A draft law that would, for the first time, give Uzbekistan a functioning legal framework for private equity, venture capital and other alternative investment vehicles is now in its final stage of review by the Cabinet of Ministers.

The question debated at a panel during the Tashkent International Investment Forum (TIIF) was not whether the legislation is necessary — every speaker agreed it is overdue — but whether it will be sufficient to build something that currently does not exist.

"Legislation alone does not create a market," moderator Alena Dolgova of the UNDP told delegates in her opening remarks, framing a discussion that repeatedly returned to a single uncomfortable theme: countries that pass investment fund laws do not automatically get investment fund industries.

The gaps the new law must close

Shukhrat Yunusov of Kosta Legal, who helped draft the legislation, set out precisely how inadequate the existing framework is. Uzbekistan's operative law on partnerships dates to 2001 — before smartphones existed, as he pointed out — and restricts a general partner to managing only one fund at a time, requires the full capital commitment upfront rather than allowing the capital calls that are standard PE practice, and demands unanimous limited partner consent for almost any change.

A 2015 mutual funds law caps any single investment at 10% of a fund's assets, ruling out the controlling stakes that private equity buyouts require, and limits fund life to five years — too short for most PE strategies. A 2019 compromise resolution left investors with only a contractual claim on a management company rather than genuine equity, exposing them to the position of unsecured creditors in any insolvency.

The new draft fixes some of these problems. It introduces an "investment partnership" structure, accompanying amendments to the civil code, enforceable fiduciary duties for general partners, and modern instruments including SAFEs and convertible notes. Sergey Salikov, general counsel of the e-commerce and fintech group Uzum — which has raised more than $200mn in private equity funding to become Uzbekistan’s first unicorn, structured entirely through Abu Dhabi Global Market because no domestic vehicle could accommodate the transaction — welcomed the reform but warned that the draft still does not clearly define who its intended beneficiary is, and that tax treatment, not legal form, will ultimately determine whether investors use it.

Georgia's cautionary tale

The panel's most pointed intervention came from Thea Jokhadze of Jokhadze Capital Advisors, who ran one of Georgia's largest private equity funds and helped draft that country's own 2020 investment funds law. Her verdict was blunt: "The law was necessary but not sufficient."

Five years after Georgia's reform, only 21 funds have registered under the new framework, managing a combined $165mn — a figure she noted is smaller than it sounds, since it is split almost entirely between two bank-affiliated asset managers running fixed income and private credit strategies. Georgia's larger, genuinely successful funds, including her own former $1.5bn vehicle, remain domiciled in Cayman and Luxembourg rather than at home.

Jokhadze's prescription for avoiding the same outcome in Uzbekistan rests on six conditions, three regulatory and three structural: flexible taxation, trusted and predictable regulation, and credible legal jurisdiction on one side; competent local limited partners, competent general partners, and deep capital markets on the other. Her single strongest recommendation was for the government to seed a fund-of-funds, paired with development finance institution capital and run strictly at arm's length from political direction, to anchor early deployment and develop a domestic general partner community simultaneously. "Quasi-commercial and quasi-political" structures, she warned, "might do more harm than good."

Banks, trust, and the slow arithmetic of confidence

Ádám Szentpéteri of Ipoteka Bank, Hungary’s OTP Group's Uzbek subsidiary, offered the clearest articulation of why momentum, once lost, is difficult to recover.

"Trust is a stock variable, not a flow," he said. "You cannot trust someone on Monday, distrust him on Tuesday, and trust him again on Wednesday."

He cited Hungary's own experience — where special taxes and rule-of-law concerns roughly halved foreign direct investment from its peak — as the risk Uzbekistan must avoid as its reform programme matures.

Shaun Reader of Curtis, Mallet-Prevost, Colt & Mosle pointed to the planned Tashkent International Financial Centre, built on English law with an independent court, as a faster route to credibility than waiting for nationwide legislative reform to bed in — a model, he noted, that other emerging financial hubs have used to compress what would otherwise take decades into a few years.

The Tashkent International Financial Centre (TIFC) is a new project that investors are watching closely as it is potentially a solution to a lot of the problems surrounding alternative investment vehicles, but it will only be rolled out in the second half of this year so investors are taking a wait-and-see approach for now.

Reader stressed that exit routes matter as much as entry conditions: without credible IPO and cross-border listing options, fund managers cannot promise returns, and without returns, capital won’t come to Uzbekistan.

The panel's consensus, if it had one, was that Uzbekistan has done the easy part. The law, once passed, creates a vehicle. Whether anyone gets in it is a different question entirely — one that Georgia's experience suggests will take considerably longer than the two to three years the panel was asked to forecast.