Author: Diloram Tashmukhamedova, the Speaker, the Legislative Chamber of Oliy Majlis of Uzbekistan



The focus of attention in the international expert community is the prevention and neutralization of the negative consequences of global financial and economic crises, which, unfortunately, seem to be deepening. There are unsolved problems of public debt and national budget deficits in many leading countries of the world, production stagnation in real economies, reduction of demand in the world markets, and persistent unemployment, leading to social tensions.

We regret to note that the current situation analysis does not give grounds for quick resolution of problems in the world economy, and most likely recovery from the crisis will be long and largely unpredictable. In these circumstances, each country of the world is interested in effective crisis management programs and implementation of measures for control and neutralization of global financial and economic crises and their consequences.

Uzbekistan sees that in the difficult current conditions, the weighing of the effects of risks and the consequences of the ongoing global crisis on the national economy gets special attention. Therefore, this article will introduce Uzbekistan’s experience in implementing economic reforms.

At the heart of the Uzbek model of development is a socially focused economy and the difficult experience of anti-recessionary fighting that has been accumulating over the years. Striving not to lose ground on economic achievements, the goals were to continue the rate of development and modernization of the country in order to maintain macroeconomic stability and to increase economic competitiveness.

We believe it is important to rely on the specific indicators that would confirm our conclusions. Thus, last year, despite the remaining serious problems in the global economy, Uzbekistan continued to steadily develop the national economy, provided the stable growth of living standards, and strengthened its position in the world market. The Gross Domestic Product grew by 8.2 percent; industrial output, by 7.7; output of agriculture, by 7; and the volume of retail turnover, by 13.9 percent.

Macroeconomic stability and economic balance have been provided.

Exports volume increased significantly – by 11.6 percent – the structure and quality of exported products improved. As a result of this, the share of non-oil finished products made more than 70 percent. The positive balance in foreign trade turnover exceeded $1 billion and $120 million. The policy of external loans pursued in Uzbekistan allows the country to hold volumes of external debt at a relatively low level, and to steadily keep the established image of the country fully incurring its obligations.

Today, the size of the cumulative external debt of Uzbekistan does not exceed 16 percent of GDP, which by international standards is classified as “less than moderate” debt.

In Uzbekistan, importance is given to the internal demand growth that, in the context of the ongoing world financial and economic crisis, becomes important as a stabilizing and stimulating factor of a sustainable economic development.

These tendencies are observed throughout a rather long period. For the years of independence, Uzbekistan’s GDP grew almost by 3,5 times; per capita, by 2,5 times; and an average salary, by 14 times. Aggregate income of the population in real terms increased by 8,6 times; 47 percent from property income and business.

Expenses of the state for social protection per capita grew by more than five times. Annually, about 60 percent of the State budget is aimed at the development of the spheres related to social protection of the population. Thus, the social orientation is also characteristic of the State budget, and even in the conditions of proceeding global crisis. About 59,2 percent of all state spending in 2012 was directed at financing this social sphere and social protection of the population, including more than 34 percent – in education and more than 14.5 percent – to the healthcare sector.

As the results of this policy, the average life expectancy of people over the years of independence has increased from 67 to 73 years, and the rate of maternal mortality was reduced by more than twice, and infant mortality, by 3 times.

The fact that the reforms implemented in Uzbekistan are aimed at providing a decent living and quality of life of every citizen is confirmed this year, declared in the country as the “Year of welfare and prosperity.” The respective State program identifies measures for ensuring steady growth of welfare and the real income of the population, for employment increases, for further development of small and private businesses, farming, and the improvement of the system of social protection and social assistance to the population, especially the socially vulnerable and low-income families.

Income increases will be provided with employment growth. According to the program of job creation and employment of the population approved by the Parliament, the creation of more than 970,000 new jobs will be provided in 2013. In addition, a special role is assigned to the accelerated development of small business and private entrepreneurship and the service sector, which is expected to create about 500,000 jobs.

We point out that the Law “On the Family Business” introduces into economic circulation a new organizational legal form of economic activity in the form of family-owned businesses, corresponding completely to nature and traditions of our people. A wide range of privileges, preferences, and guarantees are provided to them. Thus, more than 600 such enterprises have already been created in the country, six months from the time the law was adopted.

Uzbekistan, from the first days of independence, chose for itself the creation of a democratic constitutional state with a socially oriented market economy and an open and strong civil society. Reforms were carried out on the basis of the “Uzbek model” of development, based on the five principles: 1) De-ideologization of economy and its priority over politics, 2) Entrusting the state with the role of the main reformer; 3) Ensuring the rule of law; 4) Implementation of strong social policies; and 5) Gradual adoption of reforms.

In the course of the transition from a command to a market economy, Uzbekistan rejected various revolutionary models of reform, methods of “shock therapy,” and deceptive ideas about self-regulation of the market economy, acting on the principle “Without having built the new house, do not destroy the old,” and “Reforms not for reforms, but for man.”

All of these provided for change and the updating of the state and constitutional structures, thus creating a strong and solid foundation for sustainable and dynamic development of the national economy, political system, civil society, the continuous increase of the standard of living of the population, and its political and legal culture.

During the years of independence, there have been major changes in the ownership structure; a mixed economy existed where private property received priority development. Small business and entrepreneurship took place in defining the national economy, and became the main source of filling the market with necessary goods and services, income growth and human welfare, and was the most important factor in the growth of employment. For the past 20 years, the overall tax burden in the country has decreased by more than three times, thus the state provided additional benefits to exporting enterprises, small businesses, and companies that invest and develop new products.

It is especially important that the priority of the accelerated development of small and private businesses since the early days of Uzbekistan’s independence has been an important driving force. Advanced development of this sphere, as well reform and modernization of the country, have played a crucial role in Uzbekistan in the prevention and neutralization of negative and destructive consequences of the global financial and economic crisis.

As part of the deepening of democratic market reforms and liberalization of the State’s economy, four strategic programs have been developed and launched for 2011-2015. These provide for the development of industry, infrastructure, transport and communication construction; reform and stability of the financial banking system; and formation of a favorable business climate and modern international criteria for their assessment. Implementation of these programs is urged to ensure the long-term structural reforms and further enhancements of a competitive economy.

A special place in the Uzbek model of economic reform is given to implementation of an active investment policy, and technological upgrading of industries and industrial infrastructure, which has led to the creation of new high-tech industries. The growing volume of investments into fixed assets, which amounted to 22.9 percent of GDP in 2012, is the major source of sustained high rates of national economic growth. Uzbekistan has created a favorable investment climate that contributed to the attraction of leading foreign investors into the new innovative industries and enterprises.

Last year, domestic and foreign investments amounted to $11,7 billion, representing an increase against the previous year by 14 percent. Thus, more than 22 percent of all investments, or more than $2,5 billion made foreign investments, from which more than 79 percent were direct foreign investments.

We also note that about 74 percent of all investments in 2012 were aimed at industrial construction, particularly the implementation of programs and projects to modernize and upgrade production. The construction of 205 major investment projects with a total cost of the mastered capital investments of more than $1.6 billion was completed in previous year.

In the past five years, annual growth rates of investments in Uzbekistan exceed nine percent, which is one of the highest and most stable indicators in the international community, particularly during the ongoing financial and economic crisis. It is interesting to note that if during the last ten years, the volume of investment into national economy increased as a whole by 3,2 times, then the volume of direct foreign investments grew for this period by more than by 20 times.

For the years of independence, more than 5,000 new investment projects were implemented. These include new automobile factories, together with GM Company (USA) in Asaka city, buses with the Company “Isuzu” (Japan), and trucks with MAN Company (Germany) in Samarkand city.

Bukhara Oil Refinery in cooperation with “Technip” Company (France), Shurtan Gas Chemical Complex in conjunction with the “ABB” (USA), Kungrad Soda Plant in cooperation with the “CITYK” Company (China) have also been commissioned.

The new railroad Tashguzar - Boysun - Kumkurgan in cooperation with “JBIC” (Japan), as well as six new railway sections Navoi - Uchkuduk - Sultanuizdag - Nukus have been constructed. More than 40 textile complexes in cooperation with “Spentex” (India), “Daewoo International” (Korea) have been launched. The Railway Company of Uzbekistan has implemented vital development for the Afghanistan ADB project to construct for the first time in the country’s history the Hayraton – Mazar-i-Sharif railroad, 75 km long.

To this list can be added other examples, such as the construction of Dehkanabad Potash Fertilizer Plant on the basis of the Tyubegatan potash deposit, with a production capacity up to 200 thousand tons of potash fertilizers; and the mining and metallurgical enterprise in a joint source of raw materials deposits Kokpatas and Daugyztau.

Today, Uzbekistan is actively implementing a program on the priorities of industrial development of the Republic of Uzbekistan in 2011-2015, within which implementation of 519 large investment projects in the industry, to cost a total of $47.3 billion. This program is aimed at anticipatory implementation of projects for the production of industrial products with high added value on the basis of deep processing of domestic raw materials and natural resources.

These include the construction of a number of major industries. In particular, the combined cycle power plants at Tashkent, Navoi and Talimarjon TPS with total capacity of 1746 MW, Complex on production of 660 thousand tons of ammonia and one million tons of carbamide in the Navoi region, Production of synthetic liquid fuels on the basis of purified methane of the Shurtan GCC (671 thousand tons of diesel oil, 278 tons of jet fuel, 370 thousand tons of naphtha, 65 thousand tons of liquefied natural gas).

A unique construction project has now commenced: Ustyurt GCC on the basis of Surgil deposit, the total cost of which will be more than $25 billion. Construction of the facility will be completed in 2016, and it will provide processing of 4.5 billion cubic meters of natural gas with production of 400,000 tons of polyethylene and 100,000 tons of polypropylene. This project is one of the most technologically advanced in the world and provides for the introduction of next-generation gas-chemical technology, which allows the extraction from natural gas up to 97 percent of ethane, propane, and other valuable components.

In this project, a consortium of leading international banks participated on the principles of project financing without government guarantees.

The authoritative Project Finance International magazine has emphasized the project’s innovative, and acknowledged the construction of Ustyurt GCC as the best project of the year in the petrochemical industry.

Generally, between 2011 and 2015, the growth of industrial production at the level of 109-112 percent, increasing the share of manufacturing in GDP to 28 percent in 2015; the share of manufacturing branches in the industry structure up to 49 percent in 2015; and the share of exports in total production to 63.2 percent in 2015 is provided.

The importance in Uzbekistan is given also to unconditional implementation of the developed Investment program, which will implement more than 370 strategically important projects, is scheduled for 2013. Of the total amount of $13 billion allocated for these purposes, 75 percent make up the funds, financed at the expense of internal sources; the other part is from foreign investment. Almost three-quarters of the planned investment for the industrial construction accounts for new construction, reconstruction, and modernization.

The special place in the implementation of the Uzbek model of economic reform and modernization projects for the production potential of the country is occupied today by the country\\\\\\\\\\\\\\\'s free industrial and economic zones. For example, 12 enterprises have already been built and put into operation in “Navoi” FIEZ, seven high-tech projects are in progress.

A broad system of tax and customs privileges and preferences for a term of three to seven years was granted to the companies/participants of “Angren” FIZ, depending on the amount of made investments. Today, eight investment projects worth over $186 million are realized in the “Angren” FIZ territory. Currently, issues and preparation of the necessary documents for the implementation of 22 cost-effective projects for a total amount of approximately $245 million are now being carried out.

The conditions created, in particular, by “Navoi” FIEZ and “Angren” FIZ are examples of the fact that Uzbekistan has launched a major principle for foreign investors to ensure the entire production infrastructure necessary for the investment projects, through investments of the State. Uzbekistan has made a commitment to build it in accordance with the design documentation to ensure timely implementation of specific projects, valued at more than $50 million and in which a share of the foreign investors makes not less than 50 percent.

In general, the establishment of free zones represents a new step for Uzbekistan in the implementation of the policy to further improve regional development and placement of highly effective productions oriented to foreign markets, introduction of modern logistics systems, and transport infrastructure. In 2013, in the Jizzakh region of Uzbekistan, a decision was made to create a new special industrial zone: “Dzhizak,” with a branch in the Syrdarya district of Syrdarya oblast.

Another significant area of the Uzbek model of economic reform is further reforming and improving the sustainability of the financial and banking system, which includes: increasing financial stability and liquidity of banks according to the international standards; increasing their capitalization; strengthening the investment activity of commercial banks; improving the quality of their loan portfolios; expanding the resource base of banks; and enhancing the role and development of a network of non-bank credit institutions, insurance and leasing companies, and financial market infrastructure.

Uzbekistan has achieved steady and reliable functioning of the financial banking system, which continues to demonstrate a strong performance. For example, in 2012, the overall capital of the banking system increased by 24.3 percent, and for the last three years, by two times. Today, the capital adequacy ratio is 24 percent, which is three times higher than the accepted international standards. The liquidity of the banking system following the results of 2012 exceeds 65 percent, which is more than two times higher than the required minimum. If in 2010, only 13 of Uzbekistan’s commercial banks had positive international ratings, that number has now reached 28.

As well as in the previous years, much attention in the banking business is being paid to its investment components. In 2012, growth in loans, directed to the real sector of the economy, increased compared to the previous year by 1.3. More than 76 percent of outstanding loans, are long-term loans for a period of over three years.

Estimating the experience of Uzbekistan in this sphere, we present an assessment of the head of the International Monetary Fund Veronica Bacalu, made on the results of the mission to Uzbekistan in November-December 2012. She noted that the economy of Uzbekistan continues to grow at a fast rate, holds a strong position in the fiscal and external sector, has a stable banking system with a low level of public debt, and maintains a cautious approach to foreign borrowing to protect the country from the negative effects of the global crisis.

Its contribution to the implementation of the Uzbek model of economic reform brings also law-drafting activities of the lower chamber of Oliy Mazhlis of the Republic of Uzbekistan. A necessary system of legal guarantees, both for investors and for the enterprises with foreign investments, is being created to attract strategic foreign investors. First of all, the state guarantees the rights of foreign investors, protection of their investments, and the inviolability of the property created by them in the territory of the country. Consecutive lawmaking works on expansion and liberalization of provided privileges and preferences proceeds. For example, in 2012, Uzbekistan has adopted a number of additional important legislative and legal norms to further improve the investment attractiveness of the country.

For example, by the Law “On Guarantees and Measures of Protection of the Rights of Foreign Investors,” it is established that in the case of a change of legislation, worsening investment conditions, to foreign investors within ten years, the legislation in force on the date of investment will be applied. Moreover, in case of acceptance by government bodies or public authorities on places of the regulations that infringe upon the investors’ rights, as well as in cases of unlawful interference in their activities, the damages will be paid by these bodies in a judicial order.

In Uzbekistan, there are no restrictions in terms of reinvestment in the territory of the country of revenues of foreign investment; they can be used in any manner at the discretion of the foreign investor. We note that, in accordance with this law in Uzbekistan, foreign investments and other assets of foreign investors are not to be subject to nationalization, unless accepted in international law (natural disasters, accidents, etc.). The most important component of a favorable investment climate is the business environment created in the country. Uzbekistan has adopted a comprehensive program that is consistent with the methodology developed by the World Bank and aimed at further liberalization, simplification, reduction in cost, and ensuring transparency of all procedures related to doing business in the country.

Among the accepted within the Program during 2012 documents, there are six important laws, including “On the protection of private property and guarantees of owners,” “On guarantees of freedom of entrepreneurship” (in the new edition), and also the whole complex of laws and regulations, to simplify licensing procedures, reduce tax and statistical reporting.

Uzbekistan has canceled 80 licensing procedures, 15 licensed activities, forms and timing of statistical, tax and financial reporting are reduced by 1.5-2 times. Contactless electronic forms of public and regulatory bodies with business entities are successively applied. Today, business registration procedures run by the principle “in one window”; in Uzbekistan, it takes only two days, and corresponds to the best international practices.

The legislation introduced the principle of the priority of the business entity, in accordance with which all the inherent contradictions and ambiguities of law arising in connection with business activities shall be interpreted in favor of the business entity.

The first results of the carried-out activities on improvement of the business environment are already visible. According to the World Bank report on doing business for the year 2012, Uzbekistan’s rating rose by 14 places.

Despite the above achievements, Uzbekistan realizes that everything that has been done earlier is the beginning on a long and difficult path to the long-term goals facing the society and the state in becoming a modern, developed democratic country, providing people with worthy living conditions, and maintaining a rightful place in the world community. The laws of the development of the country and the target goals require the continuation of democratic reforms.

This is the reason for the adoption and consistent implementation of the Concept of the President of the Republic of Uzbekistan, Islam Karimov, on further deepening of democratic reforms and formation of civil society. This document became the basis of further modernization of the country at essentially a new stage of development of the state and society. It enabled Uzbekistan to carry out the market reforms and economic liberalization in hand with consistent democratization of the political system, ensuring independence, autonomy of the judiciary, freedom of discussion and information, freedom of choice, and the development of the electoral system, as well as the formation of civil society, increased political consciousness, and a legal culture of citizens. We are confident that the implementation of the priorities of the Concept will continue the processes of strengthening the rights and protection of private property, improve governance and licensing procedures in the field of entrepreneurship, strengthen the banking and financial sector, expand the role and share in the country’s economy of small business and private entrepreneurship, and attract investors to the leading sectors of the economy.