Mehmood Ul Hassan Khan
The Republic of Uzbekistan celebrates its 24th National Day on September 2 every year. It has been great socio-economic transformation since its inception. Its economy, politics, projects and the last but not the least governance model has been revolutionized the fate of its people. Mustaqillik bayramingiz muborak bo’lsin!
Uzbekistan can be proud of the reforms it has taken to reflect the challenges of today’s increasingly connected globalized world. The fast rail connection between Tashkent and Samarkand, advances in information technology (IT) and excel in education recognize that progress in these areas are examples of solid achievements in Uzbekistan during 24 years. Moreover, democracy is a process which is rigorously followed in Uzbekistan in its true letters and spirits.
Achievements of Macro-Economy
Uzbekistan in recent 10 years is an extremely successful economy high growth 8 percent, low domestic and international debt, undervalued exchange rate, relatively even distribution of income, creation from scratch competitive export oriented auto industry.
Since inception, President H.E. Islam Kairmov rigorously focused on the transformation of Uzbekistan towards socio-economic stability and political sustainability. Due to which the country had achieved socio-economic development since its independence with robust gross domestic product (GDP) growth till today. During his presidency Uzbekistan transformed its macro-economy from a raw-material based economy to knowledge-based economy. Its economy has grown 4.1 times, and in per capita terms it multiplied at least threefold. The public external debt of the country never reached beyond to 16 percent of the GDP, while the internal debt has a zero valuation, amid the mounting volumes of exports and gold and currency reserves. It attracted more than US$ 56 billion of FDIs. The volume of capital investments in 2013 is to make up US$14 billion, which is 23 percent of the GDP.
The pace of social development has been phenomenal. Economic growth has been remarkable and surpassed all the regional countries in so many interrelated fields of production and survival. Visionary leadership of H.E. Islam Kairmov successfully changed the destiny of its country and people alike. It has been infinite voyage of change (from old system of totalitarianism to devolution of power, gradual democratization, political & constitutional development). It has been institutionalization of gradual liberalization of economic policies and projects. It has been national drive of market freedom, privatization, qualitative education, health and housing etc. Now Uzbekistan is an incredible country all respects.
World Bank Report (2015)
According to World Bank report (2015), despite a generally subdued performance in the developing Europe and Central Asia (ECA) region, Uzbekistan continues to grow strongly. In 2014, output expanded by 8.1 percent, slightly higher than the 8 percent growth rate registered in 2013. With this, real GDP growth averaged 8.3 percent per annum between 2008 and 2014, making Uzbekistan one of the fastest growing economies in the ECA region and among middle-income countries during this period.
Sectoral Development (2014-15)
During 2014, construction expanded by 18.3 percent, services by 15.4 percent, agriculture by 6.9 percent, and industry by 5.7 percent. On the demand side, private consumption rose after a 20 percent nominal increase in minimum wages, pensions, and social allowances. The prospect of high GDP (7.6 percent) is expected during 2015 too.
People & Business’s Friendly Policies
Rigorous economic development has been one the foremost national and strategic priority of the government due to which right from the beginning the President Islam Kairmov introduced many short and long term reforms in the country. Obsolete administration has been changed into the best people friendly. Command system has been refined to contributory and community based. Planned distribution has been changed into price oriented and supply-demand. It consolidated its weak economy and achieved macroeconomic stability.
Declining Poverty Ratios
Due to rigorous social development poverty declined from 27.5 percent of the population in 2001 to 14.1 percent in 2013 and is expected to have declined further to 13.7 percent in 2014.3 These declines were due to rapid per capita economic growth, sustained annual increases in salaries and remittances, incomes from micro and small businesses, and the Government’s targeted support programs. Net remittances from labor migrants have helped many families in Uzbekistan keep poverty at bay. In 2002–13, per capita GDP grew 197 percent and poverty declined by 48.7 percent.
Rapid industrialization and resilient banking system played significant role in the constant upward economic development of the country. It did not sacrifice its people’s wish and whims for the sake of industrial production and kept a strategic balance between the economic and financial reforms and traditions and customs. Resultant there has never been chaos or political uncertainty in the country. Economic stability further strengthened the pace of politicization process and ultimately democracy flourished. Regular conduction of presidential, parliamentary and local elections all speak about the stability of the Uzbek system and unblemished will of its visionary leader H.E. Islam Kairmov. The President Islam declared the need to tackle the debacle of macro-economy as soon as possible problem as soon as possible during its speech to the 10th session of the Oliy Kengash (Supreme Council) of the Republic of Uzbekistan of the 12th convocation in July 1992.
The Government’s industrialization policies are now contributing to changes in the structure of Uzbekistan’s economy. While services continued to dominate the economy at 44 percent of GDP in 2014, the share of industry has increased by around 10 percentage points of GDP over the past decade and at 24.1 percent of GDP now exceeds that of agriculture 17.2 percent.
Pace and Bounties of Industrialization
Initially, introduction of a national currency and complete overhauling of its sick industrial units were the main worries of Uzbek government. Most of the industries were at their lowest ebbs of production and efficiency. Industries were not price based and resultant was uncompetitive orientation in the national as well as regional markets. Largest production units and businesses became irreverent and solvent. Fears of shortage of even basic necessities of life were very high and real throughout the country. Strategic planning and people’s friendly policies of the Islam Kairmov rescued the country from all the hardships and put it on the way of greater socio-economic prosperity.
Revival of import-substituting and export-oriented goods based industries were the main priorities of the government. Within very short span of time, people’s friendly agricultural and industrial policies and programs achieved and ensured food self-reliance in Uzbekistan. It was the first giant step towards greater realization of self-reliance among the people which encouraged them to work harder to achieve their desired goals of socio-economic prosperity.
Food Security & Self-reliance
In the early 1990s, the import bill of flour and other food items/commodities required an average of $900 million annually. Now, there is a paradigm shift. The demands of the domestic market are met by the domestically produced foods by 96 percent. According to national figures due to self-reliance of food items the consumption of meat per capita increased by 1.3 times, milk and dairy products by 1.6 times, and processed fruit and vegetables by almost 4 times.
Diversification of Exports
Due to its exports oriented policies as of so many advanced economies like (Japan, China, Germany, Brazil etc.) its exports now dispatch to more than 80 countries which was confined to five countries during the 90s. It introduced diversification in its traditional and non-traditional exports mix. Now exports of fruit juice have been doubled, and food products increased an average of 1.5 times over the last decade.
Main Indicators of National Economy
According to World Bank report (2015), current account surpluses over the past decade have translated into rapidly falling indebtedness, with external debt also declining rapidly from 64 percent of GDP in 2001 to around 17 percent of GDP in 2012–14. External debt has been serviced comfortably, and the debt service ratio was around 5 percent of exports in 2012–14. Uzbekistan remains a net creditor to the world despite its massive capital needs, with foreign assets at more than 14 months of imports of goods and services in 2014.
Knowledge Based Economy
The government introduced concept of knowledge based economy which geared the momentum of industrial production. It transformed farmers with greater scientific knowledge along with modern equipment. Introduction of modern methods of farming and establishment of technologically advanced processing plants and cold stores for the preservation of consumer properties of the foods grown drastically changed the shape, size and supply channels of agro-economy in the country.
With the implementation of land distribution and privatization initiatives, the number of households in agriculture increased and crop diversification was introduced. Structural changes to the land tenure system following the restructuring of large collective and state farms have resulted in the formation of private farms and the expansion of small household plots.
According to national figures, in the first years of independence 400,000 hectares of irrigated lands were allocated to 2.5 million families as small holdings, the monoculture of cotton was limited and areas under grain crops were increased. Manufactures have fully satisfied public demand for grain, flour, meat, milk, fruits and vegetables, and turned the grain importer into the grain exporter. Meanwhile, the local farmers go ahead there are numerous farms that deal with not just growing crops, but with their processing and sales through their own store networks.
Water-saving technologies, amelioration of irrigated lands, and development of reclamation and irrigation facilities were rigorously introduced which produced economy-push factor in the country. Easy and smooth supply of agricultural machinery was made prompt to local farmers which increased their per-capita yield. Strategic partnership between public-private companies and foreign assistance produced miracle in the agro-economy of Uzbekistan. Now its agro-economy and industrial scene is represented by domestic companies and representatives of the world’s leading agricultural machinery giants like the German Claas LEMKEN GmbH & Co, the American Case New Holland. Now, government of Uzbekistan is currently negotiating with Russian, German, Austrian and Italian companies on the establishment of manufacture of a wide range of agricultural machinery and equipment in the country.
Uzbekistan has ambitious plans about fruit and vegetable processing, and food manufacture. By 2020, it is planned to carry out over 300 big projects worth $410 million, and 5,000 projects of district scale worth $500 million. That implies an additional 100,000 tons of industrial output and dozens thousands of new jobs, mostly in rural areas.
Booming Oil & Gas Industry
Sincere efforts were also initiated to overcome oil deficiency in the country. Oil refineries in Bukhara and Fergana in the early 90s accelerated the economic growth. Many mega projects related to oil & gas were initiated in the country. The pilot commissioning of the Ustyurt Gas Chemical Complex this September will be a true gift for the Independence Day. This project ranked among the top ten global investment projects in 2012. After reaching the full production capacity, the plant will annually process 4.5 billion cubic meters of gas and produce up to 387,000 tons of polyethylene and 83,000 tons of polypropylene. From a technological point of view, the complex promises to ranks among the world’s most advanced plants. The introduction of new technologies would ensure extraction of up to 97 percent of ethane, propane, and other valuable components from natural gas.
Hug Investments in Oil & Gas Sector
Government of Uzbekistan is making huge investments in the fields of oil & gas exploration and production. The government has the plan to implement a total of 124 investment projects in the fields of upgradation, technical and technological extension of production, as well as 48 new promising projects involving foreign investors in the field of geology, fuel and energy complex, chemical, petrochemical and metallurgical industries. Uzbekneftegaz has scheduled to upgrade and reconstruct the Bukhara refinery, gas and chemical complex in the Mubarek Gas Processing Plant, build a new plant of hydrocarbon pyrolysis on the basis of the feedstock or Ustyurt Gas Chemical Complex, the fourth section of the Uzbekistan-China pipeline, to expand the capacity of the Uzbekhimmash plant for the manufacture of bulky large-scale petrochemical equipment (Stage 2), to establish the production of plastic articles, purchase high-tech equipment for exploration works, and much more.
It is hoped that after the implementation of all projects under the Program of Measures on Provision of Structural Reforms, Modernization and Diversification of Production for 2015-2019 will bring the oil and gas industry to a new level in Uzbekistan. It is estimated that the new production capacities will increase producing up to 8.55 billion cubic meters of natural gas, 83,000 tons of gas condensate. Moreover, it will provide nearly 20 billion cubic meters of natural gas, as well as the production of up to 361,200 tons of liquefied gas, 210,000 tons of polyethylene, 280,000 tons of polypropylene and significant volumes of other products for the transportation sector.
Strong & Stable Banking System
Uzbekistan’s banking system is strong, stable and sustainable. It provided essential input in shape of funds for rapid industrialization and investments. It encouraged domestic saving (among the highest in the region) and successfully channelized its liquidity in the production spheres. Its appropriate monetary policies supported and developed a reliable banking industries and financial intermediaries in the country.
Capacity Building Measures
Due to its constant capacity building measures and series of reforms its banking system did not shatter during sever global banking and economic crisis. Its reforms successfully mitigated the negative consequences of global banking and economic downfalls.
Global Economic Crisis and Appropriate Uzbek Measures
Uzbekistan withstood the negative impact of the crisis, avoided suspension of big investment projects, bankruptcy of industrial enterprises and job lay-offs. The stability of the national currency and strengthening of its solvency was provided by the whole range of different programs, which allowed stabilizing the financial situation in the country in a short time, and laid the foundation for future success. Most importantly, Uzbekistan prevented economic collapse and took control over a sharp rise of inflation which was raging in other former Soviet republics, as well as managed to avoid mass unemployment.
Standard & Poor report (2015)
According to International rating agency Standard & Poor report (2015) the outlook of the banking system of Uzbekistan is stable despite worsening of ratings of some CIS countries. The figures of the banking sector of Uzbekistan are at high level and exceed requirements of international standards. The different reforms introduced by Uzbekistan government are now paying its dividends. It further strengthened financial sustainability of the banking system and helped to ensure growth of aggregate capital of the bank twice in last five years. The figure rose by 25 percent in last year. The level of capital adequacy makes up almost 24 percent which three times higher compared to international standard 8 percent.
Uzbekistan’s Central Bank Report (2015)
According to the central bank of Uzbekistan’s latest report (May, 2015), the total assets of the commercial banks in Uzbekistan in Q1 2015 stood at 56.6 trillion soums. The total assets of the commercial banks of Uzbekistan were 56.2 trillion soums, and their total capital stood at 6.9 trillion soums in 2014. In Q1 2015, the total assets of the Uzbek banks rose by 0.7 percent, compared to last year’s figures. Moreover, the total loan portfolio of the Uzbek banks increased by 0.6 percent up to 35 trillion soums.
According to report the total volume of deposits attracted by the country’s banks amounted to 28.6 trillion soums in early April 2015. It increased up to 28.5 trillion soums i.e. growth of 0.4 percent. The aggregate bank capital also increased and remained at 6.9 trillion soums.
Uzbekistan invested 18.1 trillion soums of investments in the first half of 2015 with 9.8 percent growth YOY. Over the years of independent development the total amount of investments in the economy exceeded $190 billion, of which over $65 billion falls to foreign investment. Experts have predicted a record number for this year $15.9 billion worth of investment.
In the early 1990s, almost all medicines and medical supplies were imported into the country from abroad and only two local companies produced about 20 kinds of drugs, occupying 2 percent of the market share. The favorable investment climate, incentives and preferences have allowed radical changing of the situation. Today, more than 140 domestic pharmaceutical enterprises produce about 2,000 kinds of medicines, medical supplies and medical equipment. Uzbekistan’s domestic pharmaceutical enterprises outperformed the western counterparts and now have started exports. Uzbekistan exports 45 kinds of medicines and medical supplies manufactured by 17 domestic companies. The pharmacists have planned to carry out 23 different projects worth $100 million this year.
Special attention was given to the development of Uzbek automobile sector. The Central Asia’s first Automobile Plant was opened in Asaka on July 19, 1996. It has been on the way for further production, expansion and efficiency. Today, the automotive industry of Uzbekistan can be called a locomotive of the entire industry of our country. It has given a new impetus to the development of related industries and sustainable employment growth. The sector represents the whole range of enterprises and organizations, which are merged by the O’zavtosanoat Company and provide more than 27,000 jobs.
From top to bottom the Republic of Uzbekistan is incredible. It is a living miracle where sensitivities associated with macro-economy does not pollute its people’s traditions and customs. It is a game changer where “change” has been introduced through gradual socio-economic development and people have not been left alone on the mercy of free market mechanism. Social development remained supreme.
Holistic model of economic development revolutionized its family, field and factory alike. Now, it speeds up its channels of production and enhances velocity of socio-economic prosperity. Long live the Republic of Uzbekistan and its visionary leader the President H.E. Islam Kairmov.