Uzbekistan - Country Commercial Guide
Investment Climate Statement
Last published date:

The U.S. Department of State’s Investment Climate Statements provide information on the business climates of more than 170 economies and are prepared by economic officers stationed in embassies and posts around the world.  They analyze a variety of economies that are or could be markets for U.S. businesses.  The Investment Climate Statements are also references for working with partner governments to create enabling business environments that are not only economically sound, but address issues of labor, human rights, responsible business conduct, and steps taken to combat corruption.  The reports cover topics including Openness to Investment, Legal and Regulatory Systems, Protection of Real and Intellectual Property Rights, Financial Sector, State-Owned Enterprises, Responsible Business Conduct, and Corruption.

Executive Summary of the ICS

Uzbekistan is an emerging lower-middle income economy in the middle of Central Asia. An unprecedented reform program launched in 2017 has made the country’s previously isolated and highly centralized economy more friendly to private investors and resilient to external factors. The Government of Uzbekistan (“the government” or “the GOU”) declares that its goal is to overcome underemployment and poverty including through improving the business environment. The prospects for economic transformation and the huge potential of the domestic market with a population of over 36 million are attracting increasing attention from U.S. companies.

Investors can benefit from the availability of raw materials and labor resources, direct access to the markets of all Central Asian countries, and various incentives and preferences, in some cases even including state subsidies. However, despite the ever-improving legal framework, support from the host country government continues to be an important prerequisite for business success due to weak enforcement of contracts and court decisions in the event of business disputes. Local authorities generally welcome investments that are in line with their development programs, in which infrastructure and export-oriented projects dominate.

The country historically has close trade and investment ties with Russian and China. Russia’s unprovoked and unjustified full-scale invasion of Ukraine in February 2022 and the subsequent sanctions measures imposed by the international community decreased the inflow of foreign direct investment (FDI) in 2022 by about 27% to $8 billion, of which the manufacturing industry accounted for 48% and the energy industry – 12%. Uzbekistan is not a member of either the Eurasian Economic Union (EAEU) or the Collective Security Treaty Organization (CSTO) and stays in compliance with U.S. and EU regulations. The decline in investment inflows from Russia was offset by a growing inflow of remittances. Although Russia continues to be Uzbekistan’s largest economic partner, its destructive policies are motivating the GOU and local businesses to explore new markets and develop transportation corridors that bypass sanctioned jurisdictions.

Large private investors entered the industrial, chemical, banking, tourism, and aviation sectors during the reporting period. The energy deficit caused by declining supplies of hydrocarbons and inefficient infrastructure boosted green energy development. 1000 MW in solar energy projects have already been implemented, and more are in the tender stage, attracting the interest of investors from Saudi Arabia, the United Arab Emirates, China, Japan, and Korea. The GOU’s declared goal is to generate 25-30% of its electricity from renewable energy sources by 2030 and reach net zero carbon emissions by 2050.

At the same time, in 2022 relatively little progress was made in development of long-awaited legislation on the capital/securities market, which is critical to unlock the inflow of capital from portfolio investments. Data localization requirements slowed the development of the ICT sector, although the GOU’s goal of reaching $1 billion in business process outsourcing exports in the next five years appears feasible. Intellectual property rights enforcement remains weak. Many sales of state assets to private owners did not meet international transparency standards. The GOU continues to prohibit certain expressions of speech and/or religious practice, which may impose some risks for doing business responsibly, but there are no records of foreign citizens being detained for such violations, and investors have not expressed any concerns on that matter. The leadership of Uzbekistan repeatedly declared its commitment to advance the policy of reforms. If such policies continue to advance the interests of honest private investors, Uzbekistan has the potential to become a powerful regional economy.

To access the ICS, visit the U.S. Department of State Investment Climate Statement website.