To improve the business environment and increase the volume of private investment, on April 8 this year, the president of Uzbekistan adopted Decree No. UP-101 (the Decree), which represents the next step toward creating the necessary conditions in Uzbekistan for stable economic growth.

The Decree sets out the following priority areas:

  • Strengthening guarantees on the inviolability of private property
  • Transparent privatization of non-agricultural land plots with the creation of the necessary infrastructure
  • Liberalization of the market for goods and services with state participation
  • Refusal of exclusive rights and benefits
  • Accelerating the transformation and privatization of enterprises and commercial banks with the participation of the state
  • Further liberalization of the money market and capital market
  • Accelerating the attraction of foreign investors into exploration, production and processing
  • Development of the market for energy resources, transport and communications
  • Increasing public-private partnerships in the field of drinking water and sewerage, heat supply, landscaping, road construction and aviation infrastructure
  • Intolerant attitude towards manifestations of corruption and the fight against it
  • Introduction of modern methods of corporate governance, a system of compliance control, ensuring transparency of the procurement system at state-owned enterprises and commercial banks with the participation of the state.

Below you can find a summary of the main changes.

State asset acquisitions to be more convenient

  • Acquisitions of nonagricultural land plots through an auction will be able to be paid in installments for up to three years (like state assets).
  • After making a one-time down payment of at least 35 percent the buyer will be entitled to pledge these state assets and land plots. By the beginning of May this year, the government will develop a separate procedure for implementing such a pledge.

Foreign nationals will be able to invest in real estate under construction in Uzbekistan

  • From May 1, 2022, foreign citizens will be able to invest in real estate objects under construction in Uzbekistan (the list to be approved by the government). The cost of real estate objects for investment should be (in accordance with contracts concluded during the construction period) in Tashkent, Samarkand and the Tashkent region not less than the equivalent of US$150,000, and objects accepted for operation no less than US$180,000. For other regions, the cost of real estate objects for investment should be (in accordance with contracts concluded during the construction period) no less than US$70,000 and for the objects accepted for operation no less than US$85,000.
  • In Tashkent and the Tashkent region, the minimum cost of real estate acquired in order to obtain an Uzbekistan residence permit has been reduced from US$400,000 to US$300,000 (for other regions, the amount ranges from US$100,000 US$200,000). Citizens of 111 countries are eligible to obtain a residence permit in this way.
  • From May 1, 2022, the personal income tax rate for foreign citizens is set at the same level as for citizens of Uzbekistan.

Financial sanctions for companies engaging in anticompetitive behavior

  • Beginning from September 1, 2022, companies found culpable of anticompetitive actions will face financial sanctions.
  • A revised draft Law “On competition,” which the Cabinet of Ministers was instructed to submit to the Legislative Chamber of Parliament within a month, will set out the procedure for imposing financial sanctions.

Financial sanctions will be imposed on business entities that have committed the following anticompetitive actions:

  • Agreements (concerted actions) and coordination of economic activities that led to the restriction of competition in the commodity and financial markets
  • Abuse of a dominant (monopoly) position in the commodity and financial markets and overwhelming negotiating power, unreasonable overpricing of products of social and strategic importance, as well as unfair competition
  • Violations of competition law in the event of a merger, acquisition or the conclusion of agreements for the acquisition of shares (stakes) in an authorized fund (authorized capital) of business entities
  • Commission of anticompetitive actions at public auctions and violation of antimonopoly requirements.

The above measures do not apply to legal entities, individual entrepreneurs or a group of individuals (other than subjects of natural monopolies, participants in a public procurement and exchange trading, as well as economic entities whose product price is regulated by the state), if the proceeds from the sale of goods (services) for the previous calendar year does not exceed by 10,000 times the base calculated value.

From September 1, 2022, administrative liability is strengthened for:

  • Illegal restriction by public authorities and administration of free movement and for the sale of raw materials, goods and services
  • Adoption of decisions restricting competition by state unitary enterprises or institutions, associations of legal entities empowered to license, register, accredit and issue permits
  • Failure to submit the necessary documents and data at the request of the antimonopoly authority, as well as for the submission of false or inaccurate information.

Also, from May 1, 2022, the following is provided:

  • Personal income tax rates on income received by nonresident individuals from sources in the Republic of Uzbekistan (except for dividends, interest and freight income) is set at 12 percent.
  • Tax and customs benefits applicable to a limited number of entities is extended to all entities in a number of industries (a list of industries can be found in Appendix No. 2 to the Decree).
  • Tax and customs benefits are cancelled for goods (services) purchased at the expense of funds (loans, credits) of international financial institutions and foreign government financial organizations under international agreements of the Republic of Uzbekistan, provided that the purchase was approved before July 1, 2020 and refinanced through the country’s commercial banks. This applies to goods (services) purchased on the basis of newly concluded agreements (regardless of the form and method of registration) between commercial banks and business entities.

From July 1, 2022, customs duty exemptions are provided solely based on laws.

Privatization of Uzbekneftegaz JSC and Uzbekistan Airways JSC, transfer of airports under private-sector control

  • The following joint-stock companies will be put up for privatization: Uzbekneftegaz, Thermal Power Plants and Uzbekistan Airways. It is also planned to sell a portion of the shares of UzAuto Motors JSC.
  • With the involvement of an experienced investment bank, work is expected to begin on the privatization of Uzbekneftegaz JSC by the end of the year, including through a public offering of at least 49 percent of shares (through an IPO). Similar work is planned for the state share of 51 percent or more in Thermal Power Plants JSC.
  • Based on the conclusions of an international consulting company, a strategy for reforming Uzbekhydroenergo JSC is to be submitted for approval to the Cabinet of Ministers by September 1, 2022.
  • Work is planned to begin toward putting a state share of 51 percent or more in Uzbekistan Airways JSC up for auction, as well as through an IPO, by September 1, 2022.
  • The Decree calls for holding an IPO on the local stock market by August 1, 2022—with the involvement of an international investment bank and consultants—for up to 10 percent of the state’s share in UzAuto Motors JSC as well as for submission to the government of a strategy for selling the rest of the company’s shares to strategic investors, as well as shares in UzAuto Motors Powertrain JSC and Samarqand Avtomobil Zavodi LLC (Samarkand Automobile Plant).
  • A draft resolution is to be prepared within two months on the transfer of regional international airports and the Tashkent International Airport subordinate to the Uzbekistan Airports JSC, under the control of the private sector on the basis of PPP conditions to modernize and increase their operational efficiency. At the same time, measures should be provided for “effective operation of airports in the Ferghana Valley by optimizing them”.

Transformation of Uzbekistan Temir Yollari JSC

The Decree calls for the development of a strategy, with involvement from the World Bank, by June 1, 2022, for the transformation, development and privatization of the railway company, Uzbekistan Temir Yollari JSC.

In addition, by August 1, 2022, a draft resolution on the transformation of the railway company must be developed, with the following provisions:

  • An improved tariff policy, by creating a transparent and flexible tariff system aimed at developing the activities of private operators with their own passenger and freight cars, as well as developing competition in the rail transport services market;
  • Improved efficiency of operational and business processes in railway transport enterprises, including the integration of relationships between service organizations and consumers through digital transformation;
  • The transfer to the private sector of domestic and international rail freight and passenger traffic based on public-private partnerships or franchises.