In the first half of 2019, the volume of foreign direct investments (FDIs) grew 4.3 times compared to the same period in 2018 and amounted to 5.6 billion $.
By the end of 2019, the development of FDIs should reach at least 7 billion $, as compared with 2.8 billion $ in 2018.
FDI enterprises are now 10,000. The share of investments in the GDP of Uzbekistan for the first time amounted to 38%.
According to the results of January-March 2019, Uzbekistan conducted trade relations with more than 150 countries of the world. Over the past year, total turnover increased by 37%. The main trading partners are China, Russia, Kazakhstan, Korea and Turkey.
All this was achieved by the implementation of structural reforms aimed at improving the business environment, including:
– reducing the time, number of documents and costs associated with registering a business (registration takes 30 minutes);
– liberalization of the foreign exchange market, which allowed to remove restrictions on the repatriation of profits;
– simplification of tax and customs administration, introduction of a risk analysis system, reduction of documents and time required for customs clearance;
– strengthening measures for the execution of contracts (introduction of the institution of mediation), protection of minority shareholders, etc.
As a result, Uzbekistan was ranked 69th (as compared with 166th in 2012) among 190 countries in the World Bank’s Doing Business 2020 ranking and entered the top 20 reformer countries in terms of creating the most favorable conditions for doing business. Also, during the second half of 2018 and the past period of 2019, Uzbekistan got its first credit ratings from Fitch, Moody’s and Standard & Poor’s, amongst favorable economic factors such as the low level of state debt and the decrease in state participation in the country’s economy. Uzbekistan has also resumed active negotiations on accession to the World Trade Organization (WTO). Upon entry into the WTO, domestic exporters will gain easier access to foreign markets.
Uzbekistan’s potential is based on solid macroeconomic fundamentals: it is a country with a strong domestic market, relatively young and cheap labor, rich natural resources, a diversified economy and a rapidly developing infrastructure.
In general, Uzbekistan has the advantage of macroeconomic stability, which, combined with ongoing reforms, opens up opportunities in various sectors of the economy, be it financial services, construction or tourism[2].
The work on further integration into the international financial markets was intensified. In February 2019, Uzbekistan placed the first 5-year and 10-year eurobonds totaling 1 billion $ with a four-fold oversubscription distributed among more than 150 investors from the UK, Europe, America and Asia.
In November 2019, for the first time in the history of Uzbekistan, corporate eurobonds were issued. In particular, Uzpromstroybank[3] issued 5-year international bonds worth 300 million $ on the London Stock Exchange with a four-fold oversubscription.
Further Challenges
In Uzbekistan, banking sector assets are 130 times higher than the shares of free float.
In particular, today the volume of securities in free circulation is only 0.5% of the country’s GDP, the market capitalization of securities at the end of 2017 amounted to 5.9% of GDP.
These are very modest figures, which, on the other hand, show huge potential for growth.
Based on this, in order to develop this direction, in early 2019, the Agency for the Development of the Capital Market was created.
No less important is the course taken to reduce state participation in the economy and the privatization of state assets. In 2020, the Management and Privatization Strategy of state-owned enterprises will be adopted, which provides for the criteria for maintaining state ownership of enterprises and their transformation into efficient enterprises that can compete in the domestic and foreign markets. By 2023, Uzbekistan plans to privatize at least 20 large state-owned companies.
This article was published in Agefi Luxembourg, January 2020.
1By Mr. Kh. Meliev, Executive Officer, Ministry of Justice of the Republiuc of Uzbekistan
[2]Boston Consulting Group, “Uzbekistan Window od Opportunity”, June 6, 2019 https://www.bcg.com/en-ru/perspectives/221730
[3]Uzpromstroybank: Uzbek Industrial and Construction Bank
