"On additional measures to implement the Program for localization of production facilities used to manufacture finished goods, completing parts and materials on the basis of local raw stuff for the period 2004-2005"

Resolution of Cabinet of Ministers of the Republic of Uzbekistan

The Cabinet of Ministers notes that a number of grave omissions and shortcomings take place when formulating and implementing the Program for localization of production facilities used to manufacture finished goods, completing parts and materials on the basis of local raw stuff, which has a vital role to pay in the restructuring of the nation’s economy.

A critical analysis undertaken to elucidate the present posture of affairs in this sphere shows that a number of joint venture enterprises fail to fully fulfill their obligations to make wide use of local raw materials as well as completing parts, components and units turned out by domestic manufacturers. The main reason behind such a situation is poor marketing of indigenous produce and non-fulfillment of exports obligations undertaken by joint ventures upon their foundation.

What is practically missing is a complex approach to tackling that surround the localization of production facilities, with particular emphasis being laid on the formation of an efficient system of customs preferences and fax incentives. These are designed to encourage domestic manufacturers to more widely local raw stuff and domestically-produced materials and components in their production activity. At the same time, insufficient attention is devoted to stimulation and encouragement of heads and engineering staff of the enterprises participating in the implementation of localization-related projects.

As a matter of fact, there is no complex coherent program for expansion, on a stage-by-stage basis, of production facilities localization. Such a program is needed to coordinate issues such as introduction of new technologies and increase in the production of competitive completing parts, components and units, with the creation of an efficient mechanism for fueling interest, on the part of concrete operators, in hard work on intensification of production facilities localization, expansion of the market for their output and organization of courses designed to train and raise the level of professional skills of technical personnel for localized enterprises.

With a view to eliminating certain shortcomings, sorting out the indicated problems, stimulating a further increase in both the volume and assortment of indigenous competitive produce, and optimizing the importation of goods by intensifying the localization of production facilities used to turn out finished goods, completing parts and materials, the Cabinet of Ministers resolves as follows:

1.To prioritize the implementation, on a consistent basis, of processes associated with localization of production facilities used to manufacture completing parts, components and units for existing and newly-established enterprises with foreign investments, formation, for this purpose, of a modern technological base, introduction of new technologies and training of personnel. These are considered to be the topmost tasks of the national restructuring policy.

2.To take into consideration that a working group set up in accordance with the November 11, 2003 Presidential Decree NoP-1863, has assessed additional opportunities for intensifying of production facilities used to manufacture finished goods, materials and completing parts on the basis of local raw stuff as well as for optimizing the importation of goods for production use.

To approve the Complex Program for localization of production facilities used to manufacture finished goods completing parts and materials on the basis of local raw stuff for the period 2004-2005, which has been developed by the working group together with ministries, departments, economic associations, the Council of Ministers of the Republic of Karakalpakstan and khokimiyats of the provinces and the city of Tashkent.

To approve the following documents:

-a list os the localization level of production facilities used to turn out finished goods;

-a list of projects to localize production facilities used to manufacture completing parts for the main kinds of industrial output;

-a list of projects to localize production facilities used to turn out new kinds of finished goods, as well as components and completing parts for them;

-a list of projects to localize production facilities used to manufacture raw stuff, components and industrial materials;

-a list of materials and articles for production-and-technical and consumer use for the Republic’s enterprises to start their production.

3.To set up an ad-hoc commission to be involved in handling issues that arise out of the fulfillment of the Complex Program for localization of production facilities used to manufacture finished goods, completing parts and materials on the basis of local raw stuff.

The ad-hoc commission (U.Sultanov) is tasked with accomplishing the following:
-in conjunction with the Ministry of Economics and the State Statistics Committee of the Republic of Uzbekistan, to keep under control the course of implementation of projects for localization of production facilities used to manufacture finished goods, completing parts, raw stuff, components and materials, with the results of such a control being brought to the Cabinet of Ministers’ notice each month;

-to draw up, within 2 month, a list of operational and newly-established the enterprises with foreign investments, which specialize in the production of finished goods, with appropriate proposals being developed and submitted to the Cabinet of Ministers for an efficient mechanism for monitoring any increase in the level of production facilities localization.

4.The Ministry of Economics, the Finance Ministry and the Ministry of Labor and Social Protection of Population of the Republic of Uzbekistan should submit to the Cabinet of Ministers their proposals for encouraging heads and engineering staff of enterprises to expand localization of production facilities, by linking the amount of their remuneration with the level of localization achieved.

To apply the indicator of localization level and production of competitive finished goods, completing parts, components, units and materials on the basis of local raw stuff as one of major criteria used to assess the performance of one or another leader when summing up the results of management at all levels.

5.To exempt, starting January 1, 2004, enterprises involved in the implementation of projects included in the approved Complex Localization Program, from payment of the following taxes for 5 years:

-customs payments (with the exception of payment charged for registration of imports with the customs authority) charged for imported technological equipment and spare parts thereto, materials and components not manufactured domestically, which are used in technological processes involved in the production of localized output;

-income (profit) tax, unified tax (intended for economic operators who use the simplified taxation system) imposed on produce manufactured under localization projects;

-property tax imposed on basis production resources used to turn out localized produce.

The Finance Ministry, the State Tax Committee, the State Customs Committee and the Ministry of Justice of the Republic of Uzbekistan, within 10 days, should work out and approve, in accordance with the established procedure, regulations on application of the stated privileges and purposeful use of released funds for the implementation of the approved Localization Program.

6.To authorize the Agency for Foreign Economic Relations of the Republic of Uzbekistan to issue resolutions on whether or not one or another imported technological equipment, spare part, material or component not manufactured within the Republic falls under the category of materials used in the technological processes involved in the production of localized output.

The Agency for Foreign Economic Relations, the Ministry of Economics, the Finance Ministry, the State Customs Committee, the State Tax Committee and the Ministry of Justice of the Republic of Uzbekistan, within 2 weeks, should approve, in keeping with the established procedure, corresponding instructions designed to regulate a procedure for issuing the aforesaid resolutions.

7.To lay down that any changes in the lists and parameters of the Localization Program may only be introduced following appropriate proposals by the ad-hoc commission, which handles the totality of issues associated with the implementation of the Localization Program, developed on the basis of resolutions drawn up by the Ministry of Economics and other interested departments. These resolutions, in turn, should be coordinated with all the complexes incorporated into the Cabinet of Ministers, with such coordination taking the form of an appropriate resolution issued by the Cabinet of Ministers of the Republic of Uzbekistan.

The ad-hoc commission, together with the Ministry of Economics and other departments concerned, within a month, should develop a procedure for submitting proposals to the Cabinet of Ministers for the introduction, if need be, of amendments into the Localization Program.

8.To recommend the Republic’s commercial banks to register all the enterprises they are serving, which take part in the implementation of projects included in the Complex Program for localization of production facilities used to manufacture finished goods, completing parts and materials on the basis of local raw stuff for the period 2004-2005. These enterprises should be given priority when the banks form their annual credit portfolios.

9.To exclude Points 1 and 2 of the Resolution of the Cabinet of Ministers dated November 22, 2001 (№456), “On specification of the list of projects include in the Program for localization of production facilities used to manufacture goods and materials on the basis of local raw stuff for the period of up to 2005”.

10.The Ministry of Justice of the Republic of Uzbekistan, in conjunction with interested ministries and departments, within one month, should submit to the Cabinet of Ministers their proposals for the introduction into the legislation of the Republic of Uzbekistan of amendments and supplements that result from the present Resolution.

11.To commission the Prime Minister of the Republic of Uzbekistan, Sh.Mirziyaev with overseeing the way the present resolution is implemented.

Chairman of the Cabinet of Ministers Islam Karimov
January 24, 2003
Tashkent