CC BY
8Alla MAKUSHINA,
Senior lecturer of the Department «Economic Theory» of the faculty of Economics of the National University of Uzbekistan named after Mirzo Ulugbek
FOREIGN DIRECT INVESTMENT AS A FACTOR IN ENHANCING THE FOREIGN ECONOMIC ACTIVITY OF SMALL BUSINESSES IN THE
REPUBLIC OF UZBEKISTAN
The new world economy, emerging as a result of the financial and economic crisis, highlights the problem of modernization of all areas of activity, technical re-equipment and the transition to high-tech production. From the point of view of the essence of economic reform, the problem of increasing investment activity and improving the investment climate is one of the nodal. That makes it necessary to establish a balanced progressive investment policy, leading to a full increase in the competitiveness of the national economy, based on the development of measures and mechanisms adequate to modern conditions to intensify and increase investment efficiency.
Foreign investment plays an important role in the economy of any country, as it is due to the international division of labor, the development of international relations, the integration of the national economy in the world economy. Foreign investment contributes to accelerating socio-economic development, introducing new forms of management, updating and modernizing the technological process, developing small businesses, expanding the country's export potential, creating new jobs, increasing employment and developing the competitiveness of products and the state as a whole. Foreign investments is an essential resource for economic modernization. In the condition of economic modernization, high rates of economic growth imply the intensification of investment processes in priority sectors, including industry, which are the locomotive of the national economy.
Shavkat Mirziyoyev the President of the Republic of Uzbekistan in his Address of to Oliy Majlis noted: «As the world experience shows, only the country that conducts an active investment policy achieves stability and competitiveness of the national economy. Therefore, it can be argued that investment is the driver of the economy, figuratively speaking, its heart. No doubt about it. In all industries and spheres, in all regions with investments come new technologies, best practices, highly qualified specialists, entrepreneurship is rapidly developing».[2]
The investment legislation of the Republic of Uzbekistan is one of the
most advanced in the system of legislation of the CIS countries, incorporating the main provisions of international investment law, in particular, provisions of foreign investors rights' guarantees, the provision of certain preferences for investors and others.
The legal framework for attracting foreign investment in Uzbekistan is as follows:[5]
- Foreign Investment Law;
- Investment Activities Law;
- Law on Guarantees and Measures for the Protection of the Rights of Foreign Investors;
- Regulations adopted recently: Decree of the President of the Republic of Uzbekistan No. 21.12.2018 of UP-5600 «On measures to further improve the system of coordination and management of the activities of free economic zones»; Decree of the President of the Republic of Uzbekistan No. 17.01.2019 of UP-5635 «On the State Program for the Implementation of the Strategy for Action in Five Priority Directions of Development of the Republic of Uzbekistan in 2017-2021 in the Year of Active Investment and Social Development»; Decision of the President of the Republic of Uzbekistan of 13.11.2019 N PP-4519 «On measures to create and organize the activities of the Council of Foreign Investors under the President of the Republic of Uzbekistan»; Law of the Republic of Uzbekistan of December 25, 2019 No. 598 «On Investment and Investment Activities»; Decree of the President of the Republic of Uzbekistan of January 9 2020 No. PP-4563 «On measures for the implementation of the investment program of the Republic of Uzbekistan for 2020 - 2022 years».
According to the Decree of the President of the Republic of Uzbekistan from 31.03.2017 No. UP-4996 the State committee of the Republic of Uzbekistan on investments was formed to expansion and deepening of cooperation with the international and foreign state financial institutions, the leading foreign companies and banks, increasing efficiency of use the involved foreign investments into the Republic. Among the main areas of its activity was determined coordination of work on the formation and implementation of a unified state investment policy, including attracting foreign investment, as well as improving the investment climate in the republic on the basis of improving the legislative and legal framework.[1]
Also, the Tashkent International Arbitration Center (TIAC) at the Chamber of Commerce and Industry was established by Decree of the President of the Republic of Uzbekistan No. PP-4001 of 05.11.2018, whose activities are aimed at protecting conscientious investors.[4]
Other taken measures aimed at increasing the use of market levers in the economy also affected the improvement of the investment climate.
Among them, measures to liberalize foreign exchange policies stand out. Thus, in accordance with the Decree of the President of the Republic of Uzbekistan of 02.09.2017 «On the liberalization of foreign exchange policy», the Republic guarantees the free purchase and sale of foreign currency by legal entities and individuals in banks for current international operations.
The decree of the President of 11.04.2018 No. UP-5409 «About Measures for Further Reduction and Simplification of License and Allowing Procedures in the Sphere of Business Activity and also to Improvement of Conditions of Business» defined the priority directions of state policy on licensing and allowing procedures in the sphere of business activity. From June 1, 2018, this act canceled 42 licensed activities and permitting procedures; reduced time for issuing licenses and permits.
Decree of the President of Uzbekistan No. UP-5468 dated 29.06.2018 had a positive impact on the activation of investment activities and attraction of foreign investments. «On the concept of improving the tax policy of the Republic of Uzbekistan». This normative act launched a radical reform of the tax system, in the framework of which from 2019 the personal income tax was unprecedented reduced - up to 12%, the social insurance contribution from wages was canceled. For business, social payment and income tax were reduced to 12%, regulatory norms were ensured, and a favorable tax regime for foreign investment was maintained.
Fundamental transformations were carried out in the foreign economic sphere (many licenses were canceled, permissive procedures were simplified, import duty rates were reduced). Significant changes have been made in the development of integration ties with many countries, especially those in Central Asia.
Over the past two years alone, bilateral intergovernmental agreements have been signed on the development of investment and trade and economic relations with the People's Republic of China in the amount of $23 billion [6], with, the Russian Federation - by 16 billion, South Korea - by 10 billion, Turkey - by 3.5 billion, Kazakhstan - by 2.2 billion and Kyrgyzstan -by 455 million dollars of USA.
During the visit of the President of Uzbekistan to the United States in May 2018, 20 large contracts were signed between the companies of the two states, which, with their full implementation, will amount to more than $4.8 billion. The United States can help maintain 10 thousand jobs in the United States, as well as open up opportunities for multi-billion dollar contracts with American companies in the future. Full-fledged relations were restored with the European Bank for Reconstruction and Development, which provided a credit line for $190 million. United States for Small Business and Private Enterprise. Cooperation with the European Investment Bank and the French Development Agency has been established. Uzbekistan had become an
equal member of the newly established Asian Infrastructure Investment Bank. In the coming years, the country will join the World Trade Organization (WTO), which will create a solid basis for opening up new opportunities for expanding multilateral trade, investment and economic cooperation [7].
In accordance with the Development Strategy of the Republic of Uzbekistan for 2017-2021, Uzbekistan has made a significant adjustment to the investment climate, which consists in improving the working conditions for foreign investors in a number of areas.
At present, the efficiency of executive government bodies has improved, the number of activities requiring licensing has been reduced, a program for the development of financial markets has been adopted, and the transition to international reporting standards for enterprises is being completed. Legislation on free economic zones is expanding. The system of tax legislation is being improved [8].
A favorable business environment, the intensification of foreign economic activity of entrepreneurial structures, a wide system of legal guarantees and benefits for foreign investors, a holistic system of measures to stimulate the activities of enterprises with foreign investments contributed to a significant increase in the flow of foreign direct investment to the country's economy. Thus, as a result of the improvement of the investment climate for the development of the economy and social sphere of the Republic of Uzbekistan in 2019, 189.9 trillion sums of investments in fixed assets (equivalent of $21.5 billion United States dollars) were spent from all sources of financing, and the growth rate by the corresponding period of 2018 year was 133.9%.
The main factors for achieving high growth rates were foreign direct investment and loans, their share in the total investment amounted to 31.0%, which shows growth 3.9 times more than in 2018. The foreign direct investment share is 19.6% (or 3.6 times), as well as foreign loans under the state guarantee of the Republic of Uzbekistan - 14.7% (or 142.4%), budget funds - 7.6% (growth 117.7%). In 2019 were commissioned about 2.8 thousand social, infrastructure and production facilities: 145 large production facilities, 167 large regional projects, 2.5 thousand social and infrastructure facilities. [3]
In 2019, the volume of foreign investments and loans in fixed capital reached 86653.1 billion sums (equivalent of 9.8 billion USA dollars), or increased 2.5 times more by 2018. The share of foreign investments and loans in fixed capital in the total amount of investments spent for 2019 year amounted to 45.7%.
The highest share of foreign investments and loans was observed in the Kashkadarya region - 71.0%, Surkhandarya region - 61.8%, Bukhara region - 52.9%, Dzhizak region - 47.0%, Syrdarya region - 46.5% and
Namangan region - 43.6%.
The share of foreign investments and loans into fixed assets in GDP in 2019 amounted to 16.9% and increased, compared to 2018, by 9.5 percentage points. The total value of foreign investments and loans in dollar terms was $9803.5 million. United States dollars, of which 4205.4 million US dollars - foreign direct investment, or 42.9% of its total. Foreign direct investment in 2019 amounted to 37171.3 billion sum, or increased by 3.6 times compared to 2018.
«Only by actively attracting investments, introducing new production facilities will we achieve accelerated development of our economy. We will consistently pursue an active investment policy, which is an important condition for the development of our economy». [2]
Thus, at the present stage, for all developing countries in general, and for the Republic of Uzbekistan in particular, investment plays a very important role in economic process. These help to adjust the processes of capital reproduction and maintain its growth rate, ensure the development of the most important sectors of the national economy, structural changes, restructuring and modernization of the economy, accelerate the innovative development of the country and improve the social environment, contribute to the development of entrepreneurship and the activation of foreign economic activity of business. In fact, they cover not only the process of production, consumption and accumulation, but also a number of natural-technical and social phenomena that affect the development of infrastructure, and all spheres of life of modern society.
References:
1. Decree of the President of the Republic of Uzbekistan of 31.03.2017 No. UP-4996 "About formation of the State committee of the Republic of Uzbekistan on investments". Access Mode: www.lex.uz
2. Address of President of the Republic of Uzbekistan Shavkat Mirziyoyev to Oliy Majlis from 28.12.2018. Access Mode: http://www.pres.uz
3. Socio-economic situation of the Republic of Uzbekistan. For January-December 2019. Goskomstat RUz. Tashkent, 2019. Access Mode: www.stat.uz
4. www.lex.uz - National database of Uzbek legislation.
5. www.norma.uz - Information and legal portal of Uzbekistan.
6. N.G. Muminov, F.T. Egamberdiyev, B. Elmonov, T.V. Kim (2018). NONSTANDARD SOURCES OF BUSINESS FINANCING: THE EAST ASIAN APPROACH. Scientific Journal "National Academy of Managerial Staff of Culture and Arts Herald", No 3 ISSN 2226-3209, ISSN 2409-0506. DOI: 10.32461/2226-3209.3.2018.173580
7. Nozim Muminov, Pazliddin Hoshimov, Nasiba Muxitdinova and Okil Umarov. (2020). INVESTMENT COOPERATION IN THE CONDITIONS OF GLOBALIZATION: PROBLEMS AND PROSPECTS FOR THE DEVELOPMENT. International Journal of Psychosocial Rehabilitation. Vol. 24, Issue 01, 1950-1953. ISSN: 1475-7192. DOI: 10.37200/IJPR/V24I1/PR200301
8. Регулирование деятельности субъектов малого предпринимательства в начале XXI века: мировой опыт : коллективная монография - Томск : Издательский Дом Томского государственного университета, 2020. - 332 с.
