According to the Regulations “On the Procedure for Establishing and Organizing Activities of Small Industrial Zones” approved by Annex No. 1 to the Resolution of the Cabinet of Ministers No. 378 dated December 31, 2014, the term ‘small industrial zone’ (SIZ) denotes a territory including a certain land plot, and in certain cases means production areas, provided with utility and technical lines.

SIZ-s are created on the basis of unused territories and inactive production areas of state-owned objects transferred to local government bodies (Khokimiyats) in accordance with decisions of the President or the Government of the Republic of Uzbekistan.

Decisions on the establishment of SIZ-s are passed by the Council of Ministers of the Republic of Karakalpakstan, Khokimiyats of the regions and the city of Tashkent with the definition of the profile of the inventories, total area and boundaries of inventories, approval of design and planning documentation of the SIZ-s, indicating the size of land plots on a competitive basis.

In order to manage and coordinate the activities of SIZ-s, directorates for the management of small industrial zones are created under the relevant local government bodies depending on the territory of the SIZ-s.

A member of a SIZ is as a business entity engaged in economic activities on the territory of the SIZ. Participants of a SIZ are selected on a competitive basis.

At least 30 days prior to the contest, the Directorate of the SIZ, based on the decision of the contest commission, publishes an announcement of the contest in the media, at least in two periodicals distributed in the relevant territory of the Republic of Uzbekistan, as well as on the websites of the State Competition Committee, Council of Ministers of the Republic of Karakalpakstan, Khokimiyats of regions and the city of Tashkent.

A contest commission is a commission for selection and placement of business entities in SIZ-s, established under the Council of Ministers of the Republic of Karakalpakstan, Khokimiyats of oblasts and the city of Tashkent.

In order to participate in the contest, the applicant must submit to the Directorate an application with an attachment of two copies of the contest proposal. A contest proposal must contain:
1. A copy of the state registration certificate;
2. Name, volumes and assortment of products planned for production, including the ones for export;
3. The number of new jobs created and newly accepted workers at the time of beginning of production activities in the SIZ;
4. The amount of the expected investment;
5. Data on the security of project funding at the expense of own funds, as well as loan resources;
6. Schedule of the project implementation and the beginning of production activities;
7. The estimated need for electricity, water, gas and other types of utilities required for the project.

All sheets of the submitted documents must be certified by the seal and signature of the applicant. If the documents were submitted to the Directorate in electronic form with a notification of their receipt, they must be certified by the electronic digital signature of the applicant.

The Directorate submits contest proposals to the contest commission in two copies in sealed envelopes. Then the contest commission marks the acceptance of contest proposals on the second copy of the application indicating the date and time of their acceptance and returns it to the Directorate for sending to the applicant.

After opening the contest proposals submitted by the applicants, the contest commission determines the winner of the contest within a week. The winners of the contest are applicants who have offered the most attractive contest proposals in terms of the number of new jobs created, competitiveness and demand for the products (works, services), project implementation dates and the start of production activities, as well as investment volumes.

If the subject matter of the contest is provision of land on the territory of the SIZ, within three days from the date of determining the results of the contest between the Directorate and the winner of the contest signed an agreement on the project implementation. After the conclusion of an agreement on the implementation of the project, the Khokim of the relevant district or city within three days decides on allocation of land plot. After the Khokim of the district or city makes decision on allocation of a land plot, the Directorate ensures that the allotment site is registered with the relevant state authorities. In this case, the cost of work on the removal of the nature of the boundaries of the land plot and the development of an architectural-planning task is paid by the SIZ member.

If the subject matter of the contest is the provision of long-term lease for production space on the territory of a SIZ, within three days from the date of determining the results of the competition between the lessor, the Directorate and the winner of the competition shall be signed a long-term lease agreement for the production space for up to 10 years. The long-term lease agreement establishes the minimum rental rate for the use of state’s immovable property, based on the type of activity carried out on the leased area, without the use of appropriate coefficients. At the expiration of the long-term lease agreement, the members of the SIZ have the priority right to further extend the long-term lease agreements for the period specified in the statement of the SIZ member on the extension of the contract.

SIZ members have the following rights:
1. Independently own and use allocated production areas within the framework of a long-term lease agreement;
2. Require the provision of uninterrupted operation of engineering communications.

At the same time, the participants of the SIZ are obliged to
1. start production activities in the SIZ not later than 18 months from the date of the signature of the agreement or long-term lease agreement;
2. no later than one year from starting production activities, create new jobs and hire additional employees in the number stipulated in the agreement or long-term lease agreement and confirmed by the data of the state tax service authorities on the actual number of employees paying social insurance contributions.
3. In timely manner follow the terms of the agreement and long-term lease agreement.

The Contest Commission is obliged to ensure transparency of contests for selection of SIZ participants, as well as the Competition Commission, the Directorate and participants of the SIZ are responsible for compliance with the rules and requirements in accordance with the law.

The participants of SIZ-s in the city of Tashkent are provided with a number of benefits and preferences.

Production areas and land plots located on the territory of the SIZ are provided to business entities for a long-term lease for a period of 10 years, with a subsequent extension of another 10 years (subject to the implementation of agreements on the implementation of projects and the timely payment of all taxes and other obligatory payments) for the following preferential rental rates:
 For production areas – in the amount of the minimum rental rate for the use of immovable state property, based on the type of activity carried out on the leased area, without the use of step-up factors;
 For land plots – in the amount of the minimum land tax rate for the use of land plots in the city of Tashkent, charged from legal entities, without the use of additional coefficients.

Organizations participating in inventories are exempt for two years from the date of the decision on the location of an economic entity on the territory of the inventories, from property tax and income tax of legal entities, as well as the single tax payment (for entities applying the simplified tax system).

These privileges are granted on condition that the participants of the inventories make investments in the amount of at least 3,000 times the size of the minimum wage (i.e. 552,900,000 soums), also if the annual revenue of the member of the inventories is less than 2000 times the size of the minimum wage (i.e. 368.600.000 soums), benefits are canceled with the restoration of the obligation to pay them for the corresponding reporting year in the manner prescribed by law. The benefit is extended for an additional two years, provided that at least 30 percent of the total volume of production is exported.