Uzbekistan

Trade in Services

Multinational Trade Agreements

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Tajikistan-Uzbekistan: This bilateral free trade agreement (FTA) on goods has been in effect since January 1996. Uzbekistan trades extensively with Tajikistan, and this trade is set to grow with greater industrial development in both countries.

Azerbaijan-Uzbekistan: This bilateral FTA on goods has been in effect since 1996. Uzbekistan supplies vehicles, non-ferrous metals, pharmaceutical products, fertilisers, electrical and mechanical appliances, and agricultural products to Azerbaijan, and renders services in the transport, tourism and other spheres. Azerbaijan's export to Uzbekistan mainly consists of mechanical appliances, confectionery products, various organic and chemical compounds, tanning and dyeing extracts.

Ukraine-Uzbekistan: This bilateral agreement on goods was signed in December 1994 and became effective in January 1996. Uzbekistan's imports from Ukraine mainly consist of iron and steel, the products of the light and chemical industries, and agricultural products. Uzbekistan supplies various types of engineering products, chemical products, pharmaceuticals and agricultural products to Ukraine. Both countries have stressed the importance of expanding bilateral relations between their respective business communities and the implementation of joint projects to enhance economic cooperation.

Russia-Uzbekistan: This bilateral agreement on goods was signed in November 1992 and became effective in March 1993. The trade turnover between Russia and Uzbekistan for 2017 increased by 34% to USD3.65 billion compared to 2016 (latest data available).

Kazakhstan-Uzbekistan: This bilateral FTA on goods has been in effect since January 1997. Trade turnover between Kazakhstan and Uzbekistan amounted to USD2 billion in 2017 (latest data available), 31.2% higher than in 2016. Exports from Kazakhstan grew by 35% in 2017 to USD1.3 billion, while imports increased by 25.1% to USD735.2 billion.

Kyrgyzstan-Uzbekistan: This bilateral agreement on goods was signed in December 1996 and became effective in March 1998. In 2017 (latest data available), the trade turnover between Uzbekistan and Kyrgyzstan increased by almost 60%.

Georgia-Uzbekistan: This bilateral agreement on goods became effective in January 1995. The trade turnover between the two countries amounted to USD105 million in 2015 (latest data available), up 54% from 2014.

CISFTA: After it came into effect in September 2012, this agreement created a FTA between eight of the 11 CIS states – Russia, Ukraine, Belarus, Moldova, Armenia, Kyrgyzstan, Tajikistan and Kazakhstan. Uzbekistan became the ninth member when it joined in April 2014. It provides for the free movement of goods within the territory of the CIS, non-application of import customs duties, non-discrimination, gradual decrease of export customs duties and abolishment of quantitative restrictions in mutual trade between the CISFTA member states.

EU-Uzbekistan: Bilateral trade relations between the EU and Uzbekistan are governed by a Partnership and Cooperation Agreement (PCA) that has been effective since July 1999. In terms of trade, the PCA is a non-preferential agreement ensuring most-favoured nation (MFN) treatment and prohibiting quantitative restrictions in bilateral trade. MFN treatment is granted with respect to: custom duties and charges applied to imports and exports; direct and indirect taxes applied to imported goods; and rules relating to the sale, purchase, transport, distribution and use of goods on the domestic market. The EU and Uzbekistan have held three rounds of negotiations on an Enhanced PCA.

Sources: WTO Regional Trade Agreements database, European Commission, Asia Regional Integration Center, United Nations ESCAP

Foreign Direct Investment Policy

Foreign investors can get consultations, business registration and other legal assistance from the Investment Promotion Agency, which operates as a branch of the Ministry of Investments and Foreign Trade, or from the Chamber of Commerce and Industry of Uzbekistan. These agencies provide investors with consulting services, as well as information and analysis support.

Foreign ownership and control are prohibited for airlines, railways, power generation, long-distance telecommunication networks, and other sectors deemed to be related to national security.

The Law on Denationalisation and Privatisation (adopted in 1991, last amended in 2018) lists state assets that cannot be privatised, including land with mineral and water resources, the air basin, flora and fauna, cultural heritage sites and assets, foreign and gold reserves, state trust funds, the central bank, enterprises that facilitate monetary circulation, military and security-related assets and enterprises, firearms and ammunition producers, nuclear research and development enterprises, some specialised producers of drugs and toxic chemicals, emergency response entities, civil protection and mobilisation facilities, public roads and cemeteries.

In August 2019, the president signed a law (ZRU-522) that allows for the privatisation of specified non-agricultural land plots and it will come into force on March 1, 2020. Foreign citizens and non-resident legal entities may not acquire privatised plots unless otherwise provided by the Land Code.

In December 2019, the president signed a new law (ZRU-598) on investments and investment activities, and it entered into force on January 27, 2020. The law recognises three categories of investment: capital, financial and social. The law introduces new investor-support mechanisms, such as an investment tax credit that allows an investor to deduct a certain percentage of specific investment-related taxes from their tax liability; and an investment subsidy that enables the government to finance the construction of an external infrastructure element that might be required for an investment project. The law makes the Ministry of Investment and Foreign Trade a one-stop shop for investors.

The government of Uzbekistan is trying to attract direct, private foreign investment into the following economic sectors by offering tax benefits to particular industries, including: electronics, tourism, ICT, textiles, food, building materials, chemicals and pharmaceuticals.

Foreign investment in media enterprises is limited to 30%. In finance, foreign investors may operate only as joint venture partners with Uzbek firms, and banks with foreign participation face minimum fixed charter funding requirements (EUR10 million for commercial banks, EUR5.0 million for private banks and EUR1.5-6 million for insurance companies – equivalent to USD10.7 million, USD5.3 million and USD1.6-6.4 million, respectively), while the required size of charter funds for Uzbek firms is set on a case-by-case basis.

As of October 2019, the World Bank's International Finance Corporation's (IFC) investment portfolio in Uzbekistan amounted to USD58 million in the financial and textile sectors. In addition, the IFC's advisory services are assisting the country in its plans to privatise state-owned enterprises (SOEs), improve the cotton sector (including fewer exports of raw cotton and more domestic textile production), develop and diversify the financial market, pilot public-private partnerships in the renewables and health sectors, and promote energy efficiency in the chemical sector. In July 2019 a credit line of USD35 million was approved by the IFC to support the transformation of state-owned Ipoteka Bank.

Although official figures are not yet available, Mirziyoyev claimed in his January 2020 address to parliament that FDI in 2019 had reached USD4.2 billion, almost four times the total in 2018, and that the investment rate had risen to 37%. The figures suggest that Uzbekistan is opening up to international finance and trade.

Uzbekistan has bilateral investment treaties in force with 46 countries or economic unions, such as the Belgium-Luxembourg Economic Union. It has signed a further five BITs that have not yet come into force.

Uzbekistan is a signatory to the United States-Central Asia Trade and Investment Framework Agreement (TIFA), a treaty with investment provisions, which has been in force since 2004 with the United States, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan.

Source: WTO – Trade Policy Review, The International Trade Administration, US Department of Commerce, Investment Promotion Agency, Ministry of Investments and Foreign Trade of the Republic of Uzbekistan, Chamber of Commerce and Industry of Uzbekistan, World Bank, UNCTAD

Important Updates to Taxation Information

As of January 1, 2018, corporate income tax (CIT) was unified with the infrastructure development tax (IDT). Mandatory contributions to designated funds (the pension fund, road fund and educational/medical institutions fund) have been collated into a single contribution known as unified social payment (USP). On September 26, 2019, Presidential Decree 5837 stipulated that from October 1, 2019, VAT would be reduced and excise rates for most excisable goods would increase. The Cabinet of Ministers was also instructed to take into account the following changes when preparing the budget in 2020: setting the CIT base rate at 15% and reducing the USP applicable to state entities, or where the state holds a majority share, from 25% to the rate of 12% currently applicable to other entities.

Fitch Solutions Risk Summary

ECONOMIC RISK
The devaluation of the soum on September 5, 2017, and the removal of currency controls were major steps in opening up Uzbekistan's economy to foreign direct investment and international trade. Moreover, President Shavkat Mirziyoyev has sought to build international trade links, modernise key industries and reduce tensions with neighbours. Ties with Uzbekistan's neighbours have been improving under Mirziyoyev's leadership, and disputes around water supplies and borders are being resolved. Improving relations with Russia are a positive and further cooperation in relation to a potential threat from instability in Afghanistan seems likely. The prospect of Uzbekistan joining the Eurasian Economic Union has also risen. Nevertheless, the economy remains largely dependent on commodity exports and the country is developing only slowly after years of isolation. Uzbekistan's economic growth prospects face headwinds in the near term, but are bright for the future. Inflationary pressures and a need to tighten fast credit growth will weigh in the short term, but reform momentum is expected to drive longer-term growth.

OPERATIONAL RISK
Companies seeking to capitalise on Uzbekistan's strong growth trajectory, natural resources and strategic position on Mainland China's new Silk Road route, the Belt and Road Initiative, have had their confidence renewed since Mirziyoyev's election on the back of increased prospects for the implementation of business-friendly structural reforms aimed at opening up the economy. The presence of oil, gold and agricultural land, and the biggest population in the region also point to promises of growth over the medium to long term.

Source: Fitch Solutions
Date last reviewed: February 26, 2020

Fitch Solutions Political and Economic Risk Indicies

Exchange Rate HK$/US$, average
7.75 (2015)
7.76 (2016)
7.79 (2017)
7.83 (2018)
7.77 (2019)

Treaties and Agreements between Hong Kong and Uzbekistan

Uzbekistan has a bilateral investment treaty with Mainland China that entered into force on September 1, 2011.

Visa Requirements for Hong Kong Residents

From February 10, 2018, a simplified procedure for issuing Uzbekistani tourist visas was introduced for Hong Kong residents that implies getting a visa within two working days, not counting the day of receiving documents. Tourists will be given multiple-entry visas for up to one month, and representatives of the business community for up to one year, without requiring a tour voucher or an invitation from an inviting legal or physical person in Uzbekistan.

Since January 1, 2020, Hong Kong citizens can visit Uzbekistan for a visa-free stay of up to five days when arriving through Uzbekistan's international airports, provided the visitor has a return air ticket.

Sources: Ministry of Foreign Affairs of the Republic of Uzbekistan
Date last reviewed: February 21, 2020