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Uzbekistan’s largest region is considered a free economic zone

On May 15, 2019, the President of Uzbekistan signed a decree making the entire territory of Navoi region a free economic zone (FEZ).

Navoi region, located in the central part of the country, is the largest region of Uzbekistan (110,800 sq. km.). The region’s subsoil is rich in precious metals (including gold), tungsten, phosphorites, basalt, kaolin, quartz sand, cement raw materials, limestone and other minerals. Navoi region is therefore already one of the centers of the mining, chemical and energy industries of the country. Navoi Mining and Metallurgical Plant, Navoi Thermal Power Plant JSC, Navoiazot JSC, Kyzylkumcement JSC and other large enterprises are located in this region. Navoi International Airport operated by Korean Air is the largest air cargo terminal in Central Asia.

It is noteworthy that the first FEZ in Uzbekistan was established in Karamin district of Navoi region in 2008. Now with the enactment of Presidential Decree No. UP-5719 of May 15, 2019 (the “Decree”) an unprecedented decision has been made to expand the territory of the FEZ to the entire Navoi region for the period up to January 1, 2030, with the possibility of a further extension of this period.

According to the Decree, the main goals of this decision are to attract direct investment to create innovative, high-tech, export-oriented and import-substituting enterprises producing high value-added products, as well as to develop transport and other infrastructure of the region to turn it into a major logistics center. In order to finance relevant investment projects, the Ministry of Investments and Foreign Trade together with commercial banks have been instructed to develop proposals for attracting credit lines from international financial institutions and foreign export credit agencies worth at least US$ 1 billion. The infrastructure is to be developed through the roadmap approved by the Decree. According to this roadmap, more than 67 billion Uzbek soums (approximately US$8 million) will be spent on the development and improvement of infrastructure.

At the same time, the khokimiyat (local government) of Navoi region together with the relevant government agencies was instructed to conduct an inventory of unused non-agricultural land plots and vacant state-owned objects in order to allocate them for investment projects. The allocation of land plots, buildings and structures to FEZ members will be made directly by JSC Directorate of Navoi Free Economic Zone with the approval of the Administrative Council, without the need to make a separate decision of the khokim (governor)1.

Special tax, customs and visa regimes are established for the significantly expanded Navoi FEZ, as follows:

  • FEZ members are exempted from land tax, income tax, property tax of legal entities, the single tax payment for micro-firms and small enterprises. Moreover, the decree stipulates that legislation worsening the position of taxpayers shall not apply to members of the FEZ with the exception of laws related to excise tax;
  • FEZ members are also exempted from customs duties for construction materials that are not produced in Uzbekistan and for materials that are imported for the purposes of the project in accordance with the lists approved by the Center for Comprehensive Expert Examination under the Ministry of Economy and Industry. Exemption from customs payments was also granted in respect of equipment and materials imported by FEZ members for their own needs, subject to reinvestment of the released funds to improve existing facilities or develop new ones;
  • For the founders of enterprises with foreign investment – members of the FEZ and their families ̶ the government has introduced an investment visa, issued for a period of three years with the possibility of extending it without leaving the country. The Ministry of Foreign Affairs is instructed to ensure, at the request of the Directorate of the FEZ, the issuance of visas for foreign staff of FEZ members free of charge.

Under Uzbek law, the above-mentioned tax and customs privileges are applied for a certain period of time depending on the amount of investment made.

It is also noteworthy that the Ministry of Justice is instructed, together with other ministries and departments, to make proposals for establishing a special legal regime in the territory of Navoi FEZ, with the possibility of applying standards, principles and norms of English law and using the English language for records management.

In accordance with the Decree, the status of Navoi FEZ member is granted exclusively by the Administrative Council of Free Economic Zones of Navoi region, headed by the khokim (governor) of Navoi region, without the need for agreement from the Republican Council. The Cabinet of Ministers is currently developing the detailed criteria for the selection of investment projects and granting FEZ member status. In turn, the Decree expressly stipulates that Navoi FEZ member status may be suspended only through judicial procedure.

In the upcoming months, the legal acts regulating the activities of the FEZ and the selection procedure of its members in details will be adopted. The approval of the Innovation Activity Development Program in Navoi region for 2019–2021 and the List of Innovative and High-Tech Projects proposed for implementation in Navoi region in 2019–2020 is also expected.

 

By Sher Karimov

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