Investments in Uzbekistan: Favourable conditions and unlimited opportunities

Find out what makes Uzbekistan an ideal country for foreign investments.

Uzbekistan has been recognised as the heart of the Great Silk Road which has existed for more than 16 centuries. The territory of the state lies at the center of the land bridge between East and West, and has played a prominent role in international overland trade. Beginning in the late 20th century, Uzbekistan embarked on market reforms that have gradually restored and magnified its position as a key player in international business.

The Uzbekistan economy ranks as one of the most stable and fastest growing in the world today. The country has managed to not only survive the global financial and economic crisis, but to flourish and sustain high economic growth rates. Over the last five years, the annual GDP growth of Uzbekistan averaged 8%, which is higher than the average growth rate in the Commonwealth of Independent States (CIS) countries.

In the World Bank’s recently updated ranking of countries in terms of economic development as measured by the size of GDP, Uzbekistan moved from 72nd place in 2010 to 66th today out of 190 countries. The country’s ease of doing business rating also improved 8 positions, while on ease of paying taxes it ranked 61st. According to UNDP, over the last year, the country is also among the top ten countries by number of reforms in the facilitation of business.

The modern Uzbekistan economy offers foreign investors a number of advantages. Among them are political and macroeconomic stability; favorable climatic conditions; rich raw materials; strategic geographical location in the center of the largest regional markets; an integrated network of ground and air communications, transport, and logistics systems of international importance; a diversified industrial base; and superior scientific-intellectual, human resources.

According to the IFC, direct foreign investment occurs in the CIS countries on the condition of 45-55% expected profit. With this in mind, the investment attractiveness of Uzbekistan industrial sectors is generated by the relatively low cost of production factors (electricity, natural gas, labor), a significant domestic market (more than 31 million population), and free of duty access to the markets of CIS countries (more than 280 million people). In addition, by investing in Uzbekistan foreign companies gain the opportunity to access the rapidly growing market of Central and Eastern Europe, Southeast Asia, and the Middle East.

According to economic experts, the investment legislation of the Republic of Uzbekistan is among the most progressive legislations in the CIS countries. The law related to the protection of foreign investments, guarantees and rights is among the most important laws of the Republic of Uzbekistan. The law reflects basic key provisions of international investment law, in particular those provisions guaranteeing the rights of foreign investors and providing preferences for them.

Further, the Republic of Uzbekistan has signed 70 bilateral agreements on mutual encouragement and protection of investments, as well as ratified a number of related multilateral international instruments. These regulations govern the stimulation and protection of investments, compensation for investment losses caused by free transfer of investments abroad, and the procedure for settlement of investment disputes.

Of particular note is the system operating in the country providing privileges for foreign investors making direct investments. They are exempt from paying income taxes, property tax, tax on improvement and development of social infrastructure, single tax, and mandatory contributions and duties to the Republican Road Fund for a fixed term (3 to 7 years), based on the introduced investment.

Foreign companies engaged in prospecting and exploration of oil and gas, as well as foreign contractors and subcontractors, are also exempted from payment of all taxes and mandatory contributions to social funds for the period of exploration. Joint ventures in oil and gas, formed with the participation of foreign companies engaged in prospecting and exploration of oil and gas, are exempt from income tax for a period of 7 years from the beginning of oil and gas extraction.

These liberal conditions for foreign investors, manifest operating benefits, and solid guarantees have all contributed in attracting foreign capital. Currently, more than 4,000 enterprises with foreign capital from more than 90 countries successfully operate in the country. Among these partners of Uzbekistan are General Motors (USA), Samsung Electronics (South Korea), Huawei (China), Nestle (Switzerland), Man and Knauf (Germany), and many others. This year Uzbekistan attracted more than US$ 3 billion of foreign investment.