Policy Rain Affects Ukrainian Investment In Textile Enterprises

In Asian countries, Uzbekistan has attracted the attention of many overseas investors with its solid textile industry base, relatively stable market order and generous tax benefits policy.

However, at the beginning of this year, the Ukrainian side announced the abolition of the tax rate of 20%.

Not long ago, reporters from China's textile enterprises investing in Ukraine were informed that in order to make up for the loss of foreign textile investment industry due to the cancellation of the tax benefits policy, the Uzbekistan government agreed that the textile enterprises invested in the country could enjoy a 6% discount on the basis of the original 15% cotton purchase preference.

This move will undoubtedly benefit the local textile enterprises that invest locally.

With the gradual improvement of investment policy, more and more textile enterprises are also turning their attention to the slowly opened investment door in Uzbekistan.

Tax rebate cancellation let enterprises run away

As we all know, cotton is known as "Platinum" in Uzbekistan, and together with gold constitutes the two pillars of the country's national economy.

In the view of textile enterprises mainly producing cotton spinning products, the climate of Uzbekistan is dry and the quality of the cotton produced is no less than that of Xinjiang cotton. It provides an advance guarantee for the product quality control of the enterprises.

In the past two years, due to the increased pressure on domestic production costs, some textile enterprises wishing to "go out" should not only investigate the local industrial foundation, but also weigh the practical benefits that can be obtained after investment.

In July 2010, when Wang Tong and other people in Shandong Yuncheng Heng Shi Textile Co., Ltd. went to invest in Wu, they finalized a spinning mill in Andijon. The company was prepared to invest $22 million to buy it and build a production base here.

"The reason why we choose Uzbekistan is not only the quality of cotton in Ukraine, but also the attraction of the cotton purchase and tax benefit policy in the country."

Wang Tong spoke frankly to reporters.

It is understood that in order to enhance the competitiveness of the international market of export products, the Ukrainian government began to implement export rebate system for export products back to 20% of value added tax since January 1, 2005.

In addition, local foreign textile enterprises can enjoy a 15% price discount for cotton purchase.

Wang Tong roughly estimated that the textile enterprises that built factories in Ukraine should be able to enjoy 35% of the tax benefits.

However, Wang Tong did not expect this policy to change abruptly.

"At the beginning of this year, in the new tax policy of Uzbekistan, land use fees and other preferential policies are still being implemented. Only the export tax rebate policy is abolished, which has a very big impact on the production and operation of textile enterprises."

Wang Tong said, before the abolition of the tax rebate policy, the export value of 40 thousand yuan cotton can be returned to the enterprise 8000 yuan, excluding other cost factors, enterprises still earn.

Now, the tax refund has been cancelled, and it is difficult for enterprises to talk about earnings.

The change of policy has made local textile enterprises uneasy. Not only the investment plan of Shandong Heng Shi has been temporarily stranded, but another Chinese enterprise that originally planned to invest $2 million to buy the Bukhara spinning mill in Uzbekistan has had to choose to divest.

Statistics show that in the reform of the export tax rebate policy, a total of more than 100 foreign-funded textile enterprises have been involved in the policy, and the new policy has made most of the cotton spinning enterprises lose money.

Favorable policies emerge

Some analysts point out that Uzbekistan is doing this to protect its own country.

It is considering the negative impact of the cancellation of the tax rebate policy and the gradual cooling down of investment enthusiasm of foreign businessmen in recent years.

After a period of half a year, the Ukrainian side finally decided to add 6% of the quota, so that foreign enterprises can buy Cotton concessions amounting to 21%, and compensate for the original tax benefits.

The rest will be compensated through measures such as exemption from real estate tax.

As the investment situation continues to change in various countries, the Ukrainian government's initiative has not only demonstrated its support for foreign investors, but also the local government.

All along, the Uzbekistan government has taken special care of foreign textile investors.

In addition to those mentioned above, the price concessions for foreign enterprises to purchase raw materials are 15% lower than the price of the Liverpool cotton exchange market. The government also advises banks to provide short term loans to textile enterprises for 180 days.

It is understood that China has already obtained loans of 7 million US dollars from local banks in Ukrainian textile enterprises.

In addition, the Ukrainian government has attached great importance to the demands of foreign enterprises. After the abolition of the tax rebate policy, the governor has personally appease the sentiment of foreign enterprises.

Li Yan, manager of Nanyang cotton cotton Angel Textile Co., Ltd., said: "since we built our factory in 2009, we have received long-term attention and support from the Ukrainian government.

Because of the large scale of production, enterprises are also protected by the "presidential cabinet order".

With this cabinet order, we can talk directly with the government.

The good momentum of development in Ukraine has led to the next expansion plan for Nanyang cotton. "We are expected to increase the production capacity of 80 thousand spindles this year, including 40 thousand spindles of air spinning and 40 thousand spindles of ring spinning.

It is expected to export 40 million US dollars a year.

Li Yan said.

Industrial Development constrained economy

Although enterprises have embarked on a journey to invest in Ukraine, the country's policy of attracting foreign investment has also shown good results.

But there is no denying the fact that Uzbekistan's textile industry will continue to be affected by the planned economy in the future.

Liu Huaqin, deputy director of the European Research Department of the international trade and Economic Cooperation Research Institute of the Ministry of Commerce, told reporters: "in recent years, the investment situation of the Ukrainian market has improved, but the highly planned economy has increased the instability of the Ukrainian policy, which has caused certain obstacles to the development of foreign enterprises in Ukraine."

It is understood that raw material supply, electricity and natural gas in Uzbekistan are easily influenced by the planned economic system.

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Insiders pointed out that once the domestic finance is tight, the Ukrainian side is in urgent need of capital repatriation, and the government is likely to push the cotton price up.

In addition, the textile enterprises invested in Ukraine also face the problem of large mobility of labor force.

"As most businesses know, Uzbekistan has a cheaper labor force.

The monthly salary of workers is about 400 yuan ~500 yuan.

However, local workers are not accustomed to working at a fixed time of 9 to 5, so the mobility of workers is very large.

In addition, the number of skilled textile workers in the country is very limited, and enterprises need to spend some energy and cost in training workers' skills.

Liu Huaqin pointed out that for the textile enterprises eager to invest in Ukraine, while drawing on the experience of the previous enterprises, they should also actively establish contacts with the local government and take the initiative to understand the local customs and customs.

Only in this way can enterprises obtain desirable investment returns.