Uzbekistan

Like in many countries, the scale of Uzbekistan’s green transition requires a marked increase in private financing to fill the existing spending gap. However, compared to other countries, the outsized role of the state in Uzbekistan’s economy and its underdeveloped domestic capital market are particularly significant constraints to the mobilisation of private finance. Since 2021, Uzbekistan has made green bonds a central part of its strategy to fill the financing gap and mobilise new sources of capital for its domestic green infrastructure projects. This report provides a stock-take of the market and institutional set-up in Uzbekistan, the reforms that have led to recent issuances of both sovereign and corporate thematic bonds, and the remaining barriers to further uptake of the instrument. The report covers information available as of October 2023, although given the rapidly evolving situation in Uzbekistan some changes to market conditions and additional bond issuances may not be included. The report also provides policy recommendations related to the market's institutional set up, Uzbekistan's regulatory framework for debt capital markets and emerging opportunities for further green bond use aimed at key stakeholders, including policy makers and market participants. It contributes to the growing body of OECD work on thematic bonds in the emerging markets of Eastern Europe, the Caucasus and Central Asia (EECCA).

After decades of relative inactivity in international financial markets, Uzbekistan has emerged as a dynamic albeit small player that has made green finance a central component of its development strategy. Following its inaugural bond issuance on the international market in 2019, three thematic bonds have been issued in short order: a sovereign sustainability bond (labelled “Sustainable Development Goals bond”) in 2021 and two green bonds – one sovereign, one corporate – in 2023. These achievements establish Uzbekistan as a frontrunner in the region of Central Asia, where thematic bonds remain a novel financial instrument.

This chapter provides an overview of the economic, environmental, and capital market-related challenges that Uzbekistan faces and the arguments for diversifying sources to finance the green transition. The scale of Uzbekistan’s green transition requires a marked increase in private financing to fill the existing spending gap. The outsized role of the state in Uzbekistan’s economy and its underdeveloped domestic capital market act as significant constraints and call for a diversification of sources to finance the green transition. Uzbekistan’s three thematic bond issuances point to an emerging opportunity to use green bonds to finance projects related to the country’s climate and development goals while the government continues its efforts to facilitate capital market development. Although green bonds are not free of risks nor are they a panacea, they offer important advantages, such as the appetite of international investors for green investment projects and the transparency that their use-of-proceeds requirements encourage.

This chapter presents the potential role of green bonds in financing Uzbekistan’s green transition, the priority sectors for green bond issuance and barriers that potential issuers face. Non-sovereign issuers, notably subnational governments and corporate entities, face barriers in terms of the country’s existing regulatory requirements and persistent knowledge and expertise gaps, but there is considerable potential for the use of the instrument to finance these issuers’ green projects. Other bond-like instruments, such as green sukuks, an Islamic fixed-income instrument, could prove effective at mobilising domestic demand and offer an alternative financing mechanism if regulatory hurdles to the development of Islamic finance in Uzbekistan are removed. The energy sector, particularly renewable power generation projects, is the sector with the most potential for green bond issuances, but agriculture, transport, housing and water management projects could benefit as well.

This chapter provides the necessary context to understand the scale of the challenges that Uzbekistan faces in pursuing its green transition and the gap between available financing and the estimated sums required. Uzbekistan’s economy is dynamic and growing, but also highly energy- and GHG-intensive. The Government of Uzbekistan has set ambitious targets for the country in terms of economic development and climate change mitigation, but the scale of the economic transformation required to meet these targets requires sizeable investments, particularly in infrastructure. This transition will necessitate a major shift in Uzbekistan’s existing infrastructure systems, especially its fossil fuel-reliant energy sector. By facilitating private investment, including from international sources, in projects that satisfy growing demand for infrastructure services without exacerbating existing environmental problems, Uzbekistan has an opportunity to establish itself as a regional leader in sustainable development. Such projects could, for instance, seek to harness Uzbekistan’s large renewable energy potential.

This chapter outlines the public, private, domestic and international capital that Uzbekistan could use to finance its ambitions to boost living standards and swiftly reduce GHG emissions as well as the estimated gap between current spending and the flows that are needed. Public domestic financial flows, primarily from the state budget, and public international finance flows, from multilateral and bilateral donors, have been essential sources of Uzbekistan’s development and climate finance, but there are increasing opportunities to harness the country’s developing securities market and attract domestic and international financiers. Given budget constraints, the scale of the transition cannot be achieved without increased private sector financing and more efficient use of available resources.

This chapter describes the institutional set-up and market infrastructure of Uzbekistan’s financial sector as well as the institutional, legislative and regulatory barriers that have impeded the development of the country’s capital market. Uzbekistan’s domestic financial system is underdeveloped, dominated by state-owned banks and underutilised by the country’s citizens and potential investors. An opaque amalgamation of fragmented legislative and regulatory acts and the lack of a centralised platform for securities trading reduce the accessibility of the market to potential participants, and the products permitted by current legislation do not correspond with emerging demands. Although recent reforms have addressed some of the problems that have stunted the development of Uzbekistan’s capital market, there are several opportunities available to the government to boost the supply of and demand for securities on the domestic market and, in so doing, encourage the development of a healthier, more dynamic capital market.

While survey respondents were positive about digital opportunities in the country, many expressed concerns regarding infrastructure and skills. The process of digitalisation will profoundly shape Uzbekistan’s economy and society in the years to come, just as it is doing across the OECD. Ensuring access to high-quality connectivity infrastructure and raising the level of digital skills in the workforce are essential for enabling the private sector to make the most of the opportunities of digitalisation.

Респонденты опроса высказали ряд опасений, связанных с простотой торговли в Узбекистане. Эти опасения перекликаются с результатами масштабной работы, проведенной ОЭСР в сотрудничестве с правительством по вопросам содействия торговле и развитию транспортных связей. Несмотря на ограниченность транспортных связей Узбекистана в связи тем, что страна дважды замкнута сушей, у него все же есть потенциал стать привлекательным направлением для инвестиций, ориентированных на рынок, благодаря многочисленному и растущему населению и расположению среди ряда других небольших, но потенциально быстрорастущих рынков. Тем не менее, чтобы местные и международные компании могли использовать потенциальные рыночные возможности, еще многое предстоит сделать для снижения стоимости торговли и повышения осведомленности о внешних возможностях для местного частного сектора. В этой главе представлен ряд выводов, сделанных в ходе опроса, а также обзор последних достижений, возможностей и проблем в области содействия торговле и продвижения экспорта в Узбекистане.

Узбекистан является второй по величине экономикой Центральной Азии, и правительство стремится достичь статуса страны с уровнем дохода выше среднего к 2030 году. В 2022 г. реальный ВВП вырос на 5,3 % по сравнению с 7,4 % в предыдущем году. В течение почти трех десятилетий после обретения независимости рост в стране был обусловлен главным образом государственными инвестициями и индустриализацией, при этом международная торговля и развитие частного сектора были существенно ограничены. С запуском широкомасштабной программы реформ в 2017 г. эта ситуация изменилась.

The government of Uzbekistan launched a wide-ranging programme of reforms in 2017 in order to accelerate the transition to an open, market-based economy. The country is now on a pathway to a sounder economic and fiscal footing, but the success of these strategic ambitions depends on the resolution of long-standing issues in the business climate. Addressing these issues is also critical to enabling the broader structural transformation of the country’s economy, which despite having started in the mid-1990s, remains at a relatively early stage.

The purpose of the OECD private sector survey of Uzbekistan, conducted by the OECD in 2022, was to collect new firm-level insights into the ongoing reform process to support the business climate in the country. The survey provides additional input for the OECD and the Government to consider when reflecting on the effectiveness and direction of the reform process. This chapter introduces the survey, its methodology, and a number of high-level observations that emerged from the process.

Since embarking on a wide-ranging reform programme in 2017, Uzbekistan has made considerable progress in creating the framework conditions for a competitive private sector. In the first decades of independence, Uzbekistan’s growth was primarily driven by a state-led model of industrialisation, state-owned enterprises predominated in most sectors of the economy, and the role of international trade and the private sector significantly limited. Whilst macroeconomic performance was relatively strong, this development model tended to hamper the reallocation of human and fixed capital needed to drive structural transformation. Since the reform process accelerated in 2017, the government has made considerable efforts to reduce the direct role of the state in the economy and enable the private sector to play a more expansive role in economic development.

В 2017 г. правительство Узбекистана приступило к реализации широкомасштабной программы реформ, направленной на ускорение перехода к открытой рыночной экономике. В настоящий момент страна находится на пути к укреплению своих экономических и бюджетных позиций, однако успех этих стратегических амбиций зависит от решения давних проблем, связанных с деловым климатом. Решение этих проблем также имеет решающее значение для обеспечения более широких структурных преобразований в экономике страны, которые, хотя и были инициированы в середине 1990-х гг., все еще находятся на относительно ранней стадии реализации.

Respondents to the survey raised a number of concerns relating to the ease of trade in Uzbekistan. These concerns dovetail with a large body of work the OECD has conducted, in co-operation with the government, on issues around trade facilitation and connectivity. Despite the geographical connectivity penalties Uzbekistan faces due to its double landlocked status, the country has potential to be an attractive destination for market-seeking investment: a large and expanding population, nestled in the midst of a number of other small but potentially high-growth markets. Yet, for both domestic and international firms to harness potential market opportunities, there remains much to be done to lower the cost of trade and raise awareness of external opportunities for the domestic private sector. This chapter introduces a number of insights from the survey, before giving an overview of recent progress, opportunities, and challenges in trade facilitation and export promotion in Uzbekistan.

Устранение барьеров на пути развития частного сектора уже давно является целью правительства Узбекистана: в 2017 г. в стране началась реализация масштабной программы реформ, предусматривающей удвоение усилий, направленных на увеличение количества конкурентоспособных и производительных частных компаний. Узбекистану необходим более динамичный и инновационный частный сектор для того, чтобы отвечать на вызовы и использовать возможности зеленого и цифрового переходов, которые создают новый импульс для ускорения указанных реформ. Опрос частного сектора в Узбекистане предоставил возможность собрать новые ценные сведения о восприятии компаниями текущего процесса реформ и перенаправить внимание лиц, ответственных за разработку политики, на некоторые из наиболее актуальных вопросов.

Addressing barriers to private-sector development has been a long-standing ambition of the government of Uzbekistan, with an extensive programme of reforms that began in 2017 redoubling efforts to foster the growth of a more competitive and productive population of private-sector firms. Uzbekistan needs a more dynamic and innovative private sector if it is to meet the challenges and seize the opportunities of the green and digital transitions, which create a new impetus for accelerating these reforms. A survey of the private sector in Uzbekistan provided an opportunity to gather new insights into firm-level perceptions of the ongoing reform process and to refocus the attention of policymakers on some of the most pressing issues.

Responses to the survey suggest that firms consider ongoing legal and regulatory reforms to support the business climate in Uzbekistan to be moving in the right direction. At the same time, respondents note that there remains significant work to be done both on the implementation of these reforms, and on additional and complementary pro-competition reforms. These views are in line with OECD analysis on a number of areas highlighted by respondents, such as overall framework conditions for business, taxation, and competition policy. While the legal and regulatory environment for business in Uzbekistan has improved significantly developed since 2017, reducing many unnecessary fixed costs of doing business, the survey highlights a number of areas where more work is necessary to foster private sector development.

С момента начала широкомасштабной программы реформирования в 2017 году Узбекистан добился значительных успехов в области создания рамочных условий для формирования конкурентоспособного частного сектора. В первые десятилетия независимости развитие Узбекистана было главным образом обусловлено государственной моделью индустриализации, при которой государственные предприятия преобладали в большинстве секторов экономики, а роль международной торговли и частного сектора была в значительной мере ограничена. Хотя макроэкономические показатели страны были относительно высокими, подобная модель развития препятствовала перераспределению человеческого и основного капитала, необходимого для проведения структурных преобразований. По мере ускорения процесса реализации реформ в 2017 году правительство приложило значительные усилия, чтобы уменьшить непосредственную роль государства в экономике и позволить частному сектору принимать более активное участие в экономическом развитии страны.