December 5, 2005
Information on main directions and measures of further reforming and liberalisation of the economy of the Republic of Uzbekistan
President of the Republic of Uzbekistan I.Karimov on January 28, 2005 in his address on the Joint Session of the Senate and Legislative Chamber of Oliy Majlis of the Republic of Uzbekistan had set following main directions of further reforming and liberalization of republic?s economy:

1. Ensuring macroeconomic stability and sustainable economic growth.

2. Ensuring sizeable development of private sector and increase its share the economy by limiting interference of government agencies into in private business practice, increasing legal protection of entrepreneurs, providing fringe tax benefits and preferences.

3. Deepening and expanding the works on developing the small business and the farming. It envisages diminishing and simplification of the permission procedures for some kinds of activity, implementation the Program of reorganization of unprofitable or low-efficient agricultural entities into farms for the period of 2005-2007.

4. Deepening the reforms in banking and financial systems through improvement of monetary policy, strengthening of money market, increasing of financial stability and capitalization of banks, extending crediting of economic entities, providing financial assistance to the entities of small-scale business and private entrepreneurship.

5. Reforms in the field of housing and utility services, in particular through implementing of comprehensive system of taking stock of rendered utility services and organizing the production of modern metering devices, organizing effective functioning structure of running the utility networks and tenement fund, development of mortgaging.

6. Further improvement of taxation policy: elaboration of the new edition of Tax Code, implementation of Treasury system of maintaining of the State budget.

In order to implement these directions into practice, Decree of the President of the Republic of Uzbekistan ???-3618 of 14.06.2005 ?On measures for expediting the implementation of priority directions in the sphere of deepening market reforms and further liberalization of economy? was adopted.

The document defines the list of new bills, decrees and resolutions of the President of the republic, governmental decisions, interagency normative acts, which, on the systematic basis, helps to implement the main goals, tasks and priorities in the economic sphere.

Moreover, the list envisages the adoption of 7 laws (on mortgage, on consumer crediting, on electronic payments, on micro-crediting, on new edition of tax and administrative code), 13 Decrees of the President on abovementioned direction.

Along with elaborating the normative documents further work on improving the legislative base will be carried out, including amendments and cancellation of about 30 documents.

To date 4 bills were submitted for the consideration of Oliy Majlis of the Republic of Uzbekistan and 10 decisions of the President and the Cabinet of Ministers of Uzbekistan were adopted.

According to the adopted documents the following measures on liberalization of economy were implemented.

1. On stimulating the attraction of direct foreign investments.

The decree of the President of the Republic of Uzbekistan dated April 11, 2005 ¹ÓÏ-3594 ?On additional measures on stimulating the attraction of direct foreign investments? was adopted for further improving the investment climate in the country, attracting private direct foreign investments for realization of privatization programs, modernization, technical equipment and reconstruction of manufactures. Alongside with the existing legal base on guarantees and preferences for the foreign investors, including laws ?On foreign investments? and ?On guarantees and protection measures of the rights of foreign investors?, the Decree has address orientation in granting tax privileges for direct foreign investments.

Since July 1, 2005, the enterprises attracting direct private foreign investments are exempted from incomes (profit) tax, property tax, tax on developing a social infrastructure and territories improvement, tax on ecology, consolidated tax for micro firms and small enterprises, as well as obligatory deductions to National Road Fund).

These tax preferences are given at a amount of direct private foreign investments:

?from 300000 up to 3 million US dollars - for the period of 3 years; ?more than 3 up to 10 million US dollars - for the period of 5 years; ?more than 10 million US dollars - for the period of 7 years.

2. On further improving the system of legal protection of business entities.

Decree of the President ¹ÓÏ-3619 dated June 14, 2005 ?On measures of further improving the system of legal protection of business entities?, had introduced the specific measures on legal protection of businessmen, especially eliminating extra interference of authorized bodies into their activity which is a substantial obstacle at the present stage in business development.

Presidential decree stipulates:

?application of legal influences to businessmen only in the court; ?carrying out inspections of financial and economic activity of business entities only in accordance with established procedure and only by the state tax agencies, and in case during the inspection they reveal tax and currency crimes, the Department for combating tax and currency crimes under General Prosecutors Office of Republic Uzbekistan; ?responsibility of state officials for adopting illegal decisions or taking illegal actions; ?hearing of economic disputes between business entities is carried out by economic courts.

3. On stimulating the development of microfirms and small enterprises.

The decree of the President of Republic Uzbekistan ¹ÓÏ-3620, dated June 20, 2005, ?On additional measures on stimulation of development of micro firms and small enterprises \" I very important in creating more favorable financial conditions for activity of micro firm and small enterprise entities by means of unification of taxation system, reduction of burden of taxation and establishment of tax preferences.

The Presidential decree stipulates:

-From July 1, 2005 to introduce the consolidated tax payment at the rate of 13% instead of payment of common tax for micro firms and small enterprises, obligatory deductions to the Pension Fund, National Road Fund and the School Education Fund. It has enabled business entities to decrease burden of taxation up to 2,3 percent. -Empowering the newly established micro-firms and small enterprises to acquire the delay on payment of the single tax payment for a one year term, with discharge of the postponed sums for over the 12 months by equal shares after the end of the soft period. -Cutting the taxation basis in manufacturing of excisable goods for the sum of excise, that is, if the excise sum was included to the price of the taxation base, then starting July 1 this year that sum shall not be included.

4. On liberalizing the financial responsibility of entrepreneur companies for the economic offences. The Decree by the President of the Republic of Uzbekistan of June 26, 2005, ?3622, is aimed at further improving the system of protection of rights and legal interests of companies, establishing the favorable legal and economic conditions for then to engage in business.

The Decree envisages measures against officials, in keeping with current legal norms, of administrative nature only, without filing papers with the court. The measures are taken with regard to the offences, committed by enterprises for the first time, which are not intentional, but minor, as well as which not lead to interruption of payments flow to the state budget and state funds.

In case of filing papers with the court, and given the voluntary reimbursement of damage by the company for over the one month, caused by offences for failing to pay taxes, duties, and other mandatory collections, and addressing its consequences, then the enterprise is released of application of financial sanctions.

Also, the Decree envisions measures on liberalizing financial responsibility of the entrepreneur enterprises for the economic offences. The Cabinet of Ministers is charged with realization of the said measures. 5. On cutting the types and easing the permissive procedures for doing business.

The Resolution by the President of the Republic of Uzbekistan of September 21, 2005, ?186, was adopted in order to cut the administrative costs, cut and ease the permissive procedures, and it foresees the following:

Cutting down to 13 license-based types of activity, for the undertaking of which the licenses shall be issued with no term expiration limits;

With a view of cutting the approval functions on licensing 6 types of activity, these are now transferred from the Cabinet of Ministers to the relevant state administration bodies;

Eleven types of permissions and approvals are recognized duplicative, excessive, and cancelled starting October 1, 2005.

Along with that, the Resolution instructs the Cabinet of Ministers within period of three months to introduce the draft of the law \"On permission procedures\" to Oliy Majlis of the Republic of Uzbekistan.

6. On further cutting and improving the system of checks of enterprises.

The Decree by the President of the Republic of Uzbekistan of October 5, 2005, ?3565, was adopted to radically cut and improve the system of checks of enterprises, increase the responsibility of officials at the monitoring bodies for the firm observance of legislation on the state control of enterprise activity.

The Article 1 of the Decree stipulates that the scheduled checks of financial ? economic activity of the micro-firms, small enterprises and farming entities are carried out not often, than once in four years, and other enterprises ? not often, than once in three years. The financial ? economic activity of the newly established micro-firms, small enterprises, and farming entities are not subject for the scheduled checks for during the two years since their registration with state.

7. On speeding the privatization processes. The Resolution by the President of the Republic of Uzbekistan of March 14, 2005, ?29, approved and set to start the realization of the new privatization program of the state property for 2005-2006. In keeping with this program the foreign and local investors are offered 2,246 state facilities and packages of shares, including 1,385 sites and non-placed state assets for the private ownership.

In this, the simplified system of selling the state property by way of applying the step-based decrease of the site starting price, and realizing other facilities at zero-based purchasing cost with investors accepting the investment liabilities.

8. On further reforming the banking activity

For the over last period, the country designed and adopted the Program on reforming the banking system. It is aimed at improving the tools of fiscal policy, strengthening the fiscal market, increasing financial sustainability and capitalizing banks, expanding the crediting of enterprises, as well as financial supporting small businesses and private entrepreneurship.

In particular, with a view of the further strengthening cash turnover, reduction of nonbanking transaction of available money resources, the decision of the President of Republic Uzbekistan ??? - 147 from 05.08.05 adopts measures on uninterrupted maintenance of available payments from depositary accounts of managing subjects to the banks.

9. On reforming housing and municipal sphere. For implementation of these direction the Resolution of the President of the Republic of Uzbekistan have been adopted ???-3 ?On additional measures of improving the activity of associations of house owners? according to which the system apartment houses servicing? of associations of house owners was advanced. In order to implement the decision, Associations house owners were established and their tasks were determined.

In order to improve the mechanism and increase of the responsibility for duly and full calculations of consumers for municipal services, non-admission unreasonable growth of rates, and also mobilization of necessary facilities for realization of operation, technical modernization and reequipment of municipal networks, strengthening of material and technical basis of the enterprises of public service, the Resolution of the President of Republic Uzbekistan from ???-5 dated 11.02.2005 ?On measures for banning unreasonable growth of rates and promotion of the responsibility of consumers for duly and full calculation for municipal services? is realized.

According to the resolution of the Cabinet of Ministers of the Republic of Uzbekistan from February 2, 2005 ?On the program of introduction of modern devices of the accounting and resource conserving technologies in sphere of municipal services? the measures on the installation of natural gas, cold and hot water and thermal energy metering devices in multistoried apartment houses and at the heat supply facilities are being undertaken. A work of attracting foreign investments to the republic is being carried out in order to establish the manufacture of accounting devices.

Resolution of the President of the Republic Uzbekistan from February 18, 2005 ?On the further development of the housing construction and the housing market? the proper legal basis for development of mortgaging construction is established. Besides a fund for supporting of mortgaging is created. The sources of the Foundation are sourced from the long-term credits and investments of the international and foreign financial institutions, as well as from the state budget funds.

10. On reforming tax system. At the present a work on the development of a new edition of the tax code is being carried out. This document is considered as a document of direct impact aimed at reducing the tax burden on goods and services? manufacturers by optimizing tax rates, introducing a tax administration system that corresponds to the world standards. It also provides a transition from the mainly fiscal function of taxes to the functions on stimulation of goods and services manufactures.


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