EUROUZ — MONTHLY REPORT ON UZBEKISTAN (September 2020)
By: Uzbek Review
Tags: Business, Digest, Uzbekistan, Europe, Eurouz

4. MARKET DEVELOPMENT BY SECTORS

4.1 INDUSTRY AND CONSTRUCTION

Three new interchanges will be added to the capital’s road infrastructure

Three overpasses and a 6-kilometer road will connect two districts of the capital city. The goal of the project traffic optimization to the most populated district in Tashkent also serving as main road transit for the city center.

The project developed by the Turkish transport engineering company Kalyon Ulaştırma is estimated at more approx. USD 27.1 million. Funds have been allocated from the state budget. The interchanges will be built by Grand Road Tashkent LLC.

Construction of Wyndham hotel started near the Tashkent airport

The press service of the Tashkent City Administration reported that Wyndham group began the construction of its third hotel in Tashkent — Wyndham Garden Tashkent Airport.

The construction, which was estimated at approx. USD 1.9 million, is being carried out by Alta Vetta in cooperation with the German MirAZ Capital GmbH. The amount of foreign investments is USD 500,000. The hotel is expected to open by the end of 2022.

USD 300 million to be allocated for road reconstruction in Samarkand

The regional khokimiyat has already announced a USD 300 million tender for the reconstruction and modernization of Amir Temur, Bustonsaroy, and Rudaki streets. According to the terms, out of this amount, USD 210 million will be spent on road construction and

USD 90 million on water supply. Planting flowers, reparation of roads, and sidewalks are considered. Part of the funding is sourced from The Abu Dhabi Fund for Development (ADFD)

4.2 TOURISM AND AVIATION SECTOR

Uzbekistan Airways restores international flights

Uzbekistan Airways announced the phased resumption of flights on a regular basis to and from the following cities: Dubai, Frankfurt, Almaty, Bishkek and Istanbul. Passengers from the aforementioned cities will have to provide a certificate with a negative test result for COVID-19 in English or Russian, valid no more than 72 hours before the flight. In the absence of a negative test result, passengers will be denied check-in for their flight.

A government decree adopted on the implementation of the second stage of the “Amirsoy” ski resort construction near Tashkent

In accordance with the Decree of the President of the Republic of Uzbekistan “On measures to accelerate the development of tourism by introducing a special management procedure in the Bostanlyk region”, the goal to implement the second stage of the Amirsoy ski resort complex construction was determined. The project was adopted at the expense of the initiator and foreign financial institutions attracted by the initiator, for a total amount of EUR 75 million. To ensure the timely implementation of this project, the State will provide assistance in the construction of the necessary infrastructure and communications.

USD 500 million to be invested for the development of mountain tourism

A master plan of the international all-season resort “Beldersay-Chimgan-Nanay” has been developed. The plan is developed by a consortium of French companies “Geode”, “Manie Lives”, “Egis”, “Patriarche”, “Epode” with the support of the Private Sector Study and Aid Fund (FASEP). The master plan aims to attract up to USD 500 million in investment, including funds from government financial institutions of France. They will be used for the development of tourism, road transport, and communal infrastructure.

4.3 AUTOMOBILE SECTOR

Two KIA models to be produced in Uzbekistan

Starting in November 2020, the ADM-Jizzakh factory starts the production of the two models of KIA — SELTOS and K5. Cars manufactured in Uzbekistan will be exported to CIS countries through partner dealer networks. The production line was created with the participation of the Russian regional headquarters of KIA Motors.

Uzbekistan imported electric vehicles worth USD 1.7 million in 2020

From January to August, Uzbekistan imported 73 electric vehicles worth USD 1.7 million. According to the State Statistics Committee, 50 electric vehicles were imported from China, 12 from the Republic of Korea, 11 from Germany, the United Arab Emirates, Russia and Georgia. As from January 1, 2019, imported electric cars are exempted from import duties , and from July — from excise tax. Since January, the government planned to introduce a 10% duty on imports of electric vehicles, however, the plans were not implemented.

Chinese Haval cars entered the Uzbek market

On September 21, the Chinese automobile brand Haval launched its cars in the Uzbek market. It offers premium SUVs and crossovers, compliant with European and global quality standards. SHOSH AUTOTRADE GROUP (ТМ SHARQ MOTORS) has become the official distributor of Haval cars in Uzbekistan. Cars delivered from China are available with no customs duties. After payment, the car is transferred to the buyer immediately.

4.4 HEALTHCARE

ADB and UNICEF hand over USD 952,000 worth of medical supplies to Uzbekistan’s Ministry of Health

UNICEF with financial support from ADB and in consultation with the Ministry of Health of Uzbekistan has procured Personal Protective Equipment (PPE) for health workers who are providing medical service to COVID-19 patients. This includes 71,100 coveralls and 8,000 boot covers, as well as RNA mini extraction kits which provide the fastest and easiest way for lab testing. All delivered equipment and PPE were distributed to all regions of Uzbekistan, including remote areas.

4.5 AGRICULTURE AND FOOD

Clusters and farmers to receive USD 50 million in loans to buy cotton harvesters

The resolution of the President of Uzbekistan Shavkat Mirziyoyev on measures to financially support the mechanization of the harvest of raw cotton has been adopted in September. According to the decree, the share of the Fund for Reconstruction and Development in the authorized capital of Agrobank will be increased by USD 50 million. These funds will be used to provide loans to cotton-textile clusters and other economic entities for the purchase of domestically produced cotton-harvesting machines at the Central Bank base rate.

Uzbekistan aims for USD 5 billion worth of agricultural export in the coming years

Uzbekistan plans to bring the export of agricultural products to USD 5 billion in the coming years by widening the export destinations and modernizing the sector. President Shavkat Mirziyoyev has instructed the government to increase the scientific potential of the agricultural sector and to introduce an international certification system in order to achieve the export target. Uzbekistan will pay special attention to negotiations with Lithuania, Latvia, Ukraine, Azerbaijan, Egypt, Qatar, Mongolia, Afghanistan, and other countries to export fruits and vegetables.

4.6 INVESTMENT AND FINANCE

Capital Market Development Agency moves towards collaboration with the DIFC

The Capital Market Development Agency, with the support of the Ministry of Investment and Foreign Trade of the Republic of Uzbekistan, held the first bilateral negotiations with the Dubai International Financial Center (DIFC) headed by Mr. Arif Amiri, Director General of the DIFC department.

Mr. Amiri expressed his approval of bilateral relations between Uzbekistan and the UAE, as well as the Uzbek government’s effort in the development of the capital market. The parties agreed to establish partnerships in terms of effective development and modernization of the regulatory framework of Uzbekistan, which will allow companies and citizens of Uzbekistan to gain access to world financial markets through the infrastructure of the DIFC.

The first bank from Uzbekistan will connect to the Russian analog of the SWIFT system

The National Bank will connect to the financial messaging system (SPFS) of the Bank of Russia. SPFS is a specialized channel for transmitting electronic messages on financial transactions. By connecting to the SPFS, the National Bank of Uzbekistan will correspond to international standards by ensuring a) high speed of data transfer, b) protection of financial transactions, c) flexibility, and d) efficiency in mutual settlements and information exchange on interbank transactions. The bank expects that this will also create additional convenience in customer service, modernize settlement and payment processes, reduce costs for interbank communications and diversify opportunities for cooperation with foreign financial institutions.

4.7 BUSINESS

Andijan to launch production of Nike and Adidas shoes

Uzcharmsanoat Association has concluded a number of agreements with Nike and Adidas. The production of sports shoes will be launched in the Andijan region. It is planned to produce 3 million pairs of sneakers under the world-famous brand at the SinoInternational JV LLC plant through outsourcing contracts. 15 new export markets are expected to open over the next three to five years, mainly in Europe and Southeast Asia.

EBRD provides a loan of USD 50 million to Bank “Asaka” to help small businesses of Uzbekistan

The EBRD is scaling up its support to small and medium-sized enterprises (SMEs) in Uzbekistan. A loan of USD 50 million provided to Bank “Asaka”, is intended to stimulate the business activity of small and medium-sized domestic companies affected by COVID-19. The EBRD funds will also contribute to the further commercialization, efficiency, and competitiveness of Asaka Bank, paving the way for its eventual privatization.

EBRD pledges additional USD 40 million in support of Uzbek SMEs

The package will consist of a USD 30 million loan to SMEs and a USD 10 million loan for women entrepreneurs under the EBRD’s Central Asian Women in Business (WiB) program. The EBRD funds will also contribute to the further commercialization, greater efficiency, and competitiveness of Ipoteka Bank, paving the way for its eventual privatization.

4.8 INDUSTRIAL INFRASTRUCTURE

Jizzakh Petroleum announces major step towards the construction of a new gas chemical complex in Uzbekistan based on MTO technology

The launch of a project to build a new chemical complex in Uzbekistan based on MTO technology (‘The Project’) was announced by Jizzakh Petroleum. It was decided to build the plant in the Bukhara region of Uzbekistan, where it will operate using domestic feedstock. This will enable natural gas monetization via the production of export-oriented and high value-added products. The plant’s location was determined by the presence of competitive feedstock and energy supplies, suitable infrastructure, and proximity to key markets across Europe and Asia, consolidating the role of Uzbekistan as the energy leader in the region. According to the feasibility study, the estimated cost of construction is USD 2.8 billion.

New facility commissioned at Mubarek Gas Processing Plant

A new 4th string of the propane-butane mixture production unit (UPPBS) was launched at the Mubarek Gas Processing Plant, which will make it possible to annually produce 38.4 thousand tons of liquefied gas. The production will satisfy the growing demand for liquefied gas from industrial enterprises, housing and communal services of the republic.The project was financed by Uzbekneftegaz for USD 58.25 million with a payback period of 6 years

(2021–2026).

Third 650 MW combined cycle gas turbine plant to be built at Navoi TPP*

An agreement was signed with the Japan International Development Agency (JICA) for the implementation of an investment project for the construction of a third combined cycle gas turbine plant. The Agency will allocate 128.246 million yen (USD 1.18 billion) as a loan for 30 years with a 10-year grace period.

*See Appendix section for detail of JICA financed projects in Uzbekistan’s energy sector

JICA to fund Phase 2 of the Electricity Capacity Building Project in Uzbekistan*

Within the framework of the project, JICA provides consulting services; supply and repair of components, materials, spare parts and. Taking into account interest payments during the investment period and unforeseen expenses, the total loan amount is estimated to be 36.621 million Japanese yen

As an exception, JSCs Navoi TPP and Turakurgon TPP are allowed to conclude direct contracts without tenders with Japanese companies Mitsubishi Hitachi Power Systems Ltd. and with Mitsubishi Corporation, and JSC Tashkent CHPP — with Mitsubishi Hitachi Power Systems Ltd. and Itochu Corporation — for the supply and repair of components, materials, spare parts and equipment for combined cycle plants, gas turbines, main and auxiliary equipment and the provision of technical and consulting services outside Uzbekistan

*See Appendix section for detail of JICA financed projects in Uzbekistan’s energy sector

Masdar Energy to analyze the wind power potential of the Navoi region

Masdar Energy (UAE) installed four meteorological masts to study wind potential in the Tamdy district of the Navoi region. According to the Ministry of Energy, this is the next stage in the project of building a 500 MW wind power plant in the area. The results of the wind capacity study will enable to complete the feasibility and finance study of the project, which will form the basis for the conclusion of credit agreements with international financial institutions.

ACWA Power to build a wind farm near Bukhara for USD 1 billion

ACWA Power (Saudi Arabia) has installed 10 meteorological masts to study the wind potential in Peshku and Gijduvan districts of the Bukhara region, where the company will build wind power plants (WPPs) with a total capacity of 1000 MW. The project will be built by attracting direct investment in the amount of USD1 billion.

Cengiz Energy Invests USD 150 million in Uzbekistan Power Plant

Turkey’s Cengiz Energy will establish a natural gas combined cycle power plant in Uzbekistan with an investment of USD150 million.The plant, with a capacity of 240 megawatts, will be built in Tashkent under an investment agreement between Uzbekistan’s investment and foreign trade ministry, the country’s National Electric Networks (JSC) and Cengiz Energy. The power plant will be completed in 12 months. The natural gas to be used in the power plant will be supplied by Uztransgaz, Uzbekistan’s gas supply company.

China to restore the power line between Uzbekistan and Tajikistan for USD 25 million

China’s Shanghai Electric Power Transmission & Distribution has won a tender for the restoration of a 500 kV transmission line between Uzbekistan and Tajikistan. The project worth USD 25 million will be financed by the Asian Development Bank.

WB approves funding for the construction of a solar power plant in the Navoi region

The World Bank and the International Finance Corporation (IFC) allocated funds for the construction of a photovoltaic (solar) power plant in the Navoi region. The project is part of the Scaling Solar program, aimed at attracting private investment in the development of solar energy usage. The construction of the power plant has a financial guarantee of the International Bank for Reconstruction and Development (IBRD) of up to USD 5.1 million. The IFC provided a loan of USD 41 million. The project will also be the first World Bank guarantee operation in Uzbekistan.

VEB.RF may finance the modernization of HPP cascades in Uzbekistan

On September 17, negotiations between the Minister of Energy of Uzbekistan Alisher Sultanov and the Chairman of State Development Corporation VEB.RF Igor Shuvalov took place. During the negotiations, the parties discussed promising projects for expanding cooperation in the fuel, energy, oil and gas industry. These include new projects worth EUR 78.4 million on modernizing the existing HPPs — Chirchik, Kadyrinskaya, Urta-Chirchik and Tashkent HPP cascades.

ADB approved a USD 200 million loan to improve the energy sector of Uzbekistan

The service quality of Uzbekistan is poor and unreliable due to low transmission capacity and outdated generation and distribution assets. The energy sector has also struggled to attract new investments due to its weak financial performance. The government has initiated structural reforms to improve the regulatory capacity and financial sustainability of the energy sector by taking steps to reduce greenhouse gas emissions and improve energy efficiency. ADB’s program is supporting these reforms aimed at increasing private sector participation in electricity generation to at least 15% in terms of capacity, as well as 99% in increasing revenues by 2023. The program was developed jointly with the French Development Agency (FAD), which will provide co-financing of EUR 150 million.

4.9 COMMODITIES & TRADE DATA

Turkmen gasoline ECO-93 offered on Uzbekistan commodity exchange for the first time

Imported Turkmen gasoline ECO-93 appeared on the Uzbek Republican Commodity and Raw Materials Exchange. The starting price is 600 thousand soms (approx. USD 58) per 100 kg. The gasoline supplier is Nara-Komfort Servis LLC, registered in 2011 in the Kashkadarya region.

Uzbekistan and Kyrgyzstan intend to bring mutual trade turnover to USD 1 billion

Uzbekistan and Kyrgyzstan plan to increase trade turnover to USD 1 billion per year. Countries are planning to increase the capacity of roads at border checkpoints. By digitalizing the processes of customs, sanitary, transport and border control, the parties want to improve conditions for the transit of passengers, transport and goods. The issue of creating joint logistics hubs is being studied.

4.10 ENERGY AND MINING SECTOR

Uzbekistan extracts about 3.5 thousand tons of uranium per year

According to the statistics on natural uranium production, Uzbekistan currently ranks 5th in the world in terms of uranium production and 10th — in terms of uranium reserves. Uranium produced in Uzbekistan is exported in full.

4.11 EDUCATION

President signs the Law “On Education”

According to the new law, Uzbekistan divides all types education to the following types:

Pre-school education and training;

General secondary and secondary specialized education;

Vocational education;

Higher education;

Postgraduate education;

Retraining and advanced training of personnel;

Extracurricular education.

Non-governmental educational organizations can be established by their founders after receiving a license from the State Education Inspectorate. The new law declared the previous law dated August 29, 1997, “On the National Training Program” and “On Education” invalid.