The Real Estate of change: How a once closed nation to foreign investment and urban development turned into a high-growth investment zone, only recently noticed by Apple, Nike, Adidas AG, INDITEX, IKEA and Volkswagen.


Uzbekistan – the world’s only double landlocked entity, in compartment with Liechtenstein, commonly named as the historical eastern land of innovation by having its scholars develop innovative infrastructure models useful for multiple ancient societies such as the “Nilometer” in Egypt, one of the best medieval space observatories in Samarkand (central Uzbekistan) and the development of mathematical concepts used in infrastructures today. In the ancient times of the Silk Road trade, Uzbekistan has been known as the epicenter of the Silk Road route and an investment terminal of commodity, leading Uzbekistan to have incorporated commerce in its business history for centuries before the reign of the USSR and the seizure of Uzbekistan’s independency in the 1920s.

During the communistic state of the USSR, private ownership and business investments were prohibited nationwide and, for the most part, any municipal economic activity being developed or innovated required the approval of the USSR Central committee, thereby leading to extreme inefficiencies in the world of business development and economic optimization. The death of the Aral Sea, located northwest of Uzbekistan’s territories, is an example of a devastating outcome in result of Uzbekistan’s extreme cotton production volumes, initially ordered to be in place by the “production policy” of the USSR.

In 1991, upon the collapse of the USSR, Uzbekistan had its first wave of independency reforms in order to gain back its potentially lost historic success in commerce, and establish its own contracts and rules of trade both on foreign and domestic matters. However, with the years of severe historical periods of limited food supply and currency fluctuations, the focus on construction and infrastructure gradually deviated from its importance and prioritization, thereby leading to most of the country’s residential, commercial and industrial buildings to continue operations in well-depreciated assets built in the Soviet period.

Moreover, given the government’s conservatism and concerns in the preservation of Uzbekistan’s independence (focused on social control), a variety of restrictions on telecommunication, business, merchandise trade, as well as perplexing policies on foreign investments (particularly in commerce, minerals, infrastructure and real estate) have been realized. One of the main reasonings in the rapid decline of foreign investment in Uzbekistan’s early period of existence were the multiple burdens and bureaucratic interferences in dealing with various investment policies/regulations that subsequently decreased the investment sentiment and yield rates of ROI as a whole. These difficulties were extremely influential on both domestic enterprises and international venture capitalists/institutional investors seeking to tap into Uzbekistan’s economic potential.

Having kept such regulations for multiple years, the 2008 global financial crisis along with the Russian sanctions of 2014 have worsened the Uzbek economy by harsh matter, resulting the national currency to deplete its value by severe terms amidst mean inflation marking double digits of about 10% per annum, all during a fixed currency regime and the progressive strengthening of trade restrictions.

However, in 2017, amidst the passing of Uzbekistan’s first president and thereby marking the end of his 27 years of presidency, a new government administration had been established. The new administration was elected with the hope of undertaking change in the long-lasting inefficiencies developed by the governance of the previous conservative administration.

With passion in returning Uzbekistan’s once historical progress in business, trade and social welfare, the new administration had developed a five-pillar strategic reform policy aiming on improving five sectors of economic progress: state and public construction, judicial improvement, foreign relations, social wellness, economic liberalization, foreign policy, and the urbanization of cities as well as the security of its citizens.

In the same year of election, by prioritizing restructuring foreign investment policies, the foreign USD/UZS exchange had been adjusted from 4,200 to 8,100 UZS (Uzbek Som) which was implemented in favor of eliminating the long-lasting ‘black market devaluation’ of the Uzbek Som by 48%. 2 years later, an avalanche of improvements led to enforcing a free-floating national currency, e-visas for 101 countries (in contrast to 29 countries initially), eliminating capital controls for foreign investors, sovereign bond issuing amidst paying close attention to the credit rating firms like Standard & Poor’s, Moody’s, Fitch’s report a BB- score with a stable outlook prognosis.

Given the incentivization of foreign investment in Uzbekistan, the various programs of entrepreneurial subsidy for small businesses, as well as property tax and VAT exemptions, income tax deductions within first years of enterprise operation and import/export benefits for foreign investors, the political approach of the 5-year pillar “Development Strategy” program included excerpts from the Turkish, Chinese, Korean economic prosperity models, however lacked the appropriate concentration in infrastructure and Real Estate development.

After years of low GDP growth and the previous administration’s conservatism in fixed asset investments and prime neglection of international cooperation by the virtue of intervention circumspection, previously experienced with in the beginning of Uzbekistan’s independence, the new administration of Uzbekistan decided to establish new reforms centered on the importance of Real Estate construction, privatization of national corporations, the transformation of business conductance by anti-monopolistic and free-market policies, as well as incentivizing the establishment of international partnerships within both the public and private sectors of business climate. The primary government tasks laid in securing the national currency from its further depreciation and finding a more efficient pathway for sustainable development that had been thought of as achievable, given the then-adjusted, more precise, 5-pillar “Development Strategy” program.

Such motive has led to the entry of various international entities such as the Grand Thompson, Deloitte, KPMG, PwC and other consulting/appraisal establishments that have gained experience in the field of international Real Estate for decades prior, to participate in the international standardization procedures of Uzbekistan’s public and private construction projects. The ripple effect of such an open policy on international cooperation in the development and sustainability of the country’s fixed asset investments have resulted in the trustworthiness of Uzbekistan’s assets amidst the books of multiple global financial investment organizations. For instance, as of 2020, World Bank’s country program in Uzbekistan positioned as the second largest in the European and Central Asian region, cooperatively resulting in funding programs of over $100 million in funding. Other financial institutions such as the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA) have collectively offered favorable loan terms on $4.44 billion to cover 23 projects of construction, poverty reduction and meaningful social impact. The listed funds have been granted given the new administration’s active concentration on urbanization and Real Estate development which has been placed with the goal of further economic sustainability. As of 2019 alone, Uzbekistan contained a capital investment volume of over $21.5 billion, inclusive of Foreign Direct investment totaling to $4.2 billion.

*Data source: Annual “Number of economically active population, employed and unemployed by the regions of Republic of Uzbekistan” report of The State Committee of the Republic of Uzbekistan on Statistics.

It is also worth noting that one of the primary reasons the government’s focus in Real Estate development, and the driver behind the numerous incentives for fixed asset investment among both domestic and foreign entities, originates from the concern of the rapidly growing unemployment rates that were the caused by various crises, including both the coronavirus and oil price crises of 2019/20.

*All types of Real Estate included (residential, commercial, industrial). Red line separates previous (until 2016) and new government administrations (post-2016). Dotted blue line represents exponential trendline. Data source: Annual “Main social and economic indicators of investment and construction activities” report of The State Committee of the Republic of Uzbekistan on Statistics.

After political reforms were taken place on domestic and foreign investment policies with an increased concentration on Real Estate development, thereby incentivizing an increase of domestic and foreign investments in the field of real estate development, the next phase of improvement was centered in the depletion of corrupt activities and making sure that any construction happened within Uzbekistan would not solely be concentrated in certain central cities, but spread across the rural regions of its territories in order to have the contagious positive externalities of urbanization influence the rural area’s employment, social, and infrastructure conditions; this governmental program was named as “Obod Kishlok” (translated as “prospering village”). As of 2020, Uzbekistan’s effort in rural urbanization has been noticed by the World Bank and a loan of $100 million on favorable terms for the revitalization of the “Obod Kishlok” project had been granted.

With the continuing concentration in construction and Real Estate development, the government of Uzbekistan had recently established a social-oriented affordable housing program totaling to over 1,800 residential buildings and an over $100 million price tag as part of the country’s 2021-2022 urbanization project plan.

Moreover, in the beginning of 2021, a national program of affordable housing for rural areas with 15-year fixed mortgages ranging from 10-15% APR with a 5% down payment subsidy has been announced to take place and deliver aid over 8,300 regional residential estates. As the government notes, the benefits of concentrating in Real Estate development have been directed with the aspirations of its contagious upshift to economic activity; more specifically: an increased amount of job placements for a variety of employment occupations given active construction (lawyers, financiers, consultants, architects, construction workers, appraisers, etc.), improvement of infrastructure (road pavements, electricity, water, sanitation, etc.) which contribute to further development of housing, rising home appliance purchases as residents often perceive a “new life” within their new homes (fridges, toasters, TVs, A/Cs, etc.), and increases in transportation, manufacturing and trade services that can benefit the local economy. As estimated by experts, the affordable housing program would be capable of returning 1.97 UZS on every 1 UZS invested, thus, incentivizing the government to further concentrate in the urbanization and construction segment of Uzbekistan’s 5-pillar development strategy.

Apart from developments, renewable energy has also been of particular governmental concern as well. Therefore, during the course of 2020, over $2 billion worth of FDI agreements have been signed with international green-energy enterprises such as ACWA Power (Saudi Arabia), Masdar (UAE), TOTAL Eren (France), all led with the government’s notion of aiming for cheaper costs of energy and a solar energy supply of 1 GW by 2030.

By completely transforming Uzbekistan’s economic and governmental policies from its once-established political conservatism and bureaucracy, Uzbekistan had increased its ranking from 166th in 2012 to 69th in 2020 on the Doing Business global listing index. The established reforms have helped Uzbekistan gain a sky-rocket 14.5% increase in foreign enterprise registrations, having 18% of the increase concentrate in construction and 20% within the trade sector.

Some of the officially registrations/partnerships with foreign entities recorded within the past 1.5 years were Apple, Netflix, Google Commerce, Google Ireland, Google Voice, Samsung Electronics, Cleverbridge, Xsolla, Nike (world’s largest shoe-maker), ADIDAS AG (world’s second largest shoe-maker, owner of the Reebok and Runtastic brands), and INDITEX (world’s largest retailer with brands ranging from Zara Home to Pull & Bear), Spotify, Google Cloud EMEA Limited (Ireland), USM Telecom, Megafon, Volkswagen Group, IKEA and Carrefour.

Experts note that given Uzbekistan’s 97% literacy rate and growing working age population, its leadership position in cotton, gold and other precious metals, and recent anti-corruption measures of the new administration, international corporations have been favored of considering Uzbekistan as a potential epi-center of production for matters of insourcing and outsourcing on large volume scales.

As a result of the adapted reforms and incentives, Uzbekistan’s GDP growth for 2021 has been forecasted to be between 4.8-5.0% post a stable record of 1.6% growth for 2020, in comparison to the global GDP growth average of -2.7% for 2020, according to the World Bank.

Conclusively, Uzbekistan’s ongoing concentration in further urbanization and increased attention to Real Estate development, foreign investment incentives, as well as sticking to the concept of any region’s economic well-being bearing extreme correlation with the urbanization and development of its cities, has lifted Uzbekistan from a once conservatively closed nation to a securer of the “Country of the year 2019” nomination by the Economist, as well as being enlisted in the World Bank’s top 20 countries that have made the most significant reforms to facilitate business climate in 2019.

As the COVID-19 pandemic had hit Uzbekistan’s macro and microeconomies, it was surprising to note how the incentives and policy reforms in Real Estate development have resulted in the construction sector to contribute by over 30% to Uzbekistan’s GDP growth in 2020, making it the third most influential sector to GDP growth after agriculture and industrials. The prognose of job employability due to urbanization and construction have also secured Uzbekistan’s national trade balance and national income account strong records, in addition to a 22% debt-to-GDP ratio and a growing number of agreements with leading members of the Dow Jones Industrial Average, S&P 500, DAX Performance, Stoxx Europe 600, MSCI World Indexes and many other international entities.

Over the years of economic volatility and hardness of times post-independence, it has been learned that social and economic progress is contagious within an economy of strong Real Estate development, as its effects express a positive network externality on a variety of layers within the district, regional, and national levels as a whole, thereby leading to growing standards of living. Hence, it is interesting to note how a once closed nation to international cooperation and business trade, turned into a growth-country model by placing urbanization as a one of its top priorities within its strategic development program, thereafter embracing the results of Real Estate development that was implemented by believing the urbanization investments to “pay for themselves in the long-run.” So far, it seems like they certainly have.

As a final note, the outcomes of Uzbekistan’s unique approach in national urbanization may be overviewed by the charts below:

*Red line separates previous (until 2016) and new government administrations (post-2016). Dotted blue line represents exponential trendline. Data source: Annual “Main social and economic indicators of investment and construction activities” report of The State Committee of the Republic of Uzbekistan on Statistics.
*Red line separates previous (until 2016) and new government administrations (post-2016). Dotted blue line represents exponential trendline. Data source: Annual “Main social and economic indicators of investment and construction activities” report of The State Committee of the Republic of Uzbekistan on Statistics.
*Data source: Annual “Total per capita income in the previous year” report of The State Committee of the Republic of Uzbekistan on Statistics.
*Dotted blue line represents exponential trendline. Data source: Annual “Number of enterprises and organizations by type of economic activity” report of The State Committee of the Republic of Uzbekistan on Statistics.
*Dotted blue line represents exponential trendline. Data source: Annual “Number of enterprises and organizations by type of economic activity” report of The State Committee of the Republic of Uzbekistan on Statistics.
*Dotted blue line represents exponential trendline. Data source: Annual “Number of small businesses by type of economic activity” report of The State Committee of the Republic of Uzbekistan on Statistics.