The modern economy of Uzbekistan originated with the sovereign Uzbek statehood that arose after the collapse of the USSR. Among the CIS members, this country was one of the first to enter the phase of economic development. By 2001, Uzbekistan was able to restore the Soviet level of production according to GDP indicators. Export has been and remains the locomotive of growth (against the background of domestic consumption, which was in a state of stagnation). As a result, economic growth has little effect on the standard of living of the population.
Sovereign economy
To stabilize the state of the country, which has survived the formation of a new statehood, the government of Uzbekistan has chosen a phased reform course. Their key goal was the gradual transition of the economy from a planned Soviet to a modern market. Structural reforms included strengthening payment discipline and raising prices in the energy sector, transforming former collective agricultural enterprises into individual farms, and also abandoning state monopolies.
At the same time, the privatization of enterprises did not become full. As a result, the basis of the economy of Uzbekistan turned out to be full of contradictions. This feature has led to the fact that the transition to a market system has slowed down and has not ended to this day. Private sector and entrepreneurial activity are hindered by government intervention.
Banks and finance
In 1994, the economy of Uzbekistan received its own national currency - sum (one sum is equal to hundred tiyins). In the second half of the 90s, its rate against the US dollar remained relatively stable. In the early 2000s, the US currency jumped sharply. Moreover, the change in value occurred on the initiative of the Central Bank of Uzbekistan. The fact is that the exchange rate in the Central Asian state is not free, but is regulated by state financial authorities. The central bank had to take unpopular measures in order to bring the cost of Uzbek money closer to the real market indicator. Inflation is one of the main economic problems of the country. To reduce the high growth rate of prices, the government has continued to pursue a tight monetary and credit policy for 25 years.
Only in 2003, the Ministry of Economy of Uzbekistan announced the start of free conversion of the national currency. To implement the reform, it was necessary to carry out the unification of exchange rates, which was complicated by the devaluation of that time. One way or another, but thanks to the measures taken, inflation in 2003 fell to 3%. In the future, the government continued to gradually integrate the currency of Uzbekistan into the international market.
The five largest banks in the country are the National Bank, Uzpromstroybank, Asakabank, Mortgage Bank and Agrobank (they account for 62% of the cost of the entire banking system of the country). In 2013, the total capital of commercial credit organizations of the republic amounted to 3 billion dollars.
In 1994, the Tashkent Stock Exchange was established, which became one of the main centers of the country's financial life. It was established by key brokerage, investment and insurance companies in Uzbekistan. Initial placement, as well as secondary trading in securities is carried out on the exchange. In 2012, they traded at $ 85 million at this site.
External Relations
The modern economy of Uzbekistan is trying to become not only market, but also open to the rest of the world. The main tool for this is the country's participation in the international division of labor and world economic relations. In the 90s, a new sovereign state entered into various organizations that helped establish trade contacts with various countries. First of all, this is the UN, within the framework of which there are many economic institutions. The Central Asian republic also interacts with the World Bank and the International Finance Corporation.
Many organizations have opened representative offices in Tashkent. These are the UN, IMF, European Bank for Reconstruction and Development, the World Bank, the Commission of the European Union. Their regional branches are also appearing. Most of all, the economy of Uzbekistan is connected with the economies of other countries of Central Asia, Russia, Turkey, Pakistan and Iran (the economy of Kazakhstan, Uzbekistan and the Russian Federation is especially closely connected with the latter). In total, the republic is included in 37 international financial organizations.
To simplify the creation of enterprises with foreign capital, the registration of companies wishing to invest in the economy of Uzbekistan was facilitated. Especially positive was the adoption of new rules on licensing of exported goods. But as before, and now the key partners of Uzbekistan are the CIS countries.
Attraction of investments
According to statistics, the economy of Uzbekistan today, from the point of view of investments, is most attractive in the field of the energy sector (oil refining, chemical enterprises), transport and agriculture. Traditionally, foreign capital goes to the Tashkent and Ferghana regions. As noted above, the market economy of Uzbekistan is still largely dependent on the authorities. Therefore, the largest foreign investment projects in the country are implemented only under state monitoring. Most often, the Ministry of Economy of Uzbekistan and other responsible institutions choose objects of high-tech and high-tech production, as well as cross-industry significance. All of these initiatives stimulate private sector growth.
Investments are aimed not at short-term current programs, but at long-term projects necessary for solving strategically important tasks. According to these principles, the economic policy of the state is built. Foreign capital facilitates the structural transformation of various industries, accelerates the modernization and technical re-equipment of production. The economy of Uzbekistan today also needs investments in environmental projects. A serious problem is the situation in the Aral Sea, which has dried up due to the thoughtless use of water resources in the Soviet era.
In modern Uzbekistan, the most favorable investment situation has developed in the processing and mining industries. The appearance of technical innovations in them helps to reduce resource costs that interfere with the production of goods with low prices on the international market. Today's rating of Uzbekistan in the economy is largely due to such exports (cotton, textiles, etc.). Investments are especially important during the transition period in which the Central Asian republic now lives.
Raw materials
The long-term development of the economy of Uzbekistan has made it the leading industrial state of Central Asia, which is the guarantor of stability of the entire region. The country has several fundamental advantages for foreign investors. This is macroeconomic and political stability, favorable climatic and environmental conditions. The listed features are also the key to the uniform development of the republic as a whole.
The economy of Uzbekistan has been evolving for 25 years due to its rich resource base and favorable geographical position (Uzbekistan is located in the center of the largest regional market). The scientific and intellectual, as well as the personnel potential of the country is important. Access to raw materials reduces the cost of transporting materials, making production costs more optimized.
Today, about 2,800 different deposits have been discovered in the country. The mineral and raw material base of the republic is estimated at 3.5 trillion dollars. Thanks to it, the following achievements of Uzbekistan in the economy have developed: 9th place in the world in gold production, 9th - uranium, 5th - cotton fiber.
Energetics
The Central Asian state is one of the few fully energy independent throughout the world. The industry of Uzbekistan is 100% provided with oil, oil products, natural gas, electricity and coal. Economic needs will be covered for at least another 100 years. About 200 deposits of gas, oil and condensate have been explored in the country.
The economy of the Republic of Uzbekistan is efficient in terms of electricity. It not only covers increasing needs, but also is several times cheaper in cost, compared to even the most developed countries. In addition, there is also unlimited potential, consisting in alternative energy sources (wind, solar, etc.).
Today, Uzbekistan operates 45 power plants, generating 12 thousand megawatts per year. This complex generates about half the energy of the entire international energy system of Central Asia. In 2012, 52 billion kilowatt-hours were produced at power plants in Uzbekistan.
Agriculture
Agriculture is a significant supplier of raw materials for industrial production. Regardless of who the Minister of Economy of Uzbekistan was, the agricultural sector at all times remained the pride of the country. The basis of agriculture is the production of cotton fiber. This is a major export product. For example, in 2010, 3.4 million tons of cotton was harvested. Other important agricultural exports of Uzbekistan are raw silk, grapes, fruits, melons. In addition, the size of fruits and vegetables sold is significant (10 million tons per year).
About 60% of the population of Uzbekistan lives in rural areas. In this regard, a significant part of the able-bodied population involved in the national economy is employed in the agricultural sector. Large areas used for sowing are served by a huge irrigation system. She appeared in the Soviet era. Realizing the importance of this infrastructure, the authorities of an independent Uzbekistan regularly upgrade it. Today, the area under crops in the republic is estimated at 4 million hectares (irrigated land is about 87%).
According to statistics provided by the Ministry of Economy of the Republic of Uzbekistan, more than 80 thousand farms operate in the country. The average area of such a plot is 60 hectares. Agricultural enterprises are regularly exempted from taxes and mandatory contributions to the treasury. About 10 thousand of them specialize in livestock, potato and vegetable growing, the other 22 thousand specialize in viticulture and horticulture (about 50,000 tons of grapes and 15,000 tons of fruits are grown in a year).
By the decision of the late President Islam Karimov, Uzbekistan joined the International Fund for Agricultural Development. In case of unforeseen circumstances, the government may receive from it soft loans for the development of the agricultural sector. According to various estimates, about $ 700 million of foreign funds have been invested in this sphere of the Uzbek economy to date. This is the money of the Asian Development Bank, the World Bank and the Islamic Development Bank. Every year, agriculture of the republic produces products whose total value is estimated at 12 trillion soums. The enterprises of the chemical industry of Uzbekistan supply the market with more than 1 million tons of various fertilizers.
The positive factor for the development of agriculture remains the proximity of Uzbekistan to various markets. Also, its economy has a developed transport infrastructure. It is integrated into a common communication system that unites all of Eurasia. For example, Slovak companies that invest in Uzbekistan gain access to the five largest and fastest growing markets (CIS countries).
Labor resources
The Central Asian Republic remains a significant source of labor. Uzbekistan is a multinational and densely populated state, which is located at the intersection of trade routes between East and West. Since ancient times, it has been the center of concentration of educational and research institutions, as well as a forge of highly qualified personnel.
Today's place of Uzbekistan in the global economy is based on the work of specialists graduating from 65 universities of the country (professionals of industry and technical areas are especially valuable). Since 1943, the Academy of Sciences has been operating in the republic. It consists of eighteen research institutes. These are key innovation centers not only in the country, but also in the entire Central Asian region. A significant number of Uzbek workers are involved in the Russian economy. Active young people travel mainly to earn money in the Russian Federation.
Trading partners
To understand what the economy of Uzbekistan has developed in the country over 25 years of independence, it should be noted that it is closely connected with several dynamically developing markets - the CIS, South Asia, East and Southeast Asia, the Middle East, Afghanistan, Central and Eastern Europe.
Integration not only gives advantages, but also makes the republic vulnerable to external disasters from abroad. For example, the global economic crisis of 2008-2009. led to serious costs in the national economy. To cope with the challenge, the government adopted the Anti-Crisis Program. During it, modernization was accelerated, the most important sectors were updated, energy intensity costs were reduced, manufacturers' competitiveness was improved, modern infrastructure was developed, and the liquidity and reliability of the banking and financial system was radically strengthened. According to the program, the implementation of more than 300 important projects has begun, the total amount of which amounted to about 43 billion dollars.
In order to establish economic ties with the outside world, in the 90s the republic had to create several institutions from scratch. First of all, it is the Ministry of Foreign Economic Relations, the Customs Service, as well as the National Bank for Foreign Economic Affairs. These structures are controlled by the Cabinet of Ministers of Uzbekistan. In the case of particularly important partners, chambers of commerce and industry have been created (with the UK, USA, Germany and other countries). Today, about two thousand large enterprises of the Central Asian republic (concerns, associations, etc.) are actively using the right to enter the foreign market. The export potential of Uzbekistan developed along with the gradual liberalization of the country's international economic cooperation.
Entrepreneurship
Over the past 10 years, private entrepreneurship has significantly increased its own contribution to the GDP of Uzbekistan (from 30% to 50%). Small business is especially noticeable in the field of construction, agriculture, and the trade services sector. Its importance continues to grow in light industry.
Out of every four employed people in Uzbekistan, three work in small business (either they deal or are hired by such employers). These figures are only growing. Every year, private enterprise gives the country half a million new jobs (almost half of them are in agriculture, 36% in the service sector, 20% in industry). Stable business development strengthens Uzbekistan in the status of the main regional power.
After the collapse of the USSR, the government faced the need to create a favorable legal basis for the establishment and operation of small private enterprises. Subsequently, the registration of an individual case was only facilitated and modernized. In parallel with this, reforms related to taxation were carried out (an updated Tax Code was adopted).
Business and government
It is significant that the recent 2011 was declared by the President of the Central Asian Republic Islam Karimov “the year of small business and private entrepreneurship”. The Minister of Economy of Uzbekistan (now Saidova Galina Karimovna holds this post), on behalf of the first person, introduced to the government a program of measures necessary to attract new investments and create additional jobs. In particular, the budget provided individual credit lines for the most outstanding projects and small business undertakings of the country.
A separate program operates in the field of entrepreneurship in agriculture. The state additionally finances housing construction in the agricultural regions of Uzbekistan. This infrastructure alone is fertile ground for further business development. Retail trade, the service sector, and family business are growing. Agricultural borrowers receive benefits in providing loans and financing necessary for the implementation of private projects.
According to the state "Rural Development Program" small rural construction companies are being created. About one thousand such firms provide forty thousand jobs for skilled builders. For Uzbekistan, as for any other country with a transition economy, it is important to create a competitive environment in all areas, so that in the future the market itself can regulate itself.
Small business affects not only the employment of the population, but also the entire social situation in the state. Only developed entrepreneurship allows the most efficient use of human labor resources. It stimulates the welfare and confidence of society in the future and is an important driving force guiding the country along the path of progress.
Success or complete failure?
One of the key shortcomings of the modern economy of Uzbekistan remains its dependence on grain imports. Domestic production covers only a quarter of the total demand for this resource. Structurally, the economy of the republic is as follows: agriculture provides 17% of GDP, the services sector - 50%, industry - 25%.
The situation in Uzbekistan abroad is familiar to the world community quite superficially. The country is characterized by a closed information space. The nuances of the economic system are known only from the harshly filtered official information of the authorities. In general, the authoritarian nature of the state in Uzbekistan is reflected in the economy itself. It is contradictory if only because, on the one hand, it is developing as a market one, and on the other hand, it is under pressure from the authorities trying to control its most important sectors.