The increased transparency and bold reforms of the last five years have seen Uzbekistan’s economy grow at a speed few predicted. But can President Shavkat Mirzyoyev achieve his dream to create the Commonwealth of Independent States’ second highest economy after Russia?
Only after significant investment, both at home and internationally. At an open dialogue event held in Tashkent on August 22, Mirziyoyev made clear his determination to allay any concerns for potential investors, to tame inflation and to push the country’s sovereign rating higher.
The event was attended by heads of ministries and departments responsible for the economy, trade, construction and investment, as well as business executives.
Creating a fertile business environment
In the 12 months since President Mirziyoyev declared that August 20 would become a national ‘Day of Entrepreneurs’ as part of an ongoing drive to attract foreign investment, the country has seen a record amount of new businesses opening – more than 55,000. Some 26,000 of these enterprises have revenues of over US$1 million.
“We are entering a very important and decisive stage on the path of building a New Uzbekistan,” President Mirziyoyev told those present at the event. “Your selfless work, innovative thinking and approach are more important today than ever, and I believe that you will set an example for the representatives of all spheres.”
The idea of the open dialogue is to address current and potential entrepreneurs’ concerns, in nine thematic sessions.
The number of appeals from business owners has almost halved (8,500 in 2022, down from 15,000 in 2021), and it is clear many issues have already been resolved in the government’s drive to streamline bureaucracy, simplify legislation and protect businesses over the last year.
Different ways in which support would be given to local businesses and foreign investors were discussed. A key session covered property, ownership and the division of buildings, since many of the issues raised by entrepreneurs related to this.
Islam Zhasimov, first deputy chairman of Uzbekistan’s Chamber of Commerce and Industry, had reassuring words for those present. “Our most important task is to increase the freedom of entrepreneurship in Uzbekistan,” he said. “This is a very important indicator that determines the attractiveness of entrepreneurial activity. And how free do our entrepreneurs feel, free to get a loan, to get land, to buy a building, to export, to protect their property and interests?”
Among the initiatives introduced at the event were a lower flat rate of tax for small businesses, with extra tax incentives during the first 12 months. Around 370,000 entrepreneurs would stand to benefit from this at present.
Financing for small businesses has also been announced, and guarantees from the country’s Entrepreneurship Fund are to be doubled. This will enable at least 15,000 entrepreneurs to secure loans.
A drop in VAT (to 12 per cent) will take effect on January 1 2023, and should further reduce the tax burden for businesses.
Potential foreign investors have been particularly targeted in recent years, and treaties to avoid double taxation have been arranged with 54 countries. To date more than 12,000 businesses have been set up using foreign capital.
Uzbekistan is a member of the Free Trade Area of CIS countries, and in tandem with its widescale economic reforms, it is currently negotiating its accession into the World Trade Organization.
A thriving economy against the odds
Despite the pandemic and recent global economic crises, Uzbekistan has exceeded financial predictions. In 2022, according to the World Bank’s report in June, the country’s GDP per capita rose to US$2,100, a rise of 4.3 per cent. The World Bank noted that GDP growth in 2023 could be 5.3 per cent.
Forecasters predict that GDP will reach US$4,000 by 2030, allowing Uzbekistan to join the ranks of “states with an upper-middle income”.
The country’s economic growth is spread across various sectors. Its natural resources include natural gas, oil, gold, silver, uranium, coal and copper. It is one of the world’s leading producers of cotton and silk, a practice that dates back to the 4th century.
Mild winters and 320 days of sunshine provide a solid bedrock for agriculture, and Uzbekistan has extensive orchards and vineyards. Other industries include construction, textiles, leather processing, fertiliser production, pharmaceuticals and the automobile industry.
Tourism, too, is on the rise. There are almost 7,500 historic cities in Uzbekistan, and the cities of Bukhara, Samarkand, Khiva and Shakhrisabz have been included in the UNESCO World Heritage list, as has the Tian Shan ‘Heavenly Mountain’ range.
Opening up Uzbekistan’s borders is part of the government’s push to become an international player, and can only increase confidence in those looking to invest in a fast-growing economy.