Uzbekistan’s Minister for Foreign Economic Relations Elyor Ganiev, speaking at a May 24 conference in Washington, said the Central Asian nation would provide "immediate support" for investors in export-oriented investment projects. However, a US official cautioned at the same conference that Uzbekistan needed to improve implementation of the rule of law to better protect foreign investments.

"President [Islam] Karimov believes that US investment is of strategic importance to Uzbekistan," Ganiev told the audience at the American-Uzbekistan Chamber of Commerce annual conference. He touted the cotton sector as being especially receptive to investment "in all parts of this industry – from the cotton harvest through to the production of apparel."

On the surface, recent economic statistics for Uzbekistan are positive. The country’s Gross Domestic Product rose 4.4 percent in 1999. During the first quarter of 2000, Uzbekistan registered a budget surplus of about 8.4 billion sum, or about US $36 million. Nevertheless, all sectors of the Uzbek economy are grappling to adapt to market conditions, and millions of citizens wage a constant struggle to stay above the poverty line.

In addition, socio-political conditions in Uzbekistan are unstable, especially in the overcrowded Ferghana Valley. The government has reacted to growing social tension by cracking down against Islamic radicalism. Many observers contend, however, that the state’s campaign is fueling instability.

The state retains a high degree of involvement in the Uzbek economy, and heavy government regulation has served to diminish the country’s attractiveness to foreign investors. Ganiev indicated the government was prepared to take steps towards implementing a freely convertible currency by "achieving the unification of the official and commercial exchange rates."

"What we have achieved this year is greater than what we have achieved over the past three years," he asserted.

US officials and business executives attending the conference affirmed that Uzbekistan offered significant investment opportunities. Some pointed the cotton sector, others the oil and gas sector. Uzbek officials have claimed that the country’s potential oil and gas reserves total about $1 trillion.

But, Jan Kalicki, a counselor at the US Department of Commerce, described Uzbekistan’s investment climate as stagnant. He cited existing currency restrictions as a major obstacle.

"Companies are not receiving their promised convertibility quotas, which prevents them from expanding their operations in Uzbekistan," Kalicki said. "Some companies are not able to gain access to hard currency at all. We know that companies are considering leaving Uzbekistan because of the hardship that these restrictions are causing."

Kalicki added that many foreign businesses have complained about excessive Uzbek government customs and taxation regulations. "Companies which are trying to work in Uzbekistan are seeking streamlined customs procedures, adoption of commercial tax regimes which reward investment and will raise revenue, and the protection of intellectual property rights," he said.

Uzbekistan would make itself more attractive to foreign investors if it strengthened its legal framework. "This requires attention to corruption, fulfillment of contracts and enforcement of court decisions," Kalicki said.