Uzbekistan is a resource

Uzbekistan, a country with a rich history and culture, is attracting increasing attention on the global stage today thanks to its ambitious reforms and openness to international investments. Seven years of diligent work by the government have yielded noticeable results, making the country one of the most dynamically developing on the Asian continent.

At the same time, Uzbekistan is experiencing a rapid growth of the digital economy, largely due to becoming one of the leading global centers for IT outsourcing. In Tashkent, there are plans to establish an international financial center, custom-designed with its own legal and tax regime. Meanwhile, the latest Article IV consultation report by the International Monetary Fund (IMF) on Uzbekistan was very positive. Given that the Fund has placed a seal of credibility on Uzbekistan, it comes as no surprise that significant financial deals have been signed with multilateral financial institutions, including the European Bank for Reconstruction and Development (EBRD) and the International Finance Corporation (IFC), the private sector investment arm of the World Bank Group.

Three factors collectively underpin the current strong performance of Uzbekistan:

The first is the country’s sound fiscal and monetary policies. The debt is low, and foreign exchange reserves are substantial, allowing the country to withstand economic shocks.

The second factor contributing to Uzbekistan’s attractiveness for investors is its highly skilled and young workforce, particularly strong in information technology and languages.

The third factor is the country’s favorable geographic location, which makes it a key bridge between the economies of Southeast Asia and Europe. This advantage has become especially relevant in light of disrupted trade routes through the Red Sea due to conflicts in the Middle East.

From May 2 to 3, the global community will be invited to the Tashkent International Investment Forum to assess the achievements made and explore new opportunities. Participants previously unfamiliar with this country are sure to be pleasantly surprised and will spread the word around the world that Uzbekistan is open for business and on the path to significant economic development.

NEW UZBEKISTAN:

A Large Country with Boundless Potential

Uzbekistan should be regarded as an innovative economy that has undergone significant reforms over the past seven years and is showcasing high growth rates in key sectors. This large country, territorially exceeding California, has successfully managed the challenges of the pandemic and global conflicts, demonstrating economic resilience. Notably, the real economic growth has remained positive despite temporary difficulties in trade, tourism, and transportation. The recently announced five-year strategy of the EBRD for Uzbekistan up to 2029 highlighted the benefits of economic openness and extensive market reforms, including the liberalization of capital flows and increased private sector participation in the economy. These measures were accompanied by proactive economic policies, especially in infrastructure development, making Uzbekistan one of the leading inward-focused countries that has overcome the challenges of past decades. According to Ivailo Izvorski, Chief Economist for Europe and Central Asia at the World Bank, Uzbekistan’s efforts have led to expected outcomes, raising increased expectations. It is impressive that the pace of reforms did not slow during the difficulties associated with the COVID-19 pandemic. The next phase of market and institutional reforms is aimed at improving the efficiency of labor, capital, land, and resource markets and is planned to begin soon.

EY, specializing in professional services, describes Uzbekistan as an exciting and dynamic economic environment, while the international law firm Dentons, in addition to noting the cultural aspects of the country, highlights its role in the global economic shift towards Asia, as Uzbekistan becomes one of the fastest-growing economies in the world. Currently, attention is being given to the prospects for the next six years, including the “Uzbekistan 2030” strategy, which encompasses various initiatives and programs across the economic spectrum, with a particular focus on public-private partnerships (PPPs).

Uzbekistan’s Strategy to 2030 aims to achieve the status of an upper-middle-income country by 2030, including the implementation of public-private partnership (PPP) projects totaling $17 billion. These efforts are aimed at strengthening economic resilience and stimulating investments, contributing to the long-term growth and development of Uzbekistan.

In March 2024, the International Islamic Trade Finance Corporation (ITFC) concluded several agreements with Uzbekistan totaling $715 million. According to the ITFC, this financing is intended to support the production of cotton and wheat, ensure food security, stabilize prices for essential goods, and meet the trade financing needs of the private sector and small and medium-sized enterprises (SMEs). The flagship ITFC project, Trade Connect Central Asia, is aimed at stimulating growth and economic integration in Azerbaijan, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan. With Uzbekistan having a population of 37 million, significant attention is being placed on it as a rapidly developing player on the Asian economic stage. Following seven years of challenging reforms, Uzbekistan is poised to reap the benefits of these changes. Moreover, the population size itself is an advantage, exceeding that of neighboring countries, including Tajikistan (10 million), Kyrgyzstan (7 million), and Kazakhstan (19.7 million). Uzbekistan already boasts one of the highest literacy rates in Asia, close to 100 percent, and a thriving higher education sector, encompassing both academic and professional education. Most schools choose English as the first or second mandatory foreign language. It also helps that Uzbekistan is one of the youngest countries in Asia, with nearly 60 percent of the population under 30 years old.

A Compelling Economic Landscape Supported by Ambitious Reform Programs.

UZBEKISTAN IN NUMBERS

• GDP growth of 6% in 2023

• Population of 37 million with a median age of 29 years

• Literacy rate in Uzbekistan is 99%

• First country in the CIS to implement 5G

• +$70 billion FDI over the next 5 years

• 0% corporate tax for enterprises located in the IT Park

• Double growth of the average monthly salary (USD) over the last 5 years

• Uzbekistan is rated “stable” and “positive” by S&P and Moody’s, respectively

STRATEGY-2030 – KEY HIGHLIGHTS

• Increase the private sector’s share in the economy to 85%.
• Secure membership in the World Trade Organization (WTO).
• Raise the share of renewable energy sources in the economy to 40%.
• Double labor productivity in industry.
• Increase exports to $45 billion.
• Reduce the regulatory burden on the economy by 30%..

GDP PER CAPITA, IN CURRENT PRICES, THOUSAND SUMS

2023 –                                29 291,4

2022                                   25 151,9

2021                          21 149,2

2020                17 688,5

2019       15 863,8

Future Based on Renewable Energy

Transforming Uzbekistan into a significant player in renewable energy sharply contrasts with the environmentally unsafe agricultural practices of past years. Currently, natural gas production in Uzbekistan accounts for 90.5% of total energy production. Oil constitutes 5.8%, coal 2.5%, hydroelectric power 1%, and there is a “negligible amount of biofuel,” according to the report. However, these figures do not fully indicate the emergence of a new green energy powerhouse.

Nonetheless, trends beneath the surface are shifting, as the country possesses significant renewable energy potential, most of which is linked to solar energy.

“Uzbekistan benefits from high solar radiation,” an essentially “free” source of energy, which is also clean.

Certainly, utilizing such resources is not without costs, and therefore, the government has developed several strategies aiming to promote the broader adoption of eco-friendly energy sources. By the coming year, the official target is for renewable energy sources to constitute 20% of the energy market, and by 2030, this figure is expected to increase to 25%.

Uzbekistan offers competitive and affordable utility rates for businesses, as well as favorable corporate tax and value-added tax rates.

Reforms in Uzbekistan have become irreversible. Uzbekistan continues to implement market principles into the economy and create a conducive environment for turning business ideas into successful investments.