This is the right time to invest in Uzbekistan

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Milton Hancock
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1 This is the right time to invest in Uzbekistan

2 Uzbekistan main facts Total area 434 ths. km 2 Gold Uranium Total population 32 million Nukus Copper Zinc Gas/oil Density 76 people per km 2 Urgench Tashkent Andijan Languages spoken Uzbek, Russian, English Bukhara Navoi Jizak Samarkand Ferghana Natural resources Over 1800 mineral reserves Karshi Termez 2

1 Action strategy for 2017-2021 sets up investment climate and FDI attraction as key priorities President Strategic Priorities State and public institution improvement Supremacy of the rule of law

3 1 Action strategy for sets up investment climate and FDI attraction as key priorities President Strategic Priorities State and public institution improvement Supremacy of the rule of law Economic development and liberalization Development of the social sphere Security, interethnic harmony, and religious tolerance, and constructive foreign policy Key areas of the economic policy Stable foreign exchange rate Modernization of the economy Technology development FDI promotion and investment climate Private property protection mechanisms Tax system Banking system and financial markets 4

4 2 Liberalization of currency regulations No more constraint for private business development and FDI flows starting September 2017 What it used to be Exporters were required to sell ¼ of hardcurrency revenue to the government1 What it is now You earn revenue it is yours. This is a fair play Controlled exchange rate of the Uzbekistani Soum to the U.S. dollar Exchange rate is determined by the free market Restricted amount of foreign currency that individuals and companies could buy Buy as much as you need. No constraints 1 At a fixed non-market exchange rate We believe in the market economy! 5

3 Attractive tax incentives and free economic zones We welcome foreign capital with significant tax incentives 0% income tax (for SMEs) 30%-50% income tax reduction 2 0% VAT and invite them to join

5 3 Attractive tax incentives and free economic zones We welcome foreign capital with significant tax incentives 0% income tax (for SMEs) 30%-50% income tax reduction 2 0% VAT and invite them to join one of the 14 FEZ to get full exemption from Income tax and custom duties 1 Social infrastructure and uniform SME taxes Compulsory contributions to the Road Fund 45% 41% 38% 30% Steady decrease of tax burden (in % to GDP) 23% 20% 19% Total implemented: 62 projects Total amount: US$ 469 million Including FDI: US$ 261,6 million 1 excluding custom clearance fees 2 for 15%-30% export sales We are invested in creating attractive conditions for your business in Uzbekistan 6

6 3 World Bank Doing Business ranking: more than 90 points improvement in the past 5 years World Bank: Doing Business rankings Afghanistan 161 Cameroon 162 Togo 163 Såo Tomé and Principe 164 Iraq 165 Lao PDR 167 Cöte d'ivoire 168 Timor-Leste 169 Burundi 170 Djibouti 171 Zimbabwe World Bank: Doing Business rankings Turkey Costa Rica Luxembourg Bahrain Greece Vietnam Oman Indonesia El Salvador 166 Uzbekistan 74 Uzbekistan Ukraine Kyrgyz China South Africa Malta We eliminated 160 licensing procedures and 19 activities in recent years 7

7 4 World s 5th fastest growing economy in and expected to be in the TOP-3 by 2019 Historical GDP growth, % Total GDP Bn USD Uzbekistan Tajikistan Turkemnistan Kyrgyzstan Turkey Georgia 2.7 Kazakhstan 1.0 Russia Azerbaijan SOURCE: World Bank for

5 One of the most populated countries in the region with free trade access to

Population, in Mn Russia 144 Ukraine 45 Kazakhstan 18 Belarus 10 Other countries

Uzbekistan 245 32 Total market access 277 Comparable to Brazil 1 Other countries

8 5 One of the most populated countries in the region with free trade access to vast neighboring potential Neighbor countries with free trade agreements Population, in Mn Russia 144 Ukraine 45 Kazakhstan 18 Belarus 10 Other countries 1 28 Outreach of free trade agr. Uzbekistan Total market access 277 Comparable to Brazil 1 Other countries include Tajikistan (pending final signing of free trade agreement), Kyrgyzstan, Turkmenistan, Moldova, and Armenia SOURCE: World Bank for

represented in Uzbekistan General literacy of the population is 97% Labor force in Mn ppl Uzbekistan 18.5 Kazakhstan 9.

9 5 Educated workforce of 18.5 mln people Largest workforce in the region 65 higher education institutions and several international universities represented in Uzbekistan General literacy of the population is 97% Labor force in Mn ppl Uzbekistan 18.5 Kazakhstan 9.2 Azerbaijan 4.9 Tajikistan 3.9 Kyrgyzstan 2.6 Literacy rates Spain Singapore Uzbekistan Upper middle income countries average Turkmenistan 2.4 World average 86.0 SOURCE: World Bank for

10 6 Stable political, economic, and investor environment Political stability 26 Year of independence Economic stability 10 Year of triple budget surplus 0 Substantial crises 0 State internal debt 0 Years of political unrests Investor protection Legislative acts and decrees on: foreign investors guarantees and measures to protect rights of foreign investors measures to improve the system of protection of legitimate interests of businesses 11

11 Companies with FDI in Uzbekistan 12

12 President's visit to Fergana region A preliminary list of 52 investment projects with a total cost of $800 million with participation of foreign investments 40 projects - potential foreign investors have been identified 12 projects - necessary to attract foreign investors 13

13 Potential projects Field Potential projects Agricultural and food industry Deep processing in agriculture Development of a network of cold rooms for agricultural products Chemical industry Innovative chemical products and fertilizers Local production of household chemicals / cosmetics Tourism Mining metallurgy Textile Mechanical engineering IT sector Development of a chain of mass segment hotels in key tourist locations Extraction and processing of rare metals, production of industrial products from them Deep processing of cotton, clothing and home textiles Development of local production of agricultural machinery Development of the Software Development Outsourcing Center Health care Development of a network of private general clinics 14

14 We invite you to invest in expansion of profitable capacities STATE INVESTMENT COMMITTEE OF THE REPUBLIC OF UZBEKISTAN Investment presentation 3 rd November 2017

1 Short project description Прямые иностранные инвестиции The platform for project implementation The Ferganaazot enterprise - one of the largest chemical companies of Uzbekistan Project components

15 1 Short project description Прямые иностранные инвестиции The platform for project implementation The Ferganaazot enterprise - one of the largest chemical companies of Uzbekistan Project components Modernization of production of ammonia, carbamide, ammonium nitrate, nitric acid and acetate threads Production organization of synthetic fibers Financing 173 million dollars (from which 73% the foreign investments) Implementation terms preparation for project implementation purchase and installation of equipment 2022 and further an exit to design capacity and further production Investment conditions The investor receives an ownership ratio in the enterprise and the right to annual dividends from a net profit The expected cash flows on the project for the foreign investor, one million US dollars Preparation Purchase and installation of the equipment Production NPV of the investor IRR, US dollar million US dollar 17% 33 2

16 2 Focal products of the project The raw materials which are purchased from the outside Production: products are built in already existing value creation chain at the enterprise Production and primary processing X Current power, one thousand tons X Power on project deliverables, one thousand tons Production of intermediate products A number of stages of value creationis not shown Production of end products Gas enterprises Gas processing plant Petrochemical plant Chemical enterprises High costs of the electric power ~ 60% of ammonia globally go for production of a carbamide, ~ 10% - for production of nitric acid, 10% for consumption as fertilizer and 20% for industrial needs Carbamide % of ammonia are globally produced from natural gas 30% - from coal, 5% - from other raw materials Ammonia Nitric acid Ammonium nitrate N/A 5 Natural gas Methane Acetic acid Cellulose acetate Acetate threads Cotton cellulose N/A 15 Polymers Synthetic fibers SOURCE: PotashCorp, IHS Chemical SRI, Deutsche Bank, Yara Industry handbook 3

2 Domestic demand: the final industries of consumption of the considered products steadily grow Products Ammonia Carbamide Scopes of application Agriculture Production of agricultural and textile

17 2 Domestic demand: the final industries of consumption of the considered products steadily grow Products Ammonia Carbamide Scopes of application Agriculture Production of agricultural and textile products in Uzbekistan, one million US dollars (at an official rate) 15 +7% in a year Growth in national currency effect of growth of dollar exchange rate 18-9% 16 Nitric acid Ammonium nitrate Acetate threads Light industry % in a year Syntheticfibers 1 Production of textile products and clothes SOURCE: Ministry of Economics, KI, analysis of the working group 4

2 World demand: consumption of fertilizers will continue to grow in the world 60% of all fertilizers nitric (from which 56% a carbamide, 9% ammonium nitrate and 4% ammonia) Ammonia a basis of all

18 2 World demand: consumption of fertilizers will continue to grow in the world 60% of all fertilizers nitric (from which 56% a carbamide, 9% ammonium nitrate and 4% ammonia) Ammonia a basis of all nitrogen fertilizers, can be applied as fertilizer independently, but its derivatives are more often used The carbamide the most popular nitrogen fertilizer in the world, is especially widely applied in developing countries as it can be brought manually Consumption of fertilizers Million tons, N+P2O5+K2O In India input of system of subsidies is expected 7 In China optimizationof a sowing cyclecontinues 3 3 In Africa increase in regulations of introduction begins In Brazil expansion of the processed sitescontinues In the world (2015) Southern Asia East Asia Latin America Africa V. Evropa Middle and Ts. East Afrik Oceania Western Europe North America In the world (2025) SOURCE: IFA, FAO 5

19 2 Competition: Ferganaazot one of the top 3 enterprises in Uzbekistan, making similar products, at considerable world competition Top-10 Capacities for production ammonia 1, million tons Capacities for production urea 1, million tons Location of assets Pattern of ownership The company with a control package in property of the state Joint venture 8,2 7,8 4,8 5,5 Private company 4,0 2,0 4,0 2,3 Ammonia and urea are 3,7 5,6 manufactured by the Ferganaazot, Navoiazot and 3,5 2,2 Maksam companies in 3,4 2,8 Uzbekistan Chirchiq 3,0 1,0 2,7 1,0 2,7 2,4 1 General power of production SOURCE: IHS Chemical; websites of the companies; IFDC 6

2 Source of raw materials: Uzbekistan has significant resource advantages to production of the considered products The key countries - exporters Price of electricity, cents for kwh Average z/p, US

20 2 Source of raw materials: Uzbekistan has significant resource advantages to production of the considered products The key countries - exporters Price of electricity, cents for kwh Average z/p, US dollar a month Annually in Uzbekistan one of the largest volumes of natural gas are extracted Китай bcm + 10 bcm США bcm million m3 + 1 million m3 Россия There is no production Индия Бразилия Египет Канада Турция Индонезия Uzbekistan (6,5) Uzbekistan (245) SOURCE: World bank; State committeeof statistics of RU; TurkStat; Rosstat; Statistics Canada; US Bureau of Labor Statistics; National Bureau of Statistics China; India Ministry of Statistics and Programme Implementation; IBGE; Statistics Indonesia of the Republic of Indonesia; Trading Economics; Ministry of Economics of RU 7

21 3 Project economy: the project will bring NPV of 91 million US dollars for the foreign investor Синтетические волокна The planned production, one thousand tons Ацетатные нити Азотная кислота Аммиачная селитра Карбамид Аммиак The planned revenue, one million US dollars General indicators of the project NPV IRR, US dollar Coefficient profitability 96 million US dollar 16% 1,4 84 Utilization of 60% The planned operating costs, one million US dollars Utilization of 80% The expected capital costs, one million US dollars Period payback 9 years The expected financial performance for the foreign investor 99 NPV 91million US dollar 73 IRR, US dollar 17% Coefficient profitability 2, SOURCE: Ferganaazot; Ministry of Economics; KI; analysis of the working group Period payback 7 years 8

22 4 Profile of the company: Ferganaazot dynamically developing company with rich history History of the company Management and structure of property Foundation of the plant Start of production of ammonium nitrate and nitric acid Salizhanov Abdupatto Tulanovich Chairman of the board Start of production of ammonia Start of production of chlorate of sodium and chlorate of a magnesian defoliant Start of production of acetates and diacetates of cellulose Manageme nt Abdurakhmonov Fayzullo Abdullayevich Director of production Holmatov Akmal Hamidovich Director of finance Start of production of a carbamide Commissioning environmentally friendly productions of ammonium nitrate is not concentrated-ache acids Structure of property Arrangement State 48,05% JSC O'zkimyosanoat 51,00% Other shareholders 0,95% the present Accession of the Fergana plant of chemical fibers Modernization and expansion of production Tashkent Fergana Flight from Tashkent (the capital, a large transport hub flights in> 40 points of the world) to Fergana borrows less than 1 hour 9

23 Thank you for attention! Expand your horizons! +998 (71) (71) Islam Karimov street Tashkent, Uzbekistan Invest.gov.uz 15

This is the right time to invest in Uzbekistan

This is the right time to invest in Uzbekistan Uzbekistan main facts Total area 448,000 km 2 Gold Uranium Total population 32 million Nukus Copper Zinc Gas/oil Density 76 people per km 2 Urgench Tashkent