Tashkent, Uzbekistan (UzDaily.com) -- A little over 7 months ago, on August 28th, 2021, President Mirziyoyev ceremonially opened the new Nur Navoi Solar plant, Uzbekistan’s first large-scale, privately developed and operated renewable energy facility. The solar photovoltaic plant will produce power for 31,000 households and will offset nearly 150,000 tons of greenhouse gases. This plant is Uzbekistan’s first step toward a commendable goal of powering a quarter of the country with renewable energy by 2026.  

Uzbekistan is urbanizing and industrializing rapidly, and the population is booming. The country is one of the most energy intensive in the world, and demand for power is expected to continue growing: from around 63 terawatt-hours in 2018 to more than 100 terawatt-hours in 2030, according to the World Bank. How this demand will be met will have a profound impact on the country and on climate change. 

Importantly, as regulatory authorities have unbundled power generation, transmission, and distribution, more international investors are casting their eyes toward Uzbekistan. More foreign financing is beginning to roll in. More clean energy is being developed to meet the growing demand. Thanks to the ambitious reforms initiated by the Government, the Nur Navoi Solar plant is the first of what I envisage will be many energy transition solutions for Uzbekistan. It is also an essential first step towards eliminating the types of blackouts the country faced in January this year. 

These changes in the country’s power sector are just one part of an ambitious, market-oriented government reform agenda. The goal is laudable: regain Uzbekistan’s place on the investment map, drive sustainable economic growth, build private sector opportunities, and create more and better jobs.

A number of other reforms have also been swiftly adopted in support of this goal, such as lifting price controls, liberalizing the foreign exchange regime, and unifying the exchange rate. The country also reduced tariffs, lowered trade barriers, and adopted some trade facilitation measures, such as those of the World Trade Organization’s Trade Facilitation Agreement, to help pave the way for a future WTO accession.

None of this has been easy to achieve, but they are important steps to support sustainable economic activity. It is worth acknowledging that thanks in part to the hard work of these reforms, Uzbekistan’s economy was one of the few in Europe and Central Asia to avoid economic decline in 2020, despite the ravages and uncertainties of the COVID-19 pandemic. 

With Russia’s invasion of Ukraine, the outlook in the region and globally has become more uncertain. It may be tempting to consolidate gains and fall back. This would move Uzbekistan toward the past, not the future. The Government has made excellent progress so far and should stay the course – and make a further push for reforms in other sectors.

For example, the chemical sector is highly centralized and inefficient. Most chemical plants need modernization to stay competitive. State-owned enterprises dominate and restrictive regulations and policies dissuade private investment. By reducing the state’s role and cutting red tape, the Government can transform the sector into a thriving and globally competitive industry. Efforts have begun, but more is needed for success.

The telecoms sector is also ripe for reform, and an important one to get right. The pandemic has digitized the world. Businesses are turning to ICT to scale up and connect to customers. Removing barriers to entry for private operators would help increase competition and drive “Built in Uzbekistan” innovation. Governments and citizens would also benefit from the shift to more efficient methods to provide and receive social services, such as online education and e-health. 

The Uzbekistan government deserves praise for its bold reform choices so far. These choices have already started to bear fruit. Now, with current geopolitical developments bringing more uncertainty, leaning into the forward-looking reform agenda is critical. By focusing on this path, Uzbekistan will be working toward a brighter future.

Stephanie von Friedeburg

Senior Vice President, Operations, IFC