Distribution & Sales Channels
Nearly half of Uzbekistan’s population of 36.4 million is concentrated in Tashkent and the Fergana Valley, the two regions that consumer product manufacturers should consider as the most promising entry points to Uzbekistan’s markets. Residents of Tashkent have the greatest purchasing power in the country. Other large cities include Samarkand and Bukhara, which benefit from tourism. Uzbekistan is a double-landlocked country, so getting goods into the country can be complicated, especially amidst the ongoing Russia-Ukraine war and related logistical issues and Western sanctions on Russia, but once in, distribution is easier because of the dense population and relatively good transportation infrastructure. Trans-Caspian International Transport Route linking China and the European Union through Central Asia, the Caucasus, Turkey, and Eastern Europe has increased in importance. In February 2021, Uzbekistan, Pakistan, and Afghanistan agreed the construction of a 573-km-long Mazar-e-Sharif-Kabul-Peshawar railway. However, the Taliban’s takeover of Afghanistan in August 2021 made the project’s future uncertain. The three countries are still holding talks on implementation options. Such a railway could grant Uzbekistan access to the Indian Ocean and facilitate trade with South Asia and the world. The construction of China-Kyrgyzstan-Uzbekistan railway, which has been discussed for 20 years, is finally set to start in late 2023 or early 2024. A feasibility study for the project was completed in the first half of 2023.
Using an Agent or Distributor
U.S. companies currently active in Uzbekistan most commonly use the following methods to get their product to the market: distributing or selling the product directly; working through a countrywide distributor or agent; working through more than one local-area distributor or agent; and distributing or selling products directly from a warehouse.
It is important to have an experienced and reliable local partner or agent who knows the local market, customs regulations, business environment and legislation. A U.S. based exporter that is new to the market may contact business associations such as the American Chamber of Commerce in Uzbekistan (https://www.amcham.uz/) for general information on potential partners, agents, or distributors.
Establishing an Office
To open a local representative office, foreign companies need to get accreditation from the Ministry of Investments, Industry and Trade (https://miit.uz/en). The following documents should be submitted:
an application written on the letterhead of the foreign company containing information on its activity, business relations with companies and organizations in Uzbekistan, prospects for cooperation, and the requested time period for opening a representative officeconstituent documents of the foreign companythe official registration certificate from the foreign company’s domicile countrya power of attorney issued by a foreign company to the head of the representative office, indicating the full passport data and the powers grantedregulations on representation, approved and sealed by the management of the foreign companya letter of guarantee from a legal entity or individual of the Republic of Uzbekistan, which is the owner of the non-residential premises, confirming the readiness to lease or sell these premises to the representative office (indicating the conditions and terms of the lease or sale).
All documents must be legalized at the consular office of Uzbekistan in the foreign company’s domicile country. Legalization is not required if the documents are apostilled. Documents are submitted with a notarized translation into Uzbek or Russian language. If some of the above documents are not provided for by the legislation of the country of the foreign company, the company may submit to the accrediting body a confirmation from the Ministry of Foreign Affairs or the diplomatic mission of its domicile country in the Republic of Uzbekistan.
Accreditation can be issued for one to three years with the possibility of its subsequent extension, subject to the advance application of a foreign company to the accrediting body. The annual fee for accreditation is 48 times the basic calculation unit and amounts to $1,315 at the exchange rate of August 2022. The decision on accreditation should be made within 10 business days.
For the latest Investment Climate Statement (ICS), which includes information on investment and business environments in foreign economies pertinent to establishing and operating an office and to hiring employees, visit the U.S. Department of State’s Investment Climate Statements website.
Franchising
The following regulations govern a franchising agreement:
Civil Code of the Republic of Uzbekistan
Law on Trademarks, Service Marks and Places of Origin of Goods
Franchising agreements are subject to state registration. According to the Tax Code of the Republic of Uzbekistan, when paying royalties to a non-resident which does not have a permanent establishment, the licensee will be considered a tax agent for income tax and tax is withheld at a rate of 15% for each income payment, if there is no international agreement between the country of the licensor and the Republic of Uzbekistan providing for the avoidance of double taxation or applying a reduced tax rate.
Uzbekistan’s market presents unexplored opportunities for franchises, where only a few international companies are now present. The most serious barriers to franchising efforts are quality control, lack of information, and weak intellectual property rights protections. However, there is a great interest from local businesses to develop franchising arrangements with U.S. companies, primarily in the restaurant, beauty, healthcare, and hospitality industries.
Direct Marketing
Direct marketing in Uzbekistan is predominantly used by beauty and health product companies. Herbalife pioneered this field in Uzbekistan with its well-known model. Uzbekistani entrepreneurs frequently promote their products to potential customers using social networks. Other forms of direct marketing include distributing free samples at points of sale, cultural events, and door-to-door. Marketing by mail is not used.
Joint Ventures/Licensing
Uzbekistan’s current Law “On Investments and Investment activity” was issued on December 25, 2019. Under this law, the Ministry of Investments, Industry and Trade (https://miit.uz/en) is the authorized state body in the field of state regulation of investments, making it the regulatory authority for joint ventures and licensing. Depending on the extent of foreign participation, a business can be defined as an “enterprise with foreign capital” (EFC - less than 15% foreign-owned) or as an “enterprise with foreign investment” (EFI - more than 15% foreign-owned). Joint ventures are defined as a company with at least 400 million soums ($33,198 at the exchange rate in August 2023) charter capital and at least 15% of foreign ownership. A foreign enterprise (FE) is a company with at least 400 million soums charter capital that is fully owned by a foreign investor. FEs and EFIs can qualify for some tax incentives.
Currently there are 15,801 EFIs operating in Uzbekistan. The largest number of them hold Russian (3,156), Turkish (2,204), Chinese (2,141), Kazakh (1,258), and South Korean (930) capital. The U.S. comes sixth with 354 EFIs. Most (61.5%) EFIs are located in Tashkent. The number of newly registered enterprises with foreign investment amounted to 2,922 in 2022. Most new foreign investors originated in Russia (967), Turkiye (369), China (275) and Kazakhstan (195). The largest number of EFIs operates in trade (4,818), manufacturing (4,341), construction (1,270) and agriculture (770).
Express Delivery
A number of international express mail couriers are active in Uzbekistan, including DHL, FedEx, UPS, and others. Certain commodities are considered as “Non-Documents” and need to be accompanied by an invoice and, in some cases, additional customs documentation. In July 2018, the government introduced new taxation rules on goods valued at over $100 delivered via international mail and on goods valued over $1,000 on goods delivered per quarter via international courier shipments. Transit times from major U.S. cities average 10-12 days.
In accordance with Uzbekistan’s legislation on the protection of consumer rights, all products sold in the country must contain the following information:
Name of the product (work, service)Designation of regulatory documentation, the mandatory requirements of which the product (work, service) must comply withList of main consumption characteristics, including specific onesPrice (tariff) and terms of purchaseDate of manufacture of certain types of goodsManufacturer’s (service provider’s) warranty obligationsRules and conditions for effective and safe useService life (shelf life) and information about the necessary actions of the consumer after this period, as well as about the possible consequences if these actions are not takenFull name and location (legal address) of the manufacturer (service provides, seller), QR code (matrix barcode) of licenses and permits, and for imported goods - the name and location (legal address) of the manufacturer and importerName of the country of origin of goodsAddresses of the manufacturer (service provider, seller) and enterprises authorized by them to accept claims from the consumer, as well as those performing repairs and maintenanceMethods and rules of storage, safety of disposalFor a product subject to mandatory technical regulation, the consumer must be provided with relevant information about its compliance with the requirements of regulatory documents in the field of technical regulationIngredients and “best before” date (for food)User’s manual (if applicable)Warnings (if applicable).
This information label must be attached to the product at the facility where it is produced. The government will not allow in-country labeling. Information on imported goods should be provided online in advance to the customs service’s information systems.
Due Diligence
Due diligence is important in choosing the best market entry strategy and in selecting business partners and clients in Uzbekistan. Notable areas of concern include company solvency, import restrictions and procedures, rule of law issues, and limitations on government investment incentives. Interested parties may contact the American Chamber of Commerce in Uzbekistan or any of the major international audit companies with offices in Tashkent, including:
- Pricewaterhouse Coopers Uzbekistan
- Ernst & Young Uzbekistan
- Deloitte &Touche LLC Uzbekistan
- KPMG Uzbekistan
- Baker Tilly Uzbekistan
The U.S. Embassy provides International Company Profile (ICP) services to assist U.S. firms in evaluating potential business partners by providing information on Uzbekistani companies.