Strengthening the Economic, Financial and Technological Dimensions of Water Efficiency in Uzbekistan

Executive Summary

Uzbekistan is the second-largest economy in Central Asia and has set an ambitious goal to achieve upper-middle-income status by 2030. The country’s recent economic growth has been buoyed by wide-ranging reforms since 2017, and the annual real GDP growth rate has been approximately 6% over the past three years. However, rapid economic and population growth are increasing demand for water, which may constrain long-term economic development and environmental sustainability.

The government has undertaken reforms to strengthen water resource management, including the re-establishment of the Ministry of Water Resources and the adoption of the Water Sector Development Concept for 2020–2030. Uzbekistan has also committed to expanding access to safe drinking water and sanitation. Despite progress, significant service gaps remain in some regions. Uzbekistan is seeking to mobilise additional investment in infrastructure. Under the public-private partnership (PPP) development programme for 2024–2030, the government aims to attract at least USD 30 billion in private investment across infrastructure sectors, including for water supply and sanitation. Public funding for water-related infrastructure has increased in recent years, supported by both domestic resources and external financing. Nevertheless, a substantial financing gap persists. Current funding levels remain insufficient to modernise ageing infrastructure and achieve national water security objectives.

In this context, the OECD, the Asia Water Council and the Scientific Information Centre of the Interstate Commission for Water Coordination, in co-operation with Uzbekistan’s Ministry of Economy and Finance and the Ministry of Water Resources, convened a national Dialogue on water during 2024 and 2025.

Towards a more conducive enabling environment for water security investments

Uzbekistan’s enabling environment for investment in water security was assessed using the OECD Scorecard. The analysis indicates that while the country has made progress in strengthening its macroeconomic and governance framework, the investment environment remains only partially conducive to large-scale water-related sector investment.

Limited cost recovery, regulatory fragmentation and institutional complexity increase transaction costs and reduce investor confidence. Overlapping mandates and unclear procedures create inefficiencies and undermine financial sustainability. Data gaps, particularly regarding sanitation coverage and service performance, limit the ability to design evidence-based policies and investment strategies. The application of the legislative framework to guide infrastructure investment and stakeholder participation to water-related projects remains uneven. Strengthening policy coherence across water, agriculture and energy sectors would help ensure that economic incentives support water security objectives and create a more predictable investment environment.

Removing barriers to deliver Uzbekistan’s PPP agenda in water sectors

Mobilising private sector participation through PPPs is a central component of Uzbekistan’s strategy to finance water infrastructure. Although a modern PPP Law was adopted in 2019 and a PPP Centre established, the use of PPP contracts for water projects remains limited. Many water infrastructure projects, particularly in rural water supply and irrigation, are small and fragmented, making them difficult to structure as financially viable PPPs. Low tariffs and historically low collection rates reduce the ability of operators to generate stable cash flows, increasing perceived financial risks for investors. Addressing these constraints will require improvements in tariff policies, financial sustainability and risk allocation frameworks. Strengthening PPP governance will be important to improve project bankability. PPP models should also be adapted to the characteristics of water infrastructure projects.

Introducing new technologies for water efficiency and demand management

Accelerating the adoption of modern technologies and innovative practices is essential to achieve water security while responding to increasing water scarcity. Digital technologies and improved monitoring systems can enhance water management and operational efficiency. Smart monitoring systems, improved groundwater monitoring and better data systems for irrigation and drainage management can support more effective water allocation and infrastructure management. Technology adoption should be accompanied by investments in training, research and institutional capacity to ensure that innovations are implemented effectively and sustainably.

Recommendations to enhance water security in Uzbekistan

The Dialogue set out priority recommendations organised into a multi-pillar action plan, as follows:

• Clarify and consolidate the PPP regulatory framework to attract investment in water and wastewater services delivery, by clarifying responsibilities and establishing a publicly accessible legal framework for water-related PPPs.

• Improve PPP oversight and governance to ensure long-term sustainability, by improving coordination between ministries to streamline decision-making, enhancing evaluation systems for PPPs, and building institutional and technical capacity.

• Remove barriers to PPP implementation in water through improved risk allocation, sectoral mapping and increased competition. This calls for mapping sectoral infrastructure needs, enhancing transparency in procurement and creating a framework for unsolicited PPP proposals.

• Strengthen the sustainability of water resources management through economic instrument reforms and cross-sectoral coherence, through advancing agricultural tariff reforms to support PPP introduction and aligning water efficiency measures with water security objectives.

• Enhance water and wastewater service performance to attract additional financing, particularly through addressing non-revenue water.

• Update technical standards and promote innovation to safeguard water security, through safety management measures for dam evaluation, strengthening groundwater monitoring systems and introducing a master plan to improve irrigation and drainage networks.

• Expand and upgrade water-related education and training programmes, focusing on building capacity in Uzbekistan’s universities to increase the number of sectoral experts.

• Improve cross-sector policy coherence across government departments based on collaboration and shared objectives to ensure policy coherence, including organising regular multi-stakeholder National Policy Dialogues on water.