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Development of the SME sector in Uzbekistan was a gradual process, that was linked to the general course of economic reforms. At each stage of development SME played a certain role: - In early 1990-s the private sector was mainly represented by shuttle-traders which helped to mitigate negative transitory effects of economic reforms and prevent a steep drop in living standards. - From the 2-nd half of the 1990-s Uzbekistan managed to achieve a moderate economic growth rate, and the private sector’s role was to help government in implementing market reforms. - Since 2000, SME played an important role in acceleration of structural and institutional transformations. In Uzbekistan there is no legislatively approved term as a “medium enterprises”. According to the Law we use the definition "small entrepreneurship". There are three subjects of "small entrepreneurship": Individual entrepreneurs (unincorporated). Micro-companies with the average annual number of employees from 5 to 20 people. Small enterprises with the average annual number of employees from 25 to 100 of people depending on the industry. The share of micro-companies in small entrepreneurship is around 55%. High dynamics of small entrepreneurship development led to its qualitative change. Ten years ago small entrepreneurship consisted mostly of agricultural enterprises and trading companies. Today more than 28% of entities operate in the industry, almost 50% in the service and 71% in construction sector.
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Center for Economic Research (Uzbekistan) September 23, 2014
Baku, Azerbaijan
Small entrepreneurship in Uzbekistan :
financial capacity and transformative effects
Uzbekistan: Stages of SME Development
Early 1990s:
Private sector represented by shuttle-traders
Goal – to address the problems of shortages and gluts of consumer goods in the domestic market, prevent a sharp drop in living standards.
2-nd half of the 1990-s – beginning of the 2000-s:
Catalytic role of SME for introduction and effective implementation of market mechanisms and respective institutional transformations
Since the 2000-s:
SME as a main factor of accelerated structural reforms and transformations: economic growth, diversification and growth of exports, employment generation.
CENTER FOR ECONOMIC RESEARCH IQTISODIY TADQIQOTLAR MARKAZI ЦЕНТР ЭКОНОМИЧЕСКИХ ИССЛЕДОВАНИЙ
Landscape of SE Development
CENTER FOR ECONOMIC RESEARCH IQTISODIY TADQIQOTLAR MARKAZI ЦЕНТР ЭКОНОМИЧЕСКИХ ИССЛЕДОВАНИЙ
• The absence of the “medium-sized businesses” term in the legislation
• New development stage of the small
entrepreneurship: transition from quantity to quality
Sectoral structure of SE (%), 2000- 2013
48,9
46,1
71,5
98,1
28,1
37,9
45,9
37,0
72,4
11,3
0,0 20,0 40,0 60,0 80,0 100,0 120,0
Сфера услуг
Розничный товарооборот
Строительство
Сельское хозяйство
Промышленность
2000
2013 г.
Industry Agriculture Construction Retail turnover Services
0,0
10,0
20,0
30,0
40,0
50,0
60,0
70,0
80,0
90,0
100,0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
создано, тыс.ед.
ликвидировано, тыс.ед.
Created, thousand ent. Dissolved, thousand ent.
Creation and dissolution of SE entities, 2000- 2012
Micro-firms, 55%
Small enterprises,
6%
Individual Entrepreneurs, 39%
SE Structure by entities (%), 2013
The Role of Small Entrepreneurship in Economic Development
CENTER FOR ECONOMIC RESEARCH IQTISODIY TADQIQOTLAR MARKAZI ЦЕНТР ЭКОНОМИЧЕСКИХ ИССЛЕДОВАНИЙ
GDP growth rate and SE share in GDP (%), 2000-2013
Working-age population и SE share in employment, 2000-2013
Industry growth rate, SE share in Industry (%), 2000-2013
Foreign trade turnover and SE share in export and import, 2000-2013
17
,9
19
18
,9
18
,5
17
16
,7
18
,6
18
,3
18
,7
18
,9
19
,8
20
,3
20
,7
21
,2
13
,1
14
,8
15
,7
16
,5
18
,6
21
,5
23
,5
27
,4
29
,5
31
,2
32
,7
33
,7
33
,9
34
,6
0,0
2,0
4,0
6,0
8,0
10,0
12,0
0
10
20
30
40
50
60
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
доля малых предприятий и микрофирм, % доля индивидуального предпринимательства, % темп прироста ВВП, % (правая шкала)
Share of small enterprises and micro-firms, % Share of individual entrepreneurship, % GDP growth rate, % (right scale)
50,0
52,0
54,0
56,0
58,0
60,0
62,0
64,0
40,0
45,0
50,0
55,0
60,0
65,0
70,0
75,0
80,0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Удельный вес МП в численности занятых, % Доля трудоспособного населения, % (правая шкала)
Share of SE in the total number of employed, % Percentage of working-age population, % (right scale)
Global financial crisis
Global financial crisis, 2008-2010
0,0
5,0
10,0
15,0
20,0
25,0
30,0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Удельный вес МП в промышленности,%
Темп прироста продукции в промышленности,%
Global financial crisis, 2008-2010
Share of SE in Industry, % Industrial production growth rates,, % (right scale)
10,2
24,1 27,4
42,4
0,0
5,0
10,0
15,0
20,0
25,0
30,0
35,0
40,0
45,0
0
5000
10000
15000
20000
25000
30000
35000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Внешнеторговый оборот, млн.долл.США (левая шкала) Доля МП в общем объеме экспорта, % Доля МП в общем объеме импорта, %
Мировой финансовый кризис 2008-
2010 гг.
Foreign trade turnover, mln.US dollars, (left scale) SE share in the total export volume, % SE share in total import volume, %
Financial Capacity of the Small Entrepreneurship: Support Measures by the Government
Integrated approach: financial effects
Decrease in transaction costs:
• Business environment
Creation of demand for goods/services:
• State infrastructure projects
Access to resources:
• Government procurement
Access to finance:
• Bank lending
• Non-bank credit institutions
• Leasing
• Taxation
CENTER FOR ECONOMIC RESEARCH IQTISODIY TADQIQOTLAR MARKAZI ЦЕНТР ЭКОНОМИЧЕСКИХ ИССЛЕДОВАНИЙ
Decrease in transaction costs : Business environment
CENTER FOR ECONOMIC RESEARCH IQTISODIY TADQIQOTLAR MARKAZI ЦЕНТР ЭКОНОМИЧЕСКИХ ИССЛЕДОВАНИЙ
15
2
Issuance of a permit to connect to the water and sanitation networks
Presidential Decree (PD-4455, July 18, 2012) ”On measures to further radical improve the business environment and providing
greater freedom of entrepreneurship “
From August 1, 2012 reduced the time requested for:
30
10
Works to provide access to telephone network
10
3
Customs clearance and issuance of the certificate of origin for goods
30
15
Work authorization for highly skilled foreign nationals
• «Doing Business 2014»: Uzbekistan improved its ranking by 10 positions (from 156 to 146), including requirements for business registration by 66 positions – which is the 21st place among 189 countries included in the rating.
Measures Program to improve the business environment and providing greater freedom of entrepreneurship for 2013-2014
Measures Measures
results
Indicators of the top ten countries according to the "Doing Business“ ranking
Reducing the number of procedures to register a new enterprise
from 6 to 3 procedures
1-6 procedures
Reducing the time spent for the registration of new businesses
from 14 до 4 days
1-13 days
Lower initial costs of creating new businesses
from 27,2% of per capita
income to 0%
0-25% of per capita income
Reducing the number of procedures to obtain construction permits
from 25 to 12 procedures
5-17 procedures
Reducing the number of procedures for connecting to the power supply system
from 9 to 5 procedures
4-5 procedures
CENTER FOR ECONOMIC RESEARCH IQTISODIY TADQIQOTLAR MARKAZI ЦЕНТР ЭКОНОМИЧЕСКИХ ИССЛЕДОВАНИЙ
Decrease in transaction costs : Business environment
Measures Measures
results
Indicators of the top ten countries according to the "Doing Business“ ranking
Reducing the number of procedures to register the property
from 12 to 1 procedure
1-7 procedures
Reducing the time spent on the procedure of property registration
from 78 to 7 days 2-38 days
Reducing the number of tax payments from 41 to 7 payments
3-29 payments
Reducing the number of documents for export
from 6 to 4 documents
3-7 documents
Reducing the number of documents for import
from 11 to 5 documents
3-5 documents
Reduction in legal costs to enforce contracts from 22,2% to 9% of claim cost
8,2-26,9% of claim cost
CENTER FOR ECONOMIC RESEARCH IQTISODIY TADQIQOTLAR MARKAZI ЦЕНТР ЭКОНОМИЧЕСКИХ ИССЛЕДОВАНИЙ
Measures Program to improve the business environment and providing greater freedom of entrepreneurship for 2013-2014
Decrease in transaction costs : Business environment
Creating demand: Government Procurement
UZEX turnover dynamics, 2004-2014, bln. sum
UZEX turnover dynamics, 2004-2014, bln. sum
UZEX Trade turnover structure,%, 2013 г.
• UZEX (2004): the stock market of wholesale trade of commodities and raw materials, 730 brokerage firms, 2 thousand. traders.
• Online auction of non-exchange goods without the procedure of exchange listing (exhibition trades).
• SE access to obtain public contracts for the supply of goods: electronic trading in government and corporate procurement.
• Share of small business: 83% of goods and services supplied under the public procurement (2013).
CENTER FOR ECONOMIC RESEARCH IQTISODIY TADQIQOTLAR MARKAZI ЦЕНТР ЭКОНОМИЧЕСКИХ ИССЛЕДОВАНИЙ
Stock exchange trade 83%
Corporate procurement
1%
Government procurement
6%
Exhibition trade 10%
Engineering production
27%
Production of ferrous and non-
ferrous metallurgy
22% Chemical industry production
4%
Agriculture 5%
Construction materials
14%
Light industry goods
3%
Polymers, plastics, and its products
7%
Cultural purposes goods
4% Others
14%
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014(I)
Access to resources and the creation of new markets for SE: Infrastructure Projects
CENTER FOR ECONOMIC RESEARCH IQTISODIY TADQIQOTLAR MARKAZI ЦЕНТР ЭКОНОМИЧЕСКИХ ИССЛЕДОВАНИЙ
Market infrastructure:
• Free Industrial Zones (Navoi, Angren, Djizak).
Transport Infrastructure
• International Intermodal Logistics Center (Navoi). • Construction and reconstruction of 2306 km of roads. • Modernization of railway transport, construction of new sections (1,030 km.)
Public Utilities Infrastructure
• Modernization, construction of 3800 km of water and 175 km of sewer networks.
Social infrastructure
• Building of 1396 professional colleges and 143 of academic lyceums. • Construction of 2958 rural health units.
• Construction of individual housing in rural areas (9-10 thousand homes annually), engineering and transport communications, social and market infrastructure.
Microcredits from foreign credit lines:
Interest rate: 12-18% per annum
• Creation of new
enterprises; • Processing of the
agricultural products; • Infrastructure
development: • processing of local
raw materials
Access to finance: Banking
Bank microcredits from own resources
Interest rate: not more that ½ from refinancing rate of the Central Bank (10%)
Microcredits from non-budget funds
Interest rate:
• Development of farms-1/3 from CB refinancing rate;
• Production - 40% of CB refinancing rate;
• Services – 45% CB
refinancing rates;
Bank credits, 74%
SE credits, 26% • Microloans: 100 minimum wages
• Microcredits: 1000 minimum wages
• Micro leasing: 2000 minimum wages
• Law "On microcredit organizations"
• Law "On Microfinance"
Credits for SE in the total volume of bank credits, %
Fund for preferential
crediting banks
Interest rate:
5% per annum
Financing of high-tech manufacturing and innovative projects of productive SE and farms in remote and inaccessible areas, as well as in regions and cities with the excess of labor force
Microcredits, 21%
Total credits allocated to support SE, 79%
Microcredits in the total volume of bank credits, allocated to support
small businesses, %
CENTER FOR ECONOMIC RESEARCH IQTISODIY TADQIQOTLAR MARKAZI ЦЕНТР ЭКОНОМИЧЕСКИХ ИССЛЕДОВАНИЙ
Microcreitbank 83 branches, 100 agencies, 234 mini-banks
Interest rate:
3% - formation of start-up capital
6% - development of business and развитие бизнеса и financing working capital
5% -micro-leasing
• Colleague graduates projects
• Family business
Credit Unions
Abolished in2012 году. Before liquidation occupied about 30% of total microcredit portfolio
Microcredit organizations -24
Interest rate:
microcredits: 3-4% per month
microloans - 6-7% per month
• Trade
• Industry
• Agriculture
• Handicraft
• Repairing works
Methodology of individual and group lending
Pawn Shops -41
Interest rate:
0,5-1% per day
• secured by the moveable property
Access to finance: nonbanking credit institutions (MFIs)
Total volume of microcredits,
78,7%
Microcreditbank, 21,3%
Share of the Microcredit bank in the total volume of micro-crediting (%), 2013
Trade and catering Transport and
communications
Industry
Agriculture
Others
Structure of microcredits to legal entities (%), 2013
CENTER FOR ECONOMIC RESEARCH IQTISODIY TADQIQOTLAR MARKAZI ЦЕНТР ЭКОНОМИЧЕСКИХ ИССЛЕДОВАНИЙ
Access to finance: Leasing
CENTER FOR ECONOMIC RESEARCH IQTISODIY TADQIQOTLAR MARKAZI ЦЕНТР ЭКОНОМИЧЕСКИХ ИССЛЕДОВАНИЙ
Leasing companies, 68%
Banks, 32%
The structure of the leasing on the value of property, %, 2013
Agro-machinery,
37,5%
Auto, 24,8%
Real estate16,3%
Equipment, 21,4%
The structure of transactions by type of fixed assets, %, beginning of 2000s and 2013
Equipment
5,5%
Agro-machinery, 94%
Auto 0,5%
Growth factors of leasing market:
• High demand for mini-technologies.
• Development of industries with the high growth and export capacity (electrical, textile, food, tourism etc.).
• Implementation of transport and communication projects, construction and re-construction of transport infrastructure, development of road infrastructure.
• Tax preferences
• Interest Rate -16-20% per annum.
The structure of transactions by the type of equipment, %
Polygraphy 4,1%
Textile and sewing
equipment 7,8%
Food production
2,6%
Trade, 6,8%
Medical, 4,2%
Construction, 23,1%
Irrigation 15,4%
Others 16%
Access to finance: Tax policy
CENTER FOR ECONOMIC RESEARCH IQTISODIY TADQIQOTLAR MARKAZI ЦЕНТР ЭКОНОМИЧЕСКИХ ИССЛЕДОВАНИЙ
Taxes Maximum
tax rates in 1992-2009
2014 Dec-
rease
Corporate income tax 45% 8% 5,6
times
Individual income tax 13%-60% 7,5%-22% (from Jan. 2011)
1,7-2,7 times
Value added tax 30% 20% 1,5
times
Single social payment 40% 25% 1,6
times
Single tax payment for small enterprises
15,2% 6%
Industry-5% 2,5
times
Individual property tax 5% 4% 1,3
times
Dynamics of tax burden in 1993-2010 (as % to GDP)
Tax preferences to Small Entrepreneurship: • Simplified tax regime: the single tax payment (STP) instead of a number of state and local taxes and fees. • Export promotion: 1) share of export 15-30% - STP and property tax below 30%; 2) share of export 30% and more - STP and
property tax below 50%. • Localization Program: exemption from STP and the property tax till January 1, 2017. • Modernization: Reduction of tax base on STP for the cost of new purchased equipment , but no more than 25% from taxable
base for 5 years. • Free Industrial Zones: exemption from taxes. • Milk and Meat processing: STP below 50%. • Production of non-food consumer goods: exemption from STP.
0
5
10
15
20
25
30
1995 2000 2005 2013
29,7 28,5
22,6
20,5
Structural effects of SE: Transformation of Economic and Society
CENTER FOR ECONOMIC RESEARCH IQTISODIY TADQIQOTLAR MARKAZI ЦЕНТР ЭКОНОМИЧЕСКИХ ИССЛЕДОВАНИЙ
Poverty and Income Structure , %, 1991-2030 гг.
Production, productivity and the volume of imports of cereals, 1991-2013
Social Structure of Society: emerging middle class
5,5 5 0,4
18 19,1
12,5
45 48,2
43,4
16,8 14
9,2
10,6 10
18,9
4,1 3,7 15,7
0
10
20
30
40
50
60
70
80
90
100
Respondentsstratification,
N=2122
Distribution of allfamily members
by strata, N=11736
Enterpreneurs
Upper class
Upper-middle class
Low-middleclass
Middle classreserve
Poor
Very poor
The share of middle and upper class in the population - 27.7% Among entrepreneurs - 43.8% (CER, Family assets mobilization)
Structural reforms: Food security and life quality
0
10
20
30
40
50
0%
20%
40%
60%
80%
100%
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
социальные трансферты
доходы от собственности, предпринимательской деятельности и другие
оплата труда
уровень малообеспеченности (доля населения с доходами ниже $1.25 в день по ППС), %, правая шкала
Social transfers Income from property, business activity and other Wages Poverty level (share of population with the income less 1.25 USD per day on PPP), %, right scale
1908
2257
2142
2467
3215
3562
3777
4148
4331
3929
4072
5551
6103
5869
6402
6547
6643
6622
7293
7404
7054
7520
7805
0
10
20
30
40
50
0
2000
4000
6000
8000
10000
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
валовой сбор, тыс.тн импорт, тыс.тн урожайность, ц/га, правая шкала
Gross harvest, thousand tons Import, thousand tons Land productivity, c/ga, right scale
Vision 2030: Cooperation with Large industrial enterprises
Auto Industry Cluster:
• Increased demand for the products of small business: Income growth
• Multiplicative sectoral effects from the growth of demand for small business products: transport, chemical, gas & oil processing, machine building, construction.
CENTER FOR ECONOMIC RESEARCH IQTISODIY TADQIQOTLAR MARKAZI ЦЕНТР ЭКОНОМИЧЕСКИХ ИССЛЕДОВАНИЙ
https://www.facebook.com/CER.Uzbekistan Visit us for more info:
http://www.cer.uz
CER’s Flagship Initiatives of 2014:
Looking beyond the horizon: guidelines and best practices in formulating national visions http://vision.cer.uz
Uzbekistan Towards 2030: A New Social Protection Model for a Changing Economy and Society
Food Security in 2025: Availability, Accessibility and Nutrition
Thank you! Təşəkkür!
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