ВITs in Central Asia: Opportunities and Risks

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Author: Aida Bektasheva *




Foreign direct investment (FDI) inflow into the Central Asia region (Uzbekistan, Kazakhstan, Tajikistan, Kyrgyzstan, and Turkmenistan) has significantly increased since the collapse of the Soviet Union. The region’s inward FDI stock totals $211 billion; in 2021, its foreign trade in goods totaled $165.5 billion, which represents a sixfold increase over the last 20 years.[1]

Central Asia state’s investment legislation contains numerous investment-friendly provisions resulting from accession to the World Trade Organization (WTO),[2] Eurasian Economic Union (EAEU)[3], Energy Charter Treaty[4], Commonwealth of Independent States (CIS) Investor Rights Convention,[5] International Center for the Settlement of Investment Disputes (ICSID) Convention, New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (UNCITRAL), which have evolved into a Central Asian regional mechanism capable of liberalizing investment and its protection.

In particular, Central Asia’s bilateral investment treaties (BITs) are growing. For example, as of August 2023, Central Asian states were parties to 214 BITs with countries such as the United States, China, France, Germany, Switzerland, the United Kingdom, and others. The region has not yet adopted a Model BITs, although there may be plans to do so in the future. Nevertheless, the specific contents of BITs vary from country to country.

Since the legal infrastructure is relatively weak in Central Asian countries, some investment protection concepts are not clearly defined. At the same time, recent BITs show progressive shifts such as the inclusion of human rights, labor, and environmental concerns in BITs, for example, Austria-Kazakhstan BIT,[6] Austria-Tajikistan BIT,[7] Hungary-Kyrgyzstan BIT (2020), Korea-Uzbekistan BIT (2019), and others.



BITs are popular in Central Asia for several reasons:

Firstly, Central Asia’s markets form a critical geo-strategic and economic trade hub and transit corridor, linking Asia with Europe, Africa, and the Middle East.[8] Moreover, the region has the advantage of neighboring and being influenced by fast-growing economies such as India and China. Mutual trade between the countries is growing faster than their total foreign trade. Central Asian countries are becoming new FDI destinations thanks to two main characteristics: abundant natural resources and a growing population increasing the market size. Specifically:

1). Kazakhstan has made significant progress toward creating a market economy and has attracted significant foreign investment given its abundant mineral, petroleum, and natural gas resources[9]. While Kazakhstan’s vast hydrocarbon and mineral reserves remain the backbone of the economy, the government continues to make incremental progress toward diversification into other sectors.

2). In the Kyrgyz Republic, investors have mostly been interested in the country’s mineral resource wealth. The metals industry received 79.5% of all FDI in the Kyrgyz Republic, more than ten times more than the next largest recipient industry, building and construction materials (7.1%). Infrastructure-related industries, such as transportation (3.3%) and alternative/renewable energy (1.3%), received more modest amounts of FDI, while fossil fuels received only 0.4% of FDI.

3). Uzbekistan is a populous double land-locked country in Central Asia, with a population exceeding 27 million people. It is the biggest market among other Central Asian countries. Uzbekistan has the most diversified economy in Central Asia, with significant mineral and metals wealth, including gold, as well as textiles and services, and the largest population in the region.[10]

4). In Tajikistan, the total stock of FDI totaled USD 3.2 billion in 2021, representing around 37.7% of the country’s GDP. The leading investors are China (accounting for around 40% of all FDIs), Russia, the United Kingdom, Switzerland, and Iran (data from the U.S. Department of State). Investments are mainly directed to construction, communications, geological exploration, healthcare, the construction industry, and energy.

5). In Turkmenistan, the most promising areas for investment are in the energy, agricultural, financial services, and construction sectors, and the government often touts foreign loans as investment. In 2022, FDI inflows to Turkmenistan increased by 24.2% year-on-year in 2021, reaching USD 1.45 billion.[11]

Secondly, Central Asian countries practice quite actively BIT regimes to intensively attract FDI since they typically protect in accordance with international standards from expropriation, discrimination, or treatment that is not “fair and equitable.” Preparing the draft of the BITs often took significant time and typically involved intensive consultation with government agencies and private sectors of the Central Asian countries. Usually, “Model BITs” of developed countries like the U.S. Model BIT and Dutch Model BIT have been used as a template or a starting point for formulating new agreements and to serve as a basis for their negotiations[12]. Essential elements of BITs of the Central Asian countries are similar in providing certain standards of substantive protections for the foreign investor, such as fair and equitable treatment (FET); expropriation (direct and indirect) protections; most-favored-nation (MFN) treatment; non-discrimination/national treatment; full protection and security; and umbrella clause but country’s obligations may differ from treaty to treaty ( as an example Kazakhstan-United Kingdom BIT, 1995, Kazakhstan-United States of America BIT, 1992 and BITs of the Central Asian countries also protect foreign investors against political and other risks highly prevalent.


Thirdly, BITs can provide additional protection to covered foreign investors beyond that provided in national legal frameworks, including constitutions, laws, and regulations, to grant access to investor-state dispute settlement mechanisms (ISDS). BITs of the Central Asian countries provide mostly arbitration in a neutral forum as the method of resolution of the dispute with different types of clauses creating different obligations. Most dispute-settlement provisions in BITs of Central Asia refer to the International Centre for Settlement of Investment Disputes (ICSID), the most frequently used alternative being arbitration under the United Nations Commission on International Trade Law (UNCITRAL) rules.




Kazakhstan is part of more than 52 bilateral investment treaties, in addition to the Energy Charter Treaty and the Eurasian Investment Agreement. Most of Kazakhstan’s BITs do not contain public entities in the scope of foreign investors and protection from expropriation is frequently excluded from public purpose and national interest in Kazakhstan’s BITs. The scope of national interest may be problematic due to its broad definition since there is no guideline to define the general principle of national interest in Kazakhstan’s legislation. The protection of investor’s rights and the stability of concluded contracts are guaranteed by law, and the work of state bodies in relation to investors is very clearly regulated (free movement of capital, repatriation of capital, freedom to use profits, the right of private ownership of land, including for foreign companies).


Kyrgyzstan is part of 38 bilateral investment treaties, the Energy Charter Treaty and Eurasian Investment Agreement. Kyrgyzstan’s BITs include general principles of foreign investment protection, for example, BITs between Austria-Kyrgyzstan BIT, 2016 Kyrgyzstan-United States of America BIT, 1993. However, there are still challenges to implementing BITs given the high corruption, lack of transparency of courts, and partial change of frequent change of political establishment. Green investment is another promising area for potential investors as the Kyrgyz government has increased its commitment to fighting climate change and sustainable development. In 2021, the Kyrgyz Republic joined the Global Methane Pledge. It unveiled revised Nationally Determined Contributions (NDCs), which opened many opportunities for foreign firms seeking to invest in hydropower, energy efficiency, and methane reduction industries.


Uzbekistan is a party to 56 BITs, out of which 45 are currently in force and the Energy Charter Treaty. Some Uzbekistan BITs impose additional requirements such as an “effective and continuous link to the Uzbek economy” for example, Uzbekistan-Portugal BIT (2001) and offshore companies are not considered as foreign investors, for example, China-Uzbekistan BIT (2011). Moreover, Uzbekistan’s BITs frequently contain admission provisions similar to Turkmenistan’s and Tajikistan’s. It is necessary to note the positive progress as foreign ownership and control for airlines, railways, long-distance telecommunication networks, and other sectors deemed related to national security requires special permission. Still, so far, foreigners have not been welcomed in these sectors.


Tajikistan is party to more than 36 BITs, the Eurasian Investment Agreement, and the Energy Charter. Tajikistan’s BITs contain general protection principles and impose territoriality requirements. Special provisions related to the admission of foreign investment are standard in Tajikistan’s BITs, like Austria-Tajikistan BIT (2010). The primary discrimination against foreign investors pertains to land use rights, restricted to a limited-term leasehold or prohibited.


Turkmenistan is a party with around 29 BITs and provides the most-favored and national treatment clauses to foreign investors. Primarily, foreign investors can extend the scope of BIT’s protection through the most favored nation clause. Turkmenistan’s investment regime does not allow foreign investors to enter the country without screening or approval by the appropriate administrative bodies, and most of Turkmenistan’s BITs do not include public entities in the scope of foreign investors like Turkmenistan–Bahrain BIT (2011). Most foreign investment is governed by project-specific presidential decrees, which can grant privileges not provided by legislation. Turkmenistan has one of the most challenging business environments in the region due to pervasive state control, and potential investors may be discouraged by several factors, including state control measures, exchange rate restrictions, excessive and inconsistent regulations, corruption, lack of established rule of law and lack of experience in dealing with foreign investors for international trade.



The rule of law and the transparency and predictability of the legal framework governing foreign investment remain significant problems in Central Asia. The balance between investor protection and the right to regulate is another key issue in the current public debate about investment treaties and governments’ treaty policies. Beyond these bounds, some of Central Asia’s states do not have clear national investment policies, for example, Turkmenistan and Tajikistan. It is necessary to note most of the BITs were borrowed from model BITs and do not even define the concept of the fair and equitable treatment and expropriation clause. Here, the SWOT analysis of all BITs of Central Asia reveals the following takeaways:


  • BITs increase the flow of FDI coming to the country.
  • Guarantee non-discrimination between foreign investment and domestic investors.
  • BITs of the Central Asian countries also protect foreign investors against political and other risks highly prevalent.
  • BITs of Central Asia cover a broad definition of investor (both natural and legal persons).
  • While most BITs limit the regulatory flexibility within which contracting parties can pursue their economic development policies, more recent BITs include various disciplines, such as human or labor rights.


  • Current BITs are too general and do not specify the concepts used to protect investors.
  • Current BITs describe no explicit definition relating to indirect expropriations, and uncertainty over the scope of this clause can deter states from taking actions that, while in the public interest, may be regarded as indirect expropriation and require significant investor compensation.
  • Central Asian BITs are concluded mostly in 2 languages (English and Russian) instead of the 4 national languages.
  • Weak negotiation skills in Central Asia.
  • Some BIT provisions constrain future policies, from taxation to providing welfare benefits and basic infrastructure.
  • Much of the current criticism of treaties focuses on their alleged impact on the right to regulate.
  • The scope of national interest may be problematic due to its broad definition.


  • BITs provide more favorable foreign investment conditions than the Eurasian Investment Agreement and the CIS Investor Right Convention.
  • Umbrella clauses allow investors to invoke the stabilization clause from BIT with the host state and proceed directly to international arbitration.
  • BITs can ensure the effectiveness of the implementation of domestic investment law and improve the rule of law.


  • Problems with the transparency and predictability of the Central Asian states’ legislation may create risks for foreign investment.
  • Locked-in standards and constrained policy choices have fiscal and labor relations consequences and are sources of popular grievances.
  • Since arbitration is a high-risk, high-cost option, the mere threat of arbitration from investors can effectively extract concessions.

Moreover, it is a common tendency in Central Asian states’ BITs to restrict the scope of such treaties with domestic laws, for example, Turkmenistan, Tajikistan, and Uzbekistan. This phenomenon may reduce the impact of investment treaties and negatively impact the flow of foreign investment into Central Asia.



At the Central Asian level, the growing popularity of BITs is evident as a pivotal international legal mechanism to attract more FDI. Furthermore, the fall of the Iron Curtain and the dissolution of the Soviet Union were significant events that heightened the appeal of BITs. It should be kept in mind that foreign investors desire to have their investments protected in the context of international standards because national investment legislation usually provides for less protection for foreign investors than international standards. However, problems with the transparency and predictability of the Central Asian states’ legislation may create risks for foreign investment. From a Central Asian state’s perspective, Kazakhstan[14], Kyrgyzstan[15], Tajikistan[16], and Uzbekistan[17] do not apply strict procedures to the admission of foreign investment, while Turkmenistan[18] does. However, it is common practice in Central Asian states to remain absolute or quasi-monopolies in certain economic sectors. On the other hand, the state also requires that investors emphasize more robustly public policy concerns, such as health, safety, security, and environmental protection.


* Aida Bektasheva has over 10 years of international development experience in the fields of governance, international law, investment, public financial management (PFM), sustainable development at the policy, technical expertise, academic research, and project management levels with UN, INGOs, and consulting companies. She has worked in Central Asia, the Russian Federation, Sweden, and Hungary, and is fluent in Russian, English, Kyrgyz, and French. 

[1] Eurasian Development Bank, the Economy of Central Asia: A Fresh Perspective, 2022.

[2] WTO Dispute Settlement System was established during the Uruguay Round, but built on the foundations established by the GATT in 1947. See generally Ernst-Ulrich Petersmann, The GATT/WTO Dispute Settlement System: International Law, International Organizations and Dispute

[3] Treaty on the Eurasian Economic Union was signed on 29 May 2014.

[4] Energy Charter Treaty (adopted 17 December 1991, entered into force 16 April 1998), 1995 34 ILM 373.

[5] CIS Convention on Protection of Investor Rights, Moscow (signed by Armenia, Belarus, Moldova, Tajikistan, Kazakhstan, and Kyrgyzstan), 1997

[6] Austria-Kazakhstan BIT, 2010.

[7] Austria-Tajikistan BIT, 2010.

[8] Anthony Williams, “EBRD forum in Beijing to promote) investment in Central Asia.” European Bank for Reconstruction and Development, 2018.

[9] Abykanova BT, Sariyeva AK, Bekalay NK, Syrbayeva S.J, Rustemova A.I, Maatkerimov N.O. Technology and prospects of using solar energy. News of National Academy of Sciences of the Republic of Kazakhstan, Series of Geology and Technical Sciences, 2019.

[10] World Bank Group, Uzbekistan: Towards A New Economy, Summer 2019, https://documents1.worldbank.org/curated/en/866501562572675697/pdf/Uzbekistan-Toward-a-New-Economy-Country-Economic-Update.pdf.

[11] UNCTAD’s World Investment Report 2022.

[12] UNCTAD, ‘Recent Developments in the IIA Regime: Accelerating IIA Reform’, August 2021.

[13] Aidana Aldiyarova, Problem of Negotiations and Definitions, Law and Policy of New Eurasian Regionalization, 2021.

[14] Law of the Republic of Kazakhstan No. 373-II of 8 January 2003. On Investments, Journal of Parliament of the Republic of Kazakhstan, 2003, No. 14, Art. 274.

[15] Law of the Republic of Kyrgyzstan No. 66 of 27 March 2003. On Investments in the Kyrgyz Republic, Journal of Jogorku Kenesha of the Republic of Kyrgyzstan, 2003, No. 7, Art. 252.

[16] Law of the Republic of Tajikistan No. 260 of 12 May 2007. On Investments, Mazhlisi Oli of the Republic of Tajikistan Collection of Legislation, 2007, No. 5, Art. 65].

[17] Law of the Republic of Uzbekistan No. ZRU–598 “On Investments and investment activities,” December 25, 2019.

[18] Law of Turkmenistan No. 184-111, On Foreign Investments, Journal of Majlis of Republic of Turkmenistan, 2008.