by Wakabayashi Fund LLC

Uzbekistan boosts small-, medium-sized business development

Source: Central Asia Online
By Shakar Saadi

TASHKENT – Many Uzbek entrepreneurs are excited at the prospect of a prosperous year after President Islam Karimov announced that the government will focus on boosting development of small- and medium-sized businesses.

In Uzbekistan, as in many other CIS countries, private businesses are mostly in the trade, service, agricultural and furniture-making sectors, economist Malika Kochmuratova said.

The government’s first actions should be to trim red tape and develop a business lending system, she said.

The government has simplified the bureaucratic routine for business owners, said Orabek Sadykov, khokim of Tashkent’s Sergeli District.

Today, registering a private enterprise “through one window” takes three days and simply requires notifying the authorities. Previously, it required requesting authorisation, he said.

Goal is to make starting a business easier

Officials will review the package of documents required for starting a business and reduce it again this year, Ramil Abdulloyev of the Economic Development Ministry said.

He called on banks to facilitate business development.

“The terms and conditions for obtaining a loan are still complicated today,” he said. “But the banks should pay attention to this and reconsider their sets of requirements.”

Small companies need to be involved in utility maintenance and in running the so-called “natural monopolies” – energy and gas supplies and water and sewage systems, political scientist Linura Yuldasheva said.

“With stringent oversight, that would help create new jobs and significantly improve the utilities by encouraging healthy competition,” she predicted.

Small business drives economy

The share of small businesses in Uzbekistan’s GDP exceeds 50% today — up 20 percentage points from 10 years ago, the National Statistics Committee said. The small business and private enterprise sector employs more than 74% of the country’s active workers. Last year’s efforts to boost that sector’s development resulted in 480,000 new jobs, more than 60% of them in rural areas.

Those figures could be larger if the Uzbek som were a convertible currency. Private business owners are compelled to exchange money at the free market rate, which is 50% higher than the government-established rate.

“Small and private businesses that are unable to convert their money into hard currency find it difficult under the circumstances to compete with larger rivals,” advertising agency director Rano Talipova said.

Meanwhile, in his December 8 Constitution Day address to the nation, Karimov emphasised the importance of facilitating the entry of small businesses into foreign trade and onto regional and international markets.

“Given an acceptable exchange rate for the Uzbek som, the issue of access to the world market would be solved by itself,” Karimov said.

Even with help, challenges remain

To boost small businesses, the government has crafted a programme to protect small companies, create new development opportunities for them, review existing business regulations and pass new laws.

“We can no longer put up with the situation where local government officials … (create) barriers to people attempting to start their own, be it small, businesses,” Karimov said.

Profits will follow if you put in an optimal and well-thought-out manufacturing process, Anvar Nazarov, a refrigeration equipment manufacturer, said.

“Any business is risky,” he said. “But the risks you take must be assessed in each minute detail … reduced to an absolute minimum.”

Inexperienced entrepreneurs can impede their companies’ development, Nazarov observed.

Many budding entrepreneurs have only a vague understanding of business planning, bookkeeping and other requirements for success, Damir Muzaffarov, director of the Professional Management Programme at the Uzbek-Japanese People Development Centre, agreed.

“In the course of its transition to a market-led economy, Uzbekistan needs a new generation of business leaders with the knowledge and skills to run modern businesses,” Muzaffarov said.

Many entrepreneurs speaking to Central Asia Online pointed to the tax system as yet another obstacle to private business development in Uzbekistan.

The Tax Code became law in 2008, as did some amendments last December 24.

Those amendments aim at improving the taxation system, boosting small- and medium-sized businesses, and encouraging the production of goods and services, Khushnut Sharipov of the Khamzin District Tax Inspectorate of Tashkent, explained.

The current tax policy creates incentives for producers and gives fewer preferences to middlemen, he said.