Since independence, the Government of Uzbekistan has stated that it is committed to a gradual transition to a market-based economy. The progress with economic policy reforms has been cautious, but cumulatively Uzbekistan has registered respectable achievements. The government has eliminated the gap between the black market and official exchange rate by successfully introducing convertibility of the national currency, but its restrictive trade regime and generally interventionist policies continue to have a negative effect on the economy. Substantial structural reform is needed, particularly in the area of improving the investment climate for foreign investors, strengthening the banking system, and freeing the agricultural sector from state control. Remaining restrictions on currency conversion capacity and other government measures to control economic activity, including the implementation of severe import restrictions and sporadic closures of Uzbekistan's borders with neighboring Kazakhstan, Kyrgyzstan, and Tajikistan have led international lending organizations to suspend or scale back credits.
The government working closely with IMF has made considerable progress in reducing inflation and the budget deficit. The national currency was made convertible in 2003 as part of the IMF-engineered stabilization program, although some administrative restrictions remain. Agriculture and manufacturing industries contribute equally to the economy, each accounting for about one-quarter of GDP. Uzbekistan is a major producer and exporter of cotton, although the importance of this commodity has declined significantly since independence. Uzbekistan is also a major producer of gold with the largest open-pit gold mine in the world and has substantial deposits of copper, strategic minerals, gas, and oil.
Uzbekistan's foreign trade policy is based on import substitution. The system of multiple exchange rates combined with the highly regulated trade regime caused both imports and exports to drop each from about US$4.5 billion in 1996 to less than US$3 billion in 2002. The success of stabilization and currency liberalization in 2003 has led to significant increases in exports and imports in recent years, although imports have increased much less rapidly: while exports had more than doubled to US$6.5 by 2006, imports had risen to US$4.5 billion only, reflecting the impact of the government's import substitution policies designed to maintain hard currency reserves. Draconian tariffs, sporadic border closures, and border crossing "fees" have a negative effect on legal imports of both consumer products and capital equipment. Uzbek farmers are deprived of seasonal opportunities to sell legally their popular tomatoes and vegetables for good prices in Kazakhstan. Instead, they are forced to dump their produce at reduced prices on local markets or alternatively continue "exporting" by paying stiff bribes to border guards and customs officers. Uzbek consumers are deprived of access to low-cost Chinese goods that cross the border from Kyrgyzstan in normal times. Uzbekistan's traditional trade partners are the CIS countries, notably Russia, Ukraine, and Kazakhstan, which in aggregate account for over 40% of its exports and imports. Non-CIS partners have been increasing in importance in recent years, with Turkey, China, Iran, South Korea, and the EU being the most active. As of 2006, Russia remains the main foreign trade partner for Uzbekistan.
Uzbekistan is a member of the IMF, World Bank, Asian Development Bank, and European Bank for Reconstruction and Development. It has observer status at the World Trade Organization, is a member of the World Intellectual Property Organization, and is a signatory to the Convention on Settlement of Investment Disputes Between States and Nationals of Other States, the Paris Convention for the Protection of Industrial Property, the Madrid Agreement on Trademarks Protection, and the Patent Cooperation Treaty. In 2002, Uzbekistan was again placed on the special "301" Watch List for lack of intellectual copyright protection.
According to EBRD transition indicators, Uzbekistan's investment climate remains among the least favorable in the CIS, with only Belarus and Turkmenistan ranking lower. The unfavorable investment climate has caused foreign investment inflows to dwindle to a trickle. It is believed that Uzbekistan has the lowest level of FDI per capita in the CIS. Since Uzbekistan's independence, U.S. firms have invested roughly $500 million in the country, but due to declining investor confidence, harassment, and currency convertibility problems, numerous international investors have left the country or are considering leaving. In 2006, the Government of Uzbekistan forced out Newmont Mining Corporation (at the time the largest U.S. investor) from its gold mining joint venture in the Muruntau gold mine. Newmont and the government resolved their dispute, but the action adversely affected Uzbekistan's image among foreign investors. The government attempted the same with British-owned Oxus Mining. Coscom, a U.S.-owned telecommunications company, involuntarily sold its stake in a joint venture to another foreign company. GM-DAT, a Korean subsidiary of GM, is the only known U.S. business to have entered Uzbekistan in over two years. It recently signed a joint-venture agreement with UzDaewoo to assemble Korean-manufactured cars for export and domestic sale. Other large U.S. investors in Uzbekistan include Case IH, manufacturing and servicing cotton harvesters and tractors; Coca Cola, with bottling plants in Tashkent, Namangan, and Samarkand; Texaco, producing lubricants for sale in the Uzbek market; and Baker Hughes, in oil and gas development.