Investment opportunities / By Industry
Light Industry
Light industry of Uzbekistan has long standing tradition on processing of cotton fiber. The Great Silk Road passed through Uzbekistan, and the goods, produced by the Uzbek handicrafts, especially yarn and fabric, were known in many countries of the world. Unique geopolitical location of Uzbekistan still allows to stay in permanent economic relations with many countries and to maintain mutually beneficial business cooperation both with the countries of Europe and with the countries of Asia The Republic of Uzbekistan is the world’s sixth largest on production of cotton and the third on its export. Light industry of Uzbekistan has significant share in total industrial production of county. For the years of independence, the country radically changed the structure of economy oriented to development of industrial production. After administrative reforms, implemented in all industries of Uzbekistan, the most efficient tool to meet the objectives of the industry is deepening of the processing degree (cycle) of cotton fiber from production of yarn to production of ready-made garments, because it provides an opportunity to add the value from 1.5 to 10 times. Alongside with processing of cotton fiber, such industries as reeling, silk-weaving, carpeting, manufacturing of knitted wear, apparel and leg-wear garments, are developing. The enterprises of the industry also supply the needs in medical/pharmaceutical products, special uniforms and shoes, and etc. Today, significant part of enterprises of light industry of the country are under the State Joint Stock Company Uzbekengilsanoat, which unites the enterprises of cotton, silk, knitted wear, apparel and other sub-industries. According to assessments, for the last several years, the Company has been dynamically developing. For example, production capacities of the member-enterprises of Uzbekengilsanoat increased processed volume from 152,000 tons in 1995 up to 350,000 tons in 2010. Establishment of new production capacities, modernization and technological re-equipment of existing enterprises with attraction of investments, including foreign investments, lead to steady increase of the share of enterprises with modern sophisticated highly productive equipment. It should be noted, that 75 % of textile products account for joint ventures and foreign enterprises equipped with the most sophisticated technologies of world’s leaders in textile machinery: Truchler, Shlafhorst, Zinzer(Germany); Ritter (Switzerland); Toyota, Murata (Japan), Savio, Orizio, Marzoli (Italy) and others. Important indicator of dynamic development of apparel industry is steady inflow of foreign investments. For these years, Uzbekistan established more than 100 enterprises with participation of foreign investors from leading countries such as Germany, Switzerland, Italy, South Korea, Japan, Turkey, USA, India, Singapore and etc.. In Uzbekistan, are successfully operating such large foreign investors as Daewoo International, Daishin Textile, Heintex, Shingdong Enercom (Korea), Baytex Tijaret, Tekfen, Bo Group, Alkim Textile, Mert Iplik (Turkey), Spentex Industries (India), Wayrex, Osborn Trading, Tagus (UK) and others. For the years from 1995 till present, the industry attracted foreign investments totaling to more than US$ 1.25 billion with creation of new jobs, which has high social importance. Alongside with production, for the last years, export of the products produced by the enterprises of Uzbekengilsanoat significantly increased. Thus, 1994 through 2010, export of the products increased from US$ 7.8 million up to 400 million. As a result, from the moment of establishment of first enterprises till today, the share of export of apparel and light industries significantly increased. Versus previous years, when almost 100% of export accounted for export of textile semi-products, such as yarn and crash, significant increase of exports of apparel and knitted products increased. At present, more than 120 enterprises of Uzbekengilsanoat are exporting their products to countries of Europe, Asia, USA and Canada. And year after year, the number of such enterprises is growing. The followings are economic incentives for investing into textile industry: · availability of key raw materials, high grade cotton-fiber; · low cost of energy carriers; · qualified and relatively inexpensive labor resources; · developed network of communications, banking and legal services; · intense, but practically unreclaimed customer markets of apparel products; · effective state support in the form incentives and preferences. It should be noted, that primarily, attractiveness of the industry for foreign investors is preconditioned by the support and special favorable environment, created by the Leadership of the country for attraction of foreign investments into the economy. Also, for the last several years, the legislation governing activity of foreign investors has undergone permanent improvement with aim of maximum attraction of foreign investments to ensure deep processing of cotton fiber and increase production of ready-made garments in the country. It’s steady legal framework for business operations, simplified licensing procedures, registration of enterprises and certification of the products, wide range of different incentives and preferences for joint venture and foreign enterprises unlike local producers and others. Foreign investors in the Republic of Uzbekistan enjoy wide range of rights, which facilitates efficient development of business operation and getting high level of yield (profit). The foreign investor, which already invested its capital, into textile industry of Uzbekistan and in partnership established enterprise with FDI, automatically enjoys wide range incentives provided for in legislation: - Tax exemptions: enterprises with foreign direct investments specialized in production of ready- made garments (apparel, knitted wear and leather products), legwear and shoes, are exempted from all kinds of taxes and duties, except for the VAT; -Customs incentives: enterprises with foreign direct investments are exempted from customs duties (except for the fee for customs formalities) on imported equipment, components, commodities and raw materials which are not produced in Uzbekistan, used for production of nonfood consumer goods, as well as delay on payment of customs duties of up to 60 days from the day of receipt of customs declaration in the event of production of textile products; - Price discounts: Enterprises buy cotton fiber with 15 % off from the international price with the delay of payment of 120 days. Enterprises with foreign investments enjoy additional discount of 5% for the cotton fiber provided it will fully process the whole volume of cotton fiber to finished products (apparel, knitted wear and leather products) and export of at least 80% of production; - Export incentives: Enterprises of apparel industry exporting 80% and more of their product, are exempted from payment of property tax, and others. Technological approaches to project implementation could be absolutely flexible and be agreed upon between the counterparts on the established JV on the basis of profitability of the enterprises, financial capabilities of founding partners, maximum use of infrastructure, pre-studied customer market for certain assortment of apparel products, previous experience and etc. At the moment, we are running projects, developed in complex package in the context of production of the products with high value added with coefficient relation towards raw material 1 to 4. Based on international experience, including new textile countries, Vietnam, Cambodia, India, Turkey, Malaysia, Indonesia, Bangladesh, methodological studies of international federations and consulting companies, Uzbekengilsanoat is considering the following priorities of developing the industry: · focus on raising production of resource intense products (terry goods, home textile and others), knitted wear and ready-made garments. Development of innovative areas, such as blended and duck fabric; · further optimization of the production cost, including through supply of raw material on more favorable prices, supporting materials, spare parts for machines, energy carriers; · orientation, in implementation of investment projects, to specific needs and demand both on international and domestic markets, using competitive advantages of Uzbekistan; · further improvement of business environment and investment attractiveness of the industry. Facilitate relocation of production capacities to Uzbekistan from countries of Western and Eastern Europe, Turkey, with preservation of marketing networks of foreign enterprises; · support to enterprises in overcoming difficulties on access to foreign markets, in particular, identifying prospective markets, implementation of promotional activities, addressing logistic issues (optimizing routes, preferential railway tariffs) and access (capability to compete with countries, which have favorable trading treatments in export of their products to large markets of Europe and the USA); · target work on sale and development of the brand “Uzbek textile” on international market.
Light industry of Uzbekistan still has significant unrealized investment potential, all conditions for further rapid growth. The main target orienteer for further work is increasing the domestically processed volume up to 50% of total production. With aim at satisfying the increasing demands of population, production of goods for domestic market need to be increased. This requires attraction of investments in projects on production of finished cotton fabric, blended and silk fabric, ready-made garments and knitted-wear, that envisage creation of mobile productions with mandatory creation of professionals responsible for design, marketing, quick revamping (re-adjustment) of productions based on fashion trends and demand. In foreseeable future, the light industry will preserve the key role in development of industrial production in Uzbekistan. According to assessments, there is, still, a lot to be done for development of that significant potential which the light industry of Uzbekistan has. |
So far, the light industry of Uzbekistan and its governance system underwent long way of improvement and development. Implementation of measures on expansion of presence of the products of light industry of Uzbekistan on international markets yielded significant results. Nevertheless, the context of epoch of ephemerization of international economic relations creates certain prerequisites and requirements for further improvement of light industry of Uzbekistan.
