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Poor access to long-term financing remain obstacle for Uzbek firms, says EBRD

10 April 2015 17:20 (UTC+04:00)
Poor access to long-term financing remain obstacle for Uzbek firms, says EBRD

By Sara Rajabova

Electricity issues, competitors’ practices in the informal sector and access to finance was cited as the top three business environment obstacles faced by firms in Uzbekistan, according to latest report by the European Bank for Reconstruction and Development.

Worsening electricity supply reliability and poor access to long-term financing continued to remain remained as a hindrance for the firm performance in Uzbekistan, reads the Business Environment and Enterprise Performance Survey 2013/2014 conducted by the EBRD and World Bank.

While the wait for an electricity connection, as well as the share of firms that experienced power outages and their duration decreased in BEEPS V comparing to in BEEPS IV, the average number of power outages more than doubled to 15.3 in a typical month and the share of revenue lost due to power outages increased from 8.9 percent to 16.0 percent, according to the report.

“The worsening supply reliability is caused by transmission bottlenecks as well as ageing and increasingly unreliable thermal power plants. According to the World Bank, 40 percent of the available generation capacity is past or will reach the end of its service life by 2017,” the report reads.

The report named competitors’ practices in the informal sector in second place, despite the fact that the share of firms that reported to compete against unregistered or informal firms decreased in BEEPS V as a result of tight fiscal and monetary policy as well as making it easier to register a business since the previous round.

“Over the last 10 years the government introduced changes to a tax code and gradually reduced tax levels in some sectors to as low as 5 percent, while tight import regulations ensure domestic production and consumption leading to greater transparency,” the report reads.

Access to finance emerged in third place in BEEPS V, in contrast to BEEPS IV.

“By far the most important source of working capital financing as well as of fixed assets purchases in Uzbekistan were internal funds and retained earnings – 91.9 percent and 82.3 percent, respectively,” said the report, adding these were among the highest shares in Central Asia.

It further says the share of firms with a loan or a line of credit in BEEPS V was higher than in BEEPS IV: 26.4 percent, compared with 10.5 percent. “However, the average original loan duration was the shortest among the covered countries at 16.8 months.”

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Sara Rajabova is AzerNews’ staff journalist, follow her on Twitter: @SaraRajabova

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