Why emulating imported goods is a dead end?
This statement was commented at a press briefing by Alisher Abdullayev, the interim Chairman of the Association of Enterprises of the Electrotechnical Industry.
The Presidential Decree of January 4, 2019, establishes the Association of Enterprises of the Electrotechnical Industry of Uzbekistan on the basis of Uzeltehsanoat JSC. The industry received benefits and preferences. Some experts called it a partial victory for the lobbyists’ interests.
“When developing a document, the electrical engineering industry has been comprehensively studied,” said A. Abdullayev. “Considering that in our sphere there is a sizeable share of imports, we could focus only on meeting the needs of the domestic market, but this is not enough to expand employment coverage. 27 years passed quickly, so it will be with the next 20-30 years. Therefore, we need to prepare now. The experience of Japan, the Republic of Korea, Vietnam shows that the development of the industry and the creation of hundreds of thousands of jobs are highly dependent on exports.
Its share in Uzbekistan’s GDP is 1.5 percent; in South Korea, it provides 15 percent. Among the problems is a limited resource base: no aluminum, many types of polymers. At the same time, imported raw materials and components come with tangible transportation costs.
In many countries, the state supports this industry by providing incentives for exports and paying transportation costs. For example, Russia provides non-primary exports subsidies and compensations. At the same time, the country is listed in the WTO. For the future, we need to learn such mechanisms.
The provision of tax incentives to producers reaching 15 percent export volume been proven as the effective support measures. This is was one of the points of the Presidential Decree on measures of further stimulation of the domestic producers’ export potential dated November 29, 2018.
We need to protect the domestic market, otherwise, jobs will be created abroad, and people will leave for work. Our goal is not to compete with foreign products, but to increase producers in the domestic market, to create conditions for competition. When the number of local players increases, the consumer will win. Emulating imported goods is a dead end since countries such as China, the Republic of Korea have overtaken us by 20-40 years. The main idea of the resolution is to increase exports.
Uzeltehsanoat JSC has been a state enterprise, which had shares in the industry companies. Now they are transferred to the state for subsequent sale. Thus, equal conditions for producers will be created.
The reason for the discussions was the decision to introduce the procedure for the implementation of public procurement, which provides for the introduction of a price preferential mechanism of up to 20 percent for domestic producers in tenders and competitive selections held as part of public procurement of goods (works, services). At first glance, it seems to be excessive support for domestic products. In fact, our appliances are subject to 20 percent VAT, and imported goods - at zero. Therefore, this mechanism only equalizes the conditions of the game.
Photo by Muzaffar Abdullayev.
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