Five main risks facing Uzbekistan...

The experts of the World Economic Forum identified the main threats that could hinder Uzbekistan's development as the scarcity of water and energy resources, pollution of air, water, and soil, the increase in public debt, as well as the shortage of labor and specialists. The experts of the "Development Strategy" center proposed solutions to mitigate the above problems.

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

1. Water scarcity;
2. Energy supply shortages;
3. Pollution (air, water, soil);
4. Public debt;
5. Shortage of labor and highly qualified specialists.

The experts of the "Development Strategy" center analyzed each of the aforementioned risks.

Water and energy resource scarcity (risks 1-2). Uzbekistan is a country with a dry climate, facing a shortage of water resources. This is related not only to natural conditions but also to inefficient water use in agriculture, as agriculture consumes about 90 percent of the country's water resources. For example, irrigating 1 hectare of cotton field requires 10-11 thousand cubic meters of water per year, while countries with similar climates and soils require 2-3 times less water. Additionally, due to the aging irrigation infrastructure, 36 percent of water is lost. At the same time, climate change may exacerbate the problem: according to experts' estimates, by 2030, the region's water supply may decrease by 20-25 percent.

Furthermore, the growth of the population and industry increases the load on the energy system, leading to electricity shortages. In 2023, the electricity shortage amounted to 5 percent, causing intermittent outages in several regions.

Pollution of air, water, and soil (risk 3). According to research by the World Economic Forum, Uzbekistan's major cities are facing serious ecological problems such as air pollution, soil degradation, and pollution of water resources. This is related to industrial development, the use of outdated technologies, and non-compliance with environmental standards.

These conclusions are also confirmed by data from the IQAir portal, which indicates that the PM2.5 concentration in Tashkent is 13.4 times higher than the recommended level by the WHO. The main sources of PM2.5 air pollution are the heating sector (28 percent), transport (16 percent), and industry (13 percent). It should be noted that this situation can seriously affect public health and increase economic costs.

According to World Bank experts, by 2030, nearly 8 million people in Uzbekistan may suffer from ecological problems and live in high-risk areas. If no measures are taken in the long term, the country may lose 10 units of GDP growth.

Public debt (risk 4). The growth of public debt in Uzbekistan raises concerns among experts at the World Economic Forum. Although the country is actively attracting loans to finance infrastructure projects, this could lead to an increase in debt burden amid global economic instability.

According to the Ministry of Economy and Finance of the Republic of Uzbekistan, as of January 1, 2024, public debt amounted to $34.9 billion or 34.4 percent of GDP, which is close to the 55 percent threshold set by the International Monetary Fund for middle-income countries. At the same time, according to experts at the World Economic Forum, a significant portion of the debt is expected to be external, which will weaken the country against fluctuations in exchange rates and interest rates in international markets.

Shortage of labor and highly qualified specialists (risk 5). According to the statistics committee, although the unemployment rate among youth was 13.5 percent in 2023, Uzbekistan is facing a shortage of qualified personnel in high-tech fields such as IT, engineering, and green energy. This is explained by the mismatch of the education system with labor market demands: that is, the curricula are not oriented towards the needs of employers.

According to the Minister of Employment, in 2024, 59 percent of young specialists who graduated from higher education institutions (or 126 thousand) still could not find jobs in their specialty. This is due to the fact that, as highlighted in the World Bank's report "Employment of Youth in Uzbekistan," 69 percent of young graduates lack experience and necessary skills.

To address the mentioned problems, a comprehensive approach, the introduction of modern technologies, and the use of successful foreign experiences are necessary, particularly:

Solution to the problem of water and energy resource scarcity

According to experts at the World Economic Forum, the way out of the water crisis and electricity shortage is "green development."

The experts of the "Development Strategy" center consider it appropriate to implement measures in the following four main areas:

Accelerating the introduction of modern water-saving technologies such as drip and sprinkler irrigation, and the reuse of wastewater in agriculture.

In this regard, it is necessary to study the experience of Israel. Israel has significantly alleviated the problem of water scarcity due to advanced technologies in drip irrigation, seawater desalination, and wastewater treatment. As a result, nearly 90 percent of wastewater in Israel is recycled and used in agriculture, which allows saving an average of 40 percent of water.

Strictly monitoring the targeted use of funds allocated for the reconstruction and modernization of irrigation infrastructure. It is necessary to introduce transparency and accountability mechanisms to ensure effective use of allocated funds.

State support and encouragement for the development of alternative energy, including solar and wind power plants (as seen in China and Germany).

In China, the "Made in China 2025" plan encourages the development of local solar panel and wind turbine production. In 2023, China's solar energy capacity reached 609.49 GW, and wind energy reached 441.34 GW. In 2023, China's investments in renewable energy sources amounted to $546 billion.

Germany has been pursuing the Energiewende (energy transition) policy aimed at phasing out coal and nuclear energy since the 2000s. Germany's Energiewende strategy has led to a significant increase in renewable energy production. In 2023, solar and wind power plants accounted for 56 percent of the electricity generated in Germany.

Implementing "smart grids" to significantly reduce losses in electricity distribution.

Smart grids are modern electrical networks that use digital technologies, artificial intelligence, and automation to optimize electricity production, distribution, and consumption. They allow for the integration of renewable energy sources (solar, wind, etc.), manage real-time electricity demand, and reduce energy losses in transmission and distribution.

Combating environmental pollution

Based on Sweden's successful experience, exploring the possibilities of introducing a tax on SO₂ emissions for large polluting enterprises in Uzbekistan.

The introduction of a "green tax" on carbon dioxide emissions in Sweden has spurred companies to transition to environmentally friendly technologies. As a result, Sweden has managed to reduce greenhouse gas emissions by 27 percent compared to 1990.

Managing public debt

Based on Canada's experience of facing the risk of public debt exceeding 70 percent of GDP, implementing effective budget measures, encouraging the development of small and medium-sized businesses, and reducing unnecessary expenditures.

The Canadian government implemented comprehensive budget reforms aimed at reducing excessive government spending and increasing revenues to address the issue of high public debt. One of the main elements of the reforms was active support for entrepreneurship, which played a significant role in promoting economic growth and creating new jobs.

South Korea has managed to maintain its public debt at nearly 40 percent of GDP as a result of implementing a fiscal rule system.

Addressing the shortage of qualified specialists

Implementing a "dual education" program based on Germany's successful experience.

In Germany, within the framework of this program, students simultaneously receive education at higher education institutions while undergoing practical training in companies that have signed cooperation agreements with universities, meaning students integrate theory and practice from the first day of their studies.

This approach not only helps to acquire theoretical knowledge but also provides the opportunity to gain important practical skills in a real business environment, as well as the chance to obtain a bachelor's or master's degree while engaging in full professional activity.

Or Singapore's SkillsFuture initiative aimed at enhancing employee qualifications and improving competitiveness in the labor market. As a result of this approach, more than 70 percent of graduates in Singapore find employment immediately after completing their studies.