CC BY
72
Экономические науки
УДК 336
ENSURING OF FINANCING OF STRUCTURAL CHANGES IN REPUBLIC OF UZBEKISTAN THROUGH ATTRACTION OF FOREIGN DIRECT INVESTMENT
N.K. Jumaniyazov, Academy of State Governance under the President of the Republic of Uzbekistan (Tashkent, Uzbekistan), e-mail: [email protected] D.G. Barnaev, Academy of State Governance under the President of the Republic of Uzbekistan
(Tashkent, Uzbekistan). N.V. Akramova, Westminster International University in Tashkent (Tashkent, Uzbekistan)
Abstract. The paper aims to give some insights into the investment environment and the analyses of factors influencing. Foreign direct investment plays a significant role in ensuring long-term economic growth of the country. Therefore, the government of Uzbekistan declares that attracting foreign direct investment is core priority. The solution of the large-scale tasks facing the country in doubling GDP is impossible without a systematic approach of searching growth sources. Indeed, one of the key sources of economic growth in Uzbekistan is the attraction of foreign capital to the economy, along with the developed high technology output and diversification of the economy.
Keywords: foreign direct investment, national economy, economic growth, attraction of foreign capital, structural changes, host economy, regional investments, modernization of infrastructure, commodity sectors, competitiveness, investment climate, business environment.
ОБЕСПЕЧЕНИЕ ФИНАНСИРОВАНИЯ СТРУКТУРНЫХ ПРЕОБРАЗОВАНИЙ В РЕСПУБЛИКЕ УЗБЕКИСТАН ПОСРЕДСТВОМ ПРИВЛЕЧЕНИЯ ПРЯМЫХ
ИНОСТРАННЫХ ИНВЕСТИЦИЙ
Аннотация. Цель статьи - дать представление об инвестиционной среде и анализе влияющих на нее факторов. Прямые иностранные инвестиции играют важную роль в обеспечении долгосрочного экономического роста страны. Поэтому правительство Узбекистана заявляет, что привлечение прямых иностранных инвестиций является основным приоритетом. Решение масштабных задач, стоящих перед страной в удвоении ВВП, невозможно без систематического подхода к поиску источников роста. Действительно, одним из ключевых источников экономического роста в Узбекистане является привлечение иностранного капитала в экономику наряду с развитой наукоемкой продукцией и диверсификацией экономики.
Ключевые слова: прямые иностранные инвестиции, национальная экономика, экономический рост, привлечение зарубежного капитала, структурные изменения, принимающая страна, региональные инвестиции, модернизация инфраструктуры, товарные рынки, конкурентоспособность, инвестиционный климат, бизнес среда.
At the start of 2017 the President of Uzbekistan has signed a decree "On Uzbekistan's Development Strategy for 2017-2021" on five priority areas. According to this document it is planned to improve the competitiveness of the national economy through deepening of structural reforms, modernization and diversification of its leading industries, active investment policies in these areas.
Therefore, it is obvious that foreign direct investment plays a significant role in ensuring long-term economic growth of the country, creating new jobs and innovative production modernization,
and positively impacting on the balance of payments and external economic sector, as well as diversifying the economy.
Timely implementation of these tasks actualizes the issue of more effective usage of internal reserves of development and intensive participation of Uzbekistan in the international division of labor.
The solution of the large-scale tasks facing the country in doubling GDP is impossible without a systematic approach of searching growth sources. Indeed, one of the key sources of economic growth in Uzbekistan is the attraction of foreign capital to the economy, along with the developed high technology output and diversification of the economy.
At the same time, the development trends in the world economy are characterized by rapidly changing economic situation and a sharp exacerbation of competition between countries for maintaining positions in various markets.
The research shows that fall in demand for natural resources and collapse of oil prices combined by recent monetary policies in advanced economies have undermined the growth prospects of developing countries (Stiglitz, J., & Rashid H., 2016). As a result, Uzbekistan has faced the challenges of global and regional negative factors [11].
The intensity of efforts of states for attracting foreign direct investments is growing, which plays a decisive role in ensuring dynamic growth of the competitiveness of the national economy, according to the Strategy of the Republic of Uzbekistan in 2017-2021.
Moreover, according to the plans of cardinal structural changes in the Republic of Uzbekistan, it is envisioned to ensure by 2030 the accelerated growth of industry and increase its share in GDP to 40% against 33.5% in 2015, and the share of agriculture to be reduced from 16.6% to 810%. In addition, it is planned to reduce energy intensity of GDP by about two times as a result of the widespread introduction of modern energy-saving technologies [3].
In the Republic of Uzbekistan, where in recent years the share of foreign investment and loans in the total volume of investments in fixed assets varies within the range of 20-30%, a special attention has been paid to attracting foreign investments for the further development of the economy [1].
As noted in the speech of the first President of the Republic I. Karimov at the celebrations dedicated to the 23rd anniversary of the country's Independence, "with the aim of developing our country at such high rates, its modernization and renewal, and implementation of large-scale reforms in the economy, more than $ 180 billion of capital investments were invested, over $60 billion of them are foreign investments".
The main advantage of foreign direct investment (FDI) is the fact that they can support and activate other forms of financing and have a number of positive properties over national sources of capital and the funds of international funds.
The government of Uzbekistan declares that attracting foreign direct investment is core priority and there were more than 50 legislative documents issued to accelerate and coordinate investment processes. The legislation provides a wide range of guarantees to investors, including: protection against discrimination, protection from harm caused by retroactive implementation of legislation, protection from interference by the state in the economic activity of foreign investors, and protection from any changes in legislation that worsens foreign investment conditions [11].
The peculiarity of FDI is that it can guarantee the stability of economic growth due to its specificity: the inflow of technologies and know-how. At the same time, the key point in attracting FDI is that they contribute to economic growth, and the quality of such growth is preferable in that
the recipient attains the global production standards. Foreign direct investment is strategic, so these investors are called strategic investors - their investments are long-term.
Foreign direct investment, coming to the country, has a significant impact on its economy. However, the nature of this impact depends heavily on the specific characteristics specific to each individual country. In some cases, the presence of foreign direct investment stimulates domestic production, but in other cases, joint ventures drive domestic firms out of the market.
The first effect can arise from the fact that joint ventures have modern technologies that can be simulated by domestic enterprises. The second effect may be due to the increasing competition. However, a balanced policy of attracting FDI allows the second effect to be manifested to the minimum degree (a good example is the Chinese economy, the most attractive for foreign direct investment).
A study of the merits and demerits of existing forms of attracting foreign investment shows that direct investments are characterized by the presence of long-term investor interests in the host economy and account for a greater benefit compared to external loans. For example, as follows from the report of the company on US GAAP, OAO NK "LUKOIL" in 2013, the investments in its projects in the territory of Uzbekistan increased by one third compared to 2012 - up to 444 million dollars. The Russian company is currently producing gas in the Khauzak-Shady gas fields in the Bukhara region, as well as in the Dzharkuduk-Yangi Kyzylcha block in the South-Western Gissar. Within the framework of these projects, under Product Sharing Agreement, LUKOIL plans to produce 18 billion cubic meters of gas, and to increase the volume of investments to $5 billion.
The effectiveness of the policy of attracting foreign direct investment in Uzbekistan is limited in the deformed sectoral structure: the concentration of FDI in the commodity sectors, with relatively little attention to high-tech industries that produce products with a high share of value added, which in the future could become an object of the country's exports.
At the same time, a rational investment policy assumes a balanced distribution of potential benefits and a harmonious combination with the priorities for the development of the national economy, sectors and territories. The analysis of indicators on attraction of investment flows in the context of two programs - the State Investment Program, which operates nationwide (ISU), and the regional investment programs implemented in each region (RIP) - makes it possible to identify a number of trends and features [2].
Attracting foreign investment in the framework of regional investment programs remains at a low level compared to the total volume of foreign investment in the country. The bulk of foreign investment is attracted through centralized channels. The volume of foreign investment, mastered through regional investment programs, varies in the range of 10.4-16.5% of total foreign investment.
There is a significant disproportion in the distribution of foreign investment in the framework of regional investment programs between regions. In absolute terms, more than half of foreign investments are concentrated only in Tashkent city and Tashkent region. If the share of the Andijan, Fergana, Kashkadarya, Samarkand and Syrdarya regions is 5-8%, the indicators of the Surkhandarya, Namangan, Khorezm, Navoi, Jizzakh and Bukhara regions, as well as the Republic of Karakalpakstan are much lower than the average - only 1-3 % for each of the territorial entities.
The imbalance in favor of the city of Tashkent and the Tashkent region, and in part the Syrdarya region reflects the desire of foreign investors to be closer to the capital region, since the existence and uninterrupted operation of the production infrastructure, the high level of logistics capabilities, the availability of rich natural resources, relatively high compared to other regions. The
quality of market infrastructure services and human resources makes them competitive in attracting investment. These facts require the adoption of a set of measures to improve the work of the production, road, transport, communication and market infrastructure, as well as to improve the quality of training and retraining of personnel in the specialties in demand in the labor market in other regions of the country.
In the sectorial overview, the bulk of regional foreign investment is directed to light industry, services and the production of building materials, which indicates their commodity orientation. The share of technology industries with higher added value is insignificant (electrical engineering, engineering, pharmaceuticals) [5].
The sectorial distribution in the RIPs and ISUs differs significantly from each other. Thus, the structure of regional investments is dominated by light industry and services, and in the structure of state investment programs - more than half of foreign investments in 2011-2014 are accounted for projects in the oil and gas sector. At the same time, industries with more complex technological processes and high added value, such as pharmaceuticals, electronics and mechanical engineering, do not have a significant share in the total investment in both programs.
It should be noted that the current structure of investments in Uzbekistan also differs from the structure of investments throughout the world. Thus, in the publications of the Institute for Forecasting and Macroeconomic Research, it is noted that in the world, foreign direct investment in industry is basically as follows: chemical industry - 22%, vehicles and equipment - 13%, food industry, beverage and tobacco production - 13%, electro technical and electronic industries - 11%, coke and oil industries, production of nuclear fuel - 9%.
The composition of the investor countries in the regions is rather concentrated and stable, which indicates not very diversified investment profile and low dynamic mobility, which are not characterized by the active processes of structural transformation.
About half of all foreign investment falls to the share of 3-4 countries. The structure of regional investment in the country of origin is dominated by the United Kingdom, China and Russia. Further, the share of the United States, South Korea, Turkey and Switzerland is also relatively high [5].
A similar picture is also observed in the sectorial distribution of investments: regional investments are concentrated both in countries of origin and sectorial orientation, while the indicators are stable. Based on this, it can be judged that at the regional level, foreign investment is still attracted on the basis of traditional advantages and conditions. In general, economics has long argued that the level of attracting foreign investment, especially direct investments, to the economy of a particular country depends on investment climate and business environment formed in the country, the quality of state institutions.
According to the estimations of the Institute for Forecasting and Macroeconomic Research under the Cabinet of Ministers of the Republic of Uzbekistan, the volume of foreign direct investment growth correlates (directly proportional) to the degree of state influence on economic activity in the country and the volume of GDP, and the stability of its dynamics. Thus, a 1% increase in GDP corresponds to an increase in inflow of foreign direct investment by 2.39% (0.53% of deferred growth with a lag of 3 quarters and 1.76% growth due to the current GDP growth). The World Bank's calculations, reducing the bureaucratic barriers and costs of business have overcome them by 25% in the European Union led to a GDP growth of 1.7%. We can safely assume that this in turn will lead to a corresponding increase in the inflow of foreign direct investment.
In addition, the calculations of the Institute for Forecasting and Macroeconomic Research shows that the growth of the quality factor of state institutions by 1% point leads to an increase in the share of foreign direct investment in the country's GDP by 7.5 percentage points.
Despite the fact that in Uzbekistan in recent years much has been done to improve the investment climate and business environment, the active continuation of this policy is a very important factor for the further increase in the inflow of foreign investment into the country's economy.
The practice of attracting foreign investment in Uzbekistan shows that today the efforts of the central ministries and agencies are aimed at targeted attraction of foreign investments on major investment projects included in the State Investment Program and the Consolidated List of Prospective Investment Projects annually approved by the Interdepartmental Council of the Cabinet of Ministers. The powers of local authorities are limited to assisting project proponents in developing a passport and investment proposal.
Because of overload of duties of central authorities the investment proposals received from direct initiators from the regions are not given due attention, which hampers the ability to timely implement investment projects in certain regions.
It seems expedient to develop and implement programs for the development and modernization of infrastructure for medium-term periods, as well as the creation of a mechanism for accumulating local budget funds to provide external infrastructure for enterprises.
Foreign experience clearly shows that during the transition period investments become the most important factor not only for reconstruction and renovation, but also for the creation of new industries and enterprises. Therefore, attracting and using foreign capital in the economy of Uzbekistan is an essential regularity of the investment process at the present stage.
At the same time, attraction of foreign investments should be based on the principles of socio-economic efficiency, environmental and economic security, mutual benefit and maintaining the priority of state structural and reproduction policies. Based on these principles, it is necessary to determine the criteria for the correct choice of the optimal forms of investment activity. These criteria include the scope of activities and the type of products (knowledge-intensive, technically complex, etc.); Scope of the project (small, medium, large); the strategic goal of attracting (from the import of equipment to the use of production and management experience).
Литература:
1. Аналитический доклад Совершенствование организационно-правовых условий по привлечению иностранных инвесторов в регионы Республики Узбекистан. Ташкент, 2015. URL:
http://lgsp.uz/sites/default/files/REPORT%201 .%20Enhancing%20institutional%20and%20legal%2 0terms%20for%20attraction%20of%20foreign%20investors%20to%20regions%20of%20Uzbekista n_RUS.pdf
2. Инвестиции вдали от центра: выгодно ли вкладывать в регионы? // Информационный портал KUN.UZ. URL: http://kun.uz/ru/news/2017/01/12/investicii-vdali-ot-centra-vygodno-li-vkladyvat-v-regiony
3. Президент поставил задачу удвоить ВВП к 2030 году // ГазетаШ. URL: https://www.gazeta.uz/ru/2016/01/16/double
4. Abrams S. A Practical Approach to the International Valuation and Capital Allocation Puzzle. Salomon Smith Barney, 2002.
5. Analytical report "Improvement of organizational and legal conditions for attracting foreign investors to the regions of the Republic of Uzbekistan". Tashkent: UNDP Uzbekistan, 2015.
6. Bruner R. et al. (). Introduction to "Valuation in Emerging Markets" // Emerging Markets Review. 2002. №3. DOI: 10.1016/S1566-0141(02)00039-0
7. Colin J. State Keeps a Tight Rein: Market Reform in Uzbekistan. The Banker, 1998. №14(8). pp. 47-50.
8. Estrada J. Discount rates in emerging markets: Four models and an application // Journal of Applied Corporate Finance. 2007. №19. pp. 72-78. DOI: 10.1111/j.1745-6622.2007.00137.x
9. Estrada J. Systematic risk in emerging markets: The D-CAPM // Emerging Markets Review. 2002. №3. pp. 365-379. DOI: 10.1016/S1566-0141 (02)00042-0
10. James M., Koller T. Valuation in emerging markets. Corporate Finance. 2000. №4. pp. 78-85.
11. Khalikov U. Role of Stock Exchanges in Economic Development of Uzbekistan // International Business Research. 2017. Vol. 10. №1. pp. 172-180.
12. Koller T., Murrin J. Valuation: Measuring and Managing the Value of Companies (3rd ed.). New York: John Wiley & Sons, 2000.
13. Luehrman Т. Business valuation and the cost of capital. Boston: Harvard business school publishing, 2009.
14. Luehrman Т. General manager's guide to valuation. Harvard Business Review, 1997.
15. The Problems of Investment Climate in Uzbekistan. URL: https://www.researchgate.net/publication/282466053_The_Problems_of_Investment_Climate_in_U zbekistan (дата обращения 21.03.2017).
References:
1. Analiticheskii doklad Sovershenstvovanie organizatsionno-pravovykh uslovii po privlecheniyu inostrannykh investorov v regiony Respubliki Uzbekistan . Tashkent, 2015. URL: http://lgsp.uz/sites/default/files/REPORT%201 .%20Enhancing%20institutional%20and%20legal%2 0terms%20for%20attraction%20of%20foreign%20investors%20to%20regions%20of%20Uzbekista n_RUS.pdf
2. Investitsii vdali ot tsentra: vygodno li vkladyvat' v regiony? // Informatsion-nyi portal KUN.UZ. URL: http://kun.uz/ru/news/2017/01/12/investicii-vdali-ot-centra-vygodno-li-vkladyvat-v-regiony
3. Prezident postavil zadachu udvoit' VVP k 2030 godu // Gazeta.UZ. URL: https://www.gazeta.uz/ru/2016/01/16/double
4. Abrams S. A Practical Approach to the International Valuation and Capital Allocation Puzzle. Salomon Smith Barney, 2002.
5. Analytical report "Improvement of organizational and legal conditions for attracting foreign investors to the regions of the Republic of Uzbekistan". Tashkent: UNDP Uzbekistan, 2015.
6. Bruner R. et al. (). Introduction to "Valuation in Emerging Markets" // Emerging Markets Review. 2002. №3. DOI: 10.1016/S1566-0141 (02)00039-0
7. Colin J. State Keeps a Tight Rein: Market Reform in Uzbekistan. The Banker, 1998. №14(8). pp. 47-50.
8. Estrada J. Discount rates in emerging markets: Four models and an application // Journal of Applied Corporate Finance. 2007. №19. pp. 72-78. DOI: 10.1111/j.1745-6622.2007.00137.x
9. Estrada J. Systematic risk in emerging markets: The D-CAPM // Emerging Markets Review. 2002. №3. pp. 365-379. DOI: 10.1016/S1566-0141(02)00042-0
10. James M., Koller T. Valuation in emerging markets. Corporate Finance. 2000. №4. pp. 78-85.
11. Khalikov U. Role of Stock Exchanges in Economic Development of Uzbekistan // International Business Research. 2017. Vol. 10. №1. pp. 172-180.
12. Koller T., Murrin J. Valuation: Measuring and Managing the Value of Companies (3rd ed.). New York: John Wiley & Sons, 2000.
13. Luehrman T. Business valuation and the cost of capital. Boston: Harvard business school publishing, 2009.
14. Luehrman T. General manager's guide to valuation. Harvard Business Review, 1997.
15. The Problems of Investment Climate in Uzbekistan. URL: https://www.researchgate.net/publication/282466053_The_Problems_of_Investment_Climate_in_U zbekistan (accessed Apr 21, 2017).
— • —
Сведения об авторах
Nodir Kadamovich Jumaniyazov, Ph.D, 1st year student, Academy of State Governance under the President of the Republic of Uzbekistan (Tashkent, Uzbekistan)
Davron Gofurovich Barnaev, 1st year student, Academy of State Governance under the President of the Republic of Uzbekistan (Tashkent, Uzbekistan)
Nargiza Vohidjonovna Akramova, Research Assistant, Westminster International University in Tashkent (Tashkent, Uzbekistan)
