Uzbekistan provides an example of how to achieve balanced transformation without resorting to abrupt upheavals – a model that could serve as a benchmark for other developing countries, Umid Abidkhadjaev writes.
In the 2020s, Uzbekistan has relied on five interconnected pillars that serve as the foundation for long-term growth:
-
Diversifying sources of economic development;
-
Developing the private sector and competitiveness;
-
Strengthening human capital;
-
Improving the country’s sovereign credit rating and deepening financial markets;
-
Promoting a green economy and infrastructure modernisation.
This system does not simply reflect government policy priorities; it sets a long-term trajectory where economic growth, environmental sustainability, and social well-being develop synchronically.
Over the past eight years, Uzbekistan has progressed from embracing liberalisation and macroeconomic stabilisation to pursuing comprehensive strategic investment. Large-scale reforms have improved the business climate and strengthened the country’s position in the global economy.
Key areas include liberalisation of the foreign exchange and trade regime, human capital development, digitalisation of governance, and the implementation of a national sustainable development strategy. These measures have stimulated entrepreneurial activity and attracted new capital flows.
Legal and tax reforms have played a particularly important role. The new Tax Code and the Law on Investment Activity have ensured tax transparency and investor protection, creating a predictable foundation for long-term investment.
The new investment policy is based on the development of entrepreneurship and the expansion of public-private partnership (PPP) mechanisms. These instruments have paved the way for attracting private capital into strategic sectors such as infrastructure, energy, and the green economy.
In recent years, more than 2,700 projects worth over $29 billion have been signed, including 70 joint initiatives with foreign countries. Launching these will bring $27.3 billion in private investment into the economy. The implementation of the projects has stimulated investment activity and strengthened the country’s economic potential.
The results of reforms were immediate: the country’s GDP reached $115 billion by the end of 2024, and per capita income almost doubled compared to 2017, reaching $3,093 per year. The economy is gradually shifting its focus from traditional agriculture to services and industry, which have accounted for over 76% of total GDP growth.
Uzbekistan has cemented its status as one of the most dynamic economies in the region. Fixed capital investment increased from $14 billion in 2017 to $40 billion in 2024. This more than 2.8-fold jump reflects a large-scale increase in investment activity in the economy. Foreign direct investment and loans grew particularly rapidly – from $2.5 billion in 2017 to $25.9 billion in 2024, directly reflecting the growing confidence of the international business community in Uzbekistan’s economy and investment climate.
Foreign trade has demonstrated similar progress: trade turnover increased from $26.6 billion to $67.2 billion, while exports reached $27.3 billion, demonstrating a significant strengthening of the country’s foreign economic position and increased macroeconomic stability.
Since 2017, the country has undergone a large-scale tax transformation: administration has become simpler, more transparent, and more efficient, the tax burden has been reduced, and investment attractiveness has increased. A flat income tax rate of 12% was introduced, the social tax rate was reduced from 15% to 12%, and the dividend and interest tax was cut from 10% to 5%. A new tax code reduced the number of taxes from 13 to 9 and optimized rates: property tax was reduced from 5% to 2%, the profit tax rate was set at 15%, and VAT was gradually reduced from 20% to 12%, while the tax base was expanded to include cross-border digital services. As a result, over the past seven years, budget revenues have increased approximately 2.5-fold, and the number of VAT payers has grown more than 20-fold, reaching 212,000 today.
Active integration into international financial markets has strengthened the country’s investment attractiveness. From 2019 to 2025, Uzbekistan issued sovereign international bonds in foreign and national currencies totalling $6.6 billion (4 billion in dollars, 1.1 billion in euros, and 17.8 trillion soums, or approximately $1.3 billion), including Sustainable Development Goal bonds worth $1.1 billion and green bonds worth approximately $0.9 billion.
Uzbekistan’s sovereign credit rating was upgraded from “BB-” to “BB” (stable) by Fitch Ratings. As a result, interest rates on sovereign international bonds in the secondary market have significantly decreased, a sign of growing international investor confidence.
The “green” transformation of the economy has emerged as one of the country’s strategic objectives.
Key regulations were adopted in 2025: the Law “On Limiting Greenhouse Gas Emissions” and regulations for the issuance of “green” certificates. Over 346,000 I-REC (E) certificates have already been issued, and a Long-Term Low-Carbon Development Strategy through 2055 is under development.
A National Programme for the Development of Green Finance is being created, including a “green budget,” concessional lending, an environmental tax system, and the issuance of green bonds. These instruments will mobilise capital for low-carbon technologies and increase the competitiveness of the economy.
Over 60% of Uzbekistan’s population is under 30 years old, a powerful demographic resource for innovative growth. To unlock this potential, over the past seven years, funding for education and healthcare has increased sevenfold and sixfold, respectively, accounting for almost 40% of the state budget.
The number of universities has grown from 72 to 219, representing a more than threefold increase. The number of foreign higher education institutions has also increased almost 4.5-fold, from 7 to 31, and the number of lecturers has almost doubled, reaching 45,400. As a result, higher education enrolment among young people has reached 47.7%, compared to 8.3% in 2017. These achievements will allow it to create a highly skilled workforce and strengthen long-term competitiveness.
Infrastructure modernisation is key to increasing productivity and reducing business costs. The number of special economic zones has increased from 3 to 28; 766 small industrial zones have been created, serving as platforms for small and medium-sized projects. Over 210 clusters have been opened to support start-ups and innovative businesses, particularly in the services and digital economy sectors.
One of the most notable successes has been the liberalisation of the aviation market: the number of airlines has increased from 3 to 16 (14 private), the fleet from 38 to 104 aircraft, routes from 78 to 195, and passenger traffic from 4.3 million to 13.5 million. This demonstrates how industrial reform is facilitating private investment and regional connectivity.
Uzbekistan’s medium-term goal is to achieve upper-middle-income status, and by 2030, to approach $200 billion in GDP and $5,000 per capita. This will require annual economic growth of 6-7%, fixed capital investment of at least 7%, and annual inflation maintained within 5-6%, with a consolidated budget deficit of 3% of GDP. Uzbekistan’s current economic development model is a combination of structural reforms and strategic investment aimed at sustainable growth, innovation, and social well-being.
Five key pillars – diversification, the private sector, human capital, financial sustainability, and a green economy – serve as the foundation of the new model, allowing the country to harmoniously integrate economic and environmental priorities.
Uzbekistan provides an example of how to achieve balanced transformation without resorting to abrupt upheavals–a model that could serve as a benchmark for other developing countries.
