SOCIAL ECONOMIC DEVELOPMENT OF THE REPUBLIC OF UZBEKISTAN

1. SOCIAL ECONOMIC DEVELOPMENTOF THE REPUBLIC OF UZBEKISTAN AND THE MEASURES TAKEN TO IMPROVE THE BUSINESS ENVIRONMENT Ministry of Economy of the Republic of Uzbekistan August 17, 2012

2. Main trendsof social economic development of Uzbekistan Sustained high rates of economic growth (7-9% per annum on average) • for the period of independence, the development of GDP based on purchase power parity has increased 3,5 times • volume of industrial production has grown more than 3 times during 1990-2011 2

3. Main trendsof social economic development of Uzbekistan Main macroeconomic indicators of development of the Republic of Uzbekistan for the period of 2012-2015 (in % change to the previous year) 3

4. Factors affecting to the growth rate ofsocial economicdevelopment of the Republic of Uzbekistan Maintaining macroeconomic stability, domestic and external equilibrium in the economy of the state; Active industrial policy, aimed at structural changes, the rapid growth rate of the share of processing industry with the production of goods with high value added; Implementation of innovativetechniques, including energy-conserving; Modernization and development of industrial infrastructure, particularly transport, power industry, water use and sewer systems, as well as means of communication; 4

5. Factors affecting to the growth rate ofsocial economicdevelopment of the Republic of Uzbekistan Intensification of agricultural sector at the expense of the introductionof newtechnologies, water conservation, efficiency and productivity; Further liberalization of economy and improvement business environment for developing small business and private entrepreneurship, as well as attracting foreign investment; Stimulation and support for export; Active investment on the building ofhuman capital in the fields of education, health and physical training. 5

6. Main trendsof social economic development of Uzbekistan Macroeconomic stability, internal and external balance of the economyhave been ensured • a moderately tight monetary policy kept inflation below 7-8 percent Budget balance (in % to GDP) • balanced state budget – executed with a surplus since 2005 • conservative policy of domestic and external borrowing. Government external debt doesn’t increase 7% of GDP 6

7. Main trendsof social economic development of Uzbekistan • balanced foreign trade – sustainable surplus and over 6-times growth of the official reserves in the past 5 years Volume and dynamics of Uzbekistan foreign trade(USD mln.) 7

8. Main trendsof social economic development of Uzbekistan Implementation of large-scale structural reforms and diversification of the economy • structural reforms of economy have provided growth of industrial production share in GDP from 14,2% in 2000 to 24,1% in 2011; • implementation of transport and communication infrastructure development projects that increased share in GDP from 7,7% in 2000 to 11,7% in 2011; • qualitative changes in the structure of economy due to growth of services in GDP from 37% in 2000 to 50,5% in 2011. 8

9. Program on priorities of industrial development of the Republic of Uzbekistan for 2011-2015 • Programincludes: • Implementation of 519 large-scale industrial investment projects for the total of USD 47,3 bln.; • Advanced implementation of projects producing high-value-added industrial goods based on deep processing of local feed-stock and natural resources; • Annual growth of industrial production at the rate of 9-12%; • Increase of industry share in GDP from 24% in 2010 to 28% in 2015; • Increase of processing industries share in the structure of industry from 41% in 2010 to 49% in 2015; • Increase of export share in the volume of production from 42,3% in 2010 to 63,2% in 2015. 9

10. Program on priorities of industrial development of the Republic of Uzbekistan for 2011-2015 Construction of Ustyurt Gas and Chemical Complex (on the base of Surgil gas field) and Mubarek Gas and Chemical Complex with total production capacity of 800 thousands tones of polyethylene and 100 thousands tones of polypropylene; Production of synthetic liquid fuel based on refined methane from Shurtan Gas and Chemical Complex (671 thousands tones of diesel, 278 thousands tones of air fuel, 370 thousands tones of naphtha, 65 thousands tones of liquefied gas); Construction of the modern combined-cycle power plants in Tashkent, Navoi and Talimarjan power stations, with the total capacity of 1746 MWt; Transferring units №1-5 of New Angrenpover station to year-round coal firing (stage 1) with modernization of the section "Angren"; 10

11. Program on priorities of industrial development of the Republic of Uzbekistan for 2011-2015 Construction of urea and ammonia plant with production capacity of 660 thousands tones of ammonia and 1 mln. tones of urea; Expansion of Dekhkanabad potash fertilizers plant up to 600 thousands tones (II phase); Construction of propane-butane production plant at «Mubarek Gas processing plant» for increasing of liquefied gas production up to 258 thousands tones and condensate up to 125 thousands tones; Organization of production of conveyor belts, tires for agricultural machines and automobiles. 11

12. Development of transport infrastructure Development of road infrastructure More than 2300 km roads sections of the Uzbek National Highway are being constructed and reconstructed; International Logistic Center in Angren city put in operation. Development and modernization of the railway sector Currently, 1030 km of railroad is being rehabilitated, 82.4 km are being constructed, and 278 km is under electrification; High-speed passenger trains «Talgo-250» have been purchased and high-speed railway line from Tashkent to Samarkand is introduced for their exploitation. Development of air transportation Construction of new passenger terminals at the airports of Bukhara and Tashkent are completed; Exploitation of new ten Airbuses A320-200 and two Boeing-767-300 are started; The purchase of two Boeing-767-300 is foreseen in 2013 and two Boeing-787-800 in 2016. 12

13. Government support fordevelopment of the economy For the years of Independence the aggregate tax burden decreased by almost 3 times. Moreover the Government provides additional tax incentives for exporters, small business enterprises and companies engaged in new investments and starting production of new goods and products 13

14. Government support fordevelopment of the economy A stable banking and financial system in strict compliance with the Basel Core principles of banking supervision • Capital Adequacy Ratio – 3 times higher than international standards; • Total assets of banks – more than 2 times higher than the total balance of the deposits of population and legal entities, insuring complete protection and guarantee of timely payments; • for the last 10 years volume of loans to the real sector of the economy, financed from internal sources has increased by 35 times; • Total current liquidity of the banking system is 10 times higher than external payments due. Sources of credit portfolio of commercial banks (eq. USD mln) 14

15. Education system of the Republic of Uzbekistan New education system has been established, which consist of: • 1539 new academic lyceums and professional colleges, with the capacity of 1.6 million students; • 9791 renovated and newly constructed secondary schools for 4.6 million students. • 66 institutions of tertiary education are functioning in the Republic with more than 300 thousand students, including branches of leading foreign universities: • Moscow State University named after M. Lomonosov; Westminster International University; Turin Polytechnic Institute; Russian Economic Academy named after G. Plekhanov; Management Development Institute of Singapore; Russian State University of Oil and Gas named after M. Gubkin. 15

16. Small business and private entrepreneurship From the beginning of economic reforms small business and private entrepreneurship development has made the basis of multi structure market economy formation • share of small business in GDP has grown from 31% in 2000 to 54% in 2011; • number of small business enterprises has increased 2 times during last 10 years; • share of small business enterprises in employment has increased from 49,7% to 74,8%; • share of small enterprises in the total volume of industry has grown from 12,9% to 21%. Dynamics of small business and private entrepreneurship development 16

17. The number of registered small business entities per 1000 employed people in 2011 in the countries of CIS (units) 17

18. Government program “The Year of Small Business and Private Entrepreneurship” Credit stimulation of small business entities, billion. sums • The results of the Program: • atthelegislativelevel, theprincipleofpriorityoftherightsofentrepreneursis established, accordingtowhichallunavoidablecontradictionsandambiguitiesinlawsandregulationsshallbeinterpretedinfavorofentrepreneurs; • 4 Laws oftheRepublicofUzbekistan, morethan 20 decisionsofthePresidentandtheGovernment,aiming to reduceinspectionsofentities of business, to simplifyandcheapentheregistrationandpost-registration procedures andto createmorefavorableconditionsfortheiractivities are accepted; • feesforcustomsclearanceofexport is reduced by twice, a systemofregistrationofexporttransactionsbytheprincipleof "onewindow“ and the order of voluntaryproductcertificationare introduced; • Bureau of export products promotion of Agency “Uzstandard” and specialized foreign trade company “Uztadbirkorexport” are created. 18

19. Reducing tax burden forsmall businesses and restricting the inspection of their activities • The financial and economic activities of newly created small businesses cannot be target for planned tax audits in the first three years from the date of their state registration. • Moratorium of 3 years is declared to conduct tax audits of financial and economic activities of small business entities that pay taxes and other mandatory payments on time, as well as ensure sustainable growth rate and profitability. * Since January 1, 2012 the rate of individual tax payment has been decreased up to 5% out of revenue for microfirms and small enterprises in the field of industry. 19

20. Decree of the President of the Republic of Uzbekistan №DP-4453 dated July 16, 2012 “About measures of drastically reducing the statistical, fiscal, financial reporting, licensable activities and permission procedures" 20

21. Decree of the President of the Republic of Uzbekistan №DP-4455 datedJuly 18 2012 “About measures of further radically improving of business environment and providing greater freedom for entrepreneurship” Since August 1, 2012, 22 norms (standards) and measures, aiming at further improving conditions of business environment have been introduced 21

22. Decree of the President of the Republic of Uzbekistan №DP-4455 datedJuly 18 2012 “About measures of further radically improving of business environment and providing greater freedom for entrepreneurship” The Program introducing in 2013-2014 measures on further radically improving of business environment and providing greater freedom of entrepreneurship is approved, which provides: Improvement of the legislation of the Republic of Uzbekistan; Implementation of 35 measures in the following areas: I. The acceleration of the procedures related to registration and the beginning of business activity; II. Measures to improve the lending procedures and improving the activity of credit bureaus; III. Strengthening the protection of the rights and interests of investors; IV. Further reduction in the tax burden on the business entities and improvement of tax administration system; V. Liberalization of procedures related to the implementation of foreign trade operations; VI. Further simplification of procedures to restore the solvency and liquidation of business; VII. Improvement of conditions related to employment and labor relations; VIII. Measures to strengthen the legal protection of business entities. 22

23. Measures taken to improving the business environment and providing greater freedom of entrepreneurship in Uzbekistan 23

24. Measures taken to improving the business environment and providing greater freedom of entrepreneurship in Uzbekistan 24

25. Thank you!