Slide2: Republic of Uzbekistan: World's fifth largest cotton producer (2005/2006 – more than 3.5 million tons) Second largest cotton exporter after the United States of America


About State Joint-Stock Company “O’zbekyengilsanoat” : About State Joint-Stock Company “O’zbekyengilsanoat” SJSC “O’zbekyengilsanoat” was established in July 1, 2002 by the Decree of the President of the Republic of Uzbekistan #UP-3102 under the bases of the Association of Light Industry of Uzbekistan (former Light Industry Ministry of the Republic of Uzbekistan); Today SJSC “O’zbekyengilsanoat” provides: - one third of job places in the industrial sector; - more than 50%of the total volume of consumer goods; - approximately 20% of the total volume of industrial production.


About State Joint-Stock Company “O’zbekyengilsanoat” : About State Joint-Stock Company “O’zbekyengilsanoat” Existing Production Capacities of SJSC “O’zbekyengilsanoat” Enterprises: Cotton yarn (thousand tons) – 239,1; Knitted fabric (thousand tons) – 22,2; Woven fabric (million meters) – 237,0; Apparel (million pieces) – 113,0; Hosiery products (million pairs) – 22,04.


ORGANIZATIONAL CHART: ORGANIZATIONAL CHART As of November 1, 2006: total number of enterprises – 153. SJSC "O’zbekyengilsanoat" has its share in the charter capital of 40 joint-stock companies, owning from 2,8 up to 25 percents of stocks, and being also the co-founder of a number of joint-ventures in which the foreign investors own the majority of shares. Other 113 enterprises are the associated members of the Company.


Slide7: mln. USD


Slide8: mln. USD


Capabilities: Capabilities More than 50 joint ventures established with partners from Germany, South Korea, Japan, Switzerland, Turkey, U.S.A., India, etc. More than 30 projects on production of ready-to-wear clothes with annual production capacity more than 30 million pieces of ready-to-wear clothes (sports shirts, underwear, children apparel etc.)


Latest Achievements: Latest Achievements Increase in the share of domestic cotton fiber processing up to 28 % in 2006; Modern textile complexes embracing finishing, knitting and garments lines have been launched; In 2004-2006, 42 new projects with the total value of USD 340 mln. have been implemented; Increase of the EU market share of Uzbek yarn up to approximately 9%.


Main Approaches for Investment Projects Financing : Main Approaches for Investment Projects Financing Direct investments of the project initiators; Acquisition by the foreign participants of the project of shares of Uzbek enterprises offered for sale; Loans provided by foreign banks & local commercial banks in Uzbekistan; Own loans of the project participants; Leasing operations & others.


Alternatives Proposed for Organization of Textile Production: Alternatives Proposed for Organization of Textile Production To use existing textile facilities, which are installed with obsolete technological equipments, by their replacement with up-to-date textile technology; To use buildings suitable for production, which are not being used, by furnishing them with necessary textile machinery & equipments; To use incomplete construction objects or carry out construction works for the organization of textile complexes.


 Favourable Framework for Foreign Investors : Favourable Framework for Foreign Investors Availability of vast stocks of raw materials, specifically, high quality cotton fibre; Low-cost energy resources; Qualified and relatively inexpensive labour resources; Advanced network of communications; Developed system of banking and legal services; Availability of vast international markets for textile products and apparel.


Cost for Main Production Factors in Uzbekistan : Cost for Main Production Factors in Uzbekistan Water – USD 0,22 / m3 Natural Gas – USD 0,03 / m3 Electricity – USD 0,03 / Kw/h Fuel Oil – USD 0,44 / lt Diesel Oil – USD 0,40/ lt


Slide15: Note: Labour costs in Europe comprise around 21-35$/hour, in the USA – around 16$. *2005 data from http://www.wernertex.com/ US$/hour


Slide16: US$/Unit Note: Data on natural gas in India, Pakistan, Korea and Germany is not available * International Energy Agency "Key energy statistics 2005"


Slide17: * International Energy Agency "Key energy statistics 2005" US$/kWh


Slide18: *http://www.unesco.org/water/ http://www.adb.org/Water/Indicators/Profiles US$/m3


Textile Production Average Added Value: Textile Production Average Added Value 1,06$/1kg. +1$ 5-10$/3-5 pieces 2$/0.88kg. 2,4$/0.77kg. +0,4$ +2,6-7,6$ +4-9$ (min.)


 GENERAL INFORMATION ON TAXATION, LOGISTICS, LABOR RELATIONSHIPS : GENERAL INFORMATION ON TAXATION, LOGISTICS, LABOR RELATIONSHIPS


Slide21: INFORMATION on taxes, payable in Uzbekistan For SMEs simplified taxation system is envisaged on the voluntary basis. It envisages single tax payment instead of all common state taxes including levies to the non-budget Pension Fund, Republican Road Fund and Republican Fund of School Education Development, as well as local taxes and charges, charged by local authorities, excluding: Fee on commercial activity, including licensing fees; Registration fee; Compensation payments for environmental pollution and wastes. Single Tax Payment rate – 10% of volume of sales.


Slide22: INFORMATION on taxes, payable in Uzbekistan


Slide23: INFORMATION on taxes, payable in Uzbekistan


Slide24: INFORMATION on taxes, payable in Uzbekistan


Support and Special Favorable Conditions Created by the  Uzbekistan Government : Support and Special Favorable Conditions Created by the Uzbekistan Government stable legal framework for economic activity of enterprises; simplification of licensing, registration and certification procedures; significant privileges, preferences and guarantees for foreign investors.


Privileges for Private Foreign Direct Investments: : Privileges for Private Foreign Direct Investments: Starting from July 1, 2005, enterprises, attracting direct private foreign investments are exempted from: income tax, property tax, tax on development of a social infrastructure; single tax for micro-firms and small enterprises; levy to the Republican Road Fund; at following volume and periods: from $300, 000 up to $3, 000, 000 - for the period of 3 years; from over $3, 000, 000 up to - for the period of 5 years; over $10, 000, 000 - for the period of 7 years. Starting from June 1, 2006, enterprises, of the SJSC «O’zbekyengilsanoat» are exempted from property tax


Slide27: Special Privileges and Preferences for Enterprises of the Textile Industry until January 1, 2009, the enterprises with foreign investments specializing in production of garments and apparel and hosiery products are exempted from all kinds of budget taxes and duties, except for VAT; enterprises, included into the State Investment Program and undergoing re-equipment process, are exempted from the payment of customs duties on imports of technological and auxiliary equipment, technological accessories and spare parts for industrial needs. Note: State Investment Program approved annually by special Governmental Resolution


Slide28: Special Privileges and Preferences for Enterprises of the Textile Industry until January 1, 2009, enterprises importing chemicals, dyes, accessories and other auxiliary materials not produced domestically are exempted from payment of customs duties; until January 1, 2009, for the enterprises with foreign investments when they purchase cotton fiber for their own production usage, 15 percents discount is given from the price set at the Liverpool Cotton Exchange “A” Index and transaction is made in hard currency; and additional 5 percent discount is granted to the exporter-enterprises for purchase of cotton fiber, which have a full production cycle (from yarn to finished goods).


Slide29: Tallinn Riga Klaypeda Brest Chop Ilichevsk Shanghai Nahodka Poti Bandar Abbas UZBEKISTAN RUSSIAN FEDERATION KAZAKHSTAN IRAN AFGHANISTAN CHINA UKRAINE BELARUS MONGOLIA INDIA PAKISTAN TURKEY Transport corridors of Uzbekistan


Slide30: TASHKENT (Kazakhstan) (Russia) Black Sea 4 days Istanbul Novorossiysk Kandvagash 900km/10 days 21 00km/6 days (Russia) (Latvia) (Estonia) 1200km/12 days 1300km/15 days 1400km/17 days Europe St.Petersburg Riga Tallinn Baltic Sea European Port (Kazakhstan) (China) Lianyungang Yellow Sea 3 days 7000km/22 days Busan Busan (Russia) Nakhodka 7400km/25 days Eastern Sea Eastern Sea 3 days 4 days Osaka, Imabari (Turkmenistan, Iran, Turkey) Mersin Istanbul Denizli Izmir (Turkey) (Turkey) (Turkey) 4750km/10 days 5100km/12 days 5250km/13 days 5400km/14 days Mediterranean Sea 5 days 3 days Ashdod European Port (Iran) B.Abbas Indian Ocean Indian Ocean Indian Ocean, Malaks Channel Karachi Colombo Singapore 15 days 17 days 20 days South-Chinese Sea, East-Chinese Sea Busan Nagoya Ashdod–10 days Leixoes–16 days Bari–21 days Genoa–21 days Onteniente–21ds Trieste–21days Gioia Tauro– 21days Prato–21days Valencia–21days Barcelona Hamburg–4 days Rotterdam–5 days Antwerp–6 days Hull–7 days Leixoes–15 days Valencia–15 days Barcelona Atlantic Ocean Miami–25days L.A.–30 days Rome–6 days Genoa–6 days Valencia–7 days Barcelona–7days Antwerp–8 days Leixoes–12 days Rotterdam–13 days Hamburg–13 days Manchester–14days TRANS ROUTE Sea area Land Main stations and ports


Slide31: Labor Relations in Uzbekistan Maximal overtime period for a regular employee - 4 hours per 2 days (it should not exceed 120 hours per year) and 2 hours a day for work under difficult and harmful working conditions Paid vacation - no less than 15 days per year. Several categories of employees are entitled to have additional vacations. An employee is entitled to have one or two days off per week. Current legislation determines 9 days as a holiday (non-working day) within a year.


Slide32: Labor Relations in Uzbekistan Wages – the amount of payment should not be less than the minimum level determined by the current legislation Methods of calculating wages – the amount of payment can be determined by means of (1) per time wage and (2) per work wage methods. Wages paid for working on holidays, weekends and overtime are to be doubled. Night pay should not be less than 1.5-fold of the regular amount.


Slide33: Labor Relations in Uzbekistan Payments to be made by an employer – (1) salaries; (2) 31% of the salary base including extra payments (e.g. bonuses) is to be paid to the non-budget Pension Fund; (3) depending on the category of an employee, employees working in harmful conditions are granted a bonus from 6% up to 24% of a salary. Disciplinary actions – (1) to make a warning; (2) – to seize part of a salary; (3) – to cancel labor contract unilaterally.


Slide34: State Joint-Stock Company “O’zbekyengilsanoat ” 45 Babur Str., Tashkent, 700100, Uzbekistan +998 (71) 139-17-11, 362-92-91 info@legprom.uz http://www.legprom.uz


Slide35: Thank you very much for your attention!