Uzbekistan Textile and Garment Industry

 

  1. General information about Uzbekistan. Uzbekistan is well recognized as a politically stable and safe country with 34 mln. population. Uzbekistan has a free trade agreement with the CIS countries and Georgia, most-favored national treatment with 46 countries, including China, Japan, the US, the EU countries, India, South Korea. Negotiations have already been started with EU on granting to Uzbekistan the Generalized Special Program Plus (GSP+) as well as with China and Korea to reduce to zero custom tariffs towards Uzbek

 

  1. Information on the ongoing reforms to liberalize the economy and the conditions for the introduction of business. For the last years, Uzbekistan has been doing a lot to gain the further confidence          of foreign investors, and this can be demonstrated in its implementations of the wide range of economic and structural reforms. Such reforms as liberalization of the foreign exchange market (US dollars can be easily and freely converted to Uzbek currency and wise verse) will now allow foreign investors to fully repatriate their profits. This will serve as a guarantee for the protection of the rights and investments of foreign entrepreneurs. Such reforms have a positive impact on creating more friendly and convenient environment for foreign companies to do business in

World Bank October 2017 Report «Doing Business 2018» shows 13 points growth of Uzbekistan ranking within one year up to 74, and in 2020 to 69. Uzbekistan was in the top 10 countries within 2017-2019 for improving business environment, especially in business registration, obtaining of credit, economic growth, safety, etc. (International Economic Forum, Moody’s, World Justice Project, Gallup Organization). As per World Bank report “Global Economic Perspectives”, Uzbekistan is the fifth most intensively growing economy in the world with GDP Growth in 2017 – 7,8% and in 2019 – 5,5%.

 

  1. Examples of successful collaboration. There are a number of foreign companies which have been successfully doing business in Uzbekistan for a long time. Companies such as “Indorama Pte.Ltd” (Singapore) with total investment $200 mln, “Jinsheng Group” (China) with total investment $200 mln, “UZTEX Group” and Swiss Capital International Group with the total investment $200 mln, Rieter  AG (Switzerland)  with total investment   of $16,0 mln. and many

 

  1. The competitiveness of the industry, production and resource potential. Uzbekistan also has proven a competitive advantage in the textile sector because of its relatively cheaper skilled labor (100-200 USD/month depends on the region and qualification), as well as cheap-rate electricity cost being just at $0,04/kwh,
    allows manufacturers to reduce total costs of

Enterprises with a share of export of finished sewing and knitwear in the total revenue of at least 60 percent according to the results of the reporting period are exempt from property tax for a period up to January 1, 2023.

The taxable base for the tax on profits of enterprises in the textile, sewing, knitting, leather, shoe and fur industries is reduced over the course of seven years by equal shares by the amount of the cost of constructing modern treatment and sewage facilities.

Organizations commissioning modern automated slaughtering complexes, leather-processing enterprises are exempt from paying land tax until January 1, 2023.

Foreign consultants  of  the  “Uztextileprom”  Association  pay  a  tax  on  personal  income  in  the  amount  of 50 percent of its established rate on income from sources in the Republic of Uzbekistan.

(Based on the Decree of the President of the Republic of Uzbekistan No. PP-4453 dated 09.16.2019.)

 

Textile Industry in Uzbekistan is one of the fast growing and promising area for foreign investments, within last 3 years more than $2 bln. USD investments have been attracted to the industry and 260 big textile units were launched.

The state covers part of the costs of taking international certificates and 50% of transport costs to exporters.

 

  1. Investment potential of the industry. Uzbekistan integrated new taxation policy to decrease tax rates for new businesses and eliminates inefficient taxes (below enclosure 1). Enterprises that attract over $10,0 mln foreign direct investment in textile industry (production of textile products) are exempt from paying number of taxes for a period of 7 years (Corporate income tax, Property tax, Tax on improvement and development of social infrastructure; Mandatory contribution to the Republican Road Fund, subject New tax code to be effective as of 1 January 2018). Production enterprises of the Association “Uztextileprom” are exempted from import payments (tariff,) for non-produced in Uzbekistan raw materials, other auxiliary materials and

 

  1. Cotton Clusters in Uzbekistan. In recent years, in Uzbekistan, a number of government decisions have been made to reform the cotton industry and support the development of the textile industry. Since 2017, the practical implementation    of    market    mechanisms    in    agriculture    has    begun,    in    the   Navoi    region a project (cluster) has been implemented to place cotton growing orders based on the conclusion of direct contracting agreements between farms and a textile enterprise (Baxt Textile LLC) at 8,0 thousand hectares of land occupied by cotton. In 2018, 15 textile clusters concluded contracting agreements with more than 4.0 thousand farms for the supply of raw cotton for more than 160 thousand hectares (more than 15% of all land for cotton). Textile enterprises purchased more than 3.0 thousand units of agricultural machinery, including more than 130 units of modern cotton-harvesting equipment. In 2019, 75 projects were implemented to create clusters on  land over 647.4 thousand hectares (63% of all fields under cotton) in 88 regions of the republic. When harvesting cotton in 2019, 165 units of cotton harvesting equipment were involved. In 2020, 97 textile clusters occupy 100% of the total sown area of cotton in the

 

  1. Strategic industry development. As part of the reforms being carried out in Uzbekistan, the Development Strategy of the textile and garment and knitwear industry in Uzbekistan was developed, taking into account the opinions and recommendations of the consultants of International Finance Corporation (IFC), KOFOTI (Korea), KITECH (Korea), CITI (India), IFC (IFC ), Gerzi (Switzerland), Rieter (Switzerland), Strategy Partners (Russia) Indorama Corp. (Singapore), Jinsheng Group (China), Deloitte Touche Tohmatsu (USA) – “Deloitte” (USA), “Strategy Partners Group” (RF). The strategy provides for solving tasks in the following areas:
  • improving the competitive level of material and technical base
  • on the basis of technical re-equipment and modernization of production, the introduction of breakthrough technologies and the creation of new high-performance
  • ensuring the economic efficiency of production, substantial growth in labor productivity, environmental safety of technological processes and products, resource conservation, improvement of the production culture;
  • Increase in production of high technology products. The creation and use of new types of materials and products, a qualitative change in the properties of products, the development of new design solutions;
  • A significant increase in the export component of the industry,
  • wide attraction of internal and external investments,
  • Creating a basis for deepening the processes of cooperation and integration
  • and development  of inter-regional  and inter-sectorial organization of interaction between the subjects  of industry and small business;
  • The formation   of   a   civilized   consumer   market   and   market   infrastructure,   the   development   of inter-regional and inter-sectorial distribution network, commercial relations with countries near and far