Uzbekistan to Benefit From World Economic Climate

A new report suggests high world prices for raw materials are creating a positive climate for the Uzbek economy, but some local analysts say real growth is only likely to come if liberal structural reforms are instituted.



The annual outlook report issued by the Asian Development Bank, ADB, in April forecast growth of 7.8 per cent this year and 7.2 per cent in 2009.



The report said industrial production would be a significant contributory factor to the growth figures, especially after General Motors invests in local carmaker Uzavtosanoat, other capital investment in telecommunications and oil and gas, and with continuing exports of raw materials at increasingly favourable prices.



According to the ADB report, Uzbekistan exported 14.5 billion cubic metres of gas in 2007, which was not only an 18 per cent volume increase year on year, but fetched a 40 per cent higher price.



Rising world prices for cotton, gold and natural gas, which between them account for more than half of Uzbekistan’s exports, are likely to contribute to further growth this year.



NBCentralAsia experts say that if the government adopted rational policies it could use this economic growth to improve the lot of its people, by spending the extra income on support for business, accelerating private-sector reforms, and abandoning the “state order”, the system where the government tells farmers what to grown and then buys their crops at knock-down prices.



“There are a lot of unnecessary restrictions created by the state in these sectors, ranging from high customs duties on exports and imports to the control of agricultural crops,” said Ilham Mamasaliev, a professor at a Tashkent university.



At the moment private farmers account for 98 per cent of agricultural production, but they are still legally obliged to hand over a proportion of their grain or cotton to state purchasing agencies in return for a low price.



For example, although grain is worth 16 to 31 US cents per kilogram on the open market, the government buys it from the farmers at a third of these prices. Once the grain has been turned into the flour, the waste products are sold back to farmers as livestock fodder, but this time at market prices.



“The authorities must provide freedom for the private sector and abandon their rigorous controls,” said a leading member of the unregistered Agrarian Party of the Fergana Valley.



“But it’s possible they will [have an incentive to] pile on the pressure even more, in an environment where the world prices of raw materials are going up.”



He recalled that since 2003, the Uzbek prosecution service has deployed special teams in the countryside to ensure that farmers sow the mandatory area of land with grain and cotton, fertilise the crop properly, and keep to deadlines. Failure to do so can result in various penalties including prosecution under criminal law.



Firuz Iskanderov, a businessman from Samarkand region in the west of the country, said the private sector was badly in need of liberalisation.



He said that at the moment, anyone starting up a new business had to grapple with bureaucratic obstacles and corruption. They have to go round seven or eight different government departments to get the right documentation, which will not be forthcoming unless they hand out bribes.



Other commentators said the government needed a flexible economic programme geared towards job creation, given that the ADB’s forecasts must be seen against a context of rapid population growth, which could cancel the growth out in per capita terms.



As Anvar Muminov, an economist in Tashkent, noted, many members of this growing population, especially in rural areas, “have no real prospects of finding work”.



The official unemployment level in Uzbekistan stands at just 0.6 per cent of the working-age population, but the World Bank put it at six per cent in 2006 and some independent estimates say it is closer to 20 per cent.



The Institute for Macroeconomic and Social Studies puts annual population growth in Uzbekistan at 1.4 per cent, far ahead of other Central Asian and European countries. The national statistical agency said the population stood at 26.7 million in 2007.



According to one observer, at least, this populous country could one day outstrip the kind of growth levels the ADB is predicting if it introduced a set of balanced economic policies.



(NBCentralAsia is an IWPR-funded project to create a multilingual news analysis and comment service for Central Asia, drawing on the expertise of a broad range of political observers across the region. The project ran from August 2006 to September 2007, covering all five regional states. With new funding, the service is resuming, covering only Uzbekistan and Turkmenistan for the moment.)