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Uzbekistan: Doing business will become easier and more profitable

by Dilafruz Khusanova | @twfindia 28 Sep 2023, 12:25 pm

Over the past seven years, entrepreneurship has become a priority in Uzbekistan's policy. It is evident how much attention the government dedicates to this area.

Incentives are being introduced, credits are being allocated, and comprehensive support is being provided to all categories of businesses, from small to large. It is no secret that the country's economic development directly depends on the growth of its businesses.

In turn, the key annual event in Uzbekistan that shapes the future paths of business development is the President Shavkat Mirziyoyev's meetings with entrepreneurs in an open dialogue format. These events allow business representatives to share their proposals and opinions, which will undoubtedly be heard.

This year, during an open dialogue with entrepreneurs, took place on August 18, the President of Uzbekistan proposed a series of initiatives that were formulated based on the received suggestions and aimed at improving the business environment in the country.

New Opportunities for Small Business

To support and foster the development of small businesses, a comprehensive ecosystem will be established. For this purpose, the 'Qishlok Qurilish Bank' will be transformed into the 'Business Development Bank.' Both its activities and methods of operation will undergo significant changes, including financing mechanisms.

Specifically, a small business center will be established in each region under the auspices of the bank. These centers will facilitate the development of business projects initiated by entrepreneurs. They will independently provide training for entrepreneurs seeking to implement new projects, attract necessary specialists, offer accounting, tax, auditing, marketing, legal, and other consulting services.

Additionally, project financing for entrepreneurs who have undergone training in regional small business centers will be arranged under the most favorable conditions. With the assistance of the small business centers, cooperative ties will be established between project initiators and major state enterprises. The centers will support new enterprises in adopting modern technologies, enhancing employee qualifications, and effectively launching their products.

Medium-sized Business - Guarantor of Sustainable Economic Growth

In his speech, the President noted that the conditions for medium-sized businesses are currently insufficient. Guarantees or compensations for commercial loans are only provided by the Entrepreneurship Fund, and even then, not for everyone. Therefore, new approaches will be established to support entrepreneurs who aspire to transition from small to medium-sized business.

The Entrepreneurship Fund will now be responsible for providing financial assistance to projects in the service and service sectors, 'green' and energy-efficient projects. Meanwhile, the Industrial Development Fund will oversee industrial projects.

These funds will not be limited to budgetary resources; they are empowered to independently attract investments. Consequently, in the coming year, they will attract an additional $1 billion for medium-sized businesses. Furthermore, an industrial mortgage system will be implemented, and production sites will be constructed and handed over to entrepreneurs as 'ready-made businesses.' Specifically, no less than 3 new industrial zones will be established in each region.

Moreover, in industrial zones where a production facility is launched, land plots can be privatized after fulfilling investment commitments. Simultaneously, the fund will also provide loan guarantees in foreign currency for medium-sized businesses. The fund will introduce a 'service mortgage' system in the fields of tourism, trade, and services.

Henceforth, entrepreneurs will be presented with ready-made projects for establishments such as hotels, restaurants, shopping complexes, parking lots, gas stations, and camping sites. Additionally, the fund allocates resources to entrepreneurs for the acquisition of land plots for service facilities, building constructions, infrastructure, and working capital.

Entering New Markets

One of the significant opportunities for expanding exports is attracting prestigious foreign brands to Uzbekistan. For instance, 50 of the most popular brands globally, with an annual market exceeding $100 billion, have shown keen interest in collaborating with our enterprises. Following the President's directive, a working group conducted negotiations with major brands from Spain, Germany, Poland, and Turkey.

They are prepared to place orders totaling $3 billion with our local enterprises. To facilitate this, three crucial concerns they have will be addressed. International standards, ecological and certification requirements for production will be implemented. Adequate working conditions will be established, and a favorable customs regime for the import and export of products from renowned brands will be introduced.

Increase of High-Yield Enterprises

With the engagement of international consultants, 140 ready projects have been developed in the fields of electrical engineering, construction materials production, textile, leather and footwear, jewelry, furniture, polymer, chemical, and food industries.

Their combined value amounts to $10 billion, encompassing the creation of 60 thousand job opportunities, production output of $5 billion annually, and exports totaling $2.5 billion. These 140projects have been listed on an electronic platform and are offered to entrepreneurs under open and transparent conditions. Companies enrolled in the program will receive low interest loans with a tenure of 10 years from the Industrial Development Fund.

Simplified Tax Administration

In surveys, 70 percent of value-added tax (VAT) payers have reported unfair application of the tax credit coefficient in VAT refunds, a practice known as 'tax-gap.' A significant number of complaints regarding corruption within the tax system are directly related to the 'tax-gap' issue.

Therefore, starting from October 1st, the practice of applying the tax credit coefficient during VAT refunds will be abolished. Furthermore, in collaboration with the Chamber of Commerce and Industry and the Business Ombudsman, representatives from the business sphere will introduce an open rating for entrepreneurs.

Starting from January 1st of the following year, enterprises with high ratings will be exempt from all forms of tax audits. They will receive excessive VAT refunds within one day, and the practice of temporarily suspending the value-added tax payer certificate will be revoked. It is no secret that currently, desk audits have completely transformed into tax audits, which also paves the way for corruption.

Henceforth, during this procedure, demanding documents from entrepreneurs or summoning them to tax authorities is strictly prohibited.

The President also noted that currently, a single tax violation results in both financial penalties and administrative fines as if the violation were committed by an individual. This practice will now be abolished.

In general, fines imposed on entrepreneurs should not lead to the suspension of their operations. From this standpoint, all financial sanctions will be reviewed over the course of three months, and fair criteria for their implementation will be determined.