Uzbekistan Quality Job Creation as a Cornerstone for Sustainable Economic Growth

Trade and Foreign Direct Investment in Uzbekistan
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FDI also enhances economic growth by upgrading skills (including managerial 
skills) and infrastructure and due to technological spillovers from developed 
economies to developing ones (Dunning 1994). FDI liberalization includes 
reforming a wide range of policies favoring FDI, including tax incentives, 
flexible foreign exchange policies, investment guarantees, and removal of 
administrative barriers. From the theoretical perspectives, FDI is linked to 
growth through capital accumulation and to introduction of new inputs and 
technologies in the production process of the host country. However, empirical 
studies that test the relationship between FDI and economic growth have 
shown varying results. A few studies, such as De Mello (1999) for 32 developed 
and developing economies and Chakraborty and Basu (2002) for India, found 
weak or no evidence for FDI contributing to growth. But many other studies 
show positive effects of FDI, including Haskel et al. (2007), Damijan and 
Decramer (2014) on productivity improvements, Head and Ries (2002) on 
skill upgrading, and Javorcik (2012) on job creation. An important conclusion 
is that countries that grow faster also attract more FDI inflows (Choi 2006, 
Fidrmuc and Kostagianni 2015). Moreover, where an emphasis has been given 
to trade openness, there are also well-developed financial markets and strong 
institutions to facilitate FDI growth. Chile provides a further example of how 
FDI and trade liberalization accompanied with reforms to regulatory policies 
have played a positive role in economic growth (Box 5.1).
Box 5.1: Role of Trade and Foreign Direct Investment Liberalization 
in the Chilean Economy
Chile’s economy experienced phenomenal growth when its annual rate of gross 
domestic product was 7% between the late 1980s and the 2000s. The determinants 
of the economic success were the radical market reforms involving foreign trade 
practices; elimination of government controls on economic activity; infrastructure 
developments; social programs to reduce poverty; and improved private pension, 
health, and education systems. Other features that contributed to Chile’s success 
include its advantageous geographic location and abundant natural resources.
In terms of foreign trade policies, in the mid-1970s import tariffs were brought 
down to a common level of 11%, with a further reduction to 6% by the mid-2000s 
(Box Figure). Financial markets were opened to foreign competition and trade 
agreements were enacted with Canada, Latin America, and Mexico. Moreover, 
in 1976 Chile withdrew from the Andean Pact (involving Bolivia, Colombia, 
Ecuador, Peru, and Venezuela), which at the time was described as a model of 
economic integration marked by protectionism and an adverse view of foreign 
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