FURTHER MODERNIZATION AND RENEWAL OF THE COUNTRY IS A REQUIREMENT OF TIME

Address by President of the Republic of Uzbekistan Islam Karimov at the meeting of Cabinet of Ministers dedicated to the outcomes of social and economic development of the country in 2008 and the most important priorities of economic program for 2009.

Dear participants of the meeting!

Today at the extended meeting of the Cabinet of Ministers we sum up the outcomes of social and economic development of our country in 2008 and define the most important priorities of economic program for 2009.

This year the implementation of this task becomes difficult, above all, due to the fact that the economies practically of all countries of the world experience the toughest impact of the world financial and economic crisis unfolded in 2008 which at many developed and developing countries take on ever greater scales and depth, leads to downturn of production, growing unemployment, worsening of living standards of population and is mainly of an unpredictable nature.

I think there is no any need to speak about that as we take into account that our economy is becoming more integrated into the world economic and financial relations, the world crisis, firstly, its consequences have impacted and continues to render a negative impact on us.

Above all, such impact is observed on the results of activity of the basic export-bound sectors and adjacent industries related to them in terms of sharp decrease of demand and downfall of prices in the world market for the most important types of products which our country exports and, in its turn, negatively affects the balanced nature and efficiency of economy, as a whole, as well as brings about many problems in implementing the envisioned projects and in achieving the set goals.

In a word, the past year turned out to be very complex and difficult for us, above all, the workers of the country.

However, despite all emerged problems and hardships, Uzbekistan was able to achieve in 2008 not only the stable functioning of economy, but also ensure its high sustainable growth rates.

Allow me to briefly dwell on the main macroeconomic and quality outcomes of the past year.

In 2008 the gross domestic product grew and accounted for 109 percent, the growth rates in industry made up 112,7 percent, including in production of consumer goods – 117,7 percent, and the sphere of services grew by 21,3 percent.

Other most important branches of economy, as well, developed by sustainable rates: the construction grew by 8,3 percent, transport carriage – by 10,2 percent, sphere of trade – by 7,2 percent. The growth rates in agriculture made up 104,5 percent.

The raw cotton was prepared in the amount of 3 million 410 thousand tons, the grain – 6 million 330 thousand tons, including wheat – 6 million 145 thousand tons.

The State budget has been over-executed. Instead of envisaged deficit we have gained a surplus in the amount of 1,5 percent towards GDP.

As a result of gradual implementation of the moderately strict monetary and credit policy we have been able to contain inflation in the range of envisaged forecast parameters – at the level of 7,8 percent in annual calculation.

I would like to especially note the results of policy being conducted in our country to stimulate labor, increase salary and ensure growth of living standards of population.

In 2008 the average salary in budget organizations grew for more than 1,5 times and as a whole in the economy – 1,4 times. As a result, the average salary last year made up in the equivalent more than 300 US dollars. Yet the real incomes of population per capita rose during the year by 23 percent.

For 2009 we envisage to increase the amount of salary in the budget sphere for 1,4 times and respectively – in the economic entities. We are going to preserve the indicator of inflation growth at the level of 7-9 percent.

Despite worsening condition of external market, the foreign trade turnover increased by 21,4 percent in 2008 given that the export of goods and services grew by 28,7 percent. This has resulted in considerable growth of volumes of positive balance in foreign trade balance which serves as the most important indicator of reliability of balance of payment and sustainability of our economy, as a whole.

The in-depth positive changes are taking place in the structure of foreign trade. The sustainable tendency of growth of share of the finished competitive goods and decrease of the raw products’ ratio is being clearly observed in the structure of exports for over the last years. The share of non-raw goods in the total volume of exports in 2008 made up over 71 percent. In this, the share of export of the cotton fiber – traditional for Uzbekistan – decreased from 20 percent in 2003 to 12 percent in 2008.

The geography of foreign trade relations is qualitatively changing, above all, thanks to the growth of trade turnover with growing Asian market.

All these indicators, firstly, the consistent growth in exports of the share of competitive finished product with high value added cost serve as a testimony to not only growing potential and capabilities of our economy but also serve as the most significant direction of decreasing dependency of exports on the impact of often repeated fluctuations of world prices for the raw.

This is especially important in the current conditions of the world economic crisis when the raw directivity of exports and excessive dependency on risks and caprices of the world market turns into a serious factor of decreasing of currency inflows, worsening of financial sustainability and destabilization of economy of particular countries.

At the moment, we can state with full confidence that the achievements we have secured in this area for over the last years – this is, above all, the result of the earlier started deeply thought-out work in the country set for a long perspective to radically change the structure and diversify economy, establish in a short period of time the locomotives of branches that are absolutely new for us and play a role, accomplish a program of modernization, technical and technological renewal of production, as well as construction of modern market infrastructure.

The fact that we have created a favorable investment climate in the country served as a main factor of accelerating the structural reforms. Thanks to new sources of financing, the investments worth 6,4 billion US dollars have been channeled to the development of economy in 2008. Thus, in comparison to 2007 the growth has made up by 28,3 percent and the volume of investments towards GDP has accounted for 23,0 percent.

In this, about 50 percent of all assimilated investments have been channeled to modernization and technical re-equipment of production.

It is worth noting the ongoing for over the last years progressive sustainable growth of volumes of foreign investments into Uzbekistan’s economy. In 2008 it was assimilated about 1,7 billion US dollars with a rise against 2007 by 46 percent. And what is most important, 74,0 percent of foreign investments have made up direct investments. Despite continuing world crisis, in 2009 the volume of foreign investments into our country’s economy will increase up to 1 billion 800 million dollars of which more than the three of fourth – are the direct investments.

I want to state with pleasure that almost 54 percent of all assimilated investments account for the funds of enterprises and population which once again confirms the correctness of tax policy being conducted in the country aimed at decreasing the tax burden and stimulating the investment activity of economic entities.

Two years ago we have established the Development and Reconstruction Fund with authorized capital, which now makes up over 3,2 billion US dollars. The Fund plays a very important role in implementing the strategically important projects along structural transformation and modernization of economy, as well as establishing, firstly, the production infrastructure. In the nearest perspective we are going to take the Fund’s assets up to 5 billion dollars. For over the past two years the Fund allocated credits worth more than 550 million US dollars to finance and co-finance tens of large industrial and infrastructure facilities.

In the country, as a whole, as a result of implementing the investment program we have commissioned 423 industrial sites with introducing major funds worth about 250 billion Uzbek soums, including those in food industry – 145 sites, industry of construction materials – 118, light and textile industry – 65, in the sphere of agriculture and forestry – 58, chemical and petrochemical industry – 13, and pharmaceutical branch – 8 sites.

Among the largest facilities that have been commissioned and are being built we should note completion in 2008 of the construction of a 165,0 kilometer-long high-voltage power line Novo-Angren thermal power plant –Uzbekistan supply station, which will allow to ensure reliable electricity supplies to Ferghana Valley. Apart from that, Uzbekistan continues to implement the projects on constructing the high-voltage lines of Syrdarya thermal power plant – Sogdiana supply station, of Guzar-Surkhan and electricity power supply facilities of the city of Tashkent. More than 2,6 thousand kilometers of water pipeline and over 825 kilometers of gas pipeline networks have been put into operation.

We have given a priority attention to the construction and commissioning of sites of social sphere which had allowed to reconstruct and newly build 169 professional colleges for 113,2 thousand students and 23 academic lyceums for 14,7 thousand students. Uzbekistan has newly built 69 schools and completely overhauled 582 schools, 184 children’s sports sites, 26 rural medical stations and 7240 thousand square meters of housing, and others.

In 2008 proceeding from principle importance of further raising the efficiency of agricultural production the country accomplished an important work to optimize the size of land plots being allotted to farms.

The private farms which were initially established on the basis of disadvantageous low-profit and unpromising shirkats now have rightfully become a leading link as well as a major producer of agricultural products.

The life itself has demonstrated the advantages of farming as the most effective form of organizing the agricultural production. The reliable system and mechanisms of financing as well as material and technical supplies of farms have been created and are successfully functioning. They fully meet the market principles.

Annually Uzbekistan channels significant funds and allocations to support farms. In the past 2008 alone the country has channeled about one trillion Uzbek soums to finance production of the most important types of agricultural goods, including production of cotton – 800 billion soums and grain – 200 billion soums. In 2009 Uzbekistan is going to channel 1,2 trillion soums for such purposes.

More than 43 billion soums of means of the Fund which was specially established for such purposes have been used to procure agricultural techniques based on leasing. In 2009 it is envisaged to channel over 58 billion soums.

The share of farms in producing the raw cotton has made up 99,1 percent in 2008 and the grain crops – 79,2 percent.

At the same time, the experience which was accumulated for over the past period urgently requires resolution of a number of very important problems in terms of further developing farming, in particular, the issues of increasing sustainability, and mainly – the efficiency of farms.

As the experience of activity of the absolute majority of farms shows, the small sizes of land plots allotted for them at the initial stage of their establishment mostly serve as a containing factor of growth of production’s profitability.

The life itself suggests that low-power entities are not able to provide themselves with necessary techniques, circulating assets, to be solvent, and mainly, to cover their expenses and ensure profitability, as well as to be a reliable basis for raising profits.

Proceeding from that, based on thorough inventory of the land plot sizes and critical assessment of activity of farms we have accomplished a large-scale and at the same time a rather thorough work to optimize the sizes of their land plots with taking into account their sector-wise specialization, density of population in one or other areas of the country.

Such work has resulted on the average growth of size of allotted land plot in cotton- and grain-growing from 37 hectares up to 93,7 hectares, or the growth for more than 2,5 times, in vegetable growing – from 10 hectares up to 24,7 hectares, also with a growth for 2,5 times, and in cattle breeding – from 154 hectares up to 164,5 hectares.

The sphere of entrepreneurship and small business saw their stable development in 2008.

The measures which were undertaken to further decrease the tax burden on economic entities, decrease the single tax payment rates for micro-firms and small companies from 10 to 8 percent, and starting from 2009 – down to 7 percent, decrease the income tax rates for physical entities with a simultaneous improvement of the scale of its calculation have created powerful stimuli for the development of entrepreneurship, small and private business.

As a result, for over the past six years the number of small businesses rose for 1,9 times and made up about 400 thousand in 2008.

The volume of industrial products manufactured by small businesses grew by 22 percent in 2008 which is significantly higher than the average indicator on the branch as a whole. As a consequence, the net share of small businesses in GDP grew from 45,5 percent in 2007 up to 48,2 percent in 2008. At the moment, more than 76 percent of total number of employed population is busied in this sphere.

The serious quality changes are taking place in addressing the problems of population’s employment. In resolving this sharp issue alongside with accelerated development of small business and private entrepreneurship the big role is assigned to the development of sphere of services, broad introduction of various forms of home-stay labor, and stimulation of development of cattle-breeding in the countryside.

For over the past period about 661 thousand new jobs have been created, including in the sphere of small business – more than 374 thousand, the sphere of services – about 220 thousand, and thanks to the practice of home-stay labor – 97,8 thousand.

The development and expansion of sphere of services plays an important role in increasing the number of jobs. The communication, information, financial, banking and transport services and those on auto and household electronic goods repairing developed with highest rates. It is especially worth noting the dynamic development of services in the sphere of information and communication technologies, which for over the past four years have been increasing annually on average by 50 percent. As a result, the share of sphere of services in GDP grew in 2008 up to 45,3 percent against 42,5 percent in 2007.

At the same time, we should pay a special attention to the fact that the share of services rendered to the rural population, in spite of growth, still remains at rather low level – in all 26,8 percent. Neither the quality of services meets the requirements of population.

Time and again I want to draw your attention to what extent an exclusive importance we accord to the development of home-stay labor which is predicated on the cooperation with production enterprises. For this we have created an efficient integral system of stimuli both for employer enterprises and population itself engaged in home-stay labor.

At the today’s stage this form of addressing the problem of employment and additional source of increasing the family budget profits has enormous social significance in terms of attracting citizens to a creative production activity, firstly, of the vulnerable categories – the women, especially, who have many children, disabled and other persons with limited ability to work.

In 2008 the home-stay workers manufactured products and rendered services worth 34 billion soums. Thanks to the benefits given to the companies, which have created jobs for home-stay workers, they had saved more than 1 billion soums.

Another important direction of the population’s employment, particularly in the rural area, is to increase the number of persons who are busied in cattle breeding at personal subsidiary and dekhkan (peasant) entities. It should be noted that particular positive results have been achieved in this direction.

Uzbekistan has created a well-tested mechanism of realizing cattle to population and farms at the auctions, allotting them privileged purposeful credits, expanding and raising the quality of veterinary services, as well as providing with fodder. As a part of implementation of the program adopted to develop cattle breeding alone, 20.3 thousand heads of cattle were realized at the auctions in 2008. 48.2 billion soums-worth privileged credits have been allotted to procuring cattle in 2008 against 42.5 billion soums granted in 2007.

A particular attention is being paid to rendering support to the less well-off families by way of allotting cows for free. From 2006 up to now alone over 103 thousand cattle were allotted to such families.

As a result, by January 1, 2009 the total number of citizens, who are registered as engaged in growing cattle at personal subsidiary and dekhkan entities, made up over 1.1 million people. 54 thousand people were provided with new work-record books. The records were made to the existing work-books of 111 thousand people on their work record.

I would like to briefly dwell on the issues of developing finance and banking system. The strengthening and qualitatively bettering its activity is particularly important given the global economic crisis.

Last year alone, Uzbekistan took important decisions to increase the level of capitalization of such leading banks as Uzpromstroybank, Asaka-bank, Pahta-bank, Ghalla-bank and others. The Decree of President of the Republic of Uzbekistan on increasing the authorized fund of Microcreditbank was adopted. This bank is one of the main credit centers on financing small businesses and private entrepreneurship.

As a result, thanks to attraction of additional resources the cumulative capital of banks rose by 40 percent comparing to 2007, and for over the period until 2010 it will double.

At the moment, the sum of assets of the banks exceeds the volume of deposits in the accounts of population and juridical entities for more than two times. It ensures their reliable protection and guarantees their on-time and full servicing. It is an open secret that in line with the Decree of President of Uzbekistan the deposits of citizens with banks are guaranteed by state without limitation in their amounts.

At the moment, the level of sufficiency of capital of Uzbekistan’s banking system almost thrice exceeds the established international standards set by the requirements of the international Basel Committee on Banking Supervision.

Today, the cumulative current liquidity of banking system accounts for, in equivalent, more than 1.5 billion dollars or for ten times exceeds the volume of forthcoming payments on foreign non-state borrowings that allows us to say that we do not have a problem with liquidity.

Obtaining the rating of “stable” by the banking system of Uzbekistan from one of the influential rating agencies of the world Moody’s on three positions in a row served as the most important quality achievement of last year. The positions included: the stability of banking and finance system; the long-term deposit rating in national currency; the long-term deposit rating in foreign currency. According to the agency’s report: “The positive assessment for the banking system reflects the firmness of environment of banking supervision, potential growth of banking system, structural changes in financial system and growth of national economy”.

Along with that the Moody’s has conferred the positive rating of solvency on two our banks – the National Bank of Foreign Economic Activity and Ghalla bank. Yet another famous international rating agency Fitch has conferred the rating of “stable” to such banks in the country as Pahta-bank, Hamkorbank, Uzpromstroybank and Asaka-bank.

Concluding this part of my address, I would like to emphasize that the cumulative foreign debt of Uzbekistan by January 1, 2009 has made up 13.3 percent of the GDP and is characterized on international classification as “less than moderate”.

Dear friends!

I think, today it is needless to speak more about the fact that how it is important in modern current conditions along defining the main priority tasks of our economic program for 2009 to fully take into account the impact and consequences of the world economic crisis which, according to the respected world experts, will continue and may further deepen this year and in 2010.
Proceeding from this, it goes without saying that our main priority in social and economic development of Uzbekistan for 2009 is to continue implementation of the Anti-crisis program adopted in the country for 2009-2012.

Today we have all grounds to state that the model of transition to a socially-oriented free market economy, which we have adopted and is based on the well-known five principles, from year to year of our onward advancement justifies its accuracy and consistency.

Firstly, such principles as deideologization, pragmatism of economic policy in the form of a priority of economy over politics, assigning the role to a state of a chief reformer, ensuring the rule of law, conducting a strong social policy and consistency in implementing reforms – all these, especially given the extreme conditions of the global financial and economic crisis, prove their urgency and viability.

The ongoing balanced and well though-out policy to reform, liberalize and modernize, firstly, the nation’s economy, diversify its structure has created a rather powerful barrier, it can be said, a solid and reliable buffer that protects us from negative impacts of crises and other threats.

While clearly realizing that Uzbekistan as a part of the integrated global economic space has already been enduring and will further endure the negative and ever tougher consequences of the global crisis, yet in the second half of 2008 we have already embarked on elaborating the Anti-crisis action program taking into account the concrete conditions and state of affairs in our economy.

At the moment, the Anti-crisis action program on preventing and neutralizing the consequences of the global economic crisis after being tested and approved had been sent to concrete executors both in various branches and territories.
The Government commission and territorial groups to ensure strict control over the implementation of the Program have been established.

In short, the Anti-crisis program is underway and the outcomes of January 2009 witness about the modest but rather convincing results of its implementation.

I would like to briefly dwell on the concrete sections – the policy measures of the Anti-crisis program aimed at addressing the following key tasks.

First, it is further rapid modernization, technical and technological re-equipment of companies, and active introduction of the latest flexible technologies. Above all, it concerns the main branches of economy, as well as the industries, which produce the export-bound goods, and are being localized.

We put forward the task of accelerating the implementation of the adopted sector programs of modernization, technical and technological re-equipment of production, transition to international quality standards that will allow to ensure the stable positions both in foreign and domestic markets.

Second, the implementation of concrete measures to support the exporter-companies in ensuring their competitiveness at foreign markets given the rapid worsening of current conditions, creation of additional incentives for exports, in particular:

- allotting them the privileged credits to replenish the circulation funds with a term of until 12 months on the rate which does not exceed 70 percent of the refinancing rate of the Central Bank;

- prolonging until 2012 relieving the companies with foreign investments, which produce the finished goods, from levying all types of taxes and duties to the budget but for a value added tax;

- restructuring the sum of overdue and current debts on the bank credits and writing off the penalty fees on the payments to budget, and rendering other no less important benefits and preferences.

Third, raising the competitiveness of companies by way of introducing a strict regime of saving, stimulating the decrease of production expenses and prime cost of goods. Recently, we have approved the proposals by economic entities to implement the measures aimed at cutting this year the prime cost of goods by no less than 20 percent in the leading branches and spheres of our economy.

It is envisaged to elaborate the efficient mechanism to stimulate the heads and responsible persons for achieving the set parameters in terms of decreasing the prime cost.

Along with that the Anti-crisis program envisions the mechanism on limiting in 2009 the rise of prices for all types of energy carriers and main types of communal services no more than by 6-8 percent with absolute ensuring of profitability of their production.

Fourth, the implementation of measures to modernize the electro-energy, reduce the energy capacity and introduce the effective system of energy saving. Further raising competitiveness of our economy and growth of well-being of population mainly depend on how sparingly and thriftily we will learn to use existing resources and, firstly, the electro and energy resources.

Fifth, given falling demand at the world market the support of local producers by way of stimulating demand at the domestic market plays a key role in preserving the high economic growth rates.

The expansion of the program of production localization, the volumes of which are envisaged to increase three- or fourfold, plays a big role in implementing this task.

The programs adopted to stimulate the expansion of production of food and non-food consumer goods envision a broad system of incentives for the local producer-companies. In particular, for the period until January 1, 2012 the following types of tax and customs benefits are offered:

- decreasing the single tax payment rate by 50 percent to micro-firms and small companies, which process meat and milk with a purposeful channeling of the released funds to undertaking a technical re-equipment and modernize production;

- relieving companies, which produce particular types of finished non-food goods, from paying an income and property tax, single tax payment for micro-firms and small companies.

I am convinced that in implementing the Anti-crisis program a significant importance is assigned to searching additional stimuli to ensure the maximum interest on the part of each entity of our economy so that the implementation of the Program becomes the most important work for each of them.

Dear participants of the meeting!

Assessing the essence and main tasks to be addressed in the Anti-crisis program, I would like to focus your attention on the very important, as I believe, principle issue.

The point is about that, concentrating our attention, powers and resources on combating the consequences of the world economic crisis, strengthening the finance and banking system, rendering assistance to the enterprises of real economy, creating new jobs and implementing measures on social protection of population, we in no way must forget about the perspective.

In other words, we must think about the post-crisis period of our development, elaboration of the well thought-out long-term Program of purposeful projects to modernize and technically renew the main branches of our economy, introduce the modern innovative technologies that are called upon to give a powerful spur in terms of letting Uzbekistan secure the new achievements that would ensure a competitiveness of our country at the world market.

This is the task, which we have no right to put aside, if we want to live not only thinking about today but also about tomorrow, and if we think about our future.

Do we have all necessary capabilities for that and what potential has already been created to implement these projects?

I need to underscore that for over the last years we have already been undertaking a serious preparation to the implementation of such big program, and the unfolded world crisis, to my view, yet more urges this process onward and asks for its comprehensive acceleration.

The preliminary elaboration of the draft of Program for implementation of the most important priority projects aimed at modernization, technical and technological renewal and radical enhancement of competitiveness and rise of export potential of economy shows that this draft can include nearly 300 investment projects in fuel and energy, chemical, oil and gas processing, metallurgy sectors, light and textile industry, industry of construction materials and mechanical engineering, and other sectors of economy worth more than 24 billion US dollars, of them the projects of new construction make up about 18.5 billion dollars, projects of modernization, reconstruction, technical and technological re-equipment – about 6 billion dollars.

The sources of financing of sites under drafting and implementation are going to be as follows: own financial assets of companies and enterprises for a total amount of 8.2 billion US dollars, credits of the Reconstruction and Development Fund of the Republic of Uzbekistan worth 2.5 billion dollars and foreign investments and credits totaling 13.5 billion dollars.

It is essential to take into consideration that a particular part of these projects has been encompassed with construction in 2007-2008, yet some of them are due in 2009.

As calculations demonstrate, the implementation of projects hereinabove will allow, thanks to introducing innovative and energy-saving technologies, developing the production of new types of goods, which are in demand in the world market, ensure manufacturing of additional products worth 10.4 billion US dollars annually, increase exports to 6.5 billion dollars, as well as significantly increase the volumes of GDP.

Our main objective today is to conclude in a shortest time the final elaboration and endorsement with all interested structures, above all, with foreign investors of all details for each particular project and adopt a strategically important program for 2009-2014. The implementation of this task shall be assigned to the economic block of the Cabinet of Ministers (Azimov R.).

Proceeding from this, the second most important priority of our economic program for 2009 is to continue structural reforms and diversification of economy.

Availing myself of this opportunity, I want to repeat once again – this direction of reforms and renewal adopted in 2000 is not losing and will not lose its urgency and topicality during all subsequent years, above all, for only thanks to the performance of this prevailing task we can provide for competitiveness of our economy and country on the world arena.

I believe, we all definitely understand that despite that it may sound paradoxically the world economic crisis makes it yet more urgent to permanently renew and modernize the production, requires us concentrating all our strength and resources.
I will give only one example.

Today we are working over the projects of construction at the three thermal power plants – Tashkent, Navoi and Tolimarjon – of modern steam and gas plants instead of inefficient gas installations. The considerable investments are needed to implement these projects.

However, the very fact that the effect of lowering the energy intensity for production of thermal energy to the level of world standards will pay off in all aspects urgently requires accelerating the implementation of these projects.

The quest for large and small projects on technical and technological renewal of production to ensure competitiveness of products, as well as the funds and sources for this must become, firstly, the most important task and obligation of a head, as well as technicians and engineering personnel at each and every enterprise.

It is absolutely inadmissible when at the local levels under the cover of addressing the issues of employment the heads of local bodies and sector-wise structures try by all means and at all costs to retain unprofitable enterprises with obsolete equipment and technology, as a result of which the low-quality and worthless products are stored at warehouses. The number of such enterprises, as analysis shows, today totals more than 200.

Ironically, the bulk of such enterprises are retained today in the light and food industry, where the rapidly changing market demand requires renewing the equipment and technology practically every 5-7 years, while in developed countries this period is even shorter.

This state of affairs must be radically changed by announcing these types of enterprises bankrupt.

The Governmental commission (Mirziyoev Sh.), which was specially established last year, must finally finish this work.

Our next most important priority, which asks for a special attention, is to take a broad complex of long-term and well interrelated measures aimed at radically improving the living standards in and look of a countryside, accelerated developing the social and production infrastructure, cardinally revising the status, role and importance of an owner, entrepreneurship and small business, and comprehensively supporting farms.

If to take into account that the recently approved State program of the “Year of Development and Improvement of Countryside” clearly defines the essence, content, the most important directions and specific parameters of this program buttressed by the sources of financing, obviously, there is no need today to talk on these issues in detail.

Along with that, I would like to underscore that both the priority and program on its implementation are designed not only for 2009 but for a mid-term prospect, as well.

Starting the implementation of this exclusively important State program, which envisages altering not only the look of the countryside and living standards of people, the depth of reforming, essence and core of production relations in agricultural sector, but eventually enhance the socio-political and cultural level of rural population, its consciousness and civil responsibility, our objective in 2009 is to well organize all our future work on its implementation.

I believe it is not necessary now to speak that full responsibility for eventual implementation of all target tasks and parameters of this program shall be imposed on territorial commissions, which have been established in the Republic of Karakalpakstan, provinces and which must be led personally by top officials.

Along the progress and quality of implementation of specific programs at the local levels we can judge about their comprehension of significance of the tasks set by the program, shortly speaking, their correspondence to the requirements towards a modern executive.

Availing myself of this opportunity, I would like to once again draw your attention to the following directions of the program which are very important for us.

First, it is necessary to carry out a thorough work to further enhance and strengthen the legislative and legal basis related to the implementation of the aforementioned program, adopt new and introduce amendments and addenda to existing legislative acts and Land code. To pay a special attention to the issues of development of social and production infrastructure in countryside, the issues which regulate the reasonable use of water resources and improvement of reclamation state of irrigated lands.

The Cabinet of Ministers must accelerate the work on drafting and submitting to Oliy Majlis (national parliament) the proposals on extending and offering the new benefits and incentives to private entrepreneurship, small businesses, deepening as a whole the market relations in the countryside, rendering additional support to farmers, enhancing their social and political status.

Second, implementation of policy measures aimed at radically increasing the living standards in the countryside is of a principle importance and ultimate significance in the whole program. For this, it is necessary to cardinally review the system organization of architectural planning and building of rural residential areas. We need to ensure the elaboration of general plans for architectural-planning construction of territories, develop unified standards for rural houses and sites of social infrastructure with consideration of climatic, demographic and other conditions of the regions. The specialized design and survey institute of “Kishlokkurilishloyiha” has been established to implement these tasks. We need to accelerate its development and fill with the skilled cadres, set the clear and specific tasks so that this year we would be able to start working on the new architectural general plans and standard designs.

It is obvious that the new construction is unthinkable without applying new, modern construction materials and building structures. It is essential to broader introduce the industrial and prefabricated building technologies to the countryside while using the prefabricated, composite and building block structures.

The khokimiyats in provinces (governors’ offices) and districts (mayors’ offices) along with “Uzstroymateriali” company should elaborate the special programs for establishing production of construction materials from the local raw, introducing the mini-technologies for making burnt bricks, roofing, finishing agents and other materials, restoring and reconstructing the operating mines of non-metallic materials.

In the countryside we must have not only the developed communities and modern residential houses, but also the high quality roads, no-break power and drinking water supply, developed network of social facilities such as rural medical centers, schools, children’s sport facilities, telecommunications and postal service, as well as other services and trading facilities, etc.

It is essential to once again critically assess and find additional funds and means to broader the infrastructure in the countryside. At the same time, we should not forget that this is one of the factors of increasing the employment in the rural area, especially among the youth.

To implement the set measures, apparently, it is expedient to examine the issue of establishing a specialized bank for rural construction with a network of regional branches. The Central Bank along with interested structures must in a shortest time submit to the Cabinet of Ministers the proposals on how to organize the activity of this bank.

The Council of Ministers of the Republic of Karakalpakstan, governors’ offices in provinces shall consider the issue of setting up in the districts the private specialized contractor firms for building residential houses in line with standard designs, facilities of production and social infrastructure in the rural area, rendering assistance in establishing their material and technical base.

Third, the key task of the program is to take measures on accelerated development of industrial production and building in the countryside, setting up compact plants on processing fruits and vegetables, livestock products equipped with modern techniques and technologies.

The task is set even broader, that is to say, by way of increasing the production of agricultural products to create a powerful raw basis and allow for an effective operational space for establishing new and modern processing plants in the countryside equipped with compact technologies. Such productions must be set up in every province, district and village. We must clearly understand that this is not only about the new volumes of production and growth of GDP but this is, above all, the growth of the food production which always enjoys a sustainable demand and this demand, I am confident, will rise in the future.
Most importantly, by establishing the processing plants we address the employment of youth, firstly, in the countryside where there is always a big demand for jobs.

The Council of Ministers of the Republic of Karakalpakstan, governors’ offices in provinces and districts shall be assigned in two months’ period to elaborate and adopt the programs at the local levels upon endorsement of the Cabinet of Ministers on establishing the processing plants in the countryside and providing them with raw during 2009-2011.

Fourth, the special attention must be paid to consistent implementation of the system of measures on improving reclamation state of lands stipulated by the State Program for Improvement of Reclamation of Irrigated Lands for 2008-2012, providing proper technical conditions of operating irrigation and reclamation facilities, enhancing material and technical basis of specialized water, building and utilities agencies, equipping them with modern techniques.

In 2009 the priority task remains to be the further accelerated development of services and small businesses as the most important factor of ensuring jobs and raising the people’s living standards.

I believe that there is no need to repeat once again what significance is attached to the development of small businesses and service sector in our social and economic policy. I want only to draw your attention once again that the dynamic character of small business, its ability to relatively easily conform to changes in the market conditions and consumer demand makes it an indispensable instrument of creating new jobs and increasing the income of population during the world economic crisis.

This year the task of further supporting the small businesses which create the new jobs and in our conditions shape the incomes of more than 70 percent of employed population is urgent as never before.

Therefore, a special attention is paid in the Anti-crisis program to giving incentives to the development of small business. These measures include the tax and credit benefits, as well as further deepening the institutional reforms to create more favorable business climate for developing small business and private entrepreneurship.

In particular, it stipulates the two-fold increase of resource basis of the Fund of privileged crediting for the support of newly established small and private businesses; the duration of benefits has been extended; the maximum term of allocating a credit for filling up the circulating assets has been extended from 12 to 18 months.

Starting from January 1 this year the single tax payment rates for small businesses operating in industrial sector have been decreased from 8 to 7 percent, while the micro-firms and small businesses rendering financial, personal and other kinds of services are exempt from single tax payment for the period of three years. In this, the dividends gained by the founders of micro-firms and small businesses, as well as the non-state economic entities in terms of assets channeled to investments and payments for previously obtained credits are exempt from taxation for the period of five years. The Anti-crisis program also stipulates that the number of inspections of economic entities in 2009 shall be decreased by no less than 30 percent.

At the same time, it is intolerable when on the ground instead of supporting the private entrepreneurs the officials throw all kinds of obstacles in the ways of those who are willing to start their yet small but private business. How can be tolerated the fact that those who want to start or expand their business are forced to run after permission for construction and cadastral execution for months, pay big money for project development, document execution, as well as renting premises?

The Cabinet of Ministers in a month’s time shall submit the draft of resolution on further supporting small businesses with including to it the measures on decreasing the cost of developing architectural and planning tasks, expert examination of project documentation, introducing the simplified procedure of ecological assessment for small businesses along with cutting the related tariffs.

The issue of lowering tariffs for execution of cadastral documents, as well as the rental payment for state-owned premises should also be considered. In a word, it is necessary to conduct once again a detailed analysis of what hinders today the development of small businesses and private entrepreneurship and adopt concrete decisions on them.

It is important to underscore the enormous significance of deepening the work that we are accomplishing to further and speedy develop the sphere of services.

The Cabinet of Ministers, Council of Ministers of the Republic of Karakalpakstan, khokims (governors) of provinces and mayor of the city of Tashkent in a shortest time shall analyze the course of implementation of the Program for developing the sphere of services for 2007-2010, examine in detail the reasons of non-accomplishment of the set tasks and, if necessary, apply corrections.

It is important to radically review the territorial programs on developing the sphere of services and take additional measures to accelerate their development in rural areas as an important factor of employing the people, especially the youth, and increasing the living standards in the countryside.

The main task is to define the situation from the stance of an entrepreneur: what impedes him and what kind of assistance from state he needs to develop his business? A special attention should be paid to creating conditions necessary for a private sector to expand the types of services being rendered in the countryside.

The next most important priority is to further develop the production and social infrastructure as the most significant factor in modernizing the country and increasing the employment of population.

I would like to draw a special attention to this priority since we attach a significance of exceptional importance to it.
This is explained by following reasons:

First, the development of infrastructure creates necessary favorable conditions for establishing the new enterprises and developing the economy, as a whole; expands the access to develop the rich mineral resources of the country;

Second, the developed system of the production infrastructure, above all, of motorways and railroads, their effective functioning serves as the most important condition and factor in reducing the total costs of production, which increases the competitiveness of the manufactured goods and our economy, as a whole;

Third, the development of social infrastructure, provision of the population with pure drinking water, energy supply system, construction of sites of social sphere are eventually aimed at increasing the living standards of population;

Fourth, the development of infrastructure is a vast labor investment sphere that allows creating the new jobs and ensuring the employment of population, especially the youth, as well as raising the incomes and well being of the people.

With a view of ensuring the accelerated development of modern production and social infrastructure, creating on such basis the favorable conditions for sustainable and dynamic development of economy, we have adopted and took under control a special program “On additional measures to further develop production and social infrastructure for 2009”.

We attach a special significance to the development of transport infrastructure, firstly, the motorways and railroads. The implementation of the Program for development of general-use motorways for 2007-2010 has already been ensuring a year-round reliable transport communication between all provinces of the country, creating conditions for uninterrupted transportation of goods and passengers without crossing the territories of neighboring countries, and significantly increasing the transit of goods through our territory.

For much more reliable transport servicing along with adopted additional measures this year we are going to modernize more than 400 kilometers of international motorways of general use, including the construction of four-strip international highway along the route of Beyney – Bukhara – Samarkand – Tashkent – Andijan, as well as strategic sections of roads Bukhara – Alat and Samarkand – Guzar. Along with this, we put forward the task to expand the scale of reconstruction and complete overhaul of roads of local importance at the expense of funds channeled from the local budget and Republican road fund.

It is of a great importance for us to further continue the construction of the railway beds. This year we need to compl

ete the betterment works along the new railroad line of Tashguzar-Baysun-Kumkurgan, construct the new railroad branch line to the processing complex of the Dekhkanabad Plant for Potash Fertilizers, as well as implement additional measures on constructing a double-track electrified line Jizzakh – Yangiyer and single-track electrified line Yangiyer-Farkhad.

The great prospects are opening up vis-à-vis the adoption of decision to establish the free industrial economic zone on the basis of Navoi Airport, as well as transfer of newly built aerodrome in the city of Navoi for the management by the international operator – the Korean company of “Korean Air”. The establishment of international inter-modal logistical center will allow not only use it as a transcontinental transport and expeditionary junction, which connects the Southeast Asia with Europe, but also promote the new high-technological industries in Navoi Province and neighboring areas.

The issues of accelerated development of the social infrastructure sites, radical improvement of residential areas and creating the new jobs must occupy a special place in our plans.

In the framework of the set measures in 2009 we are going to commission more than 2000 kilometers of water pipeline and about 700 kilometers of gas networks, as well as radically improve the liquefied gas supplies of remote districts.

The measures on expanding the scale of contract works on complete overhaul, reconstruction and construction of housing must become an important factor in creating additional jobs and meeting the growing needs of population. In this context, it is envisioned to establish the private specialized repair and construction organizations at cities and districts which accomplish works on the turnkey terms on planning, design, construction, reconstruction and overhaul of sites of housing fund.

The Council of Ministers of the Republic of Karakalpakstan, khokimiyats (governor’s offices) and municipality of the city of Tashkent ought to create necessary conditions for establishment of such private organizations and provide them with work. For such purposes it is necessary to make complete inventory of the housing fund regardless of its subordination in terms of locating the unused emergency and ramshackle facilities, abandoned dwellings in apartment houses, including the dormitories and unfinished construction sites, as well as make a decision on them taking into account their transfer to the local authorities and elaborate the concrete programs on their reconstruction and complete overhaul.

The implementation of these programs will allow attracting additional tens of thousands workers for contractual works and promote the significant improvement of housing conditions of our people.

In 2009 the task on further improving the banking, encouraging the attraction of free means of population and economic entities to deposits in commercial banks remains as a priority.

I want to note that we constantly accord a close attention to the development and strengthening of the banking system, and it gives its positive results. However, we need to more deepen and extend, bearing in mind that the banks are, figuratively speaking, a blood-vascular system that nourishes all our economy on the state of which depends the financial and economic stability in the country.

First and foremost, the banks and their founders must finish the initiated work on raising the level of capitalization, as well as take the amount of their authorized capital up to the set parameters.

It is necessary to thoroughly analyze which factors today are containing the growth of savings, their inflow to banking system, and take additional measures. The point is about creating effective and long-term incentives in attracting the spare means of population and economic entities to a banking sector, promoting its capabilities to expand crediting the real sector of economy.

We need to radically restructure the work of banks vis-à-vis entrusting them with task on expanding the investment activity. Above all, we must strengthen the special services of commercial banks, which are engaged in examining and opening up of financing the investment projects. The outcomes of evaluation of heads of commercial banks and related subdivisions showed that most of them poorly know the legislation and mechanism of implementing the investment policy.

Therefore, it is not surprising that so far the banks have not become the active participants of investment processes, real partners of enterprises and small businesses in implementing the investment projects and programs of modernization, technical and technological re-equipment of industries.

The Central Bank of the Republic of Uzbekistan alongside with commercial banks, Ministry of Economy, Ministry of Finance and the State Committee for De-monopolization in a two month’s time shall submit to the Cabinet of Ministers the concrete proposals on further encouraging the attraction of spare means of population and economic entities to deposits.

Dear friends!

I am convinced that the implementation of the anti-crisis measures that we have elaborated will allow not only adequately confront the challenges and threats of the world financial and economic crisis, prevent its negative impact on our economy, but also overcome it with yet more stronger, sustainable and balanced economy, occupy our solid niche at the world markets, secure on such basis the dynamic economic growth, continuous resolution of tasks to further increase the living standards and well being of our population.

I wish you all a good luck and every success in achieving the set goals.