January 19, 2019

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Uzbekistan in the context of dynamic transformations

Dilyor Khakimov, Ambassador de Uzbekistan.

Interview of H.E. Mr. Dilyor Khakimov, Ambassador of the Republic of Uzbekistan to Benelux countries.: “Our cooperation with Luxembourg has been quite active”.

 

By Adelin Remy.

Mr. Ambassador, I understand that the economy of Uzbekistan has performed very well last year. What are the updated figures?

In 2018, the GDP growth in Uzbekistan is expected at 5.2% and in 2019 at 5.4%. Inflation is to be at 16–17%, in 2019 13.5–15.5%, and in 2020 10–12%. Starting from 2021, annual inflation is expected to reach single-digit values. Over the last two years, Uzbekistan concluded agreements on the implementation of 182 investment projects worth 17 billion $.

Uzbekistan announced the year 2018 as the Year of support of active entrepreneurship, innovative ideas and technologies. Uzbekistan intends to join the top 50 of the Global Innovation Index by 2030.

What were the main direct investments in 2017?

Key areas which attract foreign investments are oil and gas, textiles, pharmaceuticals, automobile industry, agriculture, processing, building materials, electrotechnical materials, chemical industry, tourism, etc.

However, at the moment, Uzbekistan is witnessing a high level of state presence in the economy, bureaucracy, certain problems in taxation and customs areas and banking system. We believe these factors hamper the growth of domestic investments and wider attraction of foreign capital.

What are the main economic priorities?

Given the current situation and in order to give a push to the development of the economy and increase the investment attractiveness of the country, Uzbekistan adopted the concept of improving the tax policy.

Much work has been done on its drafting. The draft concept has passed a wide and comprehensive public discussion in the country with the participation of the business community, international financial institutions, and renowned experts.

On the basis of this concept, important changes are being made in the tax policy of the State. Instead of the maximum income tax rate that was still in force and stood at 22.5%, the personal income tax rate was introduced at 12%, and 8% insurance deductions were abolished. The high single social payment rate has been reduced from 25% to 12%.

Mandatory deductions in the amount of 3.2% to the Extra-Budgetary Pension Fund, trust road and educational funds were abolished.

The rates of customs payments were revised and the size of duties was reduced for almost 3,500 types of goods, the excise tax rate on goods was reduced for about 800 items.

Raw materials, equipment and equipment not produced in Uzbekistan and imported for the organization of production will not be subject to state duties.

Scheduled inspections of financial and economic activities of business entities have been cancelled. The requirements for obtaining 138 types of licenses and permits have been simplified, 42 of them have been completely abolished.

In order to eliminate obstacles and barriers, manifestations of corruption in the allocation of land plots for business, a procedure has been introduced to acquire them through an electronic auction.

The procedure for a full compensation of damage caused to the property of investors and entrepreneurs has been guaranteed.

It also provides for the exemption of entrepreneurs from the payment of income tax and the single tax payment for the export of products, works and services starting from next year.

Targeted work continues to accelerate the development of tourism, further improve the quality of services, effectively utilize the tourist potential of the regions and create jobs, form new national tourism products.

Next year we will continue to work to reduce the level of inflation, comprehensively support active entrepreneurship, and create wide opportunities for investors.

What are the social priorities?

In early 2017, President Shavkat Mirziyoyev signed a decree on Uzbekistan’s Action Strategy on Five Priority Development Areas for 2017-2021, which was developed on the basis of comprehensive study of topical issues, analysis of the current legislation, law enforcement practices and the best international practices, and following public discussion.

The document envisages that the timely and effective implementation of the development strategy is the top priority of all government agencies and their officials.

The Strategy sets out the following five priority areas:

  • improving the system of state and public construction;
  •  ensuring the rule of law and further reforming of the judicial system;
  •  economic development and liberalization;
  • development of the social area;
  • ensuring security, inter-ethnic harmony and religious tolerance, as well as the implementation of balanced, mutually beneficial and constructive foreign policy.

Based on the tasks set out in this strategy of action, as well as proposals from citizens received during the 2017 Year of the Dialogue with the People, we must solve the following key issues in the social sphere.

First, it is necessary to ensure compliance of the social protection model in force in Uzbekistan with generally accepted international standards and modern requirements.

It is noteworthy that our country pays great attention to the support of people with disability, who lost their breadwinners, socially vulnerable and low-income families, in particular, providing them with affordable housing. This year alone over 21.500 families have received affordable houses.

Second, it is essential to strengthen social support for medical workers, create decent working conditions and improve the incentive system.

Since December 1, 2018, we have increased their wages, and this is only the first step. We will continue to fully support medical personnel.

In the future, in order to provide guaranteed medical services to the population, we must introduce a system of compulsory medical insurance.

Third, taking into account the advanced foreign experience it is necessary to revise the educational standards and teaching methods in the field of public education from the point of view of identifying the individual abilities of students.

Fourth, development of vocational education.

Fifth, we need to undertake urgent measures to ensure employment and reduce unemployment.

Sixth, we have to enhance the work on the construction of affordable houses on updated model projects in rural areas and apartment houses in cities.

How have the relations of Uzbekistan with the European Union developed recently?

On November 22, in Brussels, we held the 14th session of Uzbekistan-EU Cooperation Council. The Uzbek delegation was led by Foreign Minister Abdulaziz Kamilov.

At the meeting, we emphasized that Uzbekistan considers the EU as one of our key partners on the world stage, which makes a significant contribution to the promotion of the universal values of democracy, protection of human rights, preservation of peace, stability and universal sustainable development.

We believe that it is important for us to have an exchange of views on the prospects for further strengthening cooperation between the EU and Uzbekistan in the context of dynamic transformations and creating a completely new atmosphere of trust and constructive cooperation in the region of Central Asia.

In this regard, we believe that cooperation with the EU should be carried out in accordance with the new conditions for the development of Uzbekistan.

Uzbekistan attaches great importance to the development of mutually beneficial cooperation with the EU and its member countries and stands for the further development of our relations in all areas. Key areas of cooperation with European countries are trade, investment and financial cooperation, high-tech transfer, cooperation in science, technology, education, environment, tourism, health and culture, as well as strengthening regional security.

The Uzbek side is ready to contribute to the successful development of a new EU Strategy for Central Asia and looks forward to the beginning and early completion of negotiations on a new Enhanced Partnership and Cooperation Agreement. We also hope to receive the status of GSP+ (NdlR: The GSP allows developing countries to pay fewer or no duties on exports to the EU, giving them vital access to the EU market and contributing to their growth) and count on the EU’s expertise in assisting us to joining the World Trade Organization (WTO).

We reaffirm the principle position that the Uzbek side is interested in strengthening and developing relations with the EU at all levels of interaction on the principles of equality, mutual benefit, respect and consideration for each other’s interests.

In our opinion, the EU needs to turn its attention to the fast-growing and enormous potential of Asian markets, including Uzbekistan, which is among the top five most rapidly developing economies in the world.

It is necessary to intensify bilateral trade and investment relations with European companies for the implementation of promising projects implemented in our country. The signing of an agreement between Uzbekistan and the European Investment Bank will undoubtedly open up new opportunities for further cooperation.

How have the relations of Uzbekistan with Luxembourg developed recently?

Our cooperation with Luxembourg has been quite active. We are maintaining political, parliamentary, trade, economic, cultural and humanitarian cooperation. There has been a number of mutual visits on the ministerial level, as well as through parliaments of the two countries.

We welcome the fact that in Central Asia, Luxembourg gives priority to the development of bilateral and multilateral relations with Uzbekistan.

The legal framework of trade and economic relations of Uzbekistan and Luxembourg is based on the Partnership and Cooperation Agreement between the European Communities and the Republic of Uzbekistan, of the other part, concluded on June 21, 1996.

During the 8 months of 2018, trade turnover of Uzbekistan with Luxembourg amounted 3.6 million €, which, we should admit, is a quite modest figure. At the moment, 12 companies with Luxembourg capital are operating in Uzbekistan.

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Adelin Remi, AGEFI

About the author: Adelin Remy, editor of Agefi – Le Journal Financier de Luxembourg, the only exclusively financial newspaper in Luxembourg

 

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