Uzbekistan sits at an intriguing inflection point. After decades of relative economic isolation, the country has embarked on a far-reaching process of liberalization and market reform, opening its economy to greater foreign investment and gradually integrating with global capital markets. The resulting investment proposition is attracting growing attention—but so too are the questions surrounding execution, valuations, liquidity, currency risk, and the pace at which reforms translate into genuinely investable opportunities. Few investors have followed Uzbekistan as closely as Scott Osheroff, CIO of the AFC Uzbekistan Fund, an Uzbekistan-focused investment fund established by Asia Frontier Capital in 2019.
I spoke with Scott recently to discuss the “Uzbekistan opportunity” and what it means for frontier-market investors. In the interview below, Scott offers an investor’s perspective on Uzbekistan’s transformation: where he sees the most compelling opportunities, which risks deserve greater attention, and what international investors should be watching as one of Central Asia’s largest economies enters a new phase of development.
The Big Picture: Frontier Markets As an Asset Class
Anirban: Scott, it’s a pleasure to host you for this interview to be featured in The Frontier Journal. Let’s start with the big picture before zooming in on Uzbekistan: investors often describe frontier markets as “too risky” especially in light of the ongoing geopolitical turmoil. You have spent your career investing in them. What do most investors misunderstand about frontier markets?
Scott: They don’t realize that frontier markets are like anywhere else in the world. Many investors may sneer at a less developed country seeing economic or political instability, the ‘’long shadow’’ of past war, currency devaluation etc. and determine it is simply risky.
Well, the corruption and political uncertainty in places like the US and Europe are much, much larger in scale and magnitude and, not surprisingly, we’ve had events like the Plaza Accords which saw the coordinated devaluation of the USD in the past. So, it is not as if frontier markets are the only markets with challenges and risks. However, understanding these dynamics when the majority are applying blanket stereotypes is where the opportunity to generate alpha lies.
The biggest misunderstanding is exactly that – a misunderstanding due to information asymmetry, language, and cultural barriers. If one puts in the work, the opportunity moves much more into focus.
Anirban: Are frontier markets becoming more investable, or are geopolitical fragmentation and protectionism making them fundamentally riskier?
Scott: I think they’ve always been investable and are becoming more investable by the year. The main challenge has been and continues to be information asymmetry, which is also the opportunity. If you can’t buy shares through an “Interactive Brokers” you need to do the legwork to open a local brokerage account and learn about the opportunities on the ground yourself. It’s a burden, but there are many gems that make the effort worthwhile. Certainly, over the coming decade more frontier markets will be more easily accessible through global brokerages which should accelerate price discovery.
Anirban: What key characteristics make a country attractive enough for you to commit capital despite political and economic uncertainty?
Scott: I want to see value in well-run companies in an economy that is moving from “unloved” toward being “loved”. This of course includes macro, domestic and geopolitics aligning, seeing credit growth expanding from low levels and a secular growth tailwind. I think secular growth is important when investing in these markets because you can have illiquidity which means you ideally want to be targeting good businesses at attractive prices that can compound over years rather than being short-term trades.
For example, I was recently speaking with a friend who is involved in Venezuela and you have about 30 listed companies on the Caracas Stock Exchange, several of which are banks. There’s no lending going on in the country so the banks look very expensive. However, one should be looking at the well-run bank franchises, ideally with a mix of local and international expertise and foreign shareholders where the credit “spigot” can be turned on as the economy begins to rebound. I can name a half dozen countries like this which means that once the political and state institutional infrastructure aligns, you potentially have a highly attractive investment opportunity.
Further, these days in a world of increasing geopolitical struggles, countries that are commodity rich are also a definite plus.
Anirban: When you compare today’s frontier markets with today’s emerging markets as they looked twenty years ago, what similarities—and differences—stand out?
Scott: What stands out to me is that globalization is grinding to a halt and the world is balkanizing, as it has been doing the last several years. The days of buying a frontier market based on the thesis that it will capture manufacturing spillover from more developed markets, I think, is coming to an end. Bangladesh, Cambodia, Sri Lanka, and Vietnam are among the last countries, in my view, to benefit from this. Robotics is also helping to diminish this trend as factory owners can simply substitute high-cost workers with robots and increase margins while staying put in the country they are operating in.
The big similarity is that many frontier markets are benefitting from their demographic dividends of young, growing populations that will drive consumption, just as emerging markets did a decade ago, and this is a big driver in economic growth.
Anirban: How do you justify the risk-reward profile of listed frontier market equities as an asset class in an era of AI-fueled tech optimism which is driving record rallies in US equities?
Scott: The world seems to have forgotten that equities are companies. Owning shares in companies is owning a participation. Over the past several decades, with the rise of ETFs, the holding period for equities has diminished to mere months – in some cases weeks – creating a discrepancy between momentum and traditional value-investing. Assuming that the focus is on compounding capital, if you find attractively priced companies in the frontier with positive macro tailwinds, you have very attractive risk/reward that you will be able to ride throughout the cycle. The risks also are often overstated whereby you have volatile political cycles in many developed markets, but the perception is that frontier markets are somehow riskier. The risk is in not being familiar with a country, like with any investment anywhere.
Uzbekistan Macroeconomic Trajectory & Structural Reform
Anirban: Let’s zoom in on Uzbekistan. The country has undergone significant economic reforms since 2016. In your view, which reforms have been the most transformative for investors, and where does the country still have the most work to do?
Scott: Convertibility, 100%. Under former president Islom Karimov there was no currency convertibility. You could convert foreign exchange into Uzbek Som (UZS), but not go the other way. Under President Mirziyoyev this has changed and foreign investors and companies have complete freedom to convert UZS and repatriate capital abroad. This was a sticking point for investors for nearly two-decades, along with the historic black-market exchange rate relative to the central bank currency exchange rate. Today there is only the official rate.
Other notable reforms include lifting and moving towards full elimination of utility subsidies as they became too large in recent years and weighed on the government’s budget. Lifting subsidies on utilities has also exposed the historical inefficiency of the economy and its manufacturing sector which subsidies had previously hid. This reforming of the economy will force companies to be more competitive, otherwise they risk going out of business. Being more competitive is what drove the Tiger economies of east and southeast Asia, so this is a very smart move on behalf of the government, doing this early in the opening of Uzbekistan.
One of the country’s big challenges is job creation. The population is growing at such a rate, as are the number of university graduates, that the economy cannot absorb them. This has led to an increasing number of Uzbeks moving abroad for work and remitting capital back home. Hopefully as the economy continues to develop employment opportunities, specifically for white collar workers, will increase further to keep talent at home.
Need help navigating frontier and emerging Asia?
The Frontier Journal also provides:
• Country Assessments
• Deal Origination and Profiling
• Investment Research
Write to us at ask@thefrontierjournal.com to learn more
Anirban: If you had to explain Uzbekistan’s investment case to someone who knows nothing about the country, what would your elevator pitch be?
Scott: Uzbekistan is in a sweet-spot for the next 10 or 15 years with a young, and fast-growing population, a large chunk of which, works abroad in places like the Middle East, Europe, America, etc. (high-salary countries), sending home remittances of ~USD 20 billion annually (~14% of GDP) and growing. This stimulates domestic demand for goods and services which trickles down to the broader economy. Meanwhile, the government is investing heavily in infrastructure from roads and high-speed rail to hospitals and schools.
Then, we have enormous tourism potential which is increasingly seeing Asians, Europeans and tourists from as far as America coming to visit Uzbekistan for multiple days, spending money.
On the back of all this is the golden goose (pun intended) that is gold! Uzbekistan is ‘’hard rock’’ resource rich (not hydrocarbons) – it has lots of gold, copper, silver and uranium. Uzbekistan can keep spending over the years, supported by its foreign exchange reserves which reached USD 72.1 billion in September 2026 (relative to GDP of USD 147 billion). Gold is ~ USD 64.9 billion of the USD 72.1 billion FX reserves which in a world of global monetary debasement, will only appreciate over the medium to long term. And if the government needs additional cash for the budget, they can simply sell part of their gold reserves.
Uzbekistan hosts the second largest open pit gold mine in the world (Muruntau) and is the world’s 8th largest gold producer.
Anirban: Many investors still associate Central Asia with Kazakhstan. Has Uzbekistan overtaken Kazakhstan as the region’s most attractive equity market?
Scott: Kazakhstan has two equity markets, one in the old capital of Almaty and the other in Astana called the Astana Stock Exchange (AIX). The AIX is part of the Astana International Financial Center (AIFC) which has emerged as the more globally connected exchange – through such mediums as the Tabadul Hub – and plans to connect to Hong Kong in due course. It’s much larger overall than Tashkent but is also largely a fixed income market.
My prediction is that, at its current pace of growth, we should see Uzbekistan emerge as the largest economy in the region in 10 to 15 years. So, if Uzbekistan can see more state-owned enterprises (SOEs) and private companies IPO, while developing its domestic fixed income market (expected to see a record of more than USD 100 million issued locally in 2026), and integrate with regional brokers and custodians to facilitate ease of access to the market, it very well could become the largest capital market in the region. However, this will, of course, take time.
Anirban: Which sectors in Uzbekistan offer the greatest long-term opportunity and which sectors are currently overhyped?
Scott: The best long-term opportunity in the country is anything tied to consumption. Uzbekistan is struggling to enhance employment opportunities domestically so you have millions of Uzbeks working abroad – not just in Russia but in Japan, across Europe, the USA, and Middle East – who will be remitting back roughly USD 20 billion this year, equal to about 14% of GDP. This, along with the fast-growing population – now standing at 38 million and expected to reach 52 million by 2050 – is feeding demand for everything from white goods to consumer staples to real estate.
The real estate market is a bit overheated. Sitting here in Tashkent, I’ll give you a few in person examples: 1) I was looking at real estate a few days ago and came across a ground floor apartment in the city center which was built in the 1950’s with no recent renovation, and is on the market for USD 4,000/sqm. 2) A friend who owns an apartment in Tashkent’s center in a good, upscale building was offered USD 8,000/sqm and turned it down.
The real estate market is getting very hot now as the cost of capital comes down. The housing stock is only approximately 22sqm per capita so there is a big shortage. But there has been a huge credit boom over the past decade and now the Central Bank of Uzbekistan (CBU), which is very, very good at maintaining stability, has already implemented measures to cool credit growth and cap the extremely unproductive borrowing by the populace. So, I’m not expecting any credit shock or recession, because the Central Bank has implemented measures early enough, but we could certainly see a cooling-off period in the broad consumption space even though the long-term trend is “up”.
Anirban: Uzbekistan is a globally significant producer of gold, uranium, and copper – critical resources in the global industrial and energy transition. How do resource revenues and state mining operations feed into broader macroeconomic stability and capital market growth? Is the economy relatively insulated from commodity price cycles?
Scott: This is significant. If Uzbekistan wasn’t blessed with a cornucopia of resources, I would be worried. Mining revenues equal 30-40% of GDP and is the natural cash cow that will keep feeding the government. I believe we are in a world of continued balkanization and deglobalization which means competition for resources and redundancy is at the highest level it has been in a generation. Factor in the electrification of everything and the western world needing to inflate their debts away and the three core commodities of gold, copper, and uranium are a true blessing for Uzbekistan.
Of course, if there was a global downturn, Uzbekistan’s income stream from mining would be negatively impacted, which could lead to a modest weakening of the currency, but that would be mitigated by rising remittances from overseas workers and strong FDI inflows. And coming out the other side of such a global downturn would be an immense increase in global money supply which would only see Uzbekistan’s main commodities go up in price. So, the country is well hedged for the future in a variety of ways.
Anirban: How prone is Uzbekistan to the negative effects of mineral riches, i.e. the so-called ‘’Resource Curse’’ and ‘’Dutch Disease’’?
Scott: The currency has actually appreciated roughly 10% over the past 18 months. This is due to rising gold and copper prices, strong remittances and FDI. The Central Bank historically, since the country’s opening, would sell USD to support the currency. Now it is more involved in preventing it from strengthening too much, but the situation is significantly more stable than in previous years. There is a temporary risk of moderate ‘’Dutch Disease’’ based on this trifecta of flows, but longer term, I think the currency needs to undergo modest annual depreciation of 3-5% in order to remain competitive with regional competition. The CBU will make sure the currency doesn’t appreciate to the point where it significantly impairs exporters – specifically in agriculture, which is still a large employer of the populace. Equally, the multi-billion-dollar textile industry has, as you can imagine, been heavily impacted by the strengthening currency as the industry’s margins are razor thin.
Geopolitics: Uzbekistan’s Place in The Great Game
Anirban: Zooming out a bit, global supply chain shifts have elevated the importance of the Trans-Caspian International Transport Route (the Middle Corridor). How is Uzbekistan leveraging its geographic location between China, the Caspian, and Europe to build industrial and logistics value, rather than simply acting as a transit hub?
Scott: So, right now the country is focused on becoming a logistical hub. It’s the buckle in the belt road initiative and the focus is building better highway, rail, and air infrastructure to connect east with west. Logistics here is very expensive because it’s very inefficient but equally China wants an alternative route to Russia to move goods to the west and that makes Uzbekistan an important part of the land corridor. So, that’s where there’s billions of dollars of investment coming in right now.
On the industrial side, yes, there’s manufacturing capacity that’s being built here. The challenge is the country’s growth has outpaced infrastructure development and they’ve eliminated subsidies in many cases for utilities – consequently, the economics of manufacturing here are not as attractive as they once were. Over the next 5 or 10 years, they need to focus on bringing manufacturing here simply because Uzbekistan has a labor surplus – there aren’t enough jobs for the population, given its skillsets. So, I think the government will increasingly focus on incentivizing manufacturing investment.
So, I think phase one is logistics and connectivity which need to improve. Then you can start to say it makes sense to move some manufacturing here, to serve both the local market and have a portion of production exported to the broader region, Russia and Western Europe to a degree. Also, as I mentioned earlier, the country is estimated to have 52 million people by the middle of the decade. So, there’s no reason that you can’t have domestic manufacturing here to cater to growing local demand.
Anirban Lahiri: I have a follow-up question based on what you just said: there’s an apparent dichotomy to an external observer when you look at Uzbekistan because, on the one hand, you hear that it’s a very fast-growing economy there’s a huge amount of growth and investment etc. but on the other hand you keep hearing about the fact that there’s significantly high levels of youth unemployment. I was recently in Kazakhstan and saw a lot of construction workers working on road repairs, construction sites who were Uzbeks which implies that the Uzbekistan is a source of cheap labor but it also means that the youth in the country don’t have job opportunities locally. So, there’s a disconnect between the fact that you’ve got this fast-growing economy and the fact that they’re not able to generate enough employment opportunities at home to absorb the domestic population. How do you reconcile those two?
Scott: You have to remember that Uzbekistan was historically a closed economy, so the country was starting from a very low base with a very fast-growing population. When people come to Tashkent and see a booming city they might wonder how there could be a labor surplus.
Well, firstly the majority of the population lives in the Ferghana valley and now there is lots of investment in the region, but only a few years ago, there wasn’t much activity outside of agriculture and auto manufacturing. That of course is changing, fast. Nonetheless, many semi and low-skilled laborers are the ones migrating abroad.
The bigger problem is the lack of white-collar jobs and suitably qualified candidates. The sophistication of the labor pool, while rising, is still relatively low. As the number of university graduates continues to grow there are not enough job openings in the respective fields of said graduates which leads them to choose alternative careers. Typical growing pains of a fast-growing and young country.
Anirban: Is the ongoing Great Power Rivalry between the US and China, net-net, good or bad for Uzbekistan?
Scott: This remains to be seen but yes, it should be beneficial. Uzbekistan’s location allows it to play off Russia, China, the US, Europe and the Middle East against each other – it does not border Russia, which gives it some degree of autonomy versus other CIS states like Kazakhstan. The US wants Uzbekistan to be a thorn in the side of the regional powers, but I don’t think we will see it wielding any significant influence outside of perhaps grains imports and deals with some US companies for specific interests, largely because the US is too far away and has more pressing priorities.
China, in my opinion, has already won. They are Uzbekistan’s largest trading partner. China has an interest in exporting overcapacity to Central Asia, be involved in EPC contracts across the economy, and also benefit from the broad economic boom in Uzbekistan.
Anirban: Is China displacing Russia as the most influential foreign power in the country? If so, what impact do you see this having on the country’s strategic autonomy and economic development trajectory? I ask because heavy-handed Chinese economic influence particularly through programs like the one belt one road infrastructure financing etc. tends to sometimes pull these countries into its orbit and curtail their strategic autonomy. Do you see this happening in Uzbekistan?
Scott: Economically, China is already the most important economy to Uzbekistan. There are a lot of Russians that have come here – businesses expanding out of Russia and the shared Soviet history are driving factors. But I have seen an exponential increase in the number of Chinese businesses and people on the ground over the past few 3-4 years. Sometimes, I’ll go into a normal coffee shop and 10-20% of the people are Chinese, whether tourists or business people. This is, of course, also due to easing of visa restrictions for the Chinese.
Historically the Chinese would come here and get EPC contracts – so, they were extracting value from the country. Now they’re investing. So, for example, there’s a toll road project between Tashkent and Samarkand valued at USD 2.2 billion that was initially supposed to be financed by a western development finance institution (DFI). Things have since changed and now China Overseas Engineering Construction is the contractor with 85% of the project finance by China and the balance by the Uzbek state.
In fact, the Chinese are not just getting involved in investment in infrastructure projects, real estate projects for residential construction, but they are also building factories and even bringing in Chinese workers, similar to what we’ve seen happening across Southeast Asia.
So, the Chinese have the money, are willing to move fast, and they’re definitely the most influential economic partner right now of Uzbekistan and that will certainly shift the geopolitical dynamics in the region. For example, a few weeks ago, Uzbekistan bought fighter jets from China. I don’t think that’s ever happened before.
Capital Markets, Privatization and Portfolio Strategy
Anirban: What are some of the key themes underpinning your allocation strategy in Uzbekistan?
Scott: When I came here in 2018 my thesis was very simple (as there are nearly 600 listed companies between the main board and OTC market). I wanted to have concentration in the listed blue chips which offered the best leverage to economic growth, have well-run businesses or monopolies, where I could deploy significant amounts of capital to have a meaningful impact on the fund’s NAV, and also what investors who followed us would want to buy. When a foreign investor lands in Tashkent and meets a broker to ask what they should buy, I want the core holdings of the AFC Uzbekistan Fund to be named as this is what helps drive the re-rating in these names more toward the valuations of comps internationally, in addition to local retail participation which has been the key driver in the market over the past year.
Anirban: The creation of the National Investment Fund (UzNIF) – holding stakes in major state-owned enterprises across aviation, banking, energy, and telecom – and its dual listing on the Tashkent Stock Exchange (TSE) and London Stock Exchange in May 2026 represents a structural shift. What impact do you see this having on the Uzbek equity market, particularly with regards to attracting global institutional capital?
Scott: UzNIF put Uzbekistan’s capital market on the map. The fact that the company is being managed by Franklin Templeton didn’t hurt as it has led to significant international press coverage which cast a light on the unique transformation Uzbekistan is undergoing. This naturally led to a significant number of foreign and local brokerage account openings which has led the equity market to experience its second re-rating since the country opened last decade.
Anirban: One historical bottleneck for Central Asian exchanges has been free-float liquidity and custodial infrastructure. How have domestic retail participation, local brokerages, and foreign institutional inflows evolved, and what infrastructure improvements are still needed?
Scott: Low free-float is still an issue and is unlikely to change in the near future within the current universe of listed companies. The Uzbekistan National Investment Fund is one of the more liquid names on the exchange and trades an average of USD 80,000 per day – when I first came here in 2018, we were lucky if the entire exchange had $10,000 of turnover per day, so things have progressed. UzNIF IPOs and future private sector IPOs should add much more liquidity to the overall market.
In terms of custodial infrastructure, things have become much better over the past two years. Investors can choose to have securities held with the state at the central depository or with the Bank of Georgia or other top-tier foreign institutions establishing a local presence. The broad capital markets infrastructure now offers solutions to custody and brokerage access like in any other market. The sticking point is liquidity – with several millions of dollars of local and foreign capital entering the market, low free-floats have led to a dramatic increase in equity prices over the past year.
Anirban: While banking and materials currently dominate index and fund weightings, where are you finding the most overlooked bottom-up opportunities in the listed universe, particularly across consumer staples, light manufacturing, or digital infrastructure?
Scott: I’m looking at the IPO calendar. Most listed companies are still state-owned, which is fine, but I’m looking at opportunities in the spinouts from the Uzbek National Investment Fund which will happen over the coming years in hydro/electric infrastructure, telecommunications, etc. Equally there are private sector companies in retail and consumer goods that I am watching.
In Conclusion
Anirban: Do institutional allocators sitting in in London, New York, or Hong Kong understand the Uzbekistan opportunity? What are the barriers to their increased participation?
Scott: I think with the IPO of the Uzbekistan National Investment Fund on the Tashkent and London Stock Exchanges in May 2026, most investors understand the elevator pitch I described above. The only challenge is how to invest larger allocations in the debt and equity markets, but that should become easier over time as securities issuances get larger.
Anirban: Compared with other frontier markets you’ve invested in, what makes Uzbekistan unique, for better and for worse? How does it compare versus recent frontier market darlings like Vietnam in terms of risk-adjusted return potential?
Scott: It’s still at a very low base. GDP per capita is skewed because the Uzbek state is a large gold and copper producer. Uzbekistan is unique in that it has the dynamic of a growing population, vast infrastructure demand, strong remittances from a world increasingly starved of labor, and gold as a support pillar. Unlike a country like Vietnam, if Uzbekistan needs hard currency to import something, it can always just dig up more gold. The country is in a very privileged place at present.
Scott Osheroff is the Chief Investment Officer, AFC Uzbekistan Fund (Asia Frontier Capital). He has been managing the fund since its 2019 inception, capturing value in listed Uzbek equities across industrial, financial, materials, and consumer sectors. He can be reached at uzbekistan@asiafrontiercapital.com. You can also follow him on his Telegram channel at: https://t.me/yurta06 .