The Groundwork of Economic Reforms in 2024

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On the situation in the economy and the tasks set

The dynamic growth of the population of Uzbekistan requires at least high outstripping economic growth rates to adequately meet the growing needs and improve the standard of living of people. However, this requires new, more balanced, and verified approaches to ensure the timely achievement of the set goals.

These new approaches to economic policy were manifested in the decisions taken at the important meetings held at the beginning of the year under the chairmanship of the President of Uzbekistan Shavkat Mirziyoyev on the situation in the economy and the tasks assigned to the economic divisions for 2024.

In general, the year 2023 was quite successful for Uzbekistan, then there were favorable changes in the economy. Gross domestic product grew by 6% compared to 5.7% in 2022. At the end of the year, the consumer price index dropped to 8.77% compared to 12.25% in 2022. Investment activity increased sharply – an increase of 22.1% compared to 0.2% in 2022.

It is especially important that the increase was achieved due to the growth of non-centralized investments by 26%, while centralized investments decreased by 0.7%. The share of centralized investments in the total volume of investments in fixed assets continued to decline – from 15.7% in 2022 to 12.7% in 2023, and the share of non-centralized investments increased from 84.3% to 87.3%. The growth of foreign trade showed double-digit indicators – foreign trade turnover increased by 23.9% and amounted to $62.6 billion.

However, several shortcomings and problems remained in the development of the economy last year, which the President critically pointed out during the meetings, set tasks, and defined measures that will be taken to solve these problems in 2024.

Macroeconomic priorities

The meeting held on January 16 was devoted to the priority tasks of ensuring macroeconomic stability and economic development in 2024.

Economic growth. In 2023, industry grew by 6%, the service sector by 6.8%, construction by 6.4%, and agriculture by 4.1%. However, as the Head of State noted, with the growth of industrial production, the added value of products does not exceed 40%, which is due to dependence on imports, high energy consumption, and excessive costs.

Therefore, 2024 has been declared the "Year of Efficiency and Cost Reduction in Economy" for all state-owned enterprises. From now on, support mechanisms in the industry will primarily ensure the production of products that create high-added value. At the same time, the activities of the heads of the economic block will be linked to monthly, quarterly, and annual performance indicators (KPIs).

This year, it is planned to increase the volume of gross domestic product by at least 6% and bring it to $100 billion. But at the same time, the President has set the task of increasing added value, reducing cost by 15%, and ensuring industrial growth by 7%.

The budget system. Noting that in 2023 the budget deficit was 5.5%, the President set the task that in 2024 it should go below 4%. In this regard, the need to review the tax system was pointed out and new directions for its reorganization were identified.

A separate system will be created to work with 80 largest enterprises and 35 commercial banks, providing 50% of the republic's tax revenues.

Another source of budget revenue is the privatization and sale of land at auction. In particular, it was noted that last year $81.2 million were received from land auctions, and 12 thousand new projects were established. However, 484 state assets included in the privatization program are not put up for auction. Therefore, the Cabinet of Ministers has been instructed to prepare a new privatization program designed to provide $1.6 billion of income this year.

In addition, the task has been set to control the correctness of spending $25.4 billion provided for in the budget for 2024. Target indicators will be set within the framework of 120 programs for evaluating the effectiveness of funds allocated to 37 ministries and departments.

The shadow economy. The most pressing issue today is the shadow economy. In this regard, the President at the meeting outlined additional measures designed to bring the fight against the shadow economy to a new level.

At present, 14 agencies are engaged in the fight against the shadow economy and economic crime. To coordinate and strengthen these activities, the powers of the Department for Combating Economic Crimes under the Prosecutor General's Office will be expanded. It is expected that by the end of the year, due to the reduction of the shadow economy, an additional $811.5 million will be in the legal sector.

Business incentives. Last year, an open rating of entrepreneurs was developed. At present the following incentives will be provided for entrepreneurs with the highest rating: all tax audits will be invalidated; the amount of value-added tax will be refunded in one day without inspections (previously from 7 days to 30 days), the amounts of overpayment for other types of taxes will be refunded in three days (previously after 15 working days). The possibility of mutual accounting of value-added tax on the import and sale of goods will be created by the customs and tax authorities. 

The banking system. This year, $22.3 billion of credit resources should be allocated to the economy. The Central Bank has been tasked with developing a program to reduce loan rates by at least 2-3% based on market mechanisms. The volume of micro-loans to entrepreneurs will be increased to $3.3 billion; the volume of deposits of the population in the national currency has been doubled and $10.6 billion has been attracted. State-owned banks should attract $2 billion of resources this year without a state guarantee.

Employment of the population. In the field of employment, the importance of implementing the recently adopted program, which employs 5 million people this year, was emphasized. At the same time, the activities of vocational education institutions will also be improved, which should train 100,000 skilled workers who can be employed in foreign markets.

Investments in increasing export

At the meeting on January 18, priority tasks in the fields of investment, export, and industry for 2024 were considered.

Export. As the President noted, over the past six years, our country has received almost $50 billion in foreign investment, last year GDP and industry grew by 6%, but export growth does not correspond to these trends.

To bring our country's economy to a new level, it is necessary to increase exports by at least 30% annually, the President pointed out that exporters still have to pass the control of four departments at the border. In this regard, it was decided to transfer all export control functions to the Customs Committee.

Many domestic enterprises cannot join global flows due to the lack of international certification. In this regard, the Technical Regulation Agency will be completely reformed and transferred to the government.

The export support system will also change. The Export Promotion Agency will be reorganized into a trade development company by the requirements of the World Trade Organization. Subsidies, loans, and assistance from this company will be provided based on the new rating, primarily to exporters entering new markets with high-value-added products.

Investment efficiency. Over the past six years, the volume of investments attracted to the industry of our country has increased 7 times, and equipment worth $14 billion has been imported over the past three years. At the same time, the possibilities of 24 special economic zones are not being fully used. In this regard, it was decided to implement a new experiment on the development of economic zones. In particular, 240 hectares of land in special industrial zones in the Bukhara, Navoi, and Tashkent regions will be outsourced to foreign companies. It was noted that this year 309 major projects can be implemented in special economic zones and 40,000 jobs can be created.

From construction to ecology

On January 29, a meeting was held on priority tasks in the fields of housing and communal services, construction, transport, and ecology.

Construction. Last year, more than 1,000 infrastructure facilities and about 2,000 apartment buildings were built in the region. This year, it is planned to build 1,637 infrastructure facilities as part of the investment program.

Considering that new projects worth $2.5 billion will be launched this year in cooperation with international organizations, the system of project implementation through external borrowing will also change. In this case, the project assessment report and the feasibility study will be combined into one project document, which will reduce the approval to 8-9 months.

Urban planning. The task has been set to develop master plans for 170 cities and towns this year and at least 300 next year.

To save energy, a differentiated approach will be applied to the choice of heating systems for apartment buildings, i.e. centralized, local, or individual, and some boilers will be switched to cogeneration. Due to this, only in 2024, it will be possible to save 600 thousand Giga calories of thermal energy and 2.5 billion kilowatts of electricity. It was also indicated at the meeting that it was time to introduce a single billing account for payments for electricity, gas, water, heat, waste, and tax payments.

Healthy ecology. Since 2020, 22 thousand new industrial enterprises have been launched in our country. At present, industrial enterprises and transport emit more than 2 million tons of pollutants into the atmosphere. In many cases, construction projects and projects are implemented without environmental expertise.

In this regard, it was determined that from April 1, a rating of air, water, and environmental pollution by region will be introduced. The task has been set to start installing automatic atmospheric air monitoring stations in the cities of Tashkent and Nukus, regional centers, and 20 industrial districts.

Modern gas cleaning and dust collection equipment will be installed and replaced at large production facilities and all cement plants. Enterprises of building materials, energy, and metallurgy will create a "green belt" with an area of 5 hectares around themselves, 10 million trees will be planted in total.

Over the next five years, 3,000 hectares of "green belts" and 200 hectares of parks will be created in the city of Tashkent and neighboring districts of the Tashkent region. Also, the movement of heavy-duty vehicles and passenger cars older than 10 years will gradually be restricted on the streets of the capital. Starting from January 1, 2025, the issue of abandoning AI-80 gasoline will be resolved. To support "green energy", a system of stimulating the population to switch to electric vehicles will be introduced.

Conclusion

A brief overview of the economic situation and tasks in priority areas of economic development of Uzbekistan in 2024, set at the January meetings of the economic complex, shows that despite the recognized successes in reforming the Uzbek economy, bottlenecks and individual problems continue to persist, which need timely and effective solution.

The timely recognition of these problems and the development of an appropriate economic policy aimed at correcting the situation is the main key to solving problems. And it is the decisions taken at these meetings that will allow us to continue dynamically increasing the pace of economic growth and well-being of the population in 2024 in the coming year.

 

Obid Khakimov, director of the Center for Economic Research and Reforms[1] under the Administration of the Republic of Uzbekistan