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New order of forming and financing investment programs

On January 17, 2018, a meeting on issues of application of a new procedure of forming and financing state programs of development of the Republic of Uzbekistan was held under the chairmanship of President Shavkat Mirziyoyev.

The meeting was attended by the Prime Minister of the Republic of Uzbekistan and his deputies, chairman of the Jokargy Kenes of the Republic of Karakalpakstan, khokims of Tashkent city and regions, heads of relevant ministries and departments.

The Head of our state, noting the importance of investments for achieving high rates of economic growth and providing strong social protection, criticized the previously disorderly organization of activities in this sphere.

Previously, leaders of the sphere in pursuit of high figures were engaged in embellishing the indicators of attracting and absorbing investments. As a result, the heads of khokimiyats and industries, in order to fulfill this “burden”, had to include ineffective projects in the investment programs that do not correspond to the development of regions and industries, without specific funding sources and initiators.

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In 2012-2017, “Uzbekenergo” JSC included 14 projects worth $3.3 billion in investment programs. Subsequently, all of them were deemed inexpedient and terminated by government decisions. It causes confusion, why $185 million was spent on preparation of these projects’ documentation. This was reported at the meeting, held on January 17 under the chairmanship of President Shavkat Mirziyoyev.

There are a number of problems in formation of investment programs and examination of projects. This process was carried out according to the criteria and procedures defined in the resolutions that were adopted 15 years ago. In particular, as a result of repeated re-approvals of the feasibility study, business plan and tender documentation on projects, their expertise was delayed up to 6 months instead of 15 days. This led to a rise in price and decrease in profitability of investment project.

Economically justified projects with ready design and estimate documentation are subject to inclusion in the investment programs. However, earlier such documentation was prepared after inclusion of the project in the investment program. As a result, in some cases, a gap of up to 80 percent occurred between the initial and approved project costs. This led to unjustified spending of budgetary funds.

Many enterprises went bankrupt due to miscalculations in formation of projects, not attracting investors’ funds for their implementation. Commercial banks, which were entrusted with improvement of enterprises, also suffered heavy losses. Taking this into account, starting from the current year, the practice of transferring bankrupt enterprises to the banks’ balance sheet has been terminated.

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A completely new system of implementing sectoral and territorial projects is being established in Uzbekistan. The Head of our state, at the meeting on issues of application of a new procedure of forming and financing state development programs of the Republic of Uzbekistan, noted that activity in this direction should be carried out in three stages.

At the first stage, it is necessary to develop and approve the Development Concept. This concept will become a document that includes strategic tasks on implementation of directions of sectoral, territorial and targeted socio-economic development.

At the second stage, a three-year project portfolio for 2019-2021, with a specific indication of their objectives and sources of funding, should be formed on the basis of the Development Concept. These projects will be coordinated with the State Committee on Investments, the ministries of economy and finance and will be examined by the National Project Management Agency under the President of the Republic of Uzbekistan. A detailed calendar plan will be developed on implementation of each project.

At the third stage, it is required to develop and approve the State Development Program on the basis of the approved three-year projects portfolio.

Henceforth, only those projects that have a preliminary feasibility study and design estimate documentation will be included in the state development programs, emphasized Shavkat Mirziyoyev.

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Comprehensive Expertise of Projects and Import Contracts Center was established under the National Project Management Agency in accordance with the resolution of President Shavkat Mirziyoyev of January 8 of this year. Now projects, tender documentation and import contracts will be examined in this center. This was reported at the meeting, held on January 17 under the chairmanship of the President of the Republic Uzbekistan.

Since the organization of activities on the new order continues, socio-economic development projects in 2018, on an exceptional basis, will be carried out in accordance with the List of Investment Projects approved by the President.

The Head of our state proposed to implement projects using energy-saving, modern construction materials and light structures as an experiment in the city of Tashkent, Tashkent and Samarkand regions and thereby achieve a 20-30 percent reduction in their cost.

The saved funds will remain at full disposal of the city or district where the project is being implemented, and will be directed at resolving social and communal issues of this territory, said President Shavkat Mirziyoyev.

The current rules of project activity were developed back in the 60-70s of the last century and do not meet modern requirements at all. No new design institute has been established with involvement of foreign consultants to date. Activities of design organizations that meet modern requirements have not been established in the regions.

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Today, the main goal of design institutes is to artificially inflate the project cost in order to obtain a high percentage of profit from design. It’s time to stop this practice, emphasized Shavkat Mirziyoyev. Following the example of “UzEngineering” design organization, which develops projects for basic branches of the economy, other economic associations should also have similar specialized design institutes with highly qualified specialists.

Previously, activities on attracting and using loans, credits and grants were organized by Interdepartmental Council on the issues of cooperation with international financial institutions, organizations and donor countries, implementation of large and strategically important investment projects under the Cabinet of Ministers of the Republic of Uzbekistan. This reduced responsibility and initiative of state bodies, led to the emergence of unnecessarily bureaucratic procedures and costs.

The resolution of the President of our country “On measures of further enhancing effectiveness of cooperation with international and foreign financial institutions” of December 20, 2017 defined specific powers of the state governing bodies in this direction. Now the khokimiyats of all levels will work in close interaction with these structures.

Henceforth, the respective managers will be accountable to the law upon repeated assumption of cases of inclusion projects that are not well-designed, having no specific sources of funding and executors, existing only on paper in such a state development program, as an investment program. This was reported at the meeting, held on January 17 under the chairmanship of the President of the Republic Uzbekistan.

(Source: UzA)