The World Bank’s latest Country Economic Memorandum for Uzbekistan analyzes the country’s economic trajectory from 2010 to 2022. The report notes Uzbekistan’s progress in economic reforms while highlighting key challenges and recommendations to accelerate the growth of the domestic economy and private sector.
Key Challenges and Constraints
According to the Country Economic Memorandum, Uzbekistan experienced the following challenges and constraints from 2010-2022:
1. Sustaining High Growth Rates: Uzbekistan’s economy grew at an average annual per capita rate of 4.2% from 2010 to 2022, surpassing regional (in Europe and Central Asia) and lower-middle-income country averages. However, Uzbekistan’s economy has been relying heavily on capital investment as the primary growth engine. This growth did not generate the desired level of employment between 2017 to 2022, although it accelerated in 2023 and 2024.
To reach upper-middle-income status by 2030, the country will need to accelerate growth to near double-digit levels, and increasing total factor productivity (TFP) will be central. Achieving this will require removing regulatory barriers, market distortions, and technological constraints, addressing low trade integration, and improving human capital.
2. Boosting Private Sector and Market Competitiveness: In 2020, Uzbekistan had over 2,000 centrally held state-owned enterprises (SOEs), with revenues equivalent to 32% of GDP. Four out of five of these SOEs operated in sectors where private firms could compete more effectively.
3. Strengthening Infrastructure: Uzbekistan’s infrastructure across its provinces, particularly in electricity and transportation, requires modernization to reduce business costs and enhance connectivity. The government has taken significant steps to attract private investment in the energy sector, including initiating energy tariff reforms to achieve cost-recovery levels for gas and electricity by 2026-27.
4. Expanding Trade and Market Integration: Uzbekistan’s trade-to-GDP ratio has more than doubled since 2017, reaching 71.6% in 2022. However, only 6% of firms currently export their goods.
Recommendations
To address these challenges, the World Bank’s report recommends that the authorities consider the following strategic actions:
Enhance infrastructure efficiency:
- Prioritize investments in electricity infrastructure in regions with high manufacturing productivity, such as Tashkent and Qarshi.
- Improve road infrastructure between Tashkent and economically significant regions like Samarkand and Navoi.
- Modernize railway infrastructure to strengthen connectivity between Karakalpakstan, Khorezm, and central regions like Navoi and Bukhara.
Support private sector growth:
- Accelerate the privatization of SOEs in competitive sectors and establish a transparent and time-bound privatization roadmap.
- Implement corporate governance reforms to enhance the efficiency of remaining SOEs.
- Improve access to finance for small and medium-sized enterprises (SMEs) by strengthening banking sector reforms and expanding alternative funding options.
Promote competition and market reforms:
- Reduce regulatory burdens and improve the business environment by simplifying licensing and permitting procedures.
- Establish independent sector regulators for key industries, including telecommunications, railways, and energy.
- Strengthen the enforcement capabilities of the Competition Promotion and Consumer Protection Committee to ensure a level playing field.
Increase trade openness and integration:
- Remove tariffs on essential imports, including staple foods and medical supplies.
- Streamline customs clearance procedures and implement digital solutions to enhance trade efficiency.
- Expand preferential trade agreements with key regional partners to deepen Uzbekistan’s integration into global value chains.
- Develop logistics infrastructure and improve connectivity through multimodal transport networks.
By implementing these recommendations, the Country Economic Memorandum argues that Uzbekistan can sustain high growth, create quality jobs, and enhance competitiveness in the global economy.
