RFP 72012223R00002 Market Systems Transformed.pdf

Issue Date: January 13, 2023

Questions Due: January 25, 2023, 9 am Tashkent time Proposals Due: March 13, 2023 9 am Tashkent time

Subject: Request for Proposal (RFP) 72012223R00002 Market Systems Transformed

Dear Potential Offerors:

U.S. Agency for International Development (USAID)/Uzbekistan is seeking proposals from qualified organizations to implement a Market Systems Transformed activity as detailed in the Statement of Work.

The activity will be implemented through a single cost-plus-fixed fee completion contract. The applicable geographic codes for this procurement are 937 and 110.

The period of performance for this contract is 5 (five) years. The total estimated cost plus fixed fee for this procurement is approximately $18 million. Revealing the total estimated cost plus fixed fee for the contract does not mean Offerors should propose a budget equal to the estimated cost plus fixed fee. Offerors must propose costs that are necessary, realistic and reasonable for the Statement of Work. This procurement will be conducted utilizing competitive proposal procedures pursuant to FAR Part 15. Cost proposals will be evaluated as part of a best value determination for contract award, including cost effective approaches to achieve the results and cost realism.

If your organization decides to submit a proposal in response to this solicitation, it must be submitted by the designated date and time indicated above and in Block 9 of the RFP cover page (Standard Form 33). Proposals received after the closing date and time will be processed as late and handled in accordance with FAR 52.215-1. Proposals in response to this solicitation must be valid for 180 days and signed by an official who is authorized to bind the Offeror’s organization.

Offerors should carefully consider Section L - Instructions to Offerors and Section M - Evaluation Factors for Award. Issuance of an award is subject to availability of funds.

Questions and comments related to this RFP must be submitted electronically to AlmatyAASolicitations@usaid.gov with copies to Acquisition and Assistance Specialists Gulzhanat Rysdauletova at grysdauletova@usaid.gov and Zafar Khamidullaev at zkhamidullaev@usaid.gov no later than date and time indicated above using the following format for the email subject line: “72012223R00002, Market Systems Transformed Activity – [Name of Organization] Questions/Comments”.

USAID will make every effort to respond to questions/comments from each Offeror and will distribute all responses to all offerors as an amendment to this RFP.

3 Moyqorghon Street, 5th Block, Yunusobod District, 100093 Tashkent Tel: +998 781205450; Fax +998 781206335 Website: http://www.USAID.gov/Uzbekistan

The Technical and Cost proposals must be separate and must be submitted according to Section L of this RFP. Only electronic proposals will be accepted in response to this RFP.

This RFP can be viewed and downloaded from www.sam.gov. USAID bears no responsibility for data errors resulting from transmission or conversion processes. Further, be aware that amendments to solicitations are occasionally issued and will be posted on the same website from which you downloaded the solicitation. USAID advises to regularly check the above website for amendments.

Issuance of this RFP in no way obligates the U.S. Government to award a contract nor does it commit the U.S. Government to pay any costs incurred in the preparation and submission of a proposal. Furthermore, the Government reserves the right to reject any and all offers, if such action is considered to be in the best interest of the U.S. Government.

Thank you for your interest in USAID programs.

Sincerely, (for) Abtin Forghani Aghdam Contracting Officer

Dana Rose Digitally signed by Dana Rose Date: 2023.01.13 14:11:46 +05'00'

72012223R00002

SOLICITATION, OFFER AND AWARD

4. TYPE OF SOLICITATION2. CONTRACT NUMBER 3. SOLICITATION NUMBER

7. ISSUED BY CODE 8. ADDRESS OFFER TO (If other than Item 7)

ORDER UNDER DPAS (15 CFR 700)

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NOTE: In sealed bid solicitations "offer" and "offeror" mean "bid" and "bidder".

NEGOTIATED (RFP)

SEALED BID (IFB)

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(Date)(Hour) local timeuntildepository located in copies for furnishing the supplies or services in the Schedule will be received at the place specified in Item 8, or if hand carried, in the

SOLICITATION

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PART IV - REPRESENTATIONS AND INSTRUCTIONS

OTHER STATEMENTS OF OFFERORS

EVALUATION FACTORS FOR AWARD

INSTRS., CONDS., AND NOTICES TO OFFERORS

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14. ACKNOWLEDGEMENT OF AMENDMENTS

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13. DISCOUNT FOR PROMPT PAYMENT

designated point(s), within the time specified in the schedule.

by the offeror) from the date for receipt of offers specified above, to furnish any or all items upon which prices are offered at the price set opposite each item, delivered at the

NOTE: Item 12 does not apply if the solicitation includes the provisions at 52.214-16, Minimum Bid Acceptance Period.

OFFER (Must be fully completed by offeror)

IMPORTANT - Award will be made on this Form, or on Standard Form 26, or by other authorized official written notice.

28. AWARD DATE

(Signature of Contracting Officer)

27. UNITED STATES OF AMERICA

25. PAYMENT WILL BE MADE BY

26. NAME OF CONTRACTING OFFICER (Type or print)

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22. AUTHORITY FOR USING OTHER THAN FULL AND OPEN COMPETITION:

21. ACCOUNTING AND APPROPRIATION20. AMOUNT19. ACCEPTED AS TO ITEMS NUMBERED

AWARD (To be completed by government)

CODE

01/13/2023 X

720122

USAID/Uzbekistan 3 Moyqorghon St., 5th Block Yunusobod District Tashkent 100093, Uzbekistan 00000

0900 F 03/13/2023

Gulzhanat Rysdauletova grysdauletova@usaid.gov

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12. In compliance with the above, the undersigned agrees, if this offer is accepted within _____0_________ calendar days (60 calendar days unless a different period is inserted

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(A) (B) (C) (D) (E) (F)

Market Systems Transformed

OPTIONAL FORM 336 (4-86)

Sponsored by GSA

FAR (48 CFR) 53.110

NSN 7540-01-152-8067

RFP No. 72012223R00002 Market Systems Transformed

Contents

PART I - THE SCHEDULE

SECTION B - SUPPLIES OR SERVICES AND PRICE/COSTS

SECTION C - DESCRIPTION/SPECIFICATIONS/STATEMENT OF WORK

SECTION D - PACKAGING AND MARKING

SECTION E - INSPECTION AND ACCEPTANCE

SECTION F - DELIVERIES OR PERFORMANCE DELIVERABLES AND REQUIRED

REPORTING

SECTION G - CONTRACT ADMINISTRATION DATA

SECTION H - SPECIAL CONTRACT REQUIREMENTS

PART II - CONTRACT CLAUSES

SECTION I – CONTRACT CLAUSES

PART III - LIST OF DOCUMENTS, EXHIBITS AND OTHER ATTACHMENTS

SECTION J - LIST OF ATTACHMENTS

PART IV - REPRESENTATIONS AND INSTRUCTIONS

SECTION K - REPRESENTATIONS, CERTIFICATIONS, AND OTHER STATEMENTS OF

OFFERORS

Section L- INSTRUCTIONS, CONDITIONS, AND NOTICES TO OFFERORS

SECTION M – EVALUATION FACTORS FOR AWARD

PART I - THE SCHEDULE

SECTION B - SUPPLIES OR SERVICES AND PRICE/COSTS

B.1 PURPOSE

The purpose of this contract is to enhance sustainable and inclusive economic growth by strengthening businesses and the business-enabling environment in targeted sectors, while addressing the barriers faced by women, youth, and underrepresented groups.

B.2 CONTRACT TYPE AND SERVICES

This is a Cost-Plus-Fixed-Fee (CPFF) Completion contract. For consideration set forth below, the contractor must provide the deliverables or outputs described in Sections C and F in accordance with the performance standards specified in Section F.

B.3 TOTAL ESTIMATED COST, FIXED FEE, AND OBLIGATED AMOUNT

(a) The estimated cost for the performance of the work required under the Statement of Work, exclusive of fixed fee, if any, is $TBD. The fixed fee, if any, is $TBD. The estimated cost plus fixed fee, if any, is $TBD.

Item Description Total Cost Total Cost $ Fixed Fee $ Total Cost plus Fixed Fee $

(b) Within the estimated cost plus fixed fee (if any) specified in paragraph (a), the amount currently obligated and available for reimbursement of allowable costs incurred by the Contractor (and payment of fee, if any) for performance hereunder is $TBD. The Contractor shall not exceed the obligated amount.

(c) Funds obligated hereunder are anticipated to be sufficient through TBD.

B.4 COST REIMBURSABLE

The U.S. dollar costs allowable shall be limited to reasonable, allocable and necessary costs determined in accordance with FAR 52.216-7, Allowable Cost and Payment, FAR 52.216-8, Fixed Fee, if applicable, FAR 52.232-20, Limitation of Cost, FAR 52.232-22, Limitation of Funds and AIDAR 752.7003, Documentation for Payment.

B.5 INDIRECT COSTS

Pending establishment of revised provisional or final indirect cost rates, allowable indirect costs must be reimbursed on the basis of the following negotiated provisional or predetermined rates and the appropriate bases.

Description Rate Base Type Period

TBD TBD TBD TBD TBD

Base of Application: TBD Type of Rate: TBD Period: TBD Source: TBD

NOTE: Insert additional indirect rates as needed for the prime above.

The Contractor is allowed to recoup indirect costs (OH, G&A, etc.) as Other Direct Costs (ODC) if it is part of the contractor’s usual accounting procedures, consistent with FAR Part 31 and the contractor's Negotiated Indirect Cost Rate Agreement (NICRA).

B.6 PAYMENT OF FIXED FEE

Payment of fixed fee shall be based on a percentage of the fee equal to the percentage of allowable costs being paid, less withholding, consistent with FAR 52.216-8 “Fixed Fee”.

END OF SECTION B

SECTION C - DESCRIPTION/SPECIFICATIONS/STATEMENT OF WORK

C.1 TITLE

Market Systems Transformed

C.2 Purpose The United States Agency for International Development in Uzbekistan (USAID/Uzbekistan) developed its first 2022 - 2025 Strategic Framework and established Toward a Reformed, Resilient, Inclusive, and Transparent Uzbekistan as its overarching goal and Sustainable and Inclusive Economic Growth Enhanced as its economic growth development objective.

To achieve sustainable and inclusive economic growth, the Market Systems Transformed activity (the “Activity”) will focus on strengthening businesses and the business-enabling environment in targeted sectors, while addressing the barriers faced by women, youth, and underrepresented groups.

A market systems approach will be used to produce a structural transformation of the Uzbekistan economy by strengthening the current drivers of growth (tourism and textiles) and developing new sectors (information and communication technology (ICT and green economy sub-sectors) to create jobs and economic inclusion, develop export markets for small and medium-sized enterprises (SMEs), and attract capital.

C.3 Background and Context Relationship of Market Systems Transformed to other USAID Activities:

The Activity will develop bilaterally some of the sectors USAID addressed by the regional Future Growth Initiative (FGI) activity and will complement the regional USAID Trade Central Asia (TCA), Power Central Asia (PCA) and Water and Vulnerable Environment (WAVE) activities with interventions at firm level in Uzbekistan and the bilateral Agribusiness Development Activity (ADA), Youth Employment Skills (YES), and Legal Reform Program (LRP) activities or their follow on.

● FGI spurs productive economic activity across Central Asia. The main goal of the activity is to increase local competitiveness, create new jobs, improve incomes for Central Asia’s growing workforce, and advance the region toward self-reliance. Target sectors include Information and Communications Technology, Light Manufacturing (Apparel/Garments/Textiles), and Tourism.

FGI present Uzbekistan task order finalizes on September 30, 2024.

● TCA aims to improve region-wide trade connectivity and harmonization of trade regimes to accelerate economic growth and increase economic opportunity. TCA builds on USAID’s decades of achievements facilitating regional trade, enterprise development, and regional connectivity. TCA takes a facilitative approach towards three strategic objectives, providing the public and private sector with technical assistance to achieve these goals. First, it works towards harmonization of customs and border procedures in order to reduce costs, wait times, and spur economic growth in the region. Second, it facilitates public-private dialogue about beneficial reforms that can spur growth and increase investment. Third, it works with stakeholders to increase cross-border trade among businesses in the region as well as between Central Asian firms and the rest of the world.

● PCA capitalizes on USAID’s previous advancements in regional energy interconnectivity, efficiency, and diversification. It aims to support the countries in liberalizing and modernizing their national energy systems, develop and refine national clean energy strategies, and increase connectivity and electricity trade through a transparent electricity market.

● WAVE capitalizes on USAID’s previous investments and advancements in implementing integrated water resources management principles at the basin level and enhancing cooperation and governance on the broader watershed. The activity promotes stability, economic prosperity, and healthy ecosystems in Central Asia by addressing critical water, energy, and agriculture sector linkages, as well as vulnerabilities to climate change. The Activity implements an afforestation program in Karakalpakstan and Uzbekistan..

● ADA supports private sector-led growth in Uzbekistan’s agriculture sector by introducing new value-added technologies and management practices across the entire value chain for targeted agricultural commodities. The activity capitalizes on previous USAID investments and advancements by increasing the quantity, quality, and diversity of agricultural goods and services in Uzbekistan by private enterprises. These efforts are focused on increasing value-added production within Uzbekistan’s agricultural sector, engaging vulnerable populations, including youth and women, linking educational institutions with private sector demand, and fostering a favorable environment for agriculture.

● YES supports in-school and after-school programs to improve the entrepreneurship, work readiness and soft skills of Uzbekistani youth in order to ensure a successful school-to-work transition.

● LRP has three main objectives: 1) support rule of law development in Uzbekistan; 2) develop the legal profession; and 3) develop the legal enabling environment for civil society and NGOs.

It improves law making and enforcement to ensure protection of constitutional rights and freedom of citizens. In addition, it increases citizens' knowledge of the law and access to legal services to ensure reliable protection of citizens' human rights and freedoms. The activity also strengthens the enforcement of intellectual property rights (IPR) and prosecution of corruption cases, bringing the Uzbek legal system in line with international, commercial norms and standards, in order to create a level playing field for U.S. businesses to compete in the Uzbekistan’s economy.

C.4 Statement of Work

The following section describes the components and the expected results that the Contractor must accomplish under this contract. The following sections provide a brief description of the development context under each of the components, as well as a set of guiding principles that should guide the Contractor in addressing the three components below. The work plan process will establish the agreed-upon set of interventions to achieve the expected results.

A. Background and Rationale

2023 marks the seventh year of Uzbekistan’s policy of market transition. The main policy goal is to move away from statism and relative isolation toward market opening and international engagement.

Much has been accomplished – liberalization of the foreign exchange market and introduction of conversion for current operations, the ending of most price controls, tax reform, reduction of administrative costs of doing business, removal of administrative barriers to cross border flow of goods and people (primarily with Uzbekistan’s neighbors), better transparency, and greater personal choice and economic freedom. The government aims to halve poverty and become an upper middle-income country by 2030. Accomplishing this in only eight years is a highly ambitious goal; it would require per capita national income to grow by almost 10 percent per year for the next eight years, which would rank among the fastest sustained growth episodes in history. To support the achievement of this ambitious goal, the Activity will use a market systems approach to support the development of four sectors of Uzbekistan’s economy with high potential of job creation and development of a competitive and productive ecosystem for small and medium-sized enterprises.

While a lot of progress has been made, a true market economy is still a ways off. A high percentage of economic activity is still managed by Soviet-style, centralized state institutions. Agriculture still dominates the economy to a greater extent than other Central Asian/European economies. Since 2010, about two-thirds of economic growth has been generated from increases in the capital stock and the value of natural resource exports, e.g., gold and natural gas. Market distortions include State-Owned Enterprises (SOEs) and large domestic firms receiving preferences on land use, access to finance, non-performing loan forgiveness, and public procurements without adequate consideration of economic efficiency, thus reducing the viability of SMEs and the competitiveness of key industry sectors in Uzbekistan.

In Uzbekistan, most large-scale enterprises and financial institutions are state-owned. Many so-called "private companies” are controlled by the state through controlling stakes and many of the remaining large private companies are owned by politically affiliated individuals. The state controls 50 percent of its economy according to the State Assets Management Agency and owns 85 percent of all the assets in the banking sector.

High interest rates (above 20 percent), collateral requirements, and short loan terms limit the capacity of local businesses to access the funds they need to grow. Loans in foreign currency also create additional costs for the entrepreneur due to the growth of the exchange rate. Improving access to finance for SMEs is a key component for economic growth and job creation. At the same time, the government favors the practice of issuing loans with incentivized, low interest rates under various state programs that target certain sectors of the economy and segments of population. Despite the fact that the Central Bank’s refinancing (policy) rate is 15 percent, there are several state programs where loans are issued at a rate of 7 percent or even lower. Banks do not always have the right to independently determine the volume of loans and their interest rates on the basis of existing demand and according to the Central Bank the share of nonperforming loans in Uzbekistan constitutes 4.9 percent of the loan portfolio of commercial banks.

Becoming an upper middle income country by 2030 and lowering the poverty rate will require much faster job creation and more inclusive economic opportunities, especially among women, youth, and other underrepresented groups. According to the Ministry of Employment and Labor, as of January 2022 the unemployment rate1 among the economically active population was 9.6%, with 5.8 million people employed in the informal sector, 6.1 million people employed in the formal sector, and 1.4 million people looking for jobs. The unemployment rate among those aged 16-30 was 15.1 percent, while the unemployment rate among women was 13.3 percent. As the share of the population younger than 30 years old is 60 percent, youth unemployment and formal jobs creation is a serious concern for policymakers. Youth in Uzbekistan face challenges coming from economic and social disparities including migration and exploitation of labor, low opportunities for higher education or securing employment, and limited political decision-making power at the local (mahalla) level based on societal perception that “adults know better”.

1 Unemployment refers to the share of the labor force that is without work but available for and seeking employment.

According to the World Bank, in 2021, the labor force participation2 was 57.72 percent, with 44.9% female labor force participation rate3 and 70.92 percent male labor force participation rate. Increasing the female and youth labor force participation rate is critical for achieving Uzbekistan’s projected economic growth.

The pace of job creation will critically depend on the government’s continued development of business-friendly processes and the reallocation of resources within the economy to more productive and sustainable uses. Much of this process also depends on the state reducing its control of SOEs, a more dynamic private sector, especially SMEs, and the inclusion of youth, women, and other underrepresented groups. It will also require the state to proactively invest in human capital, a stronger safety net, and a shift to a more sustainable model of green growth.

Furthermore, with Russia’s war on Ukraine, the economic collapse of Uzbekistan’s largest trading and investment partner is creating significant short-term challenges, but it also represents an opportunity to build a more resilient and diverse open economy. Uzbekistan’s strong historical links with the Russian economy mean that it is heavily reliant on Russia for trade, project financing, and investment. Access to the Russian market — especially the growing demand for Uzbekistan’s food, textiles, and tourism exports — has been an important driver of the reform success in Uzbekistan’s transformation in horticulture, cotton, and tourism. But it has also reduced the incentives for Uzbekistan to accelerate global trade and supply chain integration, modernize regulations and standards, and manage systemic risk exposures that have now materialized. Key reforms such as Uzbekistan’s accession to the World Trade Organization (WTO), which USAID is supporting through a regional activity, but had stalled for decades before 2017, have become even more important as the country seeks alternative markets and investors to support structural transformation.

Uzbekistan needs to develop the productive sectors of the economy that have been impacted by Russia's war on Ukraine and have high potential to create jobs and diversify their export markets. To this end, the Activity will focus on promising SME opportunities in three of these sectors, tourism, ICT and textiles. In addition, the Activity will also support high-impact SMEs in the green economy sub-sectors (e.g., water conservation, recycling and storage, water stewardship, landscape conservation and restoration enterprises, renewable energy and energy efficiency, reusable, recyclable, or compostable plastic or alternate packaging, climate finance, sustainable transportation, or sustainable tourism). The work in green economy sub-sectors should prioritize cross-linkages with other sectors. The development of ICT applications for the agricultural sector are within the scope of this Activity.

The Government of Uzbekistan is in the process of adopting a new Entrepreneurship Code aimed at creating conditions and guarantees for free participation in entrepreneurial activities. It denotes measures to protect private property, the rights and legitimate interests of businesses. The draft Code envisages the criteria for classifying an enterprise into one of 4 categories. Special tax regimes and other norms will be introduced on their basis. The Activity will focus on providing assistance to existing SMEs, prioritizing anchor firms with high capacity of creating jobs.

The COVID-19 pandemic negatively impacted the nascent tourism sector. USAID has been working with key players in the tourism sector of Uzbekistan to make travel safer and to position the sector for a

2 The labor force participation rate is the percent of the population ages 15 and older - that is of working age. That includes the employed and the unemployed individuals.

3 For comparison, the world average in 2021 based on 181 countries is 50.14 percent.

robust recovery in the post-COVID-19 era. Tourism is identified as an important element of the national economic strategy of Uzbekistan, which has the potential to generate significant impact. Well executed, strategic marketing combined with investments in improving the tourism experience, can reasonably be expected to yield significant increases in tourist arrivals from adjacent countries and elsewhere.

ICT is the sector of the economy with the highest potential for well paid job creation. The transformation is proceeding, though unevenly. Reforming the internal systems and processes of entrenched bureaucracies is challenging. To help break through some of these institutional challenges, the e-Government Center was established in 2020 and given a broad mandate to lead and drive a “whole-of-government” approach to digital government transformation. The Digital Uzbekistan 2030 Strategy also makes raising the digital knowledge and skills of middle management and regional governments’ staff a high priority. Uzbekistan’s digital economy is in relatively early stages of development, but shows many promising opportunities for growth in e-commerce, business process outsourcing, fintech, e-learning, and software development. Widespread reforms in recent years have put in place many — though not all — key legal frameworks. Digital financial services are growing rapidly thanks to regulatory changes, but important reforms for digital trade, startups and innovative investment approaches are incomplete. The percentage of “unbanked” persons is slowly declining, and the adoption of digital payment systems is growing, though a significant urban–rural divide exists.

While the international cotton boycott previously impacted the textile industry, the recent lifting of the cotton boycott following the actions of the Government of Uzbekistan to stop forced labor violations presents immense growth opportunities to expand into areas where other countries’ cotton production is now restricted due to sanctions prompted by the use of forced labor. Textiles is an important sector in Uzbekistan due to easy access to local supply of raw materials and relatively inexpensive, qualified personnel. The industry is an especially interesting prospect for future economic development in Uzbekistan as its contribution to GDP is already significant. In recent years, the Government of Uzbekistan has taken decisive actions to reform and rebrand the cotton industry and shift toward higher-value private sector cotton production of yarn and textiles. Uzbekistan is likely to continue with its economic reform agenda, including cotton sector reforms, only if it is able to realize tangible rewards for these efforts.

Uzbekistan is on the front lines of the climate crises and needs greener growth. Much of Uzbekistan’s economic potential is lost due to the inefficient use of its natural resources. Water and energy are particularly wastefully used. Currently, there is no clear strategy of how to support and shape a sustainable and resilient structural transformation of the economy. A green economy must be developed to enable Uzbekistan’s transition to sustainable and efficient use of natural and energy resources, minimize pollution, address climate change and environmental impacts, and strengthen resilience to natural disasters and climate change. To this end, the local private sector must be incentivized to develop green technology and adopt climate resilient practices. A focus on green growth can propel Uzbekistan toward a more sustainable future while creating new jobs in emerging high-skilled fields of the green economy sub-sectors.

Finally, more inclusive growth is needed. The benefits of Uzbekistan’s economic growth over the last two decades have not been widely shared with women, youth and underrepresented groups. A more inclusive growth model is a necessary condition for achieving the country’s development goals.

Women’s economic opportunities are significantly limited in Uzbekistan. Female labor force participation needs to increase from 44.9 percent to at least the world average of 50.14 percent. As in other countries in the region, there is occupational sex disaggregation, with women in lower-paying fields and men in more profitable sectors, including IT. IT and tech are stereotyped as men’s interest areas; women average less than ten percent of students in IT-related university programs. Women’s participation in management of private enterprises in Uzbekistan is among the lowest in Central Asia because gender roles dictate that women should be in charge of child rearing and housework, acting as a deterrent for women to obtain formal employment. Uzbekistan’s population is also very young.

Children and individuals below 30 years of age constitute approximately 60 percent of the population.

Successfully incorporating youth in the workforce is a social issue of particular interest for the Government of Uzbekistan.

B. Relationship to USAID, USG and Government of Uzbekistan Strategies

The Activity contributes to the USAID/Uzbekistan 2022-2025 Strategic Framework DO3, Sustainable and Inclusive Economic Growth Enhanced and will contribute to all intermediate results, IR 3.1 Competitiveness and diversification of the private sector increased, IR 3.2 Natural resources management improved, and IR 3.3 Business enabling environment for a market-based economy improved.

Through DO3 of the USAID/Uzbekistan 2022-2025 Strategic Framework, the Mission aims at supporting the Government of Uzbekistan reform efforts to diversify its economy, increase trade and create meaningful employment for Uzbekistan’s population, including women and youth. The Activity also supports the U.S. Strategy for Central Asia under the following objectives: 1) to support and strengthen the sovereignty and independence of the Central Asian States, individually and as a region;

and 2) to promote United States investment in and development of Central Asia.

The Activity also supports the Uzbekistan 2022-2026 Integrated Country Strategy Mission Objectives:

2.2: Advance economic reforms that deliver a sustainable, inclusive, and equitable market-based economy and 3.1: Increase trade and investment opportunities for U.S. companies. By supporting these strategic objectives, the Activity will help the private sector to create economic activities that are resilient to climate risks, transformative, and sustainable. Through partnering with local and multinational companies, USAID will leverage private sector expertise, capabilities, and resources to catalyze market-based solutions that unlock the country’s economic growth potential.

C. Geographical Focus

The Activity will not have a specific geographical focus. However the target sectors — ICT, green economy sub-sectors, tourism and textiles — may be concentrated in certain geographic areas due to their nature, e.g., tourism businesses are located in areas with touristic value.

D. Approach and Parameters

The Activity will enable Uzbekistan’s SMEs in the targeted sectors to improve their productivity and competitiveness, create new jobs, and advance Uzbekistan towards a more reformed, resilient, inclusive, and transparent future. Through a series of evidence-based interventions, the Activity will support these enterprises with firm-level assistance and broad-based capacity building programs to mobilize finance, reach new markets and buyers, improve efficiency and quality of their products to meet demand, and address constraints through advocacy and public-private dialogue that complements

USAID’s policy reforms initiatives. This will allow SMEs to create jobs, especially for women, youth, and underrepresented groups.

A market systems approach will address the root causes of why the market fails to meet the needs of SMEs and has not created more and better jobs in the targeted sectors. The Activity will implement interventions that modify the incentives and behavior of businesses and other market players – public, private, formal and informal – to ensure lasting and beneficial change.

The following considerations are the overarching parameters for the Activity:

● Target beneficiaries in each sector must be selected according to transparent and predetermined criteria.

● The Activity will focus on growing existing SMEs and increasing their capacity for job creation and will not work at startup level. Exceptions can be made, on a case by case basis with USAID prior approval, for early stage companies in the ICT sector and green economy sub-sectors which are in relatively nascent stages of development in Uzbekistan.

● SMEs definition: If the number of employees of a beneficiary firm is more than 10 and fewer than 250 and/or the beneficiary firm has an annual revenue and/or annual balance sheet of more than

1.05 billion Uzbek soum but not exceeding 105 billion Uzbek soums, the firm is considered an SME. The definition of SMEs will follow the legal definition of SMEs in Uzbekistan at the time of implementation.

● High impact SMEs are defined as those that create jobs or register revenue growth at an annual two years average rate of at least 15 percent per annum.

● Depending on the availability of funding, the targeted sectors will be given priority in the following order (1) ICT, (2) green economy sub-sectors, (3) tourism, and (4) textiles. Priorities may be shifted through the work plan process, as learning occurs through achievement of results.

● The Activity will focus on value added textiles productions and will not directly support cotton production.

● As USAID/Uzbekistan has not worked on supporting the green economy sub-sectors in the past, when needed, pilot and co-creation approaches will be used to build knowledge and lessons learned.

● Pilot projects may be initiated to show demonstration effects that could be replicated at equal or higher levels without further USAID support.

● Beneficiary SMEs must have majority private-sector ownership and control.

● The focus will be on increasing exports to and tourism from South and Southeast Asia, the Gulf countries, Turkey, the United States, and/or Europe.

● Activities within each targeted sector should be led by a sector leader with broad and high-level international expertise in production, logistics, and marketing in that sector.

● Partnership with the Government of Uzbekistan with MOUs signed with each relevant ministry or government agency in each targeted sector and location to ensure all stakeholders’ commitments.

● Partnership with other USAID-funded activities and building on and complimenting other donor programs to leverage additional resources and expertise.

● Coordination and collaboration with other development partners and stakeholders, on a bi-annual basis. A readout of these meetings should be provided to USAID on a bi-annual basis. A donor coordination group may be established.

● Management/Implementation Approach should demonstrate flexibility and ability to pivot to address challenges and bottlenecks that may arise during implementation.

● Development of comprehensive communications materials on each supported business and feature their successes and lessons learned in the mass media and social media.

● Ensure that supported businesses are aware and compliant with local social and environmental laws.

● Minimum 25 percent of all USAID supported businesses should be female, youth and underrepresented groups-owned businesses.

● A minimum of $500,000 of USAID funds shall be used to co-finance and jointly implement activities with the private sector by using a USAID GDA type model or other agreed upon USAID PSE tools.

E. Activity Goal and Theory of Change (ToC)

Activity Goal: To achieve sustainable and inclusive economic growth by strengthening SMEs and the business-enabling environment in targeted sectors, while addressing the barriers faced by women, youth, and underrepresented groups and ensuring an increase in private sector investment and engagement across the market system.

Theory of Change: IF barriers to inclusive private sector growth are reduced and there is an increase in private sector investment and engagement across the market systems of the ICT, green economy sub-sectors, tourism, and textiles sectors THEN market systems will become more competitive, inclusive, sustainable, and able to create jobs.

Key assumptions that underlie the success of this theory:

a. The Government of Uzbekistan remains committed to reforms that reduce restrictions on the private sector and continues to prioritize ICT, green economy sub-sectors, tourism, and textiles sectors.

b. Local private firms in those sectors have great interest in savings and sustainability that the green economy can offer through the utilization of renewable energy/energy efficiency and climate adaptation measures.

c. The private sector is keen on learning from other countries' successes and participating in international donor programs.

d. IT systems are firmly entering all business sectors, including tourism, textiles, ICT, and green sustainable economies, but the businesses are not fully aware of the operational and maintenance costs and other challenges, including cybersecurity.

e. There are a number of local and international banks and international financial institutions interested in lending to ICT, green economy sub-sectors, tourism, and textiles businesses in Uzbekistan.

By piloting technological and business processes innovations that are transformative in all or several of the above sectors of the economy, this Activity can help the Government of Uzbekistan institutions by informing and adjusting their current policies, regulatory processes and permitting reforms. USAID may also become instrumental in helping the Government of Uzbekistan to develop standards and simplify business operations of government agencies. The pressure of rapid technological evolution provides both challenges and opportunities and this project will demonstrate how to minimize challenges and take advantage of the opportunities. One of the goals is to demonstrate to the Government of Uzbekistan and private sector firms that by embracing new methods in the execution of business activities, adapting and efficiently integrating new technologies into system operations, and utilizing new tools and green and sustainable IT systems and increasing access for women, youth and other underrepresented groups, the local businesses are more resilient to climate and market challenges.

F. Contract Objectives and Intermediate Results

Objective 1: Reduced barriers to private sector growth in the ICT, tourism, and textiles sectors and green economy sub-sectors

Objective 2: Increased private sector investment and access to finance in ICT, tourism, and textiles sectors and green economy sub-sectors

Objective 1: Reduced barriers to private sector growth in the ICT, tourism, and textiles sectors and green economy sub-sectors

Objective 1 will focus on reducing or eliminating the barriers to private sector growth in the targeted sectors. Targeted interventions will address policy, regulatory and institutional constraints, access to international markets, digitalization of business processes, network connectivity with U.S. buyers and suppliers and access to formal employment of women, youth, and other underrepresented groups.

● Intermediate Result 1.1: Policy, regulatory, institutional and environmental constraints to competitiveness and trade are reduced or eliminated

● Intermediate Result 1.2: Capacity to access new international markets is improved

● Intermediate Result 1.3: Digitalization and greenification of SME business processes improved

● Intermediate Result 1.4: Private sector demanded skills acquired and inclusive formal employment increased for women, youth and other underrepresented groups.

Illustrative Tasks:

1. Assess the policy, regulatory, taxes, import/export and institutional constraints to competitiveness and recommend short, medium and long term solutions for each sector.

Assessment must include an overview of other donors’ ongoing activities and identify private and public sector champions for potential cooperation.

2. Identify and address cross-sectoral environmental constraints (primarily water use and energy efficiency).

3. Increase public-private dialogues to provide SMEs with a platform to advocate for growth-enhancing policy reforms.

4. Build the Government of Uzbekistan's institutional capacity, where there is an identified champion, to consult with the private sector on the design and implementation of reforms.

5. Work with the sector associations to develop and market new, value-added products that would increase formal employment and export revenue (e.g., water saving or energy efficiency technologies, software products, development of additional tourism sites, and finished textile products).

6. Facilitate exports to South and Southeast Asia, the Gulf countries, the United States, and/or Europe for minimum five local high impact businesses per targeted sector, including by facilitating access to trade accelerators, business associations, and linkages to initiatives by the Ministry of Investment, Industry and Trade. When possible, activities will prioritize exports facilitation to the United States.

7. Facilitate the digitalization of business processes such as IFRS accounting software or e-commerce.

8. Facilitate the greenification of SMEs in the targeted sector through training on how to reduce their negative environmental impact by using as little water, energy and raw materials as possible while cutting carbon emissions, or by finding ways to utilize these materials in renewable and eco-friendly ways.

9. Foster contacts between U.S. and Uzbekistan SMEs in the targeted sectors through participation in trade shows, expert exchanges and other means to improve network connectivity of Uzbek companies with U.S. buyers and suppliers.

10. Grants to individual high impact firms to acquire the equipment, software or technology necessary for the introduction of new products or processes. Each grant must show an increase in formal employment and have a focus on job creation for women, youth, and other underrepresented groups.

11. Conduct seminars and workshops on the international standards required to export to global markets.

12. Facilitate training for SMEs in accounting, invoicing, financing, taxation, and good business management principles, including women leadership development.

13. Facilitate formal employment opportunities for women, youth and other underrepresented groups in the targeted sectors through jobs fairs and support for firm transitions from the informal to the formal economy.

14. Work with sector associations to assess skills needed by the sectors and the adequacy of the skills of recent graduates.

15. Identify sector-specific skills that need to be developed in Uzbekistan to ensure that the current labor force and new entrants have the skills necessary to meet industry requirements.

16. Identify local universities to collaborate with on the development of curriculum in areas with limited local expertise such as IFRS accounting standards, climate adaptation and energy efficiency processes and technologies, etc.

Objective 2: Increased private sector investment and access to finance in ICT, tourism, and textiles sectors and green economy sub-sectors

Objective 2 will focus on incentivizing investments in local value chain development, facilitating access to finance and equity investments, and the development of private sector partnerships between USAID and the private sector to advance the objectives of this Activity.

● Intermediate Result 2.1: Investments in local value chain development through transfer of knowledge, technology, and information is increased4

● Intermediate Result 2.2: SME capacity to access credit and equity investments is increased

● Intermediate Result 2.3: Joint co-financing with USAID through private sector partnerships

(PSE) is realized

Illustrative tasks:

4 Note: As large and medium firms expand their exchange of goods and services with more local small and micro entrepreneurs, the small and micro entrepreneurs become the businesses’ suppliers and/or customers. This momentum can build toward a more inclusive market system benefiting a broader range of actors and can help develop domestic markets.

1. Facilitate credit for local high impact medium -sized enterprises to develop and increase their network of local providers of goods and services.

2. Provide an overview of donor, international financial institutions, and private sector financing and trends for the targeted sectors and firms.

3. Leverage additional resources, identify financial education training and investment opportunities offered by other donors, international financial institutions, and investors and establish mechanism(s) to connect firms in the targeted sectors with their capacity building and investment opportunities.

4. Identify a minimum of two banks, microfinance organizations, or fintechs that would collaborate with USAID to ease local borrowing to small and medium-sized businesses in the above four sectors. Develop manuals and templates for ease of applications for loans and socialize the manuals with potential borrowing companies. If funding allows it, coordinate with U.S. International Development Finance Corporation (DFC) and facilitate loan guarantees that would encourage banks to lend to the targeted sectors and groups.

5. Work with selected financial institutions to develop new ways to simplify access to financing and make the process user friendly for women, youth and underrepresented groups.

6. Make green economy projects more investable, connect projects with financiers, and work with the DFC on applicable guarantees, or other support.

7. Leverage private sector funding by using a USAID Global Development Alliance (GDA) type model or other agreed upon USAID PSE tools.

G. Grants under Contract

The Activity includes a Grants under Contract (GUC) component and may use a pay for performance approach.

The GUC program encourages U.S. technology adoption by local firms and innovative product development through partnerships with U.S. companies by providing targeted technical assistance and grants to entrepreneurs. It will also support the improvement of the business linkages to South and Southeast Asia, the Gulf countries, the United States, and/or Europe.

Leveraging private sector investment is an important aspect of this Activity. As such, the GUC grants must incentivize firms to invest in their own growth, and a pay for performance approach is encouraged. Leverage and grantee contributions are highly encouraged. The GUC component will underwrite the full costs of project support to the beneficiary firms only with USAID’s prior approval for beneficiaries that uniquely advance the Activity’s goals.

GUCs to semi-private or public sector actors (e.g., public universities, think tanks, etc) are allowed, with USAID prior approval, when they are considered to be the key market actors able to substantially impact the result of the Activity.

Grants will be awarded to support the achievement of activity objectives, including, but not limited, to the following purposes:

● To acquire innovative equipment necessary for the introduction of new products or processes to individual firms (Each potential grantee must be selected based on important developmental criteria, such as employment generation, revenue impact, potential for demonstration effects, and other criteria).

● To support business associations that are viable and can add value to the efforts to increase global competitiveness through targeted direct grants to provide specific services and deliverables.

● To assess energy savings potential and climate adaptation needs and develop a roadmap for select private sector beneficiaries.

● To develop feasibility studies, audited financial statements and business plans to access DFC and other foreign investment opportunities.

● To facilitate investment and new product development by financial institutions.

The Contractor…