Implementation of measures defined by President Islam Karimov at the session of Cabinet of Ministers on 7 February 2004 on acceleration of economic reforms, aimed at further intensification of macroeconomic stability, increasing the role of private sector, deepening structural reforms, motivating foreign direct investment, undertaking administrative reforms, programs in social sphere, as well as introducing convertibility of national currency on current operations late last year had a positive effect on socioeconomic development of the country during the first nine months of 2004, according to the joint Ministry of Economy and State Statistics Committee report published on 11 November.

I. Macroeconomic stability and economic growth

Main macroeconomic indicators

During the first nine months of the year, the level of inflation kept stably low and made up 0.3%.

The third quarter of 2004 was marked by rapid growth of industries in the economy?s real sector. This had an overall positive effect on the economic growth. According to results of the nine months, GDP grew by 8.9%, which is 2.2 times higher than in the corresponding period of the previous year and exceeds the indicator recorded at the end of the first half of 2004 by 2.7 percentage points. The high rate of GDP growth was also caused by early harvesting of cotton in the third quarter of 2004.

Stimulation of production of goods and services, development of foreign trade and strengthening money circulation, including implementation of new mechanisms of crediting agricultural enterprises, provided for increase of production in the industrial (10.2%) and agricultural (14.2%) sectors, paid services (13.9%) and construction (2.6%).

Fiscal policy

Growth of production of goods and services in the real sector, undertaken fiscal policy, as well as measures taken to increase collection of taxes allowed to exceed forecasted revenues to state budget from taxation by 3.1% and from customs dues by 2.9%.

Transfer of the Republican Road Fund to the management of the Ministry of Finance, as well as strengthening of financial discipline increased the Road Fund?s income to 119.6 million soums (8.8% more than forecasted). Income collected by the Pension Fund made up 522.5 billion soums (0.4%).

Execution of the state budget balanced with surplus of 46.8 billion soums or 0.6% of GDP.

Monetary-credit policy and currency market liberalization During the reporting period, Central Bank and commercial banks carried on regulation of money circulation, allowing to restrain inflation at forecasted level on the one hand and creating favorable conditions for development of the real sector through crediting and attracting spare monetary funds of the population in the form of deposits on the other.

The total volume of remainders of credit investments grew by 11.2% compared to the beginning of the year (6.8% in the nine months of 2003). Of these, 24.8% were in national currency (17.7% in 2003). The population?s deposits in banks grew by 85.9 billion soums (40.5%) and made up 298 billion soums.

Foreign economic activity

Owing to increased export-oriented production, creation of conditions for economic entities? penetration to foreign markets, as well as stimulation of import of modern technologies, foreign trade turnover grew by 32.1%, and exports increased by 34.6% to US$3.5 billion. Export of finished goods grew by 52%.

During the reporting period, growing trend was kept on export of chemical products (2.1 times), energy carriers (1.8 times) and mechanical engineering products (1.5 times). The export of foodstuffs nearly doubled.

Exports increased at such large enterprised as UzElTechprom (up 140%), UzMetKombinat (2.2 times), UzAvtoProm (2.2 times), UzKimyoSanoat (1.3 times) and UzSelkhozmash-holding (2.7 times).

Positive foreign trade balance made up US$815.3 million, which exceeds the results of the same period of 2003 by US$300 million.

II. Development of real sector and structural reformations Industrial development

Structural and institutional reforms undertaken in the real sector, favorable macroeconomic conditions, production localization, as well as measures taken to support and improve financial conditions of industrial enterprises reflected on the results of acceleration of industrial production growth.

Positive showings are mostly the result of rapid growth of production in the spheres of mechanical engineering and metal-working (32.2%), ferrous metallurgy (23.6%), timber and woodworking (18.5%) and building materials industry (11.3%).

Production of diesel fuel, natural gas, coal, rolled ferrous metals, steel, cars, mineral fertilizers and plant protection means, various types of cable-conductor products, cultivators, tractor trailers, cement, glass, home appliances, cotton fiber and certain types of foodstuffs increased.

Industrial production growth was stimulated by increased cargo turnover for all types of transportation. Growth of cargo turnover made up 11.3% for motor vehicle transportation and 27% for air transportation. Passenger transportation by air increased 19.1%, by automobiles 10.6% and by railway 3.1%.

Implementation of the Localization Program speeded up.

Local producers manufactured goods for the total amount of 350.8 billion soums, which exceeds the forecasted volume by 12.3%. Products worth US$154.4 million were exported. Localization program is implemented by enterprises of light industry, mechanical engineering, chemical industry, etc.

Forecasted volumes of production were achieved by Andijan Mechanical Plant, OJSC in manufacturing railroad tanks for transportation of oil products, Asia Compressor Filter, LLC in manufacturing filter elements, Andijan Cable, JV in production of conductor cables with hydrophobic infill, Rele i Avtomatika, OJSC in production of bundles for electro systems of TTZ tractors and Namangan Textile, JSC in fabrics production.

To support producers, reconstruction and financial recovery of many enterprises continued, which stabilized their financial condition. Overdue accounts receivable were reduced at 52 enterprises during the reporting period. The number of unprofitable enterprises dropped by 105 in January-August to 159.

Structural investment policy

Over the first nine months of 2004, a total of 1.5 trillion soums of capital investments were distributed at the account of all types of financing sources (2.6% more compared to the same period of 2003).

Stimulation of economic entities? investment activity and their motivation to effectively invest their funds provided for positive shift in the structure of investment sources. During the reporting period, the share of non-centralized investments made up 66.5% against 65.7% in the same period of 2003. The population?s funds made up 15.8% against 12.5% in 2003, while foreign direct investment and credits reached 9.6% against last year?s 6.1%. At the same time, foreign direct investments attracted in local economy grew 1.6 times.

Investment project on launching of the car and train bridge over Amudarya River was completed. Tashguzar-Dekhkonobod railroad segment was launched into operation.

Railroad reconstruction was completed on Keles-Samarkand segment (105 km). Production of plastic pipes, fittings and general mechanical rubber goods was put on the way at TTZ-Tekhnoplastik joint venture. Bagatteks, JV installed equipment with production capacity of 4,400 tonnnes of yarn and 2.7 million running meters of fabrics yearly. East Telecom, JV expanded capacity by 39,000 telephone subscribers. Shark Model, JV increased production capacity to 7.2 million units of finished goods per year. As-Shah, JV also expanded production to 2,100 tonne of dyed stockinet yearly.

Agricultural reform

Reformation of agricultural enterprises, application of new market mechanisms of their crediting and improvement of contractual relations had a positive effect on development of agriculture. According to results of the first nine months of 2004, production of agricultural goods grew by 14.2%.

Increased production was observed for raw cotton, grapes (64.4%), fruit (17.5%), potatoes (13.8%), melons and gourds (5.7%), eggs (21.0%), meat (6.7%), etc.

Forecasted volumes of grain crops were harvested.

In order to expand farmers? activity, 322 unprofitable and low-profitable shirkats were reorganized this year. 15,300 farms were created instead. The farms? share in the total volume of grain production grew to 42.1%, and that of the raw cotton is expected to reach 47%. Crop capacity in grain growing grew to 18%, and in cotton growing to 20.5%. Stepwise transfer of farms to direct beneficial crediting through commercial banks proved to be efficient. Tendency towards strengthening of financial stability of farms and improvement of their partnership relations with commercial banks were observed in eight regions of the republic, which adopted beneficial crediting (credits worth 70.8 billion soums were issued).

2,056 TTZ tractors were supplied to agricultural enterprises in order to improve their technical equipment. Of these, 1,564 (76.1%) were supplied on leasing basis.

Small business and private enterprise

Improved legislative base, systems of taxation and beneficial crediting of small business entities increased their share in GDP to 32.4% from 31.7% in 2003. The number of registered enterprises of small business increased by 13% and reached 275,000.

Expansion of credit volumes by commercial banks was a significant support to small businesses. Credit volumes issued to small business entities made up 269.5 billion soums, including microcredits for the total amount of 27.2 billion soums. The share of medium- and long-term credits in the total volume of issued credits made up 67.7%. A total of 8.8 billion soums were issued to start-up businesses.

Overall, 106,100 new workplaces were created during the reporting period due to enterprise development, which is 8% more than in the same period of 2003.

III. Social sphere A number of purposeful measures, implemented in compliance with ?The Year of kindness and mercy? program, growing sociopolitical activity of women, preparation of specialists and other government decisions served as base for positive development of the social sphere.

As a result of low inflation rate, average real wage rate grew by 18.4% compared to the same period of 2003 and made up 62,300 soums, real per capita income grew by 12.8% and real monthly pension increased by 13.6%.

Over 364,000 workplaces were created in the reporting period. Of these, 142,000 (40%) were for women. More than 252,000 people filled available vacancies (76% of all applicants), including 110,000 women (43% of the employed).

The average monthly allowance to families with underage children was increased by 19.4%, and the amount of allowance received by each needy family increased by 10.8%. Women, who receive childcare allowance account for 60% of the total number of unemployed mothers looking after children below the age of 2.

Besides, a number of measures aimed at strengthening social protection, assisting needy families, providing support and assistance to people with disabilities, unattached and citizens deprived of breadwinners were taken in the framework of ?The Year of kindness and mercy? program. Funds in the amount of 203.9 billion soums were spent for these measures from the state budget.

State National Program of Secondary Education

Development for 2004-2009 was developed and launched. Off-budget secondary education fund was founded in the framework of the program. Work on capital and minor repairs of secondary schools scheduled for 2004 nearly finished. Retraining and improvement of qualification of teaching staff at educational facilities is carried on.

Experimental work on additional motivation of teachers labour and transfer to branchwise network of salary payment to workers of national education is in process of implementation. Over the nine months of 2004, secondary schools for 11,500 students were launched.

IV. Institutional reforms

Privatisation Program

As a result of measures undertaken to boost private sector expansion processes, a total of 1,451 state enterprises, objects and share packages and shares were sold during the first nine months of the year. This is 1.6 times more than in the corresponding period of 2003.

In the reporting period, income from privatization made up 56.2 billion soums, which is 1.7 times more than in 2003. In the framework of implementation of the Cabinet resolution No.185 dated 17 April 2004, share packages of 1,120 privatized enterprises were sold as of 1 November.

Share packages of 251 JSCs for the total amount of some 4.9 billion soums were sold using the mechanism of stepwise lowering of the starting price. This exceeds the nominal price of these shares by 1.7 billion soums.

362 objects with a starting price of 2.5 billion soums on the sale day were sold for the total amount of 2.53 billion soums at the Real Estate Exchange.

The sale of state objects and share to foreign investors made up US$23.7 million and 15.3 billion soums with investment liabilities for the total amount of US$35.6 million soums, which is 1.5 times higher than in the similar period of 2003.

Foreign investors fulfilled investment liabilities for the total amount of US$14.2 million soums, which is 89% of the year?s forecast. The share of equipment procurement made up 60% in the structure of investment liabilities.

78 enterprises and objects were sold at zero purchasing prices under the condition of accepting investment liabilities for the total amount of 63.7 billion soums. Tender conditions were approved on 113 objects for the second round of tender trades.

Secondary stock market

The secondary stock market continued developing rapidly.

During the reporting period, the market turnover grew 1.7 times and made up 108.5 billion soums. Meanwhile, secondary market turnover grew more than 2.9 times to 46.8 billion soums (43.1%). The value of shares sold at the secondary market to individuals made up 6.8 billion soums (increase of 1.6 times).

The most popular shares sold at the secondary market belong to UzDonMahsulot (17.7% of the total secondary market turnover), UzbekYengilSanoat (19.5%) and commercial banks (11.9%).

During the reporting period, work was carried on in the sphere of administrative reforms and improving the system of economy management. A total of 47 government orders were adopted, of these 29 were on bodies of state administration and 18 on economic associations.

As a result of undertaken measures on expanding commodity trade at the exchanges, products worth 287 billion soums were sold at Uzbek Commodity Exchange (UzCE), which exceeds the results of 2003 by 47%. The volumes of deals were as follows: 264 billion soums on local contracts, 13.6 billion soums on export contracts and 9.4 billion soums on imports. Highly liquid products accounted for 83.4% of the total traded volume (239.6 billion soums).

Additional income received by commodity producers of the republic at the account of sale of their products at the exchange trades made up 11 billion soums.