Economy of Uzbekistan: Course Towards Dynamic Development of the Service Sector

As practice shows, a business begins to operate faster and more efficiently with low costs and high income. For the most part, these criteria fall within the service sector, including the areas of transport, banking and finance, consumer services, construction, tourism, trade and others.

Over the past two decades, these industries have been one of the most dynamically developing sectors of the world economy, and at the same time they are among the main sources of employment in both cities and rural areas. This is due to the increasing complexity of production, saturation of the market with new products, and accelerating scientific and technological progress.

According to the International Labor Organization, an increase in the service industry of just one percent can reduce the number of poor people by 1.5 percent. And its development today is very important for the entire national economic complex.

The role of this sector in the modern economy is associated not only with its predominance in this infrastructure, but also with the fact that services form such key factors of economic growth as scientific knowledge, intangible forms of accumulation, information technology, as well as the globalization of economic activity.

The entire variety of services in the modern economy can be grouped as follows. These are transport, communications, wholesale and retail trade, credit and financial sphere, insurance, household, cultural and recreational services and a block of social services (education, healthcare and others). The conclusion is obvious: all activities of not only citizens, but also the state are covered, which indicates the high potential of the sphere.

At the beginning of this millennium, this trend in the economies of leading foreign countries grew into the largest sector of the economy: the total share of the service sector in GDP reached almost 80 percent. In terms of growth rates in many countries, the leader is a set of new business services (engineering, construction, accounting and auditing, as well as marketing and advertising services, leasing operations and others).

New types of services are actively developing in Uzbekistan. Their importance for regional economies, primarily in urban agglomerations, has noticeably increased. Not long ago, online services (such as electronic banking and online shopping) were unknown to consumers. And today they already form an integral part of our lives.

In the modern information world, as a result of the widespread use of the Internet, logistics, the emergence of network payment systems and electronic document management, a new form of activity is actively developing – web commerce. More and more consumers are purchasing goods online, and organizations are in one way or another using the capabilities of the World Wide Web when carrying out business activities. In such conditions, the service sector contributes to an increase in free time, creates opportunities for more fully satisfying people’s needs, the development of society, and acts as an essential element in the formation of a modern quality of life.

This sector of the economy helps improve productivity and production efficiency. The final result is not a finished product, but the provision of services that can be provided to both enterprises and individuals – end consumers. In this context, it is extremely important for the effective functioning of an innovative developed economy not to be episodic and fragmented, but to be constantly interacting with all participants in the system.

In modern conditions, it is necessary to take into account natural changes in the ratio of material production and the service sector in favor of the latter, the value of which, according to economists, is increasing sharply. The fastest growing areas are computer and IT support (the result of scientific and technological progress, because now almost everyone has sophisticated equipment), and personnel selection services. Therefore, it is necessary to overcome the theoretical assessment of the service sector as a secondary sector that does not correspond to reality.

First of all, the state should promote the formation and development of small businesses, which occupy important positions in the service sector. After all, solving social, political and public problems is impossible without raising the economic potential of the regions and their sustainable development. Regional policy goals can only be achieved through the implementation of predominantly economically viable projects.

It is necessary to make up for lost time in the domestic service sector in terms of scientific and technical level. The priority direction of policy (especially conversion programs) should be the development of modern technical tools for small businesses and specific operations in service industries. The creation of a system of incentives for introducing innovations into production deserves special attention. It is also necessary to provide assistance to projects for the formation of technopolises, technoparks, and scientific incubators, which are already becoming centers of scientific research and development.

It is important to note that market forces are gaining greater freedom in many countries as a result of the privatization and corporatization of a number of services – primarily in the fields of transport, telecommunications, credit and finance, insurance, and trade. For effective management of facilities, economic independence is provided, that is, healthy competition, freedom to move to a contract model and a competitive form of financing institutions with equal participation in tenders by public and private structures.

Important global trends in the field include the decentralization of social infrastructure management systems in all countries, the delegation of a significant part of rights and responsibilities to the lower echelons of the management vertical.

However, such fundamental changes are impossible without financial support. For this reason, a great contribution to the development of the sector was made by the Presidential Decree “On measures for the accelerated development of the service sector” dated May 11, 2021, which provided for the allocation of a credit line from the Fund for Reconstruction and Development in the equivalent of $300 million to promote the direction. These funds were received by a number of organizations and startups, whose business ideas have already resulted in successful projects.

And such initiatives are important not only for the financial stability of the state. The development of this sector in the country has a significant impact on a variety of industries. This includes a significant increase in the number of service organizations, the emergence of foreign competitors on the market with experience in the service sector in their countries, and the strengthening of the non-state sector of the economy – small businesses and private entrepreneurship.

 The importance of the service sector has increased in the global economic space. As a result, services in our republic are undergoing dramatic changes, especially in recent years. This not only contributes to achieving high growth rates in the domestic service sector, but also creates an excellent basis for the further development of the country.

Thus, it can be argued that it is possible to solve this complex problem and achieve a breakthrough of domestic firms into the world market subject to rapid institutional, structural and scientific and technical changes in the relevant sectors of the economy of Uzbekistan. The use of marketing, taking into account the specifics of the sphere, is a necessary condition for successful economic development. This has every chance of stimulating production and updating the range of goods and services.