Cardinal transition to targeted support

The President held the second open dialogue with entrepreneurs, during which the problems hindering the development of entrepreneurship at the moment were identified and ways to solve them were outlined.

The first dialogue: high results have been achieved
During the first dialogue held on August 20, 2021, the head of state outlined the seven most important areas of further work to solve problems that hinder business development. These are issues of availability of financial resources, reduction of the tax burden, private land use, infrastructure development, export support, transport and logistics, simplification of business procedures. 
Dialogue with the business community, taking place at different levels of government, is widespread in the world, as it helps to conduct economic policy in an optimal way, combining the interests of business with the vector of development of the state. Last year's dialogue - the first experience of this kind in Uzbekistan - has already shown high efficiency. 
Thus, a program and over 70 decrees and resolutions have been adopted aimed at solving problems and implementing entrepreneurs' proposals. 130 trillion soums of credit funds, 3.5 trillion subsidies and compensations were allocated for the establishment and development of business. Due to the fact that many entrepreneurs, having taken out a loan in foreign currency, found themselves in a difficult situation due to the growth of its exchange rate, their loans totaling $ 123 million were transferred to the national currency. 
The number of entrepreneurs with an annual income above one million dollars increased by five thousand and reached 26 thousand. A thousand entrepreneurs increased their turnover from one million to 10 million dollars, and 220 entrepreneurs' incomes increased to 100 million dollars. The number of exporting enterprises in the country has reached 7.5 thousand, the total volume of their exports has increased by 30 percent. Last year alone, entrepreneurs built more than 55 thousand buildings and production facilities for the development of their business. This indicates that they feel confident and increase their investment in real estate. 
By the second dialogue of the President, over 12 thousand appeals and proposals were received from entrepreneurs. Their analysis showed the presence of the following, the most urgent problems for the development of entrepreneurship.
The business needs an additional six billion dollars of credit resources to launch new projects, expand and increase working capital, as mentioned in three thousand appeals. 1.5 thousand entrepreneurs are dissatisfied with the complexity of tax administration and the order of inspections. The concepts of small and medium-sized businesses are not clearly defined, as well as specific measures that could give impetus to their growth. 
Second dialogue: new tasks have been set
Based on the analysis of business development trends and appeals during the second dialogue, the country's leader outlined five main areas of support for the development of entrepreneurship. 
First. Due to the fact that enterprises of different sizes face different problems in their development, separate approaches to their support will be introduced by dividing them into the following categories: microbusiness (annual turnover up to one billion soums), small business (up to ten billion) and medium business (up to one hundred billion). 
From January 1, 2023, a single tax rate of four percent will be introduced for microbusiness instead of the current turnover tax rates of four to 25 percent. At the same time, the current rates of one and two percent for entrepreneurs in remote areas and certain categories will remain. Enterprises with an annual turnover of more than one billion soums and switching to the general procedure for paying taxes will pay half as much income tax during the year. These changes will have a positive impact on the activities of 370 thousand entrepreneurs. 
It is indicated that it is necessary to increase the number of fast-growing medium-sized enterprises from the current 3.5 thousand to 10 thousand. To do this, from January 1, 2023, enterprises moving from small to medium-sized businesses will pay only 50 percent of income tax for two years. For property insurance, they will be compensated by the state for 50 percent of expenses. They have a 20 percent quota for public procurement, within which they are scheduled to pay an advance of 50 percent (now - 15 percent). 
The second direction is the creation of a more favorable financing system. 20 trillion soums are allocated for small business projects. Commercial banks will attract funds from international financial organizations for these purposes. Specific agreements have also been reached on the opening of long-term credit lines for entrepreneurs totaling one billion dollars. Of these, 300 million is allocated for women's and youth entrepreneurship projects. 
The capacity of the State Fund for Business Support of the Republic of Uzbekistan to provide guarantees will be doubled (currently - 10 trillion soums). As a result of these measures, at least 15 thousand entrepreneurs will be able to resolve the issue of collateral for loans. 
The third. Starting next year, all districts and cities will be divided into five categories, in which special taxation regimes, subsidies, interest compensation on loans, guarantees, and infrastructure connections will be determined. It is planned to create large industrial zones for 100 enterprises in the regions. 
The fourth direction is the protection of entrepreneurs' property. From now on, the cancellation of decisions on the allocation of land and property will be carried out only in court. A title document may be invalidated exclusively by a court. It is emphasized that only the court can cancel the decision on the allocation of land and property, as well as consider the issue of the seizure of property during the investigation.
The fifth direction is monitoring the activities of entrepreneurs and holding them accountable. Starting next year, the duplicate control functions of 26 departments will be canceled. Criminal liability for violation of trade rules will be completely abolished. A moratorium will be announced for a period of three years on the introduction of new types of liability and penalties against entrepreneurs. 
The Chamber of Commerce and Industry is being removed from the subordination of the government and will become an independent defender of the interests of entrepreneurs. CCI has been granted the right to submit mandatory issues to the government, to file lawsuits to the Supreme Court in the interests of entrepreneurs. Small and medium-sized businesses are exempt from paying membership fees to the Chamber, which will be allocated annually from the budget.
Expanding the targeting of support
If earlier emphasis was placed on support by industry (service sector, agricultural sector, information technology) and social characteristics (women's, youth entrepreneurship, vulnerable population), now approaches to business support are differentiated based on the dynamics of enterprise growth and territorial principle. The targeting of the measures taken is significantly enhanced, which should make the policy more effective. 
In world practice, small business, making up the overwhelming number of economic entities, provides a competitive environment in which successful entities grow, turning into medium-sized, and then into large enterprises. Some eventually become global brands. 
For many years, the problem of dynamic business growth has not been solved, since it was more profitable for enterprises to split into small ones than to develop as a whole. A mechanism for solving this problem has begun to take shape, based on a differentiated basis for the support provided, which will stimulate the dynamic growth of the most successful enterprises. 
Changes in the policy for the support and development of entrepreneurship require serious efforts from the bodies of the economic block of public administration. The new measures announced by the President encourage significant changes to the already well-established schemes of existing procedures and tools, and introduce new criteria based on new approaches. And these are very complex and responsible processes that need to be carried out in a short time. 
Despite this, the country's leader, showing political will, has set new goals and objectives that radically change approaches to supporting entrepreneurship. At the same time, the most favorable for business and its development.

Insults of the Hakims.
Director of the Center for Economic
Research and Reforms
under the Presidential Administration
Of the Republic of Uzbekistan.