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CO-WRITTEN / PARTNER | Staff Reporter, Hong Kong

Investments in Uzbekistan: Favourable conditions and unlimited opportunities

Find out what makes Uzbekistan an ideal country for foreign investments.

Uzbekistan has been recognized as the heart of the Great Silk Road which has existed for more than 16 centuries. The territory of the state lies at the center of the land bridge between East and West Road, and has played a prominent role in international overland trade. Beginning in the late 20th century, Uzbekistan embarked on market reforms that have gradually restored and magnified its position as a key player in international business. The Uzbekistan economy ranks as one of the most stable and fastest growing in the world today.

The prestigious World Economic Forum has ranked Uzbekistan among the top five countries with the fastest growing economies in the world on the basis of its development in 2014-2015 and growth projections for 2016-2017. A modern governance structure has been introduced to all joint-stock companies. A set of laws and regulations has been adopted to strengthen guarantees for and protect the legitimate rights of private owners and entrepreneurs, and to simplify and facilitate the establishment and implementation of entrepreneurial activities through one-stop centres that deliver public services based on the “one-stop shop” principle.

Despite the ongoing global financial and economic crisis, last year the GDP grew by 8%, industrial output – by 8%, agricultural production – by almost 7%, construction and installation works – almost by 18%. The annual budget is executed with a surplus of 0.1% of GDP. The inflation rate was at 5.6%, that is, within the forecasted parameters. In spite of the significant slowdown in the world trade and reduction of external demand, world prices decline for major export commodities, Uzbekistan has managed to achieve a positive balance in foreign trade, which allowed for growth of state reserves.

Despite a generally subdued performance in the developing Europe and Central Asia (ECA) region, Uzbekistan continues to grow strongly. In 2015, real GDP expanded by 8%, supported by a large fiscal stimulus that was prompted by the worsening external environment. Uzbekistan’s growth rate makes it one of the fastest-growing economies in the ECA region.

Best business environment
As mentioned in the World Bank’s report, Uzbekistan is currently among the top ten countries in the world, which in the last year achieved the best results in improving the business environment.

The modern Uzbekistan economy offers foreign investors a number of advantages. Among them are political and macroeconomic stability; favorable climatic conditions; rich raw materials; strategic geographical location in the center of the largest regional markets; an integrated network of ground and air communications, transport, and logistics systems of international importance; a diversified industrial base; and superior scientific-intellectual, human resources. The investment attractiveness of Uzbekistan industrial sectors is generated by the relatively low cost of production factors (electricity, natural gas, labor), a significant domestic market (more than 31 million population), and free of duty access to the markets of CIS countries (more than 280 million people). In addition, by investing in Uzbekistan foreign companies gain the opportunity to access the rapidly growing market of Central and Eastern Europe, Southeast Asia, and the Middle East.

To this end, in 2015 investments from all financing sources in the equivalent of $15.8 billion were drawn and utilized, indicating an increase by 9.5% against 2014. With more than $3.3 billion, or over 21% of all investments are foreign investments, of which 73% are foreign direct investments. 67.1% of all investments are channeled at industrial construction. This allowed in 2015 to complete the construction and to put into operation of 158 large production facilities with a total value of $7.4 billion.

Among facilities put into operation one can mention Ustyurt Gas Chemical Complex at Surgil deposit which had been built jointly with South Korean investors and experts. This complex is worth more than $4 billion and it is one of the most modern high-tech and large industries in the world. Its commissioning will allow to receive annually 83000 tons of polypropylene, which had previously been imported, to increase polyethylene production by 3.1 times.

Progressive legislation
According to economic experts, the investment legislation of the Republic of Uzbekistan is among the most progressive legislations in the CIS countries. The law related to the protection of foreign investments, guarantees and rights is among the most important laws of the Republic of Uzbekistan. The law reflects basic key provisions of international investment law, in particular those provisions guaranteeing the rights of foreign investors and providing preferences for them.

Further, the Republic of Uzbekistan has signed 70 bilateral agreements on mutual encouragement and protection of investments, as well as ratified a number of related multilateral international instruments. These regulations govern the stimulation and protection of investments, compensation for investment losses caused by free transfer of investments abroad, and the procedure for settlement of investment disputes. Of particular note is the system operating in the country providing privileges for foreign investors making direct investments.

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