In an interview with Gazeta, Lisa Kaestner, IFC Director for Kazakhstan, Turkey, and Uzbekistan, discussed the reforms needed to attract private investment to Uzbekistan and the barriers hindering market growth. She noted that while Uzbekistan offers attractive opportunities across several interconnected sectors, job creation remains a top priority. Over the past five years, employment growth averaged just 1.1% annually, while the population grew by 2% per year, meaning the working-age population increases by roughly 250,000 people annually.
To bridge this gap, Kaestner identified three strategic directions. First is the energy sector. The government has already launched tariff reforms aimed at ensuring cost recovery in gas and electricity supply, signaling policy commitment to investors. Modernizing energy infrastructure, especially in major industrial hubs like Tashkent and Karshi, opens new opportunities for private capital in generation, transmission, and distribution.
The second direction is privatization of state-owned enterprises. In 2025, 600 large state-owned enterprises accounted for 35% of GDP, but most operate in sectors where the private sector is more efficient. A transparent and clearly defined privatization roadmap, combined with corporate governance reform, will enable investors to form long-term strategies and participate in large projects.
The third direction is logistics, agribusiness, and industry. Uzbekistan's trade-to-GDP ratio nearly tripled from 2017 to 2025, reaching 60%. The export potential of the processing industry stands at $4.7 billion, yet only 6% of Uzbek companies export, indicating significant room for growth.
According to Kaestner, the main obstacles are not legal but related to implementation. Opening markets through privatization, improving regulatory efficiency, and redirecting banks toward the private sector are key criteria for reform success. Strengthening institutional independence in energy, telecom, and rail transport is also critical.
Uzbekistan's banking sector remains largely state-oriented: credit resources mainly support state enterprises and large state-backed projects, while small and medium enterprises face limited access to financing. Developing capital markets and introducing alternative mechanisms like venture capital and non-bank lending are important to broaden the domestic investor base.
Human capital and infrastructure gaps, especially outside Tashkent, remain major constraints. Unreliable power grids and transport limitations raise operational costs and narrow the geography of investment opportunities.
Central Asia is a market of over 80 million people with significant natural resources and a favorable geographic location. Investors aiming to build regional supply chains and access diversified resources need cross-border infrastructure, harmonized regulations, and predictable access to neighboring markets.
Cross-investments are not only a driver of integration but also a solid foundation for a unified economic space in Central Asia. Developing regional value chains—such as assembling Uzbek auto components in Kazakhstan or creating textile clusters using Uzbekistan's raw materials and Kyrgyzstan's capacities—boosts regional export competitiveness.
When external investors see Central Asian countries investing in each other, it reduces country risk for the entire region. Intra-regional cross-investments are the best indicator of political stability and common rules of the game.
Kaestner believes Central Asia can attract investment even amid global uncertainty by combining structural reforms with sensible risk-sharing mechanisms. Quality of governance, regulatory predictability, and rule of law serve as the foundation.
IFC actively supports private sector development in all three countries through investments, advisory programs, and business environment improvement initiatives. By partnering with governments, financial institutions, and the private sector, IFC helps turn reforms into practical results.
Source: www.gazeta.uz