Learn about barriers to market entry and local requirements, i.e., things to be aware of when entering the market for this country.
Protection of Intellectual Property Rights (IPR)
Insufficient IPR protection remains to be a challenge for foreign businesses in Uzbekistan. Uzbekistan took important steps in 2018 to address longstanding issues pertaining to IP protection and enforcement. In particular, Uzbekistan’s accession to the Geneva Phonograms Convention and two WIPO Internet Treaties represents progress towards adequate copyright protection for foreign sound recordings. Despite this progress and the Government’s efforts toward developing a new national strategy for improvement of IPR protection, IPR enforcement in Uzbekistan remains weak. Uzbekistan continued on the Watch List in the most recent (2020) U.S. Trade Representative’s (USTR) Special 301 Report on Intellectual Property.
Inefficient Banking Sector
Three large state-owned and 13 partially state-owned banks control over 80 % of the sector’s total assets and capital. Privately-owned commercial banks are relatively small niche players. State-owned banks are virtually the agents of the government in implementing government development strategy. All banks are closely monitored by the government, which imposes non-core functions on them, including tax withholding and financial oversight of their clients. Uzbekistan’s economy remains largely cash-based due to relatively low trust in the banking sector and the huge role of the informal sector in the economy. In recent years, however, the government’s policies have demonstrated a notable transition from financial isolationism to greater transparency and integration into international financial markets. In 2020, the government announced privatization efforts to attract more investments from the non-public sector.
Lack of Transparency
Since its 1991 independence, Uzbekistan largely remained a closed country that preferred to rely on its own resources and on loans and investments from political allies. State owned enterprises (SOEs) have traditionally been the largest actors in the economy. Both of these factors contributed to a poorly functioning market economy without inherent transparency and clear cut rules. After coming to power in 2016, President Mirziyoyev initiated large scale reforms to open up the country for foreign investments. These reforms are ongoing, but there have still been instances when government representatives or SOEs fail to adhere to the terms of agreements or signed contracts.
State-owned enterprises dominate Uzbekistan’s economy and limit fair competition in some key industries, including but not limited to energy, telecommunications, automotive, aviation, chemical, mining, etc. Government-owned banks, ministries, and agencies interfere in business operations and in some cases make efficient operations almost impossible. Documents required for licensing, registration and other permits are often amended without notice, which creates an opportunity for rent-seeking.
Judicial System and Trade Legislation
In general, the judicial system upholds the sanctity of contracts, but if a government-affiliated entity is involved, judgments tend to favor the local partner. U.S. firms should consult with a local attorney and develop relationships with Uzbekistani partners before entering the market.