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uzbekistan flags privatization and other economic reforms to woo foreign investors

Uzbekistan Flags Privatization and Other Economic Reforms to Woo Foreign Investors

Author: Aru Atibekova

Apr 8, 2022

Image source: Tashkent International Investment Forum

Uzbekistan’s first International Investment Forum took place in Tashkent on March 24-26, 2022, drawing over 2,000 major investors and high-ranking businessmen from 56 countries. Throughout the Forum, the government highlighted the country’s ongoing efforts to strengthen ties with foreign partners and international organizations. The business event resulted in announced investment agreements and contracts worth $ 7.8 billion as well as preliminary agreements on the implementation of projects worth $ 3.5 billion.

The Tashkent International Investment Forum speakers addressed Uzbekistan's economic industrialization, market liberalization, increasing the national economy's competitiveness, and strengthening the domestic energy sector. During the event, Uzbekistan officials also expressed interest in increasing economic cooperation with Central Asian countries, tackling topics such as regional and global trade, transportation interconnectivity, and expanding transit capacity – all changes since Shavkat Mirziyoyev became President in 2016 and launched a needed new, more open direction for the country.

The Tashkent International Investment Forum sought to highlight the various favorable conditions for investors the government has announced. These steps include a freely convertible currency, abolition of limits on profit repatriation, and visa-free or simplified visa regime for a number of foreign visitors.

Attracting investments is a key piece of Uzbekistan's larger effort to boost economic productivity. Earlier this year, the country adopted a New Uzbekistan Development Strategy for 2022-2026. The Strategy’s overall goal is economic restructuring and promoting value-added production, making it less reliant on raw resource exports. Uzbekistan's government noted that it recognizes that implementation requires increased foreign direct investment, job creation, more qualified personnel, and better-quality education.

Another piece of the Development Strategy is privatization of state enterprises. In 2020, the Asia Development Bank pointed out that most sectors of Uzbekistan's economy, particularly natural resources, energy, telecommunications, transportation, and agriculture, are dominated by state-owned corporations. An inventory by the State Assets Management Agency identified over 12,000 assets and pieces of real estate owned by the government. The short-term goal is to cut the number of state-owned firms in Uzbekistan by two-thirds. Privatizing many of these operations would offer efficiency, innovation, and competitiveness, enhancing economic activity within the country.

In line with this effort, Uzbekistan’s President Shavkat Mirziyoyev signed a decree March 18, 2022 to reduce government involvement in the economy and accelerate privatization. During the Tashkent International Investment Forum, the President reiterated that his administration's top priority is to make the private sector the economy's primary engine.

In the coming years, the government plans to privatize fully 627 enterprises in chemical, tourism, industrial, and other spheres. Starting April 1, certain state-owned real estate assets and land plots will be placed up for direct online auctions through an electronic application. State-owned shares of major enterprises, including 83 oil and gas corporations, will be auctioned off to domestic and foreign non-state legal entities and individuals.

The banking sector will undergo privatization as well. According to the Central Bank, the government controls 82 percent of banking assets. Several Uzbek state-owned banks, including Sanoatkurilisbank, Asaka Bank, and Mortgage Bank, will have their shares listed on the stock market in 2022 and 2023.

Uzbekistan’s Law on Public-Private Partnership states "private initiators, applicants, and private partners, including foreign ones," are entitled to the same rights under the Republic's legislation, which prohibits any discriminatory actions. Recent projects with foreign investors include privatization deals with a Turkish firm, which acquired 57.118% of state shares in Coca-Cola Bottlers Uzbekistan, a Hungarian company, which signed an agreement to purchase 75% of state shares in the Ipoteka Bank, and other international private partners.

All of these initiatives will have positive long- and short-term economic implications. As a result of the reforms, the Uzbekistan’s GDP is expected to reach up to $100 billion by 2026, and yearly exports will more than double to $30 billion. The government intends to increase the private sector's contribution to GDP to 80 percent. The Tashkent International Investment Forum is anticipated to provide a long-term platform for attracting global investment and cutting-edge technology to Uzbekistan's economy.

As the U.S. Department of State's annual investment climate report stated, "Uzbekistan has the potential to become one of the most successful economies in Central Asia,” if these economic and political reforms are properly implemented and enforced. These active initiatives, including the Tashkent International Investment Forum, represent a significant step toward market liberalization and economic openness.

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