Uzbekistan recently adopted a presidential decree to peg its domestic cotton sale prices to those recorded by the New York Mercantile Exchange. The market-based price mechanism is expected to cut the cost of raw cotton for textile companies by around one-tenth.
The strategy is a key part of a government effort to move the country away from shipping raw cotton exports in favour of instead producing finished textile products such as fabrics and clothes. Uzbek textile exports in 2019 reached a value of $1.9bn—the authorities aim to raise this figure to $15bn. President Shavkat Mirziyoyev has, meanwhile, said he wants to see finished textile product output raised to around $7bn within five years. And the government has projected that this year the country will boost its textile exports to $3bn from $2bn in 2019. Of course, such projections could be impacted by coronavirus (COVID-19) downturns yet to form part of the calculations.
The presidential decree also lengthened payment deadlines for raw cotton from 90 days to 150 days.
Moreover, among other measures designed to support the domestic textile industry, the process that allows producers to get value-added tax rebates once they ship their goods out of the country has been simplified.
The decree notes that the ex-Soviet state will charge fees on cotton yarn and knitted fabric exports via Uzbek customs borders, starting from 1 January 2021. They will be equivalent to $0.01 per kilogram of exported yarn. The fee is to be increased to $0.05 in 2022, $0.1 in 2023 and $0.2 in 2025.
