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IFC Assists the Uzbek Government in Improving Business Climate



In Washington

Irina E.Likhacheva

Phone: +1 202 473 1813

Email:
ilikhachova@ifc.org


Tashkent, July 8, 2005 — Uzbek businesses received new incentives for growth when the president of Uzbekistan recently signed four decrees to stimulate development of small and medium enterprises and ensure a better entrepreneurial climate in the country. It is anticipated that the decrees’ benefits to the SME sector will total almost $27 million a year, or about 1.5 percent of the country’s gross domestic product.

With funding from the Swiss State Secretariat for Economic Affairs, IFC’s Uzbekistan SME Policy Project has been working since 2002 to support the country’s government in efforts to improve the business environment. IFC’s assistance has focused on streamlining the inspections regime, the business reporting requirements to various authorities, and the permits system. Over the past year, IFC worked closely with Uzbekistan’s Ministry of Economy, its Ministry of Justice, and the country’s Chamber of Industry and Commerce in drafting the presidential decrees.  


The Decree on Decreasing the Burden of Inspections shifts away from regulators the rights to freeze a firm’s bank account, impose major fines, or confiscate goods. These actions are now the prerogative of courts, and prosecutors will be allowed to inspect a business only if they are investigating tax and currency violations.


The Decree on Reducing Excessive Powers of Inspecting Agencies focuses on the system of fines, which will be substantially reduced or waived altogether in cases of a first offence or offences that are unintentional or effectively harmless. The decree also calls for parliamentary approval of new rules, giving firms six months to pay any fine that exceeds 20 percent of their assets.


The Decree on Reducing Reporting Requirements concerns compulsory reporting. IFC’s Uzbekistan 2003 SME survey found that Uzbek businesses had to submit, on average, 133 statistics and tax reports to government agencies every year. The new decree reduces this number, makes reporting strictly quarterly, and prevents regulators from demanding additional documentation. Compulsory contact between firms and tax authorities is thus reduced threefold, and the number of reports an average SME has to file each year is halved.


The Decree on Simplified SME Taxation replaces a complex system of taxation for small and medium enterprises, under which most SMEs had had to pay four different taxes.  Now they will pay a single tax equal to 13 percent of profits.    


According to Uzbekistan’s First Deputy Minister of Economy, Galina Saidova, “the government of Uzbekistan developed the new decrees in close collaboration with the business community and international institutions, particularly with the experts from IFC.” She added that the signed decrees demonstrate that the Uzbek government recognizes an important role for the SME sector in the economic development of the country.    

   
Zafar Khashimov, IFC’s Project Manager, noted, “IFC is strongly committed to continuing its assistance to the Uzbek government in order to create a more favorable climate for business. These decrees will have a significant impact on the SME sector and should serve as an additional impetus for further growth.”


The International Finance Corporation is the private sector lending arm of the World 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.

Switzerland’s State Secretariat for Economic Affairs (seco) seeks to create the basic regulatory and economic policy conditions to enable business to flourish for the benefit of all. It represents Switzerland in multilateral trade organizations and in international negotiations. It is also involved in efforts to reduce poverty and to help developing countries with transition economies build sustainable democratic societies and viable market economies. Each year Switzerland spends approximately 1.7 billion francs on economic development cooperation and transition assistance to countries.