Financial Technology
DOI: 10.21070/ijler.v19i2.1057

Unlocking Uzbekistan's Growth Through Project Financing

Membuka Kunci Pertumbuhan Uzbekistan Melalui Pembiayaan Proyek

Banking and Finance Academy, Tashkent

(*) Corresponding Author

Project Financing Credit Portfolio Economic Development Fixed Capital Investment Transitional Economiesm


This study examines the implementation and impact of project financing in Uzbekistan's unique economic landscape, particularly its role in fostering investments in fixed capital. Given the country's transition towards market reforms, the research aims to assess how project financing contributes to economic development amidst these changes. Utilizing a mixed-methods approach that combines quantitative data and qualitative interviews, preliminary results highlight the effective mobilization of substantial investments in key sectors such as energy and infrastructure. However, challenges in regulatory and financial transparency remain. The findings suggest that while project financing holds significant potential for economic growth in transitional economies like Uzbekistan, improvements in governance and financial regulations are crucial to optimize its benefits.


  • Economic Transition: Project financing boosts Uzbekistan's market reforms.
  • Methodological Insight: Mixed-methods reveal financing impacts.
  • Regulatory Challenges: Improved governance necessary for success.

Keywords: Project Financing, Credit Portfolio, Economic Development, Fixed Capital Investment, Transitional Economiesm


Investment activity is a crucial component of the operations of any commercial organization. The necessity for investments arises from the need to update the current material and technical infrastructure, expand production capacities, and pursue new areas of business. Increasing production levels and diversifying into new areas of business. Under current circumstances, the implementation of substantial investment projects can be most efficiently achieved through targeted financing[1]. Target financing offers several advantages, including access to both borrowed funds and the opportunity to finance the project. Not only did they borrow resources, but they also had the opportunity to use them to acquire the necessary investment items at favorable conditions. Project financing is the most favorable avenue for lending. Specifically, the lenders do not require collateral in the form of assets for the monies granted to each project. Instead, they agree to accept future financial flows from the project as security. Developing countries are utilizing the concept of import substitution as a means to bridge the gap between themselves and wealthy countries[2]. The primary feature of the import substitution policy is the process of industrializing the economy through the imposition of restrictions and discriminatory measures against imports.[3] Put simply, the import substitution policy involves implementing artificial incentives, such as international trade and currency measures, to boost the growth of specific sectors in the home industry and enhance their competitiveness in the local market. In this scenario, the primary institution that is being referred to is private property, which is established based on protectionism[4]. However, the safeguarding of emerging industries frequently transforms into the preservation of outdated industries, leading to a lack of motivation for firms to innovate, relying solely on government subsidies and exhibiting sluggishness in adopting new technologies.Asian countries implement a philosophy known as the "flying geese" paradigm, as coined by Japanese economist Kaname Akamatsu[3]. According to this idea, countries progress incrementally towards technical advancement by emulating the countries that are somewhat ahead of them in the development process. This policy also aims to promote the industrialization of the economy.[5] However, this is accomplished not by substituting imports with domestic production through measures such as foreign trade restrictions and import discrimination, but by enhancing the country's capacity to export. This model can be understood as a direct outcome of market dynamics: countries with an excess of available workers and a scarcity of financial resources in the global market become competitive in industries that require a large workforce. However, as savings and education increase, creating a pool of capital and skilled workers, industries that require more financial resources and specialized skills begin to thrive.[6] This leads to an overall increase in the competitiveness of the entire economy. To implement this paradigm, an export platform is required. An export platform aims to establish a distinct economic zone that welcomes foreign investors[7].


An enclave that welcomes foreign investment and is seamlessly connected to the global economy, exempt from the challenges of infrastructure, security, rule of law, and trade policy that affect the rest of the economy. Various iterations of export platforms have been established in Asia, such as export-industrial zones, customs warehousing, special economic zones, and duty drawback systems[8]. Governments have provided support to these organizations by implementing macroeconomic policies that promote the export of labor-intensive items, particularly by adjusting exchange rates appropriately[9]. Taiwan has achieved remarkable success by effectively implementing a comprehensive plan to enhance the competitive advantages of its domestic industries. Taiwan has adapted the "flying geese" method to incorporate its current potential and the reality of global market rivalry. The approach adopted in Taiwan is referred to as "export-oriented import substitution". Taiwan's adoption of this technique has enabled them to steer clear of the pitfalls associated with the "flying geese" strategy[5].

Both the "flying geese" and "import substitution" tactics exploit the benefits of both approaches. The outcome has beyond all anticipated outcomes. In China and India, export expansion contributes to 5-8% of GDP growth, whereas in Thailand it contributes to 14-16%, in South Korea it contributes to 42-45%, and in Taiwan, the expansion of domestic demand contributes to 43-45% of GDP growth, with the increase in exports (with up to half being high-tech items) contributing to 55-57% of GDP growth.[10]

The GDP growth rate is projected to be between 55% and 57%.Taiwan's success can be attributed to two factors. Firstly, unlike other "Asian tigers," Taiwan became a net exporter of capital in the 1970s.[1] By the second half of the 1990s, the size of its capital exports accounted for 4-5% of its GDP, and its foreign exchange reserves reached $103.5 billion by the end of 1999. Secondly, Taiwan exercises strict control over its capital exports. Similarly, the size of its exports in the second half of the 1990s accounted for 4-5% of its GDP, and its foreign exchange reserves reached $103.5 billion by the end of 1999. Taiwan, which had become a net exporter of capital, tightly controlled its investment expansion and implemented a gradual financial liberalization strategy.[4] This approach prevented a significant influx of "hot money," which had negatively impacted the economies of several Asian and transitioning countries. By the end of 1999, Taiwan's foreign exchange reserves had reached $103.5 billion, equivalent to 5-5% of its GDP in the second half of the 1990s[10].

The performance of Asian countries in catching up with development has demonstrated that those states which effectively boosted their exports while also implementing import substitution strategies had the best results[11]. On the other hand, developing countries that have adopted the import substitution strategy are characterized by high inflation rates, low savings and investment returns, external debt, balance of payments issues, and consequently, low economic growth and welfare for the population[12]. Generally, the organization of the home market with goods produced domestically has been challenging, and the new "young industries," which get government backing in many forms, have not achieved competitiveness.[2]Furthermore, import substitution policies are inclined to offset the extra expenses of safeguarding domestic producers who compete with imports, at the detriment of consumers and exporting producers, through the manipulation of prices using direct methods of state regulation, such as foreign trade and currency restrictions[13].

The state plays a crucial role in implementing the import substitution idea. The issue at hand does not solely revolve around implementing protective measures for domestic producers or the necessity of promoting science and education as the primary foundation for effectively executing the import substitution idea. The focus of the discussion is on the selection of the import substitution strategy, which can be either internally oriented or externally-oriented. The disparity between these two tactics is fundamental. The first instance prioritizes the development of the domestic market with the goal of achieving structural shifts in the economy towards increased industrialization. In the second scenario, the objective of the producer is to enhance the visibility and sales of domestic products in the global market. This, in turn, leads to changes in the economic structure, favoring the transition towards post-industrial growth[14].

Asian nations have prioritized rapid expansion of exports, implemented effective tax strategies, maintained high rates of savings, implemented programs to boost literacy and elementary education, and have not compromised the agricultural sector[1]. All of these industries underwent a restructuring process that emphasized the mastery of science- and technology-intensive technologies, such as automotive, consumer electronics, and semiconductor industries. The main objective was to produce industrial products suitable for export to global markets[15].

Results and Discussion

Kojima and Ozawa, Japanese economists, incorporated foreign direct investment into the "flying geese" model and illustrated how technological and financial support from transnational businesses (TNCs) might enhance economic development in developing nations. They illustrated this by providing an example of Japanese corporations who relocated their production and management operations to the nearby markets of China and South-East Asia. Japanese investment has resulted in the establishment of numerous highly competitive businesses in various countries. For instance, in Thailand, the automotive and textiles sectors have flourished due to Japanese investment. Similarly, in Malaysia and Hong Kong, the consumer electronics industry has experienced significant growth, while in Taiwan, Japanese investment has played a crucial role in the development of microcomputer production. However, in order for this to occur, it is crucial for the government to maintain its openness to international interactions and, specifically, to welcome foreign direct investment from T&T[16].

Another noteworthy scientific study focuses on the categorization of export potential. Figure 1 illustrates four different forms of export potential.

Figure 1. Illustrates Four Different Forms of Export Potential

The country must maintain its openness to international interactions and, specifically, to welcome foreign direct investment from transnational corporations (TNCs), since it is an essential addition to effective public policy.

An illustrative instance is China, which has been advancing through the utilization of foreign direct investment for over two decades. According to the Ministry of Commerce, by the end of 2004, a total of 508,941 firms with foreign capital had been founded in China. Additionally, around 82% of multinational organizations have expressed their intention to engage in China's manufacturing, marketing, and research sectors. In 2004, the actual amount of foreign direct investment that was achieved surpassed US$60 billion. The amount is USD 60 billion. With the only exception of the United States, no other country attracts as much foreign direct investment.

Empirical evidence demonstrates that import replacement is advantageous when imported items are substituted with domestically produced products of equal quality, and when the price element does not significantly influence customer preferences[17]. In this scenario, not only does employment, budget, and firm revenues increase, but the customer also does not experience any negative effects. Simultaneously, the significance of national security is growing, particularly within the defense sector. Import substitution in knowledge-intensive industries is highly effective during economic crises. It enhances the competitiveness of knowledge-intensive products, boosts state tax revenues, and plays a crucial role in improving the balance of payments, preserving foreign exchange reserves, preventing inflation, stabilizing the domestic market, and combating unemployment.


According to the agreements made regarding cooperation in the development of small business exports to Uzbekistan, it is crucial to establish effective and efficient regulation of export flows to Uzbekistan. Commercial banks and foreign financial institutions, including those offering financial incentives, play a significant role in investment financing.

The production includes cotton, tobacco, beetle leather, fruit, fruit factories, refineries, as well as mini-workshops and factories for the processing of cotton into cotton garments.

Enhancing the availability of favorable financing and essential resources for commercial entities and private entrepreneurs.

Significantly enhance the production capacity and consistently enhance the quality of nationally-produced goods that are in high demand in global markets. - Foster greater participation of investments, particularly foreign investments, in the realm of entrepreneurship.


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