Kelmer Group is an International Business Consulting company that assists entrepreneurs in their international ventures, solving all the bureaucratic, administrative, and fiscal issues, from the start-up to the day-to-day operations. We opened our first office in London in 1997,
starting as a small group of professionals with a solid consulting background who decided to gather their experience to create a new project. Since then, progressively, we ensured our presence in the most strategic worldwide markets, such as UK, Ireland, UAE, China, Hong Kong, Singapore, Vietnam, The Philippines, and even USA and Australia. Thanks to our solid network and professional team, we became the ideal one-stop-shop for internationalization.
What brought Kelmer Group to Uzbekistan?
We are always interested in exploring rapidly growing economies, it is what always drove our Group’s growth. An opportunity was presented by a young entrepreneur, Mr. Farhodjon Rasulov, who is a Representative of the Governor of Andijan, H.E. Shuhratbek Abdurahmonov, about untapped opportunities for International companies that wanted to invest in the new Uzbekistan market. As any new market, we have done a due diligence and visited Andijan in February 2019, where we had the privilege to meet with the Governor and witnessed his supportive and welcoming attitude for international business proposals.
What are the reasons to invest in Uzbekistan; and what are the main projects, sectors or factors that will drive the country’s development?
Uzbekistan is a resource-rich, populous country, strategically located in the heart of Central Asia. It should be noted that President of Uzbekistan Shavkat Mirziyoyev by his decree has approved the action strategy on priority areas of the country’s development for 2017-2021. The action strategy will be implemented in five stages, and each stage provides for approval of a separate annual state program on the strategy’s implementation in Uzbekistan, according to the decree. There is five key legal and institutional reforms: state governance, rule of law and legal reforms, liberalization of the economy, social sphere, security, religious tolerance and interethnic harmony, foreign policy.
Currently, according to the United Nations Educational, Scientific and Cultural Organization (UNESCO), the literacy rate is 97%, comparable to Singapore and other developed countries. Additionally, there are 93 local universities and 21 branches of foreign universities.
Indeed, about 67% of the population of 33.5 million people aged 15 to 64 years, the average age is 29 years, which is an important advantage. By 2035, the population is forecasted at 44 million people (an increase of 33% compared to 2019); the level of urbanization will be at least 59% (currently it stands at 50%).
Currently, the Republic of Uzbekistan has the largest able-bodied population – about 19 million people – which exceeds the number of able-bodied populations of Central Asian countries combined.
Currently, the Republic’s economy is the second fastest growing in the CIS, with an indicator of 5.1%, according to the results of 9 months of this year, growth accelerated to 5.7%. According to the Asian Development Bank, GDP growth in 2020-2021 will be about 6%.
As of the beginning of 2019, the country has sufficient gold and foreign exchange reserves of USD 28 billion (55% of GDP), and government debt of USD 17.3 billion (34% of GDP). Reserves more than cover the volume of external debt, which is an important stabilizing factor.
It is noteworthy that in 2019 Uzbekistan entered the top 20 countries in the world that achieved the greatest results in improving the business environment. It is worth noting that in the World Bank “Doing Business” 2012 ranking, Uzbekistan stood in the 166th place. In the 2020 ranking, the country achieved the best results in protecting minority investors, paying taxes, enforcing contracts and international trade. In fact, the republic moved up from 76th to 69th place in this year’s “Doing Business” ranking (among 190 countries).
In accordance with the Decree of the President of the Republic of Uzbekistan “On measures to further improve the mechanisms for attracting foreign direct investment in the economy of the republic” dated April 29, 2019 № PD-4300 foreign investors are offered state shares in 29 large enterprises, including 4 financial institutions, 2 from energy sector, 6 oil and gas, 3 chemical and other industries. In addition, the shares of Uzpromstroybank, Asia Alliance Bank and Jizzakh Plastic are put up for an initial public offering (IPO), the shares of Quartz, Aloka bank and the Uzbek Republican Commodity and Raw Materials Exchange for a secondary public offer of shares (SPO).
It is significant that the decision of the Head of State decided to introduce a visa-free regime for the entry of tourists from 86 countries of the world. In this regard, Uzbekistan is becoming the most open country for tourists among the CIS countries. For comparison, in 2017, citizens of only nine countries had a similar opportunity. In case, the number of countries with visa-free entry has been increased from 9 in 2017 to 86 in 2020 (an increase of 9.5 times).
The above measures have allowed a sharp increase in the flow of foreign citizens from 1.9 million to 5.4 million people, and by 2022-2023, it is forecasted to receive 10 million foreign citizens. It is worth noting that, according to the Gallup rating “Global Law and Order” and “Individual Report on Travel Safety”, Uzbekistan is on the 5th place in the list of the safest countries in the world for personal safety, law enforcement and travel, along with Switzerland and other developed countries.
Moreover, an “investment visa” has been introduced for investors who have contributed at least USD 200,000.
The introduction of free conversion of the national currency, the reduction of trade barriers and customs payments allowed to significantly increase the volume of trade, namely by 37% compared to 9 months of 2018, while exports grew by 45.5% and imports by 31.5%.
The Republic of Uzbekistan conducts an open, mutually beneficial, and constructive foreign policy based on the national interests of the country. Current foreign policy of Uzbekistan is formed considering the dynamic changes in the world and the region as well as large-scale reforms within the country. Main turnover partners are China, Korea, Turkey, Germany, and CIS countries.
The main export structure consists of gold, tourism energy and textile products. While machinery and chemical products are base sectors to import.
One of the greatest advantages for attracting international capital is the fact that we have significant reserves of mineral resources, more than 2,000 deposits.
Obviously, The Republic of Uzbekistan has tremendous potential for energy development. There are more than 310 sunny days a year in the country, the technical potential of solar energy exceeds 2 trillion kWh, wind energy 1 trillion kWh and hydropower 27 billion kWh.
Moreover, Uzbekistan has developed infrastructure, namely the total length of roads exceeds 184,000 thousand km, electric networks 237,000 km, railways 4,700 km, gas pipelines 13,700 km, 11 international airports, and the construction of the “dry port of Navoi” is under consideration.
Currently, the Uzbek government is implementing the Program for development and modernization of engineering communications and road infrastructure for 2015-2019, which provides for the elaboration of a single complex development strategy for the national transport industry, which meets high international standards, and ensures its broad integration into international transport communications, taking into account the long-term needs of domestic manufacturers in promoting their products to the regional and world markets.
The country is making efforts to increase the capacity of the transport system, remove existing barriers to unimpeded transit through the territory of Uzbekistan, which plays great importance for the development of international transport corridors in Central Asia.
Over the past 2 years, large-scale reforms have been carried out in the tax system, the rates of a single tax payment, VAT, property tax, social payment have been reduced, a flat taxation scale has been introduced for personal income, and some types of taxes and obligatory payments have been canceled. Moreover, the VAT rate has been reduced from 20% to 15%. Therefore, the tax burden on business entities is gradually being reduced.
The measures taken to radically improve the country’s investment climate and simplify the business environment over the past 3 years have led to a sharp increase in the number of enterprises with foreign capital, namely from 5,370 in 2017 to 9,730 by October of 2019 (an increase of 81%).
Presidential Decree № PD-4300 provides for the provision of investment residency in the Republic of Uzbekistan “Uzbekistan my second home”. It is planned to introduce a procedure for providing residence permits to foreign investors, subject to investment in the Republic of Uzbekistan
To actively attract foreign capital, there are currently tax and customs incentives, 21 free economic zones (7 pharmaceutical, 12 industrial, 1 agricultural and 1 tourism), a business ombudsman institution has been introduced, the Tashkent International Arbitration Center has been established, and a draft unified law on investments has been developed and investment activity”, which aims to combine the norms of 3 laws and about 100 by-laws regarding investments.
New Silk Road connectivity, tax incentives and comprehensive structural and regulatory reform make Uzbekistan an attractive Central Asian powerhouse. Over the last few years, Uzbekistan has made significant strides to attract more international business and investment, overhauling virtually every facet of doing business in the country in an attempt to facilitate and increase foreign direct investment (FDI). The nation’s strategic location as the main land corridor with developed infrastructure helps in booming market with high growth. There is no doubt that ongoing reforms will help to provide great opportunities to each potential investor.
What are the steps an entrepreneur should follow in its approach to the local market?
For our fellow investors who show interest in Uzbekistan, our advice is to work closely with both experienced consultants, and representatives of the country, who can support them thoroughly in every step of their business venture in Uzbekistan. We as Kelmer Group, are one of the first investors in Andijan; we have recently established our Investment Consulting office there, and we are always ready to cooperate and support any new investors.