THE PROMISEOF SERVICES-LED GROWTHIN UZBEKISTANTHE PROMISEOF SERVICES-LED GROWTHIN UZBEKISTAN ?AT YOURAT YOURSERVICESERVICE THE PROMISEOF SERVICES-LED GROWTHIN UZBEKISTAN © 2024 International Bank for Reconstruction and Development /The World Bank1818 H Street NWWashington DC 20433Telephone: 202-473-1000Internet: www.worldbank.org This work is a product of the staff of The World Bank with exter-nal contributions. The findings, interpretations, and conclusions ex-pressed in this work do not necessarily reflect the views of The WorldBank, its Board of Executive Directors, or the governments theyrepresent. The World Bank does not guarantee the accuracy of the data includ-ed in this work. The boundaries, colors, denominations, and other in-formation shown on any map in this work do not imply any judgmenton the part of The World Bank concerning the legal status of any ter-ritory or the endorsement or acceptance of such boundaries. Rights and PermissionsThe material in this work is subject to copyright. Because The World Bank encourages dissemination of its knowledge, this work may bereproduced, in whole or in part, for noncommercial purposes as longas full attribution to this work is given. Any queries on rights and licenses, including subsidiary rights,should be addressed to World Bank Publications, The World BankGroup, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: pubrights@worldbank.org. Cover Design:Ellie Foster, London, United Kingdom Layout design and typesetting:Piotr Ruczynski, London, United Kingdom Contents Acknowledgements8Abbreviations9 Executive Summary10 CHAPTER 1The Services Sector and Structural Transformation 16The contribution of the services sector to growth and jobs17Inside the black box of the services sector21 CHAPTER 2 Contestability: Trade restrictions and domestic market competitiveness33Connectivity: Enabling digital and physical connections40Capabilities: Enhancing worker skills and management practices in firms43 CHAPTER 3Strengthening the Linkages between Services and Other Sectors47 Weak linkages between services and other sectors48Telecommunications: The backbone for digitalizing the economy53Transportation and logistics: Facilitating trade in goodsand movement of people56 CHAPTER 4 Expanding Global Innovator Services63The nascency of export-led growth in global innovator services64Raising the potential to compete in international markets67 CHAPTER 5 Improving the Growth Prospects of Low-skilled Services71The potential to improve the productivity of jobs72Export-led growth in tourism-related services73The use of technologies in low-skilled (non-tradable) consumer services76 CHAPTER 6 Key Recommendations80 ANNEX FOR CHAPTER 1:Decomposition Methodology85 BOXES 222324343639516517181920202122242525skilled men than women251.9Uzbekistan’s services sector is dominatedby low-skilled services as well as socialservices—with little prominence of globalinnovator services—which is consistent with itslevel of per capita income261.10Within the services sector, femaleemployment is mostly in social services andlower skilled services271.11Global innovator services are both themost productive services as well as the biggestdrivers of productivity growth282.1Compared to global comparator countries,Uzbekistan underperforms on the policydimensions of connectivity, capabilities, andcontestability322.2Trade in services is characterized by majorrestrictions in most sectors, with some sectorsvirtually closed to competition332.3There are many businesses with stateownership in the services sector, including insubsectors where private provision can beeffective352.4Services restrictions correspond to tariffequivalents of more than 25 percent for mode1 trade and more than 15 percent for mode 3trade352.5Liberalizing barriers to services trade inUzbekistan is expected to increase GDP, tradeand investment.362.6There are large impacts of servicesliberalization across all sectors, also outside ofservices.372.7Liberalizing services is expected toincrease incomes of both unskilled and skilledworkers382.8There are large gains in output and wagesof liberalizing barriers to services trade inUzbekistan382.9Uzbekistan has the highest trade costscompared to its regional peers and these haveincreased over the past two decades402.10Uzbekistan has experienced a decline in itslogistics performance since 2018 with regard toinfrastructure, tracking, tracing, and timeliness412.11Uzbekistan’s overall logistics performancescore lags regional comparators41 1.1Methodology for classifying services1.2Modes of services trade1.3Migration and trade in services2.1Measuring restrictions to services trade2.2Economic gains from reducing restrictionson services trade2.3Leveraging Uzbekistan’s WTO accessionprocess to reduce services trade restrictions3.1Financial services in Uzbekistan4.1Case studies of reforms driving growth inservices FIGURES 1.1Uzbekistan has sustained high rates ofecono