PRESS OF UZBEKISTAN
August 25, 2016
UZBEKISTAN: BROAD PROSPECTS OF TECHNOLOGICAL RENOVATION
Modern Uzbekistan is a dynamically developing state with a socially-oriented rapidly growing market economy. The strategy of cardinal restructuring selected by the nation’s leaders and aimed at producing competitive export-oriented and import-substituting goods with high value added, implies a sustainable, dynamic and balanced development of manufacturing and diversification of its industries on the basis of modernization and technical and technological renovation of production capacities.
The rich experience gained by the Republic of Uzbekistan in the space of 25 years of independent development confirms once again that the manufacturing industry, a foundation of any state’s economy, should develop in cooperation with other sectors, in keeping with the requirements of the world community.
Having foreseen the complexity of objectives confronting the underdeveloped and distorted economy of Uzbekistan, Islam Karimov stressed as far back as 1989 that the main thing was to achieve the wasteless processing of raw materials produced and extracted domestically, bringing the home output to the finished-commodity level. Put differently, it is necessary to create a strong processing industry outfitted with up-to-date equipment and technology, thus placing in jobs a rapidly swelling army of indigenous workforce, creating a highly-employment society with steadily rising living standards, providing a significant boost to GDP growth and making the Republic well-equipped to join the world’s club of developed nations.
With the fundamental target – to transform Uzbekistan into a rapidly developing economy – determined, the Uzbek leader has elaborated an original model of transition to a socially-oriented independent market economy. Based on 5 key principles of stage-by-stage restructuring, a given unique model of economic development specifically worked out for the newly-independent state was recognized by the world community. It is now universally known as the “Uzbek model”.
The consistent implementation of these reforms resulted, first of all, in a sustainable and balanced pace of economic growth in the Republic. In the past decade, the average annual rate of GDP growth was in excess of 8 per cent. By and large, over the years of independence, the national economy of Uzbekistan grew almost 6-fold, with the population’s real incomes increasing almost 9-fold. The per capita GDP reached US $6.900, which enabled the country to enter a group of states with a medium income level.
During the complicated period of transition the Uzbek government pursued the strategy of rapid development of primary industries, such as oil and gas, gold mining, non-ferrous metallurgy, chemical and petro-chemical sectors, thus solidifying the nation’s macroeconomic stability.
Thanks to the positive structural changes that took place in the Uzbek economy over the years of independence, its structure was significantly diversified. This was helped by the creation of completely novel industries, including automobile construction, production of engines and main components, petro-gas chemistry, petro-gas mechanical engineering, modern agricultural machinery construction, production of building materials, railway machine building, production of consumer electronics, pharmaceutics, microbiology, upgraded food, textile, leather and footwear sectors and others.
The number of new plants put into operation in the Republic is staggering, indeed: the plants manufacturing buses in cooperation with the Japanese company Isuzu and trucks jointly with MAN, a German company, both based in the town of Samarkand; the Bukhara Oil Refinery; the Shurtan Gas-Chemical Complex and the Ustyurt Gas Chemical Complex; and the entirely reconstructed Fergana Oil Refinery. As a consequence, serious qualitative changes took place in the sectoral structure of the Republic’s manufacturing. Today’s official figures provide the clearest illustrations of the posture of affairs there: the industry accounts for about 35 per cent of the Uzbek economy, thereby confirming its role as an engine of the country’s economic growth; at the same time, the share of agriculture in the structure of the national economy has dropped to 18 per cent, while the services sector’s share has gone up from 33 per cent to 47 per cent, which is characteristic of rapidly developing economies.
The diversification of the nation’s manufacturing changes the product composition of Uzbek exports. At the beginning of the 1990s, domestic exports basically depended on cotton, representing 60 per cent of its total exports volume. Nowadays the output of processing industries account for some 80 per cent of the country’s exports volume. The exportables encompass agricultural machinery, up-to-date building and decorative materials, finished textile and leather goods, modern cables and wires etc.
Now is the moment to stress that the localization of industrial production is the most pivotal ingredient of Uzbekistan’s industrial development. The first localization program was approved in the year 2000. Since then more than 2,600 projects, estimated at over US $5.5 billion, were brought to completion within its framework. The localized enterprises mastered the production of more than 5,000 types of manufactured commodities, substituting US $7 billion worth of annual imports volumes. The localization projects realized in the past two years have enabled indigenous manufacturers to stop importing as many as 97 product categories. What’s more, the importation of other 306 product categories have been halved.
The development of intra- and inter-sectoral industrial cooperation also facilitated the creation of a preferential regime in the contract system when it comes to the placement of orders for the purchase of home-made produce within the framework of the International Industrial Fair and Cooperation Exchange, which are held annually in the city of Tashkent. At the last year’s event, more than 13.3 thou contracts were signed for the supply of produce to the tune of 11.9 trillion Soum (currency rates of CB RU from 25.08.2016, 1$= 2984.45 soums), 38 per cent above the indicators reported at the 2014 International Industrial Fair and Cooperation Exchange. By the way, the contracts for the acquisition of hitherto imported goods accounted for 2,1 trillion Soum of the total amount. According to estimates, this is expected to reduce industrial imports in the current year by US 637.5 million.
In the first few years since it gained independence, Uzbekistan formed short-term objectives. Today, the country is in a position to determine and attain medium- and long-term priorities, owing to the high rates of economic growth, macroeconomic stability and active structural changes. The major task of the national long-term economic policy is the creation of a competitive, stable and structurally balanced economy by developing industries, which enjoy certain comparable advantages in the formation of a long chain of available raw-material resources, as well as by solidifying resource-efficient and innovative factors to boost the rapid development of high-tech processing industries, which, in turn, can ensure fast increases in the volumes of output with high value added.
In the last few years the national manufacturing industry, following this path of economic development, has launched the production of many new high-tech product categories, such as electro-technical goods, polyethylene, polypropylene, spare parts and components for mechanical engineering and other industrial sectors, consumer electric appliances, including washing machines, gas cookers, air-conditioners, vacuum cleaners, and a lot of other product groups. Suffice it to say that over 60 per cent of manufactured commodities represent the output of high-tech industries that have been created practically from nothing over the years of independence.
In addition to these measures, Uzbekistan runs the Program of Further Reform, Restructuring and Diversification of Economy for the period of up to 2020. This comprehensive strategic guide to action encompasses 8 closely interconnected complex programs designed to increase the share and importance of private property in the national economy and create a reliable legal environment for its protection; to improve the system of corporate management; to intensify the processes of re-organization, modernization and diversification of manufacturing; to accelerate the processes of localization, development and upgrading of engineering communications and road-transport infrastructural facilities; as well as to reduce the economy’s energy consumption.
Without doubt, the realization of such an active industrial and investment policy would have been impossible without the continued endeavors on the part of the Uzbek leaders in a move to improve the investment attractiveness of the national economy and the overall business climate alike. The World Bank’s report “Doing Business” ranked the Republic of Uzbekistan one of the world’s top ten state-reformers for the creation of the most auspicious conditions for doing business in 2014-2015. By its experts’ estimates, Uzbekistan these days spends less time to set up a business than Japan (1.5-fold), Germany (1.6-fold), Greece and Israel (twice as much), Spain (2.2-fold) and China (4.8-fold). Moreover, the tax burden on small business in Uzbekistan is tangibly lower than in the US, Canada, Germany, Austria, France, Italy, Spain, Greece, Japan, China, India, Belarus and a number of other countries.
The favorable business climate created in Uzbekistan lures foreign capital and business. The Republic is home to over 4,000 enterprises set up with a share of overseas investment from 90-plus countries of the world. Foreign investments and credits account for more than 20 per cent of implemented capital investments that have been ploughed into the Uzbek economy. A list of major foreign partners actively operating in the Republic include: Boeing, Honewell, Airbus, MAN, Klaas, Knauf, Lemken, Nestle, Tecknip, ABB, Maxam, Isuzu, Itochu, Mitsubishi, General Motors, Hitachi, Marubeni, Hyundai, Samsung, LG, Lotte Chemical, Huawei, ZTE, CNPS, SITIC and many other companies.
The Program of Measures to Ensure Restructuring, Modernization and Diversification in the period 2015-2019 passed in Uzbekistan stipulates the implementation of 846 new investment projects to the tune of over US $40 billion. Among them are 70 projects worth more than US $25 billion – in the oil-gas-chemical industries; 30 projects worth US $9 billion – in the power engineering sector; 150 projects worth over US $1 billion – in the textile, leather and footwear industries; over 300 projects worth US $410 million – in the food industry; some 40 projects worth US $270 million – in the electro-technical sector and other projects in different sectors of the national economy.
For the time being, long-term programs are worked out to develop manufacturing in Uzbekistan till 2030. They envisage, among other things, a rapid growth of processing industries on the basis of investment projects designed to reach the 3-4-stage processing of raw materials and to produce finished goods with high value added.
One can say with certainty that there are all prerequisites to date that allow the country to achieve a 3-fold increase in production volumes of petro-chemical and chemical output, to master the production of new types of complex polymers, olefin, synthetic rubber, synthetic fibers, aromatic hydrocarbons, and other high-tech products, complex mineral fertilizer as well as a broad range of chemicals that are much in demand in other industries.
Real possibilities are also available in Uzbekistan to swell production volumes in machinery construction, the electro-technical industries (3.7-fold), pharmaceutical (almost 10-fold), food (5-fold) and building-materials (4-fold) industries.
The realization of these programs opens up wide prospects for efficient investment cooperation.
Beyond all question, the further improvement of industries that stipulate the development of the national economy as a whole is of supreme concern to the Uzbek leaders. Their successful development will help the Republic to secure its chief objective – to double, by the year 2030, the nation’s GDP and to achieve, on the basis of root-and-branch structural changes in the national economy, a rapid advance in manufacturing, with a view to bringing its share of GDP to 40 per cent.
(Source: «Business partner.uz» newspaper)