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IFC’s Survey of Uzbek SMEs Reveals Progress and Challenges Ahead


In Washington DC:
Irina Likhachova

Phone: 202-473 1813

Email:
ilikhachova@ifc.org


February 16, 2005, Tashkent, Uzbekistan – Today it takes, on average, only 16 days to register a business in Uzbekistan under the new “One Window” registration  system, down from 31 days in 2001. The number of inspections of businesses by government authorities has also dropped substantially, to 1.9 per firm now versus 6.2 in 2001; this has reduced the “time tax” on businesses by two-thirds, in terms of working days, since 2001. These are some key findings of a survey of 2,500 Uzbek small and medium enterprises conducted by the International Finance Corporation with funding from the State Secretariat for Economic Affairs of Switzerland (seco).

The improvements in the business environment reflect the reforms undertaken by the Uzbek government, which introduced the new business registration system in 2003 as well as streamlined business inspections procedures. IFC’s surveys and advice have played a key role in the reforms.


The survey, Business Environment in Uzbekistan as Seen by Small and Medium Enterprises, is the third annual survey that IFC and seco have conducted in the country. The surveys look at regulatory issues from the viewpoint of local entrepreneurs and provide first-hand information on administrative obstacles they face, allowing the government to make better-informed policy decisions and monitor the progress of reforms. Meanwhile, IFC has drawn on international best practices in business regulation to provide policy recommendations to the government. To date, the Uzbek authorities have taken 18 of IFC’s recommendations into account in implementing reforms of registration, licensing, taxation, foreign trade, and issuance of business permits.


While the Uzbek government has undertaken a number of initiatives to improve the country’s business climate, the survey of entrepreneurs points out areas that still need to be addressed.
       The share of enterprises investing in growing their businesses has declined dramatically, from 53 to 19 percent.  

       Frequently changing tax legislation and a lack of transparency in calculating and paying taxes continue to create major difficulties for 57 percent of entrepreneurs.
       Despite progress in reducing the number of inspections per business, the inspection authorities still wield excessive powers that could significantly restrict the ability of entrepreneurs to conduct business.


IFC will continue to work on improving the country’s business inspections regime. Specifically, in 2005 IFC will assist the Uzbek Sanitary and Fire Inspectorates to update their internal guidelines and regulations and to develop practical checklists for use by inspectors during site visits.      


The International Finance Corporation
(IFC) is the private sector lending arm of the World Bank Group. The mission of IFC (
www.ifc.org) is to promote sustainable private sector investment in emerging markets, helping to reduce poverty and improve people’s lives. IFC finances private sector investments in transition and developing countries, mobilizes capital in the international financial markets, helps clients improve social and environmental sustainability, and provides technical assistance and advice to governments and businesses. From its founding in 1956 through FY04, IFC has committed more than $44 billion of its own funds and arranged $23 billion in syndications for 3,143 companies in 140 developing countries. IFC’s worldwide committed portfolio as of FY04 was $17.9 billion for its own account and $5.5 billion held for participants in loan syndications.

The State Secretariat for Economic Affairs (seco)
represents Switzerland in multilateral trade organizations and international negotiations.  It is also involved in efforts to reduce poverty and help developing countries with transition economies build a sustainable democratic society and viable market economy. Each year Switzerland spends about 1.7 billion Swiss francs on economic development and transition assistance to developing countries.



An electronic version of the survey is available at:  
www.ifc.org/centralasia