Protection of Intellectual Property Rights (IPR)
Insufficient IPR protection remains to be a challenge for foreign businesses in Uzbekistan. The government 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. The country’s leadership has acknowledged that the practice of copying well-known international brands by local entrepreneurs discourages foreign investment. The government has also indicated its awareness of the importance of paying author royalties when copyrighted video materials are broadcast or streamed online in paid subscription services. On January 13, 2022, Uzbekistan joined the Marrakesh Treaty to Facilitate Access to Published Works for Persons Who Are Blind, Visually Impaired, or Otherwise Print Disabled. Currently, Uzbekistan is in the process of accession to other international treaties and agreements, including: the International Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations (Rome, October 26, 1961); Singapore Treaty on the Law of Trademarks (Singapore, March 27, 2006); and Geneva Act of the Hague Agreement Concerning the International Registration of Industrial Designs (Geneva, July 2, 1999). On April 26, 2022, President Mirziyoyev signed the decree “On additional measures for the further development of the field of intellectual property”, which approved the Strategy for the Development of the Field of Intellectual Property in the Republic of Uzbekistan for 2022 – 2026. Despite this progress, IPR enforcement in Uzbekistan remains weak. Although Uzbekistan took steps in 2022 toward providing ex officio authority for border enforcement, it needs to take further steps to provide full ex officio authority. Uzbekistan remained on the Watch List in the most recent (2023) U.S. Trade Representative’s (USTR) Special 301 Report on Intellectual Property.
Inefficient Banking Sector
Twelve banks fully or partially owned by state account for over 76% of the sector’s total assets and capital, 60% of deposits and 81% of loans. 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. In its 2023 Banking Industry Country Risk Assessment (BICRA) Update for Uzbekistan, S&P Global Ratings lists the following weaknesses of the sector: distorted competition in the sector caused by the dominance of state banks, low quality of banking regulation and supervision, weak corporate governance and transparency standards, slow pace of privatization. Uzbekistan’s economy remains largely cash-based due to relatively low trust in the banking sector and the big 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 2020-2022, the government announced privatization efforts to attract more investments from the non-public sector. However, the Russian invasion of Ukraine discouraged investors from the region.
Lack of Transparency
Following its 1991 independence, Uzbekistan for many years remained largely 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 factors contributed to the creation of 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 the country to foreign investments. These reforms are ongoing, and there have been instances when government representatives or SOEs fail to adhere to the terms of agreements or signed contracts. The government has introduced initiatives to bring transparency to the functioning of state bodies and SOEs, including:
Creating of an anti-corruption agency in 2020Prohibiting, from January 1, 2022, civil servants from opening and owning foreign bank accounts, and keeping cash or owning real estate and other property outside the territory of the country;Introducing protocols to prevent conflicts of interest in the field of public procurement starting from January 1, 2022;Establishing an obligation for the 24 largest state-owned enterprises (SOEs) and seven Ministries to conduct procurement only through public tenders;Obtaining international credit ratings for the 23 largest state-owned enterprises (SOEs) to enable them to attract financing in domestic and foreign financial markets for their investment projects;Abolishing the power of local governments to allocate land and issuing a decree introducing an e-auction system for the sale or rent of non-agricultural land to private sector entities;Adopting the law “On public civil service” in August 2022 to provide a comprehensive legal regulation of public civil service, including the creation of an independent and competitive hiring process, and to create a legal basis for the prevention of corruption in public civil serviceAdopting the law “On state property management” in March 2023 to increase the efficiency of state property management and disclose information on state property to the public, except in cases prohibited by law. The first Consolidated report on the efficiency of operations of state enterprises and the use of state property was published on August 5, 2023.
State Involvement
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. State-owned banks, ministries, and agencies interfere in business operations and decrease their efficiency. In March 2021, the government announced that, under its 2021-2025 strategy for managing and reforming state-owned enterprises, it intends to reduce the number of state-owned enterprises in Uzbekistan by 75% through an intensive privatization effort.
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.
Protection of intellectual property rights (IPR).Insufficient IPR protection remains to be a challenge for foreign businesses in Uzbekistan. The government 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. The country’s leadership has acknowledged that the practice of copying well-known international brands by local entrepreneurs discourages foreign investment. The government has also indicated its awareness of the importance of paying author royalties when copyrighted video materials are broadcast or streamed online in paid subscription services. On January 13, 2022, Uzbekistan joined the Marrakesh Treaty to Facilitate Access to Published Works for Persons Who Are Blind, Visually Impaired, or Otherwise Print Disabled. Currently, Uzbekistan is in the process of accession to other international treaties and agreements, including: the International Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations (Rome, October 26, 1961); Singapore Treaty on the Law of Trademarks (Singapore, March 27, 2006); and Geneva Act of the Hague Agreement Concerning the International Registration of Industrial Designs (Geneva, July 2, 1999). On April 26, 2022, President Mirziyoyev signed the decree “On additional measures for the further development of the field of intellectual property”, which approved the Strategy for the Development of the Field of Intellectual Property in the Republic of Uzbekistan for 2022 – 2026. Despite this progress, IPR enforcement in Uzbekistan remains weak. Although Uzbekistan took steps in 2022 toward providing ex officio authority for border enforcement, it needs to take further steps to provide full ex officio authority. Uzbekistan remained on the Watch List in the most recent (2023) U.S. Trade Representative’s (USTR) Special 301 Report on Intellectual Property.
Inefficient Banking Sector
Twelve banks fully or partially owned by state account for over 76% of the sector’s total assets and capital, 60% of deposits and 81% of loans. 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. In its 2023 Banking Industry Country Risk Assessment (BICRA) Update for Uzbekistan, S&P Global Ratings lists the following weaknesses of the sector: distorted competition in the sector caused by the dominance of state banks, low quality of banking regulation and supervision, weak corporate governance and transparency standards, slow pace of privatization. Uzbekistan’s economy remains largely cash-based due to relatively low trust in the banking sector and the big 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 2020-2022, the government announced privatization efforts to attract more investments from the non-public sector. However, the Russian invasion of Ukraine discouraged investors from the region.
Lack of Transparency
Following its 1991 independence, Uzbekistan for many years remained largely 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 factors contributed to the creation of 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 the country to foreign investments. These reforms are ongoing, and there have been instances when government representatives or SOEs fail to adhere to the terms of agreements or signed contracts. The government has introduced initiatives to bring transparency to the functioning of state bodies and SOEs, including:
• Creating of an anti-corruption agency in 2020
• Prohibiting, from January 1, 2022, civil servants from opening and owning foreign bank accounts, and keeping cash or owning real estate and other property outside the territory of the country;
• Introducing protocols to prevent conflicts of interest in the field of public procurement starting from January 1, 2022;
• Establishing an obligation for the 24 largest state-owned enterprises (SOEs) and seven Ministries to conduct procurement only through public tenders;
• Obtaining international credit ratings for the 23 largest state-owned enterprises (SOEs) to enable them to attract financing in domestic and foreign financial markets for their investment projects;
• Abolishing the power of local governments to allocate land and issuing a decree introducing an e-auction system for the sale or rent of non-agricultural land to private sector entities;
• Adopting the law “On public civil service” in August 2022 to provide a comprehensive legal regulation of public civil service, including the creation of an independent and competitive hiring process, and to create a legal basis for the prevention of corruption in public civil service
• Adopting the law “On state property management” in March 2023 to increase the efficiency of state property management and disclose information on state property to the public, except in cases prohibited by law. The first Consolidated report on the efficiency of operations of state enterprises and the use of state property was published on August 5, 2023.
State Involvement
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. State-owned banks, ministries, and agencies interfere in business operations and decrease their efficiency. In March 2021, the government announced that, under its 2021-2025 strategy for managing and reforming state-owned enterprises, it intends to reduce the number of state-owned enterprises in Uzbekistan by 75% through an intensive privatization effort.
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.