Measures to develop the service sector discussed

The large-scale program launched three years ago is already yielding results: an additional 1.5 million people have gained a stable source of income in the service sector, and the total volume of services has grown from $19 billion in 2018 to $65 billion. The most significant acceleration has been observed in information technology, financial services, tourism, aviation, education, and healthcare industries. 

Despite this positive trend, the potential for further growth remains significantly high, and the implementation of opportunities in the regions and industries often lacks the necessary coordination. 

For instance, Khorezm aims to attract 6 million tourists, but the region still lacks sufficient air and rail connections to support this target. Meanwhile, private sector investment in healthcare, aviation, and energy has exceeded $20 billion, whereas similar initiatives in drinking water supply, sewage systems, and road construction are almost nonexistent.

Existing problems were assessed at the meeting, and significant growth opportunities were identified.

It was noted that over the past seven years, household incomes and purchasing power have doubled, leading to increased demand for services. In response, ministries and regional authorities were instructed to actively seek ways to expand the range of services and create favorable conditions for entrepreneurs daily.

Key targets for the current year were set: increase the volume of services by 15%, reaching $82 billion, expand service exports to $8.5 billion, and ensure employment for 2.5 million people in this sector.

The banking and financial sector was highlighted with strong growth potential. Developers can convert 10-15% of newly developed areas into non-commercial real estate. To leverage this opportunity, it was proposed that banks directly purchase properties from developers and offer them to entrepreneurs through favorable lease or rental agreements. This initiative will bring 50,000 square meters of non-commercial real estate into circulation and create 100,000 new jobs.

The volume of financial services is set to increase by 30%, with new mechanisms to expand access. Introducing mahalla-based bankers, who work closer to local communities, is expected to create additional opportunities. A key initiative involves the integration of cadastral, tax, and justice department data into the banking information system, which will improve the quality and volume of financial services.

A new approach will be implemented for regional service sector development starting this year. Local Councils have approved 1,156 key driver projects, with 1 trillion UZS allocated for implementation.

As part of these initiatives, it is planned to create 72 coastal recreation areas, organize 154 round-the-clock tourism and gastronomy streets, modernize 62 amusement parks, construct 364 roadside service facilities, and other infrastructure projects.

A 1% social tax rate was introduced for trade and service enterprises two years ago. As a result, the number of such businesses has grown by 1.5 times. Due to more entrepreneurs operating transparently and accurately reporting monthly salaries, the wage fund has increased 3.2 times, leading to additional budget revenues of 2.1 trillion UZS.

Considering these positive outcomes, extending this tax incentive for another three years has been proposed. The incentive will now apply to employees under 30, earning at least 3 million UZS monthly in the service sector. Additionally, construction, trade, and catering businesses will be allowed to sign short-term, simplified employment contracts with their workers.

Over the past three years, 27 types of government services have been transferred to the private sector. However, many services under various ministries could still be outsourced to entrepreneurs. In 2025, 29 state services are planned for transfer to the private sector.

A key objective has been set to develop open, transparent, and favorable conditions for renting or privatizing land plots and state-owned property.

The Presidential Resolution of December 20, 2024, on a new system for ensuring high economic growth and employment in the regions has created significant opportunities. According to this resolution, starting from March 1, 2025, state-owned properties up to 10,000 square meters that remain unsold for six months will be offered direct lease to entrepreneurs for 10 years. If the entrepreneur pays rent on time for four years, they can privatize the property. Additionally, young entrepreneurs who train youth in IT and foreign languages with international certification will receive one year of free rent.

The Head of state also emphasized the need to expand exports of remote services. To achieve this, a task has been set to study foreign service markets and train specialists to meet their demands.

This year, $50 million has been allocated to startup projects in the creative economy to support youth initiatives and attract Uzbekistan professionals working in foreign companies.

Overall, plans include a 30% increase in IT services, reaching 80 trillion UZS, expanding IT service exports beyond $1 billion, and accelerating the digitalization of services across regions and industries.

A well-developed transport infrastructure is essential for service sector growth. Last year, transport services grew by 8.6%, reaching 145 trillion UZS. However, this increase remains insufficient to sustain high economic growth rates.

Additional measures will be implemented to enhance the transport sector, including increasing the number of flights and train routes between cities, constructing multimodal logistics centers, raising the share of transit cargo, and expanding the taxi network.

These initiatives are expected to boost the volume of transport services to 185 trillion UZS and export revenue to $2.3 billion in 2025.

Tourism remains the largest segment of the service sector. Over recent years, Uzbekistan has established connections with more than 90 countries, leading to a fourfold increase in foreign tourist arrivals. In 2024, tourism exports generated $3.5 billion.

However, the country’s tourism potential remains significantly higher. For instance, many Malaysian and Indonesian citizens desire to visit the mausoleums of Uzbekistan’s great scholars before performing Umrah. Uzbekistan plans to launch a new tourism package, “Umrah Plus” to accommodate this demand.

Hosting international concerts and forums in major tourist hubs such as Samarkand, Shakhrisabz, Bukhara, Khiva, and Tashkent is expected to attract many visitors. This will stimulate growth in the hospitality, dining, retail, and entertainment sectors.

The social sector also presents new opportunities. Last year, Uzbekistan launched the “Medical Hospitality” program to attract foreign patients and increase medical service exports.

Over the past eight years, 125 new higher education institutions have been established, yet education exports remain significantly below potential. Additionally, several unused cultural and arts centers could be transferred to the private sector for more effective use.

At the meeting, the President listened to reports from sector leaders and engaged in dialogue with entrepreneurs. Industry executives outlined plans to create jobs for 2.5 million people in the service sector across regional areas in 2025.