Analysis of Uzbekistans Economy - Term Paper Example

Client ‘Uzbekistan Economy’ Since the beginning of civilization, each country has first stabilized itself and slowly grown from a non existing entity to a booming economy. Countries have been created on the world map, due to wars, breaking down of a large country or political instability. Russia which was a mega power due to its sheer size got severed from many places giving rise to new countries. The political impetus also created ‘Uzbekistan’, a country rich in resources and also becoming a large Muslim state of the region. As each country that gets fairly new independence strives hard to survive on competition with the global economy. Uzbekistan’s economy has been through its share of the initial down when it was formed. It relieved its independence in 1991, and since that time, Uzbekistan has undergone economic transformations to strive to become factor in the global economy. The collapse of the Soviet Union and the birth of Uzbekistan had left the country exposed because of the immeasurable downfall of the network of trade and suppliers. The country only had raw materials and semi processed goods available for exports, making them highly vulnerable to the world economy and thus creating a dependency on the world’s commodity prices. Uzbekistan at that time had to take drastic steps to induce polices and reforms that would influx market based aspects. However, the governance of Uzbekistan under Karimov had different set of economic ideas. He introduced policies that had the sole intention of creating control over the economy and these policies played no heed towards producing and implementing structural reforms. The economic liberation of the country in the beginning was very much controlled and the government was very cautious in its moves. The economic policies have somehow ensured a slow regression of privatization keeping more of government control in the state. The ineffectiveness of the economic forums brought the Uzbekistan’s economy as rendering and deterring factors for the foreign investments. The country then was too reluctant to listen to the economic advice on reforms by the World Bank, the IMF and various economic institutions. This led to abrupt increase in high levels of corruption and showcased the world about the extreme bureaucratic inefficiency to develop business initiatives. The core issue post independence was the soaring state control and authoritarian style of economic power. The following will shed more light on Uzbekistan’s post independence economic woes: ‘Privatization has been very slow and prices more strictly controlled than in other Central Asian republics (CARs). Nevertheless, while macroeconomic control was achieved more slowly than in Kazakhstan and the Kyrgyz Republic, with inflation only dropping below 50 percent’ (Uzbekistan in Transition .Page1). The country grew on with negative growth and on the false hopes of a baffled bankrupt Soviet economy. There was immense pressure then demographically which instead of bringing in positive policies got in the increase of political and bureaucratic corruptions. Uzbekistan suffered during the early times because of the wrong agendas and but with due course of time and due to international pressures started coming out of the unwarranted shell it had created amongst itself. The then initial government laid down their priorities by legislating liberty of entrepreneurship and creating care free equality for all forms of ownership. By 1994, the reforms in Uzbekistan though were of shut nature, still started implementing structural reforms and producing competitive markets and environments and motivated the usage of various economic contrivances for prompting regulation. The effect of this change brought in more stability in terms of decrease in inflation to the slow but final creation of platforms for investors. This stage of development between the periods of 1994 to 1996 brought in character growth in the economy and was defining in innovating massive improvements in macroeconomic situations. This was the time, when the country saw the completion of legislative reforms for privatization of small scale business and the seeds for building a large scale privatization was also seen through the generation of the privatization investment funds (PIF). This phase also saw the emergence of the reduction in state control over agricultural products especially that of cotton for which had emerged as one of the largest producers of the world and also of other food grains. This particular time was the turning point in the economic growth of Uzbekistan and also saw the upheaval of banking systems that spirited up better monetary policies and designed improved credit policies. Due to the massive changes in policies the inflation rate dropped from 1300% in 1994 to amenable 35% in 1996. After 1996, the country induced more reforms based on higher liberty. The country started using its gold reserves on a larger way and started achieving considerable growths due to its metals & minerals. The following will give a better idea on the better status achieved by Uzbekistan on gold exports: ‘In early 1997 Uzbekistan was given the status of a preferred gold and silver supplier to The London Association of Precious Metals. This enabled Uzbek gold and silver to increase their competitiveness on the global markets, proving their high quality and unique carat’ (Uzbekistan econonmy.1998). Uzbekistan rose from the title of a larger cotton producer of the world and barged into the top 5 arena countries that produce the highest cotton. It has been estimated that one third of the GDP of the country comes from the portion of agriculture and that too mostly cotton. Cotton farming also employed one third of the entire nation at one time, but due to changes in policies and depression in cotton rates, the charm of being employed in cotton fields started withering away. However the secret behind this desert having a large cotton economy is its irrigation system. ‘Virtually all agriculture production is accomplished via irrigation, and the system of canals and viaducts that provide water to the fields and orchards is both ancient and extensive, having been built up over the course of many centuries’ (Reuel R. Hanks. Page 40.2005). The eon from 1997, brought the country to a new light in economic development. Mistakes were done and learnt during this phase. By 1998, global markets had started deprecating cotton, which in turn brought in sluggishness in the economic growth of the country. The GDP went down to 4.4 from 5.2 in this period and brought in deep analysis of the economic problems of the country. There were reversals due to this roadblock and the foreign exchange rates started worsening by giving growth to extreme black market rates. The situation that was created became an adversity to the nation’s economy and saw the thriving of the black market on huge scale. It was observed that the end of the year 1999 oversaw the market exchange rates jump to five times than the original official rates. The time started going back again for the country and the ineffective control in creating multiple exchange rates along with related trade counters for both imports and exports made an monstrous impact resulting in dropping from $4.5 billion in 1996 to $3 billion in the year 2002. It was only after this phase in their economic conditions started to change for the good. The country had come out of a large financial and economic black hole and had précised the mistakes that had been executed due to strict regulations. By the end of 2003, a lot was done from a reform perspective ‘rise in cotton and gold prices on world markets, export receipts grew considerably during 2003, and imports began to increase again towards the end of the year. Wages rose in 2004-2005’ (Martin C. Spechler. Page 53. 2008). These last few years have seen the progressive financial wheel come back in alignment to Uzbekistan’s economic growth when compared to the financial turmoil it was in. The country however still suffers from high regulatory problems causing the country to take downward swings time to time. Because of the whimsical attitude of many high profile bureaucrats and politicians Uzbekistan suffers from many lucrative investment and joint venture companies backing off. Incidents with an American giant have created a rift amongst the investing communities and business houses of the world and have completely soured the relations for creating joint ventures. The country also had a hard look on the international border shutdowns which it had fabricated and had ended up with serious repercussions on the import and export of the country. Today the country is slowly trying to stabilize a platform where equity and reserves both can be maintained and accelerated at alter stage. The following will impart information on the latest economic development in the country. ‘Successful implementation of the anti-crisis measures that actually began back in 2008 have minimized the negative impact of the global crisis, in 2009 GDP growth was 8.1%, industrial production grew 9%, agricultural production rose 5.7%, investment attracted into the economy grew 25%, foreign direct investment increased 1.8-fold’ (Uzbekistan Today.2010.) The country was not fully equipped to fight recession, but it still managed to hold ground and nearly one million jobs were created during this time. Works Cited: 1) Uzbekistan in Transition, “ Uzbekistan in transition”. http://www.adb.org/Documents/Books/Country_Briefing_Papers/Women_in_Uzbekistan/Chap_1.pdf 2) “Uzbekistan economy”.1998 http://www.tashkent.org/uzland/economy.html 3) Reuel R. Hanks, “Central Asia: a global studies handbook”.2005. ABC-CLIO Press 4) Martin C. Spechler, “The political economy of reform in Central Asia: Uzbekistan under authoritarianism”.2008. Routledge 5) “Uzbekistan Today”.2010. http://www.ut.uz/eng/opinion/steady_economic_growth_amid_global_slowdown.mgr Read More