Business Opportunities and Investment Potentials in Uzbekistan
Potential for Investment Projects and Business Opportunities
Uzbekistan, with its dynamic and entrepreneurial population, offers a myriad of business opportunities and investment potentials. With over 35 million inhabitants and an average age of 27 years, the country boasts the largest consumer market in Central Asia. The capital, Tashkent, along with historically significant areas like Samarkand, Bukhara, and Khiva, present attractive avenues for business opportunities in Uzbekistan. Andijan, as the most industrialized city in the country, also garners significant interest from potential investors. In terms of investment projects in Uzbekistan, there is no shortage of business opportunities. The vibrant population ensures a continuous demand for various products and services. Moreover, the young demographic profile holds substantial potential for growth and innovation.
Human Potential and Resource Abundance
The significant human and intellectual potential, represented by approximately 60 universities and 30 branches, along with 18.8 million qualified workers and a literacy rate of 97%, serves as a crucial growth catalyst. Uzbekistan stands as one of the few countries globally that is completely energy independent, boasting enormous reserves of minerals and natural resources including gold, uranium, copper, silver, lead, zinc, tungsten, rare metals, and more. These abundant resources and a well-developed industrial base offer ample business opportunities for value-added production and supply chain diversification.
Strategic Location and Economic Reforms
Situated strategically in the heart of Central Asia, Uzbekistan offers rapid and convenient access to major economies in Asia and Europe. The well-established transportation infrastructure provides Uzbek businesses opportunities and access to burgeoning markets in Central Asia (with a population exceeding 72 million), the CIS (with over 300 million inhabitants), West and East Asia, as well as Europe. Under the leadership of President Shavkat Mirziyoyev, Uzbekistan has embarked on radical market reforms aimed at enhancing the business environment, leading to the emergence of new business opportunities. These reforms have made significant strides in addressing systemic business regulatory issues and overcoming state monopoly dominance. As a result, there has been a surge in new business opportunities, with foreign direct investment inflows rising from approximately $2 billion in 2017 to over $8 billion in 2021.
International Recognition and Trade Relations
The results of these reforms have been positively recognized by the international community, reflected in the country’s improved performance in global rankings and indices. Uzbekistan has climbed 57 places in recent years (from 166th in 2016 to 109th in 2023), by 30 places in the Index of Economic Freedom-2023, and by 34 places in the Logistics Performance Index (LPI) of the World Bank. International rating agency S&P Global Ratings continues to affirm Uzbekistan’s creditworthiness at “BB-“, highlighting progress in implementing comprehensive reforms and modernizing the economy. Notably, improvements in Doing Business, Perception of Corruption, and governance indices of the World Bank indicate continued government priorities on state-owned enterprise reform and increasing direct investments.
Integration into International Trade Agreements
Uzbekistan’s multilateral foreign policy approach ensures stability within the country. The nation has fostered strong relations with all its neighbors, including Afghanistan. In terms of international cooperation, Uzbekistan has signed bilateral agreements on the avoidance of double taxation with 54 countries and grants most favored nation treatment to 47 nations globally. Notably, Uzbekistan and the United Kingdom signed a Partnership and Cooperation Agreement in 2019, ensuring mutual application of most favored nation treatment in trade. Additionally, Uzbekistan joined the CIS Free Trade Agreement in 2014 and became an observer in the Eurasian Economic Union (EAEU) on December 11, 2020. The country also gained acceptance as the ninth beneficiary of the Generalized System of Preferences Plus (GSP+) by the European Union on April 9, 2021. Furthermore, Uzbekistan was included in the expanded Generalized System of Preferences of the United Kingdom on November 1, 2021, allowing duty-free import of goods. The nation is actively pursuing accession to the World Trade Organization (WTO).
Production costs (average comparative prices in USD in April 2023)
| UZ | US | DE | CH | |
Natural gas, per m3 | Residential | 0,04 | 0,55 | 2,20 |
|
Industry | 0,12 | 0,26 | 0,80 |
| |
Electricity, 1 kW | Residential | 0,026 | 0,166 | 0,48 | 0,21 |
Industry | 0,06 | 0,150 | 0,26 | 0,16 | |
Average monthly wage | 250 | ||||
Monthly wage of an assistant in the province | 100 | ||||
20 t truck transport to/from Central Europe | 7’000 | ||||
Taxes
Personal income tax | 12% (flat) |
|
Tax on profit | 15% |
|
Value added tax | 12% |
|
Withholding tax | 10% Dividends | Double taxation treaty with Switzerland: Interest: 5% or 0% for certain loans |
MAJOR MACROECONOMIC INDICATORS
2020 | 2021 | 2022 (e) | 2023 (p) | |
GDP growth (%) | 1.6 | 7.4 | 5.3 | 4.8 |
Inflation (yearly average, %) | 12.9 | 10.8 | 11.3 | 10.7 |
Budget balance (% GDP)* | -3.3 | -4.7 | -4.0 | -3.0 |
Current account balance (% GDP) | -5.4 | -7.0 | -3.3 | -4.0 |
Public debt (% GDP) | 37.6 | 35.8 | 34.2 | 33.4 |
(e): Estimate (p): Projection *Balance including off-budgeted public expenditures financed by borrowing
STRENGTHS
Uzbekistan offers diverse business opportunities and investment prospects in a more resilient economy compared to the rest of Central Asia. The economy is more diversified and less susceptible to external shocks. Business opportunities in Uzbekistan are supported by rich natural resources such as gas, gold, copper, and hydropower potential, making the country an attractive destination for investors. The young population, with 50% under 30 years old, presents a promising demographic profile for future business projects. International financial support and the state’s net creditor position create a stable economic environment, fostering the development of business opportunities and investment prospects in Uzbekistan. Economic reforms, including liberalization, privatization, and diversification, along with impressive credit developments, have made the country a magnet for investors, promoting foreign direct investment in renewable energies. Dynamic bilateral relationships and negotiation of preferential trade agreements with key partners, as well as the development of free trade zones and special economic zones, contribute to creating attractive business opportunities in Uzbekistan. Negotiations for accession to the World Trade Organization (WTO) and observer status membership in the Eurasian Economic Union (EAEU) strengthen Central Asia’s economic integration into the global economy, offering opportunities for foreign investors.
WEAKNESSES
Although Uzbekistan offers promising business opportunities and investment prospects, there are also some challenges to consider. Strong dependence on Russia and China as main trading partners and buyers of 80% of gas exports poses a challenge to diversifying the economy, despite existing investment opportunities in Uzbekistan. Limited productive activities and high concentration in key sectors lead to weak market competitiveness, emphasizing the need to promote the private sector and small and medium-sized enterprises. High unemployment and a lack of job opportunities result in emigration, posing a challenge to the socio-economic development of the country, despite existing business opportunities in Uzbekistan. The low level of financial intermediation and the inefficient energy sector are further aspects that restrict the business environment and can influence investments.
Companies with FDI in Uzbekistan
