THE IMPACT OF FOREIGN DIRECT INVESTMENT (FDI) ON UZBEKISTAN’S ECONOMIC GROWTH

Аннотация

The present study examines the immediate contributions of Foreign Direct Investment (FDI) to Uzbekistan's GDP growth rate and its contribution to the macroeconomic environment. The paper investigates the relationships between FDI, trade openness, inflation, population growth, and GDP per capita growth by employing time-series data and econometric methods such as multiple linear regression. They show that FDI helps specific sectors, but its general impact on growth is limited and sector-specific, with significant variability across industries. The need for reform of economic policies to diversify FDI inflows and an increase in the strength of institutional frameworks to guarantee sustainable economic development became apparent in the joint study. This research points to insights that can inform policymakers on how to maximise the role of FDI in supporting Uzbekistan’s growth trajectory and promoting a more inclusive economic environment. Key Words: Foreign Direct Investment (FDI), Uzbekistan, economic growth, trade openness, macroeconomic stability. 1.0 Introduction In the last years, the role of Foreign Direct Investment (FDI) attributing to economic growth in developing economies has received attention in the global economy. FDI is another way of channeling capital, technology or knowledge transfer, thus serves as a catalyst in increasing productivity, employment and industrial development. In the context of emerging economies, they perceive FDI as an important tool for overcoming capital deficits, developing infrastructure, and bolstering global economic integration. For many developing states, attracting FDI has become a key goal, so that countries can fortify their economies and compete in the international economy. 362 SCIENCE SHINE INTERNATIONAL SCIENTIFIC JOURNAL Issue 9(44), Volume 1 | ISSN 3030-377X | 10.05.2025 Uzbekistan, a resource-rich country in Central Asia, is witnessing important economic reforms aimed at transitioning the once state-controlled economy to a more market-oriented approach in recent years. Uzbekistan has undertaken initiatives to attract foreign investment since its independence in 1991, achieving significant success in areas such as energy, manufacturing, and agriculture. Uzbekistan's GDP growth in recent years rages around 6-7% as mentioned in the World Bank source, which is done mostly due to foreign investment. Despite progress, it still grapples with some challenges in terms of maximizing the full potential of FDI, including bureaucratic hurdles, an underdeveloped financial sector, and an overreliance on certain sectors like energy and textiles. The role of foreign direct investment ( FDI) into economic growth of Uzbekistan remains among the topics that are debated by economists. On the one hand, some research demonstrates that foreign direct investment (FDI) has played a crucial role in the country's industrial development and expansion of important sectors, while on the other hand, critics point to the uneven distribution of FDI and its little effect on advancing rural development and abating poverty. However, it is also not well established in existing literature whether/how FDI directly relates to GDP growth rates or whether it does in fact lead to sustainable economic development for Uzbekistan. The purpose of this study is to analyze the effect of FDI on Uzbekistan's economy, measuring both the direct and indirect impact of FDI on Uzbekistan's GDP. More specifically, it aims to determine the role of FDI in economic growth, whether it has been one of the main drivers of growth, and which sectors have seen the most benefit from foreign investment. There is a novelty in this study as it relies on data from relatively recent which uses FDI inflow and GDP growth to conduct analysis of the subject matter. It will employ advanced econometric techniques, including regression analysis, to determine the relationship between FDI and economic growth as well. Two-fold significance of this research On an academic level, it contributes to the growing literature on the economic effects of FDI in transitional economies, and Central Asian economies in particular. In terms of practical implications, the results may help the policymakers in Uzbekistan regarding the success of their FDI policies and the ways to improve their investment attractiveness and ensure beneficial FDI flows. It also serves as an important handbook for businesses and investors looking for opportunities in the country with big potential for growth and development. 363 SCIENCE SHINE INTERNATIONAL SCIENTIFIC JOURNAL Issue 9(44), Volume 1 | ISSN 3030-377X | 10.05.2025 The rest of the paper is organized as follows: Section 2 describes the research methodology including the data collection methods, statistical tools, and econometric techniques used in the analysis. Section 3 provides the empirical results, showing the link between foreign direct investment and economic growth in Uzbekistan. Section 4 presents the resu