THE IMPACT OF FOREIGN DIRECT INVESTMENT ON ECONOMIC GROWTH IN UZBEKISTAN

: The article is devoted to the role of foreign direct investment in promoting economic growth in Uzbekistan. The growth of direct investment and its impact on the level of income and the quality of the institutional environment, the long-term and interrelated effects of growth on the level of national income in many developing countries and the economic growth of direct investment in Uzbekistan are studied.


Introduction.
It should be noted that President of Uzbekistan Shavkat Mirziyoyev by his decree has approved the action strategy on priority areas of the country's development for 2017-2021.The action strategy will be implemented in five stages, and each stage provides for approval of a separate annual state program on the strategy's implementation in Uzbekistan, according to the decree.There are five key legal and institutional reforms: state governance, rule of law and legal reforms, liberalization of the economy, social sphere, security, religious tolerance and interethnic harmony, foreign policy.To approve the developed on the basis of a compre-hensive study of topical and exciting people and business issues, the analysis of the current legislation, law enforcement practices and the best international practices, as well as a broad public discussion Strategy actions in five priority areas of the Republic of Uzbekistan in 2017-2021 years in accordance with Annex development and economic liberalization aimed at further strengthening the macroeconomic stability and the maintenance of high economic growth, increasing its competitiveness, modernization and intensive development of agriculture, continuation of institutional and structural reforms to reduce the state presence in the economy, further streng-https://doi.org/10.55439/ECED/vol24_iss6/a4thening the protection of rights and priority role of private property, stimulating the development of small business and private entrepreneurship, comprehensive and balanced socio-economic development of regions, regions and municipalities, active attraction of foreign investments1 in the sectors of the economy and regions of the country by improving the investment climate development.
FDI inflows are important types of capital streams and outflows, generally towards the developing nations and they conclusively influence the host nation's financial development, the macroeconomic steadiness, the infrastructure and the legislative arrangement.It is contended that Uzbekistan has now attracts FDI for the most part in view of its market size and now plenty of nations are eager to make ventures after the sensational changes that have as of late been happened in recent years.The interests in type of FDI empower venture-getting (host) nations to accomplish investment levels past their ability to spare.Throughout the most recent few decades FDI has remained the biggest type of capital stream in the developing nations far outperforming portfolio value investment, private advances, and authority help.The topics matters regarding its future effects of the nation's economy.For over the previous years, there were not really any examination has been done to approach this issue As the legislature of Uzbekistan was portrayed closed country and along these lines it came up with trouble tolerating the inflow of remote capitals.FDI inflows in Central Asian nations, among which Uzbekistan, are impacted by the administration of the beneficiary nation, the financial advancement.Moreover, the flimsy political and economic position in Uzbekistan decreased its appeal toward the western remote of financial specialists.The costs of the war materials stayed high notwithstanding the expansion of the remote capitals inflow and hence, for the most part, the Russian and the rest Asian nations keep putting their capitals in Uzbekistan.
According to the report of the United Nations Conference on Trade and Development (UNCTAD), the world foreign direct investment volume has been declining for the third year in a row, reaching the lowest level that was observed immediately after the global financial crisis.Including, in 2019, due to all sources of financing, the volume of investment in Uzbekistan development amounted to 220.72 trillion soums, exceeding the approved annual forecast indicators by 2 times, including the volume of investments in fixed assets amounted to 189.9 trillion soums, with a growth rate to the same indicator in 2018 -1.3 times.1.3 compared to the same figure.
Literature review.The economic growth depends on sustained growth of productive capacity, consisting in investment and saving.The low levels in investment and saving imply low economic growth.Being a source of economic growth, the need of FDI inflows has increased in the last years.Over the last decades, investment was the object of scientific research and a vector of social development for prominent political figures.One of the leading economists A.Sh. Bekmurodov [3] is a foreigner He spoke about the characteristics of investments, their role in the economy and the investment climate: "Most countries in the world have a certain level of ability to attract foreign direct investment.Creating a favorable and competitive investment environment for it by carrying out a competitive struggle."Foreign direct investment is not only an important source of additional capital for each country in the face of limited domestic financial resources, but also a reliable source of innovation, new techniques and technologies, knowledge, training and competencies needed to ensure the competitiveness of the country's economy."Economists A.Vahabov, Muminov N.G.Sh.Khajibakiev [4], say the following about the investment climate: "Investment climate is a set of economic, political, legal and social factors that predetermine the level of risk of foreign capital investments and their effective use in the country.In 2014, a report "Catalyzing a global market in impact investment", initiated by the Prime Minister of the United Kingdom David Cameron, was published.Among empirical studies on FDI, Wallis (1968) had looked at increase in inflows of FDI from the US to the EU and assessed the importance of FDI in enhancing economic growth.Studies have found a positive relationship between openness and FDI flows (Chakrabarti, 2001).Following Chakrabarti6 (2001), the trade volume is determined by the sum of exports and imports divided by nominal GDP as a proxy for trade openness and must be positively correlated with direct investment.The greater the degree of trade openness, the more it is directed towards external market that would be more open to foreign capital.The effect of exchange rates on FDI has been examined with respect to changes in the bilateral level of the exchange rate between countries and also in the volatility of exchange rates (Blonigen, 2005).
FDIs Throughout the years, a lot of empirical research works have investigated the relationship between FDI and economic growth.Although there is many empirical researches have been conducted, the influence of FDI on economic growth is still inconclusive; some studies described the impact positively while others describedit as negative.
Data and econometric model.This study intends to estimate the determinants of FDI flows to Uzbekistan using time series data.The dependent variable is the FDI net inflows to Uzbekistan.The study uses seven explanatory variables.
In order to characterize the determinant of FDI flows to Uzbekistan, we set up the following empirical mode: lnFDIt = α t + β 1 lnTOt + β 2 lnINFLt + β3lnERt + β 4 lnPCGDPt + β 5 lnNRt + β 6 lnINFRt + β 7 lnLIBt + ε t where ln is the natural log, FDIt is the dependent variable, the subscript is the time period, TO is the trade openness, INFL is the rate of inflation, ER is the exchange rate, PCGDP is the per capita gross domestic produc NR is the natural resources, INFR is infrastructure, and Trade openness (TO) by a host country is considered as a major determinant of FDI, and has different effects on FDI.
Analysis and results.Global foreign direct investment (FDI) flows in 2021 were USD 1.58 trillion, up 64 per cent from the exceptionally low level in 2020.The recovery showed significant rebound momentum, with booming merger and acquisition (M&A) markets and rapid growth in international project finance because of loose financing conditions and major infrastructure stimulus packages.However, the global environment for international business and cross-border investment changed dramatically in 2022.The war in Ukraine -on top of the lingering effects of the pandemic -is causing a triple food, fuel and finance crisis in many countries around the world.Investor uncertainty has put significant downward pressure on global FDI in 2022, and new investment project numbers, including greenfield announcements, international project finance (IPF) deals, and cross-border mergers and acquisitions, all shifted in reverse after the first quarter of 2022 to start declining.Crossborder M&A sales were 6% lower and IPF values more than 30% lower in 2022.The outlook for global FDI in 2023 appears weak, with a significant number of economies around the world expected to enter a recession.Negative or slow growth in many economies, further deteriorating financing conditions, investor uncertainty in the face of multiple crises and, especially in developing countries, increasing risks associated with debt levels will put significant downward pressure on FDI (UNCTAD Global Investment Trends Monitor, January 2023).The negative trend reflects a shift in investor sentiment due to the food, fuel and finance crises around the world, the Ukraine war, rising inflation and interest rates, and fears of a coming recession.
However, innvestments continue to decline due to the pandemic, but the rate of decline has slowed significantly: from 11.2% in the first quarter of 2020 to 3.5% in the current one.It should be noted that mainly centralized investments are being reduced.In particular, investments from the budget decreased by 5.2%.The largest decline is observed in investments due to loans secured by the government -by 66.5% and their share in the total volume of investments decreased from 18% in the first quarter of 2020 to 6.2% over the period under review.In contrast, decentralized investment showed significant growth of 13.6%.Foreign direct investment and loans increased by 30.6%, investments at the expense of the population -by 20%, enterprisesby 6.3%.Changes in the structure of investments and their decline are caused both by the crisis due to the pandemic, which forces budget funds to be redistributed for non-investment expenditures and by structural changes and restrictions on attracting foreign loans under government guarantees.
The national investment promotion agency provides aid for foreign investors who seek to invest in Uzbekistan.The government seeks to attract FDI, especially in specific sectors -such as banking, energy, oil and gas, manufacturing, telecommunications, transport, and agriculture -as part of the president's large-scale privatisation plan.Uzbekistan is rich in natural resources and has a strategic position between China and Europe.Still, restructuring of large state enterprises and joining the WTO would bolster Uzbekistan's plea for FDI, but the country has been slow to advance on said fronts, and corruption is endemic and penetrates all levels of the business, government and social environment.In order to improve that, however, President Sh.Mirziyoyev established a new Anti Corruption Agency in 2020, as part of the State Anti-Corruption Program, which is responsible for implementing policies to prevent and combat corruption within the country.

Figure. Main investing countries (2022) [14]
The Republic of Uzbekistan conducts an open, mutually beneficial and constructive foreign policy based on the national interests of the country.Current foreign policy of Uzbekistan is formed taking into account the dynamic changes in the world and the region as well as largescale reforms within the country.Main turnover partners are China, Korea, Turkey, Germany and CIS countries.In addition, law of the republic of Uzbekistan оn investments and investment activity[11], Basic principles of investments and investment activity, The main principles of investments and investment activity are: legality; publicity and openness; freedom to implementation of investment activity; justice and equality of subjects of investment activity; non-discrimination against investors; presumption of investor conscientiousness; The basic principles of the legislation on investments and investment activity are applied at all stages of the investment process and investment activity.

Tabl № 1 Foreign Direct Investment 2020-2022 indicators[14]
Uzbekistan Foreign Direct Investment (FDI) registered a growth equal to 3.8 % of the country's Nominal GDP in September 2022, compared with a growth equal to 2.9 % in the previous quarter (CEIC Data, 2023).The country plans to implement projects worth USD17.34 billion in 2023, with Foreign direct investment amounting to US$7.06 billion.As in 2022, most of the funds (US$9.24 billion) will be directed to geology, energy and industry.In 2024, it is planned to implement projects for USD18.2 billion and it is expected that foreign direct investments will reach the amount of USD 7.73 billion (2022 Presidential decree on the investment program of Uzbekistan for 2022-2024).
Conclusion.The results of analysis of foreign direct investment economic growth in Uzbekistan shows the lack of transparency, dominant role of government in economy, inefficient judicial mechanisms and diversifications in "strategic" sectors are the obstructions for many potential foreign investors.
Including, weak Points The major obstacles to FDI in Uzbekistan are : -low economic diversification and dependence on commodity prices; -low competitiveness; -underdeveloped banking sector; -state interventionism and difficult general business climate; -autocratic regime.
Currently the government of Uzbekistan is striving against problems of foreign direct Investment of country regional development.The objective of this study was to shed light on the determinants of foreign direct investment (FDI) in Uzbekistan.In order to undertake it, we performed on data analysis for the 2020-2022 periods.
The study found trade openness, exchange rate, natural resources and infrastructure as the drivers of FDI in Uzbekistan.Macroeconomic variables, such as inflation and per capita gross domestic products, were also found to be contributing to the determinants of FDI flows in Uzbekistan.Finally, the contribution of this paper is that economic liberalization does really matter for FDI inflows in Uzbekistan and policymakers' efforts in liberalizing the economic activities may necessarily translate into significant FDI inflows into the country.
have been an important driver of economic growth.Multiple empirical research studies reported a positive impact of FDIs on economic growth both in the short and long run in the context of various developing economies (Brincikova and Darmo, 2014; Hansen and Rand, 2006; Joo and Shawl, 2021; Npg and Haiyun, 2017; Siddharthan and Narayanan, 2020; Sokang, 2018; Xu et al., 2021; Younsi et al., 2021).Therefore, both developing and developed countries often try to attract FDIs to provide new decent jobs and reaching better living standards.As economic growth in the country is fostered by macroeconomic stability, foreign investors tend to analyze macroeconomic stability and labor market conditions of a host economy prior to deciding to invest or not in addition to other determinants of FDI, such as the degree of corruption, political stability and quality of legislation (Strat et al., 2015).Jallab et al.'s (2008) study and Alguacil et al.'s (2011) study found a positive impact of FDI on growth under macroeconomic stability in the Middle East and North Africa countries (cited in Joo and Shawl, 2021).Likewise, Mehic et al.'s (2013) study found macroeconomic stability to be a strong growth driver in European countries (Joo and Shawl, 2021).Investigating the link between FDI inflows and macroeconomic stability, as proxied by inflation rate and unemployment rate, has been gaining importance (Strat et al., 2015).Xu et al., 2021).Similarly, Xu et al. (2021) identified possible spillovers from FDI inflow, such as additional source of capital, elimination of balance of payments limitations, generation of competitive market conditions in the host economy and a growth in employment and wages as well as a host country's exports.Brincikova and Darmo (2014) pointed out the potential effect of FDIs in creating jobs through forward and backward linkages generating additional spillovers and adoption of best practices of work organization in the economy.While most studies share the conclusion that FDIs are crucial for new job creation and reducing unemployment, job content of FDIs differs depending on investment type, amount and intensity.For example, Greenfield investments tend to outperform brownfield investments because a company in a host country is founded from scratch through building new production facilities, distribution hubs, offices and living spaces (Brincikova and Darmo, 2014; Çolak and Alakbarov, 2017; Harms and Méon, 2011; Mkombe et al., 2020).In contrast, in brownfield investments, an investing company purchases existing production facilities to roll out its operations and release a new product.Nguyen and Lee, 2021), human capital and trade openness (Estrin, 2017).Therefore, the effectiveness of FDIs is determined by the host country's degree of development of key factors we discussed above.