Current rearrangement of global economy’s architecture and the continuing fluctuations in the main quotations in financial markets clearly demonstrate the uncertainty that now occupies the minds of the leading analysts and managers of investment companies and funds. The major players in the market are actively diversifying their businesses, rushing out of the crisis Europe to the fast-growing Asia-Pacific region. In these circumstances, Uzbekistan has all opportunities to maximize its potential, and to attract foreign investors’ experience and resources. But you have yet to be able to use these opportunities. And, this is impossible to achieve without an effective public-private partnership. In these regards, Navoi and Angren economic zones became the new economic beacons on the economic map of Uzbekistan.

First steps

In late 2008, Uzbekistan has taken the first step towards the creation of the fundamentally new conditions for foreign and domestic investors.

The starting point for the movement of the domestic economy on the new rails was the Presidential Decree on the creation of the Navoi Free Industrial and Economic Zone (Navoi FIEZ). Those days, the project has caused heated debate in the international expert community; a lot of opinions was expressed as \"pros\" and \"cons\" of its implementation. Investment is always about risks, and critics said that it very hard to find the sufficient number of companies willing to invest in new projects even under the most favorable terms. The situation was fomented by the inchoate global financial crisis, when hundreds of companies around the world cut their investment programs, closed manufacturing plants and laid off their staff. It was broken a lot of copies, foreign press was too soon to call the FIEZ as “an impracticable project”, but only a few months later it became clear that the expectations of the critics did not materialize. Already at the stage of preliminary preparation of the draft, tens of largest investors, primarily Asiatic ones, have expressed their interest and signed memorandum of cooperation with the Uzbek side. Having seen the enormous potential of the fast-growing Asian market, the Europeans came soon after.

The creation of such a zone was an unprecedented step in Central Asia. The domestic business got unique opportunities and expertise to establish tech industries, as well as gained new frontiers for exploration of foreign markets. Companies that have appeared in Navoi FIEZ, were exempt from land tax, property tax, profit tax, tax on improvement and development of social infrastructure, the single tax for small businesses, mandatory contributions to the National Road Fund and from paying to the National School Fund for the period of time of 7 years if made direct investment from 3 to 10 million Euros; for 10 years if directly invested from 10 to 30 million euros; and were freed from the above mentioned taxes a payments for 15 years if they directly invest more than 30 million Euros. This experience, in fact, became the country\'s first step in creating a new, liberal model of doing business, which every year is becoming increasingly vivid. Plans for the plans, but in rapidly changing economic realities it was important to quickly start the creation of this economic zone, in order to not to loose the emerging conjuncture. There was organized the FIEZ’s special directorate with a statutory fund of about 4.89 billion soums (official exchange rate 1USD=1904.90UZS), to implement the active phase of the project. These funds were used to bring the external utilities, such as, water, gas, electricity and sewage systems in accordance with international standards. Open Stock Society UzshaharsozlikLITI became the general designer of the entire zone. The directorate had also become responsible for the registration of participants of economic activities in the area and concluded with them the land lease contracts, as well as the investment agreements with the investors. The Cabinet of Ministers of Uzbekistan was its principal founder.

The organizers have chosen the comprehensive approach in solving all the arising issues. This was an important component of FIEZ’s future success. Dozens of technological and modern enterprises producing export-oriented products should have to be accommodated on a fairly small area. That meant that, first of all, it was necessary to solve two tasks: to provide investors with the necessary transport infrastructure; and to bring the electric power to the area, so necessary for industrial equipment.

The first task was solved by the launching of a new joint project with the South Korean carrier Korean Air. In 2008, Uzbekistan Airways has signed an agreement with Korean Air, according to which the Korean side began the creation of an international logistics hub on the base of the Navoi airport. Since that time the airport has undergone tremendous changes. The airport gained a new parking lot for heavy aircraft Boeing-747. A new cargo terminal was commissioned. It can cover the whole range of transport services - to receive goods, to temporary storage them, and to fulfill the process of consignment. The airport also received the glide-path system which ensures precise approach of the airplanes. To date, the Uzbek and the Korean sides are actively working to increase the flow of goods through the logistics hub in the Navoi international airport. The national airline carrier successfully operates the commercial aircraft A300-600.

Transcontinental part of the global network of air traffic through Navoi airport is represented by flights to Brussels, Incheon, Milan, Shanghai, while the regional network is consists of the flight to Bangkok, Delhi, Dhaka, Mumbai, Frankfurt and many other cities. The results of this work are evident. In 2011, the national airline company transported 48.2 tons of cargo, which is 5,1% more than it did in 2010. And nearly half - 20.7 thousand tons - was shipped through the airport Navoi.

Experts note that this is only the beginning and that the hub has huge prospects.

The Korean company did not forget about the investors and foreign specialists who often visit the FIEZ. A modern residential complex Hanjin Navoi was built earlier this year for them. It covers an area of 18,000 square meters and consists of 3 buildings which have 51 apartments, a business center, a fitness club, a swimming pool, a sauna, a restaurant and a bar. Each building has its own special design. Considering the climatic conditions of the Navoi region, the constructors used thermal protection materials for the buildings, to significantly save energy consumption on heating and on air conditioning. In addition, the apartments are equipped with automatic heating and air conditioning control systems and meet the high level of comfort. The project’s total cost was $12.5 million. According to experts, the complex will certainly play a significant role in attracting foreign investors to the Navoi free industrial and economic zone.

Regarding the matter of electric power, this work does not stand still too. It was decided to install gas combined-cycle plant on the Navoi TPP which is the fourth largest power plant in Uzbekistan.

The construction of the first combined cycle gas turbine has entered the active phase in the framework of the program of modernization and technical re-equipment of the plant, financed by the loan provided by the Fund for Reconstruction and Development of Uzbekistan and using the internal funds of Uzbekenergo. The modern power plant, Mitsubishi Heavy Industries Ltd, will be able to generate electricity for 70-80% more than the existing analogues.

Experts say that the realization of the investment project will upgrade the obsolete and outdated equipment of the plant, will implement the latest technologies, as well as will provide additional energy supplies to the Navoi industrial free economic zone. There are already plans to install the second modern PSU station at the plant. In addition, the Korean government provided $2.5 million grant to Uzbekistan to improve the accounting system of electricity consumption in Navoi region. This will create an opportunity to improve the efficiency of electricity consumption in the region and will reduce its losses. All this predetermined the success of the project. Last year, the enterprises of the Navoi FIEZ produced goods worth 35.9 billion soums. More than 17 different high-tech projects are being implemented today. The construction works were fully completed at 12 of them.

The joint project of Uzbektelecom and the Indian Olive Telecommunication Pvt. Ltd, will establish the production of mobile and fixed telephones, CDMA-450 standard modems, and Internet platforms. According to representatives of the companies, all the necessary preparatory works to create this production have already been done. Not the less interesting project in the electrical field is also currently on its final stages of preparation. The JV OJSC Uzkabel, the Chinese Gulf Cable Trading Company and the Olmaliq Mining and Metal Plant plan to commission in December 2012 a new plant for production of high-voltage cables and self-supporting insulated wire with insulation from cross-linked polyethylene with an annual capacity of 10 thousand km, and forecasted export volume of at least 60 % of the total production.

PLANS FOR THE FUTURE

Undoubtedly, the success of FIEZ Navoi showed the righteousness of the strategy of Uzbekistan to attract foreign investors. The unique for the Central Asian region mechanism of successful cooperation between state and private investors was developed and perfected in practice in the country in a short time. Many experts from neighboring countries who had previously talked about the inefficiency and unprofitableness of the project, now began to campaign for the creation of such zones in their own countries. This became especially topical after the debt crisis in Europe entered its active phase and investment capital flow increased toward the Asian countries.

Uzbekistan has also not remained aloof from economic realities. Domestic experts, assessing the potential of the national economy and demands of foreign investors that are looking for the new opportunities for investment, have proposed to create another new beacon for investment in the country – the Angren Special Industrial Zone (SIZ). The joint fruitful work of the government, professionals and experts resulted in the decree of the President, signed in April this year. It defined the basic establishing and operational conditions for the new economic zone. The SIZ Angren’s main tasks and activities are to create an enabling environment to attract investment, especially direct investment, to establish effectively operational modern high-tech enterprises that produce the products with high added value and strongly competitive on domestic and global markets.

The decision to choice the Tashkent region for the new zone was dictated by several factors. At the beginning of 2010, the Angren logistics center started operation on the basis of the railway station Ablyk. Its main task were receiving and handling cargoes from the three regions of the Farghona Valley. This center can provide freight for SIZ’s companies in either direction of the country.

Angren region has the largest coal deposit in Uzbekistan. Today, there is a process of modernization of the enterprise Angren Cross-Section. The power units ¹ 1-5 of the New Angren TPP are transferring to a year-round burning of coal, which will increase the annual production of solid fuel from 3.2 to 6.4 million tons by 2014. The main direction of modernization of the cross-section is to replace the cycling process by a cyclic-threading one. The project envisages the construction of three new and upgrading of two existing conveyor lines with a significant increase of overburden operations. It is also planned to reconstruct the sorting and loading complex and to introduce the centralized control system. All this will ensure that SIZ Angren has necessary amount of electricity supply.

The term of operation of SIZ Angren, as well as of the FIEZ Navoi is 30 years with the possibility of further extension. Special tax regime and customs facilities are in force throughout the whole period of the zone’s operation.

In particular, the participants of the SIZ Angren are exempt from income tax, tax on property of legal persons, tax on the improvement and development of social infrastructure, the single tax for small businesses, as well as from the mandatory contributions to the National Road Fund. In addition, they are exempt from customs duties on equipment, components and materials not produced in the country, and imported in the country under the framework of implementation the projects in the SIZ.

Interestingly, many remarks from foreign investors and local business representatives have been considered during the creation of the new zone. In particular, many businessmen have proposed to make the financial threshold lower than in the FIEZ Navoi, at which businesses are provided the aforementioned benefits. And it was done. In SIZ Angren the companies that invest from $300,000 to $3 million are exempted from taxes and other charges for 3 years, those who invest from $3 million to $10 million - for 5 years, more than $10 million - for 7 years.

The SIZ is now at the stage of creation, but several agreements on establishing large industries here have already been signed. For example, it is planned to build a modern sugar mill with a capacity of 1,000 tons per day. Singaporean companies Welton International Enterprises Pte. Ltd., Kito Investment Pte. Ltd. and the Austrian Seid Nandelsgesellschaft mbN are the partners of the Uzbek side in this project. The total project cost exceeds $108.45 million.

In another project in the area, in partnership with Bulgarian investors, there will be created a modern production of base motor oils with complete technological cycle of collection and recycling of waste industrial oils. It is expected that the investors will direct $15 million for design and construction works, supply and installation of modern technological equipment, which will annually process up to 43 thousand tons of waste industrial oil and will produce base oils. (Source: “Uzbekistan Today” newspaper)