Marco Mantovanelli, World Bank Country manager for Uzbekistan, began his tenure in the summer of 2020, amid the COVID-19 pandemic. He led one of the bank’s largest country programs in the Europe and Central Asia region. Before completing his mission in June, he shared his thoughts with Gazeta.uz on the changes he witnessed over the past four years in Uzbekistan, the challenges and opportunities of the country’s market economy transition, and how the World Bank supports the government in this process.
Video
Read the interview (text has been condensed for readability)
— Сould you please explain the World Bank’s global mission briefly?
— The World Bank is the oldest and largest international financial institution. It was created around 80 years ago to help reconstruct Europe and Japan after World War II. My own country, Italy, also benefited from its support to restore the war-torn economy.
Today, the World Bank Group is one of the world’s largest sources of funding and specialized knowledge for developing countries. Its five institutions, including the World Bank, share a commitment to reducing poverty, increasing shared prosperity, and promoting sustainable development in these countries.
The World Bank has 189 member states, including Uzbekistan, which joined in 1992. We have offices in around 140 countries, including all countries of Central Asia.
Since 1947, the World Bank has funded over 12,000 projects focusing on economic, social, and infrastructure development in various parts of the globe. In 2023, we committed around $73 billion distributed in concessional loans, credits, and grants to countries, helping them fight poverty, grow their economies, and improve the well-being of their people.
— You have spent four years in the country and have witnessed certain changes during this period. Could you highlight some of those that, in your opinion, have had a significant impact on our society and economy?
— My experience in the country, of course, is intertwined with the World Bank. We are fortunate to have a very large program supporting various sectors of the national economy. I would highlight several areas where, in my opinion, the country has demonstrated significant progress over the last several years.
In 2020, when I arrived in Uzbekistan, cotton products from the country were boycotted by more than 300 international brands and retailers because the state was systematically using forced labor during cotton harvests. An estimated two million children and half a million adults were involved in this process.
Since 2017, the government has been demonstrating a strong political will to eliminate this legacy of the past. The World Bank was pleased to contribute to the process of eliminating forced labor in the country’s cotton sector, working closely with the authorities, civil society, and the international community.
In 2015, we concluded an agreement with the International Labor Organization to monitor progress in eliminating forced labor in the cotton sector. This initiative was supported by the European Union, and the governments of the USA, Switzerland, and Germany.
The World Bank also provided financial and analytical assistance to the government to implement reforms aimed at eliminating the root causes of forced labor in the cotton sector. This assistance facilitated reforms in Uzbekistan’s agricultural sector, resulting in a reduction of the state’s dominance in the cotton sector and the amount of land allocated for cotton cultivation.
These reforms also led to increased prices paid to farmers for cotton, aligning them with world market prices, expanding opportunities for the private sector in the cotton sector, improving cotton productivity, and facilitating more efficient use of land and water resources.
In March 2022, the ILO confirmed that 99% of those involved in the 2021 cotton harvest worked voluntarily, and Uzbek cotton is now free from systemic child labor and forced labor. Following this announcement, the global boycott of Uzbekistan cotton products was lifted.
The lifting of the boycott has transformed the textile sector into a key driver of Uzbekistan’s economy, employing hundreds of thousands of people nationwide, attracting enormous local and foreign investments in this sector, and contributing to the country’s exports of ready-made products.
Another example where the country has demonstrated steady progress is the increase in the preschool and higher education enrollment rate, which for a long time was among the lowest in the world. Why are these two important? Investing in early education transforms the life of a person. You become a better learner throughout your life, huge returns on those investments. And you need more people in higher education, if you want to have jobs in the modern economy. Both have seen quite dramatic improvements in coverage. In 2017, enrollment in preschool education was less than 30%, but thanks to government investments in preschool education, it reached over 75% in 2024. We welcome the government’s plans to ensure a 100% enrollment rate by 2030.
The World Bank is contributing to this progress by supporting projects, which are being implemented by the government to expand access to preschool education for millions of boys and girls across the country, and by providing technical assistance to the authorities to develop policies improving the quality of preschool education, teaching methodologies, and assessing the impact of educational reforms on students' performance.
Now, the challenge in education is quality. You put more students in, you need to give them quality education.
Finally, during my tenure in Uzbekistan, I witnessed transformative processes in the renewable energy sector, positioning the country as a pioneer in Central Asia. In 2019, the government opened the renewable energy sector to private investments, leading to the country’s first competitively tendered solar power public-private partnership.
This pioneering project resulted in the construction of a 100 MW solar power plant in the Navoi region by Masdar, a UAE renewable energy company, offering the lowest solar energy tariff in Central Asia at that time. The plant was launched in 2021 with financial support from international investors, including the World Bank and the International Finance Corporation (IFC), a member of the World Bank Group.
This project demonstrated the effectiveness of competitive tenders over negotiated deals, attracting reputable international investors.
It’s very important to understand that your infrastructure gaps cannot be filled only by state investment. You need the private sector. But if you bring the private sector in, you need to bring it in competitively to get the lowest price, and transparently to make sure the state protects itself from the rapacious private sector.
Since 2019, with assistance from the World Bank and the IFC, Uzbekistan has attracted private investments to launch four solar plants and one wind power plant across several regions, with a total energy generation capacity of 1.3 GW.
The most recent project the World Bank Group supported, launched in May 2024, involves constructing and operating a 250 MW solar plant with a 63 MW battery energy storage system in the Bukhara region, the first of its kind in Central Asia. This solar plant will provide clean and reliable electricity to approximately 75,000 households.
— During your time here, the World Bank’s portfolio in Uzbekistan has become one of the biggest in the Europe and Central Asia region. What are the key areas of bilateral cooperation where the World Bank is supporting the government?
— Indeed, our country program in Uzbekistan is one of the largest in the Europe and Central Asia region, following Türkiye and Ukraine. Since 2017, the World Bank’s financial and analytical assistance to Uzbekistan has tripled. Today, our project portfolio consists of 27 projects totaling over $6 billion, of which about $2.4 billion still needs to be disbursed and implemented.
Notably, $3.78 billion of these funds, or 60% of the Bank’s entire investments in Uzbekistan, are very concessional loans. They are allocated to the country for 30 years, with a five-year grace period, and are among the most concessional lending funds that developing countries can get in the global financial markets.
Since 2017, our operations in Uzbekistan have grown dramatically thanks to the strong partnership with the government. This growth is explained by our increased support for the economic and social reforms launched by President Shavkat Mirziyoyev, focusing on transforming the national economy and reducing poverty.
The Bank-funded projects, implemented by various government agencies, play a pivotal role in driving critical macroeconomic reforms and modernizing a wide array of sectors. They target improvements in agriculture, water and land resource management, water supply and sanitation, energy, transport, health, education, and social protection systems. Additionally, they focus on enhancing both urban and rural infrastructure, investing in institutional capacity building, and developing national innovation, tax administration, statistical, and financial systems.
For instance, just recently, the Bank approved a $100 million project that will be implemented by the National Agency for Social Protection to improve the quality of social services and access for vulnerable people, including older people, persons with disabilities, survivors of gender-based violence, and vulnerable children.
Furthermore, the World Bank’s engagement in Uzbekistan includes a comprehensive suite of technical assistance, advisory, and analytical services provided to the government. These services support the preparation and implementation of national strategies aimed at poverty reduction, health, education, and social protection, as well as sector-specific reforms in energy, aviation, tax administration, and banking.
I think if you ask government officials what they value most in our cooperation, they would probably find our advisory and analytical services more useful than the funds the Bank provides. Why? The analytical products the Bank prepares for the government includes experiences from other countries. This helps Uzbekistan avoid repeating mistakes of these countries in various sectors and develop policies in various areas based on international best practices.
— Could you please give some specific examples of World Bank-funded projects, which have generated specific results?
— I think there are many examples of good results delivered under Bank-funded projects implemented by the government in various sectors. Maybe I’ll mention some that I visited personally in different parts of Uzbekistan.
The first one that comes to mind is a project helping the authorities to improve basic infrastructure in 306 villages located in remote mountainous areas of the Andijan, Ferghana, Namangan, Jizzakh, and Syrdarya regions.
The key feature of this project is people residing in these villages directly participate in the project implementation, determining which most need infrastructure facilities should be built or reconstructed and supervising these processes. These include improvements to roads and bridges, electricity and water supply systems, as well as schools and kindergartens.
Thanks to the project investments, in 297 villages, around 430,000 people, over half of them women, already benefit from the improved rural infrastructure. Specifically, 5 healthcare facilities, around 80 rural schools and preschools, 75 electric power supply systems, 127 water supply systems, and 136 internal roads have been constructed or reconstructed in the project areas.
In 2021, I visited one of these villages located in the Jizzakh region to meet with a local community. At that time, they were discussing investing project funds in the construction of a new school because the old one-story building they had was in such horrible condition that one could hardly call it a ‘school'. In September 2022, I visited this village again along with a World Bank Regional Vice President to inaugurate a modern school building that children, teachers, and all villagers now enjoy.
In South Karakalpakstan, a World Bank-funded project helped authorities to modernize an 800-km network of canals, which are crucial for the local agriculture sector and the well-being of the local population. These measures have resulted in saving 300 million cubic meters of water per year. And 64,000 water users and 100,000 hectares of irrigated land benefit from improved irrigation services that have increased their productivity.
In Bukhara and Samarkand cities, around 500,000 residents benefit from improved sanitation services, which are delivered by the local wastewater treatment plants, which have been modernized thanks to another World Bank-funded project. These services aren’t only critical for meeting the needs of local residents but also for attracting more foreign tourists to your historical cities since.
I have already mentioned our support for the preschool education sector in Uzbekistan. To give you a specific example, a World Bank-funded project, implemented by the Ministry of Preschool and School Education, is improving the learning environment in 6,200 rural and urban preschools across the country. This is being achieved by equipping them with modern child-friendly equipment and furniture, teaching and learning materials, toys, recreation zones, and computers.
These are just the results of several out of many projects that the Bank is helping the authorities implement to achieve certain development goals.
— The World Bank supports the government’s reforms, and poverty reduction is one of its top priorities. According to a recent blog by World Bank experts, poverty in Uzbekistan decreased significantly in 2022 compared to 2015 levels. What further actions are needed for the government to continue this trend?
— Market reforms in Uzbekistan since 2017 have led to steady economic growth. Uzbekistan’s economy has been quite resilient and has continued to grow faster than its peers in the Europe and Central Asia region these years.
Sustained growth has contributed to the progress made in reducing poverty. Using the national poverty line, the poverty headcount rate fell from 17% in 2021 to 14% in 2022 and then further declined to 11% in 2023. This means the poor population declined by roughly 1.5 million between 2021 and 2023.
Concerted and sustained momentum on reforms will be needed to meet the government’s ambitious goals of reducing poverty by half (to 7%) by 2026 and reaching upper-middle-income status by 2030 (with a GNI per capita over $4,096 compared to $2,255 in 2022).
Everything seems to indicate that the country is on track to cut poverty in half, as one of the main country goals. However, we noticed that in order to truly do that and do it sustainably, something more needs to happen. Poverty right now has decreased mostly because wages have improved, because social protection (social transfer) has been modernized and remittances have been continuing to flow. Remittances from abroad tend to go to the poorest households.
To achieve its targets, Uzbekistan will have to accelerate per capita income growth to between 9% and 10% per year, according to the World Bank’s calculations.
Uzbekistan’s working-age population (aged 15−64) is projected to increase by about 300,000 people every year for the next 10 years. Currently, only about a third of the working-age poor have a job. Even when they are employed, the poor are prone to being engaged in low-income, less secure, and informal jobs.
Thus, the next phase of reforms should focus on fostering a vibrant private sector to produce more sustainable jobs. Achieving upper-middle-income status and dramatically reducing poverty will require this shift. More jobs in the private sector must be a top priority. And this is more jobs, that need to address also women inclusion in the workforce, thinking about rural areas where poverty is more relevant.
This impressive advances in poverty reduction have been accompanied by something that we see around the world, an increase in inequality. Income has grown faster for the top percent earners than for the bottom percent earners. This happens in many countries. The recipe to avoid that in the future are following: one — formalization, meaning there’s a lot of people that are not in the formal economy, try to bring them into the formal economy and two — more jobs, more jobs from the private sector. That helps a bottom up growth, that avoids a growth of inequality in the country.
— When you were talking about the areas of focus, you mentioned sustainable economic growth. How can this be achieved?
— We recognize Uzbekistan’s impressive progress from 2017 to today. However, your economic and social transformation is entering a more complex phase. Why? Because you need to address the role of the state in the economy, which remains significant — a legacy of the past.
In Uzbekistan, state-owned enterprises remain dominant in the national economy. 80% of them operate in competitive sectors where the private sector should be. Our analysis shows that not only are they less efficient, but their presence reduces the performance of the whole economy.
The challenge for the next phase, is that you cannot grow at 9%-10% without a greater role for the private sector in your economy. The state-owned sector produces growth, jobs, and tax revenues, but it comes at a cost when state-owned enterprises are inefficient-and often they are highly inefficient.
There are sectors where the cost is represented by preferential access to bank financing, land, or other resources provided by the state to state-owned enterprises. This means taxpayers are subsidizing such enterprises, reducing opportunities for private firms and companies, which don’t have access to such resources and hence can’t invest in their growth.
The goal of reforms should not be to eliminate the state-owned sector but to retain its efficient parts while allowing the state to withdraw from sectors where it’s not needed, thereby creating space for private sector investment. This is challenging due to the legacy of the past, and modernizing and privatizing large state-owned enterprises can be a painful process.
Another important point is attracting foreign investment. Your country is becoming more attractive to foreign investors, but challenges remain. It is needed to create a business environment with a truly level playing field, ensuring investors feel secure and not discriminated against compared to state-owned enterprises.
President Mirziyoyev keeps saying that reforms in Uzbekistan are irreversible and it will never go back to the previous economic model. Hence, it’s important to move forward and complete this transformation by reducing the state’s dominance in the economy and creating more space for private sector development.
Uzbekistan’s reform path must deepen to sustain the shift from a state-led to a market-oriented economy. Otherwise, the risk is that the country will get stuck in the transition. To achieve this goal, Uzbekistan will have to implement difficult but much-needed macroeconomic reforms that will bear fruit.
— Uzbekistan plans to join the World Trade Organization (WTO) by 2026. Can this process accelerate the expected changes you have just mentioned?
— WTO accession presents a significant opportunity, offering substantial benefits for the economy not just through larger export markets, but the productivity and investment enhancing effects of foreign direct investment and greater competition.
Reforms associated with WTO accession extend beyond the liberalization of goods trade to encompass liberalization of services, investment, intellectual property, competition, and government procurement regulatory liberalization.
Other country examples demonstrate a positive correlation between WTO membership and increased economic growth and expanded trade. According to the World Bank’s analysis, opening trade in goods and services is projected to positively impact Uzbekistan’s economy, potentially increasing real GDP by more than 10%.
— The recent World Bank economic outlook notes that Uzbekistan’s growth will be supported mainly by the continued implementation of structural reforms, notably state-owned enterprises' restructuring and privatization. What is important to keep in mind while implementing these processes? How can Uzbekistan avoid a situation where state monopolies turn into private monopolies, resulting in crucial industries ending up in the hands of an oligarchy?
— Private monopolies are much worse than state monopolies, so avoiding this outcome is crucial. There are lessons to be learned from other countries that have undergone similar transitions. For example, Poland has been one of the most successful countries in rapidly navigating this challenge during its transition to a market economy.
As I mentioned earlier, the process of transforming state-owned enterprises is not easy because it involves severing long-standing economic and political ties and creating new ones. You need vision, you need a firm hand to continue to stick to that process.This transformation requires a firm commitment to the process and some essential conditions.
First, the government should modernize state-owned enterprises to ensure they perform at their best within their sectors. They should be efficient and not rely on preferential access to financing from state-owned commercial banks or political favors to generate profits. They should be able to compete fairly with private firms and companies. If they can compete, it means they are efficient.
Second, if the government decides to sell these state-owned enterprises, the country will receive much better value for them. This can be achieved by improving corporate managerial processes, such as creating independent boards for these state-owned enterprises. Management should be accountable to these boards. Ideally, boards would appoint the CEO, and the CEO would report to these boards in a transparent manner, fostering accountability in the decision-making process.
Third, regulations that afford unfair advantages to state-owned enterprises should be dismantled and state monopolies restructured. To separate the state from state-owned enterprises, independent regulatory bodies should be established.
The country will also benefit from accelerated privatization of state-owned enterprises in competitive sectors where the private sector can deliver better results than state-owned enterprises. It is also important to establish a timeline to reach privatization goals and increase the transparency of the processes for selling state assets.
We are not advocating for the elimination of the state owned complex. We are advocating for retain your role as a state, as an investor in sectors that are natural monopolies or they are very strategic for your national security. Allow the private sector to compete in the other sectors to get you better services at the lowest cost and more innovation. This is critical for a double landlocked country. You need this to go through.
— What are other risks to Uzbekistan’s development that require special attention, and how can they be mitigated?
— We live in turbulent times, and there are many external risks facing any country, including Uzbekistan. It is important to be prepared to handle shocks, including critical economic and environmental shocks, including those related to climate change. Uncertainty is the new rule of the game.
Climate change will affect the people of Uzbekistan in multiple ways, and by 2030, at least 8 million people will be residing in areas of very high climate risk across the country. Without action on climate adaptation, the domestic economy is predicted to be 10% smaller by 2050 than it could have been without climate effects, resulting in significantly lower employment and household incomes.
Uzbekistan is one of the most energy and resource-intensive countries in the world. Water use in Uzbekistan is particularly inefficient, and the country’s energy use per unit of GDP is about three times higher than the average for the Europe and Central Asia region and twice that of neighboring Kazakhstan. Uzbekistan will need to continue taking further measures to improve resource management.
— Having worked with different government institutions and experts in Uzbekistan closely over the last four years, what Uzbekistan the needs the most at this point of development? Is it qualified specialists or is it more political will or maybe technologies?
— Maybe to answer your question, I’ll tell you the most exciting and the most frustrating thing for me to work in Uzbekistan. The most exciting is a genuine interest by our government counterparts, and also civil society on learning, knowing more, to get more information, to apply best practices, to push the agenda ambitiously. You don’t find it in many other countries. And in other countries you have to knock on the door, asking: “Are you interested in doing this?” Here is the opposite. “Can you help us doing this?” I hope you don’t lose it.
The most frustrating is that this comes through a very labor intensive process, I would say. You still have institutional capacity issues. They go through in the public sector, institutional coordination. It’s at all not uncommon that we get the same request from multiple agencies. And for us, it’s very hard to understand who first, what. Coordination of national policies through different institutional agencies is still challenging. Improving that will improve the effectiveness of the state and the public administration greatly.
Then there is still a skill mismatch in many places. You have excellent skills. In the public administration, they are concentrated in few places. And then in the middle level or the centralized level doesn’t meet the same quality. How to elevate all that, without losing resources because there is a challenge, a trade off: You train people and then they move to the private sector or they move abroad. So how to retain qualified skills here for this next phase, it’s another big challenge.
And the third, I would say full inclusion, both in the, productive cycle and decisionmaking. Women still play a very marginal role here. It has improved dramatically. We cannot see Uzbekistan going to upper middle income class level without stronger contribution of women to the economy.
— Policymaking is about making decisions and sometimes policymakers face resource scarcity. So they might need to prioritize something over other. If you had to prioritize one thing, which reform do you think is the most crucial for the country and shouldn’t be postponed?
- On the policymaking processes per se, I would say continue and expand evidence based policymaking. Here there is a lot that happens by intuition sometimes. You know, “it makes sense to invest in that region versus that”. We need data to do that. Comparative advantage of investing there versus somewhere else or investing in a sector or building a school on this side of the road or on the other side. So continue to strengthen that. That is priority.
Institutional coordination across sectors, so that you can pull together on key challenges, climate change, digitalization. That’s on processes.
On what to do. I go back to my main point before: a lot has been achieved, but the transition is not being concluded. You don’t want to become a country stuck in transition in this state. To do that jump, you need to reform the role of the state in the economy. A state that is less of an investor and more of a facilitator to attract private sector.
And the protection of the most vulnerable. In these times of changes, both internal and external, the weakest in terms of economic, or access or geographically cannot be left behind. You need to have the state protect them.
— You have spent four very dynamic years in Uzbekistan and you are completing your mission here. What is the next professional chapter for you?
— Soon I will take on a new job as a Manager for the Global Partnership for Education (GPE). The GPE’s main goal is to improve education systems globally, particularly in developing countries. The World Bank hosts the GPE Secretariat, providing administrative support and oversight.
In my new capacity, I will be covering all regions across the globe except Africa. This also includes Uzbekistan, so I hope to return here in that role. My responsibility will be to facilitate the financing and engagement efforts that the GPE has around the world.
— It was great having you at Gazeta.uz. We wish you all the best of luck in the future!
— Many thanks for this interview!
