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Spotlight on Uzbekistan: Kinstellar's regular look at the Uzbek market

May 2019 – Kinstellar's regular look at the Uzbek market

Adoption of the public-private partnership law

The law "On Public–Private Partnership" was adopted in May. The law defines the basic concepts, principles and authorities of state bodies in the field of Public-Private Partnership ("PPP"). The Agency for the Development of Public-Private Partnership under the Ministry of Finance ("the Agency") is authorized to implement the state policy in PPP.

The implementation of PPP projects consists of several stages.

(a)  Initiation and preparation of the project

The project concept will be approved:

  • with total value of up to USD 1 million – by the relevant authority or organization;
  • over USD 1 million to USD 10 million – in coordination with the Agency;
  • over USD 10 million – by the Cabinet of Ministers.

(b)  Selection by tender or direct negotiation

Projects up to USD 1 million will be conducted by one-stage tender, and if more than USD 1 million by two-stage tender.

The two-stage tender includes prequalification, application review, evaluation of tender proposals and selection of the winner, including the review and evaluation of technical and commercial proposals.

In addition, the parties may enter into an agreement without a tender on the basis of direct negotiations in the following cases:

  • ensuring national defense and security;
  • belonging to a certain person of exclusive rights to the results of intellectual activity and other exclusive rights, land, other real estate and other property, which is an obligatory condition for implementation of the project;
  • by certain decrees and resolutions of the President.

(c)  Conclusion of an agreement

The public partner shall enter into an agreement with the winner. However, the term of an agreement shall not from 3 to 49 years with the possibility of extension or early termination.

In addition, the law provides guarantees for the rights of a private partner. In case of changes in legislation that would worsen the investors commercial results, the provisions set forth in the agreement would remain in effect for ten years and prevail over such changes in legislation. Those provisions of the legislation, which improve such conditions, may be applied by the private party at its discretion.

Law "On Public–Private Partnership" No. ZRU-537 of 10 May 2019.

Navoi Region becomes a free economic zone

According to the Presidential Decree No. UP-5719, the entire territory of the Navoi region is defined as a free economic zone ("Navoi FEZ") for innovative, high-tech, export oriented and import substituting industries until 1 January 2030.

The main goals of Navoi FEZ are the development of innovation, attraction of direct investments, development of transport and engineering infrastructure, as well as creation of a large logistics center in the region.

The enterprises with the status of the Navoi FEZ are exempt from paying:

  • land tax, income tax, corporate property tax, single tax payment for micro firms and small enterprises;
  • customs payments (except for customs clearance fees) for equipment, raw materials, tools and components imported for their own production needs, with the released funds sent for creation of new ones, as well as modernization, reconstruction, technical and technological re-equipment, expansion of existing industries, construction of industrial buildings, purchase of resources and materials necessary for their own production needs, without the right to refund the negative amount of VAT arising from the export of products; and
  • customs fees (except for customs clearance fees) for construction materials that are not produced in Uzbekistan and imported as part of projects, as per the lists generated in the prescribed manner.

These benefits are given for a period of 3 to 10 years, depending on the amount of investments made:

  • from 300 thousand to USD 3 million – for a period of 3 years;
  • from USD 3 million to USD 5 million – for a period of 5 years;
  • from USD 5 million to USD 10 million – for a period of 7 years;
  • from USD 10 million and more – for a period of 10 years, with the use of the profit tax rate and the single tax payment in the amount of 50% below the current rates for the next 5 years.

Moreover, members of the Navoi FEZ and their families may apply for an investment visa, which is valid for three years with the possibility of extension without leaving the country. In accordance with the Decree, non-fulfillment of investment obligations entails the suspension and deprivation of the benefits of the Navoi FEZ.

Presidential Decree "On measures to define Navoi region as a Free Economic Zone for innovative, high-tech, export–oriented and import–substituting industries" No. UP-5719 of 15 May 2019.

For further information, please contact Joel Benjamin, the Managing Partner of the Central Asia practice of Kinstellar, at

e-mail

or Muborak Kambarova, Counsel in our Tashkent office, at .