Uzbek businesses received new incentives for growth when the president of Uzbekistan recently signed four decrees to stimulate development of small and medium enterprises and ensure a better entrepreneurial climate in the country.
It is anticipated that the decrees “benefits to the SME sector will total almost US$160mn a year, or about 1.5% of the country’s gross domestic product.
With funding from the Swiss State Secretariat for Economic Affairs, IFC’s Uzbekistan SME Policy Project has been working since 2002 to support the country’s government in efforts to improve the business environment.
IFC’s assistance has focused on streamlining the inspections regime, the business reporting requirements to various authorities, and the permits system. Over the past year, IFC worked closely with Uzbekistan’s ministry of economy, its ministry of justice, and the country’s Chamber of Industry and Commerce in drafting the presidential decrees.
The Decree on Decreasing the Burden of Inspections shifts away from regulators the rights to freeze a firm’s bank account, impose major fines, or confiscate goods. These actions are now the prerogative of courts, and prosecutors will be allowed to inspect a business only if they are investigating tax and currency violations.
The Decree on Reducing Excessive Powers of Inspecting Agencies focuses on the system of fines, which will be substantially reduced or waived altogether in cases of a first offence or offences that are unintentional or effectively harmless. The decree also calls for parliamentary approval of new rules, giving firms six months to pay any fine that exceeds 20% of their assets.
The Decree on Reducing Reporting Requirements concerns compulsory reporting. IFC’s Uzbekistan 2003 SME survey found that Uzbek businesses had to submit, on average, 133 statistics and tax reports to government agencies every year. The new decree reduces this number, makes reporting strictly quarterly, and prevents regulators from demanding additional documentation. Compulsory contact between firms and tax authorities is thus reduced threefold, and the number of reports an average SME has to file each year is halved.
The Decree on Simplified SME Taxation replaces a complex system of taxation for small and medium enterprises, under which most SMEs had had to pay four different taxes. Now they will pay a single tax equal to 13% of profits.
According to Uzbekistan’s first deputy minister of economy, Galina Saidova, “the government of Uzbekistan developed the new decrees in close collaboration with the business community and international institutions, particularly with the experts from IFC.”
She adds that the signed decrees demonstrate that the Uzbek government recognises an important role for the SME sector in the economic development of the country.
Zafar Khashimov, IFC’s project manager, notes: “IFC is strongly committed to continuing its assistance to the Uzbek government in order to create a more favourable climate for business. These decrees will have a significant impact on the SME sector and should serve as an additional impetus for further growth.”