The task of ensuring sustainable and balanced economic growth of the Republic of Uzbekistan based on diversification of the economy and increasing its competitiveness against the backdrop of limited domestic financial resources cannot be achieved without implementation of stimulating policy of attracting investment and improving the efficiency of the use of available funds.
In the Law of the Republic of Uzbekistan “On Investment Activity” investments are defined as tangible and intangible benefits and rights to them, invested in economic and other activities. This concept, more than ever, has become relevant and popular in recent years. Moreover, the current year by the initiative of the President of the country was declared the “Year of Active Investment and Social Development” and attracting investment in the economy and regions of the country by improving the investment climate is included in the five priority areas of the country’s Development Strategy for 2017-2021.
Investments as an economic category perform several important functions, without which it is impossible to develop the economy. They contribute to the creation of new jobs, new opportunities, new knowledge, the introduction of modern technological solutions that determine the path of development. If there are free funds, the desire to invest them in business (production or real estate) is the first step of investment. For example, on the scale of a single family, paying for children’s university tuition or sending them to study abroad is also an investment in children, in their education.
Direct investment is an investment of funds mainly in the equity capital of an enterprise. For example, local companies can participate in the investment project with their buildings and facilities, and a foreign investor – by bringing a technological line. Individuals making such investments are called business angels, and funds are defined as either venture or private equity funds. Portfolio investments are investments in economic assets. They are related to the purchase of shares of existing enterprises, for example, through shares or through other mechanisms. Large projects and industry programs are financed through investment funds. Banks, large domestic or foreign companies can participate in the financing program. For example, direct investments of the Abu Dhabi Fund are attracted to finance projects within the framework of the “Program of Measures for Accelerated Development of Tourist Potential of Samarkand City and Samarkand region for 2017-2019” adopted by the initiative of the President of our country Sh. Mirziyoyev. Abu Dhabi Fund for Development was established in 1971 by the government of Abu Dhabi (UAE) to assist developing countries through the provision of loans to finance development projects, as well as through long-term investment in projects.
The largest equity investment fund in the republic is also the Uzbek-Omani Investment Company, established in 2010. The founders of the company are Uzbekistan Fund for Reconstruction and Development and the State General Reserve Fund of the Sultanate of Oman. Recently, the Uzbek-Omani Investment Company announced its intention to expand its investment portfolio in Uzbekistan.
It should be noted that the reforms implemented in recent years to liberalize the economy and its openness to the outside world create new opportunities for foreign and national investors to invest capital and create new enterprises, to obtain additional profits. In a very short time, our country was able to make a leap from 166th to 76th place in the Doing Business ranking. In the framework of the “Action Strategy for Five Priority Areas of Development of the Republic of Uzbekistan for 2017-2021” in 2018 — the “Year of Active Support of Entrepreneurship, Innovative Ideas and Technologies” – key measures to improve the investment climate were implemented: scheduled inspections not related to financial-economic activity of small and private businesses were abolished; license and permit requirement for implementation of 42 types of activities were canceled; for 25 types activities the terms of consideration of issuance of licenses and permits were reduced; market mechanisms have been introduced for sale of state property and land plots to business entities through electronic bidding, including at zero cost.
And the results of such measures are not long in coming. Now many investors from different countries of the world show unprecedented interest in Uzbekistan. For example, in recent years, Chinese investors’ activities in Uzbekistan have increased significantly. To date, about a thousand companies with Chinese investments, including several enterprises for production of shoes, textiles, cement, metal structures and other products, are successfully operating in the republic. The main goal of such cooperation is to create joint production as a fundamental factor of development.
Achieving these goals is impossible without a full transition of Uzbekistan to the innovative model of development. The main mission of agencies responsible for innovative development is to increase economic growth, competitiveness of the country in the world markets and increase intellectual contribution to the economy through the widespread introduction of innovations and scientific achievements. Under Tashkent Khokimiyat, this work is being implemented in the public transportation, education and other sectors that are particularly in need of accelerated development. A significant result of this work in recent years was the agreement with Huawei on innovations in the transportation system aimed at implementation of the “Safe City” project throughout the Republic of Uzbekistan, including the creation of a single control center 112, the introduction of intelligent maps and various subsystems of intelligent traffic management, parking, video surveillance coverage of public places and others. Optimization of traffic with “smart traffic lights”, the organization of parking and streamlining the collection of fines for traffic violations will lead to lower costs and replenishment of the budget. Starting the next year an automated system of payment for public transportation should be operational.
In addition, it is planned to create a smart urban management center. It will be a single dispatching service, uniting the ambulance services, utilities and municipal services, transportation, waste collection “Mahsustrans” etc., for operational management in case of accidents and other emergency situations.
One of the mechanisms for development of the unconventional model of the economy is the functioning of special economic zones. Clusters, industrial parks, territorial-industrial complexes, industrial agglomeration, economic zones — in the world practice, such mechanisms of concentration of industry in a certain territory have fully justified themselves. In our country 150 Small Industrial Zones (SIZ) are set up, on the territory of which 1691 small enterprises operate with a total annual production volume of more than 1.7 trillion soums. More than 27 thousand job were created. In 8 SIZ of the capital 594 enterprises operate successfully. In the first half of this year they produced products for 974.2 billion soums. Of these, 80 enterprises produced import-substituting products worth 453.1 billion soums, and exports totaled 15.92 million USD.
Nevertheless, the existing problems of SIZ should be mentioned too: the need for modernization, the presence of outdated energy-consuming equipment which is non-compliant to environmental standards. It is necessary to optimize the work in this area, including rational placement of production and warehouse zones, cancelation of lease of unused territory. President of Uzbekistan Sh. Mirziyoyev on June 21 of this year signed a resolution, which provided better conditions for participants of small industrial zones to ensure marketing of their products and activization of attracting investment and accelerating the introduction of modern production and other.
In conclusion, I would like to note that the investment climate in Uzbekistan is improving year by year. The country is becoming more open, we are recognizing problems and past mistakes and taking concrete steps to overcome and correct them. There is a growing interest of foreign investors in our country. The set pace of reforms, including liberalization of the financial market, integration into the world capital markets and creation of an effective system of property rights protection will allow Uzbekistan become one of the most attractive countries in the world for investment in the near future.
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