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Economy of Uzbekistan

The economy is based primarily on agriculture and natural resource extraction. Uzbekistan is a major producer and exporter of cotton, but natural gas has replaced it as the dominant source of foreign currency earnings. It also is a major exporter of gold, uranium, and strategic minerals. (Uranium is Uzbekistan’s largest export to the U.S.) Manufacturing has become increasingly important, particularly in the automotive sector, which is aimed primarily at export to the Russian market. Since independence, the government has followed a policy of gradual transition to a free market economy but most large enterprises are still state owned or controlled.

It is difficult to accurately estimate economic growth in Uzbekistan due to unreliable government statistics. Economic growth has been strong in the past few years, but wealth is strictly held by the elite. According to the World Bank, approximately 25% of Uzbeks live at or below the poverty line.

The government implements a strict import substitution policy to control foreign trade and prevent capital outflow. Substantial structural reform is needed, particularly in the area of improving the investment climate for foreign investors and liberalizing the agricultural sector. Although the government has committed itself in theory to the provisions of the International Monetary Fund's (IMF) Article VIII regarding currency convertibility for current account operations, in practice firms can wait more than a year for currency conversion. Convertibility restrictions, difficulty withdrawing local currency from bank accounts, and other government measures to control economic activity, (e.g., import and export restrictions, and intermittent border closings) have constrained economic growth and led international lending organizations to suspend or scale back credits.

GDP and Employment
The International Monetary Fund estimates the 2008 GDP growth figure as 9%. The IMF projects 2009 GDP growth of 7%. Unemployment and underemployment are very high, but reliable figures are difficult to obtain, as no recent credible surveying has been done. Unofficially, unemployment is estimated around 8% and underemployment around 25%. Underemployment in the agricultural sector is particularly high--which is important given the fact that 63% of the population is rural-based. Many observers believe that employment growth and real wage growth have been stagnant, given virtually no growth in output.

Literacy in Uzbekistan is almost universal, and workers are generally well-educated and well-trained. Worsening corruption in the country's education system in the past few years has begun to erode Uzbekistan's advantage in terms of its human capital, as grades and degrees are routinely purchased. Additionally, elementary and secondary students in the remote provinces have poor access to basic education. Most local technical and managerial training does not meet international business standards, but foreign companies engaged in production report that locally hired workers learn quickly and work effectively. The government has ceased a long-time program emphasizing foreign education, which in past years annually sent about 50 students to the United States, Europe, and Japan for university degrees, after which they had a commitment to work for the government for 5 years. Reportedly, about 60% of the students who studied abroad found employment with foreign companies upon their return, despite their 5-year commitment to work in the government. Uzbekistan subsidizes studies for students at Westminster University--one of a few Western-style educational institutions in Uzbekistan. For the 2009-2010 school year, Westminster admitted about 685 students (including graduate students). The government funded 53 students, and the university provided an additional 20 grants. Education at Westminster costs $4,900 per academic year.

With the closure or downsizing of many foreign firms, it is relatively easy to find qualified, well-trained employees, and salaries are very low by Western standards. The government has implemented salary caps in an attempt to prevent firms from circumventing restrictions on the withdrawal of cash from banks. Some firms had tried in the past to evade these limits on withdrawals by inflating salaries of employees, allowing firms to withdraw more money. These salary caps prevent many foreign firms from paying their workers as much as they would like. Labor market regulations in Uzbekistan are similar to those once used in the Soviet Union, with all rights guaranteed but some rights unobserved. Unemployment is a persistent problem, and a significant number of people continue to look for jobs in Russia, Kazakhstan, the Middle East, and Southeast Asia, though the overall number might have declined in the past year due to slowing economies in neighboring countries. Business analysts estimate that a high number of Uzbek citizens are working abroad. Estimates range from lows of 3 million to highs of 5 million Uzbek citizens of working age living outside Uzbekistan, most in neighboring countries or Russia. Uzbekistan signed a labor agreement with Russia in 2007 to facilitate the temporary migration of Uzbek workers and the taxation of their income, though reportedly only 1,000 Uzbeks participated in this program in 2008.

Prices and Monetary and Fiscal Policy
Macroeconomic performance has been strong over the last three years and resulted in a positive trade balance. Real GDP growth was high, and official reserves continued to rise. Inflation is expected to be between 18%-22% in 2009. In order to combat inflation, the government has exercised strict currency controls, causing periodic shortages of cash. Reacting to the weakening of the dollar to the Euro, the government recently switched to the Euro for its accounting and financial management. The hospitality sector is following suit.

Outstanding external debt in 2008 was estimated at $3.822 billion. In 2007, the World Bank and the UN Development Program (UNDP) provided technical assistance to reform the Central Bank and Ministry of Finance into institutions that conduct market-oriented fiscal and monetary policy. But official economic data on Uzbekistan is still often unreliable and not always available. Bank reform is very slow and inhibits the ability of citizens or private companies to obtain credit and other banking services.

Agriculture and Natural Resources
Agriculture and the agro-industrial sector contribute about 28% to Uzbekistan's GDP. Cotton is Uzbekistan's dominant crop, accounting for roughly 12% of the country's GDP in 2008. Uzbekistan also produces significant amounts of silk, wheat, fruit, and vegetables. Nearly all agriculture involves heavy irrigation. In 2008, the President signed a decree on enlargement of private farms, which has led to the redistribution of small farmers’ land in favor of large farms. Farmers and agricultural workers earn low wages, which the state seldom pays on a regular basis. In general, the government controls the agriculture sector, dictates what farms grow, and buys directly from the farmers to sell abroad.

Natural resources, minerals, and mining are integral to Uzbekistan's economy. Natural gas is Uzbekistan's most important foreign exchange earner, estimated at around 50% (2009). Gold is another important source of foreign earnings (about 7%-10% of total exports). Uzbekistan is the world's seventh-largest producer of gold, mining about 80 tons per year, and holds the fourth-largest reserves in the world. It produces oil for domestic consumption and has significant reserves of copper, lead, zinc, tungsten, and uranium.

Trade and Investment
Uzbekistan's export/import policy is based on import substitution. The highly regulated trade regime has led to both import and export declines since 1996, although imports have declined more than exports, as the government squeezed imports to maintain hard currency reserves. Draconian tariffs and sporadic border closures and crossing "fees" decrease legal imports of both consumer products and capital equipment. Uzbekistan's traditional trade partners are from the Commonwealth of Independent States (CIS), notably Russia, Ukraine, and Kazakhstan. Non-CIS partners have been increasing in importance in recent years, with the European Union, China, South Korea, Germany, Japan, and Turkey being the most active.

Uzbekistan is a member of the IMF, the World Bank, the Asian Development Bank, the Islamic Development Bank, and the European Bank for Reconstruction and Development. It has observer status at the World Trade Organization (WTO) and has publicly stated its intention to accede to the WTO. It is a member of the World Intellectual Property Organization and is a signatory to the Convention on Settlement of Investment Disputes between States and Nationals of Other States, the Paris Convention on Industrial Property, the Madrid Agreement on Trademarks Protection, and the Patent Cooperation Treaty. In 2008, Uzbekistan was again placed on the special "301" Watch List for lack of intellectual copyright protection.

Since Uzbekistan's independence, U.S. firms have invested roughly U.S. $500 million in Uzbekistan. In 2006 and 2007, some foreign investors departed Uzbekistan because of declining investor confidence, harassment, and currency convertibility problems. However, in 2007 GM-DAT, a Korean subsidiary of GM, entered Uzbekistan when it signed a joint venture agreement with UzDaewoo to assemble Korean-manufactured cars for export and domestic sale, including Chevrolets. This plant in Asaka now produces many lines of cars under the Chevrolet nameplate for export to Russia as well as the domestic market. General Motors has also signed a deal to begin constructing powertrains in Uzbekistan at a new plant just outside Tashkent. Boeing also has a longstanding relationship with the national airline of Uzbekistan, Uzbekistan Airways.

(Note: Government of Uzbekistan statistics are not consistently reliable. This report relies on unofficial estimates and states clearly when a figure is an estimate. Estimates by international financial institutions also use Government of Uzbekistan statistics.)
GDP: 2008 real GDP growth, according to the IMF based on Government of Uzbekistan statistics, was 9%. Actual GDP growth was likely lower.
Inflation: International institutions estimate inflation reached 12.5% in 2008, though actual inflation was likely higher, between 20%-22%.
Per capita GDP: Estimated per capita GDP in 2008, on a purchasing power parity measure, was $1,012.
Natural resources: Natural gas, petroleum, gold, coal, uranium, silver, copper, lead, zinc, tungsten, molybdenum. Natural gas production in 2006 was 62.5 billion cubic meters (bcm). In 2008, the U.S. Government estimates 41.5 bcm of natural gas was consumed in Uzbekistan, and 17 bcm was exported. Estimated oil production in 2008 was 99,260 bbl/day.
Agriculture: Products--cotton, fourth-largest producer worldwide; vegetables, fruits, grain, livestock.
Industry: Types--textiles, food processing, machine building, metallurgy, natural gas, automobiles, chemical. The industrial production growth rate was estimated at 12.7% in 2008; electricity production was 50.1 billion kilowatt hours.
Budget (2008 estimates): Revenues--$11.8 (IMF Regional Economic Outlook, May 2009) billion; expenditure and net lending--$8.9 billion.
Trade: Total exports--(2008 est., $11.5 billion f.o.b.): largest contribution from natural gas, mineral fertilizers, ferrous metals, cotton fiber, food products, automobiles. Major trade partners (2008)--Russia 20.2%, Ukraine 8.4%, China 6.8%, Switzerland 5.7%, Republic of Korea 5.5%. Total imports--(2008, $7.5 billion f.o.b.): machinery and equipment, chemicals, metals, foodstuffs. Primary import partners (2008 est.)--CIS 42.7%, others 57.3%.
External debt (total gross, December 31, 2008 est.): $3.822 billion.

Geography of Uzbekistan

Location: Central Asia, north of Afghanistan Map references: Commonwealth of Independent States - Central Asian States Area: total area: 447,400 sq km land area: 425,400 sq km comparative area: slightly larger than California Land boundaries: total 6,221 km, Afghanistan 137 km, Kazakhstan 2,203 km, Kyrgyzstan 1,099 km, Tajikistan 1,161 km, Turkmenistan 1,621 km
0 km note: Uzbekistan borders the Aral Sea (420 km) Maritime claims: none; landlocked International disputes: none Climate: mostly midlatitude desert, long, hot summers, mild winters; semiarid grassland in east Terrain: mostly flat-to-rolling sandy desert with dunes; broad, flat intensely irrigated river valleys along course of Amu Darya and Sirdaryo Rivers; Fergana Valley in east surrounded by mountainous Tajikistan and Kyrgyzstan; shrinking Aral Sea in west Natural resources: natural gas, petroleum, coal, gold, uranium, silver, copper, lead and zinc, tungsten, molybdenum Land use: arable land: 10% permanent crops: 1% meadows and pastures: 47% forest and woodland: 0% other: 42% Irrigated land: 41,550 sq km (1990)
current issues: drying up of the Aral Sea is resulting in growing concentrations of chemical pesticides and natural salts; these substances are then blown from the increasingly exposed lake bed and contribute to desertification; water pollution from industrial wastes and the heavy use of fertilizers and pesticides is the cause of many human health disorders; increasing soil salinization; soil contamination from agricultural chemicals, including DDT natural hazards: NA international agreements: party to - Climate Change, Environmental Modification, Ozone Layer Protection Note: landlocked

Government of Uzbekistan

The constitution of Uzbekistan provides for separation of powers, freedom of speech, and representative government. In reality, the executive holds almost all power. The judiciary lacks independence, and the legislature--which holds a few sessions each year--has limited power to shape laws. The president selects and replaces provincial governors. Islam Karimov, former First Secretary of the Central Committee of the Uzbek SSR Communist Party, was elected to a five-year presidential term in December 1991 with 88% of the vote. In a December 1995 referendum, his term was extended to 2000. President Karimov was re-elected in January 2000 with 91.9% of the vote. In a January 2002 referendum, the term of the presidency was extended from five years to seven. President Karimov was re-elected in December 2007 with 88.1% of the vote. None of these elections or referenda were deemed free or fair.

The 2002 referendum also included a plan to create a bicameral parliament. The Organization for Security and Cooperation in Europe's (OSCE) limited observation mission concluded that the December 2004 parliamentary elections fell significantly short of OSCE commitments and other international standards for democratic elections.

Uzbekistan has battled a low-intensity insurgency since the late 1990s. Early this decade, the Islamic Movement of Uzbekistan (IMU) launched a number of small, cross-border raids. The IMU in summer 2001 allied itself with the Taliban government in Afghanistan, where most of its troops were then based, and subsequently engaged U.S. forces in Afghanistan. Since the fall of the Taliban government in 2001, the IMU appears to have become less active in Uzbekistan.

Terrorist bombings, blamed on the IMU and splinter groups, have occurred sporadically, including multiple, simultaneous attacks in Tashkent in 1998 that destroyed a portion of the Ministry of Interior headquarters and narrowly missed President Karimov. Death estimates in those attacks and in subsequent shootouts in Tashkent with alleged bombers range as high as 200. The official government death tally was sixteen. In March and April 2004, suicide bombers struck the U.S. and Israeli Embassies in Tashkent and also detonated devices in the city of Bukhara. In May 2005, armed gunman in the city of Andijon attacked a police station, seized weapons and then stormed a prison, freeing members of a local Islamic organization accused by the government of extremism. In events whose details remain unclear, the attackers then gathered in Andijon's main square. Thousands of local residents also gathered in the square. Shooting erupted between government forces and the insurgents, and a large but undetermined number of individuals were killed. The Government of Uzbekistan, which put the death toll at 187, refused to heed European and U.S. calls for an independent international investigation. Unofficial death toll estimates range as high as 700 to 800. While an international investigation did not take place, the government claimed to have conducted internal investigations into the May 2005 events. It discussed investigation techniques and results with diplomats and other international representatives in 2006, 2007, and 2008. In May 2009, a suicide bomber in the city of Andijon and an assault on a border post near the town of Khanabad on the Uzbek-Kyrgyz border caused the Uzbek Government to temporarily close its border with Kyrgyzstan and to place some portions of the Ferghana Valley under lockdown conditions.

Human Rights
Uzbekistan has no meaningful political opposition. Four pro-government political parties hold all seats in the parliament, and independent political parties have been effectively suppressed since the early 1990s. Multiple independent and governmental media outlets (radio, TV, newspaper) exist. Self-censorship is the norm. Editors and journalists who have broached politically sensitive topics have routinely experienced repercussions, including loss of employment.

Since 1991, many prominent opponents of the government have fled, and others have been arrested. The government severely represses those it suspects of Islamic extremism, including those suspected of any affiliation to organizations such as the banned extremist Party of Islamic Liberation (Hizb ut-Tahrir) or the more moderate Nurcilar (followers of Said Nursi of Turkey). Thousands of suspected extremists have been incarcerated since 1992. The exact number remaining in custody is unknown but may be several thousand. A large number of prisoners have died in custody, many from disease and other poor conditions and others from mistreatment and abuse. Political prisoners and suspected extremists are allegedly treated worse than ordinary prisoners.

The police force and the intelligence service have used torture as a routine investigation technique. In May 2003, following the visit of the UN Special Rapporteur on Torture, the Government of Uzbekistan drafted an action plan to implement the Rapporteur's recommendations. The government began enacting a number of the plan's provisions and has since restarted cooperation with international organizations involved in prison monitoring. Prison conditions and the prevalence of torture today are widely believed to remain problematic. Uzbekistan abolished the death penalty in January 2008. It became a signatory to the UN Convention on the Rights of Persons with Disabilities in February 2009.

Principal Government Officials
President and Chairman of the Cabinet of Ministers--Islam Karimov
Prime Minister--Shavkat Mirziyaev
Chairman of the Senate of the Parliament--Ilgizar Sabirov
Speaker of the Legislative Chamber--Diloram Tashmukhamedova

Deputy Prime Ministers
Economics and Foreign Economic Complex--Rustam Azimov
Information System and Telecommunications Technology--Abdulla Aripov
Geology, Fuel and Energy, Chemical, Oil-Chemistry and Metallurgical Industry--Ergash Shaismatov
Social Issues, Education, Health Care--Rustam Kosimov
Communal Service, Transportation, Capital Construction and Construction Industry--Batir Hodjaev
Automobile Industry, Machinery, Electric-Technology, Aviation, Standardization of Products--Ulugbek Rozukulov
Women's Issues--Farida Akbarova

Key Ministers
Agriculture and Water Management--Saifiddin Ismailov
Defense--Kobil Berdiyev
Foreign Affairs--Vladimir Norov
Internal Affairs--Bahodir Matlyubov
Justice--Ravshan Mukhitdinov
Public Education--Gairat Shoumarov
Higher and Special Secondary Education--Azimjon Parpiev
Emergency Situations--Qosimali Ahmadov
Finance--Rustam Azimov
Economy--Sunatilla Bekenov
Culture and Sports--Anvar Jabborov
Health--Adkham Ikramov
Foreign Economic Relations, Investments, and Trade--Elyor Ganiev
Labor and Social Protection--Aktam Haitov

Other Key Officials
Chairman, National Bank-Foreign Economics--Saidakhmad Rakhimov
Chairman, Central Bank--Fayzulla Mullajanov
Chairman, State Committee on Statistics--Gofurjon Kudratov
Chairman, State Property--Dilshod Musaev
Chairman, State Committee for Customs--Sodirkhon Nosirov
Chairman, State Committee for Taxation--Botir Parpiev
Chairman, State Committee for Geology and Mineral--Narimon Ganiev
Chairman, National Security Service--Rustam Inoyatov
Chairman, Committee on Protection of State Border--Ruslan Mirzoyev
Secretary, National Security Council--Murod Ataev
Chairman of the Board of Directors of Uzbekneftgaz--Nurmahammad Akhmedov

Ambassador to the United States--Abdulaziz Kamilov
Ambassador to the United Nations--Murod Asqarov

The Republic of Uzbekistan maintains an embassy at 1746 Massachusetts Ave., NW, Washington, DC 20036. Tel.: (202) 887-5300; fax (202) 293-6804. Its consulate and mission to the UN in New York are located at 866 United Nations Plaza, Suite 326/327a, New York, NY 10017. Consulate tel.: (212) 754-7403; fax: (212) 486-7998.

Type: Republic.
Independence: September 1, 1991.
Constitution: December 8, 1992.
Branches: Executive--president, prime minister, cabinet. Legislative--bicameral Supreme Assembly or Oliy Majlis consists of an Upper House or Senate (100 seats; 84 members are elected by regional governing councils to serve five-year terms and 16 are appointed by the president) and a Lower House or Legislative Chamber (150 seats; elected by popular vote to serve five-year terms). Judiciary--Supreme Court, constitutional court, economic court.
Administrative subdivisions (viloyatlar): 12, plus Republic of Karakalpakstan and city of Tashkent.
Political parties and leaders: Adolat (Justice) Social Democratic Party--established February 18, 1995 in Tashkent, number of seats in the Legislative Chamber of the parliament 9, Ismail Saifnazarov, first secretary; Democratic National Rebirth Party (Milly Tiklanish Democratic Partiya) or MTP--established on June 3, 1995 in Tashkent, and merged with the National Democratic Party "Fidokorlar" ("Selfless men") on June 20, 2008, number of seats in the Legislative Chamber of the parliament 28, Ahtam Tursunov, chairman; People's Democratic Party or PDPU (Uzbekiston Halq Democratic Partiya, formerly Communist Party)--established November 1, 1991 in Tashkent, number of seats in the Legislative Chamber of the parliament 32, Latif Gulomov, first secretary; Liberal Democratic Party of Uzbekistan--established December 3, 2003, number of seats in the Legislative Chamber of the parliament 41, Muhammadyusuf Mutalibjanovich Teshaboev, chairman; Ecological (“Green”) Movement--established 2009 in Tashkent (will be represented in parliament after elections in December 2009; 15 seats have been reserved.) Other political or pressure groups and leaders: Birlik (Unity) Movement--Abdurakhim PULATOV, chairman; Erk (Freedom) Democratic Party--Mohammed SOLIH, chairman (banned Dec. 1992); party of Agrarians and Entrepreneurs of Uzbekistan--Marat ZAHIDOV, chairman; Ozod Dekkon (Free Farmers) Party--Nigara KHIDOYATOVA, general secretary; Human Rights Society of Uzbekistan--Abdumannob PULATOV, chairman; Independent Human Rights Society of Uzbekistan--Mikhail ARDZINOV, chairman; Ezgulik--Vasilya INOYATOVA, chairwoman.
Suffrage: Universal at age 18, unless imprisoned or certified as insane.
Defense: Manpower fit for military service--males age 16-49 fit for military service: 6,304,446 (2009 est.), females age 16-49 fit for military service: 6,559,756 (2009 est.); 18 years of age for compulsory military service; 1-year conscript service obligation.

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History of Uzbekistan

Located in the heart of Central Asia between the Amu Darya and Syr Darya Rivers, Uzbekistan has a long and interesting heritage. The leading cities of the famous Silk Road--Samarkand, Bukhara, and Khiva--are located in Uzbekistan, and many well-known conquerors passed through the land. Alexander the Great stopped near Samarkand on his way to India in 327 B.C. and married Roxanna, daughter of a local chieftain. Conquered by Muslim Arabs in the eighth century A.D., the indigenous Samanid dynasty established an empire in the 9th century. Genghis Khan and his Mongols overran its territory in 1220. In the 1300s, Timur, known in the west as Tamerlane, built an empire with its capital at Samarkand. Uzbekistan's most noted tourist sites date from the Timurid dynasty. Later, separate Muslim city-states emerged with strong ties to Persia. In 1865, Russia occupied Tashkent and by the end of the 19th century, Russia had conquered all of Central Asia. In 1876, the Russians dissolved the Khanate of Kokand, while allowing the Khanates of Khiva and Bukhara to remain as direct protectorates. Russia placed the rest of Central Asia under colonial administration, and invested in the development of Central Asia's infrastructure, promoting cotton growing and encouraging settlement by Russian colonists. In 1924, following the establishment of Soviet power, the Soviet Socialist Republic of Uzbekistan was founded from the territories including the Khanates of Bukhara and Khiva and portions of the Ferghana Valley that had constituted the Khanate of Kokand. During the Soviet era, Moscow used Uzbekistan for its tremendous cotton growing and natural resource potential. The extensive and inefficient irrigation used to support the former has been the main cause of shrinkage of the Aral Sea to less than a third of its original volume, making this one of the world's worst environmental disasters. Uzbekistan declared independence on September 1, 1991.

People of Uzbekistan

Uzbekistan is Central Asia's most populous country. Its 27.73 million people, concentrated in the south and east of the country, are nearly half the region's total population. Uzbekistan had been one of the poorest republics of the Soviet Union; much of its population was engaged in cotton farming in small rural communities. The population continues to be heavily rural and dependent on farming for its livelihood. Uzbek is the predominant ethnic group. Other ethnic groups include Russian 5.5%, Tajik 5%, Kazakh 3%, Karakalpak 2.5%, and Tatar 1.5%. The nation is approximately 90% Sunni Muslim. Uzbek is the official state language; however, Russian is the de facto language for interethnic communication, including much day-to-day government and business use. The educational system has achieved 97% literacy, and the mean amount of schooling for both men and women is 9 years. However, due to budget constraints and other transitional problems following the collapse of the Soviet Union, texts and other school supplies, teaching methods, curricula, and educational institutions are outdated, inappropriate, and poorly kept. Additionally, the proportion of school-aged persons enrolled has been dropping. Although the government is concerned about this, budgets remain tight. Similarly, in health care, life expectancy is long, but after the breakup of the Soviet Union, health care resources have declined, reducing health care quality, accessibility, and efficiency. Uzbekistan continues to enjoy a highly educated and skilled labor force. Nationality: Uzbek. Population (July 2009 est.): 27.73 million. Ethnic groups (1996 est.): Uzbek 80%, Russian 5.5%, Tajik 5%, Kazakh 3%, Karakalpak 2.5%, Tatar 1.5%, other 2.5%. Religions: Muslim 90% (mostly Sunni), Eastern Orthodox 5%, other 5%. Languages: Uzbek 74.3%, Russian 14.2%, Tajik 4.4%, other 7.1%. Education: Literacy--97% (total population). Health (2009 est.): Life expectancy--68.95 years men; 75.15 years women. Work force (15.28 million): Agricultural and forestry--28.2%; industry--33.9%; services--37.9%. (Source: World Development Indicators Database, April 2009).