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Opening Asia for Russia

18.11.2021 34 просмотров

Today, the new Uzbekistan is implementing grandiose socio-economic reforms, turning into one of the leading states of the CIS with an open economy. Nabi Ziyadullaev, Honored Scientist of the Russian Federation, Corresponding Member of the Academy of Sciences of Uzbekistan, Chief Researcher of the Institute for Market Problems of the Russian Academy of Sciences, tells about the achievements of the Republic of Uzbekistan in his article.


The Republic of Uzbekistan, which is the largest state in Central Asia, has significant political, economic, cultural, humanitarian and intellectual potential and positions itself as a rapidly developing, transforming independent state with its own development paradigm, its own model of transition to the market. With the acquisition of national state sovereignty, since 1991, Uzbekistan has become an integral part of the global world, a member of the UN, takes an active part in a number of interstate integration associations - the CIS, the SCO, the ECO, the Organization of Islamic Cooperation (OIC), the Organization of Turkic States (OTG) (b . Turkic Council) and in more than 120 other international organizations. As an observer in the EAEU, Tashkent effectively interacts with the countries of this integration structure. Intensive negotiations are underway on accession to the WTO, as well as on enhanced cooperation with the EU. Close ties have been established with all developed countries and IFIs, as evidenced by its multifaceted cooperation with the largest trading and investment partners in the global and regional financial markets. In July 2021, Uzbekistan became a permanent observer at the Organization of American States.


Today, the new Uzbekistan is implementing grandiose socio-economic reforms, turning into one of the leading states of the CIS with an open economy. From the first days of leadership of the country, the President of the Republic of Uzbekistan Sh.M. Mirziyoyev proposed a new foreign policy and socio-economic course, directing the country towards closer integration with neighboring Central Asian states and active interaction with the Russian Federation, other CIS countries and the world. The Action Strategy is being successfully implemented in five priority areas of development of the Republic of Uzbekistan in 2017-2021, which determined the vector of economic and social reforms in building an open and socially oriented state. In the conditions of modern foreign policy and foreign economic tensions, the country has developed a carefully calibrated and balanced scientifically based strategy, taking into account its own national interests and competitive advantages as a response to internal and external threats and potential challenges. “In this program document, the President of the country Sh.M. Mirziyoyev in August 2021 - we have defined our strategic goal - to build a New Uzbekistan and the foundation of the Third Renaissance.”


The new economic policy of the country is aimed at expanding full-fledged cooperation with the Russian Federation, world and regional powers, integration associations, financial centers and, of course, with neighboring states, taking into account special increased responsibility for the region. It is no coincidence that the term "Central Asian spirit" appeared in the political vocabulary of the world.


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Over the years of sovereign development, Uzbekistan has made serious progress in catching up development, which has led to significant strengthening the economic potential of the national economy. During the years of independence, new industries have appeared in Uzbekistan. For example, the automotive industry was created from scratch, became a competitive industry and exports half of its products. Subsidiaries of the American General Motors and the South Korean Daewoo operate here. The level of localization of production at the world-famous automobile plant in the city of Asaka in the Ferghana Valley, created jointly with Daewoo JSC GM Uzbekistan, is very high. 60% of all parts are produced domestically. In order to attract foreign investment in the national economy, special economic zones have been created: the Free Industrial Zone in the city of Navoi (FIEZ "Navoi"), the Special Industrial Zone in the city of Angren (SIZ "Angren") and the Special Industrial Zone in the city of Jizzakh (FIZ "Jizzakh").


Economic success has been achieved due to a number of factors. Reforms in the 1990s were not as shocking as, for example, in Russia or Ukraine. Thanks to this, the transformational recession was not so deep. In addition, prices for the most important traditional Uzbek exports - gold, gas, cotton, and copper - also rose rapidly. Exports were stimulated by a clear undervaluation of the exchange rate and taxes. The country has relied heavily on a state-led model of import-substituting economic growth with mixed results, somehow managed to raise living standards and create new jobs sufficient for a rapidly growing economically active population. Challenges were international trade, building permits, insolvency resolution, tax policy, the business climate, obtaining loans, and registering property. All this hindered not only the development of exports, but also the national economy as a whole. Despite its huge economic and human potential, Uzbekistan was in last place in terms of attracting investments per capita among the Central Asian countries.


Over the past five years, there has been a transition to an "open economy" model through the widespread use of market mechanisms and informing the population about ongoing reforms, using new drivers of economic growth: digitalization, innovative technologies, modernized forms and methods of influencing the economy instead of the old, obsolete institutions and tools of excessively detailed, command, rather than indicative and economic regulation. Uzbekistan started market reforms later than many countries, so it can benefit from the lessons learned by other countries in transition.


Among the most notable achievements are the liberalization of the foreign exchange market, the elimination of multiple exchange rates, the gradual liberalization of prices and trade, the free movement of goods and services, the attraction of foreign investment, the opening of 14 free economic zones, the absence of import duties in mutual trade with the EAEU countries, the reduction of import tariffs and excise duties, the expansion of the social protection system, the provision of the Central Bank with greater independence, the improvement of access to national statistics, the reduction of tax rates for enterprises and individuals.


A comparative economic and statistical analysis of the global economic crises of 2009 (financial crisis) and 2020 (pandemic crisis) shows that the economy of Uzbekistan is resistant to global crises. Until 2019, Uzbekistan's GDP growth rate was at least 4-5% per year. Only in the coronavirus 2020 did growth drop to +1.7%. Uzbekistan has become one of the few countries that have managed, even in the face of severe quarantine restrictions and a decrease in economic activity at the global level, to maintain a positive trend. Since 2021, GDP growth has begun to recover.


In 2020, the GDP of the Republic of Uzbekistan per capita amounted to 19 million soums (in the equivalent of 1.7 thousand dollars) and compared with 2018 increased by 3.5%. According to the World Bank, Uzbekistan's GDP at purchasing power parity (PPP) amounted to $245.4 billion  


As a result of socio-economic reforms in Uzbekistan, a large-scale transformation has taken place in all spheres of life, and a sufficiently high macroeconomic “margin of safety” has been achieved. In general, for 2017-2020. Uzbekistan's foreign trade turnover increased from $24 billion in 2016 to $36 billion, and economic growth in the country amounted to 18.3%. The total volume of investments in a short period of time increased 2.1 times, including foreign investments - almost 3 times. The volume of industrial production amounted to 369 trillion soums, an increase of 23.4%. Thanks to the liberalization of the economy and the simplification of customs procedures, the volume of exports in 2020 amounted to $15.1 billion, which is 25% more than in 2016. New high-tech industries have been created, and fundamental structural and qualitative changes have taken place in the national economy of Uzbekistan. Thus, in 2020, compared to 2017, the share of industry in the sectoral structure of GDP increased from 21.1% to 27.4%, while the share of agriculture decreased by 5.1%. It is noteworthy that the share of knowledge-based services increased by 1.7 times and reached 40%, which also reflected the rapid growth of small businesses and private entrepreneurship. The largest increase in the contribution to economic development was demonstrated by investment construction - the industry's contribution increased by 2.5 times, which reflects the process of rapid residential and commercial construction and the creation of new infrastructure facilities. Gross value added (GVA), created by all sectors of the economy, amounted to 92.4% of total GDP in 2020 and increased by 1.7% (contribution to GDP growth - 1.5%). A significant contribution to GDP growth was made by industry, in the structure of which the mining and energy components account for about 50%. More than 60 billion cubic meters are produced annually. m of natural gas, 750 thousand tons of oil, 4 million tons of coal, as well as non-ferrous and precious metals. Net taxes on products amounted to 7.6% in the structure of GDP and showed an increase of 1.4%. At the same time, the country is still largely agrarian, but with a developing high value-added processing industry based on the deep processing of rich local raw materials.


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Photo: https://www.gov.uz/


In parallel, positive changes have taken place in the country aimed at improving the legal framework and regulatory procedures in the field of entrepreneurial activity, creating a favorable business environment and a positive image of the country in the international arena. In 2021, for the first time, Uzbekistan is included in the Organization for Economic Cooperation and Development (OECD) Index of Regulatory Restrictions on Foreign Direct Investment, which is an indicator of the degree of openness of the economies of various countries for foreign investors. As a result, over the past five years, according to the annual report of the World Bank and the International Finance Corporation "Doing Business (Doing Business)", in terms of creating the most favorable conditions for doing business, Uzbekistan has risen from 141 to 69 place among 190 states and entered the "Top best countries -reformers. According to the Global Food Security Index (The Economist Intelligence Unit), Uzbekistan has risen by 9 positions. An important indicator is the "Index of Economic Freedom" (Index of economic freedom), compiled annually by the Heritage Foundation in conjunction with the Wall Street Journal, which includes an assessment of 186 countries on 12 components, grouped into 4 groups, and is measured on a scale from 0 to 100 The higher the index value, the higher the level of economic freedom. In 2021, Uzbekistan, having scored 59 points, took 21st place out of 40 countries in the Asia-Pacific region, which means the transition to the ranks of "moderately free economies".


Reflection of the positive results of the reforms in various world ratings has created opportunities for the country to enter the international financial markets. For the first time in its history, in 2019, Uzbekistan jointly with Gazprombank issued sovereign international bonds worth one billion dollars, the demand for which significantly exceeded the expected and amounted to more than $8.5 billion. Requests for proposals were sent to international investment banks and law firms (Request of Proposals), and underwriting banks Citi (USA), JP Morgan Chase (USA), Gazprombank (Russia) were selected on a competitive basis with the participation of international investors from the USA, Great Britain, Germany, France, Denmark and Switzerland.


Total in 2019-2021 almost two billion dollars worth of Uzbek Eurobonds-Eurobonds were placed on the London Stock Exchange (in February 2019 for $1 billion with a yield of 4.75% and 5.38% per annum with maturity in 2024 and 2029; in November 2020 for 750 million dollars with a yield of 3.7% per annum maturing in 2030 and in August 2021. The President of Uzbekistan announced the placement of another Eurobonds for 5 trillion UZS. at the level of 6-8%, which clearly reflects the decrease in the cost of borrowing and the positive assessment by the world capital market of the policy of liberalization and openness pursued in Uzbekistan Proceeds from the issuance of sovereign (denominated in dollars and soums) bonds will be used to finance the program of the Sustainable Development Goals (SDG) for Uzbekistan.


The President of the country set the task of ensuring the growth of the national economy this year. public by at least 6%, industry - by 8%, and services and construction - by 8.5%, construction - by 4% to achieve the targets of 2030 - real GDP growth by 2.1 times and GDP by per capita by 3 times. To do this, it will be necessary to maintain average annual economic growth rates of at least 6-7% in subsequent years. This will allow Uzbekistan to enter the group of countries with upper middle incomes by 2030.


The main factors of GDP growth until 2030 are to ensure the growth of real volumes of industry by 2.3 times and an increase in the share in GDP to 33.3%, construction and services by 2.1 times and, accordingly, a decrease in the share of agriculture by 1.8 times to 21%. The growth of the production potential of the economy will ensure an increase in exports by 3 times. To ensure economic growth, it will be necessary to increase the volume of capital investments by 3.1 times, foreign direct investment by 7 times.


The efforts of the Republic of Uzbekistan to reform the economy are supported by all international financial institutions and will undoubtedly help attract large investments, technologies and create new jobs to the country.


The lessons of Uzbekistan, which in a short time from a closed country, fenced off from the outside world, turns into one of the advanced states in the post-Soviet space with an open economy, making the transition from a model with a high level of administrative barriers and restrictions to the model of a modern economy based on the optimal combination of state and market methods of regulation are very useful and applicable in the transformation of transition economies in other developing countries.


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Nabi Ziyadullaev, Honored Scientist of the Russian Federation, Corresponding Member of the Academy of Sciences of Uzbekistan, Chief Researcher at the Institute of Market Problems of the Russian Academy of Sciences.  ;Photo: https://uznews.uz/


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