Obid Khakimov
Director of the Center for Economic Research and Reforms under the Administration of the President of the Republic of Uzbekistan
On December 20, President of Uzbekistan Shavkat Mirziyoyev delivered anAddress to the Oliy Majlis (Parliament) and the people of Uzbekistan, in which he summed up the results of the outgoing year and outlined the priorities of the policy in 2023. In the Address that has become traditional since December 2017, the President summarizes the results of the outgoing year, suggests the course for the next year and puts forward priority policy directions for the coming year.
The President proposed to namethe 2023 year as “The Year of Caring for People and Quality Education,” while pointing out that “improving the quality of education is the only right way to develop the New Uzbekistan.”
In the economic sphere, for the first time, Uzbekistan’s gross domestic product exceeded $80 billion, $8 billion of foreign direct investment was attracted, and exports reached $19 billion.
For the first time in the history of our country, pensions and social benefits were increased to a level not lower than minimum consumer spending in 2022. If in 2017,only 500 thousand low-income families received social assistance, today there are more than 2 million. The volume of allocated funds increased 7 times and reached 11 trillion sums per year.
At the same time, it should be taken into account that the country’s population is increasing annually by 900 thousand people and in 2021 exceeded 36 million, which increases the demographic and social burden on the economy. But despite this, as the figures show, in recent years it has been possible to significantly strengthen the social protection of the population.
The international authority of Uzbekistan is also growing, which is becoming one of the centers of world politics. Thus, in 2022, Uzbekistan hosted the Summits of the Shanghai Cooperation Organization and the Organization of Turkic States, as well as dozens of high-level international conferences.
In the Address, special attention was paid to the issues of Constitutional reform. Today more than 220 thousand proposals have been received from citizens to amend the Constitution, and the draft of the new Constitution will be submitted to a national referendum. The President’s Address also identified the priorities of the policy in certain areas of activity.
Public administration reform
This reform is about the transition from “manual” management to a systematic one aimed at a specific result, which will increase the efficiency of the public administration system and make it more compact.
The state machine has accumulated a lot of duplicate functions, there is a high centralization of management and overmanning. Therefore, a Presidential Decree was signed on the implementation of a new administrative reform.
The number of Ministries and departments will be reduced from the current 61 to 28. The political status of each Minister will be increased, as well as his accountability to the President, Parliament and the public. The number of state workerswill be gradually reduced by 30-35%, and the saved funds will be used to solve social issues. The collective responsibility of the relevant committee, commission and members of Parliament for the effective organization of the Minister’s activities will be determined.
The principleof the “social state”
One of the main tasks in 2023 will be to improve the quality of school education and the authority of teachers in society. The Presidential schools have already implemented the “A-Level” educational program, approved in 130 countriesaround the world.
There are also important tasks in the field of preschool education. If over the past six years the coverage of children with preschool education has increased from 27 to 70%, then in order to achieve 80% coverage in the next five years,it is necessary to create 600 thousand more new places in kindergartens.
In the field of higher education in recent years, the number of universities in the country has increased 2.5 times –upto 198, and the coverage of higher education has increased from 9 to 38%. Forty-oneuniversities have already received academic and financial independence. Next year, the resources allocated for preferential educational loans for university students will double and amount to a total of 1.7 trillion sums. In 2023, 1.8 trillion sums will be allocated for science and innovation.
In the field of primary health care of population, another 140 family medical centers and polyclinics will be created in 2023, and compact medical centers will be created in 520 hard-to-reachand remote makhallas. Athree-year maternal and child health program will also be launched, under which all maternity complexes will be completely renovated and equipped, and the number of beds will increase by 35%. Also in 2023, projects will be launched to establish radiological centers in Samarkand, Ferghana and Khorezm.
All state investment programs will be formed in the context of makhallas. In 2023, almost 3 times more funds, or 8 trillion sums, will be allocated for the implementation of projects initiated by the population. To increase the independence of makhallas in financial terms, as part of the implementation of the “Makhalla Budget” system, from January 1, 2023, part of the proceeds from property tax and land tax will remain forthe makhalla’s disposal.
To solve the housing problem, the volume of construction of new housing will increase by 1.5 times and reach 90 thousand apartments and individual residential buildings.
Water problems and agriculture
A transparent water metering system will be introduced, and in the next three years, about 13 thousand water facilities will be digitalized. On the basis of public-private partnership, 16 large pumping stations will be modernized and transferred to alternative energy sources. For this purpose, part of the proceeds from the tax on the use of water resources will be additionally directed to the development of irrigation in the districts. Efforts in the field of ecology and environmental protection will also be intensified. Reforms in agriculture will also continue. If earlier 100 thousand hectares of acreage were transferred to 400 thousand dehkans, then in 2023 another 100 thousand hectares of irrigated land will be allocated to the population, due to which about 350 thousand new dehkan farms will be created and many social problems in rural areas will be solved. The state will also support cooperation, develop infrastructure of small and medium capacity for storage, sorting and processing of agricultural products. In total, $1 billion will be allocated for projects to create a high value chain in the agricultural sector in 2023.
Development of market relations and business support
Next year, the introduction of free market mechanisms, ensuring healthy competition, inviolability of private property and support for entrepreneurship will be actively continued. As the President noted, these issues should take a special place in the new Constitution.
In 2023, new approaches will be introduced to reduce economic inequality between regions and the balanced development of all districts and cities, which, based on their potential, will be divided into 5 categories, and the course of economic development of the district will now be determined depending on its category. Based on the specific category of the district or city, entrepreneurs will be allocated subsidies, loans and compensation. Tax rates will also be differentiated.
Due to the reduction of the value added tax rate from 15 to 12%from January 1, entrepreneurs will have at least 14 trillion sums at their disposal per year. Tax and customs administration will be significantly reformed, and a system for assessing the quality of services provided to entrepreneurs will be introduced in all state bodies.
Energy problems
Serious problems in energy supply continue to persist due to the fact that over the past six years the country’s population has increased by 13%, the number of industrial enterprises has doubled –from 45 to 100 thousand, respectively, the demand for electricity has increased by at least 35%and continues to grow. For the sustainable development of the economy, it is necessary to invest $25-30 billion in energy, for which it is necessary to attract private investment into the industry.
Over the past three years, $8 billion of direct investments have been directed to the energy sector. In 2022, 7 power plants with a capacity of 1.5 thousand megawatts were commissioned. In 2023, the construction of 11 large projects with a capacity of 4.5 thousand megawatts, including solar and wind power plants, will be completed, which will allow an additional 14 billion kilowatts of electricity to be generated and increase the supply of electricity to households by 50%. A ten-year exploration program will be adopted to increase natural gas reserves.
In the next three years, solar panels and hot water collectors will be installed in all state organizations. For this purpose, investments in the amount of $2 billion will be attracted. Due to this, 60%of electricity and gas consumption will be transferred to “green energy”. For households, the amount of subsidies allocated for the installation of solar panels will be increased by 2 times.
Attracting investment and export opportunities
In order to maintain sufficiently high rates of economic growth required to improve the standard of living of a rapidly growing population, it is necessary to actively attract investment into the economy and increase exports.
Over the past six years, the inflow of investments to Uzbekistanhas increased to a level exceeding 30%of GDP and, as the President noted in his Address, “we will continue to improve conditions for the growth of private local and foreign investments in the economy.” Thus, in 2023, about $30 billion of investments willbe attracted, of which $25 billion will be private investments, due to which over 300 projects with a total value of $8 billion will be launchedas well as40 new large projects.
Due to the implementation of these projects, the capacity of the AlmalykMining and Metallurgical Complexwill increase from the current 40 million to 100 million tons. The construction of a complex for processing gold ore with a capacity of 4 million tons will be completed at the “Pistali”deposit in Navoi region. This will allowto increase the production of copper by 3 times in the next five years, and gold up to 150 tons per year. Large-scale projects will also be launched in the chemical, automotive, and agricultural engineering industries.
In 2023, a large privatization will be launched, about 1 thousand enterprises will be put up for sale. At the same time, for the active participation of the population in the privatization processes, the shares of 10 largest companies and commercial banks of the country will be put up for open and transparent auctions(IPO), in which all citizens of the country will be able to participate.
Another task set by the President in the Address is to increase exports of finished products by $4 billion in 2023. He noted that thanks to the program “New Uzbekistan –a country of competitive products” launched in 2022, about 2 thousand entrepreneurs entered foreign markets for the first time in one year. And in 2023, the practice of compensating exporters for transportation and other expenses provided for by the program will continue.
This will at least double the supply of textiles, electrical equipment, leather and footwear and other finished products to European markets. At the same time, the current 9-stage customs clearance procedure for exporting products will be reduced by 3 times. And in general, the volume of exports in 2023 will exceed $23 billion for the first time in the history of Uzbekistan.
Conclusion
Analyzing the President’s Address, we can confidently assume that 2023 will be a breakthrough year in the implementation of reforms.
Social policy depends on economic development, since it is the economy that generates budget revenues that can be used for social purposes. And it is precisely the economic successes of recent years thathave allowed us to accumulate enough funds in the budget to move on to the formation of a truly “social state”.
The issues of privatization of state-owned enterprises have also not been effectively resolved for a long time. On the one hand, this was hindered by the insufficient capacity of the domestic market, which limits the development potential of enterprises in the event of their privatization. And on the other hand, there is an insufficient level of personal savings, both of the population and domestic business, for the acquisition of enterprises at a sufficiently high price to ensure sufficient budget revenues. However, in the course of economic development over the past five years, the situation has changed on both sides, the capacity of markets has increased, as well as the savings of businesses and the population. That is, all the necessary conditions have been created for a large privatization, which will begin next year.
And finally, the problem of energy supply, which has recently become acutedue to a reduction in gas production against the background of population and economic growth. The tasks set in the Address allow it to be solved in the most effective way today without a sharp increase in electricity prices for the population and having prepared a serious basis for eliminating this problem in the future.
Thus, we must assume that the tasks set out in the President’s Address will be successfully completed in 2023.
The Center for Economic Research and Reforms (CERR) under the Administration of the President of the Republic of Uzbekistan is both a research center and an Accelerator of socio-economic reforms. CERR provides comments and advice on suggestions for socio-economic programming and policies by the Ministries to solve the main development issues in a swift, operational and efficient way. CERR is in the Central Asian Top-10 by the «Global Go To Think Tank Index Report 2020» (USA).