page_title: Economy of Uzbekistan
section_title: External trade and investment
hierarchical_section_title: Economy of Uzbekistan / External trade and investment
caption_attribution_description: English: Uzbekistan Export Treemap from MIT Harvard Economic Complexity Observatory
context_page_description: Since independence, the economy of Uzbekistan continues to exist as a Soviet-style command economy with slow transformation to market economy. The progress of governmental economic policy reforms has been cautious, but cumulatively Uzbekistan has shown respectable achievements. Its restrictive trade regime and generally interventionist policies continue to have a negative effect on the economy. Substantial structural reform is needed, particularly in these areas: improving the investment climate for foreign investors, strengthening the banking system, and freeing the agricultural sector from state control. Remaining restrictions on currency conversion capacity and other government measures to control economic activity, including the implementation of severe import restrictions and sporadic closures of Uzbekistan's borders with neighboring Kazakhstan, Kyrgyzstan, and Tajikistan have led international lending organizations to suspend or scale back credits.
  Working closely with the IMF, the government has made considerable progress in reducing inflation and the budget deficit.
context_section_description: Uzbekistan's foreign trade policy is based on import substitution. The system of multiple exchange rates combined with the highly regulated trade regime caused both imports and exports to drop each from about US$4.5 billion in 1996 to less than US$3 billion in 2002. The success of stabilization and currency liberalization in 2003 has led to significant increases in exports and imports in recent years, although imports have increased much less rapidly: while exports had more than doubled to US$15.5 by 2011, imports had risen to US$6.5 billion only, reflecting the impact of the government's import substitution policies designed to maintain hard currency reserves. Draconian tariffs, sporadic border closures, and border crossing "fees" have a negative effect on legal imports of both consumer products and capital equipment. Uzbek farmers are deprived of seasonal opportunities to sell legally their popular tomatoes and vegetables for good prices in Kazakhstan. Instead, they are forced to dump their produce at reduced prices on local markets or alternatively continue "exporting" by paying stiff bribes to border guards and customs officers. Uzbek consumers are deprived of access to low-cost Chinese goods that cross the border from Kyrgyzstan in normal times. Uzbekistan's traditional trade partners are the Commonwealth of independent States (CIS) countries, notably Russia, Ukraine, and Kazakhstan, which in aggregate account for over 40% of its exports and imports. Non-CIS partners have been increasing in importance in recent years, with Turkey, China, Iran, South Korea, and the EU being the most active. As of 2011, Russia remains the main foreign trade partner for Uzbekistan.
  Uzbekistan is a member of the International Monetary Fund, World Bank, Asian Development Bank, and European Bank for Reconstruction and Development. It has observer status at the World Trade Organization, is a member of the World Intellectual Property Organization, and is a signatory to the Convention on Settlement of Investment Disputes Between States and Nationals of Other States, the Paris Convention for the Protection of Industrial Property, the Madrid Agreement on Trademarks Protection, and the Patent Cooperation Treaty. In 2002, Uzbekistan was again placed on the special "301" Watch List for lack of intellectual copyright protection.
  According to EBRD transition indicators, Uzbekistan's investment climate remains among the least favorable in the CIS, with only Belarus and Turkmenistan ranking lower. The unfavorable investment climate has caused foreign investment inflows to dwindle to a trickle. It is believed that Uzbekistan has the lowest level of foreign direct investment per capita in the CIS. Since Uzbekistan's independence, U.S. firms have invested roughly $500 million in the country, but due to declining investor confidence, harassment, and currency convertibility problems, numerous international investors have left the country or are considering leaving. In 2005, the Central Bank has revoked the license of the nascent Biznes Bank citing unspecified violations of local currency exchange rules.  The revocation prompted immediate bankruptcy procedures, under which clients' deposits stay arrested for two month.  No interest was accrued during that two-month period.  In 2006, the Government of Uzbekistan forced out Newmont Mining Corporation (at the time the largest U.S. investor) from its gold mining joint venture in the Muruntau gold mine. Newmont and the government resolved their dispute, but the action adversely affected Uzbekistan's image among foreign investors. The government attempted the same with British-owned Oxus Mining. Coscom, a U.S.-owned telecommunications company, involuntarily sold its stake in a joint venture to another foreign company. GM-DAT, a Korean subsidiary of GM, is the only known U.S. business to have entered Uzbekistan in over two years. It recently signed a joint-venture agreement with UzDaewooAuto to assemble Korean-manufactured cars for export and domestic sale.  Other large U.S. investors in Uzbekistan include Case I
caption: Graphical depiction of Uzbekistan's product exports in 28 color-coded categories.
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