Foreign investment in Uzbekistan

Farkhad N Maksudov
General Director, Foreign Investment Agency of Uzbekistan

The amount of foreign investment in the Republic of Uzbekistan is steadily increasing due to efforts undertaken by the Government and legislative bodies. The total amount of foreign investment in 1996 was US$6 billion, which was more than twice the 1995 figure. More than 66 per cent of investment has been earmarked for the development of production branches. In 1994 the share of foreign investment and credits in the total amount of capital investment in the country was less than one per cent, but in 1995 it was 14.3 per cent and in 1996, 18.8 per cent.

The total amount of foreign investment has increased by 55.7 per cent against 1995. In the meantime, the share of foreign investment and credits being received without the guarantee of the Republic's Government has increased to 15 per cent of the total volume (12 per cent in 1995). This confirms foreign investors' confidence in the economic reforms conducted in Uzbekistan.

Foreign capital is taking part in the development of small and medium businesses; foreign and international financing institutions have opened credit lines worth more than $350 million for these businesses.

Although small and medium scale private foreign capital is significantly less than in many East European countries and the CIS, progress can be observed here as well. For example, the share of enterprises with 100 per cent foreign capital has increased from 25 per cent up to 32 per cent in the last year.

It is a gradual process, but it is clear that foreign companies are entering the Uzbek market.

(Data from the Ministry of Macroeconomics and Statistics of Uzbekistan)
Inflow of foreign direct investment in Uzbekistan (millions of dollars)
1989-94 accrual 1994 1995 1996
144 73 115 706

The total value of collected foreign investment in Uzbekistan (on 3/1/97) by raw evaluation is $6 million.

At the beginning of 1997, 3,061 enterprises with foreign capital were registered in Uzbekistan. Between 1994 and 1996, the volume of production of enterprises with foreign capital increased almost 25 times, and in 1996 it increased 6.7 times against 1995.

In 1996 the volume of exports of enterprises with foreign investment amounted to 4.6 per cent of the total exports of the republic and in 1995 this share constituted only 1.8 per cent. Exports amounted to 21 per cent of the total output of these enterprises.

In 1996 the imports of enterprises with foreign investment increased as well, amounting to 36.7 per cent of the total imports of the republic. It should be said that this indicator slightly went down in the 4th quarter, testifying to the impact of the Government's recent measures aimed at import limitation and encouraging production activity of the enterprises with foreign capital.

As mentioned above, the growth of imports is caused by the growth of investment activity and has resulted in the delivery of machines, equipment, spare parts, chemical goods and plastics amounting to 40 per cent of all imports by these enterprises.

We put a high emphasis on the system of benefits and incentives developed for production enterprises, especially export oriented ones, which will allow the situation to be gradually improved.

Measures of active enterprises with foreign investment in 1996

CountryNumber of joint and foreign enterprisesVolume of sales of goods (billion soums)Total sales revenue (billion soums)
South Korea 56 13.5 7.5
USA 199 10.6 20.1
Great Britain 91 3.8 6.6
Russia 359 3.5 5.8
Turkey 234 3.3 11.4
Italy 37 1.1 1.4
Pakistan 41 1.1 1.1
Germany 36 1.0 2.6

Enterprises with foreign investment

The active joint ventures in the area of industrial production are made up of 442 enterprises (25.1 per cent): 41 enterprises in transport and communication (2.3 per cent); 57 enterprises in construction (3.2 per cent); 22 enterprises in public health and tourism (1.3 per cent); the remaining 322 joint ventures (18.2 per cent) are involved in intermediate trade activities.

Considerable rates of growth in production output can be seen in a number of industries such as food, transport, communications, non-ferrous metals and machinery construction. Specifically, after two years, output had increased more than 50 times; it increased by more than ten times in 1996 alone.

It should also be noted that industrial enterprises produce the major part of the overall output.

Although enterprises with foreign capital involved in trade and intermediary activities outnumber industrials with similar ownership, the latter predominate in terms of output - 72 per cent. Communication, transport and construction come after industry, with trade and catering thereafter having only 14 per cent of total output.

Main investors in Uzbekistan

NameCountrySum of investment (million $)Planned sum of investment for 1997 (million $)Projects
Daewoo Corporation South Korea 1,000   UzDaewooAvto - automotive; AlokaDaewoo - telecom; UzDaewoo - electronics; Daewoo Textiles; Tashkent Daewoo - hotel
BAT Great Britain 250 72 Tobacco industry
EBRD   503.7   Zarafshan-Newmont JV; Credit line for small medium enterprises; ABN-Amro Post-privatisation fund; Fergana Oil Processing Plant etc
Chase Manhattan Bank USA 147 100 Gascompressor JV; Gasmotors JV; Purchase of airliners
AETSL Raanani Holdings Canada 35   Asia-European Trust Company - leasing of food processing equipment
IBRD (WB)   241 16 Modernisation of cotton branch; Development of export-orientation of agriculture production; Drainage system
Lonrho Great Britain 46.5   Goldmining - Amantaytu goldfields
Central Asian-American Enterprises Fund (CAAEF)   13   Cotton spinning; food processing; clothing; construction materials etc
COFAS France 33   Hotel
AIG Group USA 21   Insurance - Uzbekinvest International; Uz-AIG; AIG-Uzbekinvest
Case Equipment Holdings USA 9   Leasing of grain processing equipment - UzCaseMash JV
Newmont Ltd   8   Angren Gold Company JV
Mitsui Uzbekistan Development BV   4   Angren Gold Company JV
EXIM Bank of Turkey Turkey 65.7 31.7 Construction of trade-exhibition business centre; sugar plant
KIW Germany 25.6 20.3 Telecom
OECF Japan 14.7 122.6 Telecom; Modernisation of airports in Bukhara, Samarkand and Urgench
Deutsche Bank and Societe General Germany and France   23.9 Airport construction in Uchkuduk city
Chemical Bank (USA); EXIM Bank of Japan; Credit Commercial de France; Pariba (France)   152 22.8 Reconstruction of Bukhara oil processing plant

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