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DE RUEHNT #0101/01 0251525
ZNR UUUUU ZZH
R 251525Z JAN 08
FM AMEMBASSY TASHKENT
TO RUEHC/SECSTATE WASHDC 9095
INFO RUEHTA/AMEMBASSY ASTANA 9850
RUEHAH/AMEMBASSY ASHGABAT 3640
RUEHEK/AMEMBASSY BISHKEK 4254
RUEHDBU/AMEMBASSY DUSHANBE 0132
RUEHNE/AMEMBASSY NEW DELHI 0795
RUEHIL/AMEMBASSY ISLAMABAD 3850
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC
RUCPCIM/CIMS NTDB WASHDC
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RHEHNSC/NSC WASHDC
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RUEKJCS/SECDEF WASHDC

UNCLAS TASHKENT 000101 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR SCA/CEN, AND EB/IFD/OIA 
DEPT PASS TO USTR 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EINV ELAB ETRD KTDB PGOV OPIC USTR UZ
SUBJECT: Part 1 of 2, 2008 Investment Climate Statement for 
Uzbekistan 
 
REF: 07 STATE 158802 
 
------------------------------ 
Openness to Foreign Investment 
------------------------------ 
 
¶1. With an estimated population of 27.3 million, Uzbekistan has the 
largest population in Central Asia.  Rich natural resources such as 
gold, gas, and cotton offer potentially attractive opportunities for 
investors. Uzbekistan is the world's fourth largest cotton producer 
and second largest cotton exporter after the United States. 
Uzbekistan has the potential to be a regional economic powerhouse, 
but the government of Uzbekistan ("the government") has yet to 
create the necessary conditions to attract needed foreign 
investment.  Currency convertibility is cited by foreign firms as 
the single greatest obstacle to normal investment operations. 
 
¶2. The declared policy of the government is to attract foreign 
investment.  Existing legislation on its face grants foreign direct 
investors a host of incentives on a case-by-case basis, including 
tax holidays, duty-free import of capital goods, and protection 
against expropriation.  However, the requirements for obtaining 
these benefits are ambiguous, the processes and procedures are 
cumbersome, and the regulatory environment is capricious.  While 
such conditions provide opportunities for some companies to turn 
special decrees and privileges to their advantage, the lack of 
predictability deters many potential investors. 
 
¶3. According to Uzbek law, the state must guarantee and protect the 
rights of foreign investors within the country.  Primary legislation 
that guarantees foreign investment includes the following decrees: 
"On Foreign Investments," "On Guarantees and Measures of Protection 
of Foreign Investor's Rights," "On Guarantees of the Freedoms of 
Entrepreneurial Activity," and "On Production Sharing Agreements." 
 
 
¶4. Enterprises with foreign investments enjoy tax concessions and 
preferences, such as a reduced profit tax rate, grace periods, and 
exemption from customs duties on the property imported by foreign 
investors for their own production and personal needs.  However, the 
government has in some cases negated this benefit by reclassifying 
foreign investments as joint ventures or local investments.  Foreign 
investors also are shielded for ten years from legislative changes 
that adversely affect existing investments.  In July 2006, however, 
the government rescinded all existing, indefinite tax breaks for 
foreign companies, other than those with product-sharing agreements, 
such as oil and gas companies.  This adversely affected a number of 
foreign businesses, mostly American and European, and some closed 
operations.  The 2006 legislation, which was retroactive, did not 
allow investors to claim damages. 
 
¶5. In principle, the judicial system upholds the sanctity of 
contracts.  However, the judiciary is not independent and has 
favored state-owned or government-affiliated entities in commercial 
disputes.  Foreign investors often retain independent local counsel. 
 
 
¶6. The government plans to retain controlling shares of some key 
industries, including oil and gas, aviation and mining.  The 
government limits access to the raw cotton market, thereby 
exercising effective control of investments and capital flows.  The 
government controls all silk sold in the country, and this dampens 
foreign investment in the textile and rug-weaving industries.  This 
is not an exhaustive list.  The government's role in key industries 
can have discriminatory effects on foreign investors.  The 
government has announced plans to privatize some mid-sized and large 
state-owned companies but has not yet done so.  Moreover, a variety 
of challenges exists, including unrealistic valuations and the 
choice of which assets to retain. 
 
¶7. In the banking and insurance sectors, foreign ownership is 
restricted.  In banking, foreign investors are prohibited from 
legally operating except as joint venture partners with Uzbek firms, 
 
and foreign ownership of banks is limited to 50 percent.  Banking 
and insurance firms with foreign participation are required to 
establish a charter capitalization fund of 5 million Euros, whereas 
the government determines the required size of the charter funds for 
Uzbek firms on a case-by-case basis.  (See also paragraph 17). 
 
¶8. An "enterprise with foreign investment" and an "enterprise with 
foreign capital" are treated differently in Uzbekistan.  Foreign 
investors act as shareholders in both cases; however, an enterprise 
with foreign investment has a special status and additional 
requirements, including: 
 
-- foreign investments must comprise at least 30 percent of shares 
of the charter fund of the enterprise; 
 
-- foreign investors, as a legal entity, must be among the 
participants in the enterprise; and 
 
-- the minimum amount of charter capital must not be less than USD 
150,000 (for enterprises established within the Republic of 
Karakalpakistan and Khorezm province, the amount is USD 75,000). 
 
¶9. Enterprises that meet the above requirements can be registered as 
"enterprises with foreign investment."  Enterprises that do not meet 
the above requirements are subject to state registration at the 
offices of regional governors (hokimiyats) as ordinary enterprises. 
 
¶10. If the charter fund of an enterprise with foreign investment 
comprises USD 20 million or more, a special government resolution is 
needed to register the enterprise.  Frequently even smaller 
investments require permission from government authorities.  The 
Uzbek government requires screening of foreign investment in sectors 
of the economy that it determines are strategic, including mining, 
cotton processing, oil and gas refining, and transportation.  The 
government does not have a standard and transparent screening 
mechanism, and the legislation is designed to protect domestic 
industries and limit competition from abroad.  In some instances, 
screening has been used by the government to limit investment in 
certain industries and by certain countries. 
 
¶11. The following sectors are relatively more open to foreign direct 
investment (FDI): oil & gas exploration, extraction and processing; 
power (transportation and distribution, renewable energy); machine 
building (automotive, agricultural, railroad trains and cars, 
aerospace, etc.); and tourism infrastructure.  However, the 
government closely scrutinizes investments, particularly those 
deemed to involve strategic national interests. 
 
¶12. According to legislation, foreign investors and investments 
receive treatment equal to that afforded local investors. 
 
¶13. Uzbekistan subscribes in principle to policies of institutional 
and economic reform, such as restructuring and privatization, in 
order to attract more foreign investment.  However, implementation 
has been limited.  A 2007 decree on privatization is promising, but 
implementation has not begun.  The government to date has been 
unwilling to sell controlling interests in enterprises, and often 
has demanded prices far in excess of what investors would be willing 
to pay.  Enterprises developed under the previous Soviet economic 
system need significant restructuring before they can be 
successfully privatized.  In general, the tender process for 
privatization is transparent only at the initial stage.  The 
government attracts international financial consultants for 
privatization of large enterprises.  Only after the evaluation of an 
enterprise is completed are foreign investors invited to participate 
in the process.  Many investors note a significant lack of 
transparency at the final stage of the bidding process, when the 
government begins conducting direct negotiations with the bidders 
before announcing the results of the tender.  In some cases, the 
government lobbies foreign mailbox companies associated with 
influential Uzbek families.  While these companies have a foreign 
address, their ties to the foreign country are tenuous. 
 
¶14. There is no official discrimination policy against foreign 
investors at the time of the initial investment or after the 
investment is made.  Certain incentives designated by presidential 
decree are granted on a case-by-case basis and are often disputed 
during the investment period.  This issue is particularly acute in 
regards to tax incentives and registration requirements.  Recently, 
several foreign investors noted conflicts between new legislation 
and a Presidential Decree on tax holiday time limits.  Presidential 
decrees are in practice easily overturned, and foreign companies 
have recently been detrimentally affected by the practice. 
 
¶15. Foreign and local investors both suffer from government 
interference in investments, and bureaucratic obstacles consume 
significant time and resources.  The current system of taxation is 
complicated and ambiguous.  The taxation legislation makes offset of 
current losses impossible: a company that does not show a concrete 
profit for six months is considered bankrupt.  The legislation also 
sets strict limits on deductions for marketing, communication and 
training expenses, and thus greatly inflates taxable income when 
compared with legislation in other countries.  Corruption and rent 
seeking are endemic.  A new Tax Code has been approved and entered 
into force January 1, 2008. Despite some decrease in tax rates and 
the allowance of deductions for certain expenses, the new code does 
not significantly alter the existing situation and does not address 
the issue of official corruption. 
 
¶16. Foreign investment, participation, or control in private firms 
in the media sector is prohibited.  According to the "Law on Mass 
Media" adopted on December 26, 1997, and updated in 2005, only Uzbek 
nationals can own a mass media enterprise.  Joint ventures cannot 
apply for a mass media license or own/establish a mass media 
enterprise if the shares of the foreign investors exceed 30 percent. 
 
 
¶17. Foreign ownership of private firms is in principle unrestricted, 
with the significant exception of firms in the media, tourism, 
banking and insurance sectors (see paragraphs 7, 16 and 32). 
However, the government often exerts influence over the operations 
of companies, even those where foreign investors own over 50 
percent.  In many privatized enterprises, the government retains a 
minority share of approximately 25 percent, and workers own another 
25 percent, thus limiting effective control by outside investors. 
 
¶18. Uzbekistan has all the ingredients needed to become a regional 
economic powerhouse: a dynamic, literate, and entrepreneurial 
population; a central location at the crossroads of Central Asia; 
relatively good infrastructure; rich mineral resources; and a large 
potential consumer market.  The lack of macroeconomic and structural 
reforms has exacerbated bureaucratic inefficiencies and contributed 
to widespread corruption.  Businesses and investors suffer from a 
multitude of problems caused by government policies.  Instead of 
instituting structural reforms immediately after independence in 
1991 and weathering the resulting economic hardships, as some other 
post-Soviet countries did, the government chose to avoid taking 
painful reform measures and now faces a rapidly declining planned 
economy. Official statistics expect GDP growth rate to be 9.8% in 
¶2007.  This growth is mostly due to the natural gas and construction 
sectors, as well as remittances from large number of Uzbeks working 
abroad.  The construction sector is contracting, as Kazakh investors 
in Uzbekistan react to the credit crunch in their own country. 
Currency restrictions through the banking system hamper business and 
economic development, as do the government's restrictive trade 
policies.  The government's manipulation and interference in the 
private sector leave companies unable to properly project profits 
and future capital purchases. 
 
-------------------------------- 
Conversion and Transfer Policies 
-------------------------------- 
 
¶19. Uzbekistan introduced currency convertibility in October 2003, 
but in practice access to foreign currency is limited.  Two legal 
exchange rates exist: the commercial (wire-transfer) rate and the 
 
exchange booth rate.  All citizens have legal access to the exchange 
booth rate.  Limitations to foreign exchange resulted in 2007 in 
average lag times of four months for current account convertibility 
for imports and slightly less for raw materials related to 
manufacturing.   As of December 2007, the black market rate of 1,340 
soum per U.S. dollar exceeded the official exchange booth rate of 
1,288 by roughly four percent.    Although the government has 
committed to the provisions of the International Monetary Fund's 
Article VIII regarding currency convertibility for current account 
operations, in practice multiple informal restrictions remain in 
place.  All legal entities must obtain permission from the Central 
Bank to access foreign currency, and applicants must expend 
significant time to navigate the bureaucracy.  The government 
reportedly issues banks confidential instructions detailing which 
orders are to be filled. 
 
¶20. The majority of foreign investors, regardless of nationality, 
report frequent difficulty obtaining sufficient foreign currency for 
operational requirements.  Investors also experience delays of one 
to six months when remitting profits, and during the interim the 
amount to be remitted is held by the Central Bank.  These delays are 
at least in part a result of the government's tight fiscal and 
monetary policies - the government runs a strict import subsidies 
regime to control foreign trade and prevent capital outflow. 
However, the policy also presents the potential of co-mingling or 
misuse of investor funds. 
 
¶21. No legal, private, parallel market exists in Uzbekistan for 
investors to remit funds.  However, private money transfer 
businesses are numerous and have few problems receiving foreign 
remittances.  The government has phased out its previous system of 
import contract registration and replaced it with a regime of high 
tariffs and border closings in order to further promote a policy of 
import substitution.  Due to border closings, foreign investors 
often experience delays in receiving necessary production inputs. 
 
------------------------------ 
Expropriation and Compensation 
------------------------------ 
 
¶22. The government may seize foreign investor assets for violation 
of local legislation, breach of contract, failure to complete, as 
well as for arbitrary reasons such as reevaluation of assets, site 
or development programs, etc.  Although the government can legally 
seize property with compensation at fair market value, it has 
expropriated property of joint ventures (with foreign investment 
partners) at lower than fair market value.  The government has also 
inadequately compensated local businesses and individuals for seized 
property.  Agricultural enterprises are particularly vulnerable to 
expropriation of land. 
 
¶23. Recent changes in tax legislation, especially regarding tax 
holidays, have caused financial difficulties for existing foreign 
investors.  Though this has not been construed as an attempt to 
expropriate investor holdings, it is a matter of concern. 
 
¶24. Large, lucrative foreign businesses are more at risk for 
expropriation or similar action than others.  In 2006, the 
government targeted the two largest U.S. joint-ventures and 
attempted to push them out of the country and expropriate their 
assets.   These two cases were eventually resolved, one through a 
negotiated settlement and the other through arbitration.  In both 
cases, the U.S. partners relinquished their shares and left 
Uzbekistan.  The U.S. Embassy is aware of expropriation cases 
involving non-U.S. companies, in the trading sector, food 
processing, furniture manufacturing, and gaming businesses. 
 
------------------ 
Dispute Settlement 
------------------ 
 
¶25. Uzbekistan does not have a uniform, well-defined method of 
settling disputes or a legal system that fairly and effectively 
 
enforces property and contractual rights.  Government officials 
inconsistently interpret laws and presidential decrees, which often 
conflict with each other.  Government interference in the court 
system is common, as are accusations of corruption. 
 
¶26. Investors have no reasonable expectation that the government 
will honor an international arbitration verdict in favor of the 
foreign plaintiff.  Contractual provisions for international 
arbitration are insufficient.  If international arbitration is 
permitted, the awards can be challenged in domestic courts.  The 
Ministry of Justice is responsible for the resolution of all 
international commercial issues.  Its power is limited and 
frequently co-opted by more influential powers within the 
government.  A number of foreign companies have not received full 
payment, even after being awarded a judgment in international 
arbitration.  Others have pursued a claim and won in the court 
system, only to have the government not enforce the ruling.  There 
are several cases, however, in which international arbitration 
awards have been successfully enforced. 
 
¶27. Most disputes involve nonpayment or delayed payment for goods or 
services by state entities.  The State Tax Committee may sequester 
funds from a company account before the court reviews the arguments 
of the company in the dispute.  The greatest number of U.S. investor 
dispute cases have occurred in the following sectors: trading, food 
processing, manufacturing, telecommunications, defense, energy, 
gaming, and tourism.  The only non-payment pattern the U.S. Embassy 
has noted is in delivering products to the agro-chemical sector. 
Disputes with joint venture partners, whether state-owned or 
private, are also common.  These disputes reflect a pattern of U.S. 
investors relying too heavily on local partners and not thoroughly 
vetting them before developing the joint venture partnership.  The 
local partners frequently cannot stand up to heavy government 
pressure or are simply corrupt. 
 
¶28. Uzbekistan is a member of the International Center for the 
Settlement of Investment Disputes and a signatory to the 1958 United 
Nations Convention on the Recognition and Enforcement of Foreign 
Arbitral Awards (The "New York" Convention).  However, numerous 
companies have reported that the local courts, including the 
Tashkent Economic Court and the Supreme Court, have failed to 
enforce international judgments against Uzbek companies, 
particularly state-owned enterprises. 
 
----------------------------------- 
Performance Requirements/Incentives 
----------------------------------- 
 
¶29. Uzbekistan has not yet notified the WTO on inconsistencies with 
Trade-Related Investment Measures (TRIMS) requirements.  However, in 
reply to WTO questions and at the request of a WTO member, 
Uzbekistan described its "localization" program, a provision of 
Resolution No. 18 of the Cabinet of Ministers issued 14 January 
2004, that provides "Exemption from profit tax, single tax (for 
entities subject to the simplified system of taxation) for a 
percentage of products manufactured under localization projects". 
Certain provisions of Resolution No. 18 violate the WTO TRIMS 
agreement, namely that local businesses must use products of 
domestic origin in manufacturing to receive advantages under the 
localization program.  This allegedly violates the WTO TRIM Annex 
1(a). 
 
¶30. According to Uzbek legislation, requirements to use domestic 
products in manufacturing are to be applied uniformly.  In practice, 
this is not always the case.  For example, the government has 
granted some companies the advantages and incentives afforded under 
the localization program, even though they do not use local 
materials in production or assembly. 
 
¶31. Customs payment exemptions envisaged under Resolution No. 18 are 
not in conflict with Paragraphs 1 and 2 of Article III of GATT, 
because this incentive is afforded to imported goods not produced in 
Uzbekistan.  Thus, there is no official import discrimination.  In 
 
certain situations conditions are actually more favorable for 
foreign investors, as is the case with the services sector 
specifically relating to freight forwarders: foreign freight 
forwarders are exempt from VAT, while local companies are not. 
 
¶32. While there are no set pre-conditions for investing, companies 
must invest USD 150,000 in charter capital to qualify for certain 
incentives.  In addition, a foreign investor must invest at least 30 
percent in a business for the company to be legally considered a 
company with foreign investments.  Also, as noted above, companies 
must purchase products from local sources to qualify for the 
localization program.  This requirement applies to both foreign and 
local investors; therefore, there is no national treatment problem 
under Article III GATT '94.  While there are no requirements that 
foreign equity be reduced over time, certain restrictions regulate 
foreign investments in the banking sector, where the foreign share 
cannot exceed 50 percent, and in the tourism sector, where it cannot 
exceed 49 percent. 
 
¶33. Any sector that is not a priority industry for the Uzbek 
government should expect to have more difficulty importing capital 
and consumer products than a priority industry.  Requirements 
affecting these industries are likely considered restricted 
information by the government and not applied uniformly. 
 
¶34. Permission is not officially required to invest, though 
preference is unofficially given to non-western firms and those that 
are closest to the decision-makers.  There are incentives to attract 
foreign investments to less developed locations (mostly rural), but 
there are no requirements.  In the banking sector, branches are not 
recognized as legal entities and therefore cannot provide banking 
services that utilize the capital of the parent company. 
Substitution for imports is covered under a localization program, 
discussed in paragraphs 29 and 30.  Host country employees are 
required in some positions in banking and auditing companies: the 
chief accountant should be an Uzbek national, as should either the 
CEO or one member of the Board of Directors.  In the tourism sector, 
only Uzbek nationals can be tour guides.  There are no requirements 
for using only local sources of financing. 
 
¶35. The government intends to eliminate requirements that are in 
violation of certain WTO agreement provisions (such as TRIMS, the 
Agreement on Subsidies and Countervailing Measures, and the General 
Agreement on Tariffs and Trade) by the time Uzbekistan accedes to 
the WTO.  In October 2005, the government presented its offer on 
goods and services to a WTO working group in Geneva.  There are no 
regulatory requirements for foreign investors to disclose 
proprietary information.  General legislation, such as the Civil 
Code (Chapter 64) and "Law on Monopolistic Activity" (Article 8), 
provide for general principles for the protection of commercial and 
trade secrets.  Participation in R&D is not regulated legislatively; 
therefore, there are no government restrictions. 
 
¶36. Uzbekistan offers two types of non-tourist visas: a temporary 
business representative visa and a working visa.  To apply, American 
citizens must submit documents regarding the company/ business they 
are affiliated with to an Uzbek Embassy or Consulate.  Currently 
almost all applicants experience delays or other problems in 
obtaining Uzbek visas.  Many non-resident, private American citizens 
continued to receive visas limited to one month.  Foreigners working 
in Uzbekistan must register with the Ministry of Labor. 
 
¶37. There are non-tariff barriers, such as discriminatory excise tax 
rates for certain imported goods.  Some goods are banned for export, 
including grain and sugar.  Import of ethyl spirit is prohibited. 
 
-------------------------------------------- 
Right to Private Ownership and Establishment 
-------------------------------------------- 
 
¶38. Uzbekistan's laws and decrees guarantee the right of foreign and 
domestic private entities to establish and own business enterprises 
and to engage in most forms of remunerative activity. The state 
 
reserves for itself the export of gold.  Cotton and gold exports 
generate most of Uzbekistan's foreign exchange earnings.  The 
government announced in a 2002 decree that it planned to scale back 
its monopoly of the cotton export trade and allow producers to sell 
50 percent directly to buyers.  To date, however, this change has 
not occurred.  Foreign companies have entered the cotton and gold 
production sectors, specifically grading, treatment, and marketing 
of cottonseed, and mining and refining of gold.  Some U.S. companies 
have reported experiencing problems in the cottonseed and gold 
refining businesses. 
 
¶39. Theoretically, private enterprises may freely establish, 
acquire, and dispose of equity interests in business enterprises. In 
practice, however, it can be difficult to do this, as securities 
markets are undeveloped. 
 
¶40. Businesses face more than the usual amount of bureaucratic 
hurdles if they compete with the government or a 
government-controlled firm in certain sectors, such as minerals. 
 
----------------------------- 
Protection of Property Rights 
----------------------------- 
 
¶41. Uzbekistan's laws governing the acquisition and disposition of 
property pose relatively few problems for foreign investors, and are 
similar to laws in other CIS countries.  Foreign entities may own 
buildings, but not land.  The concept of property ownership exists 
and is respected by local and central authorities, as long as the 
government is not interested in owning that property.  If the 
government or a well-connected entity decides it wants to own a 
piece of property, the original owner of the seized property should 
not expect to receive remuneration at market value.  Each district 
Hokimiyat has a department responsible for management of commercial 
real estate and controls all activities relating to the sale and 
purchase of commercial real estate, from paperwork to asset 
valuations. 
 
¶42. Uzbekistan has actively voiced its interest in joining the WTO 
but is only in the early stages of implementation of the appropriate 
agreements, including TRIPS.  In 2004, Uzbekistan submitted 
documentation to become a party to the Berne Convention.  In 2006, 
the Uzbek Parliament adopted all but one component of the Berne 
Convention: Article 18, regarding protecting pre-existing works. 
This year the government amended its Civil Code to match the IPR 
laws previously adopted. Presently, Uzbekistan is a consumer, but 
not a significant producer, of pirated material.  On the streets, 
pirated audio and videotapes and compact disks are sold freely. 
 
------------------------------------- 
Transparency of the Regulatory System 
------------------------------------- 
 
¶43. Ambiguous rules, legislation, and presidential decrees on 
foreign investor rights are often contradictory.  On many occasions, 
local officials have interpreted laws in a manner that is 
detrimental to individual private investors and the business 
community at large.  U.S. companies have complained that Uzbek laws 
are not interpreted or applied consistently.  In addition, the 
government occasionally issues secret decrees or instructions that 
entities are required to comply with, despite having no knowledge of 
the order.  Companies are particularly concerned with the consistent 
and fair application of the "Law on Foreign Investment," which 
outlines specific protections for foreign investors.  Because of the 
prohibitive tax code and regulatory environment, foreign investors 
often seek tax incentives and relief from certain regulatory 
requirements through Cabinet of Ministers decrees, which are 
approved directly by the President.  These, however, are easily 
revocable. 
 
¶44. The new Tax Code (see paragraph 15), like the old code, lacks 
important provisions found in most developed countries.  For 
example, it does not allow credit for VAT on capital imports, 
 
including plant, machinery, and buildings.  This puts firms 
operating in Uzbekistan at a competitive disadvantage.  The tax code 
makes no provisions on double taxation, and earnings of 
foreign-owned enterprises are therefore susceptible to double 
taxation.  A double taxation treaty negotiated with the U.S. in 1994 
has been ratified by Uzbekistan but not by the U.S.  The law on 
labor unions says that labor union fees are voluntary, but in 
practice commercial courts interpret these payments as compulsory 
and impose penalties on non-payers.  The amount of money involved is 
not large, but the issue may be of concern to foreign companies with 
union policies and concerns.  Strict rules on wages severely 
discriminate against foreign companies who follow the rules, whereas 
local firms often evade the laws by creating false employees. 
 
¶45. Bureaucratic procedures, in particular financial reporting, are 
considered time-consuming and counterproductive.  Government-owned 
banks, ministries, and agencies interfere in business operations and 
in some cases make efficient operations almost impossible. 
Documents required for licensing, registration and other permits are 
often amended without notice, which creates an opportunity for 
rent-seeking.  As a result, documents are frequently rejected the 
first time they are submitted on the grounds of some technicality. 
 
¶46. The government holds a monopoly on regulatory processes. 
However, influential actors in the "shadow economy" can create 
problems for foreign investors in certain sectors, such as 
telecommunications, real estate, mining, etc., by encouraging 
authorities to pressure foreign competitors. 
 
¶47. Publishing drafts of laws and regulations for public comment is 
uncommon in Uzbekistan.  Regulatory bodies often introduce changes 
and amendments to the commercial legislation without notification, 
which causes many disputes and misunderstandings, even among state 
institutions.  In a few cases where legislation will be highly 
scrutinized by the private sector, certain well-placed foreign 
investors have had the opportunity to review and comment on upcoming 
legislation.  However, these instances are extremely rare.  There is 
often a considerable delay between the passing of a law and its full 
release for public consumption.  The government has been discussing 
the creation of a foreign investor council, which would provide an 
excellent opportunity to review draft laws on commercial issues. 
The Uzbekistan Chamber of Commerce and Industry has taken the lead 
in organizing discussions for investors and business people on 
issues of particular note as part of a larger forum. 
 
¶48. Few of the local legal, regulatory, and accounting systems are 
transparent and consistent with international norms.  For instance, 
local accounting standards and practice in some respects contradict 
internationally accepted standards.  Although international advisors 
are working to develop the sector and train accountants, local 
practice is still document and tax driven with an underdeveloped 
concept of accruals.  As a result, financial reporting seldom 
accurately represents the financial position of Uzbek companies with 
foreign investments. 
NORLAND