“SPECIAL ECONOMIC ZONES AND FOREIGN DIRECT INVESTMENT: EVALUATING UZBEKISTAN’S FREE ECONOMIC ZONE MODEL”

Abstract

This article examines Uzbekistan’s special and free economic zone (SEZ/FEZ) program as an instrument of foreign direct investment (FDI) policy since the 2017 liberalization reforms. Drawing on national investment data, OECD and UNCTAD assessments, and case evidence from the Navoi, Angren, and Jizzakh zones, the article argues that Uzbekistan’s zone-based model has succeeded in concentrating capital, infrastructure, and tax incentives in a small number of high-performing locations, but has not yet resolved the structural weaknesses that constrain investment nationally. Navoi has developed into a logistics and high-technology hub anchored by an international air-cargo hub; Angren has diversified into food processing, building materials, and chemical manufacturing on the strength of its proximity to Tashkent; and Jizzakh, together with a growing network of smaller sector-specific zones, has extended the model into textiles, machinery, and pharmaceuticals. Despite this progress, four structural problems persist: a discretionary, case-by-case incentive regime that substitutes for systemic reform; residual currency and convertibility risk; a strong geographic concentration of investment in two or three zones; and weak contract enforcement and bureaucratic unpredictability that continue to be cited by investors as the leading obstacles to doing business. The article concludes that the zones have been a genuinely useful transitional tool, but that Uzbekistan’s medium-term FDI targets will depend on extending zone-style reforms - tax simplicity, customs efficiency, and investor protection - into the national economy rather than treating them as enclaves.