With a population of 22 million, Uzbekistan can offer major attractions to Foreign investors. These include the availability of raw materials, educated and skilled labor, a relatively developed infrastructure, and mineral resources that, according to American estimates, are worth three trillion dollars. The Uzbek government wishes to attract Foreign partners who can contribute capital, technology, and improved management to explore and develop the vast riches of the republic and share the profits fairly. Foreign Investment also is required for further development of the infrastructure for telecommunications; airport facilities: air, road, and rail transportation; power and electricity; engineering capabilities; and pipelines to allow proper functioning of the joint mining, oil, and gas industrial ventures. 

Since independence in 1991, Uzbekistan has taken a conservative and cautious approach toward market economic reforms. Although the Uzbek government has urged foreign investors to take advantage of its low taxes and other Investment incentives to invest in its agricultural, oil, gas, mining, and other infrastructure development Sectors, the response to actual cash Investment has been rather slow. Reasons for this slow pace of foreign investment in Uzbekistan include the present overall Foreign Investment environment in the NIS and a lack of confidence by Foreign investors in Uzbekistan's political and economic stability and its legal regime-or ignorance thereof. Moreover, in the past few years, many Foreign companies flooded the country with Investment proposals, much of which was a disguised attempt to sell goods, services, and equipment in a market mired by the lack of hard currency. Much of the Uzbek hard currency earnings from the sale of cotton, gold, and other raw materials has been consumed to purchase essential food and other consumer goods. Yet, in 1994, the Uzbek government began to take certain concrete steps to stabilize the Soum, liberalize prices, and comply with World Bank and IMF guidelines. This action resulted in a substantial increase in Western companies' interest to invest in Uzbekistan. 

Additionally, Uzbekistan has taken great strides in developing its legal structure-a body of commercial laws, including Foreign Investment, bankruptcy, tax, securities and stock exchange, collateral, and banking laws. The laws, which have been evolving since 1991, are fairly liberal, granting foreign investors many privileges and incentives. Further regulations are required, however, to fully implement these laws and to guarantee that certain laws provide for more concise and consistent terms and provisions. The initial implementation of these laws and Uzbekistan's progress in market economic reforms was rather slow due to the government's fear that application of shock therapy and other radical measures may trigger political and economic instability. The government has been carefully monitoring the progress of market reforms throughout the NIS, replicating their success stories and avoiding their mistakes. In addition, some of the middle and entry-level government bureaucrats responsible for implementing certain laws and regulations are not fully aware of the new laws. 

Beginning in January 1994, the government took major steps to accelerate the pace of market economic reforms by expanding privatization, removing barriers to foreign investment, improving laws and their implementation, reducing bureaucracy, and providing a more stable environment for business activity and foreign investment. These efforts included adoption of numerous laws, decrees, and resolutions by the Oli Majlis(the Supreme Council), the President, and the Cabinet of Ministers, respectively, which relate to foreign investment, privatization, bankruptcy, hard currency operation, foreign enterprises, natural resources. insurance, and banking regulations. In May 1994, a new foreign investment code was adopted, expanding foreign investors' privileges and protection. In addition, many normative acts and instructions have been issued by various government ministries and agencies to implement such laws. 

PRIVATIZATION OF STATE ENTERPRISES 

The government approach to reform of large, state enterprises has been cautious. The Uzbek Privatization Committee is concerned that if large-scale privatization happens without participation of foreign investors or infusion of capital from outside investors, then the newly privatized entities may lose their viability without access to inexpensive, state credit and subsidized, low-cost raw materials which are needed to continue production for the local market. In addition, most large state entities require modern technology and hard currency capital to modernize their existing plants in order to export competitive products on the international market. 

With the exception of gas, oil, and mineral resources, the Uzbek government is open to Privatization of its large, state enterprises, or a part thereof, in the form of a joint venture or corporation, and welcomes the idea of selling some or all of the company's shares to foreign investors. An example of the latter is the Privatization of the Tashkent Tobacco Factory, in which 97 percent of the shares of the company were acquired by BAT-a company which is investing  approximately US$200 million to modernize the factory and to produce new cigarettes. 

In the case of oil and gas exploration and mineral mining, foreign companies may invest in such projects via a joint venture. An example of a successful gold mining joint venture in Uzbekistan is the Zarafshan-Newmont Joint Venture. The first major project to reach completion since the break-up of the Soviet Union, the Zarafshan-Newmont Joint Venture is a real success story. This $220 million venture gold recovery project, which divided ownership equally between two Uzbek mining entities and the U.S. Newmont Corporation, is one of the largest western investments in the NIS to date. Certain other gold mines have also been the subject of joint ventures with participation of Foreign capital. 

CONCLUSION 

The recent measures taken by the Uzbek government have been a part of President Karimov's efforts to introduce Foreign Investment and boost Uzbekistan's declining economy, thus creating a more stable political and economic climate. The time is ripening for Foreign investors to take advantage of these developments, which offer a more secure environment for major Investment projects. 

References: 

1.  The Soum is the Uzbek national currency