Foreign investors dissatisfied with work in Uzbekistan

Foreign investors dissatisfied with work in Uzbekistan

Many foreign investors regret investing in free economic zones (FEZ) of Uzbekistan, results of a study conducted by the Development Strategy Center in conjuction with the Swiss Foundation PeaceNexus show. This study was conducted in the Novoi and Angren FEZ in September-October of 2018. President of Uzbekistan Shavkat Mirziyoyev set the task to attract $5.800 billion of direct foreign investments this year. In order to achieve this goal, a decree “On radical improvement of investment climate in Uzbekistan” was issued.

Decree's final goal was to stimulate attraction of direct investments, to strengthen investor's confidence in state policy and to increase responsibility of government agencies that work with investors. However, these goals weren't fulfilled. Experts of the Development Strategy Center, together with the Swiss Foundation PeaceNexus, conducted studies to identify problems in the economic, social and environmental areas of Uzbekistan's FEZ.

Uzbekistan has recently created 21 free economic zones. Three of them - Navoi, Angren and Dzhizak have been created in 2008-2013. The main goal of these free economic zones is to saturate domestic market with products, introduce new scientific and technological developments into production sphere, improve employment rate, as well as solve regional policy problems. In their search for preferential conditions, international investors consider free economic zones to be favorable areas where they can get increased profits.

However, investors who have invested in development of production in Uzbek free economic zones are dissatisfied with results of their work. They determined several problems they face, including difficulties in obtaining work visas and excessive red tape. Study notes that one of the respondents said that he had been waiting for approval of the State Ecological Committee for six months and wasn't able to receive a building permit for three months.

Necessary logistics services haven't been created in these free economic zones. Representatives of the Navoi FEZ explained this by the fact that only registered participants can pursue business activities in the FEZ territory. Enterprises face several problems when they try to buy necessary raw materials through the Uzbek Commodity Exchange. This is one of the main reasons why investments in the country are decreasing, investors can't develop their businesses. In addition, there's no information about procedures necessary for obtaining permits in English.

Respondents also spoke about difficult situation with logistics. FEZ don't have necessary services, and prices of transportation of goods are often too high. For example, transportation of one 40-foot container to 25 km distance from the Tinchlik station in Navoi to the territory of the Navoi free economic zone costs $500.

Foreign investors also complained that no social infrastructure has been created in FEZ. After visiting a company, many businessmen want to leave for the capital on the same day. If they had the opportunity to turn back the time, they wouldn't have invested in FEZ, but in Tashkent or the Tashkent region, despite lack of privileges and preferences.

“Reviews of businessmen regarding free economic zones of Uzbekistan objectively characterize situation. Businessmen often have things they can compare them to - many of them have experience working in free economic zones in other countries. Situation is even worse in non-free economic zones, with the exception of Tashkent and the Tashkent region, where prospects for business development are clearly better due to important role in the country's economy, despite several difficulties," expert of the Oriental Studies Institute of the Russian Academy of Science, expert of the Valdai Club, Alexander Vorobyov, said.

At the same time, Tashkent and the Tashkent region have become only regions capable of becoming locomotive of the country's development in shortest time possible. Only these regions have necessary conditions like infrastructure, logistics, qualified working force, energy, legal support, education and medical care for further development.

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