The World Bank and Uzbekistan’s Ministry of Economy and Finance: Working Together for a Greener Future

Challenge

Over the past three decades, Uzbekistan has experienced remarkable economic progress, with the reform agenda laying the groundwork for future economic expansion. Recent macroeconomic analysis indicates that the country’s economy rebounded to 7.2% in 2021, after a contraction of 1.9% in 2020, and reached 5.5% in 2023, demonstrating one of the highest growth rates among the countries in the Europe and Central Asia region.

Yet, Uzbekistan has room for improvement compared to other countries on key metrics, especially high energy and carbon intensity. This increases its vulnerability to external trade policies. As more countries adopt strong climate agendas and global demand for carbon-intensive products is likely to decrease, the country faces transition risks from a global policy environment that is shifting rapidly to address climate change. A rich resource base can be a strong and sustainable economic pillar if environmental and climate change policies are strengthened and integrated with economic policies through the "greening" of the economic growth model.

The Government of Uzbekistan has recognized that an emission and resource-intensive growth model is unsustainable and has initiated a series of structural reforms to pivot the country toward a greener and more inclusive growth framework. There are barriers that impede effective integration of green growth principles in policies, strategies, and investment decisions such as insufficient knowledge, capacity, and public awareness. The PASA's aim was to address these barriers and knowledge gaps.

Approach

The World Bank launched a joint engagement with MEF to support Uzbekistan's transition to a green economy. Towards these objectives, the World Bank and MEF team developed a four-pronged approach that leveraged: joint stakeholder engagement, joint development partner coordination, joint communication, and joint human and financial resource mobilization. Activities under these areas included:

Joint development partner coordination: The World Bank and MEF established a donor coordination group and a joint secretariat with the United Nations Development Program (UNDP) and Agence Française de Développement (AFD) to align efforts and coordinate support for development of Uzbekistan's Green Growth Strategic Framework.

Joint communication: The World Bank and MEF jointly implemented a public outreach campaign to raise public awareness of green growth and climate change reaching policymakers, decision-makers, experts, civil society and the public in Uzbekistan and Central Asia through events and conferences, media materials, and blogs showcasing PASA activities and achievements.

Joint human and financial resource mobilization: The World Bank and MEF jointly raised trust funds to establish a position of economic adviser in MEF’s newly established Green Growth Unit.

Results

This unprecedented multisectoral and multistakeholder PASA engagement has elevated the green growth agenda as a core national development priority across all levels of Uzbekistan's Government. The results reflect four themes:

1)   Knowledge generation and Advisory:

• Just-in-Time Green Growth Note: Framing Note "Uzbekistan: Choosing an Innovative and Green Future" developed jointly with the MEF and UNDP, published in February 2022.
• Analytical Report "Towards a Greener Economy in Uzbekistan" developed jointly with MEF and published in September 2022.
• Uzbekistan Green Growth Policy Dialogues: Compendium of Proceedings (in English, Uzbek, and Russian

2)   Awareness raising and capacity building:

• The World Bank, with MEF and the Regional Environmental Center for Central Asia (CAREC) organized 11 policy dialogue roundtables on green growth and climate change bringing together over 700 policy makers, experts, and stakeholders, including officials from 30 government agencies and high-level representation, seven policy think tanks, and NGOs, academia and grassroot organizations.
• The policy dialogue series focused on building awareness of and technical capacity for the top green economy transition priorities.  It leveraged partnerships and expertise in Uzbekistan and across Central Asia, and from among the international development community, including the UNDP, AFD, European Bank for Reconstruction and Development (EBRD), Organization for Economic Co-operation and Development (OECD), Asian Development Bank (ADB), and a rich network of non-governmental organizations, academic and research institutions.
• The policy dialogue series built ownership and visibility on the green growth and climate change. It also contributed to the establishment of priorities, framework, and the consultation for MEF's roadmap for a green economy transition.
• The World Bank and MEF established a donor coordination group and a joint secretariat with UNDP and AFD to align efforts and coordinate support for development of Uzbekistan’s Green Growth Strategic Framework.
• Dissemination efforts through the policy dialogue and presentation at the Uzbekistan Economic Forum in Samarkand in November 2022.

3)   Policy Adoption and Institutional Strengthening:

As a result of the support from the PASA:

• The Government developed a strategic green-growth framework that was approved in December 2022 by the Resolution of the President of Uzbekistan “On measures to improve the efficiency of reforms aimed to the transition of the Republic of Uzbekistan to a green economy by 2030”. It represents a roadmap for green growth transition and climate action for the Government.
• The Interdepartmental Council`s tasks and responsibilities were expanded and updated, and the Coordination Group of Donors and the Technical Secretariat were formalized.
• The following documents have been approved: The Green Economy Transition and Green Growth Programme in Uzbekistan until 2030; and -Action Plan on the Transition to a Green Economy and Ensuring Green Growth in  Uzbekistan until 2030.

4)   New lending:

For the first-time, green economy has been reflected as a key pillar in the Government's New Development Strategy 2022-26 and in the World Bank Country Partnership Framework 2022-26. This recognition of the importance of green transition has contributed to the approval by the World Bank Board of the Resilient Landscape Project in June 2022.

This PASA served as a springboard for continuous collaboration with MEF on specific deep-dives and new engagements related to climate change. Its results informed:

• Long-term decarbonization strategy (LTS) to identify the low-carbon development pathways for the country and their impacts on the economy, while ensuring adoption of the concepts by the agencies/institutions responsible for policy and investment planning.
• The Uzbekistan Country Climate and Development Report (CCDR):  The new core diagnostic reports will build on the PASA to help identify concrete near-, medium-, and long-term actions to promote the low-carbon transition, reduce greenhouse gas emissions, and boost climate adaptation.
• The Climate Change Institutional Assessment to improve institutional coordination.
• An Adaptation and Resilience Assessment and a Deep-Dive on the Landscape Approach to address the agriculture, forestry, and water nexus.
• Air pollution engagement: The PASA resulted in a new request by the Government of Uzbekistan for an air quality policy note that will include recommendations on improvement of air quality monitoring; new system of air quality standards based on health, preliminary source apportionment, and synergies with greenhouse gas (GHG) emissions reduction; stakeholders' analysis; and potential air quality management reform (regulations and enforcement).
• The Green Growth analysis will inform prior actions for any future operations of the World Bank supporting reforms in certain areas.

The World Bank Group Contribution

This PASA was supported with funds from the World Bank budget ($275,000), Climate Support Facility ($200,000), Nationally Determined Contributions (NDC) Support Facility ($200,000), PROGREEN ($50, 000), Effective Governance for Economic Development Program (EGED) ($150,000), and Partnership Fund for Sustainable Development Goals ($50,000).

Partners

The PASA resulted in an unprecedented engagement and collaboration among development partners: UNDP, OECD, ADB, AFD, EBRD, United Nation Economic Commission for Europe (UNECE), and the Central Asia Regional Economic Cooperation Program (CAREC). The collaboration between MEF and the World Bank resulted in multiple events and extensive knowledge sharing, including a report launch and panel discussion jointly organized by both parties and development partners at the Uzbekistan Economic Forum in November 2022 in Samarkand.

Looking Ahead

The transition towards a green economy is ongoing and so is the World Bank’s support.  More technical assistance is needed on repurposing harmful subsidies, looking at the impact of the transition of the green economy on different socio-economic groups and sectors of society, designing a new Environmental Code, working with schools and universities for new curriculum that include green transition and climate change, and thinking about regional synergies in Central Asia in championing the green transition. The World Bank started working with the Government on the green growth agenda in 2019, and it will remain a long-term partner in Uzbekistan in advancing a resilient, sustainable future.