Uzbekistan’s International Investment Strategy and the Significance of Business Expansion

Uzbekistan has been strengthening its expansion into international markets as a national strategy, and this move is particularly evident in the commercial aviation sector. This year, the government of Uzbekistan decided to purchase 22 Boeing 787 Dreamliners. This deal is more than just an aircraft transaction; it is an important milestone in Uzbekistan’s international presence and economic growth.

Motivations and Objectives of the Deal Against a Backdrop of Economic Growth

Uzbekistan’s decision to introduce the Boeing 787 Dreamliner is based on the country’s steady economic growth, with a GDP growth rate of 5.7%. Plans are also underway to develop Tashkent as a hub connecting Asia and Europe. So what exactly are the motives and objectives?

• Projected increase in air passenger traffic: passenger traffic is expected to exceed 10 million per year by 2028.
• Enhancement as a logistics hub: Plans call for the construction of an airport with an annual cargo handling capacity of 2.5 million tons.
• Economic benefits from the promotion of tourism: Tourism revenues will be increased to $4 billion per year.

In addition, as a preferential policy for foreign investment, tax incentives and simplified procedures are being offered to certain industries. The government is also focusing on fostering local industries such as wood processing and textiles.

• Implementation of a 20% income tax exemption.
• Legislation to reduce barriers to entry for foreign companies.

This series of measures has contributed to Uzbekistan’s emergence as a new and attractive market for investors.

Deal Structure, Terms, and Strategies for Success

The agreement between Uzbekistan and Boeing involves more than just the purchase of aircraft. Specifically, it aims to strengthen the economic partnership between the two countries and revitalize the region’s economy. The purchase of 22 aircraft is planned to be phased in over a five-year period. During this time, Uzbek aviation enterprises will train pilots, expand maintenance facilities, and improve the quality of air service.

• Within the training program, 300 new pilots per year will be trained.
• The number of new maintenance facilities to be built will increase to 10 by 2026.

Also on the agenda is an initiative to strengthen the partnership with Boeing to promote technical cooperation and sharing of know-how to improve the quality of the aviation industry as a whole. These specific strategies will be a major step toward achieving sustainable economic development in Uzbekistan. In the long run, this must lead to regional infrastructure development and job creation, factors that will support the country’s overall growth.

Uncovering the Attractiveness of Investing in Uzbekistan

Investing in Uzbekistan is a great opportunity to take advantage of the country’s abundant resources and geographic advantages in the business environment. However, a deep and strategic approach is required to be successful. Learn more about the investment environment in Uzbekistan.

• Economic growth: Uzbekistan has an average annual growth rate of more than 5% and is experiencing rapid growth, especially in the industrial and infrastructure sectors.
• Energy resources: With abundant natural gas and cotton throughout the country, there are many energy and agriculture-related business opportunities.
• Geographical advantages: Located in the heart of Central Asia, Uzbekistan is a key location connecting Europe and Asia, creating a growing demand for logistics hubs.

There are various risks associated with investing in Uzbekistan, but they can be avoided through appropriate measures. The labor laws in Uzbekistan have very strict regulations regarding dismissal of employees . At least 60 days’ advance notice is required to dismiss an employee. If an employee is dismissed without just cause, the company is obligated to pay six months’ salary. How to address the issue:

• Include clear performance evaluation criteria in the employment contract
• Introduce a regular quarterly appraisal system
• Making work manuals available in multiple languages (Uzbek, Russian, English)
• Retain documentary evidence (appraisal results and work reports) at the time of termination for at least one year
• Contracting with a local lawyer as a legal advisor ( about $500/month ) to deal with labor problems.

In terms of taxation, the corporate tax rate is low at 12%. However, the value-added tax (VAT) is high at 15%, so proper tax planning is required. Professional Advice: It is strongly recommended to sign an annual contract with a major local accounting firm for monthly consulting. The cost is approximately $50,000 per year, but can significantly reduce tax risks. Risk 2] Cultural Risk: Due to the strong Islamic influence, working hours are reduced during Ramadan (one month per year). Productivity during this period drops to about 70% of normal. Countermeasures:

• Consider the Ramadan period in advance in your annual production plan
• Suspend factory operations during Friday prayers ( 1-2 p.m.)
• Establish a prayer space in the company (to increase employee satisfaction)
• Procure 1.5 months’ worth of raw materials in advance of Ramadan
• Conducting local cultural training twice a year (at a cost of $500 per training)

In terms of language, the official language is Uzbek, but Russian is also widely used. It is essential to secure full-time interpreters to ensure smooth communication with local staff. Estimated cost: A good interpreter can be paid around $2,000-$3,000 per month. There is a risk of fluctuation in the currency sm . Over the past three years, the exchange rate against the dollar has depreciated by an average of 8% per year. Hedging strategy:

• Contract more than 50% of sales in dollars
• Diversify foreign currency deposits in multiple banks
• Utilize currency futures trading ( 3-6 months ahead )