Why is it profitable to invest in Uzbekistan?

Uzbekistan is a resource-rich and most populous country strategically located in the heart of Central Asia. Uzbekistan's nominal gross domestic product per capita was last recorded at US$50 billion, at US$250 billion in purchasing power parity (PPP) terms.

The President of Uzbekistan Shavkat Mirziyoyev, by his decree, approved the strategy of action in priority areas of the country’s development for 2017-2021. According to the decree, the action strategy is implemented in five stages, each stage provides for the approval of a separate annual state program for the implementation of the strategy in Uzbekistan. There are five key legal and institutional reforms: public administration, rule of law and legal reforms, economic liberalization, social sphere, security, religious tolerance and inter-ethnic harmony, foreign policy.

Currently, according to the United Nations Educational, Scientific and Cultural Organization (UNESCO), the literacy rate is 97%, which is comparable to Singapore and other developed countries. In addition, there are 93 local universities and 21 branches of foreign universities.

About 67% of the population of 33.5 million are aged between 15 and 64, with an average age of 29, which is a significant advantage. By 2035, the population is projected to reach 44 million; the urbanization level is at least 59% (currently 50%).

Currently, the Republic of Uzbekistan has the largest working-age population, which is about 19 million people, which exceeds the working-age population of the Central Asian countries combined.

The republic’s economy is the second fastest growing in the CIS with an indicator of 5.1%; according to the results of 9 months, growth accelerated to 5.7%.

As of the beginning of 2019, the country had sufficient gold and foreign exchange reserves of $28 billion (55% of GDP), and public debt — US$17.3 billion (34% of GDP). Reserves more than cover the volume of external debt, which is an important stabilizing factor. For comparison, the reserves to GDP ratio in Kyrgyzstan is 28%; the level of external debt to GDP is 48%, in Georgia 20% and 110%, in Tajikistan 18% and 39%, in Kazakhstan 16% and 93%, respectively.

Since 2019, Uzbekistan has entered the top 20 countries in the world that have achieved the greatest results in improving the business environment. In the 2020 ranking, the country achieved the best results in protecting minority investors, paying taxes, enforcing contracts and international trade.

In accordance with the Resolution of the President of the Republic of Uzbekistan “On measures to further improve the mechanisms for attracting foreign direct investment into the economy of the republic” dated April 29, 2019 No. PD-4300, foreign investors are offered state shares in 29 large enterprises, including 4 financial institutions, 2 energy sectors, 6 oil and gas, 3 chemical and other industries. In addition, shares of Uzpromstroybank, Asia Alliance Bank and Jizzakh Plastic are put up for initial public offering (IPO), shares of Quartz, Aloqabank and the Uzbek Republican Commodity and Raw Materials Exchange — on secondary public offering (SPO).

By the decision of the Head of State, it was decided to introduce a visa-free regime for the entry of tourists from 86 countries. In this regard, Uzbekistan is becoming the most open country for tourists among the CIS countries.

The above measures made it possible to sharply increase the flow of foreign citizens from 1.9 million to 5.4 million people, and in the future it is predicted to receive 10 million foreign citizens. It is worth noting that according to the Gallup rating “Global Law and Order” and “Individual Travel Safety Report” Uzbekistan is in 5th place in the list of the safest countries in the world in terms of personal safety, law and order and travel, along with Switzerland and other developed countries.

In addition, an “investment visa” has been introduced. for investors who deposited at least $200,000.

The introduction of free conversion of the national currency, the reduction of trade barriers and customs duties made it possible to significantly increase the volume of trade.

The Republic of Uzbekistan pursues an open, mutually beneficial and constructive foreign policy based on the national interests of the country. The current foreign policy of Uzbekistan is formed taking into account dynamic changes in the world and the region, as well as large-scale reforms within the country. The main trade partners are China, Korea, Türkiye, Germany and the CIS countries.

The main structure of exports consists of gold, electrical energy and textile products. While mechanical engineering and chemical products are the basic sectors for imports.

One of the biggest advantages for attracting international capital is that Uzbekistan has significant mineral reserves and more than 2,000 deposits. Annual gold production is 90 tons.

One of the key advantages of starting a business is the low cost of energy. Compared to neighboring countries, Uzbekistan has some of the lowest prices for gas and electricity.

The Republic of Uzbekistan has enormous potential for energy development. The country has more than 310 sunny days a year, the technical potential of solar energy exceeds 2 trillion kWh, wind energy 1 trillion kWh and hydropower 27 billion kWh. It is also important that from the point of view of low energy costs (cost per kWh of electricity and m3 of gas). The country is in second place among the CIS countries.

In addition, the republic has developed infrastructure, namely the total length of roads exceeds 184 thousand km, electrical networks 237 thousand km, railways 4.7 thousand km, gas pipelines 13.7 thousand km, 11 international airports , construction of the “Navoi dry port” is under consideration.

Currently, the Government is implementing a Program for the development and modernization of engineering communications and road infrastructure, which provides for the development of a unified comprehensive strategy for the development of the national transport industry that meets high international standards, and ensures its widespread integration into international transport communications, taking into account the long-term needs of domestic manufacturers in promoting their products on regional and global markets.

Currently, the country has created all the necessary conditions for the further development of transport and transit potential.

The republic is also making efforts to increase the capacity of the transport system, eliminating existing barriers to unhindered transit through the territory of Uzbekistan, which is of great importance for the development of international transport corridors in Central Asia.

Uzbekistan participates in the CIS free trade zone with general access to the markets of 275 countries.

In recent years, large-scale reforms have been carried out in the tax system, the rates of the single tax payment, VAT, property tax, and social payments have been reduced, a flat scale of taxation of personal income has been introduced, and some types of taxes and mandatory payments have been abolished. In addition, the VAT rate has been reduced from 20% to 15%.

It has been established that taxes and customs duties are provided exclusively by laws and acts of the President of the Republic of Uzbekistan as a whole for industries, areas of activity, and territories.

Measures taken to radically improve the investment climate in the country and simplify the business environment over the past 3 years have led to a sharp increase in the number of enterprises with foreign capital, namely from 5370 in 2017 to 9730 by October of this year (an increase of 81%) .

The share of capital investments through private domestic investment is 45%.

According to the country's FDI statistics, the most attractive were the mining and manufacturing industries. In addition, Russia and China are the key dominant foreign investor countries.

Presidential Decree No. PD-4300 provides for the provision of investment residency in the Republic of Uzbekistan «Uzbekistan— my second home."

It is planned to introduce a procedure for providing residence permits to foreign investors, subject to investment in the Republic of Uzbekistan. In case of purchasing real estate in:

• Tashkent region and Tashkent city — not less than 400,000 US dollars;
• Samarkand, Bukhara, Namangan, Andijan, Fergana and Khorezm region — not less than 200,000 US dollars;
• Republic of Karakalpakstan and other regions of the republic — not less than 100,000 US dollars.

In the case of other types of investments (for example, in shares, replenishment of authorized capital or acquisition of shares of enterprises), the amount of investments made must be at least 400,000 US dollars.

To actively attract foreign capital, tax and customs benefits are currently in effect, 21 free economic zones have been created (7 pharmaceutical, 12 industrial, 1 agricultural and 1 tourism), the institution of a business ombudsman has been introduced, the Tashkent International Arbitration Center has been created, and a project has been developed a unified law on investments and investment activities, the purpose of which is to combine the norms of 3 laws and about 100 by-laws on investments.  

Today, a solid foundation has been laid for increasing FDI in the economy of the republic. In particular:

• Received sovereign credit ratings from Standard & Poor's, Fitch Ratings;
• The country has risen from 6th to 5th group according to the classification of OECD countries by credit risk;

Uzbekistan sold 1 billion Eurobonds when it first entered the international debt market.

More than 50 international companies with FDI operate in the country.

The New Silk Road connection, tax incentives and comprehensive structural and regulatory reform make Uzbekistan an attractive center of influence in Central Asia. Over the past few years, Uzbekistan has made significant strides in attracting more international business and investment, overhauling virtually every aspect of doing business in the country in an attempt to facilitate and increase foreign direct investment (FDI). The country's strategic location as a major land corridor with developed infrastructure facilitates the rapid development of the market with high growth rates. The latest reforms being carried out will help provide greater opportunities for each investor.