In August 2024, the President of the Republic of Uzbekistan held an annual open Dialogue with local entrepreneurs at the main platform in the world of Uzbek business in Nukus. At the event, President Shavkat Mirziyoyev announced new initiatives in five areas. During the open Dialogue, the country's leader noted that this year's event is not being held in Karakalpakstan by chance. Here, businesses are provided with more than 50 benefits that are not available in any other region, and a simple system for land allocation has been introduced. The region is also convenient for accessing large markets. It was noted that in order to effectively utilize these opportunities, the "Do Business in Karakalpakstan" program will be adopted.

Figures and Facts

The President emphasized that since the beginning of the year, over 700 questions, initiatives, and new projects proposed by business representatives have been supported in the country, with an additional $633 million allocated. Furthermore, another $1.4 billion were directed towards the development of industry, agriculture, the service sector, and entrepreneurial infrastructure. Most importantly, a new support system has been established, ranging from small projects in mahallas (local communities) to mega-projects.

Previously, due to issues with loans, finding markets, infrastructure, and endless inspections, 60% of start-up entrepreneurs ceased operations within the first year. Currently, the share of enterprises operating for more than three years stands at 76%, and for the first time, it has reached 300,000. Additionally, this year, the turnover of entrepreneurs increased by 25% compared to the previous year, reaching $78 billion. The whole country’s  number of medium-sized enterprises (with an annual turnover of $791 thousand to $7.9 million) doubled, while the number of large enterprises (over $7.9 million) exceeded 2,200, twice as many as last year.

Thanks to the tax, banking, financial, and economic sectors operating at the mahalla and client levels, 16,000 previously unprofitable enterprises generated $514 million in profit within six months. Moreover, the number of enterprises with over 100 employees approached 3,000, and the number of jobs in them increased by 440,000 over the year. In the private sector, over 1 million employees receive salaries exceeding $400 monthly, with 370,000 earning over $791. This is one of the key indicators that businesses are emerging from the shadows and transitioning to healthy competition. In turn, as a result of changes in the working style of tax authorities and the liberalization of business operations, tax audits have been halved compared to last year. Furthermore, the country’s revenues from large taxpayers increased by 10%, regional-level enterprises by 25%, and taxes paid by district entrepreneurs by 40%.

It's important to note that relations with neighboring states have reached an unprecedented level. Uzbekistan has already become a significant market for both local enterprises and foreign companies, as well as an industrial hub in the region. Recently, the country's gross domestic product exceeded $100 billion for the first time. In the first six months of this year, the volume of foreign direct investment doubled compared to last year, reaching $14 billion. Such indicators have not been observed in the entire 33-year history of independent development. "All of this is the result of reforms initiated eight years ago, based on mutual trust, working side-by-side with entrepreneurs, and constant dialogue. We still have many opportunities. Most importantly, we have such patriotic and dedicated entrepreneurs like you who are capable of realizing them," said President Shavkat Mirziyoyev.

Increasing Financial Resources

From now on, all banks and microfinance organizations will be able to participate in supporting small and medium-sized businesses. The size of microloans will be tripled and increased to $23.7 thousand. At the same time, collateral will not be required for the portion of the loan up to $7.9 thousand. In turn, "Microcredit Bank," through its microfinance organizations, will attract an additional $79.1 million by the end of the year. It will become possible to establish microfinance banks with a charter capital of at least $3.9 million. Furthermore, new opportunities will emerge for microfinance organizations. In particular, entrepreneurs will be allowed to provide services in foreign currency and operate as payment organizations based on a license.

Factoring organizations will also be able to serve clients in foreign currency. An electronic platform will be launched by government where entrepreneurs can choose a financial product that suits them. Overall, thanks to the popularization of factoring, $1.6 billion in working capital will become available to business representatives, and an additional $1 billion in financial resources will be available to exporting enterprises. A law on Islamic finance will also be developed, which will allow for the provision of new financial services and attract more investors. In addition, it is planned to phase out the practice of transferring funds raised by the state to large enterprises - this will allow banks to direct at least $2.4 billion to private businesses.

Regarding Land and Energy Issues

It is reported that, from now on, entrepreneurs buying land at auctions will not have to pay value-added tax (VAT). Additionally, in Tashkent and regional centers, it will be possible to pay for purchased land in installments for up to three years, in other regions - up to five years, and for districts in the 4th and 5th categories - up to ten years. Furthermore, when allocating new land, deadlines will be mandatory - from the design of buildings to the commissioning of the facility. Starting from January 1, 2025, a unified classifier of land plots and capital construction objects will be introduced. This will allow for clear definitions of the types of activities and the construction of auxiliary structures on the land plot. Restrictions on energy resources (electricity and natural gas) for industrial enterprises will also be reduced. In other words, the base tariff will remain the same, even if energy consumption exceeds the limit by 20%. If this threshold is exceeded, the tariff for the excess portion will increase by 20%. In turn, payment for utilities will not be suspended even in the presence of collection orders.

Creating a Competitive Environment

President Shavkat Mirziyoyev noted that the process of joining the World Trade Organization directly influences the development of a competitive environment in the country. To date, exclusive rights in the metallurgical, chemical, energy, and telecommunications sectors have already been abolished. From now on, in corporate procurement, price priority for products purchased for production will be canceled. Everyone, including state strategic enterprises, private companies, and foreign investors, will operate under equal economic conditions.

In addition, it is planned to launch the "E-logistics" platform for cargo transportation, which will allow exporters to see if an enterprise has transportation permits and conclude direct contracts. When importing equipment and components, no debt will be incurred from now on if the contract terms are not violated. In turn, an electronic certificate from the customs authority confirming the export will be the basis for VAT refunds; no other documents will be required. Work will also be carried out to increase the share of domestic products in government procurement. In particular, large enterprises in the energy, oil and gas, chemical, metallurgical, and railway sectors will place orders for 2-3 years on the cooperation portal. Local enterprises will establish the production of new types of products based on these orders. $100 million will be allocated to finance such projects at the initial stage.

Another innovation is that the private sector will be involved in the management of regional power grids. A corresponding tender will be announced in the Samarkand region in October, and next year - in the Jizzakh and Syrdarya regions. In addition, by the end of the year, entrepreneurs will be offered another 300 deposits and sites with minerals. To cover the need for sand and gravel, 172 deposits with reserves of 110 million cubic meters will also be allocated.

AI in the Service Sector

Artificial intelligence technologies will be widely implemented in all service sectors. For this purpose, a corresponding center will be opened in the IT Park, and $50 million will be allocated to finance projects. It is also planned to create an ecosystem to support startup projects. In this regard, the activities of venture funds will be established, and the state will provide a resource of one dollar for every dollar of investment that a startup attracts from abroad, as well as cover the patenting of startup developments and the registration of trademarks.

The President Shavkat Mirziyoyev also noted that from January 1st, part of the value-added tax for catering enterprises will be returned in the form of cashback, and the income tax for restaurants and cafes will be halved. In addition, from December 1st, no documents will be required when recording agricultural products purchased by catering enterprises for cash. Restaurants and cafes will be able to hire employees on short-term, simplified employment contracts.

Reducing Barriers and Obstacles

In concluding his speech, the Head of State announced another important initiative: a registry of criteria representing a real threat to the life and health of the population will be developed. Officials who suspend the activities of an entrepreneur based on a criterion not included in this registry will be held accountable. In turn, holding entrepreneurs criminally liable will be further liberalized. Moreover, now, in case of violation of loan repayment deadlines, the current market value of the pledged property will be determined before it is put up for auction. If the outstanding debt is less than 15% of the collateral value, the claim will not be enforced on the property. The bank will allow the client to repay the debt from another source.

As the Head of State noted during his speech, this time the open dialogue was held throughout the year. The President, the Prime Minister, Deputy Prime Ministers, Ministers, khokims (regional governors), heads of the Chamber of Commerce and Industry, and the Business Ombudsman were all in constant contact with entrepreneurs. In turn, the personal meeting and sincere communication of President Shavkat Mirziyoyev with business people inspired industry representatives. And this tradition has already become an effective system for finding solutions to problems through joint discussion. 

(The author is Dilafruz Khusanova, Head of the Press Service of the Chamber of Commerce and Industry of Uzbekistan.)