Entrepreneurship Development in Uzbekistan
1. General trend on SMES and the Government policy towards their development
The development of small and medium businesses was declared one of the top priorities of the Government of Uzbekistan in its endeavors to implement economic reforms. The Government's primary tasks in this domain are to lay the foundation for the formation of a class of real owners, to create new workplaces and competitive environments, and to introduce innovations, all with the culminating goal of raising the overall wellbeing of the population and securing stability within the society.
According to the current Uzbek legislation, small and medium business entities fall into the following categories:
- an individual entrepreneur: a person who has obtained a certificate of State registration as a subject of individual entrepreneurship with no right to establish a legal entity and use hired labor;The number of SME entities is continuously growing: 43,000 new small enterprises were registered in 2003. In 2004, among the 442,000 entrepreneurship entities registered: 264,000 were small and medium private enterprises and 182,400 were with individual entrepreneurs. SMEs contribute to 35.5% of the GDP and employs 57% of the active population.
- a micro-firm: an enterprise of any form of ownership with the average annual number of employees as follows: up to 10 persons in manufacturing; up to 5 persons in trade, services and other non-manufacturing industries;
- a small enterprise: an enterprise of any form of ownership with the average annual number of employees as follows: up to 40 persons in manufacturing; up to 20 persons in construction, agriculture and other production industries; up to 10 persons in science, scientific service, retail trade and other non-production industries;
- a medium enterprise: an enterprise of any form of ownership with the average annual number of employees higher than in small enterprises, but not exceeding: 100 persons in manufacturing; 50 persons in construction, agriculture and other production industries; 30 persons in wholesale trade; 20 persons in retail trade, services and other non-production industries.
However in Uzbekistan, like other countries undergoing transition process, many specific barriers hinder the development of small and medium business activities. Among them:
- Instability of the tax legislation and non-transparency of the methodology of tax charge and payment: during 2003 more than 40 normative and legal acts have been adopted in accordance with which more than 90 changes have been made in the tax legislation;Therefore, the main tasks for the enhancement of the SME sector are the following:
- Ineffective provision and dissemination of information on markets of raw materials, equipment and credits;
- Shortage of credit resources, inactivity of financial institutions in SME promotion, limited access to credits and high interest rates on credits;
- Difficulties in obtaining information from international markets and establishing contacts with potential foreign partners.
- Endeavor to ensure the direct access of SMEs to national and international credit sources;Over the last years of reforms in Uzbekistan, new organizational and legal conditions as well as new institutional structures have emerged, providing assistance to the development of private business structures. The most significant ones will be developed below.
- Improvement of the access of small and medium enterprises to raw materials resources, production equipment, spare-parts markets and modern technologies;
- Development of market infrastructures, liberalization of the interrelations with banks, financial, consulting and legal structures;
- Setting up of wholesale markets providing sale of products, broadening of export opportunities; training of market specialists and improving their economic and legal culture;
- Expansion of export opportunities;
- Training of market economy specialists and high skilled managers to upgrade their economic and legal understanding of the stakes of a global market.
The Chamber of Trade and IndustryOne of the latest acts is the Decree of the President of Uzbekistan on the establishment of the Chamber of Trade and Industry of Uzbekistan issued in July 2004. One of the latest acts is the Decree of the President of Uzbekistan on the establishment of the Chamber of Trade and Industry of Uzbekistan issued in July 2004. It was set up with a view with the objective of creating auspicious conditions for the further development of private entrepreneurship, the improvement of business environment and the establishment of business bounds between domestic entrepreneurs and foreign partners. Besides it also aims at promoting indigenously-made goods and services to external markets, and at attracting foreign investments.
Network of insurance agenciesAmong the infrastructures providing support to small and medium entrepreneurs there is a network of insurance agencies, such as "Uzbekinvest", "UzinvestAIG", "Uzagrosugurta". The objectives of these insurance agencies are: manage guarantees on borrowed credit, insure protection against entrepreneurial risks, insure of responsibility of the borrower for the existing loans, insure protection for foreign investments aimed at the development of private and small entrepreneurship. None of the banks can grant a credit unless the guarantee of the credit recurrence is ensured. Such guarantees should be provided by the insurance agencies based on the appraisal of concrete projects and programs in the sphere of small entrepreneurship.
Business incubatorsThere is also a system of business incubators implementing training, retraining and qualification improvement of the specialists for small and private enterprises.
The Republican Coordination Council for the development of the small and private entrepreneurship sector - under the Cabinet of Ministers of the Republic of UzbekistanThe objective of the Republican Coordination Council is to support the development of the small and private entrepreneurship sector. Its Program for "development of small and medium business and private entrepreneurship in the Republic of Uzbekistan for 2002-2003" concretely addresses some of the defined priorities for SME in Uzbekistan, providing means for the development of small wholesale trading, wider access for small and medium businesses to raw material resources, development of related servicing infrastructures.
2. Specific constraints on women entrepreneurshipWhen speaking about the role and place of women in the Uzbek society it is necessary to remember that women make more than half of the population of the country (50,5%) and almost half of the working population (44%), having to combine at the same time their working obligations with their household duties. It is obvious that without an active participation of women in the economic and social life of the society, without consideration of their interests at all levels of decision making one can not speak about democratization of the society.
Cultural BarriersFirst, gender stereotypes and gender relations determine a range of non-formal barriers in women's lives in Uzbekistan. Attitude towards women is closely connected with the old traditions and human values of the Uzbek society. However the role of women in the society has been promoted by the Government. To improve their conditions the Women's Committee of Uzbekistan headed by the Deputy Prime Minister, has been created. The Women's committee has its regional, city and district branches all headed by women-deputy governors (khokims) in charge of women issues. The major objective of the Women's Committee is the overall support of women, the protection of women's rights, the promotion of their social, political and labor activity, the upgrade of the level of their legal and economic knowledge, and finally, the improvement of their social and economic status and welfare.
Uzbekistan has introduced a number of legislative changes and legal reforms designed to guarantee the interests and status of women. The Uzbek Constitution guarantees equal rights for men and women (Article 46) as mothers and household managers. However, in practice many women are not served well by these laws because of poor or patchy implementation and a lack of compliance. According to the Constitution of Uzbekistan, all citizens enjoy equal rights and freedoms irrespective of sex, race, ethnic origin, language, religion, social background, convictions, personal or social status (Article 18). There are however some special measures that pertaining only to women in the various codes, such as the Labor Code and Family Code. These conditions set out privileges and protective measures proceeding from women's biological and reproductive functions. Uzbekistan is also a signatory to the CEDAW and the United Nations Declaration and Action Platform set forth in Beijing in 1995. The Government of Uzbekistan passed a new Family Code (1998) to bring the existing family law into compliance with these international conventions and declarations. Family and labor codes are often the systems of law most directly bearing on women's status. In the case of Uzbekistan, both of these codes in general endorse the principle of men's and women's equality before the law and both also contain measures specific to the role of women.
One of the latest acts of the Government towards for the promotion of women was the Decree of the President of May 2004 on "additional measures to support the activity of the Women's Committee of Uzbekistan", followed by a Resolution of the Cabinet of Ministers of June 2004 on the implementation of the measures declared foreseen by the Decree. Both documents have a long list of initiatives aimed at the protection of women's interests and the promotion of their status in the society as well as the support of the women's NGO activities.
Economic BarriersEconomic consequences of the transition process had the most negative effect on women. One of the main social consequences of the transition period in economy was the deterioration of the position of women-employees in the labor market resulting in an exceptionally high level of unemployment among women.
According to the data of Social Research conducted jointly with the Chamber of Commerce (2001): only 19% of entrepreneurs are women (21,1% were under 30 years old, 36.8% between 30 and 40, and 42,1% above 40 years old). These entrepreneurs are usually highly educated women and most of them have higher education (78,9%).
Women's status and their ability to fully take part in the process of building a market economy and an active civil society is the most disheartening economic cost of transition. Women suffer from both economic and social deprivation as a result of unemployment and insufficient income-generating opportunities. Furthermore, there is little sign it seems that this negative trend is declining is being accented by the ever-growing poverty. Critical factors here include unemployment, wage arrears, inflation and high costs of living.
Some areas need to be developed and expanded in relation to women's participation in SMEs and income -generating activities in Uzbekistan. One of the primary risks associated with the transition to a small business in a market economy is the lack of knowledge of markets and small business management. Many NGOs have acknowledged this problem and offer training courses in a range of areas such as legal literacy, business registration, accountancy, taxation and business plan development. There is however a huge unmet demand that requires further investment by government and funding organizations and with a greater coordination across NGO activities to ensure the quality of training, geographical spread and equal opportunities to (for) urban and rural women.
Starting capital and lack of credit are other barriers to women's participation in small businesses. Banks in Uzbekistan are reluctant to give credits to small enterprises in general. Even where people have been fortunate to secure a bank loan the interest rate is often a further encumbrance to the enterprises' economic growth. It is particularly difficult for women to secure a bank loan because they often lack the collateral support required. Introduction of effective microfinance schemes could be an important mechanism for enabling less advantaged women to access capital necessary for starting up and developing business activities. Leaders from women's NGOs are particularly eager to see further expansion of microfinance projects in Uzbekistan. Nevertheless, some projects of this kind have been implemented at a regional level but they were only pilot projects with no real impact.
3. Strengthening women economic independence todaySMEs are essential to create new employment opportunities for women and generate sources of income. Women's participation in small trade and business not only improves their own welfare but also the welfare of their family. There are women with considerable skills in handicrafts, ceramics and food preparation, who could operate successful small businesses with appropriate training, provided that they have a good business plan and an access to credit. Investing in women's micro-enterprises in Uzbekistan will generate employment opportunities; however, it will be necessary at the same time to provide enhanced business development and financial management skills focusing on the needs of women. Additionally, support to establishment of small businesses will assist the emerging private sector, a priority area in the Government policy of Uzbekistan. It is highly recommended that support to the emerging private sector include training in (i) business and financial management skills for women and men, and development of educational materials designed for women's needs and experiences; and (ii) women's leadership skills and vocational skills development. Finally, it is recommended that support to micro-enterprises and SMEs be developed in tandem with credit programs and microfinance projects.
The international funding Institutions have identified four major fields of intervention to support women participation in the SME development sector in Uzbekistan:
- Training on vocational skills;One of the efficient mechanisms of creating new job places for women particularly in rural areas is the development of non-bank micro-financing institutes through thanks to the input of various international funds. The NGOs participate actively in this process. Indeed the growth of women NGO's is one of the most positive achievements in terms of women's political, social and economic participation in Uzbekistan. In 1991 there was only 1 women NGO - the Business Women Association "Tadbirkor Ayol". Currently, there are about 200 women NGOs in Uzbekistan working in different areas of promoting women.
- Training on business and entrepreneurial skills;
- Micro-credit programs;
- Financial sector and SME reform;
However, to be able to make a comprehensive analysis and build up a vision for the enhancement of women's position in Uzbek society there is a need for deep knowledge base on the status and position of women in society. Such a knowledge base is incomplete in Uzbekistan at the moment. There have been contributions to the quantitative and qualitative analysis of women and gender in the past few years but further investment in research is required. Without such research it is difficult to describe the current baseline in relation to women's status and thus measure gains or losses women currently face in Uzbekistan.
Investing in women's micro-enterprises in Uzbekistan will generate employment opportunities for women; however, it will be necessary at the same time to provide enhanced business development and financial management skills focused on the needs of women. Additionally, support to establishment of small businesses will assist the emerging private sector, a priority area in the policy of the Uzbekistan Government.
- 1. Asian Development Bank. 2001, Country Briefing Paper. February 2001. Women in the Republic of Uzbekistan;
- 2. World Bank 2003, Uzbekistan. Оценка уровня жизни населения. Volume 2: Complete Report;
- 3. "Trud" newspaper №186 of 1.10.2004, Murat Sharifkhodjaev "Приоритеты государственной политики Узбекистана";
- 4. International Finance Corporation 2003 "Деловая среда в Узбекистане глазами представителей МСБ";
- 5. Rheinisch - Westfalisches Institut fur Wirtschaftsforschung e.V. (RWI) Female entrepreneurship in the Ukraine, Moldova and Uzbekistan: National Report on Survey Data for Uzbekistan. July 2003;
- 6. www.uzreport.com