Is investing in contemporary Uzbekistan a viable option? Maybe you haven’t heard much about Uzbekistan, or can’t really place it on a map. But back during the early silk trading days, you would have. Cities such as Bukhara and Samarkand were at the core of the silk trading, and were the subjects of many tales of endless wealth.

Since then, Uzbekistan has plunged quite low. It borders countries such as Afghanistan, Tajikistan, Kazakhstan, and Turkmenistan and got its full independence from the Soviet Union in 1991.

The world’s only double landlocked country, along with Liechtenstein, had a rather rough time after independence with the iron-fist rule of Islam Karimov. The economy was closed off, and essentially under complete state and oligarchic control. Let’s just say that it wasn’t much of an environment for honest foreign investors :). Karimov passed away in 2016 and was replaced by Shavkat Mirziyoyev who promised a new course for the country.

Having worked in Central Asia for a while in the past, I always followed the political developments in the region. I remember telling myself 12 years ago that when Uzbekistan would open up, I’d want to be there to sniff out opportunities.

The government has been making progress over the last 2-3 years. For instance, it abolished exit visas for its citizens. Some political prisoners have been freed, special economic zones are being created, and virtually every sphere of government and legal codes are being reformed. Below is a list of why I believe Uzbekistan should be on your radar.

Investing in Uzbekistan – the Demographics

Except for a dip due to hard post soviet days, the population graph is very healthy, and promises many years of growing labour force. European and East Asian countries can only dream of such a pyramid.

The country has a fertility rate of 2.4, which ensures population growth. However not so much that it becomes overwhelming like in many Sub-Saharan countries.

Many people have heard of the riches of Kazakhstan; but Uzbekistan with its 33 million people is almost twice as populated.

The Geopolitics

Let’s face it, “World Power” is shifting from the North Atlantic to the East. Central Asia is in the middle of all the action. Uzbekistan is right there, ripe for the taking. Everybody is rushing to the capital Tashkent in this high stakes game.

Investing in Uzbekistan – the Reforms

Investing in Uzbekistan – the Macro & Fiscal aspects

Screenshot from The Economist, some August 2019 edition

Uzbekistan sounds like a great investment destination but

Some people will tell you:

“It’s not a democratic country”. Sure, just like Monaco, China, Hong Kong, Vietnam, etc. A lack of democracy does not mean a bad economy. Having said this, yes, just as quickly as reforms are being passed, they can be undone. Same things with capital controls; they could come back and your money would be stuck there. The risk is real.

“Inflation is high”. Yes; inflation is high, this is one of the main risks, but already the inflation numbers are coming down and the World Bank is optimistic.

Instability related to Afghanistan and Islamic terrorism. The government is acutely aware of the risk, and it is a top priority. Having said this, good reforms and economic growth are the best breaks to any sort of extremism.

“It’s risky”. No pain no gain. And quite frankly, as I see the frantic pace of extreme socialist rhetoric in many Western countries, along with their high debt burdens, risk is underestimated there. But indeed, investing in Uzbekistan is much riskier than in Singapore 🙂

In conclusion, should you go to Uzbekistan?

I know I am. The growth story is too compelling. Everyone is starting to take notice, and it is still very early in the game. Moreover, hedge funds and private equity funds such as Hong Kong based Asia Frontier Capital and London based Sturgeon Capital have started Uzbekistan focused funds this year.

The Wandering Investor will be heading there for a few weeks to see it for himself. Maybe he’ll see that the reality on the ground is completely different, or not. Expect more posts on the matter.

More articles on Uzbekistan:

Subscribe to the PRIVATE LIST below to not miss out on future investment posts, and follow me on Youtube, Facebook, and LinkedIn.

If you want to discuss your internationalization and diversification plans, book a consulting session* or send me an email.

*a consulting session is a discussion about your portfolio and objectives. It does not constitute legal, financial, tax or investment advice.