Reform Outcomes: An Established Foundation and New Constraints on Growth
Economic Growth Is Becoming More Diversified
In the first half of 2026, Andijan Region’s economy grew by 8.8%. Industrial production increased by 9.2%, services by 16.1%, and investment by 8.9%. Thus, the services sector is demonstrating the strongest momentum, with its growth rate almost twice as high as the overall rate of economic growth.
These indicators reflect a significant expansion of the region’s resource base. Over the past 10 years, 20 trillion sums has been allocated to the region from the national budget, while bank financing for entrepreneurship reached 90 trillion sums. This year alone, another 6 trillion sums has been allocated to improve household well-being. The scale of resources mobilized shows that the key issue is gradually shifting from access to financing toward its returns — namely, the extent to which invested funds translate into productivity, employment, and sustainable sources of income.
At the same time, a sizeable layer of regional businesses has emerged. The region is home to 104 enterprises with turnover exceeding 100 billion sums, including 4 enterprises with turnover of more than 1 trillion sums. This means that further growth can rely not only on the creation of new businesses, but also on scaling up existing companies, upgrading their technologies, and integrating small businesses into the production chains of large enterprises.
The Industrial Base Has Been Established, but Technological Upgrading Is Now Required
One of the region’s most important accumulated assets is its industrial expertise. Automotive manufacturing and mechanical engineering have been developing in Asaka for 30 years. However, further increasing the returns from this base requires a transition from production capabilities toward proprietary technologies, engineering solutions, electronics, and software products.
The region has substantial educational resources to support this transition. 95,000 students are enrolled at 12 universities, while another 60,000 young people study at 59 technical colleges. Of these, 10,000 students are pursuing degrees in engineering, energy, industry, and information technology. In addition, the region has 46 industrial zones and 56 large enterprises, creating an institutional foundation for closer integration between education and production.
An example of this model already exists: in the Ipak Yuli industrial zone, an investor has opened a technical college where education is combined with scholarships and subsequent employment. This is gradually creating a mechanism for training personnel directly in line with the needs of specific industries.
Infrastructure Investment Has Improved the Quality of Basic Services
Significant progress has been achieved in providing the population with drinking water. In recent years, 1.5 trillion sums has been invested in this area, bringing drinking water coverage to 93% — the second-highest level after the capital. At the same time, 9 km of sewer networks are being reconstructed in Andijan.
The development of a new urban space is also continuing. Babur City is being built on an area of 4,000 hectares; 25,000 people have already moved into new homes, while construction has begun on 800 apartment buildings designed for another 200,000 residents. This is gradually creating a new center of demand for retail, education, healthcare, hotels, and other modern services.
Transport accessibility is also improving. In September, the high-speed Tashkent–Andijan train began operating, reducing travel time from 6 to 4 hours. A bridge on Babur Street has also been commissioned in Andijan. Better interregional and intra-urban connectivity reduces the time costs associated with the mobility of people and businesses.
More Intensive Production Models Are Being Tested in Agriculture
Agriculture already has individual projects that can serve as a basis for scaling up new models. A poultry meat production complex worth $20 million has been launched in Baliqchi District, while a 5-hectare greenhouse project has been designated as a model for further replication.
At the same time, only 16% of the vegetables and fruit grown in the region are currently processed. This points to a substantial gap between agricultural production and the creation of value added after harvesting. Therefore, further policy is shifting the focus away from increasing physical output toward processing, storage, branding, and exports of finished products.
The New Constraint Is Not the Volume of Resources, but Institutional Efficiency
The results of the reforms have also revealed several structural constraints. In particular, the $3.5 billion in investment planned for this year is insufficiently diversified by source country and sector. Despite the region’s human capital potential and exports of IT services, too little investment is being directed toward strengthening the sector’s technological base.
Constraints on access to financing also remain. Since the beginning of the year, 35,000 people have been unable to obtain loans because they lacked sufficient collateral or a guarantor. Thus, the traditional collateral-based lending model is beginning to restrict further expansion of entrepreneurship even where businesses have orders, turnover, and stable cash flow.
Additional constraints include declining turnover and employment at some enterprises, the closure of a number of businesses, and prolonged court proceedings involving disputes over loans, purchase and sale agreements, supplies, utilities, and tax arrears. The next stage of regional policy is therefore focused not simply on providing resources, but on changing the mechanisms for their allocation and the way businesses are supported.
New Priorities: Transitioning to a Value-Added Growth Model
Investment Policy: Returns from Every Square Meter
A central element of the new approach is a change in the criteria used to assess investment. Recently, 1,000 hectares of land were allocated for industry and entrepreneurship. This area is expected to attract $7 billion in investment and create at least 70,000 high-income jobs. Given the scarcity of land, investment efficiency will now be assessed by the amount of value added generated per square meter.
The project management mechanism is also changing. Based on the experience of Karakalpakstan, project manager positions are being introduced in another 13 regions. In Andijan, such a manager is expected to develop a new investment model for the region. The industrial, service, and agricultural potential of each district is to be assessed using artificial intelligence, after which sectors with the highest potential for value added will be identified and targeted plans for attracting foreign investors will be developed.
Another source of growth is the scaling up of already successful businesses. Expansion projects are to be prepared for 104 enterprises with turnover above 100 billion sums, with the potential to create an additional 20,000–30,000 jobs. At 4 enterprises with turnover exceeding 1 trillion sums, technological modernization is expected to increase value added by 40–50%.
On this basis, next year’s targets are to achieve economic growth of at least 10%, attract $5 billion in investment, and increase exports to $1.5 billion.
From Industrial Assembly to Engineering Capabilities
An “Engineering Valley” is planned in Asaka, bringing together software development, electronics, electromechanics, and engineering services. The economic logic of the project is to use the 30 years of accumulated experience in automotive manufacturing and mechanical engineering to move toward developing proprietary technologies and increasing the domestic component of value added.
A similar task has been set for the textile industry. The involvement of European designers, engineers, and brands is expected to help shift specialization from relatively standardized products toward higher-value goods. Under such a transition, the sector’s export potential is estimated at more than $1.5 billion.
Agriculture: Maximizing Value from Limited Land
The same principle of intensive land use is being applied in agricultural policy. In Ulugnor District, 5,000 hectares shifted from cotton to fodder crops will provide a feed base for at least 10,000 head of cattle. By the end of the year, grazing conditions are to be created on at least 200 hectares of land along agricultural fields, while projects for large livestock complexes are to be prepared in Ulugnor and Buston.
The experience of the $20 million poultry complex in Baliqchi is expected to be replicated in other districts: 4 projects are to be launched in Jalaquduq and another 3 in Khojaobod. A fish-farming cluster is planned on 1,200 hectares in Ulugnor.
Another reserve lies in the foothill areas of Jalaquduq, Marhamat, Asaka, and Andijan districts. A specialized company, Agrostar, is expected to provide water to 4,000–5,000 hectares by spring and establish industrial orchards producing peaches, cherries, apricots, and plums. The orchards will be cultivated for 3 years before being transferred to the population as fully established farms. The program provides $30 million, with an additional 200 billion sums allocated for water supply to foothill areas.
In the fruit and vegetable sector, a “maximum value per hectare” principle is being introduced. The processing rate is expected to rise from the current 16% to 30%, while exports are to reach $500 million. 100 billion sums has been allocated to provide households with small processing units under leasing arrangements.
A pilot 5-hectare greenhouse project in Baliqchi will be scaled up nationwide. 300 billion sums will be allocated to this program, of which 50 billion sums will be directed specifically to Andijan Region.
Adapting the Textile Sector to Deteriorating External Market Conditions
Lower external demand for cotton and rising logistics costs require a dedicated support system for farmers, clusters, and producers of finished goods. A farmer selling cotton through the commodity exchange and the cluster purchasing it will each receive 500,000 sums per ton. Clusters growing cotton on their own land will receive a subsidy of 1.5 million sums per hectare.
For exporters of finished goods, a mechanism is being developed to compensate part of their interest expenses for 3 years: for foreign-currency loans, the portion of the rate above 5%, and for loans in national currency, the portion above 14%. In addition, a proposal is being considered to refund 3% of the value of goods sold through marketplaces. Taken together, these mechanisms are intended to reduce financing and sales costs during a period of deteriorating external conditions.
Incentives Are Shifting Toward Enterprises That Create Large-Scale Employment
The new support system links government incentives directly to the number of jobs created and the quality of human capital. Enterprises employing at least 1,000 workers are expected to receive compensation for 50% of the costs of employee training and professional development, as well as transportation to and from the workplace. Employees of such enterprises with at least 5 years of service will also have their children’s education contracts covered.
Enterprises approaching the threshold of 1,000 jobs will also be eligible for separate grants. $20 million has been allocated for this purpose in Andijan Region alone. A draft of the corresponding decision is to be prepared within 1 month.
Education Must Be Integrated Directly into Production
To transform Andijan into an engineering talent hub for the Fergana Valley, practical departments of universities and technical colleges are expected to be relocated directly to the premises of 46 industrial zones and 56 large enterprises. By the end of the year, the share of dual education should reach at least 80%.
This restructuring is driven by the investment cycle: new projects worth around $7.5 billion will increase demand for engineers in energy, hydraulic engineering, electronics, mechanical engineering, IT, and logistics. In this context, Andijan Technical Institute will be transformed with the involvement of foreign managers and lecturers and with updated curricula. A separate design faculty will operate on the basis of dual education and be linked to industrial enterprises; 25 billion sums has been allocated for its establishment.
Thus, human capital policy is effectively shifting from a model in which education and production operate in parallel toward a model in which specialists are trained for specific investment demand.
Energy: Local Resources as a Source of Support for Industrial Growth
Industrial growth is increasing the burden on the energy system. Andijan Region’s hydropower potential is estimated at 200 MW, corresponding to the ability to generate around 500 million kWh of electricity per year. There are already 400 applicants interested in constructing small and micro hydropower plants with a combined capacity of 44 MW, while turbines for such facilities are already being produced within the region.
Over the next 2 years, a mechanism is planned for the turnkey construction of micro hydropower plants, followed by their transfer to entrepreneurs under leasing arrangements. Hydropower cascades are also expected to be incorporated into the concreting of 81 km of canals. This links energy development with water infrastructure while simultaneously lowering the initial investment barrier for private businesses.
New Urban Areas Should Become Platforms for Private Business
The relocation of government organizations from Andijan to Babur City will free up 30 administrative buildings, 13 hectares of land, and around 70,000 square meters of premises. These assets are expected to be used for the development of trade and services. Their potential is estimated at an additional $1 billion in investment and at least 20,000 jobs.
The centers of Asaka, Shahrixon, Qurghontepa, and the city of Khanabad are also expected to be transformed into areas for high-income businesses. Their master plans will be adapted to projects capable of creating at least 20,000 jobs in trade and services.
An additional investment incentive is being introduced for Babur City. Because projects involving shopping complexes, business centers, hotels, private educational institutions, medical facilities, and sports facilities have long payback periods, the initial land price for such projects will be set at half the price of land allocated for residential construction.
Bank Financing Is Shifting from a Collateral-Based Model to Business Assessment
One of the most significant institutional changes is the revision of state banks’ lending approaches. The problem faced by 35,000 potential borrowers who could not obtain loans due to the lack of collateral or a guarantor is to be addressed through broader use of data on the actual condition of businesses.
Credit assessments are expected to take into account cash flow, orders and contracts, accounts receivable, turnover, and the enterprise’s position in the production chain. A long-term contract between a small enterprise and a leading company or major customer may be accepted as loan security.
For projects worth up to 500 million sums, a business plan will no longer be required — the decision should be based on cash flow. When financing the purchase of raw materials for export production, an insurance policy may serve as sufficient collateral. 9 state-owned banks have been instructed to develop 20 new banking products focused on business development within 1 month.
In practical terms, this represents a shift away from assessing primarily the borrower’s accumulated assets toward assessing the borrower’s ability to generate income in the future.
Tax Administration Is Acquiring an Early-Response Function
The role of tax authorities is also changing. If an enterprise experiences declining revenues or job losses, the local tax officer at the mahalla level is expected to identify the reasons and, together with the assistant hokim and the mahalla banker, propose response measures to the district task force. Possible solutions include tax payment deferrals, loan extensions, provision of working capital, and assistance with market access or exports.
At the same time, the individual cycle required for a business to reach profitability should be taken into account, while youth employment is becoming one of the criteria for evaluating the performance and remuneration of mahalla tax inspectors. Thus, the oversight function is being supplemented by a mechanism aimed at preventing business closures and job losses.
Transport and Logistics Should Remove the Region’s Spatial Constraints
Construction of the China–Kyrgyzstan–Uzbekistan railway is viewed as an opportunity to increase freight volumes tenfold — to 15 million tons per year. To serve the new traffic flow, a $600 million logistics complex project is to be launched by the end of the year on 300 hectares in Qurghontepa and Khanabad.
Cross-border infrastructure is also gaining particular importance. An agreement has been reached with Kyrgyzstan to open the Keskaner checkpoint, which will be twice as large as the existing Dustlik checkpoint. The project is to be developed and construction launched within 3 months. Freight-handling capacity is expected to increase 2–3 times, while delivery times should be shortened by 1 week.
To accommodate new transport flows, design work is beginning on the 78-km Khanabad–Andijan toll road. Practical work on the construction of the Tashkent–Andijan toll motorway is also expected to begin next year. Together with the already launched high-speed train, which reduced travel time from 6 to 4 hours, these projects should improve both external logistics and the region’s connection with the country’s largest domestic market.
Utility and Social Infrastructure Is Expanding Alongside Population Growth
Following the achievement of 93% drinking water coverage, the next stage will be the construction, starting next year, of a second line of the Khanabad–Andijan trunk water pipeline, which is expected to improve water supply for 1 million residents. Once the current 9 km of sewer networks in Andijan have been reconstructed, funding will be redirected to upgrade the remaining 15 km. The capacity of wastewater treatment facilities in Oltinkol is expected to be doubled, with the project scheduled to begin next year.
A specific barrier has been identified in women’s employment: around 3,000 women who would like to work remain occupied with childcare. Although preschool coverage has reached 86%, entrepreneurs are prepared to open another 134 family kindergartens. The relevant agreements are to be formalized within 10 days. In addition, a separate $20 million women’s employment fund is being established.
In this case, social infrastructure is directly linked to labor supply: increasing the number of kindergarten places is viewed as a tool for returning some women to the labor market.
Digitalization Is Extending to Security and the Business Climate
In Andijan, Shahrixon, and Andijan District, deputy heads of internal affairs bodies responsible for digitalization and combating cybercrime are being introduced. Data from street cameras are expected to be analyzed using artificial intelligence to prevent disorderly conduct, theft, and road accidents.
At the same time, a program will be developed to strengthen cybersecurity and digital literacy among employees of publicly funded organizations, school pupils, students, and pensioners. The model has been instructed to be extended to other regions by the end of the year.
Reducing Transaction Costs Should Also Extend to the Judicial System
Another area for improving the business environment is accelerating the resolution of commercial disputes. In October–November, training is planned across the country for entrepreneurs and lawyers from government organizations on pre-trial dispute resolution, reducing the number of disputes, and court procedures.
Within 1 month, procedural legislation is to be reviewed and proposals prepared on categories of cases that could be considered under simplified procedures and within shorter timeframes. The economic effect of such an approach is primarily associated with reducing the amount of time during which business funds and assets remain tied up in protracted disputes.
Territorial Development Is Moving to the Mahalla Level
Finally, next year a program is expected to be prepared to give 100 mahallas in Andijan Region the appearance of “New Uzbekistan.” Alongside major investment and infrastructure projects, this creates a local dimension of policy — improving streets, maintaining irrigation networks, and greening territories.
A New Logic for Regional Economic Policy
Taken together, the announced measures indicate a transition toward a more intensive development model for Andijan Region. Limited land resources make further growth through the simple expansion of land areas increasingly ineffective. Therefore, the productivity of existing resources is becoming the key criterion: value added per square meter of industrial land and per hectare of agricultural land, the technological level of enterprises, the number and quality of jobs created, and the ability of the education and financial systems to support the new investment cycle.
At the same time, the new measures form several interconnected chains. Technological modernization requires engineering talent — hence the expansion of dual education. Industrial growth increases electricity demand — hence the micro hydropower program. New transport corridors increase freight flows — hence the development of logistics centers, border infrastructure, and roads. The limitations of traditional collateral-based lending constrain entrepreneurship — hence the transition toward assessing cash flows and contracts. The low level of agricultural processing limits returns from land — hence the development of processing, industrial orchards, and agricultural clusters.
The next stage of reforms in Andijan Region involves a transition from increasing the volume of resources to improving their economic returns. While the previous stage created the financial, infrastructure, entrepreneurial, and educational foundations, the new priorities focus on the productivity of capital and land, the technological upgrading of production, reducing institutional costs, and more closely linking investment with employment and household incomes.
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