In a significant shift from decades of economic isolation, Uzbekistan has transferred $1.68 billion worth of state assets to foreign ownership.
Uzbekistan this week took a bold step toward economic liberalisation with the launch of the National Investment Fund of the Republic of Uzbekistan (UzNIF), The Caspian Post reports citing foreign media.
The 1.68 billion US dollars fund, which holds minority stakes in 18 of the country’s strategic state-owned enterprises, became fully operational on May 1. Franklin Templeton, an American asset management giant, has been appointed as both fund manager and trustee.
The move represents one of Central Asia’s most significant attempts to attract international capital and modernise its economy.
UzNIF owns stakes ranging from 20 per cent to 40 per cent in enterprises spanning energy, telecommunications, banking, utilities, and transportation-including flag carrier Uzbekistan Airlines.
Plans are already underway to list the fund on both the Tashkent Stock Exchange and a leading international bourse.
A maturing economy
For a country that has largely remained closed to foreign investors since gaining independence from the Soviet Union in 1991, this marks a dramatic shift. President Shavkat Mirziyoyev, who took office in 2016, has gradually dismantled the isolationist policies of his predecessor, Islam Karimov.
The creation of UzNIF through a presidential decree last August suggests the reforms have reached a new level of maturity.
The fund’s primary objectives extend beyond mere privatisation. By focusing on “improving the efficiency, profitability and governance” of state-owned enterprises, the government appears to be addressing the structural issues that have historically deterred foreign investment.
“We are honoured to be entrusted with the management of the UzNIF. The formal commencement of our partnership with the Ministry of Economy and Finance marks a significant milestone in our commitment to drive long-term economic growth in Uzbekistan and support the country’s reform agenda; one that promises lasting growth and prosperity for the nation,” says Manraj Sekhon, Chief Investment Officer of Templeton Global Investments.
Sleeping giant
Uzbekistan, with its population of 36 million and strategic location at the heart of Central Asia, has long been viewed as a sleeping giant.
The country possesses abundant natural resources, a young workforce and proximity to major markets including China, Russia and South Asia. Yet political isolation and a command economy have prevented it from realising its potential.
The appointment of Franklin Templeton, which manages over 1.53 trillion US dollars globally, sends a powerful signal to international investors. The firm has established a physical presence in Tashkent, bringing expertise in emerging markets to a country previously off most investors’ radars.
“Franklin Templeton is excited about the opportunity to channel global capital into Uzbekistan and showcase the country’s successful growth story to investors worldwide. We think investors will be very interested in the attractive and diversified investment access that UzNIF will have to offer on the world stage,” says Marius Dan, who has been appointed general director of Franklin Templeton’s Uzbek subsidiary in addition to his role as CEO for Central Asia.
The asset manager brings credibility from its work with similar funds elsewhere. It previously managed Romania’s Fondul Proprietatea, a privatisation vehicle that reached a market capitalisation exceeding three billion US dollars and delivered total shareholder returns of 632.4 per cent in dollar terms since its 2011 listing.
Targeted outreach
For global investors seeking new frontiers, Uzbekistan represents one of the few remaining untapped markets of scale. The country’s GDP has grown at an average of five-six per cent annually in recent years, even through the pandemic.
Its currency reforms in 2017, which eliminated the black market for foreign exchange, were widely praised by international financial institutions.
The next critical phase for UzNIF will involve roadshows and targeted outreach to international investors. Success will depend not just on investor appetite but on tangible improvements in corporate governance and transparency at the portfolio companies-areas where post-Soviet economies have historically struggled.
If executed properly, UzNIF could become a model for other resource-rich Central Asian states still dominated by state ownership and struggling to attract foreign direct investment beyond extractive industries.
For Uzbekistan itself, the initiative may finally unlock the economic potential that has remained dormant for decades.
