Uzbekistan Commercial News Update

October 2007

Prepared by Mr. Jahangir Kakharov,
BISNIS Representative, Tashkent, Uzbekistan

Cabinet of Ministers REVIEWS 2008 state budget of Uzbekistan

TASHKENT. September 28 (Uzreport) - The Cabinet of Ministers of the Republic of Uzbekistan considered the macroeconomic forecast, the concept of tax and budget policy and the draft state budget for 2008 on 26 September. Prime Minister Shavkat Mirziyoyev conducted the Cabinet session, UzA reported.

Vice Prime Minister and Finance Minister Rustam Azimov, Economy Minister Botir Khodjayev, State Tax Committee Chairman Botir Parpiyev, State Customs Committee Chairman Sodirkhon Nosirov, Commerce and Industry Chamber Chairman Alisher Shaykhov, Tashkent Mayor Abdukahhar Tukhtayev and others spoke at the session.

The Cabinet supported the proposals of the economy and finance ministries on macroeconomic forecast for 2008, which envisages keeping the real GDP growth at the minimum level of 8%, the growth of industrial sectors of 9.6%, the increase of the capital investments by 16% and the inflation level at 6-8% with the growth of the real incomes of the population.

Minister of Public Education Turobjon Jurayev and Health Minister Feruz Nazirov in their reports drew attention to rational and efficient use of budget funds in implementing state programs of personnel training, school education development, healthcare reform and social protection of the population.

During the discussions, concrete proposals were elaborated on the improvement of the tax and budget policy and 2008 budget parameters.

In particular, it was proposed to reduce the single tax for micro firms and small enterprises from 10% to 8% in order to create additional incentives for small business development and solving the employment problems.

It was also proposed to reduce excise tax for natural gas by 5% and income tax for commercial banks by 2%, as well as cancel the excise tax for consumer goods produced in Uzbekistan.

To meet the task of increasing the salaries and other payments 2.5 times during 2007-2009 set by President Islam Karimov, the supply of the 2008 budget envisages additional assignations for gradual increase of the salaries, pensions, stipends and allowances.

At the same time, it was suggested to bring the share of the supply for social sector and social protection of the population to 54%.

The Cabinet also considered issues of improvement of budget planning and financing educational institutions, providing state support to farms growing cotton at low-yield lands, and cardinal increase of financing for land-reclamation.

After the discussions, the Cabinet of Ministers approved the macroeconomic forecast, the concept of tax and budget policy and the draft of the 2008 state budget. They will now be considered by the Legislative Chamber.

The parameters of the state budget for 2008 will be announced after the approval by the Oliy Majlis (Parliament) of Uzbekistan.

Number of mobile users in Uzbekistan exceeds 4.52 million

TASHKENT. October 8 (Uzreport) - The Cabinet of Ministers has held a meeting on the results of the socio-economic development of the Information and Communication Technology Complex over the three quarters of this year.

During the meeting, particular attention was paid the implementation of the tasks concerning the intensification of the socio-economic reforms in the sphere of ICT, outlined by the President in his report "On the results of socio-economic development of the republic in 2006 and priorities for intensification of economic reforms in 2007", delivered at the meeting of the Cabinet of Ministers on 12 February 2007, UzA reported.

It was noted that in the reporting period the enterprises of the industry took practical steps towards the improvement of the regulatory-legal framework, intensification of the socio-economic reforms, democratization and liberalization of mass media, privatization of the enterprises of the sphere, attraction of foreign investments, particularly foreign direct investments, strengthening of financial and executive discipline, diversification of the range of services, modernization and development of information and telecommunication network technologies.

According to the results of the first nine months of the year 2007, the sectors of the complex produced products and provided services for the total amount of some 624.4 billion soums, thereby demonstrating a growth of 142.9% compared to the same period of the previous year.

It was noted that at the end of the reporting period, the number of mobile users reached 4.52 million, and the number of Internet users exceeded 1.9 million.

Meeting participants also carried out an analysis of the implementation of the investment programme and the performance in achievement of export targets. They emphasized the need to raise the responsibility of the administrative staff for meeting the targets set and increasing the size of direct investments within the frame of the programme on attracting foreign investments being developed for the year 2008.

Participants of the meeting also spoke of the need to expand the use of information and communication technology in the activity of public sector and economic administration agencies.

Corresponding tasks were given to raise the qualifications of the teachers of higher educational facilities on the subjects of information and communication technologies, and speed up the reforms in the sphere, particularly, through the integration of distance learning.

In order to develop the services sector in the ICT sphere, participants emphasized the need to further intensify the development of small business and private enterprise, particularly in the sphere of telecommunications, and in rural areas, and improve the provision of publishing and polygraph services to the population.

At the same time it was pointed out that there is a need to strengthen executive discipline, raise the responsibilities of administrative staff of the complex's agencies, prepare and train workers, and ensure the implementation of priority state programmes. Appropriate decisions were made concerning all of the issues discussed.

GM Uzbekistan joint venture to build and sell Chevrolets

TASHKENT. October 9 (Uzreport) - General Motors, the world's largest carmaker, has announced a joint venture with UzAvtoSanoat to assemble and distribute Chevrolet cars in Uzbekistan, the central Asian republic and part of GM Europe region. A press conference on this occasion was held at InterContinental hotel in Tashkent on October 8. The joint venture, which will be called GM Uzbekistan, will extend Chevrolet's rapid expansion in Eastern Europe and Asia.

"Chevrolet has become the fastest growing brand in Europe, demonstrating its strong appeal especially in the opportunity markets of Eastern Europe", said Carl-Peter Forster, President of General Motors Europe. "The start of operations in Uzbekistan and the launch of a series of new Chevrolet models will help us continue our rapid growth."

Sales of Chevrolet models in Europe have increased 32% year-to-date, with 328,000 units registered through September. Chevrolet is on track to reach the 450,000 unit mark this year, a more than 30% increase over 2006.

Under the terms of the joint venture, General Motors will hold a 25% equity stake with the option of increasing this amount in the future. General Motors will provide new technology, manufacturing expertise and training for the joint venture, which will have access to the portfolio of GM's largest and fastest growing global brand, Chevrolet. Senior GM managers will hold key positions in the new joint venture, particularly in manufacturing, quality, and sales and marketing.

"We are very pleased to join forces with our reliable manufacturing partner in Uzbekistan," said Michael Grimaldi, President and CEO of GM Daewoo Auto & Technology. "Demand is high around the world for the new Chevrolet models we build in Korea. The new joint venture means we will have added manufacturing capacity to assist us in meeting the growing demand for our cars in Central Asia and Eastern Europe."

The GM Uzbekistan manufacturing plant, situated in Asaka, Andijan Province, 350km from the Uzbek capital, Tashkent, has a total manufacturing capacity of 250,000 units which, over time, is to be fully utilized for producing Chevrolet cars. The first three Chevrolet models, Captiva, Epica and Tacuma, will be assembled from SKD kits starting immediately, with other carlines to be added for assembly from CKD kits and full-scale production over the next three years.

"Entry into the General Motors family gives access to a modern model line and modern automobile technologies", asserts Rustam Azimov, Vice Prime Minister of the Republic of Uzbekistan. "Quality improvement, growth of production and consumer requirements' satisfaction in Uzbekistan and in other countries, where Uzbek cars rightly deserved popularity and recognition, these are key points to which the new joint venture will focus on".

The new Chevrolet models will be sold initially at seven showrooms in Tashkent and other major Uzbek cities. By the end of 2008, the dealer network is expected to grow to over 60 showrooms as the Chevrolet range for the Uzbek market is extended to additional carlines.

Until now, the Asaka assembly plant, which started production in 1996, has been building the Daewoo Matiz, Nexia and Damas for sale both in the domestic and neighboring markets. These models will be lined up along with Chevrolet models: Captiva, Epica and Tacuma during the interim period.

"The newly created enterprise will increase production volumes to 250 thousand cars per year", said Ulugbek Rozukulov, the Chairman of Board Uzavtosanoat SC. "Besides, along with production of new models, we are planning to implement a number of localization projects of KD parts in Uzbekistan, which also will contribute to the development of the industry".

The assembly plant will begin using GM's common Global Manufacturing System, in which performance is improved through the consistent adoption of five principles: people involvement, standardization, built-in quality, short lead times and continuous improvement. The principles are interrelated and implemented as a complete system. The plant will also be integrated into General Motors' global purchasing and supply chain with a view to increasing the quantity of components and materials sourced on the domestic market.

With a population of 27 million (up 7 million in the past 15 years), Uzbekistan is an auto market with significant potential for further expansion. The country's economy has grown by an average of 7% over the past five years. In 2006, vehicle sales reached a total of 65,600, 19% more than in the previous year.

Uzbek President, GME and GMDAT heads discuss cooperation prospects

TASHKENT. October 10 (Uzreport) - President of Uzbekistan Islam Karimov on October 9 in his Oksaroy residence in Tashkent received the heads of General Motors Europe (GME) Carl Peter Foster and GM Daewoo Auto & Technology (GMDAT) Michael Grimaldy.

GME is one of the largest units of leading world car building corporation General Motors and operates in Europe and Asian-Pacific region. In the first half of 2007, GME sold successfully some 1.1 million cars. And GMDAT produces such known cars, as Buick, Cadillac, Chevrolet, Holden, Opel, Pontiac, Suzuki, and supplies to 150 countries. Chevrolet is among the General Motors' most popular products.

An agreement was signed during the visit of GME and GMDAT heads to Uzbekistan. The document envisages creation on the basis of UzDaewooAuto joint-stock company of a joint venture GM Uzbekistan for production and sale of Chevrolet cars. Along with launch of production of Captiva, Epica and Tacuma models of Chevrolet, increase of production capacities of the plant, the agreement also envisages expansion of projects aimed at localization of production.

Welcoming the guests, President Islam Karimov noted that strengthening of ties between the Uzbek enterprises and General Motors' companies testified the aspiration of both sides to mutually beneficial cooperation.

Indeed, organization of the new production will promote learning the advanced experience of General Motors Corporation and introduction of new technologies in Uzbekistan, while General Motors will expand the sales market of its Chevrolet cars in Central Asia and Eastern Europe.

GME head Carl Peter Foster sincerely thanked the Uzbek leader for all-round support in the process of GM Uzbekistan foundation. He noted that the new joint venture would serve to strengthening of prospective and mutually beneficial cooperation.

Uzbekistan advances in business environment improvement – IFC report

TASHKENT. October 12 (Uzreport) - World Bank and its division International Finance Corporation (IFC) have presented an annual report Doing Business on the problems of business activity regulation and issues of carrying out reforms in the field of entrepreneurship.

In 2006-2007, Uzbekistan has achieved significant progress in the improvement of business environment, said the project's private sector development specialist Svetlana Bagaudinova. The reforms pursued have eased the order of enterprise registration, voluntary business liquidation procedures, reduced tax burden.

Doing Business 2008 ranks 178 economies on the ease of doing business. The top 25, in order, are Singapore, New Zealand, the United States, Hong Kong (China), Denmark, the United Kingdom, Canada, Ireland, Australia, Iceland, Norway, Japan, Finland, Sweden, Thailand, Switzerland, Estonia, Georgia, Belgium, Germany, the Netherlands, Latvia, Saudi Arabia, Malaysia, and Austria.

The rankings are based on 10 indicators of business regulation that track the time and cost to meet government requirements in business start-up, operation, trade, taxation, and closure. The rankings do not reflect such areas as macroeconomic policy, quality of infrastructure, currency volatility, investor perceptions, or crime rates. Since 2003 Doing Business has inspired or informed more than 113 reforms around the world.

GE Aviation wins order from Uzbekistan

TASHKENT. October 12 (Uzreport) - A Central Asian airline will buy more than $70 million in engines from GE Aviation, the company announced. Uzbekistan Airways, based in Tashkent, ordered GEnx engines to power the two Boeing 787-8 aircraft it has on order, according to a news release. The airline flies to more than 40 cities in the United States, Europe, the Middle East and Central Asia.

More than 1,000 GEnx engines have been purchased so far, Evendale-based GE Aviation said in the release. The engine, which is being flight-tested, will power the Boeing 787 Dreamliner and the 747-8 Intercontinental. GE Aviation is a unit of Fairfield, Conn.-based General Electric.

2D-seismic operations start under Aral project in Uzbekistan sector of sea

TASHKENT. October 12 (Uzreport) - 2D-seismic operations have started in the Uzbekistan sector of the Aral Sea within the framework of implementation of the Aral project PSA.

The PSA was signed in Tashkent on 30 August 2006 by the Government of the Republic of Uzbekistan and the consortium of investors comprising National holding company Uzbekneftegaz, CNPC International (China), Korea National Oil Corporation (Korea), LUKOIL Overseas (Russia) and Petronas Carigali Overseas (Malaysia).

In accordance with the commitments of the investors 2,300 line kilometers of 2D-seismic will be acquired in 2007-2008. PetroAlliance was selected as the contractor after the tender held by Aral Sea Operating Company, established by the investors and registered in Uzbekistan.

Seismic operations will cover the aquatic area of Uzbekistan sector of the Aral Sea, the transit and the terrestrial zones. Base camps for marine and onshore seismic crews have been set up; the seismic equipment has been mobilized, tested and tuned.

To date the specialized inspection under the State Committee for Nature of Uzbekistan has completed the environmental audit of the contract area. Seismic quality control contractor (Russian company IrtyshGeophysics) has been selected on a tender basis. Tenders are being held to select contractors to carry out environmental monitoring of seismic operations and design and survey work to build a motor road to the Vozrozhdenya Peninsula.

Besides the seismic, the first stage of the exploration works under the Aral project includes the drilling of two exploration wells. Minimal financial commitment of this stage is approximately US$100 million; the duration of the stage is three years. A feasibility study based on the obtained results will be drafted and approved with the subsequent adjustment of the commercial terms of the PSA. The exploration operations of the second stage will be carried out after that.

Cabinet sums up Uzbekistan's socioeconomic development in Jan-Sep 2007

TASHKENT. October 16 (UzA.uz) - Cabinet of Ministers of the Republic of Uzbekistan held a session on October 16 to discuss results of socioeconomic development of the country in the first nine months of 2007 and approve additional measures to ensure implementation of priority tasks of deepening economic reforms.

According to data of Economy Ministry, State Statistics Committee and Finance Ministry of Uzbekistan for January-September 2007, the gross domestic product grew by 9.8%. Economic growth was achieved due to increase of the volumes of industrial production by 11.9%, agriculture – 3.5%, construction work – 20.4%, retail trade turnover – 18.4%, paid services – 25.2%.

Foreign trade turnover is increasing first of all due to growth of exports – by 41.8%. The state budget stood at surplus, inflation level did not exceed the forecast parameters. The share of small business in GDP reached 43.1% against 39% in the corresponding period of 2007.

More than 3.6 million tons of cotton gathered in Uzbekistan

TASHKENT. October 16 (Uza.uz) - Farmers of Uzbekistan have gathered more than 3.6 million tons of cotton. This year, the cotton was cultivated on 1.44 million hectares of lands.

For the first time, 100% of the total harvest was grown by farms, UzA reports. The average yield made up 26 centners per hectare, and 86 percent of the total harvest was first grade against 74 percent last year. According to Farms Association of Uzbekistan, some farms achieved harvest of 45-50 centners per hectare. The farmers of Uzbekistan continue harvesting the remaining cotton.

Uzbekistan invites Japan to develop uranium deposits

TASHKENT. October 22 (Uzreport) - Uzbekistan, one of the world's biggest uranium producers, invited Japan to deepen cooperation and jointly explore the Central Asian state's vast uranium reserves. Securing new exploration projects in Central Asia is key to Japan which relies on nuclear power for over 25% of its electricity and imports some 60% of its uranium from Australia and Canada, Reuters reported.

On Friday, an Uzbek geology official said Itochu Corp., Japan's No.4 trading company, has signed a contract with Uzbekistan to develop technology that would help explore the Rudnoye deposit. Nariman Mavlyanov, head of the State Committee on Geology and Mineral Resources, also said Itochu could explore three other uranium deposits in Uzbekistan. Mavlyanov said separately the Uzbek government has invited Japan Oil, Gas and Metals National Corporation (JOGMEC) to consider exploring a total of 11 uranium sites in Uzbekistan. "If everything is confirmed we will create a 50-50 joint venture and will then start developing the deposits," he told reporters without giving a timeframe.

Japan and Uzbekistan agreed to work together in the uranium field during a visit by former Prime Minister Junichiro Koizumi to Tashkent in 2006.

An Uzbek metals official said last year Uzbekistan may start exports of as much as 300 tons of low enriched uranium to Japan through Itochu. It was unclear if deliveries have already started.

Uzbekistan, with its large uranium reserves, is keen to diversify exports and become a fully fledged player on the booming global uranium market. It currently exports most of its uranium through US company Nukem Inc.

Uzbekistan produced 2,260 tons of low-enriched uranium in 2006, 1.8% more than in the previous year. Mavlyanov also said the government has invited Japanese investors to develop rare metals in Uzbekistan such as lithium, vanadium, molybdenum and others.

CLAAS shows off goods in Urgench, farmers ink contracts

TASHKENT. October 25 (UzA) - The German company CLAAS, one of the world's leaders on production of agricultural techniques, exhibited its products in Urgench. The new series of combiners, mowing-machines and tractors were displayed at the exhibition, according to the report. The specialists of agricultural sphere in Khorezm region and the Republic of Karakalpakstan, the heads of agricultural companies and farmers themselves observed the exhibition. More than 10 farms have signed contracts for the purchase of the CLAAS products.

Korea Telecom buys Uzbek telecom firms

TASHKENT. October 31 (Uzreport) - Korea Telecom said it has acquired East Telecom, an Uzbek Internet service company, to start broadband and wireless Internet services in the Central Asian region. The Korea's largest fixed-line telephone and Internet company said that it purchased 51% of East Telecom shares at an undisclosed price. It also bought a 60% stake in Super-iMax, which has the right to use the radio frequency for the Mobile WiMax wireless Internet service in the former member of the Soviet Union.

"Uzbekistan's communication infrastructure is underdeveloped but the corporate demand for high-speed Internet and mobile and fixed-line phone services is rapidly increasing," the company said in a statement. "Especially, Mobile WiMax has a large potential as there are around 60,000 Internet subscribers who use slow telephone connections."

KT's domestic business has been stagnant for years as the fixed-line phone and Internet markets are saturated here. The company, however, began to see increasing profits in Russia's Far Eastern region where it operates the telecom company NTC. KT's acquisition of East Telecom and Super-iMax are the first such actions by a Korean firm in Uzbekistan, which has a population of around 26 million. The annual revenue of East Telecom for this year is estimated at US$11 million, the firm said.

Earlier this month, KT celebrated the recognition of Mobile WiMax as the sixth standard third-generation mobile communication platform in an international forum in Geneva. The company, as well as several other Korean firms including Samsung Electronics and Posdata, has played a leading role in developing the technology. It is also participating in a consortium to get the Mobile WiMax business operated in Japan. KT's operating profit in the July-September period amounted to 400.4 billion won, down 7.2% from 431.6 billion won a year earlier. Sales also declined 1.9% to 2.95 trillion won.

Uzbekistan and Korea set to boost cooperation in ICT

TASHKENT. October 31 (Jahnon) - Deputy Prime Minister of the Republic of Uzbekistan, Director General of the Uzbek Agency of Communication and Informatization (UzACI) Abdulla Aripov met with the President of Korea Telecom Corporation Nam Jung-Su on 29 October. The sides discussed issues on further development of bilateral mutually beneficial cooperation in the newest areas of the sphere of information and communication technologies, Jahon reported quoting local newspapers.

Thanks to favorable investment climate and the system of legal guarantees and privileges for foreign investors created in Uzbekistan the transnational corporations Korea Telecom and Japanese Sumitomo Corporation are jointly acquiring 85% of East Telecom joint venture's shares. The 15% of shares of the joint venture belongs to Uzbektelecom joint-stock company.

East Telecom is the first communication operator in Uzbekistan, which provides services on technologies and solutions of the so-called next generation network (NGN). The main direction of East Telecom's activity is to render the complex of modern telecommunication services, including digital telephony, intellectual communication networks, organize virtual private networks and high-speed Internet access.

Korea Telecom Corporation was founded in 1892. Its annual turnover makes up US$12 billion. The company is one of the largest communication operators in Asia. It owns the biggest and technologically saturated telecommunication network of South Korea, which renders services of local, interurban and international communication, as well as data transmission.

Sumitomo Corporation is one of the oldest trade and industrial structures of Japan. It was founded in 1919. The corporation operates in many branches of economy, including the sphere of information and communication technologies. The annual turnover of the corporation makes up over US$22 billion.

During the meeting in Tashkent the sides also discussed further development of East Telecom network based on the technology of broadband wireless access WiMAX.

For more information on Uzbekistan, visit BISNIS online at http://www.bisnis.doc.gov/bisnis/country/Uzbekistan.cfm

BISNIS (www.bisnis.doc.gov) is part of the U.S. Commercial Service (www.export.gov).