Uzbek Model of Reforms at the Focus of Attention of the World Economic Community

On May 22, 2009 the city of Tashkent will host the International conference on the materials, provisions and conclusions offered in the book by President Islam Karimov “The global financial-economic crisis, ways and measures to overcome it in the conditions of Uzbekistan”.

Over 150 statesmen and public figures, representatives of business and diplomats, scientists and experts from 60 countries of the world have expressed wish to participate at the international conference. Such international organizations and financial institutions as the IMF, World Bank, ADB, IDB, UN and its structures are going to be broadly represented at it. Also, among participants of the conference there will be the heads and eminent professors from scientific and educational institutions of the U.S., UK, China, Japan, Russia, France, Austria, Belgium, India, Egypt, Pakistan and other countries.

Such unprecedented interest in the topic of the conference is not by chance. At the moment, the world economy experiences one of the most critical stages of its development for over the last decades. Having started as a crisis in the U.S. system of mortgage lending, later it had massively reflected not only in the banking and financial sphere, but also in the real sector of economies of most of both developed and developing countries of the world.

Today we are witnessing how the banking systems of the countries with transitional economy, which were recognized by international financial institutions as leaders in terms of economic reform rates, have not only withstood the crisis test, but also they have turned into a reason of its intensification at their own countries.

That said, the international community is learning with profound interest the experience of Uzbekistan’s economic development. For example, the Uzbek banks did not attract the speculative banking capital and did not participate themselves in speculative banking operations thanks to which in contrast to the banking systems of a number of other CIS states they did not become a reason and channel of spread of external shocks on the country’s economy amid the current global financial and economic crisis.

At the moment, the foreign rating agencies give the commercial banks of Uzbekistan the stable ratings since the banking system of the country develops on strong basis, augment its own capital and meets all international norms of the Basel Oversight Committee. In this, the banks augment crediting of the real sector of economy and develop the consumer crediting with strict observance of all principles of sound banking policy.

The conservative policy of external borrowings being conducted in Uzbekistan has allowed to decrease the total volume of foreign debt towards GDP from 25 percent in 2005 to 14,8 percent in 2008, whereas in other large CIS countries this indicator makes up 75-100 and more percent. The ratio of the total volume of Uzbekistan’s foreign debt towards export for over the same period came down almost twofold and in line with international criteria is lower than the moderate indicator.

The five principles laid by President Islam Karimov to the foundation of the ongoing consistent and stage-by-stage economic reforms have not been understood by many and duly assessed at that time.

Uzbekistan on principle did not rush to reckless pursuit of liberalizing the economy, when many states of transitional period by methods of “shock therapy” have forcefully compelled the not yet matured economy and not prepared population to market shocks.

Despite the criticism, Uzbekistan has never denied the principle of the need to preserve the manageability of economy on the part of state, has never fully trusted the “invisible hand of market” in order not to allow chaos and anarchy. But today it has not to, as it is the case in other countries, move backwards and nationalize the bankrupt banks and insurance companies.

Thanks to evolutionary approach towards implementing reforms Uzbekistan has been the first among the CIS countries to overcome the decline of 90s and in 1996 has already begun to demonstrate the positive growth rates of economy, which have sharply accelerated for over the last years not in the expense of favorable expediency of world prices for the raw resources, but on the sound basis of diversifying the economy, implementing the structural transformations and conducting the active investment policy.

For instance, for over the last three years alone the volume of investments into the fixed capital in the country increased for 2,3 times having made up in 2008 almost 6,5 billion US dollars against 2,8 billion US dollars in 2005. The favorable investment climate established in the country promoted the growth of direct foreign investments for 3,1 times for over this period.

The country relies not only on the large but above all on small business and private entrepreneurship. For over the last three years the state lowered the level of taxation of small business entities almost twofold. The state granted them free access to raw and sale markets, credit resources, simplified and reduced the price of all registration procedures and procedures to start a commercial activity, enhanced the legal protection and simplified the tax administration. This allowed to increase the share of small business in GDP for over the last period from 38 percent to 48 percent, despite the fact that over the last years the large enterprises of the car-making, metallurgical, chemical, oil and gas, textile and other industries increased the volumes of production by double-digit figures.

Uzbekistan has deeply integrated to the world economy for over the years of independence and secured its own niche in the world markets of not only raw materials, but also the finished products. The foreign trade of Uzbekistan between 2005-2008 grew for 2.2 times hitting 21,2 billion US dollars by the end of this period. The foreign trade ratio towards GDP increased from 66 percent to 79 percent.

The volume of exports of national products and services for the above period grew from 5,4 billion US dollars to 11,5 billion US dollars reaching 41 percent of the GDP. It means that almost half of all products and services produced by Uzbekistan goes to consumers in foreign markets. The dynamic development of economy of the country allowed to almost double the GDP in USD equivalent for over the last three years. While in 2005 Uzbekistan’s GDP made up 14,3 billion US dollars, in 2008 it exceeded 28 billion US dollars.

From the very beginning Uzbekistan adhered to the principle of conducting a strong social policy to protect the population in the difficult transition period. During the early years of independence the country established an integral system of social protection of families vulnerable amid the market reforms. The economic growth has allowed increase per capita income almost threefold for over the last three years.

In 1997 Uzbekistan initiated the large-scale National Program for Cadres Training, which included the program of constructing and providing the professional colleges and academic lyceums with the latest training equipment. By now 1,500 such educational institutions have been constructed. Since 2004 Uzbekistan has been implementing the Program of developing school education and more than 4,500 schools have been newly constructed, undergone a capital overhaul and repaired. Nearly 50 percent of the State budget goes to developing and maintaining the system of education.

This strategy of social-economic development of Uzbekistan is reflected in the major social indicators of peoples’ living standards: the literacy level of adults makes up 99,8 percent, which puts the country among the developed countries of the world. For over the last three years alone the average life-expectancy rate grew from 71,8 to 72,9 years of age.
Taking into account the global financial and economic crisis, Uzbekistan started the implementation of the Anti-crisis action program in November 2008.

Its main directions are the accelerated modernization, technical and technological re-equipment of plants and enterprises, support of exporting companies in maintaining their competitiveness at foreign markets, introduction of strict saving regime, lowering the costs and production prime costs of manufacturing, modernization of power industry, lowering the level of power consummation of manufacturing, and giving incentives to domestic demand.

The implementation of measures of the Anti-crisis action program along firm economic foundation established during the years of reforms has ensured the sustainability of development of the Uzbek economy both in 2008 and in the first quarter of 2009, when the GDP grew by 7,9 percent.

In sum, the results of the Uzbek model of economic reforms, elaborated and implemented by President Islam Karimov, have become yet more vivid in the conditions of global financial and economic crisis in other countries and these successful results of economic reforms draw a keen interest of the world economic society.

At the forthcoming International conference in Tashkent the Uzbek model of economic reforms and practical experience of Uzbekistan will be comprehensively studied. Certainly, it will be useful for the countries which will have to reconsider the principles of their economic policy, as well as for Uzbekistan, which stands ready to share its experience and assimilate the best practices of international community.