EMBASSY OF UZBEKISTAN TO THE UNITED STATES
NEWS AND EVENTS
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NEWS AND EVENTS
February 15, 2008
ENSURING THE PRIORITY OF HUMAN INTERESTS - THE MAIN GOAL OF ALL REFORMS AND TRANSFORMATIONS (Part 1) - Address by the President of the Republic of Uzbekistan Islam Karimov
Dear participants of the meeting!

The main goal and task of today’s meeting is to critically assess the achieved frontiers, quality changes and tendencies which took place in the economy and other spheres of life of our society, as well as clearly and concretely define the most important priorities in economic and social development on which we should focus our efforts this year.

Assessing the outcomes of social and economic development in 2007 I would like to dwell on and underscore the following. Last year the high and sustainable growth rate and macroeconomic stability were achieved. The work on further restructuring the economy, its modernization, technical and technological renovation of the production sphere was continued. The country’s GDP growth rate accounted for 9.5%. The volume of industrial production increased by 12.1%, agriculture – by 6.1%. All these indicators significantly exceed the forecast parameters for 2007. The state budget was fulfilled with the surplus of 1.1% towards GDP. The level of inflation has been maintained within the scope of approved parameters and made up 6.8%.

I would like to underscore that the sustainable growth of Uzbekistan’s economy is not being provided for by extensive factors, the increase of extraction of hydrocarbon raw in the conditions of high world prices for oil, gas and other raw resources. It is of a principle importance the very fact that the economic growth is being ensured firstly by consistent implementation of comprehensively well thought-out policy of the system-based market reforms and attraction of foreign investments, deep structural changes in economy, modernization and renovation of production, creation of the new export-bound sectors and enterprises, accelerated development of business and private entrepreneurship.

Industry, construction, the sphere of communications and services are growing with an advanced pace. The share of industry in the GDP now accounts for 25%, the net share of sphere of services accounts for 43%, and the small business - 46%.

Produces of the fuel and energy and gas chemical complexes, energy, gold mining and non-ferrous metallurgy, chemical industry and the industry of construction materials, information and communication technologies are consolidating their leading positions in the economy and exports.

A purposeful work on reforming the agriculture is being carried out. As a result, for over the last years the agriculture has changed fundamentally. The reorganization of shirkats into farms was practically completed. Private farms in essence have become the main form of the agricultural production, the main locomotive in providing for its stable and effective development.

Today, there are more than 215 thousand farms in the country which employ 1.6 million workers or 90% of all busied in this sphere. 85% of agricultural areas under crop are assigned to them. The share of farms in the production of cotton accounts for almost 99%, grain – 82%. The share of farms and dekhkan entities accounts for 94% of all agricultural products manufactured in the country.

The market infrastructure was practically newly established in the country. The organization and stimulation of the agricultural production is built upon the new qualitative principles. The principles and system of management in this field are changing. There are more than 200 agricultural firms operating in processing the agricultural production.

Most importantly, the owner has emerged in the countryside – the owner of land. His attitude towards labor and results of his work are radically changing.

The record high rich harvests and the volume of agricultural production output are the result of fundamental changes in the sphere of agriculture, firstly in cotton and wheat collected for over the last years.

Last year, the volume of raw cotton production reached more than 3 million 650 thousand tons, wheat – 6 million 250 thousand tons. Serious structural progress in economy is reflected on foreign economic activity indicators.

In 2007 the volume of exports of goods increased by 40.7% significantly advancing the dynamics of imports, which on the outcomes of the year has allowed to secure the positive balance of foreign trade turnover worth over 3.5 billion dollars and 1.5-time-increase of gold and foreign currency reserves of the country.

For over the mentioned period the share of finished commodity in the exports has increased which now accounts for more than 38%. These are, first of all, machines and equipment, petrochemical products, mineral fertilizers, cotton yarn and fabric, knitted wear, flavoring industry products, cable commodities and construction materials. Export of machines and equipment, electric and technical products increased to 1.5 times, chemical products – 1.6 times, pharmaceutical commodities – 1.5 times, textile –1.2 times, construction materials – 2 times, fruits and vegetables – 1.6 times. Exports of services, primarily in transport and telecommunications are growing fast.

The concrete measures were taken to optimize the foreign cargo transportation and substantially expand the transit potential of the country.

Thanks to implementation of localization programs in 2007, 270 projects in this sphere have been introduced, production of 60 new types of commodities has been put in order, expenditures have been decreased substantially and production has grown fast. The effect of localization program reached 2 billion dollars.

Last year the total volume of investments into the economy increased by 23% and accounted for more than 4.3 billion dollars in the equivalent. These are the highest indicators for all the previous years. It is noteworthy that over 70% of all investments have flown into production construction including technical and technological modernization – about 50%.

I would like to draw a special attention to the fact that the foreign investments, and what is particularly important, the direct foreign investments make up the bulk of the attracted investments. The volume of assimilated investments has accounted for over 1 billion dollars with a growth of over 58%. The foreign investments have made up nearly 76%.

In the framework of Investment program more than 300 large investment projects were implemented in 2007. Particularly, the booster station at the Zevardy deposit, the three installations on utilizing the casing head-gases at the Kokdumalak deposit, 142 km-long gas pipeline and 184 km-long electricity power lines have been commissioned. The construction of Rezaksay reservoir has also been completed. The reconstruction of international airport in the city of Navoi was accomplished.

In the textile industry, 34 enterprises from 66 which are part of the program of development, modernization, technical and technological re-equipment are manufacturing the finished products. The construction works and supply of equipment are being completed at other 20 companies. For over rather short period of time the volume of production in modernized companies has increased by 1,5 fold.

It is hard to overestimate the role and importance of the newly built 223 km-long railway “Tashguzar-Baysun-Kumkurgan” and its commissioning one year ahead of the project completion date. In line with the road construction program approved for 2007, 245 kilometers of automobile roads were built and reconstructed. Over 1 thousand 750 kilometers of international and state-profile general-use roads were commissioned following the full and medium repairs.

More than 700 new companies were established in 2007 with participation of foreign investments. It is worth mentioning that the joint ventures are being launched, firstly, in the high technological sectors – the light, food, electro technical, chemical and petrochemical industry, machine building, construction materials industry, telecommunications and information technologies. At the moment, the enterprises with foreign investments account for the third of the foreign trade turnover of the country. In this, for over the last year the volume of exports of their products increased by 62%.

The cooperation with international financial institutions is actively developing. Last year the soft loans worth 330 million dollars and grants worth 46 million dollars were attracted for the implementation of strategic projects in the sphere of education, healthcare, agriculture and water economy and finance management.

At the moment, there is no need to prove to anyone that attraction of investments, development of small businesses, private entrepreneurship, spheres of services and home labor are of a decisive importance for the progress of the country’s economy, reconstruction and building the new enterprises equipped with advanced techniques and technologies. This is, first of all, the resolution of problems on providing people with jobs, the growth of its earnings and incomes. This is also the solution of the most important social problems of regions, cities and districts of Uzbekistan

It should not be forgotten that just thanks to these sources, above all, the local regional, municipal and district budgets may live and prosper.

Today we have all grounds to declare that the way that local budgets are state subsidized, that is to say, some provinces exist at the expense of Republican budget, such as the Surkhandarya, Jizzakh, Namangan provinces and many rural districts, firstly, conditioned by the lack of attention to the development of modern enterprises, trade networks, sphere of small business, trade and infrastructure, as a whole.

What type of evaluation may deserve the heads of such districts as Peshku, Shafirkan, Nurata, Khatirchi, Kushrabad, Bandikhan, Karauzak, Takhtakupir, Bakhmal, Yangiabad and others, where over 50% of local budget expenses are covered by subsidies from the province and the republic.

The very fact that not a single project with attraction of direct foreign investments has been implemented in the Syrdarya Province last year on the initiative of local authorities cannot stand any explanation. The situation is not better in Jizzakh, Kashkadarya, Navoi, Namangan and Surkhandarya provinces, the Republic of Karakalpakstan, where the volume of assimilated foreign investments in 2007 did not exceed 1-2 million dollars despite the big potential opportunities available to these regions. At its session the Cabinet of Ministers must consider this issue in particular and adopt corresponding resolutions.

Dear friends!

Today it is an open secret for anyone that the growing volume of fiscal debts and non-liquidity of bank assets is one of the most serious and alarming problems for many countries. It should be noted with satisfaction that on international criteria the volume of our external debt and the level of its annual current servicing are characterized by the lowest parameters. The net external debt towards GDP by the end of 2007 accounted for 17% in total, and towards the annual volume of exports of goods and services – 44%. This enlists Uzbekistan in the rank of most reliable and solvent partners which guarantee the timely payments on its liabilities.

The reliable food supply of population is another most important factor which provides for the stability of domestic market and Uzbekistan’s financial standing. All this takes on a special significance if to take into account the latest rapidly increased prices for the food supplies in neighboring countries and the world markets.

In this regard it is worth remembering the rightness and long-sightedness of the objective set yet in 90s to provide for the grain self-sufficiency thus to reliably ensure the population’s needs in flour and bread and other vitally important food supplies. At the moment, on such most important food supplies as wheat, flour, cotton-seed oil, fruit and vegetable products, dried fruits and vine, melons and gourds Uzbekistan not only fully provides for its internal needs but also exports abroad.

Practically at the expense of its own production the country now meets the population’s needs in meat, milk, meat-milk and margarine products, rice and potatoes, and other most important food products.

In 2007 the work on further liberalization and promotion of private entrepreneurship was continued. Much has been accomplished on strengthening the legislation on protection of rights of private ownership and private entrepreneurship, establishing the market infrastructure. The procedures of registration, voluntary shutdown and terminating business, as well as issuance of licenses and permits for particular types of activity have been simplified and put into order. The fine sanctions for many violations have been considerable lowered and particular fines have been totally cancelled.

The work on limiting the interference of state into business is carried out as well as monitoring of applying of any sanctions to the businesses only by decision of court. All forms and time-frame of financial, tax and statistical accounting are cardinally reduced. Unified and lowered are the tax rates. In particular, the rate of single tax payment for small enterprises reduced from 13% to 10%.

A sustainable market mechanism was formed which provides for broad access of entrepreneurs, firstly, the small businesses to main resources including the high liquid materials. Thus, in 2007 the total volume of sales at the Uzbek Commodity and Raw Exchange grew almost two-fold.

Deepening the market reforms and liberalizing economy in Uzbekistan have gained a worthy assessment by many well-known international organizations. According to the international rating agency Heritage Foundation, which annually publishes index of economic freedom on 162 countries of the world, the value of liberalisation index in Uzbekistan in 2000-2007 has improved by 18 points and made up 53%. This is the evidence to significant progress in the sphere of liberalisation of national economy. In 2007 the approach to state’s control and privatization of the state property was radically reconsidered, decisions were adopted to cardinally reduce the state presence in the capital of enterprises, the work on liberalisation of the legal base is carried out to regulate the assessment and sale of state property into private one.

The total amount of agreements on realization of the state property concluded with foreign and domestic investors with the condition of their acceptance of investment or any other obligations grew 3-4 times and made up 310 million dollars and UZS 57 billion. Over 65% of the total amount of financial inflows is fully directed to modernisation and technical re-equipment of privatized enterprises. As a result, the share of the private sector in GDP in 2007 reached 85%. Almost 80% of industrial production is manufactured locally, as much as the entire volume of agricultural production and retail turnover.

I would like again and again to underline that for us the main thing in implementing privatization of the state facilities is to attract effective owners, hand over the enterprises to real masters, skilful managers who are able to take measures to modernize, technically and technologically re-equip the privatized enterprisers, organize production of goods which are competitive in the world markets.

Unfortunately, one has to ascertain that not always the new proprietors having redeemed for a symbolic payment the state property could handle this property properly and set up effective manufacture. The checks of activity at more than 7 thousand earlier privatized enterprises show that 315 of them have appeared staying idle, another 450 work at half capacity. As a result, within the past year it was necessary to accept drastic measures, after which at 198 of such enterprises the procedures of bankruptcy were completed, at 204 enterprises these procedures continue and at 34 are in the initial stage. The specified measures yield positive results. For example, at 65 enterprises, which were sold to new proprietors during bankruptcy procedures, 67 new manufactures were created, in to which the investors intend to put 50 million dollars and UZS 5,5 billion worth of investments. And this practice is necessary to continue henceforth. We should achieve such a position that all privatized enterprises were headed by true proprietors, the true owners who are anxious about own manufacture.

At the core of our attention there continued to remain the issues of deepening and expansion of the scale of reforms in banking and financial system. First of all, the issues of providing for the financial stability, further increase of level of capitalization and consolidating the independence of commercial banks. As a result of the taken measures, in 2007 the authorized capitals of commercial banks increased almost two-fold, and their cumulative capital increased in comparison with 2006 more than 40%, reaching the level of UZS 1,5 billion.

The process of banks incorporation goes on actively, the number of shareholders in a year increased by 12,5 thousand and as of beginning of this year made up about 200 thousand with 68% of the total number of shareholders are being the natural persons. Three commercial banks - National Bank of Foreign Economic Activity, Pakhtabank and Hamkorbank are among the first to have received the international ratings of leading rating companies. Necessary conditions are created to maintain the competitive conditions among commercial banks thanks to expansion of the network, opening of mini-banks and branches.

Special significance is attached to attract the banking structures to implementation of projects on modernization, technical and technological re-equipment of economic subjects. Last year about UZS 2 trillion were channeled for such purposes. For over the past year the credits allotted by banks to financially support the small businesses and private entrepreneurship increased by 36%, while volumes of micro-credits allotted to businesspeople and private persons increased by 70%.

In 2007 the market of leasing, insurance and factoring services also developed actively.

Addressing the problems of employment and enhancing the welfare of the people have remained at the center of our attention in 2007.

The last year we have created more than 630 thousand additional jobs, two third of which falls to the share of rural areas. The small businesses and the sphere of services account for about 65% of the newly created jobs, whereas home labor made up more than 20% of the jobs.

The measures directed at implementing the Program on promotion of the increase of the livestock at the private household lots in rural areas and farms are already bearing its fruitful results. More than 350 thousand citizens in the business of raising the livestock were able to get official employment record books in 2007, which made them eligible for social and legal protection.

The total number of citizens registered as being employed in the business of raising private livestock at their private household lots and farms exceeds 1 million.

The sweeping measures directed at creation of new jobs allowed to decrease the percentage of the unemployed able-bodied citizens to 5,0 % as of the end of 2007. Systematic work on increasing the welfare of the people has been carried out last year.

According to the strategic task on increasing the salaries up to 2-2,5 times within the next three years, the amount of monthly salaries, allowances, pensions and scholarships were increased 1,5 times in 2007.

Monthly salaries calculated on the basis of the monthly paycheck of those citizens employed at the public service sector and commercial enterprises averaged at 210 dollars. As a result of the introduction of more advanced system of remuneration of labor of the school teachers and healthcare employees starting from 2006, the amount of monthly salary of those has increased up to 2,8 and 2,7 times, respectively. The new system abolished the equalizing approaches during the process of labor remuneration.

The real monetary earnings of the people increased to 27% the last year. According to the statistics agencies, the average salary could cover only the 99,0% of the cost of living or monthly maintenance rate in 2001, whereas in 2007 the average salary increased more than 3 times than MMR, which is one of the highest indices among the CIS countries.

The living standards of our citizens, especially of those in rural areas, are consistently improving.

With participation of the capital of international financial institution we have implemented the large-scale investment projects on providing the people with drinking water in the Republic of Karakalpakstan, Khorezm province, Samarkand, Bukhara, Gulistan, Jizzakh, and Karshi cities for the passed period. More than 1,6 thousand km. water and 710 km. gas pipeline networks have been installed at rural areas last year. The level of access to the clean drinking water of the people increased to 84%, including 77% at rural areas. The figures in terms of natural gas make up 82%, including 77% in rural areas.

Nationwide socially earmarked programs in the field of education are being implemented with great success.

At all types of educational institutions through new construction and capital renovation method more than 169 professional colleges, 18 academic lyceums and 558 schools equipped with the modern classrooms, laboratories, and production facilities for 336,0 news students were commissioned in 2007.

Additionally more than 170 children’s activity facilities, including 27 sports halls and 143 school gyms have been constructed in 2007. Consecutive and task oriented work in the sphere of the children’s sports allowed to attract the millions of our children to regular sporting activities, which is beyond the doubt, will have an immense influence in bringing up the physically and mentally healthy generation.

Summarizing the results of the healthcare activities in 2007, such issues as improving the quality of medical aid, the widening scope of the medical coverage of population through expansion of the network of rural medical offices, measures directed at subduing the infections and viral diseases should be underscored.


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