PRESS OF UZBEKISTAN
March 31, 2016
UZBEKISTAN: THE FORMULA OF ECONOMIC GROWTH
Economic growth has always been and will ever be a basis on which to solidify a state’s power and to raise a living standard of its population. A given indicator is a kind of “barometer” that is used to gauge the condition of a national economy. What’s more, it reflects the amount of efforts made by society to augment the wealth accumulated over a certain period. No country can move forward without growing economically. To top it all, it is judging by this indicator that the world’s countries are divided into 3 main groups: developed, developing and backward (or poor) nations.
Inter-conditionality and interconnection of economic growth with production and consumption alike constitute another established rule of social development. Taken together, efficient production and moderate consumption create a pivotal prerequisite of economic growth. At the same time, production and consumption are primary factors, with a complex, dialectically conflicting link existing between them. However significant the production sector may be, its performance makes sense only when its output is consumed. Production for the sake of production is of no avail. Consumption is both an aim and a motive power of production. In addition to dictating a social order to the production sector, consumption pre-determines such vital indicators as a volume, structure and quality of goods (articles or services) that society needs at the moment.
Any satiated need generates a new one, frequently even more complicated than the previous need. The expansion and complication of needs is a powerful driving force behind the production sector’s continuous development. It is worth observing here that the needs by no means arise arbitrarily, out of a person’s fantasy or whim. Their emergence is, to a decisive degree, conditioned on production itself. For instance, the public’s demand for TV sets, refrigerators, dry-cleaners, mobile phones and smart phones has appeared following the creation and arrangement of their mass production. It can be said that the distribution and exchange of goods mediate the vibrant link that exists between production and consumption, creating a peculiar mechanism of their interaction and resolution of whatever contradictions may spring up between them.
All those phases do not exist independently, in isolation from each other; they constitute parts of a single integral process, with direct and return connections evolving between them. At the same time, production is an initial point, where a product is designed and made, and a point, where its movement starts. One should emphasize the fact that the movement of a public product is as unstoppable as life is. There are several stages of its movement. With its way starting in the production sector, then lying through the stages of distribution and exchange, the product’s movement comes to an end in the sphere of consumption. Closely linked with these stages are the economic relations that form between people, whose practical implementation is regulated by a variety of regulatory, legal, economic and other documents.
The production process should not be spontaneous; it is necessary to institute control over it in accordance with both the aims an enterprise sets itself and the regular changes that take place in the marketplace. Enterprises should turn out not what they can, but what is generally sought after by consumers. Only in this case all the costs associated with the creation of a product can be regarded as justified and production – as efficient. Put differently, only the efficiently organized production process can provide a basis for the profitable performance of enterprises. In society as a whole, such production is viewed as a reliable factor of economic growth and success. Once remarkable rates of economic growth are attained, a country can set itself and successfully tackle not only such complex tasks as modernization and renovation of its national economy and problems of social character; it is also in a position to develop interstate business links, participate in foreign trade, implement large-scale investment projects etc. Economic growth is the “face” of economy’s clever management at the state level.
Economic growth is an indicator of dynamics. At the macroeconomic level, it reflects a quantitative increase and qualitative improvement of a public product itself and its production factors alike. Economic growth is measured by growth rates or an increase in such indicators as GDP, GNP and NR for a certain period of time. The higher the amounts of GDP, GNP and NR per unit of time, or if each unit of these indicators is created by society with relatively lower expenses, the more tangible a nation’s economic growth becomes. This once again proves the fact that its economic growth is based on efficient production, which is determined, both in theory and practice, in the following way:
Efficiency = results of production (product)
Costs of production-related factors (live and materialized labor)
The correlation between the product’s growth rates and changes in production-related factors may be different, depending on the type of economic development at a given stage: extensive or intensive. In the first case (the extensive type), a country’s economic growth is achieved thanks to a quantitative increase in production-related factors, with the production’s technical and technological base remaining unchanged. For example, in order to double the output, a new production facility is built, whose capacity, quantity of equipment and the number and qualification of personnel are the same as at the operational enterprise. In the case of extensive development, the efficiency of production remains unchanged, while production assets and the number of personnel increase twice as much, when it is necessary to double the output. As a consequence, production of goods per employee, a factor determining the productivity of labor, remains at the previous level.
When it comes to the intensive type of economic development, an increase in output volumes is attained through the qualitative improvement of production-related factors: by applying more progressive means of production and more efficient articles of labor, raising the level of personnel’s professional skills, perfecting the exploitation by enterprises of their existing production potential etc. Intensification of production manifests itself in a growing level of efficiency, an increase in the output per unit of resources used in production, as well as in an appreciable improvement of the quality of goods.
Under this type of economic development, there is no need to erect a new production facility, which is equivalent to the operational one in terms of efficiency, productivity, equipment and personnel, when it is necessary to double production volumes. A given result can be reached by means of reconstruction, technical and technological re-equipment of an existing enterprise and a better utilization of available resources.
In real economic practices, though, extensive and intensive factors never exist separately or in a pure form. Instead, they go with each other in a certain combination. All depends on the character and the scale of tasks that are prioritized at one or another stage of economic construction. For example, the tasks of creating new sectors, enterprises and production facilities, developing new lands for agricultural needs, carrying out new construction projects or projects to completely modernize a fleet of motor vehicles at an automobile enterprise, all of which requiring additional investments, are usually tackled on the extensive basis. The extensive type of growth forces the economy to keep step with the times, meeting all the requirements of scientific-technical progress. The intensive type of economic growth is mainly oriented towards the search and mobilization of reserves and potentialities within an enterprise, i.e. the generation of the biggest possible return using the available production capacities and resources, which conform to the following economic principles: “minimization of expenditure, maximization of output”.
Both types of economic growth are inherent in the economy of the Republic of Uzbekistan. The ongoing intensive processes of upgrading and modernization in the national economy combine with such extensive processes as the involvement in economic turnover of production reserves and potentialities that stand idle for different reasons, the improvement of policy in the field of resources and raw materials, which concentrates on the predominant utilization in the national manufacturing of local raw stuff and materials, as well as the achievement of an increase in export volumes of home-made finished goods and a reduction, where possible, of import volumes. New industries have been created in the Republic, including automobile construction, oil-and-gas mechanical engineering, railway machinery construction, petroleum-gas chemistry, production of modern building materials and prefabricated constructions, pharmaceutics and others.
Statistics on the Republic’s economic accomplishments over the past 9 months leave no doubt that the foundations for business success are already in place: 3,440 new production capacities came on stream, 76 big investment projects, with the total cost approaching US $890 million, were brought to completion, and more than 2,100 units of morally and physically obsolete equipment were replaced. Domestic manufacturers put into production 78 new types of goods, with the calculated economic effect from import substitution being in excess of US $1 billion.
All these and many other achievements represent the spectacular outcome of the wise economic strategy acknowledged by the international community as the “the Uzbek model of development”. According to the World Economic Forum’s rating of the Republic’s economic development in the period 2914-2015 and growth forecasts for 2016-2017, Uzbekistan is ranked as one of the world’s five top nations with the fastest growing economies.
(Source: «Business partner.uz» newspaper)