The laws 'On the Mechanism of Functioning of the Securities Market' and 'On Stock Companies and Protection of Shareholder Rights' constitute the legal basis for stock market functioning in Uzbekistan.
Over the last two years, the Uzbek government has been pursuing vigorously the policy of stimulating the development of the stock market. In particular, income from operations with securities was made exempt from taxes. The rate of tax on registration of the shares issue was reduced from 0.5 to 0.1 per cent of the nominal price. By the President's Edict of 31 March 1997, the share of state ownership in newly privatised enterprises was restricted to 25 per cent and the share of employees to 26 per cent. At least 25 per cent is reserved for foreign investors.
According to the President's Edict of 17 July 1997, enterprises with foreign capital may also have more than one soum or foreign exchange demand account in any authorised bank of Uzbekistan.
The institutional structure consists of the Center for Coordination and Control of Securities Market Functioning, the Goskomimushestvo (State Property Committee) of the Republic of Uzbekistan, the Republican Stock Exchange Tashkent and the Consaditinform FIA. The FIA has 12 branches and 375 investment institutions, 44 of which are investment companies, 39 are managing companies, 27 are investment funds (24 of which have been privatised), eight investment banks, six depositories and 199 investment intermediaries (data accurate at the beginning of 1997).
The sales of shares of privatised enterprises totalled $151 million. The average income from increased prices of shares in 1996 was 77 per cent annually. The highest income was on the stock of Uzulgurbirjasavdo (price of sale ten times higher than the nominal price), Uzegmoysanoat, Uzdonmahsulot, Uzbektourism, and Uzbekbirlashiv (the price of sale two to three times higher than the nominal one).
During 1996, due to falls in the rate of inflation, interest rates and Central Bank refinancing rates, the income on state short-term bonds went down from 62 to 36 per cent per year. The income on bank bills was reduced from 144 to 35 per cent a year.
Foreign interest in investment in operations with securities in Uzbekistan has grown. The price of shares sold to foreign investors at non-stock bidding was $80 million.
Foreign Investment Agency of Uzbekistan
In furtherance of the government policy of attracting foreign investment into the Republic of Uzbekistan, recognition of the requirement for adequate support for foreign investors and their Uzbek partners to ensure the effectiveness of investment projects has led to the creation of a special structure.
Representatives of the United Nations in Uzbekistan, the Ministry for Foreign Economic Relations and the State Committee on Property of the Republic of Uzbekistan suggested the creation of such a non governmental body - the Foreign Investment Agency (FIA).
Why invest in Uzbekistan?
Political and economic stability
Due to its social and policy stability, Uzbekistan may be called a lucky exception compared to the majority of post-communist countries. The country has succeeded in having one of the smallest reductions of GDP in the region. Foreigners mark the friendly climate.
Largest market in Central-Asian region
The population of Uzbekistan is 23 million people.
Low cost and educated workforce
Uzbekistan is distinguished by the high degree of its workforce's education at both basic and undergraduate levels.
Incentives for foreign investors
What are the best investment sectors in Uzbekistan?
Traditionally, Uzbekistan is the main supplier of foods, especially vegetables and fruits, to its northern neighbours. The quality of these products is often very high.
Despite the fact that Uzbekistan is the fourth largest producer of raw cotton in the world, less than a third of the total amount is processed in the country. Some foreign companies have realised this opportunity by establishing production plants in the country and successfully exporting textiles.
Minerals, oil and gas
Uzbekistan is also famous for its gold production and great deposits of oil and gas, making the country an exporter of these products.
This sector of the Uzbekistan economy has unique technological and economical trends. Implementing the strategic project of a transcontinental fibre-optical telecommunications link creates an opportunity for foreign investors and contractors.
The main directions of investment policy in Uzbekistan
Investment policy is developed and carried out according to the strategic direction of the development of the national economy and is characterised by the following aims:
During the last few years, the intensive process of developing the legislative framework for investment activities was continued. In particular, the Government of the Republic adopted some important legislative documents aimed at improving the investment climate in Uzbekistan.
Among them, 'The Law on Free Economic Zones' (dated 25 April 1996) specifies a legislative framework regarding the creation and functioning of free economic zones which opens new opportunities to attract foreign investment via the mechanism of the external debts service etc.
Decrees by the President of Uzbekistan such as 'On Additional Measures to Stimulate the Creation and Activities of Enterprises with Foreign Capital' of 31 May 1996 and 'On Additional Incentives and Benefits Provided to Enterprises with Foreign Capital' of 30 November 1996 will play an important role in regulating the process of foreign investment attraction.
These decrees contain the essence of the Government's investment policy aimed at comprehensive support of enterprises with foreign capital involved in production activity and especially those ones producing export oriented and import substituting products.
In accordance with the decree by the President 'On Additional Measures for Stimulating the Development of Investment Activity in Enterprises with Foreign Capital' of 13 December 1996, the procedure of state regulation of funds allocated for work payment was liberalised.
The decree by the President 'On Additional Measures for Stimulating Small and Medium Business Development' was issued on 31 January 1997, where the procedure for using international organisations' credit lines allotted for the development of small and medium businesses was specified. It is established, particularly, that the import of equipment for implementing relevant investment proposals shall be absolutely exempt from customs duty.
The FIA's specialists study the investment climate in different sectors of the economy, making a comparative analysis of the investment climate in Uzbekistan and other countries. Preparing suggestions as to how to raise the attractiveness of the state's legal basis for investment is one of the important functions of the FIA.
The FIA also has the duty of preparing information and advertisements on the investment activity and policy of Uzbekistan and publishing this information abroad. One of the FIA's tasks is to assist state bodies and departments and various enterprises in preparing, registering and carrying out investment projects.
Another major function of the FIA is to seek out potential foreign investors who may be interested in investment opportunities in Uzbekistan, utilising the technical expertise and databases of various international organisations.
The FIA prepares seminars, conferences, and other measures on extending business communications, including promotion of business partnerships by holding 'round tables' with the participation of Uzbek and foreign business.
The FIA also has an obligation to arrange special training courses for specialists from Uzbekistan, with the purpose of gaining foreign experience. The FIA's activity is undertaken by its workforce under the control of its coordination council, formed of representatives of state bodies, managers, scientists, economists, the heads of various enterprises, foreign companies and banks.
The coordination council has the power to make decisions and issue recommendations on the basic direction of the FIA's activity and also considers the FIA's suggestions on improving the investment climate, solving any questions which may arise and giving state support for foreign entrepreneurs in the republic.
The Foreign Investment FIA - Tashkent
The Foreign Investment FIA - Urgench