Uzbekistan flag Uzbekistan: Investing in Uzbekistan

Foreign direct investment (FDI) in Uzbekistan

FDI in Figures

Reforms in Uzbekistan during the last few years, such as liberalizing the foreign currency market and establishing seven special economic zones with tax breaks for investors, have made the country a more appealing destination for international capital. According to UNCTAD's World Investment Report 2023, FDI inflows increased from USD 2.53 billion in 2021 to USD 2.27 billion in 2022, mostly due to the doubling of reinvested earnings to USD 1.2 billion. At the end of the same period, the total stock of FDI was estimated at USD 13.63 billion, around 16.9% of the country’s GDP. According to the Institute of Macroeconomic and Regional Studies (IMRS), Uzbekistan has attracted USD 7.5 billion in FDI in the first nine months of 2023. The main countries investing in Uzbekistan are China (more than 65% of the total stock), South Korea, Russia, Kazakhstan, and Turkey (data U.S. Department of State), with the energy, metallurgy, and chemical industry being the primary sectors (data Ministry of Investment).

Uzbekistan, situated in the heart of Central Asia, is an emerging lower-middle-income economy undergoing a significant transformation. Since the launch of an unprecedented reform program in 2017, the country has shifted from an isolated and highly centralized economy to one that is more welcoming to private investors and resilient against external factors. Investors are attracted by abundant raw materials and labor resources, direct access to markets across Central Asia, and various incentives and preferences, including state subsidies in some cases. Despite improvements in the legal framework, success in business still depends on support from the government due to weak contract enforcement and dispute resolution mechanisms. Uzbekistan's legislation, such as the Law on Investments and Investment Activities, ensures the free transfer of funds out of the country and protects investments from nationalization. Discrimination against foreign investors based on nationality, residence, or origin is prohibited by law. However, the government maintains control over capital flows in key industries, promoting investments in preapproved projects, particularly those focused on exports. The National Investment Program for 2023-2025, outlined in Presidential Resolution 459 of December 28, 2022, encompasses 768 projects valued at USD 55.4 billion. The Ministry of Investment, Industry, and Trade oversee the registration of investment projects, while the Investments Promotion Agency offers foreign investors consulting services, information and analysis, assistance with business registration, and other legal support. In 2022, the Government of Uzbekistan (GOU) persisted in its efforts to diminish government intervention in the economy by privatizing state-owned enterprises and assets across various sectors including chemical, transportation, construction, and banking. Throughout the year, monopolies held by state-owned enterprises in the air transportation and chemical industries were effectively dismantled. Overall, Uzbekistan ranks 82nd among the 132 economies on the Global Innovation Index 2023 and 103rd out of 184 countries on the latest Index of Economic Freedom.

Foreign Direct Investment 202020212022
FDI Inward Flow (million USD) 1,7282,2762,531
FDI Stock (million USD) 10,28811,54713,631
Number of Greenfield Investments* 222514
Value of Greenfield Investments (million USD) 3,2471,9241,221

Source: UNCTAD, Latest available data

Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.

Country Comparison For the Protection of Investors Uzbekistan Eastern Europe & Central Asia United States Germany
Index of Transaction Transparency* 8.0 7.5 7.0 5.0
Index of Manager’s Responsibility** 3.0 5.0 9.0 5.0
Index of Shareholders’ Power*** 7.0 6.8 9.0 5.0

Source: Doing Business, Latest available data

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.

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What to consider if you invest in Uzbekistan

Strong Points
Uzbekistan's key assets attracting FDI include:

- abundant and diversified natural resources (gas, gold, cotton, hydropower potential);
- low level of debt and comfortable foreign exchange reserves;
- ambitious public investment program;
- important size of the domestic market (population of 32 million)
- strategic position between China and Europe ("New Silk Road").

Weak Points
The major obstacles to FDI in Uzbekistan are :

- low economic diversification and dependence on commodity prices;
- low competitiveness;
- underdeveloped banking sector;
- state interventionism and difficult general business climate;
- autocratic regime.

Government Measures to Motivate or Restrict FDI
To improve the business environment, the Governement of Uzbekistan introduced in 2017 a number of legislative changes, including the cancellation of unscheduled, and seemingly arbitrary or punitive, inspections of businesses as of January 1, 2017; elimination of the requirement to convert certain percentages of hard currency export earnings at the official (artificially low) exchange rate; simplification of business registration procedures; creation of a Business Ombudsman office; and a Law on Countering Corruption that attempts to increase transparency in Government of Uzbekistan functions.

By law, foreign investors are welcome in all sectors of the Uzbek economy and the government cannot discriminate against foreign investors based on nationality, place of residence, or country of origin. However, government control of key industries has discriminatory effects on foreign investors. For example, the Governement of Uzbekistan retains strong control over all economic processes and maintains controlling shares of key industries, including energy, telecommunications, airlines, and mining. The government still regulates investment and capital flows in the raw cotton market and controls all silk sold in the country, dampening foreign investment in the textile and rug-weaving industries. Partial state ownership and government influence are common in many key sectors of the economy.

The state still reserves the right to export some commodities, such as nonferrous metals and minerals. In theory, private enterprises may freely establish, acquire, and dispose of equity interests in private businesses, but in practice, this is difficult to do because Uzbekistan’s securities markets are still underdeveloped.

Investment programmes were launched in order to encourage big investments in the priority sectors. Programmes include 86 foreign direct investment projects totaling 1.8 billion dollars, of which more than half is for the energy sector.

To encourage foreign investment, the Government provides tax incentives to joint stock companies for which foreign investment participation accounts for at least 15% of the authorised capital.

Bilateral investment conventions signed by Uzbekistan
The bilateral treaties on investment signed by Uzbekistan may be found on the Investment policy hub website.

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Latest Update: May 2024