A Word From Executive Director of AmCham Issue 31 Dear members, Credits I am pleased to welcome you to the 31st edition of IMPACT Azerbaijan magazine, devoted to Human Capital AmCham Executive Director: Development. Natavan Mammadova In today's business world it is vital to believe in human capital development – raising the most superior and loyal workforce, so that organizations and individual employees Editor: can accomplish their business goals in service to customers. Aykhan Nasibli I am pleased to witness that businesses in our country have acknowledged the rising demand for an increasingly skilled Articles contributed by: workforce and the companies are sustainably investing Gulnur Ismayil in human capital development. This is an essential asset to organizations’ future Zaur Allahverdizade success and sustainable business practices. Herein, member companies of AmCham Azerbaijan are forerunners with implementation of best practices. Various Rena Veliyeva suggestions on this area have also been reflected on our White Paper 2018, which Elnur Eyvazov will be going out very soon. Shabnam Abilova, Amina Bakhshiyeva As we all know, transforming oil capital into the human capital is on the top of the Gumru Eyvazova country’s agenda, which explains why Baku has submitted its candidacy to host Ellada Alishova World Expo 2025 under the motto of "Human Capital". Hosting World Expo 2025 Sarkhan Babayev will not only become a natural progression of Azerbaijan’s established experience in delivering large-scale international events, but will also once again demonstrate Kamran Karimli ourselves as an open and tolerant center for intercultural dialogue and cooperation. Narmin Huseynzadeh Moreover, it would also draw attention of both businesses and government to Ziba Mustafayeva the significance of human capital concept in generating long-term economic Farid Mammadov development. Rustam Rojkov I am especially happy to note that AmCham member companies and AmCham Gunay Shahbazova relevant Committees are mindful of the effective promotion of human development which is the backbone of human development and subsequently economic Alena Edisherova, Murad Namazov development. As a reflection of a public-private dialogue, this edition of IMPACT Azerbaijan magazine represents a contribution by members of the Chamber to the Advertisers: government’s agenda on human capital development. BP Azerfon Best regards, Turkish Airlines Natavan Mammadova PRIVE Steak Gallery Iteca Caspian Editor’s Comment
Publisher: Dear friends, dear members. Welcome to 31st edition of IMPACT Azerbaijan magazine, American Chamber of Commerce devoted to Human Capital Development. This interesting in Azerbaijan topic goes beyond the basis of the private sector. Herein, Azerbaijan is the candidate country for the World Expo 2025. Tel: (+994 12) 497 13 33 Within this edition, first of all, you will be able to read the Fax: (+994 12) 497 10 91 approach of the Ministry of Labor and Social Protection of www.amcham.az Population of Azerbaijan emphasizing to various dimensions of human capital development. Furthermore, it is not a www.impact.az coincidence that for this edition the authors from member companies were active enough to contribute with their Advertising opportunities: articles. The coverage of topics is quite wide; from artificial intelligence to regulation Please contact the Editor at of data protection, from talent development to impact for economic development, [email protected] and many more. It should be mentioned that this edition could not be developed without the financial support of BP, Azerfon, Turkish Airlines and Prive Steak Gallery. We appreciate for The articles in IMPACT Azerbaijan authors and companies who see deep value in this magazine. express the opinions of the authors and do not necessarily reflect the position of Enjoy reading! the American Chamber of Commerce in Azerbaijan Sincerely, Aykhan Nasibli contents IN FOCUS 4 24 Enhancing Cooperation with Human Capital as the Greatest Business Associations Remains Intangible Asset a Priority For Us
Anar Aliyev Ellada Alishova Head of Apparatus, Ministry of Labor and Social Group HR Manager, Nobel Oil Services Protection of Population 26 10 Developed and Updated Human Developing Talent Capability Capital as Reliable Economical in Organizations Basis of Strong State
Sarkhan Babayev Gulnur Ismayil General Director, DET-AL Aluminum Director of Career Management Center, ADA University 27 Digital Transformation’s Impact on 12 Human Capital EU General Data Protection Regulation Kamran Karimli HR Business Partner, Antaris Zaur Allahverdizade Legal and Compliance Officer, Rapid Solutions 28 How Activity Based Costing (ABC) 16 Principles and Methodologies Can Managing Through Reward Boost HR Efficiency?
Narmin Huseynzadeh HR Director, Workplace Rena Veliyeva Senior, People Advisory Services, EY Azerbaijan AMCHAM AZERBAIJAN 39 18 About Us Artificial Intelligence and Future Implications for Human Capital Development 40 Elnur Eyvazov Business Events Professor at School of Business, ADA University 20 Personal Data in the Context of 42 Employment Social Events
Shabnam Abilova, Amina Bakhshiyeva Deloitte Legal Azerbaijan 47 AmCham Legal Update
2 Issue 31 SMELL MORE WITH THE AIRLINE THAT FLIES TO MORE COUNTRIES THAN ANY OTHER
JAPAN in focus
Enhancing Cooperation with Business Associations Remains a Priority For Us
Anar Aliyev Head of Apparatus, Ministry of Labor and Social Protection of Population
the reforms implemented by the Ministry of Labor and Social Protection of Population (MLSPP) today are based on the transparent, modern and, at the same time, based on the full assurance of social justice and impartiality in the implementation of social programs, active labor market arrangements, disability assessment and rehabilitation. Reforms in the labor market serve to the establishment of an effective regulatory mechanism of the labor market based on progressive world practice, and the improvement of the state control system over the broad application of ICT, especially in the field of labor law enforcement. These reforms aim at forming labor relations control system with a broader application of ICT in the form of electronic monitoring, electronic protocol mechanism, ensuring that the system has a flexible and active role in ensuring the legitimate interests of workers and employers, prevention of informal employment. Dear Mr. Aliyev, reforms are being carried out in all fields Meanwhile, the creation of a unified employment portal, that of activity of the Ministry of Labor and Social Protection increases the accessablity of employeers and jobseekers to of Population. What are the goals in the field of labour the employment opportunities, and provides full transparent and employment? employment in the labor market, also, expanding active One of the important factors indicating the overall level labor market programs, increasing the material and technical of development of each society is the extent to which the capacities of the current vocational education system in overall economic development is embodied in the lives of order to increase the labor skills of the workforce, and target members of the community and the welfare of the citizen. - oriented, transparent organization of cooperation with Human factor and civic well-being ensured in the center of employers and the expansion of vocational training network the national development strategy, founded by our national network throughout the country constitute the main goals of leader Heydar Aliyev and successfully continued by President our reforms. Obviously, in every aspect of these reforms, the H.E. Ilham Aliyev in the past 15 years. Dynamic economic importance of active cooperation with business organizations development in our country is accompanied by a strong is considered, and relevant work is being implemented in this social policy, significant steps are taken in the direction of field. building a prosperous community and providing social welfare. Successful social policy has led to the creation of The development of human capital is one of the new jobs, sustainable growth in the labor market, continuous prerequisites of President H.E. Ilham Aliyev’s socio- employment opportunities, and a secure social protection economic policy. What is being done by the MLSP for the system that plays an important role in the well-being of improvement of labor skills, and what are the targets? socially vulnerable human groups. State policy on socio-economic development initiated by the According to the President H.E. Ilham Aliyev’s instruction, President H.E. Ilham Aliyev, has been shaped by practical
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the short and medium term had been identified in the “Strategic Road Map on the National Economy and Economic Sectors”, approved by the Presidential Decree No. 1138 of 6 December 2016. As the driving factors for these goals, the improvement in quality of all educational levels, ensuring continuity the development of employees ‘knowledge and skills through trainings, adaptating qualified personnel to labor market requirements, stimulating investment in companies’ research and development, and efficient use of existing human capital had been identified. As it was mentioned above, the importance of helding qualified staff training according to the requirements of the labor market becomes even more urgent in regard to increasing demand for labor force in competitive labor markets. Presently, based on advanced international experience for improving the quality of the professional education and training system, as well as the institutional structure of the country, the systematic work is underway in our country. In order to ensure adaptation of qualified personnel to the needs of the labor market, it is important to identify areas of strategic implementation of the idea of human capital development and employment and predict personnel needs in the labor market. is being pursued in certain directions in order to provide a For this purpose the work is being continued by the MLSP comprehensive opportunity for the development of the human for creation of the National Observatory for monitoring and capital. forecasting of the labor market with support of European During the last 15 years, the national economy has grown Training Foundation. This work will also be part of the EU by 3.2 times where this indicator for non-oil sector is 2.8, for Employment Education Program. Preparation of Primary increase of wages is 7.0 and pension is 11.3 times. Employment Program for Employment Program in Azerbaijan During this period, 1.9 million new jobs created in the (2018-2020) is underway. country, where 1.4 million of them were permanent jobs Currently, increasing investment in improvement of vocational which have resulted in increase of employment rate, stability skills, work habits is among the most important issues on the in the labor market, and decrease in poverty by 5%. During international agenda for achieving human capital development this period, modern development of social infrastructure as a whole. One of the main priorities of the state employment have been ensured. 3.1 thousand schools, more than 640 policy in Azerbaijan is to improve the workforce qualitatively hospitals were built and repaired. 43 Olympic Sports Centers and to increase competitiveness, to ensure a dynamic have been established in the regions, the highways in a consistency between demand and supply in the labor market. length of 12.3 thousand kilometers have been built and 443 Occupational standards play an important role in meeting the bridges have been developed. At the same time, 92 modern labor market requirements and organizing personnel training settlements and housing complexes were built and 270,000 at international standards and improving the quality of the IDPs were provided with modern apartments. The amount of expenditures envisaged in the state budget for social protection and maintenance has increased more than 10 times during the last 15 years. All of these are addressed to increase the level of services for the population, such as education, health, culture, ecology and focuses on development of human factor. Obviously, the coordination of social welfare with economic prosperity, ensuring equal provision of social needs of the population one more time confirms the perfect basis for the development strategy implemented in Azerbaijan. In parallel with the dynamic development processes in the country, the state policy, programs and concepts, directed to the development of human capital on specific strategies, the opportunities of economic growth airising from dynamic development in the country accelerates the innovation- driven community building processes. As it is known, further development of human capital and raise competitiveness in
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including institutional mechanisms. At the same time, the main objective of active employment measures is to provide vocational training and additional training courses for employers and unemployed citizens to enable them to acquire professional skills in line with the labor market requirements. In the course of vocational training, employers are required to take up new professions based on their previous profession, specialty and work experience, professional trends, basic skills and habits, as well as other socio-psychological factors. In the first half of 2018, the State Employment Service under the MLSPP has organized vocational training and additional training courses for 1501 people. Those courses are organized at the Baku Regional Vocational Training Center and in Goychay Vocational Training Center, Nakhchivan Vocational Training Center, as well as in a number of relevant training fields. But our goal is to expand the network of vocational training centers across the country. As the main measure in this field, will be set up of the Regional Vocational Training Center in Ganja. At the same time, in order to accelerate the integration workforce. These standards systematically reflect the general of sensitive populations into the labor market vocational requirements set out at the international level, not only in the rehabilitation work is being run. The Vocational Rehabilitation local labor market, but also in the labor functionality of the Center for Young People with Disabilities, which was opened workers in their professional fields. 289 occupations and 63 in December 2013 with participation of the President of the qualifications standards were prepared and employed by Republic of Azerbaijan, H.E. Ilham Aliyev and Mrs. Mehriban employers in various fields of economy with participation of Aliyeva, plays an important role in this area. In this center, international and local experts within the framework of Social where modern conditions were set, young people with Security Development project implemented jointly between disabilities, who are involved in different regions of the the Ministry and the World Bank. Representatives of about country, acquire knowledge and skills in various professions. 300 employers from the public and private sectors were also When the young people are in the vocational training, the involved in drafting these standards. state hosts them at hostel and provides them with a meal, In general, taking into account the current demand for a medical-physiotherapy service, etc. Over the past period, occupations in the labor market of the country, it is envisaged more than 1450 disabled people have been admitted to the to prepare about 900 professional standards, as well as Center. These young people have not only gained access to to create the appropriate legal framework for efficiency in new jobs, but also, have a chance to social rehabilitation and the field, to make appropriate changes in legislative acts, active integration into the society, and in general they have made a serious return to their active lives.
By the way, being one of the nominee for the organization of the Worldwide Fair of the International Exhibitions Bureau in 2025, Azerbaijan has identified the topic for the fair that also related to the developement of human capital... In fact, the development of human capital is a matter of all humanity, and every country trying to secure its long- term development and build its future on a solid foundation is interested in human capital development. In this regard, the theme of the “Development of Human Capital, Better Future” proposed by Azerbaijan for this exhibition - “Expo 2025”, which is related to the candidacy of the International Exhibitions Bureau of Baku for the 2025 World Exhibition, is of global importance. As the First Vice President of the Republic of Azerbaijan, President of Heydar Aliyev Foundation Mrs. Mehriban Aliyeva noted, “The theme of “human capital development, building a better future” is really a matter of concern to everybody. This theme covers the
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been taken in different formats devoted to the future of labor. Today, Azerbaijan is known as a place of stability and development in the world and at the same time has a great reputation as a country that successfully hosts numerous prestigious international events. In recent years, by organizing the high level events, such as Eurovision Song Contest, I European Games, IV Islamic Solidarity Games and other spectacular international events, Azerbaijan has demonstrated its political and economic stability, financial capability, tolerance, multiculturalism, capital Baku’s history and modernity. Therefore, it is an ideal place to host the next international event - the World Exhibition of International Exhibitions Bureau, in 2025, as a country with a hospitable nation, situating in intersection of Europe and Asia.
Mr. Aliyev, how would you describe the current situation in the labor market of Azerbaijan, development trends, active employment measures and the role of self- employment program in the labor market? What are the plans of the Ministry regarding this program? main challenges of our time - the impact of technology and increased commitment to humanity. At Baku Expo 2025, we think that it is far from technology to concentrate our attention on ordinary citizens, from leaders to economies, societies and people who are the leading creativity. We will bring people - universal human capital, the most powerful resource in the world.” The subject proposed by Azerbaijan for the Baku Expo 2025, covers three sub-topics that characterize human life: Future of Health, Future of Education and Future of Labor. As you can see, one of the most pressing issues for all countries is the future of labor and this is not accidental. It is known that social, political and social contradictions in the life of our planet cause serious changes in the labor market. On the other hand, the increasing use of modern technologies, robotics, and the rapidly expanding process of production automation in the economy are increasing the question of the future of the labor market. Therefore, the subject of discussion on the future of labor by the International Labor Organization was initiated for all countries and Azerbaijan was also actively involved in this initiative. Thus, in our country, measures have Successful reforms led by H.E. Ilham Aliyev resulted in economic diversification and rapid development of non- oil sector in the country, by leading to sustainability of socioeconomic development in the context of increasing competitiveness and export-oriented production, and continued development trends in the labor market. It is not accidental that Azerbaijan ranks 35th among 137 countries in 2017-2018 Global Competitiveness Report of the World Economic Forum. Azerbaijan also ranks 17th place for its labor market efficiency. Azerbaijan ranks in top places for its labor market efficiency among the CIS countries, as well as Israel, France, Sweden, Belgium, Austria, Qatar, Japan, Spain, Italy, Finland, Latvia, China and Malaysia. The measures taken during the last period based on instructions of the President enabled us to maintain the
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thousand families in 2018 are expected to participate in the program, according to the instructions of the Head of State, in the framework of the program provided by the Ministry in 2012 to provide 1200 family assets and create small family farms. More than 6,000 of them have been equipped with the skills that needed to build self-employment and small business through training courses conducted by trainers trained by the International Labor Organization’s senior trainer. In the near future, assets (goods and materials) will be provided for the successful completion of the courses and the types of economic activities selected by those who have a positive assessment of their business plans. Our plan is to further extend the scope of this program in following years and increase the number of people involved in the program by two times. The Ministry of Labor and Social Protection of Population has expressed readiness to cooperate with other organizations in implementing the self-employment program. In this sense, we highly appreciate the active support of the Heydar Aliyev Foundation’s Regional Development Public Union and the Memorandum of Cooperation signed on July 16, 2018, in implementation of the program of self-employment with that organization. According to this document, the PU will provide stability of our labour market which increases by 100 – 120 support to the creation of intensive fruit gardens, vegetable thousand people in every year. and melon farms within the program of 125 self-employment Obviously, active employment measures implemented by the programs. I believe this is an example of good co-operation in state employment agencies also play essential role in these implementation of self-employment program and the Ministry processes. At the same time, the introduction of vacancies by invites and is ready to cooperate and collaborate with other state agencies to the employment agencies, as a result of the parties in implementation and extension of self-employment initiative on social responsibility of the Head of State, these program. At the same time, businessmen, as part of corporate measures had substantially been strengthened in recent social responsibility, as well as, companies representing the years. As a continuation of the work, 37.6 thousand people American Chamber of Commerce in Azerbaijan (AmCham) were provided with adequate jobs in the first half of 2018 can also alternatively create small businesses in low-income and 510 were involved to paid public works. Regularly, labor families in relevant business spheres. The relevant information fairs are organized in the regions and active employment in this field, as well as information on past business training events are organized under the motto “First Steps in Career” courses can be obtained from the Ministry. at higher education institutions. The correct orientation of In general, we are striving to establish more effective and the young workforce who are in the eve of entering to the targeted cooperation with business entities in organization of labor market is one of the crucial issues for coordinatation active employment arrangements, organizing these events, the demand in the labor market. In this regard, in the first six presenting vacancy information to the employment agencies, months of this year, 69.2 thousand young men and women developing inclusive labor market, and other areas. in the labor market have received information and advice on jobs and employment. Among the influential programs running in the local labor market, the self-employment program initiated by the President, H.E. Ilham Aliyev, on 7th of April, 2016. The self- employment program implemented by the MLSP enabled transition from passive measures to active ones in terms of improving welfare of vulnerable group of people by helping them to overcome their dependency on state aid, increasing family income through their own efforts, access to entrepreneurship, expanding small family business in the country, and ultimately supporting small and medium entrepreneurship. Mr. President said that the program of self- employment has a very long future, and said that this program is of great social and economic importance. In 2017, seven
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In general, how does the Ministry want to see the next state budget. stage of cooperation with business people and business The Commission for the Regulation and Coordination of associations? Labor Relations established under the relevant Order of There is a practice of social dialogue with entrepreneurs in the President, H.E. Ilham Aliyev, is working purposefully to the context of social partnership. I think there is a need for prevent unofficial employment on the basis of the “Action Plan cooperation between the government and entrepreneurs, on the Prevention of Non-formal Employment in the Republic business associations in a more active and business sense. of Azerbaijan”. At the same time, the MLSP implements The MLSPP is a government body that promotes expanding various forms of awareness among employers in order to cooperation in this area, with a ready position for cooperation prevent unofficial employment. and collaboration. We have held regular meetings with private One of our primary goals is to establish more active sector and business associates in recent months, and have cooperation with entrepreneurs, business associations in expressed our commitment to cooperate efficiently with those prevention of informal employment, and increasing the level agencies in specific areas of action. of participation of employees in social insurance system. I would particularly like to emphasize the importance of Meanwhile, we would like the employers, as well as companies non-formal employment among the most important areas of represented in AmCham to use the services of employment cooperation. Today, an important element of the state policy agencies. It would be better for companies to describe the aimed at ensuring the full enjoyment of human rights and requirements of vacancies. This would be usefeul also in terms of planning for vocational trainings. At present, it is planned to create a portal for employment services that companies will be able to place not only vacancies, but also the mentioned information. The portal will provide wide range of opportunities for employers to select and engage more effectively the workforce according to their professions and specialties. Generally, within the framework of corporate social responsibility principle, the development and implementation of active labor market programs will include itself the implementation of self-employment program, the expansion of vocational training infrastructure for persons with disabilities, social insurance, birth insurance, occupational safety and carry out extensive awareness-raising activities among the companies, strengthen the production-related dual vocational training and training capacity. I am confident that during the upcoming period all necessary work will be done to shape successful cooperation in these fields.
Our guest's biography social justice in our country, where the modern state and legal Mr. Anar Aliyev is the Head of the Apparatus at the Ministry society builds up, is a reliable guarantee of workers’ rights. of Labor and Social Protection of Population of the Republic of According to the socio-economic development course of our Azerbaijan. esteemed President H.E. Ilham Aliyev, each citizen has to Before joining the Ministry, he was Head of the Legal have decent life and decent working conditions. department (2008-2018) and Chief Consultant of the Legal In this sense, the establishment of labor relations between department (2006-2008) at the Ministry of Economy; served as employers and employees in accordance with the the secretary of the court session at the local economic court requirements of the legislation, and the prevention of informal No. 1 (2000-2006). employment are of particular relevance to the present day. As He was closely involved to drafting legislative acts in different in all countries, the situation of non-employment in Azerbaijan entrepreneurship areas, granting licenses and permits, as well is one of the social problems. As a result of illicit labor relations as reforms carried out on free economic zones. with the employer, the employer thinks that he has fallen out Mr. Aliyev has graduated from Baku State University, Bachelor of tax and compulsory insurance payments. However, he in International Law. Also, carries Masters degree and in 2006 must realize that it seriously violates labor legislation, basic received PhD. labor rights of employees, issues future pension provision Mr. Anar Aliyev was awarded with the medal "For Distinction in Civil Service" (June 19, 2012) for his contribution to the of employees, and in some cases, his social protection, and development of Azerbaijan's economy by the Decree of the severely impedes tax and social insurance receipts to the President of the Republic of Azerbaijan.
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Developing Talent Capability in Organizations
Gulnur Ismayil their business performance and obtain sustainable growth. Director of Career Management More than 70 company participants of CEB survey-report had Center, ADA University been a good example of real results through the use of talent management and measurement techniques (CEB, 2014, pp.5-6). Talent management forms a natural process of motivation è outcome. Once your talent is effectively managed, engaged and feels the value for the organization – increased Importance of talent management seems clear to many motivation and commitment will lead to sustainable growth, in leadership and managerial positions. Everyone tends good performance output and business development. And to admit that human factor is the key to success of their one of the feasible attempts in securing internal talent could businesses. A paradox: why there is then a limited attention be succession planning, which will help to nurture internal and concern about it in reality? Focus on talent management talent, increase employee engagement especially for senior always helped to survive severe economic downturns, as it level positions, where bringing outsider might be dangerous plans for future challenges, increases employee engagement and damaging to organizational culture (CIPD, 2014d, p.2). and probability of long-term commitment to the employer. Earlier succession planning was seen as the only important No any organization today is secured with high potential tool for leadership positions; now it becomes equally employees who will remain with the company for a long important for broader portion of employee population, which period. Generational changes highly influence the factors eventually leads to creation of ‘leadership pipeline’ (Wellins and expectations from the employer. If 20-30 years ago job et al., 2008, p7). Factors influencing employees’ individual market was oriented on baby-boomers with their expectations abilities are important to be able to create and to prepare of stability and long-term commitment with an employer, today talent for their next positions. Broader scope and focus not Generation-Y pursues opportunities of balancing personal only on key leadership and managers will help to reveal the goals, values, flexibility, independence and mobility, wants true talent pool in organizations and ensure success in their to take ownership of their careers and highly interested in development (Charan et al., 2011; CIPD, 2014a). All in all, having challenging work (Wellins et al., 2008, p.3). today it is inevitable to understand succession planning as not According to the Development Dimensions International Inc. only a process by which an organization can successfully fill report there are several drivers emphasizing the importance in the future leadership roles, but the process of determining of talent management nowadays, among the leading ones key capabilities and competencies critical for future business are following: ‘relationship between better talent and better success. business performance’, ‘complex and dynamic context for Importance of talent management is likely non-arguable. businesses’ and ‘talent - rapidly increasing source of value However, usually limited resources, in terms of time and creation’ (Wellins et al., 2008, pp.2-3). Competitive advantage money, are allocated. Through studies of multiple research is less about products and services companies offer, as and work on talent management, as well as, years of it is more about its talent. Today it is important to look at observations through various public and private organizations, organization’s ability to attract, develop, motivate and reward I tend to draw following conclusions and anticipated factors: its talents (Heinen et al., 2004, p.67). Increasing scarcity of competent employees, high potentials with changing 1. Many organizations consider talent management more as generational context along with expansion to the new markets, a short-term goal rather than a long-term strategy. Greater put burden on companies and overall business performances. concern remains with sustainability of current performance If decades ago the primary action in the climate of financial and immediate balance of profit and cost. In the heart of every recessions was reduction and cut on employees; today, considered approach to talent management remains the organizations aim to benefit and reserve the best talent for importance of leadership buy-in (Ready et al., 2008; Caplan, the future. More and more leadership boards are concerned 2013b). Leadership is responsible to feel the importance of with upcoming challenges. Despite the fact of increasing talent management, building its potential successors in the expectations from the senior managers, boards are highly face of upcoming challenges and changes. However, in most concerned with shortage of talent and high competition. of the cases, clear line of accountability is not established. Thus, talent management enables organizations to increase Leadership have not fully understood the necessity of
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development and layoffs. Moreover, the paradox is with immediate redundancies and elimination of resources allocated for the professional development of internal talent during either budget deficiencies or economic downturns. Most of the efforts concentrate on survival of a business at a cost of employee layoffs. This is way risky for the future of an organization when it does not have clear understanding on talent and future development generators. Latest recession in Azerbaijan has shown that we still turn to cut on employees and professional development programs at a time of economic downturn. For some reason, leadership tends to immediately optimize its financial resources through savings on salaries and less expenses on developing their internal talents. Saying that it eventually leads to a greater lost at the end. But we have also witnessed when few of the private sector companies have used this as an opportunity taking ownership for the talent management, importance to attract talent to their organization by increasing slightly of considering over the long-lasting objective instead of the pay and continuing recruitment. Consequently, it let to a a short-term goal. Too much concern with revenues and better performance by these organizations showcased when business success limit the focus of business managers on economy got stabilized. talent management strategies. Integrated talent management To conclude, talent management is inevitable for every approach which is ingrained in the culture of organization, business in order to ensure its consistent and sustainable aligned with the business strategy, incorporated in development during any challenging circumstance. Its organizational vision – that all stands for the cornerstone and integration and alignment with business objectives can help important base of understanding and consideration of talent to improve performance and ensure long-lasting results. Apart development as a long-term strategic issue by the board. As from attracting new talent, it is important to focus on internal suggested by Heinen et al. in their research “people are the talent identification and development, staffing according to key competitive edge fueling the achievement of business the capabilities and competencies important for the future. goals”, which emphasizes on inevitable conjunction between Every organization does have a certain pool of talented organizational strategy and alignment of talent management employees and there is always something happening to that with it (Heinen et al., 2004). Simply said, the way we assess talent. In most of the cases it only needs to be strategized and business performance, run SWOT analysis to identify threats considered for further appropriate development and growth in and opportunities, we should also consider human capital line with the business goals and perspectives. and competency needs for successfully overcoming those gaps and benefit from potential opportunities. Author’s biography Mrs. Gulnur Ismayil is a qualified Global Career Development 2. Accountability for talent management and lack of HR Facilitator with more than 10 years of experience in career empowerment or competency. Many still think that this role development and guidance. Mrs. Ismayil is Director of Career belongs to human resource department, which has to take full Management Center at ADA University. Gulnur was involved in responsibility for supply and management of organizational various volunteer training for the youth of SABAH Groups, ASAN talent. This is true if we see the HR as a business partner, Volunteers and others, to speak about essentials of career which is primarily responsible for integration of business planning, decision-making and career changes. Before joining objectives across the effective talent management ADA University, Mrs. Ismayil has worked for the international approaches, supporting and facilitating further processes. executive recruitment agency, Michael Page International, HR owns the actual process and cycle of talent management in Moscow, Russia. She facilitated establishment of a new starting from recruitment, development, assessment and business line in Sales and Marketing for the Healthcare and retention. However, HR cannot solely be responsible for talent Government sectors with the extensive personnel match and management. Each and every line manager involvement development for the relevant businesses. Alongside the active increases efficiency. We should no longer look on Human membership in NACE and NCDA associations, Ms. Ismayil is a Resources as a department responsible for recruitment, Board Member and Country Director at the Asia Pacific Career hiring and payroll only. This is an immediately important Development Association. partner in talent management and alignment of it with the Mrs. Gulnur Ismayil holds a degree in Area Studies and IR overall organizational objectives and vision. from Volgograd State University, a postgraduate certificate in Talent and Career Management from the Charted Institute for 3. During economic slowdown, human resources are still Personnel and Development & Middlesex University, and a the first to experience the hit through cut on professional Masters degree in Diplomacy from the University of Nottingham.
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EU General Data Protection Regulation
Zaur Allahverdizade Background Information Legal and Compliance Officer, Rapid GDPR consists of 11 Chapters and 99 Articles. Although, it Solutions generally covers the European Union countries (where the Member of Azerbaijan Bar Association Data Subject, the Controller and the Processor are located in the EU), it can be applied to organizations outside the EU, if the data on EU citizens collected and processed outside of the EU. However, the Regulation does not apply to the processing of personal data in the course of personal or After 4 years of discussions, on 14 April 2016 European household activity. Parliament adopted General Data Protection Regulation The purpose of the Regulation is to manage the personal data (hereinafter, “GDPR” or “Regulation”). Then, the Parliament of EU citizens and residents, and to create a more favorable gave the member states and any impacted organizations 2 environment for the international businesses through the years to comply with the regulation and having mechanisms common legislative act within the EU. GDPR protects the in place to protect the personal data. Provisions of the GDPR processing of the personal data of natural persons and the become effective from 25 May, 2018. freedom of movement of such data. GDPR is the most comprehensive and far reaching regulation than previously existed directives in EU in the relevant field. Definitions Although both regulation and directive are the common Main definitions given in the Article 4 of the Regulation are legislative terms in the EU, they differ from each other. as below: Regulation is a binding legislative act that covers all European Personal Data means any information related to an identified Union member states. However, directive is a legislative or identifiable natural person (those are “Data Subject”), act that sets out a goal that all EU countries must achieve. such as a name, an identification number, location data, It should be mentioned that it is up to an individual country an online identifier or to one or more factors specific to the adopting their own laws to reach for these goals. physical, physiological, genetic, mental, economic, cultural or In our Article, we will provide general information about GDPR, social identity of that natural person. it’s scope, participants, principles, goals and objectives, as Controller means the natural or legal person, public authority, well as, liabilities for violation of the Regulation. agency or other body which, alone or jointly with others, determines the purposes and means of the processing of personal data. Processor means a natural or legal person, public authority, agency or other body which processes personal data on behalf of the Controller. Processing means any operation which is performed on personal data such as collection, recording, structuring, storage, use, restriction, erasure or destruction. For example, monitoring the facilities owned by the organizations by CCTV or deleting the employee’s personal electronic files is processing. Controller and Processor There are 2 main groups of organizations covered under the Regulation, in terms of processing data: Data Controller and Data Processor. A) Data Controllers have responsibility for control over personal data, as well as for their secure storage. Controller must obtain data in the interest of the data subjects and in accordance with the requirements of the Regulation and must keep it safe and only for its identified purpose.
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some imperative norms to be included in that agreement); 3. Use of sub-processors with the consent (please note that the consent should be given for the agreement and each of the amendments and addendums to it separately) of the Controller and signing of the same type of agreement along with the relevant contractual obligations those attrackted in the agreement between the Controller and the Processor; 4. Finally, ensuring that the Processor does not deviate from the intended purpose mentioned in the agreement.
Who is Controller and Processor in the next example: Company A deals with the sale of construction equipment and keep its employees’ personal files as part of their employment contract. Company A signs a contract for the processing and storage of personal data of its employees with the Company B, which is HR software provider. In this case Company A will B) Data Processors are engaged by Controllers to obtain, be Data Controller and Company B will be Data Processor. analyze and store data on their behalf. Processors are independent persons or entities providing services to the Data Protection Officer Controllers as vendors and must act exactly as they are Control over the compliance of the Organizations with the instructed by the Controllers. Regulation is carried out by the Data Protection Officer The Data Controller is responsible to EU citizens and (“DPO”). According to the Regulation, DPO should be residents, whereas the Data Processor is responsible only appointed by the Controller or Processor who requires in front of the Controller and must support Controller in any regular and systematic monitoring of data subjects on a large compliance audits that may happen for the data. scale. DPO may be employed or contracted, but this cannot Article 24 of the Regulation sets out 4 main responsibilities for be a temporary position. The Controller or Processor must the Controller as below: register the contact information of their DPO’s in the relevant 1. Determine the purpose, volume and composition of the supervisory body and provide him/her with the necessary data to be processed; support to perform his/her duties. However, they cannot give 2. Availability of appropriate technical and organizational any instructions to DPO during fulfilment of his obligations. measures for data protection; DPO must report to the highest management of the Controller 3. Protection of data by applying the relevant internal rules or the Processor. and making those rules accessible to all; 4. Existance of Code of Conduct within the organization. Regulation defines DPO’s responsibilities as follows: All these responsibilities ensure that the Controller complies 1. Inform data subjects about their rights and raise awareness with the requirements set out in the Regulation. of the Regulation; Article 28 sets out the following responsibilities for the 2. Advise his/her organization about the application of the Processor: Regulation; 1. Implementation of security measures; 3. Make risk assessments; 2. The existence of relevant written agreement for the 4. Cooperate with the supervisory authority and be a contact processing and use of data between the Controller and person in case of investigations regarding the processing Processor, including their obligations (Regulation contains of data between the supervisory auhority and his/her organization; 5. Investigate the complaints within the organization and take appropriate actions towards them. Legal Grounds Regulation define six basis for the legitimate processing of data by organizations: 1. First is consent given by data subject for the processing of the data. Consent is voluntary for processing data for any particular purpose and can be revoked at any time by the data subject. We would specifically emphasize that consent is not given generally just one time, but for each specific purpose separately. The written consent must be clear and written in plain language and must be clearly understood by
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Notification EU Parliament determined that each member state must establish an independent supervisory authority to monitor the application of the Regulation. According to the Regulation, the Controller should report the supervisory authority within 72 hours from the moment of becoming aware of a personal data breach. Personal data breach means “a breach of security leading to the accidental or unlawful destruction, loss, alteration, unauthorized disclosure of, or access to, personal data transmitted, stored or otherwise processed”. If notification is not provided within 72 hours, then the Controller is obliged to send written explanation of the reason for the delay. At the same time, if there is a risk of personal data breach, then Controller shall inform the data subjects in written also without undue delay. the signatory; Rights of the Data Subject 2. Second is contractual necessity, whereby an organization EU citizens and residents have certain rights regarding their is or will be performing processing to fulfill a contractual personal data. obligation; 3. Data processing should be within the scope of the Regulation and requires to perform a legally binding obligation; 4. Fourth, data processing should focus on protecting vital interests of data subjects. Data is private unless you are doing harm to yourself or to others. 5. Legitimate interest means processing of data for the exercise of legitimate interests by the Controller or a Third Party shall be permitted. 6. Finally, processing should be necessary for the performance of a task carried out in the public interest. Article 8 of the Regulation covers the specific requirements for personal data of children under the age of 16. Children require special protection due to their vulnerability which should be provided by their parents or legal representatives. For this reason, when processing personal data of children under the age of 16, parental consent must be obtained.
One of them is Right of Access which is covered in Article 15 of the Regulation. The Controller must allow data subjects to access their data on request. Data provided to the subject must only be a copy, in an accessible format and for free of charge. However, excessive and frequent requests may allow Controller to charge a reasonable fee. Article 16 mentions another right of subject which is the Right to Rectification. Data subject may require the Controller to make appropriate corrections to the inaccurate or incomplete data of the subject. If the inaccurate information was disclosed to a third party, the controller must inform the third party of that correction where possible. Under Article 17 of the Regulation the data subject has the right to request the Controller to delete the personal data of the subject - Right to Erasure (“Right to be Forgotten”). In such a case, the Controller shall without undue delay delete the data of the subject and provide information to the subject
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supervisory authority before the courts of the Member State where the supervisory authority is established. Also, each data subject shall have the right to an effective judicial remedy where he/she considers that his/her rights under this Regulation have been infringed. Proceedings against a Controller or a Processor shall be brought before the courts of the Member State where the controller or processor has an establishment or where the data subject has his/her habitual residence. Supervisory authority can issue warning or reprimand to those organizations that intended processing operations are likely to or have infringed provisions of the Regulation. Besides that, the Supervisory Authority when deciding whether to impose any administrative fine and deciding on the amount of the administrative fine should treat each case individually. Depending on the extent of the infringement, the supervisory about this. It should be specifically noted here that, this is authority may impose administrative fines up to 20 million unlikely to be a highly used request as Article 7 of Regulation EUR, or in the case of an undertaking up to 4 % of the total states “it shall be as easy to withdraw consent as it is to give worldwide annual turnover, whichever is higher. it”. As per Article 20 – Right to Data Portability – of Regulation Extraterritorial Data subjects have the right to transmit the data to another The organization falls within the scope of the Regulation when Controller without any hindrance upon request. The Controller processing personal data of EU citizens or offering goods or is required to provide copy of the data in a format that services to EU countries, even though the organization is individuals can use in a normal way. Also, where possible, located outside the EU. the Controller must be able to transmit the data to the other For example, an organization based in Azerbaijan collects Controller when requested by the subject. personal data of EU citizens by employing them or another Data subject can object to a processing of their personal data example, when rendering goods or services: if the price of if objection is based on legitimate or public interest. As per the organization based in Azerbaijan is indicated in Euros Right to Object (Article 21) subject can also object to process or phone numbers are mentioned with the code +994 (this data for direct marketing purposes. Except in 2 cases, the means that you are waiting for calls from outside Azerbaijan) Controller should stop processing data when the data subject or mentions an end-user or customer in the EU as a reference. objects: in the first case if the Controller needs to process the All of these indicate the organization’s target for the sale of data based on their legal rights then objection is overriden. As goods or services is the EU market. per second, processing data can be for a greater good that overrides an individual data subject’s right. An example of this Conclusion may be processing the data about the health of the person for By virtue of the entry into force of the Regulation on 25 May the prevention of the epidemic that is dangerous to society. 2018, the Directive 95/46 / EC has lost its validity. GDPR’s The Controller is obliged to respond to requests from the adoption as a Regulation, not as a Directive, does not require data subject without undue delay and at the latest within 1 national governments to adopt national law in their own month. When there is no action taken by the Controller or the countries separately – Regulation is directly applicable to Controller denies the request, the Controller must inform the whole EU member states. data subject and to give reasons where the Controller does Author’s biography not intend to comply with any such requests. However, when Mr. Zaur Allahverdizade is Legal and Compliance Officer the number of requests is too complex and complicated, the at Rapid Solutions. He is qualified Commercial and Litigation term can be extended up to 2 months. lawyer with more than 7 years of experience in Oil and Gas Industry. Mr. Allahverdizade has recently become the Member Liability of Azerbaijan Bar Association. Every data subject shall have the right to file a complaint to Zaur has started his early career working with different local and a supervisory authority, in particular EU Member State of his international organizations. His career in Oil and Gas industry or her habitual residence. The supervisory authority shall goes back to 2012 while he started to work for Baker Hughes investigate and inform the complainant on the progress and as a Legal Operations and Contracts Counsel for Azerbaijan, the outcome of the complaint. If the supervisory authority Georgia and Turkey. does not handle a complaint or does not inform the data Mr. Allahverdizade received his LL.B degree from the subject within three months on the progress or outcome of International Law faculty of Baku State University and MBA the complaint, then data subject shall take the case against a from Azerbaijan Economic State University.
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Managing Through Reward
Rena Veliyeva pay structure and moderate use of incentive plans focused Senior, People Advisory Services, on productivity and short-term financial results. On the EY Azerbaijan opposite, innovative companies would rather operate a more flexible, open and market-focused reward aimed at long-term incentive and encouraging creative and innovative behavior. Also useful may be the consideration of stage of life cycle of an organization. For example, a start-up business usually short on cash is likely to keep pay low, offering instead long- As you may probably know, yet, most of executives in former term incentive (often via employee equity participation). Vice Soviet companies would describe the issue of considering versa, a business in decline tends towards high salaries and efficiency of the explored reward system as non-strategic. Pay short-term incentives. issues were largely influenced by tradition and government However, the consideration of general business situation policies. The compensation policy was broadly limited to pay may be not sufficient to design an effective reward strategy, administration performed by a book-keeper. because given the dynamics of our new economy, many At the beginning of 90s in the West and only recently in organizations have to be responsive to clients’ needs via Russia HR specialists start talking about reward STRATEGY innovation and be, at the same time, highly cost-efficient to and its impact on the overall success of the business. Such remain competitive on the market. Also, in the conditions of revolution to pay concept was most driven by increasing the “war for talent” one of the key success factors for a start- market competition, globalization, skill shortages and new up business may be the ability to attract the best people and, technologies that have come together to move pay to the therefore, the company should be ready to pay high salaries central role in communicating and reinforcing business goals. to them. So what makes a reward strategy successful? The analysis of the best practices show that effective reward systems must have the following three components: - they have to have clearly planned goals and well defined link to the business objectives; - there have to be well-designed pay and reward programs, tailored to the needs of the organization, expectations of employees and specifics of marketplace; - there needs to be effective and supportive HR processes in place to enforce efficient communication, implementation and maintenance of reward strategy. The initial design of reward system in a company may start from the analysis of certain reward typologies usually attributable to different business strategies. Thus, for example, cost leadership companies are likely to have low-to- medium market pay position, hire-to-fire culture, hierarchical
Therefore, when designing a reward system, it is necessary to establish a clear and sequential pathway between specific business goals of a company and reward practices to be introduced in order to fulfill them. Such pathway would include the following steps: 1. Specification of the key components of the business strategy, such as the major long-term goals, performance objectives and fundamental purpose and mission of the company; 2. Practical definition of what the company has got to be good at, what capabilities it has got to have to achieve its business strategy; 3. Determination, through the HR strategy, the cultural and behavioral norms that are required to build these capabilities;
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system is especially efficient for executive positions. The underlying concept of this system is that the determined set of strategic goals of the organization are split down by business units and for each of the goal there is a number of measurable performance indicators established. The scope of responsibilities and duties for each executive position is then considered in terms of which performance indicators are under control of the executive on the considered position. The set of performance indicators that are determined to be influenced by the considered position are established as the individual goals of the executive on this position. The amount of reward to be received by the executive is then determined 4. Design of reward programs and processes that would on the basis of evaluation of how well he managed to meet encourage the desired types of behavior; the established targets for performance indicators. 5. Design of effective communication strategy and HR processes tailored to the internal culture of the company that would be used for introduction and maintaining of the reward system. There is also a number of characteristics that a reward system should possess in order to be efficient: - every employee should have clear understanding how the reward system works; - the reward system should clearly demonstrate how the performance results of a specific employee relate to his pay on the one hand and how they contribute to the overall success of the business on the other hand; - the reward system should have a motivation impact and incentivize goals achievement; - the reward system should be flexible and adaptable to a change in business strategy; - the reward system should be perceived as “fair” by employees. Given the above considerations, the more and more companies start to explore the “management by objectives” system often supported by the use of key performance indicators in reward design. The implementation of this
Detailed design of reward system based on key performance indicators entails significant amount of work and careful consideration of business processes taking place in the company, but once established it may become a powerful means of aligning business goals and corporate values with those of an individual employee. Author’s biography Ms. Rena Veliyeva has joined to People Advisory Services group at EY Azerbaijan in 2013 and specializes in human capital management issues. The projects Rena was involved include development of graded pay structures; management assessments based on «3600» method; compensation and benefits survey, as well as HR policies and practices surveys from 2014 for Oil & gas, banking and general industry; consulting services on immigration issues to international and local clients; consultancy on personal income tax issues; audit of compensation and benefits system, as well as performance management system. Ms. Veliyeva holds a Bachelor of Philology and development of education methodology and successfully passed EY HR certification program.
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Artificial Intelligence and Future Implications for Human Capital Development
Elnur Eyvazov assistants, or computer algorithms designed to simulate Professor at School of Business, a human conversation, to recruit employees, answer HR, ADA University legal and compliance questions, or personalize learning experiences. Furthermore, a survey of nearly 600 chief human resource officers conducted by the IBM Institute for Business Value revealed that half of the survey sample recognize the power of cognitive computing to transform key dimensions of HRM, such as HR Operations, Talent Acquisition, and Talent Artificial Intelligence (AI) technology, Machine to Machine Development. learning, 3D Printing and Synthetic Biology have been Currently, businesses increasingly use automate ordering gaining popularity in recent years and they will change our and customer service, engaging customers in real time future to a significant extend. From robots serving food in through their Facebook Messenger app. Artificial intelligence restaurants to self-driving cars, these applications of artificial uses data-driven processes to make decisions about content intelligence can be seen in our day-to-day lives. Even we can for social media and elsewhere that considerable improves observe the robots that can build buildings and spare-parts productivity and results for the businesses in this area of for the plains and cars produced by 3D printers that eliminate the activity. The sales and marketing industry will transform a need for big production lines and factories. These are some considerably due to a rapidly-changing technology. of the examples that might require organizations to focus on Another situation is where the rise of artificial intelligence professional development of the human resources that will affects healthcare industry. The recent projects run by IBM meet the requirements of the constantly changing business, in the healthcare industry can be given as an example. IBM technological and competitive environment. uses Watson to transform healthcare. Watson is able to treat With the rise of artificial intelligence, several of today’s rare forms of childhood diseases, such a kidney disease in larger organizations face the issue of restructuring. Several children under the age of two. Watson can read all the medical global companies believe their organizational design is literature, academic articles and empirical research, and less than ideal, but few know how to go about remedying quickly connect patterns to provide better ways for doctors to it. The answer to this is to make sure the global workforce pinpoint treatment options. “upskills” to be qualified enough to handle fresh positions. The essential issue is to make the staff have the skill-set that will make organizations more competitive in the global Artificial Intelligence and Robots As context. Adapting to a rapidly-changing world of work will be Teaching Assistants and Professors the defining task of our time. Regardless of the nature of the A long overdue application of intelligent assistants is now industry and sector of the economy, organizations should being piloted by professors who teach online courses known invest in their employees to ensure they aren’t left behind. as Massive Open Online Courses. As the number of students If businesses and organizations ignore this reality, it might enrolling in the online courses explode, there is more work lead to some unwanted consequences. One of the examples for university professors and their teaching assistants. It is of the negative results is the fact that organizations might not only online courses where we can observe the application start losing their competitive business advantages which is of artificial intelligence and robots. It can also occur in the the highly-skilled and qualified staff. The highly-skilled and traditional class-room environment where a robot lecturer can qualified staff always helps businesses reduce the costs, time lecture in front of the large auditorium. For example, some and energy required for provision of services and production. courses were taught via the application of artificial intelligence The current and future human capital realities are exacerbated and robots at some US, German, and Russian Universities. with the rise of artificial intelligence. As a consequence, the The application of artificial intelligence technology, Jill Watson nature of work changes and transforms. at Georgia Institute of Technology, demonstrated astonishing The best illustration can be the transformation of the human results. Jill Watson can teach various graduate and resources management process where some big global undergraduate courses to a lot of students at the same time. companies and a number of startups are targeting intelligent Jill Watson was trained to operate at the level of an expert
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important is nurturing learnability and adopting new skills to stay abreast and remain employable. Organizations should invest in their employees’ transferable skills, such as problem-solving, oral and written communication and analytical skills, client oriented skills and ability to work in the diverse and inclusive environment. Specifically, organizations should encourage their staff to possess software skills, be able to apply predictive models, ability to deal with massive data, knowledge of modern programming languages, ability to understand unstructured data, intellectual curiosity and business acumen. Knowledge of business intelligence technologies might be of much important as well. providing answers to questions where she has a confidence rate of at least 97%. Although, initial impression might make us think that professors can get unemployed, it is not true. On the contrary, it might considerably contribute to the improvement of the professional output of the professors by spending more time on research and professional development. It has wide capacity to assist university professor and researchers with conducting through professional academic research. Artificial Intelligence in Consultancy Services AI will make it easier to scale learning experiences that are personalized and adaptive to the learner. This will impact all aspects of activities and operations in the consultancy services, including the corporate learning function. Artificial Intelligence technology can quickly read thousands of complex documents and cases, extracting and structuring textual information for better analysis. Some studies were conducted by Deloitte on analyzes of emerging technology and business trends. Thus, companies in the consultancy services of all sizes need to review stacks of documents for Author’s biography one reason or another. Companies and their consultants Prof. Elnur Eyvazov is a Professor of Business Law and always look for risks. They look at what kind of contracts they Business Ethics at ADA University Business School. He is also may have with suppliers or counter-parties, for example. AI a Director of the Office of Diversity and Equal Opportunities now makes it possible to do that kind of work a lot faster and at ADA University. Professor Elnur Eyvazov is an expert in more comprehensively. It completely changes the way that business law, investments, business ethics, and finance. At the kind of work is done. same time, Mr. Eyvazov is a Senior Legal Advisor with Capital Legal Services. Conclusion and Recommendations He received his LL.B degree from the Law Faculty of Baku State University. Mr. Eyvazov obtained his master degree It is really hard to imagine today and at some point in future in International Commercial Law from the Law Faculty of that any employee, manager, expert, consultant, entrepreneur Cambridge University. Mr. Eyvazov is also a graduate of Law and even public and private enterprises should be practicing faculty of Oxford University where he got his MJuris/M.Phil without artificial intelligence assisting in their practice. It’s just degree in financial, banking and corporate finance law. Mr. impossible to pick up on patterns, to pick up on trends, to Eyvazov also attended Columbia University School of Law on really monitor rapidly changing business environment without a Fulbright Fellowship where he obtained MCL degree in Law possessing the requisite skills and investing in human capital and Finance. development. Mr. Elnur Eyvazov has been recognized by Legal 500 in 2017 Those with the right skills will be at an advantage to choose and 2018 as the Next Generation Lawyer for his considerable how, where and when they work. The rate of advancement achievements. He also serves as a member of editorial and globalization cannot be offset, but we can invest in board of international journals. Professor Eyvazov also has a employees’ skills to enhance their resilience. Equally considerable experience in disability rights law.
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Personal Data in the Context of Employment
Shabnam Abilova Amina Bakhshiyeva Senior Consultant, Manager, Deloitte Legal Azerbaijan Deloitte Legal Azerbaijan
As an area, inherently involving on-going work with origin, family life, religious beliefs or persuasions, health or individuals, which in turn results in dealing with personal data, convictions of an individual are categorized in the legislation employment requires careful and mindful management of as specific personal data, which are subject to more stringent such data in order to secure a balance between fundamental protection requirements. rights and freedoms of individuals and legitimate interests of businesses. Such fundamental rights are established in the Depending on the type of access, personal data are also Constitution of the Republic of Azerbaijan (“Constitution”), classified as open and confidential (i.e. restricted for access and include, inter alia, the right to privacy of life and family and use by third parties). An individual’s name, surname and of individuals. Thus, by virtue of the Constitution, collection, patronymic name are permanently open personal data. Open storage, use and dissemination of information about an personal data are also the data that have been: individual’s private life without her consent is not allowed. • “made anonymous”, i.e., no reference is made to the name of the subject and it is not possible to identify the In this article, we discuss major legislative norms, which individual to whom the data relate; require consideration while dealing with personal data in the • designated as “open” by their subjects; or context of employment. • included in publicly accessible information systems with the consent of their subjects. The core legislative acts to be referred to by employers when Confidential personal data are the data other than open managing personal data include the Constitution, the laws of personal data. the Republic of Azerbaijan “On obtaining information” (“Law Secondly, employers should know which processes are on Obtaining Information”), “On personal data” (“Law on embraced in terms of data protection. Thus, individuals’ Personal Data”) and certain specific laws, such as the laws rights to privacy and protection of their personal data shall “On banks”, “On insurance activity” and others. In the context be observed by employers when collecting (documenting the of employment, the Labor Code of the Republic of Azerbaijan personal data obtained), processing (recording, systematizing, (“Labor Code”) also serves as the landmark for employers. updating, removing, making anonymous, retaining, disclosing, disposing and destroying) and transferring (including cross- Firstly, it is important to understand what comprises personal border transfer) such data to third parties. data. Thus, pursuant to the Law on Obtaining Information, The general rule is that open personal data do not require personal data are defined as private and family data, including maintenance of their confidentiality. In contrast to open any events, actions, situations, facts, opinions, knowledge, personal data, employers, being owners and at the same identifying directly or indirectly an individual. Such data time processors of confidential personal data must secure include, inter alia, a person’s individual features, abilities and their protection. other strains, state of health, mental and physical disability, For the purposes of this article, we consider rights and taxation specifics (except for outstanding tax liabilities), obligations of employers in the context of personal data financial transactions, convictions, individual aspects about protection during three stages of human resources family life, civil status registration acts, adoption, information management: collected during criminal proceedings or other investigations, • recruitment (job announcements and selection process); etc. Biometric data of individuals are also considered personal • employment (from hiring up to termination, inclusively); data and include, inter alia, fingerprint and palm prints, facial and image, eye and eyeball, sound fragment and its acoustic • post-employment (retention and storage of personal parameters, the results of the deoxyribonucleic acid (DNA) data). analysis, the body dimensions, the line and signature, as well as other biometric data. Data relating to race or national
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information provided in writing by such individual. In view of this, any information disclosed by candidates in their curriculum vitae, including information on their marital status and personal life could be considered to be lawfully collected by employers. As regards the references, it should be noted that according to the Labor Code, employers may send information about employees’ personality or their labor activity based on written requests from another employer or relevant authorities, as well as other parties only with employees’ consents. Employees must be acquainted with the content of the feedback unless such feedback is of positive nature. Employment According to the Labor Code, when hiring individuals, employers are entitled to request the following documents from them: • labor book (except for cases when it is the first employment of an individual, an individual is an expat or has a status of refugee or temporary displaced person); Recruitment • a document identifying personality (ID card); From the perspective of employers, it might seem that they • state social insurance card (except for cases when it is have legitimate interests to obtain as much information as the first employment of an individual); possible from candidates in order to manage recruitment • document on education (when it is necessary for the and employment processes to their ultimate benefits. position applied); Nevertheless, there are limitations in the legislation on the • medical certificate (for specific working conditions which nature and extent of information, which can be requested are defined in the legislation and job positions restricted from candidates. for individuals with HIV). Though the recruitment process is not covered by the Labor The Labor Code restricts employers from collecting additional Code, certain guidance can still be found in the Law of the data from individuals during hiring process, which are not Republic of Azerbaijan “On gender equality” (“Law on Gender stipulated in the Labor Code or do not correspond to the Equality”). Thus, in accordance with the Law on Gender nature and specifics of the position concerned. With respect Equality, in job announcements it is not permitted to seek to the said limitation, it should be noted that the Labor information on candidates’ marital status or personal life. In Code envisages specific cases when additional benefits or view of this, we believe that requesting disclosure of information preferential treatment or protection may be granted to certain related to the candidates’ marital status or personal life by the categories of employees. Such cases include, inter alia, employers does not appear to be in line with the legislation. restriction on setting probations, protection from termination, Such requirement particularly relates to the predetermined privileges during reductions, additional vacation entitlements templates of the employers used for recruitment purposes. (depending on the number of children, due to physiological Such templates should not contain mandatory requests (they conditions, for outstanding achievements with respect to can nevertheless be optional) on personal life and marital Azerbaijani nation), shortened or part-time working regime, status of the candidates. Furthermore, it is the requirement as well as, benefits stipulated in the internal policies of of the Law on Personal Data that personal data must be employers. collected only for legitimate, predetermined and declared We believe that requesting additional information by purposes and should be processed through the means employers during employment for the purposes stipulated corresponding to those objectives. The scope and nature of in legislative acts other than the Labor Code may still be in the collected and processed personal data must comply with compliance with the Law on Personal Data. the declared objectives and the authorities of the owners of In addition to the above, there are cases when certain data. Due to this requirement of the legislation, employers personal data, including those comprising specific category, may not request excessive information from candidates within must be collected from individuals within the context of their the recruitment process, in particular, where they are not able employment by virtue of the legislation, which are not covered to provide grounds for such requests. by the Labor Code. The Law on Personal Data allows It must be noted that pursuant to the Law on Personal Data, collection and processing of specific personal data when such collection and processing of personal data on any individual is mandatory under the cases prescribed in the legislation. is permitted only based upon the written consent of such As an example, compliance with state quota requirements is individual including in the form of an electronic document mandatory for certain categories of employers. Thus, when signed with an enhanced electronic signature or written employers become subject to state quota (minimum number
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changes thereto, orders related to them, including termination orders must be kept within five years by employers. Along with this, labor books of the employees not collected by them during termination of employment shall be kept for two years, upon expiration of which they shall be archived for 50 years. From the perspective of the Law of the Republic of Azerbaijan “On National Archive Fund”, documents related to personnel shall be stored for 75 years. In lack of further guidance on what is encompassed by documents on personnel, reference could be made to the “Exemplary list of documents along with their storage terms created through the activities of state bodies, departments, entities and companies” approved by the State Archive Department of the Republic of Azerbaijan (“Archive Rules”). Thus, under the Archive Rules, documents on personnel include orders on personnel (orders on hiring, of secured workplaces for employment of individuals who are termination, making amendments to the employment in special need of social protection and who face difficulties agreements), curriculum vitae, questionnaires, references, with finding a job, e.g. single and multi-child parents who bring feedbacks, employment agreements, business trip orders, up children under age, parents who bring up children with copies of personal documents, agreements on full material disabilities, individuals released from detention places and liability, attestation certificates, assessment reports, awards etc.), they need to collect additional information from either and other documents related to personal folders). Furthermore, their employees or individuals during the recruitment process the Archive Rules stipulate that application forms, curriculum in order to meet their obligations under the state quota. vitae, questionnaires of candidates not hired by entities Another example is the case when employers operate in the shall be kept for one year. The same approach has been areas subject to additional regulatory requirements, such implemented in the archive rules established for banks in as banking, insurance, etc. In those cases, employers are Azerbaijan by the Central Bank of the Republic of Azerbaijan. required to collect additional information from individuals being Despite the above mentioned provision of the Labor Code, hired to managing positions, such as certificate on absence we believe that employers should categorize employment of criminal convictions, records on absence of criminal liability agreements, any related orders and other documents issued in the past for severe and especially grave crimes against with respect to the employees as documents related to property and in the area of economic activities. Despite the personnel and keep them for 75 years as well. fact that the mentioned documents are not stipulated in the Labor Code, we believe that collecting and further processing Authors’ biography of such data in cases and in the manner stipulated in the Ms. Amina Bakhshiyeva is Manager at Deloitte Legal respective legislative acts is within the legitimate interests of Azerbaijan. She carries over five years of legal experience in employers and therefore does not violate rights of individuals Azerbaijan. Amina has advised and assisted multiple local and in the context of employment or their right to privacy and data international companies in corporate reorganization, business protection. restructuring, as well as, cross-border transfer of business Upon collection of personal data from individuals, employers issues. She has extensive experience in cross-border and local must make sure that they obtain consents of the individuals M&A transactions, including due diligence reviews, advising for each and all types of processing operations, which are on structuring M&A deals, drafting and implementation of intended to be carried out by the employers. This also includes MOUs, LOIs, SPAs in the oil and gas, construction, production, consents for transferring personal data to third parties as well manpower supply, IT and other sectors. Ms. Bakhshiyeva as cross-border transfer of personal data (e.g. within group carries LL.M in International Economic and Commercial Law companies or to head offices located outside Azerbaijan). from the University of Lausanne, and Summer School on Corporate Law from the London School of Economics and Post-employment Political Science (LSE). In accordance with the Law on Personal Data, when the purpose of collection and processing of personal data is Ms. Shebnem Abilova is a Senior Consultant at Deloitte achieved and the need for their maintenance has been Legal Azerbaijan since 2011. She has over nine years of legal eliminated, such data should be destroyed without delay. experience in Azerbaijan. Shabnam has extensive experience Despite this requirement of the Law on Personal Data, in due diligence reviews, advising on corporate reorganization, employers should observe their obligations to keep or further employment and migration law matters, court litigation, archive data, including personal data in the manner and employment law audits. She advised and assisted multiple within the terms stipulated in the archive regulations of the companies during state labor audits, employment related Republic of Azerbaijan. dispute resolutions, business restructuring as well as IP and According to the Labor Code, employment agreements, any license related matters. Mrs. Abilova carries Bachelor of Laws from Baku State University.
22 Issue 31 in focus
Concept of Modern Public Manager
Gumru Eyvazova generating new ideas, to give them an authority to improve Legal and External Affairs Executive, the business, etc. British American Tobacco To sum up, we can say that there are many definitions of modern public management which was reviewed by different scholars and politicians. However, every approach taken by each researcher represent their attitudes on basic principles proved by the decades. By modern public manager we meant the person, such as public servant who uses human Public managers can be considered as a contemporary resources, information and different financial resources in version of public administrators who are constantly trying order to improve the well-being of the citizen and in general to adapt to environmental changes by always collaborating whole community. In today’s contemporary world, public with other profit and non-profit organizations, as well as managers and agencies are functioning with each other, as with citizens and interest groups and always trying to use well as with different group of people by using the latest type technologically modern utilities. Furthermore, modern of technology to manage their obligations and delivery of the public managers can be characterized as a person who is services for the customers. competent and has a great opportunity to change the world. From my point of view, modern public managers should Given these points public manager should be a person who perform the public tasks under the certain rules and regulations can assist others in understanding the public organizations, which tend to implement public policy for the sake of whole public government and governance, public sector’s role in country and its citizens. Public managers are not similar with executive, legislative and judicial branch of the government business manager, because public manager is acting on and the way it influences the state, including economy and behalf of the whole population by implementing the public society as a whole. policy, but the business manager is acting only on behalf of In general, well qualified manager in New Public management him/herself or private organization which s/he represents. I should have freedom and shouldn’t be under any supervision think that today’s public managers have to be improved by in order to have flexibility in finding the ways to achieve the the various trainings or education in particular fields in order to goals set for them. This concept surely is in contrast with apply this knowledge to the public and private sector as every public administration model where decision making, policy sector in each country should be improved for answering to making has been guided by regulations, legislations and the conditions with the other developed countries. other procedures adopted by the government. As politicians As one of the religious leader Pope Francis said, every man, often argue with public managers on any related subjects, the every woman who has to take up the service of government, impact made by politicians on them is among the challenges must ask themselves two questions: ‘Do I love my people in of the modern management. They should stand firm and resist order to serve them better? Am I humble and do I listen to on their concept, but at the same time to respect another everybody, to diverse opinions in order to choose the best attitude as well. Thus, the modern public manager should path?’ If you don’t ask those questions, your governance will have two characteristics, the first, to be understandable and not be good. the second, to have patience to respect the political game. st Managers in 21 century work in challenging and difficult Author’s biography society and, at the same time, have a great opportunity to Ms.Gumru Eyvazova is a Legal and External Affairs Executive use new technology in accomplishing the tasks. at British American Tobacco Exports B.V. Representative Today, public and private sectors in countries vary from the Office in Azerbaijan. For many years she was experienced in sectors which existed some decades ago. It means that their a banking sector and worked as a Head of Legal Division in functions have been changed due to the changes in their some banks of Azerbaijan. She attended some trainings related dependence from the government. After the establishment of to the management as a legal manager and was a Legal new private sectors, organizations’ innovations in all areas Consultant of 2 prominent airline companies in the world such have been increased in Azerbaijan. Besides, despite the fact as Austrian Airlines Representative Office and Qatar Airways that responsibilities of the managers who work in semipublic Branch Office in Azerbaijan. She also serves as a Chair of sector are very difficult, today’s society offer great opportunity the Board of Directors of local NGO, "Khazrim" Student-Youth for their improvement in order to develop and implement a Organizational Public Association. policy aimed at improvement of the new public management, Recently, she graduated from School of Public and International including to make the services to be delivered faster and better Affairs of ADA University (LLM,2018) as well as School of Law than before, and to make it more efficient. Those opportunities of Baku State University (LLM,2007) and School of Law of Baku include providing managers with the flexible environment for State University (BSc,2004).
23 in focus
Human Capital as the Greatest Intangible Asset
Ellada Alishova staff. Being one of our core values, “One team” value clearly Group HR Manager, demonstrates our vision and approach towards our entire Nobel Oil Services staff and is based on the following commitment. “As an international company, we value and respect the uniqueness of the cultures in which we work. Wherever we operate, we have an inclusive work environment and embrace a diversity of people, ideas, talents and experiences. Our aim is to build a healthy environment and work as one team.” Nowadays, organizations more than ever before recognize the It is widely recognized that if employees are satisfied importance of human capital as a source of illimitable potential with organizations, they ensure high performance and for sustainable growth. Developing human capital is a way to corresponding returns. Employees are the public face of unlock that untapped talent which influences the growth of organizations and those who maintain its corporate culture. organizations and increase in economic performances. Satisfied employees spare no effort for creating a friendly, Employees lay the foundation for a strong and sustainable professional and productive work environment and inspire organization. If the foundation of a building is not strong others to join it. No one would want to work in a hostile or enough, it always has a risk to collapse in the light of an dysfunctional atmosphere, thus, a positive ambience makes unexpected critical situation. The same is observed in a room for new people to step in. the organizations. What makes an organization a living At Nobel Oil Services, we highly appreciate the integrity and body is its employees, whether they are junior, middle or encourage the employees to freely express their views. The senior employees. Organizations invest in employees, and fact that all compliance matters are thoroughly investigated employees help transform organizations by transforming and discussed at the compliance committee led by the themselves. company’s CEO, is a solid proof for the level of attention According to Global Human Capital Index Results 2017, the paid to employees’ observations and opinions. This, in return, world has only 62% of its human capital developed. This contributes to building trust in company’s operations. topic is under the spotlight of global businesses, national and Employees are seen as major driving force for the growth and international institutions. For instance, Baku, the capital city success of their organizations. Therefore, it is vital to keep the of Azerbaijan, has placed a bid for hosting the World Expo employees satisfied to ensure that the organization does not 2025 under “Developing Human Capital, Building A Better lose on its clients, earnings and market value. Future” theme, which manifests the significance of human With rapid and significant changes in the world, organizations capital development on a global scale. face various challenges in the field of human capital As the largest country and economy of the South Caucasus development which are not so easy to address. Currently, region, Azerbaijan has been implementing various programs we can observe following global trends and challenges as and actions to convert its oil capital into a human capital. described below: Throughout the history, Azerbaijan boasted the unique model of tolerance which gathered different cultures under the same roof and reaped the benefits of this multicultural atmosphere. Being a UK-registered company, Nobel Oil Services has been operating in the Azerbaijani market for many years. We can confidently say that Nobel Oil has made considerable contributions to nurturing local human capital in a strategically important oil & gas field in the country. Nobel Oil Services continually implements innovations in the management of personnel and attaches significant attention to revealing the potential of talented employees. We believe that developing employees in organizations is also contributing to the sustainable development of the country. Teamwork is one of our five corporate values which represent the philosophy and principles that guide our business’s conduct and relationship with all stakeholders, including the
24 Issue 31 in focus
Convergence of functions The function of managers and leaders shifted considerably from planning, directing, and controlling to governing, coaching, empowering, and leading. This new approach demands higher-level abilities and behaviors from the management perspective. Whereas in the 1990’s the major focus was management evolvement, in the early 2000’s, it was replaced by leadership-centered approach. Today, before stepping in 2020’s, we observe the convergence of management and leadership functions. In this regard, last year, we organized trainings dedicated At Nobel Oil Services, we strive to provide highly qualified to leadership and change management for a group of 35 personnel with long-term loyalty to the company. Thus, we mid-level managers within Nobel Oil group of companies. are always working to determine and develop the potential of Thus, we keep abreast of latest trends in human capital our employees. For example, rotation of employees between development and work in line with those trends to ensure department and sub-companies allows them achieving their constant development of our employees. own development and benefit the employer for a longer time within the company’s built-in capabilities. New organizational design We work closely with local Universities to provide young Executives of the new generation increasingly engage their talents with opportunities such as internship, info tours employees in decision-making process. Organizational on operation sites to enable them seeing the real work designs are on the turn to eliminate the conventional environment, gaining experience and expressing themselves. downward, hierarchical model of management while shifting to flatter organizational structure that promotes teamwork and Need for a balanced life empowerment. Skilled employees increasingly recognize the necessity of balanced allocation of personal resources in different Proactive approach for meeting needs segments of their lives, which help them stay steadily at the Organizations need to be ready to overcome any kind of height of their productivity. Organizations need to ensure challenges. Therefore, the future needs have to be determined flexibility for its people to boost the personal and collective in advance to ensure that the learning and development results. process is on the right track before the problem or challenge One of the biggest issues facing modern society is the arises. For example, if the market is unsaturated, the development of human capital against the backdrop of organization should expect emergence of new competitors growing replacement of human labor with automation in and be ready to preserve its market shares. various fields. Of course, this is a fairly broad subject. All these ongoing and upcoming trends and challenges require an integrated management by not only the Human Shortage of skilled employees and Resources team, but also the high-level management. There frequent shifts is a growing understanding that while developing the strength Until recently, employees tended to spend more than in the core competencies of organizations, we also have to ten years at the same company, and this dedication was focus on the skills and knowledge needed to sustain that considered a successful career path. But now, moving from cornerstone principles. By tracing these trends, we are able one organization to another more frequently is becoming to address them with the necessary solutions. a norm rather than an exception. Employees also tend to Author’s biography move into different positions that are not necessarily related Mrs. Ellada Alishova is an established HR professional with to each other. Flexible work practices are also undermining more than 10 years of corporate experience. Mrs. Alishova the full-time employment principles, which further becomes a joined Nobel Oil Services as Group HR Manager in 2016. Prior challenge for recruiters. to joining Nobel Oil Services, she worked as Group HR Director In the past, qualified employees were looking for stability at Synergy Group, Operations Manager at Intertek Global and reliability, which they have managed to acquire through Limited, Amec Services and other international companies. being hired by organizations. Currently, organizations face a shortage of qualified candidates, as skilled people Mrs. Alishova holds MsC in Human Resource Management from progressively tend to establish their own business or manage the Robert Gordon University in Aberdeen, BA in International smaller enterprises rather than being hired by business Relations and Law from Baku State University, and an MBA giants. Organizations have to liberalize their organizational from State Economic University in Baku. She is a member of structure to retain experienced employees and involve young Chartered Institute of Personnel and Development (CIPD) talents in regular job trainings, which would pay off in growing since 2008. Mrs. Alishova teaches Strategic Human Resource the number of skilled personnel. Management, and Change Management at Executive Education of ADA University.
25 in focus
Developed and Updated Human Capital as Reliable Economical Basis of Strong State
Sarkhan Babayev education, ensure continuity of workers’ knowledge and skills General Director, DET-AL Aluminum through training, adaptation of qualified staff to labor market requirements, encouraging companies to invest in research and development, and efficient use of existing human capital. Development of human capital is an integral part of the reforms to be made in the field of economic transformation. At present, many strategies, state programs and concepts have been put forward to advance the development of human The 21st century is characterized by new formations in capital. the sphere of economic, scientific, social and cultural As macroeconomic unit, DET-AL fulfills very important mission development of society. In this renewed formation, the key in the region-by creating new jobs in the heavy industry. role is assigned to developed and adopted labor resources. DET-AL transferred labor force from agriculture sphere to Structural modernization of economy is possible only at the industry. For the purpose of further manpower development, maximum use of human potential. Studying human potential DET-AL is closely cooperating with technical universities, the of the region assumes accurate definition for the concept of Ministry of Education and the Ministry of Economy in the field human potential and definition of possibilities in use of social of specialized vocational training. Within this program young and economic development of region. Prospects for the engineers and students possess deep expertise in respective development of the national economy of any state and the fields. DET-AL fully comprehend existence of straight degree of mobilization of the development potential depend relationship between human resources qualification level and on effectiveness of introduction and use of highly qualified its impact on company performance. personnel, technologies, new knowledge and management At DET-AL there are no limit to human resources development methods. The problem of accumulation, storage and process and realizing their skills and abilities. As show the development of human potential should become a priority experience of many years, the most useful skills are achieved state strategic task, its solution should be adequately secured, at job-site training. By this way personnel improve their since the level of development of human potential that turns professional abilities and skills. Based on young team and into human capital determines the degree of development of high flexibility, DET-AL supports very special and unique the country. ideas pertaining to innovation technologies. We firmly believe Today in the situation of globalization, the availability of human that every single step towards research and development potential plays key role in achieving the stated target values. should ensure further progress in production. For generating The elaboration and conscious application of methods of the efficient and flexible solutions it is necessary to have perfectly optimal transition from mechanized machine production to trained and skilled personnel. By converting training frequency the postindustrial stage of development highlights the way to and quality, education, knowledge, skills of personnel into generate and transfer of knowledge and abilities. improvement of financial performance and also non-financial Herein, the state plays an important role. As it is known, performance it is possible significantly develop the whole according to the President Ilham Aliyev’s decree on March company performance. 16, 2016, “On the approval of the main directions of the All these once again show the development of human capital strategic roadmap for key sectors of the national economy in the near future will be in the focus of attention. and economy”, 12 strategies on 11 sectors of national economy and economy roadmap has been developed. Author’s biography One of the targets in the Strategic RoadMap is the Mr. Sarkhan Babayev is the General Director of DET-AL development of human capital. It is not causeless as Aluminum LLC. Mr. Babayev has been in aluminum industry the human capital plays an important role in raising labor since 2002. As of 2010, he has been serving as General productivity, sustainable economic development, raising the Director of DET-AL Aluminium. He carries a degree in law competitiveness of manufacturing and service sectors, as from Azerbaijan State University and a degree in international well as integrating the country into global markets. In order economy from the International Minor Business Institution of to achieve this, it is essential to improve quality at all levels of Moscow.
26 Issue 31 in focus
Digital Transformation’s Impact on Human Capital
Kamran Karimli development, performance management and so on) of talent HR Business Partner, Antaris management. Value added by people is very important for business productivity, but it has not already been measured by IQ and other technical skills as it can be replaced by different technologies. Emotional Quotient and soft skills are more significant in today`s hyper-competitive environment. We, HR BPs, clearly understand that technical skills already is not enough, our companies need leaders, super keepers, Since its creation, human has pivotal role in company and business partners. countries’ management policy. Probably, our ancestors Moreover, HR BPs must support all other functions within underestimated human capital; yet, the fact on human has organization to develop digital firm and automating business been constant. Technological and industrial improvements process. However, it does not depend on only HR BPs. make their contributions to the changes in the role of human Digital transformation, all strategic changes, is on the CEO’s in business practices. Today’s enterprises are hungry not only shoulders, on that way HR is business partner. for people with technical skills, but also for people who have HR BPs have opportunity to close the gaps between the innovative acumen to help gain advantages themselves technology and business productivity, how the work is done. from competitors. To meet these challenges, organizations What causes these gaps between them? tend to accelerate digitization to more effectively attract and In Deloitte`s annually report (Global Human Capital Trends retain needed talent, as well as, to manage services and requirements in a more streamlined way. However, they face the difficulties to catch up technology change with business productivity. Deloitte`s annual report (Global Human Capital Trends 2017) showed the gaps between technology and business productivity. You can find graphic information below:
2017) it is reasoning that it is about human capital strategy. In addition, CEO of Alphabet Google X division mentioned that technology is increasing ever faster rate while human adaptability rises slowly. In figure 2, you can see gaps between technology, individuals, businesses and public policy. In conclusion, Technologies change the way we live, work and communicate. Everyday technologies, such as AI, mobile High growth rate in technology also influences labour market, platforms, softwares and apps are changing and improving. so labour market on itself undergoes change in an effective Digitalizing of workplace and automating business processes and efficient way. According to IFR (International Federation change game roles in modern markets and manage human of Robotics) calculation, all over the world, companies will capital. replace 1.7 million employees with robots till 2020 and this Author’s biography figure reaches about 800 million in 2030. Service sector Mr. Kamran Karimli is HR Business Partner at Antaris since and home appliances industry mostly will prefer automatic April 2018. He carries 5 years of experience in HRM and 2 workforce by five countries (China, South Korea, Japan, the years in Business Development. Now Kamran is working on USA and Germany) with 74%. several projects (ERP, BPM, HR and so on) at Antaris in terms All that facts show that we must change our management of Organizational Change and Development. Mr. Karimli studied policy, education systems and company`s competency model Business Administration at ASEU and got master degree in that we request in every function (recruitment, learning and Industrial Engineering from Qafqaz University.
27 in focus
How Activity Based Costing (ABC) Principles and Methodologies Can Boost HR Efficiency?
Narmin Huseynzadeh HR Director, Workplace
One the most important trends in the modern world is the transformation of the global economy from the post- industrial to the information society (“IS” is the concept of post-industrial society describing a new historical phase of civilization’s development where the main result of production is knowledge and information). Improvement of the economic efficiency of non-industrial areas of Azerbaijan’s development Azerbaijan’s sectoral initiative on the implementation of labor is a priority issue in the Strategic Roadmap on Azerbaijan productivity initiatives, described in the Strategic Roadmap Republic’s national economic perspective, approved by the № 3.2.4. President’s Decree on December 6, 2016. Activity-Based Costing (ABC) is a methodology that allows identifying the costs of goods or services in the business. Enterprises offering non-manufacturing service usually use this kind of approach to achieve a growth in employee productivity. For example, this system allows separate controlling of each activity of the project and of time spent by each employee on each activity. This leads to increase in control over the costs and efficiency of the workforce utilization. ABC methodology allows more accurate accounting for direct costs, indirect costs (for example, rent of office center), and hence more efficient use of labor force (for example, the salary of employees). Do we have successful ABC implementations in Azerbaijan? What are the specifics of similar implementations? The short answer is yes - for example in one of Azerbaijani Oil and Gas Companies. One of the main requirements for the international company operating in the oil sector in our country is ensuring that shareholders share internal and external costs of internal At the stage of transformation to the modern information accounting according to the Production Sharing Agreement society, efficient utilization of human resources plays an (PSA). Therefore, in order to accomplish these requirements, important role, and for this reason, the use of modern parent company’s accounting department applied ABC management systems in this sphere is an important topic. Methodology and established a service center (shared Among many methodologies that are widely spread around service). In accordance with the ABC, with a purpose of more the world, ABC (Activity-Based Costing) methodology is accurate and correct accounting, each activity of the service considered the most advanced. The ABC methodology center has been individually accounted for, the activities helps to achieve 15%-20% growth in the human resources related to each partner were individually divided, and time efficiency in the non-production areas. worked by employees’ has been taken into account on the This, in its turn, will support more effective implementation of basis of automated tables (timesheets) according to the
28 Issue 31 in focus
non-oil sector? The first reason is that knowledge of the ABC methodology is on the low level and local companies experience the lack of qualified professionals with the related knowledge in this field. Secondly, the application of ABC methodology requires huge and complex changes in information systems of enterprises. Furthermore, that may require creation of unified and integrated information system that will allow human resources’ time accounting, expenses accounting, income accounting and cost of goods identification, which might lead to high investments. The third reason is that the ABC methodology is usually applied and is more effective at medium and large size companies. However, despite the above-mentioned limitations, the global and Azerbaijani experiences show that the introduction of the ABC methodology result in at least 15- 20% increase in labor productivity, more accurate accounting, and more correct and accurate managerial decisions. What can be the contribution of implementation of ABC- based human resources accounting in development of non- production areas described in the President’s roadmap of Azerbaijan Republic’s development both for 2018-2020’s type of activity performed. Based on employees’ timesheets, and for long-term development in 2020-2035? First, the all associated direct and indirect costs are proportionally introduction of the ABC system can increase the labor allocated between partners, which ensures settlement and productivity and thus play a leading role in developing human issuance of accounts among partners. capital and creating a favorable business environment. Re- One of the questions that can arise is following - what entering of the population with low-level knowledge and changes are required in human resources accounting during professionalism into the labor market, its integration with the ABC methodology implementation? The example of effective highly qualified and skilled workforce can lead to increase functioning of the ABC methodology in the International Oil in professionalism and labor productivity of the population, Company’s Representative Office operating in Azerbaijan and this can be achieved through the introduction of the shows that there are no restrictions on the application ABC methodology. As in line with the Decree № 1897 of of this system in Azerbaijan. The question is, why ABC the President of Azerbaijan Republic dated March 16, 2016 methodology is not actively implemented in Azerbaijan, and “About confirmation of the main directions of the strategic most importantly, what are the limitations of its application in roadmap on national economy, main sectors of economy and related issues” related to the non-oil sector and outlined in the strategic roadmap of the Azerbaijani economy, this will lead to a number of changes. Introduction of the ABC methodology will result in increase in productivity of the national economy across its 11 sectors, transition to information society, reduction in poverty, social transfers and increase in minimum wage indicators to the level of developed countries, and will make Azerbaijan’s economy more competitive with the countries of the world.
Author's biography Ms. Narmin Huseyznade is an HR director in Workplace. Ms. Huzeynzade is a human resource professional with more than 10 years of executive HR experience in various organizations of Azerbaijan. Her focus is improvement of organizational efficiency through HR potential optimization. Narmin holds certified International Management Accountant (CIMA) certification, MA in business management from State Economic University and currently preparing for PH.D in the area of HR efficiency.
29 in focus
Azercell Telecom the First in the Country to Receive High International Certificate in Human Resources Management
Ziba Mustafayeva • Rewarding and recognizing high performance Human Resources Department • Structuring work Director, Azercell Telecom • Building capability • Delivering continuous improvement • Creating sustainable success Azercell applied the best international practices in people management from the beginning of its operation. All processes followed by the company and current system accord with Leading, inspiring, empowering for continuous success – the international practices. It should be mentioned that the these have constituted the basic pillars of Human Resources company has invested 23.338.153,45 USD in training & management for leading mobile operator of the country development of its human resources through the period from Azercell Telecom over the years. Nurturing and developing 1996 to 2017, which is quite a significant amount. talents, benchmarked against the European standards leads Paul Devoy, Head of Investors in People, valued Azercell’s to exceptional working environment and opportunities for win of Gold Certificate as an outstanding success: ““Investors employees here, in Azercell. in People” accreditation is the sign of a great employer, In 2018 another international institution has appraised an outperforming place to work and a clear commitment Azercell’s efforts in the sphere of Human Resources. The to success. Azercell should be extremely proud of their Company was benchmarked against the requirements of achievement.” he added. “Investors in People” (IIP) standard and awarded GOLD Launched in 1991 in the UK, “Investors in People” is the only Level of Standard as a mark of strong leadership, sustainable internationally recognized standard in people management. corporate culture and continuous development of people management practices. Notably, Azercell is the only company in Azerbaijan and the only telecom company in CIS with this level of recognition. Investors in People is a standard for people management, offering accreditation to organizations that adhere to the Investors in People requirements. Azercell met all the requirements set forth to achieve the certificate for the first time in 2004 and was awarded Silver Certificate in 2011 and 2014. Azercell demonstrated high performance during the certification process conducted in January 2018, and was awarded Gold Level of the standard as a proof of reaching international level in human resources management. IIP standard is set on 9 principles listed below. Any given organization can pass through accreditation demonstrating Author’s biography proves of IIP principles implementation. Accreditation Ms. Ziba Mustafayeva is senior executive with 15 years of included audit process with on-line assessment in a form of experience in Human Capital management and over 15 years company-wide employee survey followed by IIP assessor site of experience in people leadership. She possesses broad visit to Azercell and one to one interviews and observations experience in international and cross organizational HR projects conducted with representatives of Azercell, as well as audit of leadership, strategic HR management, advising executive team human resources practices. This certificate is the indicator of on key organizational and people management issues. proficiency of human resources management practices. Ms. Mustafayeva holds Master’s degree in International IIP requirement: Economic Relations from Azerbaijan State Economic University. • Leading and inspiring people Also, certified SPHRi from HRCI and SHRM-SCP, as well as • Living the organizations values and behaviors completed Telecom’s mini MBA program of Informa Telecoms • Empowering and involving people Academy. Recognized as Master Trainer in Management by • Managing Performance SIA Group UK.
30 Issue 31 in focus
Human Capital is the Key Issue for Business in Achieving Success in Any Endeavour
Farid Mammadov a quality education. Annually in Azerbaijan we organise the Director, Iteca Caspian international exhibitions Education and Career, which have been held since their inception with the active support of the Ministry of Education of the Republic of Azerbaijan. These exhibitions provide an excellent opportunity for educational institutions to promote themselves and their programs, and for young people the exhibition provides a chance to get acquainted with the conditions of education and admission Currently, developing human capital is being spotlighted to various local and foreign universities. Every year the throughout the whole country as an indispensable condition exhibition is visited by more than 10,000 schoolchildren, the for its development and prosperity. Therefore, companies entrants. The exhibitions are more like a CSR project, since focus their activities on the creation, development and our main goal here is not profit. As part of the exhibition effective use of intellectual capital. Iteca Caspian, which we gather, at one time and place, all interested structures, has been successfully holding exhibitions in Azerbaijan various workshops and conferences, in an effort to raise the for more than 20 years, is no exception; we recognise our vital issues of education and employment. One such event, responsibility in the development of human resources in the for example, was an author’s seminar by Academician of field of exhibitions as well, especially as our company is a Creative Pedagogy, Honorary Worker of General Education pioneer in the exhibitions industry in Azerbaijan. Sharing our of the Russian Federation, and Doctor of Medical Sciences, experience, we point out that our activity in this business has Professor V.F. Bazarniy. The topic was “Ergonomics – the two vectors: external and internal. educational and cognitive process in preschool and school We refer to an external vector as an activity directed not at educational institutions and its impact on the development and the company’s own employees, but at all human resources health of new generations of people.” The seminar was very nationwide. In our work over so many years in the market, effective and had an impact on the educational process in the we came to value the indispensable role of good basic future. It is gratifying to note that Dr Bazarniy’s methodology education on the ability to fulfil oneself, to find employment is now actively used in various secondary schools of Baku. for their abilities in the job market. Therefore, we pay great We also organised a round table on “New Initiatives for attention precisely to supporting young people in receiving Labour Market Development in Azerbaijan” aimed at creating
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the younger generation, is a great honour for every company. We also actively support the student-volunteer movement in Azerbaijan “BİR könüllü”, which operates under the Ministry of Education of the Republic of Azerbaijan. We recognise the importance of the volunteer movement in Azerbaijan, so as organisers of events we are trying to incorporate their contribution into its development. We work with volunteers to include them in our activities during exhibitions, conferences and other projects. The young people find new friends and get first hand experience in the behaviour of a business environment. The second direction is of course the development of human capital within our company. I am convinced that employees are one of the key conditions for us, as a company, to be successful. It is the employees who carry the intellectual resources of the company, and all other components of a constructive dialogue between employers and universities, intellectual capital are derived from human labour and mental discussing pressing issues in the labour market of Azerbaijan, activity. Therefore, we support their development and expect expanding the areas of co-operation between the two the fulfilment of tasks in accordance with the highest quality interests, and considering further joint initiatives to develop standards. For this we use different methods; we organise the labour market. This round table served as an impulse training involving experienced coaches and role-playing for making decisions on optimizing co-operation between potential situations within the team and look for solutions universities and employers for the benefit of the companies together. For example, we conducted training on identifying and the universities as well. and applying leadership qualities, how to think strategically In addition, we support the educational project “Build Your and act as one team in a coordinated manner, to respond Future” (“Gələcəyini Qur!”). The essence of the “Build Your quickly to changing market conditions. We conduct intensive Future” project is to support and contribute to the promotion training on time management, which greatly helps participants of school children from low-income families, who demonstrate appreciate the time factor and do everything necessary superior knowledge and abilities, to obtain higher education in efficiently. I should note that for Azerbaijan the organisation the best universities in the country. We were very enthusiastic of exhibitions is in itself a unique sphere of activity, since until about joining this a few years ago, and it should be noted that recently there was no corresponding educational institution the results to date have even surpassed our expectations. in the territory of Azerbaijan. Therefore, all employees of Many students received high passing scores and now study the company can be said to have received very specific in the best universities in Azerbaijan. We are glad the project knowledge and experience. That is, the company took on helped these talented and hardworking children to take the function of educating the first qualified personnel in the advantage of the conditions and opportunities created for exhibition field in the country. We can say that our system them, and to achieve success in life by becoming a part of of work with personnel has borne fruit. About 50% of our the modern Azerbaijani society with high intellect and ethical employees work in the company for ten years or more. I values. And the most active of those who originally were think that since Baku is a candidate for the World Expo 2025 supported by the project “Build Your Future” now themselves exhibition, professional personnel are becoming especially help the organisers in working with new candidates. It seems relevant. to me that supporting such a project, a model for the future of Thus, our experience has once again confirmed that the main mechanism for the development of human resources at any level is to increase the level of employees’ knowledge, skills and the abilities necessary for professional performance. In my opinion, the share of business participation in the development of human resources should increase. After all, only investments in the development of social, human capital and human potential will enable our republic to realize its chosen innovative path to development.
Author’s biography Mr. Farid Mammadov is Director of Iteca Caspian since 2000. Before joining to Iteca he has been working for Ministry of Material Resources. Mr. Mammadov is a graduate of Azerbaijan State Economic University and in 2007 he completed the Exhibition Management Degree (EMD), UFI.
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in focus
A Road to Staff Development
Rustam Rojkov important to mention that a properly created process provides Performance Management and T&D the employer with effective team work by means of fair and Senior Specialist, Carlsberg Azerbaijan transparent assessment, timely feedback, focus on priorities, delegation, change management, leadership development. To write the development plan for each individual employee, the manager must see the whole picture and work properly with the delta of competencies (actual level vs. target value). The next phase is the use of various tools: development in the The staff development is an integral part of any organization, workplace (70%), feedback and role modeling (20%) and, of both in the private sector and government. During the late course, training for the development of both leadership skills 90’s we saw a large influx of foreign workers (expats), who and functional ones. brought knowledge and experience to the certain areas. This Unfortunately, not all managers pay enough attention to staff was not only the oil sector, but also other industries, such development. There are various reasons for this: distrust to as manufacturing, construction, FMCG, etc. It provided an subordinates, reluctance to share knowledge (see employee impetus to the development of local specialists who soon as a competitor), being less developed, being afraid of what became capable to perform the same functions and occupy to do and how to work with such development processes managerial positions. of employees. This leads to frustration of subordinates and We know that a lot of time and effort have been allocated for thereby a decrease in overall professional level of employees staff development within western companies. For example, in any organization. in some companies in order to take a management position, The young generation is especially sensitive to the you need to start from the entry-level job. Each employee’s development opportunities that the employer provides. career growth, in other words, the career ladder takes place They are more ambitious, flexible and adaptive. They want within one company. to get quick results and are eager to get new knowledge Today, there are lots of various motivational tools for retention faster. Thus, major companies, building a strategy for the of an employee in the company. Besides the financial development of human resources based on the existing incentives (payment), there are tools as intangible incentives, trends, and sometimes setting certain trends themselves, are like employee recognition, career prospects, stable and able to offer the appropriate dynamic conditions to the young attractive working conditions. generation of specialists. First and foremost, the staff development is necessary for As the Carlsberg Group’s practice shows in dozens of the employer. It gives opportunity to ensure the commitment countries in the Western and the Eastern Europe and Asia, the of the employee, his/her high level of motivation and focus company success hinges on motivation level of employees on innovation, as well as to strengthen the succession and their satisfaction with the workplace. Therefore, we process and create a skill pool. Speaking of succession, it is consider each employee’s performance individually and create a development plan based on the needs of his/her position and interest in development in a certain direction. I believe that creating conditions for the employees not to feel drowned in the daily work routine, when they can pay attention to their own development, teaching them something new, opening horizons for them, then a high-level communication is formed between the employee and the company, based not only on the exchange of services for wages. It is this connection that drives the employees when they start to think not only within the limits of their job duties, but within the whole company, finding the most ultimate solutions in the longer term. Author's biography Mr. Rustam Rojkov is Performance Management and T&D Senior Specialist at Carlsberg Azerbaijan. Before joining to Carlsberg in 2013, he was working at HR department of AZINKA. Rustam has graduated from Azerbaijan University of Architecture and Construction as a bachelor in Construction Engineering.
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Human Capital Development and Its Impacts on Economic Growth
Gunay Shahbazova Azerbaijan has the capability to raise the human capital and PR and Membership Manager, ARPA competitiveness. By using these opportunities in the short- term perspective, it is possible to further develop human capital and increase competitiveness in our country. The relationship between human capital and development is related to the productivity of the economy, precisely its growth. The secondary education has been to pay the greatest attention in this consideration. Because these Human capital plays a significant role in raising labor investments contribute the economic growth positively. productivity, sustainable economic development, raising the Hence, the investments in primary education have a greater competitiveness in the fields of manufacturing and service, impact on the level of social development of the society. as well as integrating the country into the global markets. It is This does not mean that the capacity of social development essential to improve the quality of education, ensure continuity suggests not investing in higher education. On the contrary, of workers’ knowledge and skills through training, adaptation such investments are more than necessary. of qualified staff to labor market requirements, encouraging Higher education is an important stage in formation and companies to invest in research and development and development of human capital. Its influence on formation and efficient use of existing human capital in order to achieve development of human capital is manifested in two ways: the these goals. preparation of qualified specialists directly involved in human Definitions and approaches to understanding the nature of capital formation and their direct participation in creation, human capital are various. In order to progress the human application and transfer of new knowledge. society, the economists highlight the need of increasing These points are emphasized in Strategic Roadmap on the individual’s knowledge, abilities and skills and they focuses National Economy and Main Economic Sectors of Azerbaijan on two major components on human capital: 1) education as the form of the adaptation of high-quality personnel and training, 2) health. Ideas about the importance of training to the needs of the labor market and international human capital and investment in human capital was directly qualification classification, development of a long-term or indirectly associated with the importance of education. forecasting mechanism, development of mechanisms for Education enriches people’s understanding of themselves creating differentiated wages and incentives in the labor and the world. It improves the quality of their lives and leads market. According to the Strategic Roadmap, creating to broad social benefit to individual and society. Education university clusters can increase the effectiveness of the raises people’s productivity and creativity and promotes chain of “research-innovation”. As the quality of the higher entrepreneurship and technological advances. education system increases, better human capital and In terms of business economics, the human capital is intellectual potential will be formed and labor productivity will considered as a production factor. Managerial view sees increase. human capital as a business resource or asset which forms Human capital development has important socio-economic part of the market value of the company. The macroeconomic aspects. From this perspective, societies should intensify its approach sees human capital as one of the production investments in the human capital, if they want to influence over factors, respectively sources of the economic growth. on income distribution and poverty reduction. Investments in Factors that determine human capital such as skills human capital are made once and their impact on income and qualifications, educational levels, work experience, distribution is for a long time. Equal opportunities for education communication skills, intelligence, habits and personality must be provided for everyone i.e. even distribution of traits and creativity have a great significance and this is one human capital, which is a prerequisite for reducing inequality of the priorities in the economic development of Azerbaijan of income distribution and thus strengthening the socio- Republic. economic security of citizens. In the “Human Capital Index” released by the World Economic Inequalities and differences between the education and Forum for 2015, Azerbaijan ranked 63rd place among 124 the economy might lead to increasing unemployment and countries, got ahead of countries, such as Turkey, China, underemployment, impairment of gained qualifications and Indonesia and Kuwait. Azerbaijan has also become 37th exodus of qualified men in urban areas and out of the state. among 138 countries in the “Global Competitiveness Report” So, it is important to promote harmonious development of released by that organization for 2016-2017. It shows that the education and the economy that is useful for sustainable
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integration of disabled persons into society, including labor market will be done. At the same time, improving the coordination of the social security of employed and unemployed persons with the targeted state social assistance system, as well as implementation of appropriate measures to expand the access to unemployed and their family members to education, medical and other services, a new job for vulnerable populations the creation of places and the gradual increase of the minimum amount of unemployment benefits will be kept in focus.
Finally, there are some policy implications to increase human capital. These are: 1. Education. Basic education to improve literacy and development of the society. numeracy has an important implication for a basis of Countries with economies in transition are faced with serious human capital. economic and social difficulties. There are a number of social 2. Vocational training. Direct training for skills related to groups that are left alone and exposed to risks, especially jobs, electrician, plumbing nursing. A skilled profession unemployed people. Prevalence of unemployment remains a requires particular vocational training. major challenge for development efforts not being an economic 3. A climate of creativity. An education which enables issue only, being a difficult social problem. Unemployment children to think outside the box can increase human escalated absolutely and relatively, so one has the right to capital in a way that ‘rote learning’ and an impressive say that it is a major economic and social problem of states accumulation of facts may not. in transition. In the case of Azerbaijan, “State Program for the 4. Infrastructure. The infrastructure of an economy will implementation of the Employment Strategy of the Republic influence human capital. Good transport, communication, of Azerbaijan for 2011-2015” ensures the consistency of the availability of mobile phones and the internet are very state policy in the sphere of population employment. This important for the development of human capital in program envisages stimulation of labor force, formation developing economies. of efficient business environment, deepening of structural 5. Competitiveness. An economy dominated by state reforms, further increase of investment activity and ensuring monopolies is likely to curtail individual creativity and high level of development of human capital. entrepreneurs. An environment which encourages self- The State Program also includes a number of tasks, such employment and the creation of business enables greater as strengthening the macroeconomic stability in the country use of potential human capital in an economy. and entrepreneurship development, maintaining inflation at an acceptable level, implementing measures to increase Based on the principles mentioned above, human capital competitiveness of domestic industry products in the global development and the role of knowledge in economic market, it is expected that some of the revenues from oil development will be fully supported in Azerbaijan and will exports will be focused on development of human factor. result in faster rate of development of the society, sustainable At the same time, the above-mentioned State Program development of society, equitable distribution of development implements special measures to ensure the social protection benefits. It will be focused on developing human capacity, of unemployed persons, ensuring the employment of improving the quality of human capital, productivity, the persons who have difficulty employing, ensuring economic institutional and business environment. In addition, the incentives for entrepreneurship, in particular small and infrastructure will be created, the efficiency of the coordination medium enterprises, as well as those involved in individual between the educational process and the training of qualified labor activities, to simplify classification of qualifications and personnel, the labor market and the business sector will be specialization in this area, and to improve the regulation of enhanced, the investments on the innovation sector will be internal and external migration processes in order to align enhanced, cluster initiatives will be supported and the main with changing market requirements. priority will be identified for increasing the labor productivity. The State Program also intends to accelerate the development of employment of socially vulnerable population Author's biography groups. Assistance to employment of persons with disabilities Mrs. Gunay Shahbazova is PR and Membership Manager for this purpose, development of entrepreneurship and self- of Azerbaijan Accountants and Risk Professional Association. employment among women, provision of vocational training Before joining to ARPA, she was doing PR work for construction and additional education for unemployed and employed companies and banks. Mrs. Shahbazova is a graduate of women, increasing employment of young people, ensuring Azerbaijan Architecture and Construction University.
35 member contribution
Coming Out of the Shadows: How Azerbaijan is Combating its “Black Market”
Alena Edisherova Murad Namazov Senior Manager, Financial Advisory Senior Consultant, Financial Advisory Services group, Deloitte CIS Services group, Deloitte Azerbaijan
A June 2017 survey by the UK-based Association of peers that play by the rules. Thus, unscrupulous players can Chartered Certified Accountants (ACCA) ranks Azerbaijan squeeze their more transparent competitors out of the market. No. 1 worldwide for the size of its “shadow economy”, which Finally, the degree of bureaucratic “red tape” that businesses accounts for fully 66.12% of the country’s GDP. Forecasts face also plays an important role in the scale of the “shadow show a positive trend, however, with the “shadow economy” economy,” especially in developed countries. expected by 2025 to have shrunk 13% compared to 2016.1 In the case of Azerbaijan, however, one must additionally acknowledge the lingering baleful legacy of the Soviet era, What is the “shadow economy”? which has not been conducive to fostering an overall culture Researcher Friedrich Schneider and his colleagues define of tax compliance in the country since independence in the “shadow economy” (also known as the “black market” or 1991. Indeed, for some Azerbaijani companies, paying “underground economy”) as “those economic activities and minimal taxes or no tax at all is still simply looked upon as a the income derived from them that circumvent or otherwise normal business practice. So, in parallel with such technical avoid government regulation, taxation or observation” measures as reforming tax rules and tightening up controls, (Schneider et al. 2010). They further highlight the primary the government and other interested stakeholders clearly motivating factors that compel economic actors to go into the must continue efforts to foster a culture of tax compliance and shadows, including as a means of: fiscal transparency within the domestic business community. • reducing tax liability or evading paying taxes altogether; • evading mandatory social security contributions; • getting around the need to observe legally mandated labor standards, such as the minimum wage, maximum working hours, and occupational safety and health regulations; • avoiding the need to comply with certain, potentially onerous administrative procedures, such as completing statistical questionnaires or other official forms.
Those countries with the lowest metrics for “black market” economic activity in 2017 (as a percentage of GDP) were the United States (7.69%), Japan (9.89%) and China (10.17%). It is generally believed that high tax rates represent one of the primary reasons why illicit business practices initially develop and take root over time. As a general rule, the higher tax How to “cook the books”2 rates are, the greater share that the “underground economy” What differentiates transparent (or “white”) accounting from occupies in the larger economy overall. This is because fraudulent (or “black”) accounting is quite simple. Transparent companies that do business “in the shadows,” and thus pay accounting entails full correspondence between a company’s less tax, gain an unfair competitive advantage over their business transactions and its tax returns. In contrast, “black”
1. http://www.accaglobal.com/sg/en/technical-activities/technical-resources-search/2017/june/ 2. http://www.accaglobal.com/content/dam/ACCA_Global/Technical/Future/pi-shadow-economy- emerging-from-the-shadows-the-shadow-economy-to-2025.html report.pdf
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actual quantity sold when posting the sale to its accounting books. b. Dead Souls and their “gray salaries”: In this fairly common scheme, a company pays salary to fake “employees” that do not actually work for the organization but exist on paper only. Most often, this scam is carried out by drawing up hiring requisitions and other official employment documentation for non-existent employees, whose actual salaries are then pocketed by the fraudsters. The signatures of such “make- believe” employees are forged. Thanks to the vivid example set by Gogol’s classic novel Dead Souls, life continues to imitate art as illustrated by the widespread prevalence of this particular fraud scheme right up to the present day. Very often, to create the appearance of transparency in payroll procedures, employees will receive two salaries: an official salary, which is subject to tax, and a “gray salary” paid out in a “cash envelope.” As a rule, the greater number of staff that a company employs, the less likely that they are paid in “cash envelopes,” simply because the authorities are more likely to learn of such illicit “gray salary” schemes if they involve a large number of employees, some of whom will inevitably talk about it, thus leaking information that will eventually reach the tax office. c. Fictitious “consulting” or other services: In this classic scam, the tax-dodging company concludes an agreement with a “fly-by-night company,” usually a consultancy services agreement or other non-material agreement, e.g. for the purchase of software. Then, the tax-dodging company pays the “contractor” via bank transfer. After the contracted work is purportedly performed, the “fly-by-night company” submits a bogus report on it to the tax-dodging company; however, no actual work has in fact been done but exists only on paper. (Such disreputable counterparties are often labeled “fly-by-night companies” because they typically disband and disappear right after the deal is done, taking all relevant information on the transaction and parties involved accounting procedures may be aimed at: with them.) The true purpose of this scam is as a vehicle for i. illegitimately reducing a company’s actual income for tax evasion purposes, specifically as company earnings may be subject to corporate income tax and VAT; ii. making unofficial, under-the-table payments for expenses that are not allowed by the tax authorities; iii. illicitly reducing an employer’s liability for paying mandatory social taxes on employees’ wages, salaries and benefits.
The most commonly used schemes for “cooking the books” are: a. Underreporting revenues, which remain hidden from the tax authorities: This scheme is a rather straightforward exercise for those companies with significant cash-based transactions, but can be more complicated for those businesses whose customers pay them mainly via bank transfers. For example, a hotel operator can easily conceal cash receipts from guests while claiming that the vacancy rate was high. Another scenario might be when a company records lower-than-usual revenues on existing customer orders by applying discounts to sales prices or reducing the
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lower productivity, impaired reputations, and poor employee morale and motivation, all resulting from corporate fraud.3
Azerbaijan is taking on the “black market” and bringing it out of the shadows As part of its anti-black market initiatives, the Azerbaijani government is currently making a concerted effort to combat the practice of using “cash envelopes” for salary payments in the country. Leading this effort are the Ministry of Taxes and the Ministry of Labor and Social Protection of Population. As well, the government is waging an extensive campaign to combat “under-the-table” accounting and its various manifestations. Mikayil Jabbarov, who was appointed as Azerbaijan’s Minister of Taxes in December 2017, has issued a statement on the development of a new strategy for the Tax Ministry, in which he stated: “The number of tax audits will be reduced, but controls will be tightened; ‘under-the-table’ accounting will be abolished [and] the ‘shadow economy’ will be eliminated.”4 He also highlighted that fostering healthy relations between the tax authorities and taxpayers is one of the key objectives of the Tax Ministry’s new strategy. “We will train new people, who will look at businesses not as victims, but rather as partners,” the new Tax Minister said. These initiatives are certainly encouraging and give grounds for optimism, which is potentially reflected in the positive forecast trend reported in the 2017 ACCA survey. That said, however, as long as more than half of all business transactions in the country continue to be conducted “in the shadows,” it is critically important to help contemporary Azerbaijani businesses transform themselves by encouraging them to adopt long-term, step-by-step action plans for becoming open and transparent enterprises. the tax-dodging company to receive cash funds back, which are then transformed into “black” cash that is unaccounted Authors’ biography for. The amount of “black” cash is equal to the non-cash Ms. Alena Edisherova is a Senior Manager in the Financial payment minus a so-called “commission” that the “fly-by- Advisory Services group at Deloitte CIS, where she leads night company” deducts for its services as a conduit, which the Forensic and Dispute Services practice in Georgia and is usually 2-3% of the fictitious contractual amount depending Azerbaijan. She has more than 10 years of cross-disciplinary on the currency of the transaction. experience, having led numerous fraud investigations, as well as corporate intelligence, compliance and fraud risk management The “shadow economy” is an ideal environment for fraud assignments for clients in various industry sectors. Ms. Alena and corruption Edisherova carries Master’s Degree in Economics – Financial In conclusion, we should acknowledge that senior corporate Management, Plekhanov Russian University of Economics; executives who seek to cut corners very often dig their own ACCA, Member of the Association of Chartered Certified graves by taking illicit actions that they believe will benefit Accountants (ACCA), UK; CFE, Member of the Association the business, but which only end up harming it. Business of Certified Fraud Examiners (ACFE), UK; Russian Certified owners who attempt to economize by failing to maintain Auditor, Ministry of Finance of the Russian Federation. properly transparent accounting or by knowingly paying less tax than they legitimately owe may face serious risks, right up Mr. Murad Namazov is a Senior Consultant in the Financial to forfeiting their assets. The lack of transparent accounting Advisory Services group at Deloitte Azerbaijan and a member and reporting can foster the ideal environment for committing of the Forensic and Dispute Services team. He has more than corporate fraud against the interests of shareholders as well four years of experience in conducting fraud investigations, as society at large. Research by the Association of Certified developing internal controls, and performing internal Fraud Examiners (ACFE) has revealed that on average the investigations for clients operating in diverse industries. Murad typical organization loses 5% of revenues every year due holds Masters degree from the University of Economics. to fraudulent activities. In addition to lost revenue, such 3. http://www.acfe.com/rttn/docs/2014-report-to-nations.pdf situations can lead to various unfavorable outcomes, such as 4. http://www.bbc.com/azeri/azerbaijan-43041542
38 Issue 31 AmCham Azerbaijan About Us The American Chamber of Commerce in Azerbaijan is a private, non-profit business association supporting and promoting the interests of business in Azerbaijan.
Established in 1996, AmCham is composed of over 290 members and associates active in every sector of the Azerbaijani economy. We represent 80% of all foreign investment, as well as a significant portion of local investment which allows us to promote American, Azerbaijani and multinational corporations. This includes leading companies in Energy, Banking, ICT, Legislative/ Financial Consulting, Professional Services, Education, Real Estate Development, Health, Transportation, Travel and Production fields. An active and positive influence in Azerbaijan, we conduct our mission with integrity and respect for the country, observing all local laws and insisting on the highest ethical standards in all relationships and transactions. To apply Membership
Why join? To apply for affiliation with AmCham, There are two types of affiliation with a candidate must submit a written AmCham: Member and Associate. Key member benefit – application in the form adopted by Member status includes voting best networking opportunities in the Board of Directors. Membership privileges and eligibility for Board and Azerbaijan! applications are available at the committee chairmanships in addition AmCham office or on our website at to the privileges granted to Associates. As a member of AmCham, your www.amcham.az The application For affiliation as a Member, a candidate company has access to a vast network form should be completed and sent to must be a legal entity, registered and of business information and contacts in our office with the company registration doing business in Azerbaijan and be Azerbaijan and in the US government, certificate issued by the Ministry of in good standing in the community, as as well as valuable information on US Justice of Azerbaijan. determined by the Board of Directors. businesses across Europe through A candidate meeting the objective and A legal entity, branch or representative ECACC (European Council of American subjective requirements for affiliation office of a legal entity is eligible to Chambers of Commerce) and US with AmCham is accepted as either a be affiliated with AmCham as an Chamber of Commerce. Member or Associate upon receiving Associate, subject to the Board of an affirmative majority vote of the Directors’ determination of good Additional Member Benefits include: Board of Directors and paying the first standing in the community. year’s fee for the candidate’s category Associates are eligible to participate in • Annual Employee Salary Survey of affiliation. various activities; receive our regular • Quarterly Inflation Survey To maintain affiliation with AmCham, publications, including the Membership • AmCham Membership Directory Members and Associates must Directory, Annual National Employee • AmCham Resource Library continue to meet our eligibility Salary Survey and Quarterly Inflation requirements, be in good standing in Survey. Associates, however, are not For more detailed information please the community, and be current with all entitled to vote or serve on our Board visit our website www.amcham.az financial obligations to AmCham. of Directors.
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Business Events Roundtable Discussion on “Building Trust in Paying Taxes” On June 28, AmCham in Azerbaijan organized a Roundtable Discussion on “Building Trust in Paying Taxes” featuring the participation of the Minister of Taxes of the Republic of Azerbaijan, Mr. Mikayil Jabbarov. The event became a contribution to improvement of tax administration and communication between taxpayers and tax authorities in Azerbaijan and a chance to get the first-hand information on tax policy-related issues. Mr. Nuran Kerimov, President of AmCham Azerbaijan in the welcoming speech expressed gratitude to the Minister of Taxes and his team for the commitment to an open discourse with the business community. Mr. Mikayil Jabbarov, Minister of Taxes, acknowledged the importance of ensuring a sustainable dialogue between the tax authorities and the private sector representatives. In their turn, AmCham The Discussion covered a number of topics, including ways members were enthusiastic in asking questions of the of improvement of business climate, ensuring transparency common business community concern from the Tax Ministry and improvement of tax legislation. representatives and the Minister himself. The event took place with the support of BP and SKN The Roundtable Discussion was held in an interactive form. Electrical Services.
40 Issue 31 AmCham Azerbaijan
Minister of Labour and Social Protection Chairman of the State Customs of Population, Mr. Sahil Babayev, met with Committee, Mr. Safar Mehdiyev, met with representatives of AmCham Azerbaijan representatives of AmCham Azerbaijan On July 5, Minister of Labour and Social Protection of Population, Mr. Sahil Babayev, met with representatives of AmCham Azerbaijan. “One of our main goals is to set up active cooperation with entrepreneurs in the implementation of state policy in the field of labor and employment, improvement of labor legislation, as well as preventing informal employment,” said Labor and Social Protection, Minister Sahil Babayev. The Minister emphasized that the role of private sector in national economy has grown substantially as a result of President Ilham Aliyev’s social-economic development strategy with state support to entrepreneurship, improvement of business and investment environment, as well as transparency in the On June 1, Chairman of the State Customs Committee, country. Lieutenant General Mr. Safar Mehdiyev met with a delegation led by Executive Director of AmCham, Mrs. Natavan Mammadova. Chairman of the State Customs Committee Mr. Safar Mehdiyev expressed his satisfaction with the open dialogue and development of mutual business relations in Azerbaijan between AmCham and the State Customs Committee. Mr. Mehdiyev recalled the meetings between the leadership of the State Customs Committee and members of the Chamber, stressing that the Committee attaches great importance to cooperation in all spheres of customs. Speaking about the purposeful reforms in the country under the leadership of President H.E. Ilham Aliyev, the development of non-oil sector and growth of export potential, the Chairman of the Committee also spoke about the work done in the field of operations of customs, the reforms in and the impact of Noting the measures taken to ensure employment rights, as these measures on improvement of the trade environment. well as, preventing informal employment, the Minister said At the same time, as a result of recent reforms in the customs that it would be beneficial to conduct active cooperation with system of Azerbaijan, it was reported about the simplification AmCham Azerbaijan in this area, in order to increase the of the registration of import-export operations, increasing the level of participation of employees in the social insurance number of electronic services, and the work carried out in line system in general. He said that proper and purposeful with the international standards. Safar Mehdiyev also said organization of work with employers in improving the quality that at present, efforts are being made to conduct customs of employment services is one of the important conditions. business in accordance with international standards, as Requirements for labor force should be noted in detail well as to improve the efficiency of customs services. He when employers, including AmCham Azerbaijan, have emphasized that the SCC leadership was interested in been granted vacancies for employment agencies. These ensuring transparency in organization of customs affairs, and requirements provide information on what professions are noted that they can allow monitoring Azerbaijani customs by required for the workforce; for organizing vocational training both AmCham members and other consulting companies. courses, as well as development of professional standards. Executive Director of AmCham, Mrs. Natavan Mammadova, President of AmCham Azerbaijan Mr. Nuran Kerimov noted said that they attach great importance to cooperation with that the reforms carried out in the activity directions of the Azerbaijani Customs Service and stressed the importance Ministry and the work done to regulate the labor market of mutual cooperation to deepen these ties. The Executive based on legislative acts. He said they were pleased Director noted that the efforts of the State Customs Committee with close cooperation with the Ministry, adding that this in the expansion of customs - business cooperation were cooperation also included improving the labor legislation. highly valued. Mrs. Mammadova also expressed her Representatives of the Chamber noted that such meetings, satisfaction with the State Customs Committee’s commitment allowing for mutual exchange of information and discussions, to customs offenses, as well as counterfeit and smuggling as well as providing relevant proposals, serve to strengthen of goods, saying that joint work of all relevant bodies is social dialogue. necessary in solving this problem.
41 AmCham Azerbaijan
Social Events 23rd Annual Independence Day Picnic
More than 500 people attended a festive picnic on the occasion of the 242nd Anniversary of the U.S. Independence Day on June 30, at Mambo Beach Club & Restaurant. Year by year
we are trying to make each next Picnic even more spectacular than before, and this time it was an amazing celebration of summer uniting business community representatives with their families and friends in a unique relaxed atmosphere.
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Taking the momentum, on behalf of AmCham Azerbaijan, let me once again extend a heart-felt gratitude to generous sponsors of the event. We highly appreciate the efforts which each of them has contributed to make the event really successful. It was only through their contributions that we were
able to make this Picnic an unforgettable experience. As a result, this was truly a fantastic evening full of great moments, delicious food, incredible shows, gorgeous fireworks and many more thanks to their immense support and commitment. Thank you all for coming and sharing the great moments of the Picnic with us!
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Amcham Members Luncheon
foreign investment to our country, which in turn stipulates a 22 June flexible migration management. Mr. Huseynov noted that the dialogue with the business community has widened with the aim of getting suggestions and comments concerning the activities of the SMS, aligning work of the Service in compliance with the current requirements, as well as attracting foreign investment to our country. He also expressed hope for AmCham member- company representatives who would also be represented in the Consultative Board to be set up by the SMS. He reminded about the first meeting with the Chamber, when he expressed support for implementation of this project with their active participation in the discussions. He said that the thoughts and opinions reflected in “White Paper”, “EU Business Climate Report Azerbaijan” and other documents were of great importance in view of reforms for improvement of the business and investment environment in our country, saying that the proposals have been analyzed in detail and reviewed by the Service. Mr. Huseynov invited companies operating in Azerbaijan to pursue a nationalization policy by providing trainings to
On June 22, AmCham organized its monthly members’ luncheon, featuring participation and speech by Mr. Vusal Huseynov, newly appointed Chief of State Migration Service (SMS) of the Republic of Azerbaijan. This Luncheon was also a unique opportunity for AmCham members to learn on private sector investment opportunities and challenges from Ms. Tara Blake, Director at the Finance Department at OPIC (Overseas Private Investment Corporation). She made an overview of U.S. investment opportunities in Azerbaijan, outlined most attractive sectors and industries for investing, as well as emphasized the government-initiated incentives, which contribute to inviting American private capital into Azerbaijani economy. In addition, the Luncheon featured several member presentations. Around 150 participants attended the event, including representatives of diplomatic corps. nationals in order to meet the need for qualified personnel Mr. Vusal Huseynov expressed his gratitude for the opportunity and increase the employment of the local population, as well to have a face-to-face dialogue with business representatives. as to utilize local labour resources effectively. The Chief of the He emphasized that SMS is one of the first points foreigners Service added that the works on facilitation of relevant laws address when arriving in the country. Therefore, and has been continued as well. since the development of tourism and business climate is At the end of his speech, Mr. Vusal Huseynov thanked the directly related to migration issues, ensuring transparency guests and the representatives of AmCham Azerbaijan and convenience are among the key priorities of the State for their invitation, stressing out the importance of regular Migration Service. meetings between the Government and the business The Chief of the Service stressed that large-scale and community and applauded the efficient work carried out long-term foreign investments require more favorable aimed at further development of the country’s business business environment. Large-scale initiatives, major environment. Afterwards, the State Migration Service Chief infrastructure projects, establishment of Alat Free Trade provided detailed answers to the questions of the Luncheon Zone, commissioning of Baku-Tbilisi-Kars railway and Trans- participants. Anatolian Gas Pipeline, construction of International Sea AmCham Azerbaijan expresses the gratitude to Princeps Trade Port have given a special impetus to attraction of Legem LLC for hosting the June Luncheon.
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Committee Highlights Travel, Hospitality & Tourism Committee Meeting On July 10, AmCham THT Committee hosted its regular meeting. Mr. Farid Isayev, Chairman of the THT Committee opened the meeting by welcoming the audience and announced the agenda. He introduced Mr. Husseyn Atakishiyev, Vice Chairperson of the THT Committee and guest speaker Mr. Nahid Baghirov, Chairman of Azerbaijan Tourism Association (AZTA).
BP Azerbaijan, and wished success for the next season. Later, Ms. Novruzova passed the floor to Ms. Lala Abdurahmanova, ICA Certified Coach, who would facilitate the session. The meeting was dedicated to Cross-Cultural Awareness. Representatives of different countries will share their experience in Azerbaijan. Ms. Abdurahmanova introduced panel members – Mr. Carter Wilbur, US Embassy; Mr. Donald Taylor, BP; Mr. Shintaro Nakano, Inpex; Ms. Avital Rosenberg, Israel Embassy; Mr. Chris Andre, TISA by giving Then, opening remarks were made by Mr. Baghirov to brief the brief information on their education and career life. Questions THT members on Tourism Association and recent initiatives. about their first impression in Azerbaijan, what surprised During the speech, he informed that this year tourists mainly them, the difficult points to be here, difference and similarity from Iran, Arab countries, Uzbekistan, Kazakhstan and other in traditions etc. were answered by guests. Session was in a CIS countries came to celebrate holidays in Azerbaijan. format of active discussion, so presenters were in discussion Moreover, there was an increase in the number of tourists who with the audience and happy to answer all questions related came from Arab countries for the holiday. He also highlighted to their experience. that AZAL became a member of AZTA in parallel to the board of the Association, where it will coordinate the activities of air transport. AZAL’s activity within the organization means the formation of tripartite coordination of activities of the main participants of the tourism industry in the country: tour companies, hotels and aviation.
Human Resources Committee Meeting On June 08, AmCham HR Committee hosted its closeout meeting for this season. Mr. Jamal Hasanov, Audit Director of the Deloitte, opened the meeting by welcoming the members of the Committee and expressed their gratitude for hosting this meeting in their office. He also provided information about safety induction to notify all participants on emergency precautions. Then, Ms. Leyla Novruzova welcomed the audience and Later, Mr. Nuran Kerimov, President of AmCham Azerbaijan, informed that this is the last committee meeting which led thanked to Ms. Novruzova for her inputs to HR Committee by her. She introduced the newly appointed HR Committee during 2 years and presented a plaque in appreciation for Chairman Ms. Elnara Mammadova, HR Operations Manager, outstanding and dedicated service.
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New to AmCham Tax & Customs Committee Meetings Regular Members
On June 13, AmCham Tax & Customs Committee conducted its regular meeting for this month. Ms. Arzu Hajiyeva, Chairperson of the Committee opened the meeting by welcoming participants. Afterward, Ms. Hajiyeva announced that this meeting was devoted to the preparation of the Tax Round Table with Mr. Mikayil Jabbarov, Minister of Taxes of the Republic of Azerbaijan. She briefed information about the conference. Ms. Natavan Mammadova, Executive Director of AmCham, also provided information on the conference and asked participants to be active during the process. They have encouraged participants to share recommendations on issues which they face during the work process. Then, Mr. Jeyhun Mammadov, Deputy Chair of the Committee, informed the second part of the conference, which would be Q&A session, through a new electronic program.
On May 24, AmCham Tax & Customs Committee conducted its regular meeting for this month. Ms. Arzu Hajiyeva and Mr. Jeyhun Mamedov, Chairperson and Deputy Chairperson of the Committee opened the meeting by welcoming participants. Afterward, Mr. Mamedov introduced guest speakers from Customs Committee, Mr. Igbal Babayev, Chief of Head Department of Performance Measurement and Development programs and Mr. Turgay Farzaliyev, Chief Inspector of Associate Member Financial Services and Currency Control Headquarters. Mr. Babayev informed the members on on-going work of two commissions set up at the Customs Committee aimed to analyse and improve Customs legislation. He briefed on package of proposals which had already been prepared. The proposals provide for the amendments in the field of simplification of customs procedures. It is also planned to introduce the amendments regarding facilitating trade, import-export operations, and reduction of time of customs procedures.
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AmCham Legal Update
TAX AND FINANCE activity without establishment of a legal entity shall have Amendments to the Law of the Republic of Azerbaijan employment contract with at least one professional accountant. on Accounting Professional accountant is the person who successfully According to the Amendments, the main goal of the state passes an exam organized by the State Examination Centre, regulation on accounting in the Republic of Azerbaijan is obtains a professional accountant certificate and is a member to ensure the preparation of financial statements based on of professional accounting organization. International Financial Reporting Standards (IFRS) for all The relevant certificate is provided to persons who type of entities, including Small and Medium Enterprises, successfully passed professional accounting examination Public Sector, and accounting rules and maintenance of and registered by the Ministry of Finance. Professional accounting records in the country. At the same time, with accounting organization is a non-commercial organization these amendments, the National Accounting Standards and consisting of professional accountants and accredited by the the simplified accounting rules for small entrepreneurs were Ministry of Finance. In the Amendments, there will be a state removed from the Law. According to the Amendments, tax supervision intended for accounting subjects in respect of reports submitted to the tax authorities by commercial and their accounting processes during state financial supervision non-commercial entities in accordance with the Tax Code of and tax audits carried out by Ministry of Finance and Ministry the Republic of Azerbaijan are not substitute for the financial of Taxes, respectively. In certain accounting subjects (credit statements submitted according to the requirements of the organizations, insurance companies, investment funds and Law. Additionally, according to the Amendments, chief their management, as well as persons providing licenses for accountants of the following entities should be professional securities market), the state supervision will be implemented accountants: by the authority established by relevant executive power. In 1. Legal entities, which controlling interest (stocks) of shares addition, a number of new definitions have been introduced belong to the state; into the Law together with amendments to certain definitions. 2. Other public interest entities, except the legal entities with securities traded at the stock exchange; The Financial Monitoring Service has been established 3. Large Enterprises (an entrepreneur with AZN 1.250k and in Azerbaijan more annual income, or 125 or more employees); President of the Republic of Azerbaijan H.E. Ilham Aliyev 4. Public legal entities publishing their annual or consolidated signed decree on “Establishment of the Financial Monitoring financial statements and state-funded organizations. Service of the Republic of Azerbaijan” on May 25, 2018. The legal entity rendering accounting services to the According to the decree, the newly created Financial above-mentioned persons on contractual basis should Monitoring Service (“Service”) is a public legal entity financed have an employment contract with at least two professional from the state budget, implementing unified regulation and accountants and individual engaged with an entrepreneurial control for prevention of laundering of money and other assets
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obtained through criminal activity, combating the financing of For the purposes of improving the supply of people with terrorism, and coordinating the activities of the relevant public housing, increasing opportunities to receive mortgage loans, authorities and institutions for the specified purposes. and minimizing the risks of mortgage and credit and guarantee In accordance with the decree, the Presidential Administration mechanisms, the President of the Republic of Azerbaijan has been instructed to prepare the draft charter of the has signed the Decree on “Additional Measures to Improve Service and submit it to the President within one month. The the Activity of the Mortgage and Credit Guarantee Fund Cabinet of Ministers has been tasked to submit proposals (“Fund”) of the Republic of Azerbaijan” as of 1 May 2018. By to the President on adjusting the laws of the Republic of virtue of the Decree, Rules on “Procedures for provision of Azerbaijan regarding the establishment of the Service within guarantees on mortgage loans issued by the Mortgage and three months. In line with the decree, the Ministry of Justice Credit Guarantee Fund” has been approved. According to also shall ensure compliance of normative legal acts and the Decree, the Cabinet of Ministers must present within a normative acts of central executive authorities with the decree month, proposals regarding the exemption of the Fund from and inform the Cabinet of Ministers. tax liabilities, as well as the exemption of authorized banks and borrowers from tax obligations when the Fund makes Rules on Limits and Procedures of providing information payments on guarantees. Under the Decree, the Cabinet on financial transactions performed by foreign legal along with the Fund should define the volume of the funds and natural persons in the territory of the Republic of that will be needed to grant subsidies in 2019- 2021 for Azerbaijan to competent authorities of these Countries loans issued since January 1, 2018. Furthermore, Financial was approved Markets Supervision Authority of Azerbaijan must define and The rules approved by the decision No. 211 of the Cabinet of present to the President the special economic regulations Ministers of the Republic of Azerbaijan dated June 3, 2015, and requirements to ensure banks’ active participation in have been approved in the new edition. With new rules, the mortgage lending and in activity of the credit and guarantee following procedures, rules, and lists have been defined: system. Decree was signed in accordance with clause 32 of 1. Comprehensive inspection procedures related to the Article 109 of the Constitution of Azerbaijan and eliminates identification of accounts peculiar to legal entities and/or the Fund’s authority to determine the limit on subsidies for individuals of the United States, as well as detailed inspection each authorized bank. The Fund should also ensure creation procedures of accounts owned by individuals and/or legal of a special reserve fund to cover possible financial losses. entities of foreign countries in accordance with the General Accountability Standard; Rules “On Procedures for provision of guarantees on 2. Issuance limits on Financial Transactions of Legal Entities mortgage loans issued by the Mortgage and Credit and Individuals performed in the territory of the Republic of Guarantee Fund” Azerbaijan to competent authorities of these countries; Rules “On Procedures for provision of guarantees on 3. Procedure for providing information on financial mortgage loans issued by the Mortgage and Credit Guarantee transactions carried out by individuals and legal entities of Fund” approved by the Presidential Decree of 01 May 2018 foreign countries from financial institutions to the Ministry of define general issues related to the provision of guarantees Taxes of the Republic of Azerbaijan; on mortgage loans issued by the Mortgage and Credit 4. Procedure for providing information on transactions carried Guarantee Fund of the Republic of Azerbaijan. According out by individuals and legal entities of foreign states in the to the Rules, guarantees shall be issued only on mortgage territory of the Republic of Azerbaijan from the Ministry of loans that meet the requirements of the Mortgage Loan Taxes of the Republic of Azerbaijan to competent authorities Regulations. The proportion of the amount of guaranteed of those parties; mortgage loan to the value of the loan as of the date of loan 5. List of financial institutions of the Republic of Azerbaijan issuance set by an independent appraiser should not be less that do not report; than 60% and not more than 85%. The rules further define 6. List of accounts that are not reported from. the terms of issuance of guarantees, formation of reserve fund, restructuring of mortgage loan, execution of a guarantee Amendments to the Tax Code of the Republic of obligation, termination of a guarantee obligation. Azerbaijan According to the Amendments, tax rates of some excisable MISCELLANEOUS products - tobacco products have been increased. The tax Law “On Free Economic Zone of Alat” (the Law) has rate for 1000 units of cigars, cutting cigars and cigarillos have been adopted by the Milli Majlis of Azerbaijan on 18th of been raised from 10 to 20 AZN, and for 1000 units of tobacco May 2018 cigarettes and its substitutes has been raised from 4 to 12 The Law determines the legal regime of activities, AZN. development and management of the free economic zone of Alat in accordance with clause 1 and 10 of Section I of Article MORTGAGE AND CREDIT 94 of the Constitution of the Republic of Azerbaijan. Decree “On Additional Measures to Improve the Activity Pursuant to the Law, competent body (the administrative body of the Mortgage and Credit Guarantee Fund (“Fund”) of responsible for the activities of the free zone and conducting the Republic of Azerbaijan” the control over the activities thereof), administrative facilities,
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AmCham Azerbaijan
legal entities and their employees, as well as the residents system. From now on expatriates intended to be engaged of the free zone are exempt from all taxes related to their into paid labor activity in Azerbaijan may feel free to apply for activities in the free zone. The regulatory requirements of obtainment of labor visa via electronic system. We would like the main economy (the rest of the jurisdiction of Azerbaijan to remind that previously the only way to receive the mentioned except for the free zone) can be applied to the services and type of visa was manual paper application made through the goods provided by the legal entities or residents of the free Ministry of Foreign Affairs of the Republic of Azerbaijan and zone to any taxpayer of main economy. Goods and services the Embassy of Azerbaijan in the relevant country. imported to the free zone are not subject to customs duties and taxes. For the purpose of regulation and control over Protection of Consumer Rights the activities within the free zone authorities, administrative Amendments to the Law of the Republic of Azerbaijan on facilities, free zone economic, labor and other legislation, Protection of consumers’ rights According to the amendments, internal rules and regulations will be established. The free goods whose production (sale) is licensed and certified can zone sets up a customs office which carries out its activities be advertised only if supporting documents are available. in accordance with the strategic objectives, international In this case, the number, issuance date of the license and practices and legislation of the free zone. Under the Law, certificate and name of issuing body should be specified in investors, entrepreneurs, residents, legal entities of the free the advertisement the damages suffered by consumers as a zone and their employees are entitled to conduct transactions result of unfair, inaccurate and hidden advertising should be in any currency, without any limitation. It is the requirement paid by the subject of advertising activities who found guilty of the Law, that the competent body of the free zone should according to court decision. ensure the establishment of an arbitration center or body for settlement of disputes. Along with Azerbaijani and English, Law on Environmental Impact Assessment other languages can be used as a working language in the New adopted Law defines legal, economic, organizational territory of the zone. In case of discrepancies between the grounds of impact assessment on environment and human English and Azerbaijani, the language opted by the agreement life in respect of realization of urban planning and strategical of the parties shall prevail. documents, as well as production activities and other activities, and regulates relations in this field. In addition to the Amendments to Administrative Offences Code Law, the list of activities for environmental impact assessment With amendments, new article on defining administrative has also been enacted. sanction for breaking the legislation (on insurance against unemployment) by insurer has been added to the Code. Amendments to the Law of the Republic of Azerbaijan on According to the Article, individuals will be fined in amount Public Television and Radio Broadcasting of AZN 100, officials will be fined in amount of AZN 200 and According to the amendments, advertisements broadcast on legal entities will be fined in amount of AZN 400, if they make public programs (broadcasts) should be easily understood the following administrative offences: and distinguished from visual (visual) and (or) acoustic • not registering in insurer (relevant state authority) as an (audio) elements of those programs (broadcasts). Those insurer (who is employer); who are sponsors of the program can broadcast sponsor • not insuring their employees against unemployment; advertisement. • not paying insurance cost to the insurer (relevant state Sponsor’s name, activity area and information on its goods, authority) in certain amount, time and rules defined under trademark and company logo can be provided with visual or Law of the Republic of Azerbaijan on Insurance against audio by showing news crawl. This total volume of information unemployment; in sponsor advertisement should not be more than 2 minutes • not informing, within five days from the date of order, the in each public program. insurer about the occupation, specialty and salary of the employee who has been warned in accordance with the Amendments to the Law on Medicinal products first part of Article 77 of the Labor Code of the Republic of According to the amendments, the Ministry of Health of Azerbaijan; the Republic of Azerbaijan, in addition to state regulation • not submitting the information to the insurer, which is basis measures stated under Article 4.2 of the Law, will carry out for defining insurance payment, calculation and payment of the following: insurance cost; 1. Pharmacosurveillance l of medicinal products. • not informing the insurer as to restructuring or liquidation Pharmacosurveillance is the measure taken to detect, in compliance with Civil Code of the Republic of Azerbaijan; evaluate and preclude side effects of medical products • failure in accounting on calculation and transaction of and other undesirable outcomes arising out of use of such insurance cost and not reporting to the insurer on that, failure products; in maintenance of data and documents basis for insurance 2. Preparation of list of specially controlled medicinal products. cost. Specially controlled medicinal products are the products that requires special control over the use of medical products in News in E-visa system terms of their adverse effects on human health; Labor visa option was included into “e-visa” electronic visa 3. Classification of medicinal products. Classification of me-
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dicinal products implies the systematization and cataloging of the medicinal products due to origin, release order, physical- AmCham chemical, toxicological, pharmacological, therapeutic and other characteristics; 4. Expertise of medicinal products. Expertise of medicinal Calendar of Events products is examinations and inspections to determine the quality, effectiveness and safety of the medicines through physical, chemical, biological, clinical researches clinical tests May 20 - August 20, 2018 (clinical investigations), identification of bioequivalence, as well as examinations and inspections carried out by examining the documents upon registration, pharmacosurveillance and standardization of the medical products. One of the concepts added by the Amendments is the recall/ withdrawal of the medicinal products. Recall/withdrawal of medicinal products means partial or complete withdrawal of medicinal products from circulation, which have been considered as unsuitable or dangerous to human health by the manufacturer or the Ministry of Health. According to the respective Decree of the President of the Republic of Azerbaijan, the Cabinet of Ministers of the Republic of Azerbaijan will approve the procedure for recall / withdrawal of medicinal products by agreeing with the President in 3 months (including rules for the expertise of medicinal products and pharmacosurveillance of medicinal products). July 5 - Minister of Labour and Social Protection of With the Amendments, circle of persons authorized to import the Population, Mr. Sahil Babayev, met with representatives medicinal products into the country has been also identified. For of AmCham Azerbaijan state registration purposes, specimens of medicinal products and the medical substance, which is used in the production June 30 - 23rd Annual Independence Day Picnic of medicinal products, might be imported into the country by the Ministry of Health, enterprises engaged in production June 28 - Roundtable Discussion on “Building Trust in or wholesale pharmaceutical activity, representative office Paying Taxes” (branch or authorized person) of the foreign manufacturer in the Republic of Azerbaijan in the quantity defined by the Cabinet of Ministers. According to the Amendments, in order to control the effectiveness and safety of the medicinal products, regardless of ownership and organizational legal form all treatment-and- prophylactic enterprises, the holder of the state registration certificate or the person authorized by such, for ensuring safe use of medicines, take pharmacosurveillance measures and determine the person in charge of pharmacosurveillance in accordance with the procedure set by Cabinet of Ministers. Responsible persons for pharmacosurveillance of treatment-and- prophylactic enterprises, owner of state registration certificate on medicinal product or the person authorized by it have to submit additional information as to side effects of the medicinal product and other undesired consequences arising from use of the medicines, as well as information on pharmacosurveillance and report documents to the relevant state authority.
Amendments to the Resolution of Cabinet of Ministers of the June 22 - Monthly Members’ Luncheon Republic of Azerbaijan on Terms of business trip expenses According to the Amendments, the 1-day norm of business trip June 13 - AmCham Tax & Customs Committee expenses in the territory of the Republic of Azerbaijan has been increased and determined in the following amounts: June 08 - AmCham HR Committee • In Baku - 90 AZN; June 1 - Chairman of the State Customs Committee, • In Ganja, Sumgayit and Nakhchivan- 70 AZN; Mr. Safar Mehdiyev, met with representatives of AmCham • In other subordinate cities, regional centers, urban-type settlements and villages- 65 AZN. May 24 - AmCham Tax & Customs Committee
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ABSHERON HOTEL GROUP SEABAK LLC • 15% SPA • up to 10% on IT Support Services TRAVEL, HOSPITALITY AND LEISURE • 10% Retail/rack price of room • FREE migration to CLOUD.AZ Services • 15% Laundry • up to 5% on IT Equipment, Cartridges and • 15% Food and Beverage (Only Boulevard Software Licensing Hotel) • up to 15% on Internet Services at LandMark and other business centers JW MARRIOTT ABSHERON BAKU • 10% discount on all Food & Beverages – EDUCATION Discount is applicable maximum for 20 people per card. The card cannot be applied for meetings & events held in hotel • 10% discount on all Spa Treatments – The SHAHDAG TOURISM CENTER limit is 20 guests per card. Discount does not • 10% discount on Shahdag Hotel & SPA apply for spa products retail accomodation ADA UNIVERSITY • 30% discount on Laundry & Cleaning – • 10% discount on Zirve Hotel accomodation • 10% on Executive Education Corporate Discount is applicable for minimum on 3 days Trainings Programs service SHAHDAG SUMMER CAMP HYATT REGENCY BAKU • 10% discount for kids in summer camp INTERNET AND COMMUNICATIONS • 15% discount on • 20% discount for parents in all restaurants restaurant and bar • 30% discount for parents accommodation • 15% discount on laundry and dry cleaning • 20% discount on Spa treatments at Armaiti Spa & Fitness AZQTEL LLC • 20% discount on SkyPort Wireless Leased Line BILGAH BEACH HOTEL OTHER • 10% discount on SPA treatments • 10% discount on Food and Beverages (soft only) in outlets
PROFESSIONAL SERVICES FOUR SEASONS HOTEL BAKU • 10% off on Zafferano Restaurant & Bentley`s OFFICE SYSTEMS Bar • 10% discount on office chairs • 10% off on Jaleh SPA (treatment, gym offer, • 15% discount on hard furniture retail products) • 40% discount on office partition PASHA INSURANCE For all employees of AmCham Regular Member Companies: • 15% discount on voluntary insurance of property THE LANDMARK HOTEL BAKU • 5% discount on voluntary motor insurance AUTOSTAR KAUKASUS GMBH AZERBAIJAN (CASCO) • 15% discount on Food & Beverages • 10% discount on all services at Mercedez – For individual M2M Card holders: at:Caspian Grill & Terrace (ala carte) Lunch Benz Service Center & Dinner • 20% discount on voluntary insurance of • Bangkok Noi (ala carte) lunch property • Seto (ala carte) Lunch & Dinner • 10% discount on voluntary motor insurance • Salo (ala carte) lunch (CASCO) • Shin Shin (ala carte) Lunch & Dinner NOVCO Group of Companies • Dolce Pausa (regular menu) Throughout the day • 20% discount in MyBrands network
SIAR RESEARCH AND CONSULTING GROUP • 10% discount on a number of ASPI AGRO MMC services and projects • 10% discount on beverages in Savalan Boutique Wine House HOLIDAY INN BAKU • 10% Discount on Food and Beverages at Holiday Inn Restaurant Marina 18 and Sagi PARAMED Laser Clinic Bar • 15% Discount on Holiday INN Spa annual For all employees of AmCham Regular Member subscription (fitness center and swimming INTERNATIONAL BANK OF AZERBAIJAN Companies: • 10% discount – Silver Discount Card – for all pool) • 50% discount on Amex Gold card • 10% Discount on “Your Special Day” events procedures • 50% discount on Amex Platinum card For individual M2M Card holders: inclusive Weddings, Engagements, Henna • Free MC World Elite card Parties • 20% discount – Diamond Discount Card – for all procedures