Questions/Answers

ABAD public legal entity run by the State Agency for Public Service and Social Innovations under the President of the Republic of Azerbaijan (hereinafter SAPSSI) was established following the Presidential Decree dated September 23, 2016. As an acronym, ABAD stands for "Simplified Support to Family Businesses" and is the country’s prominent national network for advancing family businesses. ABAD is aimed at the acceleration of entrepreneurial development and greatly adds to the capacity of the SMEs, helps to ensure the sustainability of the new start-ups. ABAD ensures the active participation of the citizens in the socio-economic life of the county by developing SMEs, raising the employment rate of the population and supporting the formation of competitive family businesses in the country. Many families in Azerbaijan are engaged in areas of handcrafting, agro-food production and supply the market with their own products. However, experience shows that families encounter serious difficulties and impediments in delivering their products to a wider range of customers through large retail chains, big supermarkets, etc. Other obstacles are absence of basic business, financial and legal knowledge, poor product quality, lack of proper certification and marketing skills, and failure to meet customer-oriented design and packaging. Moreover, their low income prevents them from applying innovations and new techniques to increase productivity. As a result, family businesses face decline, unemployment rises and population, in particular the youth, migrate to urban areas. This situation negatively affects the competitiveness and profitability of family businesses in the country. The primary objective of ABAD is addressing all these enumerated problems from the beginning of the business process till the end. Meaning that, through its multifaceted activities, ABAD addresses the challenges that prevent and impede the development of community-based family businesses and rural entrepreneurship, economic regeneration and job creation.

Reaching SDGs is at the core of ABAD’s activities. With a purpose of providing decent jobs to the target group, contributing to the country’s economic development with men and women working on equal terms, ABAD helps its beneficiaries with the services from A to Z (training, business planning, branding, marketing, packaging, accounting and legal assistance) based on “single window” (one-stop-shop) principle. Besides, technical equipment for production and distribution of final products to the stores are also provided. We assist citizens who want to kick-start their business with a plain idea and ensure their access to the eye-catching store shelves.

Goal 1: No Poverty. The average monthly income of ABAD members exceeds the minimum wage in the country by 62.6%. In the first year of its operation, ABAD was supporting 125 people, which increased to 234, 301 and 419 in the following years. Goal 5: Gender Equality. As of now, 56% (232 out of 419) of ABAD members are women. ABAD is also a member of the UN-WEPs platform for advancing gender equality and women’s empowerment in the workplace, marketplace and community. Goal 8: Decent Work and Economic Growth. In 2018, 234 active ABAD members constituted 0.32% of the micro and SMEs of the country. The profit of ABAD members in the field of agriculture amounted to 1.36% of the total profit in the country. Goal 9: Industry, Innovation and Infrastructure. ABAD has production plants, schools in the regions. There is an ABAD Ceramics and Applied Arts Centre in Sheki, which is the first ceramics centre in the South Caucasus. Goal 17: Partnerships for the goals. ABAD has built numerous partnerships with international organizations including UN, EU, TIKA, GIZ, JICA and several local companies within the framework of PPP.

Socially, the initiative is highly sustainable in the first place because it acts as an intermediary between entrepreneurs and government agencies. A citizen becomes an entrepreneur (ABAD's member) through ABAD without red tape or bureaucracy. Economically, ABAD positively contributes to the country’s micro-economy as it decreases poverty by increasing the employment rate. The handicrafts and food products of ABAD members offered for sale under ABAD brand and small markup is added to final products so ABAD can sustain itself. In environmental terms, ABAD ensures that its products are bio natural, do not contain any chemical additives.

Before ABAD, there was a lack of information and enthusiasm among the households living in rural and mountainous areas about building their own businesses. Furthermore, there was not an entity focused specifically on the development of family businesses in the country. Men were the majority of the workforce by 48.2% while the majority of the unemployed population was women by 57.4% before the establishment of ABAD. Moreover, on December 21, 2015, a second devaluation happened in the country and the living standards of the population relatively decreased. At that point, one of the main targets of the state was to maximize the benefit of the actual situation (the weakening power of the national currency) by increasing the domestic production without adding additional burden to the state budget. For this very reason, ABAD public legal entity that operates on the principle of partial self-financing was created as a supplement to domestic production based on family labour. The goal of the ABAD has been to achieve inclusive and sustainable economic growth and to provide decent work for all, by increasing the share of SMEs in GDP as in developed countries.

ABAD is promoting inclusive and sustainable economic growth, decent work for all and achieving gender equality by empowering women. The project is promoting the active participation of women in the socio-economic life of the country. As of now, 56% (232 out of 419) of ABAD members are women. Besides, there are 65 women among ABAD's staff out of 149. There are four women working for ABAD in managerial positions at its headquarters and it makes 44% of administrative staff. ABAD also joined the UN-WEPs platform for advancing gender equality and women’s empowerment in the workplace, marketplace and community.

ABAD is open to render its services to all citizens, non-citizens and stateless people who are enthusiastic about their business ideas. The vulnerable segment of the society, women and disabled with limited resources are among the main target group of ABAD. Since its creation, 2,236,638.53 USD revenue has been generated from the sales of goods produced by ABAD members and 1,706,908.04 USD of this sum has been transferred to the bank accounts of ABAD members, which includes a number of vulnerable internally displaced families and disabled handcrafters. ABAD staff assists families with free of charge business planning, branding, technical and legal assistance, marketing, accounting, logistics many more services. Families are demonstrating strong willingness in registering their businesses as the first step towards production and income generation; thus, one of the support areas of ABAD is helping the beneficiaries to obtain a taxpayer identification number (TIN) in a fast, non-bureaucratic and transparent way. Furthermore, ABAD staff helps families in settling social security issues including tax and social security reporting. Up to date, more than 419 citizens registered as ABAD beneficiaries by obtaining their Tax Id Numbers and signing a commission contract with ABAD.

According to the Presidential Decree № 1047, dated 23 September 2016, ABAD is functioning mainly on the principle of self-financing, registered as the VAT and 588,236 USD from the state budget were allocated upon the creation of ABAD. Initially, the SAPSSI allocated space for the ABAD's headquarters in the capital Baku to organize its activities, 7 team members engaged in the process. The project implementation was achieved by the following steps: • A strategic plan was prepared; • The internal structure of ABAD established; • Specialized structural units have been established within the organization; • An integrated Software system installed to handle operations and conduct all processes; • The corporate contracts and contracts with retail agents signed; • Turnover of goods and funds have been organized. After analysing the domestic market and incoming applications, ABAD prioritized food production and handcrafting as these two fields seemed to be more realistic in terms of having good sales. Thus, along with PR, Finance, HR, etc., two additional structural units specializing in food production and handcrafting were established. Food technicians, quality control specialists, craftsmen employed within these structural units. Their function was to monitor all business processes of ABAD members in their field of specialization, provide them professional service and to coordinate their work with the approach of "ABAD member’s problem is ABAD's problem". ABAD sells goods produced by ABAD members and this is the main, eventual service of all support mechanism. Thus, ABAD signed contracts with retail agents (supermarkets). The SAPSSI evaluated the project based on ABAD’s semi-annual and annual reports and as dynamics showed a positive increase in terms of sales, the number of ABAD Centers increased to 6 and 2 ABAD Schools launched. 10 sales stores across the country, 2 Ceramics Centers, 22 production containers, 13 mobile food trucks (Pop-up retail), 3 Factories and 8 in-store shops were installed in supermarkets.

People hesitate to start up a business and this is a typical syndrome for post-Soviet countries that experienced severe restoration and transition to the market economy. ABAD aimed at convincing the society, particularly, the vulnerable segment of the population that establishing a business is not as difficult as they think it is. Thus, ABAD continuously trained prospective SMEs on business planning, marketing, financial literacy and etc. The implementation of the ABAD project contributed to the solution of the mentioned problems: Self-confidence in terms of establishing a transparent business has increased and they became a good role model for others.

ABAD's main innovative approach is production in monoblock-containers which is a total novelty for people living in regions. Through containers, the production process becomes more efficient, clean and product reliability increases. The next innovative approach is the ABAD factories that are fully furnished with cutting-edge equipment and families are working there on shifts free of charge. However, the equipment still belongs to ABAD and production process supervised by ABAD's technicians. In case of misuse, ABAD can halt contract with the family. Additionally, fast and easy legal support of ABAD is making this project, even more, one of a kind.

Although there are alike models in the world currently, ABAD is a complex model that was initiated by a small team. Therefore, it is hard to indicate a similar model which triggered ABAD's creation. Within the process of building each family business whether it is engaged in the cheese production or ceramics, ABAD team has been accompanying family, learning and growing with them together. Thus, this is a complex chain which begins with opening TIN and ends at supermarket shelves. Between A to Z, ABAD assists the family with getting TINs, certificates, UPCs and logistics.

A person starts its journey with ABAD through www.abad.gov.az and modern equipment for the production of food is provided to families through grant projects and donors. Besides, settling social security issues including tax and social security reporting are managed through www.e-taxes.gov.az online.

The statistical indicators of ABAD's activity over the past years show growth dynamics each year. ABAD model was presented at “UN Public Service Forum” in Hague, the Netherlands in 2017, it was stated that ABAD is an initiative aimed to develop family brands in Azerbaijan and supporting the active participation of citizens in the socio-economic development of the Republic of Azerbaijan, development of small and medium-sized businesses, increasing the employment level of the population, and shaping the competitiveness of family businesses. The Republic of Kazakhstan showed interest in applying ABAD model so far and it has been successfully implementing in Turkistan region of Kazakhstan since July 2019 based on Protocol of Intention signed between both sides on cooperation in the field of development of micro-business for handicraft. Furthermore, some segments of ABAD project have already been transferred to certain provinces of Indonesia since 2017 after the visit of Special Envoy of the President of Indonesia to the Middle East and the organization of Islamic Cooperation-Mr Alvi Shihab to Azerbaijan. Some joint projects are going to be realized with Morocco and MOU is planning to be signed in this regard with the respective authority of Morocco.

The following features make ABAD easily transferable: • Recognised by law • Have a distinctive name • Formed to carry on business for profit The following work should be done to adopt the ABAD model in another country: 1. Experts from Azerbaijan should be involved 2. Features of local legislation should be analysed 3. The market for local goods and services should be analysed 4. Specific areas to be supported should be identified at the initial stage (The tourism potential and demand of the urban population for agricultural food products have been taken into account upon the creation of ABAD) 5. Given that the organization will directly be involved in sales, it must be registered as a taxpayer 6. Purposeful measures should be taken in advance to organize sales 7. Qualified staff should be hired 8. The foundation of the material, technical base and infrastructure of the organization should be laid 9. ABAD brand should be established in the country and the organization should patent the brand against undesirable plagiarism and counterfeit 10. An official website should be created to receive applications 11. Sources of funding for the implementation of ideas should be identified (in Azerbaijan, funding is provided by grants and CSR measures received by local and international donor organizations and companies) 12. The software should be set up to regulate trade.

The project had approximately three months to establish the system, to get the staff. ABAD started with 588,236 USD, 7 team members, and two pilot regions. The first ABAD centre was launched in Masally. A software established and developed, sales channels generated, site visits to regions and project presentations presented and families engaged. Moreover, the organization opened regional centres, schools, factories, etc. Currently, the organization administered by its corporate headquarter and represented by 6 Regional Centres, 10 Ethno-boutiques; 2 Ceramics and Applied Arts Centres; 8 in-stores, 22 production containers; 3 ABAD Factories; 2 ABAD Schools; and 13 Food Trucks.

ABAD gets a small markup from the sales of final products and regularly attracts grants through different local and international projects and partnerships. The increasing turnover over the years and families with stable income makes the project sustainable. The turnover statistics were 215 k, 569k, and 1 mln USD accordingly in 2017, 2018, and 2019. The number slightly decreased only in 2020 with the inevitable impact of COVID-19. The project started to get the attention of local and international organizations and their increasing support as proved to be sustainable and successful.

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ABAD initiative was evaluated by EKVITA which is a full-service legal, tax and management consulting company. The company has also been engaged in government projects as well as worked for international donor organizations such as the World Bank. Legal, tax and finance, management experts did a comparison of actual performance with a potential or desired performance from the beginning of May until July, in 2019. They provided a gap analysis.

Evaluation assessment tools were used as indicators to define the best and credible results. Interviews: Successful training professionals conducted interviews with the managers and employees to ensure the knowledge transfer occurred. Reports: Professional trainers reviewed the company’s progress toward achieving strategic goals and assigned training materials for them. They developed reports that examine the relationship between worker aptitude and company success. Training professionals used descriptive reports to improve training programs, design new programs and implement new technology to support learning and development. Training and Observation: All of the observations were turned to data points to help assess the outcomes.

Both local and foreign experts from EKVITA engaged to evaluate the initiative in terms of its operational activities in the face of its beneficiaries and staff members. Interactive training, interviews held and all ABAD families, staff members showed enthusiasm. After conducting confectionery, dairy, financial, marketing questionaries and training, the reports about project gaps and possible solutions suggested to ABAD. The main overlapping point mentioned by all the experts was that expertise in production and developed recipes were needed. To fill the mentioned gap, ABAD started to train its beneficiaries and employee. So far, new cheese, candy, sausage recipes developed with better qualities and marketing strategy of the organization revised.

ABAD is independent in its activities that are in line with the Constitution of the Republic of Azerbaijan, international agreements to which the Republic of Azerbaijan is a party, the Law of the Republic of Azerbaijan "On Public Legal Entities", other laws of the Republic of Azerbaijan, decrees and orders of the President of the Republic of Azerbaijan are governed by its Charter. ABAD interacts with international, local and non-governmental organizations, legal entities and individuals in the performance of its duties and rights. It is a subordinate body of the SAPSSI. ABAD takes full responsibility for its commercial activities and decisions. Furthermore, ABAD's activities are carried out under the law regulating commercial activities in the Republic of Azerbaijan. The law is directed to the creation of conditions for the implementation of the principle of equality of all patterns of ownership, broad manifestation of economic initiative and efficiency on the basis of the independent choice of fields of activity and adoption of economic decisions.

ABAD has built numerous partnerships with both local and international organizations including UN, EU, TIKA, JICA GIZ, AHK, etc., asserting itself as the partner of choice for working on projects. ABAD, EU and UNDP had a strong partnership since 2017and successfully implemented two projects: 1. “Sustainable Land and Forest Management in the Greater Caucasus Landscape” (together with UNDP and GEF), helped to secure alternative sources of income to rural mountain communities. Their honey and carpet products are available at ABADstores countrywide. 2. “Support to the Development of Small Family Businesses in the Sheki- Zagatala Economic Zone through Regional ABAD Centre in Balakan” project is still ongoing(together with EU and UNDP). 44 rural families including 12 IDPs became SMEs after training, mentorship, equipment support and jobs created for the community. ABAD also joined the UN Women's -WEPs platform and the world's largest corporate sustainability (CSR) initiative TheUN Global Compact which is a non-binding UN pact to encourage businesses worldwide to adopt sustainable and socially responsible policies and to report on their implementation. ABAD adheres its ten universally accepted principles in the areas of human rights, labour, environment and anti-corruption. Additionally, ABAD staff actively participate in the seminars of FAO regularly.

At the startup stage, the products of micro-entrepreneurs are in small scale, have a short shelf life, and the price is higher than competitors. The lack of strong-enough immunity of newly emerging micro-entrepreneurs against frequent losses and setbacks puts them at risk of bankruptcy within the short term. However, micro-entrepreneurs can start earning income after gaining a consumer base while maintaining quality and balanced price. For this reason, ABAD makes the ultimate effort to strengthen ABAD beneficiaries' market position through the services provided to protect micro-entrepreneurs from bankruptcy. Despite the quality of micro-entrepreneurs' products, small scale production is the main factor hindering export. Thus, at present, no commercially significant export operation has been carried out, except participating in various foreign exhibitions. Work is underway to realize export and unite members of the ABAD and obtains foreign contracts. Having 149 employees, a steady increase in the maintenance costs is inevitable which is among the existing problems. Expenditures are mainly on social security, strengthening the material and technical base, maintenance of infrastructure. To neutralize these problems, the available material resources are managed on a cost-saving basis, and grants from local, foreign and international organizations and companies are involved.