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

6. Recommendations and action plan from the National Policy Dialogue

Abstract

This chapter presents an action plan to strengthen Uzbekistan’s water sector by addressing key barriers to investment and public-private-partnership implementation. It outlines priority reforms to improve regulatory clarity, governance, economic instruments, service performance, technological innovation and capacity building to attract financing and enhance long-term water security.

Uzbekistan has made strong progress in strengthening its broader investment environment, with some advancements in water security and public-private-partnership (PPP) reforms. However, the assessment from the Scorecard highlights persistent barriers to investment in water security and specific ones that deter private sector participation through PPPs.

The following recommendations address key constraints identified and align with the government’s priority to advance PPPs in water-related sectors. Implementing these reforms would enhance investor confidence and accelerate water-related investments.

Key recommendations are outlined below. They have been brought together into an action plan, which outlines the identified challenges, specific actions required, expected outcomes and proposed timeline for implementation.

6.1. Clarify and consolidate the PPP regulatory framework to attract investment in water and wastewater services

Clarifying the regulatory framework for water and wastewater services. Ensuring a clear separation of regulatory responsibilities is essential to attracting private-sector investment. Despite multiple reviews, overlapping mandates, unclear processes and inadequate transparency continue to create inefficiencies in service delivery and financial sustainability, thereby deterring international PPPs. The absence of an independent regulatory authority contributes to uncertainty, with private-sector actors facing unclear regulations and fragmented oversight. A well-defined regulatory structure can improve governance, enhance transparency and strengthen investor confidence. The Water Code, adopted on 30 July 2025, presents an opportunity, once fully implemented, to clearly delineate ministerial responsibilities and introduce a robust regulatory framework, including a benchmarking system. This would improve regulatory monitoring and compliance and help ensure a more stable investment environment.

Establishing a transparent legal framework for water-related PPPs. A publicly accessible legal and regulatory framework for PPPs is crucial for creating a predictable investment environment. A legal risk-mitigation matrix could address risks related to water scarcity, financial instability and infrastructure failures, safeguarding both public and private-sector interests. In addition, clearly defining government roles and responsibilities in water-related PPPs would enhance accountability and reduce investor uncertainty.

6.2. Improve PPP oversight and governance to ensure long-term sustainability

Improving co-ordination between ministries to streamline decision-making, by establishing an inter-ministerial task force and clear guidelines for collaboration. Strengthening inter-ministerial co-ordination is essential for ensuring investor confidence and improving PPP implementation, which can be undertaken through consistent close co-ordination and ensuring long-term goals are aligned between ministries. Uzbekistan’s PPP framework involves multiple ministries, each with distinct responsibilities for PPP approval leading to inefficiencies and overlapping mandates that create implementation challenges. Clearly delineating responsibilities would streamline decision-making, improve efficiency and align national strategies with water sector goals.

Enhancing monitoring and evaluation systems for PPPs. Given the recent establishment of the dedicated Centre for Public–Private Partnership Projects, it is crucial to empower this new entity with robust monitoring and evaluation capacities. The Centre could establish a comprehensive framework defining clear, measurable indicators for project performance, financial viability and socio-economic impact. It could mandate standardised reporting protocols across all PPP projects. The Centre could invest in internal capacity building for monitoring and evaluation, providing specialised training for staff. Furthermore, the Centre could commission regular independent audits of PPP projects and ensure the public dissemination of monitoring reports to foster transparency and accountability, thereby strengthening investor confidence and optimising the long-term benefits of PPP initiatives in Uzbekistan.

Building institutional and technical capacity for PPPs through the promotion of mechanisms to recruit, develop and retain talent. Enhancing institutional and technical capacity within Uzbekistan’s government is essential for the successful design and implementation of PPPs. Strengthening the PPP Centre and relevant institutions will improve project structuring, negotiation and execution, addressing existing expertise gaps. Notably, many projects supported by international financial institutions also include dedicated capacity-building components.

Presidential Decree No. PF-74 of 7 May 2024 introduced increases in salary levels for employees in water-related sectors and expanded the range of revenue sources available for performance-based incentives financed through extra-budgetary funds. These measures represent an important step toward strengthening human capital, retaining qualified specialists and improving service quality. Building on these reforms, continued efforts to enhance specialised PPP-training programmes focused on project structuring, risk allocation, financial modelling and contract negotiation would further strengthen oversight and execution capacity and support the long-term sustainability of PPP arrangements.

6.3. Remove barriers to PPP implementation in water-related sectors

Developing a risk allocation matrix to improve PPP implementation. Using a risk allocation matrix before issuing PPPs would enhance project implementation and efficiency. Properly managing risks at the pre-procurement, planning, execution and transfer stages ensures sustainable and cost-effective PPPs. This is particularly relevant for irrigation PPPs, where limited experience requires additional planning to ensure value for money and public benefit. A risk allocation matrix should ensure risks are assigned to the party best equipped to manage them, optimising efficiency, increasing investor confidence and improving PPP performance.

Mapping sectoral needs to identify priority PPP investments. Comprehensive sectoral mapping is necessary to identify priority areas for infrastructure investment planning, PPP implementation and maximise impact. Uzbekistan lacks an overarching assessment of its water and wastewater and irrigation services, including infrastructure upgrade priorities and service-expansion needs. Detailed mapping would highlight key areas where PPPs can deliver the most benefits. This is particularly important for irrigation PPPs, which are government priorities. The government needs to evaluate the enabling environment and conduct due diligence before issuing irrigation PPPs to ensure technical, financial and environmental viability.

Enhancing transparency and competition in PPP procurement. Introducing stronger transparency and competition measures in PPP procurement will improve value for money and investor confidence. Open and clear procurement processes reduce corruption risks and improve service quality and efficiency. Uzbekistan currently has several active unsolicited PPP proposals, which limit transparency and competition in contract bidding. Establishing clear selection guidelines, including publicly accessible eligibility criteria, contractual obligations and bidding processes, would ensure greater accountability and efficiency. This is particularly relevant for Swiss Challenge proposals, where unsolicited bids can be challenged by competing offers. Ensuring these proposals are well-publicised and marketed will help attract counterbids, increasing competition and improving project outcomes.

Developing a framework for unsolicited PPP proposals. A clear framework for unsolicited PPP proposals is essential to improving competition and transparency. While Uzbekistan relies on unsolicited bids to introduce PPPs in the water and wastewater sectors, these tend to lack transparency and competitive safeguards. A formal framework for unsolicited proposals would reduce the risks of monopolistic pricing and inefficiencies, ensuring fair competition. A structured approach would also minimise corruption risks and ensure bids follow standardised evaluation criteria aligned with public interest. By implementing clear rules and oversight mechanisms, Uzbekistan can increase investor confidence, promote competition and maximise public benefit from water-related PPPs.

6.4. Strengthening water sectors sustainability through economic instruments reform, service improvements and cross-sectoral coherence

Implementing coherent and strategic economic instruments for water resource management. Ensuring the coherent and strategic implementation of economic instruments is essential for fair cost distribution and effective water-resource management. The primary purpose of the water-abstraction charge (tax on water-resource use) is to incentivise efficient and responsible water use, promote the appreciation of water as a valuable resource and strengthen accounting and monitoring practices, not to maximise revenue collection.

Water abstraction charges (called the tax on water resource use) and drinking water and wastewater tariffs are currently applied inconsistently across sectors and users, and pollution charges are not applied, limiting water security. Limited implementation of complementary measures, such as metering systems and water-quality monitoring, further weakens their effectiveness. A coherent strategy should ensure these instruments are implemented consistently, aligning economic sustainability with environmental and social objectives.

Advancing agricultural tariff reforms to support the introduction of PPPs in irrigation. Continued refinement of economic instruments in agriculture should be pursued within the existing unified tariff framework. Any adjustments should aim to strengthen cost recovery, improve efficiency signals and support the long-term sustainability of irrigation services, while ensuring affordability and alignment with the current legal and regulatory structure. Effective tariff adjustments need to balance affordability for farmers while ensuring cost recovery, increasing investor interest in PPPs. Currently, government subsidies cover the difference in tariff costs, and their reduction could support the transition towards sustainable and bankable PPPs. However, income-level mapping of farmers should be conducted before tariff increases to ensure fair implementation. Mitigation measures, such as targeted subsidies for vulnerable farmers, should be introduced and monitored to maintain affordability without distorting market incentives.

Aligning water-efficiency measures with water-security objectives is essential for effective resource management. While water-efficiency strategies across sectors aim to increase water availability and improve demand management, their success depends on implementation and cross-sectoral co-ordination. Water-tax reductions for farmers adopting water-saving technologies may increase overall consumption, impacting water security in other sectors. Similarly, small concrete reservoirs help mitigate floods and droughts. However, nature-based solutions to improve water retention and storage could better be beneficial and improve resilience. Mapping synergies between water management and environmental goals and policies is a requirement to support water security.

6.5. Enhancing water and wastewater services performance to attract additional financing

Reducing non-revenue water by unlocking environmental finance. Cutting down losses conserves resources, reduces energy use and strengthens environmental sustainability. Environmental funds and development banks can be mobilised to support leakage-reduction initiatives, given the impact of such interventions on lowering emissions per cubic metre delivered and enhancing resilience. Leveraging these financing opportunities would improve service efficiency while securing new investment streams.

6.6. Update technical standards and promote innovation to safeguard water security

Appropriate safety-management measures could be established through precise safety diagnosis and evaluation of dams. To assess and analyse dam safety, a risk-informed decision-making method could be introduced, moving away from the existing standard or criteria-based approach. Risk-informed dam-safety assurance incorporates risk-assessment outcomes as a key factor in decision-making. Dam safety management should integrate both deterministic and probabilistic safety analyses, along with legal, regulatory and business requirements. Several US agencies outline key steps such as identifying failure modes, risk analysis, evaluation and prioritization of risk-reduction measures. Following these structured steps enhances dam safety and operational efficiency through a systematic, risk-informed approach.

Building on the amendments to the groundwater law, strengthening monitoring systems and standards could result in more efficient groundwater conservation. The introduction of real-time monitoring could be explored through the following measurement items: groundwater level, electrical conductivity and water quality survey conducted twice per year, with a one-hour measurement cycle. This would include measurement-network maintenance, providing for continuous data acquisition and enhancing reliability through periodic inspection. Routine inspections could be carried out quarterly, with special inspections when abnormalities occur. This could subsequently reinforce the National Groundwater Information System. It could include publication of a groundwater statistical yearbook, alongside technical support for local governments, leading to informed policy and financial decisions.

In relation to water efficiency, a master plan could be established for modernising and improving irrigation and drainage facilities. This could entail the gradual replacement of earthen embankments with concrete linings where water loss is a concern. Establishment of an ICT-based comprehensive irrigation and drainage operation-information system could help improve the efficiency of agricultural water management.

6.7. Expand and upgrade water-related education and training programmes

A proposed curriculum could be developed to train water experts. It could introduce blue (water supply), white (wastewater) and green (sustainability) competency-enhancement plans, based on strategies for each field, to support capacity building. As a strategy for implementing this curriculum, existing universities with strong capacity could be promoted rather than establishing new institutions. Implementation could be divided into two areas: capacity building and strengthening Suvchilar Maktabi (School of Water Practitioners). To strengthen the School of Water Practitioners on a sustainable basis, four areas are recommended: funding, legal framework, resources and formal centre designation. Priority should be given to securing adequate human and material resources to ensure the delivery of high-quality, continuous training.

Organisation of regular National Policy Dialogues on water can show political leadership on water-related sectors priorities and bring together the wide range of stakeholders in water-related sectors to debate and progress policy priorities. Under the OECD-led Nexus programme, the OECD, in partnership with UNECE will facilitate such dialogues, presenting an opportunity for Uzbekistan to develop appropriate agenda items for progression. For example, following the “Year of Environmental Protection and Green Economy” model and to align with Uzbekistan’s broader environmental objectives under the Uzbekistan-2030 Strategy, a parallel mechanism could be introduced to strengthen intersectoral co-ordination on water-efficiency components through these Dialogues.

6.8. Action plan

The Water Code, adopted on 30 July 2025, together with recent policy decisions adopted over 2024-2025, is expected to shape the next phase of reforms in Uzbekistan’s water sector. The action plan below is designed to support implementation of these reforms and to address remaining institutional, financial and technical constraints identified through the National Dialogue.

The action plan below highlights a set of priority recommendations drawn from the full set of recommendations outlined in this paper, with a focus on those considered most feasible and impactful in the short to medium term.

Table 6.1. Tailored action plan to develop water security in Uzbekistan

Main findings
Measures to improve the enabling environment for water security in Uzbekistan to establish the foundations for PPP implementation in water sectors
Analysis of condition	Proposed measure	Methodology	Justification	Timeframe
There is limited technical capacity in water and sanitation service delivery. Constrained operational capacity undermines the financial sustainability of service provision, reducing the sector’s appeal to private investors.	Continue implementation and monitoring of salary and incentive reforms introduced under Presidential Decree PF-74 (May 2024) and assess whether further adjustments are required to ensure competitiveness with other sectors and improve operational efficiency.	Develop a business case for Parliament that justifies salary increases by demonstrating the financial benefits of improved operational efficiency.	This will help reduce high turnover in the sector and improve operational efficiency, strengthening the financial sustainability of services. It will also support the development of appropriate project pipelines.	Short to medium term (6 to 24 months). Business-case preparation in the short-term, followed by presentation to the Oliy Majlis over the remaining 18 months.
Economic instruments are currently implemented partially among water users, with inconsistencies noted. Abstraction charges and tariffs are below cost-recovery levels, and subsidies are not applied consistently.	Move towards cost recovery through tariff adjustments and apply consistent abstraction charges.	Undertake a tariff assessment to identify requirements to reach cost-recovery objectives, with improved targeting of subsidies. Study the potential introduction of pollution charges. Review existing abstraction charges to ensure long-term sustainable use.	Tariffs should be gradually increased to cover at least operating costs and reduce the subsidy burden on the government, following a thorough assessment of efficiency gains and social impacts. Mitigation measures should be adopted in poorer areas, supported by communication campaigns to socialise reforms and ensure fair access to drinking-water and wastewater services.	Short term prioritisation (including tariff, abstraction-charge and pollution-charge studies), with reform implementation over the longer term.
Recommendations for the efficient and sustainable implementation of PPPs in the water and sanitation sector in Uzbekistan
Uzbekistan has several ministries and actors responsible for introducing PPPs in the country. Given the cross-cutting nature of both PPPs and the water sectors, co-ordination challenges currently observed in Uzbekistan are leading to inefficiencies.	Improving co-ordination between ministries involved in water-related PPPs could help ensure investor confidence by establishing an inter-ministerial task force and clear guidelines for collaboration.	Undertake a mapping exercise to understand responsibility allocation across ministries and identify overlaps. Add an annex to the 2021 PPP Law outlining areas requiring improvement.	Strengthening co-ordination and ensuring clear delineation of responsibilities between ministries would streamline decision-making, ensure national strategies and water ambitions are met and enhance the implementation of water-sector PPPs.	Short to medium term.
Although steps have been taken to improve regulation, there is limited clarity over roles and regulatory responsibilities. Private-sector actors experience uncertainty regarding the regulatory structure. There is unclear regulation of private-sector participation in the WSS sector and overlapping responsibilities between the Ministry of Water Resources and the Ministry of Economy and Finance in tariff setting.	Clarifying and making the legal and regulatory framework for PPPs publicly available could enhance transparency and accessibility.	Undertake a regulatory-impact assessment to identify areas where regulation needs strengthening, focusing on achieving long-term reform. In the short term, map responsibilities between ministries for PPPs in water-related sectors and clarify the mandate for private investors.	Clear delineation of roles and responsibilities of the government during water-related PPPs would ensure accountability and create a predictable investment landscape.	Short term for responsibilities mapping. Medium-to-long term for regulatory-impact assessment.
Uzbekistan does not have an updated overarching assessment of the water and wastewater sector, including areas constituting immediate priorities for upgrades and investments.	Undertake a comprehensive mapping of water and wastewater-sector to identify priority areas requiring investments that could be accelerated via PPPs, thus maximising impact.	Update the previous sector assessment, based on drinking-water-supply needs, to better target areas most in need.	A comprehensive mapping exercise would identify where PPPs can be most beneficial, ensuring effective resource allocation and project implementation in regions where they are most needed.	Short term.
Uzbekistan uses unsolicited bids to introduce PPPs in the water and wastewater sectors. This limits transparency in awarding PPPs and may lead to inefficiencies.	Establish a clear and transparent framework for the Unsolicited Proposal Route.	Draft, for Parliament’s approval, a clear framework governing Unsolicited Proposal Route PPPs.	A framework would improve competition by reducing the risks of monopolistic pricing and inefficiencies, minimising corruption risks in contract awards and ensuring bids follow standardised evaluation criteria aligned with the public interest.	Short term.
The efficiency of PPPs could be further strengthened by ensuring risks are assigned consistently to the party most capable of managing them.	Develop a risk-allocation matrix before issuing PPPs to ensure smooth project implementation.	Employ a risk-allocation matrix as a prerequisite prior to PPP scoping and implementation.	Ensuring that all risks involved in pre-procurement, planning and execution stages are appropriately identified will allow for sustainable and cost-efficient PPPs.	Medium term.
Limited data and information regarding the progress and success of PPPs could undermine investor confidence.	Strengthening the PPP Centre’s monitoring and evaluation functions could support comprehensive mapping of PPP progress and best practice across the country.	Present a scoping note to Parliament on strengthening the PPP Centre, based on the best practice for monitoring and evaluation.	The Centre could carry out regular monitoring, providing updated data, allowing increased reporting and transparency, thus generating examples of best practice and a potential pipeline for investors. This could also serve to reduce any social unease during implementation of PPPs.	Long term.
Limited government capacity and expertise in PPPs may hinder successful and consistent implementation.	Building capacity and expertise within the Government of Uzbekistan for the PPP Centre will ensure continued PPP success,	Build on Presidential Decree No. PF-74 of 7 May 2024 by further strengthening recruitment and retention incentives for PPP-related functions (including performance-based incentives financed via extra-budgetary funds), and by expanding employment opportunities and career pathways within PPP-relevant institutions.	Enhancing institutional and technical capacity is a prerequisite for the successful design and implementation of PPPs in water-related sectors	Medium term.
Strengthening standards for technology and innovation measures to ensure water security
Dams in Uzbekistan are currently outdated, which increases the risk of unsafe conditions.	Safety-management measures could be implemented through safety diagnosis and evaluation of dams.	Introduce a risk-informed decision-making approach, rather than the current criteria-based approach, using both deterministic and probabilistic safety analysis.	Following these steps would enhance current dam operation and efficiency.	6-12 months. 6 months for mapping and developing the risk-informed decision-making approach, with a further 6 months to execute it.
Limited cohesive groundwater-management rules and systems lead to inefficiencies in groundwater conservation.	Strengthening groundwater-monitoring systems could enhance efficiency and promote more sustainable groundwater abstraction.	Strengthen the integrated monitoring system linked to surface water in the medium term, alongside routine network inspection.	This could lead to more efficient use and gradual construction of an IoT-based smart-metering system and smart-water-management system.	6 months for introducing groundwater-management rules, and a further 6 months for introducing an IT-monitoring system. Once data are established and collected (24-28 months), the IoT-based smart-metering and management system could be introduced.
Water efficiency is a national issue in Uzbekistan, particularly due to outdated irrigation and drainage facilities.	Establishing a master plan could be beneficial for modernising and improving irrigation and drainage facilities.	Develop a master plan that enables the gradual replacement of earthen embankments with concrete lining, following the establishment of an ICT-based irrigation and drainage operation-information system.	This would improve efficiencies in agricultural-water management.	Long term. A sector mapping should be completed in 6 months to identify priority areas, with gradual replacement over the following 12-48 months.
There is currently insufficient expertise in advanced water- and wastewater-treatment technologies, which constrains overall sector capacity.	Design a specialist curriculum on blue (water supply), white (wastewater) and green (sustainable) technologies, based on existing university curricula.	Implementation could be divided into capacity building and strengthening training centres.	Enhancing sector expertise may help retain and attract further talent in the water and wastewater sector and improve management efficiency.	Short term, integrate key technology modules into existing training programmes.