NEWS AND EVENTS
May 29, 2014
Export orientation of the Uzbek economy
At the January sitting of the Uzbek government, President Islam Karimov addressed those in attendance, including heads of ministries, departments, economic associations and local authorities. In his report, the leader of the Republic of Uzbekistan has set tasks to take all necessary steps, with a view to ensuring that the national economy continues to grow at a stable high pace in the current year, and that the major high-tech and modern production facilities and fresh capacities are put into operation in manufacturing without fail. This is a key factor behind the sector’s much needed modernization and renovation. At the same time, all these measures are expected to solidify the very foundation on which to develop an innovative type of economy, thus making it easier for indigenous manufacturers to penetrate foreign markets.
2014 should become a year of both a quantitative and a qualitative economic and scientific-technical breakthrough in the national economy, a year of an appreciable increase in the country’s export potential. All these achievements will enable the Republic to preserve and consolidate its image and position alike on the world stage. In a market environment, this task can be solved successfully enough by activating the scientific-technical thought, introducing scientific-technical advances in production, creating a competitive manufacturing industry and ensuring quick sales of domestically made goods and services. It is necessary to point out in this connection that the use of obvious and latent production reserves and potentialities is of enormous importance here, especially as it doesn’t require any significant additional expenditure , but the benefits that their exploitation generates are rather tangible. This means that in the process of their development, the economy at large and its production sectors should pattern their behavior not so much on new investments, which, per se, are vital in many cases, as on the mobilization of reserves and latent potentialities that are available in all industries and at each enterprise. It is no mere coincidence, then, that President Islam Karimov, speaking at the afore-mentioned sitting of the Uzbek government, accentuated the utmost importance of the effort to mobilize all available reserves and potentialities, putting it on a par with another effort – to continue and intensify economic reforms in the country.
One of such potentialities, which becomes no less than a necessity in today’s market conditions, is to augment the national economy’s export orientation. This is needed not only to swell the inflow of foreign currency to the Republic, but also to further develop and strengthen interstate linkages, which ensures, among other things, the better observance of interests of commodity producers, entrepreneurs and other participants of the modern market. At the same time, to be sure, the interests and needs of the country’s home market should not be ignored, since, by their essence and significance, they are given no less priority than a mere rise in exports volumes. Probably, there would be no much logic in exporting, for instance, metal, flour or other produce in cases where demand for them at home is large enough, although trade policy aimed at receiving the biggest amount of profit allows such a solution, provided all home needs are met without fail. In this case, reselling, which is far from a rare phenomenon in modern commerce and business, is usually resorted to, along with the widely known buying and selling operations.
Export, as well as import, encompasses the processes, which are sure to be present in economic policy of any state. As the global economic practice suggests, export parameters and potentialities are appreciably higher in rich, economically and industrially developed states than elsewhere. As a rule, countries with a lower level of technique and technology, and those lacking raw materials, material-technical resources or skilled workforce needed for the production of high quality goods, import much more than industrialized economies do. Not all countries can make aircraft, sea-going ships, automobiles and even bicycles, let alone military equipment. Importation, meaning the delivery of goods and services to a country, and exportation, meaning the supply of goods and services abroad, are both based on certain rules and requirements established by the legislation. The total amount of exports and imports characterizes a country’s foreign trade turnover, which is usually measured in money terms. Export and import operations, interpreted in wider terms and on a country scale, are regarded as a state’s foreign economic activity, which constitutes an essential and integral part of its national economic policy.
Enjoying stupendous reserves of minerals and raw material resources, as well as a significant production potential and huge labour resources, the Republic of Uzbekistan was nevertheless torn away from the world marketplace. It is noted in President Karimov’s book “Uzbekistan: its own model of transition to market relationships” that only a third of domestically made finished goods was exported, while 65 per cent of commodities consumed in the country was imported. The Republic, in fact, was a closed state, with no direct access to the world market, and all its external linkages were limited to the former USSR and the Council for Mutual Economic Aid. More than 83 per cent of Uzbekistan’s turnover of foreign trade was accounted for by commerce with the former Union republics”.
After the acquisition of independence, the Republic of Uzbekistan has become a member of the international community, possessing equal rights with other independent nations. In the field of international relationships, it is treated as a sovereign state and a subject of international law. Since then, the Republic has been building its own economic cooperation with many foreign countries, with a given effort being identified as one of the priorities of its economic development as well as a pivotal direction of its state foreign policy. The latter’s aim was to open the national economy and thereby to ensure its integration with the global economic system. In June 1991, the Law, “On foreign economic activity of the Republic of Uzbekistan” was passed, which specified such notions as foreign economic activity, powers of the state, objects and subjects of foreign economic activity etc. Later on, this document was revised and amended.
The following principles of state policy form the basis, on which the open-economy model functions:
-Openness of foreign relations with countries, irrespective of their ideological views and aspirations;
-Equality of rights and mutually beneficial cooperation, as well as non-interference in internal affairs of other countries;
-Implementation of policy that takes into account reciprocal interests, while guaranteeing the supremacy of national and state interests;
-The establishment and development of bilateral and multilateral foreign links on the basis of complete confidence and intensification of cooperation within the framework of international economic and financial institutions;
-The strict observance of universally recognized norms of international law, with any international agreements signed by the Republic of Uzbekistan having priority over domestic legislation.
The experience amassed by highly developed industrialized nations demonstrates that the closed type of economy hampers the economic development, whereas the international division of labour, bilateral economic ties between countries, reciprocal exchange of capital and goods create all prerequisites for growth and progression of a market-oriented economy. At present, therefore, the two-pronged task of forging foreign economic linkages and penetrating foreign markets is vital not only for the states themselves, but also for their industries, enterprises and production complexes.
In the book by President Karimov referred to above, the following thought is stressed: “It is necessary to trade not in cotton, but in finished produce, as all civilized countries do. The key task is to ensure the production of commodities, which are in popular demand not only within the Republic, but, in the first place, in the world market.
The priority attention should be given to those export-oriented production facilities, whose output is already much in demand in the international markets , as well as those capable not only of refunding in the near future the investments made, but also of providing a solid source of foreign exchange receipts. It needs to pursue a comprehensive policy in the import-substitution domain, with the importation of goods, whose production can be organized at home, being reduced to a reasonable minimum.”
According to analysis, indigenous manufacturers are proceeding along this very path. The high competitiveness of their output and the maximum use of local raw stuff and materials in their production underlie the strategy of production economic activity carried out by domestic enterprises, irrespective of their sectoral affiliation, type of ownership, location and other characteristics. A lot of producers already understand that high quality and competitiveness of their output guarantee not only its rapid sale and receipt of much-needed profits, but also the access to foreign markets and the improvement of their reputation and the country’s image as a whole.
Apart from cotton fiber, the product composition of Uzbek exports includes chemicals and goods made thereof, ferrous and non-ferrous metals, machinery and equipment, fuel and oil products, foodstuffs, services and suchlike.
Between 2010 and 2012, the foreign trade turnover of Uzbekistan has swelled from US $22.1 billion to almost US $26.5 billion, or a 1.2-fold increase. At the same time, exports account for more than half of the total volume of foreign trade turnover, or some US $13.6 billion, compared with US $6.2 billion in 2000, when US $3.4 billion was represented by exports. In 1995, the figure was US $2.1 billion and in 1993 – US $1.9 billion. However, such a remarkable success, one of a series of other spectacular accomplishments, or an integral part of the Republic’s powerful economic spurt, hasn’t emerged automatically or overnight. The State Program for the Development of Export Potential worked out in 1997 provided a massive initial impetus. The document’s main objective was to create an environment conducive to a stable growth of production volumes and improvement of the composition of Uzbek exportable produce, by making the maximum use of the available resources and production potentialities and ensuring their further development.
Measures of state backing and development of the country’s export potential were taken in other periods, too. Suffice it to cite the following documents as an example: the Presidential Decree, “On additional measures to stimulate producers of export-oriented goods” (June 2000) and Resolutions, “On additional measures to support the export activity of small businesses and private entrepreneurs” (August 2013) and “On additional measures to further improve the investment climate and the business environment of the Republic of Uzbekistan” (April 2014).
The April 2014 Resolution of the President of the Republic of Uzbekistan approves a program that stipulates the realization of 46 large-scale measures designed not only to improve export parameters of the national economy, but also to raise profitability of domestic production. This will, without doubt, catapult the Uzbek economy to a new level of development, while increasing both the production of export-oriented goods and the export potential of the Republic of Uzbekistan.
(Source: “Business partner.uz newspaper)