CC BY
15Review of law sciences
Sherzod Egamberdiev,
Head of Capital markets analysis and improvement of legislation departure at The Capital Markets Development Agency of the Republic of Uzbekistan
CAPITAL MARKET DEVELOPMENT OF UZBEKISTAN DURING THE CORONAVIRUS PANDEMIC PERIOD
Abstract: This article analyzes the current state and prospects of development of the capital market in the Republic of Uzbekistan during the coronavirus pandemic. According to the results of the study, the author made the appropriate conclusions.
Key words: capital market, economy, stocks, Uzbekistan, coronavirus.
Шерзод Эгамбердиев,
Начальник Управления анализа рынка капитала и совершенствования законодательства Агентства по развитию рынка капитала Республики Узбекистан
РАЗВИТИЕ РЫНКА КАПИТАЛА УЗБЕКИСТАНА В ПЕРИОД ПАНДЕМИИ
КОРОНАВИРУСА
Аннотация: в данной статье были проанализированы текущее состояние и перспективы развития рынка капитала в Республике Узбекистан в период пандемии коронавируса. По итогам исследования автором были сделаны соответствующие выводы.
Ключевые слова: рынок капитала, экономика, акции, Узбекистан, коронавирус.
Шерзод Эгамбердиев,
Узбекистан Республикаси Капитал бозорини ривожлантириш агентлиги Капитал бозорини тах,лил килиш ва конун хужжатларини такомиллаштириш бошкармаси бошлиги
КОРОНАВИРУС ПАНДЕМИЯСИ ШАРОИТИДА УЗБЕКИСТОН КАПИТАЛ
БОЗОРИНИ РИВОЖЛАНТИРИШ
Аннотация: мазкур мацолада Узбекистон Республикасида капитал бозорнинг озирги %олати ва уни коронавирус пандемияси шароитида ривожлантириш истицболлари та%лил цилинган. Тадцицот натижасида муаллиф томонидан тегишли хулосаларга келинган.
Калит сузлар: капитал бозори, ицтисодиёт, акциялар, Узбекистон, коронавирус.
1
As the world experience shows, one of the most effective measures for the maintenance and development of the economy during the crisis, as well as in a growing economy, is paying more attention by the state to the development of financial markets, especially the capital market.
Based on historical events, one can say the world is currently facing challenges caused by a coronavirus pandemic for the first time, therefore the global community does not have an accurate forecast of socio-economic effects of the pandemic. At the same time, it is difficult to determine what exact steps should be taken by the states to mitigate the consequences of this crisis.
One of the important features of the development of the securities market is the creation of the necessary conditions for the population, enterprises, organizations, as well as the state itself to channel its resources to finance various sectors of the country's economy [2]. It can be noted with confidence that with proper organization of the capital market, it can be transformed into one of the financial levers of the state, which is able to bring the economy to a new stage and a much higher level of development [3].
Under the current conditions, the development of the capital market dictates not only new requirements for the state regulation system, but also requires an in-depth assessment of the quality and validity of decisions made by the government [1].
Up to this day, the state has adopted a number of decisions aimed at softening conditions for securities market participants and many business entities.In particular:
the deadline for holding annual general meetings of shareholders in joint-stock companies has been extended until October 1, 2020, including the holding of these meetings remotely via video conferencing;
the deadline for conducting mandatory annual audit for the FY 2019 for business entities is extended until October 1, 2020;
the requirement for a mandatory annual audit of limited and additional liability companies with a book value of assets over one hundred thousand base estimated values has been introduced for the period ended of FY 2020;
the state has undertaken measures to compensate 12% of the expenses of entrepreneurs on loans with interest rates up to 28 percent.
Despite the number of efforts undertaken, the capital market of Uzbekistan is still underdeveloped.
Statistics show that the securities market in Uzbekistan is still in its infancy and does not meet the global standards.
To date, there are only 588 joint-stock companies, of which the share of 80 % belongs to the state. Limited liability companies, the number of which exceeds 150 thousand, still do not have a legislative basis for attracting investments by issuing bonds [4].
Securities market free float is 1,7 trillion sum, which is less than 1% to GDP, whereas in many other countries (e.g. China, Turkey, Russia and Kazakhstan) the rate varies from 20% to 60% to GDP.
The number of professional securities market participants is 80, which shows a reduction in their number by almost half compared to previous years (140-160).
What is the reason behind this situation? Maybe the entrepreneurs are not interested in investing in the securities market? Or does the population have no savings (money) that they could invest in the right direction? Neither one nor the other. Following the results of the social survey carried out among the population on social networks before the advent of coronavirus infection in
our country and the quarantine regime, it was revealed that more than 20 thousand people have the savings of 2 million sum or more, that indicates rather high demand on the reasonable investment of these savings.
Then what is the real problem? The analysis shows that there is a number of systemic shortcomings, without a conceptual solution of which it is difficult to talk about the further development of the capital market, becoming an alternative to the banking sector and turning it into an additional source of financing the country's economic development.
- lack of effective state support in the field of capital market development. For example, the income from bank deposits is not taxed, unlike the securities market, in which there are no tax preferences;
- absence on the secondary market of government securities that are a fundamental part of the capital market in other countries, impedes its effective development;
- lack of a healthy competitive environment, the monopoly of the credit market (bank loans), the presence of a significant number of business entities with state ownership and the immobility of shares does not allow to fully mobilize domestic investment resources and significantly affect the economy of the whole country;
- lack of coordination and systematic approach to the usage of savings, as well as insufficient financial literacy does not contribute to attracting savings of the population and entrepreneurship in the development of the country's economy;
- lag in the development of market infrastructure, including information and telecommunication systems, inefficient use of the capabilities of domestic systems in this area has a negative impact on market liquidity;
- an outdated and ineffective system of privatization and non-use of the opportunities of the "golden" stock during its implementation, as well as a small number of initial public (IPO/SPO) offered on the market hinders the increase in the share of the secondary market in the total turnover of the stock market;
- lack of centralized regulation of the issue and circulation of all types of securities. That is, the authorized state body regulating the securities market in accordance with the legislation does not regulate the issue and circulation of all types of securities (government securities, international bonds);
- inconsistency of legislation in the field of capital market regulation with international standards, modern market challenges. A large number of regulatory legal acts (more than 80) in the field of securities market regulation;
- lack of legal levers of influence by the authorized body for regulating the securities market and self-enforcement of penalties in respect of individuals who violate the law;
It is a well-known fact that Uzbekistan has set a strategic goal - to increase the market capitalization of the capital market up to 60 trillion sum from the current state (22.7 trillion sum) and bring the volume of free float securities up to 10% to the country's GDP by the end of 2025 [5].
In order to achieve this strategic goal, as well as to solve the above-mentioned problems, to attract investments, to efficiently use the assets of state owned entities, as well as to establish a capital market as a locomotive for financing the country's further economic development, the following activities are being proposed:
- expand government support for the capital market, including through the issuance of government securities in the local market, the application of preferences for the industry, financing initiatives of the regulatory body, etc.;
- revise the regulatory framework by unifying all regulatory legal acts in the field of regulation of the securities market into a single law, which has the nature of direct action and meets international standards;
- take measures to increase the demand in the market through the expansion and diversification of the investor base and enhancement of financial literacy;
- sell part of state owned shares of the most attractive joint-stock companies (ones with stable revenue and higher income) on the stock exchange to ensure up to 30% circulation of the shares;
- increase the supply on the market by increasing the number of issuers, new financial products and enhancement of corporate governance;
- make amendments and additions to the rules of the initial public offer (hereinafter - IPO) taking into account international standards, as well as the conditions of law enforcement practice in the local capital market.
- introduce the procedure for joint-stock companies to pay income tax in the amount of 50 percent of the established tax rate during three consecutive years, and the revenue of individuals received in the form of dividends and interest on securities is completely tax exempt;
- introduce a procedure for placement of government securities on stock exchanges with access for individuals and legal entities, including non-residents of the Republic of Uzbekistan;
- strengthen the institutional potential of the securities market regulator, including by granting the right to obtain all necessary information from individuals and legal entities, including law enforcement agencies within the framework of the implementation of its supervisory functions.
It is believed that realization the above-mentioned suggestions, as well as adopting in the near future Uzbekistan Capital Markets Development Strategy for 2020-2025 will mobilize the financing of the economy at the expense of the capital market, ensure sustainable economic growth to improve the welfare of the population, as well as improve the securities market investment potential
Review of law sciences References:
1. Decree of the President of the Republic of Uzbekistan dated April 03, 2020 No. UP-5978 "On additional measures to support the population, sectors of the economy and business entities during the coronavirus pandemic"
2. N.N.Rayskaya "Stock market in the system of financing investments and innovations" // World Economy and International Relations. - N 11.- 2007. - P.30-35
3. The electronic newspaper Vedomosti.ru "Market Forecast After Global Quarantine and Pandemic". // issue of April 15, 2020, Moscow, materials of the LLC UK Sistema Capital.
4. www.cmda.gov.uz
5. https://regulation.gov.uz/uz/document/11311).
