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INVESTMENTS AS A CRITICAL FACTOR IN AGRICULTURAL
DEVELOPMENT OF UZBEKISTAN
Nadirov Khurshid Hamza ugli
JSCB "Agrobank" Department financing of agro-industrial complex enterprises
Leading specialist
https://doi.org/10.5281/zenodo.13319219
Agriculture is a critical sector of the economy of any country. At the present
stage, agriculture in our country is in difficult situation due to existing unresolved
problems associated with the lack of tangible support from the state, shortage of
competent, experienced and high qualified personnel, promising and young
specialists, lack of finance, underdeveloped infrastructure, etc. To solve most
problems, an influx of funds in the form of investments is required. Investments
in agriculture and agricultural assets are very important in promoting sustainable
agricultural production and the country`s potential.
Keywords:
Agriculture, investments, government support.
Introduction.
The problem of investments has been widely studied by the
world community for a long time. It is investments that are a necessary condition
for the stable functioning and development of economic entities, economic
sectors, municipalities, regions, and the state as a whole [5]. Investments are a
relatively new category for the Uzbek economy. Investments are understood as
“money, securities, and other property, including property rights and other rights
that have a monetary value, invested in objects of entrepreneurial and other
activities in order to make a profit or achieve another useful effect”. Investments
as an economic category perform a number of important functions at both
macroeconomic and microeconomic levels. At the macroeconomic level,
investments are the basis for implementing the policy of expanded reproduction,
accelerating scientific and technological progress, improving the quality of goods
and services, ensuring their competitiveness, structural restructuring of the
economy and balanced development of all its sectors, the functioning of financial
markets, the banking sector, implementing social policy, and ensuring the
national security of the country [1].
At the microeconomic level, investments provide solutions to such
problems as the creation of fixed assets, reconstruction and expansion of existing
enterprises, their technical re-equipment, ensuring a stable financial condition
and maximizing the profits of an economic entity, ensuring the competitiveness
of manufactured products, etc [3].
As for the industry called agriculture, investing in agriculture is one of the
most effective ways to increase agricultural productivity, reduce poverty levels
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and improve environmental sustainability. The transition to sustainable
agriculture is impossible without significant new investments aimed at
preserving natural resources and increasing the efficiency of their use and
reducing losses at all stages of production, processing and consumption.
The necessary elements for all agricultural investors and rural
entrepreneurs to mobilize resources and take on the significant risks associated
with agricultural investment are good governance, macroeconomic stability, rural
infrastructure, protection of poverty rights and effective market institutions.
Investing in agriculture for a better future means more than just accumulating
physical capital in the sector, it will require building the institutions and human
capacity that will enable the agricultural sector to contribute to sustainable
development [4].
Foreign direct investment in Agriculture.
In recent years, much attention has been paid to foreign direct investment,
which, for example, is a growing source of investment in agriculture in low- and
middle-income countries. However, FDI in agriculture remains very small
compared to domestic investment in agriculture. FDI is unlikely to make a
significant contribution to increasing agricultural capital stock, but it can have a
significant impact at the local level. FDI in agriculture can create an environment
that is promising for job creation and technology transfer, but has potential
negative social and environmental consequences remain a matter of concern [4].
Private investment. Private investment implies investments made by none-
state enterprises and organizations, as well as investments of individuals. This
type of investment in agriculture plays an important role. Private investment is
fundamental to meeting future growth in demand, achieving food security and
transitioning to sustainable agriculture [2].
Government spending on agriculture. Following investments in fixed assets
directly from the farms themselves, the second largest source of investment in
agriculture is government spending. Public investments include investments of
financial resources from the federal budget, budgets of constituent entities of
Uzbekistan, state extra-budgetary funds directed to the creation, development
and maintenance of enterprises and organizations related to the state property,
the implementation of target programs and priority investment projects [4].
Government spending is a vital component of creating a favorable climate for
investment in farms and is positively correlated with the formation of the
required volume of fixed assets of farms for each worker. Public investment in
agriculture is necessary to stimulate the quantitative growth of private
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investment and ensure its economic and social orientation. However, as
governments in all regions face financial constraints and the need to meet the
needs of all sectors, they must make difficult decisions when allocating public
resources.
In order for private sectors to have new opportunities to invest in
agriculture, a clear understanding of the incentives and constraints they face in
different contexts is necessary. The public sector plays an indispensable role in
creating and stimulating a favorable investment can occur with socially beneficial
results. Government spending on agriculture has an overwhelming positive
impact on sector productivity.
Farmers invest in their farms by purchasing agricultural machinery and
equipment, purchasing or caring for animals until they reach productive age,
growing crops over a long period of time, improving the quality of their land, and
constructing agricultural buildings. Governments can invest in, among other
things, the construction and operation of rural roads and large-scale irrigation
systems, assets that produce productivity results over a long period of time.
Governments are making large investments in agricultural research and
development, which generate intellectual capital that is a critical contribution to
improving long-term agricultural productivity. Both governments and individuals
invest in education, which increases the productivity of those who receive it and
generates long-term returns through the development of human capabilities.
Farmers spend time and resources organizing producer associations, which
are a form of social capital that reduces risk and increases productivity. All of
these activities are types of investment because they accumulate capital.
Creating a favorable climate for investment in agriculture. The question of
what factors create the right climate for private investment has received
considerable attention recently. Less attention has been paid to the importance of
these factors when investing in agriculture. Overall, the investment climate plays
a central role in reducing poverty levels and achieving growth and stability.
The investment climate reflects many area-specific factors that provide
opportunities and incentives for companies to invest effectively, create jobs, and
expand their operations. A good investment climate involves more than just
making a profit for companies; if that were the goal, it would be enough to limit
costs and risks to a minimum. A good investment climate improves performance
for society as a whole [6].
According to the concept of the World Bank, the functions of the state to
ensure a generally favorable investment climate are as follows:
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• Ensuring stability and security, including respect for rights to land
resources and other property, compliance with contractual obligations and
reducing crime;
• Improving the regulatory and taxation regime both within countries and at
their borders;
• Creation of infrastructure and formation of financial market institutions;
• Promoting the labor market through job training, developing flexible and
fair labor regulations, and helping working people adapt to change.
Sustainable agricultural growth depends on policies that extend beyond the
agricultural sector to address issues that governments can improve the
environment for investment in agriculture. Briefly those problems look like this:
Investment policy. Transparency of laws and regulations, ownership of land
and other assets, protection of intellectual property and enforcement of contracts.
Promotion of investments and facilitation of the investment regime. Institutions
and policies that promote investment in agriculture, technology transfer to local
farmers, and public-private collaboration. Human resource development and
skills development. Human resource development, training of local farmers and
opportunities for local research and capacity building.
Trade policy. Customs and administrative procedures, trade policy impact
assessment, export promotion and financing, regional trade agreements.
Environment. Policies for natural resource management and the
introduction of cleaner technologies, integration of R&D with the environmental
policies, energy needs and mitigation of adverse weather conditions.
Responsible management. Labor standards in agriculture, respect for human
rights, environmental protection, labor relations and financial reporting.
Infrastructure development. Harmonious infrastructure, rural development
and agricultural policies, transparent allocation procedures, information and
communication technologies for agriculture, promoting private investment in
local roads, water management and storage infrastructure.
Development of the financial sector. Regulation of the financial flows into
agriculture, competition within the banking sector, functioning capital markets,
instruments for risk reduction, access to credit for local farmers and small and
medium-sized enterprises, guarantee mechanisms and insurance mechanisms for
smallholders upon receipt loans and business development services for local
farmers.
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Taxation. Tax policies that promote investment in agriculture, appropriate
tax burden on the agro-industry, transparent and effective tax policies and
administration, coordination of the activities of central and local tax authorities.
Government policies and market interventions can have a major impact on
the agricultural investment climate and especially on the economic incentives to
invest in the sector. Some government actions are relevant to all sectors or the
economy as a whole.
The main agricultural-specific policies affecting agricultural incentives
include tariffs, input subsidies and credit, price controls, quantitative restrictions
on trade, government spending, and taxes. There may also be indirect impacts on
agriculture through policies such as protectionism towards other sectors,
exchange rates and interest rates, fiscal and monetary policies. Such policies can
have a significant impact on incentives to invest in agriculture relative to other
sectors.
References:
1.
Analiticheskii doklad Sovershenstvovanie organizatsionno-pravovykh
uslovii po privlecheniyu inostrannykh investorov v regiony Respubliki
Uzbekistan. Tashkent, 2015.
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-vregiony
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
