India and Uzbekistan Sign Bilateral Investment Treaty

The recent signing of the Bilateral Investment Treaty (BIT) between India and Uzbekistan marks a significant development in the realm of international trade and investment, particularly in the context of India’s growing engagement with Central Asia. This agreement, designed to promote and protect investments, comes at a time when both nations are looking to bolster their economic ties in a rapidly changing geopolitical landscape. As global economic dynamics shift, particularly in the wake of the COVID-19 pandemic and rising geopolitical tensions, such treaties are pivotal for fostering stability and growth.

Why This Treaty Matters Now:

The timing of the BIT is crucial given the current global economic climate. Many countries are looking to recover from the pandemic, which has disrupted supply chains and economic stability. As nations seek to diversify their economic partnerships, India’s push into Central Asia aligns with its broader strategic objectives. Uzbekistan, on the other hand, has been undergoing significant economic reforms aimed at liberalizing its economy and attracting foreign investment. This treaty not only formalizes the commitment of both nations to enhance trade relations but also positions them as potential partners in a region that is often overshadowed by other geopolitical interests.

India and Uzbekistan Sign Bilateral Investment Treaty:

The Bilateral Investment Treaty (BIT) signed between India and Uzbekistan is an agreement aimed at promoting and protecting investments made by investors from both countries. The treaty establishes a legal framework to ensure that investments are safeguarded against various risks, providing assurance to investors regarding the stability and security of their investments.

Objectives of the Bilateral Investment Treaty:

1.Investment Protection: The treaty aims to protect investments from expropriation, discrimination, and unfair treatment, ensuring that investors can operate without undue interference.
2.Dispute Resolution: It includes provisions for resolving investment disputes, often through international arbitration, which enhances investor confidence by providing a clear mechanism for addressing grievances.
3.Promotion of Economic Cooperation: The BIT is designed to encourage bilateral trade and investment flows, facilitating closer economic ties between India and Uzbekistan.
4.Sectoral Focus: It identifies key sectors where both countries can collaborate, such as technology, agriculture, energy, and infrastructure.

Government Initiative:

The Indian government has been proactively seeking to strengthen its relations with Central Asian countries through various initiatives. The “Connect Central Asia” policy is one such initiative, aimed at enhancing economic and cultural ties. The BIT is a natural extension of this strategy, reflecting India’s intent to play a more significant role in Central Asia while providing Indian businesses with a framework for secure investments in Uzbekistan.

Bilateral Trade and Investments

India is among top 10 trade partner of Uzbekistan with bilateral trade USD 756.60 million (as per Uzbek statistics-2023) is well below potential.  The major items of India’s exports are pharmaceutical products, mechanical equipment, vehicle parts, services, frozen buffalo meat, optical instruments and equipment and mobile phones.  India’s import from Uzbekistan consists largely of fruit and vegetable products, services, fertilizers, juice products and extracts, and lubricants.

Total Indian investments in Uzbekistan amount to US$ 61 million. Notable Indian investments by Indian companies include those in the field of pharmaceuticals, amusement parks, automobile components, and hospitality industry. Investments in various fields, including pharma and healthcare, textiles and auto components, agriculture and food processing, and mining and jewellery sector are in various stages of discussion. Indian company GMR have expressed interest in investment in airports, development of air corridor, Navoi cargo complex in Uzbekistan In October 2019, Amity University and Sharda University have opened campuses in Tashkent and Andijan respectively and Sambhram University in Jizzakh region & Acharya University in Bukhara. India and Uzbekistan have signed a Joint Statement in September 2019 to set up a joint feasibility study for entering into negotiations for a Preferential Trade Agreement (PTA) and Bilateral Investment Treaty is fully negotiated between both countries and is ready for signature.

Defence & Security Cooperation

India has longstanding and wide-ranging cooperation with Uzbekistan in the field of defence. Bilateral defence cooperation is carried out through the Joint working Group format, established in 2019 and the fourth JWG meeting having took place in Uzbekistan in April 2024. India-Uzbekistan military technical cooperation has evolved over time encompassing fields of military training, military education and defence industrial interaction. India & Uzbekistan participate in joint military exercises across the under the title “DUSTLIK”, with the fifth edition held in April 2024 and attended by COAS General Manoj Pande during his visit to Uzbekistan.

Current Issues and Challenges:

1.Implementation Hurdles: While the treaty lays down a framework, the real challenge lies in its execution. Both countries need to establish efficient mechanisms for dispute resolution and enforcement of treaty provisions. Delays in judicial processes or bureaucratic hurdles could undermine investor confidence.
2.Regulatory Environment: Differences in regulatory frameworks between India and Uzbekistan may complicate the investment landscape. Investors often face challenges in understanding local laws, compliance requirements, and navigating the regulatory maze.
3.Political Stability: Uzbekistan’s political landscape, although relatively stable, can be unpredictable. Any shifts in government policy or political unrest can affect investment decisions, making it imperative for both countries to maintain a stable environment.
4.Infrastructure Limitations: Despite progress, Uzbekistan still faces challenges related to infrastructure development. Inadequate transportation, energy supply, and logistical support can hinder the establishment and growth of Indian businesses in the country.
5.Cultural and Language Barriers: The differences in culture and language may present obstacles for Indian companies looking to enter the Uzbek market. Understanding local customs and business practices is essential for successful operations.
6.Geopolitical Dynamics: The region is influenced by various geopolitical factors, including the interests of major powers like Russia and China. Navigating these dynamics will be crucial for the success of the BIT and the broader India-Uzbekistan relationship.

Way Forward:

1.Enhancing Diplomatic Engagement: Continuous dialogue between government officials and business leaders can help build trust and address concerns. Regular high-level visits and business forums can facilitate direct communication and collaboration.
2.Capacity Building Initiatives: Both countries should invest in training programs and workshops aimed at equipping investors with knowledge about regulatory frameworks, market conditions, and cultural nuances. Such initiatives can ease the entry of Indian businesses into Uzbekistan.
3.Focus on Key Sectors: Identifying and promoting specific sectors for investment—such as renewable energy, information technology, agriculture, and pharmaceuticals—can yield better outcomes. Joint ventures in these areas can foster innovation and economic growth.
4.Infrastructure Development: Uzbekistan must continue to improve its infrastructure to attract foreign investment. Public-private partnerships can play a vital role in enhancing infrastructure while providing opportunities for Indian companies to engage in significant projects.
5.Regular Monitoring and Evaluation: Establishing mechanisms to assess the effectiveness of the BIT will help identify challenges and areas for improvement. Feedback from investors can provide valuable insights into the implementation process.
6.Public-Private Collaboration: Encouraging collaboration between public entities and private businesses can enhance the effectiveness of projects and create a supportive ecosystem for investment. Joint initiatives can also mitigate risks associated with investment.

Conclusion:

The signing of the Bilateral Investment Treaty between India and Uzbekistan represents a significant milestone in the economic relationship between the two nations. In the context of current global challenges and shifting geopolitical dynamics, this treaty offers a framework for cooperation that can benefit both countries.

While the BIT lays the groundwork for increased investment and economic collaboration, realizing its potential will require addressing the challenges that lie ahead. Through strategic engagement, capacity building, and targeted investments, India and Uzbekistan can create a favorable environment for investors, contributing to mutual growth and regional stability.

As both countries navigate the complexities of the modern global economy, the India-Uzbekistan BIT stands as a testament to their commitment to fostering deeper economic ties. The road ahead may be fraught with challenges, but the opportunities for collaboration and growth are substantial, making this treaty a cornerstone of future bilateral relations in a rapidly evolving world.