Baltic States – CIS, Business, Legislation, Markets and Companies

The reason of the trend is fairly simple. Large enterprises prove clumsy, and risking to face serious problems with profitability in the context of global financial turbulence. Unlike small businesses, it appears hard for big manufacturers to re-orient their production lines for new products given declining demand and sales and changing preferences of customers.

That's not to mention the fact that every crisis is forcing large companies to cut staff, and increase profitability through enhancing efficiency and reducing costs. Small businesses do not face such a problem - they just have to bring in all opportunities to be successful.

Uzbekistan has long focused on this sector, providing the most favorable conditions. Meanwhile, the rapidly changing conditions required the accelerated rates of development of ‘small economy’, enhance the role and place of private property, eliminate certain barriers and constraints to private businesses, reduce the government involvement in the economy, and consistently increase the share of ‘private owners’ in the gross domestic product.

Approved by the state’s leader last week, a Program of Measures on Ensuring Secure Protection of Private Property, Small Business and Private Entrepreneurship and Elimination of Barriers in their Rapid Development was designed to address most of the current problems.

The program is primarily aimed at enhancing responsibility, up to criminal one, of government officials, law enforcement and regulatory authorities for impending and illegal interference in entrepreneurial activity, violation of private owners’ rights, as well as securing guarantees of protection of private property, and continuation of the liberalization process of the administrative and criminal law that regulates entrepreneurial activity.

The program settles specific measures to further simplify all kinds of registration, licensing and permitting procedures, as well as procedures related to foreign economic activities, create appropriate conditions and opportunities for accelerated development of small businesses and private enterprises, and expand their access to funds and loans.

As of July 1, 2015 Uzbekistan is introducing a new procedure of inspections for micro firms, small businesses and farms to be carried out not more than once in every four years, and no more than once every three years for other economic entities, exclusively at the decision of the Republican Council for Coordination of Regulatory Authorities in Uzbekistan.

The terms of the scheduled inspections that are not attributable to financial and economic activities should not exceed 10 calendar days. Scheduled inspections of financial and economic activity of business entities cover only the period following the last scheduled inspection.

The inspections of economic entities by law enforcement bodies in criminal cases are carried out with the obligatory presence of lawyers. In case if an entity has committed the crime of tax evasion or other mandatory payments, it might be exempted from liability without criminal proceedings, provided that it fully reimburses the damage caused, pays fines and other financial penalties within 30 days after the crime was detected.

It is worth to mention the strengthened legal safeguards for businesses. Uzbekistan schedules to introduce the round-the-clock complaint reception system for small businesses and private enterprises by July 1, 2015. It will operate on the basis of the Single Call Center of Uzbektelecom and helpline of the General Prosecutor’s Office. The system will address the cases of groundless interference of government, law enforcement and regulatory authorities in the activities of businessmen, impediment in business and violation of owners’ rights. It is entrusted with taking enforcement actions against the persons who violate the guarantees of freedom of entrepreneurship.

Economic courts have received the right to suspend execution of a decision of a supervisory authority, if it is appealed by a business entity, for the period of consideration of the relevant claim. It is also important that the property of the business entities that violated tax or customs legislation may be seized, and additionally charged customs duties may be impounded exclusively at the decision of the court, if there is an objection by the business entity.

The document has settled the issue of benefits for individual entrepreneurs. Today, a significant part of the service sector in Uzbekistan is represented by this segment, and its active growth has been constrained primarily by the lack of opportunities for expansion. Since July 1, individual entrepreneurs will get the right to employ from one to three employees, depending on the type of business, paying insurance premiums to the Pension Fund for each worker in the amount of 50% of the minimum wage and the fixed tax of 30% of the established rate for the individual entrepreneurs-employers. Besides, they are exempt from fixed tax for employed workers - graduates of vocational colleges within twelve months upon graduation.

Another important initiative is scheduled for the next year, which, according to experts, might significantly simplify the life of aspiring entrepreneurs. A centralized system of ‘single window’ centers will operate across the country as of January 1, 2016. Integrated centers of public services for businesses will be established under business entity registration inspection agencies at district and urban municipalities. By July 1, 2015, related ministries should carry out a complete inventory of the public services provided by a ‘single window’ service for various departments, further integrate them into the service system of new centers, and design standard forms of constituent documents and the documents to be submitted for public services, including licensing and permit procedures.

Other state and economic authorities will be banned to receive any documents for public services provided by ‘single window’ centers directly from the business entities. The centers will be funded by fees for state registration of business entities to accrue to their accounts. However, the funds should be channeled exclusively at strengthening their logistical capacity and staff incentives.