Five key risks for Uzbekistan’s progress and how to overcome them

According to the World Economic Forum experts, in the short term, Uzbekistan may face the following five major risks:

• Water scarcity;
• Energy supply shortages;
• Pollution (air, water, soil);
• Public debt;
• Shortages of workforce and skilled specialists.

Experts from the "Development Strategy" Center have analyzed each of these risks in detail.

Water and energy resource shortages (Risks 1-2)

Uzbekistan, a country with an arid climate, faces a shortage of water resources. This issue stems not only from natural conditions but also from inefficient water use in agriculture, which consumes approximately 90% of the country’s water resources. For instance, irrigating one hectare of cotton requires 10,000–11,000 cubic meters of water annually, while countries with similar climates and soils use two to three times less. Additionally, due to outdated irrigation infrastructure, 36% of water is lost. Climate change could exacerbate the problem further: experts predict that by 2030, the region’s water supply may decrease by 20–25%.

Moreover, population growth and industrial expansion are increasing the strain on the energy system, leading to electricity shortages. In 2023, the electricity deficit reached 5%, causing periodic outages in several regions.

Pollution of air, water, and soil (Risk 3)

According to World Economic Forum studies, Uzbekistan’s major cities face serious environmental challenges, including air pollution, soil degradation, and water contamination. These issues are linked to industrial growth, the use of outdated technologies, and non-compliance with environmental standards.

Data from the IQAir portal corroborates these findings, showing that PM2.5 concentrations in Tashkent are 13.4 times higher than the World Health Organization’s recommended levels. The primary sources of air pollution include the heating sector (28%), transportation (16%), and industry (13%). This situation not only affects public health but also increases economic costs.

World Bank experts estimate that by 2030, nearly 8 million people in Uzbekistan could suffer from environmental issues and live in high-risk areas. If no long-term measures are taken, the country could lose up to 10 percentage points of its GDP growth.

Public debt (Risk 4)

The rising public debt in Uzbekistan is a concern for World Economic Forum experts. While the country actively borrows to finance infrastructure projects, this could lead to an increased debt burden amid global economic instability.

According to the Ministry of Economy and Finance of Uzbekistan, as of January 1, 2024, the public debt stood at $34.9 billion, or 34.4% of GDP, approaching the 55% threshold set by the International Monetary Fund for middle-income countries. World Economic Forum experts note that the predominance of external debt makes Uzbekistan vulnerable to fluctuations in international currency exchange rates and interest rates.

Shortages of workforce and skilled specialists (Risk 5)

Despite a youth unemployment rate of 13.5% in 2023, according to the Statistics Committee, Uzbekistan faces a shortage of qualified personnel in high-tech sectors such as IT, engineering, and green energy. This is attributed to an education system that does not align with labor market demands, with curricula failing to meet employers’ needs.

The former Minister of Poverty Reduction and Employment stated that in 2024, 59% (or 126,000) of university graduates had not yet found jobs in their fields. A World Bank report, "Youth Employment in Uzbekistan," highlights that 69% of graduates lack practical experience and necessary skills.

Addressing these challenges requires a comprehensive approach, the adoption of modern technologies, and the application of successful international practices, including:

Solutions to water and energy resource shortages

World Economic Forum experts suggest that "green development" is the way out of the water crisis and electricity shortages.

The "Development Strategy" Center experts propose implementing measures in four key areas:

• Accelerating the adoption of modern water-saving technologies in agriculture, such as drip and discrete irrigation, and reusing wastewater.

Studying Israel’s experience is recommended, where advanced technologies like drip irrigation, desalination, and wastewater recycling have significantly alleviated water scarcity. In Israel, nearly 90% of wastewater is recycled and reused in agriculture, saving an average of 40% of water.

• Strictly monitoring the targeted use of funds allocated for the reconstruction and modernization of irrigation infrastructure, introducing transparency and accountability mechanisms to ensure efficiency.
• Promoting state support and incentives for alternative energy sources, such as solar and wind power plants, following the examples of China and Germany.

In China, the "Made in China 2025" plan has boosted local production of solar panels and wind turbines, with solar capacity reaching 609.49 GW and wind capacity 441.34 GW in 2023. Germany’s Energiewende policy has shifted away from coal and nuclear energy, with solar and wind power accounting for 56% of electricity production in 2023.

• Introducing "smart grids" to significantly reduce electricity distribution losses.

Smart grids use digital technologies, artificial intelligence, and automation to optimize energy production, distribution, and consumption, integrating renewable sources and minimizing losses.

Combating environmental pollution

Based on Sweden’s successful experience, Uzbekistan could explore introducing a CO₂ emissions tax for major polluting enterprises. Sweden’s "green tax" on carbon emissions has encouraged companies to adopt cleaner technologies, reducing greenhouse gas emissions by 27% since 1990.

Managing public debt

Drawing on Canada’s experience, where public debt exceeded 70% of GDP, Uzbekistan could introduce effective budgetary measures, encourage small and medium-sized business development, and cut inefficient spending. Canada implemented broad budget reforms to reduce excessive public expenditure and boost revenue, with entrepreneurship support playing a key role in economic growth and job creation. South Korea, meanwhile, has maintained public debt at around 40% of GDP through a fiscal rules system.

Addressing the shortage of skilled specialists

Inspired by Germany’s success, Uzbekistan could introduce a "dual education" program, where students simultaneously study at universities and gain practical experience at companies partnered with educational institutions. This approach combines theory and practice from day one, equipping graduates with both knowledge and skills for immediate employment.

Alternatively, Singapore’s SkillsFuture initiative focuses on upskilling workers and enhancing their competitiveness in the labor market, enabling over 70% of graduates to secure jobs immediately after completing their studies.