VZCZCXRO4473
RR RUEHDBU
DE RUEHNT #0074/01 0161325
ZNR UUUUU ZZH
R 161325Z JAN 09
FM AMEMBASSY TASHKENT
TO RUEHC/SECSTATE WASHDC 0294
INFO RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHAH/AMEMBASSY ASHGABAT 0014
RUEHDBU/AMEMBASSY DUSHANBE 0016
RUEHEK/AMEMBASSY BISHKEK 0026
RUEHIL/AMEMBASSY ISLAMABAD 0112
RUEHNE/AMEMBASSY NEW DELHI 0112
RUEHNT/AMEMBASSY TASHKENT
RUEHTA/AMEMBASSY ASTANA 0017

UNCLAS SECTION 01 OF 20 TASHKENT 000074 
 
SIPDIS 
DEPT PASS TO CIM NTDB WASHINGTON DC 
DEPT FOR EB/IFD/OIA 
DEPT PASS TO USTR 
 
E.O. 12958: N/A 
TAGS: EINV EFIN ETRD ELAB KTDB PGOV OPIC
SUBJECT: UZBEKISTAN:  2009 INVESTMENT CLIMATE STATEMENT 
 
REF: a) 08 STATE 123907 
 
REF: 08 STATE 123907 
 
¶1. (U) SUMMARY.  Uzbekistan remains a country where 
conditions for foreign investors are difficult. 
Legislation guarantees attractive incentives, but in 
practice it is difficult for an investor to obtain 
these benefits.  The Government of Uzbekistan 
retains control of large sectors of the economy, 
privatization is moving slowly, and the country is 
among the ten worst performers in Transparency 
International's Corruption Perceptions Index. 
Currency restrictions hamper business, and many 
foreign companies operating in Uzbekistan are 
experiencing increasing delays in converting Uzbek 
soum to dollars.  On the positive size, 2008 was 
marked by strong macroeconomic performance, no new 
seizures of foreign assets, significant expansion in 
General Motors' operations in Uzbekistan, and the 
announcement of a new free industrial trade zone in 
Navoi.  END SUMMARY 
 
------------------------------ 
Openness to Foreign Investment 
------------------------------ 
 
¶2. (U) The declared policy of the government of 
Uzbekistan ("the government") is to attract foreign 
direct investment.  Uzbekistan has the potential to 
be a regional economic powerhouse, but the 
government has yet to create the necessary 
conditions to attract needed 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.  The lack of 
predictability deters many potential investors. 
Currency convertibility is cited by foreign firms as 
one of the greatest obstacles to normal investment 
operations. 
 
¶3. (U) 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. (U) 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. 
 
¶5. (U) The government's role in key industries can 
have discriminatory effects on foreign investors. 
The government plans to retain controlling shares of 
some key industries, including oil and gas, 
telecommunications, airlines 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 has announced plans to privatize some 
mid-sized and large state-owned companies and banks 
but has not yet done so.  Moreover, a variety of 
challenges exists, including unrealistic valuations 
and the choice of which assets to retain. 
 
 
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