February 20, 2009
Dear participants of the meeting!

Today at the extended meeting of the Cabinet of Ministers we sum up the outcomes of social and economic development of our country in 2008 and define the most important priorities of economic program for 2009.

This year the implementation of this task becomes difficult, above all, due to the fact that the economies practically of all countries of the world experience the toughest impact of the world financial and economic crisis unfolded in 2008 which at many developed and developing countries take on ever greater scales and depth, leads to downturn of production, growing unemployment, worsening of living standards of population and is mainly of an unpredictable nature.

I think there is no any need to speak about that as we take into account that our economy is becoming more integrated into the world economic and financial relations, the world crisis, firstly, its consequences have impacted and continues to render a negative impact on us.

Above all, such impact is observed on the results of activity of the basic export-bound sectors and adjacent industries related to them in terms of sharp decrease of demand and downfall of prices in the world market for the most important types of products which our country exports and, in its turn, negatively affects the balanced nature and efficiency of economy, as a whole, as well as brings about many problems in implementing the envisioned projects and in achieving the set goals.

In a word, the past year turned out to be very complex and difficult for us, above all, the workers of the country.

However, despite all emerged problems and hardships, Uzbekistan was able to achieve in 2008 not only the stable functioning of economy, but also ensure its high sustainable growth rates. Allow me to briefly dwell on the main macroeconomic and quality outcomes of the past year.

In 2008 the gross domestic product grew and accounted for 109 percent, the growth rates in industry made up 112,7 percent, including in production of consumer goods – 117,7 percent, and the sphere of services grew by 21,3 percent.

Other most important branches of economy, as well, developed by sustainable rates: the construction grew by 8,3 percent, transport carriage – by 10,2 percent, sphere of trade – by 7,2 percent. The growth rates in agriculture made up 104,5 percent. The raw cotton was prepared in the amount of 3 million 410 thousand tons, the grain – 6 million 330 thousand tons, including wheat – 6 million 145 thousand tons.

The State budget has been over-executed. Instead of envisaged deficit we have gained a surplus in the amount of 1,5 percent towards GDP.

As a result of gradual implementation of the moderately strict monetary and credit policy we have been able to contain inflation in the range of envisaged forecast parameters – at the level of 7,8 percent in annual calculation.

I would like to especially note the results of policy being conducted in our country to stimulate labor, increase salary and ensure growth of living standards of population.

In 2008 the average salary in budget organizations grew for more than 1,5 times and as a whole in the economy – 1,4 times. As a result, the average salary last year made up in the equivalent more than 300 US dollars. Yet the real incomes of population per capita rose during the year by 23 percent.

For 2009 we envisage to increase the amount of salary in the budget sphere for 1,4 times and respectively – in the economic entities. We are going to preserve the indicator of inflation growth at the level of 7-9 percent.

Despite worsening condition of external market, the foreign trade turnover increased by 21,4 percent in 2008 given that the export of goods and services grew by 28,7 percent. This has resulted in considerable growth of volumes of positive balance in foreign trade balance which serves as the most important indicator of reliability of balance of payment and sustainability of our economy, as a whole.

The in-depth positive changes are taking place in the structure of foreign trade. The sustainable tendency of growth of share of the finished competitive goods and decrease of the raw products’ ratio is being clearly observed in the structure of exports for over the last years. The share of non-raw goods in the total volume of exports in 2008 made up over 71 percent. In this, the share of export of the cotton fiber – traditional for Uzbekistan – decreased from 20 percent in 2003 to 12 percent in 2008.

The geography of foreign trade relations is qualitatively changing, above all, thanks to the growth of trade turnover with growing Asian market.

All these indicators, firstly, the consistent growth in exports of the share of competitive finished product with high value added cost serve as a testimony to not only growing potential and capabilities of our economy but also serve as the most significant direction of decreasing dependency of exports on the impact of often repeated fluctuations of world prices for the raw.

This is especially important in the current conditions of the world economic crisis when the raw directivity of exports and excessive dependency on risks and caprices of the world market turns into a serious factor of decreasing of currency inflows, worsening of financial sustainability and destabilization of economy of particular countries.

At the moment, we can state with full confidence that the achievements we have secured in this area for over the last years – this is, above all, the result of the earlier started deeply thought-out work in the country set for a long perspective to radically change the structure and diversify economy, establish in a short period of time the locomotives of branches that are absolutely new for us and play a role, accomplish a program of modernization, technical and technological renewal of production, as well as construction of modern market infrastructure.

The fact that we have created a favorable investment climate in the country served as a main factor of accelerating the structural reforms. Thanks to new sources of financing, the investments worth 6,4 billion US dollars have been channeled to the development of economy in 2008. Thus, in comparison to 2007 the growth has made up by 28,3 percent and the volume of investments towards GDP has accounted for 23,0 percent. In this, about 50 percent of all assimilated investments have been channeled to modernization and technical re-equipment of production.

It is worth noting the ongoing for over the last years progressive sustainable growth of volumes of foreign investments into Uzbekistan’s economy. In 2008 it was assimilated about 1,7 billion US dollars with a rise against 2007 by 46 percent. And what is most important, 74,0 percent of foreign investments have made up direct investments. Despite continuing world crisis, in 2009 the volume of foreign investments into our country’s economy will increase up to 1 billion 800 million dollars of which more than the three of fourth – are the direct investments.

I want to state with pleasure that almost 54 percent of all assimilated investments account for the funds of enterprises and population which once again confirms the correctness of tax policy being conducted in the country aimed at decreasing the tax burden and stimulating the investment activity of economic entities. Two years ago we have established the Development and Reconstruction Fund with authorized capital, which now makes up over 3,2 billion US dollars. The Fund plays a very important role in implementing the strategically important projects along structural transformation and modernization of economy, as well as establishing, firstly, the production infrastructure. In the nearest perspective we are going to take the Fund’s assets up to 5 billion dollars. For over the past two years the Fund allocated credits worth more than 550 million US dollars to finance and co-finance tens of large industrial and infrastructure facilities.

In the country, as a whole, as a result of implementing the investment program we have commissioned 423 industrial sites with introducing major funds worth about 250 billion Uzbek soums, including those in food industry – 145 sites, industry of construction materials – 118, light and textile industry – 65, in the sphere of agriculture and forestry – 58, chemical and petrochemical industry – 13, and pharmaceutical branch – 8 sites. Among the largest facilities that have been commissioned and are being built we should note completion in 2008 of the construction of a 165,0 kilometer-long high-voltage power line Novo-Angren thermal power plant –Uzbekistan supply station, which will allow to ensure reliable electricity supplies to Ferghana Valley. Apart from that, Uzbekistan continues to implement the projects on constructing the high-voltage lines of Syrdarya thermal power plant – Sogdiana supply station, of Guzar-Surkhan and electricity power supply facilities of the city of Tashkent. More than 2,6 thousand kilometers of water pipeline and over 825 kilometers of gas pipeline networks have been put into operation.

We have given a priority attention to the construction and commissioning of sites of social sphere which had allowed to reconstruct and newly build 169 professional colleges for 113,2 thousand students and 23 academic lyceums for 14,7 thousand students. Uzbekistan has newly built 69 schools and completely overhauled 582 schools, 184 children’s sports sites, 26 rural medical stations and 7240 thousand square meters of housing, and others.

In 2008 proceeding from principle importance of further raising the efficiency of agricultural production the country accomplished an important work to optimize the size of land plots being allotted to farms.

The private farms which were initially established on the basis of disadvantageous low-profit and unpromising shirkats now have rightfully become a leading link as well as a major producer of agricultural products.

The life itself has demonstrated the advantages of farming as the most effective form of organizing the agricultural production. The reliable system and mechanisms of financing as well as material and technical supplies of farms have been created and are successfully functioning. They fully meet the market principles. Annually Uzbekistan channels significant funds and allocations to support farms. In the past 2008 alone the country has channeled about one trillion Uzbek soums to finance production of the most important types of agricultural goods, including production of cotton – 800 billion soums and grain – 200 billion soums. In 2009 Uzbekistan is going to channel 1,2 trillion soums for such purposes.

More than 43 billion soums of means of the Fund which was specially established for such purposes have been used to procure agricultural techniques based on leasing. In 2009 it is envisaged to channel over 58 billion soums.

The share of farms in producing the raw cotton has made up 99,1 percent in 2008 and the grain crops – 79,2 percent.

At the same time, the experience which was accumulated for over the past period urgently requires resolution of a number of very important problems in terms of further developing farming, in particular, the issues of increasing sustainability, and mainly – the efficiency of farms.

As the experience of activity of the absolute majority of farms shows, the small sizes of land plots allotted for them at the initial stage of their establishment mostly serve as a containing factor of growth of production’s profitability.

The life itself suggests that low-power entities are not able to provide themselves with necessary techniques, circulating assets, to be solvent, and mainly, to cover their expenses and ensure profitability, as well as to be a reliable basis for raising profits. Proceeding from that, based on thorough inventory of the land plot sizes and critical assessment of activity of farms we have accomplished a large-scale and at the same time a rather thorough work to optimize the sizes of their land plots with taking into account their sector-wise specialization, density of population in one or other areas of the country.

Such work has resulted on the average growth of size of allotted land plot in cotton- and grain-growing from 37 hectares up to 93,7 hectares, or the growth for more than 2,5 times, in vegetable growing – from 10 hectares up to 24,7 hectares, also with a growth for 2,5 times, and in cattle breeding – from 154 hectares up to 164,5 hectares.

The sphere of entrepreneurship and small business saw their stable development in 2008.

The measures which were undertaken to further decrease the tax burden on economic entities, decrease the single tax payment rates for micro-firms and small companies from 10 to 8 percent, and starting from 2009 – down to 7 percent, decrease the income tax rates for physical entities with a simultaneous improvement of the scale of its calculation have created powerful stimuli for the development of entrepreneurship, small and private business. As a result, for over the past six years the number of small businesses rose for 1,9 times and made up about 400 thousand in 2008.

The volume of industrial products manufactured by small businesses grew by 22 percent in 2008 which is significantly higher than the average indicator on the branch as a whole. As a consequence, the net share of small businesses in GDP grew from 45,5 percent in 2007 up to 48,2 percent in 2008. At the moment, more than 76 percent of total number of employed population is busied in this sphere.

The serious quality changes are taking place in addressing the problems of population’s employment. In resolving this sharp issue alongside with accelerated development of small business and private entrepreneurship the big role is assigned to the development of sphere of services, broad introduction of various forms of home-stay labor, and stimulation of development of cattle-breeding in the countryside.

For over the past period about 661 thousand new jobs have been created, including in the sphere of small business – more than 374 thousand, the sphere of services – about 220 thousand, and thanks to the practice of home-stay labor – 97,8 thousand. The development and expansion of sphere of services plays an important role in increasing the number of jobs. The communication, information, financial, banking and transport services and those on auto and household electronic goods repairing developed with highest rates. It is especially worth noting the dynamic development of services in the sphere of information and communication technologies, which for over the past four years have been increasing annually on average by 50 percent. As a result, the share of sphere of services in GDP grew in 2008 up to 45,3 percent against 42,5 percent in 2007.

At the same time, we should pay a special attention to the fact that the share of services rendered to the rural population, in spite of growth, still remains at rather low level – in all 26,8 percent. Neither the quality of services meets the requirements of population.

Time and again I want to draw your attention to what extent an exclusive importance we accord to the development of home-stay labor which is predicated on the cooperation with production enterprises. For this we have created an efficient integral system of stimuli both for employer enterprises and population itself engaged in home-stay labor.

At the today’s stage this form of addressing the problem of employment and additional source of increasing the family budget profits has enormous social significance in terms of attracting citizens to a creative production activity, firstly, of the vulnerable categories – the women, especially, who have many children, disabled and other persons with limited ability to work.

In 2008 the home-stay workers manufactured products and rendered services worth 34 billion soums. Thanks to the benefits given to the companies, which have created jobs for home-stay workers, they had saved more than 1 billion soums. Another important direction of the population’s employment, particularly in the rural area, is to increase the number of persons who are busied in cattle breeding at personal subsidiary and dekhkan (peasant) entities. It should be noted that particular positive results have been achieved in this direction.

Uzbekistan has created a well-tested mechanism of realizing cattle to population and farms at the auctions, allotting them privileged purposeful credits, expanding and raising the quality of veterinary services, as well as providing with fodder. As a part of implementation of the program adopted to develop cattle breeding alone, 20.3 thousand heads of cattle were realized at the auctions in 2008. 48.2 billion soums-worth privileged credits have been allotted to procuring cattle in 2008 against 42.5 billion soums granted in 2007.

A particular attention is being paid to rendering support to the less well-off families by way of allotting cows for free. From 2006 up to now alone over 103 thousand cattle were allotted to such families. As a result, by January 1, 2009 the total number of citizens, who are registered as engaged in growing cattle at personal subsidiary and dekhkan entities, made up over 1.1 million people. 54 thousand people were provided with new work-record books. The records were made to the existing work-books of 111 thousand people on their work record.

I would like to briefly dwell on the issues of developing finance and banking system. The strengthening and qualitatively bettering its activity is particularly important given the global economic crisis. Last year alone, Uzbekistan took important decisions to increase the level of capitalization of such leading banks as Uzpromstroybank, Asaka-bank, Pahta-bank, Ghalla-bank and others. The Decree of President of the Republic of Uzbekistan on increasing the authorized fund of Microcreditbank was adopted. This bank is one of the main credit centers on financing small businesses and private entrepreneurship.

As a result, thanks to attraction of additional resources the cumulative capital of banks rose by 40 percent comparing to 2007, and for over the period until 2010 it will double.

At the moment, the sum of assets of the banks exceeds the volume of deposits in the accounts of population and juridical entities for more than two times. It ensures their reliable protection and guarantees their on-time and full servicing. It is an open secret that in line with the Decree of President of Uzbekistan the deposits of citizens with banks are guaranteed by state without limitation in their amounts.

At the moment, the level of sufficiency of capital of Uzbekistan’s banking system almost thrice exceeds the established international standards set by the requirements of the international Basel Committee on Banking Supervision.

Today, the cumulative current liquidity of banking system accounts for, in equivalent, more than 1.5 billion dollars or for ten times exceeds the volume of forthcoming payments on foreign non-state borrowings that allows us to say that we do not have a problem with liquidity.

Obtaining the rating of “stable” by the banking system of Uzbekistan from one of the influential rating agencies of the world Moody’s on three positions in a row served as the most important quality achievement of last year. The positions included: the stability of banking and finance system; the long-term deposit rating in national currency; the long-term deposit rating in foreign currency. According to the agency’s report: “The positive assessment for the banking system reflects the firmness of environment of banking supervision, potential growth of banking system, structural changes in financial system and growth of national economy”.

Along with that the Moody’s has conferred the positive rating of solvency on two our banks – the National Bank of Foreign Economic Activity and Ghalla bank. Yet another famous international rating agency Fitch has conferred the rating of “stable” to such banks in the country as Pahta-bank, Hamkorbank, Uzpromstroybank and Asaka-bank.

Concluding this part of my address, I would like to emphasize that the cumulative foreign debt of Uzbekistan by January 1, 2009 has made up 13.3 percent of the GDP and is characterized on international classification as “less than moderate”.


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