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Investment Opportunities in the Textile Industry of Uzbekistan

Investment Opportunities in the Textile Industry of Uzbekistan. State Joint-Stock Company "O'zbekyengilsanoat". Republic of Uzbekistan : W orld's sixth largest cotton producer ( 200 5 /2006 – more than 3.5 million tons) S econd largest cotton exporter after the United States of America.

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Investment Opportunities in the Textile Industry of Uzbekistan

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  1. Investment Opportunities in the Textile Industry of Uzbekistan State Joint-Stock Company "O'zbekyengilsanoat"

  2. Republic of Uzbekistan: • World's sixth largest cotton producer (2005/2006 – more than 3.5 million tons) • Second largest cotton exporter after the United States of America

  3. About State Joint-Stock Company “O’zbekyengilsanoat” • SJSC “O’zbekyengilsanoat” was established in July 1, 2002 by the Decree of the President of the Republic of Uzbekistan #UP-3102 under the bases of the Association of Light Industry of Uzbekistan (former Light Industry Ministry of the Republic of Uzbekistan); • Today SJSC “O’zbekyengilsanoat” provides: - one third of job places in the industrial sector; - more than 50%of the total volume of consumer goods; - approximately 20% of the total volume of industrial production.

  4. About State Joint-Stock Company “O’zbekyengilsanoat”ORGANIZATIONAL CHART SJSC “O’ZBEKYENGILSANOAT” Textile Branch Garments Branch Knitting Branch Silk Branch Porcelain Branch Infrastructure Enterprises As of May 1, 2007: total number of enterprises – 202.

  5. Existing Production Capacities of SJSC “O’zbekyengilsanoat” Enterprises: Cotton yarn (thousand tons) – 282,6; Knitted fabric (thousand tons) – 37,2; Woven fabric (million meters) – 274,0; Apparel (million pieces) – 183,0; Hosiery products (million pairs) – 30,04; Silk yarn (tons) – 1900. About State Joint-Stock Company “O’zbekyengilsanoat”

  6. mln. USD

  7. mln. USD

  8. Capabilities • More than 60 joint ventures established with partners from Germany, South Korea, Japan, Switzerland, Turkey, U.S.A., Singapore, India, etc. • More than 30 projects on production of ready-to-wear clotheswith annual production capacitymore than 30 million pieces of ready-to-wear clothes (sports shirts, underwear, children apparel etc.)

  9. Latest Achievements • Increase in the share of domestic cotton fiber processing up to 30 % in 2006; • Modern textile complexes embracing finishing, knitting and garments lines have been launched; • In 2004-2006, 42 new projects with the total value of USD 340 mln. have been implemented; • Increase of the EU market share of Uzbek yarn up to approximately 9%.

  10. Main Approaches for Investment Projects Financing • Direct investments of the project initiators; • Acquisition by the foreign participants of the project of shares of Uzbek enterprises offered for sale; • Loans provided by foreign banks & local commercial banks in Uzbekistan; • Own loans of the project participants; • Leasing operations & others.

  11. Alternatives Proposed for Organization of Textile Production To use existing textile facilities, which are installed with obsolete technological equipments, by their replacement with up-to-date textile technology; To usebuildingssuitable for production, which are not being used, by furnishing them with necessary textile machinery & equipments; To use incomplete construction objects or carry out construction works for the organization of textile complexes.

  12. Favourable Framework for Foreign Investors • Availability of vast stocks of raw materials, specifically, high quality cotton fibre; • Low-cost energy resources; • Qualified and relatively inexpensive labour resources; • Advanced network of communications; • Developed system of banking and legal services; • Availability of vast international markets for textile products and apparel.

  13. Cost for Main Production Factors in Uzbekistan • Water – USD 0,022 / m3 • Natural Gas – USD 0,04 / m3 • Electricity – USD 0,029 / Kw/h • Fuel Oil – USD 0,55 / lt • Diesel Oil – USD 0,55/ lt

  14. US$/hour Note: Labour costs in Europe comprise around 21-35$/hour, in the USA – around 16$. *2006 data from http://www.wernertex.com/

  15. US$/Unit • Note:Data on natural gas in India, Pakistan, Korea and Germany is not available • International Energy Agency "Key energy statistics 2006 • "

  16. US$/kWh • International Energy Agency "Key energy statistics 2006 • "

  17. US$/m3 *http://www.unesco.org/water/ http://www.adb.org/Water/Indicators/Profiles

  18. Textile Production Average Added Value +2,6-7,6$ +4-9$ (min.) +0,4$ +1$ 5-10$/3-5pieces 2,4$/0.77kg. 2$/0.88kg. 1,06$/1kg.

  19. Support and Special Favorable Conditions Created by the Uzbekistan Government • stable legal framework for economic activity of enterprises; • simplification of licensing, registration and certification procedures; • significant privileges, preferences and guarantees for foreign investors.

  20. Privileges for Private Foreign Direct Investments: • Starting from July 1, 2005,enterprises, attracting direct private foreign investmentsare exempted from: • income tax, • property tax, • tax on development of a social infrastructure; • single tax for micro-firms and small enterprises; • levy to the Republican Road Fund;at following volume and periods: • from $300, 000 up to $3, 000, 000 - for the period of 3 years; • from over $3, 000, 000 up to - for the period of 5 years; • over $10, 000, 000 - for the period of 7 years. • Starting from June 1, 2006, enterprises, of the SJSC «O’zbekyengilsanoat»are exempted from property tax

  21. Special Privileges and Preferences for Enterprises of the Textile Industry • until January 1, 2009, the enterprises with foreign investments specializing in production of garments and apparel and hosiery products are exempted from all kinds of budget taxes and duties, except for VAT; • enterprises, included into the State Investment Program and undergoing re-equipment process, are exempted from the payment of customs duties on imports of technological and auxiliary equipment, technological accessories and spare parts for industrial needs.

  22. Special Privileges and Preferences for Enterprises of the Textile Industry • until January 1, 2009, enterprises importing chemicals, dyes, accessories and other auxiliary materials not produced domestically are exempted from payment of customs duties; • until January 1, 2009, for the enterprises with foreign investments when they purchase cotton fiber for their own production usage, 15 percents discount is given from the price set at the Liverpool Cotton Exchange “A” Index and transaction is made in hard currency; • and additional 5 percent discountis granted to the exporter-enterprises for purchase of cotton fiber, which have a full production cycle (from yarn to finished goods).

  23. Transport corridors of Uzbekistan Riga Tallinn Klaypeda Brest RUSSIAN FEDERATION BELARUS Chop Nahodka UKRAINE Ilichevsk MONGOLIA KAZAKHSTAN Poti Shanghai TURKEY UZBEKISTAN CHINA IRAN AFGHANISTAN Bandar Abbas PAKISTAN INDIA

  24. TASHKENT Kandvagash Novorossiysk Istanbul (Russia) Black Sea (Kazakhstan) Europe 21 00km/6 days 900km/10 days 4 days Ashdod–10 days (Russia) St.Petersburg Leixoes–16 days European Port 1200km/12 days Bari–21 days (Latvia) Riga Baltic Sea Genoa–21 days 1300km/15 days Onteniente–21ds Hamburg–4 days (Estonia) Trieste–21days Rotterdam–5 days 1400km/17 days Tallinn Gioia Tauro– 21days Antwerp–6 days Lianyungang (Kazakhstan) (China) Yellow Sea Hull–7 days Prato–21days Busan 3 days 7000km/22 days Leixoes–15 days Valencia–21days Barcelona Nakhodka Valencia–15 days Barcelona (Russia) Eastern Sea Busan 3 days 7400km/25 days Miami–25days L.A.–30 days Eastern Sea Osaka, Imabari Atlantic Ocean 4 days Mersin European Port (Turkmenistan, Iran, Turkey) Mediterranean Sea 4750km/10 days 5 days Istanbul (Turkey) Rome–6 days 5100km/12 days Denizli Ashdod (Turkey) 3 days Genoa–6 days 5250km/13 days (Turkey) Izmir Valencia–7 days 5400km/14 days Barcelona–7days B.Abbas Antwerp–8 days (Iran) Indian Ocean Karachi Leixoes–12 days 15 days Rotterdam–13 days TRANS ROUTE Sea area Land Main stationsand ports Colombo Indian Ocean 17 days Hamburg–13 days Singapore Manchester–14days Indian Ocean, Malaks Channel 20 days Busan South-Chinese Sea, East-Chinese Sea Nagoya

  25. THE LIST of Investments Project Proposed for Establishing Textile Facilities with Participation of Foreign Investments State Joint-Stock Company "O'zbekyengilsanot"

  26. THE LIST of Investments Project Proposed for Establishing Textile Facilities with Participation of Foreign Investments State Joint-Stock Company "O'zbekyengilsanot"

  27. INFORMATION on taxes, payable in Uzbekistan For SMEs simplified taxation system is envisaged on the voluntary basis. It envisages single tax payment instead of all common state taxes including levies to the non-budget Pension Fund, Republican Road Fund and Republican Fund of School Education Development, as well as local taxes and charges, charged by local authorities, excluding: • Fee on commercial activity, including licensing fees; • Registration fee; • Compensation payments for environmental pollution and wastes. Single Tax Payment rate – 10% of volume of sales.

  28. INFORMATION on taxes, payable in Uzbekistan

  29. INFORMATION on taxes, payable in Uzbekistan

  30. INFORMATION on taxes, payable in Uzbekistan

  31. State Joint-Stock Company “O’zbekyengilsanoat ” 45 Babur Str., Tashkent, 700100, Uzbekistan Tel: +998 (71) 253-92-91 Fax: +998 (71) 139-17-11 http://www.legprom.uz

  32. Thank you for your attention!

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