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Business Connections #11/2008

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LUKoil Acquires New Hydrocarbon Assets in the Republic of Uzbekistan

In February 2008, “LUKoil Overseas” (100% subsidiary of “LUKoil” JSC) reached an agreement with “MGNK Neftegaz” CJSC to acquire the control stock of the group of companies, including “SoyuzNeftGaz Vostok Limited”. The latter is a PDA party for the Southwest Gissar deposit and Ustyurt region in the Republic of Uzbekistan.  
Eight deposits are located in the contract territory, and their geological supply reaches 100 bln cubic meters. The project capacity makes about 3 bln cubic meters of gas per year. It is planned to reach this level in four years. Natural gas will be exported via the “Gazprom” gas mains.
The PDA, where the “SoyuzNeftGaz Vostok Limited” is participating, was signed on January 23, 2007 and became effective on April 23, 2007.  Duration of the project will be 36 years.
“News of Uzbekistan”, 15.02.2008

“General Motors” in Uzbekistan

The “General Motors Uzbekistan” JV started its operation in Uzbekistan. The JV venture has been established between “Uzavtosanoat” JSC and “General Motors” Corporation (USA).
Cooperation with “General Motors” is to introduce modern technologies in the automotive sector of the Republic and launch new high quality products that would match the international standards. In addition, such cooperation will open new jobs and improve the professionalism of the personnel, etc.
The new JV intends to increase the passenger car production in Uzbekistan. The Asaka factory is planning to produce 200 thousand passenger cars this year, and in the nearest future, the factory output will reach 250 thousand vehicles per year. The factory will make the passenger cars and off-road Chevrolet vehicles. Uzbekistan is already producing three models of this world-known brand, i.e. Captiva, Epica, and Tacuma. In 2008, the Chevrolet Lacetti car will add the model range of the national automotive industry. In a longer perspective, it is planned to manufacture the two most recent models. Designers and developers are still working on them. These commercial products will be exported to the CIS markets.
Adoption of new technologies and modern manufacturing processes will favor the implementation of these plans. In particular, “General Motors” will arrange practical and refresher trainings for 4700 employees of the JV. Much attention is paid to localization and involvement of the national manufactures of spares and components. All of them will participate in the development of the model range to be produced at the JV.                        
The JV parties are fully confident that “General Motors” will make a substantial contribution to the development of the automotive industry of Uzbekistan, and the national economy as a whole.
The “General Motors Uzbekistan” JV and its foreign staff enjoy preferences as follows: a five-year exemption from taxes, customs fees and other compulsory payments. In addition, as envisaged by a supplement to the Resolution, such preferences will be extended for the other five years from the moment when a new model is launched by the factory. The expiration date for the preferences will be December 31, 2017. 

Cost of American Visas Has Increased at One-third

In its special explanatory note, the US State Department has declared the increase of the visa issuance prices. From January 1, 2008 the tourist visas, as well as the business, student, and working ones will cost $131 instead of $100, and long-term visas (over six months) will cost $355 instead of $335. The State Department has explained such increase of the visa fees “by introduction of new information technologies, inflation, and security-related expenses”.   

Openness for Foreign Investments

According to the US State Department report on investment climate in 2007, Uzbekistan is the biggest consumer market of the Central Asia.
Such huge mineral resources as gold, natural gas and cotton, open attractive opportunities for investors. After the USA, Uzbekistan is the fourth biggest world producer of cotton and the second biggest exporter of it. Uzbekistan has a capacity to become the economic centre of the region, but the government needs to create conditions to attract investments. The government of Uzbekistan has proclaimed the policy of attraction of investments. The direct foreign investors enjoy a number of preferences including exemption from taxes, duty-free importations of industrial assets and anti-expropriation protection.
Uzbekistan possesses all the necessary factors to become the industrial centre of the region: dynamic, well-educated, and enterprising population, location at the crossroads of the Central Asia, relatively good infrastructure, rich mineral resources, consumer market with a huge potential.
Uzbekistan has entered into bilateral investment agreements or free trade treaties with 47 countries of the world. In 2004, Uzbekistan and Russia signed an agreement on strategic partnership that includes provisions on the free trade and investments. In November 2005, the government of Uzbekistan made another step, having signed the allied treaty with Russia. The treaty and its supplements cover cooperation both in the sphere of security and economy. In 2004, Uzbekistan and the Ukraine agreed to abolish all the barriers in the bilateral trade. In 2006, Uzbekistan initiated the procedure of joining the Eurasian Economic Cooperation. “Agreement between the Republic of Uzbekistan and United States of America on Encouragement of Investments and their Mutual Protection” was signed in Washington on December 26, 1994, and later on, the Parliament of Uzbekistan ratified it. In 2004, Uzbekistan signed the regional trade and investment agreement (TIFA) with the US commercial officer and four neighboring countries of the Central Asia.
OPIC and other investment insurance programs.  OPIC (Overseas Private Insurance   Corporation) began its operation in Uzbekistan from the moment when a bilateral agreement was signed in October 1992. In the course of its operation in Uzbekistan, OPIC managed to finance six projects amounting to USD 229 mln. As of January 2007, two of the mentioned projects (reconstruction of a hotel and school) were still receiving a vigorous support from OPIC.
OPIC is supporting American investments in merging countries and economies via the risk management tools, i.e. political risks insurance, financing through direct credits, cooperation with the private capital through the OPIC-backed private investment funds.  

(Material from published articles compiled by Uzbek A. Rustamov, General Representative, Interconcepts Inc. Translation to English: Lyubov Belokon)

Business Connections #11/2008

Business Connections #11

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