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Five years later, Uzbekistan’s reform program prepares for second stage

Decrees and resolutions have been signed, Powerpoint presentations have been prepared, and some of the largest state-owned companies have obtained or are in the process of seeking international credit ratings. Uzbekistan is about to begin the second stage of its historic program of national reforms.

A few months after his election five years ago, ending 25 years of post-Soviet isolation, President Shavkat Mirziyoyev liberalized exchange controls, started to relax international visa requirements and announced a series of tax changes designed to attract investors. He then began the process of downsizing the state to make way for the private sector. This has not been easy.

When the COVID-19 pandemic landed in Uzbekistan in early 2020, the government’s political and business elites were ready for a year of ‘exiting’ investment conferences, roadshows and visits by bank analysts and investment. The annual Uzbekistan Oil and Gas Conference and Exhibition, a major event in Tashkent’s business calendar, was scheduled to take place in mid-May 2020. Its last-minute cancellation was seen as a signal that few things had been planned for Uzbekistan’s international reach to happen as planned.

Emergency measures have been put in place to stop the spread of the virus. Space for more than 30,000 additional hospital beds has been arranged, including a brand new specialist hospital built in record time just outside Tashkent.

According to the World Bank, international remittances – a lifeline for many Uzbek families – dived by nearly 20%, compared to about $ 8.5 billion, or nearly 15% of GDP, in 2019. In addition, some 600,000 expatriates have been forced to return home, having lost their jobs or the ability to respond. residency requirements as national lockdowns spread around the world.

Unemployment Pink, but only slightly, at 6% – a tribute to a series of emergency loans and other aid to employers, and the start of other reforms in the areas of energy, technology and energy. Agriculture. The pandemic has brought many problems, but even under these difficult conditions, the country’s GDP grew by 1.6% in 2020. A strong rebound is currently underway, with the Asian Development Bank projecting growth of 6.5% for 2021.

But there is a longer term problem. Over the years, there has been chronic underinvestment in education. Outside the big cities and especially in the more remote parts of the country, dilapidated schools, old Soviet-era curricula and shortages of textbooks and qualified teachers have dampened ambitions and generated persistent inequalities. Where would the technicians, managers and other qualified professionals come from for the post-privatization world envisioned by Mirziyoyev?

Hence a continued emphasis on education and youth. Some $ 186 million has been budgeted this year for new schools and the renovation of old ones. Qualified teachers were offered bonuses to work in remote areas. A new system of grants has been put in place to support private schools. Ten elite “presidential” schools are emerging this year, as well as nearly 200 schools specializing in chemistry, biology, mathematics and computer science. A program to send top students to international universities has been launched, and in recent years more than two dozen leading international universities have opened branches in Uzbekistan.

In this context, the green shoots of an emerging private sector are starting to appear. The government has allocated more than $ 9 billion in state aid to new businesses this year, creating an environment in which thousands of small businesses have started to do business. Graduates receive seed funding to start their own businesses. Agrarian reform led to the creation of new agricultural and processing enterprises.

Global headlines were devoted to Uzbekistan’s sweeping privatization plans. But it is the growth of local private businesses that can be more transformative. As a result, diplomats and trade negotiators were tasked with expanding the country’s business opportunities. In the west, a new GSP + agreement was signed with the European Union, establishing duty-free entry for some 6,000 individual Uzbek products.

Even more ambitious plans are emerging on a north-south axis. It all depends on what happens in neighboring Afghanistan, after the withdrawal of US and Allied military forces, but if peace or at least some form of stability prevails, Uzbekistan is leading a push in Central Asia to establish a corridor. road and rail south through Afghanistan to Pakistani ports. This would open up new markets, both in South Asia and in the world beyond, for Uzbek products.

So now comes the second step. Long-awaited privatizations have started, with two state-owned banks, Poytaxt Bank and UzAgroExportBank, auctioned at the end of last month. Managers have spent the last year, along with everyone in international finance, getting used to virtual road shows and videoconferencing. State-owned enterprises currently represent around 55% of Uzbekistan’s economy. The goal is a 75% reduction in the number of state-owned enterprises by 2025. If COVID-19 allows, 2022 looks likely to be a critical year for the reform agenda.

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