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The economies of Central Asia are slowly opening up to foreign investors after more than two decades of relative isolation. Uzbekistan just sold $1 billion of Eurobonds in its first foray into international debt markets. In doing so, it follows its neighbor Tajikistan, which issued its first bonds in 2017 to finance the construction of a dam and hydroelectric power plant.

Unlike Tajikistan, however, Uzbekistan did not issue the bonds because it needed cash, but rather because it wants to demonstrate its bona fides to secure future financing. Uzbekistan has embarked on a set of market-friendly reforms since the death of long-time ruler Islam Karimov. His successor Shavkat Mirziyoyev, who took up the presidency in September 2016, has liberalized the foreign exchange market, lifted travel restrictions, created free economic zones, and generally improved relations with Uzbekistan’s neighbors.

The largest of the five Central Asian republics plans to follow up the $1 billion international bond market debut — in dollar-denominated five- and ten-year bonds — with regular debt sales while the country’s banks are also expected to seek funds overseas, fund managers told Reuters. “They talked about potentially coming back to the market again,” said Kevin Daly, investment director at Aberdeen Standard Investments, who met an Uzbek delegation at the London Stock Exchange.

Uzbekistan certainly has an enticing economy for investment purposes. The country’s external public debt amounts to barely 24 percent of GDP (gross domestic product). Official reserves are nearly 183 percent of public debt — extremely low for an emerging market, even compared to the most developed economies. This cash pile is to a great extent the result of Uzbekistan’s closed economy under Karimov’s rule. Uzbekistan is also rich in natural resources, such as gas, gold, and other metals, and is one of the world’s leading exporters of cotton.

Despite Uzbekistan’s healthy credit metrics, some experts warn that countries with endemic corruption and bad economic structures largely controlled by elites tend to default at much lower debt levels than other markets. Uzbekistan hits both these metrics. For example, Uzbek-born billionaire Alisher Usmanov, who has close ties to the Kremlin, owns the country’s largest copper mine as well as its most famous football club and apparently is planning on buying more state companies on the cheap. Uzbekistan also ranks 158 (out of 180 countries) on Transparency International’s Corruption Perception Index 2018.

Time will tell how serious the Uzbek elite and government are about economic reforms and if foreign investment will benefit Uzbekistan’s 30 million citizens.

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