Uzbekistan's Economic Reforms Attract Record FDI, Challenging Kazakhstan's Dominance
Uzbekistan and Kazakhstan, both Central Asian nations, are pursuing multi-vector foreign policies, accepting investments from diverse countries and maintaining relations with numerous global actors. However, a shift is noticeable, with Uzbekistan gaining traction in attracting international investors, challenging Kazakhstan's traditional dominance in the region.
Uzbekistan, under the leadership of President Shavkat Mirziyoyev since 2016, has implemented significant economic transformations. These include liberalizing its currency, reducing customs barriers, and announcing privatization programs. The country is now committed to reducing its fossil fuel dependence, as evident in its renewable energy projects with partners like Masdar from the United Arab Emirates. These efforts have paid off, with Uzbekistan attracting a record high of $2.84 billion in foreign direct investment (FDI) in 2024, despite having a smaller economy than Kazakhstan.
In contrast, Kazakhstan's economy remains heavily dependent on the energy sector, with around 60% of its FDI going to oil, gas, and uranium. While its FDI has been stable, it has not reached the peak of $17.2 billion in 2016 and even saw net outflows in 2024. Uzbekistan's textile industry, driven by reforms in cotton production and new processing plants, is booming, attracting investors from Turkey and the Gulf states. Meanwhile, German companies are increasingly exploring opportunities in Uzbekistan, with around 220 firms active in the country, including heavyweights like Claas, Knauf, MAN, and Siemens.
Uzbekistan's economic reforms and commitment to renewable energy have positioned it as a rising star in Central Asia, attracting significant investments despite its smaller economy. Meanwhile, Kazakhstan's heavy reliance on the energy sector leaves its economy vulnerable, with FDI not reaching previous peaks. As Uzbekistan continues to liberalize its economy and attract international investors, it is set to challenge Kazakhstan's traditional dominance in the region.
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