The mining sector of Uzbekistan, contributing approximately 10% to the country’s GDP, holds a strategic position in the national economy. With abundant mineral resources, including gold, uranium, copper, and other valuable commodities, the sector offers unique opportunities for international cooperation and investment. However, it also faces significant legal and environmental challenges requiring in-depth analysis and comprehensive solutions.
Economic Significance of the Mining Industry
The mining sector generates about 25% of Uzbekistan’s export revenues, equivalent to approximately $5 billion annually. Key areas include:
- Gold – Uzbekistan ranks among the top five countries globally in terms of proven gold reserves. The Muruntau mine contributes significantly to national exports.
- Uranium – amid global trends toward nuclear energy, Uzbekistan has become a major uranium exporter, collaborating with key markets such as China and the European Union.
- Copper – through modernization of processing facilities, Uzbekistan has achieved record-high copper exports, meeting the rising demand of high-tech industries.
The country’s geographic location at the crossroads of international trade routes facilitates integration into global supply chains, particularly with China, the EU, and Southeast Asia.
Legal Regulation and Regulatory Framework
The legal foundation for the sector is the Law of the Republic of Uzbekistan “On Subsoil,” which establishes licensing procedures, environmental requirements, and investor rights. Recent years have also seen the adoption of other important legal acts refining the regulatory framework:
- Resolution No. 133 of the Cabinet of Ministers – this document details the licensing process for subsoil use, including approval stages, application procedures, and requirements for applicants. The resolution aims to enhance transparency and accessibility.
- Presidential Decree No. 6044 – this decree streamlines licensing procedures, reducing application review times and focusing on creating favorable conditions for foreign investors.
- Presidential Decree No. UP-6319 on Geological Exploration – this document introduces new tax incentives for subsoil users, including reduced royalty rates and tax benefits for geological exploration activities.
Additionally, a new Law on Subsoil, set to take effect in 2025, will introduce significant changes to the sector’s regulation. Key updates include strengthened environmental requirements, a revised licensing mechanism, and new standards for information disclosure.
Licensing
The licensing process remains complex, requiring strict adherence to numerous requirements, including environmental and technical standards. However, under Presidential Decree No. 6044 and Resolution No. 133, the licensing procedure has been significantly simplified.
Taxation
Taxation is a critical issue for subsoil users. The updated Tax Code includes a dedicated section (Section 18) on subsoil use taxation, specifying royalty rates, tax benefit provisions, and mechanisms for accounting exploration expenses.
Major Industry Players
- Navoi Mining and Metallurgical Combine (NMMC) – specializes in gold and uranium mining, playing a key role in maintaining the country’s strategic reserves.
- Almalyk Mining and Metallurgical Combine (AMMC) – a leader in copper and zinc production, actively adopting modern ore enrichment and processing technologies.
These companies invest heavily in technological modernization, ensuring competitiveness in the international market. Their activities also significantly impact related industries, including transportation and energy.
Regulation
The State Committee for Geology and Mineral Resources serves as the primary regulator, overseeing compliance with legislation, licensing, and monitoring contractual obligations.
Key Legal Challenges
- Environmental Legislation – Uzbekistan is actively adapting international environmental standards, including ISO 14001 and the Paris Agreement provisions. Companies are required to implement closed water systems, waste recycling technologies, and land reclamation, necessitating significant investments and ongoing monitoring.
- Licensing Disputes – the lack of detailed and standardized procedures for obtaining licenses poses risks for investors. Resolving such disputes requires a thorough analysis of current legislation and arbitration mechanisms.
- Fiscal Issues – taxation remains a key challenge, particularly for international companies. For instance, discrepancies in the interpretation of preferential royalty rates often lead to disputes with tax authorities.
Support for Foreign Investors
For foreign companies, ensuring legal protection is a crucial factor in entering the market. Uzbekistan actively signs international agreements, such as the Convention on the Settlement of Investment Disputes, providing access to international arbitration mechanisms.
Key focus areas include:
- Contract Development: Drafting concession agreements and off-take contracts with consideration of legal risks.
- Arbitration Procedures: Facilitating access to international legal institutions enhances trust in the country’s legal system.
- Intellectual Property: Protecting technologies used in extraction and processing reduces risks of losing competitive advantages.
Environmental Reforms
Adopting hydrogen technologies, closed water supply systems, and land reclamation programs demonstrates Uzbekistan’s commitment to global environmental trends. For example, transitioning to closed systems has reduced water consumption by 30%, while reclaiming over 500 hectares of contaminated land has improved environmental conditions and increased the country’s appeal to socially responsible investors.
Uzbekistan’s mining sector holds immense growth potential, but its effective development requires the implementation of comprehensive legal strategies. Support from qualified legal advisors is an integral part of the successful realization of investment projects.
*The material was prepared by Nordic Star Managing Partner Andrei Gusev and Cerberus.Legal Managing Partner Vagif Kazimov.