18.08.2023

Speech

by the President of the Republic of Uzbekistan Shavkat Mirziyoyev

at the meeting with entrepreneurs in the form of an open dialogue

 

Dear business representatives, entrepreneurs, participants of today's dialogue!

Two years ago, we started a good tradition of holding meetings with you on the eve of Entrepreneurs' Day in the format of an open dialogue and joint search for solutions to accumulated issues. I am immensely pleased that we are meeting with you again today to continue this tradition.

Dear Compatriots!

It should be emphasized that over the last 3-4 years, changes in the international arena have had a huge impact on the world economy, including our national economy.

Our entrepreneurs are well aware of the consequences of such factors as disruption of the logistics and product supply chain due to various contradictions, devaluation of currencies of partner countries, appreciation of financial resources as a result of high inflation on a global scale.

We must admit that the future will not be easy. I am convinced that if we draw the right conclusions from our shortcomings and move forward, our hard-working people and proactive entrepreneurs will surely overcome any difficulties.

It is no coincidence that our first open dialogue took place at a time of deepening economic crisis and uncertainty in the world. Life itself confirms that in such difficult conditions, direct dialogue with business representatives, discussing the problems you are concerned about, jointly searching for ways to solve them and taking timely measures is the most correct approach in these circumstances. In particular, open dialogue resulted in 57 initiatives in 2021 and 55 last year.

What benefits and conveniences for doing business have been introduced? What positive changes have been made in the lives of entrepreneurs? What positive impact have the results of our joint initiatives had on the country's economy as a whole?

First. Based on last year's proposals, business entities were divided into categories - micro, small, medium and large - and a system of working with each of them based on separate approaches was established.

Districts and cities were also divided into 5 categories, and separate tax, credit and financial support regimes were applied to 60 districts. As a result, entrepreneurs in these districts have enjoyed benefits worth about 1 trillion Uzbek soums over the past six months. Thanks to this, the income of entrepreneurs in 20 districts has increased by 1.5-2 times compared to last year. In the first half of this year alone - from 7 trillion to 11.5 trillion Uzbek soums.

If the leaders of the other 40 districts also worked closely with entrepreneurs and made effective use of the opportunities created, there would be no districts left in category 5.

Second. The period of VAT refund has been shortened, from August 1, 2022 to August 1, 2023 6 thousand enterprises were refunded 20 trillion Uzbek soums. In particular, as a result of the introduction of the procedure of VAT refund to bona fide exporting enterprises without waiting for the receipt of foreign currency from exports, 7 trillion Uzbek soums were received on the settlement account of more than 2 thousand entrepreneurs.

Most importantly, we have reduced the rate of this tax to 12 percent, increased the number of participants in the value chain by 26,000 and brought their activities out of the "shadows". The number of VAT payers has reached 184,000.

As a result of the write-off of tax debts resulting from the application of inefficient tax mechanisms, 2 trillion Uzbek soums were left at the disposal of the business.

Third. A system has also been created to use goods in circulation, export contracts, letters of credit and future revenues as collateral when granting loans. Entrepreneurs who took advantage of this opportunity were granted loans worth $1 billion.

The procedure for opening microfinance institutions has also been simplified. As a result, an alternative credit market to banks has emerged in the country. Over the past year, the number of such organizations has increased by 1.5 times and the volume of loans granted by them has tripled. Non-bank organizations provided 3 trillion Uzbek soums of loans during the year.

We have simplified the customs clearance system. As a result, the number of companies using this customs procedure has doubled. During the year, $455 million worth of products were exported using this facility. Added value of $110 million was generated.

Fourth. Licences and permits for 119 types of activities that were previously "inaccessible" to new entrepreneurs were cancelled or transferred to the notification form. As a result of the cancellation of licences for such activities as road transport of goods on the territory of the country alone, the volume of cargo transport increased by 1.5 times.

Fifth. Let entrepreneurs themselves say how noticeable is the sharp reduction of controls in the activities of bona fide taxpayers.

It should be noted that in the first six months of 2023 the number of inspections decreased by 40 percent in comparison with the same period of the previous year - from 104 thousand to 64 thousand. This means that our entrepreneurs understand that it is better to work openly than "in the shadows". Therefore, we have stopped applying financial sanctions based on the results of tax returns and desk audits.

In general, last year the number of small entrepreneurs increased by 40 thousand and reached 490 thousand, the number of medium entrepreneurs - by 2 thousand and reached 10 thousand. The number of large enterprises increased by 400 and reached 1.5 thousand.

The annual turnover of 155 companies exceeded $100 million as a result of the privileges granted. The annual volume of foreign investment reached $10 billion for the first time. This is three times more than in 2017.

Following the meetings held in the format of an open dialogue, domestic enterprises have exported products worth $25 billion and established the production of import substitution products worth $10 billion in the past two years.

Dear business representatives!

All this is the result of the work of our proactive, business and selfless entrepreneurs, and we highly appreciate it.

In this regard, I would like to express my sincere gratitude for the great contribution to the achievement of such successes made by small entrepreneurs – creators of new ideas, representatives of small and medium-sized businesses - the locomotive of our economy, heads of large enterprises, who create thousands of jobs and provide income for our compatriots, clusters, farmers and dekhkans, who create wealth and abundance in our markets.

Today, in recognition of the tangible contribution of entrepreneurs to the development of our country, we have awarded 44 of them with orders and medals, and 126 with the "Faol Tadbirkor" badge.

Taking this opportunity, I once again express my sincere gratitude to our entrepreneurs who have been honoured with such recognition. I am deeply convinced that your ranks will grow day by day.

Dear compatriots!

We must admit that as a result of our efforts over the past seven years, a new class of entrepreneurs has emerged in New Uzbekistan.

As you know, this year has been full of political events. In order to ensure the irreversibility of the reforms that have been initiated, our people adopted a renewed Constitution.

Most importantly, for the first time in the Constitution, the state has undertaken specific commitments to ensure a favorable investment and business climate, the inviolability of property, the development of market relations, the creation of conditions for fair competition, and the independence of courts.

In order to achieve the lofty goals proclaimed in the pre-election meetings, a draft reform program for the next seven years was submitted to the general public for discussion in early August. We are indeed pleased that more than one million opinions and suggestions were received during the discussions, while many important initiatives for the further development of the country were voiced by our entrepreneurs.

At the same time, we cannot say that we have solved all the problems. We still have much to do to create new opportunities and further expand the business environment.

Every day given to us by the Almighty is a new opportunity for all of us. Our entrepreneurs understand the essence of these words better than anyone else. In order to turn every opportunity into a result, we must all make effective use of it, always be in search, not be afraid of new ideas and initiatives, and work even harder and better.

Dear entrepreneurs!

On the eve of our dialogue, we received about 6 thousand requests from entrepreneurs. Their main concerns are: increasing loans and financial support (26 percent), providing business facilities and infrastructure (21 percent), simplifying the tax system (10 percent), and drastically reducing inspections and excessive bureaucracy (8 percent).

When I looked at these figures, do you know what my first thought was? Why are there fewer proposals than last year? After studying the proposals and initiatives, I found this.

The 80 percent of issues raised in preparation for the previous open dialogues were of an individual nature, and most of them were resolved on the spot.

This time, 70 percent of entrepreneurs raised systemic problems and offered ready-to-use solutions. It is gratifying that our entrepreneurs are raising topical issues that concern not only them, but the whole sphere.

All these issues will be taken into account in the decision-making process following the outcomes of the open dialogue.

I would now like to focus on the main new initiatives, developed on the basis of the proposals received.

The first direction is the new opportunities for small businesses

As it is known, small business is a great force that brings a new spirit to the makhallas and districts, and inspires our compatriots.

In many countries with rapidly developing economies, 70–80 percent of jobs are created by representatives of this sector. The history of all recognized companies began precisely with small and medium-sized enterprises.

In recent years, our country has done a lot of practical work to develop micro- business and family entrepreneurship. We allocate more than $1 billion annually through programs that provide financial support to micro-enterprises. As a result, there are now at least 40–50 new entrepreneurs in every makhalla, and thousands of permanent jobs have been created. However, it is fair to say that the environment for targeted support to small businesses is not yet fully formed in terms of creating the necessary conditions.

At the beginning of the year, we clearly defined the small business category. Now, we are introducing completely new approaches to help small entrepreneurs “get back on their feet” and expand their activities. An integrated ecosystem will be created to train representatives of this sector in entrepreneurship, develop projects for them, finance their activities, and help them find business partners and markets for their products.

For this purpose, first, we will transform the “Qishloq Qurilish Bank” into a Business Development Bank. The activities, working methods and funding mechanisms of the new bank will be completely different. In particular, the bank will establish a small business center in each region, a total of 14 centers.

More than 500 thousand representatives of micro-enterprises have improved their skills through family entrepreneurship programs. Henceforth, assistant khokims in 9,400 makhallas will refer 3–4 entrepreneurs in their areas to the centers each month who may wish to switch from micro to small business.

The centers will assist in the development of initiators’ business projects, train at their own expense entrepreneurs willing to implement a new project, attract the necessary specialists, and provide entrepreneurs with accounting, tax, auditing, marketing, legal, and other consulting services.

Second, the financing of entrepreneurs’ projects, trained in the small business centers in the regions will be organized under the most favorable terms.

Thus, if an entrepreneur invests 10 percent in a small business project, 45 percent of the funds will be provided by the Business Development Bank, and the remaining 45 percent will be provided by state support funds.

For these purposes, in an “entrepreneurial year,” the bank alone will provide $500 million, and the same amount of funds will be allocated by the state. Loans will be provided to entrepreneurs on preferential terms for 5-7 years. From October 1, credit lines for $150 million of these funds will be opened.

For entrepreneurs who have managed to establish their own business and have a clean “credit and tax history”, the collateral requirement for obtaining a loan to bring their activities to a new level will be reduced by 50 percent.

Enterprises requiring additional funds for project implementation will be eligible for additional resources to the existing loan. An additional 1 trillion Uzbek soums per year will be allocated for this purpose. Moreover, the centers will cover the cost of insurance for equipment imported under the project and the certification of raw materials.

No inspections of the activities of small businesses participating in the program will be allowed for up to three years.

Third, the small business centers will be used to establish cooperative links between project initiators and large state-owned enterprises. At the same time, the centers will assist new enterprises to introduce modern technologies, train employees, and sell their products.

In addition, within 2 years, these enterprises will be allowed to sell their own products in the state procurement system on the basis of direct contracts.

Fourth, private partners will be involved in the management of small business centers. Such entrepreneurs will have the right to participate in the Business Development Bank.

We will also attract foreign specialists to the centers. For instance, specialists such as business consultants, process engineers, designers, hotel managers, marketing specialists, agronomists, veterinarians, and seed breeders will be attracted from abroad, and the period of their work permit in Uzbekistan will be extended from 1 to 3 years. The payment for a work permit will be reduced from the current 10 million Uzbek soums to 330 thousand Uzbek soums. They will not be subject to the requirement to obtain the opinion of a territorial labor authority on the expediency of employment.

Fifth, we will also adopt a separate law on the implementation of the new system. It will define a simplified procedure for all processes related to the implementation of small business projects together with the center.

Naturally, both the bank and the center should be interested in generating income for the new project and developing the entrepreneur’s activity. Therefore, when a new small business project is launched, all the taxes received from it will be transferred to the Business Development Bank for working capital within two years. In other words, a system is created in which the bank will be interested in the entrepreneur’s high level of income.

Most importantly, any public or private bank can participate in this program, and raise funds independently. The profit that the banks receive under the program will be deducted from the tax base. This will create commitment and competition for both entrepreneurs and banks. For this purpose, we will attract a further $500 million from the European Bank for Reconstruction and Development, the International Finance Corporation, and other international financial organizations.

Our goal is to get at least 150 thousand small businesses ‘back on their feet’, to transform at least 25 thousand into medium-sized enterprises and to create 250 thousand new permanent jobs in the sector within a year.

The second direction is small and medium-sized businesses as guarantors of sustainable economic growth

Dear business representatives!

Small and medium-sized businesses are an important link in our economy, producing high-quality and competitive products based on new technologies and innovations.

However, it is fair to say that the current conditions for SMEs are not sufficient. Only the Entrepreneurship Fund provides guarantees and compensation for commercial loans. And that is not enough for everyone.

Therefore, we will also develop new approaches to support entrepreneurs who wish to move from small to medium-sized businesses. In this direction, the activities and working methods of the existing business support funds will be fundamentally changed.

From now on, the Entrepreneurship Fund (J. Kuchkarov) will be responsible for providing financial support to projects in the field of services and green and energy-efficient projects, and the Industrial Development Fund (J. Khodjaev) will be responsible for industrial projects.

We will invite qualified foreign managers to run the funds. These funds will not be limited to budgetary resources; they will be authorized to attract investments independently. Thus, next year, these funds will attract an additional $1 billion for medium-sized businesses.

First, we have set up the Industrial Development Fund to implement promising projects in “driver” industries, with an initial allocation of $200 million.

From September 1, the fund will provide loans at an interest rate of 5 percent in foreign currency and 10 percent in local currency for a period of 10 years to finance new projects. Industrial enterprises will receive working capital loans for up to one year at an interest rate of 4 percent in foreign currency and 10 percent in local currency.

At the same time, the fund will also provide 15 percent down payments on imported equipment in the form of loans and will reimburse a portion of expenses up to $20,000 for marketing, design, and attracting foreign specialists.

Second, a system of industrial mortgages will be organized; industrial sites will be built and handed over to entrepreneurs in the form of “ready-to-go businesses”. In particular, at least three new industrial zones will be created in each region.

In addition, in industrial zones where a production facility is launched, land plots can be privatized after investment obligations have been fulfilled.

Third, in recent years, thanks to the implementation of large-scale investment programs, about 20 thousand enterprises with modern equipment have been built in our country. A half of them are medium-sized enterprises.

In order to expand their activities, it is necessary to help them attract new investors and brands. Therefore, if an enterprise concludes an agreement with a foreign brand and investor, it will be able to participate with investments of up to 25 percent of the capital of the newly created Industrial Fund.

Fourth, the Entrepreneurship Fund will be responsible for the services sector, another driver of our economy.

The funds will be authorized to invest in potential medium-sized businesses. For this purpose, the Fund will receive an additional $25 million this year and another $100 million next year.

At the same time, the Fund will provide a guarantee for a foreign currency loan for medium-sized businesses. The Fund will introduce a “service mortgage” system in the tourism, trade and services sectors.

Entrepreneurs will now be offered turnkey projects for facilities such as hotels, restaurants, shopping centers, car parks, petrol stations and campsites.

In addition, the Fund will provide resources to entrepreneurs for the purchase of land for service facilities, the construction of buildings and equipment, and working capital. At the same time, $100 million will be attracted from our foreign partners for the introduction of green technologies in businesses.

These two new schemes will be fully launched on October 1. Next year, new projects will be financed for medium-sized enterprises in industry (2,000) and services (10,000).

If we all work hard together, we will be able to provide $1 billion worth of additional services, $5 billion worth of new products, and 350 thousand new jobs thanks to the new opportunities.

The third direction is to enter new markets with high quality and competitive products 

Dear friends!

Undoubtedly, the attention paid to this direction in recent years and the increase in production by 1.5 times have ensured high growth rates in our economy.

It is necessary to understand that we cannot ensure high economic growth by exploiting oil and gas resources, as some countries do.

Our oil and gas are high quality, high value products made from raw materials by people like you, proactive and skilled entrepreneurs.

Our products should therefore be of high quality, in high demand and competitive on foreign markets. In order to achieve such results, we need to take production to a whole new level and expand it dramatically.

Last year, as part of the open dialogue, we launched the “New Uzbekistan: A Country of Competitive Products” program. As part of this, 100 leading export companies were selected for a special procedure for loans, taxes and customs. As a result, the exports of these companies will increase 1.5 times this year and reach $1.2 billion.

In general, over the past four years, thanks to the support of exports, the number of such enterprises has increased from 4.5 thousand to 7.2 thousand, the range of products sold abroad has increased from 1.5 thousand to 3 thousand, and the geographical area has expanded from 139 to 164 countries. The volume of sales of finished products to foreign markets has doubled, and the share of goods exports has increased from 50 to 65 percent.

At the same time, logistics costs have increased 3–4 times due to the international situation. Therefore, we will continue to provide consistent support to exporting companies. We need to further expand their financial capabilities.

At the same time, we will allocate an additional $100 million to offset their logistics costs. A further $25 million will be made available for the certification of products abroad, the introduction of international standards and the training of specialists in this field.

This year we will continue the program "New Uzbekistan: A Country of Competitive Products" and increase the number of enterprises covered by the program to 500. They will continue to enjoy all the benefits of the program.

Another great opportunity to expand exports is to attract prestigious foreign brands to our country. The 50 most popular brands in the world, with an annual market of more than $100 billion, are very interested in cooperating with our enterprises.

According to my instructions, the working group has held talks with the largest brands in Spain, Germany, Poland and Turkiye. They are ready to place a $3 billion order with our local companies. We have never had such an opportunity before. To do this, we will solve the 3 main issues that concern them. First, we will introduce international standards, environmental and certification requirements for production, and we will train specialists from local enterprises.

Second, we will create decent working conditions for workers in local enterprises.

Third, we will introduce a favorable customs regime for the import and export of well-known brands.

Enterprises that have attracted major brands will receive a grant of 500 million Uzbek soums. I propose today to be the first to give this grant to Nemat Fatkhiddinov, the head of Fazman Textile in Namangan, which has attracted the German brand Diesel, and Rongxuan Fan, the head of Sino International in Andijan, which has attracted the American brand Nike.

I think that our entrepreneurs who want to enter the international market will support such proposals.

The fourth direction is the growth of highly profitable enterprises

Dear participants of the event!

At today's meeting, I would like to present another initiative.

With the involvement of international consultants, 140 ready-made projects have been developed in the fields of electrical engineering, building materials production, textile, leather and footwear, jewellery, furniture, polymer, chemical and food industries.

Today, these projects of 140 advanced industrial enterprises have been presented to you. Their total cost is $10 billion, they provide for the creation of 60,000 jobs, production of $5 billion per year and exports of $2.5 billion.

These 140 projects are posted on the electronic platform and offered to entrepreneurs on open and transparent terms. We are ready to conclude agreements immediately with local entrepreneurs who have shown interest in participating in the program. For them, the issues of location, financing and infrastructure will be resolved here and now.

Enterprises included in the program will receive low-interest loans from the Industrial Development Fund for a period of 10 years.

We will definitely launch these projects together during the open dialogue next year.

The fifth direction is a simplified tax administration and a supportive environment without red tape

Dear friends!

The more entrepreneurs there are in our country, the more income they generate, the richer our country will be. We are all equally interested in increasing the number of entrepreneurs like you, who are ambitious, enterprising and selfless.

Therefore, our approach is not to increase the tax burden on entrepreneurs, but to support them and boost budget revenues by expanding the tax base.

According to surveys, 62 percent of our entrepreneurs have a positive view of the tax reforms. But how satisfied are business representatives with the tax system and the work of tax officials?

I am aware of the complexity of the tax administration, all the cases of excessive interference in business and corruption in the system. Now we are radically reforming it, completely changing the approach of tax officials. Tax administration will also be simplified.

First, the current system of classifying entrepreneurs as a risk group will be closed, and conscientious taxpayers will also be responsible for any partner who has made a mistake.

In surveys, 70 percent of VAT payers reported unfair application of the tax deduction coefficient for tax refunds, i.e. the “tax - gap” system. A large number of complaints about corruption in the tax system are linked precisely to the “tax gap”.

As of October 1, we will abolish the practice of applying the tax deduction coefficient, i.e. “tax - gap”, to VAT returns.

In addition, the Chamber of Commerce and Industry and the Economic Ombudsman, together with representatives of the business community, will introduce an open rating of entrepreneurs. At the same time, starting from January 1 next year, enterprises with a high rating will be exempted from all types of tax audits, the excess part of the value added tax will be returned to them within one day, the practice of temporary suspension of the certificate of the VAT payer will be cancelled.

Second, cameral control should not be a " weapon of the tax officer", but a process that points out an entrepreneur's mistake and helps to correct it.

It is no secret that at the moment, financial control has completely turned into a tax audit, which also opens the way for corruption.

Now, with internal control, we will categorically prohibit demanding documents from an entrepreneur or summoning him to the tax authorities.

Representatives of the tax authorities, having changed their worldview, should take advantage of the great opportunities in makhallas and create conditions only for entrepreneurs.

Moreover, what can you say about the creation of a separate open and transparent platform, the establishment of a system for assessing the quality of tax services for entrepreneurs?

Third, at present, for a tax offence, both a fine is imposed on an entrepreneur, and an administrative fine is imposed on an individual.

This practice will now be abolished.

In general, fines imposed on entrepreneurs should not be a reason to suspend their activities. From this point of view, all financial sanctions will be reviewed within three months and their fairness criteria will be determined.

Fourth, we will transfer all disputes between entrepreneurs and the tax authorities to the jurisdiction of the administrative court. In addition, we will remove all restrictions on entrepreneurs’ ability to file complaints directly with the court.

The time limit for filing tax claims against entrepreneurs will be reduced from the current 5 years to 3 years. In addition, the calculation of penalties and interest will be suspended in the event of a court decision to recover a tax or credit debt.

Fifth, within the framework of more than 140 reports, today entrepreneurs are obliged to submit about 8 thousand indicators to 16 state bodies. Consequently, 500 thousand businessmen spend 300 billion Uzbek soums on such reports every year.

Starting from January 1, 2024, repetitive and outdated reports will be stopped, all reports will be submitted through a single electronic system, and their paper versions will be abolished.

I would like to draw your attention to another issue.

The transition to the cluster system has, in a short period of time, created the basis for fundamental changes in agriculture. In particular, the yield of raw cotton per hectare has increased from 26 to 34 quintals in the last six years. Particularly in the regions of Andijan, Bukhara, Namangan, Samarkand, Kashkadarya, Khorezm and Tashkent, the yield has reached 40 centners.

Cotton fiber processing has increased by 2.5 times and reached 100%, yarn production by 2.2 times and finished products by 5 times.

We have set a big target to increase exports in the sector by 1.5 times next year to $5 billion, up from $3.2 billion in 2022.

At present, about 600,000 people work in the cotton and textile clusters and earn a regular income.

I know that our clusters suffered losses of 6 trillion Uzbek soums in last year's cotton harvest, due to a large difference between the cost of fiber in the world and domestic markets. Taking into account this situation, we extended the clusters' credit debt of 3 trillion Uzbek soums for one year.

We will continue to expand the use of such financial support mechanisms. For example, a loan of 3 trillion Uzbek soums will be provided for the working capital of clusters for a period of one and a half years.

In addition, 50 percent of the transport costs for the import of cotton and synthetic fibers will be covered, and raw materials, paints and chemicals, fittings, cooling systems and accessories will be exempt from customs duties for three years.

Dear entrepreneurs!

I would like to address you.

As a result of the tax reforms carried out in the last seven years, benefits and preferences granted to entrepreneurs, they have more than 120 trillion Uzbek soums at their disposal.

Today, they have great opportunities and privileges.

As the saying goes, cotton needs two hands. Currently, the share of the "shadow economy" in our country is around 40 percent.

We are ready to create all conditions for honest businessmen who create jobs, introduce advanced technologies, master new products and increase exports. However, we will certainly be uncompromising when it comes to dishonest businessmen who evade taxes and fail to meet their obligations.

Therefore, I believe that if our businessmen do not allow the presence of such "impure" entrepreneurs in their ranks, we will reduce the share of the "shadow economy" many times over.

Dear compatriots!

At the new stage of our country's development, every year becomes a new step in the implementation of large-scale programs and projects.

Of course, it will not be easy for us to implement the plans and programs outlined for the next few years. Moreover, we have to be honest about this. But with such determined, courageous and enterprising businessmen, hardened by life's trials, whose words do not contradict their deeds, we are sure to achieve the planned milestones.

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