Adaptive and fast: How Uzbekistan economy changes
Post-Soviet period challenges and transition to a market economy
In the first years of independence, after the break of economic ties in the post-Soviet space, Uzbekistan like other CIS countries faced a decline in its economy. Throughout 1990-2001, the country’s GDP reduced from $17.7bln to $11.1bln in current prices.
At the same time, the agricultural specialization of the republic had a very positive impact amid the economic downturn. During this period, the share of agriculture in the country’s GDP increased from 33% to 50.7%.
Besides, the gradual surrender of a government order and subsidies in the industrial sector significantly contributed to Uzbekistan’s economy. As a result, the country managed to maintain control over such strategic enterprises as the Almalyk Mining and Metallurgical Complex, Navoi Mining and Metallurgical Combine, as well as gold, uranium, coal, oil, and gas fields.
To stabilize its economy, Uzbekistan gradually moves to modern market relations. The Uzbek model of transition to a market economy has integrated many models of economic transformations, like the Chinese model of reforms, aimed at the creation of a mixed economy with a directive planned mechanism of public sector control and indicative control of the private sector; the Russian model of liberalization of economy with a focus on monetary-price, financial and credit and foreign economy policy, and the Turkish model reflected in active support of business activity by the state.
These measures enabled Uzbekistan to become the first of the post-Soviet states to stop production decline and transit to economic growth. When other post-Soviet countries lost entire industrial sectors, Uzbekistan created new ones from scratch. For instance, the car-making industry. From 2001 to 2015, Uzbekistan’s GDP surged 7.8fold to 86.2 billion US dollars having reached annual growth at 15.8%.
From agrarian economy to industrial one
In 2016, after the transit of power, Uzbekistan stepped into a brand new period of development. The improvement of the foreign political dialogue atmosphere and the character of cooperation significantly increased investment inflow and boosted foreign trade.
Industry reform became one of the major areas of Uzbekistan’s new development course. The country’s leadership realized that the export and raw materials-based industrial development model lost its potential and might pose a threat to the sustainable and balanced development of the economy and the country as a whole. It was crucial to address the issues of deeper processing of raw materials and efficient use of resources. From 2016 to 2021, the Government of Uzbekistan implemented the programs of development of the basic industrial sectors based on the National Industry Development Concept, which gave weighty results. The share of industry in GDP rose from 19.5% to 27.4%, while the share of construction increased from 5.6% to 6.7%. Growth of production in the period mentioned hit 33% and 43% in the industrial sector.
Serious attention was paid to promoting exports and expanding the list of ready products. This enabled to raise exports in the processing industry (without regard to gold exports) by 64.7%. The main drivers of growth are the textile production (41.5%) and chemical industry (11.4%), metallurgy (24.4%), and machine-building (9%).
Automotive industry – pledge of success
Uzbekistan’s automotive industry has demonstrated rapid development due to the attraction of foreign investors, having demonstrated a 2.7fold rise in car production. As a result, in 2017, the country produced 235,000 cars, thus becoming the first in Central Asia and second in the post-Soviet space after Russia. Meanwhile, production of buses rose by 159%, and trucks – by 107%. The localization of the automotive industry reached 60%.
The industry is represented by the following enterprises: the UzAutoSanoat large-unit (SKD) assembly holding, the GM Uzbekistan which produces passenger cars, the SamAuto Uzbek-Japan plant which manufactures buses and cargo trucks, and the Uzbek-German JV ManAuto-Uzbekistan which manufactures MAN special-purpose machinery, cargo trucks and cargo trailers. Besides, the Tashkent tractor plant, Uzbekselmash, Tashselmash and Chirchikselmash manufacture farm machinery.
The country made a breakthrough in the light industry shifting from raw cotton export to fabric production and tailoring all-purpose textile goods. Uzbtekstilprom Holding consisting of more than 1,500 various enterprises, including more than 369 textile enterprises and 1,143 garment and textile facilities, is the major player in the market.
The country solved the problem of monocropping significantly diversifying the output. By the time of independence, about half of the country’s crop acreage was used to cultivate cotton. Thanks to the reduction of cotton crops in favor of grain crops Uzbekistan has had a chance to achieve self-sufficiency by growing 7.6 million tons of grain. A few years ago it imported 80% of its grain.
Small businesses and private entrepreneurship are the drivers of economic development, job creation, and raising people’s income. The share of small and medium businesses in 2021 made up 54.9% of the country’s GDP. For example, the share of small and medium businesses in developed countries reaches 50-60% of the GDP. For the past few years over 50 decrees and resolutions of the President of Uzbekistan were adopted to back these entities.
As a result of the reforms in 2016-2021, Uzbekistan made great strides in its development. For the past five years, it became one of the most dynamically developing, investment-attractive economies of our region.
Investments and regional cooperation as drivers of economic development
The country continues serious economic transformations under the New Uzbekistan development strategy aimed at raising the country’s export potential and investment attractiveness in 2022-2026. It aims to create a favorable investment climate thanks to introducing various preferences. Uzbekistan plans to attract the next five years investments up to 120 billion dollars, including 70 billion in international investments. It prioritizes energy, transport sectors, water economy, public utilities, healthcare, education, and ecology.
Uzbekistan focuses on strengthening partnerships between several regions with India, China, Russia, expanding export geography from 115 to 150 nations, and increasing export of tourist, transport, information, and other services by 1.7 times to 4.3 billion dollars. Tashkent actively promotes free trade areas in the near-border territories.
As part of the new economic concept, Uzbekistan plans to raise the GDP up to 100 billion dollars in the five years to come, double exports to exceed 30 billion dollars, and increase the share of the private economy in the GDP to 80%. The country targets to join the upper-middle-income countries by 2030.
As the EDB analysts say the major asset of the country’s economy is its ability to quickly adjust to an ever-changing environment driven up by an increase in labor. The country’s population surpassed 36 million. There prevails the younger generation aged 30 years old that is 60% of the population.
The World Bank predicts the economic growth of Uzbekistan in 2023 will achieve 5.1% and accelerate up to 5.4% and 5.8% in the following two years, the highest rates in the Europe and Central Asia region.
Forbes analyst Kenneth Rapoza said in case of successful implementation of new economic reforms Uzbekistan may become Singapore of Central Asia.