American-Uzbekistan Chamber of Commerce
Week in Review:
December 7, 2012 - December 13, 2012

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In This Issue:
Uzbekistan provides preferences to enterprises with foreign capital
IMF Statement at the Conclusion of the 2012 Article IV Consultation Mission to Uzbekistan
Uzbekistan, Russia agree on Kambarata HPP expertise project
Uzbekistan, Turkey Intend to Expand Cooperation
Gazprom to bring gas production in Uzbekistan up to 300 million cubic meters in 2012
Uzbekistan approves four CDM-projects
World Bank Group : About 220,000 Uzbek Citizens to Benefit from Improved Water Supply

Established in 1993, the American-Uzbekistan Chamber of Commerce (AUCC) is a private, non-profit trade association representing interests of U.S. businesses ranging in size from small private enterprises to large, multinational corporations conducting business in Uzbekistan.

Our Mission: To advocate the views of the business community to ensure that private sector positions are considered during the development of key policies that impact American businesses and the future of U.S.-Uzbekistan relations.

Our Objective: To serve the needs of its members by strengthening commercial relations between the United States and Uzbekistan.   


The Government of Uzbekistan expanded the base of tax benefits for enterprises with foreign investment (FDI). Ministry of Finance, State Tax Committee and Ministry of Economy of Uzbekistan adopted a resolution, which introduced changes to regulation on order of use of tax preferences to enterprises, attracting private foreign direct investments. The document came into force on 14 December 2012, informed BC the Embassy of Uzbekistan in Latvia.

According to the document, the government expanded a list of industries, which can receive tax preferences for attraction of FDI from eight to twenty.

The list now includes such industries as production of packaging materials, construction of stations based on alternative energy sources, petrochemical industry, etc.

The resolution said that now tax preferences are also provided to enterprises, located in all cities and rural areas of Uzbekistan, except Tashkent city and Tashkent region. Earlier, the preferences provided to enterprises in regions with excessive labour forces.

At the same time, the preferences are provided to enterprises with the share of foreign capital at least 33%. Earlier, the figure was 50%. The government also abolished another condition and tax preferences are provide to enterprises, which attracted investments after state registration.

Enterprises, which received tax preferences, also allowed to reinvest 50% of income, received due to tax holidays. Earlier, they should reinvest all sum.

On 1 July 2005, President of Uzbekistan provided tax holidays to enterprises with foreign capital. The enterprises were exempted from payment of income tax, property tax, accommodation and infrastructure development tax, as well as payments to Republican Road Fund.

Tax privileges are provided for three years if the investment volume makes up between US$300,000 to US$3 million, for five years - for investments between US$3 million and US$10 million, as well as for seven years - for investments for over US$10 million.

In line with the legislation of Uzbekistan, the enterprises with charter capital of US$150,000 and share of foreign investors at least 30% are considered as companies with foreign capital.   


An International Monetary Fund mission led by Mrs. Veronica Bacalu, Deputy Division Chief in the IMF Middle East and Central Asia Department, visited Tashkent on November 28−December 7, 2012 to conduct discussions in the context of the Article IV consultation.1 Daniela Gressani, Deputy Director of the Middle East and Central Asia Department, participated in the discussions at the beginning of the mission.

The IMF team and the Uzbek authorities discussed recent economic developments, exchanged views on the near and medium-term outlook, as well as the impact of global slowdown on the economy of Uzbekistan.

At the conclusion of the mission, Mrs. Bacalu issued the following statement:

"The economy of Uzbekistan continues to grow rapidly. Strong fiscal and external positions, stable banking system, low public debt, and prudent external borrowing have shielded the country from the adverse impact of the global crisis. GDP grew by 8.3 percent in 2011 and by 8.2 percent through September 2012, boosted by high prices of major export commodities, and policies focused on domestic consumption and state-led investment. Growth has been led by services, transport and communication, agriculture, and industry. The external position remains strong and the current account is in surplus despite the recent drop in gold exports.

"Monetary policy has been tightened considerably since mid-2011. An increase in net foreign assets was sterilized through the accumulation of government deposits, including in the Fund for Reconstruction and Development, and intensified liquidity-mopping operations by the Central Bank of Uzbekistan.

"The banking system of Uzbekistan continues to perform well. Banks' capital adequacy ratio remains high by international standards.

"After peaking at 13.8 percent in November 2011, annual inflation, based on alternative CPI measurement by Fund staff, has declined to 10.7 percent in October 2012.2 The inflation rate reflects increases in administrative prices of fuel, utilities, and bread, which rightly aim at achieving cost recovery, as well as currency depreciation and demand pressures stemming from pension and wage increases.

"The mission expects GDP to grow by 8 percent in 2012 with strong economic growth projected over the medium term. Growth will continue to be supported by policies to boost domestic consumption and investment under the government's industrialization program. External and fiscal positions are expected to stay strong.

"Accelerating structural reforms would help increase productivity and ensure sustainable and inclusive growth. Initiatives undertaken in 2012 to improve business environment and facilitate private sector development are welcome and should be implemented vigorously.

"Going forward, the mission recommended the authorities to focus on lowering inflation and to ensure sustainable and inclusive growth over the longer term. The mission advised keeping tight monetary policy while pursuing a more flexible exchange rate. Materialization of downside global risks would warrant less tightening. In addition, the recommended policies include: avoiding fiscal loosening; undertaking measures to further deepen financial sector intermediation; accelerating reforms, particularly in the system of foreign exchange and foreign trade regulations, in tax administration, public finance management and governance; and improving the quality and dissemination of economic data.

"The mission underlines that the Fund staff stands ready to assist Uzbekistan in its reform efforts, including through technical assistance.

"The mission is grateful to the authorities and other counterparts for their hospitality and constructive dialogue."   


Uzbekistan and Russia have agreed to hold an international independent expertise on the construction of Kambarata HPP-1 in Kyrgyzstan, a source in the government circles told Trend on Thursday.

The source noted that First Deputy Prime Minister Rustam Azimov said about it at a meeting of the Russian-Uzbek intergovernmental commission on economic cooperation on Thursday.

Azimov, who co-chairs the commission, noted that the decision of the Russian government on the need for an international independent economic expertise on Kambarata HPP-1 demonstrates a constructive approach to all issues of water and energy cooperation in Central Asia.

Deputy Prime Minister Dmitry Kozak, Intergovernmental Commission from Russian side said the decisions that cast doubt on the validity of the use of water resources should be subject to independent examination.

As previously reported, Russia and Kyrgyzstan in September signed a bilateral agreement for the construction and operation of Kambarata HPP-1 and Upper Naryn cascade.

Electricity of Kambarata HPP-1 can be used both to meet the demand of Kyrgyzstan and for export to neighboring countries.

At the same time, Uzbekistan has repeatedly expressed concern about the construction of hydropower facilities in neighboring countries, which, according to Uzbek experts, may affect water and energy balance in the region.   


An agreement involving the further expansion of relations on fronts such as tourism, health care facilities, science and education, and culture and art has been reached at a meeting between Uzbek Foreign Minister and a delegation of the Turkish Foreign Ministry in Tashkent today, the Uzbek foreign ministry said today.
The Turkish delegation was headed by Deputy Foreign Minister Mehmet Fatih Ceylan.
The sides have discussed the state of bilateral cooperation in the political, diplomatic, economic, trade, investment, cultural and humanitarian spheres and perspective directions of expanding the cooperation.
Both the Turkish and Uzbek parties stressed that the Uzbek-Turkish Dialogue in various fields that has been ongoing since diplomatic relations were established 20 years ago have been a positive experience.
Around 81 bilateral documents have been signed. Mutual trade turnover in 2011 amounted to more than $1.187 billion.
Around 516 companies with Turkish capital operate in Uzbekistan. The amount of Turkish direct investments in the implementation of the Uzbek State Investment Program exceeded $353 million in 2011-2012.
Uzbekistan and Turkey are interested in the implementation of mutually beneficial projects in the "Navoi" Free Industrial Economic Zone and in "Angren" Special Economic Zone. The significant tax and customs benefits are given for foreign investors there.
Particular attention was paid to Afghanistan and other regional issues while discussing international agendas.
The next round of the Uzbek-Turkish political consultations was held by deputy foreign ministers on the same day.
Turkish Ambassador to Uzbekistan Mehmet Sertach Sonmezay also attended the bilateral meeting.   


Gazprom EP International, operator of Gazprom's projects abroad, is increasing gas production in Uzbekistan by 1.4 times compared to the previous year - up to 300 million cubic meters, the company said.

"Natural gas production from the Shakhpakhty field reconstruction and redevelopment of which is carried out by Gazprom International since 2004, will be about 300 million cubic meters at the end of this year, or about 20 million cubic meters more compared to the design level," Gazprom International said.

According to the company, about 280 million cubic meters of gas has been produced from the field which is located in north-western Uzbekistan, and growth in output at Shakhpakhty amounted to almost 40 per cent compared to the previous tear.

During 2012, Gazprom International experts overhauled and commissioned five new wells. At present the operational fund deposits increased to 16 wells, the average gas production is 956,000 cubic meters. The total of 19 wells should be restored in accordance with the project.

The total volume of gas produced in Shakhpakhty since 2004 amounted to 2.1 billion cubic meters.

The Shakhpakhty gas field is located in Uzbekistan, in the south-eastern part of the Ustyurt. The field was discovered in 1962. The initial commercial gas reserves amounting to 46.5 billion cubic meters are approved as a result of exploration held here until 1968.

Commercial production began on Shakhpakhty in 1974 and amounted to 2.5 billion cubic meters per year. The Shakhpakhty booster station was commissioned in 1983. It was stopped due to insufficient power supply for the gas produced to the required inlet pressure in February 2002.

Then the production ceased and the wells conserved in accordance with the decision of the operating organisation. Some 36.5 billion cubic meters of gas which is about 78.5 per cent of the initial approved reserves was extracted from the field.

At present, the recoverable reserves at Shakhpakhty are estimated at eight billion cubic meters.

The reconstruction and development of Shakhpakhty is a pilot project of Gazprom International in Uzbekistan, which is being implemented on terms of a PSA signed for a period of 15 years in 2004.

In 2004, Zarubejneftegaz - GPD Central Asia Operating Company was created as an operator, and is currently one of Gazprom International's operating structures.

According to the agreement terms, the company carries out construction and field development, production and the transportation of raw materials, the construction of relevant infrastructure, gas cleaning, storage, and environmental activities, as well as other necessary related actions.

Gas production was restored at the field in August 2004; commercial flow was obtained from 10 wells. In 2006, the operating company completed repeated construction of Shakhpakhty booster station and a preliminary gas development installation, a modern camp was also built at the field.

The gas produced at Shakhpakhty is supplied to the Karakalpak compressor station, and then to consumers through the Central Asia - Center gas pipeline. The investment into the project amounted to $25 million.

Since 2004, as part of the license for development of four field formations, work is carried out on the overhaul of fields and the production of raw materials.

In 2010, the operator received a license for the development of three additional downstream production formations. In February of this year, Gazprom announced the completion of exploration in Uzbekistan's Ustyurt region totaling $ 400 million.

According to the country's State Statistics Committee, between January and September of 2012, natural gas production in Uzbekistan decreased by 1.4% to 45.595 billion cubic meters.   


Inter-governmental Council on Clean Development Mechanism (CDM) of Kyoto Protocol of Uzbekistan approved agreements on purchase of certified emission reduction on CDM-components within four projects of Uzbekenergo state joint stock company, National Body on Clean Development Mechanism of Uzbekistan said.

According to national body, intergovernmental council approved a project "Expanding Talimardjan thermal power station with construction of two combined-cycle plants with a capacity of 450 MW" and "Construction of combined-cycle plant with the capacity of 370 megawatt at Tashkent thermal power station".

It is expected that the modernization of stations will allow to cut 1.543 million tonnes of CO2 emission a year. Currently, the average price of certified emission reduction makes up 6.76 euros per tonne (EUA price). The raised funds will be directed to modernization of thermal power stations.

The Council also approved projects "Construction of combined-cycle plant at Navoi thermal plant" and "Expanding Navoi thermal power station with construction of the second combined-cycle plant with the capacity of 450 megawatt".

The body said that CDM components of these projects will be implemented by Uzbekenergo in cooperation with Synecta a.s (Czech Republic).   


Almost 220,000 people in Uzbekistan will benefit from a US$82 million IDA Credit, approved by the World Bank's Board of Directors today. The Alat and Karakul Water Supply Project will improve the coverage, quality and efficiency of public water supply service in the districts of Alat and Karakul in the Bukhara region of Uzbekistan. By the time the project is completed, the network of water supply service delivery in the region will have been improved, institutional capacity of the water suppliers strengthened, and financial sustainability improved.

The two southern districts of Alat and Karakul in the Bukhara region face one of the most insecure water supply situations in the country. In the 70's, with the growing depletion and salinization of local groundwater resources, a trunk line system was built to mobilize freshwater from the Amu-Bukhara canal, and provide potable water service to the towns of Alat and Karakul. Network coverage of rural areas was however not implemented at the time. Today, after two decades of underfunded operations and maintenance, the trunkline and urban systems are in a deep state of disrepair, functioning well below capacity, with no effective water treatment.

Nearly 80 percent of the districts' population still lives in rural areas with no piped water supply, relying on unsafe water drawn from irrigation channels and saline wells, or bought at high cost from tanker trucks. The lack of access to potable water is having crippling effects on human and economic development in both the urban and rural areas of the districts, and the project is urgently needed to alleviate them. The project will combine the rehabilitation of existing water production, transmission and distribution infrastructure with the development of new networks to cover unserved rural areas.

"The Alat and Karakul Water Supply Project responds to the Government's commitment to upgrade access and quality of water supply and sanitation services in urban and rural areas," says Takuya Kamata, World Bank's Country Manager for Uzbekistan. "The Project will contribute to human development and social inclusion through improved health and productivity benefits. It will also change the daily lives of women contributing to gender advancement. The project will provide benefits in increased capacity, efficiency and accountability in public service provision, thus also improving local governance outcomes for citizens".

The Project is aligned with the 2012-2015 Country Partnership Strategy objective of supporting infrastructure efficiency and social inclusion elements.

Four main components of the project include: Improvement of Water Supply Infrastructure (US$108.6 million), Institutional Strengthening and Capacity Building (US$2.21 million), Studies for Future Investments (US$0.37 million) and Project Management (US$2.34 million).

Uzbekistan joined the World Bank in 1992. The World Bank's mission in the country is to improve people's livelihoods through being a partner in economic reforms, supporting the modernization of the country's social sectors and infrastructure, and sharing its knowledge and experience with the government and the people of Uzbekistan.

Total current World Bank commitments to Uzbekistan amount to US$812.5 million.

The American-Uzbekistan
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