My first trip to Uzbekistan

I spent the last two weeks in Tashkent, Uzbekistan. As a self-appointed lover of the “stans”, and given my love for Tajikistan, I was excited to spend time in my second “stan” country. While the two countries are different – I immediately grew to appreciate Uzbekistan. From its cultural scenes- which I really didn’t have time to explore, to its people- who are kind, friendly and diligent. But what impressed me the most was seeing practical examples of how targeted policies can really lead to sector development and growth, and I would like to share some very high-level musings that might be beneficial to countries in the catch-up game. Again, I emphasize that these views are mine, not those of my organization, or even those who took this 2-week journey with me. ?So, here are Anita’s learnings from Uzbekistan:

A wholistic policy approach is key: lessons from Uzbekistan’s ICT sector.

?In 2020, the government of Uzbekistan adopted Digital Uzbekistan 2030, which prioritized ICT exports and digital development. In the span of two years, targeted incentives and interventions have resulted in phenomenal growth in ICT exports. Specifically, between 2021 and 2022, ICT exports grew from 373 Mn USD to 1.76 Bn USD. This currently represents approximately 10 percent of the country’s total service export basket.

To achieve this, the government used tax incentives but matched these with business environment improvements, market access, skills development, highlighting the need for a wholistic approach to sector development. Specific policies include:

·?????? Ease of business registration processes, and set-up of an IT park with a one stop shop.

·?????? Investment in IT skills development with multiple IT training centers

·?????? Tax incentives for ICT companies.

·?????? Public procurement opportunities which served as ready markets for new businesses entering the space?

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Clusters can work…if done properly.

Uzbekistan served as a cotton hub during the former soviet -era. Given this, the land and the skills had been developed for cotton farming over many decades. However, the sector remained heavily protected with the use of multiple economic measures. These included production limits and state procurement prices, limiting sector growth, private sector engagement and movement to more complex products. In addition to abolishing state production quotas and moving away from procurement prices to indicative prices, the set-up of clusters for cotton reaped benefits. Specifically, we found higher yields of cluster farms compared to farms situated far from clusters, due to shared learning and increased mechanization, which led to improved processes and reduced waste. In addition to this, clusters invested heavily in cotton processing which allowed the country to produce more finished products. The cluster model also allowed for the spread-out of this industry, allowing permeation into remote regions, unlike the case in some other growing markets where such industries are located near capitals. This leads to higher costs and longer commutes for workers. Socially, the clusters also paid more to cotton pickers. This is an issue that had historically plagued the sector.

In conclusion, establishing planned clusters can work.

Protection must be paired with clear, comprehensive and timebound industrial policies to work.

As more countries look towards protecting domestic producers, self-sufficiency and import substitution, it is important to note that the use of tariffs and import limits in itself will simply drive-up prices and reduce the living standard of your citizens, and not result in the desired objectives. Instead, it is important to pair this with the right industrialization strategies. In the case of the auto industry for Uzbekistan, the country had four clear stages – starting with heavy investments in infrastructure, capital and skills in the early 90’s, followed by the implementation of strategic partnerships to bring in international know-how and increase production in the late 90’s, then the introduction of innovation and technology into the sector as a way of boosting international competitiveness in the early 2000s, and most recently increasing the capacity to produce key components and an increased focus on export promotion. This has proved to be a successful model, as the government reports that between January and October 2024, Uzbekistan produced 338,000 vehicles, generating $455 million in car exports, making it a top 30 auto producer in the world.

Other interesting lessons were learnt around strategic mining, home appliance production, the emergence and growth of the pharmaceutical industry – but I shall leave these to you to research…or better yet, visit Uzbekistan and learn more about this beautiful nation for yourself. ?In the meantime, enjoy some pictures of my time there!

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And an article: https://gov.uz/en/mingeo/news/view/33943

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