August 31, 2012
Uzbekistan Amplifies Investment Potential
The Uzbek economy has grown to be an integral part of world economy.

The nation has been building up its export capacities and consistently shifting, in the meantime, the composition of its supplies to the global market from crudes to hi-tech ready goods with higher added value.

Owing to the steadfast and targeted realization of critical priorities rested in the 2012 economic program and the timely measures undertaken to weather the impact of enduring crisis effects in world economy, Uzbekistan has been able to secure high and sustainable growth rates along with greater consolidation of macroeconomic stability. In the first quarter of 2012, the GDP grew by 8.1 percent; the manufacturing sector enlarged by 7 percent, while agricultural production and construction works increased by 7.1 and 8.6 percent, respectively.

The current actions designed to stimulate the internal demand, support domestic producers of consumer goods and enhance localization have facilitated the expansion of consumer goods production by 7.7 percent, of localized merchandise by 25.7 percent, retail trade by 12.5% and services by 14 percent. The share of services in the gross domestic product has surged from 52.2 percent in the previous year to reach 48.3 percent.

This success has resulted in the national economy’s shift toward import substitution and localization of production, which in turn have catalyzed the national manufacturing sector and helped reduce the economic dependence on external factors, facilitated a more complete utilization of domestic production reserves and raw resources.

A logical extension of the modernization course and technological replenishment of production capacities underway in Uzbekistan was the presidential resolution on “Priorities of Industrial Development in the Republic of Uzbekistan during 2011-2015” signed December 15, 2010, and designed to secure a sustainable, dynamic and well-balanced advancement of the country’s manufacturing sector.

A part and parcel of this process has been the systemic introduction of international quality standards and technical regulations in the area to ensure competitiveness of our goods in the global market.

Significantly, the equipment, materials and componentry not produced in Uzbekistan and imported as part of a variety of projects are exempt from customs duties (except for customs charges) through to January 1, 2016.

In general, the resolution envisages the implementation of more than 500 major industrial investment projects worth some 50 billion dollars.

Within the next four years, the manufacturing growth rates are anticipated by at least 60 percent and its share in the gross domestic product is to increase from 24 percent in 2010 to 28 percent in 2015.

Such segments as mechanical engineering and automobile production, chemical and food industries, pharmaceuticals, construction materials are expected to be at the vanguard of expansion at more than twofold growth rates.

Under special consideration will be the hi-tech schemes in setting up production of synthetic liquid fuels, construction of new modern gas and chemical complexes to generate polyethylene and polypropylene goods, liquefied and compressed natural gas, mineral fertilizers and new types of chemical goods on latest power-saving technologies, dynamic advancement of energy industry by replacing the obsolete equipment with state-of-the-art combined-cycle plants.

A new Uzbek-Chinese joint venture, Elektr Quvvat Qurilmalari, was launched recently to manufacture hi-tech equipment. It was established by Holley Metering Ltd. (China), Energotamir open stock company and JV Elektronhisoblagich Ltd. In the initial stage alone, its production capacities constitute 100 thousand transformers a year, a part of which is to be exported.

“Antecedent to creating this new enterprise goes back to the deal stuck by the heads of our two states,” Wan Sinhe, director general of JV Elektr Quvvat Qurilmalari, said. “Within a rather short span of time, we have been able to organize hi-tech production, procure and set up modern equipment. A trial production-run has already been launched. The successful scheme has been possible due to the effective normative base in force in Uzbekistan, the availability of extensive communications system and, surely, the high level of specialist proficiency, especially among the youth.”

It should be noted that along with the project, agreements providing the implementation of a number of investment projects worth over USD 5 billion in such directions like as oil-gas, mining, energy, including the development of alternative renewable energy, telecommunications, pharmaceuticals, production of consumer electronic products and modern construction materials were reached during the official visit of President Islam Karimov to the People’s Republic of China from 5 to 7 June of this year.

The projected priorities of domestic industrial development are an essential part of the Uzbek government’s investment policy. An unprecedented conducive investment climate and a system of privileges and preferences have been created in Uzbekistan for foreign investors.

The mounting inflow of foreign investments into our economy is quite suggestive of this argument.

The investment appeal of the country is facilitated by the availability of an enormous market and an advanced transport infrastructure integrated into the multimodal system of Eurasian communications, preconditioning the promising nature of investment and trade-economic cooperation. By investing into the Uzbek economy, foreign businesses are granted opportunity to enter the five biggest and the most dynamically growing markets, namely, the CIS (Commonwealth of Independent States) with a market of more than 300 million people, the Central and Eastern Europe, South and Southeast Asia, the Middle East.

Taking up the major provisions of international investment law, in particular those concerning the guarantees of foreign investor rights and those providing certain preferences for them, the investment legislation of the Republic of Uzbekistan is considered one of the most progressive among the related systems of CIS nations.

The backbone of normative regulation in attracting foreign investment to Uzbekistan is made up of the laws on “Foreign Investment”, “Investment Activity”, “Guarantees and Protection Measures of Foreign Investor Rights” as well as a range of other acts adopted in the form of presidential decrees and government resolutions.

Notably, President Islam Karimov signed the document “On Additional Measures to Stimulate Foreign Direct Investment” into a decree on April 10, 2012, designed to create a maximum favorable environment for foreign investors who are willing to make direct investment into the development of hi-tech production, to shore up foreign investment for implementation of projects to modernize and technically renovate the production capacities, to get rid of bureaucratic barriers and obstacles in working with foreign investors, to rule out illegal interference by government and controlling units into the activities of enterprises with foreign investment.

“Thanks to the effective legislative foundation, in excess of 4,2 thousand enterprises with foreign investment have been operating in our country’s leading sectors of economy,” says Otabek Rahmonov, the head of the Financial and currency balance Department of the Ministry of economy of the Republic of Uzbekistan. “About three billion dollars in foreign investment, primarily direct, is drawn every year – a more than 25 percent of overall investments into the economy – which is a telling testimony to the rising interest and confidence of foreign investors in the sustainability and reliability of our country’s economy and its prospects.”

The pro-active investment policy aimed at executing projects in modernization, technical and technological re-equipment of the leading sectors of economy, at boosting housing construction, transport and infrastructure communications, has helped commission dozens of cutting-edge production enterprises in 2011 alone. They have included new hi-tech businesses to manufacture automobile engines at JV General Motors Powertrain Uzbekistan, motor generators and compressors.

The construction of the dealer center of a new complex to manufacture MAN trucks in Samarkand region and spinning production on the basis of the Kokand textile combine (1st stage) are completed.

In sum total, more than 270 investment schemes are envisaged to be complete toward late 2012. They include, inter alia, the production of new model of Cobalt car with a projected 125 thousand units, the construction of combined-cycle plant at Navoi Heat Power Station, the more than 25 textile entities such as a spinning factory at Shovot Tekstil Ltd in Khorezm region with a projected capacity of five thousand tons of cotton yarn.

A keen impetus to the promotion of investment policy has been afforded by the investment program for 2012, the contours of which were outlined by the presidential enactment on “The Investment Program of the Republic of Uzbekistan for the Year 2012”.

The document was elaborated to secure the implementation of strategically important investment projects designed to set up cutting-edge production capacities, to technologically modernize the existing enterprises, ensure an advanced development of a modern network of transport and engineering-communications and social infrastructure, and hence create new jobs, strive for sustainable and dynamic development of the national economy.

Within the framework of the Investment Program, 23.6 trillion soums of capital investments are projected to be drawn in Uzbekistan, including more than 5.74 billion soums of centralized and 17.9 trillion soums of decentralized investments. The government of Uzbekistan intends to attract 1.7 trillion soums of foreign investments and loans in equivalent under its own guarantees, 301 billion soums of which is to be assigned for construction of housing in rural areas. Another 4.3 trillion soums is anticipated as foreign direct investments and loans.

Over 1 trillion soums is to be earmarked from the national budget to fund diverse projects. Furthermore, 1.4 trillion soums is to be allocated by a variety of non-budget entities, including the Republican Road Fund; the Children’s Sports Development Foundation; the Fund for Reconstruction, Cardinal Overhaul and Equipment of Education and Healthcare Institutions; Fund for the Promotion of Economic and Technical Capacities of Higher Education Institutions.

The Fund for the Reconstruction and Development of Uzbekistan plans to assign 1.4 trillion soums of investments for various sectors of economy, while the Fund for the Melioration Improvement of Irrigated Lands projects 115.5 billion soums of investments.

A practical manifestation of the current Investment Program is a project run by Uzbekyengilsanoat (light industry coordinating state stock company) to bolster the industrial potential of labor-abundant provinces by attracting foreign and local investors for creating modern textile production units at the currently spare production fields in Khorezm region.

Crucial in the further diversification of Uzbekistan’s economy is the commencement of construction works at Ustyurt Gas and Chemical Complex at Surgil deposit, as well as at Dehkanabad Potash Manure Plant.

The construction of Ustyurt Gas and Chemical Complex is thus far the biggest joint project of Uzbekistan and South Korea. After it is commissioned, up to 400 thousand tons of polyethylene and 100 thousand tons of polypropylene are to be produced per annum. In this regard, it will be the largest such complex across the CIS area.

Karakalpakstan, the place of its dislocation, will join the ranks of industrial pivots of the country. In addition, an opportunity will open up to generate new mixed production enterprises in Uzbekistan’s other regions and create new jobs.

As far as the expansion of capacities at Dehkanabad Potash Manure Plant is concerned, China-based CITIC International Cooperation Co. Ltd is to erect a reprocessing complex to produce 400 thousand tons of potash fertilizers a year worth 116.3 million dollars, while Russia’s ZUMK-Engineering is to build a mining complex to extract 1.4 million tons of sylvinite ore, a suspended freight cableway to ship 2.1 million tons of ore per annum as well as outer power supply facilities totaling 122.3 million dollars. All the works are to be complete by late 2013.

Also quite important are the projects aimed at expansion of Kungrad Soda Plant, a synthetic liquefied fuel production factory, two combined-cycle plants at Talimarjan Heat Power Station.

Measures designed to accelerate the implementation of projects on construction and reconstruction of roads – part of Uzbek National Highway that reliably links all the provinces of the country and secures passageway to regional and world markets – remain in the core of attention. To meet these goals, the plans for 2012 include building and reconstruction of 517 kilometers of automobile roads, two major transport interchanges, as well as 544 running meters of bridges, flyovers and underpasses.

Highly appreciating the strategic significance of modernization of the highway not merely for Uzbekistan, but also for the entire Central Asian region, international financial institutions like the Asian Development Bank, the Islamic Development Bank, members of Arab Coordinating Group have been enthusiastic to partake in the project by providing with soft loans totaling some 1.4 billion US dollars for the construction and reconstruction of 742 kilometers of roads and procurement of cutting-edge road building equipment.

The Afrosiyob high-speed passenger trains have been shuttling between Tashkent and Samarkand, overcoming the 344 kilometer distance between these two cities within as few as two hours. Extensive efforts in modernization of railway infrastructure have been undertaken to run these trains. The rails of hundreds of kilometers in length have been restored, while 68 kilometers of new lines have been laid with a simultaneous reconstruction and re-equipment of Tashkent and Samarkand railway stations.

Activities of the created logistical support centers are on the boost. Remarkably, 50 thousand tons of cargo has been transported through Navoi Intermodal Logistics Center. The volume of shipping via the Kamchik Pass by the Angren Logistics Center has reached 4.2 million tons – a 1.3 times increase from 2010 figures.

One should note in the meanwhile that Navoi Intercontinental Intermodal Logistics Center is unique to CIS countries, with a capacity of speeded dispatch and shipment of diverse goods, their distribution and storage. The freight bound for Europe from Asia and vice versa transits this venue – a critical element of global shipping.

Another intermodal zone – Angren – is to be set up soon in Tashkent region in accordance with President Islam Karimov’s 13 April 2012 decree to establish Angren Special Industrial Zone.

Angren Special Industrial Zone (SIZ) operating time framework is envisioned at 30 years with a possibility of subsequent extension of term. A special tax regime and customs privileges are to function within this period of time at the SIZ. The status of Angren SIZ participant is to be granted by due decisions of Administrative Council of the zone.

The mutually advantageous cooperation with foreign partners has been rather impressive since an environment conducive to consolidation of the confidence of foreign investors has been created in Uzbekistan. The government investment policy is designed for longer-run prospects and aimed at providing the investors with all the necessary conditions for effective activity. The prerequisites are available for that, including a gainful geographical location, a developed transport network, the sufficient and highly efficient natural resources, along with a high level of manufacturing and social infrastructure, proficient specialists, and other factors that help boost investor confidence. (Source: UzA news agency)


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