In Uzbekistan, construction industry is defined as a priority sector of the economy. Modern construction industry is one of the most prominent national sectors of the economy of the Republic of Uzbekistan, showing stable annual growth.
In the Action Strategy for development of the country’s economy for 2017-2021, proposed by the President of the Republic of Uzbekistan Shavkat Mirziyoyev, a special place is given to construction industry as the locomotive of economy on further accelerated development of construction of buildings and structures, new industrial facilities and private entrepreneurship entities, railways and highways, residential buildings.
The key resource for increasing the volume of construction is the affordability on ready-made objects through cost reduction at the expense of using modern high-quality building materials and products with lower energy consumption in production, with improved characteristics and the possibility of using robotics, as well as constructive solutions with lower material consumption and increased assembly, that, naturally, will positively affect the cost of the final product.
The growth of building materials industry, according to experts, is due to significant amounts of capital investment within the framework of medium-term state programs on modernizing the economy. In particular, the volume of capital investments in the national economy in 2016 increased by more than 18%, or 50 trillion UZS. Accordingly, the volume of construction activities has increased, which also contributed to the growth of the need for building materials. Half of the produced building materials account for the enterprises of “Uzqurilishmateriallari” JSC. Currently more than 120 enterprises producing more than 100 types of building materials are operating in the company.
I. The cement remains as the driving force of the industry. The cement industry of the country is represented by 18 cement plants with a total annual capacity of over 12.0 million tons, including:
– JSC Qizilqumcement – 3.5 million tons (Navoi region);
– JSC Akhangarancement – 1.74 million tons (Tashkent region);
– JSC Quvasoycement – 1.08 million tons (Fergana region);
– JSC Bekabadcement – 1.07 million tons (Tashkent region);
– JSC Almalyk MMC (Jizzakh Cement Plant) – 1.0 million tons (Jizzakh region);
– JSC Almalyk MMC (Sherabad Cement Plant) – 1.5 million tons (Surkhandarya region);
– small cement plants (12 enterprises) – 2.2 million tons.
All 6 largest plants of the country operate almost at 100% of available capacity (Sherabad Cement Plant was commissioned on August 19, 2018). The volume of production in 2017 amounted to 9.132 million tons.
The existing cement production capacity provides domestic market demand by about 75-80%. The shortage in 2018, compensated by import supplies, is projected at 2.5-3 million tons.
In order to eliminate the shortage and full saturation of the domestic market with cement, a number of new construction projects are being carried out in the country, as the result of which commissioning new capacities in the current year will amount to over 3.1 million tons, and by the end of 2019 more than 4.7 million tons.
By the beginning of 2020, the total cement production capacity will amount over 16 million tons (if there are other projects that are scheduled for commissioning in 2020-2021).
A number of projects are also being implemented on increasing the capacity of existing plants in 2019-2022, including:
– reconstruction of production at JSC Qizilqumcement with an increase in capacity by 1.5 million tons of cement per year;
– construction of new technological lines in JSC Akhangarancement with a capacity of 2.4 million tons of cement per year;
– construction of grinding stations at JSC Bekabadcement, which will increase the capacity by 700 thousand tons of cement per year.
II. The need of the country is fully satisfied in production of drywall. The total capacity of enterprises producing drywall exceeds 60 million square meters. More than 50 enterprises are engaged in manufacturing more than 15 types of dry building materials. Their total annual capacity is 400 thousand tons. Currently, the volume of existing capacities for production of ceramic tiles is 13 million square meters. As a result of development and expansion of majolica production by local producers, imports have been reduced by 3.5 times over the past 3 years.
III. Another major consumer of cement are enterprises for production of precast concrete and concrete products, development of which determines high domestic demand, which is formed in correlation dependence on the dynamics of construction growth.
As it was noted above, a little more than 3% of the total cement production goes to the production of these types of construction products, which indicates a low level of processing of the used raw materials for production of reinforced concrete structures and other products of this group and leads to the tendency of maintaining a limited range of products. In recent years, production of reinforced concrete products has decreased by 80%, which in conditions of increasing demand confirms the need for expanding this group in the structure of building materials industry.
In addition, in Sherabad district of Surkhandarya region there are promising areas of limestone more than 100.0 million tons and clay of 20 million tons which is a continuation of Beshbulak deposits and similar in quality.
In Kitab district of Kashkadarya region there are promising areas of limestone of more than 200 million tons, loams of 20 million tons which are the main components for production of cement.
Narpay and Nurabad districts of Samarkand region has promising areas of limestone of more than 100.0 million tons, 20 million tons of clay loam and 20 million tons of gypsum, which are the main components for cement production.
The volume of executed construction activities in January-August this year amounted to 27,680.8 billion UZS. Growth rates over the corresponding period of last year reached 104.4%. The volume of construction work performed by large contracting organizations amounted to 8,112.5 billion UZS, or 97.7% of the corresponding period last year, the share in the total volume of construction work reached 29.3%. The volume of construction work performed by small enterprises and micro companies amounted to 11,649.1 billion UZS, or 42.1% of the total amount of construction works, the growth rate – 113.5%. The share of informal sector amounted to 28.6%, or 7,919.2 billion UZS, the growth rate – 99.0%.
The main part of construction activities on the types of economic activity was carried out due to construction of residential buildings and non-residential premises. Their share in the total volume of construction work amounted to 77.2% and, compared to the same period of the last year, increased by 0.3 percentage points. The share in the volume of construction work by type of economic activity, civilian objects amounted to 11.3% and, compared to the same period of the last year, it became equal. The share of specialized construction work amounted to 11.5% and, compared to the same period last year, decreased by 0.3 percentage points.
According to the results of the second quarter of 2018, more than 34,343 residential buildings were built in the country, i.e. 5402.4 thousand sq.m. Including:
– more than 1946 residential buildings were built in the Republic of Karakalpakstan;
– 3880 residential buildings were built in Bukhara region;
– 3613 residential buildings were built in Tashkent region;
– 3483 residential buildings were built in Fergana region;
– 3159 residential buildings were built in Surkhandarya region;
– 3096 residential buildings were built in Andijan region;
– 3109 residential buildings were built in Kashkadarya region;
– 3105 residential buildings were built in Namangan region;
– 1788 residential buildings were built in Jizzakh region;
– 1037 residential buildings were built in Navoi region;
– 1760 residential buildings were built in Khorezm region;
– 196 residential buildings were built in Syrdarya region;
– 1109 residential buildings were built in Tashkent city;
Small enterprises and micro companies
The share in the volume of construction work by type of economic activity, construction of buildings and structures, executed by large contracting organizations, amounted to 27.2% and, compared to the same period of the last year, increased by 0.2 percentage points. Accordingly, the share of small enterprises and micro companies amounted to 36.4% (an increase by 1.9 percentage points), the share of the informal sector amounted to 36.4% (a decrease by 2.0% percentage points).
Uzbekistan has rich mineral resources for development of building materials industry. The country has a leading place among the countries of Central Asian region in terms of raw materials for production of building materials. Mineral reserves in the country are specified by many deposits, including for production of bricks and algoporite at 339 deposits, cementite – 49, profiled stone – 30, glass raw materials – 7, lime – 26, natural facing stones – 94, for manufacturing sewage pipes – 3, sand and gravel mixes –110, sand – 32, gypsum and anhydrite at 25 deposits and others.
In the country, as a result of modernizing existing facilities, introducing new enterprises, producing modern and competitive types of building materials, the number of exported products from 2007 to the present has increased from 12 to 48 types, the volume of exports of products has increased from 33.9 million USD to 107 million USD. About 10 new products worth 45.9 billion UZS were produced according to the localization program. In addition, large-scale marketing work is underway for expanding the product export area. To date, the geography of supply already covers such countries as Turkmenistan, Kazakhstan, Kyrgyzstan, Russia, Afghanistan, the United Arab Emirates, Iran and other countries.
Currently, 30 enterprises of “Uzqurilishmateriallari” JSC have established an international quality management system ISO 9001-2000. In the near future, the number of such enterprises will amount more than 100 units. A marketing study of building materials in domestic and foreign markets is carried out in order to increase the prestige of construction enterprises.
State guarantee and protection
The state guarantees and protects all the rights of foreign investors in implementation of investment activities in the territory of the Republic of Uzbekistan. (Law of the Republic of Uzbekistan of April 30, 1998 No. 611-I “On guarantees and measures for protecting the rights of foreign investors”).
Foreign investors and foreign investments are provided with fair and equitable regime, their full and permanent protection and security. Such a regime cannot be less favorable than the regime defined in the international treaties of the Republic of Uzbekistan.
The legal regime for foreign investments cannot be less favorable than the corresponding regime for investments carried out by legal entities and individuals of the Republic of Uzbekistan.
Financial autonomy (independence)
The income of a foreign investor received in the Republic of Uzbekistan may be reinvested in the territory of the Republic of Uzbekistan or used in any other way at the discretion of a foreign investor.
Enterprises with foreign investments in accordance with the legislation have the right to:
open, use and manage accounts in any currency, in any bank in the territory of the Republic of Uzbekistan, as well as abroad;
receive and return loans in foreign currency
Free repatriation of funds
Foreign investors are guaranteed free transfer of funds in foreign currency to and from the Republic of Uzbekistan without any restrictions, provided that they pay taxes and other obligatory payments in the manner established by the legislation of the Republic of Uzbekistan.
Independence in foreign trade
Enterprises with foreign investments independently carry out export-import operations in compliance with the requirements of the legislation of the Republic of Uzbekistan. Export of own-produced products is not subject to licensing and quoting.
Enterprises with foreign investments are entitled to import products for their own production needs without a license in accordance with the legislation of the Republic of Uzbekistan.
Independence in labor relations
Foreign investors and enterprises with foreign investments, in accordance with the legislation of the Republic of Uzbekistan, have the right to freely conclude employment contracts with citizens of any foreign country and stateless persons residing outside the Republic of Uzbekistan in order to carry out investment activities. Such persons have the right to enter and remain on the territory of the Republic of Uzbekistan for the entire validity period of the employment contract with the receipt of relevant multiple entry visas.
Issues of remuneration, vacations, and retirement benefits for foreign employees should be resolved in employment contracts with each of them. Wages of these workers and other incomes received legally can be transferred by them to other states without any restrictions after paying the statutory taxes and obligatory payments.
Enterprises of priority sectors of the economy, attracting direct private foreign investment, are exempt from paying corporate income tax, property tax, improvement and social infrastructure development tax, single tax for micro companies and small enterprises, as well as mandatory contributions to the Republican Road Fund.
These tax benefits are provided with the volume of direct private foreign investment:
– from 300 thousand USD to 3 million USD – for 3 years;
– over 3 million USD to 10 million USD – for 5 years;
– over 10 million USD – for 7 years.
(except for the city of Tashkent and Tashkent region)
The following are exempt from customs duties:
property imported into the Republic of Uzbekistan by enterprises with foreign investments with a share of foreign investments in the statutory fund of at least thirty-three percent for their own production needs, within two years from the date of their state registration;
property imported for the personal needs of foreign investors and citizens of foreign countries located in the Republic of Uzbekistan in accordance with labor contracts concluded with foreign investors;
goods imported by foreign legal entities that have allocated direct investments in the economy of the Republic of Uzbekistan at the amount of more than fifty million USD, provided that the imported goods are products of their own production;
technological equipment imported into the territory of the Republic of Uzbekistan according to the list approved in accordance with the legislation, as well as components and spare parts, provided that their supply is stipulated by the terms of the contract for the supply of technological equipment.
In order to saturate the market with competitive building materials of local production, deepen import substitution and increase the export volume of “Uzqurilishmateriallari” JSC, market needs are constantly studied, and the export and import operations of building materials are monitored and analyzed. As a result, in January-August 2018, industrial output worth 3 trillion UZS was produced, an increase amounted to 1.2%, compared to the last year.
“Uzqurilishmateriallari” JSC has carried out comprehensive work in January-August of 2018 in order to expand the geography and increase the volume of exports of building materials. In particular, building materials were exported for 27.6 million USD.
The main countries exporting building materials are Russia (29.7%), Kazakhstan (23.1%), Kyrgyzstan (13.2%), Tajikistan (8.8%), and Turkmenistan (6.2%).
The nomenclature of building materials export amounts to:
ceramic tiles – 16.3%;
lime – 11.3%;
drywall – 6.6%;
glass products – 5.9%;
polyethylene pipes and fittings – 2.8%;
– An easily accessible market that will grow in the future with an increase in the entry of organized retail, a favorable demography, an increase in income and change in preference for quality and branded products.
– Preferences, benefits for manufacturers, exemption from tax and customs payments for up to 10 years, depending on the amount of investment.
– Privatization and rental of state property on favorable terms and at low prices for foreign investors, with the obligation of investing funds.
– Comparative advantage in terms of skilled labor and production costs on major textile manufacturers around the world.
– Focused and favorable state policy aimed at protecting investors’ investments and private property rights.
The following can be noted among the largest projects in building materials industry:
– production of glass products and sandwich panels based on fiberglass for a total amount of 110.0 million USD (Jizzakh region) together with MINGYUAN SILU INDUSTRY company (PRC);
– production of continuous basalt fiber for production of reinforcement, composite profiles (angle, channel, I) and other environmentally friendly products worth 51.8 million USD and with capacity of 2.5 thousand tons at LLC Mega Invest Industrial (Jizzakh region) together with Leigh Barrier LLP (United Kingdom);
– construction of a plant for production of steel metal products worth 30.0 million USD at FE LLC Run Tong Metal Industrial in the territory of FEZ Angren (Tashkent region) together with Jiangsu Shangang Group Huaigang Special Steel Co. Ltd. (China);
– production of construction Particle Board from local raw materials with a total value of 10.0 million USD at LLC Krono Plit (Syrdarya region) in cooperation with Hubei Qinglin Industry and Trade Co. Ltd. (PRC);
– mining and processing of granite and marble stones with a total cost of 4.1 million USD at LLC Comfort Inert Service (Surkhandarya region) together with Xiamen Eastern Pegasus Co. Ltd. (PRC);
– production of ceramic plates with a total cost of 20.0 million USD at Great Wall Ceramic joint venture in the territory of Angren FEZ (Stage I) (Tashkent region) together with Hong Kong ZRSC Technology (PRC);
– production of glass products, MDF and Particle Board at a total cost of 28.5 million USD at FE LLC Zhong tian in Navoi FEZ (Navoi region) together with Hebei New Silk Road Import and Export Trade company (PRC).