Introduction
According to the World Bank’s published report, the services sector has become one of the key drivers of economic transformations in Uzbekistan. Over recent decades, it has played a central role in the country’s transition to a market economy, facilitating structural changes, creating employment, and boosting labor productivity. However, this sector faces challenges requiring careful attention and comprehensive reforms. This article explores the current achievements, challenges, and prospects for developing the services sector and highlights areas that could position it as the foundation of long-term economic growth.

The Role of the Services Sector in Uzbekistan’s Economy
Since the early 1990s, the services sector’s contribution to Uzbekistan’s economy has increased significantly. In 1991, it accounted for about 33% of employment, but by 2022, this share rose to 52%, offsetting the decline in agriculture’s share of overall employment. Additionally, the sector’s value-added contribution to the economy grew from 35% to 44% during the same period. Despite these achievements, growth in services sector employment has plateaued over the past decade, underscoring the need for enhanced productivity and innovative approaches. Moreover, the sector is a significant source of women’s employment, with 60% of employed women working in services, highlighting its social importance.

Challenges and Issues
Despite its successes, the services sector faces several pressing challenges:

1. Low Labor Productivity: Productivity in Uzbekistan’s services sector is significantly lower than in OECD countries—14 times lower in 2021, four times lower than in Kazakhstan, and twice as low as in Georgia.
2. Weak Linkages with Other Sectors: Services constitute less than 10% of the inputs for manufacturing, limiting growth potential across the economy.
3. Export Limitations: While foreign direct investment (FDI) in services is rising, the sector’s share in exports remains minimal, particularly in global innovative services like ICT and professional services.
4. Uneven Infrastructure Development: The quality of transport and digital infrastructure trails behind that of comparable countries, restricting growth opportunities.

Prospects and Directions for Development
To make the services sector a sustainable growth engine, Uzbekistan should focus on three key areas:

1. Improving Connectivity: Physical and digital infrastructure investments are essential. Priority actions include enhancing transportation systems, expanding broadband access, especially in rural areas, and simplifying customs procedures to facilitate service trade.
2. Enhancing Competitiveness: Market liberalization and reduced trade barriers can significantly increase efficiency. Measures include ending monopolies in telecommunications and transportation and establishing a level playing field for local and foreign businesses.
3. Developing Competencies: Investments in education and training are vital to raising productivity. Initiatives like “One Million Uzbek Coders” can help develop ICT skills, and easing access for foreign specialists can introduce best practices and advanced technologies.

Conclusion
The services sector has vast potential to transform Uzbekistan’s economy. Increasing productivity, boosting exports, and creating new jobs can lay the foundation for sustainable growth. Achieving this requires a comprehensive approach that includes improving infrastructure, liberalizing markets, and enhancing human capital. With successful implementation, Uzbekistan could emerge as a regional leader in services and achieve notable success on the global stage.

Source: World Bank