UZBEKISTAN Economic Freedom Score 25 World Rank: 160 Regional Rank: 37 Least free 0 zbekistan’s economic freedom score is 47.0, making its U economy the 160th freest in the 2015 Index. Its score is up by 0.5 point from last year, with improvements in trade free- 50 75 Most 100 free 47.0 Freedom Trend 48 dom, freedom from corruption, and labor freedom outweighing declines in the management of government spending and business freedom. Uzbekistan is ranked 37th out of 42 countries in the Asia–Pacific region, and its overall score is much lower than the world average. A stagnant economic reform environment over the past five years has turned more positive recently, but gains have not been strong enough to propel the economy out of the “repressed” category. Since 2011, economic freedom in Uzbekistan has increased by 1.2 points, with modest improvements in business freedom, labor freedom, monetary freedom, and trade freedom. Despite sustained rapid growth on the back of high commodity prices and relative stability, the underlying foundations of Uzbekistan’s economy are weak. The rule of law is weakly enforced, a holdover from the Soviet past. Investment is restricted in many industries, and financial markets are shallow, preventing the capital accumulation necessary for sustained growth. The state-owned banks and industries tend to respond to the government’s political priorities. BACKGROUND: Uzbekistan has one of the world’s most repressive governments. President Islam Karimov, in power since the late 1980s, has hinted that he may seek re-election in 2015. Karimov rose through the ranks of the Soviet-era State Planning Committee (Gosplan) and remains wedded to a command economy, which discourages foreign investment. Uzbekistan is dry and landlocked; 11 percent of the land is cultivated in irrigated river valleys. More than 60 percent of the population lives in densely populated rural communities. Production of cotton and grain has relied on overuse of agrochemicals and has depleted water supplies. Much of the agricultural land is degraded, and the Aral Sea and certain rivers are half dry. Uzbekistan is heavily dependent on natural gas, oil, gold, and uranium exports. How Do We Measure Economic Freedom? See page 475 for an explanation of the methodology or visit the Index Web site at heritage.org/index. 47 46 45 44 2011 2012 2013 2014 2015 Country Comparisons 47.0 Country World Average 60.4 Regional Average 58.8 Free Economies 84.6 0 20 40 60 80 100 Quick Facts Population: 30.2 million GDP (PPP): $113.8 billion 8.0% growth in 2013 5-year compound annual growth 8.2% $3,762 per capita Unemployment: 10.8% Inflation (CPI): 11.2% FDI Inflow: $1.1 billion Public Debt: 8.6% of GDP 2013 data unless otherwise noted. Data compiled as of September 2014. 453 UZBEKISTAN (continued) THE TEN ECONOMIC FREEDOMS Score RULE OF LAW Country World Average Property Rights 15.0 Freedom from Corruption 17.0 0 20 40 60 80 Rank 1–Year Change 157th 176th 0 +3.6 100 The president appoints all judges and can remove them at any time. Court procedures fall short of international standards, and powerful figures can expropriate property with impunity. Corruption is rampant. Property ownership, although generally respected by local and central authorities, can be subverted by the government. There is no general system for registration of liens on chattel property. Fiscal Freedom 90.2 GOVERNMENT Government Spending 67.3 SIZE 30th 94th 0 20 40 60 80 –0.1 –3.1 100 Uzbekistan’s top individual income tax rate is 22 percent, and its top corporate tax rate is 9 percent. Other taxes include a value-added tax and a property tax. The overall tax burden equals 20.3 percent of domestic income. Public spending is equivalent to 33 percent of domestic production, and government debt equals approximately 9 percent of gross domestic product. REGULATORY EFFICIENCY Business Freedom 73.1 Labor Freedom 64.2 Monetary Freedom 63.5 50th 78th 175th 0 20 40 60 80 –2.6 +3.4 +0.4 100 The regulatory system lacks clarity and consistent enforcement, injecting considerable uncertainty into business decision-making. The start-up process has been streamlined, but licensing requirements remain time-consuming. The labor market lacks flexibility, and employment in the informal sector is substantial. The state administers the prices of many basic staples, such as petroleum products, natural gas, utilities, and bread. OPEN MARKETS Trade Freedom 69.8 Investment Freedom 0.0 Financial Freedom 10.0 134th 176th 174th 0 20 40 60 80 +3.7 0 0 100 Uzbekistan’s average tariff rate is 5.1 percent. Uzbekistan is not yet a member of the WTO. The government screens foreign investment. Foreign investors may not purchase land. The financial sector is subject to heavy state intervention. Along with the high costs of financing, the banking sector’s limited capacity for financial intermediation is a key barrier to privatesector development. Long-Term Score Change (since 1998) RULE OF LAW Property Rights Freedom from Corruption 454 –15.0 +7.0 GOVERNMENT SIZE Fiscal Freedom Government Spending +32.8 +10.8 REGULATORY EFFICIENCY OPEN MARKETS Business Freedom +33.1 Labor Freedom –2.9 Monetary Freedom +63.5 Trade Freedom +19.8 Investment Freedom –30.0 Financial Freedom 0 2015 Index of Economic Freedom