Uzbekistan Quality Job Creation as a Cornerstone for Sustainable Economic Growth

Trade and Foreign Direct Investment in Uzbekistan
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effects of control variables such as geographical contiguity and membership 
in the EU and WTO are positive, but not statistically significant. Uzbekistan 
is not a WTO member and thus it faces more trade restrictions than between 
the EU and other WTO member countries (as discussed in section 5.1). 
This suggests that preferential tariffs are less applicable to Uzbekistan and, 
hence, membership factors may not play a significant role on exports. Not 
surprisingly, the impact of real exchange rates on export flows is positive and 
significant, suggesting that the weaker the Uzbekistan currency, the larger 
the export values vis-à-vis trading partners. Specifically, a 10% depreciation 
of Uzbekistan’s currency on average is associated with a 3% increase in its 
exports. When a lagged real exchange rate is considered, its magnitude 
decreases over time. This indicates that the impact of currency depreciation 
is strongest in the year it occurs and its pace declines over time.
5.7. Policy recommendations for Trade and foreign
Direct Investment Liberalization in Uzbekistan
As noted in previous sections, Uzbekistan is lagging behind its neighbors in 
exploiting benefits from global trade, as reflected in its lower share of trade in 
GDP, higher import tariffs, and lower FDI inflows compared with other Central 
Asian economies. The results suggest both government and market constraints 
on export and import growth; investment; and, subsequently, job creation. This 
section discusses some policy recommendations to address these constraints. 
Improving market access to open up to global trade. 
As discussed in section 
5.3, which reviewed the necessity to liberalize trade and FDI, Uzbekistan’s 
trade policies remain the most restrictive in the Central Asian region. The 
weighted average import tariff rate is still high compared with the average 
rates for Kazakhstan, the Kyrgyz Republic, and Tajikistan. In terms of product 
classification, the highest import tariffs are on apparel and textile manufacturing 
industries, such as footwear, leather, and fur manufacturing, which were 
among the main exports in 2016. Because the average level of applied tariffs 
has fallen globally by one-third over the last 2 decades, Uzbekistan is missing 
the opportunity to trade more freely with other economies. Reducing the high 
levels of import tariffs, excise taxes on imported goods, and nontariff barriers 
would allow Uzbekistan to access better and cheaper imports, which is likely to 
boost productivity of domestic firms. Higher productivity in turn triggers many 
firms to start exporting. Thus, trade liberalization would boost firm growth and 
trade, which in turn would create new job opportunities in the economy. 

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