NEWS AND EVENTS
August 21, 2014
Seriously affected by the current geopolitical situation, the global investment landscape is changing rapidly. Asset management companies, hedge funds as well as individual financiers and bankers working in Russia are taking their money out of that country as they are looking for additional ways to make profits. According to Emerging Portfolio Fund Research, a company analyzing the global financial flows for financial institutions, they have taken out around $500 million for the past two months. However, as major economies have been experiencing outflows of money, the interest in investing in so-called emerging markets has been growing. Only for the last week of July, the developing markets attracted $5.3 billion of foreign investments – a maximum week investment in the previous period of 18 months. So now a big investment game is unfolding in Asia, and Uzbekistan has certain trump cards in it.
The investment market activities have always been akin to a game where every country attracting investment tries to multiply their strengths and hide their weaknesses. However, investment flows – the grand prizes of the game – turn out to be extremely useful, for they are not only financiers’ business, but also the business of companies operating in real economy sectors. Foreign investment allows for quick modernization of individual manufacturers and industries to produce highly competitive and export-oriented goods through the use of advanced technologies.
The world’s economies are going to suffer from an anticipated new crisis wave. This tide is growing, being fed by political instability, trouble and violence areas around the world. Argentina has been feared it is in default, and Ukraine seems to follow it. In contrast to such facts, Uzbekistan’s economic model once again proves its effectiveness: it has been guaranteeing the country’s steadfast economic development for around ten years already, with a minimum 7% GDP and industrial production growth.
In the first half of 2014, the total value of the investment projects implemented in Uzbekistan increased by 10.8%, exceeding 15 trillion soums ($6.7 billion). The value of the completed projects funded through the Fund for Reconstruction and Development of Uzbekistan, by loans from commercial banks and other borrowings, and by direct foreign investment increased by 1.6 times, 1.4 times, and 28.8%, respectively. According to the information on the economic development of the CIS countries in the first half of 2014 issued by the Interstate Statistical Committee of the Commonwealth of Independent States, Uzbekistan was ranked first in industrial production growth (8.1%), second in GDP growth (8.1%) and retail sales growth (13.7%), and third for fixed investment growth (10.8%) and growth in transportation of goods (4.6%) compared with the same period last year. (Currency rates of CB from 21.08.2014 1$= 2344.38 soums).
Experts say that many countries still have time to adapt to the new global economic environment with its unstable markets and unpredictable behavior of investors and consumers. In order to succeed in doing so, a country, in contrast, should pursue consistent economic policies business communities can predict. This is what Uzbekistan is doing, adopting annual investment programs incorporating the most important projects to implement, as well as long-term strategic development programs.
One of them was approved by the government of the country in the middle of the last month. It is a package of measures to attract grants from donor countries as well as international and foreign governmental and non-governmental organizations in 2014 – 2016. There are 88 projects worth over $383 million under the program. They are to be carried out in the areas of critical importance to the nation: healthcare, education, agriculture, export production, alternative energy, information technologies and tourism.
There is an interesting initiative in the area of healthcare under the program, for instance. The Ministry of Health of the Republic of Uzbekistan and South Korea’s government are currently working on the issue of carrying out a project of an automated emergency medical services system. Koreans may allocate up to $3 million to implement the project. It will result in setting up a universal control center of emergency medical services in Uzbekistan, with all the necessary technical infrastructure built for it: substations installed and ambulances equipped with GPS and telecommunication facilities with special software.
It is important to understand that the policy of attracting foreign investment and foreign companies has certain time limitation. Besides, it must be consistent and include a proactive approach to stay ahead of competitors: the domestic business environment should be continuously improved to attract an increasing number of investors over the course of time. The other day, Uzbekistan’s government approved a new procedure of processing projects involving foreign investment. Now, it is the use of modern information technologies that is going to significantly contribute to the improvement of the country’s foreign investment and loans attraction policy. As of October 1, 2014, investment proposals and project passports are to be processed through the Unified Electronic Database of Investment Proposals of the Ministry of Foreign Economic Relations, Investments and Trade of Uzbekistan.
An economy’s orientation toward foreign investors should not be just a slogan shouted out regularly; it should be a practice. Currently, Uzbekistan uses all the known instruments for attracting foreign investment. First, it is a worldwide campaign to promote the economic potential of the country and the benefits foreign investors can enjoy in it through a series of presentations at the key international forums and fairs where foreign businesspeople and officials are provided with all the necessary information. The promoting activities should be intensified, though, when it comes to the use of the Internet. Unfortunately, Uzbekistan is not using all the opportunities the World Wide Web provides. Many businesspeople who visited the country say that they could hardly find the information on Uzbekistan’s investment climate, areas of possible cooperation, taxation legislation, etc. on the Internet. This situation is going to be improved by the uniform requirements the government’s websites are to meet. These requirements in the form of official regulations were adopted at the end of last year. Uzbekistan’s foreign investment attraction websites must provide as much useful information as possible. Besides, they have to have high search engine rankings so that every foreign businessperson can easily find them.
Another instrument used is the favorable environment for foreign investors being created in the country. Uzbekistan has taken unprecedented steps in doing so, providing foreign investors with a unique opportunity to pay a ‘zero’ price for its state-owned assets. The procedure is simple. If state-owned assets being put up for auction are not bid anything for six months, the price of these assets decreases by 10% every next month to reach not less than 50% of the original price. If the assets are not bid anything for within three months after the price started decreasing, they are sold at the ‘zero’ price. However, an investor purchasing such assets for this price will have to fulfill certain investment obligations and a commitment to create new jobs and keep them effective for one year as of the date of assuming the investment obligations. By now, 121 sites have already been sold for the ‘zero’ price with 164.1 billion soums’ worth of investment obligations and the responsibility to create 4,256 new jobs.
Uzbekistan also actively uses an instrument of public-private partnership. Experts point out that today every major investment project needs financial, human, intellectual and technological resources and it is effective interaction between the state and investors that can guarantee them. In Uzbekistan, such partnership is realized in its unique economic zones: the free industrial economic zone ‘Navoi’, and the free industrial zones ‘Jizzah’ and ‘Angren’. The government has invested huge amounts of money to build all the necessary engineering, transportation and utility facilities and infrastructures in the zones so that the investors working in them did not bear additional costs: about $100 million on ‘Navoi’, over $60 million on ‘Angren’, and around $50 on ‘Jizzah’.
Since the beginning of the year, over 64 projects worth $680 million in total have been implemented under the national investment program 2014 in Uzbekistan. Moreover, under the regional industrial development programs, 2,696 projects have been implemented in the regions, including 1,651manufacturing facilities launched. A large number of these projects have been carried out with the help of foreign companies. The cooperation with them has resulted in building modern manufacturing sites featuring advanced equipment and machinery, as well as creating thousands of new jobs. Besides, the country’s export statistics have improved significantly: since the beginning of the year the exports have increased by 8%, with Uzbekistan-based joint ventures contributing to this growth significantly.
The exports of polyethylene, soda ash, ammonium nitrate, molybdenum, copper-based alloys, and cotton yarn have increased in particular. Apart from that, Uzbekistan’s manufacturers have started exporting over 100 new products worth the total of $96.2 million.
(Source: «Uzbekistan Today» newspaper)