Uzbekistan: Spotlight On Uzbekistan: Kinstellar's Regular Look At The Uzbek Market - October 2018

Last Updated: 5 November 2018
Article by Joel Benjamin and Muborak Kambarova

The Legal and Business Environment

The Uzbek government has identified development strategies in five priority areas that should be implemented in the period 2017 – 2021. These are:

  1. Improvements in the development of state and social systems;
  2. Strengthening the rule of law and judicial system reforms;
  3. Development and liberalisation of the economy;
  4. Development of the social sphere;
  5. Strengthening security, religious tolerance, inter-ethnic harmony and foreign relations.

Reforms adopted

A main step in the enhancement of the economic sphere was the removal last year of most restrictions on foreign currency exchange operations. This has made the sale and purchase of foreign currency in Uzbekistan significantly easier and has allowed for the introduction of new banking operations, including the sale/purchase of foreign currency and the ability to make purchases or withdrawals in foreign currency using a special conversion payment card.

Liberalisation of the country's currency conversion rules is also helping to attract foreign direct investment (FDI) to Uzbekistan. There are currently around 850 investment projects involving FDI y with a combined value of USD 64 billion. In addition, on-going reforms of tax legislation are creating a more favourable business environment for local and foreign entrepreneurs and investors. A recent analysis by the consulting company Macro-Advisory lists Uzbekistan among the promising emerging-market countries for investments.

Free economic zones and small industrial zones

Another important step in the on-going liberalisation of the Uzbek economy is the expansion of free economic zones (FEZ). The first FEZ was launched in 2008 and today there are 18 such zones in 11 regions of Uzbekistan. Simultaneously, the number of small industrial zones (SIZ) grew to 115. In the first half of 2018, these economic zones attracted 87 new investment projects with a total value of over USD 600 million — around half of which is FDI — resulting in the creation of over 5,000 new jobs.

Information for privatised companies

The Uzbek government has been focusing recently on privatisation. The current "Presidential Regulation on Fundamental Measures to Improve the Investment Climate" provides a number of measures to assist privatised entities and develop competition, including:

  1. a decrease, from 30% to 15%, of the minimum share of foreign investment in the share capital of a legal entity with foreign investment;
  2. waiver of the requirement for mandatory participation of a foreign legal entity as a partner in a company with foreign investment;
  3. decrease of the minimum share capital of legal entities with foreign investment from UZS 600 million (approximately USD 75,000) to UZS 400 million (approximately USD 50,000);
  4. a reduction of the minimum share capital in joint-stock companies to UZS 400 million.

Natural resources of Uzbekistan

Uzbekistan is well known for its natural gas and gold reserves. As of 1 January 2018, the value of gold and foreign exchange reserves totalled USD 26.6 billion. Uzbekistan has the world's fourth-largest gold reserves and is currently the world's seventh-largest gold producer.  The country's significant oil and gas industry is lead by Uzbekneftegaz, the state-owned holding company responsible for the geological prospecting, extraction, transportation, storage, recycling and sale of oil and gas. In the first six months of 2018, Uzbek natural gas exports totalled USD 1.1 billion. Uzbekistan plans to launch 38 new projects in the oil and gas sector by the end of 2020, with a total investment value of around USD 20.6 billion.

Science and innovation

As part of Uzbekistan's strategy to develop its technology and innovation sectors, the government recently announced plans to open a bi-lateral innovation forum together with India that will unite researchers, entrepreneurs and investors from both countries and create all necessary conditions to jointly develop innovative ideas. The Uzbek government plans to create a number of similar bi-lateral innovation forums with other countries as well.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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