Uzbekistan: Economy

Overview:

Uzbekistan is a dry, landlocked country of which 11% consists of intensely cultivated, irrigated river valleys. More than 60% of its population lives in densely populated rural communities. Uzbekistan is now the world's second largest cotton exporter, a large producer of gold and oil, and a regionally significant producer of chemicals and machinery. The IMF suspended Uzbekistan's $185 million standby arrangement in late 1996 because of government steps to the negative external conditions generated by the Asian and Russian financial export and currency controls within its already largely closed economy. Economic policies that have repelled foreign investment are a major factor in the economy's stagnation. A growing debt burden, persistent inflation, and a poor business climate led to disappointing growth in 2001. However, in December 2001 the government voiced a renewed interest in economic reform, seeking advice from the IMF and other financial institutions (World 7). After independence, Uzbekistan tried to support inefficient state enterprises and shield consumers from the shocks of rapid economic reform. These policies eventually led to severe inflation and an economic crisis. Reforms brought inflation down to manageable levels and small businesses began to grow. Larger institutions are seeking joint ventures with international corporations. However, currency and trade restrictions remain too tight to encourage significant foreign investment. Falling global gold, copper, and cotton prices also hurt the economy. A privatization program is slowly being implemented with international support. Privatization is necessary to raise hard currency and promote economic development (Republic 4).

GDP: purchasing power parityÐ'--$62 billion (2001 est.)

GDPÐ'--per capita: purchasing power parityÐ'--$2,500 (2001est.)

GDPÐ'--composition by sector:

agriculture: 33%

industry: 24%

services: 43% (2001 est.)

Inflation rate (consumer prices): 23% (2001 est.)

Labor force: 11.9 million (1998 est.)

Labor forceÐ'--by occupation: agriculture 44%, industry 20%, services 36% (1995)

Unemployment rate: 10% plus another 20% underemployed (1999 est.)

Budget:

revenues: $4billion

expenditures: $4.1 billion, including capital expenditures of $1.1 billion (1999 est.)

Industries: textiles, food processing, machine building, metallurgy, natural gas, and chemicals

Industrial production growth rate: 3.5% (2000)

ElectricityÐ'--production: 40.075 billion kWh (2000)

ElectricityÐ'--production by source:

fossil fuel: 86.95%

hydro: 13.05%

nuclear: 0%

other: 0% (2000)

ElectricityÐ'--consumption: 4189 billion kWh (2000)

ElectricityÐ'--exports: 4.1 billion kWh (2000)

ElectricityÐ'--imports: 5 billion kWh (2000)

AgricultureÐ'--products: cotton, vegetables, fruits, grain; livestock

Exports: $2.8 billion (2001 est.)

ExportsÐ'--commodities: cotton 41.5%, gold 9.6%, energy products 9.6%, mineral fertilizers, ferrous metals, textiles, food products, and automobiles (1998 est.)

ExportsÐ'--partners: Russia16.7%, Switzerland 8.3%, UK 7.2%Ukraine, Eastern Europe, Western Europe

Imports: $4.1 billion (1998)

ImportsÐ'--commodities: grain, machinery and parts, consumer durables, other foods

ImportsÐ'--partners: principally other FSU, Czech Republic, and Western Europe

DebtÐ'--external: $2.6 billion (1997 est.)

Economic aidÐ'--recipient: $276.6 million (1995)

Currency: Uzbekistani som (UKS)

Exchange rates: Uzbekistani soms (UKS) per US$1Ð'--111.9 (February 1999), 110.95 (December 1998), 75.8 (September 1997), 41.1 (1996), 30.2 (1995), 11.4 (1994), 1.0 (1993)

Fiscal year: calendar year (Uzbekistan Economy 4).

Reform:

With the collapse of the Soviet Union, Uzbekistan faced serious economic challenges: the breakdown of central planning from Moscow and the end of a reliable, if limited, system of inter-republican trade and payments mechanisms; production inefficiencies; the prevalence of monopolies; declining productivity; and loss of the significant subsidies and payments that had come from Moscow. All these changes signaled that fundamental reform would be necessary if the economy of Uzbekistan were to continue to be viable.

Traditionally a raw materials supplier for the rest of the Soviet Union, Uzbekistan saw its economy hit hard by the breakdown of the highly integrated Soviet economy. Factories in Uzbekistan could not get the raw materials they needed to diversity the national economy, and the end of subsidies from Moscow was exacerbated by concurrent declines in world prices for Uzbekistan's two major export commodities, gold and cotton (Lubin 431).

Natural Resources:

Only 10.8% of the land in Uzbekistan is arable. The richest farmland is found in the river valleys and the alluvial plains at mountain bases. Uzbekistan contains significant mineral wealth. Deposits of gold, uranium, silver, copper, zinc, coal, and lead are mined. Uzbekistan also harbors large and as yet mostly undeveloped reserves of oil and natural gas (Uzbekistan 3).

Agriculture:

Agriculture remains the mainstay of the economy. It accounted for 35% of the GDP in 2000, among the highest rates of the former Soviet republics. Cotton is the primary crop; Uzbekistan is among the world's largest producers and exporters of seed cotton. However, such production has come at a high price. Cotton requires large amounts of water to