In this exclusive interview, Fintech Review sits down with Laziz Kudratov, the Minister of Investment, Industry and Trade of the Republic of Uzbekistan. Minister Kudratov highlights Uzbekistan’s evolving investment scene, focusing on increased Foreign Direct Investment (FDI). He emphasises progress, especially in the fintech sector. Read more about the ambitious reforms and strategic initiatives positioning Uzbekistan as a top destination for global investors. Explore dynamic and promising opportunities in this emerging market. We provide here an in-depth look at Uzbekistan’s economic advancements and its promising future on the international stage.
Minister, could you provide an overview of the current investment climate in Uzbekistan and highlight the opportunities available for foreign direct investment?
Uzbekistan has already overseen impressive progress in increasing FDI into the region. We are on track to meet our 2030 targets – with the aim of $250bn investment into the country.
We have undergone significant economic reforms to make Uzbekistan an attractive destination for foreign investors. To enable us to become a more attractive proposition, Uzbekistan improved process and governance including implementing appropriate legal frameworks and financial resources for entrepreneurship and investment, as well as creating ample opportunities for investors and increased transparency in the investment process.
Simplification…
Uzbekistan has simplified entry and exit for foreign investors by introducing a visa-free regime. Over 90 countries are included. The country liberalised the foreign exchange market, meaning investors are guaranteed free transfer of funds into foreign currency without restrictions, including tax benefits in the form of exemption from land tax, property tax and water use tax for a period of seven years, depending on the volume of investment.
For investors producing medium-sized products, these benefits are provided for an indefinite period. The state aims to fund projects with large investments that visit engineering and communication networks. The VAT rate has dropped from 20% to 12% to ease import duties. This affects over seven thousand raw materials and goods. It also reduces 132 types of restrictions and permits.
We are actively working to join the World Trade Organisation (WTO). The GSP+ system is creating opportunities for export, particularly to the EU, based on its preferential conditions. In 2021, the OECD included Uzbekistan for the first time in its FDI Restriction Index, where it ranked 1st in Central Asia. Fitch Ratings assigned our country a BB- rating with a 5.7 percent economic growth forecast. S&P also rated it BB- with a 5.2 percent growth forecast.
What makes Uzbekistan so appealing for foreign investment?
Opportunities span various sectors, including manufacturing, energy, IT and communications, mining and transportation. We are confident that our ongoing efforts will help us meet our targets. We aim to make Uzbekistan a top investment destination. Uzbekistan’s strategic location offers access to duty-free markets in the CIS, China, South Asia, and beyond. This geographical advantage is crucial.
As I have mentioned we have overseen encouraging progress in our economy in recent years. We are experiencing rapid growth while the economy stays stable. Large-scale reforms and privatisation programs promote an open economy. This creates a favourable investment climate.
Can you elaborate on the role of the Tashkent International Investment Forum in promoting foreign direct investment?
The Tashkent International Investment Forum is Uzbekistan’s largest platform for showcasing its investment potential. It facilitates dialogue between domestic and foreign investors. It’s a hub for networking, knowledge exchange, and exploring collaborative opportunities across various sectors, including startups and fintech.
It showcases New Uzbekistan as a Big Country with Big Opportunities to the global business community. It highlights Uzbekistan as an attractive destination for foreign investment. An ambitious reform program enhances its competitiveness. This, coupled with appealing investment dynamics and long-term trends, boosts investor appeal. It also enables bilateral partnerships and has seen success in delivering investment and trade agreements.
How has foreign direct investment been since the last Forum?
The first Forum in 2022 drew over 2,000 business representatives from 56 countries. Contracts worth $7.8 billion were signed. The 2023 Forum welcomed more than 2,500 participants from 70 countries, and documents worth $11.1 billion were signed. After The Forum 2023, the share of foreign investments and loans directed to fixed capital amounted to 17.6% of GDP.
I can also mention some of investment project since the previous Forum in 2023. The EBRD has invested almost €4.46 billion in 146 projects across Uzbekistan and The International Islamic Trade Finance Corporation (ITFC), a member of the Islamic Development Bank (IsDB) Group, signed several agreements with us, amounting to US$ 715 million to support the production of cotton and wheat, ensuring food security, and helping stabilise prices for essential commodities, as well as supporting the trade finance needs of private sector and SME clients.
ACWA Power invested $2.4 billion in a 1.5 GW wind power project. Located in Karakalpakstan, it’s the world’s largest onshore wind project. Twelve projects are being developed to construct green stations and energy storage systems. Partners include companies from Saudi Arabia, UAE, China, France, and Switzerland.
Large projects
China Gezhouba Group is implementing a 500 MW solar power plant project. Masdar has launched a 457 MW solar power plant project. The Hungarian bank OTP acquired Ipoteka Bank and entered the banking market of Uzbekistan. Manufacturer of electric cars BYD, ZTE Corporation and Schneider Electric started projects in the country. Furthermore, this year, the Bonafarm group from Hungary, Mareven Food Holdings from Vietnam, Wilmar from Singapore, SANY from China and Cotonella from Italy invested over $700 million in projects in our country.
The effect of reforms aimed at improving the investment environment can also be seen in diversification: our country is not tied to one large country or region in terms of attracting foreign direct investment and loans. The number of countries investing in Uzbekistan has exceeded 60.
We are ambitious. We aim to improve last year’s FDI investment. We’re confident in achieving rapid growth to meet our 2030 objectives.
How does Uzbekistan encourage investment in emerging sectors such as startups and fintech?
We recognise the importance of innovation in driving economic growth. We have seen Uzbekistan’s first unicorn, Uzum, and want to foster more success stories and showcase to the world the opportunity that our region offers.
To support startups and fintech ventures, we’ve introduced initiatives such as tax incentives, simplified regulatory procedures, and access to funding and resources. Our goal is to nurture a vibrant community that fosters entrepreneurship and technological advancement.
Looking ahead, what are the Ministry’s priorities and strategies to further enhance Uzbekistan’s attractiveness as a destination for foreign direct investment, particularly in the startup and fintech sectors?
Our focus remains on creating an enabling environment that encourages innovation, entrepreneurship, and investment. We will continue to implement targeted reforms, enhance institutional capacity, and promote collaboration between government, industry, academia, and international partners.
All benefits available to foreign investors apply equally to fintech projects. Moreover, if startups focus on producing certain types of in-demand products, the market provides benefits indefinitely, regardless of the amount of funds invested.
Besides, important demographic strengths, including a very young and well-educated workforce, partially underpin Uzbekistan’s promise as a tech hub. 60% of our population of over 36 million is under 30. Moreover, this dynamic population generally has a high education level and often speaks multiple languages, achieving a near 100% literacy rate.
An emphasis on STEM fields persists in Uzbekistan, and the government has demonstrated its willingness to invest into further expanding education, particularly tertiary. Not only did the Higher Education Ministry’s budget increase by 44% in 2023, but the government has also declared intentions of educating 50% more high school graduates – particularly in technical disciplines – by 2030, a target which will involve the building of 30 new universities in the country.
Not just education
Compounding the educational advantages enjoyed by our people, the country boasts the highest rates of internet access in the region (with 31 million network users and 99% coverage) and a strong culture of technological proficiency. For instance, the popularity of IT education has been borne out by the success of the “One million Uzbek Coders” initiative, a free distance learning programme emphasising Data Analytics, Android Development, FrontEnd Development and FullStack Development.
A young, tech-literate population has combined with a government agenda focused on economic liberalisation to spur rapid and dramatic growth in Uzbekistan’s IT sector. Meanwhile, the sheer rate of this sector’s expansion borders on the exponential: for example, where the country hosted 14 foreign IT companies in 2020, within three years the figure stood at 300. The IT Park scheme, established in 2019, incentivises entrepreneurs to establish their tech operations in Uzbekistan by offering generous tax breaks along with streamlined administration and financing options.
Thanks to these measures and our people’s entrepreneurial spirit, the country now boasts over 1200 startups, with more emerging.