This chapter summarises the chapters of the Roadmap for Sustainable Investment Policy Reforms of Uzbekistan, including the key findings and recommendations in each policy area. The Roadmap provides an assessment of Uzbekistan’s investment policy framework. It provides recommendations on the investment legal and regulatory framework, investment promotion and facilitation policies, tax incentives, responsible business conduct, and on the contribution of foreign investment to the green and digital transitions and Uzbekistan’s integration in global value chains.
Roadmap for Sustainable Investment Policy Reforms in Uzbekistan
Abstract
Uzbekistan has embarked on wide-ranging political and economic reforms since 2017 to improve the investment climate. Reforms started with the liberalisation of the capital account and foreign exchange regime, followed by further liberalisation, along with various measures to reduce the role of government in the economy and to foster a more conducive business environment to allow the private sector, including foreign investment, to flourish. These measures have been accompanied by an increased focus on sustainability, building on the lessons of earlier environmental degradation, and on translating economic growth into tangible benefits on the ground. Much remains to be done, but the direction of change is clear.
This Roadmap for Sustainable Investment Policy Reforms in Uzbekistan looks at what has been achieved and what further reforms could provide the trajectory for Uzbekistan to reach its goal of upper middle-income status by 2030. The focus of the Roadmap is on strategies, the policy mix, laws and regulations needed to foster sustainable investment. Investment is not an end in itself but rather a means through which sustainable development can arise. A dynamic and well-regulated private sector can drive structural transformation and productivity growth and, in the right circumstances, contribute to sustainable and inclusive outcomes. A conducive business climate is not sufficient to achieve these outcomes, but it is a necessary pre-condition.
The Roadmap complements the recent OECD Public Governance Reviews: Uzbekistan which looks at how to build a more modern, effective and strategic public administration (OECD, 2024[1]). Good governance and effective investment policies go hand in hand, creating a virtuous cycle where an inclusive process for designing laws, building on government strategies and with the active engagement of a broad range of stakeholders, facilitates effective implementation.
This Roadmap, a collaboration between the OECD and the Asian Development Bank (ADB), applies tools such as the OECD Policy Framework for Investment (OECD, 2015[2]), the OECD FDI Qualities Policy Toolkit , as well as other tools and indicators from both the OECD and the ADB, to advise the Government of Uzbekistan on a way forward to address policy and governance challenges across a range of policy areas with an impact on both investment and sustainable development. These tools have been applied in dozens of countries worldwide, and the experience of other countries facing similar challenges will also be discussed where relevant lessons can be drawn.
Table 1.1 summarises the main reform areas and corresponding key policy recommendations of the Roadmap, along with an indicative time horizon and corresponding implementing institutions. The time horizon partly depends on the immediate implementation feasibility of the recommendation – some long-term recommendations could be more important to further improve the investment climate but may require a certain amount of time to be effectively implemented. The inter-ministerial taskforce established in the context of the RSIPR should monitor the implementation of the recommendations, including by developing specific set of indicators to assess progress and policy outcomes. Stakeholder engagement (e.g. private sector representations, trade union and other civil society bodies) is essential to implement the Roadmap.
Source: OECD and ADB elaboration.
1.2.1. The pace of reform has been impressive…
One indicator of the pace of reform can be seen in the sheer number of strategic documents prepared over recent years. Uzbekistan’s national strategies provide the overall framework for sustainable development and are complemented by strategic documents for specific sectors and policy areas and a comprehensive legal framework. The overarching strategy is the Uzbekistan Strategy 2030, along with the Uzbekistan 2030 Development Plan and the Development Strategy of New Uzbekistan 2022-26. These are complemented by dozens of more specific strategies, covering inter alia state-owned enterprises (SOEs), small and medium-sized enterprises (SMEs), digital transformation, intellectual property, innovation, greening the economy and social areas such as a National Human Rights Strategy.
A modern and well-functioning economy requires a comprehensive and up-to-date legal framework which is an important complement to the strategies listed above. Signs of legislative activity are ubiquitous in Uzbekistan. Beyond the new Constitution from 2023, laws only five years old are being revised and amended, while others are being enacted. These laws cover the following areas of relevance for this Roadmap, inter alia: investment; special economic zones; public-private partnerships; competition; entrepreneurship; privatisation; the judiciary; international commercial arbitration; mediation; anti-corruption; the public civil service; real estate; intellectual property rights; trademarks; labour; equal rights and opportunities for men and women; trade unions; environmental audits; environmental impact assessments; public procurement; and taxation. In international treatymaking, Uzbekistan is collaborating with the Asian Development Bank (ADB) to develop a new model bilateral investment treaty.
These strategies and laws have in turn led to frequent institutional changes, with new agencies, authorities, centres, committees and councils created across government. Ministries have also been created, restructured or sometimes merged. Examples of such institutional change are provided throughout this Roadmap.
1.2.2. …but this has created its own set of challenges
Through this active policymaking and institutional reform, the government is developing a comprehensive legal, regulatory and institutional framework for investment and sustainable development. In only a few years, it has completely restructured its legal framework on investment, but given the pace of reform, challenges have inevitably arisen in implementation. The breadth of economic and social reforms has sometimes been emphasised more than the depth and quality of implementation or measurable outcomes. Presidential Decrees aimed at improving the business environment and advancing reform agendas are abundant. After 2017, the government reportedly issued nearly 23 000 legal and regulatory documents to support the 2017-2021 Development Strategy (World Bank, 2022[3]). But frequent changes in legislation regarding reforms, licensing, and administrative frameworks create difficulties for implementing bodies, which struggle to stay updated with the latest guidelines and effectively co-ordinate when multiple institutions are involved. This is further exacerbated by limited government capacity due to ineffective institutional structures and high staff turnover, impeding progress on key reforms and affecting the quality of public services (EBRD, 2024[4]).
In Uzbekistan, the successful performance of governmental entities is often measured based on the number of laws and regulations adopted, rather than on their effective implementation. Overall, institutional actors are often placed under pressure to develop new laws quickly and in a reactive manner. Furthermore, multiple institutions are entrusted with law-making powers, which they exercise independently in accordance with their own legislative plans. Such fragmentation at the institutional level leads to co-ordination issues, making it difficult to align policy options and regulatory developments in a coherent manner (OECD, forthcoming[5]). The executive branch also has significant lawmaking powers (OSCE ODIHR, 2023[6]).
Overly complex and overlapping legislation can cause delays for businesses attempting to comply with new regulations, leading to higher costs and resource burdens. The rapid pace of legislative change has created uncertainty and undermined business confidence—a longstanding issue acknowledged by the OECD in 2020, as well as by the World Bank and UNCTAD (OECD, 2021[7]; World Bank, 2022[3]; UNCTAD, 2019[8]). Current legislation continues to include vague or incomplete definitions and references, creating space for misinterpretation and, in some cases, compliance difficulties for the private sector (World Bank, 2020[9]).
Ministries tend to over-use sub-legislative regulation rather than primary laws adopted by the Parliament, which has led to the adoption of a large swathe of regulations which were not subject to the ordinary legislative scrutiny applicable to primary laws. This has led to a considerable redundancy in Uzbekistan's business reforms, particularly in areas such as licensing, registration and administrative procedures (OSCE ODIHR, 2023[6]). Business associations and investors have consistently expressed concerns about these issues in consultations held with the OECD in 2023 and 2024, further highlighting the need for more effective and streamlined legislative processes (OECD, 2024[1]).
The government is conscious of these governance challenges. The OECD Public Governance Reviews: Uzbekistan highlighted the significant strides in modernising and promoting effective public administration since 2017, including in areas of regulatory quality, the rule of law, and responsiveness and inclusiveness of public administration (OECD, 2024[1]). An evidence-informed lawmaking framework is emerging. This Roadmap suggests areas where it could be further enhanced.
1.2.3. Economic growth has been stable but will need to increase to meet income targets
Growth has been stable, but more needs to be done to reach the country’s ambitious income targets. The government has targeted achieving upper middle-income status by 2030. Using the World Bank’s current definition of upper middle income, joining this group by 2030 would require an average annual growth in GNI per capita of at least 7.6%. While Uzbekistan’s economic performance has been moderately strong, it has not attained that rate of growth.
Following a strong negative shock in the early years of independence, annual GDP growth rates in Uzbekistan have mostly exceeded its country income group average since the early 2000s, driven by strong prices for its commodity exports (Figure 1.1). Over 2000-23, Uzbekistan’s growth averaged 6.4%, compared to 5.3 % in lower middle-income countries (LMICs) as a whole. The economy held up relatively well during the COVID-19 pandemic, with growth slipping to 1.6% in 2020, compared with a contraction of 3.6% across LMICs. While it has not yet had a major impact on the Uzbek economy, Russia’s war of aggression against Ukraine risks affecting growth, given Russia’s importance as a trading partner, and source of both remittances and investment. Strong gold exports have recently supported growth, though rising prices for imported commodities including wheat and fuel risk pushing up inflation in the near term.
Source: World Bank.
Longer-term growth potential has been driven in part by a falling dependency ratio and could be further boosted by the demographic window of opportunity created by Uzbekistan’s large working age population. The dependency ratio fell from a peak of 1.03 in 1967 to 0.49 in 2014 and is expected to remain relatively stable in coming decades as an ageing population increases the old age dependency ratio, offsetting the decline in the child dependency ratio. This demographic structure offers the potential for increased per capita incomes and improved saving and investment.
Despite favourable demographics, per capita incomes are constrained by low rates of labour utilisation. Uzbekistan’s labour force participation rate (61% of the population aged 15 to 64) is below that of OECD member countries (73.4%) but in line with other countries in its income group (61%). The gap with the OECD economies is almost entirely due to the lower female participation rate. At 44%, this has been relatively stable over the past decade after a gradual decline from a peak of 53% in 1996. While men and women have similar access to education up to the secondary level, cultural expectations regarding women’s roles in domestic work and childcare prevent many from greater involvement in the labour market (ILO, 2020[10]). Uzbekistan’s labour markets have also been challenged since 2022 by the need to incorporate the arrival of hundreds of thousands of largely high-skill immigrants from Russia.
Investment generally has been a major contributor to Uzbekistan’s growth in recent years, though much of this has been public rather than private sector investment. Gross fixed capital formation accounted for 32.2% of GDP in 2023, higher than in 16 peer economies with available data. Despite improvements in the business environment, private sector investment has been hindered not only by the large presence of SOEs but also by barriers in access to finance, particularly the underdevelopment of the banking sector and underdevelopment of domestic capital markets, which affect smaller and larger firms, respectively (OECD, 2023[11]). Foreign direct investment is low but growing, supported in part by recent privatisation efforts.
These trends will be important going forward if they can translate into higher productivity growth. Labour productivity in Uzbekistan remains low compared to peer economies, though it is growing rapidly. Foreign firms in Uzbekistan can contribute to improving productivity because of their access to better technology, managerial practices, and resources for capital investment which support productivity and innovation. Continued structural transformation and improved productivity of firms are needed to further improve growth prospects.
1.2.4. Despite significant progress, environmental sustainability remains a challenge
To some extent, economic growth in Uzbekistan in the past has come partly at the expense of the environment. The man-made environmental disaster of the Aral Sea is one example. Emissions have been increasing in absolute terms over the past decade, though this has been outpaced by economic growth. The carbon intensity of the Uzbek economy declined by 35% over 2013-23, from 1.6 kg to 1.1 kg of carbon dioxide equivalent per dollar of GDP (in constant 2015 prices). Nevertheless, the reliance on the carbon-intensive energy sector and other carbon-intensive activities means that emissions relative to GDP in Uzbekistan are higher than in many peer economies and well above the OECD average of 0.2 kg.
Uzbekistan is also highly exposed to climate change, including serious risks from droughts and water scarcity, extreme heat, and dust storms, as well as the ecological challenges related to the drying of the Aral Sea (World Bank, 2023[12]). The economy’s reliance on agriculture exacerbates these risks.
The government has been addressing these challenges over recent years, as described in-depth in subsequent chapters. This Roadmap will describe the significant efforts of the government to improve outcomes in terms of sustainability, the challenges that remain, and how an improved business climate and greater inflows of foreign investment could contribute to positive outcomes and support Uzbekistan’s green and digital transition.
1.2.5. Smaller business face numerous obstacles, and informality is still prevalent
A good business climate should benefit all firms – public and private, large and small, foreign and domestic – and should also encourage firms to leave the informal sector. Small and medium-sized enterprises (SMEs) are particularly important to driving growth because of their large contributions to the Uzbek economy and potential to support inclusion and innovation. SMEs accounted for 74% of employment and 54% of GDP in 2023 (National Statistics Committee, n.d.[13]). As drivers of job creation, smaller businesses and entrepreneurship can be essential in supporting inclusive growth (Koirala, 2019[14]).
Firm dynamism in Uzbekistan has increased over the last decade following liberalising reforms. The entry of new firms began to increase in 2016 and grew more quickly from 2018 before slowing during the COVID-19 pandemic in 2020-21 (OECD, 2023[11]). The adoption of e-government solutions is reducing administrative costs for new and small businesses. Online single window registration has been available since 2017, and licensing was streamlined and digitalised through further reforms in 2021. But SMEs face challenges in accessing finance as a result of the underdeveloped banking system, high cost of credit, and high collateral requirements for lending (OECD, 2023[11]).
The large informal sector undermines the potential of Uzbek SMEs. The informal economy may account for close to a third of GDP, though this share appears to be gradually declining (Abdumavlonov, Khakimov and Eshchanov, 2023[15]). This limits tax revenue and the reach of regulation, hinders growth potential, and creates an uneven competitive environment, especially for the formal SMEs competition with these firms. Small businesses were most likely to compete against informal firms and, in a World Bank survey, identified the practices of these firms as a major or very severe constraint (World Bank, 2019[16]). Informal work is common as well: one estimate based on the 2022 labour force survey found that 39% of workers were not registered. Women are particularly likely to work informal jobs, being concentrated in the primary sector and other areas of the economy with high rates of informality (World Bank, 2022[17]).
1.2.6. State-owned enterprises are ubiquitous in key sectors of the economy
The dynamism of Uzbekistan’s firms is hindered by the presence of large SOEs. Despite recent reform efforts, the role of the state in the economy continues to be extensive (OECD, 2023[18]; 2021[7]). According to the World Bank, SOEs have been estimated to account for up to half of GDP and close to a fifth of employment (World Bank, 2022[3]), significantly influencing the competitive landscape. Estimates since 2023 could differ. SOEs have also been responsible for much investment and industrial development, but the lack of a level playing field and insufficient competitive pressure for SOEs to improve efficiency pose barriers to private sector development and productivity growth (Abdullaev, 2020[19]). According to preliminary evidence from the OECD Product Market Regulation indicators, the extent to which SOEs are present is more than twice as large in Uzbekistan as the OECD average. Uzbek SOEs are active in sectors where natural monopolies typically arise, such as electricity, gas, telecommunications and transport (such as railways), but also have a broad presence in other sectors, such as accommodation, food and beverage activities, motion picture distribution and projection, financial services, and all manufacturing sectors.
While the presence of SOEs in an economy is not an issue in and of itself, competition-distorting elements in the regulatory framework for their operation make it more difficult for private competitors to enter the market. Uzbek SOEs have regulatory and policy influence in certain sectors and are accorded various types of preferential treatment compared to private firms (OECD, 2023[18]; 2021[7]). For instance, SOEs are granted preferential treatment in terms of access to land, financing and investment incentives that distorts market entry for private firms (ibid). In addition to privatisation efforts, eliminating the above-mentioned competition-distorting policies is also needed to level the playing field and foster competition.
Following a major privatisation push after independence, SOEs have continued to be privatised on a case-by-case basis. A recent step in the privatisation process was the adoption of the Strategy for the Management and Reform of SOEs (2021-2025), setting out measures to increase efficiency in SOE management and to improve the regulatory framework for SOEs. It also sets out the criteria to determine when an enterprise should be kept in state ownership. The process of privatisation of large SOEs in the energy, transport, mining, manufacturing, and ICT sector began in 2022.
Uzbekistan adopted two key instruments contributing to the privatisation process. The 2021 Law on Privatisation of Non-Agricultural Land Plots sets out the process for the privatisation of land plots attributed to legal entities for entrepreneurial activities or attributed to citizens for housing and performance of entrepreneurial activities, and land plots on which state-owned real estate facilities subject to privatisation are located. Foreign citizens and foreign legal entities cannot participate in the privatisation process, however. A new law was approved in 2024 to support the privatisation of state-owned property, setting out the regime for the privatisation of state-owned real estate, government shares, and state unitary enterprises. Other recent reforms have reduced preferential lending, increased fiscal transparency, and strengthened the Competition Promotion and Consumer Protection Committee of the Republic of Uzbekistan (CPCPC). The government has supported improvements in corporate governance, though more could be done to provide a more level playing field and to separate regulatory and operational functions (IMF, 2024[20]). The Agency for Management of State Assets (UzSAMA) is responsible for addressing these issues and classifying SOEs for privatisation, while the National Investment Fund of the Republic of Uzbekistan (“UzNIF”), established in 2024, owns strategic stakes ranging from 20% to 40% in key SOEs.
Given this context, it is promising that progress is being made in establishing an effective policy framework in Uzbekistan. The CPCPC was established as an independent national competition regulator in 2019, and a new competition law was adopted in 2023 to clarify antimonopoly compliance. Nevertheless, more could be done to strengthen the independence of the CPCPC and to address the market distortions resulting from the significant role of SOEs (OECD, 2022[21]).
The government is also taking action to improve the management of environmental, social and governance risks in SOEs. The corporate governance framework for SOEs contains compulsory rules on managing risks of corruption, through risk identification, dedicated risk management and oversight services, as well as rules on conflict of interest and whistleblowing. It is complemented by a model code of ethics, which was shared with SOEs for integration into their management procedures (Daryo.uz, 2023[22]). UzSAMA supports SOEs on anti-corruption, as part of wider work on managing Environmental, Social and Governance (ESG) risks. The IMF encouraged these reform efforts to continue, to achieve comprehensive and transparent reporting of SOEs (IMF, 2024[20]). SOEs are now required to issue ESG reporting and several SOEs have already put in place policies on managing related risks. Moreover, a dedicated Openness Index1 by the Anti-Corruption Agency assesses the performance of public institutions including SOEs. Gaps in SOE practice concern notably the transparent and merit-based nomination of supervisory boards and company leadership (OECD, 2024[23]).
1.2.7. Foreign direct investment trends and impact
Recent reforms to investment policy and economic policy more broadly have significantly improved the business environment in Uzbekistan, driving new interest from investors and creating opportunities for private sector development. The potential of foreign direct investment (FDI) is acknowledged in national development planning for driving growth in income and job creation, developing new sectors of the economy, and enhancing innovation capacities is a pillar of the National Development Strategy 2022-2026 and the Uzbekistan – 2030 Strategy. FDI could contribute more to the Uzbek economy, however. The public sector still plays a large role in the economy and drives much of new investment – in 2023, aggregate investment represented one third of GDP, well above other comparator economies, though much of it is public rather than private investment (Figure 1.2, Panel A). More diversification in investment and additional efforts to leverage these inflows to support development goals are needed.
Since 2017, liberalisation reforms and the privatisation of several SOEs have led to increased investment. FDI inflows have grown, despite the COVID-19 pandemic and impacts of the Russian war of aggression in Ukraine. FDI inflows accounted for 2.1% of GDP in 2024. But stocks of FDI – 14.6% of GDP – remain small relative to other countries (Figure 1.2, Panel B). A few sectors and source countries account for the bulk of FDI. Inflows have been concentrated in manufacturing, energy and extractives, taking advantage of Uzbekistan’s natural resource wealth. Banking and some other services sectors have seen a nascent interest in recent years, though this remains limited. Chinese and Russian investors account for the largest shares of investment, mainly due to large and capital-intensive energy and infrastructure projects. The potential remains for greater involvement of OECD member countries and other advanced economies in Uzbekistan. FDI is also fairly concentrated by region because of its sectoral concentration, though special economic zones are increasingly influencing the geographic distribution of investment.
In percent of GDP, 2023
Source: OECD based on IMF Statistics.
Foreign businesses make significant direct contributions to Uzbek productivity, innovation, employment and skills, and gender equality. While their activities have the potential to create positive spillovers in the rest of the economy, firm capacities and labour market inefficiencies in Uzbekistan may prevent the realisation of these indirect benefits of foreign investment. While supply chain linkages do often arise – foreign firms, like domestic businesses, source most of their inputs locally – the limited capacities of many SMEs and other barriers such as labour mobility hinder technology and knowledge spillovers from FDI.
The local activities of foreign multinational enterprises provide a much-needed boost to productivity. On average, the labour productivity of foreign businesses is 64% higher than that of domestically owned firms, though this is at least partly the result of the concentration of foreign investment in sectors with above-average productivity. Foreign-owned businesses are also much more export-oriented, supporting growing international trade in Uzbekistan.
While Uzbekistan has a relatively strong foundation for innovation, there is little involvement of the private sector and resulting commercialisation of products. Foreign businesses introduce new knowledge and technologies, as they are more likely to make use of ICT and international licensed technologies. While domestic firms are slightly more likely to introduce process innovations, they are much less likely to introduce new products or services or to invest in research and development. Spillovers related to technology and innovation driven by business linkages or imitation could benefit domestic SMEs with capacity to assimilate these new practices.
In addition to its innovation potential, Uzbekistan has a relatively young and well-educated population that would benefit from more diversified investment. FDI is creating jobs, though the number of jobs created relative to the amount of investment is moderate because of high levels of investment in capital-intensive activities. Most jobs are created in consumer products, textiles, and automotive original equipment manufacturing, sectors requiring mid-skilled workers, but more foreign firms provide training to develop workers’ skills. In line with their productivity premium, foreign firms also pay higher wages. They also support gender equality through their employment practices. Despite being most found in male-dominated sectors, these firms are more likely to employ women.
1.3.1. Strengthening the legal and policy framework for sustainable investment
In recent years, Uzbekistan has undertaken extensive efforts to improve the domestic investment climate, including to ease regulatory barriers and enhance attractiveness to foreign investors. In only five years, it has completely restructured the legal framework on investment, adopting new laws that, directly or indirectly, regulate investment activities. Reforms have resulted in the development of the new Law on Investment and Investment Activity of 2019 (2019 LOI), the Law on Public-Private Partnerships of 2019 (PPP Law), and the Law on Special Economic Zones of 2020 (SEZ Law), among others. Despite their recent adoption, all these instruments have already been subject to significant revisions, including to comply with the requirements of the World Trade Organization, with the PPP Law having been amended in 2021, and a new draft Law on Investment and Investment Activities (draft 2024 LOI, reviewed in its January 2025 version) and a revised SEZ law under preparation.
Reforms under way are expected to address restrictions affecting foreign investors under Uzbekistan’s legal framework. Currently, Uzbekistan’s FDI regulatory restrictiveness aligns with non-OECD average (Figure 1.3). Statutory restrictions on FDI are largely concentrated in real estate investment, although foreign investors’ limited access to land has broad consequences across all sectors of the economy and can represent a barrier for land-intensive investments, such as renewable energy projects. Foreign investors may not own land but, under the 2019 LOI, can access land on a leasehold basis for up to 25 years. This time limit is expected to be extended to 49 years with the adoption of the draft 2024 LOI. In the case of agricultural land, although “enterprises with foreign investment” may lease it in practice, the Land Code does not explicitly confirm this right. Foreign investment in real estate assets, excluding land plots, has been partly liberalised since May 2022, but remains subject to important restrictions. Sector-specific regulation in mining, media, banking, and legal services limits foreign equity participation in locally incorporated firms, while other sectors, such as, electricity, transport, telecommunications, other financial services, and fishing are more open than in the OECD area.
Note: The indices take values between 0 (fully open) and 1 (fully closed). Data reflect regulation in force as of end-December 2023. The regional average for Central Asia covers Kazakhstan, the Kyrgyz Republic and Tajikistan. Among the benchmark economies used in this report, Bolivia, Paraguay and Turkmenistan are omitted due to lack of data.
Source: OECD FDI Regulatory Restrictiveness Index database, 2023.
The modalities under which legal reforms are implemented, and the quick pace in which they are put in place, can give rise to concerns. Legal reforms should further strive to preserve the domestic policy space to regulate in the public interest and to ensure that all investors – domestic and foreign, large and small – are granted equal access to economic opportunities. Certain features of the draft investment law, such as the integration of a Foreign Investor Council seemingly representing only large foreign investors, needs careful implementation to ensure that concerns of small- and medium-sized enterprises (SMEs) and investors are not overlooked.
Legal reform processes should also avoid creating additional uncertainties for investors. Duplication and overlaps of legislation in Uzbekistan raise doubts as to whether a new legal instrument is necessary, or if the same objectives could be achieved through other means, for example by strengthening implementation of existing laws and regulations. At the same time, even when legislative amendments are necessary, concerns arise as to possible overlaps and contradictions within the existing legal framework, especially considering the heavy reliance that Uzbekistan places on secondary legislation for the regulation of substantive investment matters. The excessive recourse to “by-laws” (e.g., Presidential and Cabinet Decrees) for the regulation of substantive investment issues, including the definition of incentives and benefits, increases fragmentation in the legal framework and creates uncertainty for investors.
A more coherent legal framework for investment could also contribute to reducing margins of discretion in the negotiation of investment contracts, particularly on the possibility of granting to certain large investors additional benefits and incentives not envisaged under primary legislation. Eliminating discretion in contract negotiation helps to establish a level playing field among different types of investors and limits the risk that large strategic investors can use their bargaining power to benefit from preferential treatment, in breach of the principle of non-discrimination under domestic law. The draft 2024 LOI already introduces provisions aimed at clarifying the specific types of incentives and benefits that foreign investors can access. Ensuring transparency of investment contracts, for example through their publication and parliamentary review, could also contribute to further reducing discretionary outcomes in negotiations.
Uzbekistan’s commitment to improving the domestic investment climate has resulted in the adoption of measures in several areas. It has invested in digitalisation to simplify regulatory burdens, increasing the efficiency of the applicable licensing regime, facilitating administrative processes to start and operate a business, and enhancing access to land tenure information. At the same time, inefficiencies continue to negatively affect the land administration regime, mostly due to difficulties in navigating the different legal instruments governing the allocation of responsibilities between central and local authorities. Steps were also taken to strengthen access to justice, including for foreign investors, and to enhance quality and efficiency of the judicial process. But concerns remain as to the ability of the judiciary to adjudicate disputes on technical matters, such as intellectual property disputes, as well as to the effective implementation of the legal principle of judicial independence, despite recent legal reforms undertaken in this area.
The domestic legal framework on investment also interacts with international investment agreements (IIAs) to which Uzbekistan is a party. Most of Uzbekistan’s IIAs were negotiated between the 1990s and the early 2000s and therefore provide little consideration to issues such as the need to preserve the state’s right to regulate in the public interest and potential interactions between investment and sustainable development. This circumstance leads to an increased risk of exposure to investor-state dispute settlement (ISDS), raising the need to undertake a thorough review of the existing IIA stock.
Restrictions on foreign direct investment
Clarify and consolidate foreign investment measures in real estate to ensure a transparent and standardised framework. While recent reforms have eased some restrictions, nationality-based conditions and investment thresholds remain. Establishing uniform rules for all foreign investors would enhance legal certainty and support a more predictable investment environment.
Implement a negative list approach, consolidating regulatory restrictions to FDI, in the context of the reform process of the 2019 LOI. Sector-specific foreign equity limits and other restrictions on foreign investment are scattered across different laws and decrees. Defining and maintaining an up-to-date, publicly available negative list of FDI restrictions under the proposed draft 2024 LOI would add transparency and increase regulatory certainty. Furthermore, to ensure its rapid adoption after the enactment of the draft 2024 LOI, the negative list should be developed in parallel with the draft law, in consultation with all relevant stakeholders and in a manner consistent with, and reflective of, already existing FDI restrictions enacted under Uzbek law.
Take advantage of the on-going process of approval of the draft 2024 LOI to clarify the legal situation regarding foreign investors’ access to agricultural land. The draft 2024 LOI extends the maximum lease term for foreign investors from 25 to 49 years but remains unclear as to whether foreign investors may lease agricultural land. Ensure that implementing regulations provide clear guidance on land access, particularly for agricultural investments, to strengthen legal certainty and contribute to a more predictable investment environment.
Re-evaluate the necessity of foreign equity restrictions in service sectors such as banking and legal services and consider lifting restrictions on branches of foreign banks and insurance companies to reap the benefits of open service sectors for downstream industries and consumers.
Reassess the necessity of discriminatory minimum capital requirements and ensure a level playing field for investors. Harmonising minimum capital requirements across all legal forms, regardless of ownership, would enhance Uzbekistan’s investment climate and facilitate market access for foreign investors.
Domestic legal framework for investment and investor protection
Ensure that ongoing legal reform processes are effectively co-ordinated, to reduce risks of overlaps and contradictions with existing laws and regulations. Recourse to tools like Regulatory Impacts Assessment may help determine whether new laws or amendments to existing laws are needed, or whether the same objectives can be achieved by strengthening implementation of existing rules.
Limit recourse to secondary legislation (“by-laws”) and Presidential and Cabinet Decrees only to implement provisions in primary legislation. Relying on secondary legislation to regulate substantive investment issues increases fragmentation in the legal framework and creates uncertainty for investors. For example, it is preferable to consolidate substantive issues relating to the definition of incentives and benefits in primary tax legislation, rather than regulated through decrees.
Adopt measures to ensure effective co-ordination between the Foreign Investors Council envisaged under the draft 2024 LOI and existing participatory mechanisms involving SMEs, to ensure that existing investment climate challenges can be addressed in an effective and comprehensive manner. To this end, consider adopting measures to ensure the effective involvement of SMEs in the activities of the Foreign Investors Council.
Consider adopting measures to reduce margins of discretion when negotiating investment contracts (i.e., “investment agreements” under Uzbek law), particularly on the possibility to grant certain large strategic investors additional benefits and incentives not envisaged under primary legislation. Such measures could include, for example, publishing investment contracts with large strategic investors, submitting such contracts to parliamentary review and ensuring that the granting of incentives with financial implications be attributed to a single authority.
Continue making efforts to promote competition. The comparatively extensive state presence in the economy, combined with advantages to SOEs, distorts the level playing field with private firms and limits opportunities for foreign investors to enter and operate in the market.
Investor challenges and improvements to the domestic business environment
Provide sufficient time for public consultations on draft legislation and ensure that public consultations are inclusive and accessible, including through the use of electronic platforms (e.g. regulation.gov.uz). Have recourse to direct methods (e.g., stakeholder platforms and dialogues) to engage with interested stakeholders, including foreign investors. If relying on electronic platforms, ensure that English translations of proposed laws are available. Remove bureaucratic barriers and improve data sharing among agencies to facilitate access to information and improve the quality of the RIA.
Continue implementing measures to enhance the quality and efficiency of domestic judicial proceedings, including by providing training and capacity building to the judiciary on specialised matters relating to FDI (e.g., recognition and enforcement of foreign arbitral awards, intellectual property). Strengthen the current regulatory framework on mediation, by making mediation a pre-condition to the submission of a judicial claim or the initiation of an arbitral proceeding and facilitating enforcement of settlement agreements, including by joining the Singapore Convention on Mediation. Co-operate with the relevant institutions and the private sector to raise awareness of the benefits of alternative dispute resolution mechanisms for the resolution of commercial disputes and build the capacity of domestic arbitrators and mediators to settle disputes involving foreign investors.
Clarify the allocation of responsibilities on land administration between national and sub-national authorities, including through the systematisation of existing regulatory instruments. Define clear criteria for revocation or withdrawal of land permits, taking advantage of the approval process of the draft 2024 LOI to extend guarantees against indirect expropriation of investor’s land plots and other properties.
Renew efforts to strengthen enforcement of intellectual property (IP) rights and continue ongoing reforms to reduce administrative burdens in connection with the registration of IP, including by investing in digitalisation and extending the procedure for accelerated review of IP applications beyond trademarks.
International investment agreements
Adopt more specific language in investment protection provisions in IIAs, to ensure increased predictability for both investors and the government and strike a balance between investor protection and the government’s right to regulate. As Uzbekistan is working to adopt a model bilateral investment treaty in line with modern practices and language, the government may wish to use this opportunity to undertake a review of existing agreements to ensure that they reflect sound practices emerging in recent treaty policy, as well as to ensure coherence with the draft 2024 LOI.
Participate in and follow closely international investment treaty reform initiatives, including the OECD’s “Future of investment treaties” initiative, dedicated to substantive treaty clauses, and UNCITRAL Working Group III on ISDS reform.
1.3.2. Enhancing the investment promotion and facilitation framework
As part of its broader reforms to the business environment, Uzbekistan has made notable progress in strengthening the policy and institutional framework for investment promotion and facilitation. A central goal of these reforms, as emphasised in key strategic documents, including the Uzbekistan 2030 Strategy, is increased foreign direct investment (FDI) by improving the investment climate and strengthening promotion and facilitation mechanisms. Since 2018, over 20 Presidential Decrees have sought to overhaul administrative, licensing and registration processes. The government has automated approximately of public services, with a target of reaching 80%, and is currently developing a new Entrepreneurship Code. The Agency for Strategic Reforms has also recently developed a methodology to evaluate the investment environment across Uzbekistan's 14 regions and assess how public institutions are addressing business climate challenges. Surveys indicate that businesses have responded positively, reflecting growing confidence in the reform agenda (OECD, 2023[11]).
These policy reforms have been complemented by institutional developments. The Investment Promotion Agency of Uzbekistan (UzIPA) was created by Presidential Decree in 2019 as a distinct unit under the Ministry of Investments, Industry and Trade (MIIT) which has also established additional departments working on investment-related tasks. The government has introduced special economic zones to attract investment, and increased collaboration with the private sector, civil society and academia on investment promotion and facilitation by inaugurating the Foreign Investors Council and the Foreign Investment Forum. These efforts, combined with a strong vision for national development, have enhanced investor visibility and helped improve the ease of doing business for domestic and foreign investors. Yet, frequent regulatory changes continue to complicate co-ordination among institutions, delaying effective policy implementation, and, in turn, hindering business climate improvements. For instance, the investment portal, launched in 2019 to track and monitor investment projects, remains underutilised. At the same time, access to finance, regulatory unpredictability, state dominance, regulatory barriers in key sectors and skilled labour shortages continue to constrain both foreign and domestic firms, raising the business costs and limiting competitiveness, particularly in construction, manufacturing and high-tech industries. At the strategic level, strengthened co-ordination between the Foreign Investors Council and mechanisms involving SMEs would ensure that investment climate challenges are addressed in a comprehensive manner.
These challenges are compounded by a complex institutional landscape, marked by unclear and overlapping responsibilities between UzIPA and MIIT, whereby the function of UzIPA is unclear and insufficiently integrated into national strategies. While MIIT, the Ministry of Economy and Finance, and other bodies have clearly defined responsibilities in forming, implementing and monitoring the Investment Programme, an annual document outlining the upcoming priorities for investment projects, the IPA’s role is not formally recognised or integrated into this process. Decision-making processes between the Cabinet, MIIT and UzIPA lack coherence, leading to delays in the adoption of investment strategies, fragmented strategic directions and inconsistencies in investment priorities, with unaligned priority sectors for tax incentives and promotion (see Chapter on Tax Incentives), weakening the overall effectiveness of investment promotion efforts. Although national development strategies are in place, the absence of the IPA from those processes limits its ability to contribute effectively. The omission of references to UzIPA, or the state body responsible for investment promotion, in the draft investment law risks further weakening its institutional position. Adding to this institutional ambiguity, MIIT has gradually assumed many functions traditionally handled by IPAs, including investment promotion, policy advocacy and aftercare. This consolidation has come at the expense of UzIPA, which has experienced declining financial and human resources, and it now unable to fully implement key initiatives like the Investor Centre. Meanwhile, MIIT has expanded its investment-related departments, some of which are now double UzIPA’s entire staff, consolidating functions that in many countries are reserved for IPAs.
Other complexities hinder investment promotion and facilitation activities, particularly in policy advocacy, monitoring and evaluation (M&E), where the absence of a Customer Relationship Management (CRM) system and defined key priority indicators make evidence-based policy-making difficult. UzIPA faces significant resource constraints that limit its capacity for policy advocacy. While MIIT's aftercare unit oversees this function, it focuses mainly on large-scale investments, leaving smaller investors underserved. This presents an opportunity for UzIPA to bridge the gap by leveraging its expertise across the investment lifecycle to better advocate for diverse investor needs. M&E remains underdeveloped, with data collection and sharing processes fragmented across regional offices, MIIT departments, and contract managers. MIIT’s strategic planning unit regularly monitors investment data, but access is not shared with UzIPA, leading to gaps in alignment and co-ordination. A robust M&E framework is essential to prioritise sectors, evaluate project impact, and ensure value-for-money outcomes in investment promotion. The lack of a comprehensive CRM system further exacerbates challenges in data-driven decision-making. A 2019 legislative mandate for an electronic portal managed by MIIT to track investment projects has yet to be implemented effectively. Existing databases, while capturing new investment proposals, remain siloed, as UzIPA lacks access and the ability to contribute, undermining efforts for a unified and efficient approach to investment facilitation.
Consider restructuring the institutional framework for investment promotion and facilitation to clarify roles between MIIT and the IPA, eliminate overlaps, and ensure each body focuses on its core competencies. This restructuring should build on existing UzIPA services, including the Investor Centre and the “Single Window” digital platform integrated with government service platforms, to avoid duplication and maximise operational efficiency. The draft investment law does not define UzIPA’s mandate or role, leaving the institutional framework for investment promotion insufficiently clarified. Executive regulations implementing the law could address this gap by formally outlining UzIPA’s core functions, with the agency regaining its mandates of investment promotion, facilitation, policy advocacy and the operation of the Investor Centre, and delineating them from the strategic responsibilities of MIIT. In this context, MIIT units working on investment-related matters could focus on policymaking, legislative and regulatory functions, with a strategic oversight of investment promotion policies, providing overall direction while leaving the operational aspects to UzIPA. Establishing a clear co-ordination framework and reporting mechanism between MIIT and UzIPA will ensure that the agency’s activities are guided by MIIT’s strategic direction, without redundancies.
Restore and reinforce resource allocation by increasing financial and human resources of UzIPA, allowing it to resume its full mandate, particularly in carrying out newly added mandates such as the Investor Centre. If an institutional restructuring takes place, the human and financial resources of MIIT's investment attraction departments could be reallocated to UzIPA, enabling the agency to build a stronger team and effectively manage its responsibilities, particularly in policy advocacy and investment generation.
Establish a comprehensive and unified government-wide strategic plan for investment promotion and facilitation that aligns the objectives of MIIT, UzIPA, and other relevant bodies. This should be supported by a formal inter-agency coordination mechanism to ensure consistent messaging to investors, and coherent policy alignment. Consider instating mechanisms for better alignment between the broad strategic goals of MIIT and the more targeted initiatives of UzIPA, including developing a comprehensive prioritisation strategy, which reduces the number of priority sectors and investors to improve resource allocation and effectiveness in attracting high-value investments in high-potential sectors. While the investment law can provide the legal basis for defining a classification of priority investment projects and establishing co-ordination principles, the identification of specific priority sectors could be addressed through supporting executive regulations or strategies. This would allow greater flexibility to adapt to evolving national development priorities and global investment trends, while ensuring transparency and coherence in the selection process.
Streamline and consolidate legislative processes by reducing the frequency of legislative changes and enhancing the clarity and consistency of existing regulations to ensure better alignment with institutional capacity and reform priorities. This could include establishing a centralised legal review mechanism to minimise redundancies, providing comprehensive guidelines to implementing bodies to facilitate co-ordination and focusing on addressing vague legal references to reduce misinterpretation and enforcement challenges. Uzbekistan should also consider joining the WTO Agreement on Investment Facilitation for Development in the context of its renewed membership discussions.
Develop comprehensive linkage programmes between multinational enterprises (MNEs) and domestic firms to facilitate the integration of local businesses into global supply chains. This includes the creation of a centralised and publicly accessible database of local suppliers to improve transparency and connectivity for foreign investors. UzIPA, in collaboration with the Chamber of Commerce and Industry of Uzbekistan and other relevant agencies, should take the lead in offering targeted services such as matchmaking, cluster development, and capacity-building initiatives aimed at increasing domestic firms' competitiveness and fostering technology transfers. Establishing a robust aftercare programme for investors would further promote local workforce development and enhance linkages with local suppliers, boosting investment spillovers and driving productivity growth across sectors.
Conduct a thorough review of both UzIPA’s and MIIT's indicators, as well as their data-sharing processes, to identify ways to enhance the investment promotion strategy’s alignment with, and support for, national development objectives. This review should focus on refining prioritisation, improving monitoring, and standardising data tracking methods to enhance co-ordination between institutions. Additionally, implementing a centralised CRM system would streamline data management, ensuring timely and accurate information sharing across stakeholders. Establishing a dedicated M&E department within MIIT could further support systematic analysis and dissemination of investment-related data, ultimately improving decision-making processes and the effectiveness of investment promotion activities.
Strengthen UzIPA’s role in policy advocacy and in better representing small investors. UzIPA may consider creating dedicated platforms for small investor engagement in policy discussions and focus on developing targeted initiatives that specifically address the challenges faced by smaller investors, enabling them to participate actively in policy reform processes. By improving co-ordination between ministries and ensuring that the needs of both large and small investors are included, UzIPA can foster a more inclusive and balanced investment facilitation approach, bridging the gap in policy advocacy for under-represented smaller investors.
1.3.3. Assessing the design of corporate income tax incentives
As in many economies, Uzbekistan uses investment incentives to achieve certain objectives, such as increasing the overall level of investment or encouraging greater flows to certain sectors, locations, or desired investor outcomes. The main tax incentives in Uzbekistan involve concessions on corporate income tax (CIT) introduced by presidential decrees and consolidated into the main tax law (Tax Code of 2020). CIT benefits are most commonly provided in the form of temporary exemptions and reduced CIT rates. Aside from CIT benefits, Uzbekistan offers a range of additional tax incentives that include concessions on customs and import duties, land and property taxes, as well as a water use tax.
Tax reform has been a priority of the government in recent years, as part of broader efforts to enhance the investment climate. Significant changes include the revision of the Tax Code in 2020 to simplify the tax system and reduce the tax burden on businesses. Recent initiatives have also aimed at promoting an efficient and stable tax system by improving tax administration procedures. These efforts have accelerated as part of progress towards accession to the World Trade Organization (WTO). Uzbekistan also joined the international tax agreement establishing a Global Minimum Tax (GMT) for Large Multinational Enterprises (MNEs) in 2023, which provides further opportunity and impetus for tax reform moving forward.
As a result of ambitious tax reforms, Uzbekistan’s tax revenue – as measured by the tax-to-GDP ratio – has increased since 2019 and peaked at 18.8% in 2021. Despite these gains, overall tax revenues remain lower than several benchmarked economies selected for this analysis. In addition, tax reforms aimed at reducing the tax burden on businesses have contributed to declining tax revenues as a percentage of GDP since 2021. Tax revenues can enable government spending on infrastructure and social services which, in turn, facilitates progress towards improving the business environment in the long-term. Moving forward, Uzbekistan would benefit from broadening the tax base and reducing the amounts of forgone revenue tied to tax incentives. It is encouraged to revisit its stock of tax incentives to assess whether benefits lead to their stated objectives to maximise their efficiency and effectiveness.
Uzbekistan has traditionally relied on income-based incentives (e.g. CIT exemptions and reduced CIT rates) over expenditure-based ones to attract investment. Expenditure-based incentives are more likely to stimulate additional investment, as the instruments directly target investment expenses and encourage spending that might not occur in the absence of those incentives (IMF et al., 2015[24]). Expenditure-based incentives are also less likely to be affected by the GMT for large MNEs, which would reduce the risk of forgoing revenue to other jurisdictions that may impose a top-up tax on in-scope MNEs. For these reasons, Uzbekistan could consider gradually shifting from income- to expenditure-based incentives, including in SEZs where CIT benefits are a prominent instrument for investment promotion.
Uzbekistan’s current investment incentives target a broad range of investor characteristics. Sector-specific tax incentives indicate a preference for agriculture and energy activities, but it is difficult to assess the effectiveness of tax incentives in the absence of an overarching strategy for investment promotion. Adopting such a strategy would not only enable Uzbekistan to better structure and monitor its investment promotion activities, it would also help guide the design of investment incentives and orient the instruments towards supporting broader economic and sustainable development goals. A key area that Uzbekistan may reconsider is energy-related tax incentives. Tax incentives aimed at stimulating renewable energy activities reflect the increasing priority attributed to green growth in Uzbekistan, but investment incentives extended to gas and oil exploration risk solidifying fossil fuels in the country’s energy mix in the longer term, which may hinder the transition to clean energy.
While a country's tax burden is one factor in investment decisions, it is often not the primary concern. Investors typically weigh other key considerations, including macroeconomic stability, business climate risks, compliance costs related to legal and regulatory frameworks, and administrative practices (OECD, 2015[2]). A survey of a subset of investors in Uzbekistan showed that recent reforms aimed at simplifying business licensing and registration as well as digitalising public services were viewed more favourably than changes to tax incentives (OECD, 2023[11]). As such, Uzbekistan may explore further improving the investment climate by measures outside of the provision of investment incentives.
Among the options that Uzbekistan may consider to enhance the investment climate is improving the transparency of tax incentives. Generally, investment incentives are consolidated in the Tax Code of 2020, which is published online and updated regularly, but investors may receive tax incentives through several channels, including investment contracts negotiated with the government on a case-by-case basis. Reducing discretionary granting of investment incentives would enhance investor confidence, reduce opportunities for aggressive privilege-seeking behaviour and contribute to the creation of a level playing field among investors. Recognising these benefits, Uzbekistan is taking initial steps towards reducing the discretionary granting of incentives by specifying the nature of those benefits in the new draft Law on Investment and Investment Activities. Uzbekistan is encouraged to continue these efforts that contribute to a more transparent climate for investment.
Design investment incentives within the parameters of a comprehensive strategy for investment promotion. Establishing an investment promotion strategy would enable Uzbekistan to better structure and monitor its investment promotion activities, including with respect to the design and assessment of investment incentives. Uzbekistan’s current stock of tax incentives is offered to a wide range of investor characteristics and sectors, rendering it challenging to assess the effectiveness of investment incentives based on broader national development priorities. A more targeted approach to the design of investment incentives would also reduce the amounts of forgone revenue linked to tax incentives.
Shift from income- to expenditure-based incentives. Uzbekistan has traditionally relied on income-based incentives (CIT exemptions and reduced CIT rates) to attract investment. These incentives are not always effective at stimulating new investment and could lead to forgone revenue and increased tax competition. Alternatively, Uzbekistan may consider shifting towards expenditure-based incentives (tax allowances and tax credits), which are more cost-effective and less likely to be affected by the GMT for large MNEs.
Conduct regular assessments of the main investment incentives provided in Special Economic Zones. Generous CIT relief is a central feature of the investment incentive framework in Uzbekistan’s Special Economic Zones (SEZs). Looking forward, Uzbekistan would benefit from conducting periodic assessments of the tax incentives provided in SEZs. Such assessments should not only measure the impact of existing tax benefits but also explore whether alternative policy tools, such as non-tax incentives or broader business climate improvements, could offer more efficient means at achieving the desired policy objectives.
Strengthen transparency for investment facilitation purposes, including of investment incentives. Uzbekistan is recommended to reduce discretionary granting of investment incentives, such as those provided in investment contracts, as this would contribute to limiting investor uncertainty and supporting a level playing field between investors. Initial steps to clarify the nature of benefits available to investors in the new draft Law on Investment and Investment Activities are welcomed and encouraged. In addition, as many tax benefits are time-bound, Uzbekistan may consider developing an inventory of all available incentives to consolidate information on tax relief and reduce tax system complexity. Alternatively, Uzbekistan may develop incentive-specific guides that detail the level of benefit provided, eligibility criteria, and granting process to investors.
Implement monitoring and evaluation practices to assess the costs and benefits of investment incentives. Uzbekistan may consider undertaking and publishing tax expenditure reports in a regular and systemic way. Tax expenditure reports can support the evaluation of the costs of tax incentives (direct or revenue forgone) and create accountability and better control over the use of public funds.
Promote a level playing field among investors by reducing investment incentives that exclusively favour foreign firms. Such incentives disproportionately benefit foreign firms, while preventing domestic peers from benefitting equally from comparable support. Adopting a more equitable approach towards investment incentives would enable Uzbekistan to maximise benefits from investment from all sources, beyond foreign investment.
1.3.4. Promoting and enabling responsible business conduct
Integration and promotion of responsible business conduct (RBC) principles and standards in the Uzbek economy can significantly support progress toward sustainable development. RBC sets out an expectation that all companies avoid and address the adverse impacts of their operations on people, planet and society, and contribute to the sustainable development of the countries in which they operate. At the same time, RBC enhances Uzbekistan’s access to global investments and markets: the country’s key economic partners and potential new markets are setting expectations in terms of observance of RBC principles and standards, including in important sectors for Uzbekistan’s economy such as mining, textiles and agriculture. Moreover, RBC presents a clear business case for individual companies, strengthening their competitiveness in global value chains and markets with high RBC expectations, enhancing their management of risks and resources, and improving their brand and employer reputation.
Uzbekistan has already made progress in promoting RBC. The government actively supports the management of environmental, social and governance risks by state-owned enterprises and has made their non-financial reporting mandatory. Both green procurement and sustainable finance are expanding, setting important incentives for better business behaviour. These actions complement progress in key policy areas, including efforts to eradicate systemic forced labour, efforts in the fight against corruption and increasing attention to and incentives for protecting natural resources and reducing climate emissions. A growing number of businesses is interested in RBC and adapt their practices.
The government has underscored the importance of RBC to attract foreign investment. It is working on a National Action Plan on Business and Human Rights to enhance the realisation of human rights, raise awareness of RBC and improve access to remedy. The government is also including the promotion of RBC in a draft strategy for small- and medium-sized enterprises and considering strengthening the legal framework for RBC.
Government action will be essential to address remaining gaps in observance of international RBC principles and standards. Effective implementation and enforcement of standards are not systematic, meaning that more efforts are needed to translate better rules into better practice. Companies do not always respect labour rights and labour inspections require strengthening. The right to strike is not guaranteed and independent operations of unions face challenges. Businesses are frequently not held to account when damaging the environment. Impact assessments of business operations do not systematically consider social and human rights impacts. The framework for transparency and anti-corruption of private businesses could be enhanced.
Greater efforts are needed to create an enabling environment for RBC, in particular meaningful stakeholder engagement. Restrictions to freedom of association and of expression impede the ability of citizens, media, and civil society to flag risks of poor business behaviour, advise on risk management and contribute to monitoring. While courts help resolve RBC-related issues, increased access to non-judicial and notably operational-level grievance mechanisms could enhance stakeholders’ access to remedy. As an economic actor, the government is not yet fully exploiting its potential to incentivise better business behaviour. Raising greater awareness of RBC is a key challenge, as is the common misperception of RBC as an obstacle to business activity, rather than an enhancement of business practice.
A clear institutional framework for RBC does not yet exist. While various public actors promote aspects of RBC as part of their wider mandates, no institution has a dedicated mandate to promote RBC and there is no mechanism to strengthen co-ordination and coherence of RBC-related activities across government. The Foreign Investors Council has established a working group on RBC and tripartite commissions discuss social and labour issues, but no national or sectoral platforms exist where all relevant stakeholders from government, business, unions and civil society could discuss RBC challenges and efforts to address them.
Enhance awareness of RBC and support businesses to implement RBC principles and standards. To maximise the opportunities for investment and trade, this should be aligned with international standards, such as the OECD Guidelines for Multinational Enterprises on RBC and due diligence guidances. RBC should be systematically integrated in policies to promote private sector development. The government is exploring further opportunities to do so, including through dedicated regulation on responsible business conduct and plans to include promotion of RBC in its planned strategy for development of small- and medium-sized enterprises. Activities should involve key ministries, human rights institutions, the Business Ombudsman, business associations, trade unions and civil society organisations. Activities should include:
Informing all stakeholders about the rationale and benefits of RBC, building on the dynamic to promote environmental, social and governance (ESG) risk management and outlining the difference to corporate social responsibility as philanthropy;
Providing information, tools and advice to businesses operating in and from Uzbekistan on the integration of RBC and notably RBC due diligence in their business operations, including in supply chains. This should also be part of investment and trade promotion activities, as it will help businesses in Uzbekistan to meet RBC expectations of international trade and investment partners.
Adopt and implement a National Action Plan for Business and Human Rights in close collaboration with all stakeholders. The roadmap for implementing the UN Guiding Principles for Business and Human Rights led by the National Human Rights Centre provides an important opportunity to boost implementation of the recommendations presented here. Implementing the roadmap should facilitate co-ordination, monitoring and dialogue on progress and challenges.
Clarify the institutional responsibilities for promoting RBC and ensure cross-government co-ordination of RBC-related policies. Several ministries and public institutions already undertake activities related to RBC. As significant opportunities to expand efforts exist, the government should clarify how each institution will promote and enable RBC. An effective co‑ordination mechanism should bring together include key ministries and public institutions active in promoting, overseeing and contracting private sector activities, to align messages, expectations, requirements and incentives, and to promote exchange of information and learning.
Facilitate meaningful stakeholder engagement around RBC-related policies as well as the identification of risks of adverse impacts, response measures and monitoring at the operational level. This includes ensuring an enabling environment that allows all stakeholders to express their views and encouraging companies to consider the views of stakeholders and affected communities. The government should also ensure stakeholder engagement in consultations for, and follow-up to, environmental impact assessments.
Enhance the regulatory environment for responsible business conduct and ensure the effective application of standards. Better respect for existing standards would already make a substantial difference in due diligence risk assessments of potential investors and trade partners. If Uzbekistan develops dedicated legislation on RBC, it will be important to consult all stakeholders to ensure coherence across policy areas such as corporate governance, investment, procurement and sectoral policies. Uzbekistan could act in the following areas:
Enhance enforcement of RBC-related standards, by systematically applying requirements for licensing and permits, effective monitoring and follow-up to recommendations and injunctions to businesses. The government should closely monitor whether the new system of notification and risk classification strengthens the effectiveness of inspections, allows unannounced inspections, and does not impede inspections where they would be warranted, in line with international standards.
Implement fundamental ILO conventions Uzbekistan has adhered to. In addition to building on progress in the eradication of systemic forced and child labour, this relates notably to freedom of association of trade unions, the right to strike and the effectiveness of labour inspections.
Integrate consideration of social impacts in impact assessments of business activities. This could pertain to the effects of business operations notably on livelihoods, land rights and vulnerable groups to help consider impacts in addition to those on the environment and climate change.
Strengthen transparency and anti-corruption in private enterprises. Building on ongoing efforts, this should include clear responsibilities for risk management in corporate governance, which could strengthen businesses’ readiness for RBC due diligence. The recent OECD Monitoring of Anti-Corruption Reforms in Uzbekistan under the Istanbul Anti-Corruption Action Plan provides important steer in this regard.
Further promote RBC in economic activities of the government, notably by
Reinforcing expectations for large SOEs to observe RBC standards, supporting implementation and monitoring progress. Building on the ongoing promotion of ESG risk management, this should include support to meaningful stakeholder engagement of SOEs and a gradual introduction of RBC due diligence in their business operations, to identify and respond to the range of relevant risks of adverse impacts, including in supply chains.
Fostering attention to RBC in public procurement. Building on efforts to promote green procurement, the government should support and guide procurement authorities in making full use of existing regulations to strengthen attention to both environmental and social impacts of procurement, including in supply chains. The planned introduction of a principle of sustainable procurement provides an opportunity to reinforce these efforts.
Strengthen access to remedy. The government should raise awareness of existing judicial and non-judicial mechanisms, assess to what extent these mechanisms are effective in remediation and ensure follow-up to relevant measures under the planned National Action Plan for Business and Human Rights. To strengthen access to judicial remedies, the government should promote training for judges and legal professionals on RBC and continue efforts to strengthen the independence of the judiciary. The government should also work with social partners to promote operational-level grievance mechanisms.
1.3.5. Promoting green investment
Uzbekistan is endowed with rich natural resources, benefitting from high solar irradiation and wind speeds, and large territories suitable for solar power plants are available in sparsely populated areas. Technical solar and wind power potentials are estimated at several times the entire primary energy supply2. Large-scale agriculture and animal farming, in turn, offer considerable opportunities for bioenergy. This large renewable potential could allow Uzbekistan to become a renewable exporter to the region and hub for green hydrogen production.
Uzbekistan remains strongly reliant on carbon-intensive fossil fuels, however, and faces significant environmental challenges. It has succeeded in decoupling GDP growth from carbon emissions and in reducing its economy’s energy and carbon intensities by more than 70% since 1990, but natural gas still constitutes 86% of Uzbekistan’s energy supply. Energy intensity remains high across all economic sectors, making it one of the most carbon-intensive countries in the world. Furthermore, extensive irrigation and high-water losses in the agricultural sector make Uzbekistan one of the most water-stressed countries in the world. Water stress is likely to be further exacerbated by climate change. Partly as a result of the desertification of the Aral Sea, Uzbekistan is also affected by significant air pollution.
Since 2018, green growth has become a policy priority for Uzbekistan. A first Nationally Determined Contribution (NDC) to the Paris Agreement in 2018 was adopted, which was replaced with a more ambitious greenhouse gases (GHG) emission reduction target in its updated NDC in 2021. In 2018, Uzbekistan also adopted its Green Economy Transition Strategy 2019-2030, the framework document for green growth, aiming to achieve long-term sustainable economic development and meet Uzbekistan’s pledge under the Paris Agreement. In 2024, Uzbekistan revised the strategy’s target of 25% of renewable energy in installed capacity for electricity generation by 2030 to an ambitious 40% from only 14% in 2022.
Driven by government policies, investment in variable3 renewable energies has strongly increased. With the support of international financial institutions, since 2022, tenders for solar and wind capacity equivalent to around 55% of total installed generation capacity have been awarded to foreign investors in the form of public-private partnerships (PPPs). Greenfield FDI in renewables increased from USD 1.4 billion in 2014-18 to USD 11.7 billion in 2019-23 (50% of total), almost three times as much FDI as in fossil fuels. Overall, greenfield projects in renewables accounted for nearly a quarter of all greenfield FDI Uzbekistan attracted between 2003 and 2024 (Figure 1.4). PPPs have enabled this impressive amount of investment by reducing Uzbekistan’s country risk premium for private investors and ultimately the cost of electricity.
Investment in fossil fuels and energy-intensive industries nevertheless remains significant, and investment in environmental technologies other than renewables is still negligible. Although greenfield FDI in coal, oil and gas in Uzbekistan has declined by almost 50%, it still accounted for 21.8% of total greenfield FDI between 2019 and 2023. While much of this investment targets modern, flexible natural gas-fired power plants, which can serve as flexible balancing sources for intermittent renewables and replace inefficient and polluting older plants, Uzbekistan also seeks to attract new investment in oil and gas exploration. In addition, its energy-intensive industrial sector continues to receive considerable investment. Private investment projects related to environmental technologies such as sewerage, wastewater treatment and water management, on the other hand, are still relatively scarce.
Cumulated greenfield FDI between 2003 and 2024 in percent of total greenfield FDI
Source: OECD FDI Qualities Indicators based on Financial Times fDi Markets Database.
Deficiencies in Uzbekistan’s energy infrastructure combined with contingent liabilities from PPPs used to finance variable renewables generate financial risks. Even though Uzbekistan is already taking measures to make its electricity system more flexible, given the large volume of new intermittent renewable capacity, system flexibility remains a challenge. At the same time, large parts of the transmission and distribution grid are outdated, and transmission lines do not always reach those areas with the highest solar and wind potential. If not addressed, these deficiencies could impair the transmission of the full amount of electricity generated by new solar and wind power plants to consumers. Such a scenario could generate significant financial losses for the public sector, given the contingent liabilities associated with the PPPs used to finance new solar and wind power plants, ultimately jeopardising the government’s ability to finance additional investments in clean energy infrastructure.
Uzbekistan would benefit from a clearer strategic and institutional framework for green investment. Despite several fora for dialogue and inter-ministerial co-ordination, a disconnect exists between ambitious green growth targets and policies, including for green investment, and plans to further expand highly polluting sectors such as petrochemicals and cement production. Likewise, due to limited strategic orientation and institutional overlap, Uzbekistan is still in the early stages of integrating green considerations into investment promotion and facilitation policies. While the 2019 investment law contains significant environmental obligations for investors, environmental provisions have been significantly reduced in a new draft law to be adopted in 2024.
Better enforcement of environmental regulations could incentivise more green business practices among investors. Energy efficiency regulations such as energy saving targets for energy efficient industries or energy performance requirements for buildings are not always applied in practice. Likewise, environmental impact assessments are frequently treated as a mere formality by investors rather than an obligation, and public participation requirements are not always respected.
Strategic priorities for investment in renewable energies
Carefully assess the timeline for investment in utility-scale solar and wind power plants. More gradually phasing in of investment in new utility-scale solar and wind power plants would allow for better designing new projects and for simultaneously investing sufficiently in power system flexibility1 and upgrading Uzbekistan’s grid infrastructure. Extended timelines for project planning and preparation could also allow for using competitive tendering processes to award new projects to investors more frequently, thereby ultimately reducing electricity prices.
Further enhance the flexibility of Uzbekistan’s power system and upgrade and expand the electricity grid. This involves strengthening co-operation and electricity trade with neighbouring countries, expanding battery storage and leveraging demand management. Recent reforms to liberalise the electricity market could facilitate increased public investment in modernising and expanding grid infrastructure.
Improve the management of PPP-related fiscal risks and strategic planning and ensure the organisation of competitive tendering processes. It will be critical to assess PPPs for their affordability in the preparation process, to monitor fiscal risks throughout the project lifecycle and to disclose contingent liabilities in the government budget. Better strategic planning of PPP projects, in turn, could ensure that those projects with the largest benefits are implemented first and increase value for money.
Introduce competition in the power sector by establishing competitive wholesale and retail electricity markets as foreseen in recently adopted legislation. Consider privatising part of its state-owned electricity companies and assets as the sector remains dominated by SOEs.
Phase out fossil fuel subsidies and progressively liberalise energy prices. This process could improve state-owned electricity companies’ financial viability and allow them to invest in the modernisation of grid and power generation infrastructure. It could also incentivise more private investment in energy efficiency improvements and in renewables. It should go hand in hand with an expansion of social assistance for vulnerable consumers.
Shift towards expenditure-based tax incentives for renewables while phasing out tax incentives for fossil fuels. This involves replacing corporate income tax (CIT) exemptions for green sectors and exemptions from indirect taxes for renewable producers with expenditure-based incentives. Such incentives lower the cost of specific inputs or expenses, thereby attracting investors who would not have invested otherwise. Uzbekistan should also consider reducing its generous tax incentives for the geological exploration of oil and gas.
Strategic priorities for ensuring the environmental sustainability of investment projects
Promote and facilitate green investment more systematically. This requires streamlining the institutional set up for investment promotion and facilitation and adopting a national investment promotion strategy which addresses climate and environmental considerations.
Better enforce environmental impact assessments (EIAs). This requires better enforcing public consultations prior to project development and ensuring that EIAs meet quality standards and are implemented in practice.
Establish a dedicated energy efficiency entity to co-ordinate and improve the enforcement of energy efficiency regulations. This institution should be endowed with sufficient financial and human resources and the mandate to lead and co-ordinate the country’s energy efficiency policy but also to monitor and enforce the implementation of existing regulations.
Leverage responsible business conduct (RBC) to promote environment- and climate friendly business practices. To encourage the uptake of green business practices, the government can set out RBC-related expectations in investment and other policy areas, raise awareness and support businesses to apply RBC due diligence to address adverse impacts on environment, climate and biodiversity.
Improve the enabling conditions and framework for attracting green investment. This includes building the professional capabilities and skills in demand by green investors. Policies to promote more low-carbon and environment-related innovation and stronger intellectual property protection could also enable more green investment.
Create the framework conditions for attracting investment in green hydrogen. This requires defining a strategic vision and clear policy framework for green hydrogen. It also involves removing barriers to and facilitating investment into green hydrogen, reducing costs and risks for early investors and creating a business case for green hydrogen.
1. Power system flexibility refers to the ability to respond in a timely manner to variations in electricity supply and demand (IEA, 2019[27]).
1.3.6. Promoting digital FDI
Uzbekistan has attracted a growing volume of FDI in digital sectors over the past two decades, reaching a total of USD 3.4 billion between 2003 and 2024. However, digital investment remains a relatively small share of total FDI, and Uzbekistan has yet to fully capitalise on the global shift toward more innovation- and tech-intensive investment following the COVID-19 pandemic (Figure 1.4). Digital FDI in Uzbekistan is largely concentrated in telecommunications and digital services, reflecting investor confidence in foundational digital infrastructure and service delivery. In contrast, there is limited investment in advanced digital technologies such as AI, fintech, or R&D. The country’s digital transformation is progressing, but remains service-driven, with untapped potential in higher-value, innovation-led activities. Digital FDI also plays an increasingly important role in job creation, particularly in labour-intensive segments such as digital services and electronics. However, employment outcomes remain modest compared to high-performing economies, in part due to the focus on the capital-intensive telecommunications sector. Strengthening digital skills, improving infrastructure, and promoting investment in knowledge-intensive functions will be critical to attracting more diversified digital FDI and maximising its development impact.
The design and implementation of investment and digital policies in Uzbekistan involves multiple ministries and agencies, highlighting the need for strong institutional co-ordination mechanisms to ensure policy coherence. The Ministry of Digital Technologies (MDT) leads Uzbekistan’s digital transformation efforts and co-ordinates several specialised agencies in addition to the IT Park. Investment support is led by MIIT and UzIPA, but co-ordination with digital policy remains limited. Cross-ministerial collaboration continues to be fragmented and largely top-down. Uzbekistan’s digital transformation is guided by the Digital Uzbekistan 2030 Strategy, which outlines broad priorities but lacks a dedicated section on investment. Fragmented investment provisions across various strategies weaken policy coherence, while sectoral plans like the Strategy for the Development of Artificial Intelligence Technologies also lack sections on investment considerations. A consolidated, cross-referenced framework aligning digital and investment strategies is essential to improve transparency, attract targeted investment and support digital transformation.
Notable progress has been made in strengthening Uzbekistan’s investment climate through the Law on Investments and Investment Activities along with supporting decrees aimed at attracting foreign capital and improving investor protection. Despite efforts, Uzbekistan continues to maintain relatively high FDI restrictions in digital sectors compared to OECD and non-OECD averages. While less restrictive than some Central Asia peers, significant foreign equity limitations remain, particularly in media and telecommunications sectors, where ownership caps and operational constraints aim to safeguard critical infrastructure and national interests. Restrictions across digitally intensive sectors, including finance and professional services, may hinder competition, innovation spillovers and digital economy growth. In parallel, Uzbekistan has advanced its legal framework to support digital trust through the Law on Personal Data and the Law on Cybersecurity, enhancing data protection, regulatory certainty and investor confidence. Reforms in competition and telecommunications have further improved the investment environment, with the revised Law on Competition addressing anti-competitive practices in digital markets and the Telecommunication Law strengthening regulatory oversight and removing licensing barriers in data services. Nonetheless, fragmented follow-up measures complicate accessibility and transparency, highlighting the need for a consolidated platform to centralise investment-related legislation.
Uzbekistan has expanded the use of tax and non-tax incentives to attract investment into digital sectors. These include reduced tax rates, customs exemptions, dedicated visa schemes, startup support programmes and initiatives such as the Zero Risk Programme. While these measures have helped boost foreign investment and IT service exports, they remain largely limited to IT Park residents, restricting access for smaller enterprises outside the IT Park. Significant progress has been made in digital skills development through initiatives like One Million Uzbek Coders and the Youth Digital Skills Programme, which promote inclusive digital upskilling, particularly for women. To address the digital skills gap, Uzbekistan should strengthen lifelong learning policies, integrate gender components across digital programmes, and expand support for SMEs and individuals transitioning between jobs. Closer private sector engagement and partnerships with multinational enterprises would help better align skills development with labour market needs and investment priorities. Despite ongoing efforts, Uzbekistan lacks a comprehensive skills anticipation system, which is essential for forward-looking digital skills development. Strengthening collaboration between the IPA, foreign firms, IT Park and government bodies is essential to build domestic capacity, attract talent, and boost investment in skill-intensive digital sectors.
UzIPA has enhanced investment promotion efforts by leveraging digital tools to attract investment, particularly in the digital economy. However, promotion across digital sectors remains fragmented due to the absence of a clear prioritisation framework. Developing a comprehensive, regularly updated prioritisation strategy aligned with national digital and investment goals would enable effective targeting of high-potential digital segments. Stronger stakeholder engagement and greater use of AI for data analysis, investor targeting, and service delivery could also further improve efficiency and investor satisfaction. While progress has been made in digitalising investment processes, business registration and permitting procedures remain only partially online, creating administrative burdens. Expanding digital compliance services, improving regulatory information availability, and strengthening co-ordination between UzIPA and IT Park are critical to supporting digital investors. Lastly, a stronger focus on investment facilitation and aftercare, particularly in addressing regulatory and skills-related needs, would help close information gaps, enhance transparency and reinforce Uzbekistan’s attractiveness as a digital investment destination.
Develop a comprehensive investment strategy that integrates digitalisation priorities and strengthens alignment with Digital Uzbekistan 2030. A revised investment strategy should define key target sectors, priority activities, and investment types to attract investment in support of digital transformation. It should also set clear government objectives, outline reform plans to enhance the investment climate, clarify responsibilities of relevant institutions, and align target sectors with existing capabilities.
Expand financial and non-financial incentives beyond IT Park residency to strengthen digital capabilities to SMEs across digital and non-digital sectors. Broader government programmes, such as grants, subsidies, and training cost deductions should be introduced to support SMEs access to basic digital tools. Tailored support is key, as SMEs face different barriers compared to larger firms. extending incentives will help level the playing field, enhance SME competitiveness, and enable greater spillovers from FDI.
Expand partnerships with foreign MNEs to strengthen digital skills development in Uzbekistan. Engaging in partnerships with foreign firms is key, given their capacity to establish training centres and digital upskilling programmes. Building on domestic initiatives such as Uzum’s partnerships, Uzbekistan should engage more with foreign MNEs to introduce innovative talent development approaches and address local digital skills gaps.
Establish a comprehensive skills anticipation system to identify evolving labour market needs and better align workforce capabilities with the needs of digital sectors. The absence of a comprehensive skills anticipation system hinders digital skills development, as policymakers are unable to assess evolving labour market needs. Building on the efforts of the Institute for Labour Market Research, further developing real-time skills forecasting, including regular skills needs surveys, will be key to support targeted upskilling policies and attracting more skill-intensive digital investments.
Develop a comprehensive investment prioritisation framework to enable UzIPA to target high-potential segments of the digital economy. The prioritisation framework should align with national digital and investment strategies, set clear prioritisation criteria, and be regulatory reviewed to reflect technological changes. Regular consultations with digital sector stakeholders should also be established to ensure that investment promotion activities address industry needs and challenges effectively.
Strengthen and streamline co-ordination between UzIPA and IT Park to strengthen investment promotion, facilitation, and aftercare services across digital sectors. Greater alignment between the two agencies would reduce institutional overlaps, minimise informational asymmetries, and lower transaction costs for investors. UzIPA should take a more active role in investment facilitation and aftercare, particularly in addressing the specific needs of digital investors, such as data governance, regulatory clarity, and access to skilled labour. Improving access to regulatory information and promoting awareness of business support programmes would help close information gaps, reduce investor uncertainty, and foster a more transparent and digital-friendly business environment.
1.3.7. Enhancing the trade and investment nexus
Trade is increasingly important to the Uzbek economy even if exports have not done much to support diversification. As a double-landlocked country, Uzbekistan’s export market diversification is hindered by its geography. Increased focus on trade policy, including making progress on WTO accession through four rounds of multilateral negotiations since 2020, and currency liberalisation reforms have nevertheless added to the momentum created by wide-ranging reforms made since 2017 to drive a large increase in trade. Nevertheless, more could still be done to develop Uzbekistan’s export potential; the total value of exports was equal to 23.7% of GDP in 2023, a share somewhat below that of lower middle-income countries as a group (27.3%) and well below Uzbekistan’s peak of 41.8% in 2004.
Exports from Uzbekistan are dominated by semi-manufactured gold, refined copper and natural gas, reflecting a continued reliance on extractive industries and large-scale natural resource endowments. Various cotton yarn products are also significant and collectively indicate the vital role of agro‐industrial and textile exports. Exports of finished or semi‐finished goods, such as knitted fabrics, T‐shirts and prefabricated copper products, reveal that Uzbekistan is moving up certain value chains, albeit gradually. Some pockets of higher-complexity activity – encompassing vehicle parts, machinery and chemical goods – are beginning to surface and expand. Although smaller in scale and sometimes slower to grow, these nascent industries have the potential to generate more knowledge-intensive and value-added exports in the long run.
Estimates of revealed comparative advantage suggest that Uzbekistan has strengths in metals, textiles, and processed stone materials which could be further developed. Overall, Uzbekistan appears to have made some progress in reaching new markets, although further efforts are needed to enhance market diversification and trade facilitation. Uzbekistan’s trade remains moderately concentrated, indicating progress in diversification but with ongoing reliance on key partners, notably Türkiye, Russia, Kazakhstan and China. Expanding into higher‐income markets like the EU or advanced Asian economies would require strict adherence to product quality, safety, and origin requirements.
Uzbekistan’s accession to the WTO could enhance trade by streamlining customs procedures, harmonising tariff schedules and reducing non-tariff barriers, thereby increasing the attractiveness and access of Uzbek products in foreign markets under transparent and consistent rules. Accession would also allow Uzbekistan to align its domestic legislation with relevant WTO disciplines and facilitate the negotiation of bilateral market access with WTO member states while also receiving technical assistance in areas such as sanitary and phytosanitary standards and technical barriers to trade. This would help Uzbekistan strengthen its trade institutional capacity, assist its exporters in meeting international standards, and simplify licensing requirements for its traders. Accession is also likely to enhance the confidence of foreign investors and improve the ease of doing business in Uzbekistan, ultimately tying Uzbekistan to the rules-based multilateral trading system and facilitating a more robust presence in global goods markets. The establishment of the National Committee on Trade Facilitation is an important step in enhancing Uzbekistan’s readiness for compliance with WTO laws and regulations.
Further growth in trade is substantially hindered by Uzbekistan’s trade infrastructure. This includes the “soft” dimension of trade facilitation – streamlining procedures and integrating transparency mechanisms – to make its cross-border processes more predictable. Uzbekistan should also invest in the “hard” dimension of trade facilitation by upgrading infrastructure that supports freight movement and logistics. Targeted improvements to roads, railways, and border crossings, combined with modern cargo tracking systems, could alleviate bottlenecks that disproportionately burden a double-landlocked country.
The logistical performance of Uzbekistan, under the World Bank’s Logistical Performance Index (LPI), improved between 2007 and 2023, driven mostly by the timeliness scorecard which captures the timeliness of shipments in reaching its destination within the scheduled or expected delivery time. Uzbekistan also improved the efficiency of its customs clearance processes and arrangement of international shipments from 2018 to 2023, while the quality of infrastructure and logistics services dipped slightly. As a result, Uzbekistan’s LPI score in 2023 was higher than the regional average of Central Asian countries, jumping 11 notches to a rank of 88th through efforts to improve its logistics performance.
Foreign direct investment can propel integration of the local economy with global value chains (GVCs). Uzbekistan’s participation in international production networks remains low yet shows a steady expansion from the mid-2000s onward. Although participation in GVCs beyond commodity exports is limited, there has been some manufacturing GVC involvement. For example, the government-owned UzAuto Motors, which was previously a joint venture with General Motors, produces motor vehicles and automotive parts for domestic and export markets. Overall, these trends suggest that while Uzbekistan’s economy has historically been driven by domestic activities, its increasing GVC participation signals a gradual move toward more diversified trade and industrial development. Much of this GVC trade is concentrated for now on the region itself, reflecting in part the origin of much of the FDI in Uzbekistan to date. Further diversification of FDI by country of origin has been found to improve export diversification.
Beyond creating GVC links in certain sectors, FDI can raise the competitiveness of the broader economy, as greater FDI in the services sector is correlated with stronger export performance. At present, FDI in Uzbekistan is concentrated in the primary sector. Foreign investment can also contribute to export competitiveness through public-private partnerships in infrastructure, and the revised PPP Law is intended to facilitate such investment. Uzbekistan has made great efforts to improve infrastructure connectivity through revitalised regional transport corridors.
Build on revealed comparative advantages by reinforcing strengths in metals, textiles, and processed stone materials while exploring opportunities to enhance competitiveness in declining sectors through investment, value addition, and trade diversification strategies.
Encourage both foreign and domestic investment in downstream activities to reduce dependence on volatile commodities, including by transforming refined copper into copper wire or moving up the value chain to branded finished garments and home textiles. It could also include investment in processing facilities (e.g. for dried fruits, juices, canned vegetables).
Invest in training for local producers, increase their links with foreign investors and secure internationally recognised certifications to boost export competitiveness and facilitate entry into new markets.
Continue to forge deeper trade relationships through free trade agreements, such as the recent one with Türkiye which came into effect in 2023, to lock in stable or preferential rates and reduce the risk of sudden protectionist measures.
Strengthen trade relationships with countries whose import structures most closely align with Uzbekistan’s export structure. The Trade Complementarity Index suggests a focus on Switzerland, the UAE, Romania and Armenia in this respect.
Enhance cross-ministerial co-ordination on trade, building on the WTO accession process.
Review and simplify administrative procedures at the border. This includes customs, sanitary-phytosanitary checks and technical regulations, creating a “single window” where traders submit all documents electronically to one platform, harmonising border practices with international standards and publishing all relevant regulations and requirements online. It could also include capacity building for customs officers and improved inter-agency co-ordination, such as through the creation of a single, co-ordinated checkpoint comprising officials from different agencies.
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← 2. Primary energy supply is defined as energy production plus energy imports, minus energy exports, minus international bunkers, then plus or minus stock changes (IEA, 2024[25]).
← 3. Variable renewable energy refers to sources of renewable energy (usually electricity) where the maximum output of an installation at a given time depends on the availability of fluctuating environmental inputs. It includes wind energy, solar energy, run-of-river hydro and ocean energy (OECD, 2024[26]).