Chamber of Commerce and Industry
of the Republic of Uzbekistan,
700047, 6, Bukhoro Street,
(Mr. Alisher Shaikhov, Chairman)
Tel: 998-71-1320901, fax: 998-71-1333799
E-mail: root@rptp.co.uz
 

BACKGROUND

Trade relations between India and Uzbekistan are governed by the Agreement on Trade and Economic Cooperation, signed in May 1993. It contains normal features of trade agreements, such as mutual MFN treatment, promotion of economic, industrial, scientific & technical cooperation, including in the field of training of personnel, active participation of small and medium sized enterprises in bilateral economic cooperation, and counter-trade, etc. India and Uzbekistanalso signed an Agreement on Avoidance of Double Taxation in 1993 and yet another one for Bilateral Investment Promotion and Protection in May 1999.

Bilateral Trade

According to figures published by the State Committee on Statistics, Republic of Uzbekistan, imports from and Exports to India during 1999-2006 are given below:-

As per trade statistics, India\'s exports to Uzbekistan include drugs, pharmaceuticals, paper, wood products, machinery, garments & fabrics, tea, plastic items, chemicals, sergical items and consumer goods.

Non-ferrous metals constitute the largest item of Indian imports from Uzbekistan.   Other principal items of import are machinery, silver, raw cotton & silk, pulses & services (which reflect remittances of Uzbek Airways from India of its revenue from both passengers and cargo services).

BOTTLENECKS FOR INDO-UZBEK TRADE AND RECENT POSITIVE DEVELOPMENTS:

The fall in volume of Indo-Uzbek trade (1998-2001) has been, to some extent, a reflection of the sharp decline in the volume of Uzbekistan’s global foreign trade because of problems in the external sector (from $ 9.4 billion in 1996 to $5.659 billion in 2002).  High cost of transportation between Uzbekistan and India (Uzbekistan is doubly landlocked) has been another problem. Yet another adverse factor until recently has been the non-convertibility of local currency to finance imports into Uzbekistan. Tough competition posed by cheaper Chinese goods has also hurt India’s exports to Uzbekistan.  India’s export of tea has suffered due to high prices of Indian tea compared to Sri Lankan and Chinese tea.  
 

In October, 2003, the Uzbek Government announced current account convertibility of the local currency. This was an important step in regard to improvement of the trade climate in Uzbekistan. An IMF mission, that visited Uzbekistan in December 2004, observed that the currency convertibility has “continued to operate fairly successfully.” Further, in January 2003, Uzbekistan acceded to the trilateral agreement on transit of goods between India, Iran and Turkmenistan. India’s agreement with Iran and Afghanistan to develop a transportation route from the Iranian port of Chahbahar to Afghanistan and Central Asia will also help in this regard. In June 2003, Uzbekistan, Iran and Afghanistan signed a trilateral agreement to link Termez (Uzbekistan) via Herat to Bandar Abbas and Chahbahar. This route, when developed, will considerably reduce the distance between Uzbekistan and India.

 
Tariffs:

The import duty structure of Uzbekistan consists of four components viz. import excise, import duty, import VAT and customs registration fee.  It is calculated using the following formula:

Import VAT =  20% of (customs value + import excise, import duty).

Customs value is usually calculated by adding invoice price, insurance and transportation of the imported product. Customs registration fee is generally around 0.2% of customs value.

The import duty rates for a few items are as follows :

Pharmaceuticals & pharmaceutical products    - 5 to 30%, Chemicals - 5 to 10%, Cotton products - 10 to 30%, engineering goods – 5 to 30%, electronic items including IT equipment – 5 to 30%.

Excise rates for a few indicative products are as follows:

Cotton fibre, its waste, thread and yarn – 10%, cotton fibre for retail purposes and cotton cloth – 30%, FMCGs – 20 to 60%, insulated wires – 50% and so on.

Import duties and excise rates vary significantly from product to product and within each generic product category.  Thus, specific codes have been assigned to each specific product for import duty and excise rate and these have been extensively documented by the custom authorities in Uzbekistan.

Freight Rates 

Currently, there are two popularly used transportation routes from Tashkent.  The first is through Bander Abbas in Iran and the second through Avtovo (St. Petersburg) in Russia.  Freight ex-Tashkent to Mumbai through Bander Abbas is approximately US$2300/- (20 ft. container), $2980/- (40 ft. container) using rail and sea modes and is $2300/- (20 ft. container) and $2500/- (40 ft. container) using truck and sea modes of transportation.  Ex-Tashkent to Avtovo is US$1400/- (20 ft.) and $2200/- (40 ft.) containers by railway transportation.

Goods can also be transported by air directly from Tashkent-Delhi/Amritsar and the cost varies from US$3-4 per kg. depending on the volume.  Currently a fuel surcharge of US$0.5 is also being levied on airfreight.                                    

Labour and Electricity Charges:

Basic infrastructural elements such as power, water, telecommunication, rail and road communication are readily available in Uzbekistan.  Average labour cost for skilled and unskilled labor varies from US$50-80 per month.  Electric power for industrial use is available at US$0.03 per unit.

Indian joint ventures in Uzbekistan

The following Indo-Uzbek joint ventures have been operating in Uzbekistan:

Core Pharmasanoat Limited: Established in February 1997. (M/s. Core Healthcare Ltd., Ahmedabad) (Pharmaceuticals) (The plant was sold to Uzbeks in 2002). 
Surkhan Ajantha  Pharma: Established in 1993 (M/s. Ajantha Pharma Ltd., Mumbai) (Pharmaceuticals) (Factory lying nearly closed).
Gufic Avicenna Limited: Established in March 1997 (M/s. Gufic Ltd., Mumbai) (Pharmaceuticals). 
Reddy-Pharmed Limited: Established in 1998 (Dr. Reddy’s Laboratories Ltd., Hyderabad) (Pharmaceuticals)  (The production was started in the month of July 1999). 
“Singapore-Samarkand Ice Cream Factory” (Ice cream) (Controls over 70% of ice cream market in Uzbekistan)
“Babur Botir Packaging Ltd” Indo- Kent Plastics Pvt. Ltd, Hyderabad (packaging material) (JV dissolved in February 2003)
Kafolat Kapur Fashion : established 1994 (Garments)
“ILYOS” Hotel: established in 1997 (95% share held by Indian partner)
East Butterfly, manufacturer of stainless steel utensils (M/s Butterfly, India) (The plant was temporarily closed because of lack of working capital and raw material, but has resumed production again recently).
Hotel Sunshine-Turon International Ltd.; established in 2002 (Ultimate Fashion Maker Ltd. And Fashion Factory International Pvt. Ltd.) (The owners have plans to invest US$5.5 million for reconstruction of Hotel Turon).
Vinuz Ltd. (Veterinary products).
“Margilan Spun Silk Ltd” ( Abdul Rahim Textiles & Company of India and Uzbek Ipagi {Ministry of Silk} : established in 2004 (silk products).

Indian Textile Company "Spentex" bought two textile mills near Tashkent in August 2006 with an investment of US$ 81 million.  Spentex also acquired a design unit near Margalan in the Ferghana valley.