A presentation was delivered by Mrs Stefka Slavova, Lead Economist, Trade and Competitiveness Global Practice at the World Bank, on 8 November 2017, in Tashkent, Uzbekistan.

1. Beyond Doing Business:
the Unfinished Investment Climate
Reform Agenda in Uzbekistan
November 8, 2017
Tashkent
Stefka Slavova
Lead Economist, Trade and Competitiveness Global Practice

2. Who improved the most across 3 or more areas measured by Doing
Business in 2016/17?
Source: Doing Business database.
Note: Economies are selected on the basis of the number of reforms and ranked on how much their distance to frontier (DTF) score
improved. First, Doing Business selects the economies that implemented reforms making it easier to do business in three or more of the 10
areas included in this year’s aggregate distance to frontier score. Regulatory changes making it more difficult to do business are subtracted
from the number of those making it easier. Second, Doing Business ranks these economies on the increase in their distance to frontier
score from the previous year. The improvement in their score is calculated not by using the data published in 2017 but by using comparable
data that capture data revisions and methodology changes. The choice of the most improved economies is determined by the largest
improvements in the distance to frontier score among those with at least three reforms.
1

3. Where did Uzbekistan reform to improve its
business environment change in 2016/17?
Uzbekistan reformed 5 areas measured by Doing Business in
2016/17
2
+4.5
0
10
20
30
40
50
60
70
80
90
100
Distancetofrontierscore(0-100)
2017
2016
DB2018 rank: 74
2016/17 2015/16
How did Uzbekistan
do it?
Starting a
Business
It takes 3 procedures
and 5 days to start a
business
It took 4 procedures
and 5.5 days to start a
business
New platform for
business
registration
Dealing with
Construction
Permits
It takes 17
procedures and 246
days to obtain a
building permit
It took 22 days and
258 days to obtain a
building permit
Streamlined the
process of obtaining
approvals of land
plot allocations
Getting
Electricity
It takes 4 procedures
and 883.1% of
income per capita to
obtain electricity
connection
It took 7 procedures
and 1,232.5% of
income per capita to
obtain electricity
connection
Introduced a turnkey
service at the utility
that fulfills all
connection-related
services
Protecting
Minority
Investors
Extent of shareholder
governance
index is 5.7
Extent of shareholder
governance
index was 5
Increased corporate
transparency
requirements
Paying Taxes
It takes 181 hours
and 10 payments are
required to pay taxes
It took 202 hours and
58 payments were
required to pay taxes
Introduced an
electronic system for
filing and paying
several taxes

4. 0 20 40 60 80 100
Trading across borders
Resolving insolvency
Protecting minority investors
Dealing with construction permits
Getting credit
Registering property
Enforcing contracts
Paying taxes
Getting electricity
Starting a business
DTF score
Results on individual indicators
Doing Business in Uzbekistan– score
22
0
10
20
30
40
50
60
70
80
90
100
Uzbekistan
scored 66.33
points in DTF in
Doing Business
2018, giving it a
ranking of 74th
overall.
Source: Doing Business 2018

5. Starting a business (11)
Dealing with construction permits (135)
Getting electricity (27)
Registering property (73)
Getting credit (55)
Protecting minority investors (62)
Paying taxes (78)
Trading across borders (168)
Enforcing contracts (39)
Resolving insolvency (87)
Doing Business in Uzbekistan– ranking:
23
Rankings on Doing Business topics – Uzbekistan
(Scale: Rank 190 center, Rank 1 outer edge)
Source: Doing Business 2018

6. Doing Business in Uzbekistan over time
Improvements jump-started in 2010
5
0
5
10
15
20
25
30
35
40
DB 2018
DB 2017-2014
DB 2013-2010
DB 2009-2005
Average year-on-year improvement
in distance-to-frontier score
Source: Doing Business database.
Note: The measure is normalized to range from 0 to 100, with 100 representing the frontier. Because of changes over the years in methodology and
in the economies and indicators included, the improvements are measured year on year using pairs of consecutive years with comparable data.

7. Doing Business Reform Going Forward
• Electronic procedures have not fully replaced paper documents and electronic
systems need to be adopted by the majority of users
• Pilot of electronic single window for customs clearance - can have large impact on
reducing the time to import and export (similar to Business Registration one-stop shop
and online registry led Uzbekistan to 92.18 percent of frontier in registering a business)
• Opportunities to strengthen secured transactions and insolvency: after the approval
of the Collateral Registry Law and the introduction of the collateral registry, there is a
need to amend several laws, including the Civil Code and Law on Pledges.
• Opportunities to consolidate and update the legal and regulatory framework for
construction permits and property registration
• Need for collaboration with the private sector and strong coordination among
different government agencies
• More effective implementation mechanisms through:
1) Improved coordination,
2) implementation of risk-based approaches to regulation.
3) strong monitoring mechanisms, including user feedback mechanisms
4) training to instill a culture of customer service among government officials.
6

8. Sub-National Doing Business
7
• Uzbekistan could benefit from a study of Doing Business topics at the
sub-national/regional level: a request from the Government of
Uzbekistan to the WBG can trigger the process
• The advantages of a SNDB report are the possibility to measure
business regulation at the municipal/regional level; create competition
among cities/regions in improving business climate and attracting
investment; goes beyond the national business capital measured by
Doing Business; creates momentum for reform at the “grassroots” level
• A recent example: Kazakhstan SNDB Report of 2017: covers 8
regions/cities (Aktobe, Almaty, Astana, Karagandy, Kostanay,
Oskemen, Pavlodar, Shymkent) across 4 DB indicators (Starting a
Business, Dealing with Construction Permits, Getting Electricity and
Registering Property). Following the launch, the Government has
requested a new Subnational DB report, covering all regions

9. Competition Policy and SOE Reform
8
• Initial assessment at the Competition Law and the competition
framework indicate serious deficiencies with respect to competitive
neutrality: sectors where large SOEs operate are exempt from
competition law provisions and procompetitive behavior is discouraged
• WBG Competition Team is about to engage with the Committee on
Assistance to Privatized Enterprises and Support of Competition under
the Investment Climate TA project and further under the DPL
• Examples of work done in Kazakhstan, Romania, Mexico to strengthen
provisions related to anticompetitive practices and apply principles of
competitive neutrality (i.e., create a more level-playing field between
SOEs and private companies)

10. Weak competition paired with significant weight of SOEs in key markets seem to be hindering the
overall efforts of the GoU to foster private sector development and economic diversification
1. Weak competition: Uzbekistan is placed low among comparator
countries in terms of key indicators for organization of the market and
competition
0
5
10
15
20
25
30
Best=30
Market-based competition
Source: Bertelsmann Stiftung's Transformation Index, BTI 2016.
Fine levels fail to create incentives to comply with the competition
law: Fines for non compliance are between USD 1400-7000 for legal
persons and USD 70-98 for individuals plus damages on the basis of
private claims
Fundamentals of the market economy:
competition policy indicators for selected ECA
countries
2. SOEs play a strong role in the economy but they remain to some extent
exempted from antitrust scrutiny
• SOEs account for over 50 percent of GDP (World Bank, 2014) and almost
twice the number of people employed by private enterprises (Ajwad et al.
(2014)
• In key sectors with strong SOE presence (energy, water, transportation,
postal services, banking and securities) competition law applies only
if/when not in conflict with the sector-specific regulation.

11. In this context, the risks related to lack of competition are the highest in the region and market
structures more prone to anticompetitive behavior prevail in key sectors
3. In manufacturing, a key sector for private sector development,
market structures typically prone to anticompetitive behavior prevail
• Uzbekistan exhibits the largest share of monopolies in the region.
• While the share of all monopolies decreased for almost all
comparators, in Uzbekistan it increased from 21% to 26% from
2008-2013.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2009 2013 2008 2013 2009 2013 2009 2012 2008 2013 2008 2013
Monopoly Duopoly Oligopoly (3-6) More than 6
Armenia Georgia UkraineRussiaKazakhstan Uzbekistan
Source: Authors calculations using Enterprise Survey data from the World Bank
Evolution of Market structure of the manufacturing sector for
Uzbekistan and selected comparators in the ECA region
4. In this context, Business risks related to lack of competition
are perceived to be among the highest in the region
Business risks related to weak competition policies
(Economist Intelligence Unit, Aug. 2017)

12. Investment Policy and Promotion
11
• A new WBG Investment Competitiveness Report launched in October
2017: political stability and the rule-of-law valued the most among
surveyed investors
• WBG IPP Team is in the initial stage of engaging with the State
Investment Committee on formulating a national Investment Promotion
and Retention Strategy
• Examples of recent WBG work done in Brazil, India, Turkey,
Kazakhstan, Saudi Arabia, among others, on both investment policy
and institutional arrangements for successful investment attraction and
retention

13. Investment Vision and Strategy through an Investment Reform
Map...
Objective
Assist clients in designing and implementing an
investment policy reform agenda.
Components
 Diagnostic and identification of policy challenges
to maximize benefits of each type of FDI:
 natural resource-seeking
 market-seeking
 efficiency-seeking and
 strategic asset-seeking
 Dialogue with Government to prepare a reform
agenda to address various challenges
 Identification of client’s needs on different stages
of investment life cycle
Investment Reform Memo and/or Investment
Policy Statement

14. Investment promotion
What we do
 Investment promotion
institutional arrangements
 Sector benchmarking for
investment
 investment facilitation
 Investment opportunity
identification
 sector targeting and promotion
 investor aftercare
 GIPB
• Investment Promotion is a flexible tool that assists government
to proactively reach out to potential investors.
• At its heart it is a marketing tool.
• Must be based on competitiveness
• Promotion links competitiveness, policy and regulatory reform
agendas to investment and jobs
• Long standing area of WBG expertise – 25+ years
• Changing nature of investment promotion:
o More FDI coming from non-traditional markets
o south-south, etc.
o Investment promotion for FCS
o Environmental and social sustainability concerns

15. InvProestment Promotion: Examples of success ProjectBrazil Frontier States
Approach Outcome
T&C supported APEX, the national
investment promotion agency of Brazil,
to build the country’s competitiveness for
FDI by creating more effective capacity
to attract FDI to the poorer North and
North/East regions of the country.
During a period of 3 years, attraction of
over $1.3 billion of new investment to
Brazil, of which some 70% went to the
two frontier states in sectors such as
renewable energy and agribusiness.
Rajasthan, India
T&Cs supported the Government of
Rajasthan, as part of the India Lagging
States program, to help develop the
investment attraction competitiveness in
four key sectors of the economy –
automotive, IT enabled services, solar
power manufacturing and tourism.
investments of approximately $2 billion
are currently in the pipeline in these
sectors, with over $300 million of new
investment having been achieved so far.
Project Example: Investment Promotion in Brazil

16. Investment Entry:
Focus areas
Focus areas Examples
Legal and
regulatory
barriers
Prohibition of foreign investment in
certain sectors
• A country may prohibit FDI in the retail sector by regulating that only
companies owned and controlled by nationals can own supermarkets or
department stores
Restrictions on top managerial
personnel
• A country may restrict the appointment of foreigners to the board of
directors and/or to executive-level positions
Discriminatory licensing requirements • A foreign investor may be required to meet additional conditions in order to
get a license to operate (in comparison to a domestic investor)
Procedural
barriers
Obtaining investment approval • A country may require several different agencies to sign off on investment
approval, causing increased time and costs
Registration or notification of
investment
• Registration or notification requirements may require detailed, forward-
looking information that is time-consuming to prepare
Obtaining a work permit or visa • Work permits applications may be onerous and lengthy, and may impose
restrictions on staff mobility
Opening a bank account in a foreign
currency
• Documentation required to open a bank account may be costly to collect
and slow to process
Having documents recognized (Hague
Apostille Convention)
• A country may require that certain foreign documents be certified or
notarized before they can be recognised for establishment
De Facto
barriers
Lack of transparency • Substantive laws and regulations of the country may be complex and
difficult to access, and decision-making processes may be opaque .
Excessive discretion and lack of
certainty
• Decision-makers may have significant discretion, allowing informal
practices to creep into the system.
15

17. Investment Protection & Retention:
Rationale
Reinvested earnings are an
increasing source of FDI
Around 25% of investors either withdraw from an
existing investment or cancel planned investments due
to political risk concerns
0 5 10 15 20 25 30
Transfer and convertibility…
Breach of contract
Non-honoring of gov't guarantees
Expropriation/nationalization
Adverse regulatory changes
War
Terrorism
Civil disturbance
Withdraw existing investment Cancel planned investments
Source: WIPR 2012
Political risks that
investors are most
concerned about
relate to
government actions
16

18. 17
Substantive focus Approaches Measuring success
Key guarantees of
investor protection
against:
 Currency
conversion and
transfer restrictions
 Expropriation
 Breach of contract
 Arbitrary state
action
Technical assistance provided
though:
 Legal reform: Alignment of
provisions in domestic
legislation with international
obligations
 Administrative streamlining:
Specific focus on currency
transfer and other FX-related
transactions
 Systemic Investment
Response Mechanism: SIRM
(lead agency, monitoring
system, etc.)
Impact indicators:
 Investment retained
 Cost compliance
savings
 Public savings (derived
from prevention of
investor-State
disputes)
Investment Protection:
Focus areas

19. Business Licenses, Permits and Inspections
18
• Draft Decrees (#1580 and 1581) on Simplification of Business Licensing
and Permitting, and on Entrepreneurship Support and Improving the
Business Climate set the tone for systematic work in this area; they
foresee the elimination of a number of licenses and permits, or
simplified procedures for their issuance
• In addition, the Chamber of Commerce and Industry has been charged
with determining the impact of any new laws and regulations on
business activity (regulatory impact assessment) and providing its
conclusions to the relevant law- or regulation-drafting bodies
• Inspections are also being streamlined, with less opportunity for
discretionary inspections by government bodies
• However, a systematic inventory of all types of business licenses and
permits currently in effect would help identify further opportunities for
streamlining and reducing licensed business activities, and leveraging
e-portals (such as the Single Window) for the issue of licenses and
permits

20. Next Steps in WBG Engagement on Investment Climate Reform
19
• Investment Climate ASA underway (focus on Competition, Doing
Business reform, licenses and permits review
• Investment Policy and Promotion (WBG team to engage with State
Investment Committee)
• Subnational Doing Business Report – potential to do, request from the
Government needed to initiate the process
• IFC Country Private Sector Diagnostic (deep dive into sector
competitiveness)
• Development Policy Loan (to have a strong PSD pillar)

21. 20
• This is one of the weakest areas of the country’s performance. There seems to be a
gap between legal requirements and practice.
• Obtaining a certificate of conformity, or its recognition based on bilateral agreements
remains a difficult procedure
• The majority of declarations are now entered through an Automated Electronic
System for Goods Declaration, while monitoring over the international trade contracts
is performed through the Unified Electronic System of International Trade Operations
• It takes less time to use paper-based applications for most of technical approvals,
partially due to insufficient development of the regulatory framework underlying
institutional coordination in international trade, inadequate automation and process
reengineering of some of the agencies
• The customs value of imported and exported goods is not fully consistent with the
international principles
• The customs authorities check all the cargo at the border with no application of risk-
based approaches
Trading Across Borders
Recent Trends

22. 21
1. Map existing documentary requirements in
practice to identify gaps in the implementation of
existing regulations and adopt measures to
address them.
2. Enable the elimination of paper-based
applications for technical certificates and permits.
3. Prepare for transition to risk-based approaches in
customs clearance and technical control by
collecting statistics on results of inspections;
design a risk matrix and criteria.
4. Eliminate the need for repeated certifications,
unless technical parameters change; ensure the
information on compulsory standards and
laboratories issuing certificates for each product
is publicly available in a unified updated database
free of charge.
5. Enhance efficiency of border post operations by
enforcing the working hours and ensure main
technical experts are available on site.
1. Make the systems involved in international trade
regulation fully interoperable through an eSW, and
expand user access to the automated systems.
2. Encourage pre-arrival processing of all document
requirements electronically.
3. Adopt a risk-based, regulatory compliance framework in
distinct phases: (i) Develop and implement a coordinated
border management strategy; and (ii) Introduce the status
of an Authorized Economic Operator.
4. Subsequently incorporate a single risk engine and e-
surveillance of inspection results into the eSW.
5. Revise existing technical requirements to exempt certain
goods from mandatory certification and introduce
automatic recognition of international quality standards.
6. Upgrade national quality infrastructure, including
capacities of accredited laboratories.
7. Align customs valuation methods with international best
practices and ensure that valuation happens with regards
to imports only.
8. Encourage private investment in transportation services to
allow for more competitive pricing, higher quality and
diversity of services.
9. Align international trade requirements with those of
countries – major trade partners; establish data exchange
with their customs authorities; consider creating joint
border control checkpoints.
Trading Across Borders
Short Term Recommendations Medium Term Recommendations