Late Banking Transitions : Comparing Uzbekistan to Earlier Reformers

Uzbekistan is one of the late transition economies. This paper compares the earlyexperience and challenges that Uzbekistan confronts in transitioning its banking system to market principlesagainst the earlier experience with banking transitions from Poland, Russia, and Vietnam, and other relevant evidencefrom the literature. To that effect, the paper uses new data on Uzbekistan’s banking sector, the data on past transitioneconomies, and qualitative and quantitative evidence from the literature. Uzbekistan’s latest experience with bankingtransition generates important lessons for countries that have yet to transition. Namely, how much can a newtransitioning country reasonably expect to accomplish within the medium term Which banking reforms are the most essentialand how should they best be sequenced How can expectations about efficient capital reallocation be managed, access tofinance made more equitable, and transition risks of financial instability be mitigated What are thecomplementary reforms in the real sector, especially of state-owned enterprises and the competition framework, thatneed to happen in tandem for the new banking market to function properly