Slow but sure signs of change in Uzbekistan

Despite having a history as an entrepôt situated along the ancient silk route, the modern nation of Uzbekistan has taken an insular approach to both geopolitics and economics. As leader from 1989, Islam Karimov kept a firm hand on the tightly controlled, state-dominated economy, as well as the populace.

Upon his death in 2016, there were questions as to whether a change of guard would bring any substantive change at all – or whether his successor as president, long-time prime minister Shavkat Mirziyoyev, would carry on in much the same mould. A year-and-a-half in, Mr Mirziyoyev has proved that – in economic terms at least – he is serious about reform. Though critics complain about the slow pace of reform in the sociopolitical sphere, the economic changes are coming at a steady march.

Liberalising laws

The president has issued 118 decrees, 54 of which involve the development and liberalisation of the economy and 22 relate to reform of the legal system; 29 new laws have been adopted, 19 related to the economy or judiciary.

A new system of land allocation and construction regulations is among the key elements of the legal and rule of law reform. Tax reform is now top of the agenda, with plans to reduce the tax burden and simplify procedures; also high on the list are customs reform and the improvement of state governance.

Two months after Mr Mirziyoyev’s election, a five-year development strategy was unveiled, spelling out plans to liberalise the economy and improve the investment environment, among other reforms – hardly heady talk by Western standards, but a new tone for this closed off country.

In April 2017, the State Committee for Investments was created, tasked with unlocking Uzbekistan’s investment potential through the creation of favourable conditions for investors and the implementation of reforms. Five months later came currency-change liberalisation, with the establishment of a floating exchange rate and free-market exchange.

These efforts earned Uzbekistan inclusion among the top 10 global improvers in the World Bank Group’s Doing Business 2018 report, and the country now ranks 74th out of 190 for ease of doing business. Neighbour and competitor Kazakhstan, now several years into its own reform phase, ranks an enviable 36.

“Uzbekistan has much to celebrate as the government has taken decisive steps forward in its reform agenda,” said Lilia Burunciuc, World Bank regional director for Central Asia, in announcing the report.

A new energy

For Uzbekistan, there is an urgency in its efforts to liberalise and diversify the economy, spurred by the downturn in energy prices, which has necessitated a rethink among most major oil and gas-producing countries. Among the government’s objectives is to diversify and modernise its energy sector while expanding into new industries.

Change rarely comes easily to sclerotic bureaucratic structures, but Alisher Kurmanov, chairman of Uzbekistan's Senate Committee on International Relations, Foreign Economic Relations, Investments and Tourism, says at this point the reform process is “irreversible”.

It is also essential to realising the country’s broader ambitions. “Our ambition is to become an industrialised hub for Central Asia and regain our status as a logistics and transport hub. We also want to become an education centre for the region,” says Mr Kurmanov. “We understand we are at the beginning of our journey and we are very committed.”