Institutional Reforms and Economic Liberalization in Uzbekistan

The period from 2017 to 2025 has marked an era of profound institutional and economic transformation in Uzbekistan. During this time, the country transitioned from a model of centralized governance to the formation of an open market economy. The reforms aimed to create a favorable business environment, stimulate investment, and integrate Uzbekistan into global economic processes.

Sustained economic growth and increased investor confidence resulted from large-scale measures on currency liberalization, tax burden reduction, improvement of corporate governance, and strengthening of the legal framework for investments.

1. Institutional Reforms

1.1. Public Administration and Administrative Reform

Between 2017 and 2024, Uzbekistan carried out a comprehensive reform of its public administration system.

Key steps included:

• Restructuring of the Cabinet of Ministers (69 bodies, including 21 ministries and 25 agencies);
• Elimination of overlapping functions and centralization of strategic planning;
• Introduction of e-government and over 130 digital public services through a single portal.

These measures helped reduce administrative barriers, increase transparency, and ensure equal access for businesses to public services.

1.2. Legal and Institutional Framework for Investment

To protect investors and enhance confidence in the state, the Law “On Investment Activities” (2019) was adopted, along with the establishment of the Foreign Investors Council under the President.

Furthermore, in 2023, the following laws were enacted:

• Law “On International Commercial Arbitration”;
• Law “On Public–Private Partnership”;
• Law “On Special Economic Zones”.

Together, they established a legal basis for international cooperation and investment protection.

2. Economic Liberalization as a Strategic Development Vector

2.1. Currency and Tax Liberalization

One of the key decisions was the introduction of free currency convertibility (2017), which strengthened trust among foreign partners and simplified international settlements.

The tax reform (2019–2020) significantly reduced the tax burden:

• VAT was lowered to 12%;
• Corporate income tax — to 15%;
• Property tax — to 2%, and small businesses received social contribution exemptions.

As a result, Uzbekistan’s tax system became one of the most competitive in Central Asia.

2.2. Privatization and Development of the Private Sector

Privatization of state-owned enterprises symbolized a new stage of liberalization. In 2024, the Uzbekistan National Investment Fund (UzNIF) was established to manage state shares in 18 major enterprises and banks. Its goal is to list state assets on international stock exchanges and increase their market capitalization.

By 2025, over 1,000 enterprises had been privatized, including major banks (Asaka Bank, Ipoteka Bank, SQB) and companies in the energy and telecommunications sectors. These steps fostered competition and expanded private sector participation in the economy.

3. Improvement of the Investment Climate

3.1. Regulatory Reform and Barrier Removal

Since 2017, over 500 outdated regulatory functions have been abolished, and the business registration procedure has been simplified to one day. The One-Stop-Shop system provides entrepreneurs with integrated services — from legal registration to bank account opening.

3.2. International Agreements and Investor Protection

Uzbekistan has concluded 57 bilateral investment treaties and established most-favored-nation (MFN) status with 47 countries. A “Unified Register of Preferences for Foreign Investors” guarantees stability of the tax and customs regime for up to 10 years.

4. Financial and Market Reforms

The financial sector is being reformed to foster competition and develop capital markets. Measures include:

• Development of the stock market and introduction of corporate governance in state enterprises;
• Launch of the Tashkent International Financial Center;
• Promotion of green and corporate bond issuance.

Digitalization of the banking sector and the implementation of fintech solutions have led to a surge of investment in IT and digital services, reinforcing Uzbekistan’s role as a technological hub in the region.

5. Impact of Reforms on Investment Attractiveness

According to official data, foreign direct investment (FDI) inflows grew from USD 1.8 billion in 2017 to USD 10.3 billion in 2024. Key growth sectors included:

• Energy (including renewables),
• Mining industry,
• Textiles and agribusiness,
• IT and digital services.

Uzbekistan’s improved rankings in Doing Business, Moody’s, and S&P confirm the effectiveness of liberalization and institutional reforms.

Institutional reforms and economic liberalization have laid the foundation for Uzbekistan’s investment boom. The creation of a predictable legal environment, deregulation, privatization, and openness to global capital have made the country one of the most dynamic investment markets in Central Asia.

Future Priorities

At the next stage, the key objectives include:

• Further development of financial institutions;
• Strengthening judicial protection of investors;
• Promotion of ESG standards and green investment.

Thus, institutional transformation has not only enhanced economic resilience but also established the groundwork for long-term sustainable growth.

Key Indicators of Institutional Reforms in Uzbekistan (2020–2025)

№	Indicator	Unit	2020	2021	2022	2023	2024 (est.)	2025 (proj.)	Source / Comment
1	Real GDP growth	%	1.6	7.4	5.7	6.0	6.5	6.8	MEF of Uzbekistan
2	Nominal GDP	USD bn	60.5	69.2	79.1	98.3	115.0	125.0	World Bank
3	GDP per capita	USD	1,770	2,050	2,420	2,850	3,100	3,300	SSC
4	FDI inflows	USD bn	2.1	3.8	6.1	8.9	10.3	11.5	ADB
5	FDI share in GDP	%	3.4	5.5	7.7	9.1	9.5	10.0	Ministry of Finance
6	Domestic investment volume	USD bn	9.5	11.7	13.9	16.4	18.0	20.0	State Statistics Committee
7	Privatized enterprises	units	620	1,050	1,800	2,300	2,800	3,200	Ministry of Economy
8	Privatization revenue	USD mln	230	550	710	1,050	1,300	1,600	State Property Agency
9	Share of private sector in GDP	%	60	64	67	70	72	74	Strategy “Uzbekistan-2030”
10	Economic Freedom Index (Heritage Foundation)	/100	56.4	59.2	61.7	63.1	64.8	66.0	Heritage Index 2025
11	Competitiveness Index (WEF)	rank	94	87	76	71	65	60	WEF
12	Inflation (CPI)	%	11.1	10.0	9.5	8.8	8.0	7.0	Central Bank
13	Unemployment rate	%	9.7	9.0	8.2	7.4	7.0	6.5	Ministry of Labor
14	Foreign companies operating in Uzbekistan	units	7,800	8,950	10,600	12,200	13,400	14,000	MEF
15	Bilateral investment treaties signed	units	45	48	52	55	57	60	Ministry of Justice
16	Level of digitalization of public services	%	35	50	62	73	81	90	Ministry of Digital Development
17	Tax burden (share of taxes in GDP)	%	21	19	17	17	16	15	Tax reform
18	Corruption Perception Index (TI)	rank	146	141	137	126	118	110	Transparency International
19	Reformed government bodies	units	20	33	46	53	60	65	Administrative Reform
20	Issuance of corporate and green bonds	USD mln	—	200	400	800	1,200	2,000	Ministry of Finance

 

Summary of Institutional Reform Outcomes (2020–2025)

Indicator	Change 2020 → 2025	Trend
Real GDP growth	1.6% → 6.8%	Stable economic growth
FDI inflows	$2.1B → $11.5B	5.5× increase
Privatization revenue	$230M → $1.6B	Higher efficiency of state assets
Share of private sector in GDP	60% → 74%	Economic liberalization
Unemployment	9.7% → 6.5%	Improved employment
Economic Freedom Index	56.4 → 66.0	Institutional strengthening
Inflation	11.1% → 7.0%	Macroeconomic stability

Analytical Findings

• Macroeconomic Stability: Uzbekistan’s GDP nearly doubled from 2020 to 2025, with an average annual growth rate of about 6.5%, driven by privatization, public administration reform, and a stronger investment climate.
• Investment Activity: FDI inflows increased 5.5-fold, mainly through projects in the energy, banking, and industrial sectors.
• Role of Institutional Reforms: Reforms in currency regulation, taxation, and corporate governance became key drivers of Uzbekistan’s integration into the global economy.
• Digitalization and Governance: The digitalization level of public services reached 90%, improving transparency and reducing administrative barriers for businesses.