Small and medium entrepreneurship in Tajikistan’s economic system

Интернет-журнал «НАУКОВЕДЕНИЕ» Выпуск 4 (23), июль - август 2014

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http://naukovedenie.ru 07TAVN414

Интернет-журнал «НАУКОВЕДЕНИЕ» Выпуск 4 (23), июль - август 2014

http://naukovedenie.ru publishing@naukovedenie.ru

1

http://naukovedenie.ru 07TAVN414

Small and medium entrepreneurship in Tajikistan's economic system

Farrukh F. Jalilov

Moscow State University of Economics, Statistics and Informatics (MESI)

Russia, Moscow

E-Mail: fjalilov@mail.ru

Abstract

The article presents the structure of organization of the sector of small and medium entrepreneurship in the Republic of Tajikistan. The role of small and medium entrepreneurships in the economy of the country. Reflected development indicators of the sector.

In recent years experienced sustained economic development and macroeconomic stability has allowed the country to some extent to recover from consequences of collapse of the Soviet Union and the ensuing civil war in Tajikistan. This growth had a positive impact on small and medium entrepreneurship, which is reflected in the increase in the number of active business entities, as well as in the growth of their share in GDP and employment. However, for the sector of small and medium entrepreneurship still characterized by structural weaknesses: while the overall growth was significant, the major part of the sector consists of Dehkan (farmer) farms and individual entrepreneurs engaged in small business. The number of small and medium entrepreneurship subjects in these two groups is constantly increasing, but the growth in the number of small and medium enterprises remains low, as the latter is inherent in a more complex organizational structure and has to operate in a tougher business environment.

Keywords: small and medium entrepreneurship; employment; economy; the subjects of entrepreneurship; investments; profitableness.

Identification number of article 07TAVN414

Аннотация

Джалилов Фаррух Фарходович

ФГБОУ ВПО «Московский государственный университет экономики, статистики и информатики» Россия, Москва

Аспирант кафедры «Общего менеджмента и предпринимательства»

Малое и среднее предпринимательство в экономической системе Таджикистана

В статье представлена структура организации сектора малого и среднего предпринимательства в Республике Таджикистан. Определена роль малого и среднего предпринимательства в экономике страны. Отражены основные показатели развития сектора.

В последние годы в Республике Таджикистан наблюдается устойчивое экономическое развитие и установление макроэкономической стабильности, что позволило стране в какой-то степени оправиться от последствий распада Советского Союза и последовавшей гражданской войны. Этот рост позитивно сказался на малом и среднем предпринимательстве, что отразилось в увеличении числа действующих субъектов предпринимательства, а также в росте их доли в ВВП и занятости населения. Тем не менее, для сектора малого и среднего предпринимательства все еще характерны структурные недостатки: в то время как общий рост был существенным, основную часть сектора составляют дехканские (фермерские) хозяйства и индивидуальные предприниматели, занимающиеся малым бизнесом. Количество субъектов малого и среднего предпринимательства в этих двух группах постоянно растёт, однако темпы роста числа малых и средних предприятий остаются низкими, так как последним присуща более сложная организационная структура и приходится осуществлять деятельность в более жесткой бизнес среде.

Ключевые слова: малое и среднее предпринимательство; занятость; экономика; субъекты предпринимательства; инвестиции; доходность.

Small and medium entrepreneurship subjects in Tajikistan can be conditionally subdivided into three groups: individual entrepreneurs (sole business owners without legal entity formation); dekhkan farms (owners of private agrarian farms); small-scale and medium-scale enterprises (legal entities) - commonly larger than the first two entity types.

During 2006-2012, the contribution of the small and medium entrepreneurship to the country's economy has increased: number of population employed in SME sector has reached around 1474.740 thousand Data on population employment is provided by the Statistics Agency under the President of Tajikistan. However, they result from averaged estimate of mean annual number of those employed in SME sector, considering continuous changes throughout year. , which made up to 64.4% from the total employment (Figure 1.2).

economic tajikistan sector

Meanwhile, the comparison by the number of SME per 1000 population has shown a possibility for increase of the sector that provides respectable contribution to both GDP and job creation (Figure 2).

Employment pattern reflects agrarian nature of Tajikistan economy: 67% of those employed in SME sector account for dekhkan farms; 22% are employees of small-scale and medium-scale enterprises, while the rest 11% are individual entrepreneurs (Figure 3).

Although the highest entrepreneurship activity is observed in Soghd and Khatlon region, the number of small-scale and medium-scale enterprises per capita is higher in Dushanbe and the districts of direct (Republic) subordination (DRS).

Individual entrepreneur is a natural person (sole owner) engaged in entrepreneurial activity without legal entity formation and carries it out at his/her own risk.

Individual entrepreneurs can register and perform their activity on two legal bases:

• facilitated system (patent-based) providing simplified taxation and reporting systems but limited in activities, location (only outside) and hiring workers. It also requires renewal of entrepreneurial activity term registration;

• more structured legal basis (certificate-based) providing additional flexibility in expenditures with more strict requirements of financial and accounting reporting.

Number of individual entrepreneurs has drastically increased in the period from 2006 through 2012 (aggregate average annual increase Aggregate average annual increase is average annual increase in certain period has made 13.5%, on average), and as of 2012 there were 161,242 of subjects.

Majority of individual entrepreneurs are concentrated in Soghd and Khatlon regions. These two areas have high density of individual entrepreneurs engaged in trade. Rapid increase of the number of individual entrepreneurs can result in competition among them and limit further development of their activity. Entrepreneurs' income level greatly varies depending on the region. The highest one is in Dushanbe and Soghd region: average annual sale of individual entrepreneur in Dushanbe is several times higher than in DRS. This indicates that the city of Dushanbe and Soghd region are in general economically developed regions of the country with higher population purchasing power as compared to the rest of Tajikistan. Because individual entrepreneurs mainly perform in the area of trade, local population's purchase power is crucial to them. The author believes the reason to lie in the fact that individual entrepreneurs are predominantly engaged in the activity requiring minimum investments and bringing in rapid income, trade in particular (Figure 4.). Only few individual entrepreneurs are engaged in processing industries requiring high initial capital investments that bring in the income after quite a long period, however with prospective branching out of their business activity. Individual entrepreneurs usually do without hired labor force, involving their family members if needed.

Dekhkan farm is an enterprise producing and selling agricultural commodities. Dekhkans (farmers) act as individual entrepreneurs according to the state registration certificate. Dekhkan farms represent the most dynamically developing type of business, both in terms of number and employment rates (Figures 5 and 6).

The mentioned increase is greatly conditioned by the government reforms in the sector of agriculture to transform large state farms into smaller private farms Until 2010, the country had collective and state farms (kolkhozes andsovkhozes). After 2010, as a result of agricultural sector reform, the farms were transformed into community and dekhkan farms . According to the official statistics, the highest density of dekhkan farms is in Khatlon and Soghd regions. Farming industry is also developed in the districts of direct Republic subordination. Dekhkan farms employ 67% of total population employed in SME sector.

The highest volumes of sale are usually reported in dekhkan farms in Soghd and Khatlon regions with large land plots. At the same time, DRS farms are notable for the highest profitability, but in money terms their gain is behind versus the farms in more developed agrarian regions of Khatlon and Soghd.

Due to high labour intensiveness in agricultural sector typical dekhkan farm on average has 13 permanent workers. In addition to the permanent force, dekhkans (farmers) hire up to 10 seasonal workers on average.

Small-scale and medium-scale enterprise is a private entity employing 1 to 200 workers. Based on the definition given by the Statistics agency under the President of Tajikistan which does not envisage any limitations with regards to the annual turnover. In Tajikistan, in early 2012 23,943 small-scale and medium-scale enterprises were registered that makes 9% of the entire SME sector. However, the number of entrepreneurs deciding to make their business more structured by registering it as legal entity is very little. By regions, the highest density of smallscale and medium-scale enterprises per 1000 population is in Dushanbe, followed by Soghd region. Notably, employment data received from the survey (12-18 workers per one small-scale and mediumscale enterprise) is somewhat higher than official statistics (13 workers), which can be explained by the presence of informal (“black”) labour market the official sources do not report on. On average, smallscale and medium-scale enterprises hire 15 permanent workers and 5-6 seasonal ones. The activity of small-scale and medium-scale enterprises in Tajikistan is mainly focused on servicing Servicing sector of economy is sector of services. The activity thereunder includes retailing and wholesale, transportation and distribution of commodities, entertainment, restaurants, tourism, insurance, banking, healthcare, etc.sectors of economy, i.e. general commercial activities and trade (above 15%) (Figure 6).

It must be mentioned that prevailing sector of agriculture and hunting implicates the enterprises engaged in agricultural processing activity unlike manufacturing by dekhkan farms. Public utilities and social services (19%) and trade (15%) perhaps are the most typical activities for the business sector of the country's economy. Industry makes about 7% of the entire sector, civil works (particularly actively developing sector of economy lately) - 8%. To ensure sustainable economic development further diversification in other sectors is required. The evidence shows that small-scale and medium-scale enterprises are not that highly profitable, while their gain is the highest among the three types of SME subjects due to their larger size: volume of trade of small-scale and medium-scale enterprises is almost 10 times higher than of individual entrepreneurs.

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