Note of Comment on Labour Reforms in Uzbekistan

As is widely known, Uzbekistan embarked in 2016 in a social, economic and political reform process, institutionalized in the Development Strategy framework of Uzbekistan for the period 2017-2021. This includes the modernization and effective regulation of the labour market as the country’s ability to create sufficient quality jobs is an importance factor to sustain the entire reform process.

Five years into the process we can already see the first results of such mammoth undertaking: wide-ranging judicial and administrative reforms, improvement of transparency in law enforcement, market-oriented economic reforms (currency liberalization, dismantling of monopolistic practices and price controls, etc), actions for the generation of employment (through support to SMEs, etc), just to name a few.

The creation of a more open, competitive and enabling environment for market forces has facilitated Uzbekistan’s participation in regional and global trade and improved the business climate. A rapid inflow of Foreign Direct Investment (FDI) levels has been the outcome, with investors flocking to Uzbekistan in big numbers.

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A few weeks ago, for example, Dutch-registered company Stone City Energy announced the construction of a Thermal Power Plant (TPP) in the Surkhandarya Region in South-East Uzbekistan which is expected to create 2,000 jobs and 150 additional specialist jobs.

In the field of labour reforms, new laws have introduced to deter forced and child labour, such as the establishment of criminal liability for these practices. The strengthening of labour rights in Uzbekistan is evident, for example, in the findings of the third-party monitoring of the 2020 cotton harvest conducted by the ILO. This report notably concludes that there is no longer evidence of systemic forced or child labour during the cotton harvest. Further measures are envisaged to ensure full elimination of forced labour in the context of a fully privatised cotton production.

Looking into the future, active work is being carried for the development and implementation of new legal instruments, frameworks and strategies to strengthen labour reforms. Among these we can highlight the following:

 

  • The development of a National Employment Strategy - a long-term action plan for the next 5-10 years aimed at covering the entire sphere of employment and labour relations, with the support of the ILO. A wide array of actors (both state and non-state) at all levels (national, regional and local) is involved in the development of this strategy.

 

  • Furthermore, the country’s Labour Code is being updated for the first time since 1995 – the new Labour Code is currently under review by legislators awaiting the second hearing at the Oliy Majlis. It will take into account ILO recommendations on key conventions No. 87 (Freedom of Association and Protection of the Right to Organise Convention) No. 98 (Right to Organise and Collective Bargaining), No. 100 (Equal Remuneration Convention) and No. 111 (The Convention concerning Discrimination in Respect of Employment and Occupation or Discrimination). We can expect the new labour code to include provisions such as for example raising the minimum working age until the completion of compulsory education.

 

  • Third, Under President Shavkat Mirziyoyev, the role of the State Labour Inspectorate has been substantially strengthened. The State Labour Inspectorate was established as a department of the Ministry of Employment and Labour Relations in December 2018. Since then, it is playing an important role in the mitigation of labour rights violations and in particular by enforcing laws designed to eliminate systemic forced and child labour during cotton harvest. A number of steps have been taken to strengthen the mandate and capacity of the Inspectorate, which has undergone an expansion of human resources, and inspectors have been given more powers to access unhindered the workplaces. Furthermore, the ratification by the Republic of Uzbekistan of ILO Conventions No. 81 (Labour Inspection Convention) and No. 129 (Labour Inspection (Agriculture) Convention) opens up new opportunities for improving the labour inspection system.

 

Labour inspection is a vital government function. It is at the core of ensuring and maintaining decent working conditions and the realization of fundamental principles and rights at work. It is therefore also essential for the achievement of the 2030 Sustainable Development Goal 8 related to decent work and economic growth.

 

Successful ratification and implementation of core international human and labour rights conventions has also made it possible for Uzbekistan to access the GSP+ scheme of the European Union. This will create opportunities for export growth and attract further investments in the country. It will also facilitate the participation of Uzbekistan into global supply and value chains and diversify exports beyond a narrow base. In the context of the ongoing COVID-19 pandemic, GSP+ will enable Uzbekistan to focus on a trade-led recovery from the crisis.

Taking a look at the macro picture, we see that Uzbekistan currently has a unique demographic window of opportunity as 500,000 youths are entering the labour market on a yearly basis. To this end, ADB principal economist Mr Kiyoshi Taniguchi noted that “the labour market is Uzbekistan’s greatest challenge and opportunity at the same time”. Successfully integrating job seekers to the labour market could transform Uzbekistan into a rapidly growing and diversifying economy and push Uzbekistan’s economy toward upper-middle-income status.

Labour reforms will need to take into account the Uzbek economy’s changing structure, increased digitalization and introduction of other advanced innovative technologies. In short, the structure of domestic employment is moving gradually toward industry and services and away from primary and labour-intensive industries such as agriculture. Increasingly, the service sector will hold the most potential for high-quality job creation. Services-related SMEs, especially tech-based SMEs, could play an important role in boosting national productivity through innovation and skills development.

At the same time, labour reforms must go hand-in-hand with education reforms. In order to prevent mismatches between labour supply and demand, the education system and curricula of schools and vocational training institutions should be reflective of the skills and qualifications demanded in an increasingly open and modernizing Uzbek economy, and be aligned with the needs of the bourgeoning private sector.

 

Alberto Turkstra, Project Manager, Diplomatic World Institute