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Driving economic growth: A study of Uzbekistan’s Family-owned Supermarkets

Ali-Gulam Sadanov (Research assistant at Innovative Centre

Scientific Supervisor: Mukhammadkhon Soliev (Director of Innovative Centre)



Abstract Family-owned businesses are the backbone of economic development, particularly in burgeoning economies such as Uzbekistan. This research empirically demonstrates the specific role of family-owned supermarkets in shaping Uzbekistan's economic landscape through an extensive analysis of secondary data. Drawing upon previous research, the findings underscore the significant contribution of these enterprises to the nation's economic advancement, considering the unique legislative environment, market trends, and broader economic reforms. Moreover, this research identifies future areas that provide scholars opportunities to push theoretical Boundaries and offer further insights into family business. 

Key words: Family business, economic development, family-owned supermarkets.

           

           1. INTRODUCTION.

A

 decline in global demand and rise in the rate of unemployment have become the main events of the 21th century throughout the world due to many recent global economic changes. Therefore, world economists are 


viewing entrepreneurship and family business as a main source of creating wealth and employment (Manfred F. R. Kets de Vries 2007) because of its significant impact on the global economy. Family-run enterprises serve as essential pillars for generating wealth and driving economic activity (Poutziouris 2004). They play a pivotal role in fostering economic development on a global scale. Studies indicate that a significant majority—more than two-thirds—of businesses worldwide are owned and operated by households, collectively contributing to approximately half of the total Gross Domestic Product (GDP) (Shanker 1996). In North America, specifically Canada and the USA, family-owned businesses dominate the landscape, comprising around 90% of all enterprises (Ibrahim 2004). Similarly, in Australia, a substantial portion—roughly half—of businesses are family-owned (] Getz 2000). Additionally, family enterprises serve as key drivers of economic growth in emerging economies like India (Basu 1998).


Nowadays, family businesses are regarded as a major form of business organization (Koopman 2009). Family business keep a significant contribution to the Uzbek economy, which is still struggling with a huge debt. They support approximately 50% of the population, with a staggering 80-90% of all businesses in the country being family-owned (Sarvar 2016). In Uzbekistan, there several family-owned supermarkets e.g. Anglesey Food, Darvoza  Savdo, Havas Food etc. are among the most dominant players that showed profit of around $500 million in 2021  (Euromonitor International 2022). These numbers illustrate that family businesses have a significant influence on the economic development of Uzbekistan.


In recent years, the Uzbek government has taken steps to promote the development of family businesses, recognizing their potential contribution to the economy and the creation of new jobs. By taking critical role of family business in Uzbekistan and its possible great impact on economic growth into account, in 2012, Uzbekistan introduced a unique law on "Family Entrepreneurship," which has significantly impacted the country's approach to family businesses. This law distinguishes Uzbek family businesses from global norms by offering tax incentives, such as exempting family firm founders from income tax on declared dividend while other companies face a 10% tax (Sarvar 2016). 


                                                                           Figure 1

Source:  Gained from International Journal of management Science and Business administration.  

This legislation has been pivotal in fostering entrepreneurship and is considered a top priority for the government to create jobs and ensure stability and prosperity. President Mirziyoyev's reforms, including the 2017-2021 National Development Strategy, have positioned the private sector as the key driver for economic growth and job creation (Tsereteli 2018). These reforms have improved Uzbekistan's business environment, as evidenced by its rise in the World Bank's "Doing Business" ranking (Tsereteli 2018) . The country has also seen an increase in exports and significant export deals, signaling a more open and robust economy.


As of March 2024, there are 55,772 family businesses in Uzbekistan, with the highest number located in the Samarkand region. The distribution of these businesses across various regions highlights their widespread impact on the country's economy


                            Figure 2 Number of Family Businesses in 2024 by region:



Samarkand regiom

9,890

Fergana region

6,061

Khorezm region

5,599

Tashkent region

4,961

Navoi Region

4,107

Tashkent City

3,633

Bukhara region

3,354

andijan region

2,966

Republic of karakalpastan

2,606

jizzakh region 

1,985

Namangan region

1,258

syrdarya region

345

                 

Source: compiled by the author according to the stat.uz 



The largest number of family businesses (21% of the total) falls on the Samarkand region. This is primarily due to the fact that historically the Great Silk Road passed through the territory of this region, and secondly, since the times of the former Soviet Union, tourism has been developed in this territory, which made it possible to develop various handicrafts industries, the service sector (public catering places, hotels, transport services, etc.). Thus, the traditional culture and social values, the accumulated experience, the availability of markets, the availability of resources have allowed the region to create favorable conditions for the development of family business

Family entrepreneurship has become one of the tools to increase employment and welfare of the population, indicators of its development are included in the forecast parameters of territorial programs for creating new jobs. The organizational and legal form of family business carried out with the formation of a legal entity is a family enterprise. According to the Law “On Family Business”, a family business is a small business entity created by its participants on a voluntary basis on the basis of common property that is in the shared or joint ownership of the participants in the family business, as well as the property of each of the participants in the family business for the production and sale of goods (works, services). The activities of a family business are based on the personal labor of its members. The minimum number of participants in a family business must be at least two people. Also, a family business must have a name and the words “oilaviy korxona” (family business) or OK for short


The description of the concept of family business has differed in various scientific sources, and this notion has been interpreted in different researches in different ways, thus, one concrete definition does not exist (Ayranci 2010). Nevertheless, most efforts have focused on defining family businesses in terms of distinguishing them from non-family businesses.


                                          Figure 3 requirements for defining Family business




On the basis of these arguments, the objective of this research is to show the actual contribution of family-owned supermarkets to the economic development of Uzbekistan. This research paper contributes to the literature on family businesses by exploring the actual economic contribution of family-owned supermarkets in Spain. From the practical point of view, the overall findings of the research may contribute to expand the family-owned supermarkets in Uzbekistan. This research also contributes to the theoretical basis for further studies on family-owned supermarkets existing in the other developing and developed countries.


          2.  RESEARCH METHODOLOGY  

This research paper is based on an extensive review of published and unpublished data/information on family businesses in Uzbekistan. This included analyzing articles and research papers published in scientific journals, as well as reviewing relevant reports. The focus was on English language sources to ensure comprehensiveness. The approach was primarily qualitative, involving synthesizing and analyzing existing literature to provide insights and perspectives on the topic.


       3.  Findings.

The research is centered on investigating the precise contribution of family-owned supermarkets to the economic advancement of Uzbekistan and identifying strategies to enhance their development by addressing prevailing constraints. The analysis underscores the significant importance of Uzbek family-owned supermarkets in fostering the nation's economic growth.

                4.  CONCLUSION

Family businesses play a pivotal role in the economic development of Uzbekistan, as well as in number countries in the word. According to the Family Business Survey, (Family Firm: a resident model for the 21st centuary 2012) 72% of respondents believe that family businesses contribute to economic stability and is effective force for providing and enhancing. Therefore, this research finds the actual contribution of family-owned supermarkets to the economic development of Uzbekistan. The findings of the research show that the Uzbek family-owned supermarkets are creating huge job opportunities and contributing to the country’s GDP (Gross Domestic Product) greatly. The overall research has generated some new ideas for the further development of Uzbek family-owned supermarkets, for example, comparatively small family-owned supermarket can take further steps to expand its business regarding its economic importance in Uzbekistan. Finally, it is very clear that family-owned supermarkets have great economic importance in Uzbekistan regarding the country’s current economic condition.



                                    5.REFERENCES

] Getz, D. & Carlson, J. «Characteristics and goals of family- and owner-operated businesses in the rural tourism and hospitality sectors.» Tourism Management, 2000: 547-560.

Basu, A. « An exploration of entrepreneurial activity among Asian small businesses in Britain.» Small Business Economics, 1998: 313-326.

Euromonitor International. April 2022 г. (дата обращения: 13 February 2024 г.).

«Family Firm: a resident model for the 21st centuary.» pws, 2012: 20-24.

Ibrahim, A., McGuire, J., Soufani, K., & Poutziouris, P. «patterns in strategy formation in a family firm.» International Journal of Entrepreneurial Behavior & Research, 2004: 127-140.

Koopman, M. & Sebel, K. (2009). The Internationalization of Family Firms: Facilitating and Constraining Features. Jönköping University, Jönköping. « The Internationalization of Family Firms: Facilitating and Constraining Features.» Jönköping University, Jönköping, 2009: 130-142.

Manfred F. R. Kets de Vries, Randel S. Carlock with Elizabeth Florent-Treacy. «Family Business.» International Encyclopedia of Organizational Studies, 2007: 325.

Poutziouris, P., Steier, L., & Smyrnios, K. «Impact of Family business on economic Development.» International Journal of enterpreneurial Behaviour & Research, 2004: 7-11.

Sarvar, Fayzullayev. «Unique Approach to Family business: Uzbekistan Case.» International Journal of Management Science and Business Administration , 2016: 34-43.

Shanker, M. & Astrachan, J. «Myth and realities: Family businesses' contribution to the US economy, a framework for assessing family business statistics.» Family business review, 1996: 107-119.

Tsereteli, Mamuka. «The Ecinimic Modernization of Uzbekistan.» silk Road Paper, 2018: 20-34.

                                                                           Authors:

Correspondending author: Sadanov Mukhammad

Scientific Supervisor: Mukhammadkhon Soliev



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