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PUBLISHED DATE: - 31-08-2024
DOI: -
https://doi.org/10.37547/tajmei/Volume06Issue08-11
IMPROVING THE MECHANISM OF
ATTRACTING INVESTMENTS IN ENSURING
THE FINANCIAL STABILITY OF ECONOMIC
NETWORKS
Tursunov Ilxom Toirovich
Independent student of the Academy of Banking and Finance of the Republic of Uzbekistan
INTRODUCTION
At the current stage of the development of the
business environment in Uzbekistan, corporate
structures must make decisions about diversifying
the type of activity, looking for additional
investment opportunities, and becoming a
participant of the international capital market. In
recent years, as a result of the reforms
implemented in economic sectors, new forms and
approaches to conducting business are developing.
While the fundamental and scientific bases of
attracting portfolio investments are developing in
the improvement of investment activity by
corporate structures, we can note that this segment
is not developing sufficiently in the financial
market of our country. Of course, in this case, the
improvement of the incentive mechanism for
attracting portfolio investments by the state is of
urgent importance, and the development of
scientific
proposals
and
practical
recommendations for the development of the
sector is one of the important tasks.
The Development Strategy of New Uzbekistan for
2022-2026, "further improving the investment
environment in the country and increasing its
attractiveness, taking measures to attract 120
billion US dollars, including 70 billion dollars of
foreign investments in the next five years" [1] is
defined as one of the main goals. Of course, the role
of large joint-stock companies operating in our
country and their investment activities play an
important role in achieving such great goals. It is
important to increase the share of portfolio
RESEARCH ARTICLE
Open Access
Abstract
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investments and effectively use the best practices
of foreign countries to stimulate the mechanism of
portfolio investment attraction in attracting
investments and their effective use.
Review of literature
The role and importance of foreign investments in
the development of the country's economy, the
transformation of the capital market and the
application of modern approaches are being
carried out by domestic and foreign economists.
At first glance, the idea of investing internationally
seems exciting and full of promise, as there are
many advantages to international portfolio
investing. By investing in foreign securities,
investors can participate in the economic growth of
other countries, protect the consumer basket from
exchange rate risk, realize diversification effects
and use market segmentation on a global scale.
Although these advantages may seem attractive,
the risks and limitations of international portfolio
investment should not be overlooked [2]. Portfolio
management is the process of organizing an
investor's financial assets to minimize risk and
maximize returns. This process allows the investor
to make investment decisions and use trading
strategies [3]. According to M.Giofre, investments
are a combination of national economies,
integration
associations,
international
organizations and various relations between them,
which are important structural links of the world
economy. In the following years, the development
of investment relations between these sectors is
gaining importance in economic and social
development, as well as increasing the integration
of states [4]. According to P. Panagiotis, the results
of foreign studies show that direct investment is a
mechanism that has a positive effect on economic
growth in industrialized countries. Foreign
investment, particularly direct investment, serves
as a source of capital income both in manufacturing
and in the service sector [5].
In the theoretical views on foreign investment, the
following points are stated: "Foreign investment is
the tying of the capital of one economic entity to
another economy for a certain period. It differs
from domestic investment by the breadth of risks,
changes in legal conditions, the investment
environment, characterize it and as a result, capital
migration occurs across countries and regions.
gives" [6]. According to N. Khaidarov, "if the
investment policy implemented in each individual
country is decided with a positive indicator, then
the indicators of the gross domestic product
created in that country will tend to increase.
Therefore, if the investment policy shows a decline,
the above-mentioned situation will appear, and the
gross domestic product will have a downward
trend compared to the indicator of the previous
year" [7].
According to Sh.Mustafagulov, "natural resource
reserves in the regions, benefits created for
investors, infrastructure condition, investment
rating of the regions affect the flow of foreign
investments and the activation of domestic
investments" [8]. O. Astanakulov expressed the
following opinions about the importance of
investments in economic development: "Achieving
economic development requires attracting
investment resources to the real sector and using
them effectively" [9]. Analysis of the experience of
developed countries shows that investments,
including foreign investments, have led to a high
level of development of countries. Investments
have led to the rapid development of local sectors
in the economies of developed countries.
RESULTS
The rapid growth of private investments is also
important in supporting economic development. In
particular, in 2023, the amount of investments
absorbed from all sources of financing in the
economy increased by 22.1 percent in real terms
compared to 2022 and reached 352.1. reached trln
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soums. In this regard, the volume of decentralized
investments increased by 26.2% to 307.3 trillion
soums compared to 2022, and centralized
investments decreased by 0.7% to 44.8 trillion
soums (Table 1).
Table 1
Changes in fixed capital investments by sources of financing, in billion soums
1
№
Funding sources
2021 y.
2022 y.
2023 y.
Ўзгариш,
фоизда
1.
Total investments
239553
269857,5
352064,1
22,1
2.
Centralized
investments
46100
41548,1
44806,8
-0,7
Budget funds
22172
20910,1
20447,0
-11,4
Recovery and
Development Fund
funds
3006
2447,9
1554,2
-42,0
Foreign loans under
government
guarantee
18129
15256,5
21153,4
30,1
3.
Decentralized
investments
193452
228423,6
307257,3
26,2
Own funds of
enterprises
68360
84513,9
84936,4
-2,7
Foreign direct
investment and loans
83243
97095,4
166731,4
56,2
including
foreign direct
investment
29911
37006,3
84311,6
96,4
Population funds
22705
25738,1
33321,7
8,9
Commercial bank
loans
19145
21076,2
22267,8
17,9
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In 2023, the net volume of foreign direct
investments will decrease by 16% compared to
2022 and will amount to about 2.2 billion dollars,
with a net increase in capital of 870 million dollars,
a net increase in debt obligations from parent
companies of 914 million dollars, and agreements
related to product distribution ( Net decrease of
investments within MTB) amounted to 382 million
dollars (Figure 1). Also, the reinvestment of income
by foreign investors decreased by 36% compared
to 2022 and amounted to 786 million dollars.
Figure 1. Changes in the structure of foreign direct investments
2
In 2023, the negative balance of portfolio
investments was formed for 995.4 million dollars
due to the attraction of foreign portfolio
investments to the capital of non-financial
organizations, as well as interest calculated for
international bonds issued by the government,
commercial banks and other enterprises, and
"green" Eurobonds. Foreign loans and borrowings
are the main sources of financing the current
account deficit, and the volume of these operations
has increased by 57% compared to 2022 and
amounted to 7.1 billion dollars. Despite the
reduction of the net international investment
position by the end of 2023, the position of "net
creditor" of Uzbekistan was preserved. In 2023, the
volume of total foreign assets increased by 3% and
amounted to 84.9 billion dollars, while the volume
of total foreign liabilities increased by 14% and
reached 72.5 billion dollars. The net international
investment position of our country amounted to
12.4 billion dollars as of January 1, 2024. Despite
the increase in assets in foreign currency and the
positive trend of the gold price in the world, the
decrease in the net international investment
position was mainly due to the attraction of foreign
debt and foreign investments by the state, banks
and other private sector enterprises.
According to the information provided by the
Central
Depository
of
the
organizations
responsible for portfolio investment management
in Uzbekistan, as of January 2024, 625 joint-stock
companies are accounting for the issuance of
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17,947.40 billion securities with a total nominal
value of 189,709.12 billion soums. During 2023, the
volume of securities issuance is 22,946.63 billion.
to soums, and the number of shares is 1,501.39
billion. increased to pieces. The central depository
also maintains accounts of 897,200 corporate
bonds with a total amount of 1,063.4 billion soums
issued by 33 issuers. 543.1 thousand of them with
a total amount of 669.19 billion soums were issued
by 26 LLCs.
As of January 2024, the state share in 239 joint-
stock companies amounted to 158,216.5 billion
soums (including the state share in the form of
shares of 158,172.8 billion soums in the Central
Depository of 219 joint-stock companies). During
2023, the number of joint-stock companies with a
state share in the charter fund increased to 16, and
the size of the state share increased to 23,641.1
billion soums. The size of shares of economic
management bodies in the charter fund of 135 JSCs
amounted to 3,848.8 billion soums. During 2023,
the volume of assets of economic management
bodies decreased to 3762.0 billion soums, and the
number of JSCs decreased to 27.
The Central Depository provides services to 2 XIFs
and 7 investment funds, performing the exclusive
functions of accounting for rights to securities
issued and owned by investment funds. As of the
reporting date, the volume of securities issued by
investment funds was 2.32 billion soums, and the
volume of securities purchased by investment
funds was 8.47 billion soums. The number of
shareholders of investment funds was 50,439,
including 50,402 individuals and 37 legal entities.
The Central Depository also maintains accounts for
the securities rights of 55 investment
intermediaries and their clients. As of January
2024, the number of clients of investment
intermediaries who opened deposit accounts
amounted to 704.88 thousand, including 57.98
thousand legal entities and 646.90 thousand
individuals. Compared to the same period last year,
the number of deposit accounts increased by 0.04
percent. The total volume of securities managed by
investment intermediaries is 17,308.39 billion by
nominal value. 7 179.12 billion soums. constituted
a piece of stock. Compared to the same period last
year, the volume of securities managed by
investment intermediaries increased by 38.46
percent.
38,693.6 billion soums in the amount of 3,821.57
billion soums were transferred by the Central
Depository during the reporting period. 184 over-
the-counter deals on individual securities were
registered, and 212 transfers were made to
depository accounts on registered over-the-
counter deals. It should be noted that the degree of
development of the capital market is important in
attracting portfolio investments. Capital market
development depends on many factors, including
macroeconomic stability, political stability, level of
regulation and supervision, availability of
infrastructure and technological innovation,
availability of information, investor knowledge and
confidence in the system. These factors are
interrelated and together determine the level of
development and stability of the capital market.
CONCLUSION
Portfolio investments allow investors to
independently determine the level of profitability
and capital protection required. According to the
modern portfolio theory, special attention should
be paid to the process of diversification of financial
instruments to reduce portfolio risk. Because the
decrease in the yield of one type of asset can harm
the total yield of other types of assets in the
portfolio. This, in turn, can lead to a decrease in the
company's investment portfolio.
It should be noted that the methodology of
investment risk assessment is one of the broad
scientific directions, and investment risks are
related not only to internal factors that occur in one
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company or a certain industry but also to external
risks that occur as a result of changes in the country
or world economy. Therefore, before spending
investment resources on a specific project, it is
necessary to analyze the market situation in the
current period and what kind of economic situation
is expected shortly, as well as the laws related to
the field of activity of the company chosen by the
investor. According to international financial
experts, there is usually a separate management
method and methodology for each type of financial
risk. The choice of specific methods for assessing
and analyzing the level of risk of an investment
project depends on the following factors: the scope
of the project, the completeness of the information
base, the requirements for the level of reliability of
the analysis and the project, etc. Given that
investment activity is intrinsically linked with risk,
it is very important to be able to reduce or prevent
risks.
One of the important aspects of increasing the
efficiency of the investment portfolio is portfolio
monitoring. Portfolio monitoring is a developed
mechanism for regular monitoring of key
indicators of investment projects included in the
portfolio. The main purpose of the monitoring
system includes the approved schedule of
individual projects included in the portfolio and the
tasks from identifying "deviations" in the project to
eliminating the deficiencies identified in the course
of studies. Monitoring should ensure early
detection of miscalculations and problems.
Creating a monitoring system consists of selecting
and evaluating individual indicators of investment
projects.
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