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BUSINESS IN UZBEKISTAN: PREREQUISITES, OBSTACLES, ORDER OF
INTRODUCTION
Saidova Markhabo Habibullo qizi,
Teacher of Statistics Department, TFI
E-mail:
Annotation:
This article refers to the theoretical and practical aspects of
business, its development paths and strategy selection in Uzbek economy, the
statistical analyses through methods of observation, collection of statistical data,
classification, tabulation; and also diagrams and graphs frequently used in
presenting data, dynamic changes, comparison and prognosis of indicators of the
development of business, including the ways of improvement of private sector in the
formation of economy as well as the perspectives of development of business in
Uzbekistan.
Annotatsiya:
Мазкур мақолада бизнесни ривожлантиришни назарий ва
амалий жиҳатларини, унинг Ўзбекистон иқтисодиётидаги ривожланиш йўли
ва стратегиясини, бизнес фаолиятининг мавжуд кўрсаткичларини статистик
кузатиш, гуруҳлаш, таққослаш, динамик ўзгаришини аниқлаш, прогноз қилиш
ва жадвалларда акс эттириш орқали статистик таҳлил қилинган, шунингдек,
Ўзбекистонда хусусий секторни янада такомиллаштириш ва бизнесни
ривожлантириш истиқболлари ўз аксини топган.
Аннотация:
В данной статье приведены теоретические и практические
основы развития бизнеса, его пути и выбор в экономике Узбекистана. Дан
статистический анализ основных показателей развития бизнеса с помощью
методов наблюдения, сбора статистических данных и классификации. В
работе при предоставлении данных используются диаграммы и графики, а
также дана динамика, сравнения и прогноз показателей развития бизнеса и
перспектива его развития в Узбекистане.
Key words:
business, competitiveness, productivity, innovation, micro firm,
privatization, family business, individual business, small business, statistical analyses
of data, analytical method, prognosis.
Introduction
The operation of a market economy is inseparably going to connect with
business which is considered to be one of the main sectors as fast growing economy
and improving living standards in national economy. Through developing of these
sectors new jobs are created, productivity and competitiveness are increased, poverty
are alleviated and societal goals are achieved, in particular by helping specific
population groups to help themselves.
Business plays a crucial role in the formation and development of Uzbek
economy. Since its independence the republic of Uzbekistan, which is a doubly
landlocked country conducted enormous economic changes. Economic reform has
been gradually increased throughout many areas, such as business. As stressed by
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The First President of the Republic of Uzbekistan I.A.Karimov “Measures to improve
the business environment and create more favorable conditions for the development
of small business and private entrepreneurship deserve all kind of support”[1]
There are many different opinions to open the meaning of business. One of them
is business is one which is independently owned and operated and not dominant in its
field of operation. Inexperienced management and lack of financial stability, small
businesses suffer a mortality rate significantly higher than that of larger, more
established businesses primarily because of limited resources.
The intricacy of entrepreneurship makes it impossible to apprehend the totality
of entrepreneurship with an idea; for that reason, I propose the following definition of
entrepreneurship: “The entrepreneur has an owner or acting function, a risk and
uncertainty bearing function, as well as, an innovation function.”
The combination of innovation, owning or operating an establishment, and
bearing uncertainty provides an effective working definition of entrepreneurship that
is useful for economic development purposes. This definition captures all of the
components other scholars identify and is multi-faceted, to capture these multiple
components of entrepreneurship.
There are some issues cause most business failures, they are: poor operations
management, lack of experience, poor financial management, over-investing in fixed
assets, poor credit practices, failure to plan, inappropriate location, lack of inventory
control and others.
As it’s said above, business plays a distinctive and irreplaceable role in the
development of the economy in Uzbekistan. Through developing of these sectors is
provided with creating new jobs, increasing productivity and competitiveness,
alleviating poverty and achieving societal goals. Uzbek economy operates two types
of enterprises, which are large and small enterprises, as well as the activities depend
on personal and family labor. The condition to run a business in Uzbekistan has been
implemented through the Law of the Republic of Uzbekistan "On family business",
“On the introduction of amendments and additions” in the Law of the Republic of
Uzbekistan, “On guarantees of free entrepreneurial activity “ and they are designed to
further facilitate the development of business.
According to the Decree of the President of the republic of Uzbekistan the law
“On measures to further stimulation of business development” from April 9, 1998,
the subjects of Business divided into three parts:
1)
Individual business-is physical person without legal entity, juridical /
juristic person.;
2)
Micro firm- employing 20 people or fewer people in production,10
people or fewer in services, 5 people or fewer in trade (retail and wholesale).;
3)
Small business. A firm was considered “small” for the purposes of tax
collection if the number of employees did not exceed an officially established limit of
200 people (to July 1, 2014 was 100 people) in heavy industry and construction, 25 in
Research and science, 20 in other areas of production, 10 in trade and services.
The official definition of small businesses has changed a few times. The law
“On measures to further stimulation of business development” currently regulates all
activity of the business sector.
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Literature review
Presently, business development have been an issue among local and foreign
researchers, scientists and specialists, amid uzbek researchers I.A.Karimov,
Y.Abdullayev, Abdullaеv A., Yugai A., Sоtvоldiеv A., Sirojiddinov I, Botirova A.,
Abirova G., Yuldashеv Sh.A., A.Vakhobov, U.Burkhanov, N.Jumaev, F. Mullajonov,
M. Solihov, B. Bеrdiyorov, F. Dodiyev, N. Holmuratov, Sh. Normuminov,
S.K.Salayev, N.B.Fayzullaev
,
B.U.Tadjiyev, E. Egamberdiyev, H.Hujaqulov,
S.Sattorov, N. Abdunazarova, N. O’rmanova, N.Xusanov, O.Iminov; among foreign
scientists Richard Cantillon, Jean Baptiste Say, Alfred Marshall, Y.Schumpeter,
R.Kirzner, Lapusta M.G, Gоrfinkеl V.Ya., Pоlyak G.B, Shvandar V.A., Nikоlas N.,
Gоrfinkеl V.Ya., Shvandar V.A., Hirshleifer, Fama, Miller, Jensen, Meckling,
Breley, Meyers and others have researched these issues.
Research Methodology
In readiness of this article there have been extensively used methods of
observation, collection of statistical data, classification, tabulation; and also diagrams
and graphs frequently used in presenting data, dynamic changes, comparison and
prognosis of indicators of the development of business.
Analysis and results
As the matter of fact, according to the governmental report, Uzbekistan achieved
growth of gross domestic product (GDP) by 7,8 % in the previous 2016. The
contribution of business in GDP amounted to 56,9 %. As a result, the total number
of operating small businesses entities as on 1 January 2016 reached 207104 units or
5.7 percent more than the same period last year, according to the press service of the
State Statistics Committee of the Republic of Uzbekistan”.[2]
It is admitted that, the share of business in GDP is increasing year by year. As
you can see below, the bar chart represents growing trend of share of business
development from 2000 to 2016.
Graph 1.[2] The share of business in Gross Domestic Product in Uzbekistan
Based on www.stat.uz
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The message of the Committee says that in 2016 the share of business in total
volume of industrial production amounted to
45
% (in 2015 –
40,6
8%), in retail
turnover –
89,6
% (87.1 %), and in employment –
78,1
% (77.9%).
[2]
A prediction is a statement about a risk. It is often based upon experience or
knowledge and it can be useful to assist in making decisions about possible
developments. Howard H. Stevenson writes that prediction in business is at least two
things: important and hard.
In statistics, prediction is a part of inference. One particular approach to such
inference is known as predictive inference, but the prediction can be undertaken
within any of the several approaches to statistical inference. Indeed, one description
of statistics is that it provides a means of transferring knowledge about a sample of a
population to the whole population, and to other related populations, which is not
necessarily the same as prediction over time. When information is transferred across
time, often to specific points in time, the process is known as forecasting.
Statistical techniques used for prediction include regression analysis and time
series analysis, and their various sub-categories such as ordinary least squares,
logistic regression and vector auto regression models. When these and/or a related,
generalized set of regression or machine learning methods are deployed in
commercial usage, the field is known as predictive analytics.
In many applications, such as time series analysis, it is possible to estimate the
models that generate the observations. If models can be expressed as transfer
functions or in terms of state-space parameters then smoothed, filtered and predicted
data estimates can be calculated.
To use analytical method for prediction, data are collected on the variable that is
to be predicted. A functional form, often linear the parameters of the function are
estimated from the data that is, are chosen so as to optimize is some way the fit of the
function, thus parameterized, to the data. For the prediction step, explanatory variable
values that are deemed relevant to future values of the dependent variable are input to
the parameterized function to generate predictions for the dependent variable.
We know, through analytical method we can predict future events. Necessary
information is given below:
Table 1
Results theoretical aspects of business share in GDP for observing period
Years
Y
i
t
t
2
Y
i*
t
Y
t
2010
52,5
-3
9
-157,5
53,021
2011
54,0
-2
4
-108,0
53,664
2012
54,6
-1
1
-54,6
54,307
2013
55,8
0
0
55,8
55,593
2014
56,1
1
1
112,2
56,236
2015
56,7
2
4
170,1
56,879
2016
56,9
3
9
170,7
56,985
∑
329,7
329,7
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In order to use analytical method we need right linear equation. Here its
mathematical formula:
Ȳ
t
=a
0
+a
1
t
In this, t-periods; a
0
and a
1
a
0
n + a
1
∑t = ∑y,
a
0
∑t - a
1
∑t
2
= ∑yt
Here, y-real degree of lines; and n-the number of degree.
a
0
=ȳ-a
1
t
and
a
0
=
1
,
after that
;
If ∑t=0, then the equation above can be in that manner:
a
0
n = ∑y,
a
1
∑t
2
= ∑yt
First of all, it is needed to be identified a
0
and
a
1
; for that purpose we have to
calculate
, ∑t
2
, ∑yt. According to certain information these parameters are the
following sequence:
a
0
=
=
= 54, 95 and a
1 =
=
=0,6
To measure tendency of business I decided to use analytical method, which is
one of the main methods to analyze economic changes in dynamic lines in statistics.
Analytical methods welcome early applied demonstrations of new analytical
methods. This method should be demonstrated that methods and technology are
sufficiently fit for purpose in the future.
In this example, analytical method about long-range prognosis of business
development in Uzbekistan
characterized by the following graph and it is
predicted
through zoom lines how recent economic trend may play out over the next few
decades:
Graph 2. The prognosis of business share in Gross Domestic Product in
Uzbekistan
Calculated by author through using information Business in Uzbekistan. Statistical Bulletin.
Tashkent 2016
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The bar chart illustrates the percentage of business in GDP in Uzbekistan from
2010 until 2050. It shows both present and future trend.
Over the following five years, the share of business increased slightly from 53,0
per cent in 2010 to 56,8 per cent in 2015. As can be seen, every five year the growth
rate has raised three or four per cent and the share is expected to go up modestly.
Between 2015 and 2050, it is also projected to raise, but more steadily and it is
predicted to reach more than three quarters in 2050 and then it will soar gradually.
Conclusion and Recommendations
Business more flexible and can adapt quickly to changes in demand, the
situation on the global and regional markets, timely respond to their challenges,
because it’s compact in form, has a mobility and speed in decision-making and it’s
receptive to innovation. Creating and develop business do not require large
expenditures and capital investments, which allows faster and easier to carry out
modernization, technical and technological equipment, develop new products,
constantly updating its range and provide competitiveness. The higher stability of this
sector compared with large enterprises to the challenges and consequences of the
global financial and economic crisis. Business are not only a source of income, but
also opportunity to disclosure the creative and intellectual abilities of people. This
scope allows everyone to show their individual talents and capabilities, thereby
forming a new layer of people - enthusiastic, enterprising and prone to self-
employment who can achieve the goal.
The most important document accepted by the Central Bank of the Republic of
Uzbekistan jointly with the Association of Banks of Uzbekistan, commercial banks
and international financial institutions is the development of foreign funds and banks,
proposals for the creation of the Guarantee Fund. It provides for business the need for
the part uncovered collateral for loans of commercial banks issued for the purchase of
new equipment.
As you know, one of the basic principles of lending in the allocation of loans by
commercial banks is that of a secured loan. The main problem is lack of business
Republic of collateral in the financing of investment projects. The problem of lack of
security for loans by business exists not only in countries with economies in
transition, but also in developed countries such as the U.S., Japan and EU countries.
In these countries, the issue is solved just through the mechanism to guarantee
repayment of loans - the guarantee fund.
Creation of the Guarantee Fund for Development of entrepreneurship in
Uzbekistan will increase access thousands of business representatives to bank loans
who wants to organize production and services on the basis of new, advanced
technologies. Undoubtedly business play an important role in shaping the structure of
the economy, meet rapidly changing market demands. Business represents a sphere of
labor application and a source of income generation for a significant percentage of
the country’s population. Moreover, it is the most flexible part of the national labor
market, covering a lion’s share of predominantly low-skilled manpower, those with
insufficient practical experience and those preferring flexible working hours. Very
often, it is the only economic sector, where many socially vulnerable strata of
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population, such as women, young people, uneducated and unskilled persons, can
find a job.
Principles of incentives to ensure the development of small business and private
entrepreneurship are the provision of tax incentives, the use of a simplified tax
system, preferential loans, reducing the frequency and timing of tax and accounting
in government tax and statistical authorities, ways to reduce the frequency of tax and
other inspections.
The higher stability of this sector compared with large enterprises to the
challenges and consequences of the global financial and economic crisis. Business is
not only a source of income, but also opportunity to disclosure the creative and
intellectual abilities of people. This scope allows everyone to show their individual
talents and capabilities, thereby forming a new layer of people - enthusiastic,
enterprising and prone to self-employment who can achieve the goal.
As stressed by the President, “We should be aware that what has been achieved
so far is just the beginning of the long path that the country has chosen: to become a
modern, developed, democratic country; to ensure a decent quality of life for the
people and for future generations; and to achieve a strong reputation in the
international community”. [5]
Following the introduction of the President’s initiative, the country has adopted
27 laws and dozens of normative acts to implement constitutional and regulatory
reforms. These reforms aim to: further develop and enforce the constitutional
principle of separation of powers, enhance the role of the Oliy Majlis (Parliament)
within the governance system, and strengthen the parliamentary role and authority in
shaping and implementing both domestic and foreign policies. Parliamentary powers
have thus been enhanced, while the Government’s accountability to the Parliament
and local authorities’ accountability to the Councils of the Peoples’ Deputies have
been strengthened. Critically, Uzbekistan has introduced an important institutional
mechanism that allows the party that receives the largest number of Deputy seats in
the legislative chamber to promote its candidate to the post of Prime Minister;
strengthen judiciary control to ensure that civil procedural rights are enforced during
the stages of inquest and investigation. The number of civil courts has been increased
to improve the quality and speed of case processing. Strengthen accountability of the
Government and public agencies for decisions taken under the Law “On the
Openness of the Government and Public Agencies”, further improve institutional and
regulatory frameworks of civil self-governance institutions and enhance their roles in
providing legal protection to citizens, particularly youth, women and vulnerable
populations.
Opportunities of various strata of the population in taking advantage of benefits
of economic growth also directly depend on infrastructure conditions. Infrastructure
services are not only the major consumer benefits but also are means for increase of
labour productivity and improvement of market access. Both functions of
infrastructure - support of economic growth and expansion of its facilities- has a great
importance for overcoming poverty, accumulating human capital, and increasing the
welfare of the country.
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Despite all these achievements, according to some sources, serious problems and
misbalances, attributes of which can be found practically in all sectors and segments
of the given sector of the economy, are maintained and being aggravated in social and
economic infrastructure of the country.
Taking into account national peculiarities and spiritual values of the republic,
entrepreneurship has a special social significance. Social efficiency reflects the
degree of achievement of the social dimensions of entrepreneurship. In this case
brings to the fore the question of how data with limited resources to best meet the
needs of staff entrepreneurial structures (micro level) and all members of society
(macro level).
Recommendations will be in the further development of business in Uzbekistan:
- Reduction of government intervention and regulatory authorities in the
financial and economic activities of businesses;
- Creation of maximum favorable conditions, privileges and preferences on tax
and other payments for business, improvement and standardization of the reporting
system and the mechanism of delivery of reports in the financial, tax and statistical
authorities;
- Broad involvement and direction for the development of business of foreign
investment, especially concessional loans from international financial institutions and
private equity;
- Further development of the information management system and advice to
business, as well as in matters of training, retraining and skills development;
- Expand opportunities for small businesses bank loans, raw materials.
However, the Law of the Republic of Uzbekistan "On family business": allowed
to carry out activities in the family business of residential and non-residential
premises owned by the participants in the family business ownership or other legal
basis, sales of products family business can be carried out at the place of production;
determined that after the payment of family business members of taxes and other
obligatory payments remaining under their jurisdiction shall be exempt from income
tax; found that a family business in the manner prescribed by law shall be exempted
from the single tax on revenue received from the sale of products of national crafts
and applied arts own making.
According to the idea of M.Kalecki who is Polish economist, the most important
prerequisite for becoming an entrepreneur is the ownership of capital. In terms of
prerequisite for business he was totally right. Nevertheless it is also important
entrepreneurial skills.
Recent advances in the theory of ownership and contracting provide a more
specific analytical justification for business. The trade-off facing a government
seeking to arrange for the provision of a particular service is between quality and
efficiency. The private sector can use its better management skills and capacity for
innovation to more actively pursue opportunities to reduce costs, but service quality
may be compromised in the process. However, private provision may be workable if
the government can write a fully specified, enforceable contract with the private
sector. It needs for entrepreneurs to be able to enforce contracts, and reviews the
types of reform of contract enforcement which have proven to be successful. For
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instance, tax registration, labor registration, administrative registration, bank deposit,
notarization, health benefits, notice in newspaper, Company seal, court registration,
statistical papers and etc.
Needless to say, special initiatives to reduce burdens and support regulatory
compliance of business should be balanced against other concerns. Business have
been put forward and originally realized in industrially developed countries, but soon
was picked up also in developing countries, which have experienced urgent need for
expansion and modernization of infrastructure. The most important features are the
ability of small businesses to accelerate the development of investment and high
turnover of working capital. Another characteristic of this sector is an active
innovation and accelerate the development of various sectors of the economy in all
sectors of the Uzbek economy.
The inherent flexibility of small businesses and high adaptability to market
conditions variability contribute to the stabilization of macro-economic processes in
the country. Analysis showed that in Uzbekistan, the sector characterized by a certain
yield, high labor intensity, the complexity of the introduction of new technologies,
limited own resources, and increased risk of competition. In our view, it is
appropriate to establish a definite system which provides for sanctions for clear
violations or improper fulfillment of the law. A special role is played in business
control over the implementation of legislation and economic reforms should be based
on the full legal space. In this case, absolutely equal footing before the courts and
arbitration authorities should be all. Uzbekistan has developed industry and regional
priority programs and enterprise development are successfully implemented.
Reference
1.
In order to make more opportunities for development of private property and
private enterprise through the implementation of the indigenous structural change in
economy, a consistent continuation of the processes of modernization and
diversification is our priority. President Islam Karimov’s keynote speech at the
meeting of the Cabinet of Ministers dedicated to the results of socio-economic
development of the country in 2014 and main priorities of economic program for
2015. January 16, 2015.
2.
Small business in Uzbekistan. Statistical Bulletin. Tashkent 2015. 16 p.
3.
Annual Statistical Report of Uzbekistan. Tashkent.2015.
4.
The Law of the Republic of Uzbekistan “On measures to further stimulation
of business development” from May 25, 2000.
5.
The year 2015 observed the continuation of active work on providing the
reliable protection to private property, small business and private entrepreneurship,
the removal of barriers to their rapid development. The Ministry of economy of the
Republic of Uzbekistan has published a report on the results of socio-economic
development of the country in 2015 and the most important priorities of economic
program for 2016. January 15, 2016.
