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Dilpreet answered on
Oct 08 2024
ECONOMIC GROWTH OF UZBEKISTAN
Table of Contents
1.0 Introduction 3
1.1 Scope of the Research 3
1.2 Research Objectives 3
1.3 Research Questions 4
2.0 Literature Review 4
2.1 TheoreticalFramework 5
2.2 Comparative Studies of Economic Transitions in Central Asia 6
2.3 Impact of International Institutions 7
2.4 Sector-Specific Analyses 10
3. Methodology 10
3.1Data Collection: 10
3.2Qualitative and Quantitative Analysis: 11
3.3Time Frame: 11
3.4Comparative Approach: 11
4. Economic Context and Key Reforms 11
4.1 Background 11
4.2 Key Reforms (2000 – 2010) 12
4.3 Economic Liberalization: 14
5. Results: Sources of Economic Growth (2000–2010) 17
5.1. GDP Growth 17
5.2. Key Sectors 18
5.3. Foreign Trade and Investment 19
5.4. Infrastructure Development 20
5.5. Economic Diversification 20
5.6. Employment and Poverty Reduction 21
6. Discussion: Challenges and Limitations 21
6.1. Economic Challenges 21
6.2. Political and Institutional Ba
iers 22
6.3. Environmental Impact 22
6.4. Regional Disparities 22
7. Conclusion and Policy Recommendations 22
7.1 Conclusion 22
7.2 Policy Recommendations 23
7.3 Research Limitations 23
7.4 Scope of Future Research 24
References 25
1.0 Introduction
Uzbekistan is a central Asian country that emerged in the year 1991 as a collapse of the Soviet Union. Initially, the country has to face several challenges,economical challenges being the most prominent ones. The economy of the country is primarily dependent on agriculture and industries owned by the state and therefore, it became difficult for them to adopt a market-oriented system. Rather practising liberalization like other neighbouring countries, the government of Uzbekistan prefe
ed to ensure stability through the control of the state over strategic industries. In the subsequent years, these approaches have a played a crucial role in shaping the economy of the country. This report has been written with a purpose to explore and analyse the economic growth of Uzbekistan over the years. The primary focus of the report is to shed light on the key economic reforms, policies, and economic strategies related to foreign investment and trade that have contributed significantly towards the growth of the country. The report will also discuss the challenges faced during the strengthening of the economy of Uzbekistan.
1.1 Scope of the Research
The research will primarily discuss the economic policies implemented by the government of Uzbekistan from the year 2000 to 2010. The research will explore the impact of the internal factors such as the policy reforms along with the other external factors such as changes in the prices of global commodities and foreign investment on the economic growth of Uzbekistan. The report will explore the economic growth in sectors like agriculture, energy, manufacturing, and development of the infrastructure. In addition to this, the report will also consider the challenges faced during this phase including economic inequality, regional issues, and degradation of the environment.
1.2 Research Objectives
The primary objectives of this research have been identified as:
· To identify the primary factors driving the economic growth of Uzbekistan in the period of 2000-2010
· To explore the impact of the government policies on the economic growth of different sectors
· To analyse the role of external factors such as international trade and foreign direct investment in the economic growth of the country
· To explore the challenges faced while ensuring a sustainable economic growth and the measures adopted to address these challenges
1.3 Research Questions
The research questions, which this research aims to address are:
· What are the factors that have contributed to the economic growth of Uzbekistan during the period of 2000-2010?
· What is the impact of government policies on the growth of different sectors within the economy of Uzbekistan?
· What is the role of external factors such as international trade and foreign direct investment in the economic growth of the country?
· What are the challenges faced during the phase of sustainable economic growth and how these challenges have been addressed?
2.0 Literature Review
Post the collapse of the Soviet Union, the newly formed independent countries have undergone significant economic transitions to make a shift from centrally planned economies to market-oriented economies. Uzbekistan being one of the independent countries after the split of the Soviet Union choose to adopt gradualism, and selective liberalization as the primary strategies to transition its economy. In contrast to this approach of Uzbekistan, most of the other countries in the Central Asian region have chosen to undergo rapid reform according to international models, however, Uzbekistanchooses to take on a more gradual approach. This literature review will explore the economic transition of Uzbekistan taking into consideration the theoreticalframeworks and by conducing comparative studies. The literature will further analyse the role of international institutions on the economic growth of Uzbekistan. A sector-specific study to better understand the economic reforms of Uzbekistan shall also be conducted through this literature review.
2.1 TheoreticalFramework
The two primary frameworks that are often adopted to make economic transitions from a centrally planned economy to a market-based economy are shock therapy and gradualism. Considering the approach of shock therapy, it advocates rapid liberalization, privatization, and the dismantling of the control of state. In contrast to this shock therapy, Uzbekistan has opted to go for gradualist strategy where reforms are implemented gradually and incrementally to ensure social order and political stability.One of the primary aspects of the economic transition of Uzbekistan was the retention of the control of state over strategic sectors such as energy and agriculture, which ere considered to be critical to ensure economic stability.
The gradualist theory being adopted by Uzbekistan is based on the notion that rapid economic liberalization especially in newly established countries with weak institutions can lead to economic shocks, political instability, and social unrest. With gradualism, the state managed to have control over the key industries while slowly introducing the market reforms. Therefore, representing a sheer contrast between the shock therapy and gradualism, where shock therapy propagates rapid market reforms and gradualists in contrast are of the opinion that rapid reforms may lead to political unrest and social dislocation therefore undermining the success of the transformation.
Though most of the researchers have indicated that rapid reforms in the economic policies helps to control inflation, and assists to compete in the competitive business environment, the view point of Uzbekistan is completely different. It is based on the notion that gradual transitions can lead to more stable outcomes in countries like Uzbekistan where the public is dependent on the support they receive from the state. The resistance by the government of Uzbekistan towards rapid liberalization presents an example, where the government managed to prevent the economic collapses seen in several other countries formed because of the collapse of the Soviet Union. In these countries, unlike Uzbekistan, unemployment and inflation was wide spread.
The gradualism theory being adopted by Uzbekistan can further be closely related to the concept of institutional economic. Institutional economics focuses primarily on the significance of having robust legal, regulatory, and social institutions to ensure a constant success of the economic reforms and economic transitions. It has further been suggested that strong and robust institutions play a crucial role in long-term economic growth of emerging economies like Uzbekistan. The political leadership of Uzbekistan insisted on the role of state institutions in managing the change, which helped to control the risks associated with sudden liberalization of economic policies and trade.
2.2 Comparative Studies of Economic Transitions in Central Asia
Central Asia after the post-soviet period has witnessed a market-based economic transition. The changes in the well-being of the population of Uzbekistan were witnessed in 2005. Other nations of Central Asia apart from Uzbekistan such as Tajikistan, Kyrgyzstan, and several other nations have started to achieve economic integration since the dismantle of U.S.S.R. However, due to the lack of major natural resources in Kyrgyzstan and Tajikistan, these two nations are having economically poor condition. Considering the monetary and fiscal policies which were implemented for stabilizing price and balancing the public revenue and spending of the five countries of Central Asia.Batsaikhan and Dadrowski (2017) have discussed that there are several reasons behind the lack of economic development of the Central Asian nations because of the geography and geo-politics of the region. Kazakhstan among all Central Asian nation is the largest landlocked country; whereas, Uzbekistan is double landlocked that led to limited transportation connections within and outside the regions. Since, major transportation routes crossed across the borders of soviet republic, the post-soviet
eakup had led to the formation of the Central Asia nations with border and custom control. The complications had further increased enormous challenge for the intra-regional trade practices because of the visa requirements.
The economic instability can also be reasoned with the political instability witnessed in the Central Asian nations. The ethnic riots in Osh, Kyrgyzstan in 1990 and 2010, the uprising in Andizhan, Uzbekistan in 2005, and several other revolution during the early 2000s have reduced 5the intra-regional cooperation. Nevertheless, it had reduced the possibility of potential trade practices, transit, tourism activities, and investment from MNCs. The border regions have also affected the economic perspective of the regions as Russia, China, and Iran have dominated the regions of Central Asia. Russia had previously dominated the area for the last two centuries, and after the dismantle of USSR, China had been rapidly expanding its presence in the Central Asian regions, thus leading to a difficult situation for the Central Asian nations to navigate its trade practices between the two giant nations (Saiazimova, 2009).
2.3 Impact of International Institutions
International organizations have played a significant role in the economic reformation process of Uzbekistan as the international bodies such as World Bank, International Labor Organization, EBRD and Asian Development Bank have played a pivotal role in their growth and development. Ochilov (2017) discussed that the period of 2000 to 2010 had witnessed significant role of international organizations for the economic growth of these regions which helped with the facilitation of the market reforms, infrastructural development, and creating an environment to attract foreign investment. However, despite the involvement of the international organizations, the challenges related to political and social issues are hindering its growth.
Figure 1: Trade and Economic Integration
Source: Batsaikhan and Da
owski (2017)
The above-mentioned table clearly shows the role and importance of various international organizations along with the involvement of Uzbekistan for its economic reform and growth. Uzbekistan not being the member of World Trade Organization (WTO) is an observer in the important decision making activities for its nation. The role of Commonwealth of Independent States (CIS), Eurasian Economic Union (EAEU), European Bank for Reconstruction and Development (EBRD), and Economic Cooperation Organization (ECO) plays significant role in the economic development of Uzbekistan.
However, to gain a better understanding of the roles of the international bodies in the economic reformation period between 2000 and 2010, it is essential to understand the focus areas of intervention.
· Economic Reform Support: The international organizations have provided all kind of technical support and expertise to assist Uzbekistan in its economic growth regime. The expertise includes series of interventionsthat helped with the formation of a centrally planned market based economy. It helps with a clear understanding of the market condition and its impact on the economy of Uzbekistan. The reform support also helped with the promotion of privatization of the organizations which helped with a profit driven approach to expand its market presence and strengthen its position. The reform support also promoted deregulation in the trade activities and promoted the trade liberalization which further helped with the inflow of more companies in the marketplace of Uzbekistan.
· Infrastructural Development: The international bodies also played a significant role in the infrastructural development of Uzbekistan which is an essential step for itseconomic growth and development. Significant investment from international bodies helped with the development of transportation network to help trade process. Infrastructural development also helped with the energy production along with the water management system, enhancing the connectivity and improving the overall economic activity of Uzbekistan. Infrastructural development is a crucial part in the overall growth and development of a nation and during the period of 2000 to 2010, Uzbekistan witnessed significant support from the international organizations for its economic growth. (Khalikov, 2017)
· Foreign Direct Investment (FDI) Facilitation: The instability witnessed in the political and social sphere had started to slowdown during the era of 2000 and 2010. With the changing and improved market condition, several international companies startedto invest during that era which further helped with the flow of foreign cu
ency and helped with the diversification of the economy of Uzbekistan. Since, Uzbekistan was traditionally dependent on the production of cotton, the FDIs during the period of 2000 to 2010 helped with the initiation of different sectors which further expanded the economy of Uzbekistan.
· Sectoral Development & Policy Advice:The transition phase during the 2000 and 2010 period, Uzbekistan witnessed sectoral developments where specific focus was given on the diversified sectors. It includes agriculture, manufacturing, and tourism which helped with the creation of job, inflow of foreign cu
encies, and overall economic and social development of the nation. Furthermore, the international organizations have helped with the development of several economic policies during the period. The policies include the development of fiscal management, monetary policies, and governance which helped with the economic stability along with the growth of Uzbekistan. (Tsereteli, 2018).
International Organizations that helped with the Economic Growth of Uzbekistan
· World Bank:World Bank aided the economic reformation of Uzbekistan by reforming the banking sector of the nation, improved the access of small and medium enterprises with...