 The highest success
among all the Central Asian countries |
Uzbekistan has seen immense and fundamental changes during the last ten years following its independence in 1991. At the threshold of independence the country possessed neither a private sector nor a diversified economy, but rather an ever-increasing demand for local market. Moreover, as the demand for goods rose, it was realised that there were more imports than exports and that there was a strong necessity to establish an effective market structure. Coming from a place of virtual isolation in the Soviet Union to accepting foreign partners into all spheres of its economic life and entering the foreboding world of capitalism reflect the goals and effort the Uzbek government has put into this successful transition period.
The government of Uzbekistan has addressed the need for the development of a free market economy by taking a step-by-step approach with the main priorities being the privatisation itself, a stable macro-economic environment and an increasing number of foreign investments. The objectives for this foreign investment approach are firstly, to increase the quality of production to international standards, secondly, to introduce new technologies and modernise the status quo, thirdly, to create employment for the local workforce. This approach has come to fruition especially with regard to gold mining, cotton and silk production, and food processing.
The government is keen to see investors as long term partners who would actively contribute to the development of the country's economy, export potential and infrastructure. The attractions for foreign investors are the rich mineral resources, abundant oil and gas resources, existing infrastructure and a skilled workforce. To enhance these positive factors, the government offers incentives for foreign investors such as tax holidays, a shareholding of more than 50% in some sectors, lower taxes, land tax exemptions, customs exemptions and more, depending on the area of investment. However, the question of convertibility is an issue on which, unlike other CIS countries, Uzbekistan has moved with extreme caution. The government is fully aware of its economic benefits, but also sees the need to keep a social safety net in place for its people. Partial convertibility is in place, and, as is the government's overall economic policy, convertibility will be instituted. "We fully understand the necessity for the liberalisation of the currency exchange market, but we also realise that this should be done in a smooth, set-by-step manner so that the economy as a whole will benefit from these measures," assures Mrs. Shakhlo Abdullaeva, Deputy Minister of Foreign Economic Relations.
The privatisation program has moved slower than expected, but is still on course as is the case with most small enterprises and some selected medium enterprises. The political will to privatise is however, very much in place. In 1995 private houses and farms were privatised followed by industrial enterprises in 1998. Currently more than 4 500 former state companies have been transformed into joint-stock companies, involving around 2 million out of the 6.5 million working population as shareholders of privatised companies. Today, the total number of private small and medium-scale enterprises is more than 85 000, a considerable growth from the 2 900 figure of 1994. To further cement the privatisation process and increase investment confidence the government, since January 2001, gave the responsibility to the Ministry of Macroeconomics headed by Mr. Azimov, the Deputy Prime Minister to ensure closer co-ordination between those in charge of all sectors of the country's economy. Large companies are currently being given priority by the government for the purpose of privatisation and development, some examples are Uzbektelecom, UzNeftegas and Uzbektourism. Some other examples of large-scale privatisation sectors so far are aircraft building, tractor building, metallurgical plants, tobacco growing and processing and food processing and packaging.
The mining sector continues to contribute to Uzbekistan's economy making Uzbekistan the ninth largest gold producer in the world. Newmont Mining concluded a JV as early as 1992, for their heap leaching processing plant. Navoi Mining has been operating in the country for decades and Oxus Resources Corporation is on the verge of entering the gold mining market of Uzbekistan. There are a few other potential investors researching this area at present. They continue to enjoy a successful and prosperous future.
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The Uzbek government has emphasised the development
of the oil and gas industry, sustaining Uzbekistan
as one of the largest gas producers in Central
Asia. Oil refineries have been built in the Fergana
and Bukhara regions with co-investment from foreign
partners and banks. The goal is to modernise the
present infrastructure and increase export potential.
UzNeftegas, the national oil company in charge
of bringing all oil and petroleum activities under
one body, is eager to attract foreign investment
into this sector of the economy.
Agriculture dating back to the Soviet times, has
been the primary sector of the country supplying
up to 60% of the GDP.Cotton remains a priority
crop but more emphasis is being placed on its
processing leading to the textile industry and
establishing joint ventures with foreign investors.
Uzbekistan is actively moving from monoagriculture
to more diverse agricultural activities. The textile
industry, especially silk processing, is one of
the fastest growing industries in Uzbekistan today.
Foreign cooperation from Germany, China, Japan
and Korea has resulted in a $10 million export
of silk annually with a plan to make Uzbekistan
the 2nd largest cocoon producer in
the world.
Uzbekistan's abundant fruit and vegetables are
also being introduced to the world through the
very successful and growing fruit processing and
packaging industry. Food processing is a very
important industry for Uzbekistan and foreign
investment to date, has allowed for the modernisation
of the present infrastructure as well as the introduction
of new technologies. The country has a large
number of businesses specialising in the canning
and processing of products such as vegetable and
animal oil, margarine, confectionery, bakery products,
macaroni, tomato paste, and various alcoholic
and non-alcoholic beverages, UHT milk packaging,
powdered milk and more. The most substantial investments
in this sector have been Coca
Cola led by Nick
Evangelopoulos and Nestle.
Telecommunication in Uzbekistan is run by the
national company Uzbektelecom.
The doors are wide open and the company eagerly
awaits foreign participation in their privatisation
program. In the areas of cellular and internet
communications, much modernisation and growth
has taken place since independence, and the market
is competitive and virtually growing on a daily
basis
The car industry has been developed primarily
by UzDaewoo Auto, one of the early birds of the
privatisation process that has been producing
cars in Uzbekistan since 1996,and another important
company Case Corporation has been building tractors
and agricultural equipment. This contribution
to the industrial sector has beebeneficial to
Uzbekistan by increasing the level of economy,
providing employment and mutually contributing
to related sectors.
As a tourist destination, the ancient cities of
Bukhara, Samarkand and Khiva offer the wealth
of unspoiled history. However, tourism in Uzbekistan
needs to be developed to international standards
and steps have been taken towards this goal. Major
international hotels operate in Tashkent and in
some of the tourist centres throughout the country.
Uzbekistan is represented at major tourist fairs
internationally in an attempt to make it a new
and exciting tourist destination, and surely the
future will prove the efforts worthwhile. Uzbekistan
Airways, the leading airline in the CIS, offers
regular flights to the US, Europe and Asia and
is maintained by Lufthansa.
According to Mrs. Shakhlo Abdullaeva, Deputy Minister
of Foreign Economic Relations, ".our future
plan is to become a totally open country to all
the countries of the world." This vision
can become a reality with all this young country
has to offer in the form of resources. Given this,
with a stable macro-economic situation, an accommodating
foreign economic policy, its expanding private
sector and the will to succeed, this ancient trading
post on the Great Silk Road has been revived and
ready to draw on its centuries-old heritage of
commerce and trade.
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