Uzbek shoes seek to Russia

About 3 million pairs of leather shoes and about 30 million square decimetres of leather will be supplied to Russia from Uzbekistan in the first half of 2017, said Sardor Umurzakov, Deputy Chairman of the Uzbekcharpoyabzali Association of Leather and Footwear Enterprises. Uzbekistan aims to strengthen commercial ties with Russia and the active development of its own leather and footwear industry, for this, the country has developed an economic program that affects all aspects of the development of these industries.

Development plans

Many countries are trying to repeat the Chinese economic miracle. The incentive measures for the development of the leather and footwear industry, adopted at the state level, and the favored regime for attracting foreign investment have recently been announced by Vietnam and India, and now the turn has come to Uzbekistan. 

According to Uzlegpromtorg statistics, currently Uzbekistan produces more than 17 million pairs of shoes per year, of which 55% are leather shoes, about 500 million square meters. decimetres of leather. Over the past four years, from 2011 to 2015, the country's export volume has tripled and amounted to $ 2015 million at the end of 111. This year, the volume of exports of leather products should amount to about $ 250 million. The country sets itself ambitious goals for the next 9 years to increase the volume exports up to $ 1 billion, while expecting that a quarter of this volume will come from Russia. Now 50% of exports go to China, while Russia's share is only 4%.

Public policy

The basis for the announced plans is a powerful state support, which is provided to the leather and footwear industry of Uzbekistan at all levels. 

Firstly, at the level of tax legislation. In Uzbekistan, all new enterprises are exempted from all types of taxes for a period of five years (companies make obligatory payments only to the wage fund). Existing enterprises are also exempted from all types of taxes until the 2018 year. Enterprises that are classified as small (the number of employees of which is no more than 200 people, when employing graduates of professional colleges - no more than 250 people) are subject to a single tax rate of 5%.

In a number of industries, this rate is also half as much - 2,5%. When exporting goods of own production, the VAT rate is zero. Import of raw materials, billets, components for the use of production is also not subject to VAT. That is, the entire tax policy is aimed at stimulating the development of domestic production and export of our own products.

In addition, a number of customs privileges have been adopted in Uzbekistan. - the import of raw materials, equipment, components, accessories (if these goods are not produced in Uzbekistan) is exempted from customs duties.

Programs for preferential lending to manufacturers adopted. Manufacturing enterprises that fall into the state investment program of Uzbekistan receive credit at a reduced rate equal to the Central Bank refinancing rate, in Uzbekistan - 9%.

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Companies are granted a grace period for repayment of the principal debt - up to two years, and if the enterprise is modernized, credit resources are allocated for a longer period - 4-5 years with a two-year grace period.

The leather and footwear industry development fund is being created, which will finance the programs on modernization of production, expansion of capacities. Sources here will be bank loans at a preferential rate (2 / 3 from the refinancing rate), deductions of enterprises, the production of which will reduce the tax base of companies, and from other sources.

The raw material base is actively developing  - this year 17 complexes for automated slaughter of livestock were opened in each region, in the future it is planned to open 133 such enterprises that will be able to cover the entire territory of the country. The development of the vocational education system is supported.

At present, the Association of Leather and Footwear Enterprises of Uzbekistan unites 252 industry enterprises - both for the processing of leather raw materials and for the production of leather, and leather goods enterprises, as well as 131 companies for the production of footwear. This year, 207 new industries have been created in the country, and modernization is underway at 57 operating ones. All these measures, coupled with the low cost of energy resources, a well-developed transport infrastructure, make the country an attractive platform for outsourcing footwear tailoring, - Sardor Umurzakov believes. “From May to June, we began to establish close contacts with Russian customers in terms of outsourcing of shoe making in Uzbekistan. We have identified this for ourselves as a priority area at the first stage of our trade and economic cooperation with Russia in the leather and footwear industry, ”he says.

Russia's interest

The perspective of cooperation with the Uzbek side was noted by the chairman of the board of directors of "Russian leather" Igor Surin. For his enterprise, Uzbekistan is primarily interesting as a possible supplier of materials for the leather industry.

“In the Russian Federation, there is a shortage of leather materials, due to the fact that our industry is somewhat ahead of the development of agriculture, so they even introduced a temporary restriction on the export of semi-finished products,” he notes. “At the same time, about 55% of semi-finished leather products in Uzbekistan are exported to China. For us, buying semi-finished products is very interesting, and buying, first of all, sheep leathers, and I will gladly interact with Uzbek companies. " In addition, according to Surin, exchange of supplies of leather may also be of some interest, since no enterprise is capable of producing all types of leather or the entire range of articles that may be required for the production of footwear or haberdashery.

According to Andrey Pavlov, president and founder of the ZENDEN group, Uzbek enterprises will most likely find it difficult to compete with Chinese shoe manufacturers, since Chinese manufacturers have a number of competitive advantages, such as experience gained over the years, cheap labor resources and large production clusters with the most modern equipment. Nevertheless, the interest in locating production at factories in Uzbekistan on the part of Russian shoe companies, in his opinion, will largely depend on the conditions that will be offered by the neighboring state.

“Now the main demand from Russian shoe makers and Russian buyers is quality, and the question is whether Uzbek manufacturers can provide it,” he says. - We positively perceive new projects, consider various forms of cooperation and are ready to consider including this. But it is worth repeating that the quality of the finished shoes will be at the forefront. If the conditions of the parties in relations with each other are met, if they meet the interests of the business, then such cooperation can become fruitful and mutually beneficial. ”