Yulia Prokhorova: ‘Uzbekistan pursues an open-door policy for foreign investors’

An expert in the real estate market about new opportunities for Russian business in Central Asia

Tatarstan President Rustam Minnikhanov noted the growth of business relations with Uzbekistan after meeting with the country’s Minister of Innovative Development Ibrokhim Abdurakhmonov at the Saint Petersburg Economic Forum. “We have good dynamics,” he stressed welcoming the Uzbekistani delegation and successful steps in such projects as Chirchiq industrial park several Tatarstan companies already joined. Realnoe Vremya’s columnist, a real estate expert Yulia Prokhorova also points out big potential for the development of Russian businesses in this Central Asian republic. In another column for our newspaper, Perfect RED’s executive partner presented a review of Uzbekistan’s real estate market.

Review. Republic of Uzbekistan

Uzbekistan (Uzbek: Oʻzbekiston; officially the Republic of Uzbekistan) is a country at the heart of Central Asia, it borders five countries: Kyrgyzstan to the east, Kazakhstan to the northeast, north and northwest, Turkmenistan to the southwest and south, Afghanistan to the south, Tajikistan to the southeast.

The official language is Uzbek. The Russian language isn’t official but the second-most important in the country.

The currency is Uzbek som.

Uzbekistan is a member state of the United Nations, the Commonwealth of Independent States, the United Nations Industrial Development Organization, ESCAP, the World Health Organization, the Shanghai Cooperation Organisation, the Inter-Parliamentary Union, the Organization of Turkic States, the International Organization of Turkic Culture, an observer of the Eurasian Economic Union and World Trade Organization.

According to the World Bank, since 2017, Uzbekistan has achieved significant progress in the transformation of its economy and society. Nowadays the government starts the next stage of reforms aimed to remove structural restrictions such as the absence of production markets and economic domination of the state in the economy. The World Bank forecasts in its report Prospects of the World Economy, Uzbekistan’s economic growth in 2022 will total 5,6%, 5,8% in 2023. These are the best prospects in the region.

According to the official statistics, GDP in 2021 was 734,6 trillion som, compared to 2020, it rose by 7,4% in real terms.

Uzbekistan is an industry-oriented state, the industry of different sectors account for more than 50% of gross domestic product. It is followed by such sectors as agriculture, construction, cargo and passenger transportation, commerce and services.

The country is rich in natural minerals, it has big oil and natural gas, uranium, coal, silver, tungsten fields and many other minerals on its territory. Due to this, the ore mining and oil production industries, non-ferrous and black metallurgy, gold production and processing are well developed in Uzbekistan. The light industry is a developed and progressive sector. There is a lot of feedstock for it, that’s to say, cotton quality and inexpensive textile products are made of in the country.

Last year, Uzbekistan spent $11,1 billion of foreign investments — it is 113% of the annual forecast. Investments in the working capital totalled $9,8 billion demonstrating a 110% growth pace compared to the numbers in 2020. China, Russia, Turkey, Germany, South Korea are the top 5 countries with the biggest investments in Uzbekistan’s economy.

In 2017, Uzbekistan started to pursue an open-door policy for foreign investors, and today many note that the country has the potential of the “sleeping tiger,” “new economic giant,” “new Asian dragon.”

Foreign Direct Investment research annually done by World Bank Group says Uzbekistan ranks 103rd in the world.

Tashkent. Analysis of key socio-economic indicators

Tashkent (Uzbek: Toshkent) is the capital and largest city of Uzbekstan of republican subordination. It is the most populous city of Central Asia and an aviation, railway and automobile hub.

  • The population of the city in 2021 was 2,694,400 according to the official statistics.
  • The territory of the city is 358 km².

According to the Ministry of Employment and Labour Relations of Uzbekistan, the unemployment rate in the country as of 1 January 2022 was 9,6%, which is 0,9% less than during the same period in 2021. The number of unemployed people in Tashkent is the lowest in the country and amounts to 7%.

The salary in Tashkent is the highest in the country. In 2021, the average monthly salary was 4,947,000 som, which is about 34,134 rubles (as of April 2022, the Uzbek som rate against the Russian ruble was 1 to 0,0069).

Analysis of housing development

In the last years, several strategically important infrastructure facilities have been launched in Uzbekistan, for instance, a circumferential metro line above the ground. Also, most roads have been expanded and repaired. Experts forecast that housing development can become one of the drivers of the country’s economy. So in March 2021, President Shavkat Mirziyoyov announced the start of a large-scale housing development programme in all the regions of Uzbekistan. The total funding is about $1,1 billion.

Entrepreneur Jahongir Artikxodjayev’s appointment as mayor in 2018 is associated with a new development stage of Tashkent. Tashkent City project started to be implemented approximately at the same time. This complex is located on a territory of 80 hectares, includes several business centres, hotels, shopping malls, parking and luxury high-rises.

The coronavirus pandemic had a significant impact on residential property. At the same time, since the economy of Uzbekistan is getting out of pandemic crisis, the population’s incomes are normalising and continue rising in some places. Such dynamics stimulate the population to invest in realty. The highest growth numbers are noticeable in the capital — in the last two years, the number of deals has increased by 66%.

According to the Central Bank, real estate purchase became an alternative source of income for entrepreneurs and a part of the population with sufficient savings.

The removal of administrative barriers to buying a flat in the capital for the regional population influenced more active demand in this sphere. A mortgage programme introduced by the government for finished housing played an important role too.

Analysis of prices. Housing development

The average prices, according to an analysis of the realty market in Uzbekistan done by the Centre for Economic Research based on open data, research on supply on the market.

The dollar rate in March 2022 was about 11,500 som.

Average second-hand housing prices in the capital in March rose by 2,4% compared to the previous month. The biggest growth was noted in Chilanzar (3,7%), Mirzo Ulugbek (3,7%) and Sergeli (3,2%) districts.

Experts note that a rise in supply on the realty market, and state housing programmes continue supporting citizens’ purchasing power.

Also, mortgage rates won’t change till the end of 2022, this was envisaged by a decree of Uzbekistan’s president.

Experts consider Tashkent a polycentric city whose centres were formed as a result of the specifics of urban development in the past and thanks to the development of private entrepreneurship.

Tashkent is divided into 12 districts: Olmazor, Bektemir, Mirobod, Mirzo Ulugbek, Sergeli, Chilanzar, Shayxontoxur, Yashnobod, Yakkasaray, Yashanad, Yangihayot and Uchtepa.

In late August 2021, the area of the capital increased by nearly 8,000 ha thanks to the territory of Tashkent District. A New Tashkent concept is planned to be realised in this zone.

The city develops mainly eastwards. The authorities try not to make the existing environment denser to save green zones and improve the amenities.

Most blocks of flats are erected within a public housing programme for young families and the vulnerable. Since its launch in 2017, the amount of construction in Tashkent has grown significantly.

Yulia Prokhorova

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The author’s opinion doesn’t necessarily coincide with the position of Realnoe Vremya’s editorial board.