Privatization of State Property in Uzbekistan: General Overview

Privatization of state property is one of the key directions of economic reforms in the Republic of Uzbekistan. The adoption of the new Law “On Privatization of State Property” No. ZRU-907 dated February 14, 2024 marks the transition to a more comprehensive and institutionally established regulation of the processes of denationalization. This article is aimed at a scientific analysis of the provisions of the new law, identifying its features, and assessing its impact on the economy and legal system of the country.

The law defines privatization as the sale of state property to individuals and non-state legal entities in accordance with the established procedure. The main goals of privatization are:

• increasing the efficiency of asset use;
• attracting investment;
• developing a competitive environment;
• reducing the role of the state in economic activity.

An important task is to ensure transparency and accountability, which is consistent with international standards of state asset management.

Principles of Privatization

The law establishes five key principles:

• Legality — compliance with the Constitution and current legislation.
• Openness and transparency — ensuring access to information about privatized property.
• Accountability — reporting by the authorized body to the President, the Cabinet of Ministers, and the Parliament.
• Competitiveness — creating equal conditions for participants.
• Prohibition of corruption — eliminating conflicts of interest and implementing electronic procedures.

These principles set the framework for the democratic and market-oriented nature of the privatization process.

Subjects and Objects of Privatization

Objects of privatization include:

• state-owned real estate;
• state shares (stocks, stakes);
• state institutions.

Subjects of the process include authorized state bodies (primarily the Agency for State Asset Management), their territorial departments, and buyers.

Special attention is paid to excluding persons whose participation could lead to unfair competition.

Mechanisms of Privatization

The law provides for a wide range of privatization methods:

• auction;
• competitive bidding;
• public invitation to negotiations;
• competitive dialogue;
• stock exchange trading;
• contribution of property to the authorized capital of business entities;
• lease with subsequent privatization.

Thus, a flexible model is established, taking into account sectoral, regional, and investment features.

Procedural Guarantees and Financial Aspects

An important innovation is the mandatory preparation of “roadmaps” including stages, timelines, and conditions of privatization.

Financial mechanisms include:

• deposit payments for participation in bidding;
• installment payments (up to 3 years) depending on the value of the property;
• the possibility of pledging privatized property subject to a 35% initial payment.

This helps balance the interests of the state and investors.

Ensuring Openness and Control

The law requires the publication of information on auctions, privatization programs, and transaction results on official government websites. Reporting must be published quarterly and annually.

Control mechanisms include monitoring the implementation of sale contracts and the possibility of mediation in disputes.

Guarantees and Protection of Property Rights

Privatized property is recognized as inviolable private property. Its return to the state is not allowed, except in cases directly provided for by law and by a court decision. If the rights of previous owners are restored, compensation is paid from the privatization fund.

These provisions enhance the investment attractiveness of the Uzbek market.

Comparative Legal Analysis

Law No. ZRU-907 replaced the 1991 Law “On Denationalization and Privatization,” eliminating gaps and modernizing the system in line with contemporary requirements. Unlike the earlier period, emphasis is placed on:

• institutional accountability;
• use of electronic trading platforms;
• comprehensive regulation of all forms of privatization;
• international cooperation in the field of denationalization.

The adoption of the Law “On Privatization of State Property” No. ZRU-907 is an important step in institutionalizing market reforms in Uzbekistan. The law provides legal guarantees for investors, strengthens transparency and competitiveness of privatization procedures. At the same time, its successful implementation will depend on the quality of law enforcement practice, the effectiveness of judicial protection of property rights, and the political will to continue reforms.

Thus, ZRU-907 forms the foundation for the transition from fragmented decisions to a systemic privatization policy aimed at sustainable development of the national economy.

Forms of Privatization of State Property in Uzbekistan

Form of Privatization	Conditions of Application	Advantages	Risks	Control Mechanisms
Auction	Applied when selling property without additional conditions (except for certain construction projects)	Transparency, equal conditions for all, price maximization	Lack of investor interest, possibility of collusion	Online electronic auctions, deposit (3–15%), publication of notices
Competitive bidding	Used when conditions are present (investment obligations, job retention, etc.)	Selection of the most efficient investor, consideration of non-financial conditions	Prolonged procedures, subjectivity of evaluation	Scoring system (80% price + 20% conditions), mandatory publication of bidding conditions
Public invitation to negotiations	Applied when flexible negotiations with investors are required, several stages	Attracts strategic investors, ability to adapt conditions	Limited access to information, risk of corruption	NDAs, recording of stages, involvement of professional consultants
Competitive dialogue	Used when deal conditions and market requirements are unclear	Joint development of optimal deal conditions	Time- and resource-consuming, risk of non-transparency	Reporting, negotiation protocols, publication of conditions
Stock exchange trading	Sale of state shares on the stock market	Liquidity, market price discovery	Market volatility, speculative transactions	Laws “On Securities Market” and “On Exchanges,” supervision by Central Depository
Contribution of property to authorized capital	Applied when establishing/increasing authorized capital of business entities	Development of PPP, strengthening of business with state participation	Dilution of state share, conflict of interest	Valuation reports, monitoring by State Assets Agency
Sale of a state institution as a property complex	Competitive bidding or negotiations	Preservation of production facilities	Risk of liquidation in case of failed privatization	Re-registration of institution, monitoring contract conditions
Lease with subsequent privatization	Transfer of an institution under lease with buy-out option	Gradual transition to private ownership, “regulatory sandbox” possibility	Delay in privatization, risk of unscrupulous lessee	Control of lease terms, state supervision, special “sandbox” regime

 

Powers of State Bodies in the Field of Privatization

1. Cabinet of Ministers of the Republic of Uzbekistan.

The law assigns a key coordinating and strategic role to the Cabinet of Ministers.

Powers include:

• coordinating the activities of all state bodies during privatization;
• approving the privatization program for republican property (except for the largest enterprises, which are decided by the President);
• submitting proposals to the President on the privatization of major state-owned enterprises;
• establishing commissions and working groups to coordinate privatization processes on the President’s instruction.

Conclusion: The Cabinet of Ministers serves as a link between the strategic level (President) and the executors (Agency for State Assets Management and its structures).

 

2. Authorized State Body — Agency for State Asset Management (ASAM)

The law grants the Agency the status of the central body for privatization.

Powers include:

• implementing a unified state policy in the field of privatization;
• organizing the sale of state property and signing sales contracts;
• forming and submitting to the Cabinet of Ministers the program of privatization of republican property;
• determining the timing, methods, and starting prices (except for cases of sale without a starting price);
• engaging independent valuation organizations and experts to verify valuation reports;
• developing and approving privatization “roadmaps”;
• monitoring the fulfillment of privatization contract terms;
• entering into contracts with professional consultants (legal, investment, audit firms);
• organizing the sale of property through electronic platforms and operators.

Conclusion: ASAM effectively combines the functions of seller, regulator, and analytical center, requiring special control mechanisms to prevent conflicts of interest.

 

3. Territorial Departments of the Agency

Act as “local sellers” and implement privatization policy on the ground.

Powers include:

• forming municipal privatization programs;
• selling real estate, institutions, and shares at the regional and Tashkent city level;
• preparing “roadmaps” for municipal objects;
• participating in auctions and execution of sales contracts.

Conclusion: These bodies ensure decentralization and adaptation of national programs to regional conditions.

 

4. Specially Authorized State Bodies

By Presidential decision, certain ministries or agencies are given powers for the reform and privatization of large enterprises.

Powers include:

• their activities are regulated by the Law “On State Property Management”;
• jointly with the Cabinet of Ministers, they submit proposals to the President on the privatization of state shares in the authorized capital of large enterprises entrusted to them for reform.

Conclusion: This allows consideration of industry specifics (e.g., energy, transport, telecommunications) where specialized management is required.

 

5. Local Authorities (Jokargy Kenes, Councils of People’s Deputies, Khokims)

The law assigns them the function of approving certain privatization programs.

Powers include:

• approving programs for privatization of municipal institutions and shares in business entities;
• approving plans for privatization of real estate;
• monitoring implementation of programs within their territory.

Conclusion: The role of local authorities strengthens the subsidiarity principle and allows consideration of regional interests.

 

6. President of the Republic of Uzbekistan

Although the President is not named as an “executive body,” his role is strategically central.

Powers include:

• approving the privatization program for major state-owned enterprises;
• issuing acts on direct sale of property at market price within the framework of international agreements;
• creating commissions under the Cabinet of Ministers to improve privatization efficiency.

Conclusion: The President retains control over the most significant assets and strategic sectors of the economy.