General Information about Uzbekistan
Area: 447,4 square kilometers;
Population: more than 34 million of people(2020.01.01);
Average population density is 75 people for 1 sq. km;
State language: Uzbek;
Capital: Tashkent;
Currency unit: Sum;
Uzbekistan has been the UN, OSCE member since 1992. It is the member of CIS since 1991.
Uzbekistan has an area of 447,400 square kilometers (172,700 sq. mi). It is the 56th largest country in the world by area and the 42nd by population. Among the CIS countries, it is the 4th largest by area and the 2nd largest by population. Uzbekistan lies between latitudes 37° and 46° N, and longitudes 56° and 74° E. It stretches 1,425 kilometers (885 mi) from west to east and 930 kilometers (580 mi) from north to south. Bordering Kazakhstan and the Aralkum Desert (former Aral Sea) to the north and northwest, Turkmenistan and Afghanistan to the southwest, Tajikistan to the southeast, and Kyrgyzstan to the northeast, Uzbekistan is one of the largest Central Asian states and the only Central Asian state to border all the other four. Uzbekistan also shares a short border (less than 150 km or 93 mi) with Afghanistan to the south. Uzbekistan is a dry, landlocked country. It is one of two doubly landlocked countries in the world (that is, a country completely surrounded by landlocked countries), the other being Liechtenstein. In addition, due to its location within a series of endorheic basins, none of its rivers lead to the sea. Less than 10% of its territory is intensively cultivated irrigated land in river valleys and oases, and formerly in the Aral sea, which has largely desiccated. The rest is vast desert (Kyzyl Kum) and mountains. Turning to the economy of Uzbekistan, Uzbekistan’s economic freedom score is 53.3, making its economy the 140th freest in the 2019 Index. Its overall score has increased by 1.8 points, led by robustly higher scores for investment freedom, labor freedom, and business freedom. Uzbekistan is ranked 36th among 43 countries in the Asia–Pacific region, and its overall score is below the regional and world averages.
Uzbekistan is implementing ambitious market-oriented economic reforms. Starting in September 2017, the government unified the exchange rate, liberalized the foreign exchange market, initiated price and trade liberalization and, since January 2019, has made significant cuts to tax rates for both firms and individuals. The country has eliminated the need for entry visas to promote tourism and business, and renewed its commitment to join the World Trade Organization (WTO). The government has expanded social safety net coverage and substantially improved the availability of economic statistics. Uzbekistan’s progress has been impressive to date but, as a late reformer, it can also benefit from the lessons learned by other transition economies.
Uzbekistan has increased the number of countries whose citizens can obtain tourist visas in a simplified procedure and expanded the e-visa validity period in a bid to boost tourism, the Uzbek Foreign Ministry said over the weekend. Citizens of 77 countries can now get Uzbek tourist visas within two working days and the requirements to provide a tourist voucher or invitation of the inviting legal or natural persons in Uzbekistan have been abolished, the ministry said, citing a presidential decree signed earlier this week. Furthermore, the validity of an Uzbek electronic visa for a 30-day stay in the country has been expanded to 90 days. That is, the stay of a foreign citizen is calculated from the moment of crossing the Uzbek state border, including entry into the country on the 90th day, according to the document. The number of foreign tourists visiting Uzbekistan has reached 1.3 million in the first quarter of 2019, an increase of 42 percent compared to the same period of 2018, according to the Uzbek State Committee for Tourism. During the second quarter of 2019, the number is expected to be around 1.47 million, and by the end of the year, about 6 million foreign tourists are expected to visit Uzbekistan.
The growing public and private investments resulting from the Uzbek government’s export oriented and import substituting industrialization agenda may create more opportunities for businessmen. Increasing prospects may be found in the following sectors:
Oil and Gas: Projects in the oil and gas industry are intended to attract about $36.5 billion in investment from various sources through 2030. These projects may represent good export opportunities for suppliers of oil and gas extraction, transportation, processing technologies, and oil services.
Food Processing and Packaging: Growing external demand for food products produced in Uzbekistan and efforts to improve the productivity of the agricultural sector create export opportunities for suppliers of food preservation, processing, and packaging technologies as well as transportation and logistics solutions.
Construction: Construction is one of most promising industries in Uzbekistan, which demonstrates a continual growth rate of 10% per year. In 2018, the industry consumed about $6 billion of both public and private investments.
ICT: An ambitious government program aimed at developing a national information-communication system creates increasing demand for IT solutions in both the public and private sectors of the economy.
Tourism: Developing tourism is among the major priorities of the Government and the number of foreign tourists is rapidly increasing. It creates incentives for construction of international class hotels and other infrastructure in the Great Silk Road cities of Samarkand, Bukhara and Khiva and connecting them to Tashkent.
In the first half of 2019, real GDP growth increased to 5.8 percent (from 4.9 percent in the year-earlier period) supported by a surge in investment growth financed by substantial increases in directed lending to state-owned enterprises (SOEs). Industry, agriculture, and services all experienced faster growth in the first half of 2019 compared with a year earlier. Annual consumer price inflation eased to 13.6 percent in June 2019 (from 17.7 percent in June 2018) reflecting a slowdown in the growth of both food and non-food prices. Slower inflation and stronger remittance inflows (up 13 percent year on year) supported an expansion of private consumption in the first half of 2019. The current account deficit, which fell to an estimated 6.6 percent of GDP in the first half of 2019 (from 8.4 percent in the year-earlier period), was financed by a drawdown of reserves and borrowing abroad. Import spending rose sharply in the first half of 2019 (up 32 percent year on year) driven by large capital imports by SOEs and new investment projects in infrastructure, industry, and housing. Export earnings growth (up 27 percent year on year) was fueled by higher exports of gold (up 35 percent year on year), food (36 percent), and natural gas and cotton (33 percent each). Large transfers resulted in a capital account surplus of $135 million in the first quarter of 2019. Owing to higher repatriation of investments under production-sharing agreements with international investors, net inflows of foreign direct investment (FDI) contracted sharply. The negative balance on the financial account reflected the rapid growth of portfolio investment, foreign loans, and trade credits and advances. The Central Bank of Uzbekistan (CBU) has kept its policy rate on hold at 16 percent since September 2018 (when it was raised from 14 percent). However, the interest rate transmission mechanism continues to be distorted by significant state-directed lending at subsidized interest rates. Directed lending contributed to a 52.8 percent year-on-year spike in credit growth in the first half of 2019 (on the back of a 50.8 percent increase in 2018). Currency depreciation in Uzbekistan’s main trading partners (Russia, South Korea, China, and Kazakhstan) and increased domestic demand for U.S. dollars led to a sum depreciation of 8.8 percent against the U.S. dollar in August 2019 (compared to a 2 percent depreciation in the first half of 2019). The exchange rate has remained stable since the end of August, supported by a recent decision by the CBU to allow the sum to float more freely in response to market conditions. Government revenue collection has remained strong despite cuts to direct tax rates in January 2019. Nevertheless, expansions in public investment, government lending to SOEs, and reform related social spending schemes increased the overall budget deficit from 2.3 percent of GDP in the first half of 2018 to estimated 3 percent of GDP in the first half of 2019.
1-figure. GDP per capital and sectors by percentage[1]
In August 2019, the capital adequacy ratio of the banking system was 14.9 percent, down from 16.5 percent a year earlier. While the capital adequacy and liquidity buffers remain above regulatory minimum levels, both have been depleted over the last year owing to high bank credit growth, which increased vulnerability to shocks. Stronger economic growth resulted in a decline in the official poverty rate from 11.9 percent in 2017 to 11.4 percent in 2018, though it is measured using nonstandard methods. Producing internationally comparable poverty rates is challenging due to limitations in PPP conversion factor data for Uzbekistan, but World Bank data sources suggest the poverty rate at the LMIC line was approximately 9.6 percent in 2018. The official unemployment rate was 9.1 percent in the first half of 2019 (down from 9.3 percent rate in the same period of 2018), including 16.8 percent among youth (16-25 years old) and 12.7 percent among women.
2-figure. GDP growth by sectors[2]
GDP growth is expected to remain at around 5.6 percent in 2019–20 before increasing to 6 percent in 2021 as market reforms open new sources of export-led growth, address production bottlenecks, and ease regulatory constraints. Annual inflation is forecast to increase by about one percentage point in 2019 following increases in energy prices in August 2019 (18.8 percent for natural gas, 18 percent for electricity, and 12.5 percent for gasoline). According to the official labor force survey, the number of workers employed in the informal sector declined for the first time since independence, falling by 1.1 percentage points to 58.2 percent of total employment in the first half of 2019. Since September 2018, income growth among the bottom 40 percent has been driven by increased remittance inflows and a 30 percent nominal increase in social protection payments. Minimum wages, salaries, pensions, and allowances were increased by 10 percent on August 1, 2019. Inflationary pressures are likely to persist in 2019–20, due to further price reforms and wage increases, but should decline over the medium term. The current account deficit is expected to moderate from its 2018 peak but remain at 5-6 percent of GDP in 2020–21 on account of sustained heavy machinery and equipment imports. The shortfall is expected to be financed by a gradual increase in FDI and sustained donor inflows. Foreign exchange reserves stood at $27.7 billion in August 2019 (the equivalent of 12.4 months of import cover); external buffers will remain comfortable over the medium term. Gross external debt is expected to decline slightly by 2020 to about 34 percent of GDP.
According to Global Economic Prospects report by World Bank Uzbekistan is considered as the second fastest growing economy. (World Bank Group, 2017). This can be explained by the growth of GDP, the total amount of which equal to $650 and it is expected that this will further increase (Spot.uz, 2018). This implies that standard of living of Uzbek people has improved, which can be evidenced by the increase in population income by 14% (Uznews.uz, 2017).
3-table. GDP information and forecast
| Main Indicators | 2016 | 2017 | 2018 (e) | 2019 (e) | 2020 (e) |
| GDP (billions USD) | 67.07 | 48.83 | 43.30 | 51.34 | 55.28 |
| GDP (Constant Prices, Annual % Change) | 7.8 | 5.3e | 5.0 | 5.0 | 5.5 |
| GDP per Capita (USD) | 2,124 | 1,520 | 1,326 | 1,560 | 1,660 |
| General Government Gross Debt (in % of GDP) | 10.5 | 24.3 | 19.2 | 21.7 | 22.3 |
| Inflation Rate (%) | 8.0 | 12.5 | 19.2 | 14.9 | 12.6 |
| Current Account (billions USD) | 0.38 | 1.71 | -0.22 | -0.76 | -1.32 |
Source: UNCTAD – Latest available data.
4.3 Foreign trade figures of Uzbekistan
Uzbekistan’s trade represented 68.52% of GDP in 2017 (World Bank). The country exports energy products, cotton, gold, mineral fertilizers, ferrous and nonferrous metals, textiles, food, machinery, and automobiles. Imports include machinery and equipment, food, chemicals, ferrous and nonferrous metals (OEC).
4-table. Foreign trade indicators
| Foreign Trade Indicators | 2014 | 2015 | 2016 | 2017 | 2018 |
| Imports of Goods (million USD) | 12,998 | 14,000 | 14,000 | 11,500 | 12,000 |
| Exports of Goods (million USD) | 12,643 | 13,000 | 13,000 | 10,000 | 10,500 |
| Imports of Services (million USD) | 1,032 | n/a | n/a | n/a | 978 |
| Exports of Services (million USD) | 2,526 | n/a | n/a | n/a | 3,506 |
| Imports of Goods and Services (Annual % Change) | 5.9 | -4.1 | -16.4 | -2.8 | 3.7 |
| Exports of Goods and Services (Annual % Change) | 8.3 | -5.1 | -10.3 | -2.8 | 9.4 |
| Imports of Goods and Services (in % of GDP) | 30.9 | 27.1 | 21.3 | 20.7 | 29.5 |
| Exports of Goods and Services (in % of GDP) | 26.6 | 23.1 | 19.5 | 18.9 | 28.5 |
| Foreign Trade (in % of GDP) | 57.5 | 50.2 | 40.9 | 39.6 | 58.1 |
Source: WTO – World Trade Organization; World Bank, 2016
Main export destinations include Switzerland, China, Russia, Turkey, Kazakhstan, Bangladesh, and Afghanistan. Imports generally arrive from China, Russia, South Korea, Kazakhstan, Turkey and Germany and Germany (OEC). As of 2019, Uzbekistan has trade relations with over 140 countries (Azer News). Uzbekistan is harmonizing its import tariffs with Eurasian Economic Union standards (The Diplomat). The UAE has also agreed to increase trade volume and investments in textiles, renewable energy, infrastructure, and agriculture. A large trade and logistics center will also be constructed in the border areas of Kazakhstan and Uzbekistan.
Uzbekistan exported goods and services worth 8.44 billion dollars while importing goods and services worth 11.24 billion dollars in the first six months of 2019, according to the report. China topped the list of Uzbekistan’s trade partners with a trade turnover of 3.9 billion dollars. Russia was the second largest partner with 2.9 billion dollars while the third was Kazakhstan with 1.7 billion dollars. The other top five trade partners include South Korea (1.3 billion dollars) and Turkey (1.2 billion dollars). Uzbekistan mostly exports gold, gas, electricity and oil products, food and textile goods, while its imports comprise machinery and equipment, chemical and food products, ferrous metals and petroleum products.
According to the UNCTAD’s 2019 World Investment Report, FDI inflows increased significantly in 2018 to USD 412 million (compared to USD 98 million in 2017) . The World Bank also claims investment growth moderated from 9.5% in 2016 to 7.1% in 2017. This represents a 27.82% drop from 2016 levels (USD 134 million), but strong investments in renewable energy anticipate a much stronger FDI outlook going forward (444% FDI increase from 2017 to 2018) (FDI Intelligence). FDI traditionally arrives from Russia, South Korea, China and Germany, but Canada increased its financial presence in 2018. Investments focus on the energy sector, including alternative/renewable energy in recent years. Total FDI stock stood at USD 9.6 billion (23.4% of GDP) in 2018.
Uzbekistan ranked 76th in the World Bank 2019 Doing Business, including a ranking as the 12th easiest country to start a business in. The country also ranks 158th out of 180 countries in Transparency International’s Corruption Perceptions Index 2018. The Government’s policy of establishing seven special economic zones with tax breaks for investors has made the country attractive to international capital. Examples include the Syrdaryo economic free zone and an October 2018 decree by Interim President Shavkat Mirziyoev requesting “additional measures for the intensification and expansion of activities of free economic zones” (FDI Intelligence). Uzbekistan also sold up to USD 300 million in Eurobonds during 2018 to be used production and infrastructure projects (Bloomberg). Russia has approached Saudi Arabia and Uzbekistan to construct a nuclear plant in these countries through Rosatom, Russia’s nuclear corporation (TASS). USD 2.7 billion in money transfers from Russia to Uzbekistan was reported by the Russian central bank in 2017. (Reuters). Restructuring of large state enterprises and joining the WTO would bolster Uzbekistan’s plea for FDI, but the country has been slow to advance on said fronts (Reuters).
5-table. FDI indicators
| Foreign Direct Investment | 2016 | 2017 | 2018 |
| FDI Inward Flow (million USD) | 134 | 98 | 412 |
| FDI Stock (million USD) | 9,157 | 9,254 | 9,667 |
| Number of Greenfield Investments*** | 23 | 10 | 55 |
| FDI Inwards (in % of GFCF****) | 0.3 | n/a | n/a |
| FDI Stock (in % of GDP) | 13.5 | n/a | n/a |
Source: UNCTAD – Latest available data.
Investment Attractiveness of Uzbekistan 