ECONOMIC POLICY AND STRUCTURAL REFORM IN UZBEKISTAN
Ilkhom Ibragimov, Director, Talaba Educational Center, Tashkent State Economic University (Tashkent, Uzbekistan)
Economic Growth Trends
Current economic reforms in the country are a natural and direct continuation of the sweeping social changes launched back in 1985, when market elements began to be introduced in the Soviet Union. These were progressive laws recognizing the diversity of forms of ownership and economic activity within the socialist system (for example, laws on lease, cooperation, individual labor activity, enterprises, etc.). At that time, entire regions were being switched to cost accounting, which paved the way for future economic independence of the republics.
Since the fall of 1991, Uzbekistan has had three stages of market-oriented transformations designed to ensure further economic growth and raise the people’s living standards. Similar goals were set by virtually all the governments of the post-Soviet states. True, in contrast to a number of other former Union republics, Uzbekistan has managed to maintain macroeconomic, social and political stability. The country proclaimed a transition to a market-based system at a time when the downturn in industrial production was least pronounced compared with the other republics. The mid-1990s brought real growth of the gross domestic product (1.7% in 1996, 5.2% in 1997, 4.4% in 1998, and 4.5% in 2001). Last year industrial output rose by 8.1% and agricultural output by 4.5%, while the rate of inflation went down in line with forecasts. At a Cabinet of Ministers meeting called to assess the results of socioeconomic development and the progress of economic reforms in 2001 and to set the tasks for 2002, President Islam Karimov said: “The past year was a logical continuation, yet another crucial stage in the consistent pursuit of our adopted course toward a deepening of reforms in the economy and in society as a whole.”1 According to official data, GDP in 2001 rose to 103% of the 1991 figure. As a result, GDP per capita went up to 103.1%, while the real incomes of households increased by 16.9%.
On the whole, the reforms of 1991-2001 could be described as follows: their consistent implementation “from the simple to the complex” was started in sectors where it was easiest to make the largest amount of profit (retail and small wholesale trade, consumer services, transport); the process had a dual character: the old system was maintained with a simultaneous phase-in of the new system (do not pull down the old house before you have built a new one); the cyclical transformations model provided for alternating periods of growth and stabilization; the reforms were mostly of a practical nature and were fairly flexible, allowing for the coexistence of diverse rules and standards.
Specialists from the republic’s Ministry of Macroeconomics and Statistics say that such indicators were achieved owing to an abundance of natural resources and substantial government support for the industrial sector, which was badly in need of direct assistance and credits. These measures were funded mostly at the expense of export earnings from cotton and gold. But although the reforms were successful over the short term, their implementation required sizeable government expenditures which led to medium-term delays in a number of key transformations necessary for stimulating further growth.2
The policy of reform has had a constructive nature, so resulting in real changes in the economy. The government’s main tasks for the entire transition period were as follows: support for the development of private business within the framework of small and medium-sized enterprises; reform of the financial and banking markets; liberalization of the foreign exchange market; an increase in the production of consumer goods; and development of a market infrastructure (exchanges, insurance agencies, credit institutions, markets of real estate, raw materials, capital, etc.).
The government sought to carry out the economic restructuring with the utmost efficiency. The target in this area was to develop export-oriented lines of production, to branch out into new world markets, and to upgrade import-substituting branches such as agriculture (wheat, potatoes), electric power generation, the chemical industry and agricultural engineering. At the same time, the government paid much attention to the development of a proper infrastructure for the production, financial and commercial sectors.
All the reforms were carried out in the context of five principles proclaimed by the state and lying at the root of all the reform programs. These are: deideologization and depoliticization of the economy, which means the reforms are conducted in the public interest instead of pursuing class, religious, national, party or other interests; the state—the leading reformer of the economy—bears full responsibility for the adoption and implementation of decisions, provides a legal framework and lays down the “rules of the game” for all economic players, and selects priority sectors for investment; the state prepares a proper legislative base and replaces the administrative-command system with a law-governed system, upholds the rule of law, and ensures equal rights for citizens, enterprises, investors, etc.; social protection of the population, with efforts to reduce the risk of sociopolitical upheavals and income inequality between households; a phased process of economic transformations with due regard for the specifics of the Eastern mentality, way of life and sociocultural heritage of Uzbekistan.
Stages Along the Road
Experts differ in outlining the various stages of the republic’s independent “voyage.” In the view of K. Uldzhabaev, it is characterized by three stages of reform. Stage one (from 1991 to mid-1994) was a transition from the totalitarian system to a market economy. It was a preparatory stage and was marked by the establishment of a legal framework for the new economic reform and by the assertion of independent statehood, with people gradually getting rid of the stereotypes of the old way of thinking. Stage two began in July 1994 with the introduction of a national currency (the Uzbek som) and continues to date. This is a time of economic stabilization, recovery from the slump in production and a renewal of economic growth, profound systemic and institutional transformations, maturing market relations and the emergence of a stratum of effective owners. The idea is to complete the process of formation of market structures, to go on improving the government’s tax, financial and monetary policy, and to continue deregulating foreign economic activity across the board. Stage three is to be a period of steady economic growth and consolidation of market relations.
In my view, however, the country has gone through four stages of reform.
Stage one lasted from August 1991 to 1993 and was marked by a liberal macroeconomic policy, stage-by-stage implementation of market-oriented reforms (with price and trade liberalization), small-scale privatization, and changes in the fiscal and legislative spheres. On the one hand, the liberalization of the foreign exchange market got underway but, on the other, it was carried out under strict administrative control. The authorities converted a certain number of large and medium-sized state enterprises into joint-stock companies while retaining a controlling interest in these companies.
Owing to a concentration of resources and to appropriate decisions adopted by the government and by the local authorities, it proved to be possible to avoid acute social conflicts and to slow down the decline in production. Thus, GDP (in comparable prices) came to 97.6% of the 1992 level, and the national income produced, to 96.5%. At that time, the nongovernmental sector began to gather momentum. Its share in the structure of the national income exceeded 38% (cooperative entities accounted for 6.5%, leasehold enterprises for 5.1%, collective farms for 12%, and the individual sector for 13.1%, including personal subsidiary farms—12.4%).
Out of a total of 1.7 thousand industrial enterprises, 364 were in nonstate ownership. To be sure, that was a small number, but one should bear in mind that the mechanisms for an efficient change of ownership and efficient management were not yet operating properly: neither the work collectives nor the new owners had any idea how to work in the new conditions. That is why the process of denationalization and privatization began with social infrastructure facilities, since the sphere of material production called for a special approach. As a result, at the end of 1993 only 4.1% of the total number of privatized facilities were industrial enterprises. The private farming movement was taking shape at a rapid pace: the number of such farms exceeded 7.5 thousand, and the area they occupied, 70.6 thousand hectares. Special attention was given by the government to the development of personal subsidiary farms, which played a prominent role in implementing the food program. Thus, their share in the production of grain was 11%, potatoes 44%, vegetables 63.9%, meat 68.5%, milk 76.0%, eggs 42.8%, and wool 64.8%. At the same time, the government retained control of the production and marketing of staple and strategic agricultural products such as cotton.
As experts say, a characteristic feature of 1993 was that privatized facilities proved to be 7-8% more profitable than those remaining in state ownership.3 Meanwhile, only 10 of the republic’s 2,287 building and assembly organizations had been converted into joint-stock companies.
Stage one was also marked by a loose budget policy, a broad investment program, and allotment of centralized credits to state-owned enterprises, which ultimately led to a budget deficit. And that, in turn, was a spur to inflation. The monthly increase in the money supply was 18%, real GDP shrank by 13%, and the average retail price index was 21% a month. In that period, Uzbekistan was still in the ruble zone, and it was only in late 1993 that the government introduced a transitional currency: the som coupon. That was necessary to stem the influx into the country of unsecured Soviet banknotes and to stabilize its commodity and financial markets.
Stage two (January 1994-September 1996) was a time of tight financial policy, accelerating market-oriented reform, and stabilization of GDP and of the macroeconomic situation. One should note that Uzbekistan’s stay within the ruble zone had a negative effect on the republic’s economy. The government was obliged to adjust its economic policy and to initiate transformations in every area of the national economy. In the budgetary sphere, the government acted to boost budget revenue and to strengthen the budgetary control system. This went hand in hand with a tax reform. As a result, the budget deficit as a share of GDP was reduced.
Further steps were taken to liberalize consumer prices and trade, exchange restrictions were partly lifted, the privatization of small enterprises was nearing completion, and a new denationalization program was drawn up. The program covered large and medium-sized enterprises and was carried out with the involvement of privatization investment funds. In addition, the government introduced private possession of land and abolished the system of government procurement of all kinds of farm produce, except cotton and wheat. In July 1994, the Central Bank tightened its monetary and fiscal policy in the period before and after the introduction of the national currency (the som), raising the refinance rate and the legal minimum reserve requirements, with a reduction in the amount of centralized credits granted to various industries. Banking control was tightened, banking requirements were improved, and a Stock Exchange and a National Depositary were set up.
The government paid special attention to creating favorable conditions for foreign investment. According to the estimates of the republic’s State Forecasts and Statistics Committee, in 1996 foreign direct investments in capital construction totalled nearly $1bn, or more than double the figure for 1995. Foreign investments and credits were used to carry out 30 large, 16 medium and a considerable number of small projects, including joint ventures such as Kabul-Toitepa-Textiles (textiles), Uzsalaman (footwear), a textile complex in the town of Karshi, Kasmir-Deri (fur and leather goods) in the Namangan Region, and a number of other facilities of strategic importance for the national economy.
One could say that the outcome of the second stage was an improvement in the economic situation, as confirmed by a slower decline in GDP and its gradual real growth in 1996, and also by slower inflation and growing foreign exchange reserves. As a result of these changes, the nongovernmental sector of the economy grew stronger. Its share in the number of employed persons rose to 71.6%, in the national income produced, to 68.9%, in industrial output, to 53.5%, and in agricultural output, to 97.7%.
Moreover, measures in the social protection of the population prevented any sharp income inequalities. The ratio between the incomes of the most-well-off 10% and the least-well-off 10% of the population went down from 9.7 times at the beginning of the year to 7.8 times at year-end. The rise in real incomes invigorated consumer demand, with a resultant increase in retail trade and paid services by 21% and 9.9%, respectively. Experts noted a significant trend: a reduction in the share of spending on food in favor of manufactures.
Stage three (October 1996-1999) brought a slowdown in the pace of reform in most sectors of the economy. In late 1996, the economic situation was adversely affected by a number of factors. In particular, there was a fall in world prices for cotton, gasoline and gold, and exports shrank by almost one-half, which put a strain on the country’s balance of payments. The budget deficit at the end of 1996 swelled to 15% of GDP. In 1997, the government tightened its budget policy and managed to curb inflation, with the result that the rate of GDP growth was 5.2%. And although the government still tried to follow a liberal budget policy, it tightened trade and exchange restrictions. The authorities took steps to establish control over the prices of a certain commodity group, including imports: they raised tax rates for imported goods, established prior registration of import contracts, introduced excise taxes, and extended the list of government procurements abroad. They also put in place a system providing for a so-called legal exchange rate. On the black market, the difference with the official exchange rate tripled.
Continued efforts were being made to reform the financial sector. In particular, a single chart of accounts was introduced in the country, new private banks were set up, and official reserves were transferred to the Central Bank. One should note that the government demonstrated its intention to sell equity stakes in large state-owned banks, to reduce the government stake in commercial banks, improve corporate governance, and restructure banks with ineffective loan portfolios.
In that period, the process of denationalization and privatization slowed down. Meanwhile, the adoption of a Tax Code may be seen as a positive trend. That helped to reform the tax sector, and also to enact laws on natural monopolies and on foreign investments. Legislative and regulatory acts relating to land and agriculture entered into force, and the country’s parliament made significant amendments to the law on bankruptcy. The republic’s president issued a decree limiting government intervention in the activity of private entrepreneurs, notably on the part of the so-called force structures.
A major blow was struck at the economy in the second half of 1998, when the country felt the impact of the global financial crisis. As experts note, despite GDP growth and falling rates of inflation, the overall budget deficit came to 2% of GDP. In that context, negative changes also occurred in foreign economic activity: exports and imports fell, while the external government debt increased; in 1998 alone it reached $2.8bn, even though as a share of GDP it remained on the 1997 level and stood at 17.9%. During 1998 and 1999, the pressure on the balance of payments was maintained.
Against that background, the government introduced even more stringent restrictions on imports and tightened control over the foreign exchange market. This enabled it to achieve a balance of payments surplus. At the same time, foreign direct investment shrank and the volume of foreign loans increased.
During stage four (since 2000 to date), significant measures have been taken to ensure financial balance in the economy, both national, regional and sectoral. In 2001, the budget deficit was under 1% of GDP. Due to a reduction in the tax burden and tax withdrawals into the budgets of all levels, the share of taxes and mandatory payments went down to 26% of GDP. The monetary system was simultaneously strengthened: the growth rate of currency in circulation was 6.5%, while money velocity increased. As a result, money supply growth was 16.4% of GDP, whereas the figure for 2000 was 17.1%.
Despite the persisting unfavorable situation on the world market, the foreign trade turnover rose by 3.1%, and the trade surplus increased to $128.0m. In 2001, 90 enterprises with foreign participation were set up in the country. The share of foreign investment in fixed capital formation was 30% ($1bn), and the total volume of investment in the national economy stood at 24.5% of GDP.
Entrepreneurial activity has been developing dynamically: the share of small and medium-sized business has reached 24.5% of GDP, and the sector now accounts for over 53% of all persons employed in the economy. A new chart of accounts introduced since 1 January, 2002, is close to world standards. The amount of credits granted to small businesses has multiplied 2.4-fold, with 70% of these being medium and long-term credits. The amount of micro credits has reached 27bn soms.
New industries and lines of production have been growing intensively. Take the newly started line for the manufacture of Matiz cars at UzDaewooAvto, facilities for lint processing and cellulose production at the Ferghana Furan Compounds Plant and the Yangiyul Pulp and Paper Mill, cotton processing facilities at the Kabul-Ferghana and Chinaz Tukmachi joint ventures, or the newly launched manufacture of medical glass. Incidentally, in the ten years of independence the share of domestic processing of cotton grown in Uzbekistan has gone up from 12% to 24%.
Agriculture is being reformed as well. By 1 January, 2002, 1.9 thousand farms had been converted into shirkats (cooperatives) with 1.4 million members. Fifty-two agricultural enterprises have been reorganized on a competitive basis into 3.4 thousand private farms. Financial-settlement centers set up to raise the efficiency of the new farms operate under a check-based cost accounting system.
Development of Key Sectors
The state has been doing a great deal to reform and develop the key sectors constituting the backbone of the national economy. This includes industry, which accounts for 15% of GDP and for 13% of the country’s working population. According to statistics, real production growth has been recorded in nonferrous metallurgy and machine-building, in the production of chemicals from oil and gas, synthetic fiber, electrical engineering goods and lint cotton, and in the food industry. Among the major investment projects carried out in 2001 one may list the completion of the Shurtan Gas-Chemical Complex for the production of polyethylene and liquefied gas with a total cost of around $1bn, and the first phase of the Kyzylkum Phosphorite Plant. The list also includes a newly started passenger car repair plant, the completion of commissioning work under a project to modernize facilities for the production of sodium chlorate and chlorate-magnesium defoliants at the Ferghana PO Azot industrial association, of caustic soda, liquid chlorine and hydrochloric acid at the PO Navoiazot industrial association, arrangement of the production of welding electrodes, medical hygiene products, superfine basalt fiber, paints and varnishes, firebrick, etc. Much attention is being paid to programs in the automotive industry and agricultural engineering, and to the manufacture of new types of downstream products from local mineral and raw material resources. In recent years, the government has created favorable conditions for the development of local industry, which specializes in consumer goods and ensures a high rate of employment.
Light industry accounts for over two-thirds of all industrial enterprises and over 20% of total industrial output. The Uzlegprom state-run association includes 127 enterprises producing silk, cotton, leather and wool. Modernization of enterprises in cotton manufacturing and in the food industry is a government priority, since Uzbekistan is a major cotton producer and has a potential for increasing the production and processing of fruits and vegetables. The country’s reserves of ferrous and nonferrous metals have made it possible to develop metallurgy. The key enterprises here are the Uzbek Iron and Steel Works (rolled metal, metal fittings), the OAO Almalyk Mining and Metallurgical Combine (refined copper and zinc, rolling copper, copper and zinc vitriol), the Navoi Mining and Metallurgical Combine and the Uzbek Refractory and High-Temperature Metal Works (alloy and high-temperature metals). The republic has all the necessary conditions for expanding the chemical industry: it has large natural deposits of gas, oil, sulfur, phosphorus, sodium carbonate and other minerals used in this industry. Its enterprises produce mineral fertilizers, pesticides, synthetic yarn and fiber, food alcohol, tire cord, synthetic resins and plastics.
In addition, such industries as aircraft and automobile manufacturing, construction and machine building are operating in the country.
The energy industry is another key branch of the economy. On 20 September, 2000, President Islam Karimov held a government meeting to look into the development of the country’s energy system. He noted, among other things, that the functioning of all branches of the economy is directly dependent on the state of plants generating electric power in quantities sufficient to meet the needs of production and households. He said: “The energy industry is a source of our country’s present potential and future might. The funds going into the energy sector must yield benefits and must in general serve the future of our country.”4
Uzbekistan’s energy system is an integral part of the Interconnected Power System of Central Asia. A point to note here is that geographically the republic is located in its very center and generates around 50% of the system’s overall power, so that one can say that Uzbekistan plays a key role in developing the economy of the entire region. According to Uzbek specialists, the republic’s power grid is used to effect reversible transfers of electricity to neighboring countries.5
The country’s reliable energy supply makes it possible to implement socioeconomic development programs and to ensure the republic’s self-sufficiency in energy. The total installed capacity of its electric power stations is now 11.2m kW, with hydroelectric stations accounting for over 12%, and thermal plants, for close to 88%. The largest thermal power plants are the Syrdarya TPP (3.0 thou MW), the Novo-Angren TPP (2.1 thou MW) and the Tashkent TPP (1.8 thou MW). All of them are fitted out with high-capacity power generating units. The hydropower industry is mostly represented by systems of hydroelectric stations, the largest of which is the 620 MW Charvak station and the 165 MW Khodzhikent station. All of them have water storage reservoirs enabling the hydrosystems to regulate their power output. Other hydroelectric stations, experts say, operate at base load.
The electrification system also includes departmental electric power stations with a total installed capacity of 320 MW. The share of thermal stations in electricity generation is 84%, that of hydroelectric stations, 13%, and of departmental stations, 3%. In the structure of primary energy resources used to produce electric and thermal power, gas fuel accounts for 85%, fuel oil for 11%, and coal for 4%.
The length of electricity networks of all voltages is over 330 thou km. Networks with a voltage of 500 and 220 kV are mostly used to connect the republic’s energy centers with the energy systems of neighboring states. At the same time, Uzbekistan’s energy system ensures the country’s self-sufficiency in energy supplies, fully meeting the electricity requirements of the national economy and the population at large. In the view of experts, the existing facilities will make it possible to meet the needs of the republic in the immediate future without the construction of new electric power stations.
However, around 40% of the equipment now in operation has been in service for 25 years or longer, which tends to worsen cost-performance ratios, increases specific fuel consumption in the production of electric and thermal power, and has an adverse effect on the environment. In this connection, given the national strategy of sustainable development and the commitments made by the republic under the U.N. Framework Convention on Climate Change, the problem of more effective use of fuel and energy resources presents a special challenge.
The region’s largest thermal power station—the Talimardzhan State-Owned Regional Power Station with power generating units of 800 MW each—is now under construction. Its completion will help to ensure a steady power supply to the national economy, to raise the electricity export potential, and to improve the conditions for attracting foreign investment to Uzbekistan.
Work is also underway to renovate the first two power generating units of the Syrdarya Thermal Power Station. The credit for these purposes was provided by the European Bank for Reconstruction and Development, while deliveries and contract supervision are effected by Germany’s Siemens. The aim of the project is to restore the power generating units to design capacity, reduce specific fuel consumption, and generate an additional 550-600m kWh of electric power.
In order to make more efficient use of organic fuel, the Ministry of Energy is also planning to renovate a number of other thermal power plants, which are to be fitted out with high-performance and ecologically sound gas-vapor equipment. Let us add that this line of thermal power engineering is at the basis of Uzbekistan’s projected energy program for the period until 2010.
Yet another key sector of the national economy is agriculture, which accounts for 27% of GDP and employs 40% of the working population. Its main components are grain and cotton, constituting 55% of total agricultural output; 75% of all crop area is sown to cotton and wheat. As of 1 January, 2000, 1,541 thousand of the 3,322.6 thousand personal subsidiary farms (43.3%) were reregistered into dehkan (peasant) farms. At the same time, 4,845 dehkan farms with an allotted 1,091 hectares of land (0.22 hectares per farm) have been granted the status of a legal person. Dehkan farms produce 81% of the country’s potatoes, 66% of its vegetables, and 56% of its melons. Many analysts believe that for a further development of agriculture Uzbekistan needs to resolve the following basic problems: to boost agricultural output; ensure further development of cotton growing; enhance the country’s self-sufficiency in grain crops; develop livestock farming; raise the employment rate and improve the people’s living standards.6
Transport plays a significant role in the republic’s economic development. The country has a wide network of railroads, which are used to carry oil, grain, cotton, fertilizes and building materials. Railroads account for 90% of cargo shipments by all kinds of transport and 65% of long-distance passenger traffic. The total length of the country’s railroad tracks is 3.65 thou km, including 680 km of double tracks and 498 km of electrified tracks. In 2001, a new line from Uchkuduk to Misken was put into regular service, and new station buildings were commissioned in the towns of Termez, Uchkuduk, Turtkul and Ellikkala. The process of denationalization of the whole railroad network into the system of the Uzbekiston Temir Yullari State Joint-Stock Railroad Company has got underway.
As for road transport, one should note that public roads total 43.5 thou km, and in-house, departmental and street roads, 95.2 thou km. The republic’s convenient geographical location was the main factor behind its involvement in the TRACECA project for the construction of a Europe-Caucasus-Asia transportation corridor. The government program for the development of arterial highways until 2010 has charted the main priority lines, including a renovation of the Tashkent-Andizhan-Osh highway and of the route leading from Bukhara to the border with Turkmenistan, the construction of a tunnel at the Kamchik Pass, etc. Let us add that the SamKochAvto automobile plant in Samarkand has been making buses.
The air communications network includes 20 airports, 17 of which are commercial ones. Four airports—in Samarkand, Tashkent, Bukhara and Urgench—have been granted the status of international airports. In order to raise the effectiveness of aviation subsectors, the government has launched a program designed to improve the overall infrastructure, renew the aircraft fleet and upgrade the legislative framework.
Telecommunications are another key sector in the republic. Their efficient operation is crucial to the performance of other branches of the economy. The government has prepared and is implementing a program for the development of a national digital telecommunications network and its integration into the international telecommunications network. In the sphere of posts and telecommunications, the country has three corporations, 29 joint-stock companies, and 12 joint ventures, three of which provide cellular communication services, one turns out import-substituting communication products, and the rest provide paging services and operate local telecommunications networks.
Medium-Term Economic Development Strategy
President Islam Karimov said: “In 2002, it is still important for us to ensure macroeconomic stability, to achieve a substantial reduction in the rate of inflation, and to follow a tight financial and credit policy.” In this context, the main strategic goal of economic policy is to ensure steady, balanced and lasting growth. It envisages sustained growth of the gross domestic product; balanced economic and social development; continued tax and budgetary reforms; liberalization of exchange-rate policy and foreign economic activity; a solution of denationalization and privatization problems; efforts to boost employment; a gradual removal of territorial disproportions; a rise in living standards; protection of the environment and effective use of resources.
Experts say7 that for achieving sustained economic growth it is necessary to single out four basic lines.
First, we need to create a favorable economic environment, to deregulate foreign trade and the foreign exchange market.
Second, most of the increase in GDP is to be obtained by means of an active industrial and investment policy. In order to saturate the domestic consumer market with goods of domestic origin (through retooling and modernization), measures are to be taken to develop processing plants.
According to specialist forecasts, the investments in the economy in the period ahead are to grow by 7%. Most of these are to go into the chemical, gas-chemical and energy sectors, into the food industry, agricultural engineering and transport.
In the social sphere, further steps are to be taken to implement the program aimed to finance the material and technical base of academic lycees and professional training colleges, to develop the social infrastructure in the countryside, water supply and gasification, and to reform the health care system. This is to be done with the help of credits from the Asian Development Bank (ADB), the Japanese Overseas Economic Cooperation Fund (OECF) and the International Bank for Reconstruction and Development, and also loans and grants from other international financial institutions and organizations. In addition, the republic is expecting funds from the IBRD and the ADB for deepening reforms in the housing and public utilities sector.
Third, another key line is to continue developing private enterprise and providing incentives for the establishment of small and medium-sized enterprises. In particular, new lines of credit are to be opened by international financial organizations for an amount of over $200m, with special emphasis on private enterprise in the countryside.
Fourth, agricultural growth is to be achieved through a deepening of institutional and market transformations, development of diverse forms of farming, government support and promotion of rural commodity producers. With this aim in view, the government provides for a further conversion of state property and expects privatized enterprises to enhance their performance as a result of restructuring.
Economic development programs have already been drawn up for the short-term period, whose main purposes are to reduce the number of loss-making enterprises through their restructuring and ensure more stringent application of the bankruptcy law; to overcome the cross-defaults crisis; to raise cost-effectiveness in the processing and manufacturing industries; to enable enterprises to increase their internal sources and funds going to renew their productive assets; to markedly reduce the rate of inflation and improve the balance of payments; to provide new jobs, raise the people’s real incomes and consumption levels; and to create conditions for internal convertibility of the som in current transactions.
The results to be achieved by the end of 2002 will enable the government to put forward new economic development and reform goals for the medium term. Experts formulate the main goals as follows: to create new industries and lines of production capable of turning out competitive products, to go over to a resource-saving type of reproduction based on wide use of scientific and technological achievements and advanced forms and methods of management; to expand traditional lines of production whose products are in demand, fitting them out with modern technology and equipment; and to upgrade the country’s market and production infrastructure, transport, service lines, communications and information system.
It is necessary to make fundamental changes in the reproduction structure of the economy, to cut production costs, reduce material and energy intensity, and increase national accumulation and investment in the economy.
As experts estimate, the share of agriculture in GDP will continue to decrease as its productivity rises, while the share of the light and food industries will markedly increase. The share of the innovation-investment spheres of science and scientific services and of machine building is to grow at a particularly rapid pace. There are plans to improve integrated waste reclamation and recycling of secondary raw materials. Given the growing demand for synthetic materials, the trend toward an increase in the share of the chemical and petrochemical industry will be maintained.
1 Vechernii Tashkent, No. 20, 15 February, 2002, p. 1.
2 See: Programma gosudarstvennykh investitsii 2000-2002, Ministry of Macroeconomics and Statistics of the Republic of Uzbekistan, Tashkent, 2000, p. 7.
3 See: V.A. Chzhen, Osnovy privatizatsii, Shark, Tashkent, 1996, p. 8.
4 Narodnoie slovo, 21 September, 2000, p. 1.
5 See: Biznes-vestnik Vostoka, No. 22, 2000, p. 25.
6 See: Biznes-vestnik Vostoka, No. 23, 2000, p. 22.
7 See: Biznes-vestnik Vostoka, No. 22, 2000, p, 21.