Uzbekistan Quality Job Creation as a Cornerstone for Sustainable Economic Growth

particularly through labor market measures, in reducing the economic aspects 
of gender disparities.
Emerging environmental issues relate to water scarcity, soil degradation, 
deforestation, and air pollution in urban and industrial centers. Controlled 
energy and water prices have encouraged overuse: by international standards, 
Uzbekistan has very low ratios of GDP to both energy and water use. 
Uzbekistan is a particularly inefficient user of energy, with a ratio of carbon 
dioxide emissions per unit of GDP more than three times the average for its 
income level.
12
The district heating system installed in the former Soviet period 
11
Ravallion (2001) finds that a 1% rate of growth in average household income or consumption leads to a drop 
in the poverty rate of between 0.6% and 3.5%.
12
In 2013, the ratio was 4.9 kilograms of carbon dioxide per unit of GDP in 2005 dollars, compared with the
1.4 kilogram average for lower-middle-income countries.

---

Uzbekistan Quality Job Creation as a Cornerstone for Sustainable Economic Growth
22
is a particular source of inefficiency. The Aral Sea, once the fourth-largest 
inland lake in the world has lost more than half its surface area, largely due to 
inappropriate irrigation during the Soviet period (World Bank 2014). Climate 
change will exacerbate these problems, with expected temperature rising 
sufficiently high to force changes in agricultural practices and measures, such 
as afforestation and shifts to less water-intensive farming. 
1.7. Key Messages and Policy recommendations
The key macroeconomic issue for Uzbekistan at this time is to convert jobless 
growth into more-inclusive economic growth. This means that creating good 
quality employment opportunities for all Uzbeks must be a top priority. Recent 
trends are worrying in this regard, as employment growth is historically low 
and agricultural and manufacturing exports are declining. Relying on the 
resources sector will not create enough jobs, and will maintain the economy’s 
vulnerability to external shocks. What is needed instead is private business 
development in the nonresource sector and export diversification. 
Recent policy reforms are necessary and are being implemented at a critical 
time. The lifting of foreign exchange restrictions has led to a substantial 
improvement in the investment climate. Other measures such as tax reform 
and removal of many import tariffs promise further improvements. However, 
the reform efforts may not reach their full positive impact on the economy 
unless further government action is taken along three additional dimensions. 
The first concerns improving firms’ access to finance. Even the best investment 
climate does not help if businesses cannot secure funds to finance their 
projects. A recent World Bank survey (Table 1.3) indicates that this is a major 
problem for large and small firms alike. In the Doing Business survey, “getting 
credit” is one of the few areas where Uzbekistan ranks worse in 2020, at 67th, 
than in 2016, when it was 42nd (Table 1.1). Fixing this issue should thus be a 
high priority on the reform agenda. Particular focus should be placed on small 
and medium-sized enterprises, which contributed 53.3% to GDP and 78.3% to 
total employment in 2017.
Currently the financial system is dominated by state-owned banks, often with 
a close relationship with state-owned enterprises in that directed credit and 
interest rate subsidies have been used to support priority areas. State-owned 
banks account for more than 75% of banking sector assets (Reuters 2015). 
The government is aware of the need to develop and modernize the financial 
sector so that it can play a more effective financial intermediation role, which 

---