Uzbekistan has reduced the excise tax on Kazakh flour
The problem of the milling companies, which the Chamber of entrepreneurs of the SKO raised for several years, has moved from a dead point. From 1st of April 2017, Uzbekistan reduced the excise tax on Kazakh flour from 11% to 5%. The agreement at the governmental level was reached during the visit of the President of Uzbekistan to Kazakhstan. President Nursultan Nazarbayev on this issue issued a resolution "On further measures to streamline foreign economic activity of the Republic of Uzbekistan" on March 31, 2017. As it was noted in the document, the resolution was adopted to create favorable conditions for the sustainable development of domestic production based on the application of generally accepted methods of customs and tariff regulation in the world practice. For many years the main importer of Kazakhstan wheat flour was the Republic of Uzbekistan. In 2012, every three export wagons of Kazakh flour from four were destined for Uzbekistan - the share of this country in total exports reached 75%. Then flour export to Uzbekistan began to decline from year to year. As a result of the first quarter of 2016, the share of Uzbekistan in total exports fell to 42%. The main reason for this reduction was Uzbekistan's introduction of an excise tax on all imported flour at a rate of 15%. In 2014, after the meeting of the intergovernmental commission on the initiative of the Kazakh side, Uzbekistan reduced this rate from 15 to 11%. The introduction of excise tax on flour imported from Kazakhstan led to the fact that it became more profitable for Uzbekistan to purchase grain, rather than flour. As a consequence, the rapid growth of mill production in Uzbekistan and, accordingly, the growth of Uzbek flour production from Kazakhstani grain. It should be noted that 95 percent of all flour milling companies that were focused on Central Asia and Uzbekistan are located exactly in the SKR. Because of high excises, our flour, for example, in Uzbekistan, the cost was more than the price of local to 70 USD per ton, so the volume of exports began to fall sharply. The profitability of enterprises began to decline, flour milling industries turned into loss-making plans, and the industry - in an unattractive investment. The decrease in the volume of flour exports automatically reduced the load of mill enterprises, which led to the closure of a number of flour mills. South Kazakhstan flour in the Uzbek market has become uncompetitive. The share of reduced flour exports reached 30%. In the SKO, there are 29 companies for the production of flour, which export flour to the countries of the near abroad. The Chamber of Entrepreneurs of SKR raised this problem at all levels, it proposed to cancel or at least to reduce the excise tax rate or to reimburse expenses for subsidies for each ton of the product. Flour mills are also offered to open additional production of pasta, bakery, confectionery products. "The Chamber of Entrepreneurs of the SKR is helping our domestic producers in the sale of their products in every possible way", said Gazizbek Natbayev, deputy director of the Chamber of Entrepreneurs of SKR. - In addition to assisting in participation in public procurement and tenders, we are working on the sale of domestic products in foreign markets. For example, the agreement of the government of Kazakhstan with the government of China was recently reached on the promotion of our products on their market. Another success, which significantly affects South Kazakhstan, can be called Uzbekistan's reduction of the excise tax on the import of flour products by Kazakhstan's commodity producers. This issue has been raised repeatedly since the establishment of the Chamber together with the Union of Millers of the South Kazakhstan Region, because all the large flour milling companies in South Kazakhstan are oriented to Central Asia and Uzbekistan. "At the same time Gazizbek Natbaev noted that the flour mill is a locomotive not only of the grain-processing industry, but also of the agro-industrial complex and the entire economy as a whole. This industry has a large multiplier effect, which appears in related industries: flour production, logistics, transportation, energy, trade, and jobs are all involved. In the opinion of the deputy director of RCE of SKR, the reduction of excise duties on Kazakh flour will protect domestic producers, creating conditions for long-term growth of the milling industry and will serve the development of mill production in Kazakhstan.
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