Growth and Job Creation in Uzbekistan
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Growth and Job Creation in Uzbekistan: An In-depth Diagnostic Growth and Job Creation in Uzbekistan: Public Disclosure Authorized An In-depth Diagnostic Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Macroeconomics, Trade & Investment Global Practice GROWTH AND JOB CREATION IN UZBEKISTAN: AN IN-DEPTH DIAGNOSTIC December 28, 2018 Macroeconomics, Trade and Investment Global Practice Europe and Central Asia Region Document of the World Bank Uzbekistan Government Fiscal Year: January 1 – December 31 Currency Equivalents: EXchange Rate Effective as of December 28, 2018 Currency Unit: Uzbekistan Som (UZS) US$1 = 8,339.55 UZS Weights and Measures: Metric System ABBREVIATIONS AND ACRONYMS CBU Central Bank of Uzbekistan CIS Commonwealth of Independent States ECA Europe and Central Asia FDI Foreign direct investment GDP Gross domestic product GNI Gross national income HICs High-income countries ICOR Incremental Capital Output Ratio ICT Information and communications technology IFMR Institute for Forecasting and Macroeconomic Research ILO International Labor Organization IMF International Monetary Fund JoGG World Bank’s Jobs Generation and Growth Decomposition Tool LMICs Lower-middle income countries ML Ministry of Labor NGO Non-governmental organization OECD Organisation for Economic Co-operation and Development PPP Public-private partnership SCD Systematic Country Diagnostic SOE State-owned enterprise TFP Total factor productivity UMICs Upper-middle income countries UNIDO United Nations Industrial Development Organization Regional Vice President: Cyril Muller Country Director: Lilia Burunciuc EFI Vice President/SD Vice President Ceyla Pazarbasioglu-Dutz Practice Director: Lalita M. Moorty Practice Manager: Sandeep Mahajan Team Leader: Eskender Trushin CONTENTS Foreword ........................................................................................................................................................ i Acknowledgements ....................................................................................................................................... ii Executive Summary ...................................................................................................................................... iii 1. An Initial Decomposition of Aggregate Growth Per Capita .................................................................. 1 2. Trends in Labor Productivity, Capital Productivity, Capital- and Labor-Intensity, Employment and Real Wages .................................................................................................................................................. 14 3. Analysis of Enterprise Survey Results - Binding Constraints to Labor Productivity and Employment Growth in Uzbekistan’s Manufacturing Sector ................................................................................... 33 4. Identifying Priorities and Solution Areas ............................................................................................ 45 References .................................................................................................................................................. 57 Annexes ....................................................................................................................................................... 59 List of Tables Table 1.1. Decomposition of Growth in Value Added Per Capita, 1996–2016 ............................................. 3 Table 1.2. Employment, Output, Productivity, and Population in Uzbekistan, 1996–2016 ......................... 4 Table 1.3. Decomposition of Growth in Value Added per Capita and Changes in Labor Productivity by Subsector . 7 Table 1.4. Data Used for Decomposition of Output per Worker, Capital Stocks, Capital Labor Ratio and Share of Capital in Total Income, 1996–2016 .............................................................................. 9 Table 1.5. Changes in Employment by Sectors and Subsectors of the Economy (1,000 people), 1996–2016 .... 10 Table 1.6. Decomposition of Growth in Value Added per Capita and Changes in Employment by Subsector ....... 11 Table 1.7. Decomposition of Inter-Sectoral Shifts, 2009–16 ...................................................................... 13 Table 2.1. Changes in Employment and Labor Productivity by Subsector of the Economy, 1996–2016 ... 19 Table 2.2. Economic Subsectors by Direction of Change in Employment and Labor Productivity Growth, 1996–2016 .. 20 Table 2.3. Growth in Labor Productivity, Real Wages and Employment, 2004–16 .................................... 26 Table 3.1. Uzbekistan: Differences in Labor Productivity and Employment between Large and Small Manufacturing Firms .................................................................................................................. 36 Table 3.2. Uzbekistan: Ranking of Barriers to Increasing Employment in Large and Small Manufacturing Firms ... 38 Table 3.3. Uzbekistan: Ranking of Threats Perceived by Management of Large and Small Manufacturing Firms .. 39 Table 3.4. Uzbekistan: Constraints on Physical Infrastructure for Large and Small Manufacturing Firms ..................... 40 Table 3.5. Uzbekistan: Main Factors that Limited Technology Absorption and Innovation in Manufacturing Firms ... 42 Table 3.6. Uzbekistan: Ranking of Measures to Increase Labor Productivity for Large and Small Manufacturing Firms . 43 Table 4.1. Employment Challenges and Possible Solution Areas ............................................................... 48 Table 4.2. Uzbekistan: Ranking of State Support Measures Demanded by Manufacturing Firms in 2017 ........... 53 List of Figures Figure 1.1. Shapley Decomposition of Growth in Value Added per Capita, 1996–2016 .............................. 2 Figure 1.2. Shapley Decomposition of Growth in Value Added per Capita, 2011–12 .................................. 2 Figure 1.3. Shapley Decomposition of Growth in Value Added per Capita, 1996–2016 .............................. 3 Figure 1.4. Uzbekistan: Value Added (Output) per Worker, 1996–2016 ...................................................... 8 Figure 1.5. Decomposition of Changes in Output per Worker, 1996–2016 ................................................. 9 Figure 1.6. Decomposition of Changes in Output per Worker, 2009–16 ..................................................... 9 Figure 1.7. Uzbekistan: Employment in Economic Sectors, 1996–2016 ..................................................... 12 Figure 1.8. Uzbekistan: Employment in Economic Sectors, 2009–16 ......................................................... 12 Figure 2.1. Labor Productivity Gap in Manufacturing Subsectors between Uzbekistan and Other Countries .... 15 Figure 2.2. Average Wages Gap in Manufacturing Subsectors between Uzbekistan and Other Countries ..... 15 Figure 2.3. Share of Value Added in Total Output in the Food Processing Industry, 2014–16 .................. 16 Figure 2.4. Share of Value Added in Total Output in the Construction Materials Industry, 2014–16 ........ 16 Figure 2.5. Share of Value Added in Total Output in the Textile Industry, 2014–16 .................................. 16 Figure 2.6. Share of Value Added in Total Output in the Apparel Industry, 2014–16 ................................ 16 Figure 2.7. Share of Value Added in Total Output in the Chemical & Petrochemical Industry – Nitrogen Fertilizers, 2014–16 .................................................................................................................. 17 Figure 2.8. Share of Value Added in Total Output in the Chemical & Petrochemical Industry – Polyethylene and Polypropylene, 2014–16 .............................................................................. 17 Figure 2.9. Uzbekistan: Labor-Intensity in Economic Subsectors, Measured as a Ratio of Labor/Fixed Capital in Constant Prices, 1996–2016 ..................................................................................... 23 Figure 2.10. Labor Productivity, Capital Productivity, and Capital Intensity in all Labor-Intensive Manufacturing, 1996–2016 ...................................................................................................... 25 Figure 2.11. Wages/GDP Ratio, Growth in Labor Productivity, Real Wages, and Employment, 2005–16 . 26 Figure 2.12. Power Industry - Growth in Labor Productivity, Real Wages, and Employment, 2007–16 .... 28 Figure 2.13. Fuel Industry - Growth in Labor Productivity, Real Wages, and Employment, 2007–16 ....... 28 Figure 2.14. Machinery Industry - Growth in Labor Productivity, Real Wages, and Employment, 2007-16 .... 28 Figure 2.15. Metallurgy Industry - Growth in Labor Productivity, Real Wages, and Employment, 2007-16 .... 28 Figure 2.16. Chemical & Petrochemical Industry - Growth in Labor Productivity, Real Wages, and Employment, 2007-16 .............................................................................................................. 28 Figure 2.17. Light Industry - Growth in Labor Productivity, Real Wages, and Employment, 2007-16 ....... 28 Figure 2.18. Food processing Industry - Growth in Labor Productivity, Real Wages, and Employment, 2007-16 .. 29 Figure 2.19. Construction Materials Industry - Growth in Labor Productivity, Real Wages, and Employment, 2007-16 .............................................................................................................. 29 Figure 2.20. Construction - Growth in Labor Productivity, Real Wages, and Employment, 2007–16 ........ 29 Figure 2.21. Agriculture