2018/19 KSP Policy Consultation Report Uzbekistan Support for Operation of the Angren FEZ in Uzbekistan Government Publications Registration Number 11-1051000-000963-01
2018/19 KSP Policy Consultation Report Uzbekistan Support for Operation of the Angren FEZ in Uzbekistan 2018/19 KSP Policy Consultation Report
Project Title Support for Operation of the Angren FEZ in Uzbekistan Prepared for The Government of the Republic of Uzbekistan In Cooperation with Directorate of Free Economic Zone "Angren" (Angren FEZ)
Supported by Ministry of Economy and Finance (MOEF), Republic of Korea Prepared by Korea Development Institute (KDI) Project Directors Sanghoon Ahn, Executive Director, Center for International Development (CID), KDI Youngsun Koh, Executive Director, Global Knowledge Exchange & Development Center, Former Executive Director, CID, KDI Project Manager Ildong Koh, Visiting Senior Fellow, CID, KDI Project Officers Jiyu Ha, Senior Research Associate, Division of Policy Consultation, CID, KDI Jiyun Park, Research Associate, Division of Policy Consultation, CID, KDI Principal Investigator Siwook Lee, Professor, KDI School of Public Policy and Management Authors Chapter 1. Siwook Lee, Professor, KDI School of Public Policy and Management Mutalibjon Hojimurotov, Director, Angren FEZ Chapter 2. Chongin Lim, President, Jeonbuk Saemankeum Industry-University Convergence Institute Kudrat Karimov, Chief Specialist of Investments Department, Angren FEZ Chapter 3. Gi-woo Jin , Endowed Chair Professor, Korea Polytechnic University Abuhalil Ermatov, Head of Investor Relations Department, Angren FEZ English Editor Korea Institute of Culture and Arts Translation
Government Publications Registration Number 11-1051000-000963-01 ISBN 979-11-5932-476-5 979-11-5932-438-3 (set) Copyright ⓒ 2019 by Ministry of Economy and Finance, Republic of Korea 2018/19 KSP Policy Consultation Report Support for Operation of the Angren FEZ in Uzbekistan Preface
Knowledge is an essential ingredient in a country’s economic growth and social development. Of particular importance is government capacity to formulate and implement policies. The global society is making various efforts to promote knowledge sharing between countries and improve their policy capacity to tackle development issues and enhance global prosperity.
Indeed, knowledge laid the foundation for Korea’s unprecedented transformation from a poor agro-based economy into a modern industrialized nation with an open and democratic society. Technology transfer from abroad and educational investment helped expand the domestic knowledge stock and made this transformation possible. The Korean government could also accumulate invaluable practical lessons not found in a conventional textbook through the course of development.
The Ministry of Economy and Finance (MOEF) of Korea introduced the Knowledge Sharing Program (KSP) in 2004 to share Korea’s development experience with the international community through joint research, policy consultations, and capacity-building activities. Since its inception, the program has played a vital role in supporting socio-economic development of partner countries around the world.
Korea Development Institute (KDI) has participated in the KSP since the program’s launch and has been working with more than seventy foreign countries and organizations. KDI, Korea’s leading think-tank with an extensive experience in policy research, has provided solutions to the challenges that partner countries face in a variety of fields, ranging from industrial development to public-sector reform. In the 2018/19 KSP, KDI carried out policy consultation and capacity-building projects with twenty-two partners including three new participants— Belarus, Serbia, and the ASEAN Secretariat.
Among these meaningful projects for mutual learning, this one was initiated by the Directorate of Free Economic Zone “Angren” with the aim of “Support for Operation of the Angren FEZ in Uzbekistan.” Upon the request of the Angren FEZ, the MOEF and KDI organized a research team consisting of Uzbekistan and Korean experts. The team conducted in-depth analysis of internal and external policy environments, identified Uzbekistan’s key development challenges, and offered policy recommendations and action plans. On behalf of KDI, I would like to express my deepest appreciation to the Government of Uzbekistan for their collaboration in the project. In particular, I would like to extend my profound gratitude to His Excellency Deputy Minister Mr. Laziz Kudratov and Mr. Shukhrat Vafaev at the Ministry of Investments and Foreign Trade for their unwavering support. The completion of this project would not have been possible without their devotion. I also wish to thank the KSP consultation team—Principal Investigator Professor Siwook Lee, researchers Professor Chongin Lim and Professor Gi Woo Jin, and local consultants Mr. Hojimurotov Mutalibjon, Mr. Kudrat Karimov, Mr. Abuhalil Ermatov—for producing this report.
This project benefited greatly from many others both inside and outside the Uzbekistan government. I would like to extend my sincere thanks to all who have made valuable contributions to a successful completion of the project. I am also grateful to the Center for International Development of KDI, in particular Executive Director Dr. Sanghoon Ahn, former Executive Director Dr. Youngsun Koh, Project Manager Dr. Ildong Koh, and Project Officer Ms. Jiyu Ha, for their hard work and dedication to the project.
I firmly believe that the KSP will serve as a stepping stone to further elevate mutual learning and economic cooperation between Uzbekistan and Korea, and hope it will contribute to their sustainable development.
Jeong Pyo Choi President Korea Development Institute (KDI) Contents
2018/19 KSP with Uzbekistan·····································································································013 Executive Summary·····················································································································017
Chapter 1 Assessment of FEZ Policy in Uzbekistan and Its Implications for the Angren FEZ Summary·····································································································································025 1. Introduction·····························································································································027 2. Situation Analysis of FEZs in Uzbekistan················································································029 2.1. Macroeconomic Conditions·····························································································029 2.2. Legal Framework & Incentive System of FEZs································································036 2.3. Current Status of FEZs: The Angren FEZ Case·································································042 3. Assessment of FEZ Policy in Uzbekistan·················································································052 3.1. Analytic Framework: A Brief Introduction·······································································052 3.2. Analytic Results·················································································································055 4. Policy Discussions····················································································································070 4.1. Improving FEZ Policy Management System···································································070 4.2. VAT Tax Issues···················································································································072 4.3. Improving Infrastructural Provisions··············································································072 4.4. Designating a “High-tech Complex”···············································································073 References···································································································································075 Appendix······································································································································077
Chapter 2 The Infrastructure Support Strategy of the Angren FEZ
Summary·····································································································································081 1. Introduction·····························································································································084 1.1. Background and Purpose································································································084 1.2. Scope and Configuration·································································································085 1.3. Methodology····················································································································085 2. The Status and Challenges of the Angren FEZ·······································································086 2.1. Status Analysis of the Regions·························································································086 2.2. Status Analysis of the Angren FEZ···················································································090 2.3. Infrastructure Status of the Angren FEZ·········································································094 2.4. Problems and Challenges································································································096 3. Korean Experience and Its Implications················································································097 3.1. Infrastructure Support Policy for Industrial Complex····················································097 3.2. Industrial Manpower Support Policy··············································································100 3.3. Implication for Angren FEZ······························································································106 4. Infrastructure Support Strategy for the Angren FEZ·····························································107 4.1. Electricity···························································································································107 4.2. Water·································································································································113 4.3. Gas Supply Facilities·········································································································120 4.4. Treatment Facility of Sewage, Wastewater, Waste·························································122 5. Production Element Support Strategy for the Angren FEZ···················································126 5.1. Industrial Manpower·······································································································126 5.2. Support Facilities··············································································································129 6. Policy Suggestions···················································································································132 References···································································································································135 Appendix······································································································································138
Chapter 3 Optimization Strategy of the Angren FEZ Operation
Summary·····································································································································143 1. Introduction·····························································································································145 1.1. Background and Goal······································································································145 1.2. Contents and Configuration····························································································146 2. Analysis and Problems of the Angren FEZ·············································································148 2.1. General Status and Major Business················································································148 2.2. Organization, System and Business Analysis·································································152 2.3. Operational Issues and Implications··············································································154 3. ROK’s Operations Experience and Implications····································································157 3.1. Changes in the Institutional Foundation and Industrial Parks Management··············157 3.2. Cases of Foreign Investment Areas·················································································165 3.3. Implications from the Korean Case·················································································177 4. Suggestions for Optimizing Operations of the Angren Free Economic Zone Authority·····185 4.1. Improvement of Registration Procedures and Follow-up Management······················185 4.2. Improving the Support System for Investment Enterprises··········································188 4.3. Strengthening Investment Support Services··································································190 4.4. Major Tasks and Organizational Restructuring Plan······················································192 References···································································································································199 Contents l List of Tables
Chapter 1
Chronology of Legislative Acts on FEZs·····························································038
Land Usage of the Angren FEZ (As of May, 2019)·············································046
Foreign Investments by Country: the Angren FEZ············································049
Implementing Projects by Sector: the Angren FEZ Case··································051
Production and Export Volume: the Angren FEZ··············································052
Success Factors of SEZs: Shenzhen versus Masan···········································068
Chapter 2
Population by Gender/Age in Angren City························································086
Population by Industry in Angren City······························································086
Schools Status in Angren City············································································087
Status of College & Vocational Education Institutes in Angren City················087
Population by Gender/Age in Akhangaran City···············································087
Population by Industry in Akhangaran City······················································088
Services Facilities in Akhangaran City·······························································088
Current Status of Schools in Akhangaran City··················································088
Current Status of College & Vocational Institutes in Akhangaran City···········089
Population by Gender/Age in Akhangaran District··········································089
Population by Industry in Akhangaran District················································090
Services Facilities in Akhangaran District·························································090
Status of the Angren FEZ (2018)········································································091
Investment Status (2019)···················································································092
Companies Status by Site Area Size··································································092
Industry Distribution Status by Block·······························································093
Land Area by Industry (2019)············································································094
SWOT Analysis of the Angren FEZ······································································096
Object and Cost Supporting Rate······································································098
Industrial Human Resources Support Policy by Period···································101
Actual Power Basic Unit of Korea by Industry (1996)·······································111
Power Basic Unit Deduction per Land (day) in Uzbekistan (2016)··················112
Power Basic Unit Outlook per Land (day) in Uzbekistan··································112
Water Basic Unit of ROK (1995)·········································································115
Industrial Water Basic Unit of Japan by Industry (1995)··································116
Water Basic Unit per Land in Japan (1985)·······················································117
Water Basic Unit Outlook per Land···································································118
Basic Unit per Employee in ROK (1995)····························································127
Basic Unit Outlook of Employment···································································128
Training of Industrial Manpower······································································129
Management of Support Facilities····································································130
Chapter 3
Regional Status of Free Trade Areas·································································166
Tax Reduction in Free Economic Zones·····························································170
Various Subsidies and Other Support Contents···············································171
Support for Foreign Living Conditions of Incheon FEZ Authority···················172
Comparison by Special Zone in Korea (The End of September, 2017)············181 Contents l List of Figures
Chapter 1 [Figure 1-1] GDP Growth Rate of the Uzbek Economy·························································029 [Figure 1-2] Sectoral Composition of GDP············································································031 [Figure 1-3] Foreign Trade Turnover·····················································································032 [Figure 1-4] Export Destination (As of 2018)·········································································033 [Figure 1-5] Export Composition (As of 2018)·······································································034 [Figure 1-6] The Size of FDI Relative to GDP: International Comparison····························035 [Figure 1-7] Free Economic Zones in Uzbekistan··································································040 [Figure 1-8] Number of Operating Firms in FEZs (As of October 2018)·······························042 [Figure 1-9] Investment Composition by Block: the Angren FEZ·········································048 [Figure 1-10] Implemented Projects by Sector: the Angren FEZ Case···································050 [Figure 1-11] Assessment of FEZ Policy: Analytic Framework················································053 [Figure 1-12] Corporate Income Tax Rate: International Comparison (As of 2018)·············056 [Figure 1-13] Structure of FEZ Policy Management in Uzbekistan········································061 [Figure 1-14] Structure of FEZ Policy Management: the Korean Case···································063 [Figure 1-15] SWOT Analysis: FEZs in Uzbekistan···································································067
Chapter 2 [Figure2-1] The Configuration of Angren FEZ······································································090 [Figure 2-2] Status of the Angren FEZ's Infrastructure·························································094 [Figure 2-3] Framework of Industrial Complex Development Support System··················097 [Figure 2-4] Angren Thermal Power Plant············································································107 [Figure 2-5] Novo-Angren Thermal Power Plant··································································108 [Figure 2-6] Angren 1 Block Substation················································································109 [Figure 2-7] Angren 2 Block Substation················································································109 [Figure 2-8] Akhangaran Block Substation···········································································110 [Figure 2-9] Natural Gas Pipeline Network in Angren 1 Block·············································120 [Figure 2-10] Natural Gas Pipeline Network in Angren 2 Block·············································121 [Figure 2-11] Natural Gas Pipeline Network in Akhangaran Block········································121 [Figure 2-12] Sewage Treatment Facility Plan·········································································122 Chapter 3 [Figure 3-1] Organization of Angren's Free Economic Zone Authority································152 [Figure 3-2] Roadmap for Business Promotion and Organizational Improvement···········197 2018/19 KSP with Uzbekistan
Jiyu Ha (Project Officer, Korea Development Institute) 2018/19 KSP with Uzbekistan
Jiyu Ha (Project Officer, Korea Development Institute)
The Knowledge Sharing Program (KSP) is a knowledge-intensive development and economic cooperation program designed to share Korea’s development experience with partner countries. The Ministry of Economy and Finance of Republic of Korea (MOEF) and Korea Development Institute (KDI) have been implementing KSP with partner countries for their policy capacity building and sustainable development since 2004. KSP has offered comprehensive policy consultations tailored to the needs of partner countries encompassing 013 in-depth analysis, policy consultation, and training opportunities. 2018/19 KSP with Uzbekistan
The Korean government began its partnership with the Uzbekistan counterpart since the first year of the program in 2004, and conducted fourteen projects including bilateral KSP for policy consultation and multilateral KSP for joint consulting collaborated with the international organizations.
This year, upon the KSP demand survey submitted by the Directorate of Free Economic Zone “Angren” State Unitary Company, MOEF confirmed a launch of the project under the main theme of “Support for Operation of the Angren FEZ in Uzbekistan” after a thorough review. It aimed to assist formulating the strategy for the development and optimization of Angren FEZ by utilizing Korea’s experience, and thereby providing recommendations and capacity building opportunities. The description below gives a brief overview of the 2018/19 program, including its topics, team of researchers and project progress. Angren FEZ Angren FEZ Angren FEZ Kudrat Karimov Kudrat Abuhalil Ermatov Local Consultants Local Consultants Mutalibjon Hojimurotov Gi Woo JIN Gi Woo KDI School Siwook LEE Chongin LIM Researchers Korea Polytechnic University Korea Jeonbuk Saemankeum Industry- Jeonbuk Saemankeum University Convergence Institute University Convergence Strategy Sub-topics the Angren FEZ of the Angren FEZ Assessment of FEZ Policy in Assessment In designing the project framework prior to the launch, KDI and the Korean expert had As the first stage of the 2018/19 the KSP, Launching Seminar and High-level Meeting information on current policies and system in the Angren FEZ, KSP Policy collect more To to participate As a next step, six Uzbekistan delegates visited Seoul from June 23-28, 2019, Uzbekistan and Its Implications for Uzbekistan and The Infrastructure Support Strategy Support Strategy The Infrastructure Project Manager: Ildong Koh (Korea Development Institute) (Korea Koh Project Manager: Ildong Angren FEZ Operational Optimization Angren FEZ Operational • Lee (KDI School of Public Policy and Management) • Principal Investigator: Siwook a pre-dialogue with relevant stakeholders from the State Committee for Investment and Committee for Investment and from the State a pre-dialogue with relevant stakeholders Angren FEZ on November 20-21, 2018. were conducted March 11-14, 2019. The Launching Seminar presented initial findings and partner institutions of the KSP attended the seminar research plans. Representatives from talks with Uzbekistan delegation also held schedule. The Korean to discuss the program the proposed topics and collect to identify relevant research themes regarding policymakers necessary information and data. Angren. and out from June 3-4, 2019 in Tashkent Seminar and In-depth Study was carried in-depth meetings with government researchers and local consultants had The Korean both public and private institutions to attain more officials and relevant personnel in milestones were discussed Uzbekistan. Also, research progress and future on information with the partner organizations. the Interim Reporting At Workshop. in the Interim Reporting and Policy Practitioners’ interim their presented delegation Uzbekistan the and researchers 24, June on Workshop contents of the research findings and discussed and exchanged feedback to finalize the policy practitioners provided Workshop final reports. Furthermore, Policy Practitioners’ with first-hand experiencesby visiting relevant organizations and meetingKorean experts Investment Zone in Cheonan City, including Incheon Free Economic Zone (IFEZ), Foreign Institute for Industrial Economics & Trade, Korea Industrial Complex Corporation, Korea Invest Korea. and KOTRA 014 Support for Operation of the Angren FEZ in Uzbekistan As the final stage of 2018/19 KSP with Uzbekistan, the Korean delegation visited Tashkent on August 16-17, 2019, to share the final research findings and policy recommendations with high-level policymakers, policy practitioners, and relevant stakeholders of Uzbekistan at the Final Reporting Workshop. In addition, surveys and interviews to receive feedback on 2018/19 KSP were conducted. Senior Policy Dialogue was held in Seoul with the Deputy Minister of Investment and Foreign Trade of Uzbekistan who was visiting Korea on August 12. In the dialogue, the Korean research team provided policy consultation and discussed about a successful method for implementation.
015 2018/19 KSP with Uzbekistan Executive Summary
Siwook Lee (KDI School of Public Policy and Management) Executive Summary
Siwook Lee (KDI School of Public Policy and Management)
In recent years, the government of Uzbekistan has embarked on an impressive series of reform programs, which affects virtually every sector of socio-economic life. Thanks to such progressive efforts and an improved perception of the Uzbek economy, Uzbekistan is now back on international investors’ radars. Under these circumstances, the government of Uzbekistan is actively promoting free economic zones (FEZs hereafter) as one of the key policy tools to attract large-scale foreign investments, to upgrade its industrial structure, and 017 to maintain sustained economic growth. Over the last two years, a total of 18 free economic Executive Summary zones were newly established nationwide.
With promising growth prospects, relatively low public debt, a rich natural resource base, and a young and growing population, the Uzbek economy indeed possesses great potential for attracting a large volume of foreign direct investments in coming years. At the same time, however, it should be noted that historically only a few special economic zones (SEZs hereafter), including FEZs, turned out to be successful both in developed and developing economies. Even today, there are many more cases of SEZs that are underutilized or largely vacant than other cases (UNCTAD, 2019). Therefore, a well-designed SEZ policy and its effective implementation are imperative in achieving the intended policy goals of SEZs.
In this context, 2018/19 Knowledge Sharing Project (KSP hereafter) with Uzbekistan aims to assess the overall FEZ policy of Uzbekistan and to provide hands-on policy recommendations to vitalize the FEZs, with a special focus on the Angren FEZ. The Angren FEZ is one of the largest special economic zones in Uzbekistan. It is located near Tashkent and is adjacent to the densely populated Fergana Valley. It has access to a large-scale container station, which can provide portal-to-portal cargo delivery services. Despite such advantages, its investment attraction performance has been relatively weak. While there may be various possible factors resulting in such sluggish investments, this project draws special attention to the assessment of the following issues: overall FEZ policy of Uzbekistan, Stage 5 : Investment Project handling Stage 6 : After-care Investor Services Stage 7 : Monitoring & Evalution Stage 1 : Setting the national policy context Stage 1 : Setting the national systems Stage 2 : Setting objectives, Legal provisions & Incentive Stage 3 : Setting the Structure of investment promotion targeting, Marketing Stage 4 : Positioning, Sector / company Evaluation Facilitation Policy Setting Investor Care & Lead Generation & Lead Generation Author. This chapter identifies some bottlenecks in Uzbekistan’s FEZ policy management and and FEZ policy management in Uzbekistan’s This chapter identifies some bottlenecks of an FEZ is a legal entity in the form of a state unitary Second, while the Directorate First, Chapter 1 of this volume focuses on examining the overall FEZ policy of Uzbekistan FEZ policy the overall focuses on examining 1 of this volume First, Chapter provides policy recommendations to overcome such constraints. First of all, excessively First of all, excessively overcome such constraints. provides policy recommendations to a or decree presidential a through either legislations, FEZs-related in changes frequent much confusion among stakeholders resolution of the cabinet of ministries, have generated and significantlyundermined investors’ confidence.The government of Uzbekistan should be more careful when introducing new policies and revising existing ones. Sufficient ex-ante is needed before new policies or legislation is introduced, and the opinions consideration from interested parties should be fully reflected in the process. not management, the current system does enterprise and in charge of daily operative experience Based on the Korean or authority to the Directorate. delegate much autonomy in Uzbekistan should be entrusted with FEZs, this chapter suggests that the FEZ Directorates Source: Source: [Figure] Assessment of FEZ Policy: Analytic Framework Assessment of FEZ Policy: Analytic [Figure] infrastructure support strategy of the Angren FEZ, and operations management of the the of management and operations Angren FEZ, the of strategy support infrastructure Angren FEZ. and provides major policy implications for further improvement. The policy analysis assessment, as for framework version of Loewendahl (2001)’s a simplified on is based below. presented in the figure 018 Support for Operation of the Angren FEZ in Uzbekistan by statutes with multiple authorities delegated from central and local governments in order to improve the effectiveness of FEZ management.
Third, in order to pursue more active investment promotion activities, the government of Uzbekistan could consider two policy options. The first one is to set up an IPA independent or semi-independent from the government and provide various supports for its marketing activities. The second alternative is to vitalize marketing activities led by the FEZ Directorates. In both cases, the government should implement various measures, notably training programs, financial resources, and support for database construction. Introducing the ombudsman system for each FEZ is worth considering as well.
Fourth, taxation and tax administration are among the areas that are still in need of further reform efforts. For instance, ongoing SME-favored tax reforms would positively contribute to private sector development, but a sudden increase in tax burden on companies not qualified as SMEs may greatly impede their expansion in firm size, thus discouraging large-scale investments. Therefore, in order to encourage large-scale high-tech investments in Uzbekistan, the government of Uzbekistan needs to consider reducing or exempting 019 value-added tax burdens for FEZ companies. Executive Summary
Fifth, most FEZs in Uzbekistan, including the Angren FEZ, are suffering from a lack of relevant infrastructure facilities. The government of Uzbekistan needs to prepare a mid- to long-term plan for infrastructural provisions of FEZs and prioritize the FEZs that need imminent investment in infrastructure. For FEZs with greater potential of attracting high-tech FDI firms, it would be beneficial to adopt the Russian and Chinese systems for infrastructural provisions.
Finally, the development concept of the Angren FEZ should be differentiated compared to that of other FEZs in Uzbekistan. High priority should be given to the attraction of large- scale high-tech investments, which in turn could serve as a key growth engine for the overall economy. Taking into consideration that high-tech industries need modern infrastructural provisions, the Government of Uzbekistan may consider designating and developing a small- scale, high-tech complex within the Angren FEZ or somewhere between Tashkent and the Angren FEZ. In any case, the Angren FEZ could serve as rear-end agglomerate areas for domestic companies that supply intermediate inputs to the high-tech complex. By doing so, the Angren FEZ could be a catalyst for establishing a close industrial linkage between the high-tech complex and the domestic economy.
In Chapter 2, the current status of infrastructural provisions for the Angren FEZ is First of all, the government of Uzbekistan needs to prepare a long-term national prepare a long-term national of Uzbekistan needs to First of all, the government utilities essential the SOC, a mid- to long-term roadmap is also needed for Second, like there will be an increased amount of sewage, Third, it is important to note that examined. Although the overall SOC situation of the Angren FEZ is relatively better than that FEZ is relatively of the Angren SOC situation Although the overall examined. into all the factories come trouble when that there will be much it is expected of other FEZs, as power, water, of utilities, such due to the lack Angren FEZ, largely within the operation communication, and industrial manpower. The key objective of this chapter is to suggest solve the current problems to manpower support strategies and industrial infrastructure experience. a special reference to the Korean the Angren FEZ, with faced by SOC construction roadmap for FEZs. plan, which includes an comprehensive development construction, to from designing process only a time-consuming not entails SOC establishment the FEZ should be designated in heavy financial burden. Therefore, but it also bears a development plan. If it is inevitably necessary accordance with the national comprehensive to designate an FEZ in the middle of the plan’s progress, it is desirable either to reflect it in development plan or to harmonize the two plans. addition to the national comprehensive power, industrial water, gas, and telecommunications. for the production activities, such as plan, supply power long-term a prepare should government central the within ministry Each supply plan, and communication network supply plan industrial water supply plan, energy for five years or more. Based on this, the timing,location, and size of the FEZ designation a utility roadmap, demand, demand patterns, should be determined. In order to establish supply and quantity, supply patterns must be analyzed first through surveys of electricity, by prepared be should statistics relevant end, this To communication. and energy, water, the government. Based on such objective data, a mid-to-long-term supply and demand for plan should be established. utilities should be forecast, and a supply and that the manufacturing companies, by wastewater, and other wastes generated in the future. At industrial structure of the Angren FEZ will become more complicated wastewater, and present, there are few factories that discharge large quantities of sewage, wastewater, waste in Angren FEZ, and thus recognition of the need for disposal of sewage, and waste in businesses, as well as in the is community, very low. However, given the we if past, the in China and ROK, Japan, as such nations industrialized the of experience do not prepare a disposal plan in advance, Uzbekistan could suffer fromgreat social costs standards for the due to environmental pollution. Therefore, the government must set up of factories, secure the related facilities, treatment of sewage and waste from the operation them thoroughly as soon as possible. and operate 020 Support for Operation of the Angren FEZ in Uzbekistan Fourth, with the development of FEZ, a huge budget is needed to construct SOC, utilities, such as power, water, energy, and telecommunication, and pollution prevention facilities, such as sewage, wastewater, and waste disposal facilities. However, if the current financial situation of the local government is taken into consideration, the central government will have to bear the financial burdens. However, the government does not have enough finances, so, if necessary, it will need to consider utilization of funds from international development financing, introduction of EDCF funds, or foreign investment capital.
Fifth, in the industrial complex, the supply company should provide a supply network up to the factory door, so that end users can use utilities immediately. Then the installation costs of power, water, gas, and communication facilities should be borne by each beneficiary. Furthermore, the Angren FEZ Management Office, which is in contact with the companies directly, should regularly gather the difficulties of SOCs, utilities, and manpower in the tenant companies, and have a system for regularly conducting surveys. Those results should be shared with the supplier or the tenant companies and passed on to the central or local government to solve the difficulties as necessary. 021
Finally, in order to match the supply and demand of industrial manpower, it is necessary Executive Summary to establish a database and to provide a system to utilize it. In this case, it is desirable that the Ministry of Labor takes responsibility at the national level, and the Angren FEZ at the regional level.
Chapter 3 of this project aims to develop strategies for optimizing the operation of the Angren FEZ. Various policy recommendations are provided on the following issues: improving registration procedures and follow-up management; strengthening investment support services; and preparing a roadmap for organizational restructuring of the FEZ directorate.
First, involving too many stakeholders regarding investment may lead to the undermining of investors’ confidence, to provoking confusion in the administrative progress, and to a loss in time. Therefore, the FEZ directorate should have sufficient authorities to handle certain matters, such as the approval of the Administrative Committee, the establishment of land compartmentalization, and boundary measurements in the registration procedure. For instance, it would be quite desirable to transfer land management tasks and authorities to the FEZ directorate. According to the current legislation, land spots for FEZ areas belong to local government authorities. In reality, many FDI firms claim that there are excessive bureaucratic procedures and unduly long delays in land assignment. Although an FEZ Directorate identifies the location of a specific investment project, it has no decision power Second, the diversification of the landsupply system should be considered. Land could introducing one-stop services of Uzbekistan could also consider Third, the government improve to proposal the outlines chapter this above, discussed information the on Based There are a few medium and long-term development methods forAngren FEZ. The first to finalize land assignment to investors. land assignment to finalize land Investors often prefer entities. preference of investment according to the be provided over time. From the standpoint of are anticipating a rise in land prices ownership if they Uzbekistan, it is also an opportunity for a large influx of foreign Leasing currency. will be and production through market Uzbek the into tap to aim that companies by preferred exports. a and operates designates FEZ Authority Each FEZ Authorities. Korea’s similar to those of dedicated project manager to support the entire process of investment projects from the finding new investment as consulting, such Business review stage to post-management. investment partners, as well as legal, accounting, opportunities or searching for promising quick decisions services, help to make support tax counseling, and various administrative by provided services management systematic and business through professional and pursue statutes and that end, the government should establish a system of free economic zones. To of investment enterprises. reorganization to support the projects conduct structural major tasks and organizations in the short- and mid-long term. The short-term major that tasks the arrange to experience ROK’s to applied were measures improvement business could be applied in the early stages. The first of such steps is the preparation of the basic of Second is the preparation using it. complex of the management plan and management regulations, such as changes in the land land management and appropriate administrative and one-stop-service) (including procedures registration of improvement and system supply third step is to expand the support business of investment enterprises. The plant operation is the development of various corporate of companies and amenity businesses. Fourth support projects and the expansion of the fiscal expansion. The fifth step is organizing short-term a is sixth Finally, meetings. expert and leader business various operating and reorganization that can handle these tasks. second support facilities and fiscal expansion. The method is the expansion of H/W corporate is related to safety management, or education and management projects, such as chemical management, fire prevention, and health. Third is a cluster support project for cooperation sector, various in industries, universities, and research institutes. Next is the business facilities, and environmental improvement projects. Then there is the project to build an 022 Support for Operation of the Angren FEZ in Uzbekistan ecological industrial complex, including waste management. Sixth, there is the introduction of the land use diversification system, which involve the diversification and maximization of the use of land and construction of all facilities, such as factories, houses, and commercial facilities in a single piece of land. Lastly, there is the method to expand the organization and work step by step in line with the mid and long-term development of these tasks.
023 Executive Summary 01 Chapter
Assessment of FEZ Policy in Uzbekistan and Its Implications for the Angren FEZ
Siwook Lee (KDI School of Public Policy and Management) Mutalibjon Hojimurotov (Directorate of Free Economic Zone "Angren")
1. Introduction 2. Situation Analysis of FEZs in Uzbekistan 3. Assessment of FEZ Policy in Uzbekistan 4. Policy Discussions
Keywords Free Economic Zones, Foreign Direct Investments, Incentive System, Policy Assessment, One-stop Services Assessment of FEZ Policy in Uzbekistan and Its Implications for the Angren FEZ
Siwook Lee (KDI School of Public Policy and Management) Mutalibjon Hojimurotov (Directorate of Free Economic Zone "Angren")
Summary
The government of Uzbekistan has been actively promoting free economic zones (FEZs hereafter) as one of the key policy tools to upgrade its industrial structure and attain sustained economic growth. During the last two years (2017-18), a total of 18 free economic zones were newly established nationwide, with multiple aims of attracting foreign direct 025 Chapter investment, promoting exports, and balancing regional development. Nowadays, almost three out of every four countries in the world have at least one special economic zone (SEZ 01 hereafter) in their territories, but past experience indicates that only a few of these SEZs Assessment of FEZ Policy in Uzbekistan and Its Implications for the Angren FEZ were successful. According to UNCTAD (2019), even today there are many cases of SEZs that are underutilized or largely vacant. These all indicate that a well-designed SEZ policy and its effective implementation are much needed to achieve the intended policy goals of SEZs.
In this context, this chapter aims to assess overall FEZ policy of Uzbekistan and to provide major policy implications to vitalize FEZs, with a special focus on the Angren FEZ, which is a representative special economic zone in Uzbekistan. The Angren FEZ is located near Tashkent, the capital city of Uzbekistan and the economic center, and is also adjacent to the densely populated Fergana Valley. Unlike the other FEZs in Uzbekistan, it is also equipped with a container station, which can provide portal-to-portal cargo delivery services. Despite such advantages and its larger size compared to other FEZs, its investment attraction performance has been much weaker than expected. As of February 2019, 95 companies reside in the Angren FEZ, of which only 46 are actually in operation.
Our analysis identifies the following bottlenecks in Uzbekistan’s FEZ policy management. First of all, excessively frequent changes in FEZs-related legislations, through a presidential decree or a resolution of the cabinet of ministries, have generated much confusion to stakeholders and significantly undermined investors’ confidence. Hence, from now on, the Second, the overall system of FEZ policy management needs to be reconsidered for reconsidered for policy management needs to be system of FEZ Second, the overall of an FEZ is a legal entity in the form of a On the other hand, while the Directorate conditions more favorable of FEZs, to create Third, in order to preserve the attractiveness the development concept of the Angren FEZ should be differentiated compared to Finally, government of Uzbekistan should be more careful in introducing new policies and revising new policies and in introducing be more careful of Uzbekistan should government existing ones. Sufficient ex-ante consideration is needed before a new policy or legislation is in the process. should be fully reflected from interested parties and the opinions introduced, of an FEZ are coordinated FEZ legislation, the activities to current restructuring. According each region, which is headed by Council of FEZs for the Administrative and regulated by from local governments. This region and composed of senior officials the governor of its Council is empowered with much authority and should confirm every decision and action in and body, government separate a not is Council Administrative the Since management. FEZ all members of the Council have major jobs in various government offices, inpractice they FEZ operations. could not fully devote themselves to daily management, the current system of daily operative state unitary enterprise and in charge Korean Based on the and authority to the Directorate. does not delegate much autonomy Uzbekistan in Directorates FEZ the that suggests chapter this FEZs, with experience local and central from delegated authorities multiple with statutes by entrusted be should effectiveness of FEZ management. governments in order to improve the investments, high-tech large-scale encourage to importantly, most and, investors, the for tax value-added exempting or reducing consider to needs Uzbekistan of government the ongoing SME-favored tax reforms would positively burdens for FEZ companies. While companies on burden tax in increase sudden a development, sector private to contribute not qualified as SMEs greatly may impede their expansion in firm size and large- discourage scale investments. that of the other FEZs in Uzbekistan. High priority should be given to the attraction of large- overall the for engine growth key a as serve could turn in which investments, high-tech scale, industries need modern infrastructural that high-tech into consideration Taking economy. a small- consider designating and developing provisions, the Government of Uzbekistan may and the Tashkent scale, high-tech complex within the Angren FEZ or somewhere between area for case, the Angren FEZ could serve as a rear-end, agglomerate Angren FEZ. In any doing so, By domestic companies that supply intermediate inputs to the high-tech complex. the linkage between a catalyst for establishing a close industrial be FEZ could the Angren In addition, discretionary incentives should high-tech complex and the domestic economy. 026 Support for Operation of the Angren FEZ in Uzbekistan be prepared for strategic large–scale, high-tech MNCs, including temporal exemptions or the reduction of VAT.
1. Introduction
Since President Shavkat Mirziyoyev came into power in 2016, the government of Uzbekistan has embarked on a breathtaking series of progressive initiatives, which led to large-scale reforms in virtually every sector of socio-economic life. In January 2019, the government adopted the “Reform Roadmap 2019-21,” outlining a comprehensive reform program in the following focus areas: (i) macroeconomic stability, (ii) the transition into a market-based economy, (iii) social protection and citizen services, (iv) privatization, and (v) environmental sustainability. Given the fact that these reforms are met with much less resistance than anticipated, it is evident that Uzbekistan is rapidly transforming into a market-based economy.
Thanks to such reform efforts and an improved perception of the Uzbek economy, 027 Chapter Uzbekistan is now back on international investors’ radars. BCGs (2018) recently reported that Uzbekistan’s investment potential is estimated to be up to US$ 65 billion over the next 10 01 years, of which around US$ 20 billion is for non-primary industries. With promising growth Assessment of FEZ Policy in Uzbekistan and Its Implications for the Angren FEZ prospects, relatively low public debt, a rich natural resource base, and a young and growing population, Uzbekistan indeed possesses great potential for attracting a large volume of foreign direct investments in the coming years. Uzbek law does not discriminate against foreign investors, and the government of Uzbekistan is becoming increasingly inclined to be more favorable to investors from abroad.
The government of Uzbekistan recently has placed a special emphasis on Free Economic Zones (FEZs hereafter) as key drivers of increasing foreign investments and modernizing its economy. During the last two years (2017-18), in particular, a total of 18 free economic zones were newly established nationwide, with multiple aims of attracting foreign direct investment, promoting exports, upgrading its industrial structure and balancing regional development. FEZs, or more broadly Special Economic Zones (SEZs hereafter), are widely recognized as enclaves to attain special policy goals, such as promoting exports, raising foreign exchange earnings, adopting technology, and creating employment opportunity. They also can serve as a test bed on the path to nationwide trade liberalization, since the latter may require more time and experience to maximize benefits. Finally, SEZs can contribute to vitalize local economies in disadvantaged areas. Meantime, the total number of SEZs in the world has increased from around 500 in 1995 around 500 in has increased from of SEZs in the world the total number Meantime, FEZ policy of Uzbekistan and to provide overall In this respect, this chapter aims to assess economic the and Uzbekistan of city capital the Tashkent, near located is FEZ Angren The In Section 2, we conduct a situational This chapter proceeds in the following way. to more than 5,400 in 2018, as many countries take a similar approach as Uzbekistan to Uzbekistan to approach as a similar take countries as many 5,400 in 2018, to more than countries out of every four about three Nowadays, 2019). SEZs (UNCTAD, actively promote however, historical experiences at least one zone. At the same time, are equipped with argues, (2015) Economist the As successful. be to out turned SEZs of few a only that indicate politicians and government officials tend to see SEZs as an easy win: designate some areas, flourishes. and the local economy then foreign investors come in, provide tax breaks, are more cases of SEZs that however, there are many (2019), to UNCTAD According a well-designed SEZ policy vacant than the other cases. Therefore, underutilized or largely and effective implementation for are achieving imperative the intended policy goals of SEZs. country facing a double-landlocked important for Uzbekistan, as it is This is particularly countries. FDIs relative to other more challenges in attracting many with a special focus on the Angren FEZ. The Angrensome policy implications to vitalize FEZs, special representative and the Jizzakh FEZ, is one of the most with the Navoi FEZ FEZ, along zone was designated as a Special Industrial Zone economic zones in Uzbekistan. The Angren modern high-tech at attracting the presidential decree No.4436 in 2012, aiming (SIZ) by started to carry out full-scale investment promotion foreign and domestic enterprises. It FEZ in 2016. the “Angren” activities in 2015 and was renamed as center, and is also adjacent to the densely populated Unlike Fergana Valley. the other FEZs container station, which can provide portal- in Uzbekistan, it has access to a large-scale such advantages as well as its large size (a total to-portal cargo delivery services. Despite performance has been relatively attraction of 14,500 hectare), however, its investment in the Angren FEZ, of which only 46 are 2019, 95 companies reside weak. As of February be various possible factors resulting in such sluggish While there may actually in operation. FEZ policy on investments in Angren FEZ, this chapter focuses on the impacts of overall to areas for policy improvement investment promotion activities and proposes several vitalize FEZs. growth, analysis of FEZs in Uzbekistan. First of all, recent macroeconomic conditions—GDP of FEZ policies industrial production, exports, and FDIs—are presented. Then, a brief history Next, the current and the changes in related legal provisions of Uzbekistan are introduced. 3 provides status of FEZs is discussed, with a special reference of the Angren FEZ. Section our analytic results on the overall assessment of FEZ policy in Uzbekistan. our Specifically, 028 Support for Operation of the Angren FEZ in Uzbekistan analysis is based on a simplified version of Loewendahl (2001)’s framework for assessment. Finally, Section 4 discusses key policy implications from this chapter to further vitalize FEZs in Uzbekistan and then concludes.
2. Situation Analysis of FEZs in Uzbekistan
2.1. Macroeconomic Conditions
2.1.1. Growth Prospect and Industrial Production
The Uzbek economy has grown at a rate of 8.2 percent per annum for the period of 2005- 2016, making it one of the best performing countries in the world. Although the GDP growth rate slowed down during the period of 2017-18, it is expected to continue to grow steadily despite the prolonged global recession, with a recovery of up to 6 percent by 2021.
[Figure 1-1] GDP Growth Rate of the Uzbek Economy 029 (Unit: %) Chapter
10 01
9 Assessment of FEZ Policy in Uzbekistan and Its Implications for the Angren FEZ
8
7 6.0 6 5.3 5.1 5
4
3
2
1
0 2005 2007 2009 2011 2013 2015 2017 2019 2021
Note: The figures for 2019-21 are forecasts by World Bank. Source: State Committee of Uzbekistan on Statistics.
In 2018, the industrial sector contributed more than 40 percent (2.1 percent points) of the overall GDP growth (5.1 percent), followed by the service sector (1.8 percent points), construction (0.5 percent points), and then agriculture (0.1 percent points). Recent GDP growth has been driven largely by construction, mining, communication, and a number of
(Unit: %) Although the government of Uzbekistan faces challenges in adjusting the macroeconomic of Uzbekistan faces challenges Although the government Asia. Central in diversified most the of one is Uzbekistan of structure industrial The declined, which of agriculture in GDP gradually During the period of 2000-16, the share service sectors. At the same time, however, manufacturing and agriculture reveal rather rather agriculture reveal and time, however, manufacturing At the same service sectors. such input bottlenecks, from intermediate still suffers paths. Manufacturing slow growth as energy and water shortages. In any case, more systematic efforts to attract foreign direct manufacturing growth and to gain this sector are needed to stimulate investment (FDI) in international competitiveness. policies that cause excessive domestic demand, inflation pressure, and heightened external is prospect for the Uzbek economy short-run, the medium- to long-term imbalances in the and better liberalization, Ongoing tax reductions, market perceived as promising. generally high to contribute to expected are reforms full-fledged through environments business public debt It should be also noted that Uzbekistan’s growth in the medium- to long-term. This implies only around 24.5 percent of GDP. remains relatively low and stable, currently investments public expanding for room policy some has Uzbekistan of government the that in socio-economic infrastructure. as cars, trucks, and high-quality of vehicles (such Uzbekistan produces a wide range textile goods, and fertilizers, mineral machinery), chemical products including agricultural foods with the recycling of agriculture products. One of the five priorities of Development is the increase in competitiveness of the national economy 2017-21 of Uzbekistan Strategy its modernization, and diversifying transformation, through the extension of structural leading industrial sectors. of the potential for the development of industries was connected with the further expansion modernize, and renew diversify, to continuously taken and services. Owing to the measures the share of industry in GDP increased from 27.8 industries technically and technologically, percent in 1995 to 32.0 percent in 2018, as depicted in [Figure 1-2]. 030 Support for Operation of the Angren FEZ in Uzbekistan [Figure 1-2] Sectoral Composition of GDP (Unit: %)
100 19.8 18.3 17.6 80 32.4 34.4 29.5 34.0 32.4
33.0 60 33.3 32.9 29.1 27.8 23.1 27.9 32.0 40
46.9 48.7 49.5 39.8 42.5 41.4 20 38.1 35.6
0 1995 2000 2005 2010 2015 2016 2017 2018
Services Industry Agriculture, including construction
Source: State Committee of Uzbekistan on Statistics, https://stat.uz.
In 2018, the monetary value of industrial production reached UZS 95.1 trillion, with a 031 growth of 10.6 percent compared to the previous year. Positive dynamics in the industrial Chapter sector was mainly due to the expansion of the mining industry and the development of 01 quarries, with an annual growth of 28.2 percent. The manufacturing industry grew by 6.4 Assessment of FEZ Policy in Uzbekistan and Its Implications for the Angren FEZ percent in 2018, and other industrial sectors by 4.7 percent, respectively.
On the other hand, the growth in the total volume of industrial production in 2018 was attributable to an increase of manufacturing by 6.4 percent, and its contribution to the total industrial production growth was around 5.2 percent points. Mining and quarrying industries grew by 12.9 percent relative to the previous year, with the contribution to industrial production estimated to be around 1.3 percent points. Electricity supply, gas supply, steam, and air conditioning account for 0.4 percent points of industrial production, followed by water supply, sewage, and collection and disposal of waste (0.1 percent points in total).
As for the structure of manufacturing, metallurgical and metalworking industries accounts for the largest share (24.5 percent), and the second largest sector is food, beverages, and tobacco production (17.0 percent). The shares of the other manufacturing sectors are as follows: textiles, clothing, leather and related products (16.1 percent); rubber, plastic products and other non-metallic mineral products (11.3 percent); chemical products (9.2 percent); cars, trailers, semi-trailers and other transport equipment (7.4 percent); electrical equipment (3.5 percent): and other manufactured goods (11.0 percent). (Unit: US$ million) 2018 19,555.2 14,253.9 13,013.4 2016 2014 13,893.6 2012
2010 Import 2008 Export 2006 F 2004 2002 2000 0 0 0 0 0 5,000 10,000 20,000 15,000 State Committee of Uzbekistan on Statistics. The main destinations of Uzbek exports are China (US$ 2.9 billion), the Russian the Russian The main destinations of Uzbek exports are China (US$ 2.9 billion), 2.1.2. Trade and Foreign Investments and Foreign 2.1.2. Trade for more accounted materials raw independence, years of Uzbekistan’s In the first with a 25.7 percent turnover amounted to US$ 33.8 billion, trade In 2018, the total foreign
Federation (2.2 billion), Kazakhstan (1.5 billion), Turkey (0.9 billion), Afghanistan (0.6 Afghanistan (0.6 billion), (0.9 Turkey billion), (1.5 Kazakhstan billion), (2.2 Federation (0.3 billion) in 2018. billion), and Kyrgyzstan than 70% of the country's total exports. Today, as a result of numerous reforms aiming at at reforms aiming as a result of numerous exports. Today, of the country's total than 70% increasing the export potential and its diversification, Uzbekistan has become a country that exports finished andvalue-added goods,with 76% of exports beingfinished products and semi-finished products. Over the past two decades, the volume of exports from Uzbekistan than 30 times. has increased more was US$ 14.3 billion with an to the previous year. The export volume increase compared 50.3 by increased drastically imports hand, other the On percent. 2.6 of growth rate annual led was imports in surge The 2018. in billion 19.6 to 2017 in billion 13.0 US$ from percent, current Uzbekistan’s Consequently, materials. construction and equipment, machinery, by 2018. in GDP of percent 3 of deficit a to 2017 in surplus a from shifted position account Such a modest external deficit is expected to continue in coming years, given high domestic demand pressure. Source: Source: [Figure 1-3] Foreign Trade Turnover Turnover Trade 1-3] Foreign [Figure 032 Support for Operation of the Angren FEZ in Uzbekistan [Figure 1-4] Export Destination (As of 2018) (Unit: %)
Source: State Committee of Uzbekistan on Statistics.
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Thanks to the diversification of the industrial structure in recent years, the structure of Chapter exports has changed, and there has been an increase in the export of almost all groups of goods and services. It should be noted that, in comparison with previous years, the export 01 Assessment of FEZ Policy in Uzbekistan and Its Implications for the Angren FEZ of finished products predominated over that of raw materials. In particular, the share of cotton fiber in total exports has declined from 27.5 percent to 1.6 percent as of 2018. On the other hand, the share of food products has increased from 5.4 to 7.7 percent during the same period; chemical products and articles thereof from 2.9 to 6.3 percent; energy and oil products from 10.3 to 18.7 percent; ferrous and nonferrous metals from 6.6 to 8.2 percent; gold from 17.0 to 20.4 percent; and textiles from 7.2 to 11.2 percent, respectively. (Unit: %) 18.7% Energy and Oil Products, 6.3% 8.2% Products, Chemical Ferrous and Non-ferrous, 7.7% Food Products, 1.6% Fiber, Cotton Gold, 20.4% 3.1% 21.3% Others, Services, and 1.5% Machine Equipment, 11.2% Textile, State Committee of Uzbekistan on Statistics. In order to maintain export enterprises and increase export volumes, the government and increase export volumes, the government In order to maintain export enterprises investments, promote to try often growth socio-economic sustainable seeking Countries reform plans As aforementioned, the government of Uzbekistan launched various of Uzbekistan is implementing a number of tax incentives. Exporting firms are generally of tax incentives. Exporting firms are generally of Uzbekistan is implementing a number exempted from paying excise and value added tax. In addition, these companies are subject to a reduced tax rate on profits, and property, a single tax. In addition, most customs duties and fees have been abolished or significantly reduced to further facilitate business in the country. investment climate creating a favorable (FDI), by especially foreign direct investments where favorable investments tend to flow into countries in domestic territories. Foreign and conditions are provided for investment, including adequate infrastructure law. of the rights of investors by systems, as well as the guarantee transportation and open system. One of the most into a more market-oriented to recast its economy important changes affectingFDI inflows is arguably the liberalization of the exchange rate vis-à-vis currency national the of devaluation percent 100 almost the After 2017. in regime currency for markets black and stable, largely been has rate exchange the US dollars, the ability the exchange virtually disappeared. Also, foreign investors are now fully guaranteed foreign funds in foreign currency into and out of Uzbekistan. They can also buy to transfer Source: Source: [Figure 1-5] Export Composition (As of 2018) Export Composition 1-5] [Figure 034 Support for Operation of the Angren FEZ in Uzbekistan currency in commercial banks for current international transactions, under the condition that purchased foreign currency should be deposited onto debit cards that can only be used abroad. The requirement for businesses to exchange 25 percent of their foreign currency earnings for local currency was also abolished.
This was particularly beneficial for exporters that were forced to exchange at least part of their foreign currency revenues at overvalued exchange rates. Foreign investors are also able to repatriate their profits instead of being forced to reinvest or deposit their earnings with local banks.
Thanks to the initial progress and improved perception on the Uzbek economy, FDI inflows have increased by more than 400 percent between 2017 and 2018, according to FDI Markets. FDIs in the alternative/renewable energy sector contributed to 41.2% of FDI projects in 2018, and Tashkent, the capital city of Uzbekistan, is the top ranking recipient for new investments. Despites recent FDI increase, the cumulative inflow of FDI into Uzbekistan is still one of the lowest among CIS countries.
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[Figure 1-6] The Size of FDI Relative to GDP: International Comparison Chapter (Unit: %) 01
25% Assessment of FEZ Policy in Uzbekistan and Its Implications for the Angren FEZ
Kazakhstan Tajikistan Kyrgyzstan Turkmenistan Russian Federation Uzbekistan
Source: UNCTAD Database.
In 2018, foreign investment inflows, including FDIs and foreign credits, constituted a quarter of total capital investments, while the share of government funding, bank loans, and 2.2. Legal Framework & Incentive System of FEZs 2.2. Legal Framework Investment Direct 2.2.1. Laws and Regulations on Foreign Investments Legal provisions related to FDIs are diverse, including the Law on Foreign In the structure of foreign investment and credits by investing countries, the Russian Russian the countries, investing by credits and investment of foreign structure the In large to are directed guarantee investments and credits under the government Foreign The following major investment projects are recently being financedby foreign direct (No.609-I, issued on 1998); the Law on Guarantees and Measures on Protection of Foreign Foreign of Protection on Measures and Guarantees on Law the 1998); on issued (No.609-I, Entrepreneurial of Freedoms the of Guarantees on Law the 1998); 611-I, (No. Investments of a number and 719-I, 1998); (No. 69-II, 2000); the Law on Investment Activity (No. Activity 2018). In 2017, the President of Uzbekistan signed a other decrees and resolutions (BEBA, notably on the Creation investments, of decrees and resolutions regarding foreign number the on importantly, most and, 2017) (March, Investments on Committee State the of of the Currency Exchange Policy (September, 2017). aforementioned Liberalization other borrowed funds were roughly 30 percent altogether. Having looked at the distribution of share largest the that see can one economy, the of sectors by investments capital of sector. belongs to the mining investments foreign total the of half than more invested having position, leading the holds Federation investment inflows. Russian investments focus on the following types of activities: crude of other non- and communication, production gas production, information oil and natural China, the On the other hand, and the metallurgical industry. products, metallic mineral of natural chemicals, extraction tends to engage in rubber/plastics, second largest investor, products. and non-metallic mineral gas, communication, investment projects, such as electrification of the railway section of Karshi-Termez, Pap- Kokand-Andijan, construction of a new thermal power plants in Namangan and Navoi, caustic soda and methanol production chloride (PVC), construction of a complex of polyvinyl of ground digital development Tashkent-Osh, A-373 high-way reconstruction facilities, projects. infrastructure broadcasting in Uzbekistan, and other investments: construction of a gas processing plant complex and development of the Kandym group of deposits; development of hydrocarbon fields and production in the Gissar organization of textile complexes; expansion of the investment block and Ustyurt region; creation of a network of a national mobile operator. cellular communication system; and 036 Support for Operation of the Angren FEZ in Uzbekistan If a foreign investor invests in minority interests, it is also considered to be foreign investment under Uzbek law. If a foreign investor owns at least 30 percent of shares or a participating interest in the charter fund of a company for 600 million Uzbek soum and above, then the company acquires the status of a “company with foreign investment” and becomes eligible for various preferences, tax, and customs benefits.
All incentive measures for foreign investors are regulated by national level legislation, which can be adopted only by the president. Therefore, local governments have limited authority to offer any additional incentives. Uzbek legislation provides a number of incentives for foreign investors, including tax holidays and exemptions from customs and other mandatory duties and payments.
2.2.2. Laws and Regulations on Free Economic Zones
The initial move of establishing FEZs in Uzbekistan started in the late 1990s, when the Law of the Republic of Uzbekistan “On free economic zones” was enacted in 1996. The government initiated several attempts for establishing FEZs based upon this Law, such as the 037 free economic zone in Jizzakh province (1996), special open economic zone of international Chapter tourism in Samarkand province (1997), and “Nukus” free industrial-economic zone in
Karakalpakstan (1998), but it could not succeed in starting any FEZs within territories of the 01 Assessment of FEZ Policy in Uzbekistan and Its Implications for the Angren FEZ country until the late 2000s.
According to UNCTAD (2008), such failure stemmed mainly from inadequate design of the Law that did not meet the modern requirements of the establishment, operations, and administration of the FEZs. Furthermore, after the collapse of the totalitarian Soviet regime, an effective market economy mechanism still had not been formed in Uzbekistan in the 1990s. Finally, poor infrastructure, transport, and logistics systems inside the country further caused much difficulty for sound industrial production.
After 12 years since the initial adoption of the Law, the government of Uzbekistan succeeded in establishing its first Special Economic Zone—the “Navoi” Free Industrial Economic Zone (FIEZ hereafter)—in accordance with Decree of the President of Uzbekistan, dated December 2, 2008 #UP-4059. Ogai (2009) argues precisely that the presidential decree on establishment of the “Navoi” FIEZ contributed to the consolidation of a legal basis for creating and functioning FEZs in Uzbekistan. The government amended the Law “On free economic zones” in 2009 to ensure the creation of more favorable investment environments.
According to Article 3 of the Law in its new edition, a free economic zone can be Main subject Main legal basis for the establishment Main legal basis for the establishment economicand functioning of free (special) zones in Uzbekistan and supplements amendments Adopted to the Law of the Republic of Uzbekistan “On free economic zones.” free economic Establishment of “Angren” cities of zone in Angren and Akhangaran province Tashkent Established the State Unitary Enterprise Economic Zone of the Free “Directorate Approved: “Angren” FEZ; – Regulation on “Angren” of the - Structure of the Directorate FEZ “Angren” Approved Regulation on the procedure to participants of land plots for granting free economic zones Approved: - Regulation on the procedure for the application of exemptions on taxes and in the territory of free customs payments economic zones; - Regulation on free economic zones (in unified edition); - Regulation on the procedure for the selection of investment projects placement on the territory of free of economic zones and registration participants of free economic zones new terms and instructions Adopted aimed at improving the efficiency of the activity of free economic zones and small industrial zones Type and name of the legislative act Type and name of the Resolution of the Cabinet of Ministers of the Republic Resolution of the Cabinet of Ministers of the Republic of Uzbekistan “On measures to organize the activities of free economic zones” Law of the Republic of Uzbekistan “On free economic Law of the Republic of Uzbekistan zones” Law of the Republic of Uzbekistan “On Amendments and Supplements to the Law of the Republic of Uzbekistan “On free economic zones.” Decree of the President of the Republic of Uzbekistan “On establishment of Free Economic Zone “Angren” Resolution of the Cabinet of Ministers of the Republic of Uzbekistan “On measures of organization of activity free economic zone” of the “Angren” Resolution of the Cabinet of Ministers of the Republic of Uzbekistan “On approval of Regulation on the land plots to participants of procedure for granting free economic zones” Decree of the President of the Republic of Uzbekistan dated October 25, 2017 #PP-3356 “On measures for enhanced coordination and increasing the responsibility of ministries, departments, state authorities in the places for effective functioning of free economic zones” Date & Number April 10, 2017 #196 August, 2009 August, Cabinet of Ministers of the Republic of Uzbekistan Decrees of the President and resolutions of the April 13, 2012 #UP-4436 29, 2012 May #146 26, 2013 August #234 7, 2017 August #PP-3175 Laws of the Republic of Uzbekistan Laws of the Republic of April 25, 1996 #220-I
Chronology of Legislative Acts on FEZs 1-1> Chronology
Continued
Date & Number Type and name of the legislative act Main subject
Decree of the President of the Republic of Uzbekistan Adopted new terms and instructions October 25, 2017 dated October 25, 2017 #PP-3356 “On additional aimed at improving the efficiency of the #PP-3356 measures to improve the efficiency of the activity of activity of free economic zones and small free economic zones and small industrial zones” industrial zones
Resolution of the Cabinet of Ministers of the Republic Approved in new edition: of Uzbekistan "On measures for implementation of the - Regulation on free economic zones; Decree of the President of the Republic of Uzbekistan - Regulation on the procedure for dated October 25, 2017 #PP-3356 “On additional the selection of investment projects January 16, 2018 measures to improve the efficiency of the activity of placement on the territory of free #29 free economic zones and small industrial zones” economic zones and registration of participants of free economic zones; - Regulation on the procedure for granting land plots to participants of free economic zones.
Decree of the President of Uzbekistan “On measures Adopted of new terms and instructions December 21, for further improvement of coordination system and aimed at improving the efficiency of the 2018 #UP-5600 management of free economic zones” activity of free economic zones
Source: Compiled by author.
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With the initial experience of establishing the Navoi FIEZ, the “Angren” Special Industrial Chapter Zone (SIZ hereafter) was created in Angren and Akhangaran cities and on the land located between them by the Decree of the President of Uzbekistan, dated April 13, 2012 #UP-4436, 01 Assessment of FEZ Policy in Uzbekistan and Its Implications for the Angren FEZ followed by the “Djizak” SIZ in 2013.
More recently, the Decree of the President of Uzbekistan, dated October 26, 2016 #UP- 4853, aimed to create more favorable conditions for further development of FEZs, especially establishing a more unified legal regime for all zones. By this Decree, FIEZ and SIZs are renamed as FEZs, and all privileges and incentive systems applied to these zones were unified. In addition, a single administrative council of free economic zones was established to coordinate all the activities of FEZs.
The main goals of FEZs stipulated in the legislation are as follows:
• Establishment of unified and most favorable conditions for foreign investors; • Attraction of FDI to create modern production with high levels of local sourcing, ensuring substantial processing of local mineral resources and production of competitive products with high added value, promotion of industrial specialization of free economic zones, and development of industrial cooperation; • Gradual transition to a “one window principle” in all free economic zones that provides for the rendering all types of public services, including licensing Industrial zone Pharmaceutical zone zone Touristic zone Agro-business procedures; and social transport, engineering-communication, of production, Development high- to provide infrastructure, of modern as well as development infrastructure, quality logistics services; professional in higher and secondary special opportunities Organization of training future needs of FEZs for a with regard to current and educational institutions skilled labor force. • • http://invest.gov.uz. In January 2017, four free economic zones were additionally created, including the including the In January 2017, four free economic zones were additionally created, “Urgut” FEZ in Urgut district, “Gijduvan” FEZ in Gizhduvan district, “Kokand” FEZ in 2017, seven district. Moreover, in May FEZ in Khazarasp and “Kharazasp” city, Kokand the in FEZ “Nukus-pharm” as such created, also were zones economic pharmaceutical province, “Kosonsoy-pharm” “Zomin-pharm” in the Jizzakh Republic of Karakalpakstan, in province, “Boysun-pharm” in Namangan province, “Sirdaryo-pharm” in Syrdarya province. in Tashkent Surkhandarya province, “Bustonlik-pharm” and “Parkent-pharm” Also, additional FEZs were further established: the “Charvak” free tourist zone (December province (April 2018), the “Bukhoro-Agro” 2017), the “Sirdarya” FEZ in the Syrdarya province (April 2018), the “Namangan” FEZ in Namangan FEZ in Bukhara agricultural Source: Source: [Figure 1-7] Free Economic Zones in Uzbekistan Economic 1-7] Free [Figure 040 Support for Operation of the Angren FEZ in Uzbekistan province (August 2018), the “Termez” FEZ in Surkhandarya province (September 2018), and finally the “Andijon-Pharm” FEZ in Andijan province (January 2019), respectively. Currently, there are a total of 21 FEZs: 10 zones for industrial manufacturing, eight zones for pharmaceutical manufacturing, two zones for agribusiness, and one zone for tourism in Uzbekistan (See Figure 1-7).
2.2.3. Incentive Systems of Free Economic Zones
A financial incentive is one of the most important principles of the government policy on creation of SEZs. Stefanovich (2008) argues that SEZs are a crucial factor for an increase of FDI inflow, which provides business entities financial incentives, an easy approval process for FDI, sufficient infrastructure regarding communication, transport and logistics, minimal stage of bureaucratic procedure, convenient labor law, and other softened requirements.
Currently, residents of free economic zones are eligible for tax and customs incentives with exemption from the payments of:
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• Land tax, income tax (incorporate tax), property tax for legal entities, unified tax Chapter for small businesses, as well as compulsory contributions central funds;
• Customs payments (except customs clearance duties) for the equipment, raw 01 Assessment of FEZ Policy in Uzbekistan and Its Implications for the Angren FEZ materials, materials and components imported for their own production needs, as well as building materials not produced in the republic, in accordance with the lists approved by the Center for complex examination projects and import contracts under the Ministry of Economy and Industry; • Initially residents of “Angren” special economic zone can use tax and customs preferences for the period of from three to seven years based on investment volume; • From US$ 300 thousand to 3 million or its equivalent: for three years; • From US$ 3 to 10 million USD: for five years; • More than US$ 10 million: for seven years.
Currently, after unified all incentives for free economic zones in accordance with the Decree of the President of Uzbekistan, dated October 26, 2016 #UP-4853, the abovementioned preferences and benefits are provided for the period from three to 10 years, depending on the amount of contributed investments as follows:
• From US$ 300 thousand to 3 million: for three years; • From US$ 3 to 5 million: for five years; 100 80 No. of Operating Firms No. of Operating 60 40 32 29 20 17 No. of Resident Firms 10 6 5 5 4 3 1 0 From US$ 5 to 10 million: for seven years; 5 to 10 million: for From US$ More than US$ 10 million: for 10 years with the application for the next five years, current of 50% below in the amount tax payment and single tax rate the income rates. • • Development Strategy Center and PeaceNexus (2018). Center and PeaceNexus Strategy Development Navoi (2008) Angren (2012) Jizzakh (2013) Urgut (2017) (2017) Kokand (2017) Khazarasp Gijduvan (2017) Nukus-Pharm (2017) Zomin-Pham (2017) (2017) Kosonsoy-Pharm Sirdaryo-Pharm (2017) (2017) Boysun_Pharm Bustonlik-Pharm (2017) (2017) Parkent-Pharm (2018) Charvak-Tour Balik (2018) Sirdarya (2018) (2018) Termez Namangan (2018) (2018) Bukhoro_Agro Andijon-Pharm (2019) Moreover, for products sent to export, customs privileges will be applied until the end of sent to export, customs privileges Moreover, for products At the same time, however, investment and production activities are still limited even for At the same time, however, investment and production activities are still limited As mentioned above, there are currently a total of 21 FEZs in Uzbekistan. Since they were there are currently a total of 21 FEZs As mentioned above, 2.3. Current Status of FEZs: The Angren FEZ Case Status of FEZs: The Angren 2.3. Current the FEZ operation. New incentives became more attractive and stimulated investors seeking seeking investors stimulated and attractive more became incentives New operation. FEZ the in free economic zones. to open their business older FEZs. As shown in [Figure 1-8], as of October 2018, the Navoi FEZ and the Angren FEZ older FEZs. As shown in [Figure 1-8], as of October 2018, the Navoi FEZ and increasing recently are there While respectively. companies, operating 32 and 29 only have designated as FEZs very recently, many of them do not yet have operating resident firms firms resident operating have not yet do them of many recently, very FEZs as designated within the zones. Source: Source: [Figure 1-8] Number of Operating Firms in FEZs (As of October 2018) 1-8] Number of Operating [Figure 042 Support for Operation of the Angren FEZ in Uzbekistan cases of inquiries from potential foreign investors, many more policy efforts are still imperative to boost FDI inflows into FEZs. From here, we examine the current status of FEZs in details, using the Angren FEZ as a reference.
2.3.1. The Angren FEZ: A Brief Overview
The Angren FEZ is located between the City of Tashkent (80 km away) and Namangan (116 km away). The City of Tashkent is the economic center of Uzbekistan and the most populated city in Central Asia, with a population size of 1.98 million people, as of 2019. Namagan has been an important craft and trade center in the Fergana Valley since the 17th century and is now the second largest city (432 thousand residents) in Uzbekistan.
The City of Angren emerged from the rich Angren coal basin during World War II, and several large coal mining factories existed within the region during Soviet times. Although the majority of them were abandoned after the collapse of the Soviet Union, Angren still retains a number of factories in coal mining and construction-materials industries. Angren’s coal reserves account for about one quarter of coal supplies in the Central Asian region. 043 Chapter There are several reasons why the government of Uzbekistan designated these areas as a special economic zone in 2012. First, the government decided to create the Angren FEZ on 01 Assessment of FEZ Policy in Uzbekistan and Its Implications for the Angren FEZ the basis of former industrial areas in Angren and Ahangaran, which were launched during the soviet regime. These industrial areas had been functioning inefficiently for the previous two decades until the government made the decision to reconstruct them completely. The government aims to not only manufacture high value-added products based on local resources, but also to boost the economy of Angren and Ahangaran by creating new jobs and efficiently utilizing the existing industrial and resource capacities of those industrial areas.
Second, the Angren FEZ is located in a very promising area between the capital of Uzbekistan and Fergana Valley, the latter of which has a potentially huge consumer market of approximately more than ten million people, one third of the total population of the country. Also, the proximity of the FEZ to the capital city makes it a very attractive destination for investors that are seeking to produce for the internal market (UNDP & MFERIT, 2013).
Third, the Angren FEZ possesses convenient transportation and logistics infrastructure. In particular, the A373, the Tashkent– Andijan-Osh highway, with a total length of 404 km, passes through the City of Angren. It is the main road linking the northeastern part of Uzbekistan and serves as a corridor to the Kyrgyz Republic and further to China and other Creating favorable conditions for attracting investments, primarily foreign direct foreign direct investments, primarily conditions for attracting Creating favorable that are investments, for the creation of high-tech and high value-added products competitive in the domestic and world markets; Ensuring the integrated and efficient use of the production and resource potential province, via creation of new productions with deeper processing of of Tashkent resources; mineral materials Deepening of localization processes for production based on local raw relations and between enterprises in and the establishment of close cooperative free economic zone and in the whole of the republic; engineering, Provision of advanced development and efficient use of transport, as well as further development and wide communication, and social infrastructure, system of use of the potential of the Angren Logistics Center and the established • • • • The Angren International Logistics Center (Angren ILC, hereafter) is located on the bases Logistics Center (Angren ILC, The Angren International However, after creating a logistics center in Namangan region and constructing the The following are the main objectives and activities of the Angren FEZ determined when Central/South Asian regions. The Tashkent-Angren (currently Tashkent-Angren-Pap-Andijan) (currently Tashkent-Angren-Pap-Andijan) Asian regions. The Tashkent-Angren Central/South Fergana in regions three the connects which the Angren FEZ, through passes also railway rest of Uzbekistan. with the Valley cargo handling services, of freight forwarding, provides a full range of Ablyk station and Dovlatov and certification of goods. clearance, customs storage, container transportation, as a new industrial zone was the decision to choose the City of Angren (2012) argues that “Ablyk” the at 2009 in founded was which ILC, Angren this of the existence by dictated in centers trans-shipment largest the of one is currently and city the in station railway processing, and sending goods, the in systematically receiving, Uzbekistan. Specializing with the business entities in Fergana role in cargo transportation a key Angren ILC plays Valley. areas of the Qamchiq Pass, Angren-Pap through the mountain new electrified railway transportation of various cargoes to and from Ferghana Valley and the Angren Logistic but also for international cargo for domestic markets, Center has been decreasing not only logistic-transportation markets. However, considering Angren FEZ companies’ wide range the republic and of directions several throughout in freight transportation of services in asset advantageous an become potentially could ILC Angren the countries, neighboring open their business in Angren FEZ. the long-run for companies seeking to it was established in 2012: 044 Support for Operation of the Angren FEZ in Uzbekistan road and container transportation of goods.
According to the Order of the Uzbekistan President of the Republic of Uzbekistan, dated September 19, 2014 #R-4351, a special committee for the Angren SIZ was established for the analysis and development of measures aimed at enhancing the activity of free economic zones. Later on, this Committee was abolished when the President of Uzbekistan adopted the Decree dated October 26, 2016 #UP-4853, which aimed at establishing a unified legal regime, as well as tax and customs privileges for FEZs. In accordance with the Decree, main directions of further development of the free economic zones “Navoi”, “Angren,” and “Jizzakh” were determined once again to include the following new tasks:
• Actively attracting direct investments, primarily foreign investments, to create modern high-tech industries ensuring deep processing of local mineral resources and production of competitive high added value products; • Gradual transition to the provision of all types of public services in the free economic zones on the principle of “one window”;
• Training of highly qualified specialists in higher and secondary specialized, 045
professional educational institutions, based on the current and future needs of free Chapter economic zones in specialized personnel, providing that they undergo practical 01 training at existing enterprises located in free economic zones. Assessment of FEZ Policy in Uzbekistan and Its Implications for the Angren FEZ
2.3.2. Development of the Angren FEZ
The total area of the Angren FEZ amounts to 4,037 hectares, divided into the following blocks:1
• Akhangaran Block: there was a former industrial zone in this block where mainly large manufacturing companies were located, such as a cement plant, asbestos slate plant, marble plant, metal recycling plant, and flour mill plant. According to the Master Plan (I stage), besides the existing territory of the former industrial zone, more than 320 hectare land plot were additionally included as a reserve in order to further locate investment projects in the long run; • Aqcha Block: this block is an agricultural land with a total area of 97 hectares and is not adjacent to old residential areas. • Angren-1 Block: It is located in Angren and one part of it is in Akhangaran district, with a total area of 1,210 ha. Large manufacturing companies, such as rubber- technical plants, grader plants, cardboard paper plants, gold recovery plants, and
1 The Master plan (I stage) of each block is shown in Appendix. 65.5 60.6 62.2 192.1 380.5 spots (Unit: Hectare) of free land On the basis - Located projects 41.2 36.2 104.6 182.0 entities of existing On the basis 97.0 323.3 303.6 126.8 850.7 spots Free land - 423.0 699.6 892.2 2,014.8 Location for project Not suitable In particular: - 343.7 206.8 621.0 1,171.5 entities Existing private local 97 area 1,090 1,210 1,640 4,037 Total Total gas engineering plants are located here. According to the Master plan (I stage), Master plan (I stage), to the located here. According plants are gas engineering land plot zone, an additional of the former industrial existing territory besides the of more than 300 ha was included in order to further locate investment projects in the long run; Angren-2 Block: It is also located in Angren city with a total area of 1,640 ha. The industrial zone like was located on the basis of former territory of this block were located, such mainly some manufacturing companies Angren-1 Block, where oil storages, concrete plants, thermal power plants, plants, reinforced as ceramic to the Master plan (I stage), besides enterprises. According and road construction land plot of more than of former industrial zone, an additional the existing territory projects in the long run. in order to further locate investment 120 ha was included Aqcha Angren-1 Angren-2 • Akhangaran In total: Blocks name Master plan (I stage) of the Angren FEZ. Master plan (I stage) of the Angren At the same time, free land spots of approximately 850.7 hectares out of the total area approximately 850.7 hectares out of the total area At the same time, free land spots of arguably the One of the most important factors for the effective functioning of FEZ is 1 3 2 4 # of all blocks (4,037 ha) were determined to be further developed to locate new investment investment new locate to developed further be to determined were ha) (4,037 blocks all of projects. As depicted in
, about 1,171.5 hectares are the territory of existing FEZ, Angren establishing the of announcement located before the entities private local while around 2,014.8 hectares is not suitable for individual investment projects. Among spaces, parking these, 745.8 hectares are the existing or planned auto roads and railways, addition, In corridors. technical and them, to attached lands the and facilities infrastructure other houses, private 1-2-story buildings, administrative-commercial for are hectares 468.3 social entities, and the lands attached to them. that stimulates and manufacturing infrastructure proper development of transportation for the 2012, the government adopted a program the flow of investment. In August Source: Source:
Land Usage of the Angren FEZ (As of May, 2019) FEZ (As of May, 1-2> Land Usage of the Angren
This program focused exclusively on the development of the existing industrial zones, including the construction of electricity substations and new gas pipelines, the renovation of cargo railway stations, and the renewal or new construction of auto roads within the Angren FEZ. Although the Angren FEZ was designed for the complex development of industry, businesses (commerce), logistics, and housing, little investment has been done yet for logistics, business facilities, housing, and other social infrastructure in Akhangaran and Angren.
2.3.3. Operation of the Angren FEZ: Current Status
047
2.3.3.1. Resident Companies and Their Investment Performance Chapter
Since the establishment of the Angren FEZ, the Administration Council has approved 01 Assessment of FEZ Policy in Uzbekistan and Its Implications for the Angren FEZ a total of 102 investment applications by 98 resident companies. The implementation of investment projects is worth of US$ 1,179.4 million, of which around US$ 714.5 million are foreign direct investments. As shown in [Figure 1-9], the Akhangaran block has been the largest destination, attracting US$ 483.6 million for 46 projects, or about 41 percent of the total investment within the Angren FEZ. The Angren-1 block has attracted the second largest investments with a total of 29 projects worth US$ 377.3 million, followed by the Angren-2 block and the Aqcha block. 5 0 50 45 40 35 30 25 20 15 10 (Unit: US$ Million) 26 127 Angren-2 block No. of Projects 377.3 29 Angren-1 block 4 191.5 Aqcha block Aqcha Investment (US$ million) 46 483.6 Akhangaran block Akhangaran 0 600 500 400 300 200 100 Directorate of “Angren” FEZ. of “Angren” Directorate In terms of origin of foreign investors, China dominates both the number of investment both the China dominates investors, of foreign origin terms of In projects projects and FDI volume. It has invested in a total of 25 projects worth US$ million 322.1, United the and Singapore FEZ. Angren the in FDIs total the of percent 45.1 to amounts which 15.8% percent in the total FDI volume, respectively. States account for 26.1 percent and Russia is the fourth largest investing with country, US$ 18 million for four projects. The countries, with a total FDI volume of is also one of the top ten investing Republic of Korea US$ 8 million for three projects. Source: Source: [Figure 1-9] Investment Composition by Block: the Angren FEZ Block: the Angren by Investment Composition 1-9] [Figure 048 Support for Operation of the Angren FEZ in Uzbekistan
Foreign Investments by Country: the Angren FEZ
Number of Declared FDI volume # Country of origin of foreign investors projects (US$ million)
1. People’s Republic of China 25 322.1
2. Singapore 4 186.6
3. USA 2 112.6
4. Russia 4 18.0
5. Turkey 4 17.8
6. Hong Kong 2 15.8
7. England 6 14.3
8. Bulgaria 1 8.1
9. Republic of Korea 3 7.9
10. Kazakhstan 2 3.9
11. Other Countries 5 8.2
TOTAL 58 714.5 049 Chapter
Source: The Directorate of “Angren” FEZ. 01
2.3.3.2. Implemented Projects Assessment of FEZ Policy in Uzbekistan and Its Implications for the Angren FEZ
A total of 50 investment projects, with an investment size of US$ 574.1 million, have been implemented on the basis of 49 resident companies, including 32 investment projects with the participation of FDI worth US$ 233.0 million. It is estimated that these investments have created more than 4 300 new jobs. An analysis on implemented projects by industries indicates that the lion’s share of investments goes to the chemical and petrochemical sector (its share in the total is 39.9 percent), building materials (29.5 percent), and food processing (22.9 percent). (Petro-)chemicals Building materials Foods Light industry Mechanical engineering Metallurgy Others 235.1 17.1 8.9 174.1 9.2 135 9.8 The Directorate of “Angren” FEZ. of “Angren” The Directorate 2.3.3.3. Ongoing Investment Projects 2.3.3.3. Ongoing Investment Projects there Currently, are 52 ongoing investment projects total worth US$ 605.3 million. They Among successfully implemented investment projects, sugar manufacturing in “Angren include 25 investment projects with the participation of FDI worth US$ 481.25 million. It is expected that these ongoing projects would generate a total of 5,000 new jobs. Up to now, foreign from is amount this of half and invested, been has million 80.9 US$ around only (42.8 percent out of total investment volume), direct investments. Building materials industry percent), and food (15.0 petrochemicals and chemicals percent), (24.1 metallurgy Detailed information on these new investments. are the main industries for (22.9 percent) 1-4>. sectors is depicted in
Implementing Projects by Sector: the Angren FEZ Case
Number of Total cost of project # Industry projects (US$ million)
1. Industry of building materials 22 258.8
2. Metallurgy 2 146.2
3. Chemical and petrochemical industry 5 95.9
4. Light industry 3 26.8
5. Food industry 3 14.2
6. Production of label and packaging products 3 14.1
7. Mechanical engineering industry 2 13.9
8. Pharmaceutical industry 4 12.4
9. Electro-technical industry 2 9.9
10. Leather industry 4 8.5
11. Production of consumer goods 2 4.7
TOTAL: 52 605.3 051 Chapter
Source: The Directorate of “Angren” FEZ. 01
According to initial plans, resident companies will complete 36 investment projects (US$ Assessment of FEZ Policy in Uzbekistan and Its Implications for the Angren FEZ 166.0 million) by the end of 2019, 14 projects (US$ 311.5 million) by 2020, and two projects (US$ 127.8 million) by 2021, respectively. Other than these, seven investment projects with the participation of FDI worth US$ 55.1 million USD are being currently examined by the Center for Comprehensive Expertise of Projects and Import Contracts under the Ministry of Economy and Industry, as well as the Administration Council of Tashkent province.
2.3.3.4. Production/Export Performance
Since production activities in the Angren FEZ started in 2014, the total volume of production by business entities within the zone has been increasing year by year. It increased 2.8 times during the period of 2014-18 and amounted to the equivalent of US$ 235.9 million as of 2018. For 2017-18, the production volume declined in terms of US dollars, but this is simply the result of exchange rate liberalization pursued by the government of Uzbekistan since September 2017. The production capacities of residents are expected to amount to the equivalent of US$ 465.7 million in 2019, two times larger than those of the previous year.
The majority of resident firms operating in the Angren FEZ at the initial stage produced 2019 20.2% 67,979 13,737 (Jan-Apr.) 2018 60.5% 235,936 142,672 9.8% 2017 13,476 136,932 4.5% 2016 13,068 292,500 3.0% 2015 6,920 232,238 978 1.2% 2014 83,483 years years Export volume Share of export (in US$ thousand) (in US$ thousand) Production volume, The Directorate of Angren FEZ. of Angren The Directorate (% in total production) Assessment of FEZ Policy in Uzbekistan Assessment of FEZ Policy Status 3.1. Analytic Framework: A Brief Introduction 3.1. Analytic Framework: results on the assessment of FEZ policy in In this section, we report the analytic Uzbekistan. Specifically, our analysis isUzbekistan. basedSpecifically, on a simplified version of Loewendahl (2001)’s promotion investment that framework analytic an proposes (2001) Loewendahl approach. effectiveness and performance. He divides investmentauthorities could use to improve their generation, Lead organization, and (Strategy areas main four into activities promotion Facilitation, and Investment services) and 10 different stages from the policy setting stage FEZ policy more to the monitoring/evaluation stage. In order to examine Uzbekistan's efficiently and conveyour we results simplify more framework Loewendahl clearly, (2001)’s into three areas and seven stages, as reported in [Figure 1-11]. Source: Source: 3.
Production and Export Volume: the Angren FEZ the Angren and Export Volume: 1-5> Production
Policy setting consists of three different issues (or stages); first of all, in order to promote 01
foreign direct investments, national policies should aim to create favorable business climates Assessment of FEZ Policy in Uzbekistan and Its Implications for the Angren FEZ and be consistent with investment promotion policies. These policies comprise macro- economic policies, foreign trade policy, tax policy, corporate policy, labor market policy, and infrastructure policy, among many others. They should be designed and implemented in a coherent way to promote investments.
Second, the ultimate objectives for attracting FDIs should be clearly stipulated in legal provisions, and incentive systems are to be carefully designed to attain the intended policy goals and maximize benefits in the most effective way. As mentioned above, FEZs could be used to achieve a wide range of policy objectives, such as promoting exports, raising foreign exchange earnings, nurturing strategic industries, creating new employment opportunities, or even vitalizing disadvantaged areas. At the same time, however, historical evidence confirms that FEZs are not a panacea; a well-designed FEZ policy can help to attain some policy objectives, but definitely not all of them.
Furthermore, the direction and structure of incentive systems should differ, depending on specific policy objectives. If the key objective is simply to raise foreign exchange earnings, then investment size-based mandatory incentives perfectly make sense; this incentive system ensures a high extent of policy certainty since an investor is automatically awarded Third, as Loewendahl (2001) discusses, the structure of investment promotion differs of investment promotion differs (2001) discusses, the structure Third, as Loewendahl should prepare their IPAs for FDI or FEZ policy, Then, based upon the legal framework The next stage, project handling, is for materializing investment inquiries into actual after-care attention to provide have to pay Once actual investments are made, IPAs if his/her investment meets predetermined criteria. One the other hand, if the ultimate ultimate hand, if the criteria. One the other predetermined investment meets if his/her objective for FDI attraction is to enhance domestic technological capacities and upgrade the because could be sensible incentives system of discretionary structure, then a industrial high- projects that contain large-scale more focused support for specific such a system allows employment transfer, cash credits, tax grants, include options Incentive investments. tech improvements, and visa infrastructural assistance, training incentives, R&D incentives, exemptions. investment promotion agency (IPA countries have a single, specialized across countries. Some United Kingdom (Invest Korea), the Republic of Korea level, like hereafter) at the national Economic Development Board). In other countries, and Singapore (Singapore (Invest.uk), than at the regional rather and China, investment promotion is facilitated including U.S. coordination mechanism among the central case, an effective national levels. In any promotion authorities, and other stakeholders government, local governments, investment is a necessary condition for effective FDIpromotion. In addition, sufficient autonomy from of authorities need to be assigned to national or governments and an appropriate level giving them greater credibility and flexibility. regional IPAs, pursue and investors, foreign target for search attraction, FDI for direction strategic clear effective marketing, as is depicted as Stage 4 in [Figure 1-11].Given the severe competition relative its recognize should country every investors, foreign attract to countries across when compared to neighboring countries, as an strengths and weaknesses, especially number a manageable identify to IPAs for recommended highly also is It destination. FDI databases, external using business by sectors of potential foreign investors in strategic should place special emphasis on Also, IPAs consultants, or other information sources. enhance investors’ awareness of new investment opportunities. activities to marketing investments. In this stage, most countries assign a project manager or key contact person to each potential project. IPAs and the project manager preferably need to provide one- consulting, stop investor services for facilitating the investment. One-stop services include expediting applications and permit processing, screening or evaluating the project, and providing incentive negotiation and approval (Loewendahl; 2001). existing by investor services. A large share of FDI consists of re-investment or expansion 054 Support for Operation of the Angren FEZ in Uzbekistan investors. By responding to difficulties or bottlenecks raised by incumbent foreign investors, attractiveness as an FDI destination could be enhanced so that other investors more easily consider the country as a favorable investment site. Finally, regular monitoring and evaluation for FDI policies should be followed to improve the effectiveness of these policies.
In the next section, we assess FEZ policy in Uzbekistan under this framework and discuss some policy implications from the analysis.
3.2. Analytic Results
3.2.1. Setting National Policy Context
The government of Uzbekistan prepared a five-year development strategy for 2017-2021, which provides inter alia for the development and liberalization of the economy, aimed at further strengthening macroeconomic stability, maintaining high economic growth rates, and increasing the competitive advantage of the country. This strategy is designed to achieve greater economic, social, and political openness and build a competitive and market- 055
oriented economy in Uzbekistan. Chapter
Under such a development strategy, the new government of Uzbekistan has embarked 01 Assessment of FEZ Policy in Uzbekistan and Its Implications for the Angren FEZ on far-reaching structural reforms aimed to recast its economy into a more market- oriented and open system, including the cancellation of arbitrary or punitive inspections of businesses; adoption of anti-corruption laws; elimination of the conversion requirement for certain percentages of hard currency export earnings at the official exchange rate; simplification of business registration procedures and taxation systems; and creation of the Business Ombudsman office. The most critical policy changes so far are the liberalization of the exchange rate regime in 2017, as well as free convertibility and transfer of foreign exchanges. As a matter of fact, the restrictive foreign exchange regime has long been considered as a major impediment regarding FDI promotion.
With the intention of further improving the investment climate of Uzbekistan, a number of reforms have been implemented by the government in recent years. Major improvements are the establishment of the direct investment fund of Uzbekistan, creation of the foreign investment companies, introduction of an investment visa for investors and their families, introduction of IT-technologies for monitoring the implementation of investment projects, and creation of favorable business conditions corresponding to the indicators of international ratings and indexes. All these changes will contribute to the increase of foreign investment inflows and enlarge the usage of new technologies and contemporary Legal (Unit: %) 2 7.5 Uzbekistan 9 Hungary 10 Kytgyzstan 20 Russia 20 Kazakhstan 20 Turkmenictan 25 Korea 5 0 KPMG’s Corporate Tax Table. Tax Corporate KPMG’s 30 25 20 15 10 Consequently, a Consequently, majority of Uzbek businesses are exempt from tax payments. In 2017, These extensive reform efforts are largely acknowledged by the World Bank’s 2018 Doing World Bank’s These extensive reform efforts areby largely the acknowledged harmonious with and help in Uzbekistan are apparently recent policy changes Overall, tax maintains a relatively low level of corporate As shown in [Figure 1-12], Uzbekistan tional practices. The government of Uzbekistan is currently smallworking andon medium aligning sizeof definitions enterprisesUzbekistan of withis micro, interna- currently The government
2 Source: Source: [Figure 1-12] Corporate Income Tax Rate: International Comparison (As of 2018) Income Tax 1-12] Corporate [Figure mechanisms in the working process. in the working mechanisms Business report: Uzbekistan ranks 74th out of 190 countries in the world, up by 13 from the Starting for world the in best 11th as Uzbekistan ranked also Bank World The year. previous in its 2018 Doing Business report. a Business environment however, there still exist a number direct investments. At the same time, to promote foreign of investment for further enhancement the way to pave areas for improvement of policy are related to FEZ operation The most impending ones climates within Uzbekistan. and insufficient social infrastructure tax burden, excessive red tape, inadequate value-added focus on taxation issues. to vitalize FEZs. Among these, here we tax obligation strongly favors SMEs. compared to other countries. Furthermore, rate, entities qualifying as small businesses and applying for a simplified taxation regime, as well income tax nor of of corporate are not payers as wholesale, retail, and catering companies, value-added tax. 056 Support for Operation of the Angren FEZ in Uzbekistan for instance, only about 8,000 out of 350,000 companies paid taxes in 2017, and a half of corporate tax revenues came from state-owned enterprises. These firms could manage such tax obligations using their monopoly position and preferred access to credit.
Recently, in accordance with the new Tax Concept, approved by the Decree of the President of the Republic of Uzbekistan dated June 29, 2018 #UP-5468, from January 1, 2019, legal entities, including participants of the FEZs, whose gross revenues during the tax period exceeded one billion soums (approximately 120 thousand USD), are transferred to general taxation procedure, including payment of value added tax. The general rate of value added tax is currently 20% of firms’ turnover.
While ongoing SMEs-favored tax reforms would positively contribute to private sector development, a sudden increase in tax burden of companies not qualified as SMEs may result in greatly impeding their expansion of firm size and discouraging large- scale investments. In particular, given FEZs’ remote location and relatively poor social infrastructure and living conditions, the recent change of the taxation system would further worsen the overall attractiveness of free economic zones and negatively impact strategic 057 investment plans of investors. Furthermore, all FEZ firms are obligated by tax authorities Chapter to pay VAT from January 1, 2019, although, according to the Decree of the President of the 01 Republic of Uzbekistan dated October 25, 2017 #PP-3356, the rules and regulations on the tax Assessment of FEZ Policy in Uzbekistan and Its Implications for the Angren FEZ payment and other obligatory payments in force on the date of their registration could be applicable to the participants of FEZs if the tax legislation changes.
In order to preserve the attractiveness of free economic zones, to create more favorable conditions for investors, and, most importantly, to encourage large-scale, high-tech investments, the government of Uzbekistan needs to seriously consider reducing the value- added tax burden for FEZ companies.
3.2.2. Setting Objectives, Legal Provisions, and Incentive Systems
The key objectives for establishing FEZs should be clearly defined to improve policy consistency and effectiveness. Legal frameworks and policy instruments for FEZs are to be designed to fulfill these objectives in the most efficient way. If the objectives are defined too broadly or diversely, then the effectiveness of FEZ policy cannot be guaranteed. As discussed in Section 3-1, FEZs are not a panacea for curing all the problems, and there are many failure cases of FEZs due to inconsistent policy direction.
According to the Law “on Free Economic Zones” of Uzbekistan, the major policy goals Since 2016, there have been several legislative efforts to facilitate FEZ policies in efforts to facilitate FEZ policies in legislative Since 2016, there have been several 7, 2017 #PP-3175, established instance, the Decree of the President dated August For for for establishing FEZs are two-fold: to create modern capacities on production of exporting to deepen the processing added value; and products with high import-substituting goods and and materials of local raw goods on the base technological production of high of localized #UP- 2016 26, October dated Uzbekistan of President the of Decree the Similarly, products. production with FDI in order to create modern FEZs aim to attract 4853, stipulates that resources of local mineral sourcing, ensuring substantial processing high levels of local value. It seems quite apparent competitive products with high added and production of that the ultimate objectives of FEZs are closely related to the enhancement of indigenous In for high valued-added products. productive capacities, especially technological and content is also an important goal structure with high-levels of local addition, the production provisions legal current whether is here question policy key the Therefore, policy. FEZ for will in accordance with these policy goals or not. We and policy instruments of FEZs are incentive systems of FEZs in this section. come back to this issue when we assess Uzbekistan. The main subjects of these legal provisions are diverse: authorities and parties coordination systems among related body, responsibilities of each government for tax exemption, regulation on the selection and management of FEZs, the procedure procedure of investment projects, etc. Nevertheless, these legislative acts could not yet barriers and obstacles in working bureaucratic produce their expected results, nor reduce with investors and selecting investment projects. Furthermore, as shown in
, a of forms took so far legislations all these Zones,” Economic Law “on Free the than other relatively easy to adopt is which of ministries, cabinet of resolution a or presidential decree frequent changes in legislations, through these and amend. At the same time, however, forms of legal provisions, have generated much confusion to stakeholders and significantly has so far negatively affected the effective managementundermined investors’ confidence. It foreign investors. of FEZs and long-term investments by to coordinate the a special interdepartmental commission and territorial commissions and Development activities of FEZs and small industrial zones. The Fund for Reconstruction of 100 million of Uzbekistan was entrusted to open a special credit line in a total amount USD to finance or co-finance investment projects implemented in the territories of the FEZs. However, since these commissions had duplicate functions with the Administrative Council territorial commissions were abolished after four and FEZs, these interdepartmental of Reconstruction months of their adoption. In addition, the special credit line of the Fund for to complicated and Development of Uzbekistan failed to stimulate new investments, due procedures. bureaucratic 058 Support for Operation of the Angren FEZ in Uzbekistan According to the Decree of the President dated October 25, 2017 #PP-3356, territorial commissions were transformed into regional administrative councils of FEZs and small industrial zones, and the Administrative Council of FEZs was transformed into the Republican Council for the overall coordination of regional administrative councils. Furthermore, investment projects worth over US$ 5.0 million were required to be approved by the Republican Council, in order to bypass possible bureaucratic barriers and obstacles regarding the selection of investment projects. However, because of oft-delayed decisions by the Republican Council, this system could not contribute to enhance the effectiveness of management system of FEZs. As a result, the Republican Council was abolished by the Decree of the President #UP-5600 on December 21, 2018. Yet another bureaucratic regulation was introduced with this legislation, indicating that investment project selection is now subject to be through the examination of investment projects by the Center for Complex Examination projects and import contracts under the Ministry of Economy and Industry. Now, some FDI firms experience unexpected delay in the approval by this Center on the list of goods of the FEZ participants subject to custom preferences. These goods are often intermediate inputs necessary for producing final products, and, consequently, such delay in approval sometimes halts production activities. 059 Chapter
Another example of legislative failure is related to the status of FEZ residents. According 01
to the Decree of the President #UP-5600, the main term for project placement in FEZs was Assessment of FEZ Policy in Uzbekistan and Its Implications for the Angren FEZ adjusted in a way that export volume should be at least 25% of the output within initial two years after starting operations and at least 50% in the third and subsequent years. In the case of non-compliance of these terms, the business entity loses the status of FEZ participant with the cancellation of previously granted benefits. This new condition for FEZ residency has been facing strong objection from incumbent and potential foreign investors, greatly undermining policy consistency and investors’ confidence. Recently, the government is taking considerations to repeal this requirement. In conclusion, the government of Uzbekistan should be more careful in introducing new policies and revising existing ones. Sufficient ex-ante consideration is needed before a new policy is introduced, and the opinions of interested parties should be fully reflected in the process. In addition, the content and timing of a new policy should be explicitly disclosed to the public reasonably in advance.
On the other hand, the levels of tax incentives currently offered to foreign investors in FEZ could be regarded as competitive, given the current status of the Uzbek economy and incentive systems in neighboring countries. In addition, the recent radical depreciation of the domestic currency and other reform programs to liberalize foreign exchange transactions are playing a critical role in expanding FDI inflows. 3.2.3. Setting the Structure of Investment Promotion 3.2.3. Setting the Structure [Figure 1-13] describes the current structure of FEZ policy management in Uzbekistan: In principle, incentive systems should be designed in a way that best achieves the the that best achieves in a way should be designed incentive systems In principle, Since the primary objective of the FEZ policy in Uzbekistan is to enhance indigenous Hence, the government of Uzbekistan needs to adopt a system of discretionary incentives first, the Cabinet of Ministries is responsible for the adoption of FEZ rules and regulations, development programs, coordination among FEZS, the approval of infrastructure overall the Ministry of Investment and Foreign member status. Next, and the decision on the FEZ for development concepts and strategies body to formulate administrative is the key Trade original purpose of FEZ policy. As already discussed in Section 3-1, FDI incentive systems FDI incentive systems in Section 3-1, already discussed As of FEZ policy. original purpose can be divided into two types: mandatory and An discretionary. investor is automatically under a mandatory incentive investment meets pre-determined criteria awarded if his/her is a mandatory one, since its incentive system of FEZs in Uzbekistan system. The current size. depends solely on pre-determined investment incentive provision however, the government of capacities for high-tech products, technological and productive system is suitable for achievingre-examine whether the current incentive Uzbekistan should FDIs for location attractive an be not is Uzbekistan that admitted be should It goal. this Asian countries. First, it has rich natural Central in high-tech industries, relative to other are equipped with similar countries but neighboring resources and a young population, costs due transport is not enough to compensate extra opportunities. Labor cost advantage still has the most advanced Uzbekistan had and maybe to its disadvantageous geography. are not readily applicable to modern high- Asia, but they technological capacities in Central tech industries. since Finally, corporate tax burdens (other than are VAT) generally low in FDIs in high-tech sectors. very effective in attracting Uzbekistan, tax incentives alone are not such a system allows more focused support for specific for priority high-tech sectors because projects that contain large-scale high-tech investments. For instance, the government could provide modern foreign investors and exclusively for high-tech area FEZ special a designate investments large-scale attracting for effective very be will it addition, In infrastructure. if could VAT be reduced or exempted for these investors under a certain condition. One of Decree in the stipulated requirement export a minimum be could example possible the President #UP-5600, but the fulfillment of this requirement will be connected to VAT possible incentives could Other status. residency FEZ of maintenance to the not exemption, any In grants. cash even or assistance, training incentives, R&D incentives, employment be cases, such incentive packages could be flexible and negotiable for each case. 060 Support for Operation of the Angren FEZ in Uzbekistan FEZs and coordinate FEZ development. This ministry was newly created by merging the State Committee for Investment and the Ministry of Foreign Trade in January this year. Under the ministry, the Foreign Investment Promotion Agency was also established to provide information and legal support to foreign investors, solve emerging problems, and provide investors with services for the preparation of the necessary documentation.
According to the Law of Uzbekistan on Free Economic Zones, activities of zones are coordinated by the Administrative Councils, whose functions are to monitor compliance with the special legal regime, work out development programs of the FEZ, approve investment projects for placement in FEZ territory, approve construction projects, and coordinate the activities of local government bodies on issues related to the functioning of FEZs.
[Figure 1-13] Structure of FEZ Policy Management in Uzbekistan
Functions: Cabinet of Ministers - Adoption of Regulations on FEZS - Overall coordination of FEZS - Approval of Program on development transport & engineering-communal infrastructure in FEZ
061
Functions: Chapter Administrative Council of FEZ - Coordination and regulation of activity of a FEZ - Approval of investment projects for placement - Approval of construction projects
- Determination of basic activities of FEZ Directorate 01 Assessment of FEZ Policy in Uzbekistan and Its Implications for the Angren FEZ
Functions: Ministry of Investment - Coordination of FEZ development and Foreign Trade - Working out development concept and strategy
Functions: - Responsible for operative management of a FEZ - Registration of residents with approval of Administrative Directorate of a FEZ Council - Preparation of reports concerning current activity of FEZ
Responsible for: District / City Mayor - Provision of land plots for investment project location in a FEZ
Responsible for: Center for Comprehensive Expertise of Projects and Import Contracts - Consider feasibility studies and give a positive conclusion on investment project
Source: Author.
The Directorate of a FEZ is a legal entity in the form of a state unitary enterprise, responsible for operational management of FEZ activities. The Directorate is supposed to perform the following functions:
• Registering the participants of the FEZ based on decisions of the administrative council; the with contracts FEZ, the of investors with agreements investment Concluding redemption value at a “zero” sale of state property of the FEZ on the participants council; of the administrative based on decisions Attracting foreign and domestic investors to implement investment projects in the territory of the FEZ; Placing approved investment projects based on decisions of the Administrative Council; Exercising systematic control over the proper fulfillmentby investors of the FEZ of their obligations; etc. FEZ territory, real estate objects located in the Managing state-owned • • • • • Finally, according to the Decree of the President of Uzbekistan dated December 21, 2018 to the Decree of the President of Uzbekistan dated December 21, according Finally, A recent study (2018) conducted jointly by the Development Strategy Center and to address in this paper is the lack of The most significant challenge we would like However, since the Administrative Council is not a separate government and body, all #UP-5600, the approval process of investment projects for FEZs is completed in the following way: first, the Center for ComprehensiveExpertise of Projects and Import Contracts under study for an applied and Industry should pursue a feasibility the Ministry of Economy investment project. If the Center provides a positive conclusion on the project, then the of each region could consider the Council of FEZs and small industrial zones Administrative project fulfills relevant requirements. application and approve it when the PeaceNexus identifies a number of bottlenecks regarding FEZ policy management, including process for the Republic Council; in the decision procedures and long delays bureaucratic provisions; lack Council regarding infrastructural limited authority of the Administrative procedure; and absence of concrete the mid- to of “One Window” services and appealing adopting the Decree fact, some of them were successfully resolved by In long-term strategy. of the President #UP-5600 on December 21, 2018. However, there still exist non-negligible shortcomings in the system of FEZ policy management in Uzbekistan. legislation, the current to FEZ. According of Directorate the to assigned authorities relevant Council of FEZs in the Administrative the activities of a FEZ are coordinated and regulated by each region, which is headed by the governor of its region and composed of senior officials from local governments. Hence, this Council is empowered with much authority and should confirm every decision and action on FEZ management. members of the Council have major jobs in various government offices, in practice they 062 Support for Operation of the Angren FEZ in Uzbekistan could not fully devote themselves to daily FEZ operations. The Administrative Council, gathering all members of the Council and other representatives of concerning organizations, tends to hold special meetings only once a month to deal with current issues of FEZ. On the top of that, the participation of local governments is still insufficient in conducting FEZ activities. As noted above, the central government is the main implementer in establishing and operating FEZs in Uzbekistan. Therefore, although the territory of a FEZ belongs to a local authority, provincial, or municipal government, each of these entities does not have enough financial resources to develop transport, engineering, and communications infrastructure in advance.
On the other hand, the Directorate of a FEZ is a legal entity in the form of a state unitary enterprise and is in charge of daily operations management, directly engaging in FEZ activities and cooperating with participant-enterprises. However, the current system does not delegate much autonomy or authority to the Directorate. In this situation, even though the Directorate does its best to settle a FEZ-related bottleneck, long delays in administrative procedure are unavoidable due to such poor institutional design. 063
Regarding this, here we briefly explain the current structure of ROK’s FEZ policy Chapter management in comparison with that of Uzbekistan. [Figure 1-14] presents the structure of 01 ROK’s FEZ policy management system, which could be compared with [Figure 1-13] for the Assessment of FEZ Policy in Uzbekistan and Its Implications for the Angren FEZ Uzbek case.
[Figure 1-14] Structure of FEZ Policy Management: the Korean Case
Free Economic Zone Committee (Policy Making) Ministry of Trade, Industry & Energy Free Economic Zone Planning Office (Policy Implementation and Coordination)
Invest Korea Local FEZ Authorities (Support for Governments (FEZ Operation) Investment Promotion)
Source: Author. Planning and formulating FEZ Policies; of legislation on free economic zones; Operation Designation and removal of free economic zones; Confirmation and Change of Economic Free Zone Development Plan; of Assessment of FEZs’ Performance and Support for the establishment in free economic zones; infrastructure Main policy and system regarding FEZs; Main policy and system of master plans for FEZs; Formulation of designation of FEZs; or alteration Designation, revocation, and implementation for FEZs; Development plans necessary for foreign investors; services Provision of administrative agencies and administrative of central Coordination of opinions with the heads with respect to FEZs; mayors/governors cases concerning the handling of Exclusion from application of special affairs of local governments, etc.; administrative and necessary for the designation Presidential Decree Other matters prescribed by and management of free economic zones. • • • • • • • • • • • • • 3.2.3.2. Free Economic Zone Planning Office Economic 3.2.3.2. Free The Free Economic Zone Planning Office (FEZ Planning Office, hereafter) assists the FEZ The Minister of Trade, Industry and Energy is the chairperson of FEZ Committee and chairperson of FEZ Committee and Industry and Energy is the The Minister of Trade, 3.2.3.1. Free Economic Zone Committee Economic 3.2.3.1. Free of Free Economic Zones Management of Designation and on Act to the Special According Committee as an executive This body. Office is set up within the Ministry ofTrade, Industry the main are following The ministry. of the a senior official and headed by Energy and responsibilities of the FEZ Planning Office: exercises overall control over the FEZ Committee's affairs. The Committee members are Committee's affairs. The Committee members are control over the FEZ exercises overall and private sector experts (especially on issues of vice ministers from various ministries labor, environment, FDI, distribution, and urban planning) with sufficient knowledge and experience on FEZ matters. Korea (the Special Act, hereafter), the Free Economic Zone Committee (the FEZ Committee, FEZ (the Committee Zone Economic Free the hereafter), Act, Special (the Korea Act Special matters (the following the on and pass resolutions deliberate hereafter) shall Article 25(2)): 064 Support for Operation of the Angren FEZ in Uzbekistan • FEZs-related Information search, establishment of database, international cooperation; • Consultation on FEZ operations with the Free Economic Zone Authorities and local governments; • Maintenance and support for improvement of business and living conditions; • Consultation with relevant departments on revitalizing foreign investment and resolution of bottlenecks; • Support for the operation of the Free Economic Zone Committee.
3.2.3.3. Free Economic Zone Authority
The Free Economic Zone Authority (the FEZ Authority, hereafter) is an administrative body in charge of pursuing operation management for each FEZ. Although authorities and responsibilities for FEZ establishment and management belong either to central governments or local governments, the Special Act explicitly mandates that the FEZ Authority performs administrative affairs under Article 27 of the Act and Article 31 (3) of the Enforcement Decree of the Special Act or administrative affairs delegated by the State 065 or a local government in accordance with municipal ordinances or rules. Therefore, a FEZ Chapter Authority has the practical authority to make decisions on the following matters: 01 Assessment of FEZ Policy in Uzbekistan and Its Implications for the Angren FEZ • Permission for construction and management of structure; • Construction of local roads, determination of road zones, and designation of clearance zones, etc.; • Approval for setting up of a factory and registration of a factory, etc.; • Environmental impact assessment, the control of business place wastes, and conservation of soil environment; • Management of sewerage, the utilization and management of forest, approval for plans for installing urban gas facilities, and permission for manufacturing high- pressure gas; • Reporting on the diversion of use of farmland; • Registration and management of tourist accommodation business, etc., approval for a business plan, permission for and management of amusement facility business; • Permission for occupying and using public waters, management thereof, etc.; • Application for the designation of any urban development district, etc.; • Imposition, collection, etc. of administrative fines incurred by a delay in the registration of real estates.
Purchase of sites for urban and rural planning facilities, permission for development Once the legal framework for FEZ policy is properly set, then the government should for FEZ policy is properly set, then the government should Once the legal framework of Uzbekistan is planning to prepare an interactive the government Fortunately, 3.2.4. Competitive Positioning, Targeting and Marketing 3.2.4. Competitive Positioning, Targeting Comparing ROK’s FEZ management system with that of Uzbekistan, the following Uzbekistan, the following of with that management system FEZ Comparing ROK’s with multiple authorities delegated statutes by is entrusted FEZ Authority Second, ROK’s prepare a clear strategic direction for FDI attraction and FEZ management under objective results for FEZs analysis an example of SWOT situational analysis. [Figure 1-15] represents in Uzbekistan. investment investment map of Uzbekistan, reflecting its production potential, regional demands, specific investment projects, and other information of interest to potential investors, but investors. This investment map could serve not only as guidance for potential activities, activities, implementation of projects for urban and rural planning facilities, establishment of execution plans for each stage, imposition and collection of compulsory fines, access to fines, etc. and collection of administrative imposition, reporting, examination, land, hearing, of Ministries FEZ Committee, the Cabinet ROK’s be made. First, like observations can formulates overall FEZ policies and monitors FEZ operations. However, one notable Industry and Energy ROK case, the Minister of Trade, them is that for the difference between is the chairperson of the FEZ Committee. Since the FEZ Planning Office, the key executive such a system apparently control, also under the same Minister’s is body for FEZ policy, allows ROK to formulate and implement FEZ policies in a more consistent and efficientway. Another difference is thatthe Center for Comprehensive Expertise of Projects and Import and Industry examines investment which is under the Ministry of Economy Contracts, Council of FEZs starts to proceed with applications in feasibility before the Administrative has been there addition, In a system does not exist. such ROK, for As Uzbekistan. the case of halt a in resulting sometimes Center, the by approval import delayed about concern growing in production. does not need a legal entity ROK Consequently, and local governments. from central due to its extensive mandate system. Council of Uzbekistan equivalent to the Administrative activities and investment attraction could pursue more autonomous Thus, the FEZ Authority hurdles, relative to the FEZ Directorates FEZ management without significant administrative a to officials their dispatch regularly governments central and local Third, Uzbekistan. in in monitoring the FEZ authority and coordinating in accordance which helps FEZ Authority, directions. with national FEZ policies and local governments’ 066 Support for Operation of the Angren FEZ in Uzbekistan also as an important background study in formulating its mid- to long-term strategy.
[Figure 1-15] SWOT Analysis: FEZs in Uzbekistan
ㆍDouble landlockedness ㆍSound macro-economic prospects ㆍWeak backward industrial linkage ㆍRelatively large domestic demand base ㆍUnderdeveloped banking system ㆍStrong natural resource base ㆍPolicy inconsistency with frequent legal ㆍStratrgic position in the New Silk Road changes ㆍLack of authorities and resources managed by FEZ directorate ㆍOutdataed infrastructure Strength Weakness
Opportunities Threats
ㆍFar-reaching structural reforms ㆍImproved relationship with neighboring ㆍPolicy emphasis on impact-substitution countries ㆍEconomic uncertainties surrounding recent ㆍOn-going expansion of cross-border reforms and state interventionism tansportation networks ㆍPotentially intense export competotion with ㆍLow government debt China and other CIS countries
Source: Author. 067 Chapter
As discussed in Section 1, it should be also noted that FEZ policies contain high risk 01
and uncertainty. Many FEZs in the world fail to attract enough investments and remain Assessment of FEZ Policy in Uzbekistan and Its Implications for the Angren FEZ underutilized or largely vacant. Therefore, when setting up a strategic direction for FDI attraction and FEZ management, one also needs to look at historical experience on successful FEZs in the world. By comparing them with the current situation of FEZs in Uzbekistan, one could figure out more accurately the relative strength and weakness of the latter. For this purpose, here we briefly discuss two famous cases in this section: the Shenzhen SEZ in China and the Masan EPZ in ROK.
The Shenzhen SEZ is arguably the most successful special economic zone worldwide. Soon after adopting the “Open Door” policy, China designated Shenzhen, along with Zhuhai and Shantou in Guangdong and Xiamen in Fujian Province, as SEZS in 1980. They were intentionally located remote from Beijing, the center of political power, so that political interference and related risk could be minimized. They took a very pragmatic approach for FEZ management and served as a successful test bed for broader market liberalization for the entire economy. Encouraged by the success of these four SEZs, the Chinese government has opened many more SEZs since then.
Nowadays, the Shenzhen SEZ contains large-scale industrial parks, including Huawei Tech City, and has become a world leader in shipping and logistics, high tech industries, 3 Masan EPZ Location advantage (Proximity to a harbor and industries) of related agglomeration Strong commitment and support of the Central government services, such as Effective one-stop administration investment consultation, advice, and approval of the EPZ authority. business, provided by Close connection with the local business sector technologies, shared of advanced through transfer business methods and outward processing such as leading MNEs, the world’s Success in attracting etc. NOKIA, SONY and SANYO, • • • • • Shenzhen SEZ Author. Location advantage (Coastal region and near major Location advantage (Coastal region and near major cities) Reform-oriented mindset with strong commitment and support of the government and investment promotion Effective marketing of SEZs, Great political and economic autonomy including the legislative authority to develop SEZ- related laws and regulations firms Close linkage between SEZ firms and domestic through supply chain Innovative cultures On the other hand, successful investment promotion requires not only clear strategic clear strategic On the other hand, successful investment promotion requires not only limited to IR In the case of Uzbekistan, investment promotion activities had been The Masan Export Processing Zone (the Masan EPZ hereafter) of ROK is often cited as is often cited as ROK of Processing Zone (the Masan EPZ hereafter) The Masan Export For more detailed information on the success of the Shenzhen SEZ, please refer to Zeng (2015). of the Shenzhen SEZ, please refer detailed information on the success For more • • • • • •
direction with realistic competition positioning, but also effective marketing and targeting. national the at IPA single a by conducted usually are functions these countries, many In level or by regional agencies. There are many marketing techniques: general public relation conferences, investment or trade campaign, participating in investment exhibitions, IPA missions, creating a web site, or directly contacting potential investors. activities during overseas visits by the president or high-level government officials, as well another successful SEZ. The Masan EPZ, established in the early 1970, has been recognized the early 1970, has been recognized SEZ. The Masan EPZ, established in another successful as a rare example of success in creating close linkage between EPZ firms and the domestic In economy. 1988, the majority of zone firms engaged 525 domestic firms for outsourcing of the electronics industry EPZ greatly contributed to the development processes. The Masan process and human capital development in the early through learning from outsourcing stages. As shown in
, the Masan EPZ shares several common success factors with the Shenzhen SEZ. 3 Source: Source:
Success Factors of SEZs: Shenzhen versus Masan 1-6> Success Factors of SEZs: Shenzhen
, there advantage, extensive the Shenzhen SEZ, including its location success factors for are several and SEZ, the to given autonomy economic and political great government, the from support others. firms, among many linkage between SEZ firms and domestic strong supply-chain 068 Support for Operation of the Angren FEZ in Uzbekistan as to participation in investment exhibitions. Recently, the Foreign Investment Promotion Agency was created under the Ministry of Investment and Foreign Trade. This agency is supposed to perform IPA functions, including information provision, consultation, and legal support. It is a promising move, but marketing activities, the most important function of an IPA, are apparently missing. In addition, as Loewendahl (2001) argues, an IPA needs to be sufficiently independent from governments, so that the IPA could gain greater credibility from investors.
At this point, two major alternatives can be considered to further promote foreign investment-related marketing activities for FEZs in Uzbekistan. The first option is to set up an IPA independent or semi-independent from the government and provide various supports for its marketing activities. The second alternative is to vitalize marketing activities led by the FEZ Directorates. For both cases, the government should provide various supporting measures, notably training programs, financial resources, and support for database construction.
3.2.5. Project Handling 069 Chapter
Effective project handling is necessary to materialize actual projects. Hence, IPAs or the
FEZ Directorates should develop project handling skills, understand an investor’s needs, 01 Assessment of FEZ Policy in Uzbekistan and Its Implications for the Angren FEZ prepare relevant information and package offer, and maintain close connections with government agencies and potential investors. For investment facilitation, many countries try to provide one-stop investor services. As mentioned above, one-stop services include consulting, expediting applications and permit processing, screening or evaluating the project, and providing incentive negotiation and approval.
In order to offer sound one-stop services to investors, the FEZ Directorates must possess with qualified specialists and sufficient financial budgets but the FEZ directorates lack both human capital and financial resources. Their spending depends entirely on fees paid by resident firms, which is not enough for effective FEZ management. On the other hand, ROK’s FEZ authorities have multiple revenue sources:
• Subsidies provided by the state in accordance with the Act; • Shares borne by a local government or transferred money from general accounts • Project profits, etc. accrued in the course of executing a project for a free economic zone, such as revenues from the sales of land, etc.; • Rents of public facilities located in a free economic zone and other use fees, charges, revenues, etc.; Other items the Minister of Trade, Industry and Energy deems necessary to be necessary to be Energy deems Industry and Trade, the Minister of Other items a free economic zone. the promotion of in the revenues for included Helping to settle the problems facing foreigners and foreign-invested enterprises within a FEZ; difficulties facing FDI firms in the zone; Collecting information on managerial living conditions for foreigners in the zone; Collecting information on problems in agencies administrative to them suggesting and problems solve to ways Devising concerned. • • • • • Policy Discussions 4.1. Improving FEZ Policy Management System FEZ Policy Management 4.1. Improving FEZ of the current system reconsider to needs Uzbekistan 3, Section in discussed As Finally, by Finally, offering after-care investor services, the attractiveness of an FDI destination difficulties resolve to ombudsman an have could FEZ a Act, Special the According for the following duties: each ombudsman is responsible to the Special Act, According 3.2.6. After-Care Investor Services 3.2.6. After-Care policy management to improve its First,efficiency. the government of Uzbekistan should be frequent more careful in introducing new policies and revising existing ones. Excessively a resolution of changes in FEZs-related legislations, through a presidential decree or cabinet of ministries, could generate much confusion for stakeholders and negatively affect investment performance. Sufficient ex-ante consideration is needed before a new policy or could be enhanced, so that other investors more easily consider the country as a favorable consider the country as a favorable so that other investors more easily could be enhanced, to firms foreign existing the encourage could services such addition, In site. investment introducing ROK’s by this section conclude we this purpose, For re-invest their earnings. ombudsman system. that FEZ resident investors are experiencing. An in management and living conditions among persons who have profound each local government ombudsman is commissioned by experience in FDI business and are proficient in foreign languages. Each ombudsman could in performing his/her duties. for cooperation agencies or organizations ask administrative or organizations should notify the ombudsman Upon receipt of such a request, the agencies of the request. from the date of their opinions within seven days 4. 070 Support for Operation of the Angren FEZ in Uzbekistan legislation is introduced, and the opinions from interested parties should be fully reflected in the process.
Second, the FEZ Directorates should have more autonomy and authority in managing FEZ operations and must be entrusted by statutes with multiple authorities delegated from central and local governments. The current system that every decision and action on FEZ management are to be confirmed by the Administrative Council of FEZs needs to be restructured. For instance, according to the current legislation, land spots for FEZ areas belong to local government authorities. In reality, many FDI firms claim that there are excessive bureaucratic procedures and unduly, long delays in land assignment. Although an FEZ Directorate identifies the location of a specific investment project, it has no decision power to finalize land assignment to investors.
Third, there are a number of administrative procedures that need to be improved. According to President Decree #UP-5600, dated 21/12/2018, feasibility studies of investors should be implemented by the Center for Comprehensive Expertise of Projects and Import
Contracts under the Ministry of Economy and Industry. However, this process often takes 071 a long period of time. Furthermore, even after reaching a positive conclusion with the Chapter Center on an investment project, the final investment approval by the Administrative 01 council usually takes another 2-3 months. These bureaucratic procedures substantially Assessment of FEZ Policy in Uzbekistan and Its Implications for the Angren FEZ hinder bringing in any new investments. Some FDI firms experience unexpected delays in gaining approval by this Center on the list of goods of the FEZ participants subject to custom preferences. These goods are often intermediate inputs necessary for producing final products, and, consequently, such delays in approval can sometimes halt production activities.
Fourth, in order to pursue more active investment promotion activities, the government of Uzbekistan could consider two policy options. The first one is to set up an IPA independent or semi-independent from the government and provide various supports for its marketing activities. The second alternative is to vitalize marketing activities led by the FEZ Directorates. For both cases, the government should provide various supporting measures, notably training programs, financial resources, and support for database construction. Introducing the ombudsman system for each FEZ is worth considering as well.
Finally, in order to offer sound one-stop services to investors, the FEZ Directorates must possess qualified specialists and sufficient financial budgets. The FEZ directorates are currently suffering from lack of human capital and financial resources. There are various options for expanding financial resources, as depicted in Section 3. More detailed discussions 4.3. Improving Infrastructural Provisions Infrastructural 4.3. Improving Another issue often raised by foreign investors within FEZs is insufficient infrastructural 4.2. VAT Tax Issues Tax 4.2. VAT as regarded be can FEZ in investors foreign for systems incentive current The However, taxation and tax administration are among the areas that are still in need high-tech FDI firms that prefers attracting The government of Uzbekistan apparently provisions. For instance, in case of the Angren FEZ, approximately more than 500 hectares instance, in case of the Angren FEZ, approximately more than 500 hectares provisions. For communication of land plots have not yet been provided with main engineering and re-consider their investment plans and investors facilities, which makes infrastructure investments for an unknown period. Despite the assignment of the consequently delay and development coordination to the Ministry Economy responsibility for infrastructure in working out Industry within free economic zones, the role of the Ministry is not sensitive and implementing them. development programs infrastructure competitive, given the current status of the Uzbek economy and incentive systems in and incentive systems in the current status of the Uzbek economy competitive, given of the domestic depreciation radical In addition, thanks to the recent neighboring countries. the transactions, foreign exchange liberalize to reform programs currency and other gone. of sluggish FDI inflows is practically longstanding cause of further reform efforts. For instance, the recent change of the obligation VAT system of companies taxation abrupt increase in is positive, the SMEs. While this strongly favors the splitting growth beyond a certain size and provokes not qualifying as SMEs hinders their for This problem is particularly grave governance. of companies and suboptimal corporate large- high-value-added, promote to is needed investments of volume a large where FEZs, scale industries. that exporting firms are exempt from paying solely focus on exporting activities, considering value added tax. However, Uzbekistan may not be an ideal destination for those exporting relatively the time, same the At incentive. special this with even firms, FDI high-tech factor for foreign an attractive of Uzbekistan could be large size of the domestic market high-tech investments in Uzbekistan, large-scale investors. Therefore, in order to encourage tax value-added exempting or reducing consider to needs Uzbekistan of government the burdens for FEZ companies. on this issue will be presented in Chapter 2 of this report. in Chapter 2 of this will be presented on this issue 072 Support for Operation of the Angren FEZ in Uzbekistan In fact, experience in FEZ operations in other countries suggests that foreign companies start their business after creating necessary transport and manufacture infrastructure. During the past years, the authors investigated the system of infrastructure provisions for the cases of the Chinese and Russian FEZs. Before starting measures to attract investors and locate investment projects in Tianjin Economic Development Area (TEDA) in China, for instance, all infrastructure facilities and transport system were already built within the area at the expense of large scale financial support from the Central government. In addition, commercial facilities like business offices and banks, customs office, R&D and design centers, international schools for foreign residents, and high-intensity transport network were also provided in TEDA.
In “Alabuga” Special Economic Zone (SEZ) in the Russian Federation, more than 2,000 hectares of land are provided with all necessary engineering and transport infrastructure with financial support from federal budgets. All land plots have access to roads and engineering infrastructure. The development program of “Alabuga” SEZ provided for the development of social infrastructure also. In fact, completed construction of cottage villages includes 40 two-story cottages, international school offering in-depth study of the English 073 language, a kindergarten at the school, and housing for teachers and other specialists. Chapter 01 Meanwhile, most FEZs in Uzbekistan, including the Angren FEZ, are suffering from Assessment of FEZ Policy in Uzbekistan and Its Implications for the Angren FEZ the lack of relevant infrastructure facilities. A major reason for this may be the shortage of financial resources for infrastructural investment provided by the central government. Given the government’s budget situation, however, it is virtually impossible for the government of Uzbekistan to help to establish infrastructural provisions simultaneously for all 21 FEZs. Therefore, the government of Uzbekistan needs to prepare a mid- to long- term plan for infrastructural provisions of FEZs and prioritize the FEZs that need the imminent investment on infrastructure. For FEZs with greater potential of attracting high- tech FDI firms, it could be recommendable for adopting the Russian and Chinese systems for infrastructural provisions.
4.4. Designating a “High-tech Complex”
According to a recent study conducted by the Development Strategy Center, in conjunction with the Swiss Foundation PeaceNexus, many incumbent FEZ firms are dissatisfied with their initial location choices. This study suggests that Tashkent and the Tashkent region have become the only regions capable of becoming drivers of the country's development in the shortest time possible. At the same time, however, a new Presidential Decree on additional measures for the the measures for Decree on additional a new Presidential time, however, At the same compared to the distinctive characteristics FEZ has several Angren Additionally, Therefore, the development concept of the Angren FEZ should be different, compared to intensification and expansion of theactivities of free economic zones unified thelegal status systems for 21 and incentive development concepts in Uzbekistan. Consequently, of all FEZs to each other. FEZs are very similar developed sites production old in located is FEZ Angren First, Uzbekistan. in FEZs other factories a large area where non-residential It contains quite Union era. during the Soviet with better social infrastructure. co-exist. It is also equipped and residential facilities investment and growth of the has great potential for stimulating Second, Angren FEZ the economic center it is the closest FEZ to Tashkent, considering that economy, overall region is arguably capable of becoming a driver of the of Uzbekistan. Only the Tashkent time possible, as only this region possesses the country's development in the shortest logistics, qualified such as infrastructure, necessary conditions for further development, legal support, education, and medical care. working force, energy, that of the other FEZs in Uzbekistan. High priority should be given to the attraction of large- overall the for engine growth key a as serve could turn in which investments, high-tech scale, that high-tech industries need modern infrastructural into consideration Taking economy. a developing designating and consider may of Uzbekistan the Government provisions, and the Angren FEZ or somewhere between Tashkent small-scale, high-tech complex within area as a rear-end, agglomerate case, the Angren FEZ could serve the Angren FEZ. In any doing inputs to the high-tech complex. By for domestic companies that supply intermediate between linkage industrial a close, establishing for a catalyst be FEZ could Angren the so, the high-tech complex and the In domestic addition, economy. differentiated (discretionary) (so-called “anchor high-tech MNCs large–scale, for strategic, prepared incentives should be exemption or reduction of VAT. companies”), including the temporary 074 Support for Operation of the Angren FEZ in Uzbekistan References
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Jeong, H-G. and J-H. Pek (2016), “Special Economic Zones: What Can Developing Countries 01
Learn from the Korean Experience?,” 2016 Modularization of Korea’s Development Expe- Assessment of FEZ Policy in Uzbekistan and Its Implications for the Angren FEZ rience, KDI School of Public Policy and Management.
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Stefanovich, S, (2008), Analytical Framework of FDI Determinants: Implementation of the OLI model. Economics and Organization, 5 (3); 239 – 249. Retrieved March 25, 2012, from http://facta.junis.ni.ac.rs/eao200803/eao200803-07.pdf
UNCTAD (2019), World Investment Report 2019. - rica,” Policy Research Working Paper No. 7240, World Bank. World Paper No. 7240, Research Working rica,” Policy U.S. Department of Commerce (2018), “U.S. Country Commercial Guides: Uzbekistan.” Uzbekistan.” Commercial Guides: Country “U.S. Commerce (2018), Department of U.S. Zeng, D.Z. (2015), “Global Experiences with Special Economic Zones: Focus on China and Af 076 Support for Operation of the Angren FEZ in Uzbekistan Appendix
Master plan (I stage) of the Angren FEZ
[Appendix Figure 1-1] “Akhangaran” Block
077 Chapter 01 Assessment of FEZ Policy in Uzbekistan and Its Implications for the Angren FEZ
Note: Total area – 1090 ha. Source: Master plan (I stage) of the Angren FEZ.
[Appendix Figure 1-2] “Aqcha” Block
Note: Total area – 97 ha. Source: Master plan (I stage) of the Angren FEZ. Master plan (I stage) of the Angren FEZ. Master plan (I stage) of the Angren Master plan (I stage) of the Angren FEZ. Master plan (I stage) of the Angren Total area – 1640 ha. area Total Total area – 1210 ha. – 1210 area Total Note: Note: Source: Source: Source: Source: [Appendix Figure 1-4] “Angren-2” Block 1-4] “Angren-2” [Appendix Figure [Appendix Figure 1-3] “Angren-1” Block 1-3] “Angren-1” Figure [Appendix 078 Support for Operation of the Angren FEZ in Uzbekistan
Chapter Keywords Roadmap Support Facility, Industrial Manpower, Utility, Infrastructure, 1. Introduction FEZ Angren 2. The Status and Challenges of the Experience and Its Implications 3. Korean FEZ for the Angren Support Strategy 4. Infrastructure FEZ for the Angren Strategy Element Support 5. Production 6. Policy Suggestions Chongin Lim (Jeonbuk Institute) Covergence Saemanguem Institute of Industry-University Economic Zone "Angren") of Free (Directorate Karimov Kudrat Angren FEZ Angren The Infrastructure Support Strategy of the Strategy Support The Infrastructure 02 080 Support for Operation of the Angren FEZ in Uzbekistan The Infrastructure Support Strategy of the Angren FEZ
Chongin Lim (Jeonbuk Saemanguem Institute of Industry-University Covergence Institute) Kudrat Karimov (Directorate of Free Economic Zone "Angren")
Summary
Uzbekistan set up FEZ as an axis of national economic development for the expansion of exports and for attracting foreign investment and added 18 FEZs in 2017. Despite quantitative expansion policies like this, qualitative improvement of infrastructure has become a critical task because the relevant infrastructure was not built properly. 081 Chapter
The objective of this study is to suggest infrastructure and industrial manpower support 02
strategies based on the Republic of Korea’s (ROK) experience to solve the problem of the The Infrastructure Support Strategy of the Angren FEZ Angren FEZ.
The scope of this project is limited to support strategies of utilities, such as electric power and water, sewage, wastewater and waste disposal facilities, and manpower and support facilities.
In ROK’s infrastructure policy, development costs are borne by the project developer, and these costs are included in the sale price in principle. Most of the expenses for the development of industrial complexes are construction costs of public facilities, such as roads, water facilities, and sewerage facilities. However, because it is difficult for the developer to bear all of these expenses, there are systems to subsidy them by the central or local governments. The applicable objects are public facilities, such as roads, water facilities, sewage facilities in the industrial complex.
Meanwhile, KEPCO supplies electricity, K water corporation or municipal waterworks provides water, and KOGAS supplies gas supplies. The contents of the development plan of the industrial complex are reflected in the electricity, water, and energy supply and demand plans of the Ministry of Land, Infrastructure and Energy, so it can be supplied timely. If we divide the industrial manpower policy of the Republic of Korea by period, the period, the by of Korea of the Republic manpower policy the industrial If we divide surveys to establish demand for the Angren FEZ is to operate The first implication Angren FEZ, the and the Uzbekistan of tasks and analysis situation present the on Based line in proper capacity and to the transmission The substation should be easily connected include should it but water, industrial on based be should water for demand The pollution water considering by be established should plans treatment Wastewater 1960s marked the early stages of ROK’s economic development, with a focus on establishing on establishing a focus with development, economic stages of ROK’s early the 1960s marked full-scale industrialization, of period a was 1970s The technology. and of science foundations As for the established to support this. vocational high schools and university with many and strengthening graduate focused on revitalizing university research 1980s, this period education. central supply and demand plans. The construction plans and utilities infrastructure from a long-term view point. establish a utilities supply roadmap government should be should complex industrial the in supply utilities for network facility the addition, In costs borne by water, and gas, with those electricity, supplying a company constructed by should The supply of industrial manpower the individual tenant who is the beneficiary. first establish a long-term strategy and roadmap based on demand surveys and forecasts. through the utilization of the existing vocational Based on this, the supply should be made institutions. In order to do of vocational training education system and the establishment system to manpower database and its operating this, it is necessary to establish an industry match demand and supply. for the Angren FEZ, we have conducted discussions and the implications the case of ROK, suggested we Then, with local coordinators. and exchanged opinions and on-site surveys manpower, and support for production elements, such as industrial support strategies and treatments facility water, gas, sewerage, such as electricity, for infrastructure strategies of waste and waste water. improve the older installed close to the center of the demand area. In addition, it is urgent to system. lines and improve the nation-wide electricity trading checking transmission lines by the of size The hinterland. in the residents and employees for water public and domestic the scale of future facility should be determined from a long-term perspective considering expansion. of and maintenance prevention, ease of maintenance of exclusion facilities, operation Wastewater should wastewater treatment plants, treatment effects, and economicefficiency. 082 Support for Operation of the Angren FEZ in Uzbekistan be connected to sewage pipes after being treated first at each factory.
The following are suggestions for policies supporting the infrastructure and industrial manpower of Angren FEZ.
First of all, it is necessary to establish a national plan of comprehensive development that can be used as the basis for preparing a roadmap for SOC (Social Overhead Capital) for FEZ. In other words, it is not desirable to cope with SOC supplements when there is difficulty in factory operations. SOC is not only time-consuming from designing to construction, but it also bears a heavy financial burden. Therefore, the FEZ should be designated in accordance with the national plan of comprehensive development. If it is necessary to designate it en route, it is desirable to reflect it in addition to the national comprehensive development plan or to harmonize the two plans.
Like the SOC, a mid- to long-term roadmap is needed for utilities essential for the production activities, such as power, industrial water, gas, and telecommunications. In other words, each ministry of central government should establish a long-term power supply plan, 083 industrial water supply plan, energy supply plan, and communication network supply plan Chapter for five years or more. Based on this, the timing, location, and size of the FEZ designation should be determined. However, if FEZ has designated without reflecting the roadmap, the 02 The Infrastructure Support Strategy of the Angren FEZ utility roadmaps must be revised and supplemented, so that utilities can be supplied on time. In order to establish a utility roadmap, we first need to analyze the demand, demand patterns, supply quantity, and supply patterns through surveys of electricity, water, energy, and communication. To this end, relevant statistics should be prepared by the government. Based on such objective data, mid-to-long-term supply and demand for utilities should be forecast and a supply plan should be established accordingly.
On the other hand, there will be an increase in the amount of sewage, wastewater, and other wastes, generated by manufacturing if factory is full scale operaed in the Angren FEZ. At present, although there are not many factories that discharge large quantities of sewage, wastewater, and waste in Angren FEZ, there are few facilities to deal with them. So, the recognition of the need for disposal of sewage, wastewater, and waste in businesses and in the community is very low. Even from this stage, the government must set up standards for the treatment of sewage, sewage, and waste from the operation of factories, secure the related facilities, and operate them thoroughly.
With the development of FEZ, a huge budget is needed to construct SOC, utility, and pollution prevention facilities, requiring the central government to take charge of it. Introduction Under the “2017-2021 Uzbekistan Development Strategy”, the Uzbekistan government government Uzbekistan the Strategy”, Development the “2017-2021 Uzbekistan Under capital the to close is It FEZ. Navoiy after FEZ designated second the is FEZ Angren FEZ, based Therefore, this study aims to solve those problems and tasks of the Angren 1.1. Background and Purpose and 1.1. Background On the other hand, in order to supply industrial manpower smoothly, it is necessary to to it is necessary smoothly, in order to supply industrial manpower On the other hand, manpower, it is necessary demand of industrial supply and in order to match the Finally, designated FEZ as the development axis of Uzbekistan's national economy for export export for economy national Uzbekistan's of axis development the as FEZ designated investment and additionally designated 18 FEZ in foreign direct expansion and attracting the FEZ's support for tenant companies, policy, 2017. Despite such a quantitative growth human resources are not performed construction, and supply of industrial infrastructure and properly, qualitative improvement is an urgent issue. As such, President Mirjiyoyev during the first for technical assistance for the development of Angren FEZ ROK asked 2018. and Uzbekistan Vice-Premiers in February meeting between the ROK are there USSR, former the since and, railway, the and expressway, the Tashkent, 92 companies as of March 2019 comprising the industrial base. However, industrial it water, gas, and sewage, are insufficient, even though such as electricity, infrastructure, production of supply poor Also, the activity. production tenant companies’ for essential is elements, such as industrial manpower, causes difficulties in the management activitiesof tenant companies. 1. However, However, the government does not have enough finances, so that utilization of financing foreign EDCF funds, and introduction of financing, the development from international necessary. capital may investment FEZ's development considering plan demand and supply long-term and mid- a establish and industrial outlooks. Based survey for companies, and economic plan, labor demand education system and to establish is necessary to utilize the existing on these factors, it manpower. if necessary to smoothly supply industrial institutes vocational training manpower and to provide a system supply and demand of industrial to establish a DB of for its effective utilization. In this case, the Ministry of Labor should be responsible at the the regional level. national level and the Angren FEZ at 084 Support for Operation of the Angren FEZ in Uzbekistan on the experience of development and operation of industrial complex in ROK over the past 60 years. We suggest not only an infrastructure construction strategy, but also support strategies for production elements in Angren FEZ.
1.2. Scope and Configuration
The scope of this study focuses on suggestions for the supporting strategies of infrastructure1 and production elements to activate the Angren FEZ. In Chapter 2, we will analyze the state of infrastructure and production elements of the Angren FEZ, which is the spatial scope of this study, and present problems and future challenges. In Chapter 3, we will look at infrastructure policy and industrial policy support policies in industrial complexes, such as FEZ in ROK, and suggest policy implications for Uzbekistan, especially the Angren FEZ. Chapter 4 presents the strategy of building infrastructure for the Angren FEZ, and Chapter 5 proposes strategies for supporting the production elements, such as manpower. Finally, Chapter 6 will consist of policy suggestions for activating the Angren FEZ, in conclusion.
085
1.3. Methodology Chapter
In this research, we have conducted field surveys, literature surveys, and case studies. 02 The Infrastructure Support Strategy of the Angren FEZ First, we tried to conduct interviews on related parties such as issues of interest and project priorities in relation to the Angren FEZ through two field visits. During this process, a window of cooperation had been established with the Uzbekistan collaborators (consultants: in this case, the head of infrastructure of the Angren FEZ Administration Agency), and we discussed and shared research content and strategy ideas.
Finally, in order to grasp the experiences and examples of policy in ROK, we executed case studies on development and support policies of industrial complexes and FEZ in and outside the country. For this purpose, we visited industrial complexes and FEZ related organizations, both domestic and overseas, and collected relevant data.
1 The infrastructure is divided into industrial infrastructure and living infrastructure. Here, we shall limit the industrial infrastructure to utilities except SOC. 9,158 1,508 26,741 66,371 Total 183,563 6,000 28,000 75,000 (Unit: persons) (Unit: persons) Population 944 5,016 13,519 33,975 92,162 Women Total Others 564 Services Industry 4,142 Men 13,222 32,396 91,401 Health / Social 3,000 1,500 Total 13,000 23-30 30-60 60-80 80-100 Population Distribution 9,070 Total 21,930 16,771 11,342 13,916 . Retail ㎢ Industry Transport Transport Education Wholesale Warehousing , a bordering length of 43.2km, a population of 183,563, and a , a bordering length of 43.2km, a population 8,168 5,276 4,468 6,863 10,677 Women ㎢ 500 1,000 22,000 8,603 6,066 4,602 7,053 Population Men 11,253 1-7 7-12 12-16 16-19 19-23 Angren FEZ. Angren Angren FEZ. Angren Industry The Status and Challenges of the Angren FEZ of the Angren and Challenges The Status Agriculture Construction Angren FEZ consists of Angren City, Akhangaran City, and the Angren area. Angren Angren area. Angren the and City, Akhangaran City, Angren of consists FEZ Angren of the total population to gender distribution, women comprise 92,162 According 29.3% (22,000 persons) work in to the industry-specific population, According 2.1. Status Analysis of the Regions Analysis of 2.1. Status Distribution Manufacturing population density of 12,156 people/ City has a total area of 15.1 than men, but there are more men among of 183,563, with a slightly larger number comparison because the same It is difficult to make the population under the age of 23. under age 30 the younger generation age group, but distribution interval is not constant by comprises 58.0% of the total population. it Therefore, retail. and services, social and health education, by followed manufacturing, other regions. can be seen that the manufacturing industry is well developed compared to Source: Source: Source: Source: 2. City Gender/Age in Angren 2-1> Population by
Population by Industry in Angren City Industry in Angren Population by 2-2>
Schools Status in Angren City (Unit : persons)
Distribution Number Distribution Number
Schools 39 Students 32,143
Teachers 2,080 High School Students 14,157
Source: Angren FEZ.
Status of College & Vocational Education Institutes in Angren City
Distribution Number Distribution Number Distribution Number
Colleges 9 Students 3,743 Professors 983
Source: Angren FEZ. 087 Chapter Another area where Angren FEZ is located, Akhangaran City, has an area of 17.84㎢, a bordering length of 18.959km, a population of 37,349, and a population density of 2,094 02 people per square kilometer. The scale is smaller than that of Angren City. The Infrastructure Support Strategy of the Angren FEZ
According to gender distribution, there are slightly more women than men, with 19,093 women out of a total population of 37,349, but there are more males in the age group of 12- 19 years. By age group, it is difficult to compare because there is no constant class division, but people under 30 comprise 51.5% of the total population, which is somewhat smaller when compared to Angren.
Population by Gender/Age in Akhangaran City (Unit : persons)
Distribution Men Women Total Distribution Men Women Total
0-1 250 292 542 23-30 2,097 2,435 4,532
1-7 1,754 1,788 3,542 30-60 6,699 6,907 13,606
7-12 1,811 1,841 3,652 60-80 1,927 2,135 4,062
12-16 1,282 1,232 2,514 80-100 204 258 462
16-19 1,058 1,029 2,087 Total 18,256 19,093 37,349
19-23 1,174 1,176 2,350
Source: Angren FEZ. 55 1,116 1,392 Numbers 14,222 (Unit : persons) (Unit : persons) Population 736 7,138 Number Others Total Others Distribution Services Industry Health / Social 5 5 Student 513 Distribution Numbers 1,614 2,597 High school student Population Hotel Retail Distribution service facility Industry Transport Transport Education Wholesale health and social 9 Warehousing 409 Numbers 26 24 705 Numbers 1,271 5,014 Population School Teacher Distribution restaurant Angren FEZ. Angren Angren FEZ. Angren Distribution Industry On the other hand, there are nine schools, 409 teachers, and 7,138 students, of whom 736 On the other hand, there are nine schools, As for the service facilities in the area, there are 26 commercial facilities, 24 catering catering 24 facilities, commercial 26 are there area, the in facilities service the for As According to the population by industry, manufacturing is the biggest with 35.3% (5,014 is the biggest with manufacturing industry, by to the population According Agriculture Construction commercial facility catering facility and Manufacturing are high school students. In addition, there are two vocational higher education institutions are high school students. In addition, can see that the education and 888 students. We at the college level, with 39 professors than that of Angren. is significantly poorer institute level of Akhangaran facilities and restaurants, five hotels, and five health and social service facilities. five hotels, and five facilities and restaurants, persons), followed by the provinces, retail, education, and health and social services. health and social education, and the provinces, retail, followed by persons), Source: Source:
Current Status of Schools in Akhangaran City Status of Schools in Akhangaran Current 2-8>
Services Facilities in Akhangaran City 2-7> Services Facilities in Akhangaran
Population by Industry in Akhangaran City Industry in Akhangaran by 2-6> Population
Current Status of College & Vocational Institutes in Akhangaran City (Unit: person)
Distribution Numbers Distribution Numbers Distribution Number
Institute 2 Student 888 Professor 39
Source: Angren FEZ.
Angren area has an area of 3,190 ㎢, a population of 92,987, and a population density of 29.1 people/㎢.
According to gender distribution, there are 47,272 males out of a total 92,987, indicating a slightly larger male population, thus differing from urban areas.
But it has a different distribution of aged 16-19 and 80 years or older although it is difficult to make the same comparison because distribution interval is not constant by age group. However, 56.0% of the population is younger than 30 and 6.6% is over 60 years old. In this regard, the region is also estimated to have a high potential for manpower supply if Angren FEZ is fully operated. 089 Chapter
Population by Gender/Age in Akhangaran District
(Unit: person) 02 The Infrastructure Support Strategy of the Angren FEZ Distribution Men Women Total Distribution Men Women Total
0-1 993 896 1,889 23-30 6,490 6,342 12,832
1-7 6,137 5,666 11,803 30-60 17,719 16,362 34,081
7-12 4,663 4,524 9,187 60-80 3,034 485 6,160
12-16 2,951 2,940 5,891 80-100 323 485 808
16-19 1,800 2,367 4,167 Total 47,272 45,715 92,987
19-23 3,162 3,007 6,169
Source: Angren FEZ.
As for the population by industry, agriculture was 52.7% (18,783 persons) due to the nature of rural areas, followed by construction, provincial, retail, and health and social service industries. 84 600 Number 2,685 (Unit: person) 35,616 population Total area: 1640 ha Total Reserve area: 237 ha “ANGREN-2” block “ANGREN-2” Others Total Others Distribution Services Industry Health/Social - 1 0 Number 3,217 1,000 Total area: 1212 ha Total Reserve area: 221 ha “ANGREN-1” block “ANGREN-1” population ANGREN FEZ: TERRITORIES
Hotel Distribution service facility Industry Education Health and social Warehouse Transportation/ Wholesales/Retail Area: 90 ha “AHCHA” block “AHCHA” 56 31 Number 4,114 5,217 18,783 population Total area: 1090 ha Total Reserve area: 284 ha ANGREN: TERRITORIES restaurant restaurant “AHANGARAN” block “AHANGARAN” Hojimurotov M. M., Angren free economic zone - territory of broad opportunities. -, 2018.12, Angren FEZ. opportunities. -, 2018.12, Angren economic zone - territory of broad free M. M., Angren Hojimurotov Angren FEZ. Angren Angren FEZ. Angren Distribution Industry The Angren FEZ was established the second in Uzbekistan in April 2012 under 2012 under The Angren FEZ was established the second in Uzbekistan in April 2.2. Status Analysis of the Angren FEZ 2.2. Status Analysis of the Angren As for social service facilities, there are 56 buildings for business, 31 food restaurants, business, 31 food restaurants, facilities, there are 56 buildings for As for social service Agriculture Construction catering facility and Manufacturing Commercial Building Presidential Decree # 4436. It is located 80km from the capital city Tashkent and spans spans and # 4436. It is located 80km from the capital city Tashkent Presidential Decree located along the Silk Road and consists of four blocks. Angren and Akhangaran, and one hotel, but there are no health and welfare facilities. and one hotel, but there are no health Source: Source: Source: Source: FEZ of Angren The Configuration [Figure2-1]
Services Facilities in Akhangaran District 2-12> Services Facilities in Akhangaran
Population by Industry in Akhangaran District Akhangaran Industry in by 2-11> Population
In sold area, the land area is 422.08㏊(49.7% of total 850ha), the investment amount is 900.13 million dollars (FDI is 90.79 million dollars), and the export amount is 216 million dollars.
Status of the Angren FEZ (2018)
Akhangaran Angren Angren Indicators Total block Block 1 Block2
Firms 37 22 24 83
Area (㏊) 237.88 90.24 93.96 422.08 091
Export (M.USD) 170.5 30.3 15.2 216 Chapter
Investment (M.USD) 453.28 331.93 114.92 900.13 02 The Infrastructure Support Strategy of the Angren FEZ FDI (M.USD) 375.26 71.79 43.74 490.79
Source: Directorate of Angren FEZ, List of Residents of Angren FEZ, 2019.3, Angren FEZ.
The largest weight of investment is $ 1-5 million USD, accounting for 47 cases (56.7%), and the largest amounts of FDI are under $ 5 million USD (77.8%). ) ㏊ 64 ( 126.2 422.08 9 2 5 1 2 Land Area 26 45 490.79 Numbers 6 1 83 (N) Companies FDI in total investment FDI in total ~1.0 100.0~ 1.0~5.0 ) 5.0~10.0 (M.USD) 10.0~30.0 30.0~100.0 계 ㏊ ( Total numbers Total 10.0~30.0 Investment volume 30.0~100.0 Distribution Total investment Amount investment Total ) ㏊ ( 10.64 119.5 101.74 7 9 2 3 Land Area 15 47 83 900.13 Numbers 14 48 14 (N) Company Total investment Total ~1.0 100.0~ 1.0~5.0 ) 5.0~10.0 (M.USD) 10.0~30.0 30.0~100.0 ㏊ ( ~1.0 Total numbers Total Angren FEZ. Angren Angren FEZ. Angren Of the total investments, domestic enterprises comprised 38 cases and USD 409.34 million. Of the total investments, domestic enterprises comprised 1.0~5.0 5.0~10.0 Investment volume Investment volume By industry, the non-metal industry is the largest with 22 companies, followed by petro- the non-metal industry is the largest with 22 companies, followed by industry, By By country, China has 21 companies (25.3%), followed by Britain (six companies), ROK, (six companies), ROK, Britain China has 21 companies (25.3%), followed by country, By Distribution Total investment Amount investment Total Note: Source: Source: chemicals (18 companies), By region, Akhangaran block is mainly steel, textiles, non-metallic, block is mainly steel, region, Akhangaran chemicals (18 companies), By Angren 1 block is mainly petrochemical, non-metallic, industry, non-metallic industry, Angren 2 block is mainly non-metallic and petrochemical industry. Singapore (four companies each), Turkey (two companies), and the remaining 38 companies and the remaining (two companies), Singapore (four companies each), Turkey The site size of 1-5ha is the investment. stake) are Uzbekistan independent (single invested The ha. 10 than less at more or 90% with (57.8%), companies 48 with component largest site area is 5.08 ha. average Source: Source:
Companies Status by Site Area Size Site Area 2-15> Companies Status by
Investment Status (2019) 2-14> Investment
Industry Distribution Status by Block
Akhangaran Angren Angren Industry Total Block Block 1 Block2
Food & Beverage 5 1 1 7
Textile and Leather 7 2 1 10
Wood & Printing 0 0 0 0
Petroleum & Chemical 4 7 7 18
Nonmetallic Mineral 6 5 11 22
Primary Metal 11 3 3 17
Machinery & Equipment 2 0 0 2
Electrical and electronic 2 2 0 4
Transportation Equipment 0 0 1 1
Other Manufacturing 0 2 0 2
Total 37 22 24 83
Source: Angren FEZ. 093 Chapter
The preferred industries are electronic technology, engineering, chemistry, 02 petrochemicals, food, building materials, and leather. However, the products currently The Infrastructure Support Strategy of the Angren FEZ produced are building materials (ceramics, sanitary ware, acrylic glass, organic glass, phomex), welding rods, electric drills, adhesive tapes, synthetic base oils, socks, magnets, medical swabs, insulation materials, and leather. We can see that the high-tech industries are rather poor in the FEZ.
On the other hand, looking at the site area by industry, non-metals are the largest at 139.2 ha, followed by steels (92.7 ha) and petro-chemicals (82.1 ha). The average site area of each company is 5.08 ha. The average area per company viewed by industry was the largest at 6.52 ha for food and drink products, followed by electricity and electronics (6.37 ha) and non- metallics (6.32 ha). ) ㏊ ( 5.08 1.55 4.00 6.37 1.60 5.45 area Average Average ) ㏊ 3.1 4.0 3.2 ( 25.5 92.7 422.08 pipeline Land area 2 TPS, 2500 MW/h Ahangaran-Pungan gas Ahangaran-Pungan 2 1 4 2 83 17 (N) Company (cu/m) 0,1 USD 850 sum Other Industry electronic Equipment Equipment Machinery & Electrical and Primary Metal Manufacturing Transportation Transportation (kW/h) and 400 sum 0,05 USD ) Logistics - ㏊ November, 2018 FACILITIES ( 6.32 4.56 2.66 6.52 area Infrastructure Average Average (cu/m) 0,12 USD 1000 sum ) - ㏊ ( 82.1 26.6 45.7 Total 139.2 Land area - 7 22 18 10 (N) Company A-373 Highway Forghana region Forghana Forghana region Forghana Tashkent-Angren- 4 railway stations, 4 railway Directorate of Angren FEZ, Angren Free Economic Zone, 2018.11, Angren FEZ. Angren Economic Zone, 2018.11, Free FEZ, Angren of Angren Directorate Angren FEZ. Angren railway Tashkent-Angren- railway Food & Food Leather Mineral Mineral Beverage Chemical 2.3. Infrastructure Status of the Angren FEZ Status of the Angren 2.3. Infrastructure and utilities such and roads are well developed, of railways Angren FEZ's infrastructure Industry Textile and Textile Nonmetallic Petroleum & Wood & Printing Wood as power and gas are sufficient However, in water, wastewater, terms sewerage, of quantity. in both quantity and quality. and waste disposal are not sufficient Source: Source: [Figure 2-2] Status of the Angren FEZ's Infrastructure FEZ's 2-2] Status of the Angren [Figure Source: Source:
Land Area by Industry (2019) by Area 2-17> Land
There are two thermal power stations (TPS: 2,500MWh) that have been sufficient in terms of quantity until now, but there have been frequent power outages due to very weak transmission facilities and substations. Therefore, expansion of transmission and distribution facilities is the most urgent task in the future. And electricity charge is $ 0.05 per KWh. In addition, industrial water is supplied using nearby reservoirs as the primary water source, but there are few companies that use industrial water in Angren FEZ. So water supply is not a big problem at present because they use a ground water by themselves. And water rate is $ 0.1 per ㎥. However, in the future, if water consumption patterns change and water consumption increases, it will be necessary to secure water and adequate water quality depending on the industries. Gas is basically rich in reserves, with sufficient supplies 095 from Akhangaran to Pungan. However, there have been a poor pipeline network to resident Chapter companies in the Angren FEZ. And gas rate is $ 0.12 per cubic meter. 02 The Infrastructure Support Strategy of the Angren FEZ Despite being an industrial area in the former Soviet Union era, sewage treatment facilities for rain water and dirty water are not only poor, but also they don’t have a concept or consciousness for those treatment as well as waste treatment facilities. Threats Weaknesses Landlocked country, high logistics cost due to complex country, Landlocked accessibility to world markets less than 34 (population Narrow domestic market million) of cluster Poor manufacturing basement/lack experience development/low Insufficient human resources technology level experience & FDI Insufficient FEZ operation lack of information transparency, Low market infrastructure due Concerns about industrial structure dependence to lack of technology and capital Slow industrial/economic restructuring Heavy tax and non-tariff barrier • • • • • • • • • Strengths Opportunitiesy Author. Adjacent to large markets such as Russia, China and such as Russia, China and to large markets Adjacent Turkey land of arable tracts Vast Abundant Gas/Coal resources and Abundant natural product agricultural Abundant, young workforce Low wage level Geographically located in the center of the CIS located in the center of the CIS Geographically countries the Possibility to cultivate high-quality manpower of young people Increasing value-added through processing natural resources and agricultural road Construction of continental railway, infrastructure Based on the previous situation, SWOT analysis results of Angren FEZ are shown in analysis results of Angren FEZ are shown in Based on the previous situation, SWOT fact to the due is narrow market domestic the that is other hand, the weakness the On CIS neighboring to proximity and Asia Central of middle the in location its to Due 2.4. Problems and Challenges and Challenges 2.4. Problems • • • • • • • • • • •
. The strength of Angren FEZ is that it is adjacent to large markets, such as but it also has it is not only easy to secure the market, Therefore, Russia, China and Turkey. potential for economic development, has abundant vast land resources. They have great it. In addition, the abundance of various gas, and can be smoothly supplied coal and natural In materials. raw supply to easy it make products agricultural and resources natural age in terms of population under 30 years of workers addition to an abundance of young to low wage levels. due composition, the labor supply is favorable cost of import and that the population is less than 34 million. Also, the transportation the of inland countries. In addition, export goods is excessive due to the characteristics manufacturing base is very weak, and the clustering experience is not sufficient. Because it is difficult low, human resources are not properly developed and technology levels are In addition, we to supply high quality industrial manpower required for industrialization. there is not through FEZ, but want to promote the development of the industrial economy FDI capacities. experience, but also weaknesses in attracting only a lack of operational high- fostering by growth for potential area has great this Asia, countries and Southwest Source: Source:
SWOT Analysis of the Angren FEZ of the Angren Analysis 2-18> SWOT
Threat factors include low market transparency, lack of information and distribution bases, lack of technology and capital, and industrial structures that are dependent on developed countries. In addition, the adjustment of industry and economic structure is slow, and taxation system and non-tariff barriers are likely to be a big obstacle to future economic development.
3. Korean Experience and Its Implications
3.1. Infrastructure Support Policy for Industrial Complex 097 As shown in [Figure 3-3], the support system2 related to development of industrial Chapter complex in ROK is divided into a support system for developers and a support system for 02
resident companies. The support system for developers is divided into financial support The Infrastructure Support Strategy of the Angren FEZ for cost sharing of project owners, such as development cost burden and fund support, and land development support that facilitates land acquisition and development. In addition, the public facility support for resident companies is divided into tax offices, financial facilities, and welfare facilities within the industrial complex.
[Figure 2-3] Framework of Industrial Complex Development Support System
Industrial Complex Development Support System
Developer Support System Resident company support system
Cost sharing and Land development Taxation / financial Welfare Facilities Financial support support support installment
2 There is little difference in development systems between industrial complex and FEZ. 50% 50% 50% 50% 50% 50% Rate 100% 100% 100% 100% 100% Object KICOX, The Industrial Location Handbook 2018, 2018.4. KICOX, Except metropolitan area and its nearby areas, as defined in the Metropolitan Reforming Plan Act (1982). Metropolitan as defined in the areas, and its nearby area metropolitan Except Construction costs of main roads and greenery facilities in industrial complexes Construction costs of main roads and greenery facilities supply facility construction cost Water land rental of purpose the for created is which complex, industrial the of cost purchase land The or facilities industrial complex Construction cost of park and common groove in construction The land purchase cost for apartment-type factory construction industrial complexes for infrastructure Site construction costs for the agricultural road, power and communication facilities, and land purchase cost such as entrance Construction cost of sewage and wastewater terminal treatment facility* assets* Investigation cost of cultural If deemed necessary especially for the development of underdeveloped areas If the developer leases the land in an underdeveloped area industrial complex or unsold industrial complex* construct and rent an urban high-tech industrial complex To 3.1.2. Priority Support for Infrastructure only give not governments local and industrial complex construction, the central For 3.1.1. Cost Sharing of Construction Cost Sharing of Construction 3.1.1. Cost roads and railways, facilities such as are not public complexes Since industrial can bear the industrial estate to which the government and local governments Targets • • • • • • • • • • • Note: Source: Source: development development costs are borne by the project developer, and the cost is included in the land sale price. However, if this principle is strictly applied, the development of industrial addition, In poor. are conditions location the where smoothly proceed cannot complexes public of costs construction the mostly are complexes industrial of costs development the facilities. sewerage and facilities, water roads, internal roads, entrance as such facilities, state or municipalities to bear some a cost-sharing system that allows the Therefore, there is subsidies are the government and local government to this system, of the costs. According in ROK. industrial park development projects provided for some development project costs are public facilities, such as roads, green areas, irrigation rental industry costs. The migration the estate and facilities, and sewer facilities within The costs complex purchase costs are also included. industrial estate and the agricultural local governments are uniformly 50%, but the government and that can be subsidized by the Industrial Location Policy Council if by they can be subsidized 100% after deliberation of development the and sewerage of construction the for particularly necessary, deemed underdeveloped areas.
Object and Cost Supporting Rate
A. Supported Infrastructure
1. Ports, roads and railways 2. Water supply facilities, electricity, communication facilities and gas facilities 3. Wastewater treatment plant and wastewater treatment facility 4. Common groove in industrial complex 5. Collective energy supply facility 6. Facilities which be designated by the Minister of Land, Infrastructure, and Transport as public facilities that are particularly necessary for the development of industrial complexes 099 Chapter B. Corresponding Industrial Complex
1. Industrial complexes not subject to completion under the industrial location law 02 The Infrastructure Support Strategy of the Angren FEZ 2. Industrial complexes with an area of more than 300,000 ㎡, and more than the size prescribed by the Minister of Land, Infrastructure, and Transport 3. A complex under development in an area recognized by the Minister of Land, Infrastructure, and Transport, as a need for industrial development for the development of underdeveloped regions and balanced national development 4. Industrial complexes that demonstrate the need for support under the industrial location policy at the industrial location policy council
The development of the industrial complex requires the establishment of infrastructure in the surrounding area for the purpose of activation, thus incurring enormous costs. The Ministry of Land, Infrastructure and Transport, in accordance with the above institutional arrangements, applies the above provisions in accordance with the provisions of the Presidential Decree when implementing business directly related to industrial complex development projects in the vicinity of industrial complexes. The following are directly related to industrial complex development.
C. Project Directly Related to Industrial Complex Development
1. Ports, roads, railways, water supply facilities, sewage systems, wastewater terminal treatment facilities, waste treatment facilities, electric facilities or communication facilities or communication facilities, electric treatment facilities, waste treatment facilities construction to pipeline) supply facility (limited business and heat supply facility Gas and oil business industrial complex picking and rock for developing an Development of soil land reclamation Dredging for industrial River maintenance urban and rural athletic facilities (planned public and cultural Green spaces, parks, environment and the living improving the industrial complexes public facilities) for in industrial complexes convenience of workers 2. 3. 4. 5. 6. 3.2. Industrial Manpower Support Policy 3.2. Industrial Manpower The characteristics of ROK’s industrial manpower policy are shown in
, support The following table divides the development process of the industrial manpower The government supports only the construction of outer facilities like the entrance roads, the entrance of outer facilities like The government supports only the construction Power, water is supplied Electric Korea supplied by the other hand, electric power is On which covers the 1960s to 1980s, when rapid economic development took place. Above economic development took place. Above rapid which covers the 1960s to 1980s, when viewpoint of human resource from the the educational aspect into policies are divided The 1960s supply and the industrial aspect from the viewpoint of human resource demand. economic development, focusing on the establishment of the early stages of ROK’s marked The 1970s were a full-scale industrialization period. foundations of science and technology. was greatly In order to support this, the number of vocational high schools and university revitalization of university research and the by increased. The 1980s can be characterized education. the strengthening of graduate education, policy into four periods from 1960-1990. It also classifies them into higher water, ports, and the lead-in railways of the national industrial complex. In the case of of In the case complex. industrial national of the the lead-in railways and ports, water, to those facilities of regional industrial complex. underdeveloped areas, it also supports waterworks, and gas is supplied by and municipal Resources Corporation the Water by has been based on the principle that to the industrial complex. ROK Gas corporation Korea the development plan of the industrial complex should be reflected in the power supply and and demand plan of the MOLIT and the supply, demand plan, water supply plan, energy supply these utilities to industrial complexes MOCIE. In addition, although utility companies individual factories are installed at the cost of the at their costs, the lead-in facilities to resident company. 100 Support for Operation of the Angren FEZ in Uzbekistan employee training, and corporate education. In addition to these formal education institutions, ROK’s representative vocational training institution included the Jeong Soo vocational training centers.
Industrial Human Resources Support Policy by Period
1960s (Establishing base 1970s (Significant 1980s (Activation of of science & technology enlargement of university to university research, Sector development) support of industrialization) reinforcement of graduate education)
• Enactment of University • Establishment of KAIS (71) • KAIST launched (80) Student Quota Regulations Establishment of Industry • Graduation Quota System (81 (65) • Education Promotion ~ 87) • Korea Institute of Science Act (71), revision (73) • Introduction of master and Technology (KIST) Introduction of preference officer system (81) Establishment (66)According for Korean military service • Opened university to the Personnel (73) establishment (82) • Supply and Demand Plan, • Establishment of • KIST & KAIS, Integration (80), Education Determination of Quota Specialization scheme for Re-separation (88) Adjustment Principle of each Technical high schools and • Establishment of Science Department (67, 68) Industrial technical schools High School (83-89) • Introduction of Educational (74-78) • Establishment of Science & Loan for Science & • Vocational school Graduation Technology University (85) Engineering Colleges (69) Qualification Test (75) • Scientific Gifted Selection 101 • Integration of short-term Committee Rule (85) Chapter Higher Education Institutions • Established POSTECH (86) into Junior Colleges (79) 02
• Enactment of the Industrial • Establishment of Industrial • National Technology The Infrastructure Support Strategy of the Angren FEZ Standardization Act (61) Promotion Agency (73) Qualification Testing Service, • Establishment of Professional • National Technical Korea technical college, etc. Engineer Law (63) Qualifications Act (73) transfer to the Ministry of • Enactment of the Vocational • Enacted the Basic Law on Labor (81) Training Act (67) Vocational Training (76) • Machinery Industry • Establishment of Korean Promotion Act (67) Technology Testing Industry • Establishment of Electronics Center(76) Industry Promotion Law (69) • Revision of technical service • Training of Upstream promotion law, abolishment Training Teachers through of technical law (76) the Central Vocational • Established Changwon Training Center (68) Technical College (77) • Attraction project overseas Korean Scientists & Engineers (68)
Source: H. H. Cho et.al., Review of Science & Technology Manpower in Korea, 2002.12, STEPI.
3.2.1. 1960s: Supply of Light Industry Export Manpower
The industrial education policy in the 1960s is represented by the establishment of a five-year vocational high school. However, because of the length of the five-year course, graduates did not graduate until the late 1960s, so were not effective to both employee and employer immediately. In addition, this school was not clear how different from existing 3.2.3. 1980s: Training of Multifunctional Technician 3.2.3. 1980s: Training that focused The industrial education policy of 1980 shifted from the imbalanced policy The accumulation of capital in the 1960s was basically centered on the light industry centered on the light industry of capital in the 1960s was basically The accumulation of the industry dependency from the structural In the end, in order to break away improvement of production technology in the These contributed greatly to the 3.2.2. 1970s: Supply of Heavy Chemical Industry Manpower 3.2.2. 1970s: Supply on few technical high schools to a leveling policy. Accordingly, we simplified the four types of Accordingly, on few technical high schools to a leveling policy. technical technical high schools, such as mechanical technical high schools, demonstration into schools, high technical general and schools, high technical specialization schools, high technical high school. two types: specialization technical high school and general such as textiles, wigs, and shoes. This industrialization in the 1960s had external dependence the 1960s had external dependence and shoes. This industrialization in such as textiles, wigs, and exporting the value of and production means from abroad on importing capital the products produced by the abundant domestic labor force. However, this external accumulation of capital faced difficulties in the late 1960s andearly 1970s due to a surge in import prices, the difficulty of realizing product value due to the rise of new protectionism, In particular, the regulation of US textile repayment. and the arrival of a period of principal on light emerged as a critical obstacle for export industrialization centered imports to ROK to heavy chemical on the direction of the transition industry and has had a great impact industrialization. heavy the on centered industrialization base, industrial independent an establish to and educating government sought to solve the problem by chemical industry was required. The skilled workers to engage in this sector after the Declaration of Industrialization of Heavy instead of investing evenly in technical high schools Chemicals in 1973. In order to do this, and established, newly or designated specially were schools high technical some nationwide, 19 technical high schools were designated as to it. As a result, the budget was concentrated 1973 to 1979 and received intensive budget support. mechanical technical high schools from the weapons the shipbuilding industry, the machine tool industry, automobile industry, and the electrical and electronic parts industry. production industry, two-year college and four-year college. Because the workforce demand of the enterprise has of the enterprise the workforce demand college. Because college and four-year two-year existence has so value of its than on technicians, rather workers focused on skilled also been lost. 102 Support for Operation of the Angren FEZ in Uzbekistan In the 1980s, there was a need for multifunctional education in preparation for technology-intensive industries rather than simple functional workers who would engage in labor-intensive industries. In the 1980s, in order to shift to a technology-intensive industrial structure, it was necessary to make policy efforts or conduct research to transform secondary vocational education from simple public education to multifunctional public education. In other words, the workforce policies of the 1970s, including specialization policies, which emphasized the quantity rather than quality of education, was effective to an extent, but the side effects were not negligible. However, industrial education in the 1980s was not received support highly from industry because it did not improve the quality of education in preparation for the increasingly technology-intensive strategies of companies.
3.2.4. 1990s: Quality Deterioration due to Quantitative Expansion
In the 1990s, the expansion policy of technical high schools was strengthened due to the shortage of production and technical manpower in the manufacturing sector, which had surfaced since 1989. This improvement was presented in the form of an expansion policy for technical high schools with an emphasis on publicity, resulting in the increased supply 103 of unskilled skilled workers. In addition, a 2 + 1 system with one year of on-the-job training Chapter also resulted in a similar increase. At the time, it was difficult to say that the training of 02 unskilled laborers through the education policy of technical high school was an effective The Infrastructure Support Strategy of the Angren FEZ policy to meet the demands of the labor market, because there were overwhelming numbers of unskilled workers, rather than skilled workers. Therefore, in the 1990s, education policy should have emphasized the quality of education in preparation for the shortage of skillful workers rather than quantitative expansion.
3.2.5. Cultivating Human Resources at the Tertiary Level
Since the 1980s, following upgrades in industrial structure, the necessity of enhancing the expertise of functional manpower also increased, along with the desire for higher education of industrial manpower. To cope with this trend, a system for higher education, particularly for the functional workforce, was implemented.
Through two years of education and training, the functional college is an institute that cultivates multifunctional technicians who are intermediate technical workers in the industrial field. The establishment and operation of functional universities are the national and local governments and school corporations, with the government in charge of funding. The management of bachelor's courses is principle to the autonomy of universities. The curriculum established in the functional universities consisted mainly of occupations in the 3.2.7. Support for Corporate Education 3.2.7. Support for Corporate it began ROK, The in-house university system originated from the United States. In 3.2.6. Training Functional/Technical Manpower through Job Training Job Training through Manpower Functional/Technical 3.2.6. Training The Vocational Training Act was enacted in 1967. Vocational training is divided into Vocational training institutions can be divided into public vocational training centers, as in-house technical universities in 1991 to directly train internally necessary technical internally necessary technical as in-house technical universities in 1991 to directly train was institutionalized as an amendment of the manpower. The College of Technology The in-house in 1996, and, in 1999, Jeong Seok University was established. Education Act and Samsung Act, university was institutionalized in 1999 under the Lifelong Education public vocational training and private vocational training. Among them, public vocational vocational public them, Among training. vocational private and training vocational public resources, of functional human important role in the training an has played training training vocational Public 1970s. - mid the since industry chemical heavy in the especially It was But graduates. school middle of youth for 1970s and 1960s the in conducted was train to functioned has It 1980s. the from graduates school high of youth to conducted insufficient functional manpower and to supplement regular education. Private vocational recognized vocational and in-house vocational training has been provided by training industrialization along with public which has fostered the personnel needed for training, vocational training. centers, depending vocational training centers, and accredited in-house vocational training the conducted by refers to training Public vocational training on the implementation body. the Presidential Decree. organization established by national or local government or a public It is the representative public vocational training that is run by the Korea Industrial Human for the Disabled, Promotion Agency Employment the Resources Development Corporation, involves training vocational In-house Industry. and Commerce of Chamber Korea the and individual both with workers, his/her for training vocational conducting employer the training and joint training. Recognized vocational training is vocational training carried out training. under the approval of the Ministry of Labor besides public and in-house vocational other corporations, social welfare The main agents are divided into special corporations, and individuals. corporations, key industry in 1994 according to the plan to facilitate the supply and demand of the human demand of the human the supply and the plan to facilitate 1994 according to industry in key system. vocational training plan of the and the reorganization of the government resources that the assumption and organized under has been selected the curriculum Since 1995, parallel. industries are also installed in occupations in high-tech 104 Support for Operation of the Angren FEZ in Uzbekistan Electronics College was established in 2000. The government institutionalized technical universities and in-house universities to encourage workers' education and training to be lifelong education, with respective degrees recognized as academic degrees. At the same time, it was absorbed in-house technical colleges as in-house universities and technical college systems.
In-house universities emphasize on-the-job training and lifelong learning opportunities at the higher education level. The technical college is meant to be an industrial field and to nurture professional staff with theoretical and practical skills, and an in-house technical college aims to train its own technical personnel. However, these systems are practically the same in terms of education and training for workers. In the case of in-house technical colleges, the guiding and supervising department is the Ministry of Science and Technology, so the emphasis is on the training of technical personnel.
3.2.8. Establishment System of Customized Manpower for Regional and Industry
Since the training of industrial manpower has been operated by the supplier, it has not 105 properly reflected the demand of the industrial manpower, which is the worker. Moreover, Chapter since the training and training institutions have been concentrated in some areas, the supply of education and training among the regions has been unbalanced. Despite the large budget, 02 The Infrastructure Support Strategy of the Angren FEZ SMEs lacked manpower, and various problems such as mismatch between education and training and field were still not solved. So, the government has established a customized workforce training system based on local and industrial demand centered on the Ministry of Employment and Labor in 2014.
In order to establish an industry-led new manpower training system that reflects the needs of companies in each region, a human resource development committee was formed at the regional level, responsible for conducting joint surveys on education and training. Based on this, they conducted joint education and training, hired jointly, and provided HRD comprehensive services. Through this, they were linking the training of the unemployed with unemployed persons and the improvement training to reflect the demands that occur from time to time depending on the characteristics of the industries and companies in each region. The regional human resource committee was given the practical authority to demand surveys and business plan establishment at the regional level, but quality management had been carried out through monitoring and performance evaluations. In addition, the current unemployed person training was integrated step-by-step from the area where the manpower training system was established. It also played the role of HRD governance at the regional level, linking projects with strong character of education and We present the implications for Angren FEZ through ROK’s experience of industrial experience of industrial FEZ through ROK’s present the implications for Angren We as method therapy symptom a as treated be not should supply infrastructure the First, When the FEZ development plan is established, it must be reflected in the government a the industrial complex should be constructed by The utilities supply network within economic The supply policy of industrial manpower should be also based on long-term existing the utilize to necessary is it smoothly, workforces industrial supply to order In 3.3. Implication for Angren FEZ for Angren 3.3. Implication complex infrastructures and industrial manpower policy for the past 60 years as follows. industrial manpower policy for the past and complex infrastructures a roadmap from government should establish the central Therefore, it has been until now. In order to secure utilities indispensable and secure it gradually. a long-term perspective a timely manner, it is necessary to such as power, water, and gas, in for industrialization and demand plans on these sectors. In addition, the establish mid- to long-term supply Angren FEZ Management Office, which is in contact with companies directly in relationto utilities, should undergo a demand survey. and the supply of industrial infrastructure and airports, utility plans roads highways, plans such as railways, plan on infrastructure wastewater treatment and waste disposal and gas, and sewerage, water such as electricity, but FEZ, to companies foreign and domestic from investment attract only not will sites. This activities of companies in the complex. also will avoid hurting the production supplied immediately be can it that so gas, and water, electricity, supplies that company the individual tenant but the costs should be borne by to the front door of the factory, international utilize to possible also is it end, this To beneficiaries. are that companies and foreign investment capital, if necessary. development financing, EDCF funds, this To than a symptom treatment solution as it is today. and industrial prospects, rather education, labor, and science-related ministries is end, close coordination between industry, essential. Since the policy objectives of these ministries might be different at times, policies in the prime minister's office should be coordinated as necessary. of vocational through the establishment manpower industrial system and supply education institutions. training training training such as regional job creation support projects and youth employment academy to training. industry customized regional and 106 Support for Operation of the Angren FEZ in Uzbekistan ROK has also undergone many instances of trial and error over the course of economic development for the last 60 years. However, in line with the demands of each era, relevant ministries have participated jointly to promote the supply of industrial manpower, and this has become a driving force for successful industrial development today.
On the other hand, it is necessary to establish an industrial manpower supply and demand DB to match the demand and supply of industrial manpower and to operate a system to utilize it to supply industrial manpower smoothly.
In addition, the basic unit of each factor should be calculated and applied in order to comprehensively calculate the demand of major utilities and industrial manpower.
4. Infrastructure Support Strategy for the Angren FEZ
4.1. Electricity 107
4.1.1. Supply Status of Electric Power Chapter 02 There are two thermal power plants in Angren FEZ, but in terms of the size of the The Infrastructure Support Strategy of the Angren FEZ Angren FEZ, further installation of the power generation facilities seems inevitable. "Angren Thermal Power Plant (location: Angren, Tashkent Street-4) has an annual power generation of 869.36MkWh, a capacity of 634MW, and plans to build an additional 150MW energy block in the future. Here, the voltage is heightened to 220/110/35 kV and sent to the substation.
[Figure 2-4] Angren Thermal Power Plant
Source: Angren FEZ. Angren FEZ. Angren The other thermal power plant is the Novo-Angren Thermal Power Plant (located in in Plant (located Thermal Power is the Novo-Angren thermal power plant The other network. Therefore, energy supply and demand integrated Uzbekistan has a nationwide the of Nurabad town, Angren), with an annual generation of 5,674.4 MWh and a power a power and MWh of 5,674.4 generation annual an Angren), with town, Nurabad of the MW. blocks totaling 2,100 of 300 MW seven capacity generation plants, electricity can be supplied to is shut down at the two power even if the power supply FEZ, there are four substations As for the substation status of Angren the Angren FEZ plant. and T-2 (16mVA) T-1 (16mVA), substations of 10 / 10kV, block. There are "PP" in the "Angren-1" along substations with of the 110 "ARK" / The substation 10kV "Korabog" is and 110 10mVA. / scale. The capacity and of T-2 10kV the (40mVA) with "ZIF" T-1 substation (16mVA) is 110/35 / T-3 (16 mVA). and T-2 (16 mVA), It consist of T-1 (16 mVA), 6kV. Source: Source: [Figure 2-5] Novo-Angren Thermal Power Plant Thermal Power 2-5] Novo-Angren [Figure 108 Support for Operation of the Angren FEZ in Uzbekistan [Figure 2-6] Angren 1 Block Substation
Source: Angren FEZ. 109 Chapter
There are also two substations in the "Angren-2" block. The capacity of the "Shark" 02 substation is 110/10 kV, with T-1 (25 mVA) and T-2 (10 mVA). The "Neftebaza" substation has a The Infrastructure Support Strategy of the Angren FEZ capacity of 110 / 10kV with T-1 (10 mVA) and T-2 (10 mVA).
[Figure 2-7] Angren 2 Block Substation
Source: Angren FEZ. In order to calculate electric power demands, the basic unit is used in the industrial industrial the in used is unit basic the demands, power electric calculate to order In electricity on the data statistical FEZ, Angren at power consumption estimate the To 4.1.2. Projection of Electric Power Demand Power of Electric 4.1.2. Projection The "Akhangaran" block has four substations. That is, the capacity of the "Akhangaran" has four substations. That is, the capacity of the "Akhangaran" block The "Akhangaran" site. The basic unit is calculated by unit comparison between input factors (e.g., basic unit unit comparison between input factors (e.g., basic unit site. The basic unit is calculated by like to determine the scale of the infrastructure = input factor/output factor). It is necessary water, manpower in our research. electricity, FEZ Angren the on data but available, be should sector manufacturing the of consumption were rather poor. Therefore, based on the ROK field survey in 1996, we assumed that the Therefore, Korea. Uzbekistan manufacturing industry is similar to that of the mid-1990s in real power basic unit, which is calculated using the Energy Statistics we used the ROK estimated We Annual Report and the Mining and Manufacturing Statistics Report in ROK. (See 2016 in area land per area unit basic power and company per unit basic power the 2-21). Table substation is 110/35/6kV with T-1 and (25mVA) T-2 The (25mVA). capacity of the "Shakar" substation is 110/6kV and has a T-1 The (10mVA). capacity of the "Zarbdor" substation is and 35/6kV, there are T-1 T-2 (7.2mVA), The (6.3mVA). capacity of the "Gharbi" capacity is T-1 (4mVA). and there is 35/6kV, Angren FEZ. Angren Source: [Figure 2-8] Akhangaran Block Substation Akhangaran 2-8] [Figure 110 Support for Operation of the Angren FEZ in Uzbekistan
Actual Power Basic Unit of Korea by Industry (1996)
Per Company Per Land Area Industry (MWh/) (KWh/㎡)
Food & Beverage 782.1 141.4
Textile and Leather 548.0 298.0
Wood & Wood Product 151.7 44.0
Paper & Printing 851.3 390.1
Chemical 1,898.4 201.1
Nonmetallic Mineral 1,905.8 163.6
Primary Metal 7,748.3 317.3
Machinery & Equipment 590.9 165.7 Assembled Metal
Other Manufacturing 365.5 237.5
Manufacturing Average 930.8 203.8
Source: Power basic unit of ROK was calculated by the author based on the Korean Energy Statistical Yearbook (1996) and Mining & Manufacturing Statistics Report (1997). 111 Chapter
Based on this,
shows the planned basic unit and applied basic unit per land 02
area, which will be applied to the resident companies in Angren FEZ. However, considering The Infrastructure Support Strategy of the Angren FEZ the level of factory operation, technology level, and power utilization level of the companies that are currently operating in Angren FEZ, it is more appropriate to apply the power basic unit rather than the planned power basic unit. If the supply is based on this, the demands can be met. /day) ) ㎡ ㎡ 136 484 764 226 533 318 535 544 612 2036 1,105 167.000 564.227 627.100 388.577 311.983 677.777 727.620 735.897 1010.533 Applied 1,477.370 143 504 822 245 555 334 569 592 641 2031 1,188 (Unit : KWH/thousand (day, KWh/thousand KWh/thousand (day, 151 525 884 267 578 352 605 636 671 2026 1,278 ) ㎡ 50.100 93.595 443.211 169.268 303.160 188.130 116.573 220.769 203.333 218.286 159 547 950 290 602 370 644 684 703 Planned 2021 1,374 (year, KWh/ 167 564 312 627 389 678 728 736 2016 1,477 1,011 Chemical Industry Primary Metal Paper & Printing Food & Beverage & Food Assembled Metal Chemical Industry Textile and Leather Textile Nonmetallic Mineral Nonmetallic Mineral Other Manufacturing Wood & Wood Product & Wood Wood Primary Metal Manufacturing Average Machinery & Equipment Paper & Printing Food & Beverage Food Assembled Metal Textile and Leather Textile Nonmetallic Mineral Other Manufacturing Wood & Wood Product & Wood Wood Manufacturing Average Machinery & Equipment consumption in 2016. Prepared by the author under the assumption that ROK’s power consumption in 1996 can be applied to Uzbekistan’s consumption in 1996 can be applied to Uzbekistan’s power that ROK’s the author under the assumption by Prepared Author's estimation on the basis of < Table 2-23 >. Author's estimation on the basis of < Table Source: Source: Source: Basic Unit Outlook per Land (day) in Uzbekistan 2-23> Power
Power Basic Unit Deduction per Land (day) in Uzbekistan (2016) per Land (day) in Unit Deduction Basic 2-22> Power
Power plant are located in areas that are easy to access, easy to secure fuel, and easy to secure water for power generation. They should be low humidity areas without risk of flooding. Ideally, they should be industrial areas, green areas, and high demand areas with a convenient supply system. In addition, these locations should have the capacity to expand facilities in consideration of the increase of electric power demand in future, if needed. Finally, they should also be selected after taking into consideration the temperature, pressure, wind direction, and the land use situation in the vicinity.
In Angren FEZ, there is a problem not only with power quantity, but also with frequent power outages due to lack of transformer capacity, aging of power transmission line, and weakness of the electric power trading system. It is urgent to solve these problems. The substation should be easily connected to the transmission line, and it should be installed close to the center of the demand area, while allowing the heavy goods to be brought in and taken out. In the case of high-voltage lines, the outer trunk line should be installed on the outskirts of the city, and the internal entrance trunk line should be installed in the urban or 113 low-density areas to prevent disasters caused by accidents. The distribution office should be Chapter easily connected to the substation and installed close to the center of the demand area. In 02 addition, it is urgent to improve the aged transmission lines by checking their status, and the The Infrastructure Support Strategy of the Angren FEZ national electricity trading system should undergo improvements.
4.2. Water
4.2.1. Supply Status of Industrial Water
The industrial water of Angren FEZ is currently being supplied from a nearby reservoir, but it is expected that it will be necessary to secure a source of water further if the factories increase and the operation of tenant companies becomes full-scale. Also, it is essential to expand the facilities because the drainage facilities and pipelines are not properly installed.
We look at the water supply facilities of Angren FEZ as follows. First, in Block 1 and 2 of the Angren area, the water supply capacity of the "lower zone" is 37,400㎥/ day, actually 13,800㎥/day is supplied. And the water capacity of the "Markaziy" is 23,000㎥/day, actually it supplies 4,000㎥/day. The capacity of the second pumping station of the drainage facility is 60,400㎥/day, actually it supplies 14,400㎥/day. The capacity of the third pumping station of the drainage facility is 23,300㎥/day, which is actually supplied 5,200㎥/day. Because those facilities are so old, the actual water supply and pumping capacity were significantly below . ㎥ , and the third tank is 3,000 tank third the , and ㎥ , the second tank is 500 is tank second , the ㎥ /h scale, and to construct a water supply network of 7.5km to supply for 7.5km to supply for a water supply network of /h scale, and to construct ㎥ scale). Water distribution facilities in “Ahangaran” are operated by nine wells and nine wells and by are operated in “Ahangaran” distribution facilities scale). Water ㎥ Industrial water shall be calculated including the amount of living water for the including the amount of living water for the Industrial water shall be calculated the the total usage from them. In general, The demand for industrial water means and employee, There is a method to calculate the basic unit per amount of shipment, per 4.2.2. Projection of Industrial Water Demand Water of Industrial 4.2.2. Projection On the other hand, in the case of Akhangran block, water is collected through six wells in block, water is collected in the case of Akhangran On the other hand, The use of industrial water varies greatly depending on the type of industry, the size of the size depending on the type of industry, The use of industrial water varies greatly employees. That is, the amount used by the manufacturer (external water supply + ground + ground water supply (external the manufacturer by used the amount is, That employees. use of water is regarded as industrial water. The water + river water) regardless of the Even among similar industries, industry. widely by amount of industrial water used varies there is a great difference depending on the size of the plant, the utilizationrate, theratio of environment. reused water, and the regional economic estimation of demand for industrial water is based on the basic unit. use per used calculation of quantity per factory building (or site) area. These are generally consumption, one-day be to estimated is capita per water of Consumption area. site factory usage, by including household, public, and commercial use. When we estimate demand be should water natural for demand and rates, water standards, living lifestyle, climate, considered. The expansion plan aims to reconstruct water collection bases in "Shariah", to install two install two to bases in "Shariah", aims to reconstruct water collection The expansion plan pumps of 720 three three tanks. The first tankis 500 the original capacity. Under the PP-2910 (October 20, 2011), the government is pursuing a pursuing a the government is 20, 2011), the PP-2910 (October Under capacity. the original That is, Angren City in 2017-2021. water facilities in rebuild drinking to build and program water supply water pipe, a 7.1km tower, a 6.3km wells, a water supply two City, in Angren wells to be constructed. network, and two chlorinated one reservoir through eight wells and from "A.Navoiy" and the water is collected "Sharhiya", (3,000 Angren FEZ. once and the availability of underground water. Also, it is not easy to expand the industry, to very important is it FEZ, when constructing Therefore, installed. been facilities have consider those conditions. 114 Support for Operation of the Angren FEZ in Uzbekistan
Water Basic Unit of ROK (1995)
Per Company Per Land Area Industry (㎥/N/day) (㎥/thousand ㎡/day)
Food & Beverage 202.42 19.83
Textile and Leather 48.63 29.95
Wood & Wood Product 28.06 5.64
Paper & Printing 58.80 33.71
Chemical 213.08 16.17
Nonmetallic Mineral 87.30 78.96
Primary Metal 691.63 10.21
Machinery & Equipment, 21.17 7.27 Assembled Metal
Other Manufacturing 7.01 7.83
Manufacturing Average 82.02 15.84 115 Chapter
Source: KOSTAT, 1995 Industry Census Report, 1998. 02
To estimate the water basic unit at Angren FEZ, there should be sufficient statistical The Infrastructure Support Strategy of the Angren FEZ data on the amount of water used in the manufacturing sector, but data on this are very poor. Based on interviews and field surveys, it is estimated that the level of manufacturing industry is similar to that of ROK in the early 1990s. So we substitute it to data of the ROK Mining and Manufacturing Survey Report(1995). In 2016, the water basic unit per 1,000 square meters per day is 15.84㎥, and the water basic unit per day per factory is 202.42㎥. By industry, non-metallic minerals accounted for 78.96 cubic meters of land, and the first metal used 691.63 cubic meters of water, which accounts for the most used in the manufacturing industry.
In the meantime, the sector of the manufacturing industry is further subdivided, and the water basic unit based on the 1995 land area and employee is shown in
. We can see in this table that pulp, paper and copper products, chemical industry, and steel industry are the industries that consume water the most, while wood, copper products, furniture, and fur use less water. /person/day) 2.70 1.96 3.77 1.40 2.40 0.90 5.41 0.42 0.91 0.66 0.62 ㎥ 12.80 24.39 15.17 10.24 14.28 16.61 87.91 11.33 154.60 140.28 335.14 Employee( /day) ㎡ 9.7 6.4 2.6 3.1 13.0 11.2 40.6 64.4 14.9 16.1 57.6 30.7 45.5 64.2 35.8 59.3 15.1 58.0 208.6 270.9 298.4 145.7 /thound ㎥ Land( Steel Food Textile Apparel Industry Furniture Metal Product Plastic Product Rubber Product Chemical industry Precision Machine Publishing/ Printing Nonmetallic Product Wood/Wood Product Wood/Wood Leather, Fur Product Other Manufacturing Petroleum, Coal Product Beverage /Tobacco/ Feed /Tobacco/ Beverage Transportation Machine Transportation Ceramics /Tossing Product /Tossing Ceramics Pulp /Paper/ Paper Product Electric Machine / Instrument General Machine / Instrument General
shows the planned water basic unit of Japan per land area and the applied water basic unit of Japan per land area in 1985. Although there are some time lags between water basic unit of Japan per land area in 1985. Although there are some are sector manufacturing the in patterns consumption water the countries, two the comparable. Japan Bureau of Statistics, 1995 Industrial statistics (Land, Water), 1997. of Statistics, 1995 Industrial statistics (Land, Water), Japan Bureau Source:
Industrial Water Basic Unit of Japan by Industry (1995) Industry of Japan by Basic Unit Water 2-25> Industrial
Water Basic Unit per Land in Japan (1985)
Industry Planned(㎥/㎡/y) Applied(㎥/T.㎡/day)
Food & Beverage 11.65 38.83
Textile and Leather 14.74 49.12
Wood & Wood Product 2.41 8.04
Paper & Printing 12.92 43.067
Chemical 3.49 11.62
Nonmetallic Mineral 2.713 9.043
Primary Metal 2.09 6.98
Machinery & Equipment 1.39 4.63 Assembled Metal
Other Manufacturing 4.00 13.33
Manufacturing Average 4.62 15.38
Note: 1) Although the water basic unit has been contained drinking water for employee. it is generally calculated by adding drinking water quantity to the industrial complex plan (80-150 liters / day per employee). 117 2) The number of operation days per year is assumed as 300 days. Chapter Source: Korea Institute for Industrial Economics and Trade (KIET), Survey Research for Establishment of Basic Layout of Industrial Layout - Basic Frame of Industrial Layout - , 1988.12. 02 The Infrastructure Support Strategy of the Angren FEZ Based on these data, the future water basic unit per land area of Angren FEZ until 2036 is shown in
. The average consumption of the manufacturing industry is 16.833㎥ per 1,000 square meters. By industry, paper, printing, publishing, textile, apparel and leather industries show greater consumption, while wood, assembly metal, and machinery show lower consumption. The demand can be met when the supply is based on this. day) ㎥ 2036 5.100 7.367 6.967 6.600 17.300 28.667 31.567 14.533 10.267 14.300 2031 5.100 7.400 6.833 6.667 17.500 28.667 31.567 14.633 10.267 14.467 (Unit: Metric ton/thousand (Unit: Metric 2026 5.100 7.467 7.333 6.833 17.933 28.667 31.567 15.467 10.267 15.000 2021 5.100 7.967 7.567 7.500 19.000 28.667 32.267 16.500 10.267 16.167 2016 6.000 8.400 7.733 8.333 21.100 31.867 17.200 35.867 10.867 16.833 Chemical Industry Primary Metal Paper & Printing Food & Beverage & Food Assembled Metal Textile and Leather Textile Nonmetallic Mineral Nonmetallic Mineral Other Manufacturing Author. Angren FEZ in 2016. to Angren Based on the 1995 basic water unit per land in ROK, applied Wood & Wood Product & Wood Wood Manufacturing Average Machinery & Equipment The industrial water source is divided into dedicated industrial water and waterworks, into dedicated industrial water and waterworks, The industrial water source is divided is largely divided into demand estimation, water The process of water supply planning 4.2.3. Water Supply Strategy 4.2.3. Water Note: Source: Source: ground water, and river water. planning, and facility planning. The demand for resource planning, water treatment water, but should include domestic water for water should calculated based on industrial and public water for public service facilities. and residents living in the bed town employees construction, construction quantity, The water supply plan needs to consider water quality, from a long-term costs, and maintenance costs. The size of the facility should be determined the also but FEZ, Angren present the of size the only not account into taking perspective, be should scale of future expansion. Also, when establishing the supply plan, consideration given water to water intake, the purification, and water drainage, supply area, water supply, of type the considering determined be should source water addition, In plan. management When designing the and amount of water withdrawn. water source, point of water intake, of calculation facilities, main of arrangement the to given be should consideration waterway, structure, and project costs.
Water Basic Unit Outlook per Land Unit Outlook Basic 2-27> Water
An irrigation facility is a facility to draw raw water from a water intake facility to a water purification facility, and it is made up of a water pipe, a water conduit, and a pump facility. The water supply facility is a facility that transports water from a water purification plant to a reservoir, and is composed of accessory facilities, such as water pipes or water collectors, water pumps, and valves.
Water from the water source cannot be used without processing, so it should be processed properly. The water treatment method is a method of only disinfection, a slow 119 filtration method or a rapid filtration method, and there is a method of adding advanced Chapter water purification treatment or other treatment methods. It is preferable to select a method 02 capable of satisfying the management target of the purified water quality. The planned The Infrastructure Support Strategy of the Angren FEZ quantity of purified water is based on the maximum water quantity per day, and it is determined by predicting the number of working water. In addition, the water purification facilities should have the ability to properly handle the purified water quantity. Also, reserve capabilities should be in place to secure the water purification capacity even in facility improvement and facility change.
The drainage facility is a facility for safe and smooth drainage of the required quantity of water within the water supply area according to demand. Drainage facilities consist of reservoirs, drain tanks, elevated tanks, drain pipes, pumps and valves, and other associated facilities. The effective capacity of the reservoir is the standard of 8-12 hours of the maximum quantity of water per day in the water supply zone. It should be increased for at least six hours, taking into account the characteristics of the area and the safety of waterworks facilities.3 The reservoir should be installed close to the center of the water supply area except for unavoidable cases, and the height of the natural discharge reservoir should be such as to ensure minimum hydrostatic pressure.
The pipeline plan should be designed to be at least equal to or less than the same slope
3 LH, Guidebook of Industrial Complex Development, LH, 2014, p.144. /h, and and /h, ㎥ /h and now supplies /h and now supplies ㎥ /h. In this regard, the reserved ratio for gas supply is 52.0% in the for gas supply is 52.0% in the /h. In this regard, the reserved ratio ㎥ /h. It supplies gas to Angren 1 block and 2 blocks of companies. /h. It supplies gas to Angren 1 block and ㎥ Angren FEZ. Angren The supply capacity of the Akhangaran gas distribution center is 84,000 is center distribution gas Akhangaran the of capacity supply The Although Angren FEZ itshas supplysufficient facilities gas are supply poor, capacity, and 4.3. Gas Supply Facilities 4.3. Gas Supply 4.3.1. Gas Supply Network it supplies 67,000 Angren area and 20.2% in the Akghangan area. However, it is expected that additional gas of the factories increase in the future. distribution areas will be enlarged if the operation pipe line, so that the connection from the Also, it will be necessary to expand the gas intake current pipeline to all tenant companies is smoothly carried out. the supply channel is not well equipped. According to the gas supply network status, the status, the to the gas supply network is not well equipped. According the supply channel supply capacity of up to 25,000 Angren gas distribution center has a 12,000 Source: Source: [Figure 2-9] Natural Gas Pipeline Network in Angren 1 Block Gas Pipeline Network in Angren 2-9] Natural [Figure line, and the pipeline should be selected so that any point on the pipeline is always lower lower always is pipeline the on point any so that selected be should pipeline the and line, at the point selected economically pipeline should be slope line. The than the hydrodynamic to be as short as possible That is, it should cost is paid. minimum construction where the prevent abnormal water pressure, of horizontal and vertical, to prevent sudden bending cost. and to minimize construction 120 Support for Operation of the Angren FEZ in Uzbekistan [Figure 2-10] Natural Gas Pipeline Network in Angren 2 Block
121
Source: Angren FEZ. Chapter
[Figure 2-11] Natural Gas Pipeline Network in Akhangaran Block 02 The Infrastructure Support Strategy of the Angren FEZ
Source: Angren FEZ. /day. /day. ㎥ /day, and it is currently and it is currently /day, ㎥ /day, which currently covers 46,200 /day, ㎥ /day. Meanwhile, the sewage treatment plant "Aeration" in Angren City in Angren City sewage treatment plant "Aeration" Meanwhile, the /day. ㎥ Angren FEZ. Angren The water treatment plant capacity of Angren is 100,000 The water treatment plant capacity 4.4. Treatment Facility of Sewage, Wastewater, Waste Waste Wastewater, Facility of Sewage, 4.4. Treatment 4.4.1. Facility Status 4.3.2. Gas Supply Strategy 4.3.2. Gas facilities, container charging LPG storage, high pressure gas facilities include Gas supply Although the concept of waste material treatment has not been established yet, the demand Although the concept of waste material PP-2910 the to according Therefore, future. the in surge to expected is treatment water of Decree, we are planning the expansion of "emulation". (October 20, 2011) of the Presidential processing 30,000 has a maximum treatment capacity of 100,000 has a maximum treatment capacity tank filling facilities fixed to vehicles, and LNG gas supply facilities. The decision of the of the The decision gas supply facilities. to vehicles, and LNG facilities fixed tank filling gas supply facility should take into account the land use plan so nearby, that no major it should be installed only in are installed in dense areas. In addition, facilities or structures facilities, pipelines, constant Among the gas supply green areas. areas and natural industrial for Also, in other areas. can be installed facilities and those associated pressure instrument, the facility should not be burns and explosions, accidents caused by preventing unexpected installed near places that are densely crowded or experience busy traffic, such as shopping or markets. malls, shopping centers, Source: Source: [Figure 2-12] Sewage Treatment Facility Plan Treatment 2-12] Sewage [Figure 122 Support for Operation of the Angren FEZ in Uzbekistan 4.4.2. Facility Support Strategy
4.4.2.1. Basic Principles of Planning
The sewage exclusion plan should be established by examining the prevention of water pollution in public waters, the ease of maintenance of exclusion facilities, the operation and maintenance of wastewater treatment plants, the treatment effect, and economic efficiency. In addition, the rain water exemption plan should establish a reasonable exclusion system by taking into consideration the geographical conditions and the road network plan after selecting the scope of the planned area.
The wastewater from the industrial facility should be connected to the sewage pipe, which is treated first in each factory. In addition, domestic sewage from residential areas and supporting facilities should be planned to be connected directly to sewage pipes.
The sewage treatment plant plan should select treatment methods and locations considering easiness of expansion, the situation of discharged water stations, and 123
environmental sanitation. The pipeline plan should outline the facility size and route plan Chapter considering construction, economics, and maintenance of facilities. 02 The Infrastructure Support Strategy of the Angren FEZ In order to determine the size of the sewage facilities, drainage method, difficulty of construction, drainage system, the location of lakes, rivers, roads, soil condition, groundwater level, the sewage exclusion system, drainage system, and discharge location, the maintenance situation and availability of existing drainage facilities should be investigated in advance.
4.4.2.2. Treatment of Rain Water
When establishing a rain water exclusion plan, the flooding situation and the damage situation by the past intensive rainfall around the Angren FEZ should be taken into consideration. When establishing a storm water plan, it is necessary to investigate relevant regulations, quantity of discharge water, water quality, water level, water flow quantity, water rights, and water use situation. When constructing an industrial complex, the scope of the planned drainage area should be investigated and a plan should be established accordingly.
The probabilistic years4 are basically 5 to 10 years, but it is necessary for the disaster
4 The probability years are used to prepare for the maximum rainfall during the period. The time of concentration is the summation of influx time and travel time. The former is based on the planned amount a water exclusion plan, a conduit When establishing reservoir the Firstly, facility. a storage water facility and a of consists The reservoir the in made be should facilities reservoir of installment the and structures, of criteria The facility should be made in a public The criterion of structure, installment of the storage prevention to make the probable years different according to the importance of the area and to the importance different according the probable years to make prevention core facilities. years for the the probability The latter is obtained units. of minimal drain consider surface traits can be obtained to a point of the of the most upstream conduit to dividing the distance from the end by inflow The to the planned flow rate. corresponding the flow rate by downstream conduit time depends on the surface distance, slope, and roughness coefficient of the minimum unit drainage. but should should minimize water head loss, of the conduit water. Arrangement of rain burial. The cross-sectional and underground roadway, geology, also consider the terrain, shape and slope of the conduit shall be calculated to ensure adequate flowrates to prevent also necessary to consider the use of existing drains. sediment deposits in the conduit. It is amount the regulate to rivers the to water discharge temporarily to facilities are facilities to increasing due are rapidly of the domestic water or the lowlands, which of drainage and then collects rainwater facility temporarily the storage In addition, intensive rainfall. water level, then constructs it in order to reduce or discharges it after lowering the outside minimize the discharge amount. residential the lowlands where the in or river the to discharge to easy is which basin river running water facility installation should not environment is not obstructed. In principle, cover a stream. However, when the local government establishes and manages the reservoir management basic plan, it can be permitted if it is judged that there is no risk of flooding. athletic facilities, These types of facility should be used only for roads, squares, parking lots, and green areas. automobile driving range, minimizing the can be collected by facility or a public housing complex where the rainwater movement of rainwater when it firstrains. In addition, water should be smoothly collected which are discharge points, and connections with rivers, sewers, waterways, drained, and land on levees low installing by collected is water rain if addition, In smooth. be should of number the and quickly, done be should drainage intended, originally are they where times of use should not be excessive. 124 Support for Operation of the Angren FEZ in Uzbekistan The following functions should be considered, so that the function of the storage facility is not impaired and rainwater can be collected safely. ① Install a drainage basin in principle for smooth drainage. ② Install the discharge outlet in a place where the entire quantity of water is discharged to the bottom of the storage facility. ③ The water depth of the storage facility should be set to a suitable depth considering the safety of the surrounding area. ④ Do not install facilities that can be disturbed by flooding in the storage facilities. In addition, rainfall should not flow over the reservoir when the rainfall is below the planned rainfall, and soil should not be introduced into the reservoir due to local development.
4.4.2.3. Treatment of sewage
When calculating the planned sewage amount, it is decided by dividing the sewage amount (domestic sewage amount and operating sewage amount), factory waste water amount, and underground water amount considering the following matters. When planning village sewerage, the volume of animal wastewater should be considered, if needed.
With regard to the sewage pipe system, the sewage system is a facility that includes 125 sewerage systems, manholes, sewer systems, toilets, water tanks, and connection pipes, Chapter and collects sewage or storm water discharged from houses and commercial and industrial areas. 02 The Infrastructure Support Strategy of the Angren FEZ
In the case of sewage pipes, the maximum amount of sewage is planned. In the case of a combined sewer system, the planned amount of sewage is added to the planned amount of sewage.
In the intercept sewer, the amount of planned sewage at the time of rain is assumed. It is also possible to allocate a margin to the planned sewage amount according to the local situation. If the siphon is crossed and the reverse siphon cannot be avoided, it is preferable to use the reverse siphon for the sewer pipe. Considering the temporal change of the sewage volume and the maintenance, 400 m/m, it is preferable to design the culvert more than circularity to D = 1,200 m/m.
4.4.2.4. Sewage Terminal Treatment Facility
The sewage terminal treatment facility is a treatment facility for the final treatment of sewage and discharging it to rivers, the sea, and other shared waters, and a facility to supplement the treatment facilities. The placement criteria are as follows5:
5 LH, Guidebook of Industrial Complex Development, LH, 2014, p.153. Treatment Plant Treatment 6 for future expansion. for future treatment area. in the sewage generated facilities and treat sewerage use plan, etc.). land social conditions (locality, The location of the treatment plant should be a site where it is easy to secure site easy to secure site a site where it is plant should be of the treatment The location the existing position to examine and economical be the most reasonable It should be small. water on discharged water should The effect of the treated plant. treatment the of function the with interfere not shall flood to due Inundation should be small. areas such as odor and noise Influence on surrounding should be economical. roads and relevant facilities Access considering other with the surrounding area when in harmony The area should be ① ② ③ ④ ⑤ ⑥ ⑦ Production Element Support Strategy for the Support Strategy Element Production FEZ Angren 5.1.1. Estimation of Industrial Manpower Demand 5.1.1. Estimation of Industrial Manpower in the early In order to estimate manpower demand, we used the basic unit of ROK 5.1. Industrial Manpower 4.4.2.5. Wastewater should install and manage a wastewater government and local governments The central causes water pollution should be responsible for all In this case, the person who directly Wastewater refers to water that cannot be used as it contains liquid or solid water pollutants. refers Wastewater
1990s. As of the end of 1994, employee’s basic unit per shipment (KRW in 0.1billions) was in 0.1billions) was basic unit per shipment (KRW 1990s. As of the end of 1994, employee’s 2.4 persons in manufacturing, as shown in
. By textile, industry, clothing manufacturing (3.7), machinery (5.1), and other manufacturing (5.3) were higher than the other This means that these industries need more manpower for production. On the average. treatment plant in order to jointly treat pollutants discharged from the workplaces in areas where water quality pollution becomes severe and environmental standards are difficult to also entrust can They conservation. quality water for necessary considered are or maintain to the private sector, if the private sector can do it more efficiently than the government or local government. of the waste water treatment and operation or part of the cost necessary for the installation law. plant, as stipulated by 6 5. 126 Support for Operation of the Angren FEZ in Uzbekistan hand, the basic unit of food industry (1.3), petrochemical (1.3), steel (1.7), and electricity and electronics (2.2) are lower than the manufacturing average. Most of these industries are device-based industries.
On the other hand, textile, clothing (3.7 persons), wood, paper (2.9 persons) and other manufacturing (5.3 persons) require more than 2.4 employees, which is the average of manufacturing. Most of these industries are labor intensive industries.
The average number of employees per company is 158. By industry, the food industry (748), steel (436), and petrochemicals (125) is high. On the other hand, the electricity, electronics (43), other (2.7), transport equipment (48) are smaller than the manufacturing average. We can see that the manufacturing process in those industrial sectors has been automated.
Basic Unit per Employee in ROK (1995)
Per Company Per Shipment Amount Per Land Area Industry (Persons/N) (Persons/100m.Krw) (Persons/Thousand㎡)
Food & Beverage 747.6 1.3 5.59 127 Chapter
Textile and Leather 98.8 3.7 7.78
Wood & Printing 51.7 2.9 7.42 02 The Infrastructure Support Strategy of the Angren FEZ
Petroleum & Chemical 124.8 1.3 2.60
Nonmetallic Mineral 74.4 2.1 3.32
Primary Metal 436.4 1.7 3.60
Machinery & Equipment 43.4 5.1 3.89
Electrical and electronic 42.5 2.2 9.97
Transportation Equipment 48.3 2.1 5.79
Other Manufacturing 26.5 5.3 4.01
Manufacturing Average 157.6 2.4 5.48
Source: KICOX, Survey results of Industrial Complex 1995, 1997.
The average number of employee basic unit per factory land (1,000 ㎡) was 5.48 as shown in
. By industry, textile, clothing (7.78), wood and paper (7.42), transportation equipment (5.79) and food and beverages (5.59) were higher than the manufacturing average numbers. This means that these industries need more manpower per 1,000 square meters of land. On the other hand, the petroleum (2.60), non-metal (3.32), steel (3.60), machinery (3.89) and other manufacturing (4.01) were low. These industries are characterized as device-type industries, and most of them require large factory lands. ) ㎡ 4.28 3.30 4.71 7.63 3.17 3.12 2.62 1.84 5.37 5.63 4.09 land 2036 9.1 9.7 7.0 7.1 13.4 26.2 10.3 27.0 14.2 19.0 20.1 Ship- ment 4.65 3.54 5.07 8.28 3.37 3.29 2.85 2.05 5.97 6.26 4.54 land 2031 8.4 8.5 16.3 32.8 12.2 12.9 33.0 11.4 15.7 21.6 24.3 Ship- ment 5.00 3.77 5.39 8.90 3.54 3.42 3.03 2.25 6.56 6.87 4.93 land (Unit : persons/M.USD, persons/thousand persons/thousand (Unit : persons/M.USD, 2026 9.9 19.6 38.6 15.3 16.1 39.7 13.4 17.5 24.0 28.5 10.0 Ship- ment 5.26 3.81 5.62 9.47 3.70 3.53 3.19 2.42 7.05 7.39 5.31 land 2021 23.1 45.4 18.4 19.4 46.7 15.8 19.4 11.6 26.6 33.6 11.8 Ship- ment 5.48 4.01 5.79 9.97 3.89 3.60 3.32 2.60 7.42 7.78 5.59 land 2016 24.2 53.4 21.7 22.8 51.6 17.5 21.6 13.1 29.6 37.3 13.1 Ship- ment In order to do this, the demand must be identified through the above-mentioned 7 Industry Primary Metal Wood & Printing Wood Food & Beverage Food Prepared by the author based on
. on
Shahrisabz (2018) in order to foster skilled workforce and increase em-ployment. and increase to foster skilled workforce (2018) in order in Samar-kand (2013) and Shahrisabz projects as part of ODA At the request of the Uzbek government, KOICA has established and has been operating vocational education and training institutes vocational education and training has established and has been operating KOICA of the Uzbek government, At the request Transportation Equipment Transportation Note:
Source: Source: be established for high school students who want work after graduation. Furthermore, the Furthermore, be established for high school students who want work after graduation. educational quality of vocational colleges (vocational college: intermediate level between technical high school and college) should be improved. ROK companies. decreasing basic unit, the table below is the basic unit (per production amount and factory and amount production (per unit basic the is below table the unit, basic decreasing 2016-2036. FEZ during to be applied to Angren land area) 7
Basic Unit Outlook of Employment 2-29> Basic Unit Outlook
Training of Industrial Manpower
Division Contents
• Cultivation of key personnel in consideration of industrial development stage and Infrastructure industrial manpower demand establishment and • Establishment of technical education teacher (professor) training and education and environment training infrastructure development • Collection and management of labor market information through management of employment information system
• Collaboration between industrial manpower policy and industrial education policy Strengthen • Activation the supply and demand of industrial manpower through information sharing collaboration and and collaboration between industry and academia partnerships • Provide customized industrial manpower for local industry 129
NCS • Standardization of industrial manpower cultivation Chapter development • Systematization of human resource development suitable for industrial sites
Source: Author. 02 The Infrastructure Support Strategy of the Angren FEZ
5.2. Support Facilities
5.2.1. Concept of Support Facilities
The industrial complex support facility is a facility that directly and indirectly supports the enterprises that are in the industrial complex and the workers who work there. These include public support facilities for administration and management of tenant companies and workers, production support facilities directly related to the production activities of tenant companies, and welfare support facilities for workers. Therefore, these facilities should be efficiently deployed in accordance with the development direction of the Angren FEZ and the given circumstances. In other words, the type and size of support facilities should be calculated so that tenant companies can perform efficient and vigorous production activities. In addition, the standards and location of welfare facilities should be set up in order to create leisure activities and comfortable work environment for workers in the Angren FEZ.
8 The National Competency Standards (NCS) is a systematization of the knowledge and technology as required by government stan- dards for members of various industries to perform tasks in their respective fields. Facility Banks, etc. Management training center training Dormitory, Studio Dormitory, General warehouse General Business support center Lease (standard) factory Industrial inspection office Gas station, Cargo terminal Post office, Telephone office Telephone Post office, Public health center, Hospital Working youth center, Nursery Working Logistics center, Distribution center, Logistics center, Distribution Chamber of Commerce, Associations Packaging center, Bonded warehouse, IP management agency, Safety(guard), IP management agency, Tax office, Customs office, Labor office office, Customs Tax Welfare center, Women's welfare center, center, Women's Welfare Production/Technology research institute Production/Technology Vehicle garage, Car wash, Car attachment garage, Vehicle Exhibition Government office, Police box, Fire station, office, Police box, Fire Government Convenience store, Gymnasium, Play ground Convenience store, Gymnasium, Play Employee apartment, Rented apartment for Worker, Rented apartment for Worker, apartment, Employee plant, Sewage end treatment plant, Raw material storage plant, Sewage end treatment plant, Raw material Power plant, Power substation, Joint waste water treatment Power plant, Power substation, Joint waste water Vocational training center, Working youth school, Corporate youth school, Corporate center, Working training Vocational R & D Usage Welfare Housing operation Business support Management and Neighborhood life Production facility Product inspection Logistics/Warehouse Financial institutions Public administration Supply and Processing Vehicle/Transportation Education and Training Medical care and health Post/Telecommunication Type facilities facilities Partial modifications were made based on LH, “Guidebook of Industrial Complex Development 2015”, 2016, LH. Development made based on LH, “Guidebook of Industrial Complex Partial modifications were Public support 5.2.2. Installation Standards 5.2.2. Installation Standards facilities, it is In order to establish the standards for the installation of the support The types are classified into public support facilities, production support facilities, and support facility Welfare support Welfare Production activity welfare support facilities, according to the publicity, management, production activities, and welfare support facilities, according to the publicity, 2-31). welfare aspects (See Table Source: Source:
Management of Support Facilities of Support 2-31> Management
5.2.3. Layout Strategy of Supporting Facilities
The arrangement of the supporting facilities to be accommodated in the industrial complex should reflect the characteristics of the industrial complex and its relation with the surrounding area as much as possible in order to harmonize with the direction of long - term development and to contribute to activation of the Angren FEZ. In other words, it should 131 consider the layout status concentration and dispersion of support facilities, accessibility of Chapter location of support facilities (walking, vehicles), location (use of occupants, workers), and 02 environmental status (noise, landscape). Also, the arrangement should consider location The Infrastructure Support Strategy of the Angren FEZ correlation, placement status, function, and suitability of characteristics.
In addition, the supply and processing functions and the production facility functions should be carefully considered in order to improve the efficiency of use and the benefits of integration, except for facilities that are dispersed by function. In addition, the facilities should be arranged based on the characteristics and usage aspects of each facility. Facilities such as police stations, gas stations, general playgrounds, government offices, fire departments, substation, common wastewater treatment plants, general shopping centers, and most other facilities should be effectively considered in the overall layout.
The layout standard of the industrial complex supporting facilities is different according to their functions, and, therefore, the conditions for the characteristics of each supporting facility must be met. Public support facilities should be placed at locations where accessibility, location, and availability of tenant companies and workers are favorable, so that they can be used effectively.
The production support facility needs various location conditions by function, the research and inspection function should be located in a quiet place with no noise, and Policy Suggestions Only providing land and incentives will not be successful in attracting companies in companies in will not be successful in attracting Only providing land and incentives Since Angren FEZ is adjacent to Tashkent, it is evaluated that the SOC situation is very a national long-term national comprehensive First of all, it is necessary to establish FEZ. Even if the factory has been built in the given area, if the infrastructure is not properly in the given area, if the infrastructure FEZ. Even if the factory has been built not would FEZ case, that activities. In in production problems lot of a be will there equipped, it wants as planned. the companies that be sustainable and cannot attract good compared to that of other FEZs. However, if all the factories come into operation in will be in trouble due to the lack of utilities, such as Angren FEZ, it is expected that they industrial manpower. So, the policy for supporting power, water, communication, and follows. as suggested be can FEZ Angren of manpower industrial and infrastructure the applied equally to developing and activating FEZ in Of course, these policies should be should be investment priorities of the infrastructure areas other than Angren. In addition, determined considering efficiency. is it words, other In FEZ. for roadmap SOC an for basis the as serve to plan development is factory a when difficulties are there after supplement SOC with cope to desirable not as in the present. SOC is not only time-consuming from designing to construction, operating, Therefore, the FEZ should be designated in but it also bears a heavy financial burden. necessary accordance with the national comprehensive development plan. If it is inevitably to designate FEZ in the middle of plan, it is desirable to reflect it in addition to the national early 1970s, ROK comprehensive development plan or to harmonize the two plans. Until the a mid-long-term had developed industrial complexes in large cities such as Seoul without roadmap. However, these industrial complexes were not only small in size, but also could utilize the of existing the infrastructure big cities, so that there were no difficulties with SOC. 6. the logistics and warehouse function should be in a place where it can be linked with with it can be linked be in a place where function should and warehouse the logistics accessibility good with place a in placed be should facilities These means. transportation supply/ vehicle. And the and exit of the of frequent entry accessibility because and easy processing function should not be affectedby environmental factors, such as noise. In the be provided function should the education and training support facility, case of the welfare functions welfare and the welfare area, where in the commutable no noise where there is should be placed in a and the neighborhood life function and usability, are good in location good accessibility. have and workers place where residents 132 Support for Operation of the Angren FEZ in Uzbekistan However, as economic development took place in earnest, infrastructure shortages became reality. Through these trials and errors, since the 1970s, the ROK government has designated new industrial complexes after establishing a comprehensive national development plan and expanded the SOC in a timely manner.
Like the SOC, a mid- to long-term roadmap is also needed for utilities essential for the production activities, such as power, industrial water, gas, and telecommunications. In other words, each ministry within the central government should establish a long-term power supply plan, industrial water supply plan, energy supply plan, and communication network supply plan for five years or more. Based on this, the timing, location, and size of the FEZ designation should be determined. However, if FEZ is designated without reflecting the roadmap, the utility roadmaps must be revised and supplemented accordingly. This is because the utilities can be supplied timely. In order to establish a utility roadmap, demand, demand patterns, supply quantity, and supply patterns must be analyzed first through surveys of electricity, water, energy and communication. To this end, relevant statistics should be prepared by the government. Based on such objective data, a mid-to-long-term supply and demand for utilities should be forecast, and a supply plan should be established. 133
In ROK, when the FEZ development basic plan is established, the mid- and long-term utility Chapter plan must be taken into consideration during the deliberation, and the development plan 02
is approved by a comprehensive review of disaster prevention and cultural property The Infrastructure Support Strategy of the Angren FEZ protection.
It is important to note that there will be an increased amount of sewage, wastewater, and other wastes generated by manufacturing companies, and that the industrial structure of Angren FEZ will be complicated in the future. At present, although there are few factories that discharge large quantities of sewage, wastewater, and waste in Angren FEZ, there are also few facilities to deal with them. So, the recognition of the need for disposal of sewage, wastewater, and waste in businesses, as well as in the community, is very low. However, given the experience of the industrialized nations such as Japan, ROK, and China in the past, if we do not actively prepare for this from the beginning of development, Uzbekistan will have a great social cost due to environmental pollution. Therefore, even from this stage, the government must set up standards for the treatment of sewage and waste from the operation of factories, secure the related facilities, and operate them thoroughly.
With the development of FEZ, a huge budget is needed to construct SOC, utilities, such as power, water, energy, and telecommunication, and pollution prevention facilities, such as sewage, wastewater, and waste disposal facilities. However, if the current financial situation of the local government is taken into consideration, the central government will have to . 9 In the industrial complex, the supply company should establish a supply network up to should establish the supply company In the industrial complex, Management the Angren FEZ FEZ, support of the Angren Regarding the infrastructure and it is necessary to establish a mid- smoothly, In order to supply industrial manpower of industrial manpower, it is necessary demand in order to match the supply and Finally, Overhead Capital) investing all by or part of pri-vate capital. Ownership of the facility has and the the government, investment com- and man-ages the facility for a certain maintains the facility and operates, rights of operating pany is a type of business that receives investment costs and profits. period of time while recovering PPP (Public Private Partnership) is a scheme to design, construct, finance and operate infrastructure facilities such as SOC(Social
the factory door so that end user can use utilities immediately. And the installation costs of And that end user can use utilities immediately. the factory door so the power, water, gas, and communication facilities should be borne by each beneficiary. so is facility entrance the complex, industrial the in network supply a is there though Even However, until the factory entrance. enterprises need to secure facilities poor that individual costs afterwards, both facility to user and collects the entrance installs if a utility company as well as costs. sides can save on time should regularly collect the companies directly, Office, which is in contact with the in the tenant companies, and have a system difficulties of SOCs, utilities, and manpower results should be shared to the supplier or the tenant that regularly conduct surveys. Those if difficulties the solve to government local or central the to suggested and companies necessary. considering FEZ's development plan, labor demand long-term supply and demand plan manpower on Based outlook. industrial and economic the and companies, for survey execute should want companies FEZ that supply manpower industrial the plan, supply education, labor, between industry, timely through the close cooperation those programs the government. Sometimes conflicts arise because and science related ministries within the policy objectives between demand ministries (typically the Ministry of Industry) and of Education and the Ministry of Labor) may the supply ministries (typically the Ministry minister. Prime the by policies those coordinate to beneficial be would so it be different, training It is necessary to utilize the existing education system and to establish vocational institute to smoothly supply industrial manpower. industrial of supply the smooth to it utilize to system a provide to and DB a establish to the for responsible be Labor of Ministry the that desirable is it case, this In manpower. national level and the Angren FEZ for the regional level. 9 bear bear finance. However, thegovernment does not haveenough finances, soif it necessary, financing, development financing from international of to consider utilization will need capital or foreign investment of EDCF funds, introduction 134 Support for Operation of the Angren FEZ in Uzbekistan References
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137 Chapter 02 The Infrastructure Support Strategy of the Angren FEZ No 6.3% 6.3% 0.0% 0.0% 0.0% 12.5% answer 0.0% 0.0% 0.0% 0.0% 6.3% Very Very 0.0%0 satisfied Gas (31.3%) ⑥ 0.0% 0.0% 0.0% 18.8% 18.8% 12 5% Satisfied Managing office (12.5%) Waste disposal facility (31.3%) Waste Communication (43.8%) ⑪ 43.8% 43.8% 50.0% 50.0% ⑧ 43.8% 43.8% ③ Normal 37.5% 50.0% 25.0% 31.3% 37.5% 25.0% Dissatisfied Road (56.3%) ② 6.3% 0.0% 0.0% 6.3% 6.3% Very 18.8% Power (including substations) (50.0%) Power (including substations) (50.0%) dissatisfied ⑤ Water Water Power facility FEZ? the smooth operation of the Angren FEZ? (Multiple choice) Angren of the the smooth operation Category (Internet, etc.) Railway (37.5%) Railway Water (50.0%) Water treatment facility (31.3%) Wastewater Logistics facilities (warehouse, loading dock, etc.) (43.8%) Logistics facilities (warehouse, loading authorities (25.0%) Administrative Business support facilities (bank, insurance, etc.) (50.0%) etc.) Business support facilities (bank, insurance, (37.5%) living facilities) Residential facilities (including nearby (railway, road) (railway, Transportation Transportation Communication (including pipeline) Q2. How satisfied are your company with the following infrastructure in the Angren in the Angren infrastructure your company with the following satisfied are Q2. How ① Infrastructure Conditions Infrastructure be equipped (or supplemented) for must infrastructures Q1. Which of the following ④ ⑦ ⑨ ⑩ ⑫ ⑬ (including substtions) Waste disposal facility Waste Wastewater treatment Wastewater Survey Result Survey Appendix 138 Support for Operation of the Angren FEZ in Uzbekistan Very Very No Category Dissatisfied Normal Satisfied dissatisfied satisfied answer
Commercial facilities 6.3% 12.5% 37.5% 18.8% 6.3% 18.8% Power (including substations): Power / Power substations): (including Power ⑤ with the companies in the Angren FEZ? (Multiple choice) with the companies in the Angren (Subjective questions) (e.g.: questions) (e.g.: (Subjective outages causing power frequent are there is so small that capacity transmission disruptions) production Communication: Communication: 12.5% (e.g. : Virtually no mobile connection. Almost no logistics. Access way to main road: 25.0% way Access Power receiving facility (including substations): 18.8% Gas incoming pipe: 18.8% Common logistics facilities: 12.5% treatment facility: 6.3% Wastewater disposal facility: 6.3% Waste etc.): 25.0% facility, training Human resources development facility (Vocational welfare facility: 12.5% Workers' Railway: 12.5% (e.g. : lack of raw materials) materials) raw 12.5% (e.g. : lack of Railway: Road - poor quality pavement.) Road: 18.8% (e.g. : : No regular water availability) 12.5% (e.g. Water: warning of power outage) : 12.5% (e.g. : Often without Power (including substations) Gas : None treatment facility: 6.3% Wastewater disposal facility: None Waste dock, etc.): 6.3% Logistics facilities (warehouse, loading authorities: None Administrative Managing office: None 6.3% etc.): Business support facilities (bank, insurance, 6.3% living facilities): Residential facilities (including nearby Neighborhood living facility: None Other shortcomings are still being addressed, The internet is bad) are still being addressed, The internet Other shortcomings Water incoming pipe:18.8% Water accommodation): 25.0% apartments, workers' Residential facilities (employee ① ② ③ ④ ⑤ ⑥ ⑦ ⑧ ⑨ ⑩ Q5. Which of the following infrastructure would require a cost-sharing arrangement arrangement a cost-sharing would require infrastructure Q5. Which of the following ① ② ③ ④ ⑤ ⑥ ⑦ ⑧ ⑨ ⑩ ⑪ ⑫ ⑬ ⑭ Q4. What is the most inconvenient aspect of each of the following infrastructure? infrastructure? each of the following aspect of is the most inconvenient Q4. What 140 Support for Operation of the Angren FEZ in Uzbekistan Q6. How satisfied are your company with the following production factors?
Very Very No Category Dissatisfied (Normal Satisfied dissatisfied satisfied answer
Production workers 0.0% 0.0% 37.5% 25.0% 25.0% 12.5% 02 The Infrastructure Support Strategy of the Angren FEZ Raw materials 0.0% 0.0% 50.0% 0.0% 37.5% 12.5%
Q8. What are the difficulties associated with the following production factors?
(Subjective questions) (e.g.: ② Engineers: It is difficult to save adequate people due to metropolitan preference, ③ Production workers: production disruptions due to frequent turnover)
① Administrative/Managing workers: 6.3% (Employees must be hired from Tashkent)
② Engineers: 37.5%
③ Production workers: 6.3%
④ Raw materials: 25.0% (Difficult to find raw materials for the requested quality) and (Mainly lack of raw materials)
This survey was for 34 companies that have been operating plants at Angren FEZ in May 2019. Because respondent companies were only 16, it was statistically meaningless. But this is the first survey, so we used it reference only.
Chapter Keywords Zone, Economic Zone, Foreigners-Only Free Area, Trade FEZ, Free Angren Industrial Complex 1. Introduction FEZ of the Angren 2. Analysis and Problems Experience and Implications Operations 3. ROK’s Economic Zone Authority Free the Angren of 4. Suggestions for Optimizing Operations Gi-woo Jin (Korea Polytechnic University) Gi-woo Jin (Korea Economic Zone "Angren") of Free (Directorate Abuhalil Ermatov Operation Optimization Strategy of the Angren FEZ of the Angren Optimization Strategy 03 142 Support for Operation of the Angren FEZ in Uzbekistan Optimization Strategy of the Angren FEZ Operation
Gi-woo Jin (Korea Polytechnic University) Abuhalil Ermatov (Directorate of Free Economic Zone "Angren")
Summary
This chapter aims to develop strategies for optimizing the operation of the Angren FEZ based on ROK's experiences and practices.
By analyzing the status of the Angren FEZ, they have already implemented a number 143 of support policies and incentives. It is also said to be well equipped with various Chapter infrastructure, including proximity to the capital, Tashkent, highways, railways, and power. 03
However, investors believe that investment performance is low due to location factors Optimization Strategy of the Angren FEZ Operation (selling market, procurement of raw materials, investment environment, etc.), problems in registration procedures, and problems in business support facilities and environment. What appeared in the analysis of the status of the Angren FEZ and local requests can be summarized into three things. First, it is necessary to find problems and improvements in the registration process; second, to develop a one-stop service system that can be applied; and third, to improve and expand work, implement various business support projects, and prepare mid and long-term development plans to create an environment suitable for the investment environment.
ROK's experience recognizes the change in institutional foundation and management. The relevant laws of industrial parks began in 1964, and they were, in the early stage, centered on development work and gradually changed into a business that operates various facilities and administrative services supporting businesses. In addition, the basic management plan, which is the norm for industrial park management and details of management, operation, support services, and business support facilities that have developed in accordance with the times were reviewed. Examples of foreign investment zones included free trade areas, free economic zones and foreigner-only complexes. The review looked at differences in registration, one-stop services, corporate support projects, Based on the above analysis, it is proposed that 60 years of ROK's historical experience experience historical ROK's of years 60 that proposed is it analysis, above the on Based post-management, and procedures registration of improvement of field the in First, Based on the information discussed earlier, it is proposed to improve major tasks and experience The short-term major business improvement measures were applied to ROK’s and various facilities for corporate support. The difference was that Angren handled the handled the was that Angren The difference support. facilities for corporate and various the local government, central approval from the approval and procedure with registration showed the land distribution In particular, committee. and the administrative government, the local directly handled by between ownership and sale procedures a large difference government. It was also not carrying out various business support projects. In addition, the approval provision of infrastructure, (registration, One-Roof handled by not been has work entities. resulting in inconvenience for investment of land provision, etc.), The of Angren FEZ operations. and applied to the optimization policy can be compressed based on the Uzbek local were divided into three things operations proposals for optimizing situation analysis and requests. provided be should they FEZ. Secondly, Angren in the out tasks should be carried all of land-making industrial obligations held by directly to enterprises after the transfer the for a need is there Third, government. local the or committee administrative the the committee installation to project coordinate of administrative its excessive work. Fourth, the infrastructure should be integrated and managed. As for the field of corporate support for free provision should be diversified to include systems, first, the existing land system capital corporate other and infrastructure Second, free. or rental either as sale, of the type development integrated an of establishment the considering advance in up set be should various management support activities for S/W should be carried out. Third, company. Fourth, the installation projects of various enterprise support facilities should be carried out step by step. the Finally, field of strengthening investment support services includes the Second, it is the Invest-Korea). (ROK's government opening of service systems at the central system within the Angren FEZ. Third, it involves the establishment of a One-Stop-Service legal system for the installation of joint facilities, and corporate support facilities that are necessary for businesses. organizations in the short and mid-long term. of preparation the First, stages. early the in applied be could that tasks the arrange to land Second, it. through complex the of management and plan management basic the regulations, such as changes in the land supply management and appropriate administrative one-stop-service) and plant procedures (including of registration system and improvement 144 Support for Operation of the Angren FEZ in Uzbekistan operation of investment enterprises. Third, it is to expand the support business of companies and the amenity business. Fourth, the development of various corporate support projects and the expansion of the fiscal expansion. Fifth, it is a business of organizing and operating various business leaders' meetings and business experts' meetings. Sixth, it is a short-term reorganization that can handle these tasks.
Finally, the medium & long-term development methods of Angren FEZ work are, first, the expansion of H/W corporate support facilities and fiscal expansion. Second, it is related to safety management, i.e., education and management projects, such as chemical management, fire prevention, and health. Third, it is a cluster support project for cooperation in industries, universities and research institutes. Fourth, it is the business sector, various facilities and environmental improvement projects. Fifth, the project to build an ecological industrial complex (including waste management) is promoted, and sixth, the land use diversification system is introduced. In other words, it involves the diversification and maximization of the use of land and construction of all facilities, such as factories, houses, and commercial facilities in a single piece of land. Seventh, it is to expand the organization and work step by step in line with the mid & long-term development of these 145 tasks. Chapter 03 Optimization Strategy of the Angren FEZ Operation 1. Introduction
1.1. Background and Goal
Since the 2000s, the Uzbek government has been continuously pushing to revitalize special economic zones as one of the key drivers of economic growth strategy based on upgrading the country's industrial structure.
This drive has been particularly more conspicuous as free economic zones (FEZs) have been designated as a key component for the 2017-2021 Uzbekistan Development Strategy. President Mirziyoyev declared the FEZs as the axis of economic development for expanding exports and attracting foreign investments in Uzbekistan and established 18 more FEZs in 2017, totaling to 21 special economic zones at present day.
The Angren Free Economic Zone (FEZ) is one of Uzbekistan's most representative special economic zones, along with the Naboy FIEZ and Jijak FEZ. It was designated as a FEZ under presidential decree in 2012 and has been carrying out full-fledged investment promotion activities since 2015. 1.2. Contents and Configuration 1.2. Contents and Configuration Economic Free the of tasks and the management analyze to is this study of scope The of the Angren FEZ, we will first look into analyze the current state of operations To The Angren FEZ has, so far, hosted 54 companies, taking advantage of its proximity to the of its proximity taking advantage hosted 54 companies, FEZ has, so far, The Angren However, its investment attraction performance is not as high as was expected and the operations for optimizing this paper attempts to derive strategies Under this context, this of similar cases in ROK, and operations Among the examples of management of the the system, organization, and operations The reorganization plan regarding Zone Authority, which faced significant challenges. In order to achieve efficiency in in efficiency achieve to order In challenges. significant faced which Authority, Zone Zone foreign investment and promoting the activities of the Angren Economic attracting one must firstAuthority, identifykey problems and challenges to come up with measures to optimize its operation. the legal foundation of the Angren FEZ and its major tasks. Afterwards, we will examine the status of the entry conditions and qualifications into the Angren FEZ and the general use, surrounding infrastructure, industry and the complex (investment enterprises, areas by capital, Tashkent, and its proximity to key infrastructures, such as highways and railways. highways such as infrastructures, to key and its proximity capital, Tashkent, approval procedures and improvement in terms of investment some room for demonstrates lessons learned from key be bolstered by companies, which may management of investment strategies. and operational experience ROK’s of the Angren FEZ and, firstthereby, examines the current operations of the Angren Free key challenges. and identifies Zone Authority of of industrial parks and the transformation paper examines the institutional foundation basis for the three types of foreign investment zones management tasks, which are the legal cases of operational that will be studied in this paper. Next, this paper looks at the in ROK business complexes similar to the Angren zones, free economic zones, and foreign free trade cases. analysis with Korean from comparative FEZ and derives implications and challenges Angren FEZ will be also studied, along with the expansion of new projects and support analysis of the support systems for hosting mechanisms in accordance with the comparative procedures and a one-stop service plan for registration companies. It proposes a new line of it aims to propose mid- and long-term development measures of residents. Finally, attracting experience with long-term strategies. derived from ROK’s the Angren Free Zone Authority, 146 Support for Operation of the Angren FEZ in Uzbekistan cultural and economic facilities, etc.). Specifically, we will look at the Zone’s hosting strategies to attract overseas investment companies (such as tax support, tariff benefits, foreign exchange management, etc.), preferential industries, and the characteristics of hosted companies (such as industry, size, and key differences compared to local companies in Uzbekistan).
Relevant data and information were acquired through interviews and research through the use of local consultants, and the status of the Angren FEZ was analyzed through actual site visits to businesses.
In addition, task analysis was conducted by interviewing individual employees to investigate and analyze the organization, job system (operating personnel), job division, and job satisfaction levels for respective duties.
Among the Korean cases regarding operation and management of FEZs, three types were chosen to be analyzed to derive relevant and practical lessons for Uzbekistan. Through literature reviews and interviews, this research looks into the transition process of industrial 147 policies, changes in legal and institutional frameworks, and the management operations Chapter for industrial complexes, which later evolved into legal foundations for ROK’s foreign investment zones. 03 Optimization Strategy of the Angren FEZ Operation
In addition, since free trade zones, free economic zones, and foreign business complexes are similar in meaning and work scope, their registration procedures, corporate services, and various business support activities were also compiled and analyzed in this study. In order to achieve the operational optimization of the Angren Free Economic Zone Authority, implications and key lessons from the management and operations of free trade zones, free economic zones, and foreign business complexes that operate in a similar fashion to the Angren Free Economic Zone Authority were analyzed. Finally, based on the Korean experience, recommendations for the Commission are presented, including major tasks, reorganization plans, support systems for hosting businesses, and measures to optimize the operations of the Angren Free Economic Zone Authority. Finally, this study proposes measures for mid- to long-term development in the future based on ROK’s experience and examples. was announced. The Decree stipulated that foreign investment standards should be was announced. The Decree stipulated ” Analysis and Problems of the Angren FEZ Angren of the and Problems Analysis 2.1. General Status and Major Business and Major Status 2.1. General the of decree presidential the under 2012 12, April on was established FEZ Angren The the Resolution of the President of on Measures for Implementing In addition, “Re-action further for “Measures NoPD-5600, Decree Presidential in 2018, 21, December on Later, land sizable a with years, seven about for operation in been has FEZ Angren The the and Angren, city of Akhangaran, the the Angren FEZ includes to allocated land The FEZ. in the Angren A number of supporting policies are in place for companies operating of these incentives and benefits depend on the amount of investment. The duration up from: of incentives and preferences; if amount of investment makes Duration Republic of Uzbekistan. The main purpose of the establishment of the Special Industrial Industrial the establishment of the Special The main purpose of Republic of Uzbekistan. to companies domestic and foreign from investment FEZ was to attract Angren Zone jobs. products and to create new produce modern, high-tech January 2018, which stipulated the 2017” was announced on 16 Uzbekistan on 25 October procedures for selecting investment projects and the regulations for procedures registration Zone. of investors in the Free Economic and land transfer and management of activities in the free economic improvement of the coordination system zones set to at least 25 percent of production during the first two years and to at least 50 percent of exports in the next three years. The area. the into to move companies foreign allows hectares that of about 830 allocation FEZs is about 500 hectares as of April 1, 2019. land available to investors in the Angren The distance between the two cities of Akhangaran land located between these two cities. and Angren is about 35 kilometers, which is divided into four blocks: Akhangaran (284 (90 hectares). hectares), Angren-1 (221 hectares), Angren-2 (237 hectares), and Akcha First, tax and tariff incentives include (1) land tax, (2) property tax, (3) income tax, (4) single mandatory deduction for central (small and private business operators),(5) tax payment materials, equipment, and parts exemption from tariffs. funds, and (6) raw 2. 148 Support for Operation of the Angren FEZ in Uzbekistan • 3 years: 0.3 up 3million USD; • 5 years: 3 up 5 million USD; • 7 years: 5 UP 10 million USD; • 10 years: ever 10 million USD.
For exported products, customs privileges apply until the end of the FEZ operation Uzbekistan has been suffering from a lack of autonomy in its monetary policy, and the “liberation of monetary policy” was implemented in a decree signed by the Uzbek president on Sept. 2, 2017, which helped enhance the competitiveness of companies, along with the free circulation of foreign exchange.
Uzbekistan is located in the center of Central Asia, serving as a hub for Central Asian markets. The country boasts a strategic location for cost-cutting in terms of logistics and labor costs for numerous foreign companies currently doing business in Central Asia and various parts of the world, including Europe, Central America, and Southeast Asia.
Regarding visas, Uzbekistan's government offers many incentives for foreign investors 149 who enter the country. According to a resolution by Uzbekistan's cabinet, entry visas, Chapter including entry and transportation means, will be freely issued in the context of “On Rules and Regulations on Entry, Exit, Stay and Transportation of Foreign Citizens and Non-Citizens 03 Optimization Strategy of the Angren FEZ Operation in Uzbekistan”
The Angren FEZ is geographically closest to the city of Tashkent compared to other free economic zones.
The Angren FEZ is also located between two huge domestic markets: the city of Tashkent, with more than 4 million people, and the Fergana Valley area, with a population of over 10 million, encompassing three administrative regions of Uzbekistan.
Another advantage of the Angren FEZ is Highway-A373, passing through the territory of the Angren FEZ. The highway connects the Fergana region and other parts of Uzbekistan, leading to Kyrgyzstan and China. A railway is currently under construction that will connect Uzbekistan and China within the next two years. Regarding power supplies, there are two thermal power plants with a production capacity of 2500 MW/h providing uninterruptible power supply.
Angren Logistics Center, with different types of warehouses, terminals, customs, and container yards, can handle loading, unloading, storage, handling, and customs with ease In order to become an investment company in the Angren FEZ, the following main following main the Angren FEZ, the in company to become an investment In order appliances, include electricity, for moving into the Angren FEZ The priority industries the of mission the under falls companies foreign-invested attracting Uzbekistan, In decree presidential a attraction, investment for approach passive this overturn To an investment Next, the required documents to register as an investment entity include In addition, investors' financial reports for the past three years have to be submitted. The procedure for registering investment projects to prepare the necessary documents and convenience. The railway is operated by OJSC Uzbekistan Railway and can also be used and can Railway OJSC Uzbekistan by is operated The railway and convenience. use. corporate discount for at a 30 percent the level; be at a considerable set the localization of production should criteria have been and those enterprises should enterprises should be 30% or more; export of investment and produce high-tech products. more than 95% of Uzbek nationals employ industries, food industries, chemical and petrochemical engineering, electrical technology, other export- manufacturing, and manufacturing, leather and footwear building materials driven industries. is in charge which Trade, of Investment and Foreign investment division in the Ministry investment include functions main department's The Uzbekistan. to FDI attracting of production. of type the to according FEZs suitable into investors moving counseling, due to but Tashkent, various exhibitions in in part usually take Angren FEZ's activities financial problems, it is still difficult to attend overseas investment exhibitions, fairs,and international events. to required all FEZs are the law, 29). Under dd. 2019.4. (NPP-4300 announced was recently participate in related international events every year. However, the reality is that overseas like problems to due passively out carried being are activities attraction investment limitations in budget and areas of business. the about information and plan, business investment an of report feasibility a application, experience of investors in the relevant fields. for entry and conduct business activities in the Angren FEZ is as below: 150 Support for Operation of the Angren FEZ in Uzbekistan [1] Selection of Investment Projects for Implementation in the Angren FEZs
• Inspection of investment applications for location selection and submission to the Executive Committee of the first FEZs (2 business days) • Administrative Committee: Examination and determination of the location of investment projects in the region (five business days). In this case, if the project is to be implemented with an investment of more than $50 million, it will be forwarded to the Central Administration Committee for approval of the Central Administration Committee (two business days) • Central Administration Committee: Over $50 million investment project review (seven business days) • FEZ Board: The decision made by the Central Administrative Commission is sent to investors (one business day).
[2] Registering Occupants (Members) in the Angren FEZ
• FEZ Board of Directors and Investors: settlement of Investment Contracts between 151
Free Economic Zone Authority and Investors (five business days) Chapter • Re-registering from previously registered contents within the Angren FEZ (five
business days) 03 Optimization Strategy of the Angren FEZ Operation • FEZ Board: Registering the company and issuing certificates to tenant companies in the Angren FEZ (two business days) • FEZ Board: Tax and Customs authorities on company registration as tenant companies in the Angren FEZ (one business day)
The procedure for the sale of land to Angren FEZ tenant companies is as follows:
• Investors: Application for land purchase to government centers (one business day) • Government service centers: Submit an application to Khokimlyat for land needed by tenants (one business day); (1) Submission to urban construction and construction departments as preparation materials for road selection (position selection) ). (2) Submitting an application to the state's intellectual office in the area (city) as a preparation for the selection of land for sale (from the date of application receipt) • The National Territory Intellectual Property Office: Land sale documents are prepared and submitted for approval by the authorized authorities (five business days) • Authorized agency: consents to the conclusion, such as location selection, of the land for sale (four business days)
Chief Office Manager Accountant Chief Head of Division Division specialist Development Infrastructure Director Chief Head of Division Division specialist Participants Registration of Registration Chief Head of Division Investor Relations Division specialist State-owned State-owned enterprises: (1) Submit preparation data for land allocation (2) Submit and data on land selection (2) Submit as passageways, selection, such data on road days) (three business a decision to make (Earth) to the city's Hakeem allocation in Hakeem City Hall: Decision-making to preparation allocate land to investors (two business days) • • The Angren FEZ Auothority. The Angren Investment companies can be registered as resident companies in the Angren FEZ only in the Angren FEZ only can be registered as resident companies Investment companies The Angren FEZ chief is appointed by the Uzbek prime minister's resolution. Under the the Uzbek prime minister's resolution. The Angren FEZ chief is appointed by The organization, work, and business of Angren's Free Economic Zone Authority were were Free Economic Zone Authority work, and business of Angren's The organization, 2.2. Organization, System and Business Analysis System 2.2. Organization, after completing the above procedure. after completing the commissioner, three divisions are an operated: investment division, attraction a registration development division. Each division has two employees, division, and an infrastructure Economic Free Angren the of operations overall the on work people six of total a and Zone Accounting Authority. affairs are handledby a designated division, with one person organized to perform the management and operation of the Free Economic Zone Authority of the Free Economic Zone Authority and operation organized to perform the management structure of the Angren FEZs is as follows: The efficiently. Source: Source: [Figure 3-1] Organization of Angren's Free Economic Zone Authority Free of Angren's 3-1] Organization [Figure 152 Support for Operation of the Angren FEZ in Uzbekistan handling the work as a separate division in accounting. A total of eight people are engaged in the management and operations of the Angren Economic Zone Authority.
As shown in the figure above, Angren FEZ consists of three Divisions:
1) Investor Relations Division
The main functions of this division were to establish and maintain long-term relations with investors. Regulation of business processes in the framework of interaction with potential investors for competent positioning of the company in the market is its primary function. Making evaluations of the company image in the context of the investment environment by collecting and analyzing data on how it is perceived by the market, as well as making proposals for improving that image, also falls under its duties. Establishing the process of attracting foreign direct or local investments, giving presentations to investors, posting information on the company website, and providing interpretation support are also important duties.
2) Registration Division 153 Chapter This division’s duties start as soon as the investor solicits a feasibility study of an
investment project. After receiving all of the required documents from an investor, the 03 Division prepares all other documents and data within two days and sends them to the Optimization Strategy of the Angren FEZ Operation Administrative Council, the body in charge of approving or declining the investment project for review. Simultaneously, the Division sends one copy of the documents to the Center of expertise under the Ministry of Economy for review. As soon as the project is approved by the Administrative Council, the Angren FEZ Management will sign an investment agreement with the investor and provides the Angren FEZ membership certificate. Later, the division registers the new company in their database. After the company is registered by the division, it provides a monthly report on the current status of the company (how much equipment was imported, the amount of investment invested in this current month, how much was spent for the construction of the factory, etc.). All information is kept in the database of the Angren FEZ Directorate.
3) Infrastructure Development Division
This division’s main functions include analyzing the actual expenditure of the budgets on all levels in terms of financing the infrastructure utilities sector. It also interacts with ministries and departments, administrations of rural settlements, and heads of local divisions of infrastructure providers about current problems related to the connection of natural gas, electricity, automobile roads, sewage systems, drinking water, or water for 2.3. Operational Issues and Implications Issues 2.3. Operational conditions should create adequate investment The Angren Free Economic Zone Authority Angren's work is simply defined as attracting investment, providing infrastructure, and manner and promoting experience in dealing with all tasks in an integrated ROK’s Next, according to the resolution of Uzbekistan's President NoPR-3356, a new system system new a NoPR-3356, President Uzbekistan's of resolution the to according Next, The Administrative Council is a joint body approved by the Uzbek president among The main functions of the Administrative Council are as follows: implementation of Council indicate that these tasks of the Administrative to the case in Korea, In contrast for investors. To this end, the problems and areas for improvement are as follows. for investors. To free economic registering entering companies. This shows that the work scope of the early zones still has room for further sophistication. agencies government and other related comprehensive and systematic work with the central offer some perspectives. may industrial use. This division also provides practical assistance to the member companies of to the member assistance also provides practical use. This division industrial utilities. of infrastructure on connection issues Angren FEZ adopted from Dec. 1, 2017, under organizing economic free zones was of managing and measures “Additional to enhance the efficiency of free economic zones and small industrial zones was established council for free economic that an administrative zones.” This means in free economic zones. committee for coordinating activities instead of a territorial local executive bodies and other organizations. representatives of national regulations and adjustments in free economic zones; control over compliance with functional of activities and formation the over control systems; economic and laws special provision the on decisions zones; economic free in directors of boards and organizations enterprises; investment of provision the on decision enterprises; investment for land of transport and communications engineering of provision plans; master of preparation obligations investor of fulfillment the monitoring zones; economic free in infrastructure of the area boundary and area of management and support for enterprises; administrative of investment enterprises. regulations the zone; legal proposals; and administrative major decisions, approvals, permits, etc. on the zones are made outside the Economic Zone Authority. 154 Support for Operation of the Angren FEZ in Uzbekistan When reflecting upon the experience of ROK and other countries, a series of procedures, such as land provision and factory registration, should be handled within the free economic zone office of the central and local governments. In reality, the decision-making processes are fragmented among the central government and local governments, which makes obtaining permits and gaining access to infrastructure more difficult for investors.
Therefore, the work of the Free Economic Zone Authority remains very limited in its depth and scope, serving more as a messenger rather than a control tower, only handling decisions made by the Administrative Council and implementing infrastructure- related institutions to investors. This relationship makes systematic and comprehensive management difficult.
Another side effect of this is that excessive work is concentrated on the administrative council. Basic and important tasks that may be carried out by the Angren Free Economic Zone Authority belong to the council.
The administration of land provision, as well as its main tasks, is in charge of the 155
Administrative Council. In these tasks, as experienced in ROK, it is necessary to simplify Chapter administrative procedures by transferring some tasks to the Free Economic Zone Authority. 03 Optimization Strategy of the Angren FEZ Operation The role of the administrative council is to implement national regulations and adjustments in free economic zones, to implement control over compliance with special laws and economic systems, to organize the functions of free economic zones, and to form the board of directors and control of activities.
The main role of the Administrative Council should be control and coordination.
The preparation of master plans; decisions on the placement of investment entities; decisions on the provision of land to investment entities; the provision of engineering, telecommunications, and transport infrastructure in free economic zones; monitoring of investor obligations; corporate support; area boundary and area administrative management of zones legal proposals; and administrative regulations of investment entities are required to be directly controlled by the Free Economic Zone Authority.
As a result of these problems, foreign investors are suffering from inconveniences, such as a delay in administrative handling and visits by various agencies.
For example, the Chinese investment company called “Allfine Hygiene” recently faced In terms of land use, industrial complexes of ROK or other countries manage and operate and operate manage countries or other ROK of complexes industrial terms of land use, In support facilities or public facilities, for corporate As a result, there is no land allocated the comprehensive handling of management Overcoming investors' difficulties with collectively The introduction of a one-stop service, which handles the bulk of the tasks association in Center Strategy Development Uzbek the by conducted study one In Free Economic Zone have Some investors who have already invested in Uzbekistan's some infrastructure related issues. One such issue was the connection of natural gas to to gas natural of connection the was issue such One issues. related infrastructure some months. three almost took procedure The built. had company the factory the of gates the the for responsible Uztransgaz of branch contacted the regional the company this case, In stop” service within the FEZ, the on its own. If there was a “One connection of gas pipelines promptly instead of losing three months care of the issue could have taken same company has company receive a construction permit, the To directly. Uztransgaz before contacting electricity, of connection the for permit the get To center. services State the to apply to All of Uzbekenergo. the regional branch has to contact the company on the other hand, to investors, ultimately creating a both time-consuming and puzzling these procedures are significant disadvantage in attracting FDIs many investors to still Uzbekistan. Unfortunately, Angren needs to improve its credibility. retain the view that supporting facilities, purposes, including industry, various zones according to specific In the case of Angren, the area is managed and ecological zones, and public facilities. room for other purposes of land use, leaving only for industrial use, so there is no operated room mostly for supporting facilities. possibility the hinders this long-run, the In programs. support corporate of lack a in resulting service in one-stop so-called no is there Presently, zone. of the independence financial of for investors to carry out their daily work. Uzbekistan, which is creating difficulties work process with relevant agencies should be work and the establishment of a systematic dealt with promptly. will enhance the provision of administrative within the Free Economic Zone Authority, convenience and credibility for investors. Peace Nexus to identify problems in the economic, social and foundation with the Swiss environmental sectors of Uzbekistan's FEZ, it was found that the objectives of stimulating direct investment, strengthening investors’ confidence in national policies, and ensuring the responsibility of government agencies provided to investors are yet to be met. 156 Support for Operation of the Angren FEZ in Uzbekistan pointed out several problems, including the difficulty of obtaining work visas and working around red tape.
They also pointed out that infrastructure in the FEZ needs to be improved significantly.
The success of promotion schemes to attract companies seeking to invest in free economic zones is greatly affected by various support policies, corporate support programs, and location factors in free economic zones. The Angren FEZ face difficulties attracting foreign investors due to lack of promotion, advertising, and infrastructure facilities, and the lack of various corporate support programs has also reduced the effectiveness of investment attraction efforts.
Also, investors with manufacturing plants in the Angren FEZ are having problems commuting from Tashkent to Angren (80 km) every day because Angren remains inadequate as a residential area. The city of Angren lacks certain facilities that investors consider essential to live and conduct businesses, such as hotels, international schools, convention centers, and restaurants. Meanwhile, the shortage of manpower in the FEZ remains as 157 the most conspicuous issue. This problem is one of the key issues in the operation of and Chapter investment in special zones, and, with the absence of science and engineering colleges nearby, access to adequate technical personnel is very difficult. Previous research reports 03 Optimization Strategy of the Angren FEZ Operation have also adequately addressed such problems facing Angren.
The results of such studies show that there are almost no means to support corporate management activities, and necessary joint facilities and support facilities for companies are yet to be realized.
3. ROK’s Operations Experience and Implications
3.1. Changes in the Institutional Foundation and Industrial Parks Management
3.1.1. Enactment of Relevant Laws and Process of Change
ROK has various types of industrial complexes, but this paper will focus on foreign investment industrial parks from which implications for legal basis can be deduced. The management, operations, and support of industrial parks are based on the Industrial Park Management Act, so it would be necessary to look into its key aspects. The Industrial Park On December 31, 1975, the Industrial Park Management Act was enacted, and its purpose was enacted, and Act Park Management 31, 1975, the Industrial On December designating parks by basis for the management of industrial provided the legal The Act in the Free-Export Zone Establishment Act In the meantime, the government established to enacted the "Industrial Placement Act" On December 31, 1977, the government review of the location was designed for a comprehensive The Industrial Placement Act switched from the formation work was In addition, the management organization's on Development of Local Industrial Complexes, the Industrial Since the 1970s, the Act revitalize the After the 1980s, it led to the development of local industrial complexes to Management Act and the Export Industrial Park Development Act were enacted in 1964 to to enacted in 1964 were Development Act Industrial Park and the Export Act Management parks. export industrial first planned create ROK’s and rationalizing by economy the sound development of the national is to contribute to parks. the management of industrial basic matters concerning operating parks, basic industrial of transfer the stipulating and institutions a management as them prices of land, land purchase, land use, compartmentalization by plans for management, for industrial parks. committee of industrial parks, and the deliberation safety management and began to create the Masan Free-Export Zone and 1970 to promote foreign investment Iri- Free Export Zones. public deploying rationally by the national economy promote balanced development of ordinance has been in effect since 1979, as it was works. Since then, the enforcement declared on Dec. 30, 1978. fundamental its and nationwide, of industries placement proper the for sites industrial of national territory development plan, considering the purpose was to harmonize with the local characteristics. location adequacy of the industries and institutions. Though it did not completely and installation of the complex to management with from developmental work, it expanded its scope of management work along withdraw development projects. have been in and the Industrial Park Management Act Base Development Promotion Act, effect under a number of separate laws to meet demands for the development of various industrial complexes under various development measures. economy. rural the revive to aimed parks industrial and agricultural and economy local 158 Support for Operation of the Angren FEZ in Uzbekistan In addition, various programs were introduced, such as the restriction on imprudent designation of industrial parks and the introduction of the rental industrial park system in accordance with changes in the industrial environment.
In the 1990s, the Act on Industrial Location and Development, the Act on Industrial Location and Development, and the Act on Industrial Placement and Factory Establishment (now, Industrial Cluster Development and Factory Establishment Act) were merged into two legal systems.
The foreigner-only complex is an area designated for supplying land for factories to foreign businesses at low prices and for reduced rent. It was introduced in 1994 to promote foreign direct investment and strengthen the competitiveness of domestic industries. The complex was created with the expectation that it would upgrade the sophistication levels of local industrial structures and revitalize the local economy through the introduction of advanced technologies from foreign countries, thus leading to positive externalities.
In January 2001, the “Act on Industrial Location and Development” was amended to 159 introduce the Urban Advanced Industrial Park System, which allowed small-scale zones in Chapter urban areas to be used for cultural and knowledge industries. 03 Optimization Strategy of the Angren FEZ Operation In 2002, the Act on the Designation and Operation of Free Economic Zones for the Promotion of Foreign Investment, Strengthening National Competitiveness and Regional Development was enacted, and, consequently, Incheon, Busan, Jinhae, Gwangyang were designated in 2003, followed by Saemangeum, Gunsan, Hwanghae, Daegu and North Gyeongsang Province in 2008.
Free economic zones are areas created not only to improve the business environment of foreign investment enterprises, but also to accommodate and improve their living conditions as residents. Such needs were met by the “Special Act on the Designation and Operation of Free Economic Zones.”
The purpose of the free economic zones is to provide an optimal environment for overseas companies that are meeting increasing needs to broaden their activities on an international scale, as globalization is becoming a reality for many of such firms. Against this backdrop, various programs and policies were introduced to enhance national competitiveness and promote foreign investment through the comprehensive improvement of the business environment for foreign investment enterprises. Industrial park overview Management institution • • 3.1.2. Scope and Change of Management of industrial parks are management and operations The basic legal requirements for the the management institution when an industrial park is designated, to the Act, According The details contained in the basic management plan include the following: Area of (1) In this regard, more specific details are as follows: In 2008, in order to meet with the rising demand for industrial parks promptly, the the parks promptly, for industrial the rising demand order to meet with In 2008, in Thus, have deteriorated. parks have become old and facilities Over time, industrial derived derived from the “Basic Plan for Management of Industrial Parks” which definesthe basic management of industrial parks. and the overall conditions of industrial park occupancy lists the Establishment Act” Development and Factory Article 33 of the “Industrial Cluster specific details. is obligated to establish a basic plan for the industrial park management as defined under the management institution entrusted with the the Presidential Decree. In this case, concerning the basic manager from the control management service obtains approval plan). management plan (including the change Industrial Park to Manage; Qualification of businesses and businesses subject to occupancy; industry; Items on the Installation and by layout use of industrial land; Factory Areas by and Other matters necessary for the management of of Support Facilities; Operation industrial parks are included in the basic management plan. development and management of industrial complexes were established under three three established under complexes were of industrial and management development laws with the establishment of the on “Act Special Cases Concerning The Simplification of Procedure for Industrial Complexes.” and Permission Authorization projects to renovate industrial complexes not only to expand and upgrade the industrial facilities in order to attract also to improve culture and childcare but infrastructure, scheme, new this Under processes. legislation necessary the through went also investors eased were purposes specific to according use land restricted that regulations existing demand-driven development of land lots. With this change, to allow for multi-purpose possible became from the private sector participation complexes and enhanced industrial residential factories, including use, broader to committed could be sector funds and private new opportunities for the private sector to participate. areas, and commercial areas, opening 160 Support for Operation of the Angren FEZ in Uzbekistan • Project implementer status of promotion • Status of sale • Rental status • Occupancy status • Location conditions
(2) Industrial Park Basic Management Plan
• Basic direction • Zoning plan by industrial park use: Zoning area by use, scope of buildings to be constructed by zone, layout plan by area • Zoning plan by industry • Zoning management plan: Zoning list of occupations, occupancy level, occupancy procedure • Ex-post management plan: Industrial facility management, environment management, Safety management, infrastructure support • Implementation Plan for the entry-level company: matters concerning factory establishment support, production activities support, worker welfare support, 161 Chapter support facility installation
• Operation of other matters in industrial complexes 03 Optimization Strategy of the Angren FEZ Operation
The details of the basic management plan will be included.
The management of industrial parks is conducted under this basic plan, which is a strong regulatory tool with a legal basis and supports the management activities of businesses. After the enactment of the “Act on the Management of Industrial Parks”, the management activities went through some significant changes. In the early days of industrial park management, most of the tasks had to do with the maintenance of facilities and managing occupancy contracts with businesses, as well as restitution and regulation of unused lands. In order to meet rising needs for diversified management needs and to conduct the required maintenance tasks, however, the nature of management activities also had to evolve.
The current work scope of industrial park management is detailed by the “Act on Industrial Cluster Development and Factory Establishment”. The Korea Industrial Complex Corporation (KICOX), the management agency of the industrial parks, performs the duties specified in Article 45-13 in order to achieve its goals, as defined in Article 45-9-1.
(1) Management of industrial parks; (2) Developing, creating, leasing and selling industrial parks; Act" for the promotion of field experts, industrial and academic cooperation, and and academic cooperation, the promotion of field experts, industrial for Act" technology innovation; required for industrial re-education of workers Presidential Decree. establishment and industrial park; support facilities, and industrial-intensive infrastructure, and the purchase and and purchase the and infrastructure, industrial-intensive and facilities, support or factories, etc. industrial land the sale of purchased including sale of properties, the entrants; (6) Projects to enhance productivity and promote exports of the entrants; productivity and promote exports (6) Projects to enhance establishment; (7) Supporting work related to factory of factories; (8) Projects for relocation and grouping research of information related to factory (9) Collection, distribution, survey and of industrial complexes; upgrading (10) Structural industrial parks; (11) Project for enhancing the Competitiveness of industrial parks; (12) Safety management and safety education (13) Supporting companies entering the country and other projects prescribed by the (3) Installation and operation of factories, knowledge-based industrial centers, centers, industrial factories, knowledge-based of and operation (3) Installation manpower for and the supply of cooperation of labor-management (4) Improvement ; projects for employees education projects and housing construction and (5) Welfare for the children of the employees. of childcare facilities (5-1) Operation the "Private School of schools under establishment and operation (5-2) Supporting the As mentioned above, the management institutions include the creation of industrial institutions include the creation of industrial As mentioned above, the management managementIn addition to basic management of inbound businesses, the industrial park industrial development, the Saemaul Undong for factories of ROK’s In the early days parks, investment inducement in industrial parks, factory registration, follow-up follow-up industrial parks, factory registration, parks, investment inducement in factory as such tasks basic to addition In management. use land and management, also carries out other various tasks. From management, KICOX establishment registration likely are frameworks managerial and legal initial that assume safely can one process, this to cope with the changing environment. to change through trial and error in order facilities operates service provides various management support activities and installs and and marketing, sales, production, operations, for factory support can provide that technology development. These projects have been used to generate profit, which could then be used not only to attain financial independence, but also to fund corporate support programs. industrial complexes, education setting up night schools for nearby was promoted. By who were able to get high school opportunities could be enhanced for young workers 162 Support for Operation of the Angren FEZ in Uzbekistan diplomas while working. Vocational education was another important program that allowed fresh recruits to be on the job as soon as they were employed. The Gumi-Banwol Industrial Complex also operated a multi-purpose thermal power plant, from which both electricity and steam were supplied to support the dyeing process of textile factories. It also operated a bonded zone to support customs duties, operated exhibition halls for sales and overseas marketing, maintained a public playground, installed factory spaces for small and medium-sized enterprises, and introduced apartment-type factories for micro enterprises. In addition, various facilities were constructed within the industrial park to facilitate management, accounting, marketing, and purchasing so that businesses could have easy access.
Other logistical needs were also met by establishing and operating gas stations, water purification plants for supplying industrial water, and industrial park management institutions. Though public expenditures were made for the initial development of an industrial ecosystem within the complex, financial autonomy was greatly encouraged and achieved in some instances, mainly through revenue streams from business support activities. 163 Chapter
Promoting various business groups and operational programs are also an important 03 component that merits closer study. Optimization Strategy of the Angren FEZ Operation
Today’s business activities rely greatly on networks, which are utilized for information exchange, finding new business opportunities, and enhancing corporate management activities. In the case of ROK, various management councils and councils in specialized fields have been established in industrial complexes to tap into the potential of using networks to improve the business environment. In the recent decade, cluster projects have received substantial support from the government. An industrial cluster contains related industries in proximity to promote synergy.
A cluster aims to bring together not only companies directly connected via production, but also research and development entities to form a mutual relationship that may lead to positive externalities in technology development, information exchange, and logistical support.
Whereas traditional industrial areas solely focus on production functions and thus cannot expect high interaction among businesses, clusters aim for creation and innovation by sharing information and knowledge not only among businesses, but also through the creation of interweaving networks with universities, research institutes, and related “Building and Operating R&BD Network” (budget size $62 million as of 2019) is the main million as of 2019) (budget size $62 R&BD Network” and Operating “Building The details of major projects are first formed and operated by industry-academic Joint R&D support projects support smaller projects that need immediate On-site R&D projects aim to commercialize technologies owned by innovative countries are paying competitiveness, many Because clusters can enhance industrial attention. Coping with changing industrial sophistication also merits equal Structural structural complexes through industrial innovating keep to Therefore, it is necessary agencies. clusters. fostering industrial for program flagship industry and sectors shared by focusing on the core industrial association organizations, seminars, activities like industrial-academic network various by academia, supported and task development meetings. exchange meetings, the tasks that have been drawn at industrial sites and are selected among commercialization up through joint cooperation initiatives by industry-academic association from time to time throughout the year. or universities, or directly support technological institutions, such as research institutions development required to improve existing products or production processes. Project-based R&D identifies commonneeds of multiple firms (typically five) and develops technologies production modules into an previously separate and business models that can connect one to develop a new product. integrated considerable attention to clusters. Typical examples of industrial clusters are Silicon Valley for Daedeok research and development. and a special zone in ROK in the U.S., as facility a robust complex that can deal with rising issues, such and keeping paradigms and nurturing a capable working conditions, and attracting satisfaction, worker upgrading, workforce are becoming more demanding endeavors. the to enhance the competitiveness of the manufacturing industry and re-engage upgrading culture, value-added businesses, of high whole. With the expansion as a national economy industrial reorganize government is pushing to the facilities, educational welfare, and complexes into complex spaces that combine jobs, learning centers, and even entertainment zones. 164 Support for Operation of the Angren FEZ in Uzbekistan Ecological considerations are also becoming a very important issue. Eco-industrial parks apply concepts derived from natural ecosystems onto industries. An eco-friendly industrial complex enhances interconnectivity of factories and businesses and turns by- products, surplus heat, and waste from one business to resources and raw materials for another, so that resource use is efficient to the point where zero-emission can be a feasible objective. Eco-industrial complexes can greatly reduce potential conflicts with residents who are naturally concerned about possible environmental problems and encourage clean production technologies on a large scale, which would be difficult to achieve through engaging businesses one-by-one instead of adopting a holistic approach. Similar projects are already being carried out in advanced countries such as the United States, Denmark, and Japan and have also been launched in ROK.
It is expected that industrial parks will be able to overcome long-standing conflicts with the community due to environmental pollution problems and transform themselves into eco-friendly industrial complexes that lead to co-prosperity with the community.
3.2. Cases of Foreign Investment Areas 165 Chapter
3.2.1. Free Trade Area 03 Optimization Strategy of the Angren FEZ Operation A free trade zone is a specific area that allows exceptional measures, such as non-tariffs on economic activities such as trade, production, and investment within a country. It aims to introduce international economic norms for specific regions and to create a friendly environment for foreign investment.
The most well-known type is a free trade area, which is designed to promote foreign direct investment in the manufacturing sector, exemplified by Masan, Gunsan, Daebul Free Trade Zone, and Taiwan's mechanical tools export zones. Another type is a trade- oriented free trade zone, which is established with the aim of promoting trade through the deregulation of international trade activities. Examples of these zones include Hamburg in Germany and Amsterdam and Rotterdam in the Netherlands. Lastly, there is also the mixed- type production and trade-type free trade area, which is a hybrid form that allows all types of economic activities, such as the US free trade area, Hong Kong, and Singapore.
ROK mostly employs production-oriented free trade areas, and the status of each region is summarized in
. 992 ‘08.12 Kimje 1,297 ‘08.12 Ulsan 943 ‘05.12 Yulchon 248 ‘05.12 Donghae 1,157 ‘02.11 Daebul 1,256 ‘00.10 Kunsan 309 ‘73.10 Iksan 957 ‘70.03 Masan ) ㎢ Time of Area( Masan Free Trade Agency. Trade Masan Free Division designation There are largely four economic effects of free trade zones. First, they promote zones. First, they promote four economic effects of free trade There are largely This stimulates the international base. trading Second, they serve as an international which is why development of the local economy, Third, they greatly contribute to the experience, This study will closely examine the most representative case from ROK’s industries can The priority industries in this region are those in which foreign high-tech foreign investment through the creation of a specialized investment environment with investment environment with through the creation of a specialized foreign investment logistics and production combining land, rental low-cost as such support, comprehensive agencies. and one-stop service of management and distribution functions, functions and compounding the function of processing and manufacturing transaction area and enhances the competitiveness the free trade logistics and distribution functions in of linkage between foreign companies in the of domestic companies through the activation the area. area and domestic companies outside and industries local promoting of means a as area trade free the use governments local regional developmentdevelopment Gradual allowing ofby them the to free flexibly. operate growth as demand that can generate zone can result in a scalable industrial complex trade as the advancement Finally, fuels its growth further. from the expanding local economy technology global with companies multinational is promoted, structure industrial the of to productivity contributing in, thereby to move network are more likely and market the and the advancement of industrial structure by enhancement of domestic companies influx of new capital goods, advanced technologies, and management strategies. export-oriented manufacturing, Zone. It aimed to attract which is the Masan Free Trade that focus on foreign companies, knowledge service industries, and wholesale businesses of the and advanced logistics. The relevant regulations import and export transactions Zone Designation eligibility for residence have the legal basis in Article 10 of the Free Trade and the Enforcement Decree of the same Act. Act and Operation advantageous strategically be to deemed were that businesses and growth new generate Source: Source:
Regional Status of Free Trade Areas Trade Status of Free 3-1> Regional
In terms of the details of the tenant industry, ROK has designated specific industries by laws or regulations. First, the high-tech industries are subject to the notification of the Minister of Industry and Commerce in accordance with Article 5 of the Industrial Development Act, and industries deemed to possess the potential to become new growth engines are subject to the advancement of the domestic industrial structure and the strengthening of international competitiveness. In the case of Masan Free Trade Zone, automobiles, machinery, robots, aviation, electrical and electronic equipment, and precision equipment linked to local cities, such as Masan, Changwon and Gimhae, are key examples. Other industries that meet the purpose of basic foreign investment, such as manufacturing, which has great potential for technology transfer and employment, are also targets for active promotion.
The entry procedures are: consultation on residence → application for registration of → → foreign investment companies application for residence contract approval of residence 167 contract → lease contract → facility installation and building permit. As for incentives for Chapter companies that move into free trade zones, tax exemptions are applied regardless of the 03 amount of foreign investment (Article 116-2, Paragraph 4 of the Enforcement Decree of the Optimization Strategy of the Angren FEZ Operation Special Taxation Act). Tax exemptions are granted to foreign-invested companies for 10 years (10 years of acquisition tax and property tax for seven years, 50% reduction for three years).
Tariff exemptions are also one of the key benefits, and free trade zones are legally deemed to be outside the tariff area. Businesses can also receive tax exemptions and reimbursements for declared goods coming into the free trade area.
An offshore processing system was also implemented in the free trade zone, which allowed some flexibility for tenant companies by allowing some of the production processes to be conducted outside zone, and foreign goods, such as facility equipment, can be exported to non-exempt domestic areas in a bonded state. A one-stop service handles a wide scope of administrative tasks related to business activities, such as building permits and tenant contracts. In this case, building permits constitute an exception, in which the local government's exclusive license is granted for firms in the free trade zone.
Masan Free Trade Center, the managing authority, is composed of 19 directors, one or three departments (sections), and the number of operating personnel in three departments 3.2.2. Free Economic Zone 3.2.2. Free and declared in accordance with the Special A Free Economic Zone is an area designated for environment the optimal provide to established zone economic special a is It of Free Economic Zones" was enacted on the Designation and Operation In 2002, the "Act Free Economic Zone Committee after the by The Free Economic Zone is designated The Free Economic Zone (Korea Free Economic Zones: KFEZ) was started in Incheon Act on the Designation and Operation of Free Economic Zones, which is an area created to of Free Economic on the Designation and Operation Act foreign companies and their living conditions. improve the business environment of with new business environments from globalization. businesses that are increasingly faced national competitiveness, and develop local to promote foreign investment, strengthen Sea, Daegu and Gyeongbuk were Gunsan, the Yellow economies. In 2003, Saemangeum, designated as free economic zones . the of consideration in Committee Zone Economic Free the of resolution and deliberation and foreign investment and settlement, impact on regional economy possibility of attracting cost. balanced regional development, ease of securing the necessary land, and development Sea, Yellow Bay, Gwangyang Jinhae, Busan, in operation began them of eight and 2003, in Daegu, Gyeongbuk, Saemangeum, Gunsan, Chungbuk, and the East Coast. is 17. First, the management department is staffed by eight people responsible for the responsible for the eight people staffed by department is the management is 17. First, contract the factories; and land of lease the zone; trade free the in revenues of collection agencies with the administrative companies; cooperation of the supporting and follow-up such as the standard factories, the management of public facilities, zone; in the free trade industry division is composed of and safety matters. The export documents, and personnel; companies, permits and registering foreign are responsible for attracting six personnel who free trade and managing promoting imports and exports, contracting for exporting and and issuing permits for tax exemptions and systems, improving (manufacturing) contracts, Department is responsible other facilities. The Investment Promotion the installation of public relations, and data press related matters, investment attraction, for public relations, three persons. by archives, and it is staffed 168 Support for Operation of the Angren FEZ in Uzbekistan
Korea's Free Economic Zones
Area Opening Airports Development Name Position Key attracting industry (㎢) day and ports completion
Incheon Incheon 2022 1st - Tourism Leisure (Yeonsu-gu, International 03~09 2nd - High-tech Industry Incheon 123 2003.10.15 Jung-gu and Airport 10~14 3rd - Medical, Finance, Seo-gu) Incheon Port 15~22 Distribution Logistics
- Advanced parts and materials(car, offshore plant Busan 2023 1st parts, industrial machinery, Gimhae Busan and (Gangseo-gu) 04~06 2nd parts, etc.) 51 2004.03.30 Airport Busan Jinhae Gyeongnam 07~15 3rd - Port logistics, Information new port (Changwon City) 16~23 & communication, R&D, Tourism Leisure, Culture Education
Jeonnam Future High-tech Material (Yeosu, 2022 1st Gwangyang Industry - Steel and Metal Gwangyang Suncheon, 04~10 2nd 69 2004.03.24 Port Yeosu Industry - Renewable Energy bay area Gwangyang) 11~15 3rd Airport - R&D Service - Tourism Gyeongnam 16~22 Leisure -Hadonggun
Daegu, Optimization Strategy of the Angren FEZ Operation Daegu airport Gyeongbuk 2022 1st Automobile and Machine Daegu- Pohang (Gyeongsan, 18 2008.08.13 08~13 2nd Parts - Green Energy - Bio - Gyeongbuk Yeongilman Yeongcheon, 14~22 Medical Device - IT - SW Port Pohang)
Yangyang Gongwon Advanced Materials Industry East coast International 2024 1st (Gangneung, 9 2013.07.09 - Four Seasons Luxury zone Airport East 13~24 East Sea) Marine Complex Tourism Sea Port
- BT, IT - Advanced Cheongju Chungbuk 2020 1st - Airline industry Sources Chungbuk 5 2013.04.26 International (Cheongju) 13~20 : Data from the Free Airport Economic Zone Planning Committee
Source: Data from the Free Economic Zone Planning Committee.
For overseas companies investing in the Free Economic Zone, special exemptions and benefits are available, including tax exemptions, funding support, exclusion from the Metropolitan Area Maintenance Planning Act, educational and medical institutions, special permits for casinos, and provision of advantageous housing for rent for foreigners. The legal basis is provided in Article 2, 4, 5 of the Special Act on the Designation and Operation of Free Economic Zones.
→ Remittance Remittance → Foreign Investment Investment Foreign → Reduction requirement Register of corporation Register of corporation Limited to imported capital goods → Corporate Account Transfer (Foreign Bank) (Foreign Transfer Account Corporate Reduction of tax → Five years exemption 100% exemption for up to 15 years by local government ordinance 100% exemption for up to 15 years by Local government ordinances allow for up to 15 years of reduction Tariff Property tax Acquisition tax Acquisition Division Free Economic Zone Planning Board. Free Local tax National tax The Free Economic Zone exempts corporate tax, income tax, customs tax, acquisition tax, tax, The Free Economic Zone exempts corporate In addition to basic and local taxes, it supports various financial and in-kind support support in-kind and financial various supports it taxes, local and basic to addition In The concept of foreign direct investment refers to the acquisition of shares or equity of of shares or equity to the acquisition investment refers of foreign direct The concept 2 of the Act, 1, Paragraph direct investment under Article be recognized as foreign To as follows: The foreign investment procedures are Bank) Exchange Foreign or (Invest KOREA Report Investment Foreign of investment funds (Foreign Bank, Customs Mobile Station) of investment funds (Foreign establishment and business operators Bank) Investment Register of paid-in capital (Foreign Foreign Investment Authority). (Report of the Foreign Authority companies in free economic zones under the Special and property tax on foreign-invested and the Special Taxation of Free Economic Zones on the Designation and Operation Act Restriction Act. for business operations such as funds, infrastructure, and leasing for foreign-invested and leasing for foreign-invested such as funds, infrastructure, for business operations the on Act Special the from grounds legal their derive mechanisms support Such companies. Act, Promotion Investment Foreign the Zones, Economic Free of Operation and Designation domestic companies for the purpose of establishing a continuous economic relationship economic relationship a continuous purpose of establishing companies for the domestic alliance. and technical participation through management the time, same the At won. million 100 least be at should person amount per the investment investment, and, when more pertain more than 10% of the aggregate investment should criteria. Exceptions regarding the all of them must meet this than 1 person is participating, the total foreign but. even in cases where the law, are not recognized by investment amount the aggregate investment is below of the ratio or than 100 million KRW investment is more an exception and the foreign investor can constitute a board member by 10%, designation of thus be recognized as foreign direct investment. Source: Source:
Tax Reduction in Free Economic Zones Reduction in Free 3-3> Tax
.
Various Subsidies and Other Support Contents
The decision will be made through negotiations, Manufacturing: More than $10 million with the standing condition of maintaining a Tourism : More than $10 million minimum of 5% FDI support - factory facilities, Logistics : Over $5 million Cash support research facility installation costs, employment Medical institutions : Over $5 million subsidies, education and training subsidies, etc. R&D: More than $1 million Services : Over $10 million
Roads, railways, airports, port facilities, water 50% government funding Support for and sewage, waste disposal facilities Full support for the Free Economic Zone infrastructure Committee Institute
Foreign Financial support for establishing Education · Measuring the evaluation factors such as Education Research Institutes, Early Operation Expenses, contribution to national development and Research Construction Expenses, etc. reputation
Rental Lease for 50 years - Rent at 10/1,000 of the land Foreign investors support price
Rent By local government ordinance Foreign investors 171 reduction Chapter
Source: The Free Economic Zone Planning Office (http://www.fez.go.kr/global/index.do). 03
In addition, support to improve living conditions, easing of regulatory burdens, Optimization Strategy of the Angren FEZ Operation simplified administrative procedures, and improvements in immigration systems are also an integral part of the support programs. Improvement of living conditions for foreigners merit a special note. Attracting investors from overseas also involves providing not only a business-friendly conditions, but also offering appealing conditions to immigrate, including foreign language services and educational and medical support for families. Such indirect support mechanisms are listed in
. IFEZ Act on FEZ Act Act on FEZ Act Special Act on Special Act Relevant law Economic Zones Economic Zones Article 23&23-2 of Foreign Education Education Foreign Special Act on Free Special Act Special Act on Free Special Act Article 23-3&24-2 of Article 23-3&24-2 of Article 22 of Special Article 20 of SpecialArticle 20 of Main content operate and schools and/or operation educational institutions 30 percent of the students enrolled) junior high schools, within million) broadcasting Allowing foreign medical institutions or foreigner-only pharmacies to Allowing foreign medical Allowing establishment and operation of foreign educational institutions of foreign and operation Allowing establishment of the site, support for facility construction Provision of land or purchase of international on the Establishment and Operation Special Acts schools (elementary and students to enter international Allowing Korean Exemption permits such as the casino business for foreigners (over $500 Exemption permits such as the casino business for of foreign broadcasting channels on cable Expansion and operation - projects of medical institutions (e.g. Spa) - Special recognition of subsidiary Medical Institutions (in process) on Foreign - Special Act Issued in a foreign language or received or processed official documents in or processed official language or received Issued in a foreign a foreign language - - - - - - rental housing (1~10% of total housing) - Foreign-only etc. Incheon Free Economic Zone (http://www.ifez.go.kr/noti001). Incheon Free services Excellent Incentive To provide a one-stop service, each Free Economic Zone Authority designates and designates and provide a one-stop service, each Free Economic Zone Authority To the local is carried out by Zone Authority The one-stop service of the Free Economic Cheongna and Zone Economic Free Songdo the operates instance, for Incheon, of city The Safe medical environment Environment p-educational Foreign language Foreign operates operates a project manager to support the entire process, from the investment review stage to follow-up management. Having a designated manager with due authority and decision- decisions and professional and systematic management making capacities allows for rapid services provided by free economic zones; business consulting for finding new investment tax and accounting, legal, partners; investment promising seeking and opportunities services. support consultation; and various administrative processes such as building permits in free trade the administrative governments, unlike zones. and Yeongjong in the Incheon Free Economic Zone. The Planning Office of the main office Promotion plans and activities. The Investment coordinates basic investment attraction with 24 persons in four divisions, each Division has three departments and operates Development urban architecture, and environment. responsible for planning, infrastructure, projects such as complex planning, environmental management, port, logistics, international waste disposal, landfill treatment, electricity, business complex, Songdo Landmark City, water, gas management, and new and renewable energy projects also fall under the work Source: Source:
Support for Foreign Living Conditions of Incheon FEZ Authority Conditions of Incheon Living for Foreign 3-5> Support
The tasks and organizations of other regions differ. Busan Free Economic Zone Authority is composed of three main offices (planning, budgeting, and public relations), and seven persons form a support team promoting foreign investment support. It is charged with attracting investment by facility types, such as the Myongji complex, enterprise investment attraction business, educational institutions, and medical institutions. The three teams are in charge of development planning and development projects, and it is staffed by 10 people. The architectural environment team is responsible for environmental and waste management by district, with a staff of nine people. The enterprise support team is responsible for the administrative affairs of the agricultural land management and other industrial complexes.
3.2.3. Foreigners-only Complex
Foreigners-only Complexes refer to areas designated to provide factory sites to foreign companies at low prices and reduced rents. The system was introduced in 1994 to promote 173 investment by foreign companies and strengthen the competitiveness of domestic industries. Chapter It was introduced with the expectation of contributing to the advancement of the local industrial structure and the revitalization of the local economy through the introduction 03 Optimization Strategy of the Angren FEZ Operation of foreign advanced technology and the ripple effect to related industries. Currently, 3,732,249㎥ is designated as a foreign-only complex in Cheonan, Gwangju, Pyeongdong, Daebul, and Gyeongnam Jinsa Complexes.
If the tenant is already designated for companies, the tenant will be given the benefit of rent, tax, and local tax benefits and/or exemptions (in the case of high-tech business).
The qualification for residence is defined by No. 12 of the Foreign Investment Guidelines, which stipulates that foreign investors and foreign-invested companies should pertain a total share of 30% (10 percent for the Daebul Standard Factory and 50 percent when Article 5, Paragraph 11 is applicable), and the net amount of foreign investment amount must be over 100 million KRW. Article 23 and Article 2 of the Co-investment Guideline is applicable when a new factory or a facility is to be installed in an existing building.
Limitations on lot sales (Article 15, Foreign Investment Guidelines) is a characteristic in ROK, where the real estate prices are relatively kept high, due to limited land mass and increasing demand. others, the completion limit is within four years. others, the completion Individual Outlook: FDI - More than twice, Architecture - More than one time. Individual Outlook: FDI - More than twice, For For foreign investors, construction completion limit is within 5 years, and for Complex type, material and parts complex less than 100/100 Complex type, material and parts complex (Guidelines 26.3) Less than 50/100 of the individual type Factory Site Standard (minimum building size by manufacturing industry) industry) manufacturing by building size Standard (minimum Site Factory Industry (A Rate by Area Factory Site Area × Standard Building Size = Factory Factory for less than 2%) 12% area ratio the from charged be will rent 5% standards, the exceeds site the where cases In date of entry • • • • • investment regulations (Foreign (Foreign Investments) Rentals within the scope of the value of 100/100 of foreign (Factory (Factory Building Dimensions) Construction must comply with the building size Other foreign investment complexes employ lease contracts. In ROK, imposing rents imposing rents In ROK, lease contracts. employ Other foreign investment complexes provides all the services of investment consultation, investment execution, Invest Korea investment consultations, information search and consultation services are provided For investors, a foreign investment report (issuance of a foreign investment declaration For 2. 2. * * * 1. 1. on unqualified foreign companies is possible, but as land is provided free of charge in possible, but as land is provided free of charge in on unqualified foreign companies is to be less relevant. Support services for foreigners are Uzbekistan, such schemes are deemed established within the organization a national investment attraction “Invest Korea,” done by services from providing administrative (KOTRA) Promotion Agency Trade-Investment Korea role in promoting a key plays Invest Korea consultation on housing to factory construction. such as overseas and provides comprehensive services, the investment environment of ROK support for business activities in ROK, establishment of company, investment declaration, and resolution of management difficulties. Invest Korea's one-stop service was carried out procedures when entering the providing services for various administrative collectively by process. complex and the investment promotion and follow-up management. and partners, investment finding include serves Such studies. feasibility investment for incentives, laws, consultation with experts to provide on-site and on-site consultations on accounting, taxes, and locations. 174 Support for Operation of the Angren FEZ in Uzbekistan certificate), investment fund, and company registration card are issued by Invest Korea. In addition, it will issue visas and other paperwork, such as corporate registration, various licenses and permits, foreign investors (D-8), and visas or registration permits for accompanying family members (F-3).
The Ombudsman System offers solutions for overseas investors who face obstacles, ranging from visa extensions to tax issues. Tax exemptions for foreign investors companies are stipulated in Article 121-2 of the Tax Exemption Restriction Act.
The main target companies of the Act are companies that aim to generate new engines of growth (technology) and seek tax cuts. Corporate and income tax benefits are given to such companies at 50% for two years after a 100% reduction for three years when promoting a manufacturing industry with more than US $ 10 million or attempting to start logistics business with US $ 50 million or more. Local taxes can be exempted for up to 15 years under the ordinance of local governments. Tariffs are exempt for three years (the individual foreign investment zone has seven years of national tax (corporation tax and income tax) and the tariffs are exempted from individual consumption tax and VAT in addition to tariffs). 175 Chapter
The procedures for establishing foreign investment areas and establishing factories are as follows: 03 Optimization Strategy of the Angren FEZ Operation
• Location and investment consultation (investors such as related organizations) • MOU • Recommendation of the move-in of foreign-invested companies (Regional City, Governor → Management Agency) • Application for a tenant contract (investment company → management agency) within seven days • Review of application form and notification of result (management agency → investment company) within 15 days • On the same day, the contract for the residence (investment in management agencies) is signed ⇒ requesting approval of land use (investment company → management agency) • The application for the reduction of the company's rent (investment company → management agency) within 21 days • Application for building permit (investment company → local government) within 14 days • A Construction Permit (the Local Government) within 14 days • After the commencement of the construction, the factory construction (invested → the investment the investment → local government) local government) → investment company) investment company) → within seven days days within seven government is issued (the local of building use The approval within seven days company) (investment company of factory establishment Reporting completion within seven days management agency) (manager and contents notification registration Factory company) company) company approval (investment for building use Application The purchase cost or rent of land or buildings for the installation of factory or buildings for the installation of factory or The purchase cost or rent of land or research facilities facility Construction cost of a factory or research materials for use in a factory or research Costs to acquire capital and research facility for business or research facility telecommunication and electrical as such infrastructure, of cost Installation facilities, for new plant or research facilities grants subsidies and education and training Employment within three days • • • • • • • • • One to two managers of the complex are assigned to each complex, with about 15 to 20 One to two managers of the complex are assigned to each complex, with In addition, cash support for foreign investment is provided under the relevant laws. for foreign investment is provided In addition, cash support the government can provide Act, Investment Promotion Under Article 14.2 of the Foreign the of Decree Enforcement the of 20 (Article Decree Presidential the by set purpose The managers across the country. Regional headquarters coordinate of the industrial park carry managers across the country. of factories, etc. tasks such as re-location, registration out simple administrative foreign investors with cash funds for their use under the Presidential Decree, including the foreign investors with cash funds for infrastructure labs, research of establishment the facilities, factory new of establishment advanced of effects for consideration subsidies, training educational and facilities, creation, redundancy of employment from foreign investment, the size technology transfers of local areas. of domestic investment, and appropriateness of the following five items: shall be met with at least one Investment Promotion Act) Foreign 176 Support for Operation of the Angren FEZ in Uzbekistan 3.3. Implications from the Korean Case
3.3.1. Management System of Industrial Parks
In 1964, the Act on the Establishment of Korea Export Industrial Park, ROK’s first planned site, was enacted to regulate the development of industrial parks.
The Industrial Park Management Act went through several changes to ensure rational operations and management. Under the Industrial Park Management Act, the Industrial Complex Management Corporation was created as the implementing body.
ROK’s case shows how the management of industrial parks goes through a process of evolution in order to accommodate an expanding scope of work, including the transfer of industrial parks, preparation of basic management plans, compartmentalization of land, sale price of land, moving contracts, purchase of land, safety management of industrial parks, and deliberation committee of industrial parks.
In addition to the preparation of the basic management plan, the Act provides 177 Chapter investment entities in industrial complexes that can legally regulate and even reclaim their
use for purposes when used against their original purpose or for arbitrary sale of newly sold 03 industrial land, thereby keeping investors within certain regulations. Optimization Strategy of the Angren FEZ Operation
On December 31, 1977, the Industrial Placement Act was designed for a comprehensive review of industrial locations for the proper placement of industries nationwide.
This went hand-in-hand with the comprehensive national territory development plan in consideration of the local adequacy of the industry and the regional characteristics of the unit, which may be expected for the Free Economic Zone Authority in the future.
The Export-Free Zone Establishment Act was enacted to boost foreign investment. This launched the early foreign investment zone that attracted labor-intensive foreign companies in ROK, with industrial areas centered around them.
In the 1990s, the Industrial Location and Development Act (now the Industrial Cluster Development and Factory establishment Act) was merged into two major legal systems. In the past, the Industrial Complex Management Act contained development and management in the early stages of industrial complex development.
This is the development covered by the Industrial Location and Development Act and the This breaks down into two major laws because it deals with broad development efforts supplying factory land to foreign complex is an area designated for The foreigner-only local the of revitalization and enhancement the to contribution its for recognized is It to improve the business environment of foreign Free economic zones are areas created Zone is to enhance national competitiveness and The purpose of the Free Economic It has a that framework facilitates international management activities, such as finances, innovative Recently, industrial complex projects to expand industrial infrastructure, eased which introduced, was system usage land multi-purpose a system, this Under management covered by the Industrial Cluster Development and Factory Environment Act. Act. Environment and Factory Cluster Development the Industrial covered by management in the past simple activity of source load per unit of the Pollutant for the deployment Comprehensive Territory National the with linkages its and development park industrial Development Plan. to promote investment by and for reduced rent and was introduced businesses at low prices of domestic industries. and to strengthen the competitiveness foreign companies technologies from foreign countries and the through the introduction of advanced economy spillover effect into related industries. investment enterprises and living conditions of foreigners, as designated and notified under Economic Zones." of Free on the Designation and Operation the "Special Act the improvement of the business environment and promote foreign investment through enterprises and to serve as a special economic living conditions of foreign investment companies to cope with expanding international zone to provide an optimal environment activities from globalization. Economic Free Angren The complexes. industrial and facilities, commercial and housing on industrial sites. other hand, is very much concentrated on the Zone Authority, aging of industrialculture, and childcare facilities were also legislated in connection with the complexes. more addition, In usage. land of purposes various the on placed been had that regulations for all facilities, including factories, housing, encouraged was private sector participation lucrative of and commercial facilities, so that demand-oriented development and generation opportunities were possible. 178 Support for Operation of the Angren FEZ in Uzbekistan The Angren area may also consider further participation by the private sector instead of solely relying on the public sector. Some important tasks that may emerge as the work scope Angren Free Economic Zone Authority expands may be worth mentioning.
Both ROK and Uzbekistan share some common features regarding development, formation, sale, lease and sale of industrial parks, though the Korean system applies tighter legal regulations on purchase and sale of land, whereas the Angren Free Economic Zone Authority’s regulations on land rely more on administrative guidance.
In ROK, a fine or penalty is imposed for selling land arbitrarily or to another company other than the tenant industry, as is stipulated in the basic management plan. In addition, if a company does not follow the factory standard area ratio within a certain period of time, heavy taxation is imposed. In other words, strong regulations are in place to enable companies investing in industrial parks to operate in accordance with their initially planned business plans.
The efforts of the Angren Free Economic Zone Authority are largely concentrated on the 179 management of the sale of industrial complexes, proper factory construction, provision of Chapter infrastructure, and inducement of investment. 03 Optimization Strategy of the Angren FEZ Operation In ROK, on the other hand, the scope of work defined under the presidential decree tends to be wider:
• Promotion of labor-management cooperation and supply of manpower • Workers' welfare and education projects and housing construction projects • The operation of childcare facilities • Training of field experts needed for industrial technology innovation, and industry- academic cooperation • Support for the establishment and operation of schools under the Private School Act for the re-education of workers • Initiative to improve productivity and promote exports • Collection, distribution, surveys, and studies of information related to factory establishment and industrial parks (research projects at the Industrial Location Research Institute) • Studies on the structural sophistication of industrial complexes • Industrial Integrated Land Competitiveness Project (Industry-University-Research Inst. Cluster Support Project) • Projects on safety management and safety education It seems that the following projects need to be considered for the Angren Free Economic welfare of manpower, workers' and supply cooperation of labor-management Promotion High Level Project of Industrial Complex Structure and Industrial Integrated Land Various schemes to upgrade the structural sophistication of industrial complexes have the of the factories currently in operation, Considering the poor environment is a viable expenses on the tenant companies On that note, charging administrative Zone Authority. Zone Authority. and education and housing support projects, childcare facilities for the children of workers, enacting the "Private School Act" for the promotion of field experts, cooperation between and productivity of Improvement workers. of re-education and school, and industry promotion of exports, information collection, distribution, survey and research projects for guidelines would also be as general and education, as well businesses safety management management to of facilities. Pre-emptive uninterrupted operation very helpful in ensuring and sophisticated companies are, is important; the more high-tech prevent possible hazards and chemicals. the more risks they face regarding fire Competitiveness (Industrial-Universities-R&D Institute Cluster Support Project) are one of an with decade, a than more a little for introduced been have They trends. new latest the competitiveness, technological improve to million $60 approximately of annual funding and marketing. networks, joint technological R&D projects, and improvement of factories, strengthening been carried out, including improvement and improving living conditions for young workers, the competitiveness of businesses, environmental improvement of industrial complexes. Such projects aim to promote higher competent, nurture and attract can that complexes the enter to industries added-value in the area. young workers aforementioned projects may have to be implemented in the short term, which will that such efforts require scalable public expenditures. It is worth taking note, however, must be coupled with sufficient growth and upgrading in administrative guidance, urban environment improvements, and provision of clear guidelines; otherwise, the same efforts simply consume large amounts of time and public funds. may revenues extra The them. for burden financial a become not does it that given option, and improvements, and upgrades necessary make to complex the into reinvested be can better motivating funds, collected the for accountable entity managing the it also makes performance. 180 Support for Operation of the Angren FEZ in Uzbekistan In the case of ROK, the Regulations for Collection of Management Expenses came into effect in January 1991, and an amount equivalent to seven percent of the total sales price of site lots of companies was collected for administrative expenses.
The administrative expenses were then eased to within two percent in July 1994, and the administrative expenses system was abolished in 1997.
Since then, the management agency has been raising operating costs from other sources, most notably from installing and maintaining various support facilities and collecting rental fees.
The Angren Free Economic Zone Authority also plans to collect administrative expenses at a certain rate, but this should only be done when investing companies are settled in and can expect returns from their businesses.
3.3.2. Examples and Implications of Foreign Investment Areas
181 For better understanding the implications of various types of industrial complexes, as Chapter well as their legal basis and contents, it is worth comparing them by types: free economic zones, foreign investment zones, and free trade zones. 03 Optimization Strategy of the Angren FEZ Operation
The most salient characteristic of these complexes is the provision of land at a significantly lower price than domestic businesses and low rents to facilitate foreign businesses to move in.
Angren Economic Zone can be seen to be similar to a Foreigners-only Complex that is composed of smaller industrial complexes.
Comparison by Special Zone in Korea (The End of September, 2017)
Classify Free Economic Zone Foreign Investment Area Free Trade Zone
Special Act on the Foreign Investment Act on the Designation and Legal basis Designation & Operation Promotion Act, Zones Operation of Free Trade of Free Economic Zones
Foreign investment, Foreign Investment, Foreign investment in job Designated national competitiveness, transfer of advanced creation, and development of purpose balanced regional technology international logistics bases development
In the vicinity of port, Designated International Airport, In the industrial park airport, distribution location port complex, cargo terminal,
Free Trade Zone Free Trade and materials industry of more than $5 million:100% reduction manufacturing of more than $5 million: 75% reduction New investment parts New investment logistics-related business engine technology of more than $1 million:100% reduction focused wholesale, composite Projects with new growth Non-tariff area industry and Minister of trade, energy Domestic and foreign companies for export purposes, Foreign-invested enterprises Import-export trade - Same as the Industrial Complex- type Foreign Investment Zone Site value of 10/1000 level the (deciding by management office after consultation with the Ministry and Finance) of Strategy Corporate tax : Five-years tax : Five-years Corporate (three-year 100%, two-year 50%) by Local taxes : Adjusted ordinances within the 15-year range. retention (imported Tariff goods, capital goods) 10-year exemption from factory site and standard factory rent when meeting schedule requirements - -- --
↑ ↑ : 75% ↑
↑ Foreign Investment Area Foreign Principles of Rental Site Operating the Foreign *Review by Investment Committee The governor of a city and The governor of a city and province 100 million won in foreign 100 million won in foreign exchange amount, and 30 percent in foreign ownership etc.) - (manufacturing, logistics, arriving at FDI within five years equal to at least of the contract the rental property value Manufacturing: $10 million Logistics: $5 million Site value 10/1,000 level (management base plan) tax : Five years Corporate Local taxes : within the 15 years range. a five-year exemption from capital goods reduction (100% for materials and components only) : 100% (10 Years) Reduction, : 100% (10 Years) manufacturing & General 5 million dollars New Growth Engines Industry & 1 Million Dollar Technology ↑ ㎡ to 199 mill ㎡
↑ Free Economic Zone Free Economic Special administrative (local region level government union) * 67 mill Minister of trade, industry and energy the Free *Review by Economic Zone Committee Foreign-invested enterprises enterprises Foreign-invested (manufacturing, logistics, medical institutions, educational institutions, foreign broadcasting, financial institutions, etc.) Manufacturing, Tourism : Manufacturing, Tourism $10M Logistics, Medical Institutions : $5 million Site value 10/1,000 level the management (decided by office) In the case of projects headed by new growth engine industry technology, corporate tax reduction corporate new growth engine industry technology, In the case of projects headed by 50 percent) is reduced regardless of region. of seven years (five years 100 percent, two years a five-year exemption from capital goods Corporate tax : Five years Corporate (seven years in case individual types are satisfied) Local taxes : within the 15 years range. Decide the management office according to the ordinance (50% to 100%) Rent for tax foreign Right of regional Classify exemption exemption investment designation Requirements characteristics Rent reduction tariff reduction Qualification of Taxes subject to Taxes
Continued
Continued
Classify Free Economic Zone Foreign Investment Area Free Trade Zone
Seoul Metropolitan Area: 40% of national funds, Determining the ratio of 60% of Local Government Support sharing rate of share not decided site purchase sharing in the Non-capital areas: 60% of designated stage national funds, 40% of local governments
Unifying ('04.6.23) Unifying ('04.12.31) Revision of the Act on the Note Additional designation ('08.5.6) Revised the Foreign Investment Designation and Operation of Promotion Act Free Trade Areas ('04.3.22)
Incheon, Busan (Jinhae), Site type(25) : Gwangyang, Jeonbuk Industrial Complex(8): Cheonan, Daebul, Sacheon, (Saemangeum, Gunsan), Masan, Gunsan, Daebul, Iksan, Ochang, Gumi, Jangan 1•2, Inju, Daegu-North Gyeongsang Donghae, Youlchon, Ulsan, Dangdong, Jisan, Dalseong, Province (Kumi, Gyeongsan, Kimjae Designated area Gumi, Oseong, Pohang, Iksan, Yeongcheon), Yellow Sea Airport (1) : Incheon Changwon, Cheonan 5, Woljeon, (Pyeongtaek, Dangjin), International Airport Munmak, Jinshan, Songsan Gangwon Province Port (5) : Incheon, Busan, 2, National Food, Chungju, ('13.4-month'), Chungbuk Gwangyang, Pohang, Dangjin Songsan Province ('13.5-month) 183 Chapter Source: Incheon Free Economic Zone (http://www.ifez.go.kr/noti001). 03
Since the Angren FEZ provides land free of charge, it is not necessary to describe the Optimization Strategy of the Angren FEZ Operation acquisition tax reduction.
For free trade zones, 100 percent foreign investment enterprises, joint ventures, and foreign investment enterprises with more than 10 percent foreign ownership and those investing more than $10 million in manufacturing or $5 million in logistics can be subject to tax breaks.
For the first three years, corporate tax, income tax, acquisition tax, property tax, and aggregate land tax will be 100% exempt and 50% exempt for the next two years. Tariff exemption on foreign goods brought into the region by such companies is also applicable.
In addition, exemptions for value added tax, temporary import surtax, liquor tax, special consumption tax, transportation tax, special agricultural tax, and education tax are made for domestic goods brought in by businesses and transactions between businesses in FTZs.
The application of zero value-added tax applied to domestic goods brought in by free trade contractors and business-to-business transactions in FTZs can be a very attractive feature for investors, considering the recent rise of value-added tax from 10 percent to 20 Tax benefits for foreign businesses with more than 30% of foreign ownership located located of foreign ownership more than 30% businesses with benefits for foreign Tax include non-tariff benefits, such as non-tariff The following special tariff benefits to domestic goods that are declared applies rates The application of zero value-added tax systems allow suppliers to export locally It is important to note that business processing and Angren do not show As for foreign investment zones, the support systems of ROK the One-Stop Service. It designates and also operates The Free Economic Zone Authority percent in Uzbekistan. percent in 1, 18, Paragraph Article stipulated by complexes are beneficiary within foreigner These companies are exempt Act. Investment Promotion Foreign 1 of the Subparagraph million is investing more than $10 requirements of tax breaks, which when they meet the tax A five-year logistics. in companies for million $5 and sector manufacturing the for and income from corporate national tax, 100 percent exemption exemption from the regions two years are eligible. For 50 percent reduction for the next taxes for three years, tax, 100 percent exemption for are exempted for 15 years of acquisition where local taxes next three years and 100 percent tax, 50 percent reduction for the seven years of property exemption for property tax are eligible. benefits, which are non-tariff in the freetrade area and non-tariff on foreign goods, while or refunded on domestic goods that are reported into duty-free or refund is exempted from zone. the free trade businesses in supplied or provided by area, foreign goods, and services within the free trade the region. areas, while foreign goods such as equipment and processed products from domestic shipped to domestic customs areas in a bonded state, materials needed for processing can be providing great convenience for businesses. handles administrative zones, the One-Stop Service great differences. In the case of free trade affairs related to business activities,ranging from tenant contracts to building permits; this The construction Agency. Management Zone Trade Free the by form in a package is done their own is an exceptional procedure in which local governments grant permit in ROK for zones, without having to burden businesses with paperwork permits within free trade government agencies. local and central the business settling by project managers to support the entire process of successful operates from the investment review stage to post-management. company, 184 Support for Operation of the Angren FEZ in Uzbekistan Business consulting, such as finding new investment opportunities or searching for promising investment partners, as well as legal, accounting, tax counseling, and various administrative support services, help to make quick decisions and pursue business through professional and systematic management services provided by free economic zones.
The foreigner-beneficiary complex provides administrative support, ranging from consultation on moving in to signing contracts for moving in and registering factories. In this case, construction permits are promoted by the local government.
In the case of the complex, Invest Korea supports foreign companies' advancement into the country in attracting investment.
Invest Korea plays a role in promoting the investment environment of ROK overseas and provides comprehensive services from investment counseling to investment reporting, business establishment, support for domestic business activities, and resolutions for complaints.
185
In addition to similar support and common in each zone, free trade zones are Chapter characterized by simplified procedures: immigration, entry, registration procedures, entry contract applications, contract approval and lease contracts, facility installation, and 03 Optimization Strategy of the Angren FEZ Operation building permits. Such reduced procedures are designed to meet the purpose of introducing foreign investment into special zones without having to go through unnecessary delays.
4. Suggestions for Optimizing Operations of the Angren Free Economic Zone Authority
4.1. Improvement of Registration Procedures and Follow-up Management
Registration process of foreign investment enterprises of ROK and Uzbekistan appear to be similar, both aiming to hasten registration procedures in a transparent manner. To briefly introduce the registration procedures of the two countries, they are conducted through registration counseling, → registration of foreign investment enterprises, → application for entry contracts, → approval of acquisition contracts, → contract and installation of facilities (including building permits in ROK’s free trade areas).
The administrative procedures for companies operating in the Angren Free Economic Administrative procedures allow rapid and easy registration of investment in investment in investment of investment and easy registration rapid procedures allow Administrative zones should be geared the work scope of the free economic be safe to argue that It may a certain initiative. procedures should be carried out with First, all tasks in registration result in reduced investor regarding investment may stakeholders Involving too many carry out their work according to their original This will allow investment firms to to Angren. Land provision should be transferred Second, the authority regarding land all transferring procedures by This shows that it is necessary to simplify administrative Zone Authority have been gradually improved and continue to improve, including the the including improve, to continue and improved gradually been have Authority Zone committees. of unnecessary elimination enterprises, as well as the similarities between the two countries. However, if looked at the area when compared to of approvals from outside Angren requires a multitude closely, ROK. agency. of the investors, not that of the administrative for the convenience management of the complex, work and dealing with general This will involve administrative can be carried out. management and operations so that more comprehensive and systematic confidence, confusion in administrative progress, and loss in time. Therefore, the Economic such as the approval of the Administrative should handle matters Zone Authority measurements boundary and compartmentalization, land of establishment the Committee, provision work will Infrastructure authority. procedure based on its own in the registration in the short term, handled under direct control of also have to be dispatched to the agency the economic zone office. when carrying out investment projects and predictingbusiness plan, enhancing convenience the progress of the project. or given the experience of Korea a management agency, should be done directly by and local governments both have government Uzbekistan, the central In other countries. the Authority, authority in land ownership. In the case of the Angren Free Economic Zone committee, and related to land provision is in charge of the administration administration the actual provision of land is carried out by the local government, which is the de jure landowner. the bringing simplicity to land acquisition related tasks to the Free Economic Zone Authority, process of investment enterprises. registration 186 Support for Operation of the Angren FEZ in Uzbekistan Third, the workload of the Executive Council is too excessive. Unlike in ROK, almost all tasks of management and operation are subject to the commission's authority, not the Free Economic Zone Authority. Several of the above-mentioned tasks of the Committee need to be delegated. The tasks to be carried out by the Executive Council will be appropriate to carry out key control functions and coordination within the zones, such as implementation of national regulations and adjustments, control of compliance with special laws and economic systems, effective functioning organization of the Free Economic Zone Authority, and control of the formation and activities of free economic zones.
Among the main tasks of the Executive Council, it is the following that must be carried out directly at the Economic Zone Authority:
• Decisions on the layout of investment projects, • Decisions on land provision, preparation of free economic zones development programs, • Preparation of master plans for the development of free economic zones, timely
implementation of projects for the construction of engineering, 187
• Telecommunications and transport infrastructure in free economic zones, Chapter • Monitoring the implementation of investor obligations in free economic zones, 03 • Resolving various problems arising from the implementation of investment Optimization Strategy of the Angren FEZ Operation projects and the operations of the company, and the boundary of the zones and zone administrative management, regulatory actions, and the proposed, or deprivation of the regulations, etc. of the free economic zones, or the regulations of the regulations of the authorized institutions, etc.
These tasks are also carried out directly by management agencies in ROK’s case.
Fourth, integrated management of infrastructure installation projects is necessary. As illustrated by a case of an investor that took more than three months for a company to receive gas, basic infrastructure such as electricity, gas, telecommunications, and water should be offered as a package as soon as an investment company registers; the lack of such support would become a very unattractive feature for investors. This recommendation should be implemented with a long-term perspective, as abrupt changes may interfere with the on-going flow of investors. Various agencies will have to work together and improve their work procedures. 4.2. Improving the Support System for Investment Enterprises for Investment Support System the 4.2. Improving solid means to provide legal done by of free export zones designation why The reason As all three types have been designated with the objective of attracting investment are quite similar. Along with the reduction of The tax support policies of both countries tax, excise special tax, liquor surtax, import temporary which in cases are There investors may First, the diversification of the land supply system. Since the needs of legal frameworks for promotion of foreign investment. Foreigner-only complexes were complexes were Foreigner-only foreign investment. for promotion of legal frameworks and rent, while free sites to foreign businesses at low prices factory designated to grant and promote foreign designated to enhance national competitiveness economic zones were business environment and living foreign-invested companies' improving investment by conditions. companies are various support policies for hosting of operations from foreign companies, be largely divided into tax support policies for hosting companies can essential. The support policies and incentives. acquisition and taxes, registration the government provides support for a five-year property depending on the amount of investment tax exemption varies tax reduction. The corporate five-year reduction and a seven-year foreigners, but in some cases there is a made by reduction. Tax breaks include exemption of tariffs on corporate tax, income tax, property goods brought into FTZ, domestic goods brought in by tax, aggregate land tax, and foreign between companies in FTZ. transactions of value-added tax on businesses, and zero rate has also Angren exempted. are tax education and tax, agricultural special tax, transportation and incentives, and no further improvement seems a similar support policy for tax support of taxes on value- the rate controversy over to have been made. There has been considerable added taxes in recent years, but this is a policy part and is omitted from the first topic as a policy improvement. However, there is room for improvement in many practical matters, support systems and experience with and also some suggestions are made in light of ROK’s businesses. content that are effective in attracting investment. a role in attracting to play be one way using various methods may vary greatly, units to provide and rental sales divided into paid are ROK in zones investment Foreign but they can land to investment firms. Paid distributions can burden initial investment, and increasing assets be owned, and property ownership is legally recognized, thereby be hedged for additional investments. Investors often prefer the form of that may collateral a lot distribution because it has the effect of anticipating a rise in land prices if surrounding 188 Support for Operation of the Angren FEZ in Uzbekistan land prices rise. From the standpoint of Uzbekistan, it is also an opportunity for a large influx of foreign currency. Leasing will be preferred by companies that aim to tap into the Uzbek market through production and export.
It has the advantage of having low initial investment costs and lightening the burden on companies. In the case of paid-in sales or leases, the price should be offered at a lower price than those in the Central Asian region to attract investment firms more easily. In the case of Angren, the land could be provided according to the preference of investment entities after selecting a sector by dividing a certain area into free-of-charge. The result would be that investment firms could choose according to their preferences and needs.
“Giveaways”, however, are rarely recommendable. This is because they may give out the wrong message to businesses, that “free land” is compensating for different burdens in the future, namely poor investment environments or difficulties in business activities.
Although ROK has also carried out various free projects, it has seen that companies are less responsive when compared to the case of paid fees. For investors, free giveaways may 189 be signs of low value or future requirements. Chapter
Second, pre-installation of enterprise utility, such as infrastructure, is necessary, 03 Optimization Strategy of the Angren FEZ Operation perhaps through an establishment of integrated development company. In ROK, the sites are equipped with facilities in advance before it is sold. The creation of the land is not only about flat and compartmentalized operations, but also about the provision of all corporate operational infrastructure, including electricity, telecommunications, gas, and water. Therefore, it is necessary to provide state-funded public enterprises with individual infrastructure at present, or to ensure that all infrastructure is in place in the early stages with a package of long-term loans. If it is difficult for individual infrastructure-supplied public institutions to collectively carry out the project, it is a good way to set up public development agencies, such as the Land and Housing Corporation, the Korea Water Resources Corporation, or KICOX, in ROK.
Otherwise, it is one way for the private sector to use government funds to carry out infrastructure installation projects. Funds will be able to use state funds or methods of extending long-term low-interest funds. And some are government funds plus long-term low-interest funds from financial institutions. Such land development procedures are bound to be complicated by legal requirements, financing, and administrative procedures, and therefore need to be reviewed in more depth. For both ROK and Uzbekistan, the inflow of investments are met with early engagements, and Uzbekistan, both ROK For the central by First, a single window for investment guidance should be installed 4.3. Strengthening Investment Support Services 4.3. Strengthening Third, development of various “soft” management supporting activities is essential. In the is essential. supporting activities “soft” management of various Third, development Free service cases of ROK’s activities could cover one-stop Management support companies who do not know the business This will greatly help foreign investment Fourth, it is the implementation of various enterprise support facilities. This is a project but remain passive and rudimentary. There are many differences and challenges to be be to challenges and differences many are There rudimentary. and passive remain but addressed. the Ministry government. In the case of the Angren Free Economic Zone Authority, for acting as a window of Investment and Security is working to connect the area by lack as such poor conditions, Angren, of in the case seen As foreign investment. attracting case of ROK, the entire process of settling the business from the stage of investment review investment review from the stage of the business entire process of settling the case of ROK, activities. Business supporting various management by is supported to post-management or searching for promising finding new investment opportunities consulting, such as and various administrative as well as legal, accounting, tax counseling, investment partners, through quick decisions and pursue business helping companies make support services, are and systematic management services. various professional a and operates designates Zone Authority Economic Free Each Economic Zone Authority. dedicated project manager to support the entire process of successful business settling by stage to post-management. Business consulting, such businesses from the investment review as finding new investment opportunities or searching for promising investment partners, are services, support administrative various and counseling tax accounting, legal, as well as and systematic professional business through and pursue decisions quick to make helping should that end, the government zones. To free economic management services provided by the organization further to support the projects establish a system of statutes and reorganize of investment enterprises. and business procedures, know the various cultural environment in Uzbekistan and do not investment environment in Uzbekistan. as well as enhance the reliability of the and promotes business activities of investment that improves investment environment enterprises and is necessary for the creation of Angren's own revenue flows and basis for financial independence. 190 Support for Operation of the Angren FEZ in Uzbekistan of infrastructure, lack of convenience facilities for foreign businessmen, such as hotels and public facilities, and lack of facilities for workers, as well as distance (80 kilometers) from Tashkent, are making potential investors hesitate.
In the case of ROK, foreign investment information is provided through Invest Korea, a government-run agency, and local governments and management agencies conduct activities to attract foreign investment or to conduct activities through international events, fairs, exhibitions, and foreign visits (most of these activities also involve cooperation with Invest Korea).
The Angren Free Economic Zone Authority should pursue similar initiatives, with the objective of preparing and promoting various infrastructure and manpower inflow measures necessary for business activities. But there are apparent limitations without a central, government-level body like Invest Korea.
Second, a One-Stop Service system must be implemented. There are three major types in ROK. First, the Free Trade Zone Management Agency collectively handles administrative 191 affairs related to business activities, ranging from tenant contracts to building permits. Chapter
The Free Economic Zone Authority is designated to enhance national competitiveness 03 Optimization Strategy of the Angren FEZ Operation and promote foreign investment through the improvement of foreign-invested companies' business environment and living conditions, making it a business-oriented area that also involves non-industrial needs, such as houses, commercial facilities, universities, hotels, and cultural facilities. The One-Stop Service designates and operates a dedicated project manager to support the entire process of successful business settling by the company, from the investment review stage to post-management.
Business consulting, such as finding new investment opportunities or searching for promising investment partners, as well as legal, accounting, tax counseling and various administrative support services, help to make quick decisions.
In the case of Korea's Free Economic Zone Authority, the one-stop service is concentrated in corporate management supporting activities. In the case of a general industrial park, it is allowed to handle matters other than registration procedures within one entity, including the establishment of a local government business trip station, dispatch of a KOTRA export support team, and placement of experts related to legal, accounting, and tax affairs, which are operated by businesses. Changes in the Act on the Management of Industrial Complexes and its implications are on the Management of Industrial Complexes and its implications Changes in the Act 4.4. Major Tasks and Organizational Restructuring Plan and Organizational 4.4. Major Tasks Plan 4.4.1. Short-term Major Business Improvement The one-stop service in the Angren Free Economic Zone Authority must first have the the must first have Zone Authority Angren Free Economic service in the The one-stop by procedures administrative above, it is necessary to simplify Also, as mentioned of legal, accounting, and One-Stop Service will be the final goal of a package Angren's Third, the legal system for the installation of joint facilities, corporate support facilities, stated above, which should be properly realized in consideration of the basic management of stated above, which should be properly realized in consideration of industries, and the changing arrangement the rational the Free Economic Zone Authority, should government should deal with legislation and implementation and times. The central zones to and other economic work together with the Angren Free Economic Zone Authority them evolve and resolve the related laws through legal proposals and suggestions to help develop. above registration procedure. In addition, the government should have a system to deal with with deal to system a have should government the addition, In procedure. registration above businesses for important are which permits, building including procedures administrative as well as improvement compliance within the zones, architectural to enhance convenience, governments, they will related matters to local the zones. If there are any of management in need to be dispatched to local offices and companies will have a support system for various they need. management activities Otherwise, Authority. tasks to the Free Economic Zone all and supply-related transferring at least, but if the land supply is be placed in local governments land ownership should process of investment the registration Zone Authority, to the Free Economic transferred in addition to their simplicity in the registration enterprises could be achieved smoothly process. as well as within the district, support services various administrative consultation and tax the unification in registration procedures and the provision of corporate convenience and business consulting. was the Industrial Park Management Act In ROK, etc., which are necessary for businesses. industrial of management and operation expanded to include was and it 1976, enacted in of these tasks will be set up and the management parks other than development. The scope a similar legal system. consider employing agency will perform them. Angren should 192 Support for Operation of the Angren FEZ in Uzbekistan Next, based on ROK’s experience, the following is a proposal on major tasks, organizations, and measures for the expansion and development of the Angren Free Economic Zone Authority.
First, the preparation and management of the basic management plan. In ROK, the "Basic Plan for Management of Industrial Complexes" is based on the conditions for eligibility for entry into industrial complexes and the overall management of industrial complexes.
• The details consist of items related to the area of the industrial park to be managed, • Items related to the qualification of the businesses subject to move in, • Items related to the use of the industrial park, • Items concerning the layout of factories by industry, • Matters concerning the installation and operation of support facilities, and • Six other matters necessary for the management of the industrial park.
The Master Plan for Management is the arrangement of rational industries and the systematic management and, by extension, the means of regulation. Since the management 193 of industrial parks is basically managed by this basic management plan, which is a strong Chapter regulatory tool with a legal basis and is the basis for the management of industrial parks, the Angren Free Economic Zone Authority should prepare a "Basic Plan for Industrial Park 03 Optimization Strategy of the Angren FEZ Operation Management" and make it the basis for the management of the zones. In particular, for industrial parks and foreign investment zones in ROK, land use is managed and operated by various use-specific zones, including industrial, supporting, green, and public facilities. In the case of Angren, there is no other land for industrial use, such as land for support facilities, and there is no corporate support facility, so there is no corporate support project or financial independence base through it.
Second, it is a series of land management and appropriate administrative regulations, including the operation of factories by investment companies. Although the two countries are working on similar projects for the development, sale, lease, and sale of industrial parks, as is the experience of ROK, strong regulations should be imposed on corporate management or factories transferred by companies after the sale of industrial land.
Through field visits, this research was able to verify that some factories in Angren had more land than needed. Although these excess holdings are not a big problem in the beginning, they may prevent a more diversified use of land or become subjects of real estate speculation. This should be controlled through administrative guidance in the case of the Angren Free of the Angren Free guidance in the case administrative be controlled through This should using an excessive amount of situations, investment companies are Considering future business. the Amenity the expansion of support business and Third, the company's zones development of stages early the in required are that businesses words, other In support development of various corporate the Economic Free Zone Authority's Fourth, plans to collect management fees at a certain The Angren Free Economic Zone Authority Economic Zone. In ROK, high-priced land prices impose penalties or fines on people who who or fines on people impose penalties land prices high-priced Zone. In ROK, Economic in sector, as stipulated other than the tenant other companies sell their land to voluntarily plan. the basic management or land for non-working purposes, it is not expected to be used properly land for sale, since as a reference to manage the system should be introduced factory area ratio standard ROK’s guidance. and administrative such as heavy taxation, reclamation, zones with regulations, support expand its corporate should gradually Zone Authority The Angren Free Economic projects in addition to basic business support for the sale of industrial complexes, proper activities, as attraction and investment provision of infrastructure, factory construction, convenience, business for the provision of corporate Support programs is the case in ROK. support corporate various and consultation, tax accounting, legal, as well as consulting, of investors. services are very important in the eyes include projects for enhancing cooperative relations between businesses and workers, providing workers with workers' welfare, education and housing construction projects, needed for industrial technology of on-site experts of childcare, training the operation School Private the under schools of operation and establishment the supporting innovation, Act for re-education of workers, projects for enhancing productivity and supporting other entrants. The additional project may be able to proceed with the project by selecting from the points of suggestion. projects and the expansion of its autonomous financial base.For the financial foundation collect could ROK that provided Act the institution, management park industrial the of administrative expenses from tenant businesses and support agencies in order to efficiently agency has manage the industrial park. Based on these management costs, the management installing and maintaining various expenses that can be managed by operating been raising support facilities, public facilities, and rental facilities. rate when investment companies generate profits. Investment firms will have tosee profits first because it will take considerable time for them to complete their entry into the zone 194 Support for Operation of the Angren FEZ in Uzbekistan and generate revenue. One way is to collect administrative expenses at an appropriate rate for land area. With such funds, various support facilities, public facilities, and rental facilities in the area will have to be financed by operating expenses that can be installed and maintained.
In ROK, not only were industrial parks created, but also maintained and improved through joint facilities for supporting production activities. They could also raise funds for financial independence and form an additional budget for corporate support. One of the most successful cases would be the Saemaeul Movement in the early days of ROK’s industrialization, which promoted education opportunities for the young workforce, thus greatly enhancing education levels. ROK’s management agency carried out vocational education programs, so that fresh graduates could become new recruits for the industrial complexes.
Fifth, various networks should be promoted.They will become more important as the business environment become more network-intensive and the national economy becomes more complex in nature. 195 Chapter
Sixth, some short-term organizational restructuring would be necessary. The scale of the organization should be in accordance with the given workload. The Angren Free Economic 03 Optimization Strategy of the Angren FEZ Operation Zone Authority has the task of improving the work of registration procedures, transferring some work, and promoting the work of external agencies on its premises.
In addition to the existing departments, there should be six new departments, including the Management Support Department (each type of management support activities), the Support Business Department (Introduction of support facilities, installation and operation), and the Accounting Department (e.g., the size of accounting increased for each facility), and the number of additional employees of the Corporate Registration Department should be increased to carry out future land management tasks. The expansion of the organization will require the expansion of the organization to a total of 12 people, including two investment- related ministries, four registers, two management support units, two support units, and two accounting departments.
4.4.2. Mid- and Long-Term Work Development Plan
Finally, the contents below are suggestions for mid and long-term development measures for the Free Economic Zone Administration based on ROK’s experience. These measures may not seem necessary in the short term, but they will greatly help to prepare for the future. First, expansion of support corporate facilities and financial independence. Management plan will be needed is important. A safety management safety management Secondly, can bring together industries, universities cluster support projects that Third, cooperative would greatly boost industrial development. facility improvements for businesses Fourth, is necessary. Fifth, an ecological industrial complex that includes waste management institutions institutions should continue to push ahead with projects such as building and operating medium- for small and factory spaces provide affordable factories that apartment-type sized enterprises, projects to enhance labor-management cooperation, housing construction projects for workers, facilities to dispose of wastes emitted by companies, and various support will facilities These companies. by needed offices and facilities commercial even be able to achieve self-reliance activities, and some projects will companies' production income of management agencies. with the financial medical, chemical, fire, handle to needs the of consideration in complexes industrial for In addition, the government should establish and other hazards in a preemptive manner. to training action plans for regular well as as legal education, such as curriculum regular a disasters that pose great risks for businesses. prevent massive property damage and and research institutes is highly recommended. In the case of ROK, a similar project was Supporting industries, universities, research centers, carried out more than 10 years ago. such as to enhance management, and marketing, enterprise technology, cluster cooperation the competitiveness of businesses, overseas exchanges, joint technology development, joint-Marketing a variety of enterprise competitiveness for up to $ 60 million per year and of state funds business. resulted in over 10 years with the levels industrial ROK’s complexes have been carrying out projects for the improvement of factory environment of industrial complexes. Such efforts and residential conditions and the industries into high value- low added-value are essential for turning labor-intensive, procure better added industries. Though such improvements are not cheap, they will inflow of qualified labor and capital. They also require continuous input for planning and approach. thus requiring a step-by-step administration, and enhancing connectivity This greatly reduces cost and resource usage for industries by such initiatives will also reduce seamless resource use among businesses. Most importantly, communities that waste and pollution, which will help in obtaining support from local environmental conditions as industries concerned about deteriorating would be naturally areas. move into nearby 196 Support for Operation of the Angren FEZ in Uzbekistan Sixth, the introduction of a 'diversified land use' system. It is also worth taking advantage of ROK’s experience of diversifying land usage as well as inviting private funds. Private sector participation can bring in more innovation and generate profits for the public sector that can enhance financial independence.
Lastly, a step-by-step approach is essential. The Angren Free Economic Zone Authority should eventually establish a new department to promote business within the organization and expand, while planning and implementing on-going projects in accordance with the above mid- and long-term development plans. This will not be an easy task, and hastiness will not help. Ambitious goals should be followed by careful planning and practical alterations to fit the challenges Angren will face as it develops and grows.
4.4.3. Roadmap for Short and Long-Term Business Promotion and Organizational Improvement
This study suggests a roadmap for short-term and long-term work promotion and organizational improvement. 197 Chapter [Figure 3-2] Roadmap for Business Promotion and Organizational Improvement 03 Optimization Strategy of the Angren FEZ Operation The Period of Establishing Management and Operation System (2020~2021 : Two years)
1. Registration Procedure 2. Support System of Registered Enterprise - Establishing an integrated system of - Establishment of basic One-Stop Service registration procedures(~2021) System(2020) - Separation of the administrative • S/W Enerprise Service System (2021) committee and establishment of legal • H/W enterprise support facility project system (2021) preparation (2020) initial pilot project - Transfer of the administrative committee (2021) work (2022) - Transfer of land provision work (2020) - Construction of integrated support system of infrastructure support organization (2020) - Progress of Integrated Support System Business (2022)
3. Investment Support Service 4. Improving Business and Organization - Preparing to open a central government - Preparing a basic model for basic investment guidance system (2020) ⇒ management plan (2020) Operation (2021) - New clause of the Act on Basic - Transfer of land supply work (2020) Management Plan (2021) - Establishment of a system for - Establishing early corporate support diversification of land provision (2022) ⇒ business (S/W+H/W) models (2020) Establishment of legal foundation for - Various corporate meeting systems (2020~), diversification of land provision (2022) - Initial reorganization (2021)
Development Period for Medium-Term Management and Operations (2022-2025 : four Years)
1. Registration Procedure 2. Support System of Registered Enterprise - Operation of the integrated system of - Mid-term One-Stop Service registration procedures (2022~) Administration Service (2023) - Direct implementation of administrative - Completion of the S/W enterprise committee work (2022~) service system (2023) - Stabilization of the control and - H/W corporate support facility project coordination functions of the Executive preparation (2022-23) Council (2023) - Work progress through the integrated infrastructure support system (2024~)
3. Investment Support Service 4. Improving Business and Organization - Period to stabilize the foreign - Progress and supplementation of investment information system of the management basic plan work (2023) central organization - Medium-sized H/W Enterprise Support - Application of the land supply Project (2022-25) diversification system (2023~) - Developing a large H/W enterprise support project (2023) - Construction of waste disposal sites (2024) - Various corporate meeting system cooperation projects (2023~)
Completion Period of Management and Operations (2026-2029: Four years)
•Continued supplementation of management basic plan (2023) •Expanding large H/W enterprise support projects •Implementation of various corporate cluster projects •Safety management settler •Land regulations and multi-use land projects •Industry, facilities, and environmental improvement projects 4. Improving Business and Organization and Business 4. Improving basic for model basic a - Preparing (2020) plan management Basic on Act the of clause - New (2021) Plan Management support corporate early Establishing - (2020) models (S/W+H/W) business (2020~), systems meeting corporate - Various (2021) reorganization - Initial of Registered Enterprise 2. Support System - Mid-term One-Stop Service Service (2023) Administration enterprise - Completion of the S/W service system (2023) facility project support - H/W corporate (2022-23) preparation 2. Support System of Registered Enterprise 2. Support System One-Stop Service - Establishment of basic System(2020) (2021) System • S/W Enerprise Service project support facility • H/W enterprise initial pilot project (2020) preparation (2021) 4. Improving Business and Organization 4. Improving Business of - Progress and supplementation work (2023) management basic plan - Medium-sized H/W Enterprise Support Project (2022-25) - Developing a large H/W enterprise support project (2023) - Construction of waste disposal sites (2024) meeting system corporate - Various projects (2023~) cooperation Completion Period of Management and Operations (2026-2029: Four years) (2026-2029: Four Completion Period of Management and Operations The Period of Establishing Management and Operation System (2020~2021 : Two years) System Management and Operation The Period of Establishing Continued supplementation of management basic plan (2023) •Continued supplementation of management basic •Expanding large H/W enterprise support projects projects cluster •Implementation of various corporate •Safety management settler •Land regulations and multi-use land projects facilities, and environmental improvement projects •Industry, Development Period for Medium-Term Management and Operations (2022-2025 : four Years) (2022-2025 : and Operations Management Period for Medium-Term Development 1. Registration Procedure 1. Registration system of of the integrated - Operation procedures (2022~) registration of administrative - Direct implementation committee work (2022~) and - Stabilization of the control of the Executive coordination functions Council (2023) through the integrated progress - Work support system (2024~) infrastructure 1. Registration Procedure 1. Registration system of - Establishing an integrated procedures(~2021) registration of the administrative - Separation legal and establishment of committee system (2021) committee of the administrative - Transfer work (2022) provision work (2020) of land - Transfer support of integrated - Construction support infrastructure system of (2020) organization Support System of Integrated - Progress (2022) Business 3. Investment Support Service 3. Investment Support - Period to stabilize the foreign system of the investment information organization central - Application of the land supply diversification system (2023~) 3. Investment Support Service Support 3. Investment government a central open to - Preparing ⇒ (2020) system guidance investment (2021) Operation (2020) work supply land of - Transfer for system of a Establishment - ⇒ (2022) land provision of diversification for of legal foundation Establishment (2022) of land provision diversification Author. Source: Source: [Figure 3-2] Continued 3-2] [Figure 198 Support for Operation of the Angren FEZ in Uzbekistan References
Baek Jae-hyun (2015). 50 years of industrial park, the process of changing industrial policy by era and the change of laws and systems related to industrial park.
KICOX, Korea Industrial Park 50 Years old, 2015a.
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Websites http://www.fez.go.kr/global/index.do http://www.kicox.or.kr/index.do 199 http://www.motie.go.kr/ftz/masan/homeEng/main.jsp Chapter http://www.ifez.go.kr/noti001 http://www.bjfez.go.kr/main.web 03 Optimization Strategy of the Angren FEZ Operation https://ko.wikipedia.org/wiki/ Ministry of Economy and Finance (MOEF) Sejong Government Complex, 477, Galmae-ro, Sejong-si 30109, Republic of Korea Tel. 82-44-215-7741 www.moef.go.kr
Korea Development Institute (KDI) Namsejong-ro, 263, Sejong-si 30149, Republic of Korea Tel. 82-44-550-4114 www.kdi.re.kr
Knowledge Sharing Program (KSP) www.ksp.go.kr
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9 791159 324765 ISBN 979-11-5932-476-5 ISBN 979-11-5932-438-3(set)