Scientific research results in pandemic conditions (COVID-19)
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5. Borjelli N. Cooperation between the state and civil society //
International experience on social partnership and public participation in
public decision-making. National Center for Human Rights of the Republic of
Uzbekistan, Center for the Study of Legal Issues. - T., ART FLEX, -2012.
6.Bulletin of the Oliy Majlis of the Republic of Uzbekistan, 1999, No. 5,
Article 115.
7. Bulletin of the Oliy Majlis of the Republic of Uzbekistan, 2003, No. 9-
10, Article 141.
8. Resolution of the Cabinet of Ministers of the Republic of Uzbekistan
dated March 10, 2014 No 57. National database of
Farangiz Zaynobiddinova, PhD doctoral student, University of World
Economy and Diplomacy, Uzbekistan.
ECONOMY AND INVESTMENT ACTIVITY IN THE CONTEXT OF A PANDEMIC:
PROBLEMS AND PRACTICAL PROPOSALS
F. Zaynobiddinova
Abstract: This article analyzes the impact of the COVID-19 pandemic on
the economy and investment activities of counties based on expert opinions,
reports and forecasts of international organizations as well as statistical
data. It was also observed the problems caused by the coronavirus and the
measures taken in our country to eliminate them along with the practice of
foreign countries in this condition. In addition, a number of proposals and
recommendations were presented in the scientific work so as to avoid the
negative consequences of the coronavirus pandemic and increasing
economic activity, ensuring the stability of the investment climate as well.
Keywords: Business environment, COVID-19, export potential,
economy, foreign trade, investment activity, online negotiations, pandemic.
Introduction. COVID-19 which today threatens the entire world, has had
a dramatic impact on the social, cultural, political and economic aspects of
human life. The coronavirus, which was first registered at the end of 2019, a
few months later immediately became the cause of disruption of trade and
industrial chains between China and other countries. As a result, the world
economy suffered huge losses. According to experts: âThe sudden and rapid
outbreak of the new coronavirus epidemic in the world has become a
catalyst for major changes in the economic, political and social spheres in
most countries on our planet. The problems that have arisen have developed
rapidly, and issues of effective use of available resources and technological
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158
advances have come to the fore. Along with the sanitary and epidemiological
situation, the world economy received the most serious blowâ[1].
The coronavirus pandemic is a major challenge for the social and
economic sectors. At the same time, the economic crisis that entered the
period of the pandemic with the term âGreat closureâ, along with the break
in the "value chains" in international economic relations, seriously affected
the service and service sectors and started a recession in the world economy
[2].
The head of the International Monetary Fund Kristalina Georgieva
predicts the worst economic recession after the âGreat Depressionâ [3]. This
year, according to the calculations of this financial institution, negative
growth in per capita income is observed in more than 170 countries.
The Organization for economic cooperation and development (OECD)
also lowered its forecast for global economic growth in 2020 to 0.5% [4].
The OECD noted: â... due to trade wars and political tensions, the world
economy itself is on the verge of a "pit", which is now facing problems of
supply chain disruption, slowing demand for resources, declining tourism
trends and declining consumer confidence due to diseasesâ.
Practical analysis and problems. Investment activity, which is necessary
for the stability of the economy, was also not excluded from the influence of
today's negative processes. At the same time, the crisis that occurred on the
world's leading exchanges sold off the shares of many investors as a result
of panic. Experts said that this has not happened in the last 10 years.
According to Berlin economist Born Fogler: âThe temporary closure of
borders, manufacturing enterprises, construction sites leads to untimely
delays in the preparation and implementation of investment projects.
Moreover, UNCTAD and OECD forecasts, as a result of supply constraints,
sharp fluctuations in external demand and overall decrease in investor
confidence, global FDI in 2020 may be reduced by more than 30% compared
to 2019 [5].
Today, because of COVID-19, the economies of many countries are
experiencing difficulties. In particular, according to the IMF's April forecasts,
in 2020 the world economy will be in the zone of negative growth for the
first time since the global financial and economic crisis of 2007-2008 and
will record the strongest drop - three percent-since the great depression of
the 1930s.
Uzbekistan also faced economic difficulties. Since the second half of
March this year, the country has seen a decline in economic activity, a drop
in domestic and external demand. The main factor in the slowdown in
economic growth was the decline in investment and consumer activity due
to the suspension of several sectors of the economy. So, in the first quarter
Scientific research results in pandemic conditions (COVID-19)
159
of 2020, the volume of investment decreased by 10.2 percent, and the
growth rate of retail turnover - to 3.8.
According to the Central Bank's preliminary estimates, the GDP growth
rate will slow down to 1.5-2.5 percent. The most significant slowdown is
expected in the tourism, hospitality, international transportation,
entertainment, sports, and exclusive services industries [6].
It should be noted that China, which is the furnace of the COVID-19
coronavirus, is considered the largest trade partner of Uzbekistan, and the
foreign trade turnover with China in 2019 amounted to 7,6 billion dollars
(compared to the total turnover of foreign trade - 18.1%), exports - 2.5
billion, imports-5.1 billion made up of dollars [7].
The decrease in demand for energy resources in China will lead to a
decrease in the volume of exports of Uzbekistan to China, including natural
gas exports. Taking into account the fact that in the structure of exports of
Uzbekistan energy sources and petroleum products (that is, natural gas)
stand in 3rd place (14.1%), the total volume of exports to China corresponds
to 36.4% of energy sources and petroleum products, one can conclude that
this situation will lead to a reduction in foreign exchange earnings to
Uzbekistan, of course [8].
One of the most important negative consequences of the coronavirus
pandemic for the countries of the world, in particular Uzbekistan, is the
restriction of the movement of goods and people in many regions. The
decline in international trade caused by the epidemic has a negative impact
on countries ' export processes. Falling exports, in turn, will limit foreign
exchange earnings and reduce imports, which, of course, will lead to a
decrease in tax revenues to the state budget.
It should be noted that in the context of the pandemic, two factors that
threaten the economy of Uzbekistan are widely manifested. The first is the
decline in business activity within the country , and the second is the
slowdown in the world economy, in particular the economies of countries
that have close economic ties with our state.
In connection with the above-mentioned events in Uzbekistan, it
became necessary to take important and effective measures in the short
term. Accordingly, more than ten documents have been issued by the
President and the Cabinet of Ministers in order to prevent coronavirus
threats against our country. In particular, the decree of the President of the
Republic of Uzbekistan â5537 âAbout formation of the Republican
Commission for preparation of the program of measures to prevent the
introduction and spread of a new type of coronavirus in the Republic of
Uzbekistanâ [9] and the resolution of the Cabinet of Ministers of the Republic
of Uzbekistan No. 176 âOn additional measures to combat the spread of
coronavirus infectionâ [10] on the basis of this normative legal act, and to
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160
ensure sanitary-epidemiological well-being and security of the population
in the Republic of Uzbekistan as well as in order to organize coordinated
activities of state and economic management bodies and organizations
responsible for preventing the spread of coronavirus infection, protecting
the life and health of citizens, a Republican special Commission has been
established, quarantine and certain restrictions have been established
throughout the country.
Also in the context of the pandemic, a crisis management Fund with a
budget of more than us $ 1.0 billion was established to combat the spread of
coronavirus infection in Uzbekistan, to support entrepreneurship and
ensure the stable functioning of economic sectors. In order to cover all issues
and timely resolve problems in the field of entrepreneurship, the Republican
headquarters has launched operational activities to support exporters and
entrepreneurs.
In addition, in order to strengthen social protection of the population
and support the activities of economic sectors during the fight against the
spread of coronavirus infection in our country for individual entrepreneurs
who are forced to stop their activities during the quarantine period, in order
to stop calculating a fixed amount of personal income tax and social tax;
granting the right to an interest-free deferral (installment) of a number of
taxes until October 1, 2020 with notification of tax authorities to micro,
small businesses and individual entrepreneurs whose receipts have
decreased by more than 50 percent compared to the average monthly
amount of receipts for the first quarter of this year; granting commercial
banks a deferral until October 1, 2020 for payments on loans to legal entities
and individuals, individual entrepreneurs facing financial difficulties; for
overdue loans of debtors that had a negative impact on the functioning of
the quarantine regime, numerous opportunities were provided not to apply
penalties and penalties for collateral, etc.
As evidence of the effective reforms carried out in our country, the
report on global investment under the title "International production
beyond the Pandemic" [11] of the UN Conference on Trade and Development
(UNCTAD) also reflected positive developments in the economy of
Uzbekistan. What is more, it is estimated that by the end of 2020, the volume
of foreign direct investment inflows due to the pandemic in the world will
decrease by 40 percent, and in 2021-by 5-10 percent. In countries with
economies in transition, foreign direct investment increased by 59 percent,
reaching $ 55 billion. This is due to the large-scale measures taken to
increase investment in Russia and Ukraine and liberalize the economy of
Uzbekistan [12].
Foreign practice. Today, there is not a single state on earth that is itself
excluded from the impact of the pandemic. In the world, self-isolation
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negatively affects the economy of countries, including investment activities.
In particular, with the rapid spread of the coronavirus around the world,
restrictive measures to protect against it and a 30 percent drop in oil prices,
the violation of the OPEC + agreement has radically changed everything.
Business activity in the world began to decline, and 30-40% of the leading
indicators of stock markets were in crisis.
Since March, many investors around the world began to massively sell
their stocks and bonds.The latest data from Emerging Portfolio Fund
Research (EPFR) shows that international investors are actively leaving the
stock markets of developing countries. According to estimates based on data
from EPFR and Midlincoln, funds whose investment policy is focused on
emerging markets (EM) lost almost $4 billion in the week ending January
29. In the previous three weeks of this year, investors actively invested in
risky assets â the inflow of funds to EM funds during this period amounted
to almost $10 billion [13].
The economic impact of the Covid-19 pandemic is having a much deeper
and more serious influence on the United States than most experts initially
assumed. The coronavirus pandemic was a real stress test for the American
economy [14]. The administration of President Donald trump is taking
unprecedented measures to correct the difficult situation, in particular, by
preparing a bill on the Federal economic stimulus package (the CARES Act
[15]), passed by the Senate and Congress and signed by trump on March 27.
The $ 2 trillion economic aid package, or 10% of the country's GDP, is
already the largest in US history.
In Europe, unlike the United States, there is no single fiscal support
div, so each country will make its own decisions. Another problem is the
high integration of production and value chains in the EU, which have now
been severed. The economic strength of the EU is precisely in cross-country
trade, in the multitude of small businesses and their integration into global
supply chains, a significant part of which is accounted by the EU itself. Even
those states that will suffer from the virus less than others, , as a
consequence, inevitably awaits the echo of the break in intra-European ties.
As the leading researcher of the Institute of Latin America of the Russian
Academy of Sciences Nikolay shkolyar notes: This epidemic, which covered
the entire globe, affected almost all countries of the world. The States of
Latin-Caribbean America, which are home to 654 million people, are no
exception. The rapid spread of COVID-19 triggered a global cyclical
economic crisis, the approach of which was predicted by many world
experts. The coronavirus was the detonator of its global cyclical crisis. It not
only accelerated the approaching crisis, but created a completely new
situation in relations between countries and people. In these conditions, the
world is waiting for new forms of relationships.
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The expert noted the consequences of coronavirus affect the entire
world economy, including the countries of the Latin American region. First,
it impacts the overall development of national economies. In particular, a
sharp reduction in consumption could negatively affect production,
employment and investment in the coming months. Second, a sharp
reduction in investment and capital outflow. That is, during any crisis, there
is a flight of capital to the most developed countries. In this situation, capital
outflow from developing Latin American countries, mainly to the United
States, leads to a reduction in production and a decrease in the
competitiveness of national currencies [16].
As a result of increased sanitary and epidemiological work, temporary
production stoppages and problems with the supply of raw materials have
limited the activities of many development companies in the world.
Besides, isolation between countries has led to a serious reduction in
the world's tourism industry. In particular, the temporary closure of tourist
facilities, a sharp decrease in the tourist flow causing serious damage to the
activities of hotels, kitchens, services, job cuts, increased unemployment and
social tension. Specifically, according to the UN world tourism organization
UNWTO, due to the coronavirus pandemic, tourism revenues for the first
four months of 2020 have fallen to $ 195 billion. Since the introduction of
travel restrictions in many countries the number of tourists has decreased
by almost 97 percent [17].
It should be noted that the coronavirus pandemic marked the beginning
of a new stage of relations around the world. In other words, it has brought
many areas of social, economic and political life to the Internet. Now, thanks
to virtual communication, bilateral and multilateral relations are
developing.
In fact, at the moment the physical contact between people must be kept
to a minimum, electronic representations and paperless transactions are
becoming increasingly important. While goods still need to be moved
physically, cleaning and information exchange operations should make the
most of existing electronic data exchange. Where possible, Contracting
parties should use electronic alternatives to traditional paper-based
negotiable invoices.
After the end of the coronavirus pandemic, venture capital investors will
more often invest in companies that organize remote business processes,
financial and medical technologies as well as online trading [18], - this was
reported by specialists of TASS, Russia's leading state news Agency.
Therefore, the prospects of the economy, namely, depend on the criteria for
the effective use of modern information technologies. This circumstance
creates the need to develop and implement new innovative ideas for the
development of the industry.
Scientific research results in pandemic conditions (COVID-19)
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Suggestions and conclusions. The consequences of the coronavirus
pandemic require all countries to take prompt and effective measures to
step up actions. In order to eliminate the negative influence of the COVID-
19 pandemic on the state's economy,especially on investment activities, the
foundations of economic recovery must be laid right now. For this reason so
as to increase economic activity and ensure the stability of the investment
climate we can say the following:
1. Ensuring more rational use of domestic resources and development
of free economic zones in order to preserve the country's investment
attractiveness and assure the stability of the investment environment;
2. Postponement of the terms of performance of obligations for the
implementation of investment projects to prevent disputes arising from late
performance of contractual obligations;
3. Providing an opportunity to adjust the contractual terms for the
implementation of individual investment projects in such a difficult
epidemiological situation. Additionally,developing of a draft law that
reduces liability for violation of the terms of objects under investment
contracts in the period of quarantine for the purpose of legal protection of
investors;
4. Possibility of concluding an additional agreement while changing the
terms of implementation of the investment project, providing the investor
reforming the established terms of unutilised taxes and other benefits that
corresponding with the edited terms of the investment project;
5. In order to maintain the volume of investment in our country, create
the necessary conditions for reinvesting capital, providing additional
benefits and increasing a mass of acceptable investment projects;
6. Providing an information about investment activities, investment
projects and opportunities for investors, focusing on the informative
content of materials in social networks and prepare analytical materials on
the new investment policy;
7. Creating the necessary conditions for the introduction of virtual
communications in investment activities and promoting the conclusion of
smart contracts as well as taking measures to ensure data security;
8. In times of a rapidly changing trading environment, it is necessary to
establishing conditions for clear exchange of information and ensure the
availability of information for all participants and stakeholders, and
constantly update information and reference tables online;
9. Providing additional support measures to companies implementing
investment projects in the sectors affected by the pandemic, in particular,
offering interest-free loans to pay salaries, direct gratuitous financial
support for solving current urgent tasks, deferred payments for leased state
property.
Scientific research results in pandemic conditions (COVID-19)
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10. Providing remote access to all forms and requirements in trading
information systems to ensure that relationship subjects have access to
relevant information in all cases required of them;
11. Introduction of a moratorium for certain periods on bureaucratic
procedures for authorization, reporting and verification, especially during
the quarantine;
12. Strengthening additional support for fiscal and monetary policy in
the country;
13. Taking strong and effective measures to guarantee employment, to
encourage the creation of short-term jobs (in particular, through seasonal
jobs);
14. Reducing tax rates for a certain period of time, provide "tax
holidays", "tax credits" and create the possibility of repayment in the long
term;
15. Implementation of measures to mitigate the negative impact of the
pandemic on the tourism sector;
16. Expanding the financing of small businesses, stimulating the grace
period for granting loans, stimulating economic activity, providing targeted
assistance to the socially needy segment of the population;
17. Rapid resolution of obstacles and problems that occurs in the
processes of investment and entrepreneurship in the context of a pandemic,
etc.
The above-mentioned proposals and recommendations are not the
solution to all the problems, but these measures can serve to strengthen the
economic environment in the country and support the efficiency of
investment activities. Also, in today's struggle, the most important thing in
solving the global problem facing humanity is to stimulate interstate
international relations, effective cooperation between citizens and all
interested individuals, ensuring commitment to goals and coordinating
common attampts to combat coronavirus.
References:
1.
Yuri Nemtsev, the Impact of COVID-19 on the Latin American
economy. «International life» // https://interaffairs.ru/news/show/26016
2.
The Great Lockdownâ: IMF Confirms Global Recession //
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Depression
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/us-health-coronavirus-
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National legislative database, 17.04.2020, 09/20/234/0453 //
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