Doing Business in Uzbekistan Will Become Easier and More Profitable

Over the past seven years, entrepreneurship has become a priority direction 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.

The most important annual event in Uzbekistan for shaping the future of business development is the meetings that President Shavkat Mirziyoyev holds with entrepreneurs in an open dialogue format. During these events, business representatives have the opportunity to share their proposals and opinions, which are given due consideration.

During an open dialogue with entrepreneurs on August 18th, the President of Uzbekistan proposed a series of initiatives aimed at improving the business environment in the country. These initiatives were formulated based on the suggestions received during the dialogue.

New Opportunities for Small Business

In order to support and promote the development of small businesses, a comprehensive ecosystem will be established. To achieve this, the Qishlok Qurilish Bank will be transformed into the Business Development Bank. This will include significant changes in its activities and methods of operation, as well as financing mechanisms. In particular, a small business center will be established in each region under the guidance of the bank. These centres aim to support entrepreneurs in the development of their business projects. They will offer various services, such as independent training programs, assistance in attracting necessary specialists, and consulting services including accounting, tax, auditing, marketing, legal, and more. Entrepreneurs who receive training in these regional small business centres will also have access to project financing under favourable conditions. The centres will facilitate cooperative ties between project initiators and major state enterprises. Furthermore, they will help new enterprises adopt modern technologies, enhance employee qualifications, and effectively launch 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 businesses. 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

Expanding exports through collaboration with prestigious foreign brands is a significant opportunity for Uzbekistan. Currently, 50 of the most popular global brands, with a market value exceeding $100 billion, have expressed interest in working with local enterprises. Pursuant to the President's directive, a working group has conducted negotiations with major brands from Spain, Germany, Poland, and Turkey. These brands are willing to place orders totalling $3 billion with our local enterprises under certain conditions. To address their concerns, we will implement international standards, and ecological and certification requirements for production. Additionally, we will ensure adequate working conditions and introduce a favourable customs regime for the import and export of products from well-known brands.

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, jewellery, furniture, polymer, chemical, and food industries. Their combined value amounts to $10 billion, encompassing the creation of 60 thousand job opportunities, a production output of $5 billion annually, and exports totalling $2.5 billion. These 140 projects 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 per cent 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 taxpayer 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.

Dilafruz Khusanova, expert