UZBEKISTAN IS OPEN FOR TRADE

The world practice demonstrates that every state forms its foreign trade policy, first of all, with aim at integration into world economic relationship. Foreign trade regime as an aggregate of trade policy instruments should solve a set of the following tasks, along with required level of integration:

-stimulate inflow of foreign investments;

-provide maximum use of domestic raw resources;

-preserve existing jobs and stimulate creation of new jobs;

-create competitive environment on the market;

-solve a fiscal task of replenishment of budget revenues; and etc.

Effective uses in practice of internationally acknowledged trade policy instruments should stimulate economic growth of the country as a whole and ensure improvement of incomes and life level of the population.

Foreign trade regime of the Republic of Uzbekistan is characterized by its openness and absence of quantitative restrictions, quotation and licensing. Export duties for all kinds of goods (works and services) are abolished. Exports of goods (works and services) for foreign currency, including supplies to CIS countries, are subject to zero rate of VAT. Besides, supplies of goods for exports for foreign currency are exempt from excises.

Beginning from 1 January 2004, a new customs tariff has been applied in Uzbekistan. Principle of escalation forms a base for calculation of custom duty rates by product categories and sub-categories, i.e. the more value is added on an imported good, the higher is rate of the duty. The most significant changes engaged groups of goods earlier subject to zero rate and maximal 30% rate, and their considerable part was shifted to a new 5% line.

Average arithmetical rate of the new tariff was reduced to 14.6% compared to 15.4% of the earlier operating tariff.

Pursuant to classification of tariff regimes depending on the level of average tariff rates and used by the IMF for assessment of the openness level of trade regimes, the tariff regime of the Republic of Uzbekistan might be referred to ‘relatively open’ (average arithmetical rate should be between 10% and 15%).

If to compare, the average arithmetical rate of customs tariff in India composes 32%, in Pakistan – 20.4%, in Mexico – 16.5%, in Russian Federation – 14%, in Korea – 13.8%, in Bulgaria – 12.42%, in Ukraine – 10.54%, in China – 10.4%. At this, the majority of the above countries are the WTO members.

The average weighted tariff calculated pursuant to WTO definitions by the methodology of dividing the amount of collected customs duties by the total amount of leviable imports (without zero categories, considering system privileges by payment of customs duties provided by the law) in fact composed 2.03% in 2003. By the WTO classification it characterizes the tariff regime of Uzbekistan as ‘open’ (average weighted tariff is less than 10%).

CUSTOMS DUTIES PRIVILIGES

Open character of the customs tariff can be explained by a set of existing privileges by payment of customs duties.

In particular, import duties are not imposed on:


-goods having an origin and imported from the Free Trade area (FTA) member countries (by the results of 2003, imports from the FTA members of CIS composed 38.3% of the total imports into the country);

-goods supplied by means of the intergovernmental and loan agreements made on behalf of the Government of the Republic of Uzbekistan or under its guarantees;

-goods for implementation of investment projects financed by foreign loans under the government guarantees;

-property imported by foreign investors into the Republic of Uzbekistan for their own production needs;

-contribution of foreign investors into the charter funds of enterprises with foreign investments;

-technological equipment imported into the territory of the Republic of Uzbekistan;

-equipment imported into the country for establishment of computer data transmitting systems, computer techniques and spare parts as well as software;

- goods imported by SMEs for organization of production;

-imported wood and materials;

-imported materials and components, which are not produced inside the country and are used in technologic process of manufacturing localized production by the enterprises implementing projects approved by the Localization program.

GOODS THAT ARE NOT SUBJECT TO VAT

Imports of certain goods into Uzbekistan are not subject to VAT.

In particular, VAT is not imposed on:

-technologic equipment imported into Uzbekistan:

for equipping facility of priority importance included in the investment program;

for implementation of investment projects financed by foreign loans under the Government guarantees;

for newly constructed and reconstructed enterprises specialized on manufacturing of consumer goods;

by foreign investors as a contribution into the charter capital of an enterprise with foreign investments;

-equipment, materials (works and services) imported by legal entities, including non-residents of the Republic of Uzbekistan, by means of loans and grants provided by international and foreign governmental financial and economic organizations through agreements made by Uzbekistan.

-equipment imported into the country for establishment of computer data transmitting networks, computer technique and spare parts as well as software;

-imported medicines.

MANDATORY CERTIFICATION OF CONFORMITY AND PRE-SHIPMENT INSPECTION

With aim at protection of health and security of the population, separate goods imported to the territory of the Republic of Uzbekistan are subject to mandatory certification of conformity. These measures are consistent with the Article 2.2 of the WTO Agreement on TBT, which accepts introduction of technical regulations for ‘…protection of human health or safety, animal or plant life or health, or the environment’.

In Japan, for example, more tough measurement has been applied. Pursuant to the Articles 67-72 of the Act ‘On customs’, any individual or legal entity willing to import goods to Japan, is to submit a declaration to the Director General of the Customs Office and get a permit to import after the correspondent expertise of goods.

In China, where all imported goods are subject to mandatory inspection at the State Bureau for quarantine and certification, importer should submit a certificate of conformity.

With aim at development of favorable environment for imports of such products, state structures of the Republic of Uzbekistan recognize expertise and preshipment inspection acts issued by independent consulting companies having the accreditation of ‘Uzstandart’ (Uzbek State Agency for standartization). Nowadays, these companies include SGS, ITS, OMIC, Control Union together with a set of Uzbek companies.

At present, with the purpose of optimization of certification of imported products, the list of goods being subject to mandatory certification is revised in favor of significant reduction by 27%. The draft of the corresponding governmental decision is submitted for approval by the Cabinet of Ministers.

By importing separate consumer goods into the territory of the Republic of Uzbekistan, it requires mandatory marking in the official state language.

The requirement of goods marking in the Uzbek language was approved pursuant to the Law of the Republic of Uzbekistan ‘On protection of consumers’ rights' (Article 6), which determines that a producer (executor, seller) is to opportunely submit the required adequate and available information about the sold goods (works and services) to consumers. At present, with the assistance of the PRAGMA Corporation, drafts for the Laws ‘On technical regulation’ and ‘On assessment of conformity of goods’ have been developed.

Foreign trade turnover

Consistent work held for liberalization of foreign trade is one of the key directions for implementation of market reforms in Uzbekistan. The dynamics of foreign trade turnover witnesses positive changes in the trade regime.

By the results of 2003, foreign trade turnover of the Republic of Uzbekistan was estimated in more than US$ 6.6 billion and grew by 17.3% compared to 2002. Trade turnover growth concerns both growth of exports of goods and services (by 24.6%) and imports (by 9.3%). Exports comprised US$ 3.7 billion, imports – US$ 2.9 billion, trade surplus – US$ 760.8 million.

By the results of the 1st quarter of the current year, the positive dynamics of foreign trade development was preserved in the country. Foreign trade turnover comprised US$ 2.1 billion and grew by 32.8% compared to the same period of 2003. At this, its growth regards both growth of exports (by 31.5%) and imports (by 34.6%). Trade surplus comprised 335.8 million.

The export structure fixes reduction of raw materials share and increase of share of production with high value added. Exports of finished products grew by 53.4%, including growth of exports of chemical products in 2.1 times, machines and equipment – in 2 times, foodstuff – in 2.6 times, textiles garment – in 1.6 times. By keeping the physical amount of cotton fiber at the level of 2002, its share in exports reduced to 19.8%.

Machines and equipment represent the biggest share in imports – 44.4%, others are goods of production and technical importance, including chemical products - 12.8%, ferrous and non-ferrous metals and their wares – 7.9%, energy sources - 2.7%, other products - 12.1%, food stuff including products for further industrial processing – 9.9%, services – 10.2%.

Foreign countries dominate in the foreign trade turnover of the Republic of Uzbekistan. The share of trade transactions with them grew in 2003 and comprised 68.5% from the country’s foreign trade turnover. Exports from foreign countries have a 74% share in the trade turnover structure, and imports – 61.7%. European countries have the biggest share in the trade turnover – 60.3%, it grew by 17.4%.

Trade turnover with Asian countries grew by 25.9%, at present their share in trade turnover is estimated in 33%. Trade turnover with American countries (80% of which are countries of North America) comprises 6.5% of the foreign trade.

Acceleration and further expansion of trade and economic relations is a priority direction of development of economic cooperation of the Republic of Uzbekistan with Central Asian states. Applied free trade treatment is an active mechanism for improvement of the level of mutual trade.

UZBEKISTAN AND CENTRAL ASIAN COUNTRIES

As known, during the Summit of the Council of Heads of the Central Asian Cooperation Organization member countries held on May 28 in Astana city, the President of the Republic of Uzbekistan Islam Karimov made a proposal on establishment of the common market in the region at the base of gradual development of economic integration processes, depending on interests and specifics of economic development of the countries of the region. Establishment of the common market supposes not only free trade treatment for goods traffic among the countries, but also free traffic for labor resources and capital.

This initiative has an extreme importance as the common market would accelerate the investment inflow into the region and extend the scale of trade in goods and services.

By the results of the Summit, the Governments of the countries were ordered to take measures on elimination of obstacles on the way of integration processes acceleration. In frame of the Summit the Heads of Uzbekistan and Kazakhstan ordered Deputy Prime Ministers to prepare their proposals on substantial expansion of bilateral trade turnover volumes and elimination of obstacles on the way of integration processes acceleration.

By the results of 2003, foreign trade turnover of the Republic of Uzbekistan with Central Asian countries comprised more than US$ 607 million and grew by 6.8% compared to 2002. Trade turnover growth was formed by growth of exports of goods by 6.9% and imports growth by 6.7%. (Exports comprise US$ 346 million and imports – US$ 261 million; trade surplus comprises US$ 85 million).

By the results of the 1st quarter of 2004, foreign trade turnover with Central Asian states grew by 34% and comprised US$ 153.9 million. At this, trade turnover growth in the current year relates the accretion of trade transactions both in exports and imports (growth correspondently by 32.4% and 36.2%, exports comprise US$ 91.5 million, imports – US$ 62.4 million, trade surplus comprised US$ 29.1 million).

By the results of 2003, foreign trade turnover by individuals comprised US$ 205.0 million and grew by 16.9% compared to 2002 (US$ 175.4 million), including exports reduced by 30.8% (US$ 62.5 million) and imports grown in 1.7 times (US$ 142.5 million). The share of exports by individuals in 2003 comprised 2.7% of the total country’s exports, the share of imports by individuals – 5.4%.

The role of SMEs and entrepreneurship in foreign trade of Central Asian Cooperation Organization member countries also grows. By the results of 2003, 10% (US$ 52 million) of the total trade turnover with the region partners represents the share of foreign trade by private entrepreneurs. As a whole, imports (93.8%) dominates in the trade turnover by individuals, and its dynamics (103% compared to 2003) is ahead of the dynamics of exports (44% compared to 2003).

Pursuant to the Resolution of the Cabinet of Ministers of the Republic of Uzbekistan #335 from 27 September, 2002 ‘On adjustments to the separate decisions of the Government of the Republic of Uzbekistan concerning the issues of regulating imports by individuals into the territory of the country’, it is stated that, beginning from 1 October, 2002, a single customs duty imposed on individuals is paid from the customs value of a good without use of duty-free norm of import for all categories of goods, not depending on the code of the trade nomenclature, at the amount of:

-40% - for foodstuff (except for flour);

-70% - for non-foodstuff.

It should be noted that the single customs duty is introduced with aim at securing the balance of taxation burden among individuals and legal entities by imports. At this, individuals do not pay a set of internal taxes (on income and property, single social charge from the labor fund, rent of buildings and etc.

Besides, individuals can register themselves as legal entities in 3-day term and import at generally established procedure. This provides a right for importers to choose among current terms by their own discretion.

In this regard, it is important to identify the issues concerning the definition of border trade. The WTO provisions have no wording for the meaning of border trade. At the same time, the Article XXIV of GATT 94 states that the General Agreement does not prohibit the neighboring countries to provide certain privileges by border trade. The WTO member countries may apply general trade rules or make separate waivers from them and promote cross-border trade.

The general practice use restrictions on volume and cost of goods, which might be imported from the neighboring states on unprecedented conditions, including duty-free imports. For example, imports 2 bottles of vine, 1 kg of meat, 250 g of butter is considered as duty-free imports in Geneva and etc. Unprecedented terms are applied to only those goods, which are produced and consumed in frontier areas.

Rules of border trade are identified by the countries at the base of local agreements on trade and payments.

International experience demonstrates that border trade is applied among the states not providing MFN to each other (for example, Russia-China, Turkey-Armenia, Azerbaijan-Iran) and foresees the simplification of border and customs control and visa-free regime in the areas of cross-border trade.

At present, trade relationship of the Republic of Uzbekistan with Central Asian countries is based on free trade treatment secured by the Agreement ‘On establishment of free trade area’ signed with all CIS countries in April 1994 and all bilateral agreements on foreign trade between Uzbekistan and Central Asian states.

Accordingly, enterprises and entrepreneurs of the Central Asian states by trade transactions use the preferential treatment, which spreads not only to frontier regions but also to the whole territory of Central Asian region. In this view, consideration of the issue of establishment of cross-border trade between the countries is not actual.

In such terms, when prevention of penetration of destructive elements from terrorist and extremist groups into the country is a burning topic, the state borders of the Republic of Uzbekistan stay open for civilized trade.

80 customs posts on the borders with the neighboring countries operate in full-time regime (the amount of operating posts has not been reduced from 1998), including 68 – stationary on auto passes; 11- on railway stations; 11- in airports; 1 – in river port. Among them, 18 posts are dislocated on the border with the Republic of Kazakhstan, 17 – with the Republic of Tajikistan, 24 – with the Kyrgyz Republic, 19 – with Turkmenistan, and 2 – with Afghanistan.

In 1998 the Customs Сode was enacted in Uzbekistan, the Law ‘On state customs service’ was approved. The Resolution of the Cabinet of Ministers ‘On the issues of organization of operation of the State Customs Committee of the Republic of Uzbekistan’ (№374 от 30.07.97г.) was approved. The legal and organizational framework of customs posts operations have been identified, type provisions on territorial management and specialized customs complexes and posts, instructions on customs examination procedures on the borders of the Republic of Uzbekistan have been adopted.

Legal acts regulating the operations of customs posts in Uzbekistan are completely consistent with the corresponding internationally applied standards.

Functioning of all customs posts and border crossing points, procedures of customs registration of cargo have been carried out pursuant to the international norms. The Government of the Republic of Uzbekistan applies measures on speeding-up of the customs formalities, in particular, by implementing the up-to-date scanning equipment.

Tackling illegal imports of goods is actively carried out. Unfortunately, some observers obviously underestimate the danger of smuggling flow into Central Asian region, which would undermine the principles of fair competition and basis for development of local producers, especially SMEs, brake growth of export potential of our countries. Uzbekistan will hereafter counteract imports and illegal turnover of smuggled products, drugs and diseases penetration.

UZBEKISTAN AND WTO

Beginning from 1994, Uzbekistan has a status of WTO observer and submitted an application for accession. By the decision of the WTO General Council, the Working Party on Uzbekistan’s accession to the WTO was established in January 1995. In September 1998 Uzbekistan submitted its Memorandum on foreign trade to the WTO.

The first meeting of the Working Party on Uzbekistan’s accession to the WTO was held on July 17, 2002 in Geneva. During this meeting the Memorandum on foreign trade was discussed. Several countries (USA, EU, Australia, New Zealand, Korea) sent their questions to the Memorandum in written form.

In 1998 the Government decision (Resolution of the Cabinet of Ministers #520 of 14.12.1998) established the Interministerial Commission for work with the WTO aimed at coordination of activity of ministries and agencies during the accession process. By the results of the Commission’s session in December 2003, the decision was made to create the Small Council for work with the WTO. It conducts activity on preparation of required documents both for bilateral and multilateral negotiations on accession and preparation of proposals for adaptation of the legislation to the requirements of the WTO agreements by means of supplements and amendments.

Pursuant to the procedure of accession, such documents were submitted to the WTO, as replies on questions of the WTO members by the results of the first meeting of the Working Party, SPS and TBT Checklists, information on TRIPS.

Active work is carried out to prepare for the second meeting of the Working Party on Uzbekistan’s accession to the WTO, which is to be held on June 29, 2004.

With this regard, further measures on liberalization of foreign trade regime would closely concern the process of negotiations on Uzbekistan’s accession to the WTO.

From our point of view, such approach would secure complex decision of all issues concerning further liberalization of foreign trade regime and enable complete integration of the Republic of Uzbekistan into the world economy in the shortest terms.