Content and main features of a market economy Plan: introduction

2.2 Directions for further development of Uzbekistan in a developed market economy
From the experience of developed countries, it can be concluded that if the goal is to develop the economy, then the state should have one task before the economy: to get both hands out of the throat of the economy. The rest is left to the free economy. The key is to answer the question of what not to do, not what to do. A free-market economy is based on the principle of "voluntary cooperation". In a state-run economy, who, what, when, and how much is planned to be consumed, and the former Soviet policy has shown what such a system would lead to (a crisis).
The economies of many countries of the Commonwealth of Independent States (former Soviet socialist countries) are mainly based on the sale of raw materials. The business system, on the other hand, is driven by public policy; for example in Russia. But the world's most developed economies, such as Japan, Singapore, Hong Kong, and Switzerland, which have the highest quality of life, have no oil, gold, or other natural resources at all, but a higher standard of living than the United States. Why do you think so? The answer is simple: In developed countries, the government makes the policy / plan based on the business situation. The reason is that business feeds both the state and the people. These countries have invested in improving the knowledge of their people and specializing in building economies based on innovative ideas. Singapore was once in a difficult situation. But the Singaporean president, who is working to improve the living standards of his people, is making money by sending the most talented children of his population to study in developed countries. Young Singaporeans who have completed their studies and gained experience will boost their country's economy. Today, the country's economy and public policy are being studied as a model of success.
The above experience can be observed in the work of our first President Islam Karimov and our second President Mirziyoyev. Despite the difficult economic situation in Uzbekistan, the first president will earn money and send more than 800 young people to study in the most developed countries of the world with "hope". President Mirziyoyev's creation of a ministry of preschool education is a revolutionary idea. Calling 2018 the Year of Entrepreneurship and Innovative Ideas is a step towards building a high-tech economy, along with other developed countries.
The risk to the external stability of the economy is moderate due to the country's sufficient foreign exchange reserves and relatively low public external debt. The next phase of the reforms will address more complex issues such as state-owned enterprises and the financial sector, privatization of non-agricultural land, and agricultural reform. These reforms are critical to economic change, supporting economic growth, and creating jobs. At the same time, they cover important economic and social risks that need to be carefully monitored.
The focus should be on economic growth and job creation
Serious problems in the labor market. The Uzbek economy creates about 280,000 new jobs a year. For demographic reasons, almost 600,000 jobs need to be created each year. Therefore, the number of jobs created in the economy each year should be doubled only to attract new workers entering the labor market. Most jobs need to be created by creating new businesses and expanding existing ones. The authors of the report note that the Uzbek labor market has the following structural and systemic shortcomings:
• lack of motivation to work;
• Insufficient staff qualifications;
• Lack of technical training opportunities in enterprises;
• high unemployment among young people;
• large share of economically inactive population;
• long-term unemployment;
• Limited labor mobilization.
The pace of job creation is lagging behind the growth of the economically active population. The “Uzbek model” used from 1996 to 2016 failed to create enough jobs for the rapidly growing economically active population. Creating new jobs, especially in the manufacturing sector, was a serious challenge. These include the food industry, light industry and other sectors. Only 13 percent of total employment is in the mining and manufacturing industries. In 2016, the figure was much lower than in other countries: 45 percent in Turkmenistan, 32 percent in Belarus, 25 percent in Ukraine, 22 percent in Kyrgyzstan, and 21 percent in Kazakhstan.
Deficiencies in physical infrastructure are leading to losses. Disruptions in physical infrastructure activities lead to large production losses each year. Compared to large enterprises, smaller firms suffer more from interruptions in electricity, gas and water supply, from lack of land, or from high rental rates to expand production. In 2016, total losses from all disruptions in physical infrastructure activities accounted for 24 percent of production at large enterprises and 38 percent at small enterprises. Authorities can increase labor productivity and employment in enterprises by improving the performance of infrastructure services.
Inefficient use of time and resources by firms hinders productivity. The time and financial resources of business leaders are often distracted from non-production activities. About 31 percent of large business executives and 26 percent of small business executives waste their time on inefficient bureaucratic arrangements. These include agreements with central and local authorities, ministries and agencies, sectoral associations on taxes, customs procedures, inspections, sanitation and environmental issues, and others. As a result, there is little time left to increase production productivity, efficiency, skills, technology introduction and profitability of these enterprises.
The bank's report contains the following information based on the results of a survey of enterprises in 2016:

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  32% of employees of large enterprises and 30% of employees of small enterprises are involved in agricultural work or other types of public works;
  
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  About 23 per cent of large enterprises and 11 per cent of small enterprises reported that local authorities had asked them to provide a grant for “additional costs”;
  
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  About 13% of large enterprises and 7% of small enterprises have made informal payments together with the authorities on various issues;
  
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  More than half of the total output of large enterprises in the free market is distributed by central sector ministries or associations, not by the enterprises themselves.
  

Simplification of business conditions and development of market relations will contribute to the development of the private sector. Overcoming barriers to entry and exit, simplification of business rules, gradual abolition of state pricing, strengthening of private property rights and overcoming the inefficiency of the state-owned enterprises sector will further improve the overall efficiency (productivity) serves to increase. If businesses have access to financial markets, raw materials and other resources, increased competition can encourage the introduction of technology and innovation. Business registration in Uzbekistan is relatively simple. (In 2019, Uzbekistan ranked 12th in the world in terms of ease of starting a business in the Doing Business report). However, informal restrictions, inefficient operation of government agencies, non-transparent regulations, and inadequate protection of property rights remain major barriers. Such restrictions hinder Uzbekistan's ability to attract foreign direct investment and develop technology.
Reforms are crucial for economic growth and job creation. The Uzbek government's economic liberalization reforms since 2017 have removed restrictions on doing business, such as a lack of foreign exchange conversion, high import duties, and tax rates. The Uzbek government needs to continue to optimize the state's role in the economy and remove barriers to private sector development. Measures to address these restrictions include:
• improving the investment climate;
• Full implementation of tax administration reforms;
• Ensuring transparency of state budget operations, in particular, against ineffective hidden subsidies provided to state-owned enterprises;
• reform of land use rights and ownership of industry, services and agriculture;
• Structural (systemic) restructuring of state monopolies, strengthening the requirements for corporate governance and financial reporting;
• government support for export orientation (including ISO certification, expert risk reduction, diversification, WTO membership). In the medium term, modernization of infrastructure (especially energy, transport and logistics) and improving the quality of higher education will help strengthen the country's economic potential.
At the same time, a number of issues are important, such as improving the open economy, business and investment climate, reducing state participation in the economy, creating new jobs through rapid development of the private sector, modernization and diversification, training qualified personnel.
The Resolution of the President of the Republic of Uzbekistan Shavkat Mirziyoyev dated July 3, 2018 "On measures to develop the digital economy in the Republic of Uzbekistan" is another important step in the country's economy, the introduction of innovative ideas, technologies and developments in the digital economy. It serves to ensure close cooperation between government agencies and businesses in the field.
According to the analysis, the digital economy will allow to increase GDP by at least 30% and sharply reduce corruption.