Opportunities of the New Uzbekistan Attract Investors: Op-ed

The results of the second Tashkent International Investment Forum (TIIF-2023) were summed up. It was attended by about 2.5 thousand representatives of business and banking and financial sector from 70 countries, including the USA, EU, Great Britain, Turkey, China, India, Egypt, CIS countries, Southeast Asia and the Middle East. The first similar forum, held in March 2022, was attended by more than two thousand guests from 56 countries. If 105 documents totaling $7.8 billion were signed last year, this year 164 agreements and contracts worth $11 billion were signed.

These figures indicate the growing interest of foreign investors in cooperation with Uzbekistan. Important factors contribute to this. Firstly, in modern conditions, complex, alarming and unpredictable processes are taking place in the international arena, which are becoming a serious test for the global economy, which forces investors to look for more reliable options for their investments.

As the President of Uzbekistan said in his speech at the forum, "I am convinced that in such conditions of growing contradictions, our meeting today will serve to strengthen bilateral and multilateral cooperation, open new business opportunities."

Another important factor of investors' interest in a particular country is the state of the economy and prospects for its development. In the post-pandemic period, amid the turbulence of the world economy, Uzbekistan is steadily gaining economic growth. According to the analytical data of the Center for Economic Research and Reforms under the Administration of the President of the Republic of Uzbekistan (CERR), at the beginning of 2023, the economy of Uzbekistan experienced a short-term decline due to the abnormal cold of January, which provoked an energy shortage crisis, and external geopolitical shocks that caused supply disruptions, but already in the first quarter the economy managed to reach the trajectory of a confident growth.

Uzbekistan's gross domestic product increased by 5.5% in the first quarter of 2023. Inflation slowed down in the first three months to 2.4% (in January-March 2022 it amounted to 2.9%). The business activity index in March this year increased by 4.2% compared to the previous month, and by 11% compared to the same period last year. Current business assessments have improved significantly, being at the peak level of April-May 2021, and the share of negative assessments regarding the state of the business climate in the country has decreased by four percent. Since the beginning of the year, activity in the real estate market of Uzbekistan has increased by 2.7%.

The World Bank has recently raised its expectations for the economy of Uzbekistan to 5.3% and the IMF to 5.2%. CERR expects a more confident growth of the economy to 5.65% in the first half of the year. Thus, the economy of the republic and its development prospects look very attractive, which increases the interest of investors in our country.

The investmen climate in dynamics

The favorable investment climate has been changing for the better in recent years. For example, at the TIIF-2023, it was stated that over the past year after the Forum-2022, systemic reforms aimed at further liberalization of the economy were accelerated, thereby improving the investment climate.

In the field of taxation, the value added tax rate has been reduced from 20 to 12%. The income of foreign investors in the form of dividends on shares is exempt from income tax for a period of 3 years, for them the income tax rate has also been reduced from 20 to 12%. There is a strict ban on introducing new or tougher liability measures into the tax and customs legislation.

In the field of foreign trade, customs duties on raw materials and goods of more than seven thousand items have been abolished for investors. A simplified procedure for processing in the customs territory has been introduced. Currently, work is actively continuing on the harmonization of national legislation with the rules and regulations of the World Trade Organization and negotiations with member countries.

As part of the administrative reform, a holistic system of working with investors has been introduced. The Ministry of Investment, Industry and Trade has established a system of assistance to investors from the initiation of the project to its launch on the principle of "one window". In order to establish a direct dialogue between investors and the Head of state, the Council of Foreign Investors under the President of the Republic of Uzbekistan has started its work.

Conditions for the purchase of real estate, entry-exit and residence in Uzbekistan have been radically simplified for foreign investors. The status of administrative courts has been raised, whose powers have been expanded. The mechanisms for applying to the mandatory execution of decisions of international arbitration courts are legally fixed. This year, for the first time in the history of Uzbekistan, the activities of the International Commercial Court are being established.

The new version of the Constitution is also aimed at strengthening guarantees for the protection of investors' rights, according to which the state undertakes obligations to ensure a favorable investment and business climate, the inviolability of property, the development of market relations, the creation of conditions for fair competition, and the independence of the judicial system.

Thanks to the ongoing reforms, Uzbekistan's status as the state with the most diversified economy in the region has been strengthened. About 100 thousand enterprises have been created in a year alone. The volume of attracted foreign investments reached $10 billion, an increase of 3 times compared to 2017. The level of poverty among the population has been reduced.

New opportunities

In his speech at the investment forum, the President of Uzbekistan proposed five new directions for expanding cooperation with foreign investors.

First. Uzbekistan will continue the course of transition to a "green" economy. This year, more than two thousand MW of capacity will be commissioned, and next year it will be eight thousand MW. Accordingly, it is planned to launch enterprises for the production of solar panels, wind turbines, inverters, and other electrical equipment, which opens up opportunities for investments of $8 billion.

Second. Public-private partnership. In the process of reforms, private investment began to be actively attracted to previously closed areas. For example, wide opportunities have opened up for the private sector in the aviation sector, where five private airlines have been formed. Samarkand International Airport has been transferred to external management. This year, the management of airports in Andijan, Namangan, Bukhara and Urgench is transferred to the private sector. Major transformations in the railway industry are also opening up opportunities for investors. In the fields of IT, tourism, education, medicine, Uzbekistan is becoming a regional hub, which implies extensive investment injections.

This year, with the assistance of international financial institutions, separate programs have been developed in the field of public-private partnership ($14 billion), covering such important areas for the state as transport, utilities and water management, healthcare, specific projects on which are presented at the forum.

Third. This year, the program "1 thousand + 1 thousand + 40" on the privatization of state property was adopted. This means that state shares in one thousand enterprises and another thousand objects of state property will be put up for auction. Forty enterprises of strategic importance for the economy will be put up for IPO. In particular, investors will be offered shares of large gold and copper mining enterprises, as well as telecommunications, insurance companies and banks.

The fourth direction is industrial development. Currently, the textile, leather and footwear industries, the production of building materials, electrical engineering, mechanical engineering have a sufficient raw material base and qualified personnel. There are prerequisites for doubling the volume of production and exports. To do this, it is necessary to establish cooperation with major brands, master foreign markets, innovations and modern technologies. The organization of technoparks, industrial zones and additional preferences is provided for interested investors. 160 similar large projects were presented during the TIIF sessions.

Fifth. Economic cooperation with neighboring countries. Joint investment funds are being created, major regional projects are being implemented in industry, energy, transport and water management.

The new areas of cooperation outlined by the head of state are becoming in demand and relevant, which was actively discussed on the sidelines and panel sessions of the forum.

In particular, in the direction of expanding cooperation with neighboring countries, the International Islamic Trade and Finance Corporation (ITFC) held a round table of partners of the Trade Connect Central Asia+ program, which presented the TCCA+ program developed for Central Asia and focused on Uzbekistan, Azerbaijan, Kazakhstan, Kyrgyzstan, Tajikistan and Turkmenistan. The goal of the program is to achieve inclusive economic growth, regional economic cooperation and trade development between the OIC member countries in Central Asia and with the rest of the world.

From the perspective of industrial development, there was a discussion at the session "The Investment Potential of the Textile, Leather and Silk Industries", including improving the competitiveness of these industries. At the session "Chemistry: A Look into the Future" it was noted that the chemical industry strives to find a balance between sustainability and profitability, as investors choose brands that aim to minimize the negative impact on the environment, protect health and natural resources.

At the end of the round table "The Potential of Tashkent as an International Financial Center: Opportunities and Priority Steps", it was concluded that the capital of Uzbekistan has significant potential for this due to its unique geographical location, economic growth and political stability. However, there are some issues that need to be resolved, in particular, to harmonize legislation in this area.

It can be stated that the TIFF-2023 was successful, having gathered the widest audience, demonstrated the interest of foreign investors in Uzbekistan as a reliable partner in investment cooperation.

In addition to the above factors, there is another one. This is our sovereign foreign policy based on our own national interests, which provides for non-participation in different blocs, neutral mutually beneficial economic relations with all countries without political preferences, as well as peace and stability achieved in the republic.

At a time when geopolitical differences are growing in the world, instability is observed, which negatively affects the markets of many countries and global value chains, Uzbekistan is gaining the trust and respect of investors as a reliable and stable partner.