Discusses distribution network from how products enter to final destination, including reliability of distribution systems, distribution centers, ports, etc.
Nearly half of Uzbekistan’s population of 35.5 million is concentrated in Tashkent and the Fergana Valley, the two regions that consumer product manufacturers should consider as the most promising entry points to Uzbekistan’s markets. Residents of Tashkent have the greatest purchasing power in the country. Other large cities include Samarkand and Bukhara, which benefit from tourism. Uzbekistan is a double-landlocked country, so getting goods into the country can be complicated, especially amidst the ongoing Russia-Ukraine war and related logistical issues and Western sanctions on Russia, but once in, distribution is easier because of the dense population and relatively good transportation infrastructure. In February 2021, Uzbekistan, Pakistan and Afghanistan agreed the construction of a 573-km-long Mazar-e-Sharif-Kabul-Peshawar railway. However, the Taliban’s takeover of Afghanistan in August 2021 made the project’s future uncertain. The three countries are still holding talks on implementation options. Such a railway could grant Uzbekistan access to the Indian Ocean and facilitate trade with South Asia and the world. The construction of China-Kyrgyzstan-Uzbekistan railway, which has been discussed for 20 years, is finally set to start in fall 2022.
Using an Agent or Distributor
U.S. companies currently active in Uzbekistan most commonly use the following methods to get their product to the market: distributing or selling the product directly; working through a countrywide distributor or agent; working through more than one local-area distributor or agent; and distributing or selling products directly from a warehouse.
It is important to have an experienced and reliable local partner or agent who knows the local market, customs regulations, business environment and legislation. A U.S. based exporter that is new to the market may contact business associations such as the American Chamber of Commerce in Uzbekistan (https://www.amcham.uz/) for general information on potential partners, agents or distributors.
Establishing an Office
To open a local representative office, foreign companies need to get accreditation from the Ministry of Investments and Foreign Trade (https://mift.uz/en/). The following documents should be submitted:
an application written on the letterhead of the foreign company containing information on its activity, business relations with companies and organizations in Uzbekistan, prospects for cooperation, and the requested time period for opening a representative office
constituent documents of the foreign company
the official registration certificate from the foreign company’s domicile country
a power of attorney issued by a foreign company to the head of the representative office, indicating the full passport data and the powers granted
regulations on representation, approved and sealed by the management of the foreign company
a letter of guarantee from a legal entity or individual of the Republic of Uzbekistan, which is the owner of the non-residential premises, confirming the readiness to lease or sell these premises to the representative office (indicating the conditions and terms of the lease or sale)
All documents must be legalized at the consular office of Uzbekistan in the foreign company’s domicile country. Legalization is not required if the documents are apostilled. Documents are submitted with a notarized translation into Uzbek or Russian language. If some of the above documents are not provided for by the legislation of the country of the foreign company, the company may submit to the accrediting body a confirmation from the Ministry of Foreign Affairs or the diplomatic mission of its domicile country in the Republic of Uzbekistan.
Accreditation can be issued for one to three years. The annual fee for accreditation is 48 times the basic calculation unit and amounts to $1,309 at the exchange rate of June 5, 2022. The decision on accreditation should be made within 10 business days.
State Department’s 2021 Investment Climate Statement for Uzbekistan includes information on investment and business environments.
The following regulations govern a franchising agreement:
Franchising agreements are subject to state registration. According to the Tax Code of the Republic of Uzbekistan, when paying royalties to a non-resident which does not have a permanent establishment, the licensee will be considered a tax agent for income tax and tax is withheld at a rate of 20% for each income payment, if there is no international agreement between the country of the licensor and the Republic of Uzbekistan providing for the avoidance of double taxation or applying a reduced tax rate.
Uzbekistan’s market presents unexplored opportunities for franchises, where only a few international companies are now present. The most serious barriers to franchising efforts are quality control, lack of information, and weak intellectual property rights protections. However, there is a great interest from local businesses to develop franchising arrangements with U.S. companies, primarily in the restaurant, beauty, healthcare, and hospitality industries.
Direct marketing in Uzbekistan is predominantly used by beauty and health product companies. Herbalife pioneered this field in Uzbekistan with its well-known model. Uzbekistani entrepreneurs frequently promote their products to potential customers using social networks. Other forms of direct marketing include distributing free samples at points of sale, cultural events, and door-to-door. Marketing by mail is not used.
Uzbekistan’s current Law “On Investments and Investment activity” was issued on December 25, 2019. Under this law, the Ministry of Investments and Foreign Trade (https://mift.uz/en/) is the authorized state body in the field of state regulation of investments, making it the regulatory authority for joint ventures and licensing. Depending on the extent of foreign participation, a business can be defined as an “enterprise with foreign capital,” (EFC - less than 15% foreign-owned) or as an “enterprise with foreign investment” (EFI - more than 15% foreign-owned). Joint ventures are defined as a company with at least 400 million soums ($36,347 at the exchange rate on June 5, 2022) charter capital and at least 15% of foreign ownership. A foreign enterprise (FE) is a company with at least 400 million soums charter capital that is fully owned by a foreign investor. FEs and EFIs can qualify for some tax incentives.
Currently there are 13,289 EFIs operating in Uzbekistan. The largest number of them hold Russian (2,309), Chinese (1,927), Turkish (1,882), Kazakh (1,067) and South Korean (896) capital. The U.S. comes sixth with 306 EFIs. Most (59%) EFIs are located in Tashkent. The number of newly registered enterprises with foreign investment amounted to 2,341 in 2021. Most new foreign investors originated in Turkey (407), Russia (356), China (266) and Kazakhstan (209). The largest number of EFIs operates in manufacturing (4,076), trade (3,782), construction (1,100) and agriculture (718).
A number of international express mail couriers are active in Uzbekistan, including DHL, FedEx, UPS, and others. Certain commodities are considered as “Non-Documents” and need to be accompanied by an invoice and, in some cases, additional customs documentation. In July 2018, the government introduced new taxation rules on imported goods valued at over $100. Transit times from major U.S. cities average around one week.
In accordance with Uzbekistan’s legislation on the protection of consumer’s rights, all products sold in the country must contain the following information in the Uzbek language:
Name of the product (work, service)
Designation of regulatory documentation, the mandatory requirements of which the product (work, service) must comply with
List of main consumption characteristics, including specific ones
Price (tariff) and terms of purchase
Date of manufacture of certain types of goods
Manufacturer’s (service provider’s) warranty obligations
Rules and conditions for effective and safe use
Service life (shelf life) and information about the necessary actions of the consumer after this period, as well as about the possible consequences if these actions are not taken
Full name and location (legal address) of the manufacturer (service provides, seller), QR code (matrix barcode) of licenses and permits, and for imported goods - the name and location (legal address) of the manufacturer and importer
Name of the country of origin of goods
Addresses of the manufacturer (service provider, seller) and enterprises authorized by them to accept claims from the consumer, as well as those performing repairs and maintenance
Methods and rules of storage, safety of disposal
For a product subject to mandatory technical regulation, the consumer must be provided with relevant information about its compliance with the requirements of regulatory documents in the field of technical regulation
Ingredients and “best before” date (for food)
User’s manual (if applicable)
Warnings (if applicable)
This information label must be applied on the product at the facility where it is produced. The government will not allow in-country labeling. Information on imported goods should be provided online in advance to the customs service’s information systems.
Due diligence is important in choosing the best market entry strategy and in selecting business partners and clients in Uzbekistan. Notable areas of concern include company solvency, import restrictions and procedures, rule of law issues, and limitations on government investment incentives. Interested parties may contact the American Chamber of Commerce in Uzbekistan or any of the major international audit companies with offices in Tashkent, including:
The U.S. Embassy provides International Company Profile (ICP) services to assist U.S. firms in evaluating potential business partners by providing information on Uzbekistani companies.