NEWS AND EVENTS
September 15, 2012
President Islam Karimov’s Keynote Speech at the International Conference on Small Business and Private Entrepreneurship
Distinguished Participants, Ladies and Gentlemen!
It gives me a great pleasure to welcome you, our dear guests, representatives of international institutions – the United Nations, the World Bank, the International Finance Corporation, the Asian Development Bank, the Islamic Development Bank, the leading academics and professionals, businesspeople, all the conference participants from 45 countries – and express my deep respect and sincere gratefulness for your participation in this forum.
The subject matter and hence the title of this conference, “The Role and Importance of Small Business and Private Entrepreneurship in the Implementation of Social and Economic Policy in Uzbekistan” is hardly accidental. This is due primarily to the fact that the priority of an accelerated development of this sector from the very first days of Uzbekistan’s independence has been an important driving force in addressing the most acute of the crisis issues that were left to us from the old totalitarian, planning and distributive system.
The advanced development of this sector and, in general, the model of reforms and modernization we had chosen have played a crucial role in preventing and neutralizing the negative and destructive impact of the global financial and economic downturn that broke out in 2008, a crisis that is, unfortunately, is likely to deepen.
The mounting threat of a new wave of recession and bankruptcy, of stagnation and declining productivity, of increasing debts and the budget deficits, unemployment issues, a sharp deterioration in living conditions of the population and, as a consequence, a growing general discontent of people and social tensions – all of these are of great concern and alarm.
The ongoing pumping of the banking sector with new mass of money by printing banknotes, as well as the uncontrolled flooding of financial markets with all different kinds of derivatives may not only lead to delays in the recovery, but also to the further devaluation of national currencies, with all the ensuing consequences.
In addition, these massive infusions of currency are barely reaching the real economy, by and large facilitating the speculative component and stagnant processes in the global economy.
In a word, the unfolding state of affairs gives no reason for a sooner resolution of problems in the world economy. It is becoming increasingly clear that the way out of the downturn is anticipated as being lengthier and more unpredictable. Through this conference, we would like to share our experience in fostering small business and private entrepreneurship as a critical factor in our efforts to mitigate and overcome the negative effects of the crisis.
To be sure, we are quite interested in enquiring into the wealth of experience garnered over the centuries in the advanced and developing nations, where the share of this sector accounts for about 80 percent of gross domestic product and at least 70 percent of the working population. It is extremely important for us.
It gives me great delight to see our foreign guests in this hall. Your participation in the conference, your speeches, reports due in plenary and panel sessions, your close interaction with your Uzbek counterparts, your visits and trips to individual places of your interest, discussions and exchange of views – all of this can not but enrich and diversify our forum and, hopefully, justify your expectations.
I would like to sincerely thank you for that.
I believe it would be logical to wonder – what, what factors and reasons were behind the choice, the decision to prioritize advanced development of small business and entrepreneurship?
Let me briefly outline the reasons behind this choice, and they are as follows.
First, as the international practice shows, small business, as a critical structure-shaping sector of economy, serves as a principal source of filling the domestic market with essential goods and services.
Small business does not only populate certain niches in the economy, but it is also instrumental in the economy’s diversification and ensuring its sustainable growth rates.
It is hard to overestimate, especially in our conditions, the vital role of the entrepreneurial business in providing for employment and growth in people’s incomes. This can be seen if we take into account the following figures.
During the period between 2005 and 2011, in excess of 5 million new jobs were created in the economy of our country, whereby over 60 percent of them accounted for small business and private entrepreneurship. These indicators are rather telling in their own right, and, in my opinion, so are they for any other country. As a result, this sphere currently covers more than 75 percent of the total employed population.
Second, compact in form, agile and efficient in decision making, receptive to innovation, small business is more flexible and swift in adapting quickly to changes in the demand and the situation in the global and regional markets, and in timely addressing its challenges.
Third, starting and running small business does not require large expenses and capital investments, which allows for faster and easier modernization, technical and technological re-equipment of production facilities, introduce new types of goods, constantly upgrade its range and provide for competitive edge.
Fourth, the higher sustainability of this sphere, compared to large enterprises, for the challenges and consequences of the global financial and economic crisis.
Only through an accelerated promotion and a predominant status of small business and private entrepreneurship have we been able to cope with the negative impact of the 2008-2009 slowdown with lesser pain and loss, and reorient – within a brief span of time – the production capacities with an eye to the changing global market conditions.
In manufacturing industry, the growth rates of small businesses and private entrepreneurship during 2008-2009 averaged 23-24 percent, while services expanded at least 15-16 percent.
Fifth, small business is not only a source of income, but also a tool for discovering the creative and intellectual abilities of people. This area allows everyone to show their individual talents and capabilities, thus forming a new layer of people – the enterprising, initiative-prone, inclined to independent activity, and able to achieve their goals.
In a word, small business and private entrepreneurship in essence are serve as a constantly expanding base for the formation of the middle class, a class which is the backbone of any democratic society. It is through the development of this sector that a social stratum is shaped, the one which is interested in the socio-political, socio-economic stability in the society, the one which is an active driving force moving the country towards progress and democratic reforms.
I am convinced that a profound understanding of these and other factors may explain the enormous significance attached in Uzbekistan to the advanced development of small business and private entrepreneurship. Suffice it to say that twenty years ago, there scarcely was any private entrepreneurship in Uzbekistan, while today small business accounts for more than 90 percent of all corporate businesses in the country. It accounts for about 54 percent of the current gross domestic product, 22 percent of manufacturing, and 98 percent of agricultural production.
I think the conference participants will appreciate our achievements in this area over the past years.
I would like to emphasize that such a rapid growth of small business has been possible owing to the fact that for centuries, private enterprise has had a special place in the history of our country.
We have every right to take pride in the preserved enterprising legacy of our ancestors, their reverence and respect for the land, property and crafts.
Dear forum participants!
Let me very briefly expound on the next critical issue, namely – on what principles and foundations the development of entrepreneurship and small business is based in Uzbekistan.
This has been due primarily to a powerful legislative and normative framework, its constant improvement, the system of government assistance in the provision of business with incentives and preferences, technical and technological re-equipment and modernization.
As early as in the early 1990s, a number of laws were adopted, including those on denationalization and privatization, on property, that were built on constitutional norms and principles. These laws allowed within a short period of time to denationalize hundreds of thousands of state-owned enterprises in manufacturing, trade, catering and services into private property, to implement the principles of rental property, primarily in agriculture.
The fundamentally important in the development of private enterprise has been the 2000 law on guarantees of the freedom of entrepreneurship, which fixes all the basic guarantees and conditions for the free participation of citizens in enterprising business, protecting the rights and legitimate interests of economic entities and business.
We have always focused our attention on taxation issues. In the period from 2005 to 2012, the single tax payment for micro and small enterprises has been reduced more than 2.5 times from 13 to 5 percent of the turnover, while folk craftsmanship and family business is not taxed at all or taxed at minimum rates.
Deserving special attention is the fact that amid the global financial and economic downturn, we not only avoided increasing the tax rate, as it was the case in many countries within their anti-crisis programs, but, on the contrary, reduced the single tax for small businesses. We also freed of tax for 5-7 years those enterprises that produce consumer goods in demand, and freed of customs duties those businesses who are involved in technical and technological modernization and renewal.
In 2011 alone, the total amount of tax benefits provided to small businesses and private enterprises has exceeded 500 million US dollars in equivalent.
The enterprise assigned about 35 percent of this amount to expansion and modernization of production, another 25 percent was allocated to stimulate their staff and workers.
It is difficult to overestimate the role of the state in the formation and establishment of small business and entrepreneurship, given its decisive contribution to the development of industrial, social, communication and transport infrastructure.
As an example, suffice it to mention the successful experience of operating high-tech business in the Navoi Free Industrial and Economic Zone and the Angren Special Industrial Zone we have created.
In the Navoi industrial zone, the state has invested about 100 million US dollars in equivalent to the construction of engineering networks, logistics and support systems, the strides that have facilitated the attraction of foreign investment to the creation of dozens of modern production facilities.
For the Angren industrial zone created earlier this year, a special program to build production infrastructure and communications for over 60 million US dollars is elaborated and already been being implemented.
Why is all this done for? We clearly understand that small business cannot take on such a burden. They cannot put huge amounts of investments into building the communications, which serve not merely for small business or a group of companies, and in general, this stimulates the production infrastructure, brings people together, and creates the necessary conditions and opportunities for operational efficiency of small business and entrepreneurship. This, naturally, should be clear to everyone.
The decision has been made in Uzbekistan envisions that in these areas that are being created as free zones – zones of preferences – all the infrastructure for those enterprises, foreign investment into which exceeds 30 million dollars, is 100 percent funded by the state. We believe that the measures being taken by us are the very incentives that provide for a rapid economic growth and advancement of entrepreneurship in Uzbekistan.
The decisive factor of stimulating the formation and expansion of private enterprise are the issues of optimization and privileged lending.
In 2011 alone, the banking system provided lending for the total of 2.5 billion dollars in equivalent to bolster and stimulate this sector, accounting for 26 percent of total loans.
We highly appreciate the tremendous assistance provided by international financial institutions like the Asian Development Bank, the World Bank, the International Finance Corporation, the Islamic Development Bank, UN agencies, the Arab Coordination Group countries, the governments of South Korea, China, Germany and others, who have assigned more than 1.5 billion dollars of loans for small business and private sector funding over the last years.
Expounding on this subject, on behalf of all our Uzbek entrepreneurs and me personally, I would like to express sincere gratitude time and again to the management and representatives of the UN, banking institutions present at the conference, representatives of foreign embassies for your contribution to the establishment and successful development of business in Uzbekistan.
Today, there is no need to convince or prove to anyone that only an educated, modern-minded, intellectually advanced and proficient young people can become the most pivotal condition and guarantee of quality, dynamic and innovative development, can win a decent future for the nation.
Realizing this, the specialist training in Uzbekistan is raised to the level of a top priority of state policy. A unique system of professional training has been on the run in the country for the last fifteen years.
The essence of this system lies in the transition to the compulsory 12-year free education on the basis of 9+3 principle, whereby following 9 years of study at general school, children can continue 3 years of education at professional colleges or lyceums they opt.
Typically, lyceums are created at higher educational institutions and universities to facilitate subsequent education in the latter.
Over these years, about 1.5 thousand new specialized professional education institutions – colleges outfitted with cutting-edge equipment have been built, providing training in three or four professional specializations and knowledge of at least two foreign languages.
Only in the last five years, in excess of 2 million 500 thousand young people have graduated these institutions and who join the ranks of those working today at the newly built modern factories and farming enterprises of the country.
I am confident that many of you, our guests – contributors to this forum, have been able to find a confirmation of these words while familiarizing with the level and quality of training of future specialists and professionals, at colleges and lyceums in Tashkent, Samarkand, Bukhara, and other cities of Uzbekistan.
I would like to share a point with you. I think it is very important. Frequently, during conversations our foreign guests, especially those who wish to do business in Uzbekistan, and of course, politicians and diplomats, wonder in particular as to what kind of society Uzbekistan is building. What goals has this country set for itself? And to what extent can we be sure that Uzbekistan will go along the path chosen by the democratic world.
I always say in this case: look and see with your own eyes, visit one of our new colleges or lyceums and you will see that there the future of Uzbekistan is born – namely, a new generation that thinks absolutely differently. They do not know of the Soviet system. We have been advancing for twenty one years, dependent on no one, and guided by our national interests. These are free people, free-thinking people who believe in themselves, and crucially, have long gotten rid of the ideology of the former regime. Those days are long gone. Those were the times when we all thought that a Secretary General sits at the top, and he knows and decides everything. Indeed, with such a thinking mode, for sure, we could not develop. I would say that the Soviet Union collapsed for the very reason that it could not develop further. The system could not continue to exist. We had to evolve like the world – the democratic world – was evolving. And we now will develop in that direction.
Look at the young people, graduates of lyceums and colleges, and in their eyes you can read out what they want and what they aspire for. I think if you really want to fix the idea that Uzbekistan will continue to develop in a democratic community, make more contact with our younger generation, and you will understand what growing generation we have and how it sees its future.
Dear conference participants!
It is no secret that one of the underlying prerequisites for the normal operation of business is to provide, first and foremost, for robust legal guarantees of freedom of enterprise, their unconditional implementation not in word but in deed, to rule out illegal interference by government, law enforcement and regulatory agencies in their activities.
At the legislative level, we have introduced the principle of the priority of entrepreneur rights in the relations of businesses with government, law enforcement and regulatory agencies, whereby all the contradictions and inconsistencies in the law should be interpreted in favor of entrepreneurs. An order is in force that prohibits planned tax audits of small businesses within three years from the date of registration and limiting subsequent conduction of tax audits in steadily working and honest taxpayers.
Since 2005, the permissive system has been switching to the notification one of state registration of business entities. It takes no more than two days for entrepreneurs to open their own business, meeting the criteria in force in advanced nations.
Much emphasis is placed in Uzbekistan on the institutional and market infrastructure that is conducive to boosting small business and private entrepreneurship.
The most important tool of market price formation and ensuring equal access to highly liquid raw materials and commodities is a commodity exchange. We have today a well established mechanism of stock trade, which allows any business to have equal and unfettered access to raw materials through exchange trades.
This year, we have provided additional incentives and benefits to exporters and foreign investors. This last July, measures were worked out in cooperation with the International Finance Corporation designed to radically improve the business environment and to provide for greater freedom of entrepreneurship, an action that produced two decrees of the President of the Republic of Uzbekistan.
The country provides a wide introduction of the electronic system of providing statistical, financial and tax reporting, payment of taxes and mandatory payments of the registration and licensing procedures, filing pleadings and motions for commercial courts, substantially reduce or completely exclude direct contact between the government and regulatory agencies and entrepreneurship entities.
Approved measures have allowed from August 1 this year to reduce the number of procedures for business registration twofold, abolish the requirement to establish an initial authorized capital prior to registration, reduce the judicial and legal costs by businesses 2.5 times.
In order to radically diminish government interference in the activities of business entities in the current year, we have denounced eighty types of licensing procedures and fifteen licensed activities, and decreased the forms and frequency of submission of financial statements 1.5 times.
In addition, the decision has been made to denounce 65 types of statistical reporting and six types of tax reporting starting from January 1, 2013, with a more than twofold reduction in the frequency of report submission.
I would especially like to stress that in accordance with the legislation, an order is established whereby the state reimburses to the subject of business the latter’s losses caused by unlawful acts of public authorities, action or inaction of their officers, as well as by agency act contradicting the law.
Dear conference participants!
Today, we have every reason to state that the model of reforms and modernization of the country, the formation of civil society, based on the evolutionary path of development and the renowned five principles, that we chose right in the first days of our independence, has allowed us to build – within a short period of time by historical terms – a robust foundation for sustainable economic development, has allowed us to reliably withstand the negative impact of the global financial and economic crisis, to achieve sustained high rates of economic and social development among the few countries in the world.
Over the last six years, the gross domestic product has been growing at an annual rate of at least 8.2 percent. Compared to the year 2000, the GDP has enlarged 2.9 times, the industrial production increased 2.6 times, the volume of investments in the economy multiplied 3.4 times, while foreign direct investment has expanded more than 20 times.
What does this imply? This suggests that we are trusted. Foreign investors believe that their investment will pay off, and they will not worry whether they have concluded agreement with a country or people who are insolvent. I attach a tremendous significance to the fact that the flow of direct investment has been growing, which is pretty important for the country. It means that we are joining the world of global business, the world of business of the international community. It means we are trusted, it means we are the ones one can rely on. This is rather precious.
According to data from the Asian Development Bank, the per capita income in Uzbekistan over the last seven years has increased threefold. A constant surplus of the current account balance is being secured, so is the low total external debt at 10-12 percent of GDP, with an almost zero internal public debt and sufficient currency reserves.
All this gives us confidence in the future of the country, in the future of our hard-working and hospitable people.
Let me take this opportunity and reiterate my great respect and sincere gratitude to all the participants of this conference.
I wish you, dear friends, productive work and pleasant stay in Uzbekistan, a sound health, every success and the best of luck in your activities.
See you soon!