Employees of the Agency for Strategic Reforms, within the framework of working groups formed in January of this year, spent several days studying the effectiveness and efficiency of reforms being implemented in 16 areas in the Republic of Karakalpakstan, regions and the city of Tashkent.
Meetings were held with more than 1,200 entrepreneurs, including more than 200 start-up entrepreneurs, as well as with government officials who coordinate local entrepreneurship development issues. As a result of the meetings, problems that worried entrepreneurs and hampered their activities were summarized.
Representatives of the working groups compiled 60 groups of issues (from all received requests in the amount of more than 700) and corresponding proposals for their solution by region.
Based on the results of a study of the effectiveness and efficiency of business support reforms and existing problems in the implementation of tax policy, Agency employees found that:
tax and customs benefits provided for by the country’s legislation have had a positive impact on the activities of business entities. The incentives were mainly used for the import of equipment and raw materials in the textile and furniture industries, as well as goods and vehicles in the tourism sector.
Most of the benefits provided will expire in 2024, the cost of products developed by entrepreneurs may increase, and export opportunities may be limited.
Certain provisions of tax legislation negatively affect the efficiency of entrepreneurs and lead to the growth of the “shadow” economy. In particular, in accordance with the Tax Code, a “zero” level of value added tax and profit tax rates is applied to exported goods when funds are received in foreign currency. In practice, entrepreneurs exporting in national currency that is traded through legal channels on the stock exchanges of neighboring countries are not able to take advantage of this benefit.
In the course of studying the effectiveness and efficiency of reforms in the direction of development of agriculture and water management, a discrepancy between the level of productivity of agricultural land and the credit rating of the soil was also revealed, which causes difficulties in the practical application of the system of loans to producers of cotton raw materials and grain, based on the credit rating of the soil.
In addition, there are a number of untapped opportunities for the development of the tourism sector. Thus, the legislation establishes that the costs of connecting to the infrastructure of business projects worth 50 billion soums and more in cities and districts of the 4th and 5th categories will be covered by the state.
However, in practice, this Decree No. UP-278 remains unimplemented, that is, in cases of investment, measures to support connection to the infrastructure remain unapplied.
For example, in the Khatyrchinsky district (4th type), NATIONAL CERAMICS LLC JV invested $8.7 million in foreign investment as part of a project for processing feldspar and quartz worth $10 million. Due to the fact that the state-guaranteed measures for connecting to the infrastructure (gas, water, sewerage, electricity) were not implemented, the entrepreneur, using his own funds, installed process water and a power line at a distance of 20 km.
The analysis carried out by ACP employees revealed important aspects that require attention and further efforts. Positive results in the business environment highlight the need to continue successful initiatives, but new challenges are emerging, such as the expiration of benefits and difficulties in agriculture. Solving the identified problems will be an important step for sustainable economic development and improving the quality of life of entrepreneurs and the population as a whole.
The Agency will continue to study the effectiveness of measures to stimulate entrepreneurship in the regions using the example of specific projects.