Uzbekistan reduces localized production

Business Materials 18 April 2019 14:48 (UTC +04:00)

Baku, Azerbaijan, April 18

By Fakhri Vakilov – Trend:

Uzbekistan reduced the number of projects for the manufacture of localized products from 619 to 447, the number of enterprises from 262 to 184 and production from 4.5 trillion soums to 3.2 trillion soums in the first quarter of 2019, Trend reports with reference to the State Statistics Committee of Uzbekistan.

Importantly, in the first quarter of this year, sales of localized products for export decreased from $135 million to $108 million.

Import substitution in Uzbekistan had a solid government support in the form of tax and customs benefits.

Localization program participants who produce imported analogues of foreign products were exempted from paying customs duties for imported technological equipment and spare parts, income tax, single tax (for entities applying the simplified tax system), property tax for a period of 3 years.

The rate was made on the production of import-substituting and export-oriented products, providing a level of localization of at least 36 percent.

Moreover, the share of exports of localized products in net revenues from its sales should have been at least 20 percent.

Ministry of Economy and Industry of Uzbekistan states that over 2,800 localization projects worth over $5.5 billion have been implemented in the country over 15 years.

Foreign analysts note that the import-substituting model of industrial policy has its drawbacks.

They include self-isolation from new trends in the global economy, the possibility of technological and, consequently, a competitive lag from developed countries.

A considerable threat is the danger of creating greenhouse conditions for national producers, which leads to inefficient management and use of resources.

It is noticed that in the conditions of a long economic isolation import substitution inevitably leads to a lag and a policy of catch-up development.

However, the main disadvantage is that localized products often turn out to be uncompetitive by the "price / quality" formula and are not in demand on the external market.

($1-8462.38 soums on Apr. 18)


Follow author on Twitter:@vakilovfaxri