Ferghana Valley

Foreign Investment
Since 1996 foreign investment in both Uzbekistan and Kyrgyzstan has grown 
steadily, albeit from very low bases. Instability in Tajikistan and Afghanistan 
discourages foreign investments nearby, but the negative experiences of earlier 
investors and persisting fears over the possibility of repatriating profits surely 
provide the most significant brake on investments from abroad. 
A very few major international projects account for most of the foreign invest-
ment in the Ferghana Valley. Thus, in 1995 the Daewoo factory in Andijan accounted 
for 80 percent of foreign direct investment. The TEK complex brought about the 
reconstruction of the Ferghana NPZ oil refinery, to which 15.7 percent of all capital 
investment in the Ferghana Valley region was allocated. Many other initiatives also 
involve foreign investments, which are focused in heavy industry but increasingly 
include such light industries as sewing factories and food processing. Among these, 
joint ventures are a common investment vehicle across the valley.
The development of Kyrgyzstan’s large Kumtor gold mine accounted for a 
jump in foreign investment at the national level in the 1990s. Later, investments 
to reconstruct technology firms rose from 15 percent of the total in 1997 to 48.3 
percent in 1999.
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Regional differentials were large even within the Kyrgyz sector 

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ECONOMIC DEVELOPMENT SINCE 1991 241
of the valley, with Jalalabad’s percent of total investments in the Ferghana Valley 
rising from 25.9 percent in 2000 to 34.5 percent by 2005. In the Kyrgyz sector 
foreign investment is directed mainly to mining and electricity, textiles and clothing 
manufacturing, cotton, and tobacco.
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Tajikistan’s civil war sharply curtailed all foreign investment throughout the 
1990s, and the recovery has been slow thereafter. Foreign investment, significantly 
from Kazakhstan and Korea, is concentrated mainly in mining, textiles, construc-
tion materials, and agro-processing industries. Typical are Tajik-Korean and 
Tajik-Italian joint ventures being developed to produce fabric and clothing in the 
city of Khujand.
Several factors have shaped the level of foreign investment in the three sec-
tors of the Ferghana Valley since 1997. The presence of mineral resources is an 
obvious magnet, but so is the quality of labor. Infrastructure plays a role, but so 
does the presence of enabling legislation by the national government, the ability 
to repatriate profits, and the degree of transparency. The interaction of these fac-
tors may explain why the Uzbek sector of the Ferghana Valley accounts for more 
than half of FDI-based industrial production in Uzbekistan and 40 percent of FDI 
itself, but only 6 percent of joint ventures. Note, too, that while Andijan province 
accounts for a third of Uzbekistan’s FDI, nearby Namangan province claims less 
than 1 percent of the total.
Whatever the differences among the three sectors of the Ferghana Valley, they 
all suffer from relatively low absolute levels of foreign investment and hence low 
levels of transfer of technology and skills. This can be traced in part to inadequate 
knowledge of the region abroad. But the various factors enumerated above—for 
example, inadequate infrastructure, poor cross-border contact, insufficient enabling 
legislation, and the perception of high levels of corruption—also play a part.