Uzbekistan is reforming and opening up to the world
Since late 2016, Uzbekistan has embarked on large-scale institutional, economic and social reforms under President Mirziyoyev’s administration.
Looking at the economic reforms, we have liberalised the currency markets (2017), significantly lifted trade restrictions (2017-2018), started liberalising administrative prices (from 2018), improved the quality of statistics (joined e-GDDS in 2017) and strengthened Central Bank’s independence. Early results are very encouraging. We have managed to improve the business climate — World Bank’s Doing Business ranking improved to 76 in 2018 from 166 in 2012 — increased the foreign trade turnover (by 40% within 2 years) while retaining macro-economic stability. Uzbekistan has also recently received good international credit ratings (BB- with stable outlook by S&P and Fitch) and joined the club of emerging nations active in global capital markets —$1bn of 5-year and 10-year Eurobonds were issued in February this year creating a transparent benchmark to price the sovereign credit.
The priority reform agenda for this year includes adoption of a new tax code, and further price liberalisations which go handin- hand with reforming the State Owned Enterprises (SOEs). We would like to create an attractive eco-system for businesses (including SOEs) to operate efficiently and profitably. In parallel, we are drastically improving the corporate governance and commercialisation of the SOEs to prepare them for successful privatisations (including IPOs in global markets).
Strong economic foundations
Uzbekistan’s strong economic foundations support reforms and underpin future development. Average GDP growth constituted 5.3% during 2016-2018 outpacing the world average while the IMF forecasts real GDP growth will accelerate from 5.5% to 6.0% during 2019-2021.
Low external debt provides a margin of safety for the economy as both Uzbekistan’s private and public sectors have largely avoided debt financing for growth. As of 2018, total external debt amounted to 33.7% of GDP, of which 19.8% of GDP is external public debt.
Solid economic and fiscal management has kept the budget in surplus, and the fiscal stance remains prudent as the government undertakes public spending initiatives. Moreover, the tax reforms are aimed at reducing the tax burden while bringing more small businesses into the formal economy.
Uzbekistan’s strong external position is reflected in remaining in a significant net lender position for several consecutive years and holding robust foreign exchange reserves equivalent to 16 months of imports.
The government is keen to implement large scale reforms in a sequenced and transparent manner in close cooperation with international organisations such as the World Bank, IMF, Asian Development Bank, EBRD and UNDP to adopt the best international practices.
We have introduced compulsory online publication of legislative acts during drafting stage to ensure high levels of transparency and public involvement. This way we have achieved overwhelming public support on reforms, however painful these can be.
Uzbekistan is also tracking the reform progress based on 24 international ratings and indices, among which are sovereign credit ratings, Doing Business ranking, Global Competitiveness Index, Economic Freedom Index, Global Innovation Index, Worldwide Governance Indicators and OECD country risk classification (Uzbekistan was upgraded to 5th classification in February 2019). These together with investor perception in capital markets will serve as barometer of reform success ensuring irreversibility of our strategic course.
Some key challenges will remain as we reform and open our economy. These include the impact of price liberalisation on low-income households. We are currently working on a targeted subsidies programme to address this issue. Lifting trade restrictions has exposed Uzbek companies to global competition. Therefore, through the SOE reforms and privatisation, we intend to increase the efficiency of our companies which will thrive at home and abroad.
With an open minded approach and benefitting from the experience and advice from our international partners, we will overcome these challenges and transform Uzbekistan into a modern and competitive economy. Uzbekistan is open for business!
Uzbekistan: a solid platform
The most populous nation in Central Asia with 33.2m people, Uzbekistan is pursuing reforms to more productively and positively leverage on its favourable demographics, natural resources and strategic location.
According to the World Bank, the country is among the leaders in the world with 99.98% literacy rate. It is a young nation with people of working age exceeding those in retirement by nine times.
The country’s diverse and rich natural resources endowment provide a solid platform for growth — globally Uzbekistan ranks within the top three in gold deposits, top nine in production and is among the top 10- 20 countries in natural gas, copper and uranium deposits and production.
With 320 days of sunshine each year, the country is ideally positioned to transform its energy system to sustainable solar energy.
Given its strategic location in the heart of Eurasia, Uzbekistan benefits from access to markets with over 3.3bn people within 950kms. The country’s Silk Road trade location central to China’s Belt and Road initiative links Uzbekistan to large-scale investment in infrastructure connecting Asia to Europe.