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September 22, 2015


economy.. 2

Uzbekneftegaz to produce localized goods for 746bn soums in 2016. 2

The light industry: a vital component of the national economy. 2

11th international uzbek cotton faot.. 4

White Gold: Major Cotton Fair in the Making. 4


Small and medium-sized businesses in Uzbekistan: stimulation of their foreign economic activity  5



Uzbekneftegaz to produce localized goods for 746bn soums in 2016

Uzbekneftegaz is planning to produce goods for 746 billion soums in 2016 within the localization programme, head specialists of department of the single technical policy of Uzbekneftegaz Sanjar Berdiev said last week (currency rates of CB RU from 23.09.2015   1$= 2615.91 soums).

He said that the forecasted figure will exceed nine times of the expected figure for 2015 .

Berdiev said that the enterprises of industry are planning to implement 31 projects within the localization programme and produce goods for 746 billion soums, including production of polyethylene and polypropylene at Ustyurt Gas Chemical Plant.

Till the end of 2015, oil and gas industry of Uzbekistan will realize 30 localization projects, Berdiev said.

He said that it is planned to produce ready goods, spare parts and materials for 87.7 billion soums within these projects.

In the first six months, the industry already implemented 20 projects and produced localized products for 28.7 billion soums.

According to Sanjar Berdiev, as ofthe end of September due to the implementation of localization projects the industry will produce localized goods for 45 billion soums.

In addition, Uzbekneftegaz is conducting a systematic work on the preparation and implementation of 5 long-term projects based on local raw materials and resources.


The light industry: a vital component of the national economy

In today’s world, the light industry ranks high among the industries involved in export activity. It has the widest range of exported goods – from yarn to finished commodities.

Since the dawn of independence, the Republic of Uzbekistan has been steadily implementing structural reforms in the light industry. The fruits of these endeavors solidified its position among other sectors and made its output competitive in international markets. Nowadays, over 2,500 enterprises are operating in the sector (according to data provided by the Cabinet of Ministers of the Republic of Uzbekistan).

Uzbekistan places a high priority on the attraction of foreign investments to the light industry, in order to ensure its continuous development. The sector’s attractiveness to foreign investors is based on several factors: the abundance of raw materials, relatively cheap highly qualified workforce, the state’s guaranteed support and a favorable environment for doing business in the country. Furthermore, one should mention the availability of a stable legal framework for carrying out economic activity, the elimination of excessive external interference on the part of regulatory and controlling authorities, the reduction of the number of check-ups conducted by the latter, the streamlining of reporting procedures, the simplification of procedures for licensing, registration and certification, and, what is of no less importance, the granting to joint ventures and foreign enterprises of a broad range of privileges, preferences and guarantees, all of which are enshrined in Uzbek law.

The bulwark of the national light industry is the Joint-Stock Company Uzbekengilsanoat, incorporating more than 300 enterprises that specialize in the production of yarn, fabrics, stockinet, finished knitted garments, hosiery and other product groups.

The equivalent of US $1 billion worth of their output is sold abroad. At present, Uzbekengilsanoat is running 50-plus dealer representative offices across the European Union, Asia and the CIS.

The main products exported by indigenous textile enterprises include: cotton yarn, mélange yarn, compact yarn, finished knitted fabrics, a wide range of clothes, knitted garments and hosiery, as well as goods made of silk.

In 2014, the exports geography of the Uzbek light industry was expanded by 50 new destinations, such as Argentine, Brazil, Venezuela, Columbia, Peru, Chili and the South-African Republic.

Today, 75 per cent of output manufactured by the light industry of Uzbekistan, in particular textile goods, is accounted for by joint ventures and foreign enterprises, which are outfitted with state-of-the-art equipment from the world leaders in the field of textile machinery construction, such as Trutzschler, Schlafhorst and Tsinzer (Germany), Rieter AG (Switzerland), Toyota Tsusho Corporation and Murata (Japan),  Savio, Orizio and Martsoli (Italy).

Several big-name foreign investors are operating in Uzbekistan to date. These include: Indorama Industries PTE. Ltd. (Singapore), Daewoo International, Daishin Textile, Shindong Enerkom (South Korea), Rieter AG, Swiss Capital (Switzerland), Trutzschler (Germany), Bayteks Tigaret, Tekfen, Bo Group, Mert iplik (Turkey), Vayreks, Osborne Trading, Tagus (Great Britain) and many others.

The aggregate value of foreign investments lured to the national light industry exceeds US $2.2 billion. Over 180 large-scale investment projects have already been realized in the sector, with all of them focusing on the production of textile goods. Both the volume of output and the product range in the sector tend to increase year after year.

Over the years of independence, the role of the light industry in the economy of Uzbekistan has grown considerably, with its share of the nation’s GDP now reaching 3.8 per cent. According to data from Uzbekengilsanoat, the sector’s share of industrial produce and of the volume of non-food consumer goods is indicated in the following figures: 26.2 per cent and 44 per cent, respectively.

The volume of cotton fiber processed domestically soared from 7 per cent in 1991 to 35 per cent in 2014 of the total volume of cotton fiber produced in the Republic (data from Uzbekengilsanoat).

In the last three years, as many as 92 new industrial enterprises have been put into operation with the attraction of US $575.3 million worth of foreign investments. Their overall exports potential comes to US $215.6 million. More than 11.600 new jobs have been created there.

Among the newly established enterprises are Indorama Kokand Textile, a joint venture set up on the basis of the Kokand Textile Concern (the project’s value – US $110 million), with the production capacity of 29,000 tons of cotton yarn per year; UzTeksShovot, a joint venture created in Khorezm province with participation of Swiss Capital (Switzerland), whose annual production capacity comes to 12,000 tons of cotton yarn (the project’s value – more than US $50 million) and Rieter Uzbekistan, a foreign enterprise established at the Uzbektekstilmash Production Association jointly with Maschinenfabrik Rieter AG (Switzerland) , specializing in the production of combing machines, ring-spinning frames and belt equipment (data from Uzbekengilsanoat).

There are plans to put into operation 18 new industrial enterprises in the near future. Estimated at US $99 million, they will enjoy the cumulative exports potential of US $43.1 million and the capacity to create over 1,000 new jobs (data from Uzbekengilsanoat).

Moreover, the Program of Priority Measures for the period 2015-2019, which is designed to improve production and to launch into production many new categories of competitive goods, envisages the implementation of 78 projects to the tune of US $995.2 million, including US $435.6 million worth of foreign direct investments. Emphasis in these projects is placed on the production of garments, hosiery, jean fabrics, blended earn and fabrics, textile (knitting) equipment and overlock sewing machines.

On the whole, the continued technical and technological modernization of textile enterprises, the rapid development of the sector’s infrastructural facilities, the achievement of an increase in its exports potential and the creation of new jobs will remain among the major priorities of industrial policy pursued by the Republic of Uzbekistan.

(Source: «Business» newspaper)

11th international uzbek cotton faot

White Gold: Major Cotton Fair in the Making

As the 11th International Uzbek Cotton Fair, one of the season’s highlights, is fast approaching, it is expected to bring all the international elite representatives of the textile and cotton industry together. The preparation of the major sites for the expert meeting has been in full swing. The domestic manufacturers have declared ambitious plans to increase the domestic processing of ‘white gold’.

Uzbekistan intends to increase raw cotton processing to 1.4 million tons by the end of 2020 through the reconstruction of 50 enterprises affiliated with the O’zpahtasanoat Association. The obsolete technologies at Mangit, Muzrobod and Bagat ginneries will be replaced by new ones in the near future.

The Association has been actively involved in several projects of cotton processing. It has been working closely with O’zbekyengilsanoat Company on the launch of big textile enterprises in 2015-2016. The projects include the establishment of cotton, knitted fabrics and finished garment manufacture based on Kungrad and Chimboy ginneries, and establishment of textile complexes in idle buildings of Guzar and Beshkent ginneries.

Ten factories operate in each of Andijan, Kashkadarya and Surkhandarya regions, nine plants – in Bukhara region, and eight enterprises in each of Tashkent, Namangan and Khorezm regions. The works on equipping them with modern equipment, enhancing the efficiency of production capacities and competitiveness in the global market are currently in progress.

“We have recently, commissioned a modern enterprise specializing in the manufacture of equipment for pressing fiber and lint articles in cooperation with the Chinese company of Sinokot. Previously, we had exported it from abroad. In the future, we are planning to establish the production of new technological equipment, spare parts and components for the industry companies. After reaching its full capacity, we expect to produce goods worth $10 million per year. The export share is estimated at 18%, localization – at 38%, and it is planned to create about 150 jobs,” said the Head of Investment Projects Department of O’zpahtasanoat Association, Rinat Gulyayev.

Certain measures are being taken to increase the output of high-quality and high-grade cotton fiber, and produce the articles in line with international standards. For example, thermal generators at ginneries have been replaced by gas and liquid fuel generators, and low-power cleaning equipment – by high performance lines. As a result, the daily production capacity has increased from 35-45 tons to 50-55 tons.

Up-to-date equipment allows increasing the volumes of the production, and enhancing its competitiveness on the world market. For example, in 2013, the quality of cotton was 95.1%, and last year – 97.1%. The total share of premium-quality class has increased by 14.8%. There are significant results in the field of seed production. Last year saw an increase by 10.3% YOY, and the current year promises higher outcomes.

Cutting-edge devices allow significant power saving. Power expenses for the production of one ton of cotton fiber have decreased by an average of 25-27%. Another 1,200 solar panels have been purchased in addition to the existing 100 solar panels at seven plants under the ongoing cooperation with the International Development Association project on enhancement of energy efficiency at enterprises. They also provide illumination to the territory of ginneries. The above-mentioned measures have allowed the plant to save 430,000 KW of electricity annually. Two-hundred energy-intensive machines Lintern brand MR-160C have been purchased under the project.

(Source: «Uzbekistan Today» newspaper)


Small and medium-sized businesses in Uzbekistan: stimulation of their foreign economic activity

The study of overseas experience shows that the availability of an effective system and mechanisms of stimulating the foreign economic activity carried out by small and medium-sized businesses is a sine qua non for augmenting the latter’s role in the expansion of a nation’s foreign economic relations.

In developed and developing countries alike, measures designed to encourage small and medium-sized businesses to transact foreign economic operations are implemented via a variety of assistance institutes. Their main function is the provision of a whole spectrum of services to entrepreneurs. A list of such services encompasses information, educational and consulting services, as well as judicial and insurance services. They also render assistance in searching foreign partners, promoting their exports through exhibitions and fairs, advertising the output of enterprises etc. Thanks to the efficient institutional support, small and medium-sized businesses in the US, Japan, the EU member states, the Republic of Korea, China and other countries take active part in foreign economic activity.

Additionally, foreign experience is testimony to the fact that different forms of associations created by entrepreneurs prove a highly efficacious instrument of promoting their export-oriented produce.

One of such forms is an exports consortium, which represents a voluntary association of companies set up for the purpose of promoting their goods and services in the international marketplace and lending a helping hand in their exports activity through the combination of efforts.

In particular, Italy’s experience demonstrates that small and medium-sized enterprises may considerably increase their export potential and reduce the risks and expenses associated with the penetration into foreign markets by pooling their knowledge, financial resources and contacts within the framework of an export consortium. At the same time, the state support plays an important role. It may take multiple forms, from initiating the organization of consortia to funding their activity through the allotment of credits on favourable terms to granting tax holidays and other subsidies.

Uzbekistan works out and takes diverse steps in an effort to improve the business environment in the country for the further development of small business and private entrepreneurship. These include a reduction of the number of administrative barriers that domestic entrepreneurs have to overcome on their way to foreign economic activity, improvement of a legal protection system, limitation of the state’s interference in entrepreneurial activity, introduction of tax cuts, simplification of taxation, granting of various privileges and preferences, provision of wider access to financial and material resources and other measures.

As the President Islam Karimov of the Republic of Uzbekistan accentuates: “Today, small business and private entrepreneurship are becoming not only the main link that ensures the population’s employment and the source of their stable income, but also the essential factor of economic steadiness, the guarantor and support of social and political stability, and the active driving force behind the nation’s advancement along the path of progress”.

After the cardinal transformation of the Uzbek economy, the formation of the class of real proprietors together with the development of small business and private entrepreneurship as an integral element of the market-oriented economy has become one of the priority economic tasks.

In connection with this, the indigenous economists have directed their attention to studying the peculiarities of performance and development of small business as well as to determining the role played by a given sector in the national economy.

The role played by small business is determined by its capacity to quickly adapt to the constantly changing market environment, to produce a considerable portion of GDP, to ensure employment, to raise the population’s standard of living and to guarantee the social stability. In many countries throughout the globe, small businesses actively participate in foreign economic activity. When studying this line of their activity, it is important to identify the factors that facilitate the export activity of small enterprises and entrepreneurs, in a move to elaborate a set of practical measures to encourage the development of this sector.

It is also essential to observe that the efficiency of export activity carried out by small businesses largely depends on how correctly their strategy of penetrating the foreign markets has been worked out, in accordance with the characteristic features of a firm, product and a sector as a whole. The process of internationalization may be performed in various forms, such as a step-by-step internationalization, creation of joint ventures, amalgamation of enterprises in alliances, concerted transaction of foreign economic operations etc.

One of the pivotal elements of stimulation of small business’ foreign economic activity is an effective legal framework, whose major objective is the creation of general economic, legal and organizational conditions needed for the formation of an auspicious entrepreneurial climate.

The normative-legal documents regulating the foreign economic activity performed by entrepreneurs in Uzbekistan envisage the granting of lavish economic incentives to small businesses and entrepreneurial establishments, which are involved in foreign economic and investment activities.  These incentives include: the calculation of exports customs duties for all categories of goods (works, services) and the requirement to license the exportation of goods (works, services), with the exception of specific ones; the imposition of the zero-rate value-added excise tax on goods (works, services) sold for foreign currency, including their deliveries to the CIS member states; the exemption from excise tax on export deliveries, with the exception of several product groups, whose list is determined by the Cabinet of Ministers of the Republic of Uzbekistan; the reduction of income (profit) and property tax rates – for enterprises-exporters, depending on a proportion of exports in the total sales volume; the exemption from the obligatory sale to the budget of export receipts; the exemption from the payment of customs duties on imported technological equipment etc.

The main direction in which to further develop small business and private entrepreneurship in the Republic should be an increase in both the volumes and the level of efficiency of exports activity in the small-business sector. The most promising fields for the development of the latter’s export potential are as follows: the production of foodstuffs using the deep processing of fruit and vegetables; manufacturing of machinery and equipment; production of textile and building materials; and provision of construction, tourist and transport services.

The system of foreign economic-activity stimulation in the small-business sector in Uzbekistan is perfected in the following main directions: liberalization of the national foreign economic policy; intensification of institutional reforms and improvement of Uzbekistan’s macroeconomic policy. In particular, it is expedient to liberalize the country’s foreign economic policy by bringing its foreign trade regime into line with WTO requirements. Such an approach will be conducive to the expansion of the scope of potentialities in trade and the sales market alike; a more efficient exploitation of advantages available in economy of scale; an increase in the inflow of foreign investments; the strengthening of competition and a rise in the competitiveness level of small businesses and entrepreneurs.

Improving the macroeconomic policy is designed to address the following tasks: to make the system of taxation and customs administration much more efficient; to maintain a low inflation level; to ensure a stable exchange rate; to liberalize the banking sector; to encourage investment processes in Uzbekistan, and to perfect the industrial policy.

On 15th May 2015, the Presidential Decree, “On measures to ensure the reliable protection of private property, small business and entrepreneurship, and to eliminate obstacles on the way of their accelerated development” has been passed in order to back small business and entrepreneurship in the Republic.

Small businesses and entrepreneurs are in a position to perform foreign economic activity and take part in globalization processes just from the date of their establishment. Their potential to transact international operations and the effectiveness of this line of activity depend on the presence of many internal factors, such as the peculiar features of firms themselves, and the external factors, which characterize, among other things, the efficiency with which the foreign economic activity stimulation system is used.

Small business in Uzbekistan is a very promising sector for the development of foreign economic activity. Opening up and mobilizing its enormous potentialities requires the creation of auspicious conditions that boost the sector’s productive investment in the development of business and organization of high-tech production facilities intended to produce diversified competitive goods, which, in turn, presupposes the reformation of different industries.

(Source: «Business» newspaper)


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