENEFIT FOR THE UNEMPLOYED) Number Percent None 33 6,9 Only one member 218 45,7 2 members 170 35,6 3 members 56 11,7 Total 477 100,0 10. YOUR FAMILY LIVES IN: Number Percent Own apartment 322 67,5 Own house 82 17,2 Rented apartment or house 17 3,6 State provided apartment or 9 1,9 house Dormitory 33 6,9 With relatives 14 2,9 Total 477 100,0 11. DOES YOUR FAMILY OWN A SUMMER HOUSE OUTSIDE TOWN? Number Percent Yes 29 6,1 No 448 93,9 Total 477 100,0 12. DOES YOUR FAMILY OWN LAND: FARM, ORCHARD? Number Percent Yes 67 14,0 No 410 86,0 Total 477 100,0 FEATURES OF YOUR JOB 13. YOU WOULD DESCRIBE YOUR JOB AS: Number Percent Worker in process of production 194 40,7 Worker engaged in maintenance of 95 19,9 machines Service personnel 90 18,9 Administration 49 10,3 Manager 15 3,1 Public health services 1 0,2 Something else 33 6,9 Total 477 100,0 14.. ARE YOU WORKING IN PRIVATE OR PUBLIC SECTOR? Number Percent Private sector 51 10,7 State sector 426 89,3 Total 477 100,0 15. WHAT IS THE APPROXIMATE NUMBER OF EMPLOYEES IN THE COMPANY WHERE YOU WORK? Number Percent Less than 100 84 17,6 100-500 person 195 40,9 501-1000 person 3 ,6 1001 and more 180 37,7 I do not know 15 3,1 Total 477 100,0 16. HAS THE NUMBER OF EMPLOYMENT IN YOUR WORKPLACE DURING THE LAST 12 MONTHS: NumberPercent Increased 25 5,2 Remained the same 424 88,9 Decreased 6 1,3 I don't know 22 4,6 Total 477 100,0 17. IS THIS YOUR FIRST EMPLOYMENT? Number Percent Yes 223 46,8 No, this is my second 155 32,5 employment No, this is my third employment 51 10,7 No, this is my fourth 18 3,8 employment More than fourth employment 30 6,3 Total 477 100,0 18. WITH YOUR EMPLOYER, DO YOU HAVE Number Percent A written term less employment contract 143 30,0 A written fixed-term employment 319 66,9 contract A written contract for doing a specific 6 1,2 work No written labor agreement 9 1,9 Total 477 100,0 19. HOW MANY YEARS OF WORKING EXPERIENCE DO YOU HAVE? Number Percent Less than 2 years 41 8,6 3-10 years 38 8,0 11-25 years 221 46,3 Over 25 years 177 37,1 Total 477 100,0 20. HOW MANY DAYS DURING THE LAST FULL MONTH PRIOR TO A SURVEY YOU COULD SAY YOU ACTUALLY WORKED? Number Percent I was employed full time 354 74,2 10-20 days 72 15,1 Less than 10 days 2 0,4 I was on leave (annual, sick leave, etc.) 36 7,5 I did not work although I am still on the 13 2,7 enterprise list Total 477 100,0 21. YOUR WORKING TIME IS: Number Percent Full working time, 8 hours a day 450 94,3 Partial, with half working time a day 7 1,5 More than 8 hours a day 16 3,4 There is no fixed working time; I work as told by 4 0,8 the employ Total 477 100,0 22. WHAT IS THE AMOUNT OF YOUR SALARY (WE THINK HERE OF THE NOMINAL VALUE, REGARDLESS OF THE FACT IF THE WHOLE SALARY WAS RECEIVED/PAID OUT Number Percent Up to 100,000 manat 41 8,6 100 000 - 200 000 manat 148 31,0 200 000 - 300 000 manat 95 19,9 300 000 - 400 000 manat 64 13,4 400 000 - 500 000 manat 65 13,6 Over 500,000 manat 64 13,4 Total 477 100,0 23. ON WHAT BASIS DO YOU RECEIVE YOUR SALARY? IT IS... Number Percent Pure fixed monthly salary 396 83,0 Pure results pay (piecework) 44 9,2 Pure fixed mo nthly salary + 24 5,0 regular additional payments Fixed monthly salary + results 8 1,7 pay (piecework) I do not wish to say 5 1,0 Total 477 100,0 24. DO YOU RECEIVE THE SALARY "IN ENVELOPE"? Number Percent Sometimes 1 ,2 Every month 2 ,4 Never 471 98,7 Do not wish to say 3 ,6 Total 477 100,0 25. HAVE THERE BEEN ANY DELAYS IN RECEIVING YOUR SALARY DURING THE LAST 12 MONTHS? Number Percent No 103 21,6 yes 374 78,4 Total 477 100,0 26. IF ANY, HOW LONG HAVE THOSE DELAYS BEEN? Number Percent Up to two weeks 83 51,2 Up to 1 month 60 37,0 2-6 months 15 9,3 Over 6 months 4 2,5 Total 162 100,0 27. HAVE THE FOLLOWING INCIDENTS OCCURRED IN YOUR COMPANY DURING THE LAST 12 MONTHS? NumberPercent Someone has been redundant 15 3,1 Working day/ time has been reduced 2 0,4 Someone has been sent in unpaid 62 13,0 vacation If someone has left (i.e. retired), the 4 0,8 vacant place has not been filled I do not know 369 77,4 Total 452 100,0 28. DO YOU CONSIDER IT IS POSSIBLE THAT IN THE NEXT YEAR...? Number Percent You will lose your current job 27 5,7 You will be transferred to another job in the same 13 2,7 company Your working time will be increased 3 0,6 Your working regime will be changed against your 2 0,4 will You will get lower remuneration 5 1,0 I do not know 414 86,8 I do not want to say 13 2,7 Total 477 100,0 29. IN THE LAST 12 MONTHS, HAS THERE BEEN ANY DEVELOPMENT ACTIVITY AT YOUR WORKPLACE CONCERNING... Number Percent New products 101 21,2 New ways of working, or manufacturing 29 6,1 methods, or manufacturing processes New technical equipment has been taken 5 1,0 into use No, nothing has happened 315 66,0 I do not want to say 27 5,7 Total 477 100,0 30. IN ADDITION TO YOUR MAIN JOB, DO YOU HAVE ANY OTHER OR SECONDARY JOB? Number Percent Yes 13 2,7 No 464 97,3 Total 477 100,0 31. BASED ON THE LAW FOR PENSION AND DISABILITY INSURANCE, DO YOU FULFILL SOME OF THE CONDITIONS FOR RETIREMENT? Number Percent Yes 35 7,3 Yes, but contributions to the pension 4 0,8 fund have not been paid. Otherwise, I have sufficient years of working experience No, I do not have sufficient years of 15 3,1 working experience No, I do not have sufficient years of age 270 56,6 I have neither sufficient age or 140 29,4 experience I do not want to say 13 2,7 Total 477 100,0 32. HAVE YOU PAY THE FULL AMOUNT OF WAGE ARREARS OWED TO YOU BY YOUR COMPANY? Number Percent Yes 427 89,5 No 50 10,5 Total 477 100,0 33. DOES YOUR COMPANY PAY ALL THE LEGALLY REQUIRED CONTRIBUTIONS AND TAXES FOR YOU? Number Percent Yes, it does 358 75,1 It does not 17 3,6 I do not know 102 21,4 Total 477 100,0 35. WHAT IS THE AVERAGE MONTHLY INCOME OF YOUR FAMILY, EVERYTHING INCLUDED (SALARY, PENSION, SOCIAL BENEFITS, INCOME FROM AGRICULTURE)? Number Percent Up to 100,000 manat 18 3.8 100,000-200,000 manat 87 18.2 200,000-300,000 manat 95 19.9 300,000-400,000 manat 73 15.3 400,000-500,000 manat 81 17.0 500,000-750,000 manat 83 17.4 500,000-750,000 manat 24 5.0 Over 1,000,0000 manat 5 1.0 No reply 11 2.3 Total 477 100.0 36. HAVE YOU RECEIVED ANY HUMANITARIAN OR SOCIAL ASSISTANCE? Number Percent Yes, regularly 17 3,6 Sometimes 29 6,1 No 431 90,4 Total 477 100,0 37. ARE OTHER MEMBERS OF YOUR EXTENDED FAMILY OR YOUR FRIENDS SUPPORTING YOU OR YOUR FAMILY? Number Percent No 386 80,9 Yes, regularly 23 4,8 Yes, occasionally 68 14,3 Total 477 100,0 BEING INFORMED ON THE SITUATION AND TRANSFORMATION IN THE COMPANY 38. ARE YOU INFORMED ABOUT THE POTENTIAL TRANSFORMATIONS IN YOUR COMPANY? Number Percent Yes, I am informed all the time about the 198 41,5 course of the transformation I was given informal information through some 33 6,9 of my colleagues No, no one has informed me 246 51,6 Total 477 100,0 39. ARE YOU INFORMED OF THE PLAN FOR PRIVATIZATION OF THE FIRM (IF APPLICABLE)? Number Percent Yes 209 43,8 No 171 35,8 I never heard of such a plan 97 20,3 Total 477 100,0 40. ARE YOU A MEMBER OF A TRADE UNION? Number Percent Yes 443 92,9 No 34 7,1 Total 477 100,0 41. ARE THERE ANY COLLECTIVE AGREEMENTS IN YOUR WORKPLACE? Number Percent Yes 279 58,5 No 75 15,7 Do not know 123 25,8 Total 477 100,0 42. DO YOU KNOW THE RIGHTS YOU HAVE IN CASE YOU WILL BE MADE REDUNDANT PURSUANT TO THE LABOR LAW, LAW ON BANKCRUPCY AND LAW ON PRIVATIZATION Number Percent Yes, the Trade Union have 78 16,4 informed me Yes, I have informed myself 125 26,2 No, no one has informed me 232 48,6 I am not interested in anything 42 8,8 Total 477 100,0 IV. ARE YOU LOOKING FOR A NEW JOB 43. WHAT KIND OF A JOB ARE YOU LOOKING FOR? Number Percent Similar to my former job 89 18,7 Differe nt from my former job 26 5,5 It is all the same to me 60 12,6 I am not very active 18 3,8 I am not looking a job 284 59,5 Total 477 100,0 44. HOW ARE YOU INFORMED ABOUT VACANCIES? Number Percent Through colleagues from the 34 17,6 company Through friends and relatives 79 40,9 Through mass media, public 40 20,7 notice Through the Employment Bureau 28 14,5 Through other means 12 6,2 Total 193 100,0 45. HOW LONG DO YOU THINK IT WILL TAKE YOU TO FIND A JOB? Number Percent Next 6 months 9 4,7 Next 12 months 3 1,6 I do not know 113 58,5 I do not expect 63 32,6 I have already got the invitation to 5 2,6 new work Total 193 100,0 46. WERE DO YOU EXPECT TO FIND A JOB? Number Percent In the same firm 126 65,3 In another firm 25 13,0 I do not expect to find a job 41 21,2 I have already got the invitation to a new 1 0,5 work Total 193 100,0 47. WHAT IS THE BIGGEST OBSTACLE TO FINDING A NEW JOB? Number Percent Lack of qualifications, education 19 14,0 Lack of skills, knowledge 1 0,7 I can't move to another town 40 29,4 My age 13 9,6 Something else 36 26,5 I don't have any problems finding a job 19 14,0 I have already got the invitation to a 8 5,9 new work Total 136 100,0 III. 47.1. SOME OTHER OBSTACLES TO FINDING A JOB IV. Number Percent I cannot find work 2 6,9 I have no money for job search 19 65,5 It not my specialty 1 3,4 Marriage 1 3,4 There is no work 5 17,2 Political views 1 3,4 Total 29 100,0 48. HOW MANY MONTHS HAVE YOU BEEN LOOKING FOR A JOB? Number Percent Less than 3 months 19 22,9 3-6 months 6 7,2 6-9 months 7 8,4 9-12 months 4 4,8 Over 12 month 47 56,6 Total 83 100,0 V. 49. ARE YOU READY TO MOVE TO ANOTHER PLACE? Number Percent Yes, with my family 33 20,0 Yes, but alone 35 21,2 No 97 58,8 Total 165 100,0 50. HAVE YOU TRIED TO OBTAIN RETRAINING? Number Percent Yes 65 33,3 No 130 66,7 Total 195 100,0 51. IF NO, THEN WHYNO? Number Percent It is useless, even with the new 47 35,3 retraining I will not find a new job This requires money and I 50 37,6 have none I do not know where to obtain 5 3,8 retraining II do not know what other 11 8,3 retraining to take Other 20 15,0 Total 133 100,0 52. WHAT OTHER THINGS YOU CAN WORK IN ACCORDANCE WITH YOUR SKILLS, KNOWLEDGE, QUALIFICATIONS, EXCEPT WHAT YOU HAD ALREADY WORKED AT YOUR JOB Number Percent I would work anything 65 29,3 Any kind of physical work 20 9,0 Agriculture, farming 6 2,7 Doorman, cleaning 1 0,5 Production crafts 8 3,6 Services 4 1,8 The job I used to do, with my 72 32,4 qualification Administration, bookkeeping 14 6,3 Other 8 3,6 Without answer 24 10,8 Total 222 100,0 53. HAVE YOU TRIED ACTIVELY, ALONE OR WITH ANOTHER PERSON, TO START SOME PRIVATE BUSINESS, IN ORDER TO ENGAGE YOURSELF? Number Percent Yes 44 9,2 No 186 39,0 Without answer 247 51,8 Total 477 100,0 54. IF NO, THEN WHY NO? Number Percent Do not have money, material means 116 62,4 Do not have interest, do not want to work in 10 5,4 private business Are physically incapable, invalids 4 2,2 Are old, on retiring age 1 0,5 Without answer 55 29,6 Total 186 100,0 ANNEX III Focus Group Survey of Local Employers Pilot group: Location: Mingachevir, Azerbaijan Date: 30 June 2004 Duration: 4 hours Number of participants: 7 National group: Location: Baku, Azerbaijan Date: 2 October 2004 Duration: 4 hours Number of participants: 15 Method used A pilot study to test the approach was conducted with 7 business owners in a medium-size industrial city. Invitations to participate were made to 8 businesses, representing main areas of economic activity in the locale: wholesale and retail trade, manufacturing, lease and rent, construction, transportation. A meeting of the Focus Group was held on neutral premises (in a riverside park). Discussion was structured around 8 basic questions where four of the questions were substantive and the other four temporal asking to evaluate change in given parameters over the selected time frame (2 years). Six of the questions were explicitly grouped into 3 pairs such that the same question menu was used for both questions in a pair. After results of the pilot study were reported to the World Bank, a decision was reached to use the same approach to the National Focus Group (AZ FG), with addition of four questions (two pairs) relating to finance and infrastructure, modeled after the pairs used in Mingachevir FG. Insertion of these four questions brought the total number of questions to 12, i.e.: 1. Legal and regulatory framework affecting business establishment and operation. 2. Change thereof in the last two years. 3. Enactment, enforcement and implementation of business laws and regulations. 4. Change thereof in the last two years. 5. Availability of external finance for business establishment and operation. 6. Change thereof in the last two years. 7. Availability of basic infrastructure for entrepreneurship. 8. Change thereof in the last two years. 9. Institutional corruption. 10. Change thereof in the last two years. 11. Change in overall business environment in the last two years. 12. Special question: Increase in state attention to business relative to turnover growth. For AZ Focus Group we also modified some definitions (marked with an asterisk in the tables below) and added options to menus in questions 1-2 and 9-10. The National Focus Group exercise was held 2 October 2004 at the World Bank office in Baku. Selection of the focus group was not random and was based on reference. Of 21 business owners invited, 15 took part. A geographically diverse group, with ten out of the 15 members from outside of Baku (i.e. Ganja, Sumgayit, Mingachevir, Barda, Imishli, Xachmaz, Gusar, Saatli, Zagatala), the FG participants also spanned the broad sectoral range of the non-oil economy, from agriculture and food processing to wholesale and retail trade and catering to transportation and IT services to banking, law and accountancy. The six invited entrepreneurs who did not join were from Baku, Nakhchivan, Lankaran and Shamkir. The Focus Group was conducted in Azeri by two moderators. After introductions and explanation of the goals and method, the exercise further consisted of two parts. During the first, informal part, the participants were requested, one by one, to comment on one or more of the following topics: 1) business establishment; 2) business operation; 3) financial obstacles; 4) institutional obstacles. This informal discussion served as a warm-up for the participants and also gave valuable insights and observations for interpreting the Focus Group. In particular, it urged separate evaluation of major cities and the country in questions 5 and 7, introduced the notion of "consumer rights" into the natural monopoly option (Question 1) and helped to clarify some of the definitions. The second part was conducted as a structured discussion in accordance with pre-designed template enumerating possible causes for current state of business environment in Azerbaijan. Group participants were requested to speak from their own experience and, at the same time, evaluate situation not just for their respective businesses but for an entire business community of their locale. During the formal part the moderator read every question. Group participants received copies of measurement scales used in the exercise. On each question a short discussion was held. After this discussion, the moderator summarized and declared finding to be entered into the template for the Group. Finding was entered if there were no objections from participants. If, after the discussion, one or more of the participants still disagreed with the grade the Group gave to a particular answer but did not want to elaborate further on their view, it was entered into the template as a "dissent". A frame of two years was suggested for making temporal comparisons because in 2002 the government of Azerbaijan conducted a well-publicized campaign for eliminating or reducing impediments for SME development. As the outcomes of the pilot FG in Mingachevir were recognized as valid and valuable, we enter them where applicable, i.e. in tables 1-4 and 9-12 where identical or almost identical questions were asked. For easy comparison, the presentation of numerical results in questions 1,3 and 9 is organized into 2 separate columns: AZ for National FG (in bold) and Min. for Mingachevir FG. Where such approach would be impracticable (in tables 2, 4, 10 and 11), the national outcomes are marked in bold and the Mingachevir outcomes are given in parentheses. For questions of 5 and 7 the FG participants believed a gap between Baku and a few other major cities (Sumgayit, Ganja) and the rest of the country was large enough to warrant their separate evaluation and tabular differentiation. Hence, two columns: BM for Baku and major cities and RoA for the rest of Azerbaijan (in bold). Ordering is based on RoA answers. Scale A Problem Incidence 0 No problem 1 A little problem 2 A problem exists and bears on business environment 3 A regularly occurring problem with significant negative impact 4 A serious, long-lasting problem with damaging consequences 5 A severe problem, one of the main impediments to business development Scale B Problem Persistence In the last two years: -2 Situation significantly worsened -1 Situation somewhat worsened 0 Situation remained generally unchanged +1 Situation somewhat improved +2 Situation significantly improved Findings Question 1 Table 1 describes some aspects of the legal and regulatory framework affecting business establishment and operation. Based on your current experience, evaluate each of these aspects in their possible negative impact on business environment in a locale where you operate your business. Please use Scale A (Problem Incidence) for your evaluation, with 0 ­ no problem at all and 5 ­ very severe problem. Please summarize description of the problems for most important legal and regulatory areas. Table 1 Presentation in the decreasing order of AZ FG points, which aremarked bold Definitions modified from the Mingachevir FG are marked with an asterisk * Legal or regulatory area Points in FG: Summary, remarks AZ Min. 5 not Regulatory gaps; selective enforcement; Custom dues and regulations rated valuation based not on invoicing but "market price" arrived at arbitrarily Custom procedures for export- 4 not High payoffs (must pay for everything); import rated arbitrary holdups, restrictions and delays; widespread, organized smuggling Formalization of real estate 4 5 Impossible / payoff prohibitively expensive to transactions (title, purchase, formalize real estate deals and get the title to lease)* be able to sell / lease, collateralize or otherwise dispose of property Privatization procedures 4 4 Impossible / payoffprohibitively expensive to complete privatization process and get the title to be able to sell / lease, collateralize or otherwise dispose of property Business licensing, certification 4 3 (getting product to market) and Some meaningless or redundant licenses receiving various permits* remain on the books while it was wrong to abolish some others, for particular businesses and professions (e.g. for valuation and assessment); number of requisite licenses was drastically reduced but procedures for the remaining ones were toughened Tariff policy of natural 4 2 Regulatory insufficiency to ensure reliable monopolies (utilities, fuels, supply of utilities and telecom services to telecom, etc.), limited rights of minimal industry standards; no legal and consumers* regulatory basis to hold them accountable for failure thereof; lack of recourse for private consumers vis-à-vis utilities companies; service charge collections targeted at private sector (who also pay higher rates) and residential consumers whereas state-owned companies and government agencies allowed to accumulate huge arrears; international and mobile phone calls very expensive compared to neighboring countries; imminent threat of increased fuel tariffs Rates for personal income tax 4 2 Too high rates discourage formal and social contributions employment and wage increases Getting land and necessary 3 3 Bureaucratic obstacles; rules not permits for construction transparent; arbitrary refusals and delays; lack of standard enforcement Rates for corporate profit tax, 3 2 Profit tax rate is too high, especially in view VAT and other business taxes of difficulty (especially outside of major cities) and extra cost of getting proper invoices for procured items to be able to legally deduct from the taxable income Tax assessment and payment 2 1 Problems with VAT return and excise assessment Inspections (planned and 1 1 unplanned) 0 n/a Not a problem now, but in the longer run Labor regulations (hiring, firing, weak labor regulations and lack of union vacations, etc.) organization will reduce workplace morale and encourage personnel turnover The respondents unanimously agreed that they have the biggest concern with the customs regulations / procedures and property formalization / transactions. Customs, in addition to being the most systemically corrupt institution, has become an enforcement arm and largest benefactor of the artificial monopolies and segmented, non-competitive markets. Customs-related questions were not rated in the Mingachevir FG because respondents there did not feel to be qualified to assess them: as local business owners do not directly import / export but deal with wholesalers, they thought custom fees or practices do not directly impinge on the business environment in their locale (in accordance with question formulation). As for property, it is very difficult to receive an official title to privatized or purchased property. Local officers of the Ministry of Economic Development (MED) misinform or fail to inform business owners about rates and procedures (e.g. the Law on State Registry for Real Estate is enacted but not published or not accessible for business owners). Their rates for both formal and informal payments are sometimes arbitrary; unreasonable delays and refusals are followed by offers from "right people" to buy privatized land or property at cut-prices. All this creates insecurity, increases effectiveness of extortion, discourages outside investment and job creation. Question 2 Please use the same list as in the Table 1. In your opinion, how did situation in these areas changed in comparison with the past (2 years ago)? Please use Scale B (Problem Persistence) for your evaluation, with 0 ­ the same and 2 either much better or much worse. Table 2 Presentation in the order of Table 1 Mingachevir FG results are given in parentheses ( ) Definitions modified from the Mingachevir FG are marked with an asterisk * Legal or regulatory area Better now Same Worse now 0 (not Custom dues and regulations rated) Custom procedures for export-import 0 (not rated) -2 (-2) Formalization of real estate transactions (title, purchase, lease)* Privatization procedures 0 (-2) Business licensing, certification (getting product +1 (-1) to market) and receiving various permits* Tariff policy of natural monopolies (electricity, dissent: +1 0 (-1) fuels, telecom, etc.), limited rights of consumers* Rates for personal income tax and social +1 (+1) contributions Getting land and necessary permits for 0 (-1) construction Rates for corporate profit tax, VAT and other +1 (+1) business taxes Tax assessment and payment +2 (+2) Inspections (planned and unplanned) +2 (+2) Labor regulations (hiring, firing, vacations, 0 (n/a) etc.) Question 3 Table 3 presents some possible problems in the legal and regulatory framework and governance mechanisms pertaining to enactment, enforcement and implementation of business laws and regulations. Based on your current experience, evaluate each of these aspects in their possible negative impact on business environment in a locale where you operate your business. Please use Scale A (Problem Incidence) for your evaluation, with 0 ­ no problem at all and 5 ­ very severe problem. Please summarize description of the problems for most important aspects. Table 3 Presentation in the decreasing order of AZ FG points, which are marked bold Possible negative aspects Points in FG: Summary, remarks AZ Min. Weak anti-monopoly policy and 5 5 Especially after the Anti- regulations, proliferation of artificially monopoly Committee is merged protected monopolies, unfair competition with MED Business interests of state officials, conflict 5 5 and collusion of interests Courts, including economic courts, are not 5 5 independent and can not protect from state unfair practices Interference of executive offices and other 4 1 If the average counted, the score local authorities would more properly be 4.5 as many participants insisted on the score of 5 ­ overall, regional variations Selective enforcement and discrimination 4 3 Dissent in Min: a little problem in application of tax, customs and other (1) business laws and regulations Rules and regulations change too quickly 3 1 Codification is a positive development but within the given code legal provisions often change by the year (e.g., the Customs Code) Rules are incomprehensible, or too 2 2 complex, or overlapping, duplicating and contradictory A respondent in Mingachevir FG recalled a case last year when he appealed to court for wrong tax assessment on his business. Many judges refused to accept the claim for proceedings until, finally, one did (in another city). After that the respondent was mobbed with tax inspectors to make him withdraw the claim. Finally, a phone call from the Ministry of Taxation halted the case ­ it never even went for hearing. Tax authorities made the respondent pay the original assessment in full, plus "fines", USD 21,000 in total. A respondent in AZ FG stated that his business several times sued and won over the tax, customs and local authorities. Utilities companies were the only exception where he could not obtain justice despite bringing 4 separate claims against them for unreliable service, violating the standards, overcharging, etc. He felt the utilities (electricity, gas, water, sewerage) and railways behave like "spoiled kids of the state". The Azerbaijan FG respondents think that local executive authorities, politically subservient and economically greedy, are overstaffed with incompetent and overbearing officials, often without any explicit function to perform. These executive offices ("powers") can, the respondents think, be safely abolished or merged. In general, the respondents believe that "business interests of state officials", coupled with "weak anti-monopoly policy and regulations" and corrupt courts, bring about "proliferation of artificially protected monopolies" and "unfair competition". This strongly victimizes "unaffiliated" SMEs, especially medium-size companies. Because of the above, in Mingachevir in the last two years two of the respondents had to stop or cut back their businesses and fire, between them, 94 employees. Another respondent is precluded from starting a business he says can employ up to 140 people. Question 4 Please use the same list as in the Table 3. In your opinion, how did situation in these areas changed in comparison with the past (2 years ago)? Please use Scale B (Problem Persistence) for your evaluation, with 0 ­ the same and 2 either much better or much worse. Table 4 Presentation in the order of Table 3 Mingachevir FG results are given in parentheses ( ) Possible negative aspects Better Same Worse now now Weak anti-monopoly policy and regulations, -2 (-1) proliferation of artificially protected monopolies, unfair competition Business interests of state officials, conflict and -2 (-1) collusion of interests Courts, including economic courts, are not 0 independent and can not protect from state unfair practices Interference of executive offices and other local (+2) -2 authorities Selective enforcement and discrimination in (+1) 0 application of tax, customs and other business laws and regulations Rules and regulations change too quickly (+1) -1 Rules are incomprehensible, or too complex, or +1 (+1) overlapping, duplicating and contradictory For the top two conditions, the situation, already very bad 2 years ago, managed to further deteriorate. Courts are as corrupt, inefficient and controlled as ever. Recent frequent changes of district executive chiefs have created additional incentives to "make hay while the sun shines" and thus increased prevalence and unpredictability of extortion. In Mingachevir, however, the respondents believed that the recent stability of the local executive has helped to significantly reduce interference with and direct extortion of local business. Hence, the topical difference in Tables 3 and 4. Codification of laws has helped to alleviate many problems with volatility, duplication and complexity of rules. However, many regulations (serencam or "executive orders") remain overlapping and contradictory. Multitude of recent modifications in many already codified legal areas has made the national group assess the change here negatively, as opposed to the Mingachevir FG. Question 5 Table 5 presents possible obstacles to obtaining external finance for operation and growth of the business. Based on your current experience, evaluate each of these aspects in their possible negative impact on business environment in a locale where you operate your business. Please use Scale A (Problem Incidence) for your evaluation, with 0 ­ no problem at all and 5 ­ very severe problem. Please summarize description of the problems for most important obstacles. Table 5 Evaluation is done separately for Baku and other major cities (BM) and the rest of Azerbaijan (RoA) Presentation in the decreasing order of RoA points, which are marked bold Possible financial obstacles Points AZ Summary, remarks FG: BM RoA Lack of access to long-term bank loans 5 5 Average maturity for commercial credit is between 6 month and 1 year Lack of access to lease finance 5 5 Leasing market has just started developing with a Japanese grant and IFC funds High interest rates 4 4 Rates have stopped declining and shot up to preempt inflationary expectations Need for special connections with banks, 3 4 Especially for concessional corruption of bank officials financing (under National Business Support Fund); some banks are worse at this that others: this often leads to large local differences because very small number of commercial banks (1 or 2) operates in some locales Collateral requirements of banks and 2 4 Big local differences; real estate financial institutions market is not developed, which prevents using RoA property for collateralization Banks, financial institutions lack money to 3 3 Banks do not have enough "cheap lend money" and attractive risk / return lending options Inadequate credit information on 3 3 Although banking confidence and customers bank advertising (and name recognition) is up, marketing strategies and customer information remain weak points for many banks Paperwork, red tape 2 3 Especially for concessional financing (under National Business Support Fund); some banks are worse at this that others : this often leads to large local differences because only very small number of commercial banks (1 or 2) operates in some locales The National Business Support Fund provides concessional financing to authorized banks to lend to businesses at low rates. However, at 7% lending rate banks earn only about 4% on those loans, which is below the current inflation rate. Due to the low reward, the banks are reluctant to shoulder lending risks, especially in absence of adequate credit and commercial information about applicant businesses (see above). These leads to underutilization of funds: only about AZM 26 bln out of 50 bln available were used in 2003. This low utilization rate (52%), FG participants suppose, can only get lower as the available financing is scheduled to increase in 2004 to AZM 100 bln and in 2005 to AZM 200 bln. According to FG participants, many banks use concessional financing either to finance related or "friendly" businesses, or for additional reward (bribe), at the same time trying to put off regular business customers with unnecessary red tape, excuses about not having enough money or flat refusals. National FG members believe that unless a scheme is developed where lending risks are reduced and /or spread more evenly, the current scheme will not contribute significantly to goals of general economic growth and, specifically, regional development. Question 6 Please use the same list as in the Table 5. In your opinion, how did situation in these areas changed in comparison with the past (2 years ago)? Please use Scale B (Problem Persistence) for your evaluation, with 0 ­ the same and 2 either much better or much worse. Table 6 Presentation in the order of Table 5 Possible obstacles Better now Same Worse now Lack of access to long-term bank loans +1 Lack of access to lease finance 0 High interest rates +1 Need for special connections with banks, +1 corruption of bank officials Collateral requirements of banks and financial +1 (0 for institutions RoA) Banks, financial institutions lack money to lend +1 Inadequate credit information on customers +1 Paperwork, red tape +1 FG participants felt that although current situation in the banking sector merits separate evaluation for Baku, Ganja, Sumgayit (BM) and the rest of the country (RoA), as is done with Question 5, the direction of changes is concomitant, and, therefore, Question 6 can be dealt with on a concurrent basis, except for "collateral requirements", where positive changes in BM were not accompanied with corresponding improvement in RoA. Question 7 Table 7 presents types of basic infrastructure for entrepreneurship. Based on your current experience, evaluate LACK OF each of these facilities in their possible negative impact on business environment in a locale where you operate your business. Please use Scale A (Problem Incidence) for your evaluation, with 0 ­ no problem at all and 5 ­ very severe problem. Please summarize description of the problems for most important facilities. Table 7 Evaluation is done separately for Baku and other major cities (BM) and the rest of Azerbaijan (RoA) Presentation in the decreasing order of RoA points, which are marked bold Infrastructure Points AZ Summary, remarks FG: BM RoA Regular, reliable electricity supply 2 5 Quality of local roads 2 4 Quality of intercity roads 3 3 Access to production / commercial / 3 3 business premises Regular, reliable gas supply 2 3 Regular, reliable water supply 2 3 Reliable cellular phone services with good 1 2 coverage Reliable local and long -distance 1 1 telecommunications Question 8 Please use the same list as in the Table 7. In your opinion, how did situation in these areas changed in comparison with the past (2 years ago)? Please use Scale B (Problem Persistence) for your evaluation, with 0 ­ the same and 2 either much better or much worse. Table 8 Presentation in the order of Table 7 VI. Infrastructure Better now Same Worse now Regular, reliable electricity supply +1 Quality of local roads +1 Quality of intercity roads +2 Access to production / commercial / business 0 premises Regular, reliable gas supply 0 Regular, reliable water supply 0 Reliable cellular phone services with good -1 coverage Reliable local and long -distance +2 telecommunications FG participants noted that although overall quality of local roads has somewhat improved, especially in and around Baku and major cities, local roads in many other parts of the country have further deteriorated due to lack of maintenance and repairs. Despite increased penetration, cellular phones services have declined for the first time running as coverage has not noticeably extended and service quality actually dropped. Question 9 In your opinion, how corruption in the following institutions affects business environment in a locale where you operate your business? Evaluate using Scale A (Problem Incidence), with 0 ­ no problem at all and 5 ­ very severe problem. In you answers please try to reflect possible danger factor for businesses in the cases bribes are not paid to these agencies (effectiveness of extortion factor). Please comment where appropriate. For comparison, we included two areas without direct bearing on private business: education and health. Table 9 Presentation in the decreasing order of AZ FG points, which are marked bold Definitions modified from the Mingachevir FG are marked with an asterisk * Institutions Points in FG: Summary, remarks AZ Min. MED* 5 5 A super-ministry that seeks to controls almost every aspect of economic activity; minimum 15-20% payoff rate for every transaction; some areas and activities are protected by prohibitively high payoffs and / or tacit proscription Local executive offices 5 2 A dissent in Mingachevir: no problem at all (0) Educational institutions 5 4 Corruption is rampant; you must pay even if you don't get any quality; education standard is so low it will distress our future and already affects businesses because of lack of qualified personnel Health care facilities 4 3 Only if you pay you can get some quality Customs authorities 4 not Predictably high and increasing payoffs, rated "must pay for everything" Other line ministries 3 n/a Worst perpetrators are Ministry of Agriculture, the Irrigation Committee and, increasingly, Ministry of Transport Tax administration 2 2 Payoff predictable and not prohibitive Sanitary and fire inspections 2 2 Try as they might, they take away little: "effectiveness of extortion" low Police and law enforcement 2 1 In Mingachevir, much is due to personality of a local district prosecutor, and to a lesser extent, a district police chief Municipalities 2 1 Except for some rural municipalities, a weak and inefficient entity practically appointed by local executive offices: "effectiveness of extortion" low Question 10 Please use the same list as in the Table 9. In your opinion, how did situation in these areas changed in comparison with the past (2 years ago)? Please use Scale B (Problem Persistence) for your evaluation, with 0 ­ the same and 2 eithermuch better or much worse. Table 10 Presentation in the order of Table 9 Mingachevir FG results are given in parentheses ( ) Definitions modified from the Mingachevir FG are marked with an asterisk * Public institutions Better now Same Worse now MED* -2 (-1) Local executive offices (+1) -1 Educational institutions -2 (-2) Health care facilities (0) -1 Customs authorities 0 (not rated) Other line ministries 0 (n/a) Tax administration +1 (+1) Sanitary and fire inspections 0 (0) Police and law enforcement +1 (+2) Municipalities -1 (-1) Schools get worse with every passing year. Tax administration became more regular, and police and other law enforcement agencies interfere and extort less than they used to. Local executive offices have increased payoff rates: see explanations to Questions 3 and 4, also for discrepancy between the national sample and the Mingachevir group. Under "police and law enforcement" one extra factor point in Mingachevir is due to personality of a local district prosecutor, and to a lesser extent, a district police chief. Better evaluation that the executive office, the prosecutor's office and police got in Mingachevir as compared with the national FG may partially be due to the fact that the Mingachevir FG participants did not want to upset their local authorities. Question 11 Please, to the best of your experience, evaluate changes in the overall business environment in relation to 2 years ago. Please use Scale B (Problem Persistence) for your evaluation, with 0 ­ the same and 2 either much better or much worse. Mingachevir FG results are given in parentheses ( ) Better now Same Worse now General business environment (0) On this question, the Focus Group has failed to reach a consensus. 10 FG members believed the situation somewhat improved (+1), 3 members said it remained the same (0), and 2 insisted it somewhat worsened: that is, a third of the group dissented from the majority opinion. Still, the greater part of the Azerbaijan FG thought bus iness environment has improved, as opposed to Mingachevir, where the group agreed the situation generally stayed the same. This contrast is striking, particularly as Min. FG viewed changes under Questions 4 and 10 more positively than AZ FG. Probably, it can be explained by introduction of Questions 5-8 (which were absent from the Mingachevir exercise) where for 10 areas out of 15 the national FG members noted improvements, and only one area was deemed lapsed. Consequently, participants in the national exercise had a broader frame of reference that, we believe, had weighed on their evaluations. Question 12 There is a statement: State agencies do not usually touch (inspect, audit etc) very small businesses. The reason being ­ there is nothing to take from them. Such businesses can grow until they reach the certain level of turnover. Then attention to them from the state jumps. Question A ­ Is there a pronounced jump or a steady increase of attention? Answer ­ In most cases there is a jump, which, in casethe turnover continues to rise, is followed by a steady increase, or possibly, another jump at a higher level. (Answer in Mingachevir: in most cases there is a jump) Question B­ If there is a jump, in your opinion, what is the level of turnover when it occurs? Does it depend on turnover or on other factors? Answer - This jump in most cases occurs if annual turnover reaches $100,000 in Baku and other major cities and $50,000 in the rest of the country. (Answer in Mingachevir: $100,000). However, the jump can happen regardless of the turnover if a company presents a competitive threat to a business interest of a powerful state official, is in a "restricted-access" subsector of the economy, or can be bankrupted to be taken over. Conclusion Improvements in some areas were offset by deterioration in other areas. Despite much publicized government campaign in 2002 to help SMEs and private business, business environment in Azerbaijan in the two years since has improved only marginally or remained, on balance,the same, which, as the respondents stressed, had been very unattractive for genuine business development in the first place. ANNEX V EMPLOYMENT AND JOB VACANCY SURVEY INMINGACHEVIR EJV Survey Field: Mingachevir, Azerbaijan Dates: 24 ­ 30 June 2004 Sample: random stratified sample of 100 employers Administration: questionnaire-based face-to-face interviews The survey was conducted in the scope of the PSIA Framework for Labor Redeployment Program in Mingachevir (Azerbaijan) between 24 and 30 June 2004. Caspian Business Consultants Ltd. (CBC), in the capacity of a World Bank contractor, administered this survey face-to-face to a randomly selected sample of 100 employers in the Mingachevir area. The survey questionnaire inc luded 17 questions and was developed by the World Bank project staff in consultation with CBC. Sampling Number of entrepreneurs and small, medium and large business owners in the city of Mingachevir registered by the Mingachevir Charter of the Nationa l Employer Association (MC-NEC) is 2,000; this was considered the survey universe for the purposes of this study. The sample was stratified by industry type. Quotas were established according to MC-NEC data: 45% for wholesale and retail trade, 30% for services, transport and communication, 25% for manufacturing and construction. After stratification, all business owners were alphabetically listed, and every 20th name was selected from the list (selection of the first order). If the first order selection came into conflict with the quota principle, the reconciliation was performed, i.e. the business satisfying the quota requirement with a closest higher number to the first-order number was selected. For example, if the first-order number 1,860 did not fit the quota, the closest higher number that did, e.g. 1861, 1862 or 1,863 was selected. The same method was used when a selected respondent was not found at his / her place of business, or an interview was not possible to conduct. The sample was stratified allocating quotas to certain industries and then firms were selected randomly within that stratification. The sample of firms by economic activity is displayed in Figure 17. The two dominant sectors in the sample are wholesale and retail trade, and manufacturing. The dominance of these industries in the survey attempts to mirror the characteristics of the non-oil formal business landscape in the sampled jurisdiction. Figure 24: Economic activity of the firms in the sample Transportation Othe r Manufacturi Service ng s Constructio n Wholesale and retail trade In terms of size, most of the sampled firms were small and medium enterprises. For practical purposes here we have classified them into firms with less than 10 employees, firms with 10 to 30 employees, and finally firms with more than 30 employees. The first group, small firms with less than 10 employees, concentrates the largest number of firms in the sample as can be observed in Figure 2. It is important to clarify that the reported number of employees included both full time and part time employees. The number of reported part time and seasonal employees was minimal in the sample. Figure 25: Size of sampled firms (by number of employees) Above 30 Between 10 and employees 30 employee s 15 % Below10 employees 82 % The firms in the sample were formally established in different periods in time, 12 percent of the firms were established before the transition (before 1992); 46 percent in the early years of the trans ition (1992-1999); and 42 percent were established during the last 4 years. Figure 26: Firm's Year of Establishment Pre-transition (1970- 1992), 11, Recent 12% 2004), 38, (2001- 42% Early- (1992-2000), 42, transition 46 % Finally, regarding ownership, 81 percent of the sampled firms are entirely private while 19 percent have some type of mix of public- private ownership. Figure 27: Firms' Ownership Mixed (public and private), 19 Private, 81 It is important to note that this is not a scientific sample for the country or even Mingachevir. Thus, conclusions about the labor market and the business environment of Azerbaijan or this particular locality can not be drawn for the analysis of these results. Rather, we use the survey results as an illustration of some of the issues that could be further researched analyzed and evaluated in the labor market through survey data. Notes on Survey Results 1. Processed responses to all the 17 questions are reflected below such that figures in bold indicate number of employers who gave a particular answer. Because the total sample was 100, those figures normally represent sample percentages. 2. Only 19 employers responded to Question 15 about available vacancies; hence, the figures for this question do here represent percentages. 3. In Question 15, not all respondents indicated the wage (salary) they are ready to offer to potential employees that would fill available vacancies. SURVEY RESULTS 1. Year your company was established? 1970 - 1 1980 - 2 1987 - 1 1989 - 1 1990 - 1 1991 - 2 1992 - 3 1993 - 2 1994 - 6 1995 - 4 1996 - 10 1997 - 10 1998 - 9 1999 - 3 2000 - 7 2001 - 9 2002 - 6 2003 - 19 2004 - 4 2. Was it difficult to establish your company? A) quite difficult - 46 B) moderately difficult - 20 C) easy - 34 D) don't know - 0 3. To which property type does your company belong? A) private property - 81 B) mixed private and public property - 19 C) public property - 0 D) municipal property - 0 4. Does foreign capital participate in your company? A) ?? - 1 B) ??? - 99 5. What is the main economic activity of your company? A) Agriculture;hunting; forestry - 0 B) Fisheries - 0 C) Mining and quarries- 0 D) Manufacturing and processing -23 E) Electricity, gas and water supply - 0 F) Construction - 2 G) Wholesale and retail trade; repairs of motorized cars, motorcycles, personal and household appliances - 52 H) Hotels and restaurants - 8 I) Transport; warehousing; communication - 3 J) Financial intermediation - 0 K) Real estate, rent and business transactions - 3 L) State administration; national defense; mandatory social security - 0 M) Education - 0 N) Health care and social work - 1 O) Other social activities - 8 P) Private households in employment capacity with undifferentiatedproductionactivity - 0 Q) Exterritorial entities and organizations - 0 6. Within the past year, have your company obtained a business loan from a bank or other financial institution? A) Yes - 13 B) No - 87 7. Within the past year, have you made a capital investment in your company (e.g. procurement of machinery or equipment, purchase of real estate)? A) Yes - 73 B) No - 27 8. What are your company's sales for the past month? AZM '000 100-250 - 2 400-600 - 11 1000 - 1500 - 10 2000 ­ 2500 - 7 2800 - 1 3000 ­ 3500 - 14 4000 ­ 4500 - 4 5000 - 3 6000 ­ 6500 - 2 7000 - 2 8000 - 1 9000 - 1 10000 - 5 15000 - 4 20000-21000 - 6 25000 - 1 30000 - 3 35000 - 1 50000 - 1 60000 - 2 70000-75000 - 3 80000 - 1 120000 - 1 150000 - 1 200000 - 2 750000 - 1 25000000 - 1 8888 (no answer) - 9 9. How do your company's current sales compare with those a year ago? A) remained the same - 21 B) declined - 47 C) increased - 31 D) don't know - 1 10. What do you think your company's sales will be in 6 month time? A) will remain the same - 13 B) will decline- 14 C) will increase - 44 D) don't know - 29 11. How many staff does your company employ? 1 - 29 2 - 23 3 - 12 4 - 5 5 - 6 6 - 2 7 - 1 9 - 2 10 - 2 12 - 2 13 - 1 14 - 3 15 - 1 16 - 1 17 - 1 18 - 1 20 - 1 21 - 2 25 - 1 30 - 1 50 - 1 65 - 1 80 - 1 Please note that a person is deemed an employee if s/he receives remuneration (wage or salary) for his / her work (consequently, unpaid staff are not considered employees) 12. Of them, how many are: A) permanent staff (permanent contracts, full-time) 1 - 29 2 - 24 3 - 11 4 - 6 5 - 6 6 - 2 7 - 1 9 - 2 10 - 2 12 - 3 13 - 1 14 - 2 15 - 1 16 - 1 18 - 1 20 - 1 21 - 2 25 - 2 50 - 1 60 - 1 63 - 1 B) temporary staff (short-term contracts, seasonal work, part-time) 2 - 1 4 - 1 5 - 2 6 - 1 13. How does employment at your company compare with the year ago? A) remained the same - 57 B) declined (by how many?) 1 - 6 2 - 1 4 - 2 5 - 2 6 - 1 7 - 1 C) increased (by how many?) 1 - 12 2 - 5 3 - 3 4 - 3 5 - 3 7 - 1 10 - 1 11 - 1 30 - 1 D) don't know- 0 14. In 6 month time does your company plan to employ: A) same number of staff - 40 B) reduced staff (by how many?) 1 - 1 3 - 2 C) increased staff (by how many?) 1 - 7 2 - 4 3 - 5 4 - 4 5 - 3 8 - 2 9 - 1 10 - 3 15 - 3 18 - 1 25 - 1 30 - 1 150 - 1 D) don't know - 21 15. Please indicate all available vacancies at your company. A position is deemed vacant and available if all of the following conditions are met: a) the position actually exists; b) the vacancy, if filled, can become operative within 30 days; c) your company is actively seeking potential employees for the position. No. Position Number of Length of time your Proposed wage vacancies company sought (salary) employees to fill vacancy(ies): 1. under 30 days 2. 30-59 days 3. over 59 days AZM '000 (a) (b) (c) (d) 15.1 Total 1 ­ 9 2 ­ 4 500 ­ 1 2 - 4 1 ­ 8 100 ­ 1 3 - 4 3 ­ 1 150 ­ 2 15 ­ 1 10 - 1 15.2 Managerial and professional - - - personnel (with university education) 15.3 Technical personnel (with 4 ­ 1 - 400 ­ 1 secondary education) 3 - 1 15.4 Clerical and administrative - - - personnel 15.5 Sales and service personnel, 1 ­ 9 1 ­ 2 300 ­ 1 chefs 15 ­ 1 200 ­ 4 3 ­ 3 150 - 6 2 ­ 3 250 ­ 1 6 - 1 100 ­ 2 600 ­ 1 15.6 Agricultural and fisheries 1 ­ 1 - 150 ­ 1 personnel 15.7 Artisans and craftsmen (clock - - - repairers, tailors, cobblers, etc.) 15.8 Laborers (mechanics, 1 - 1 - 100 ­ 1 controllers, fitters, etc.) 15.9 Unqualified personnel - - - 16. How difficult is for your company to find suitable staff? A) easy - 72 B) somewhat difficult - 13 C) difficult - 13 D) don't know- 2 17. What are the main reasons your company does not hire more new staff? (indicate up to 3 major reasons) A) no need - 20 B) unstable situation and lack of finances - 91 C) impossible to obtain a loan on good terms - 74 D) high wages and /or high personal income taxes - 3 E) problems with labor legislation, especially when dismissing an employee - 0 F) avoiding attention - 0 G) can't find suitable qualified personnel - 22 H) high business taxes (profit tax, VAT) - 2 I) bureaucratic obstacles for expanding business (receiving a permit or license, formalization of a transaction, bribes, etc.) - 4 J) lack of infrastructure (electricity, roads, communications) - 0 K) illegal (artificial) monopoly - 3 L) inadequate demand and /or excessive competition - 11