Republic of UzbekistanRepublic of Uzbekistan::

WWorld's orld's sixthsixth largest cotton producer ( largest cotton producer (20020055/2006 – more /2006 – more than 3.5 million tons)than 3.5 million tons)SSecond largest cotton exporter after the United Statesecond largest cotton exporter after the United States of of AmericaAmerica

About State Joint-Stock Company

“O’zbekyengilsanoat” SJSC “O’zbekyengilsanoat” was established in July

1, 2002 by the Decree of the President of the Republic of Uzbekistan #UP-3102 under the bases of the Association of Light Industry of Uzbekistan (former Light Industry Ministry of the Republic of Uzbekistan);

Today SJSC “O’zbekyengilsanoat” provides:- one third of job places in the industrial sector;- more than 50%of the total volume of consumer goods;- approximately 20% of the total volume of industrial production.

SJSC“O’ZBEKYENGILSANOAT”

SJSC“O’ZBEKYENGILSANOAT”

Knitting Branch

Knitting Branch

Textile Branch

Textile Branch

PorcelainBranch

PorcelainBranch

Garments Branch

Garments Branch

About State Joint-Stock Company

“O’zbekyengilsanoat” ORGANIZATIONAL CHART

Infrastructure Enterprises

Infrastructure Enterprises

As of May 1, 2007: total number of enterprises – 202.

Silk Branch

Silk Branch

About State Joint-Stock Company

“O’zbekyengilsanoat”

Existing Production Capacities of SJSC “O’zbekyengilsanoat” Enterprises:

- Cotton yarn (thousand tons) – 282,6;- Knitted fabric (thousand tons) – 37,2;- Woven fabric (million meters) – 274,0;- Apparel (million pieces) – 183,0;- Hosiery products (million pairs) – 30,04;- Silk yarn (tons) – 1900.

0

50

100

150

200

250

300

350th

ous.tons

Uzbekistan Cotton Fibre Processing Capacities

Modern production capacities Total production capacities

5,25

37,7

119,2

209,3

334,7

398,17

465,6

633,3

698,6

748,6

847,8

943,8

1049,8

0

200

400

600

800

1000

1200

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Dynamics of Attracted Foreign Investments in Uzbekistan

mln. USD

Uzbekistan Textile Industry Exports

Dynamics

0,0

50,0

100,0

150,0

200,0

250,0

300,0

350,0

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

mln. USD

Capabilities

More than 60 joint ventures established with partners from Germany, South Korea, Japan, Switzerland, Turkey, U.S.A., Singapore, India, etc.

More than 30 projects on production of ready-to-wear clothes with annual production capacity more than 30 million pieces of ready-to-wear clothes (sports shirts, underwear, children apparel etc.)

Latest Achievements

Increase in the share of domestic cotton fiber processing up to 30 % in 2006;

Modern textile complexes embracing finishing, knitting and garments lines have been launched;

In 2004-2006, 42 new projects with the total value of USD 340 mln. have been implemented;

Increase of the EU market share of Uzbek yarn up to approximately 9%.

Main Approaches

for Investment Projects Financing

Direct investments of the project initiators;Direct investments of the project initiators; Acquisition by the foreign participants of the Acquisition by the foreign participants of the

project of shares of Uzbek enterprisesproject of shares of Uzbek enterprises offered for offered for sale;sale;

Loans provided by foreign banks & local Loans provided by foreign banks & local commercial banks in Uzbekistan;commercial banks in Uzbekistan;

Own loans of the project participants;Own loans of the project participants; Leasing operations & others.Leasing operations & others.

Alternatives Proposed for Organization of Textile Production

To use existing textile facilities, which are installed o use existing textile facilities, which are installed with obsolete technological equipments, by their with obsolete technological equipments, by their replacement with up-to-date textile technology;replacement with up-to-date textile technology;

To useo use buildingsbuildings suitable for production, which are suitable for production, which are not being used, by furnishing them with necessary not being used, by furnishing them with necessary textile machinery & equipments;textile machinery & equipments;

To use incomplete construction objects or carry out o use incomplete construction objects or carry out construction works for the organization of textile construction works for the organization of textile complexes. complexes.

Favourable Framework for Foreign Investors

Availability of vast stocks of raw materials, specifically, high quality cotton fibre;

Low-cost energy resources; Qualified and relatively inexpensive labour

resources; Advanced network of communications; Developed system of banking and legal services; Availability of vast international markets for

textile products and apparel.

Cost for Main Production Factors in Uzbekistan

Water – USD 0,022 / m3 Natural Gas – USD 0,04 / m3 Electricity – USD 0,029 / Kw/h Fuel Oil – USD 0,55 / lt Diesel Oil – USD 0,55/ lt

$0,48 $0,67

$0,37

$2,88

$7,10

$3,80

$0,22

0,00

1,00

2,00

3,00

4,00

5,00

6,00

7,00

8,00

US

D

Textile Industry Labour Cost Comparison (as of 2006)*

Note: Labour costs in Europe comprise around 21-35$/hour, in the USA – around 16$.*2006 data from http://www.wernertex.com/

US$/hour

Energy Cost Comparison (as of 2006)*

$0,50$0,54

$1,03

$0,71

$0,42

$0,85

$0,92$0,94

$0,63

$0,26

$0,03

$0,16

$0,31

$0,21

$0,23$0,28

$0,21

$0,14$0,08

$0,20

$0,23

$0,22

$0,21

$0,34$0,34$0,31$0,29

$0,43

$0,37

$0,00

$0,20

$0,40

$0,60

$0,80

$1,00

$1,20

China India Pakistan Turkey South Korea USA France Switzerland Germany Poland Uzbekistan

Natural gas (cubic meter) Fuel Oil (kg.) Diesel Oil (litre)

US$/Unit

Note: Data on natural gas in India, Pakistan, Korea and Germany is not available•International Energy Agency "Key energy statistics 2006•"

•International Energy Agency "Key energy statistics 2006•"

Electricity Cost Comparison (as of 2006)*

$0,05

$0,07

$0,04

$0,09

$0,05

$0,04

$0,05 $0,05

$0,06

$0,029

$0,00

$0,01

$0,02

$0,03

$0,04

$0,05

$0,06

$0,07

$0,08

$0,09

$0,10US$/kWh

*http://www.unesco.org/water/ http://www.adb.org/Water/Indicators/Profiles

Water Cost Comparison (as of 2006)*

$0,15 $0,16$0,26

$1,50

$0,60$0,51

$1,23

$1,91

$0,70

$0,02$0,00

$0,50

$1,00

$1,50

$2,00

$2,50

China

India

Pakist

an

Turke

y

South

Korea

USA

France

German

y

Poland

Uzbek

istan

US$/m3

Textile Production Average Added Value

1,06$/1kg.

+1$

5-10$/3-5 pieces

2$/0.88kg.

2,4$/0.77kg.

+0,4$

+2,6-7,6$

+4-9$ (min.)

Support and Special Favorable Conditions Created by the Uzbekistan Government

stable legal framework for economic activity of enterprises;

simplification of licensing, registration and certification procedures;

significant privileges, preferences and guarantees for foreign investors.

Privileges for Private Foreign

Direct Investments: Starting from July 1, 2005, enterprises, attracting direct private foreign investments are exempted from: income tax, income tax, property tax, property tax, tax on development of a social infrastructuretax on development of a social infrastructure;;single tax for micro-firms and small enterprisessingle tax for micro-firms and small enterprises;; levylevy to the Republican Road Fund to the Republican Road Fund;;at following volume and periods:•from $300, 000 up to $3, 000, 000 - for the period of 3 years;•from over $3, 000, 000 up to - for the period of 5 years;•over $10, 000, 000 - for the period of 7 years.

Starting from June 1, 2006, enterprises, of the SJSC «O’zbekyengilsanoat» are exempted from property tax

Special Privileges and Preferences for Enterprises of

the Textile Industry

until January 1, 2009, the enterprises with foreign investments specializing in production of garments and apparel and hosiery products are exempted from all kinds of budget taxes and duties, except for VAT;

enterprises, included into the State Investment Program and undergoing re-equipment process, are exempted from the payment of customs duties on imports of technological and auxiliary equipment, technological accessories and spare parts for industrial needs.

Special Privileges and Preferences for Enterprises of

the Textile Industry

until January 1, 2009, enterprises importing chemicals, dyes, accessories and other auxiliary materials not produced domestically are exempted from payment of customs duties;

until January 1, 2009, for the enterprises with foreign investments when they purchase cotton fiber for their own production usage, 15 percents discount is given from the price set at the Liverpool Cotton Exchange “A” Index and transaction is made in hard currency;

and additional 5 percent discount is granted to the exporter-enterprises for purchase of cotton fiber, which have a full production cycle (from yarn to finished goods).

TallinnTallinnRigaRiga

KlaypedaKlaypeda

BrestBrest

ChopChop

IlichevskIlichevsk

ShanghaiShanghai

NahodkaNahodka

PotiPoti

BandarBandarAbbasAbbas

UZBEKISTAN

UZBEKISTAN

RUSSIAN FEDERATION

KAZAKHSTAN

IRAN

AFGHANISTAN

CHINA

UKRAINE

BELARUS

MONGOLIA

INDIAPAKISTAN

TURKEY

Transport corridors of UzbekistanTransport corridors of Uzbekistan

TASHKENT(Kazakhstan) (Russia) Black Sea

4 days

IstanbulNovorossiyskKandvagash

900km/10 days21 00km/6 days

(Russia)

(Latvia)

(Estonia)

1200km/12 days

1300km/15 days

1400km/17 days

Europe

St.Petersburg

Riga

Tallinn

Baltic Sea

European Port

(Kazakhstan) (China) LianyungangYellow Sea

3 days7000km/22 daysBusan

Busan(Russia) Nakhodka

7400km/25 daysEastern Sea

Eastern Sea3 days

4 days

Osaka, Imabari

(Turkmenistan, Iran, Turkey)Mersin

Istanbul

Denizli

Izmir

(Turkey)(Turkey)

(Turkey)

4750km/10 days

5100km/12 days5250km/13 days

5400km/14 days

Mediterranean Sea5 days

3 days Ashdod

European Port

(Iran)B.Abbas

Indian Ocean

Indian Ocean

Indian Ocean, Malaks Channel

Karachi

Colombo

Singapore

15 days

17 days

20 daysSouth-Chinese Sea,

East-Chinese Sea

Busan

Nagoya

Ashdod–10 daysLeixoes–16 daysBari–21 daysGenoa–21 daysOnteniente–21dsTrieste–21daysGioia Tauro–21daysPrato–21days

Valencia–21daysBarcelona

Hamburg–4 daysRotterdam–5 daysAntwerp–6 daysHull–7 daysLeixoes–15 daysValencia–15 daysBarcelona

Atlantic OceanMiami–25days

L.A.–30 days

Rome–6 days Genoa–6 days

Valencia–7 days Barcelona–7days Antwerp–8 days Leixoes–12 days

Rotterdam–13 days Hamburg–13 days

Manchester–14days

TRANS ROUTE

Sea areaLandMain stations and ports

State Joint-Stock Company "O'zbekyengilsanot" 26

THE LIST of Investments Project Proposed for Establishing Textile Facilities

with Participation of Foreign Investments

Name Product Range Annual Production Capacity

JSC “Bukharatex”

Bukhara City

Cotton spun yarn, finished woven fabric

a) 19700 tons of cotton yarn,

b) 142 mln. meters of woven fabric

JSC “Babur”

Andijan City

Cotton spun yarn, grey and finished woven fabric

a)11,0 thousand tons of yarn;

b) 42,8 mln. r. m. of grey woven fabric;

c) 71,3 mln. r. m. finished woven fabric;

State Joint-Stock Company "O'zbekyengilsanot" 27

THE LIST of Investments Project Proposed for Establishing Textile Facilities

with Participation of Foreign Investments

Name Product Range Annual Production Capacity

JV “Lola Model”

Gulistan City, Syrdarya Region

Apparel/knitwear 5,0 mln. apparel items

JV “Sharq Model”

Tashkent City

Apparel/knitwear 2,0 mln. knitwear items

JV “Iskavutteks”

Namangan Region

Cotton spun yarn,

knitted fabric

a) 5000 tons of cotton yarn,

b) 2500 tons of knitted fabric

JV “Oqsaroy toqimachi”

Shahrizabz City

Qashqadarya Region

Cotton spun yarn,

knitted fabric

a) 4800 tons of cotton yarn

b) 2000 tons of knitted fabric

INFORMATION on taxes, payable in Uzbekistan

For SMEs simplified taxation system is envisaged on the voluntary basis. It envisages single tax payment instead of all common state taxes including levies to the non-budget Pension Fund, Republican Road Fund and Republican Fund of School Education Development, as well as local taxes and charges, charged by local authorities, excluding:

Fee on commercial activity, including licensing fees; Registration fee; Compensation payments for environmental pollution and wastes.

Single Tax Payment rate – 10% of volume of sales.

INFORMATION

on taxes, payable in Uzbekistan

Income Tax 10% of the income

Value Added Tax 20% of sales volume, value of imported products, works and services

Tax on Development of Social Infrastructure

8% from the net profit of enterprise

Tax on Dividends 10% of the dividends and interests

Property Tax 3.5% of the average annual depreciated cost of assets

INFORMATION on taxes, payable in Uzbekistan

Land Tax The rate varies

Excise Tax The rate varies

Water charge 1% of the volume of water resources used

INFORMATION on taxes, payable in Uzbekistan

Levy to the non-budget Pension Fund

0.7% of the net sales volume

Levy to the Republican Road Fund

1.5% of the net sales volume

Levy to the Republican Fund of School Education Development

1% of the net sales volume

State Joint-Stock Company “O’zbekyengilsanoat ”

45 Babur Str., Tashkent, 700100, Uzbekistan

Tel: +998 (71) 253-92-91Fax: +998 (71) 139-17-11http://www.legprom.uz

Thank you

for your attention!