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Summary

Agricultural land – 21.5 million hectares;
Irrigated land – 4.2 million hectares;
Average annual number of sunny days – 320;
Possibility of harvesting – 3 times a year;
Number of commissioned logistics centers – 6.

Reasons to invest

Agriculture is one of the key sectors of Uzbekistan’s economy. The land used for agricultural production occupies 45% of the territory of the country, about 50% of the population lives in rural areas.
Together with water and forestry, the industry employs 3.6 million people (27% of employed in the economy as a whole) and 18% of GDP. The export of agricultural products brings the Republic of Uzbekistan about 20-25% of total export revenues.
The volume of agricultural production has increased by almost 3 times over 20 years, reaching 24 million tons of fruits and vegetables, of which 11, 3 million tons of vegetables, 3.1 million tons of fruits, 1.7 million tons of grapes and 2.1 million tons of melons. In addition, there are more than 12 million heads of cattle, more than 20 million heads of small cattle, about 72 million birds, as well as more than 2.4 million tons of meat, more than 10 million tons of milk, 37 thousand tons of wool and more than 7 billion eggs annually in the country.
Currently, in order to develop agriculture, the government is taking measures on modernizing and diversifying agriculture. Attracting foreign investment plays an important role in implementation of the above mentioned measures.
Attracting investment in agriculture is carried out in three directions, such as attracting investment under the guarantee of the government, foreign direct investment, as well as attracting funds for free technical assistance.
In accordance with land use statistics in 2016-2017, the net cultivated area amounted:

  • Cotton – 1,071 thousand hectares;
  • Grain crops – 1,100 thousand hectares;
  • Gardens – 275 thousand hectares;
  • Vineyards – 150 thousand hectares;
  • Vegetables – 205 thousand hectares;
  • Other crops – 200 thousand hectares.

Uzbekistan is a manufacturer of about one hundred types of fruits and vegetables, of which 70 are exported. The country ranks third in the export of persimmon, fourth in the export of fresh and dried apricots and raisins, fifth in the export of prunes, tenth in the export of grapes. In 2018, Uzbekistan ranked the fourth place in the export of cherries, ahead of Spain.
In Uzbekistan there are the following factors contributing to development of fruits and vegetables production:

  • low cost of energy resources and production cost;
  • environmental friendliness;
  • excellent indicators of the content of useful substances;
  • excellent organoleptic properties;
  • access to the largest global markets.

According to the FAO (Food and Agriculture Organization of the United Nations), the annual loss of fruits and vegetables in the world reaches 30-35% of world production. The Government of the Republic of Uzbekistan has developed a plan for development of agricultural infrastructure until 2021 for reducing losses.
According to the Ministry of Agriculture of Uzbekistan, until 2018, 382 thousand tons of storage facilities and 682 thousand tons of cold stores were created in the country. The volume of stored products amounts only to 4.4% compared with the total production of fruits and vegetables. In 2017, 6 logistics centers were commissioned, with additional refrigeration storage capacity of 120 thousand tons of products, as well as 7 metric tons per hour of individual quick freezing (IQF) and 45 refrigerated vans. According to the plan for development of agricultural infrastructure, by 2021 it is planned to create another 600 thousand tons of cold stores connected to a common logistics network. For investors, this is the best time to invest in this sphere.
In 2016-2017, 288.5 million USD was allocated for implementation of 568 projects in the sphere of horticulture at the expense of IFIs, including for creation of a modern cold store with a capacity of 160 thousand tons, an intensive garden for 2,532 hectares, production on processing of products with a capacity of 570 thousand tons per year and modern greenhouses on 212.9 hectares.
There are more than 57 thousand greenhouse complexes on more than 8,300 hectares in the country, and they produce:

  • tomatoes on 4,560 hectares;
  • cucumbers on 2,397 hectares;
  • other vegetables and citrus fruits on 1,282 hectares.

The total volume of the global market for greenhouse products amounts to 12.6 billion USD. The annual growth of the market is 11%.
The state has developed a plan for development of greenhouse complexes in Uzbekistan, according to which their total area in 2018–2030 should exceed 68.0 thousand hectares.
In addition, in 2018–2020, it is planned to complete the creation of at least one food testing laboratory in each region – a total of 14. IFI funds are attracted for achieving this goal.

In addition to the growing population, including urban, its purchasing power, the growth of retail trade in Uzbekistan, the availability of markets of nearby countries can be considered as the main factors for the growth of the industry. So, if the domestic market of Uzbekistan consists of a population of 33 million people, the CIS countries market available in free trade zone is 300 million people.

Diversification of agricultural production

At present, Uzbekistan is pursuing a policy of further diversifying agriculture, including:

  • Increasing the acreage for fruits and vegetables due to reduction of more than 135 thousand hectares of land under cotton and grain crops;
  • Development of farming by stimulating multidisciplinary activities;
  • Cultivation of non-traditional crops (soybean, saffron, pepper, medicinal herbs and others);
  • Creation of clusters for effective development of agriculture.
Statistics

Food industry has become one of the important segments in terms of its contribution to Uzbekistan’s economy, since it contributes 13% of GDP.

The number of registered food industry enterprises increased from 8,050 in 2014–2015 to 12,065 in 2017–2018.

Investments in fixed assets in the registered sector of food industry increased from 102.0 million USD in 2015-2017 to 495.7 million USD in 2018, while the growth rate amounted to 485%.

This sector accounts for 6.4% of total Uzbekistan’s exports and 9.8% of total industrial investment. In addition, the sector is considered the 4th largest FDI acceptor in Uzbekistan.

Advantages of projects implementation in Uzbekistan
  • Provision of land plots with infrastructure (gas, electricity, water, transportation system) for rent for a period of up to 50 years (Law of the Republic of Uzbekistan of April 30, 1998, No. 598-I);
  • Providing tax and customs benefits and preferences;
  • Cost competitive raw materials and labor.
Sector policy

Banks of Uzbekistan have opened credit lines for projects in the agricultural sector with an interest rate from 3.5% to 14%. The government annually allocates a credit line at the expense of the Fund for Reconstruction and Development and the National Bank (NBU) for providing affordable credit to food industry enterprises and individual food producers.

The credit lines of the Asian Development Bank, the European Bank for Reconstruction and Development and other credit lines for development of food industry and agriculture are operating in Uzbekistan.

“Uzbekoziqovqatholding” company together with the Ministry of Agriculture developed a comprehensive document defining the national policy in food industry, and distributed among interested organizations for receiving suggestions and recommendations. The document is aimed at creating a national food network of Uzbekistan and a single national information portal for investors.

Benefits and preferences

By the Decree of the President of the Republic of Uzbekistan DP-3594 of April 11, 2005, enterprises attracting foreign direct investment and specialized in manufacturing products (services) are exempt from paying corporate income tax, property tax, single tax payments for micro companies and small enterprises, as well as mandatory contributions to the Republican Road Fund.

The indicated tax benefits are provided with the volume of direct private foreign investment:

  • from 300 thousand USD to 3 million USD – for 3 years;
  • from 3 million USD to 10 million USD – for 5 years;
  • over 10 million USD – for 7 years.
  • the following preferences for investors are also provided:
  • the minimum amount of share of foreign investments in the statutory fund of an enterprise with foreign investments was reduced from 30 to 15 percent for classifying the enterprise as a joint venture;
  • the requirements for mandatory participation of a foreign legal entity as a participant of an enterprise with foreign investments were abolished;
  • the minimum amount of the statutory fund of an enterprise with foreign investments was reduced from 600 million UZS to 400 million UZS (about 50 thousand USD, at the rate of the Central Bank of the Republic of Uzbekistan on the day of investment);
  • the amount of the state duty for state registration of enterprises with foreign investments has been reduced three times;
  • the mandatory procedure for concluding export contracts for fruits and vegetables at prices not lower than the prices published by “Uzagroexport” JSC has been abolished;
  • for legal entities attracting foreign direct investment and specialized in manufacturing according to the list approved by the legislation of the Republic of Uzbekistan, it is planned to apply privileges on certain taxes and other obligatory payments, with a share of foreign participants in the statutory fund (in the authorized capital) of legal entities not less than 33%, and for joint-stock companies – at least 15% (Law of the Republic of Uzbekistan of September 23, 2016, No. LRU-411), when foreign investments are attracted in the form of freely convertible currency or a new modern technological equipment, when allocating at least 50 percent of the income received as a result of provision of tax exemptions and other obligatory payments, during the period of their use, for reinvestment in order to further develop the legal entity;
  • turnover from the sale of goods (excluding precious metals) for export for foreign currency is subject to value added tax at a zero rate;
  • property imported into the Republic of Uzbekistan for its own production needs is exempt from customs duties;
  • technological equipment, spare parts to them and others, not produced in the country, are exempt from customs duties;
  • agricultural producers introducing a drip irrigation system are exempt from paying a single land tax for 5 years.
BUKHORO-AGRO Free Economic Zone

Bukhoro-Agro free economic zone is organized in accordance with the resolution of the President of the Republic of Uzbekistan of July 10, 2018, No. RP-3843.

Goals:

  • Creating favorable conditions for investors for implementation of investment projects;
  • Organizing greenhouses using hydroponic technology by creating clusters;
  • Creating logistics centers for supporting the export of agricultural products;
  • Creating conditions for standardization and certification of grown and processed products;
  • Training personnel in the agricultural sector.

Tax benefits for participants of Bukhoro-Agro FEZ depending on the volume of attracted foreign investments:

  • from 300 thousand USD to 3 million USD – for 3 years
  • from 3 million USD to 5 million USD – for 5 years
  • from 5 million USD to 10 million USD – for 7 years
  • from 10 million USD and higher – for 10 years

Participants are exempt from paying a single tax for small enterprises, land tax, income tax, property tax, targeted state funds in the above mentioned period.

Participants are exempt from customs duties for:

  • equipment;
  • raw materials;
  • materials;
  • components.

Conditions for participants:

  • provision of credit resources for the purchase of imported equipment, technologies and materials by banks NBU, JSCB “Uzpromstroybank” and JSCB “Asaka Bank”;
  • provision of equipment on a leasing basis without mortgage security;
  • provision of infrastructure (natural gas, electricity, road, etc.);
  • availability of logistics centers;
  • visa support for foreign experts.
Investment opportunities
  • creation of intensive gardens;
  • creation of greenhouses;
  • creation of facilities for processing fruits and vegetables;
  • creation of low-temperature storage units;
  • creation of logistic centers;
  • creation of clusters – ensuring the cycle from zero to the final product, increasing the volume of production, storage, processing, drying, packaging and export of agricultural products;
  • preservation of products for export purposes and storage of products by fermentation: wine, beer, vinegar, yeast, soft drinks;
  • production of beverages, juices and concentrates based on natural fruits and vegetables;
  • production of dairy products: milk, cottage cheese, flavored yogurt, processed and hard cheeses, ice cream, milk sweets;
  • creation of modern livestock breeding complexes for production and processing of meat and dairy products;
  • production of food additives;
  • production of bakery and confectionery;
  • production of means of storage and packaging of food products: metal cans, aseptic packages, corrugated boxes, environmentally friendly packaging;
  • production of equipment for the food industry;
  • consumer food production: packaged food, soft drinks and packaged drinking water;
  • baby food production.
Foreign investors operating in the FEZ

Nestle (Switzerland)

Pepsi (the United States)

Coca-Cola (the United States)

Carlsberg (Germany)

British American Tobacco (the United Kingdom – the United States)