FINDINGS OF THE WORLD BANK STUDY OF UZBEKISTAN S NATIONAL QUALITY INFRASTRUCTURE

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1 1 FINDINGS OF THE WORLD BANK STUDY OF UZBEKISTAN S NATIONAL QUALITY INFRASTRUCTURE Jean-Louis Racine The World Bank The World Bank

2 Main Findings 2 Firms have limited access to high quality inputs and to support services for quality. Firms have a limited understanding of quality upgrading and of international standards. Physical, legal and organizational improvements to Uzbekistan s national quality infrastructure (NQI) can bring many benefits to quality upgrading, innovation and export competitiveness. Sources: World Bank Enterprise Innovation Survey (900 enterprises); focus groups with 27 enterprises; detailed case studies with enterprises and conformity assessment bodies; interviews with, information from Uzstandard, information from international and regional standards, accreditation and metrology organizations.

3 3 How do Uzbek firms fare on quality?

4 By improving product quality, Uzbek firms could export in sectors where quality plays a decisive role 4 Focus of exports in quality-competitive or price-competitive sectors Export share in quality-dominated d industries (%) TKM Export in more quality-competitive sectors ALB DEU ESP MDA KOR TUR AZE GBR HUN ROM CZE SVN MKD CHN POL BGR EST BIH SVK HRV LTU GEO LVA KGZ BLR RUS UZB Export in more price-competitive sectors ARM UKR KAZ TJK Export share in price-dominated industries (%) Note: 2006 data for EU exports

5 5 Quality and NQI services are already important for globally-oriented Uzbek firms ISO certification (% of firms) 8% 6% 4% 2% 0% Exporters Non-exporters Quality is the leading factor in input choice (% of firms) 80% 60% 40% 12% 10% 8% 6% 4% 2% 0% Firms that compete with imports Firms that do not compete with imports 20% 0% Exporters to high-income economies Non-exporters Source: World Bank Enterprise Innovation Survey

6 6 But there is a quality gap between local and imported inputs Globally-oriented companies tend to use fewer local inputs than domestically-owned or non-exporting companies Mean local percentage of inputs 100% 100% 80% 80% 60% 60% 40% 40% 20% 0% Foreign Private domestic 20% 0% Exporters Non -exporters

7 7 And most firms do not understand their quality needs Firms do not see a link between quality improvements and competitiveness 64% of firms respond that they have no need for voluntary testing and calibration given their domestic focus. 83% of firms respond that they have no need for ISO certification because their domestic focus or their foreign customers do not require it.

8 There has been a sharp increase in quality certification in Uzbekistan 8 Number of ISO 9001 certificates in Uzbekistan IOS 9001 certificates Source: ISO Survey of Certificates; World Development Indicators.

9 But the rate of certification is still lagging 9 ISO 9001 certificates standa ardized by industry and services value ad dded (billion 2000 USD) Number of ISO 9001 certificates standardized by valueadded in industry & services China CIS Europe excl. Russia Turkey Russia Caucasus & Central Asia Uzbekistan Kazakhstan Uzbekistan Source: ISO Survey of Certificates; World Development Indicators.

10 And external trust in the value of the certificates is weak 10 40% of surveyed firms took less than 6 weeks to prepare for their ISO 9001 certification. This process typically takes an entire year in other countries. Source: World Bank Enterprise Innovation Survey

11 11 Uzbekistan s National Quality Infrastructure

12 Current Status 12 In recent years, Uzstandard has been working towards improving the NQI s: Technical capacity Organizational framework Legal framework Significant challenges remain ahead The NQI does not provide the necessary choice of services to support quality-upgrading and could be made more industry-friendly. The NQI does not facilitate exporting: accreditations, certificates and measurements are not recognized internationally.

13 Progress in adopting international standards, but many standards are old GOST standards 13 Origin of Uzbekistan s national standards International EU GOST Domestic thousands of standards Uzbekistan Poland Georgia Romania Turkey Bulgaria United Kingdom Ukraine Moldova Kazakhstan Serbia Tajikistan Kyrgyz Republic Bosnia and Herzegovina Albania FYR Macedonia Croatia Source: World Bank Survey of Quality Infrastructure Institutions

14 This limits Uzbekistan s ability to innovate and compete on quality in global markets 14 Since most mandatory standards in use are not internationally harmonized, Uzbek firms face challenges in: Exporting their products outside the CIS and insertion into global supply chains. Importing modern technologies. Learning about the state-of-the-art technologies which are described in international standards. Understanding the quality needs of high-income economies.

15 Standards in Uzbekistan have mandatory requirements 15 In Uzbekistan a very broad range of products are subject to mandatory standards. But most countries have found that their enterprises can still produce safe, environmentally sound and high-quality products without resorting to a long list of mandatory standards. Most countries are transitioning to a system where the NQI does not have a regulatory role. Source: World Bank Survey of Quality Infrastructure Institutions

16 Mandatory standards restrict technology upgrading and impose additional costs 16 Mandatory standards: Stifle innovation and technology upgrading because they impose detailed technical requirements that are not able to keep up with technological change. Decrease productivity when mandatory certification imposes additional costs on firms to prove compliance, estimated at US$ million per year in Uzbekistan.

17 Uzbekistan s accreditations are not yet recognized internationally 17 Membership in international organizations and mutual recognition agreements (MRA/MLA) International Accreditation Forum (IAF) International International Laboratory Accreditation Cooperation (ILAC) European cooperation for Accreditation (EA) Regional Asia Pacific Laboratory Accreditation Coordination (APLAC) and Pacific Accreditation Coordination (PAC) Brazil partial MLA MRA partial MLA China partial MLA MRA partial MLA MRA Germany MLA MRA MLA Kazakhastan associate cooperation Korea, Rep. partial MLA MRA MRA Poland MLA MRA MLA Romania member partial MRA partial MLA Russia associate cooperation partial MRA (APLAC only) Spain * MRA near total MLA Turkey MLA MRA MLA United Kingdom MLA MRA MLA Uzbekistan affiliate

18 this has implications for the economy 18 Uzbekistan is not a full member of main international bodies and hence has no MRA/MLA. This means that: None of the certificates, inspections, test results and measurement results in Uzbekistan are accepted abroad on a technical basis. Firms wishing to export products outside the CIS, or high-quality goods in the CIS, need to have them re-tested and re-certified in the importing market, which increases export costs and time. This limits the credibility of Uzbekistan s accreditation system in the domestic market.

19 Uzbekistan s measurements are not recognized abroad 19 Uzbekistan has not joined the International Committee for Weights and Measures (CIPM) MRA. This means: There is no way for enterprises or laboratories to know the accuracy of what they are really measuring with their instruments. This can hamper the development of high-quality goods that require sound measurements. None of the measurements made by Uzstandart, or by laboratories and enterprises which were calibrated by Uzstandart, are recognized abroad. As a result, Uzbekistan s ISO 9001 are of questionable validity, since certification requires international measurement traceability.

20 20 Recommendations

21 Objective 21 Continue progress towards an internationally recognized NQI that is industry-friendly and genuinely supports quality, innovation and export competitiveness.

22 In the short term 22 Adopt internationally-recognized standards whenever possible. Remove remaining mandatory requirements from standards and continue progress with technical regulations. Give the full responsibility of technical regulations to policy- making bodies with no commercial activities. Decrease the number of regulated measuring instruments. Create a single accreditation body which operates as an independent legal entity. Harmonize the legal framework for metrology, accreditation and standardization with international practices. Transition from compulsory certification to market surveillance.

23 In the medium term 23 Join an accreditation mutual recognition agreement (MRA). Join the International Committee of Weights and Measures (CIPM) MRA. Train NQI personnel to international practices. Invest in metrology facilities. Stimulate demand for quality in small and medium enterprises through technical assistance.

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