Uzbekistan – Upcoming Business Opportunities on the back of a Strong Reform Agenda 21 January, 2020 – European Business Association (Moscow) Bruno Balvanera, MD Central Asia, Alkis Drakinos, Head of Uzbekistan
Table of Contents • Brief Introduction to EBRD • Uzbekistan Macroeconomic Overview o Attractiveness of Uzbekistan o Key Reforms o Potential Sectors of Interest o • EBRD in Uzbekistan • Business Opportunities
European Bank for Reconstruction and Development • EBRD promotes market et econom nomy and focuses on privat ate e sector tor develop velopmen ent • 71 71 Shareholders - 69 69 countries, EU & EIB • 38 38 countries of operations • Larges gest single gle inve vest stor or in the region from central Europe to central Asia and the southern • Established in 1991 1991 and eastern Mediterranean • 43 43 resident offices, 6 regional offices, HQ in London • AAA AAA-rated ed (S&P, Moody’s, Fitch) • Capital base of EUR 30 bill llion ion • Above EUR 140 billi lion on invested in over 5,650 50 projects jects since nce 1991* • 79% in private ate sector or *Data as of January 1, 2020
From Morocco to Mongolia
Regional Context UZB KAZ KGZ TKM TJK RUS Population (million) 32.9 18.2 6.3 5.8 9.1 144.5 58.3 170.5 8.0 40.7 7.5 1,658 GDP (US$ billion, nominal / PPP) 231.4 508.6 24.5 112.7 31.3 4,051 1,741 9,331 1,281 6,967 827 11,289 GDP per capita (US$, nominal / PPP) 7,020 27,831 3,878 19,270 3,444 27,147 GDP Growth Forecasted*: F2019 5.5% 3.9% 4.3% 6.3% 7.0% 1.1% F2020 5.8% 3.6% 3.7% 6.0 6.3% 1.7% CPI, IMF (Oct’19) 15.2% 2% 5.3% 1.3% 13.4% 7.4% 4.7% Unemployment 5.2% 4.9% 7.2% 3.9% 10.9% 4.7% CPI, Transparency 158 th 124 th 132 nd 161 st 152 nd 138 th Doing Business 2020 69 th 25 th 80 th N/A 106 th 28 th Total External Debt to nominal GDP 35% 92% 99% 0.02% 80% 27% Total Reserves (includes gold, US$ billion) 27.1 31.0 2.2 N/A 1.3 468.6 2018 data unless otherwise stated * Regional Economic Prospects in EBRD Regions published by EBRD World Bank Data unless otherwise stated Macroeconomic Attractiveness of Opportunities & Key Business Key Reforms EBRD in Uzbekistan Overview Uzbekistan Sectors Opportunities
Sector Overview Agricu icult lture • Historically focused on cotton and wheat; moving towards vegetables and fruits production GDP Structure as of Oct, 2019 • Opportunities: animal farming, seeds and seedlings, mills, technical solutions, packaging Trade, Construction accomodation and 6% food services Service ices 6% Industry • Driven by transportation, trade and financial services 27% Transportation, • Opportunities: financial services, tourism, various inexistent storage and Agriculture, forestry communication Other services services in Uzbekistan and fisheries 7% 19% 26% Net taxes on Indust stry products • Driven by manufacture of food, textile and chemicals, mining and 9% quarrying • Opportunities: oil & gas related, import substitution, construction Macroeconomic Attractiveness of Opportunities & Key Business Key Reforms EBRD in Uzbekistan Overview Uzbekistan Sectors Opportunities
Strengths of Uzbekistan • Reserves (compared to world) • Gold 10 th • Natural gas & oil 24 th • Copper 10 th Natu tural ral • Uranium 16 th Resources • Total mineral resource potential is at US$ 5.7 trillion • Availability of locally produced raw materials for various industries • 33.7million in 2019 • Annual growth at 1.7% • 14.6 million of economically active population Grow owing ing • Median age at 29.1 Population Po ulation • CISFTA between 9 states with total population of 240 million • Shanghai Cooperation Organization with 8 states and total population of 3 billion • Belt and Road Initiative proposed by China which will create logistics of a unified large market Cooperati eration on Macroeconomic Attractiveness of Opportunities & Key Business Key Reforms EBRD in Uzbekistan Overview Uzbekistan Sectors Opportunities
Major Challenges Underdeveloped financial sector and legal frameworks Socio-economic • Dominated by state owned • Reliance on commodity • Double landlocked – two banks (55% of the all and cultural exports (gold exports make countries in-between to commercial banks assets 45% of the total) differences reach the sea are controlled by the top 3 • Exchange rate fluctuations • No sea ports SOBs) • Average monthly wage of • High economic dependence • The closest port is Bandar USD 226 (2018) • UZSE - with market cap of on China and Russia (35% of Abbas, Iran. only USD 4.9bn - 9.7% of • Urban population of total trade) GDP 50.4% • Historically, many entities • Insurance market only • General cultural and/or sectors are state accounts to 0.4% of GDP differences in doing controlled; some of which may • Most regulations are being business show forms of protection developed Logistics Structure of the economy Macroeconomic Attractiveness of Opportunities & Key Business Key Reforms EBRD in Uzbekistan Overview Uzbekistan Sectors Opportunities
Taxes in Uzbekistan Personal income tax of 12% (flat) • • General corporate tax rate of 12% • Property tax (excluding land) is at 2% • Value added tax rate of 15% • Tax treaties with over 50 countries Tax Code in the new edition is in force as of • January 1, 2020 Macroeconomic Attractiveness of Opportunities & Key Business Key Reforms EBRD in Uzbekistan 9 Overview Uzbekistan Sectors Opportunities
Free (or Special) Economic Zones 11 11 industrial zones • Foreign investors have access to Free Economic Zones Exports of at least 25% of production by the end of o 8 8 pharmaceutical zones 2 nd year 1 1 agricultural zone 50% from subsequent years o 1 1 tourism and hospitality zone • Exemptions are: Land tax, income tax, tax on property of legal o entities and various mandatory contributions Customs payments (except clearance fees) for o equipment, raw materials Periods of exemptions dependent on matching • investment volume Macroeconomic Attractiveness of Opportunities & Key Business Key Reforms EBRD in Uzbekistan 10 Overview Uzbekistan Sectors Opportunities
Traveling to Uzbekistan • Visa free regime with 65 states including all EU members Visa free regime with Russia and most CIS countries o Additional 22 states have been approved effective January 1, 2020 o • e-visa regime for 77 jurisdictions • EU citizens can stay in Uzbekistan for 30 days without visa Macroeconomic Attractiveness of Opportunities & Key Business Key Reforms EBRD in Uzbekistan 11 Overview Uzbekistan Sectors Opportunities
Key Reforms Feb ‘17 J a n u a r y , 2 0 1 9 Feb’19 Mar’19 May’19 Aug’19 Sep’17 Feb’18 • On going ng reforms: orms: • Land acquisition laws • Political Reforms • Price liberalizations • Privatizations • Sector strategies and road maps • Tax reforms • Additional FEZs • Determined to join WTO Macroeconomic Attractiveness of Opportunities & Key Business Key Reforms EBRD in Uzbekistan Overview Uzbekistan Sectors Opportunities
Potential Sectors of Interest • Ongoi oing Priv ivatisat atisatio ions Banks o Chemical sector o Construction sector: cement o • Ener ergy & I Infrastructure astructure Renewable energy: wind o Development of hydro power and electric transmissions o Introduction of toll roads to Uzbekistan o Development of waste water treatment facilities o Investment Promotion Agency • Developm lopment t of Tourism ism & Services ices www.invest.gov.uz Hospitality - Development of Silk Road cities o Healthcare o Education o Macroeconomic Attractiveness of Opportunities & Key Business Key Reforms EBRD in Uzbekistan 13 Overview Uzbekistan Sectors Opportunities
EBRD Product Flexibility Equity Debt • Loans to the private sector (up to 35% • Investing with majority sponsor to syndicating the rest), including SME reduce equity burden and add partnership value. No more than 25% • Debt co-financing, working with commercial banks and IFIs • Common or preferred stock • Project finance loans (incl. PPP) • Privatisation and initial public offering (IPO) • Fixed/floating rates • Mezzanine equity and subordinated • Syndication under preferred creditor debt status • Infrastructure funds • Access to capital markets • Private equity and VC Funds Technical Cooperation EBRD brings in additional financial capital and technical assistance (TC) to economically viable projects
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