UZBEKISTAN Quality Job Creation As a Cornerstone for Sustainable Economic Growth COUNTRY Diagnostic Study Kym Anderson, Edimon Ginting, and Kiyoshi Taniguchi
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UZBEKISTAN QualitY JOB CReation as A CORNERSTONE FOR SUSTAINABLE EconoMIC GROWTH COUNTRY DIAGNOSTIC STUDY Kym Anderson, Edimon Ginting, and Kiyoshi Taniguchi MAY 2020 ASIAN DEVELOPMENT BANK UZBEKISTAN QualitY JOB CReation as A CORNERSTONE FOR SUSTAINABLE EconoMIC GROWTH COUNTRY DIAGNOSTIC STUDY Kym Anderson, Edimon Ginting, and Kiyoshi Taniguchi MAY 2020 ASIAN DEVELOPMENT BANK Creative Commons Attribution 3.0 IGO license (CC BY 3.0 IGO) © 2020 Asian Development Bank 6 ADB Avenue, Mandaluyong City, 1550 Metro Manila, Philippines Tel +63 2 8632 4444; Fax +63 2 8636 2444 www.adb.org Some rights reserved. Published in 2020. ISBN 978-92-9262-194-0 (print); 978-92-9262-195-7 (electronic); 978-92-9262-196-4 (ebook) Publication Stock No. TCS200134-2 DOI: http://dx.doi.org/10.22617/TCS200134-2 The views expressed in this publication are those of the authors and do not necessarily reflect the views and policies of the Asian Development Bank (ADB) or its Board of Governors or the governments they represent. ADB does not guarantee the accuracy of the data included in this publication and accepts no responsibility for any consequence of their use. The mention of specific companies or products of manufacturers does not imply that they are endorsed or recommended by ADB in preference to others of a similar nature that are not mentioned. By making any designation of or reference to a particular territory or geographic area, or by using the term “country” in this document, ADB does not intend to make any judgments as to the legal or other status of any territory or area. 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Corrigenda to ADB publications may be found at http://www.adb.org/publications/corrigenda. Notes: In this publication, “$” refers to United States dollars. ADB recognizes “Kyrgyzstan” as the Kyrgyz Republic, “China” as the People’s Republic of China, “Korea” and “South Korea” as the Republic of Korea, and “Russia” as the Russian Federation. On the cover: From the top: Daily life, architecture and views of Bukhara, 2016 (Relisa Granovskaya); Daily life, architecture and views of Samarkand, 2016 (Relisa Granovskaya); Construction site on the Talimarjan Power Plant, 2016 (Nikita Makarenko); Daily life, architecture and views of Tashkent, 2016 (Relisa Granovskaya); New turbine installed on Talimarjan Power Plant, 2016. (Relisa Granovskaya); A high-speed train “Afrosiyob” is arriving to Samarkand railway station, 2016 (Relisa Granovskaya). iii Contents Tables, Figures, and Boxes v Preface x Acknowledgments xii Author Profiles xiv Abbreviations xix Weights and Measures xx Executive Summary xxi 1. Macroeconomic Performance, Opportunities, and Challenges 1 1.1. Recent Reforms 2 1.2. Economic Growth and Inflation 5 1.3. Fiscal Policy and Reform 8 1.4. External Sector 11 1.5. Job Creation 18 1.6. Inclusion and Sustainability 20 1.7. Key Messages and Policy Recommendations 22 References 26 2. Infrastructure as a Foundation for Job Creation 29 2.1 Assessment of the Transport and Logistics Sectors 31 2.2 Assessment of the Energy Sector 47 2.3 Policy Recommendations 71 References 77 3. Unlocking the Potential for Labor Productivity Growth 83 3.1. Demographic Dynamics 84 3.2. Economic Structure and Drivers of Economic Growth 85 3.3. Education and Skill Development 88 3.4. Employment Structure and Job Quality 105 3.5. Labor Migration and Remittances 117 3.6. Policy Recommendations 123 References 129 iv Contents 4. Private Sector Development and Access to Finance 136 4.1. Private Sector Development for Economic Diversification 137 4.2. Financial Sector Development: Trends and Challenges 150 4.3. Financial Inclusion for Future Growth 158 4.4. Government Efforts Toward Inclusive 168 and Private Sector-led Growth 4.5. Policy Implications for Accelerating Inclusive 172 Economic Growth 4.6. Conclusion 174 References 176 5. Trade and Foreign Direct Investment in Uzbekistan 178 5.1. Uzbekistan’s Trade and International Economic 180 Cooperation: An Overview 5.2. The Evolution of Trade and Foreign Direct Investment 182 in Uzbekistan: Stylized Facts 5.3. Why Does Uzbekistan Need to Liberalize Its 187 Trade and Foreign Direct Investment? 5.4. Potential Gains from Trade and Foreign Direct Investment 193 5.5. Firm Size Distribution Analysis 197 5.6. Gravity Model of Exports 199 5.7. Policy Recommendations for Trade and Foreign 203 Direct Investment Liberalization in Uzbekistan 203 Appendix 5.1: Uzbekistan’s Trading Partners 206 References 207 v Tables, Figures, and Boxes Tables 1.1 Ease of Doing Business Rankings, Uzbekistan, 2016 and 2018 4 1.2 External Indicators, Uzbekistan, 2005–2018 16 1.3 Ranking of Barriers to Creating Employment, Uzbekistan Enterprise 19 Survey, 2017 1.4 Poverty and Inequality Indicators, Uzbekistan, 20 2001, 2007, 2010, 2013, 2016-2018 1.5 Poverty Incidence by Region, Uzbekistan, 2012 20 2.1 Road Transport Indicators, Uzbekistan, 2004 to Latest Data 31 2.2 Rail Transport Indicators, Uzbekistan, 2011–2018 37 2.3 Transport Corridors for Foreign-Traded Goods, Uzbekistan 40 2.4 Indicators of Cost of Trading Across Borders, Selected Countries, 43 2018 2.5 Logistics Performance Index Rank, Selected Countries, 2018 45 2.6 Energy Reserves, Uzbekistan, 2017 48 2.7 Supply and Consumption of Gas, by Sector, Uzbekistan, 2018 50 2.8 Enterprise Survey Results, Uzbekistan, 2013 59 2.9 Electricity Supply Projection, Uzbekistan, 2015–2020 61 2.10 Uzbekistan’s Power Generation, 1991, 2016, 2017, 61 and Projections 2017–2050 2.11 Generating Capacity of Hydropower Plants, Actual and Targeted, 62 Uzbekistan, 2017–2025 2.12 Generation Expansion Plan, by Source, Uzbekistan, 2018–2030 62 2.13 Efficienciesf o Thermal Power Plants, Uzbekistan, 2013 64 2.14 Length of Transmission and Distribution Infrastructure, 65 Uzbekistan, 2017 2.15 Required Investment for Hydropower Plants, Uzbekistan 67 2.16 Tariff ates,R Uzbekistan, 2001–2018 69 2.17 Uzbekenergo’s Projected Financial Performance, 2017–2026 70 3.1 Education System, Uzbekistan, 2018 89 3.2 Top Universities Based on UniRank, Uzbekistan, 2019 101 3.3 Webometrics Ranking of Universities in Uzbekistan, 2019 101 3.4 Factors Affecting Labor Force Participation, Aged 25–55, 2013 110 3.5 Occupational and Sectoral Distribution by Gender, Aged 25–55, 112 Uzbekistan, 2013 vi Tables, Figures, and Boxes 3.6 Formal and Informal Employment, Uzbekistan, 2016 113 3.7 Profile of a Typical Migrant, Uzbekistan, 2013 117 3.8 Positive and Negative Outcomes of Migration 122 4.1 Number of Enterprises, Employment, and Gross Value Added, 139 Uzbekistan, 2003–2017 4.2 Priority Areas Under the 2017 National Development Strategy, 168 Uzbekistan 4.3 Tax on Business Income, Uzbekistan, 2017 169 5.1 Trade and Economic Organization Memberships, Uzbekistan 181 5.2 Average Import Tariffs, by Product, Uzbekistan, 2014 189 5.3 Decline in Global Applied Most-Favored Nation Tariffs, 190 1998–2014 5.4 Logistics Performance Index and Infrastructure Index Scores, 193 Uzbekistan and Comparators 5.5 Estimates of Gravity Model for Uzbekistan 202 Figures 1.1 Uzbekistan’s Exchange Rate, 2013–2019 3 1.2 Real GDP Growth, Uzbekistan, 1993–2018 5 1.3 GDP per Capita, 1993–2018 6 1.4 GDP by Economic Activity, Uzbekistan, 1993–2018 6 1.5 CPI and Food Inflation Rates, Uzbekistan, 2000–2018 7 1.6 Total Fiscal Revenue and Expenditure (Budget), Uzbekistan, 10 2013–2018 1.7 Tax and Expenditure Items (Budget), Uzbekistan, 2013–2018 10 1.8 Value of Exports, Uzbekistan, 1995–2018 12 1.9 Sectoral Export Shares, Uzbekistan, 1995–2018 12 1.10 Exports by Level of Technology, Uzbekistan, 1995–2018 13 1.11 Product Space of Exports, Uzbekistan, 14 1995, 2005, and 2017 1.12 Economic Complexity and GDP per Capita, Various Countries, 15 2017 1.13 Economic Complexity Index Values, Uzbekistan 16 and Other Resource-Rich Countries, 1995–2017 1.14 Official Reserves, Uzbekistan, January 2013–December 2018 17 1.15 Age Dependency Ratio, Uzbekistan, 1990-2018 18 1.16 Selected Banking Indicators, Uzbekistan, 2006–2018 23 2.1 Road Traffic Deaths, Uzbekistan, 2000–2016 32 2.2 Road Fund Revenues, Uzbekistan, 2011–2018 33 2.3 Development of Republican Road Fund Expenditures, 34 Uzbekistan, 2011–2017 Tables, Figures, and Boxes vii 2.4 Railway Lines, Uzbekistan, 2005–2018 36 2.5 Energy Intensity, Selected Countries, 2014 47 2.6 Total Primary Energy Supply, Uzbekistan, 1990–2018 49 2.7a Final Energy Consumption, by Source, 1990–2018 50 2.7b Final Energy Consumption, by Consuming Sector, 1990–2018 51 2.8 Electricity Generation, by Source, Uzbekistan, 1990–2018 55 2.9 Electricity Balance Trade, Uzbekistan, 1990 to 2018 55 2.10 Electricity Consumption, by Sector, Uzbekistan,1990–2018 56 2.11 Electricity