Investment Policy of the Republic of Uzbekistan

Importance of the topic of the course work. Uzbekistan has carefully transitioned from a centrally planned to a market economy since gaining independence in 1991. Understanding that foreign direct investment can help Uzbekistan grow and evolve while also removing the country's change to a market-based economy and integration into the global economy, the country has welcomed foreign investors. Foreign direct investment boosts fixed capital formation and has a positive impact on the balance of payments because it represents an inflow of foreign capital. Investors have shown a keen interest in Uzbekistan's manufacturing sector, with the hope of increasing the quality of these facilities. Above all, an FDI kit brings together science, technological, and managerial skills. Quite significantly, an FDI brings science, technological, and organizational skills to Uzbekistan, which are crucial for the country's industrial transformation.

Uzbekistan has demonstrated stable economic development in recent years, reporting 6.6% GDP growth in 2020. The government of the country is continuing to introduce large-scale economic reform policies aimed at boosting development by modernizing state-owned monopolies and establishing a favorable environment for private and foreign direct investment.

In November 2019, President Shavkat Mirziyoyev created the Council of Foreign Investors, a body where executives and representatives of foreign companies, banks, investment companies, international financial institutions and foreign government financial organizations will be given the opportunity to improve the investment climate. And in speech of president of the Republic of Uzbekistan which addressed to the Oliy Majlis Shavkat Mirziyoyev admit that “Investment inflow has considerably grown. Foreign direct investments amounted to 4.2 billion US dollars, which is $ 3.1 billion or 3.7 times as much as in 2018. The share of investments in gross domestic product reached 37 percent. For the first time, Uzbekistan received an international credit rating and successfully placed $ 1 billion worth of bonds on the global financial market. For the first time in 10 years, our country’s position in the credit risk rating of the Organization for Economic Cooperation and Development has improved”.

The purpose of the course work topic. Study the structure, goals and objectives of regional and international financial institutions, theoretical and practical analysis of some of their financial activities and make important proposals and conclusions to raise the investment climate in Uzbekistan to a new level.

Uzbekistan has the potential of becoming one of the strongest economies in the post-Soviet region, with a population of over 34 million people – the largest in Central Asia – rich natural resource reserves, and considerably well-developed infrastructure. During the reporting period, policy priorities centered on increasing Uzbekistan's investment attractiveness, including the introduction of a new currency regulation law to ensure the freedom of existing cross-border and capital movement transactions; a new law on investment activities to protect foreign investors' rights; and a new tax code with lower and more fair tax rates and reporting criteria have been improved.

Above we talk about investment policy but at first we should know what is it. Investment policy- it is an integral part of the financial policy of the state, which is a set of methods and measures to attract, distribution and effective use of domestic and foreign investment resources.

Investment policy — a set of interrelated measures to ensure the required level and structure of investments in the economy of the Republic of Uzbekistan and its individual sectors, increase investment activity of investment entities aimed at finding sources of investments and identifying priority sectors for their use.

The purpose of the state investment policy - the implementation of structural reforms in the economy, GDP growth, higher living standards and welfare of the population through the mobilization and effective use of investments.

The main areas of investment policy of the Republic of Uzbekistan are:

• Creating and improving the regulatory framework of investment activities in Uzbekistan;

• Implementation of centralized investment for structural reforms in the country and growth of industrial production;

• Creating a favorable investment climate to attract foreign investment;

• Promote the investment activity of local people and businesses;

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• Monitoring the protection of investors' rights and fulfill their obligations, the improvement of the public administration which carry out the functions of regulation and control.

In the legislative area Oliy Majlis (Parliament), the Senate, the Cabinet of Ministers, the President, the Ministry of Justice Investment climate and the relationship between the participants of the investment activities Laws and regulations

In the financial and economic sphere The Ministry of Finance, The Ministry of Economy, MFER, line ministries and agencies, judicial authorities Investment market, bond market Safety measures and penalties

In the field of functional Central Bank and commercial banks, STC, Uzstandard, Patent Office, the Ministry of Foreign Affairs, insurance companies Monetary market, execution of tax, customs, insurance law Requirements, norms, procedures, established by the legislation, standards, guidelines

As can be seen on Table 1, the main purpose of investment policy is to improve the investment climate in the country, the development of the investment market and other components of the overall financial sector - banking, insurance, foreign exchange and money market.

Reforms in Uzbekistan during the three last years, such as liberalising the foreign currency market and establishing seven special economic zones with tax breaks for investors, has made the country a more appealing destination for international . According to the UNCTAD's 2020 World Investment Report, FDI inflows increased significantly in 2019 to USD 2,3 billion, compared to USD 625 million in 2018. Total FDI stock stood at USD 9.5 billion in 2019. FDI traditionally arrives from Russia, South Korea, China and Germany, but Canada recently increased its financial presence. Investments focus on the energy sector, including alternativerenewable energy in recent years.

Uzbekistan ranked 69th in the World Bank 2020 Doing Business, same as the previous year. The country is one of the best-performing economies in three or more Doing Business surveys. As part of the president's large-scale privatisation programme, the government hopes to encourage FDI, especially in specific industries such as banking, electricity, oil and gas, manufacturing, telecommunications, transportation, and agriculture. Uzbekistan is a landlocked country with abundant natural resources and a strategic location between China and Europe. Attracting private investment and developing funding mechanisms are critical components of the structural transformation. The percentage of overall investments funded by bank loans and other lending increased from 3,1 percent in 2000 to 13,3 percent in 2017. However, a high degree of government presence in the economy, bureaucracy, problems in the tax and customs spheres, and the banking system stifle domestic investment growth and foreign capital attraction.

The policy of liberalization reforms, initiated by the government in 2016, is paying off: the total volume of foreign direct investment attracted to Uzbekistan has grown from about $1.6 billion in 2018 to $4.2 billion in 2019. Uzbekistan was named as one of the top 20 “global improvers” in the World Bank’s 2020 Doing Business report, and the 2019 Country of the Year award winner by The Economist magazine.

According to Uzbekistan’s official statistics, the total volume of capital investments exceeded $21.5 billion in 2019. Financing sources included $4.2 billion FDIs and $5.6 billion as foreign loans. Major industries include mining, oil, and gas extractives, electricity generation, construction, agriculture, textiles, transportation, metallurgy, non-metalnon-mineral production, and chemical production.

Moreover, private companies have raised concerns about local authority growth plans that do not comply with newly enacted regulations on private property rights. Expropriation of small businesses' property in favor of well-connected corporations or construction projects backed by state or local governments has been confirmed. The implementation of laws securing intellectual property rights is also missing.

The Government of Uzbekistan (“the government” or “the GOU”) has declared attracting foreign direct investments to be one of its top policy priorities, recognizing that increased private sector participation is essential for economic growth and highlighting social challenges caused by significantly higher unemployment and poverty rates. To entice more foreign investors, the government simplified entry visa procedures and widened foreigners' residence permits. The new Tax Code, which went into effect on January 1, 2020, reduced corporate and individual income taxes by nearly half and significantly simplified taxation procedures for private businesses. President Mirziyoyev challenged all regional governments to make their territories more appealing to foreign investors and to provide quarterly FDI progress reports. He also established the Supreme Economic Council, which he proposed as a device for further economic reforms to be coordinated with multinational companies, specialist communities, and development banks. The government has yet to resolve a range of fundamental issues that companies and investors face, including state-owned monopolies' dominance in key sectors of the economy, a lack of accountability in public procurements, a weak track record implementing public-private contracts, an underdeveloped and overregulated banking sector, and insufficient protection of private property rights.

According to the World Bank, between 1991 and 2016, fixed capital investment accounted for 29.38% of GDP in middle-income countries, 41.44% in China, 32.31% in India, 33.14% in South Korea, and 29.28% in Singapore. Malaysia accounted for 28.25 percent, Turkey for 25.55 percent, and Kazakhstan for 25.40 percent2. Given that this figure is 23.89% in our country, it is necessary to radically improve the investment climate and attract more investment.

It is important to accelerate the investment process in the economy, modernize the leading sectors of the economy and enterprises, and expand the use of banking services to ensure innovative development and increase investment lending. First of all, it should be noted that the share of private sector funds in investment financing is growing rapidly, and it would be appropriate to further expand the use of banking and financial market opportunities. The share of bank loans and other borrowings in total investment financing increased from 2.1% in 2000 to 3.1% in 2005, and by the end of 2019 to 13.3%. This indicator is an important positive trend in the rapidly changing environment of international financial markets.

Investment financing is primarily related to the ability of enterprises to obtain loans. In particular, the volume of credit investments in the real sector of the economy increased by 25.1% in 2016 and amounted to 53.4 trillion soums at the beginning of 2017 soums. 80% of these loans were long-term loans for investment purposes. Investment in fixed capital was increased to 91.8% in 2020. This is also a good change which effect to the economy.