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PRINCIPLES OF ATTRACTING FOREIGN INVESTMENT IN
REGIONS
Muzaffar Rakhimboev
1
Ubaydullayeva Laylo
2
Imamadinova Rayhon
3
1.
Assistant professor of Economics department, Karakalpak state
university
2.
Sophomore of Economics department, Karakalpak state university
3.
Sophomore of Economics department, Karakalpak state university
Abstract. The article analyzes the principles of attracting foreign investment
in the region. Proposals are developed for the implementation of a number of target
tasks for the transition to a "green" economy set out in the Uzbekistan-2030 strategy,
and information is provided on investment criteria indicators. The article also
discusses the importance of a favorable investment climate and investment activity in
ensuring sustainable economic growth, creating jobs and increasing population
incomes in the world, and you can also get information about research conducted in
this area. There are also extensive works on the priority importance of attracting
investment.
Keywords: Region, investment, green economy, strategy, infrastructure,
national economy,
The intensification of global competition in the world economy, the expansion
of the financial and economic restrictions regime, the disruption of the value chain
and the international transport and logistics system create the need to implement an
investment policy aimed at actively attracting foreign direct investment, increasing
the attractiveness of the investment environment and ensuring the competitiveness of
economic sectors. According to the World Bank[1], “in 1991-2022, the investment
rate in the economy was 29.4 percent in middle-income countries, 23.9 percent in
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Uzbekistan, 25.4 percent in Kazakhstan, 25.6 percent in Turkey, 28.3 percent in
Malaysia, 29.3 percent in Singapore, 33.1 percent in the Republic of Korea, 32.3
percent in India, and 41.4 percent in China.” Achieving high investment activity and
expanding the attraction of foreign direct investment in developing countries is
considered an urgent problem in ensuring sustainable economic growth, modernizing
the economy and developing integration into the international division of labor
through attracting foreign investment, implementing structural changes, and creating
new jobs.
Priority attention is being paid to research and development work aimed at
ensuring sustainable economic growth in the world, creating jobs and increasing the
income of the population, the importance of a favorable investment environment and
investment activity, diversifying sources of financing for investments in fixed capital
and increasing the efficiency of investment use, assessing the determinants of
attracting foreign direct investment, investment attraction mechanisms, and assessing
the effectiveness of fiscal and financial incentive instruments. These studies pay
special attention to such important issues as improving the legal and institutional
framework for attracting foreign direct investment in developing countries in the
context of the transition to a "green" economy, defining the criteria for classifying
"green" projects and financing them, models for attracting investments in
infrastructure projects and assessing their effectiveness, and ensuring the participation
of foreign direct investment in financing public-private partnership projects.
Extensive research is being conducted on the scientific-theoretical,
organizational-economic, socio-political, and natural-economic foundations of
improving the investment climate and attracting foreign direct investment in the
world, including an assessment of factors influencing the formation of investment
attractiveness and the business environment (World Bank Institute, Washington);
research on the correlation-regression relationship between the investment rate,
economic growth, and other important economic indicators based on econometric
models (International Monetary Fund, IMF), the investment climate and attracting
foreign direct investment in countries with transition economies (European Bank for
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Reconstruction and Development, London), determinants of foreign direct investment
(National Bureau of Economic Research, Cambridge), and the specific characteristics
of foreign investment directed at infrastructure projects (Asian Development Bank
Institute, Tokyo).
Priority is given to further increasing the investment attractiveness of the
Uzbek economy, achieving sustainable growth in the volume of investments directed
to fixed capital, ensuring the effectiveness of investment projects related to the
transition to a "green" economy, and improving the economic mechanism for
attracting foreign direct investment. In accordance with the "Uzbekistan-2030"
strategy[2], priority tasks have been set to "absorb $250 billion in investments in our
country, including $110 billion in foreign investments and $30 billion in investments
within the framework of public-private partnerships." The implementation of these
tasks determines the need to continue institutional reforms in the economy, widely
introduce public-private partnerships and "green" economy projects, and develop
proposals and recommendations on improving the economic mechanism for attracting
foreign direct investment.
In economics, investments are interpreted differently depending on their
purpose, sources of financing, industry, and other aspects. J. Keynes defines
investments as “the part of the income earned during a period that is not used for
consumption” in the form of a current increase in the value of capital assets as a result
of the production activity of that period. [3] Economists who have conducted research
in this area define investments as “money, target deposits, shares, other types of
securities, technologies, machinery, equipment, licenses, any other property or
property rights invested in business objects and other types of activities in order to
receive income (profit) and achieve a positive social effect.”
Sources of financing fixed capital investments in the economy of
Uzbekistan, as a percentage of GDP
1
1
Compiled by the author based on data from the Statistical Agency under the President of the Republic of
Uzbekistan.
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Investment sources
1996-
2000
2001-
2005
2006-
2010
2011-
2015
2016-
2020
2021 2022
A. Foreign investment
5.8
5.2
6.2
4.8
9.2
13.2 12.8
Direct investments
0.8
1.2
3.7
2.3
3.9
4.1
4.5
Foreign loans
5.0
4.0
2.6
2.5
2.4
7.2
6.7
Government
guarantee
account
4.6
3.3
1.0
1.0
3.16
2.5
1.7
V. Domestic investments
20.2
16.5
16.7
18.9
19.7
18.3 16.8
Budget funds
7.0
3.9
1.9
1.3
1.8
3.0
2.4
Centralized bank loans
1.5
0.3
-
-
-
-
-
Extra-budgetary funds
0.3
0.3
1.1
1.3
1.2
0.0
0.0
Reconstruction
and
Development Fund
-
-
0.4
0.9
1.3
0.4
0.3
Enterprise funds
7.9
8.7
9.3
8.0
8.1
9.3
9.1
Commercial bank loans and
other borrowed funds
0.4
0.8
1.4
2.6
3.6
2.6
2.0
Population funds
3.0
2.5
2.6
4.7
3.7
3.1
3.1
Fixed capital investment as
a
percentage
of
GDP,
percent
26.0
21.7
22.9
23.7
28.7
32.4 30.0
The Uzbekistan-2030 strategy sets a number of targets for the transition to a
"green" economy. In particular, "increasing the share of renewable energy sources to
25 thousand MW and 40% in total consumption, developing the market for green
certificates in industry and introducing the practice of environmental labeling,
switching public transport to environmentally friendly fuels, reducing greenhouse gas
emissions per unit of GDP by 30% compared to 2010, radically improving the
environmental situation, and eliminating environmental problems affecting human
life" are among them.
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Analysis shows that over the past 20 years, the share of investment financing
in the national economy has had an increasing trend relative to GDP. In turn, the share
of the non-state sector, including the own funds of enterprises, funds of the population
and foreign investors in financing investments in fixed capital has increased sharply.
In particular, the share of foreign direct investment in financing gross investments has
increased from an average of 3.1 percent in 1996-2000, to an average of 5.6 percent
in 2001-2005, to 13.5 percent in 2011-2015, the share of foreign investments and
loans in 2016 - to 20.7 percent, and in 2022 - to 42.3 percent. This trend indicates that
in recent years, foreign investment has become increasingly important in financing
fixed capital investments and ensuring economic growth in the Uzbek economy.
FDI cumulative, 2022. Relative to GDP in percent
GDP per capita, current prices, 2022 (USD)
Indicators of attracting foreign direct investment in Uzbekistan and other
countries of the region
2
At the same time, it can be seen that the level of foreign direct investment
attraction is low compared to Central Asia. According to the World Bank[4], the ratio
of the cumulative volume of attracted foreign direct investment to GDP is much
2
Author based on materials from the United Nations Conference on Trade and Development, World Investment
Report, 2001 y.
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higher in the economies of Turkmenistan (73.5 percent) and Kazakhstan (68.4
percent), while in neighboring Kyrgyzstan and Tajikistan it is more than 30 percent,
and in Uzbekistan it is approaching 20 percent. These figures show that the volume
of foreign direct investment attracted to date does not meet the requirements for
ensuring high economic growth set out in the "Uzbekistan-2030" strategy. In
accordance with the "Uzbekistan-2030" strategy, which defines the priority areas of
the country's development, it is planned to absorb $ 250 billion in investments into
the national economy, including $ 110 billion in It is planned to attract foreign
investments of $ 1.5 billion. The implementation of these goals requires increasing
the average annual volume of foreign direct investment in the national economy from
the current $ 2.5 billion to $ 4.0-4.5 billion. This, in turn, will increase the importance
of foreign direct investment in the national economy in ensuring sustainable economic
growth.
The share of enterprises with foreign investment in employment has shown an
increasing trend, with the number of employees reaching 302.6 thousand by the end
of 2022, up from 152.8 thousand in 2010. According to the Statistics Agency, as of
January 1, 2023, 44.1 percent of jobs were in Tashkent city, 17.4 percent in Tashkent
region, 6.1 percent in Fergana, 5.7 percent in Andijan, and 4.3 percent in Samarkand
region. Attracting more investment to other regions remains an urgent task.
REFERENCES
1. Calculated based on World Bank data (https://worldbank.org/opendata).
2. Decree of the President of the Republic of Uzbekistan No. PF-158 “On the Strategy
of Uzbekistan-2030” dated September 11, 2023. https://lex.uz/ru/docs/6600413.
3. Keynes Dj. Obshchaya teoriya zanyatosti, protsenta i deneg. M.: Progress, 1978, p.
117.
4. Prepared based on World Bank data https://data.worldbank.org.
