Uzbekistan pushes for Economic Reforms in a Bid to join World Trade Organisation
Marina Gruzer | 18 November 2024
Summary
Uzbekistan aims to join the WTO by 2026 as part of its 2030 Strategy, with reforms to liberalise its economy, reduce protectionism, and improve transparency.
A recent decree pushes structural changes to meet WTO standards, such as removing exclusive rights in key sectors, phasing out export subsidies, and increasing international connectivity in telecommunications.
While reforms will likely boost long-term economic growth and global market access, domestic sectors (energy, metals, agriculture) face short-term competition risks, market fluctuations, and potential economic shocks if liberalisation proceeds too quickly.
As part of the Uzbekistan 2030 Strategy, the President of Uzbekistan, Shavkat Mirziyoyev, set the ambitious goal to facilitate the accession of Uzbekistan to the World Trade Organisation (WTO) by as early as 2026. Whereas the working party, set up to oversee the accession process, was established soon after Uzbekistan’s independence in 1994, no significant progress was made under mercantilist leaders who prioritised protectionist foreign economic policy. Accession to the WTO generally stipulates the creation of a liberal international trade framework as well as a more transparent economic and political environment. Since coming to power in 2016, Mirziyoyev has put significant effort into liberalising Uzbekistan’s economy in order to shift the national trade regulation in line with WTO standards. Some analysts argue that, despite reforms in recent years, continued protectionist government involvement in the economy limits the extent of growth. While liberalisation policies will likely increase Uzbekistan’s access to global markets and facilitate long run growth, domestic firms are at risk of economic shocks.
The 2024 recent decree aims to enforce structural changes necessary to meet WTO requirements. This aims to facilitate a roll back of some protectionist policies and increase connectivity with international networks in areas such as telecommunications and digital technologies. Regarding anti-protectionism, the decree removes certain exclusive rights previously held by companies in the procurement and export of goods like metals, natural gas, and chemical products. Additionally, in line with WTO standards, subsidy and tax benefits supporting exports will be abolished from January 1st 2025. In terms of increasing telecommunications interconnectivity, crucial for ensuring greater economic transparency, telecommunication operators based in Uzbekistan will be granted the right to directly connect to international internet networks for ‘their own commercial needs’. The WTO’s “2024 World Trade Report” argues that ‘economies that reform their markets during the WTO accession process grew on average 1.5 percentage points more’ than those that limited reform. Therefore, these policies would likely facilitate global economic integration and may accelerate growth.
However, extensive structural changes in key industries in Uzbekistan, such as energy, metal mining and agriculture, risk subjecting domestic industries to short term economic shocks. For example, ending exclusive export import rights for firms like Lukoil and Uzbekneftegaz National Holding by 2026 may expose the energy sector to increased competition and pricing pressures. Similarly, changes to protections in the agricultural exports sector could also impact small-scale producers who would face sudden increased competition in international markets. Revoking exclusive export rights without insurance measures would increase vulnerability to market risks and price fluctuations. This could be particularly damaging as agriculture contributes to approximately 25% of Uzbekistan’s GDP and employs 26% of the labour force. Consequently, if liberalisation policies are implemented too quickly, this could risk economic shocks that could limit profitability in certain sectors.
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Forecast
Short-term
Uzbekistan’s liberalisation reforms to meet WTO standards is highly likely to lead to economic shocks in key sectors like energy, metals, and agriculture. Ending exclusive export rights and subsidies could expose domestic firms, particularly small-scale producers, to increased competition, market risks, and price fluctuations, affecting profitability and stability.
Long-term
These reforms are fairly likely to enhance Uzbekistan’s access to global markets, promoting economic growth and integration. By aligning with WTO standards, Uzbekistan may experience improved transparency, increased foreign investment, and long-term economic resilience.
