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The Presidential Address as the Trajectory for Action in 2023

The President of Uzbekistan Shavkat Miyoyev gave an Address to the Oliy Majlis and the Uzbek people on December 20. He summarized the results of the previous year and set out the priorities for the policy in 2023. The Address, which has been a tradition since December 2017, summarizes the results and suggests the direction for the next year. It also sets out priority policy directions for 2023 – Obid Khakimov is Director of the Center for Economic Research and Reforms.

The President suggested that 2023 be referred to as “The Year of Caring for People and Quality Education” and pointed out that “improving education quality is the only way to develop New Uzbekistan.”

In the economic sphere, Uzbekistan’s GDP exceeded $80 Billion for the first time. $8 Billion of foreign direct investments was attracted and Uzbekistan’s exports surpassed $19 billion.

The minimum level of 2022 consumer spending was the lowest that our country has ever seen, and pensions and social benefits have been increased for the first time in its history. Today, there are more than 2,000,000 recipients of social assistance, compared to 500 000 families with low incomes in 2017. The annual allocation of funds increased seven times to reach 11 trillion dollars.

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However, one should also consider that the country’s annual population growth is 900 000 people per year and will surpass 36 million in 2021, increasing the economic and demographic burden. However, the numbers show that it is possible to strengthen the social protection of the country’s population in recent years.

Uzbekistan’s international authority is growing and is now a major center of global politics. In 2022, Uzbekistan hosted both the Summits of Shanghai Cooperation Organization (SPO) and the Organization of Turkic States (OTS), as well as numerous high-level international conferences.

The Address paid special attention to issues related to Constitutional reform. More than 220 000 citizen proposals to amend the Constitution have been received today. The draft of the new Constitution will then be submitted for a national referendum. In his Address, the President also identified the priority areas for the policy.


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Reform of public administration

This reform involves the shift from “manual” to a systemic management aiming at a specific outcome, which will improve the efficiency and compactness of the public administration system.

There are many duplicate functions in the state machine, high levels of centralization and overmanning, and the state machine is over-managed. A Presidential Decree was issued to implement a new administrative reform.

From the current 61 Ministries and Departments, there will be 28. Each Minister’s political status will be enhanced, along with his accountability to the President and Parliament. The state worker count will gradually decrease by between 30-35% and funds saved will be used for social problems. It will be decided which committees, commissions and members of Parliament are responsible for the efficient organization of Minister’s activities.


The principle and “social state”

In 2023, one of the most important tasks will be to improve school education quality and teacher authority in society. Already, the Presidential Schools have implemented the “A Level” educational program in 130 countries.

Preschool education has many important tasks. It is essential to create 600,000 more kindergartens if the preschool education coverage has increased from 27 percent to 70% in six years.

The number of universities in the country, up to 198 in recent years, has increased 2.5x in the last few years. In addition, higher education coverage has increased from 98% to 38%. 41 universities have achieved financial and academic independence. Next year, the amount of preferential education loans available to university students will more than double, reaching a total of 1.7 billion sums. In 2023, there will be 1.8 trillion dollars allocated to science and innovation.

In the area of primary health care for population, 140 additional family medical centers and polyclinics are planned. Compact medical centers will also be established in 520 remote and hard-to reach makhallas. The launch of a three-year maternal/child health program, which will see all maternity facilities completely renovated and equipped. Additionally, the number and quality of beds will go up by 35%. In 2023, radiological centers will be established in Ferghana, Samarkand and Khorezm.

All state investment programs will take place within the framework of makhallas. The implementation of population-led projects will receive almost three times the amount of funds in 2023 (8 trillion). As part of the implementation the “Makhalla Budget”, a portion of the property and land tax proceeds will be available to the makhalla starting January 1, 2023. This is in order to increase financial independence for makhallas.

The volume of housing construction will rise 1.5 times to reach 90 000 apartments and individual residential houses in order to solve the housing crisis.


Water problems and agricultural

In the next three years, approximately 13 000 water facilities will have their digitalization completed. 16 large pumping stations that are of great importance will be modernized through public-private partnerships and then transferred to other energy sources. A portion of the revenue from the tax on water use will also be used to develop irrigation in the district. The efforts in ecology and protection of the environment will be intensified.

The reforms in agriculture will continue. If 100 000 hectares were previously transferred to 400 000 dehkans, then another 100 000 hectares will be allotted to the population in 2023. This will result in about 350 thousand new farms and solve many social problems in rural areas. The state will support cooperation and develop infrastructure with small and medium capacities for storage, sorting, and processing agricultural products. Projects to build a high-value chain in the agricultural sector will receive $1 billion in total funding by 2023.


Market relations and business support

Next year will see the active continuation of the free market mechanism, which ensures healthy competition, protection of private property, and support for entrepreneurship. These issues, as the President pointed out, should be given a special place within the new Constitution.

New approaches will be implemented in 2023 to reduce economic inequality among regions and promote balanced development of all districts. These five categories will be determined based on the potential of each district and will determine the direction of economic development for that particular area. Entrepreneurs will receive subsidies, loans, and compensation based on their specific city or district. Different tax rates will be applied.

Entrepreneurs will be able to access at least 14 trillion dollars annually due to the decrease in the value added tax rate, which has been reduced from 15 to 12.5% starting January 1. All state agencies will have a system to assess the quality of entrepreneurs’ services. This will significantly reform tax and customs administration.


Energy problems

The country continues to face serious problems with its energy supply. This is due to the fact that the population of the country has grown by 13% and the number of industrial companies has doubled. In addition, the demand for electricity increased by at least 35% over the last six years. It is essential to invest $25-30 Billion in energy to ensure the economic’s sustainable development. Private investment is also needed.

In the last three years, $8Billion has been invested in the energy sector. 7 power plants of 1.5 million megawatts capacity were built in 2022. 11 large projects, each with a capacity 4.5 thousand megawatts (including solar and wind power plant), will be constructed in 2023. This will increase the electricity supply to households by half and allow for an additional 14 billion kilowatts to be generated. To increase natural gas reserves, a ten-year exploration plan will be implemented.

All state agencies will soon have solar panels and hot-water collectors installed within the next three year. This will attract investments of up to $2 billion. This will result in 60% of electricity and gas being converted to “green energy”. The amount of subsidies for solar panel installation will increase by two-fold for households.


Attracting investments and export opportunities

It is essential to attract investments and increase exports to ensure that the economy can grow at the high rate required to raise the standard of living for a rapidly increasing population.

The inflow of foreign and local investments into Uzbekistan over the last six years has exceeded 30% of its GDP. As the President stated in his Address, “we will continue improving conditions for the growth private local and international investments in the economy.” In 2023, there will be $30 billion in investments. Of this, $25 billion will come from private investors. This will allow for the launch of over 300 projects worth $8 billion and 40 large-scale projects.

These projects will result in an increase of the Almalyk Mining and Metallurgical Complex’s capacity from 40 million to 100 millions tons. At the “Pistali”, a Navoi region deposit, a complex will be built to process gold ore. It has a processing capacity of 4,000,000 tons. This will enable copper production to grow by three times over the next five year, and gold production to reach 150 tons annually. In the agricultural, automotive, and chemical industries, large-scale projects will be also launched.

A large privatization program will be initiated in 2023. Around 1 000 enterprises will go up for sale. To encourage active participation by the citizens in privatization processes, 10 of the largest companies and commercial banks will be offered for sale in open and transparent auctions (IPO).

In his Address, the President also stated that he would increase the exports of finished goods by $4 billion by 2023. The President noted that around 21,000 entrepreneurs have entered foreign markets in the past year thanks to the “New Uzbekistan” program. In 2023, the program will continue to provide compensation for exporters for transportation costs and other expenses.

This will increase the supply of leather, textiles, and electrical equipment to European markets by at least two-thirds. The current 9-stage customs clearance process for exporting products will be shortened by three times. In general, Uzbekistan’s 2023 export volume will surpass $23 billion for first time in its history.


Conclusion

We can conclude from the President’s Address that 2023 is a landmark year for reform implementation.

Economic development is a key component of social policy. It is the economy that generates revenue that can be used to support social programs. It is precisely these economic achievements that have enabled us to accumulate sufficient funds in the budget to allow us to move forward to creating a truly “social status”.

Problems of privatization in state-owned enterprises are also still not resolved. This was due to the insufficient domestic market capacity, which hinders the potential development of enterprises in the event that they are privatized. On the other hand, the level of personal savings in the country, as well as domestic business, is not sufficient to allow for acquisitions at a high enough price to generate sufficient revenue. The situation has changed for both sides over the last five years. Both the market capacity and savings have increased. This means that all conditions are in place for large-scale privatization which will start next year.

The last problem is the one of energy supply. This has become more serious due to the recent reduction in gas production, despite the fact that there has been rapid economic growth and population growth. It can be solved today in the most efficient way without a dramatic increase in electricity prices. The Address also provides a solid basis for solving this problem in the future.

Therefore, it is reasonable to assume that the President’s Address tasks will be completed successfully in 2023.



Obid Khkimov

Obid Khkimov, Director of Center for Economic Research and Reforms [1] Under the Administration of President of the Republic of Uzbekistan

[1] The Center for Economic Research and Reforms, which is under the Administration of the President of the Republic of Uzbekistan, serves as both a research centre and an accelerator of socio-economic changes. CERR offers advice and comments on recommendations for socio-economic programming by Ministries in order to address the major development issues in a quick, efficient and operational manner. CERR is ranked in the Central Asian Top-10 according to the Global Go To Think Tank Index Report 2020>>. (USA em).

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