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Executive Summary

After the currency exchange liberalization reform in 2017, there were relatively high expectations for a continuation of significant reforms in 2018.  The government raised these expectations by announcing a number of new reforms including in tax, customs, banking, privatization, and public administration areas.  However, none of these reforms were fully completed by the end of 2018. Some elements of a sweeping tax reform went into effect and other elements are expected to go into effect in 2019.  The government seeks to achieve greater progress in 2019 by focusing on the development of a business friendly environment and on improvement of the quality and efficiency of public administration.

Publically available reports do not provide the exact volume of inbound foreign direct investments (FDI), but some official documents indicate that 2018 FDI was less than USD 1.6 billion (about 3 percent of the GDP).  This number is smaller than 2017 (USD 2.4 billion), and much smaller than the projections of the government, which expected to attract USD 5.8 billion in FDI in 2018. Officials of the Government of Uzbekistan (GOU) lamented Uzbekistan’s average annual FDI inflow rate of USD 2 billion.  GOU experts suggest that the size and the scale of Uzbekistan’s economy requires about USD 12 billion of FDI every year.

State funded and initiated investments remain among the main drivers of economic growth in Uzbekistan. According to preliminary estimates, about UZS 107.3 trillion (USD 13 billion) was invested in Uzbekistan in 2018.  About 26 percent of these investments were directed to the energy and mining industries, 19 percent to construction, 4.4 percent to textiles, 3.8 percent to the chemical industry, and 3.3 percent to agriculture. Over 65 percent of all investments involved funds of the state budget, off-budget funds, funds of state-owned enterprises, and loans attracted by the government. Traditionally, most FDI attracted in 2018 was invested in the oil and gas sector. The government’s target for 2019 is to raise the volume of all investments to about USD 17 billion and attract USD 4.2 billion of FDI. We estimate that the energy, construction and transportation sectors will be the main recipients of investments in 2019.

In general, the economy of Uzbekistan in 2018 continued its sustainable growth and the government maintained macroeconomic and financial stability. The government initiated and continued a number of critical reforms, which, in general, resulted in some improvement of the business environment. The government’s economic policy became more transparent, and Uzbekistan was appreciative of assistance from the international expert community. However, the reform strategy remains not entirely formulated.

Table 1: Key Metrics and Rankings

Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2018 158 of 180 
World Bank’s Doing Business Report 2019 76 of 190
Global Innovation Index 2018 N/A of 126 
U.S. FDI in partner country ($M USD, stock positions) 2017 $69 
World Bank GNI per capita 2017 $2,000 

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

The Government of Uzbekistan (GOU) has prioritized improvement of Uzbekistan’s economic situation through attraction of foreign direct investments (FDI) and greater involvement of the private sector through privatization and private-public partnerships. Senior GOU officials declare that their policy has been focused on improvement of the business environment, changing Uzbekistan’s international reputation as a difficult investment destination, and building confidence among domestic investors. The five-year Development Strategy adopted by President Mirziyoyev in 2017 includes some liberalization measures and calls for the removal of “ineffective administrative barriers” that slow development of the private sector. The most recent Uzbekistan Reform Roadmap for 2019-2021 presented in November 2018 outlines economic reform goals in five “strategic directions”. These include accelerating the transition to a market economy, including through the creation of an Economic Council, envisioned as a consulting platform that would allow the government and local and international experts to collaboratively make evidence-based analyses and decisions.

Continuing its implementation of liberalization reforms, the GOU in 2018 expanded its cooperation with the international expert community and demonstrated a notable improvement in various critical areas, such as quality and availability of economic statistics and fiscal transparency. The government has lowered corporate and individual income taxes almost by a half, and the corporate tax burden was reduced by the introduction of a new business classification method, which allows small enterprises to pay a single social contribution at a fixed rate. On November 21, 2018, the GOU published the draft of the new Tax Code for public review.

In 2018, the number of companies with foreign capital increased by 2,385 (31 percent year-on-year). This number is significantly bigger than the 2017 increase of 863 new companies. Most of the new foreign investors originated in Russia (428), Turkey (364), and China (351).  According to official statistics, the share of companies with foreign capital is 2.8 percent (7,560 firms) of the total number of registered commercial enterprises operating in Uzbekistan; of these firms, 2,995 operate in production industries, 1,668 in trade, 488 in construction, 325 in tourism and catering, and 209 in IT and communications.

The government has yet to address a number of fundamental problems plaguing businesses and investors. The cumulative inflow of FDI is still one of the lowest in the former Soviet Union due to factors such as the domination of state-owned monopolies in various key sectors of the Uzbek economy, an underdeveloped and overregulated banking sector, incomplete tax reform, remaining trade barriers, and a lack of transparency. Meanwhile, Uzbekistan fell two places from 74th to 76th in the comparative rankings of 190 countries in the World Bank’s 2019 Ease of Doing Business Index (DB), even as it improved its score in absolute terms. On July 13, 2018, President Mirziyoyev signed a Presidential Resolution on improving Uzbekistan’s DB rankings, in which he noted that despite recent progress, existing practices “still do not fully meet international norms and standards”.  The current goal is to be among the top 20 countries in the world by 2022. The decree assigned the National Agency for Project Management (known by its Russian acronym NAPU) as the agency responsible for coordination of GOU efforts in this area.

By law, foreign investors are welcome in all sectors of the Uzbek economy and the government cannot discriminate against foreign investors based on nationality, place of residence, or country of origin.  However, government control of key industries has discriminatory effects on foreign investors. For example, the GOU retains strong control over all economic processes and maintains controlling shares of key industries, including energy, telecommunications, airlines, and mining.  The government still regulates investment and capital flows in the raw cotton market and controls all silk sold in the country, dampening foreign investment in the textile and rug-weaving industries. Partial state ownership and government influence are common in many key sectors of the economy.

The Ministry of Investments and Foreign Trade (  ,  ) and the Chamber of Commerce and Industry of Uzbekistan (  ) on a contractual basis provide foreign investors with consulting services, information and analysis, and business registration and other legal assistance.

There were a number of government-business forums and meetings in 2018. Senior GOU officials and regional governors usually do monthly briefings with local business and media. President Mirziyoyev and a large group of Uzbekistan ministers met with U.S. businesses in Washington during Mirziyoyev’s first official visit to the United States on May 15-17, 2018. Later, in October 2018, Uzbekistan hosted the US-Uzbekistan Annual Business Forum attended by U.S. Secretary of Commerce Wilbur Ross; government-business events dedicated to the U.S.-Central Asia Trade and Investment Framework Agreement (TIFA) annual Council meeting; and the Central Asia Trade Forum (CATF) organized by USAID, which gathered over 1,000 entrepreneurs from 27 different countries. The government regularly published drafts of some legislation and policy papers for public review.  In May 2017, the Parliament established the “Institute of the Business Ombudsperson” to protect the rights and legitimate interests of businesses and render them legal support. In public forums, Uzbek officials continue to stress an interest in seeing new companies establish operations in Uzbekistan, but tangible liberalization measures are still under consideration.

Limits on Foreign Control and Right to Private Ownership and Establishment

Formally, Uzbekistan guarantees the right of foreign and domestic private entities to establish and own business enterprises and to engage in most forms of remunerative activity.  The GOU has started the process of reconsidering the role of large state-owned monopolies, especially in the transportation, banking and energy sectors. Reforms in the cotton industry were the first step in implementing this policy.  In 2017, President Mirziyoyev ended the monopoly of government-controlled enterprise Uzpaxtasanoat to buy and sell raw cotton. In January 2018, the GOU launched pilot projects for a new integrated value chain system in the industry to allow private investors to independently manage cotton cultivation, harvesting, processing, and exports.  The state still reserves the right to export some commodities, such as nonferrous metals and minerals. In theory, private enterprises may freely establish, acquire, and dispose of equity interests in private businesses, but in practice, this is difficult to do because Uzbekistan’s securities markets are still underdeveloped.

Private capital is not allowed in some industries and enterprises.  The Law on Denationalization and Privatization (adopted in 1991, last amended in 2018) lists state assets that cannot be privatized, including land with mineral and water resources, the air basin, flora and fauna, cultural heritage sites and assets, state budget funds, foreign and gold reserves, state trust funds, the Central Bank, enterprises that facilitate monetary circulation, military and security-related assets and enterprises, firearms and ammunition producers, nuclear research and development enterprises, some specialized producers of drugs and toxic chemicals, emergency response entities, civil protection and mobilization facilities, public roads, and cemeteries.

There are several other official limits on foreign investment.  Foreign ownership and control are prohibited for airlines, railways, power generation, long-distance telecommunication networks, and other sectors deemed related to national security.  Foreign nationals cannot obtain a license or tax permission for individual entrepreneurship in Uzbekistan.

In August 2018, the minimum share of foreign ownership in Uzbek companies qualified as companies with foreign capital was reduced from 30 to 15 percent. Remaining restrictions apply to media, finance, and insurance.  Foreign investment in media enterprises is limited to 30 percent. In finance, foreign investors may operate only as joint venture partners with Uzbek firms, and banks with foreign participation face minimum fixed charter funding requirements (UZS 100 billion for commercial and private banks, and UZS 7.5-30 billion for insurance companies – equivalent to USD 12 million and USD 0.8-3.4 million respectively), while the required size of charter funds for Uzbek firms is set on a case-by-case basis.

The government closely scrutinizes all foreign investment, with special emphasis on sectors of the economy that it considers strategic, such as mining, cotton processing, oil and gas refining, and transportation.  There is no standard and transparent screening mechanism, and some elements of the legal framework are designed to protect domestic industries and limit competition from abroad. The government also uses licensing as a tool to control enterprises in several important sectors such as energy, telecommunications, wholesale trade businesses, and tourism. There are no legislative restrictions that selectively disadvantage U.S. investors.

Other Investment Policy Reviews

There were no investment policy reviews of Uzbekistan completed by the Organization for Economic Cooperation and Development (OECD), the World Trade Organization (WTO), or the United Nations Conference on Trade and Development (UNCTAD) in recent years.

Business Facilitation

The GOU has declared that business facilitation and improvement of the business environment are among its top policy priorities.  Uzbekistan’s working-age population is growing by over 250,000 people annually—the GOU often says the number of new entrants to the workforce is over 500,000 per year.  Therefore, the GOU prioritizes private businesses and joint ventures that create additional jobs and help the government address the employment issue. Business registration procedures were considerably simplified and streamlined by the introduction of one-window and on-line registration practices and electronic reporting systems.  The GOU has created a number of new special economic zones to attract more FDI. New legislation has also created additional tax incentives for private businesses and sought to increase their protection against unlawful actions by government authorities. In 2016, the Ministry of Justice established a special department responsible for the protection of private businesses and foreign investors from meritless claims, unjustified inspections, and other abusive practices of state bodies.  In 2017, the GOU banned a wide range of inspections and other forms of coercion and interference in the activities of private businesses.

By legislation (effective from January 2018), foreign and domestic private investors can register their business in Uzbekistan using any Center of Government Services (SGS), which operate as “Single Window” (SW) registration offices, or 24/7 online services of the Electronic Government (EG) website –  The procedure requires only electronic submission of an application, company name or trademark, and foundation documents.  The SW/EG service will register the company in the Ministry of Justice, Tax Committee, local administration, and other relevant government agencies.  The registration fee is equivalent to one minimum wage monthly salary (UZS 202,730 (USD 24) as of March 2019) for local investors and 10.5 minimum wage monthly salaries (UZS 2,128,665 (USD 253) as of March 2019) for foreign investors.  Applicants receive a 50 percent discount for using the EG website. The new system reduces the length of the registration process from several weeks to 30 minutes.

Depending on the extent of foreign participation, a business can be defined as an “enterprise with foreign capital,” or EFC (less than 15 percent foreign-owned), or as an “enterprise with foreign investment,” or EFI (more than 15 percent foreign-owned and with a minimum charter capital of UZS 400 million (USD 47,620 as of March 2019). Foreign companies may also maintain a physical presence in Uzbekistan as “permanent establishments” without registering as separate legal entities (other than with tax authorities).  A permanent establishment may have a bank account.

The World Bank ranked Uzbekistan as 12th in the world for the “Starting a Business” indicator in its 2018 Doing Business report.

Outward Investment

In general, the GOU does not promote or incentivize outward investments.  There is no institution or agency that promotes outward investment from Uzbekistan.  Some state-owned enterprises invest in development of their marketing networks abroad as part of efforts to boost export sales.  Private companies that operate primarily in retail, construction and textile businesses use outward investments for a number of reasons, including market outreach, accessing foreign financial resources, trade facilitation, and in some cases for expatriation of capital.  The most popular destinations for outward investments are Russia, China, Kazakhstan, Singapore, UAE, and Germany.

Formally, outward investments are not restricted.  However, financial transactions with some foreign jurisdictions (such as Afghanistan, Syria, Libya, and Yemen) and offshore tax havens can be subjected to additional screening by the authorities.

2. Bilateral Investment Agreements and Taxation Treaties

Uzbekistan has signed bilateral investment agreements with 53 countries, though the 1994 agreement signed with the United States has not been ratified and those with several other countries, including Turkey, Bahrain, and Saudi Arabia, have not yet entered into force.  In 2004, Uzbekistan and Russia signed a Strategic Framework Agreement that also includes free trade and investment concessions. Uzbekistan has signed bilateral free trade agreements with eleven CIS countries (Russia, Belarus, Ukraine, Armenia, Azerbaijan, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Turkmenistan and Tajikistan).  In 2005, the government signed an alliance agreement with Russia, which provides for economic cooperation, and Uzbekistan and Ukraine agreed in 2004 to remove all bilateral trade barriers. Uzbekistan joined the CIS Free Trade Zone Agreement in 2014. In December 2015, the GOU officially announced that Uzbekistan would not join the Free Trade Zone within the Shanghai Cooperation Organization (SCO).  See UNCTAD’s database for more details:  

Since its independence in 1991, Uzbekistan has signed double taxation agreements with 48 countries, of which seven have not entered into force.  The country also has other bilateral taxation treaties with CIS countries, Georgia, Ukraine, Mongolia, and UAE. The U.S. Internal Revenue Service (  ) considers Uzbekistan as one of the former Soviet republics that are now covered by a taxation treaty with the Commonwealth of Independent States (CIS) as the successor to the dual taxation treaty signed between the United States and the Union of Soviet Socialist Republics (USSR) (signed in 1973 and entered into force in 1976).  However, the Government of Uzbekistan presumes that this agreement cannot be considered in effect and has proposed signing a new double taxation treaty. Uzbekistan officially presented the draft of new dual taxation treaty to the U.S. government in December 2017. In 2015, Uzbekistan and the United States signed the Intergovernmental Agreement to Improve International Tax Compliance with respect to the United States Information Reporting Provisions, commonly known as the Foreign Account Tax Compliance Act (FATCA).  The FATCA agreement entered into force in July 2017.

Reform of the taxation system, which for many years had been discouragingly burdensome and inadequate, is among the most desired reforms in the country. President Mirziyoyev first announced the tax reform in 2016, and active discussions on its parameters started in 2017. In June 2018, the government approved the new concept of the tax reform, and some elements of the new taxation system went into effect on January 1, 2019. These include a notable decrease of the tax burden to local businesses and simplification of tax reporting. In particular, the government abolished 8 percent social security contributions and all mandatory payments to various state funds, and reduced some tax rates, including:

  • corporate and individual income taxes from a progressive rate of up to 24 percent to a single flat rate of 12 percent;
  • income tax on dividends from 10 percent to 5 percent;
  • mandatory social payments for private entities from 15 percent to 12 percent;
  • the turnover tax for small businesses (i.e. for businesses with less than UZS 1 billion (USD 120,000) of annual turnover) from 5 percent to 4 percent; and
  • property tax from 5 percent to 2 percent.

On November 21, 2018, the Government of Uzbekistan published the draft of the new Tax Code for public review. Initially the Code should have been approved by the end of 2018, but the review timeline was extended to July 2019. Businesses expect that the reform will lead to a radical simplification of the taxation system. Some independent experts say, however, that the draft does not provide best solutions on some critical issues like VAT administration and determination of non-deductible income tax expenses.

3. Legal Regime

Transparency of the Regulatory System

Uzbekistan has a substantial body of laws and regulations aimed at protecting the business and investment community.  Primary legislation regulating competition includes the Law on Competition and Restrictions of Monopolistic Activity (2016), the Law on Competition, the Law on Guarantees of the Freedoms of Entrepreneurial Activity, the Law on Private Enterprise (2003, last updated in 2018), the Law on Investment Activities, and a number of decrees, resolutions and instructions.  In late 2016, the GOU publicly recognized the need to improve and streamline business and investment legislation, which is still perceived as complicated, often contradictory, and not fully consistent with international norms. In some cases, the government may require businesses to comply with decrees or instructions that are not publicly available. To avoid problems with tax and regulatory measures, foreign investors often secure government benefits through Cabinet of Ministers decrees, approved directly by the president.  These, however, have been easily revocable.

For additional information, please review the World Bank’s Regulatory Governance assessment on Uzbekistan:  

Practices that appear as informal regulatory processes are not associated with nongovernmental organizations or private sector associations, but rather with influential local politicians or well-connected local elites.

Most rule-making and regulatory authority exists on the national level. Businesses in some regions and special economic zones can be regulated differently, but relevant legislation has to be adopted by the central government and then regulated by national-level authorities.

Only a few local legal, regulatory, and accounting systems are transparent and fully consistent with international norms.  Although the GOU has started to unify local accounting rules with international standards, local practices are still document- and tax-driven, with an underdeveloped concept of accruals.

In late 2016, President Mirziyoyev ordered publication of some draft legislation for public comment, including draft decrees on the government’s development strategies, tax and customs regulation, and legislation to create new economic zones.  Public review of the legislation is performed through the website  Prior to 2016, publishing drafts of laws and regulations for public review was uncommon.

The GOU selectively publishes some presidential decrees and government decisions online.  Drafts of some legislation are published on a government website (  ) for public consideration and comments.  Uzbekistan’s legislation digest (  ) serves as a centralized online location for current legislation in effect.  As of now, there is no centralized nor comprehensive online location for Uzbekistan’s legislation, similar to the Federal Register in the United States, where all key regulatory actions or their summaries are published.  There are other online legislative resources with executive summaries and comments that could be useful for businesses and investors, including   and  .

Formally, the Ministry of Justice and the Prosecutor’s Office of Uzbekistan are responsible for oversight to ensure that government agencies follow administrative processes.  In some cases, however, local officials may inconsistently interpret laws, often in a manner detrimental to private investors and the business community at large.

The GOU selectively publishes some presidential decrees and government decisions online.  Drafts of some legislation are published on a government website (  ) for public consideration and comments.  Uzbekistan’s legislation digest (  ) serves as a centralized online location for current legislation in effect.  As of now, there is no centralized nor comprehensive online location for Uzbekistan, similar to the Federal Register in the United States, where all key regulatory actions or their summaries are published.  There are other online legislative resources with executive summaries and comments that could be useful for businesses and investors, including   and  .

GOU officials have publicly suggested that improvement of the regulatory system is critical for the overall business climate.  A number of reforms have been implemented in recent years. These include regulations for improvement of the business environment (reduction of the tax burden and cancellation of unjustified tax inspections, elimination of the mandatory sale of export earnings, and simplification of business registration and foreign trade procedures), the new law on combatting corruption, and establishment of the business Ombudsperson. On March 2019, President Mirziyoyev instructed the Prosecutor General’s Office to develop a new Code of Enforcement Proceedings. Some of earlier announced reforms, such as introduction of a new tax and customs rules and currency exchange regulation, have yet to be implemented.

The government’s development strategies include a range of targets for upcoming reforms, such as ensuring reliable protection of private property rights; removal of all barriers and limitations for private entrepreneurship and small business; creation of a favorable business environment; suppression of unlawful interference of government bodies in the activities of businesses; improvement of the investment climate; decentralization and democratization of the public administration system; and expansion of public-private partnerships.

Previously implemented regulatory system reforms often left room for interpretation and were accordingly enforced subjectively.  New or updated legislation continues to leave room for interpretation and contains unclear definitions. In many cases, private businesses still face difficulties associated with enforcement and interpretation of the legislation.  More information on Uzbekistan’s regulatory system can be reviewed at the World Bank’s Global Indicators of Regulatory Governance (  ).

The scope of business-related regulations in Uzbekistan includes a large number of laws, decrees, resolutions, rules, specific guidelines, and instructions.  Usually regulations and rules are developed by relevant government agencies and are approved by the president or relevant ministers, as appropriate. Public laws are subject to parliamentary approval.  

The Ministry of Justice and the system of Economic Courts are formally responsible for regulatory enforcement, while the Institute of Business Ombudsperson was established in May 2017 to protect the rights and legitimate interests of businesses and render them legal support.  A number of GOU policy papers call for raising the role of civil society, non-governmental organizations, and local communities in regulatory oversight and enforcement. Recently the government also offered several drafts of business-related legislation for public comments; the comments, in turn, were publicly available.  However, the development of a new regulatory system, including regulatory enforcement mechanisms outlined in various reform and development roadmaps of the government has yet to be completed.

There are a number of research centers and think tanks that are involved in the development and review of regulations.  These include experts that work in various government agencies or state-owned enterprises, as well as research centers funded by the government and international organizations like UNDP.  However, except under rare circumstances, their scientific studies or analysis on the impact of regulations are not publicly available. A specialized Development Strategy Center was created in 2017 as an NGO. Its projects involve the work of a number of local organizations, including the Independent Civil Society Monitoring Institute, the Legislation Monitoring Institute, the Chamber of Commerce and Industry, the Chamber of Advocates, the Academy of Public Administration, the National Association of Electronic Media, and the National Association of NGOs. The Center is intended to consolidate efforts of these institutes to facilitate expert and public discussions on reforms outlined in the aforementioned development strategies of the government. In February 2019, the president ordered the creation of a new “National System of Monitoring and Evaluation of the Position of the Republic of Uzbekistan in International Ratings.” This initiative will consolidate efforts of specific scientific institutions and think tanks in the area of regulatory reforms. Public review of the legislation is available through the website  .

Uzbekistan’s fiscal transparency still does not meet generally accepted international standards, although in 2018 the government demonstrated notable progress in this area. A Presidential Resolution of August 22, 2018, calls for transparency of public finances and wider involvement of citizens in the budgetary process. It also contains measures for harmonizing the budget accounting with international standards, international assessment of budget documents through the Public Expenditure and Financial Accountability (PEFA) and opening the budget for the Open Budget Survey ranking after 2020. The first publication of the detailed state budget for fiscal year (FY) 2018 and the FY2019 budget proposal within the framework of Budget for Citizens project indicates positive developments in implementation of these tasks. Despite this progress, the government still does not release complete information on its off-budget accounts and on their oversight, publishing only some generalized parameters. Information on debt obligations, including contingent and state-owned enterprise debt, are not publicly available. Publicly available budget documents do not provide a substantially complete picture of the government’s expenditures and revenue streams, including natural resource revenues. Budget documents do not include detail on expenditures by ministry or information on allocations to or earnings from state-owned enterprises and detailed information on natural resource revenues. Information on budget-related decision-making and budget audit reports are still rather selective or unavailable.

International Regulatory Considerations

Uzbekistan is not a member of the WTO or any existing economic blocs.  No regional or other international regulatory systems, norms, or standards have been directly incorporated or thoroughly referenced in Uzbekistan’s regulatory system – although Uzbek officials often claim its regulatory system incorporates international best practices.

Legal System and Judicial Independence

The hierarchy of Uzbek law includes the Constitution of the Republic of Uzbekistan, constitutional laws, codes, ordinary laws, decrees of the president, resolutions of the Cabinet of Ministers, and normative acts.  Existing legislation which implies legal enforcement of contracts through economic courts or arbitral authorities includes the Civil Code, the Law “About the Contractual Legal Base of Activities of Business Entities” (No. 670-I, issued August 29, 1998, and last revised in 2018), and a number of other decrees and resolutions.

The contractual law of Uzbekistan is established by the Law “About the Contractual Legal Base of Activities of Business Entities.”  It determines the legal basis of the conclusion, execution, change, and termination of economic agreements, the rights and obligations of business entities, and also the competence of relevant public authorities and state bodies in the field of contractual relations.  Economic disputes, including intellectual property claims, can be heard in the lower-level Economic Court and appealed to the Supreme Court of the Republic of Uzbekistan. Economic court judges are appointed for five-year terms. This judicial branch also includes regional, district, town, city, Tashkent city (a special administrative territory) courts, and arbitration courts.

On paper, the judicial system in Uzbekistan is independent, but government interference and corruption are common.  Government officials, attorneys, and judges often interpret legislation inconsistently and in conflict with each other’s interpretations.

Court decisions or enforcement actions are appealable though a process that can be initiated in accordance with the Economic Procedural Code and other applicable laws of Uzbekistan.

Laws and Regulations on Foreign Direct Investment

Legislation protecting foreign investors includes laws and a number of presidential decrees and government resolutions. The main laws are:

  • Law on Investment Activities (№719-1, 7998);
  • Law on Foreign Investments (№609-1, 1998);
  • Law on Guarantees and Measures on Protection of Foreign Investments (№ 611-I, 1998);
  • Law on Guarantees of the Freedoms of Entrepreneurial Activity (№ 69-II, 2000);
  • Law on Free economic Zones (№ 220-I, 1996);
  • Production Sharing Agreements Law (№ 312-II, 2001);
  • Law on Concessions (№ 110-I, 1995); and
  • Law on Investment and Share Funds (ZRU-392, 2015).

In 2018 and in the beginning of 2019, President Mirziyoyev signed a number of decrees and resolutions related to foreign investments, including:

  • Decree on Improvement of Investments and Foreign Trade Governance through Establishment of the Ministry of Investments and Foreign Trade of the Republic of Uzbekistan (UP-5643, January 28, 2019).

As of now, there is no real “one-stop-shop” website for investors that provides relevant laws, rules, procedures, and reporting requirements in Uzbekistan. On December 2018, the GOU created a specialized web portal for investors called Invest Uz (  ), which can provide some useful information. The website of the Ministry of Investments and Foreign Trade (  ) offers some general information on laws and procedures, but mainly in Uzbek and Russian language.

Competition and Anti-Trust Laws

Competition and anti-trust legislation in Uzbekistan is governed by the Law on Competition (ZRU-319, issued January 6, 2012, and last revised in 2018).  The main entity that reviews transactions for competition-related concerns is the State Antimonopoly Committee (Established in January 2019). This government agency is responsible for advancing competition, controlling the activities of natural monopolies, protecting consumer rights and regulating the advertisement market. There were no significant competition-related cases with the involvement of foreign investors over the past year.

Expropriation and Compensation

Formally, private businesses are protected by legislation against baseless expropriation, including the Law on Investment Activities and the Law on Guarantees of the Freedoms of Entrepreneurial Activity.  The government may seize foreign investors’ assets due to violations of the law or for arbitrary reasons, such as a unilateral revision of an investment agreement, a reapportionment of the equity shares in an existing joint venture with an SOE, or a public works or social improvement project (similar to an eminent domain taking).  By law, the government is obligated to provide fair market compensation for seized property.

Uzbekistan has a history of expropriations.  Profitable, high-profile foreign businesses are at greater risk for expropriation, but smaller companies are also vulnerable. In previous years, a number of large companies with foreign capital in the food processing, mining, retail, and telecommunications sectors faced expropriation.  In cases where the property of foreign investors is expropriated for arbitrary reasons, the law obligates the government to provide fair compensation in a transferable currency. However, in most of the cases the private property was expropriated based upon court decisions after the owners were convicted for breach of contract, failure to complete investment commitments, or other violations.

Decisions of Uzbekistan’s Economic Court on expropriation of private property can be appealed to the Supreme Court of the Republic of Uzbekistan in accordance with the Economic Procedural Code or other applicable local law.  Reviews usually are quite slow. Some foreign investors have characterized the process as unpredictable, non-transparent, and lacking due process.

Dispute Settlement

ICSID Convention and New York Convention

Uzbekistan is a member of the International Center for the Settlement of Investment Disputes (ICSID) and a signatory to the 1958 UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention).

In November 2006, the Constitutional Court of Uzbekistan issued its ruling that ICSID arbitration does not stipulate the consent of the involved parties to have their dispute settled at the international level.  In practice, this means that Uzbek courts do not recognize foreign businesses’ attempts to defend their interests in international courts unless all parties first give their consent in writing.

Investor-State Dispute Settlement

Dispute settlement methods are regulated by the Economic Procedural Code, the Law on Arbitration Courts, and the Law on Contractual Basics of Activities of Commercial Enterprises.  The Law on Guarantees to Foreign Investors and Protection of their Rights requires that involved parties settle foreign investment disputes using the methods they define themselves, generally in terms predefined in an investment agreement.  Investors are entitled to use any international dispute settlement mechanism specified in their contracts and agreements with local partners, and these agreements should define the methods of settlement.

The Law on Guarantees to Foreign Investors and Protection of their Rights permits resolution of investment disputes in line with the rules and procedures of the international treaties to which Uzbekistan is a signatory, including the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, the 1992 CIS Agreement on Procedure for Settling Disputes Arising Out of Business Activity, and other bilateral legal assistance agreements with individual countries.  Currently there is no such treaty that covers U.S. citizens.

If the parties fail to specify an international mechanism, Uzbekistan’s economic courts can settle commercial disputes arising between local and foreign businesses.  The economic courts have subordinate regional and city courts. Complainants may seek recognition and enforcement of foreign arbitral awards pursuant to the New York Convention through the economic courts.  When the court decides in favor of a foreign investor, the Ministry of Justice is responsible for enforcing the ruling.

Currently Uzbekistan does not have a Bilateral Investment Treaty (BIT) or a Free Trade Agreement (FTA) with an investment chapter with the United States. The governments of the United States and Uzbekistan signed a BIT in 1994, but ratification documents have not been exchanged and the agreement never entered into force.

Post is aware of numerous cases of commercial or investment disputes involving foreign investors.  These have included asset seizures, expropriations, or liquidations; lengthy forced production stoppages; and pressure to sell off foreign shares in joint ventures.  These cases have involved a variety of sectors, including food production, mining, telecommunications, and agriculture. Although government actions in such cases have been taken under the guise of law enforcement, some observers have claimed more arbitrary or extralegal motives were at play.

In 2013, local authorities initiated criminal investigations against the owners and senior executives of the Muzimpex Company, the local partner of the Coca-Cola Bottlers Uzbekistan joint venture, in which Coca-Cola owns 43 percent of the shares.  In February 2014, the government liquidated Muzimpex and presently controls the shares of the company.

U.S.-owned Newmont Mining and the telecommunications company MCT both faced pressure from the Uzbek government to sell their shares in joint ventures in 2006; both agreed to sell them after lengthy legal disputes and neither has returned to Uzbekistan.

Local and non-U.S. foreign companies have also faced expropriation in the agriculture, mining and retail sectors.  In September 2012, the Tashkent City Criminal Court seized the assets of cellular telecom provider Uzdunrobita, a 100 percent subsidiary of the Russian company MTS, for financial crimes.  An appeals court reversed this decision in November 2012, but upheld the USD 600 million of fines imposed. MTS wrote off its total assets in Uzbekistan of USD 1.1 billion and left the market.  In 2013, the government transferred all MTS assets to a state-owned telecom operator after trying unsuccessfully twice to liquidate them. In 2014, MTS dropped legal proceedings against Uzbekistan and signed a settlement.

In October 2011, the government halted the production and distribution operations of a brewery owned by the Danish firm Carlsberg for dubious reasons.  The interruption of business lasted 18 months before the company re-opened.

Earlier in 2011, the government initiated liquidation of the Amantaytau Goldfields, a 50-50 joint venture of the British company Oxus Gold and an Uzbek state mining company.

In March 2011, government authorities also seized a large chain grocery store and approximately 50 smaller companies owned by Turkish investors.

Foreign investors should have no reasonable expectation that the government will honor an international arbitration verdict.  The Constitutional Court of Uzbekistan ruled in 2006 that the written consent of all parties involved is required to recognize an international decision.  There have been several cases, however, in which international arbitration awards were successfully collected.

Although in many cases investor-state disputes in Uzbekistan were associated with immediate asset freezes, almost all of them were followed by formal legal proceedings.

International Commercial Arbitration and Foreign Courts

Alternative dispute resolution institutions of Uzbekistan include arbitration courts (also known as Third-Party Courts), and a number of specialized arbitration commissions.  Businesses and individuals can apply to arbitration courts only if they have a relevant dispute-settlement clause in their contract or a separate arbitration agreement. The Civil Procedural Code and the Commercial Procedural Code also have provisions that regulate arbitration.

The main domestic arbitration body is the Arbitration Court.  General provisions of the Law on Arbitration Courts are based on principles of the UNCITRAL model law, but with some national specifics – namely that Uzbek arbitration courts cannot make reference to non-Uzbek laws.  According to the Law, parties of a dispute can choose their own arbiter and the arbiter in turn chooses a chair. The decisions of these courts are binding. The Law says that executive or legislative bodies, as well as other state agencies, are barred from creating arbitration courts and cannot be a party to arbitration proceedings.  Either party to the dispute can appeal the verdict of the Arbitration Court to the general court system within thirty days of the verdict. Separate arbitration courts are also available for civil cases, and their decisions can be appealed in the general court system. Arbitration courts do not review cases involving administrative and labor/employment disputes.

Foreign arbitral awards or other acts issued by a foreign country can be recognized and enforced only if Uzbekistan has a relevant bilateral or multilateral agreement with that country.  If international arbitration is permitted, awards can be challenged in domestic courts. However, currently local economic courts do not have a solid mechanism for enforcement of foreign courts’ decisions.  Foreign businesses may wish to consult with a local law firm in order to avoid delays or other unexpected outcomes of their cases in local economic and arbitration courts.

Most investment disputes with involvement of Uzbek state-owned enterprises (SOEs) reviewed by domestic courts have been suspended prior to a final decision due to out of court settlements –or have been decided in favor of SOEs.  When the court decides in favor of a foreign investor, the Ministry of Justice is responsible for enforcing the ruling. In some cases its authority is limited and co-opted by other elements within the government. Judgments against SOEs are particularly difficult to enforce.

Bankruptcy Regulations

The Law on Bankruptcy regulates bankruptcy procedures.  Creditors can participate in liquidation or reorganization of the debtor only in the form of a creditor’s committee.  According to the Law on Bankruptcy and the Labor Code, an enterprise may claim exemption from paying property and land taxes, as well as fines and penalties for back taxes and other mandatory payments, for the entire period of the liquidation proceedings.  Monetary judgments are usually made in local currency. Bankruptcy itself is not criminalized, but in August 2013, the GOU introduced new legislation on false bankruptcy, non-disclosure of bankruptcy, and premeditated bankruptcy cases. In its 2019 Doing Business report, the World Bank ranked Uzbekistan 91st out of 190 for the “Resolving Insolvency” indicator (  ).

4. Industrial Policies

Investment Incentives

All investment incentives to foreign investors are regulated by national level legislation, which can be adopted only by the president.  Regional and local governments have limited authorities to offer any additional preferences. Uzbek legislation provides a number of incentives for businesses qualified as enterprises with foreign investment.  These include mainly various tax holidays and exemptions from customs and other mandatory duties and payments. However, the tax reform concept adopted by the GOU in 2018 promotes renouncing selective awarding of tax incentives. New tax and customs legislations are currently under consideration and are expected to appear in July-August 2019.

Foreign Trade Zones/Free Ports/Trade Facilitation

The law on free economic zones, passed in 1996, envisaged the establishment of free trade zones, including consigned warehouses, customs-free zones, and zones for the processing, packing, sorting, and storage of goods.  A Free Industrial and Economic Zone (FIEZ) was created in 2008 in the Navoi region; the Special Industrial Zone (SIZ) was established in 2012 in Angren City of Tashkent province; and the SIZ Jizzakh appeared in March 2013 in Jizzakh region, with a branch in Syrdarya region.  Each economic zone was created for a period of 30 years from the date of its establishment, with the possibility of extension. In 2016, the GOU unified the legal and economic status of the FIEZ and SIZs and renamed them to Free Economic Zones (FEZ). In 2017, the government established a number of new FEZs raising their overall number to fourteen.  Businesses need permission of the Contracts Detailed Due Diligence Center under the Ministry of Economy for investing in FEZs. A special FEZ Administrative Council coordinates activities of FEZs.

All businesses operating in the territory of FEZs can now make foreign currency transactions with local vendors and expect the following privileges:

  • Exemption from paying land tax, income tax, tax on property of legal entities, tax for accomplishment and development of social infrastructure, single tax payment for micro-firms and small enterprises, as well as obligatory contributions to the Republican Road Fund and off-budget Fund for Reconstruction of Schools, Colleges, Lyceums and Medical Institutions; and
  • Exemption from customs payments (except customs clearance fees) for equipment, materials, and components imported to cover their own production needs, as well as for building materials that cannot be sourced in Uzbekistan for the projects approved by the government.

The validity of the above privileges depends on the amount of investment, accordingly:

  • 3 years for investments from USD 300,000 to USD 3 million;
  • 5 years for investments from USD 3 million to USD 5 million;
  • 7 years for investments from USD 5 million to USD 10 million; and
  • 10 years for investments of USD 10 million and above, with a 50 percent reduction of income taxes for the subsequent 5 years.

Businesses that invest in these zones were promised various additional incentives, including tax holidays; a special customs, currency, and tax regime; a simplified procedure for entering, staying, and leaving; and provisions by which non-residents can receive labor licenses.  However, due to the slow improvement of the business climate in the country and other factors, these special zones failed to boost FDI. A survey conducted in mid-2018 showed that most foreign investors are dissatisfied with business conditions in the FEZs. Businesses note a burdensome bureaucracy, uncompetitive high cost of logistical services, and poor social infrastructure. A Presidential Decree issued on December 21, 2018, ordered the government to improve the quality of infrastructure at FEZs.

Performance and Data Localization Requirements

There are several restrictions and quantitative limitations on employment of foreign nationals in Uzbekistan.  The chief accountants in banking and auditing companies must be Uzbek nationals. The law also requires that either the CEO or one member of a board of directors be a citizen of Uzbekistan.  In the tourism sector, only Uzbek nationals can be professional tour guides. All foreign citizens, except those from certain countries of the former Soviet Union, need visas to work in Uzbekistan and all individuals must register their residences with authorities.  Legislation permits foreign investors and specialists to obtain multiple entry visas for the period of their contract. To apply for a visa, American citizens must submit documents regarding their company to an Uzbek embassy or consulate. American investors have complained in the past about the short validity of visas and the limited number of entries.  We understand that practice is changing, but investors should specifically request multiple entry/longer term visas.

Foreign workers must also register with the Ministry of Employment and Labor Relations. The Agency on Foreign Labor Migration under the Ministry of Employment and Labor Relations is responsible for quantitative control over employment of foreign nationals in various industries. For example, the number of foreign nationals in energy companies that operate in the country under Production Sharing Agreement terms cannot exceed 20 percent of the total number of employees, and additional foreign personnel can be hired only if there is no qualified local labor.

Formally, permission from the government is not required to invest in Uzbekistan (except for the FEZs), but the GOU’s economic policy still maintains an intense focus on import substitution and export-oriented industrialization.  Investors in non-priority sectors should expect less support in importing capital and consumer products than those in priority industries.

Uzbek legislation stipulates that the government must apply requirements to use domestic inputs in manufacturing uniformly to enterprises with domestic and foreign investments, but in practice, this is not always the case.  There are no requirements for using only local sources of financing. The government welcomes foreign investors mainly in the areas of localization, building local production capacities, and developing export potential.

To qualify as an enterprise or business with foreign investment and be eligible for tax and other incentives, the share of foreign investment must be at least 15 percent of the charter capital of a company.  The investment must consist of hard currency or new equipment, delivered within one year of registering the enterprise. The minimum requirements for charter capital for certain incentives are:

  • UZS 100 million (USD 12,000 as of March 2019) for joint-stock companies (except financial institutions);
  • UZS 400 million (USD 48,000 as of March 2019) for ventures in other sectors of the economy.

Tax incentives for foreign investment are essentially the same as for local enterprises participating in an investment, localization, or modernization program.  Enterprises with significant investment in priority sectors or registered in one of free economic or special industrial zones can expect additional benefits.

Legislation does not require data storage within the country, or transfer of technology or proprietary information; such transfers are negotiated between the foreign investor and its local partner.

5. Protection of Property Rights

Property ownership is governed by the Law on Protection of Private Property and Guarantees of the Owner’s Rights.  Uzbek and foreign entities may own or lease buildings, but not the underlying land. Mortgages are available for local individuals only, but not for legal entities.  There are no mortgage and liens securities in Uzbekistan.

The World Bank ranked Uzbekistan 71th in the world in the Registering Property category of its 2019 Doing Business Report, up from 73 the previous year, indicating that the GOU has simplified some property-transfer procedures.  More details can be reviewed here:  

All land in Uzbekistan is owned by the state.  Legislation governing the acquisition and disposition of immoveable property (buildings and facilities) poses relatively few problems for foreign investors and is similar to laws in other CIS countries.  Immoveable property ownership is generally respected by local and central authorities.  District governments have departments responsible for managing commercial real estate issues ranging from valuations to sale and purchase of immoveable property.

Legally purchased but unoccupied immoveable property can be nationalized for several reasons, including by an enforcement process of a court decision, past due debts for utility or communal services, debts for property taxes, and in some cases for security considerations.  Unauthorized takeover of unoccupied immoveable property by other private owners (squatters) is not a common practice in Uzbekistan.  Usually authorities inspect the legitimacy of immoveable property ownership at least once every year.

Intellectual Property Rights

While the concept of registering intellectual property (IP) is still new to Uzbekistan, the GOU recognizes intellectual property rights (IPR) protections as critical to its economic goals.  As Uzbekistan prepares for accession to the World Trade Organization (WTO), its leaders have demonstrated increased political will to strengthen IPR legislation and enforcement mechanisms. This represents a significant political shift towards improved IPR protections.  In particular, Uzbekistan’s accession to the Geneva Phonograms Convention and two World Intellectual Property Organization (WIPO) Internet Treaties at the end of 2018 represents progress towards providing adequate copyright protection for foreign sound recordings. Responsibility for IPR issues lies with the formerly independent Uzbek Agency for Intellectual Property (AIP), which was subsumed under the Ministry of Justice (IPA,  ) in February 2019. Uzbekistan’s Customs Code (which came into force on April 22, 2016) allows rights holders to control the importation of intellectual property goods.  The Code introduced a special Customs Record procedure, which is based on a database of legal producers and their distributors. Uzbekistan also introduced several amendments to IPR law, as well as amendments to civil and criminal codes to enforce stricter punishment for IPR violations.  Uzbekistan is a consumer, but not a significant producer, of pirated material. The IPA is actively working with WIPO to develop a new national strategy for IPR. Uzbekistan’s patent protections are generally sufficient. While Uzbekistan took important steps in 2018 to address longstanding issues pertaining to IPR, there remain serious deficiencies in trademark and copyright protections, judicial processes related to IPR, and enforcement of actions against IPR violations.

On December 26, 2018, President Mirziyoyev signed a bill into law for Uzbekistan to accede to the Geneva Phonograms Convention. The GOU forwarded signed copies of the law to WIPO and the UN, thus completing the formal ratification of these conventions. Later, on February 16, 2019, the President approved adoption of two bills into the law for Uzbekistan to accede to the WIPO Copyright Treaty and the WIPO Performance and Phonograms Treaty (“Internet Treaties”). The GOU is working on amendments to national legislation to bring it in line with the requirements of the IPR Treaties. These measures represent the necessary short-term actions for Uzbekistan to maintain its benefits under the U.S. Generalized System of Preferences (GSP). The full list of IPR-related international agreements/treaties that Uzbekistan has acceded to is available here:  .

In April 2018, the GOU provided greater authority to a new Inspectorate under the Ministry of Information Technologies and Communications to monitor compliance and enforce copyright protections on the internet.  The GOU is also establishing a system of licensing for companies that sell software legally, in order to stem the flow of pirated software to the marketplace.

There are no publically available reports on seizures of counterfeit goods in 2018. According to AIP officials, Uzbekistan law enforcement agencies recorded 324 cases of illegal selling of audiovisual records and software copies, and seized 83,429 DVDs, CDs and other carriers with such products. Under current Uzbek law, the court considers copyright infringement cases only after the copyright holder submits a claim of damages.  Similarly, for imported products, customs officials do not have an ex-officio function, and the onus is on the rights holder to initiate an action against a suspected infringer.

Uzbekistan has been on the Watch List of the U.S. Trade Representative’s (USTR) Special 301 Report since 2000. Although Uzbekistan has taken important first steps to improve the protection of IPR and address concerns raised in previous USTR’s reports, the country has to demonstrate measurable and sustained progress before removal from the Special 301 Watch List.

The country does not host a Notorious Market for pirated and counterfeited American products (as defined by the Office of the United States Trade Representative).

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at  .

6. Financial Sector

Capital Markets and Portfolio Investment

In general, the GOU has not made a priority of attracting portfolio investments, as it prefers what it calls “strategic investors,” capable of providing new technologies and employment in local industries.  A number of international fund management companies have worked in the country in the past, investing in various industries through the stock market or in the real estate and construction sectors. Most of these funds had left the market by 2010 due to capital losses brought about by the global financial crisis.  The few portfolio managers remaining invest primarily in the insurance and leasing sectors.

Uzbekistan has its own stock market, which has been traded through Tashkent Stock Exchange, the main securities trading platform and the only corporate securities exchange.  The stock exchange mainly hosts equity and secondary market transactions with shares of state-owned enterprises. In most cases, government agencies determine who can buy and sell shares and at what prices, and it is often impossible to locate accurate financial reports for traded companies.

Current economic policies have not facilitated the free flow of financial resources into the product and factor markets.  In 2017, the GOU announced its plans to use more stock market instruments in meeting its privatization targets. In January 2019, the President ordered the creation of the Agency for the Development of Capital Markets. The Agency is responsible for regulation of the securities market and protection of the rights and legitimate interests of investors in securities market.

Uzbekistan accepted IMF Article VIII in October 2003, and the government declared its full commitment to honoring its obligations under this article.  However, in practice, businesses had limited access to foreign currency, which stimulated the grey economy and multiple exchange rates system. Effective September 5, 2017, the GOU eliminated the difference between the artificially low official rate and the black market exchange rate, and formally allowed unlimited non-cash foreign exchange transactions for businesses.  Nevertheless, investors continue to experience difficulties related to repatriation of their capital and dividends from the country due to various banking limitations that are still in place. For example, banks limit repatriation of income and capital invested in Uzbek industrial assets, securities and the stock market, unless they have special permission of the government.

Formally, foreign investors are able to get credit on the local market.  The private sector has access to a restricted variety of credit instruments and the isolated and overregulated financial system yields unreliable credit terms.  Access to foreign banks is limited and is usually only granted through their joint ventures with local banks. Commercial banks to a limited degree are able to use credit lines from international financial institutions to finance small and medium sized businesses.

Money and Banking System

There are 29 commercial banks, including 5 state-owned banks; 13 partly state-owned joint-stock banks; 5 banks with foreign capital; and 6 private banks. The total number of credit offices throughout the country, including microcredit organizations and branches of commercial banks is 8,610.

According to assessments of international rating agencies, including Fitch and Moody’s, the banking sector of Uzbekistan is stable and poses limited near-term risks, primarily due to high concentration and domination of the public sector, which controls over 80 percent assets in the banking system. The average rate of capital adequacy within the system is 15.7 percent, and the current liquidity rate is 86.1 percent. Relatively low exposure to global financial markets shields the sector from global financial market volatility. The growing volume of state-led investments in the economy supports the stability of larger commercial banks, which often operate as agents of the government in implementing its development strategy. Privately owned commercial banks are relatively small niche players. The government and the Central Bank of Uzbekistan (CBU) still closely monitor commercial banks, in some cases imposing requirements to perform non-core functions, such as tax withholding and client financial oversight, which keeps confidence in the banking sector low.

Official information on non-performing assets is not publicly available. According to the latest available official statistics, the share of nonperforming loans to total gross loans was about 0.42 percent, while Fitch estimated 1.2 percent.  A majority of Uzbek commercial banks have earned “stable” ratings from international rating agencies.

In February 2019, the banking sector’s capitalization was about USD 3.3 billion and the value of total bank assets in the whole country was equivalent to USD 26.6 billion. Included in this amount are the assets of the three largest state-owned banks, which together hold about USD 12.2 billion.

Uzbekistan maintains a central bank system. The Central Bank of Uzbekistan (CBU) is the state issuing and reserve bank and central monetary authority.  The bank is accountable to the Supreme Council of Uzbekistan and is independent of the executive bodies (organization chart of the bank is available here:  ).

In general, any banking activity in Uzbekistan is subject to licensing and regulation by the Central Bank of Uzbekistan.  Foreign banks often feel pressured to establish joint-ventures with local financial institutions. Currently there are five small banks with foreign capital operating in the market, and six foreign banks have accredited representative offices in Uzbekistan, but do not provide direct services to local businesses and individuals.  Information about the status of Uzbekistan’s correspondent banking relationships is not publicly available.

Foreigners and foreign investors can establish bank accounts in local banks without restrictions.  They also have access to local credit, although the terms and interest rates do not represent a competitive or realistic source of financing.

Foreign Exchange and Remittances

Foreign Exchange

Uzbekistan on paper adopted Article VIII of the IMF’s Articles of Agreement in October 2003 and, thus, committed to currency convertibility for current account transactions.  However, implementation of the country’s obligations under this article only began in September 2017. Formally, foreign investors are guaranteed the ability to transfer funds in foreign currency into and out of Uzbekistan without limitation, provided they have paid all taxes and other financial obligations in accordance with legislation. In reality, however, investors continue to experience difficulties related with repatriation of their capital and dividends from the country due to various banking limitations still in place. For example, banks limit repatriation of income and capital invested in Uzbek industrial assets, securities and the stock market. Local authorities may stop the repatriation of a foreign investor’s funds in cases of insolvency and bankruptcy, criminal acts by the foreign investor, or when directed by arbitration or a court decision. Along with that, local banks still have a limited ability to sell cash dollars to individuals, stimulating further cash outflows to the black market. New legislation on liberalization of currency exchange is expected by the end of 2019.

The exchange rate is determined by the CBU, which insists that it is based on free market forces (UZS 8,374 per U.S dollar as of March 15, 2019).  After the almost 50 percent devaluation of the national currency in September 2017, the exchange rate has been relatively stable, supported by strong foreign exchange reserves (USD 27.4 billion by March 1, 2019). The CBU reported it had made USD 3.8 billion interventions in 2018 in the forex market to support the local currency.

Remittance Policies

President Mirziyoyev launched foreign exchange liberalization reform on September 2017 by issuing a decree “On Priority Measures for Liberalization of Monetary Policy.”  Formally, business entities can purchase foreign currency in commercial banks without restrictions for current international transactions, including import of goods, works and services, repatriation of profits, repayment of loans, payment of travel expenses and other transfers of a non-trade nature.  All payments in foreign currency within the country are prohibited. Various banking limitations are still in place limiting repatriation of investor’s income and capital invested in Uzbek industrial assets, securities and the stock market. In November 2017, CBU officials announced plans to complete the transition to free currency convertibility within six to nine months, and that a new law on currency regulation policy would be developed based on the economic results of the first half of 2018. Later, in 2018, the deadline was extended to July 2019.

Banking regulations mandate that the currency conversion process should take no longer than two weeks.  After adoption of the above-mentioned Presidential Decree on monetary liberalization, most businesses reported that they observed no delays with conversion and remittance of their investment returns including dividends; return on investment, interest and principal on private foreign debt; lease payments; royalties; and management fees.

Sovereign Wealth Funds

The Fund for Reconstruction and Development (FRD) of Uzbekistan serves as a sovereign wealth fund.  Uzbekistan’s Cabinet of Ministers, Ministry of Finance, and the five largest state-owned banks were instrumental in establishing the FRD, and all those institutions have membership on its Board of Directors.  The equity of the FRD had grown from USD 1 billion in 2006 to about USD 15 billion in 2018.

The fund does not follow the voluntary code of good practices known as the Santiago Principles, and Uzbekistan does not participate in the IMF-hosted International Working Group on sovereign wealth funds.  The GOU established the FRD in 2006, using it to sterilize and accumulate foreign exchange revenues, but officially the goal of the FRD is to provide government-guaranteed loans and equity investments to strategic sectors of the domestic economy.

The FRD does not invest, but instead provides debt financing to SOEs for modernization and technical upgrade projects in sectors that are strategically important for the Uzbek economy.  All FRD loans require government approval.

7. State-Owned Enterprises

State-owned enterprises (SOEs) dominate those sectors of the economy recognized by the government as being of national strategic interest.  These include energy (power generation and transmission, and oil and gas refining, transportation and distribution), metallurgy, mining (ferrous and non-ferrous metals and uranium), telecommunications (fixed telephony and data transmission), machinery (the automotive industry, locomotive and aircraft production and repair), and transportation (airlines and railways).  Most SOEs register as joint-stock companies, and a minority share in these companies usually belongs to employees or private enterprises.

Although SOEs have boards of directors, typically one or more members will be a government official, and senior executives report directly to relevant ministries or the Cabinet of Ministers.  Generally, SOEs must consult with the government before making significant business decisions.

The government owns majority or blocking minority shares in numerous non-state entities, ensuring substantial control over their operations, as it retains the authority to regulate and control the activities and transactions of any company in which it owns shares. The Agency for Management of State-owned Assets is responsible for management of Uzbekistan state-owned assets both located in the country and abroad. It includes implementation of GOU privatization programs, renting state properties, promotion of corporate governance, and rehabilitation of non-performing assets.

The published list of major Uzbek SOEs is available on the official GOU website (for large companies and banks):  .

In theory, private sector or foreign companies can be more competitive than local SOEs in sectors that are not under the control of state-owned monopolies, but regulations make them dependent on government SOEs.  For example, in 2004 the government granted exclusive control of the country’s international telecommunication networks to the state-owned Uztelecom Company. This forces all providers of voice and data transmission services, including internet and IP-telephony, to use only Uztelecom switches to access long-distance and international channels.  In addition to technical restrictions, the providers must also conduct their financial transactions with international partners through Uztelecom.

There is no third-party market analysis of SOEs’ ties to the government.  By law, SOEs are obligated to operate under the same tax and regulatory environment as private businesses.  In practice, however, private enterprises do not enjoy the same terms and conditions. The government leverages registrations, licensing, and access to some commodities and utilities to protect quasi-governmental institutions and companies from commercial competition.  Private businesses face more than the usual amount of bureaucratic hurdles if they compete with the government or a government-controlled firm. Most SOEs have a range of advantages, including various tax holidays, as well as better access to commodities, utility supplies, local and external markets, and smoother access to financing.  Additionally, SOEs are usually not subject to legislative budget constraints unless they are in low-priority industries.

On December 28, 2018, President Mirziyoyev ordered the GOU to develop a plan to restructure SOEs. He noted that 486 out of 603 joint-stock companies in Uzbekistan are state-owned and such strong involvement of the state in the fuel and energy, petrochemical, chemical, transport, and banking sectors is hampering their development.  Mirziyoyev criticized the government entities with ministerial authority that own SOEs as preventing healthy competition in the economy and deterring private and foreign investments. The SOE reform policy may appear in 2019.

Privatization Program

Various policy papers of the government indicate further privatization of state-owned assets among current priorities. The goal is to reduce the public share of capital in the banking sector and business entities through greater attraction of foreign direct investments, local private investments, and promotion of public-private partnerships. By law, privatization of non-strategic assets does not require government approval and can be cleared by local officials. For investors that privatize assets at preferential terms the payment period is three years, and the investment commitment fulfillment term is five years. Most of the state assets that have been offered for privatization consist of auxiliary or ineffective enterprises and unprofitable public facilities.  According to official reports, 835 state owned enterprises and facilities were privatized in 2018. Privatization earnings of the state budget were equivalent to USD 27.4 million.

In May 2018, the GOU first announced upcoming restructuring and privatization in various industries, but noted that SOEs in extractive industries (hydrocarbons and gold) would stay under state ownership. Senior government officials see privatization as a solution to improve the economic performance of currently inefficient large SOEs and as an instrument to attract private investments, which are critical for the creation of new jobs and mitigation of state budget losses. Implementation of large-scale privatizations and SOE restructuring likely will take some time, as the GOU seeks both to avoid high “social costs” (e.g., unemployment) and to maximize revenue garnered from privatization. The GOU believes it needs to prepare SOEs for privatization, including organizational and financial restructuring of each underperforming industry. Currently the government is prioritizing restructuring and privatization programs in the aviation, energy, chemical, mining and banking sectors.

In October 2018, the Ministry of Justice (MOJ) published draft legislation on the gradual introduction of private property rights for non-agricultural lands.  According to the draft law, which is expected to go into effect on July 1, 2019, entities will be able to privatize the land under and associated with their business property, while individuals will be allowed to purchase land only for building new residential houses.  Land privatized within the territory of urban settlements or villages, and land allocations must be approved by local authorities. The MOJ officials say that the main motivation here is to mobilize the potential of “local investors,” but land privatization earnings are anticipated to provide substantial revenue to local budgets.

Large privatization deals with the involvement of foreign investment require GOU approval. Formally, such approval can be issued after examination by the Contracts Detailed Due Diligence Center under the Ministry of Economy. Many investors note a lack of transparency at the final stage of the bidding process, when the government negotiates directly with bidders before announcing the results.  In some cases, the bidders have been foreign-registered front companies associated with influential Uzbek families.

8. Responsible Business Conduct

There is no legislation on responsible business conduct (RBC) in Uzbekistan, and the concept has not been widely adopted, though many companies are active in charitable activities, either through their own initiative or because they were mandated by local government officials.

Relevant government agencies and departments inspect both newly registering and operating local businesses and enterprises for enforcement of the Labor Code in respect to labor and employment rights; the Law on Protection of Consumer’s Rights for consumer protections; and the Law on Protection of Nature for environmental protections.  Labor or environmental laws and regulations are not waived for enterprises with private and foreign investments.

Legislation, including the Law on Joint-Stock Companies and Protection of Shareholder’s Rights, issued in 1996 and last updated in 2018, sets a range of standards to protect the interests of minority shareholders.

The Law on the Securities Market requires businesses that issue securities (except government securities) to publish annual reports, which should include a summary of business activities for the previous year, financial statements with a copy of an independent audit, and material facts on the activities of the issuer during the corresponding period.

There are no independent NGOs, investment funds, worker organizations/unions, or business associations promoting or monitoring RBC in Uzbekistan.

At present, Uzbekistan does not adhere to the OECD guidelines regarding responsible supply chains of minerals from conflict-afflicted and high-risk areas, and there has been no substantial evidence to suggest the government encourages foreign and local businesses to follow generally accepted corporate social responsibility (CSR) principles such as the OECD Guidelines for Multinational Enterprises. Uzbekistan does not participate in the Extractive Industries Transparency Initiative (EITI).

9. Corruption

Uzbekistan’s legislation and Criminal Code both prohibit corruption. President Mirziyoyev has declared combating widespread corruption as one of his top priorities. On January 3, 2017, he approved the law “On Combating Corruption.” The law is intended to raise the efficiency of anti-corruption measures through consolidation of efforts of government bodies and the civil society in preventing and combating cases of corruption, attempted corruption, and conflict of interest, ensuring punishment for such crimes. Currently the government is preparing the State Anti-Corruption Program for 2019-2021.

Formally, the anti-corruption legislation extends to all government officials, their family members, and members of all political parties of the country.  However, Uzbekistan has not yet introduced asset declaration requirements for government officials or their family members. The Prosecutor General’s Office of Uzbekistan (PGO) is the main government arm tasked with fighting corruption in the country.  Since Mirziyoyev took office in September 2016, the government has prosecuted a number of officials under anti-corruption laws, and punishment can vary from a fine to imprisonment with confiscation of property. According to official statistics, the PGO initiated over 10,000 corruption related cases in 2017 and about 6,700 in 2018.

The process of awarding Uzbek government contracts continues to lack transparency.  A presidential decree issued on January 10, 2019 transferred a number of the powers of NAPU to other state institutions, including oversight over government procurement.  All government procurements now go through a clearing process within the Ministry of Economy. Procurement contracts with involvement of public funds or performed by state enterprises with values of over USD 100,000 need additional clearance by other relevant government agencies.

The law “On Combating Corruption” prescribes a range of measures for preventing corruption, including through raising public awareness and introduction of transparent rules for public-private interactions.  The law, however, does not encourage companies to establish relevant internal codes of conduct.

Currently only a few local companies created by or with foreign investors have effective internal ethics programs.

Uzbekistan is a member of the OECD Anti-Corruption Network (ACN) for Eastern Europe and Central Asia.  During the 2018 round of ACN Mutual Evaluation, Uzbekistan demonstrated significant progress towards implementing recommendations of the Istanbul Anti-Corruption Action Plan.   However, it ranked 158 out of 180 rated countries in Transparency International’s 2018 Corruption Perceptions Index.

There are very few officially registered local NGOs available to investigate corruption cases and Embassy Tashkent is not aware of any genuine NGOs that are actually involved in investigating corruption.  The law “On Combating Corruption” encourages more active involvement of NGOs and civil society in investigation and prevention of crimes related with corruption. The few “NGOs” involved in the work of the Interagency Anti-Corruption Commission are mostly government-supported organizations, not genuine grass-roots NGOs.

U.S. businesses have cited corruption and lack of transparency in bureaucratic processes, including public procurements and licensing, as among the main obstacles to foreign direct investment in Uzbekistan.

Resources to Report Corruption

The government agencies that are responsible for combating corruption are the Prosecutor General’s Office and the Ministry of Justice.  Currently, no international or local nongovernmental watchdog organizations have permission to monitor corruption in Uzbekistan.

Contact information for the office of Uzbekistan’s Prosecutor General:

Address: 66, Akademik Gulyamov St., 100047, Tashkent, Uzbekistan
Hotline telephone numbers: +998(71) 1007, 232-4391, 232-4550

Contact information for the office of Uzbekistan’s Ministry of Justice:

Address: 5, Sayilgoh Street, 100047, Tashkent, Uzbekistan
Website:   or  
Hotline telephone numbers: +998(71) 1008, 233-2610, 233-1305, 236-0509

10. Political and Security Environment

Although there are supporters in Uzbekistan of extremist groups such as the Islamic Movement of Uzbekistan (IMU), al-Qaida, and the Eastern Turkistan Islamic Movement in Central Asia, the GOU has made it a priority to limit the activities of these groups, which have all expressed anti-U.S. sentiments.

In light of domestic and international threats, the government has implemented heightened security measures, such as police sorties and patrolling of public places.  The border between Uzbekistan and Afghanistan is officially open to traffic, but some travel restrictions for the region remain in place.

11. Labor Policies and Practices

During 2018, the population of Uzbekistan increased by 597,400 people (1.8 percent) to 33,254,100. According to publically available statistics, 30.3 percent of the population is under 16 years old; 59.5 percent is working age (16-60); and 10.2 percent are 60 years old and older. The demographic burden ratio is 681 dependents (509 children and 172 elderly) per 1,000 working age people. This ratio has increased since 2016 by 6.4 percent. The accuracy of given statistics is based on records of local residents’ registration offices, and does not always reflect the actual situation in the country. The next national census in Uzbekistan is expected in 2022, while the last one was in 1989. 

The total number of labor resources is about 19 million people. The Ministry of Employment and Labor Relations of Uzbekistan (MOL) subtracts about 4.2 million working age people as a group of economically inactive people, i.e. people that do not seek any employment. These include students, housewives, disabled people, etc. Accordingly, the economically active population (the labor resource) is 14.6 million. Less than 13.3 million of them were considered as employed, wherein only 5.4 million people were employed officially while remaining 7.9 million were considered as self-employed. The latter includes, among others, individual entrepreneurs, unregistered traders (informal economy workforce), and labor migrants. The share of non-agricultural workforce is about 73 percent.

Official number of unemployment is 1,368,600 people, or 9.7 percent of the total labor resource. The level of youth unemployment is 17 percent, and the level of female unemployment is 12.9 percent. With the closure or downsizing of many businesses, it is easy to find qualified employees, and salaries are low by Western standards.  According to government and alternative statistics, 14 percent of the population live below the poverty level, and approximately 48 percent of the employed population have low-productivity and low-income jobs. Accordingly, Uzbekistan is the largest supplier of labor migrants among former Soviet Union republics. The exact number of labor migrants is still unrevealed: the MOL insists the number is about 2.4 million, but Russian migration authorities report registering over 3.4 million Uzbek workers in 2018.

At 97 percent, literacy is nearly universal, but most local technical and managerial training does not meet international business standards.  Foreign firms report that younger Uzbeks are more flexible in adapting to changing international business practices, but are also less educated than their Soviet-trained elders.  Widespread corruption in the education sector has lowered educational standards as students purchase grades and even admittance to prestigious universities and lyceums.

Legislation requires companies to hire Uzbek nationals for specified positions in banking and auditing companies.  The chief accountant must be an Uzbek national, as should either the CEO or any one member of the board of directors.  Only Uzbek nationals can be tour guides.

According to Uzbekistan’s Labor Code, labor-management relations should be formalized in a fixed-term or temporary employment contract.  The maximum length of a single fixed-term contract is 5 years (  ).  The Labor Code and subordinate labor legislation differentiate between layoffs and firing.  Employees can terminate their employment by filing two-week prior written notice, or apply for leave without pay.  Layoff or temporary leaves without pay can be initiated by an employer due to worsening of the economic situation. For firing (severance), the employer should personally give two months’ advance notice in the case of corporate liquidation or optimization, two weeks’ advance notice in the case of an employee’s incompetence, and three days’ advance notice in the case of an employee’s malpractice or unacceptable violations.  In case of severance caused by corporate liquidation or optimization, an employee should receive compensation, which should not be less than two average monthly salaries paid during their employment plus payment for unused leave (if another form of compensation was not agreed to in the employment contract). In reality, however, many businesses choose to avoid signing formal contracts with employees, especially those involved in seasonal agricultural work, which leads to widespread labor rights violations.

Officially, labor legislation cannot be waived or applied differently for private or foreign-owned enterprises, including those that operate in free and special economic zones.

The state-run Board of the Federation of Trade Unions of Uzbekistan incorporates more than 37,600 primary organizations and 14 regional trade unions, with official reports of 60 percent of employees in the country participating.  The Office of the President appoints the leaders of the federation; union boards are not involved in electing these leaders to their positions. All regional and industrial trade unions at the local level are state-managed.

By law, all employees of either local or foreign-owned enterprises operating in Uzbekistan have the following rights to:

  • fair and timely payment of wages that should not be less than minimum monthly salary amounts set by the government;
  • a standard workweek of forty hours, with a mandatory rest period of twenty-four hours and annual leave;
  • overtime compensation as specified in employment contracts or agreed to with an employee’s trade union, which can be implemented in the form of additional pay or leave.  The law states that overtime compensation should not be less than 200 percent of the employee’s average monthly salary rate (broken down by hours worked). Additional leave time should not be less than the length of actual overtime work;
  • working conditions that meet occupational health and safety standards prescribed by legislation;
  • compensation of any health or property damages incurred as a result of professional duties through an employer’s fault;
  • professional training;
  • formation and joining of labor unions;
  • pensions; and
  • legal support in protection of workers’ rights.

There is no single state institution responsible for labor arbitration.  The general court system, where civil and criminal cases are tried, is responsible for resolving labor-related disputes.  This can be done on a regional or city level. Formally, workers can file their complaints through the Prosecutor General’s Office.  The Ministry of Employment and Labor Relations should provide legal support to employees in their labor disputes.

The law neither provides for nor prohibits the right to strike.  In recent years, workers involved in various large state-facilitated civil construction projects conducted strikes, demanding improvement of their working conditions. Reportedly, law enforcement authorities inspected the employing company, which eventually addressed most of the issues raised by the workers.  There is no public information about the role of official unions in these negotiations.

Although employees in Uzbekistan enjoy many rights by law, in practice these laws are subject to arbitrary and inconsistent interpretation.  For example, the law prohibits compulsory overtime – and only 120 hours of overtime per year is permitted. In practice, overtime limitations are not widely observed and compensation is rarely paid.  Wage violations have become quite common in recent years.

14 conventions of the UN’s International Labor Organization (ILO) are officially in force in Uzbekistan:

  • Forced Labor Convention
  • Freedom of Association and Protection of the Right to Organize Convention
  • Right to Organize and Collective Bargaining Convention
  • Equal Remuneration Convention
  • Abolition of Forced Labor Convention
  • Discrimination [Employment and Occupation] Convention
  • Minimum Age Convention
  • Worst Forms of Child Labor Convention
  • Employment Policy Convention
  • Forty-Hour Week Convention
  • Holidays with Pay Convention
  • Maternity Protection Convention [Revised]
  • Workers’ Representatives Convention
  • Collective Bargaining Convention

The most recent observations of the ILO’s Committee of Experts on the Application of Conventions and Recommendations (CEACR) can be reviewed here:  

The law prohibits all forms of forced or compulsory labor, including by children, except as legal punishment for offenses such as robbery, fraud, or tax evasion, or as specified by law.  Uzbekistan has eliminated the systematic use of child labor in the annual cotton harvest and has implemented reforms to significantly improve its record on adult forced labor.  The Ministry of Employment and Labor Relations establishes and enforces occupational health and safety standards. Labor inspectors conduct routine inspections of small and medium-sized businesses once every four years, and inspect larger enterprises once every three years.

In 2018, Uzbekistan adopted a number of labor related laws and regulations, including:

  • GOU Resolution on Additional Measures to Eradicate Forced Labor in Uzbekistan (N 349 issued May 10, 2018)
  • GOU Resolution for Implementation of ILO Conventions Ratified by Uzbekistan with the Regulations on the Republican Interagency Commission (N 407 issued May 31, 2018)
  • The Law on Mediation (NRU-482 issued July 3, 2018)
  • Regulation on the procedure for the formation and use of the State Employment Facilitation Fund (GOU Decree N 1066 issued December 31, 2018)

12. OPIC and Other Investment Insurance Programs

The Overseas Private Investment Corporation (OPIC) began working in Uzbekistan in 1992 and has loaned approximately USD 229 million over the course of its operations in Uzbekistan, but had no new projects in FY2018. Uzbekistan is a developing country member of the Multilateral Investment Guarantee Agency.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Note: In many instances below (indicated by “N/A”), no data has been published by the Government of Uzbekistan, and independent assessments and estimations are also not available. The GOU includes foreign debt inflow in FDI figures.  In some reports the GOU may also indicate contractual pledges of FDI, rather than actual investment inflow.

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

Host Country Statistical Source USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) ($M USD) 2018 $49,500 2018 N/A   
Foreign Direct Investment Host Country Statistical Source USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) 2018 N/A 2018 N/A BEA data available at  
Host country’s FDI in the United States ($M USD, stock positions) 2018 N/A 2018 N/A BEA data available at  
Total inbound stock of FDI as % host GDP 2018 N/A 2018 N/A UNCTAD data available at  

Table 3: Sources and Destination of FDI

Data not available.

Table 4: Sources of Portfolio Investment

Data not available.

14. Contact for More Information

Laurence Wright II
Economic and Commercial Officer
3, Maykurgan St., Yunusabad District, 100093, Tashkent, Uzbekistan
Phone: +998-71-140-2130

2019 Investment Climate Statements: Uzbekistan
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