June 26, 2020
Review of Legislation in the Construction Sector (April – June 2020)
- Denau District Development Program;
- Resumption of Construction work;
- Construction of Sewage Facilities;
- Environmental Control over Cement Production Strengthened;
- Deregulation in State Construction Control;
- Report of the Ministry of Construction on Corruption in the Construction Sector;
- New Order of Equity Construction of Multi-Storey Buildings;
- Customs Exemptions in Construction.
In early April 2020 the Program for the Comprehensive Socio-economic Development of the Denau District of Surkhandarya Region in 2020-2022 was adopted (PP-4667 dated 09.04.2020). Program priorities are as follows:
- revision of the General plan of the district, in particular, the location of the road infrastructure, streets, multi-storey buildings and other objects, as well as defining the urban development plans for the short and medium terms;
- changing the architectural appearance of the District Center, reconstruction of its historical part, improvement of multi-storey housing stock, improvement of the public utility services;
- development of the industrial, service sectors and processing of agricultural products to provide employment;
- increase of FDI and establishment of exports production ;
- construction of engineering and communication systems, improvement of road infrastructure and internal streets, installation of modern lighting devices;
- opening new public transport routes, improving quality of transport services;
- improving the state of buildings of social institutions, updating their equipment;
- construction of modern medical centers;
- improvement of a meliorative condition of irrigated lands;
- increase of revenues of the local budget by expanding a tax base.
50 billion Soums will be allocated from the Anti-crisis Fund on:
- improvement of water supply;
- reconstruction and renovation of internal roads, kindergartens and schools; and
- provision of communication systems to small industrial zones.
Republican Working Group is responsible for implementation of the adopted program. It consists of the head of the President’s Administration, First Deputy Prime Minister and Khokim of Surkhandarya Region. The right to (title of) permanent use of land plots will be released through an online auction. All funds received will be directed, on an exceptional basis, to the local district budget in order to finance infrastructure projects.
Until July 1, 2020 three small industrial zones will be organized in well-developed and densely populated areas that are not intended for farming and not on vacant land plots.
Since mid-April 2020 construction has been resumed at major construction objects. The corresponding decision was made by the Special Republican Commission which takes measures against COVID-19. The report on the decision notes that compliance with healthy and hygiene rules at construction sites is mandatory. Staff food should be arranged directly on the construction site, the responsibility for such compliance is on the head of the relevant business entities, as well as Chairman of the Council of Ministers and Regional Khokims. Previously, measures were taken to support entrepreneurs during the pandemic. For example, according to PD-5978 of 03.04.2020 building materials that are needed for the construction of medical and quarantine facilities against COVID-19, as well as goods necessary for their operation, are exempt from customs payments and VAT until December 31, 2020.
At a presidential video conference of 24.04.2020 on the issue of ensuring the full-fledged operation of industry, construction and infrastructure during the quarantine period, it was noted that 1.5 trillion Soums were allocated from the Anti-crisis Fund for the construction of engineering and communication infrastructure, including 500 billion Soums for 55 projects in the water supply sector and 1 trillion Soums for 1547 projects in the road construction sector. It was also noted at the meeting that all types of construction work can be continued in case if compliance with the quarantine rules are guaranteed. It was recommended to involve local contractors in projects of improvement of the drinking water supply and road construction on the basis of a tender. In addition, it is noted that in places with dense housing needs of the population, the process of issuing land for the construction of multi-storey buildings will be accelerated. Since April 25, 2020 the construction materials markets have restarted their work.
In mid-April 2020 two resolutions of the Government (No.220, 221 both dated 14.04.2020) entered into force. They are aimed to increasing a level of sewerage services provision to the population and economic entities of Karshi (Kashkadarya region), Urgench, Khiva, Pitnak and Gurlen (Khorezm region) cities in 2020-2023. Construction work will be carried out with the participation of the EBRD. Total cost of projects:
- in Kashdarya Region – 76.04 million US dollars; and
- in the Khorezm Region – 114.5 million us dollars.
Of these, US $ 60 million and US $ 90 million respectively, are EBRD loans granted for 15 years with a 4-year grace period. The responsible governmental body for project implementation and targeted disbursement of EBRD loans is the Kommunxizmat Agency under the Ministry of Housing and Communal Services. The allocation of land plots for the construction of sewage networks and structures, as well as implementation of necessary compensation payments is the responsibility of the Khokimiyats of the respective regions.
At the end of April 2020 the Decree of the Cabinet No. 223 dated April 14, 2020 “On Strengthening Environmental Control in the Field of Cement Production” entered into force. Starting from January 1, 2022 all cement production enterprises must install automatic sampling and analysis stations at air pollution sources and stationary posts in adjacent territories. These stationary posts should be equipped with devices for remote monitoring of the level of air pollution. The exception to this rule applies to enterprises with a high risk of environmental impact. For them, the installation of such stations and posts is mandatory starting from January 1, 2021.
Since the end of May 2020, according to the Decree of the Cabinet No. 309 dated 22.05.2020, the restriction on the import of cement products (Classification of Goods Code 2523210000 and 2523290000) has been cancelled. According to the Decree of the Cabinet No. 247 dated 23.04.2020, this restriction should have been in effect for the period from May 1 to December 31, 2020 due to a cement demand drop due to the suspension of construction works during the COVID-19 pandemic. However, now the import of cement products with the foregoing codes is resumed. This decision was made to ensure uninterrupted supply of construction works with scarce building materials. The State Customs Committee ensures prompt processing of necessary documents for importing cement products by business entities.
Presidential Decree (PD-4586 dated 05.02.2020) is being gradually implemented. In particular, existing Acceptance procedures for completed construction projects are cancelled. From May 1 the Construction Control Inspection under the Ministry of Construction will start issuing Permits for their operation. The first category of objects for operation that already need to get a Permit is low-risk objects, regardless of their sources of funding. The act regulating the procedure for obtaining a Permit has not yet been adopted. The State Construction Control of Capital Repair Facilities is also canceled except for objects that are funded from the State Budget.
The issue of the level of corruption is on the agenda after the speech of the President in February 2020. The Legislative Chamber decided that the anti-corruption measures should be implemented separately in each industry in order to increase the effectiveness of anti-corruption measures. So in May 2020 the Committee of the Legislative Chamber on Anti-Corruption and Judicial Issues (hereinafter – the Committee) held a hearing of the report of the Minister of Construction (MoC) on the topic of measures to combat corruption in the construction sector.
The Minister of construction pointed out the following reasons for corruption in the construction sector:
- The legal acts are not sufficiently systematized. For example, in the Administrative regulations approved by the Cabinet Decree No. 370 of 18.05. 2018 on the provision of public services for the development of architectural and planning tasks there is a legislative gap that allows the applicant to re-apply for permission without paying a fee. This may raise the intention of state officials to collect additional fees from the applicant. This possible procedure contradicts to the basic principles of the Law of the Republic of Uzbekistan “On Licensing Procedures in the Field of Business”;
- Urban planning regulations are outdated. On the Minister’s opinion, urban development norms and rules (hereinafter UDN) do not meet modern requirements and establish excessive obligations, which is a corruption-causing factor in accordance with the Methodology for Conducting Anti-corruption Expertise of Normative Legal Acts and Their Projects, approved by the Order of the MoJ No. 2745 dated 25.12.2015;
- Unspecified tender requirements. On the Minister’s opinion, there are a certain number of unclear norms in the legislation, which are corruption-causing. For example, according to the Regulation “On Competitive Bidding in Capital “, approved by the Cabinet’s Decree No. 302 of 03.06.2003 the applicant for participation in competitive bidding may be subject to the basic and “other requirements set by the customer“;
- As the Minister noted, many checks are carried out only on paper. At the end of each stage of construction, control check must be executed. However, in fact this procedure is violated. For example, the fact of conducting high-pressure tests of concrete samples must be recorded in the laboratories of Territorial Inspections of Supervision in the Field of Construction, yet their actual implementation is absent.
- Detection of the embezzlement of the budget funds. In his report, the Minister notes that in 2019-2020 according to the Prosecutor’s office there was the detection of the embezzlement of 38 billion Soums from the funds, i.e. preferential construction materials and other material values. In the years 2018-2019 365 criminal offenses were committed in the construction sector, 72 % of them related to corruption. At the same time, 14 of those brought to criminal responsibility are employees of the system of the MoC.
After hearing the Report, the Committee made the following decisions on combating corruption in the construction sector:
- exclude norms of a corrupted nature in the legal acts;
- ensure transparency, openness and implement the system for organizing online tenders (contests);
- create the possibility of conducting a systematic anti-corruption internal audit;
- systematize the law and to reduce the number of regulations.
Another important regulation in this area is PD-4732 of 27.05.2020 “on Measures of Regulating the Process of Equity Construction of Multi-storey Buildings” which established a new procedure for the equity construction of multi-storey buildings.
From May 28, 2020 the attraction of funds of individuals and legal entities that are shareholders in the construction of multi-storey buildings can be carried out only by those developers who are included in the Electronic List of Developers according to the Regulations. Now the developers must be included in this list separately for each building complex. Only after the inclusion into the List the developers can conclude contracts with shareholders. The MoC and its territorial divisions are responsible for the inclusion of the developer into the Electronic List and registration of contracts. Amendments and additions of the contract that are not registered shall be considered invalid. The Regulation stipulates that in order to be included in this list, developers shall submit documents confirming the following information:
- on land allocation and primary permits for construction works;
- on availability of design and estimate documentation for the construction complex and a positive conclusion of the expertise (except for projects implemented by the “fast-track” method);
- on a presence of concluded contracts for technical and author’s supervision over the construction of the complex, as well as state control in the field of construction carried out in the process of construction and installation works by the relevant territorial inspection;
- the absence of overdue taxes and other mandatory payments from the developer;
the availability of the developer’s financial resources in the amount of at least 20 per cent of the cost of the construction complex, or a letter of guarantee of the bank on the allocation of credit for this amount or its missing part;
- opening of a separate current account with a commercial bank to accumulate funds by shareholders.
The MoC and its territorial divisions are authorized to conduct an electronic data platform on:
- a building complex;
- the contracts concluded on each object of the building;
- the developer and the general contractor;
- the problematic building objects and unfair developers.
The Regulation establishes conditions of the contracts concluded by the developer and shareholders. The contract should contain the following provisions:
- information about the construction complex and the object;
- the area and the cost of the object;
- the date and condition of the object acceptance by the shareholder, the amount contributed by the shareholder;
- the order of settlements;
- rights, obligations and responsibilities of the parties;
- the warranty period of the object;
- the schedule of construction and installation work;
- the order of assignment of claims under the contract;
- the procedure for dispute resolution; and
- other conditions agreed by the parties under the law.
From July 1, 2020 the following measures will be taken to widely involve business entities in the construction of apartment buildings in rural areas:
- аllocation of land plots not intended for irrigated agriculture and forestry, as well as without forced resettlement of the population;
- selection of business entities involved in the construction of multi-storey buildings in rural areas through competitive bidding;
- conclusion of an agreement with the winner of the competitive bidding with investment obligations;
- rising environmental standards in the construction of supply and internal water supply, sewerage and highway networks.
From July 1, 2020 until January 1, 2021 in accordance with PD-4718 of 19.05.2020 “On measures of acceleration of the multi-storey buildings construction in the regions”, the import of new construction equipment, vehicles for the carriage of goods is exempt from customs payments under the list, which is an appendix to the mentioned Decree.
Moreover, from July 1, 2020 to July 1, 2023 the import of forms for casting concrete, machines for preparing concrete for the construction of apartment buildings according to the special list is exempt from customs payments. The procedure for the establishment this list has not yet been defined by law.
Moreover, payers of customs payments can get a delay of up to 120 days or installment payment of customs payments in the period from July 1, 2020 to July 1, 2023 for the import of machinery used in the construction industry, technological equipment, small-scale mechanization, devices, spare and component parts. In all cases, payers are not exempt from paying VAT and charges for customs registration.