Suspicion as Uzbek Leaders Pledge to Back Small Businesses

Every year has an official theme in Uzbekistan and 2011 is no different – President Islam Karimov has declared it the Year of Small Business and Enterprise.

Past experience has made businessmen wary of their government, however, and some fear that being placed in the spotlight will merely attract unwelcome attention to them.

Entrepreneurs are concerned with the fact that bona fide intentions of the authorities would turn into close attention to entrepreneurs, which would just increase the number of various inspections and bureaucratic obstacles.

The authorities say the private sector is on the up, with half a million new workplaces created last year alone.

However, some businessmen are suspicious of this optimistic portrayal, saying the environment is not conducive to entrepreneurship, with numerous restrictions, frequent intrusive inspections, excessive taxes, and the levying of compulsory “contributions” for public works.

In August 2010, the authorities announced changes to the “unified tax payment”, a type of profit tax payable by smaller companies in the retail and service sectors, so that instead of a variable percentage it would become a fixed sum. The move led many small businesses to consider closing down. (See: Uzbek Businesses Stung by Tax Rise .)

Businesspeople say the private sector has come under increasing pressure in the last two years. The authorities have placed new restrictions on legal practices, barring them from acting as notaries, and on doctors working in private practice.

"After eliminating private medical and law offices, which also represent enterprise, the authorities are turning on other businesses," a lawyer in the capital Tashkent said. "The year [of small business] will see various agencies acquiring unofficial powers to deal with businesspeople."

Sabo, who runs a small business in Samarkand, fully expected greater regulation this year. The result, he predicts, will be “numerous bank failures and a massive shift into the grey economy on the part of those who are currently running their businesses in a more or less transparent manner”.

Tashkent-based analyst Dilmurod Kholmatov sees the declaration of 2011 as Year of Small Business and Enterprise as a political campaign that will mainly generate “more bureaucratic activity – reports, meetings, roundtables and workshops”.

Suhrob, a businessman from Tashkent, says he prefers to do actual work rather than attend such “trivial” discussion events.

“These events usually end in condemnation of those entrepreneurs who complain most about arbitrary treatment," he said. "We have become wiser and no longer take statements by officials at face value."

This article was produced as part of IWPR’s News Briefing Central Asia output, funded by the National Endowment for Democracy.