OREANDA-NEWS. October 19, 2009. Market-oriented economic reforms are consistently implemented in our country, a process that deepens with each passing year. In order to create favorable conditions for attracting foreign investment and the organization of modern high-tech industries a presidential decree “On creation of industrial free-trade zone in Navoi region was adopted on December 2, 2008, reported the Official website gov.uz.

Today, in many states one of the most effective and promising forms of attracting investment for development of economic and scientific potential became free economic zones (FEZ). There are currently about 3000 FIEZs in 120 countries worldwide, including such in Germany, Britain, Canada, USA, and Japan. Only export turnover of these zones, with more than 50 million people, exceeds 600 billion U.S. dollars.

There is a centuries-old practice in the establishment and functioning of free economic zones. For example, the status of free port back in XVI-XVII centuries had such European cities as Livorno, Genoa, Venice, and Marseilles. World experience proves that the FEZ actually promote the welfare of both within the zones and across the country as a whole

The most important aspect of the functioning of the FIEZ is a system of preferences and privileges granted to foreign and domestic investors. Tax incentives are essential to the investor, because the tax burden in some countries with the market economy is large enough, and taxes can be more than half of the income earned.

International Convention on Simplification and Harmonization of Customs Procedures adopted in 1973, set standards for regulating relations in the creation of free customs zones, which serve as a guide for legislative activities in various countries. Under this Convention, the State in accordance with international standards specify its legislation requiring the establishment of FIEZ, the types of goods permitted in such zones, the nature of operations that can be made in respect of goods. With the help of international standards, it provides a unified approach to the regulation of foreign trade, whose goal is to achieve a harmonious interaction between national legal systems. This approach allows the adoption of international standards of a higher order, as it was reflected primarily in the General Agreement on Tariffs and Trade from 1994 and agreements of the World Trade Organization (WTO). The main objective of these regulations is to prevent the adoption by the States Parties the measures that lead to unfair competition between states.

It should be noted that the main purpose of creating FIEZs is a deeper integration of countries into the international division of labor, in particular, increased production and export of competitive products and growth of foreign exchange into the country. These zones are needed for the saturation of high quality products in the domestic market, which is achieved by the organization with foreign investment import replacing productions. FEZ is designed to ensure rapid introduction into production of domestic and foreign scientific and technical developments with the continued use throughout the national economy.

World experience shows that in the absence of such zones, the growth of export of goods and services increases at an average annual 7 percent, while with their presence at 20 percent.

Many countries have formed the legal basis for the establishment and functioning of FEZ. In Uzbekistan, 25 April 1996 it was adopted the Law “On free economic zones”. According to the law under a free economic zone refers to a dedicated area with well-defined administrative boundaries and a special legal regime is created in order to attract domestic and foreign capital, advanced technologies and managerial expertise for the accelerated socio-economic development of the zone.

New step in this direction was the adoption of the Decree of President Islam Karimov on 2 December 2008 on the establishment of free industrial and economic zone (FIEZ) in Navoi region. It defines the main directions of activity of economic entities on the territory of FIEZ “Navoi”, the term of its operation, controls, specified benefits and preferences for business entities – the residents of FIEZ and delivery mechanisms, and also provides the implementation of institutional measures to ensure the effective functioning of the zone.

Based on the provisions of the Decree by the Head of State, which was passed by the Legislative Chamber, and then approved at the 28-29 August 2009 XIX plenary session of Senate of Oliy Majlis of Uzbekistan, the Law on Amendments and Supplements to the Law of the Republic of Uzbekistan “On free economic zones.”

In article 3 of the Act, taking into account the world practice it was changed with regard to easy creation and effective functioning of the FIEZ. Thus, in accordance with the Decree of the President of the Republic of Uzbekistan in the law defined the term functioning of FIEZ “Navoi” and a special legal regime, acting on its territory. Furthermore, according to the Decree of the Head of State Regulations at FIEZ “Navoi” and its boundaries are approved by the Cabinet of Ministers of the Republic of Uzbekistan.

Changes in article 4 of law, aimed at bringing existing legislation into line with the practice of creation and functioning of FEZ and simplifying the mechanism of their creation.

Given that FIEZ “Navoi” is a kind of free industrial zones, it was introduced an addition to Article 7 of the Act.

Presidential Decree established a special legal regime on the territory of FIEZ “Navoi”, as well as a clear list of benefits and preferences provided to the participants in exercising of economic activity, and therefore the amended article 9 of the Act.

Taking into account that one feature of the legal regime of FIEZ is that the income (profit) earned by legal and natural persons by a violation of the special legal regime, are being withdrawn in accordance with the law, article 11 of the Act amended the relevant part.

Article 14 of the editorial changes intended to bring its provisions into conformity with Articles 12 and 30 of the Tax Code of Uzbekistan.

Changes to article 15 made in order to bring the provisions of existing law into compliance with labor legislation and practice establishment and functioning of FEZ. Changes in Article 17 of the current legislation into line with the establishment and functioning of FEZ, coordination and operational management. This takes into account that the position of each of the free economic zone approved by the Cabinet of Ministers of the Republic of Uzbekistan.

According to the Decree of the Head of State in the territory FIEZ “Navoi” establishes a simplified procedure for entry, stay and departure of foreign citizens and stateless persons, which is approved by the Cabinet of Ministers of the Republic of Uzbekistan. In connection with this amended article 18 of the Act.

Insurance protection of participants of economic activities on the territory of free economic zones shall be as prescribed by the legislation of Uzbekistan, and not by domestic and foreign insurance companies, as defined in the previous version, based on this amended article 19 of the Act.

Changes in Article 21 – that the Governing Council, which coordinates the activities FIEZ, formed by the Cabinet of Ministers of the Republic of Uzbekistan. Changes in Articles 20, 22, 24 and 25 of the law’s aim is to institutionalize the functions and powers of the Administrative Council, the legal status of the Directorate of Free Economic Zone, the uniform application of terms and acts of legislation, bringing it into line with the establishment and functioning of FIEZ, as well as to avoid duplication of its provisions. In addition, clarifying and editorial changes made in Article 2, 12, 23, 26 and 27 of the Act.

In general, the updated legislation should increase the attractiveness of the FEZ to contain high-tech, export-oriented industries that meet the priorities of economic policy of the State to regulate the establishment and functioning of FIEZ, set the date for the operation of these zones, functions and competence of government, rights and responsibilities of the operating company and other participants, to strengthen the rules that provide guarantees to investors in changing legislation, and to increase periods of providing guarantees.

Thus, changes and amendments to the Law “On free economic zones”, will ensure further development and support industries of Uzbekistan, would provide increased business efficiency and to attract investments, technologies and techniques of modern management, as well as the creation of a new highly efficient and competitive industries.