ECONOMIC MECHANISMS OF INVESTMENT ACTIVITY IN ENSURING THE COMPETITIVE DEVELOPMENT OF LIGHT INDUSTRY ENTERPRISES

Abstract

This paper examines the economic mechanisms through which investment activity is directed toward the competitive development of Uzbekistan’s light industry — textiles, knitwear, footwear, leather, and silk-weaving — during the period 2024–2026. Drawing on presidential decrees, Tax Code provisions, official export statistics, and enterprise-level case evidence, the paper maps three families of mechanisms — concessional credit, targeted tax incentives, and special economic zone infrastructure — established under Presidential Decree No. DP-174 of September 2025 and Presidential Decree No. DP-4 of January 2026, and evaluates their association with the sector’s competitiveness outcomes. Between 2024 and 2025, the textile industry’s exports were estimated at USD 3.0 billion in 2024 and USD 2.5–2.6 billion in finished and semi-finished products in 2025 (sources differ on the precise 2025 figure), foreign direct investment into the sector reached USD 2.1 billion in 2025, and the number of exporting enterprises grew to 1,409, of which 502 were new entrants generating USD 203.0 million in first-year exports. Enterprises supplying international brands such as LC Waikiki, Inditex, and The North Face exported 42 percent of their 2024 output by value, a substantially higher export-orientation ratio than the sector average, and generated more than 37,500 jobs. The paper argues that the sector’s post-2025 institutional architecture — a dedicated development agency, an offbudget support fund, a temporary 2 percent corporate income tax regime for qualifying manufacturers, and free economic zone incentives requiring as little as USD 3 million in qualifying investment — represents a coherent and evolving application of location-advantage and cluster-based competitiveness theory to a specific industrial sector, and identifies the government’s USD 7 billion export target for 2028 as the benchmark against which the effectiveness of these mechanisms should next be assessed.