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Uzbek model – an economic miracle worth emulating
August 28, 2016, 2:07 pm
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Since its independence on 1 September 1991, Uzbekistan has chosen a unique form of economic and social development under the ‘Uzbek Model’, which aims to evolve the country into a socially-oriented market economy. As Uzbekistan celebrates its 25th anniversary, we look back at a quarter-century of balanced and targeted, political, social and economic policies by the country’s leadership. These astute policies and strategies have helped the country achieve and excellent harmony between the level and quality of life for the nearly 31 million people of Uzbekistan.

The Uzbek Model of reform and development, which continue to drive the country’s economic and social transformation, can be traced back to five principles created and promoted by the government of President Islam Karimov.

The first principle of giving priority to economy over politics ensured that economic reforms were not hindered by any ideologies, dogmas, postulates or obsolete stereotypes.

The second principle which emphasized the role of the State as the main impetus for reform, allowed the government to be in charge of setting priorities, developing and monitoring directions and consistently implementing reforms.

The third principle underlined the rule of law in all spheres of society and this stressed that the democratically adopted constitution and laws must be respected by all without any exception.

The fourth principle which highlighted the importance of pursuing a strong social policy provided all citizens with reliable and resilient social protection.

The final principle accentuated that the state’s transformation into a market economy should be implemented in a gradual, phased and evolutionary manner and in line with economic laws.

The five principles, which emphasize strong qualitative growth and realistic reforms to the economy, along with prudent fiscal and monetary policies, have led to an economic miracle in Uzbekistan. Today, the country is not only one of the largest producers of gold and cotton, but also is among countries with largest reserves gold, uranium, tungsten and copper, as well as being among the top ten producers of natural gas.

Within the short span of a little over two decades, the country’s economy has grown over five times and, despite doubling of population in the same period, its per capita GDP has increased four-fold to around US$7,000. In the last ten consecutive years, the country has reported a budget surplus that has brought about macroeconomic stability.

The economic diversification has also taken Uzbekistan’s economy, which relied on export of agricultural products, mainly single-crop cotton, to an exporter of multiple high-value processed and manufactured products. From being dependent on food and energy imports, the country has not only achieved full self-sufficiency in food and energy but has also become a net exporter of wheat, fruit and vegetables.

The five principles also helped usher in much-needed structural transformation and diversification of Uzbekistan’s economy. With an emphasis on increasing the manufacturing sectors role in the economy, annual capital investments have steadily exceeded 23 percent of GDP. These investments have been channeled into automobile manufacturing, railway engineering, consumer electronics, textiles, food processing and pharmaceuticals, as well as to the oil and gas industry.

Currently, more than 60 percent of industrial output, and close to 80 percent of the country’s exports, come from products designed by high-tech industries. Many manufacturing companies are being built from scratch in cooperation with global multi-national companies who are eager to utilize the raw materials and talented human resources readily available in Uzbekistan.

Business Climate: Twenty-five years of economic and political stability have ushered in a business climate that has grown increasingly attractive to foreign investors. A new phase of reforms, which saw the creation of special financial packages, tax privileges and guarantees based on international legal frameworks have led to a surge in capital inflows into the economy, as well as seen the introduction of advanced technologies and modern management techniques in the country’s industries.

At the legislative level, the introduction of a new principle of priority for the rights of entrepreneurs, including foreign investors, in their relations with government, law enforcement and regulatory authorities has helped further boost investor confidence in the country. In 2015, Foreign Direct Investments (FDI) to the country was in excess of $15 billion, which was 9.5 percent higher than in 2014.

Today, foreign investors from over 90 countries have invested in more than 5,000 enterprises in the country, including some of the world’s leading global corporations that have invested in high-tech industries manufacturing consumer and industrial products for domestic and international markets. 

In recent years, small business, which now constitute over 90 percent of all business and account for 56.7 percent of the country’s GDP, has become the driving force behind Uzbekistan’s phenomenal economic growth story. A dynamic service industry is also promising to propel the country’s economy; the services industry which accounted for less than 33 percent share of GDP at the time of independence has grown to over 54.5 percent.

Meanwhile, the country’s coherent and comprehensive policies, as well as the implementation of market and institutional reforms in the agriculture sector, have resulted in Uzbekistan going from being an importer of food stuff in 1991, to a regular exporter of high-quality wheat, fruits and vegetables. Reclamation of irrigated land, rational and careful use of scarce water resources and increasing soil fertility have allowed the agriculture sector to grow over 7 million tons of wheat and more than 17 million tons of fruits and vegetables that allow it to export foodstuff to more than 120 countries worldwide.

Reforms to the tax structure in the country have brought about a single tax rate for small industrial enterprises that has decreased by more than three-fold, from 15.2 percent to 5 percent. Consistent reduction of tax rates, broadening of the tax base and the liberalization of the tax administration have also resulted in the total tax burden on the economy dropping from over 45 percent to less than 20 percent today.

New reforms: The country’s path of evolutionary economic reforms implemented in a phased manner has seen the introduction of further innovative reforms in 2015. The government of President Karimov has now developed and approved the implementation of new economic restructurings designed to take the country forward during the 2015-2019 period.

These reforms include, reducing the role of state sector in the economy; fundamentally improving the business environment and introducing modern corporate management practices; implementing structural reforms to the economy, as well as modernizing and diversifying industrial production; deepening localization of production for finished goods, components and raw materials; developing and modernizing infrastructure and reducing energy consumption through introduction of energy-saving technologies and sustainable energy sources in all sectors of economy and social sphere.

Economic restructuring will see the state sector’s role in the economy significantly diluted by the sale of over 1,000 state-owned enterprises to the private ownership. Other measures include, closing down hundreds of inefficient state-run companies and leasing out government-held land to the private sector on transparent and competitive basis. These moves are expected to increase the role of private sector in the economy from its current 82 percent to 86 percent and provide a sharp incentive for economic efficiency.

Education: The country has also embarked on large-scale educational reforms and a national program of training aimed at developing its human resources. The free and universal education system that the country inherited at the time of its independence means that Uzbekistan has a literacy rate of over 99 percent. Under the new program, a universal 12-year compulsory free education, which includes 9 years of study in secondary school and 3 years of training in specialized professional colleges and academies ensure each student gets professional training in two or three trades that are in demand by the labor market.

In the higher-education sphere, cooperation and technical collaboration with leading universities abroad and agreements with several international partners, have allowed the 58 universities and other institutions of higher learning to benefit from the latest advances in the teaching and learning fields that meet the needs of the younger generation and allow them to realize their full potential.

As the employment of fresh graduates is of common concern to the state, private businesses and the individual, a new setup has been introduced that will include the head of the educational institution, the head of the district administration, and an employer. Specialized offices have been established in all districts with over 200,000 companies and businesses being involved in this program.

The president has on more than one occasion reiterated that the steady improvement of well-being of the level and quality of life for all citizens will always be the top priority of the government. With this in mind, more than one million new jobs will be created each year, with over 60 percent of them in the rural areas and more than 12,000 homes are to be built in rural areas. Over the years, several hundreds of thousands of families have been provided with modern and comfortable housing with provisions of electricity and natural gas.

With all these economic and social factors going in its favor, it is no wonder that that there are very few countries in the world that can match Uzbekistan’s economic indicators. The International Monetary Fund (IMF) acknowledged this when it said that Uzbekistan provides a high economic growth over a long period and that an active investment policy and structural reforms effectively protect the country from economic slowdowns witnessed elsewhere.

The country is currently ranked fifth in the world among countries with rapidly growing economies. The economic miracle about by the Uzbek model of economic growth and development, in the relatively short span of twenty-five years, has won the country and its leadership accolades and admiration from all over the world.

The year of healthy mother and child:

Following its independence in 1991, Uzbekistan has pursued a policy of protecting and supporting the health of its citizens. Promoting the health of mothers and infants, which has been a large part of the state’s health policy, has led to a stable reduction in child and maternal mortality. The overall infant mortality rate has decreased from 34.6 percent in 1990 to 10.8 percent in 2014. During the same period, maternal mortality rate dropped from 65.3 to 19.1 per 100,000 live births.

Uzbekistan is celebrating 2016 as the Year of the Healthy Mother and Child. Key priorities during the year will be strengthening of families, mother and child health and the upbringing of a healthy and comprehensively advanced generation. The celebrations, which are being held under the motto of, ‘Healthy mother and child are the basis of a happy family, and a happy family is the foundation of the prosperous society’ has several programs designed to strengthen awareness and promote a healthy lifestyle among the public.

With around $200 million earmarked for promoting the ‘Healthy Mother and Child’ model, a number of measures are being adopted to improve the health culture among the population, strengthen work on sanitation and hygiene, improve health protection and on enhancing care appropriate care for pregnant women, young mothers and newborns. Authorities are also looking at various steps aimed at improving legislation and regulatory framework for protecting the family, motherhood and childhood; ensuring the interests of women; increasing the role of women in the upbringing of a healthy child and strengthening the family institution so as to ensure the upbringing of a harmoniously developed generation.

Strengthening of families and the health of mother and child has already witnessed numerous health campaigns that promote preventive medical care and the early detection of diseases and the prevention of complications..

One of the sections of the national program of the Year of Mother and Child Health is dedicated to strengthening the role of the system of education in the formation of healthy generation. Every effort is being taken to provide good education for children, especially when it comes to pre-school education institutions, which are attended by a quarter of children.

The program involves not just the leading national experts, but also experts of the best training centers in Germany, Singapore, the Republic of Korea and Japan, as well as international scientists and experts.

Qualified medical care today is not seen as the only way to promote health. Physical culture and sports occupy an important place in addressing the pressing issues of healthy lifestyles. The development of infrastructure and construction of modern sports facilities has been in progress throughout the country.  

One result from this attention to the health and well-being of the young is the notable achievements made by Uzbek athletes at the 2016 Olympics that recently concluded in Brazil. Olympic boxing at Rio 2016 also witnessed the rise of Uzbekistan as an undeniable force in the sport. The country, which had taken a single bronze medal at the London Olympics in 2012, walked away from Rio 2016 with a haul of 13 medals, including four gold, two silver and seven bronze medals.

 

 

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