Uzbekistan

Investment Policy of the Republic of Uzbekistan

During the years of Independence, Uzbekistan formed favorable investment environment, broad system of legal guarantees and privileges for foreign investors, developed integral system of measures on encouragement of activity of the enterprises with the foreign investments.

The investment legislation of Uzbekistan is one of advanced amongst legislations of the CIS countries, and it incorporated major provisions of the international investment law, in particular, regulations on guarantees of the rights of foreign investors, certain preferences for investors and others.

The following laws form the basis of investment environment in Uzbekistan:

· On Foreign Investments;

· On Investment Activities;

· On Guarantees and Measures of Protection of Rights of Foreign Investors;

· On Protection of Rights of Investors on Securities Market.

In addition there is number of legislative normative acts issued in the form of Decrees of the President and/or Resolutions of the Government of Uzbekistan.

In accordance with current legislation the concept of foreign direct investment includes:

· investing by foreign investors of material and non-material welfares and rights for them including IPR;

· any income from foreign investments in facilities of enterprise and other types of activities.

Foreign investments in Uzbekistan could be made in different forms, and in particular:

· equity participation in charter funds and other property of business entities, banks, insurance institutions and other enterprises established together with legal entities and/or with natural persons of Uzbekistan;

· creation and development of business entities, banks, insurance institutions and other enterprises completely belonging to foreign investors;

· purchase of property, shares and other securities, including the promissory notes emitted by residents of Uzbekistan;

· investment of intellectual property rights, including copyrights, patents, trade marks, useful model, industrial samples, company names and a know-how, and also business reputation (goodwill);

· purchase of concessions, including concessions on prospecting, exploration, extraction or use of natural resources;

· purchase of the rights for property for facilities of trade and sphere of services, for premises together with the land plots on which they are located, and also the rights of possession and using the land (including on the basis of rent) and natural resources.

The Republic of Uzbekistan has no restrictions concerning the form of capital investment. Foreign investors are entitled to create within the county the enterprise in any organizational-legal form allowed by the legislation.

As of today, the most different forms of capital investment are offered to potential foreign investors:

· creation of joint venture;

· creation of the enterprise with 100 % foreign capital;

· purchase of a part or full package of shares of privatized enterprises.

The enterprises with foreign investments are newly created enterprises meeting the following terms and conditions:

· the size of the charter capital of the enterprise not less than the sum, equivalent to US $ 150 thousand;

· one of participants of the enterprise is the foreign legal entity;

· the share of foreign investments makes not less than 30 % of the charter capital of the enterprise.

Besides, if the enterprise with foreign investments earns over 60% of incomes from sale of produced goods or services, it is considered the industrial enterprise with foreign investments. Such enterprises are provided with additional tax, customs and other preferences and privileges.

Guarantees and Measures of Protection of Foreign Investors

Foreign investments in the Republic of Uzbekistan enjoy the national treatment which provides foreign investors with conditions not less favorable, than corresponding conditions for investments, made by legal entities and natural persons of the Republic of Uzbekistan.

The legislation, alongside with the general guarantees and measures of protection of foreign investors, may envisage additional guarantees and measures of protection, including providing unconditional performance by partners.

Additional guarantees and measures of protection can be given to foreign investors in each individual case at investment in:

· the priority sectors providing steady economic growth, progressive structural changes of a national economy;

· the priority projects providing strengthening and expansion of an export potential of the country, its integration into world economic relations;

· projects in sphere of small business oriented at processing of raw material and materials, production of consumer goods and services, providing population with employment.

The investment agreement

In case the Government of the Republic of Uzbekistan provides the foreign investor with additional guarantees and measures of protection (privileges and preferences), without fail, the investment agreement shall be concluded.

The investment agreement shall be concluded on behalf of the Government of the Republic of Uzbekistan between the Ministry for Foreign Economic Relations, Investments and Trade of the Republic of Uzbekistan and the foreign investor.

Also, the state guarantees and protects the rights of the foreign investors carrying out investment activity within the Republic Uzbekistan.

In case the subsequent legislation of the Republic of Uzbekistan deteriorates investment environment to foreign investors, within ten years from the moment of investment, the legislation acted on date of investment is applied. The foreign investor is entitled to apply at own discretion those provisions of the new legislation which improve investment environment.

The legislation stipulates the notifying order of use of a ten years guarantee. Thus, at approach of deterioration investment environment, the foreign investor notifies the corresponding authorized body on application of a guarantee.

The authorized bodies which shall be notified on application by the foreign investor of a guarantee, are the public organizations carrying out the state registration of legal entities, the Ministry for Foreign Affairs, the Ministry of Internal Affairs, the Ministry for Foreign Economic Relations, Investments and Trade, the State Tax Committee of the Republic of Uzbekistan and servicing banks.

The notice of the foreign investor is the basis for application by the authorized body concerning the foreign investor of the legislation acted on date of investment. The notice, irrespective of date of its direction to the authorized body, operates from coming into force of the act.

Privileges and Preferences


· Newly created enterprises, including the enterprises with foreign investments (except for those engaged in trading, intermediary, supply-marketing and procuring activity) pay the income (profit) tax in the first year from the moment of registration at a rate of 25% and in the second year at a rate of 50% from the established rate. The following years, the income (profit) tax is paid in the full size under the established rate;

· Newly created enterprises, including the enterprises with foreign investments (except for those engaged in trading, intermediary, supply-marketing and procuring activity) created in a rural area, in the first year from the moment of registration are released from payment of the income (profit) tax, in the second year pay the tax at a rate of 25 % and in the third year at a rate of 50 % from the established rate. The following years the income (profit) tax is paid in the full size on the established rate.

· Newly created enterprises, including the enterprises with foreign investments, are exempted from the property tax within two years from the moment of registration;

· 50 % reduction in the income (profit) tax - if the company exports not less than 30 % of total amount of sales of produced goods (works, services);

· 30 % reduction in the income (profit) tax - if the company exports from 15 % up to 30 % of total amount of sales of produced goods (works, services);

· Exemption of the enterprises with the foreign investments, engaged in production activity, from payment of the land tax within two years from the moment of registration.

The enterprises of sectors of the economy attracting direct private foreign investments, are exempted from payment on primary activity:

-the income (profit) tax;

-the property tax;

-the tax to development of a social infrastructure and an development of territories;

-the environmental tax;

-the single tax for microfirms and small enterprises;

-mandatory deductions in the Road Fund.

The specified tax privileges are given at volume of direct private foreign investments:

· from US $ 300 thousand up to US $ 3 million - for the period of 3 years;

· from above US $ 3 million up to US $ 10 million - for the period of 5 years;

· from above US $ 10 million - for the period of 7 years.

In accordance with the Resolution of the Cabinet of Republic of Uzbekistan dated 13 November, 2002, №390 On measures of encouragement of filling the market by consumer goods and improvement of relations of producers and the trading organizations from 1 January, 2003 till 31 December, 2007:

· the enterprises producing consumer goods, pay the income (profit) tax under the incomes earned from production of consumer goods, under the rate lower by 20 % against current;

· the enterprises producing the goods of childrens assortment, pay the income (profit) tax under the incomes earned from production of the goods of childrens assortment, under the rate of 7 %;

· microfirms and small enterprises pay the single tax from the proceeds received from production of consumer goods, under the rate lower by 25 % against current;

· the incomes (profit) of the production enterprises received due to a growth of physical volumes of production of consumer goods, are exempted from payment of the income (profit) tax and the single tax;

· the enterprises producing non food consumer goods (except for tobacco and jewels, household and toilet soaps, as well as gasoline), are exempted from payment of the excise tax under condition of a target direction of liberated resources for increasing production, expansion of assortment and increase of competitiveness of produced consumer goods.

From the customs duties also are exempted:

· the property imported by foreign investors in the Republic of Uzbekistan for own industrial needs, and also for personal needs of foreign investors and citizens of the foreign states residing in the Republic of Uzbekistan in accordance with labor contracts with foreign investors;

· the goods imported by foreign legal entities, which made direct investments into economy of the Republic of Uzbekistan for a total sum of more than US $ 50 million provided that the imported goods are goods of their own production;

· the goods, works and the services intended for work under the Production Sharing Agreement and imported into the Republic of Uzbekistan according to project documentation by the foreign investor or other persons, participating in performance of works under the Production Sharing Agreement, and also goods exported by the investor belonging him/her according to the Production Sharing Agreement;

· the technological equipment imported on customs territory of the Republic of Uzbekistan by foreign investors as their contribution into charter capital of the enterprises with foreign investments, and also imported into the country in accordance with the projects approved on creation of new, and also modernization and re-equipment of operating productions, at presence of corresponding acknowledgement of the authorized bank.

Localization Program

A number of additional incentives and preferences is envisaged for enterprises taking part in realization of Localization Program of finished goods, component items and materials on the basis of local raw materials aimed at increasing the competitiveness of Uzbek products and optimization of imports.

In particular, enterprises, included in Localization Program, are exempted from paying:

· customs duties (except for fees for customs formalities) for imported technological equipment, spare parts and components which are not produced in the country and are used during the production process of the goods that are being localized;

· income (profit) tax, the single tax (for the enterprises that are using simplified system of taxation) with regards to goods produced within the projects of localization;

· property tax with regards to the basic production assets used for the production goods that are being localized.

Special preferences for some sectors

Oil and gas field:

foreign companies engaged in prospecting and exploration of sub-soil are provided the Most Favored Nation Treatment, which provides:

· exclusive right to carry out prospecting works on certain territory with further exploration of a deposit from those discovered on the above mentioned territory by establishing a joint venture on the basis of concession or production sharing;

· advantageous right for a new territory to continue prospecting and exploratory works in case a company was not able to discover any resources with industrial value on the territories stipulated in the agreement on carrying out such works;

· property right and the right for free export of a part of extracted hydrocarbons, envisaged by constituent documents of a joint venture or concession agreement as well as products thereof on the basis of tolling;

· guarantee of recovery of actual expenses spent for prospecting and exploration works in discovering deposits with industrial value in case they are passed for further exploration to the Uzbekneftegaz National Holding Company.

Foreign companies attracted in oil and gas prospecting and exploration works are exempted from:

· all types of taxes and payments in force on the territory of the Republic of Uzbekistan for the period of prospecting and exploration works;

· customs duties in import of equipment, material and technological resources and services needed for carrying out prospecting, exploration and other associated works.

Oil and gas joint ventures established with participation of foreign companies, which carried out oil and gas prospecting exploration works, are exempted from:

· income (profit) tax for 7 years from the moment of starting extraction of oil or gas. Upon expiry of the above term, income (profit) tax rate for the said enterprises shall be determined as 50% of current rate;

· property and income of foreign participants tax from equity participation share in joint ventures;

· mandatory surrender of a part of hard currency proceeds from sales of products received as a result of activity on extraction and refinement of oil and gas, for the period of compensation of invested capital for search and prospecting works.

Light industry:

· enterprises specialized on production of ready-made-garments (garment, knitted and leather products), hosieries and footwear, are exempted from payment to the state budget of all kinds of taxes and duties, except for the value added tax;

· enterprises are exempted from payment of customs duties (except for customs formalities fees) on technological, auxiliary and industrial equipment and spare parts imported for own needs.

Moreover, it should be noted, that liberated resources are subject to the subsequent direction to the technological re-equipment and modernization of production, assimilation of new kinds of finished goods, filling own cash flows, encouragement of labor of workers.

The Program of development of silk industry of Uzbekistan envisages exemption of:

· value added tax till 1 January, 2010, graining factories - with regards to sale grainy of own production to cocoon growing entities under direct contracts and through cocoon procuring entities and the enterprises engaged primary processing of cocoons - with regards to sale of dry cocoons to the processing enterprises of silk industry of the country;

· till 1 January, 2008, from customs duties (except for fees for customs formalities) raw material, dyes, chemicals and the auxiliary materials not produced in the country, imported by the enterprises of silk industry of JSC Uzbekyengilsanoat (light industry) for own production needs.

Production of building materials:

The enterprises and the organizations specialized on production of building materials, works and designs are exempted from customs duties (except for fees for customs formalities) in import of the equipment and components thereof for their production.

Clean Development Mechanism of Кyoto Protocol:

In implementation of investment projects within Clean Development Mechanism of Кyoto Protocol to the UN Framework Convention on climate change, the foreign partners carrying out direct investments into said projects are provided with additional advantage in the form of exemption of tax on income (profit) gained within projects in the territory of the Republic of Uzbekistan.

Source: "UZINFOINVEST" the Information Support & Foreign Investments Promotion Agency of the Ministry of Foreign Economic Relations, Investments and Trade of the Republic of Uzbekistan

Afncient Khorezm...


Alexander the Great

In 334 B.C., Alexander began marching to Asia. Having conquered the Minor Asia, Syria, Phoenicia, Egypt, and Iran Alexander, entered the territory of Central Asia in spring 329, crossing Hindukush Mountains. Bess, the Satrap of Bactria and Sogd, who had accepted the title of King and name of Artakserks, left Bactria and ran to the other side of Amudarya, territory of Sogdiana, after he had known that Alexander had come near. Alexander crossed Amudarya surreptitiously. Bess could not avoid him because at that time his recent supporters - Spitamen and Datafern - imprisoned him. They sent their messengers to Alexander with offer to send his force to capture Bess. In Nautak (north-western part of Kashkadarya Valley) Alexander conquered several fortresses. Having left his garrison in Marakand, he took a tour to the Land of Saks, Syrdarya. On their way to Marakand, the Macedonians had faced tough resistance of local population - the Usturshan highlanders. Alexander was hardly wounded. The "riverside barbarians" began to revolt from back with defeating the Macedonian garrisons. At the same time, Sogdians led by Spitamen began to revolt. The Sogdians adjoined Baktrians. Spitamen had stood openly against Alexander and halted the Macedonian garrison in Marakand. Over the short period of time, on the bank of Syrdarya, the Macedonians built their fortress of Alexandria Distant (Alexandria Eskhata). Alexander hurriedly accomplished peace with Saks and threw his basic forces against Spitamen. The regular retaliatory actions of Greek-Macedonian armies in the territory of Sogd from autumn 329 till the same period in 328 did not bring results, which Alexander expected. After two years of wearisome and unsuccessful struggle he changed his tactics and went for rapprochement with local elites. Kwint Kursye Roof writes: "He ordered to give cities and lands of those who persisted in insubordination to those barbarians, who have obeyed". As a result, Alexander could involve a significant number of local dynasties and formed military contingencies from Sogdians and Baktrians in his campaign. In autumn 328 the decisive battle between Alexander and Spitamen took place, in which Spitamen had lost and ran to desert, where his recent allies executed him. Having conquered the mountain fortresses of Horien and Oxiart in Gissar mountains, Alexander married the daughter of Oxiart - Roxanne, thus related with local elite. Having appointed the king of Sogd, Oropiya, one of the representatives of Sogdian elite, who took sides with Alexander, he finished the conquest of Central Asia. Crossing through Amudarya, in the very summer of 327, he passed through Hindukush and began his famous Indian campaign.


The State of Selevkides

After the death of Spitamen and the consensus with Sogdian-Baktrian crest in 327 BC, Central Asia had become a part of the Great Empire of the Alexander the Great. The military groups of local elite were included in his army. In 323 BC, when the message about Alexanders death had reached Central Asia, the Greek settlers in Sogd and Bactria gathered group of 20,000 infantrymen and 3,000 cavalrymen, intending to return home. The commander Perdikka, Alexanders comrade-in-arms, was sent to stop them. He managed to disarm and interrupt the runners. A Sogdian satrap from local grandees, who sympathized with Macedonian retreat, was displaced with Macedonian Phillip, ruling for some time two satrapies - Sogdiana and Bactria. After 315 BC, the Greeks and Macedonians replaced all the appointed local satraps, with exception of Oxiart (Alexanders father-in-law) and Iranian Atropat (Perdikks father-in-law). In 312 Selevk, one of the commanders of Alexander, secured Babylon. Soon, he expanded his possessions up to Syrdarya and Ind, and his son - Antioch 1 Soter (born from a marriage of Selevk and Apama, who was Spitamens daughter) had possessed even more Asian territories, which belonged to Alexander. In Central Asia, only one satrapy, which included Sogdiana and Bactria with Margiana, was formed. Khorezm did not belong to Selevkids. During the period of Achaemenids and Alexander, it kept its independence. Selevk and Antioch paid much attention in strengthening their position in Central Asia. The fortresses and cities, settled by Greeks, had been built actively. The historical tradition imputes building of 75 new cities to Selevk. In keeping in line with Pleniy, Antiochia behind Yaksart was one of the most distant cities. Supposedly, it was situated in the area of modern Tashkent (Kanka town) or the Ferghana Valley. Till the sixties of 3rd century B.C., in Bactras, there was a selevkian mint, which issued mainly large nominal gold and silver coins. From the beginning of Selevkian Antioch II (261-247 BC) governance, Diodod, his strap in Bactria, issued coins of Selevkian sample, which witnesses of relative autonomy. Bactria, Sogdiana and other areas of Central Asia kept living with their economic life, significantly differing from the western regions of Selevkian kingdom.


Greece and Bactrian Kingdom

In 256 B.C. Parphia, Bactria and Sogdiana separated from Selevkides. In response to this, the Arshakids captured power in Parphia. Sogdiana went under Bactria. In 230 B.C. Sogdianas satrap (leader) Evtidem overthrew Diodots descendent. There was a constant struggle between Greece-Bactrian kingdom over the possession of the trading roads. During 208-209 B.C. Selevkian king Antioch III the Great went on eastern crusade for re-establishment of the past powerful orb of Selevkids. Delivering defeat on Parphs, he has raged fierce attacks against Greece-Bactrian kingdom. As Evtidems troops suffered much and Antioch besieged capital town of Baktri. A siege lingered for two years. Fighting for Bactri, Evditem cut peace agreement with Antioch, and left all his elephants to him. In the meantime, Evditems son Demetriy married a Selevkien princess. Defeat delivered to Selevkians by Romans during the fight at Magnesia opened new chance for Greece-Bactrian kingdom in its quest for domains in southern territories - former allies of Selevkids. Around 187 B.C. Demetriy with inheriting fathers throne conquered Arahosia and went further to India. In 171 B.C. during Demetriys long absence, who was delayed in northern India, due to Bactrian power was conquered by one of his military commanders - Evkratid. Evkratids kingdom was named "The Kingdom of Thousand Cities". Chinese sources assert that in 165 B.C. yuetji came from the land between two rivers (present Syrdarya and Amudarya). They managed to conquer Bactria. In 155 AD Evkratid was killed by his son during his military campaigns. Greece-Indian kingdom has been formed during these times. During 141-129 A.D. Greece-Bactrian kingdom collapsed. Presumably, after yuetjis conquest of Bactria King Geliokl kept power in Paropamisads or Arahosia. Two centuries of Hellenic rule world left behind a deep track in the territory of Central Asia. Sogd and Bactria became satraps (municipalities), backed up by Greek - Macedonian military command troops. New cities have been built (Herat and Merv). The Greek was a communication tool for governors and military officials. Greek standard money was issued in the area. The pantheon of Greek lords/gods, Greek literature and Greek theater became accessible to local elites. Synthesis of local and Greek tradition has occurred.


Kangyuy

Chinese historian Si Ma-tsyan in his chronicle writes about nomadic state of Kangyuy or Kadzyuy and Kangha, where "traditions were similar to those of yuetji". Ancient authors do not mention about State of Kangha, but it was told in Avesto and Mahabharat, mentioned as Saks, Tohars and Kanghs. Later Chinese chronicles maintained that Kangyuy occupied the entire territory to the north of Amudarya: Bukhara, Shakhrisabz, Kattakurgan region, Tashkent oasis, where governors of Kangyuy were called "Chao-vu". Probably, "jabru" is the Chinese transcription for "Chao-vu". The second half of 2 century BC and 1 century AD are the period when the state of Kangyuy has seen its peak. The short-lived crisis in Kangyuy, when southern hegemony belonged to yuetji and northeastern part to Hun, Kangyuy re-established its power with the help of weak yuetji government in Bactria. In 2-1 BC Kangyuy issued the currency exchange. The Greek-Bactrian currency types were selected for the issue, as an example. Recovery from the territory of Khorezm, particularly at right side of Janbas-Kala, testifies about the level of material culture. The castle with a 200x170 m size is a 10-11 m high, and was built from the silver bricks. There is a wide street inside. At the end of street there are remains of buildings, community fire in the oval metal altar. There were many religious beliefs during Kangyuy era: Zoroastrianism, Anahita cult, Mitra cult - embodied on the horse. One of the great achievements of the period in the military field, which was related to the Kangyuy cult was the tactics that later were widespread. They were the metal worn riders on metal covered horses in a tightly lined fight. Rider arms were pommel, lance and long sworn. There is little information on the later history of state of Kangyuy. It is uncertain, whether it was included into Kushan state later. According to Chinese sources, from the beginning AD Kangyuy safekept its independence and conquered yantsay (aorsi-alans) and other tribes (areas).


Kushan Kingdom

Invasion of yuetji in middle 2nd century BC. Initial possessions of yuetji was in the north of Bactria (in the south of modern Uzbekistan and Tajikistan). Kushan Kingdom emerged in the first half or in the middle of the 1st century AD, as a result of rising of yuetji the Kingdom of Kushan, which corresponds with the name of yuetji tribe.

Founder of the kingdom was Kudzula Kadviz I, under whom Kushans conquered the largest part of now Afghanistan and Pakistan. Under his successor, Vina Tok, the considerable part of India was annexed to the territory of Kushan.

In Kanishkas time Kushan Kingdom has seen its highest rise (78-123 AD) The capital has been transferred from Bactria to Peshavar, that stretched the territory to India and Hotan. In Central Asia the northern part of Kushan ownership passed through Ghyssar Mountain Range, in the south of Uzbekistan, where huge borderline walls were erected.

New cities were built with trade relations established with India, China, and Roman Empire. Kushan coins and figures made of bones, made by Kushan masters, were discovered during excavations in Pompeii. The architecture reached its highest level of development in Kushan Kingdom. Particular attention has been paid in construction of palaces and temples. The high artistic work in wall painting and sculptures in the palace of governors in Halchayan and Buddhist temple in old Termez and Dalvarzintepa are still preserved. The archaeologists revealed bronze vessel, graceful candlesticks, morrows, fine jewelry products by brilliant Kushan masters, concerning high masters of Kushan craftsman. The main economy of Kushan was land irrigation. Fertilizers were used in a bid to increase the harvest of crops.

The cattle breeding evolved in foothills and steppes. The excavations in ancient Termez also revealed inscription in Aramaic writing. Kushan Italic letters characterized in combination with acute-angled, quadrate and rounded form of letters that were wide spread.

In Kanishkas time the Kushan Kingdom accepted the religion of Buddhism, which later remained as a main state religion of Kushans.

However, simultaneously existed Zoroastrianism and also local Central Asian minor beliefs. In the third century the Kushan Empire began to face its gradual downfall and suffered a number of defeats from the Sassanid monarchies. By the fourth century, the empire no longer existed.