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Priorities of Economic and Social Development of Uzbekistan in 2008 (extracts from the Address by the President of the Republic of Uzbekistan Islam Karimov at the meeting of Cabinet of Ministers, 8th February 2008)

Press Release ¹6

I. The most important task still remains to provide for the macroeconomic stability, sustainable and balanced growth of the economy, continue structural reforms, modernize and renovate the leading branches of economy through raising the foreign investment:

  1. The task to achieve 8% growth in GDP, 9,6% growth in industrial output, 5% growth in agriculture, 17% increase in foreign investment to industrial output is set forth. Inflation is envisaged at the level of 2007 or 6-8 %.
  2. The adopted program of economic development for 2008 lays emphasis to the growth of strategic industries: fuel and energy complex, non-ferrous and ferrous metallurgy by means of developing the new sources of minerals and the raw-material basis and accumulating the existing stocks, introducing the modern energy-saving and highly efficient technologies for extraction and processing of minerals and raw materials, as well as to the development of the chemical and light industries, petro-chemistry, the industry of construction materials, production of consumer goods.
  3. The transport and communication infrastructure will see rapid development as it constitutes a major factor for the sustainable, balanced and complex development of the branches and spheres of our economy.
  4. Solving the tasks of modernization, technical and technological renovation of production as a key direction of our economic policy will become the priority in structural transformations. It is of high importance in achieving these priorities to implement over ten programs adopted in 2007 for modernization, reconstruction and renewal of production in such leading branches, as non-ferrous and ferrous metallurgy, automobile, chemical, cotton-processing, textile industries and others.
  5. It is planned to invest more than 5,4 billion USD in the development of the national economy in 2008 through of all sources of financing, including foreign investments totaling to about 1,5 billion dollars. Thus, the rate of growth of foreign investments into the national economy will increase by more than 35%. Over 80 investment projects are planned to be implemented at the expense of attracted foreign investments, more than thirty facilities worth 1,4 billion USD are to be put into operation this year.
  6. The central place in implementation of the investment program and construction of facilities in the basic economic branches in 2008 and the forthcoming years takes the Fund for Reconstruction and Development set up in 2006, whose currency reserves today total to 1,2 billion dollars. In 2008 only the volume of funds to be mastered with foreign partners under such projects, will account for about 800 million USD.

II. The second important priority remains to be the deepening of reforms and the further liberalization of economy, taxation and budgetary policy, fast development of the market infrastructure:

  1. It is planned to continue the work on further reducing the presence of the state in economy by transferring to private proprietors the enterprises and facilities, in which joint-stock companies have not given practical results. The main aim is to create a maximum of favorable conditions for attracting in the privatization process the reliable and responsible investors who take the obligations on modernization and technical renovation of production, produce goods demanded in the world market.
  2. The important place in liberalization of economy is given, first of all, to issues of reduction of tax burden, simplification and unification of the taxation system. The rate of single tax for small business entities, private enterprises and farms is to be reduced from 10,0 to 8,0%. The income tax rate for banks goes down from 17 to 15%, with released funds purposefully directed at increasing their capitalization. For all other economic entities the income tax rate remains at a stable rate of 10%. Thus it is necessary to note that this rate is one of the lowest not only in the CIS countries, but also among economically advanced foreign countries. Implementation of the proposed measures will allow economic entities to additionally save more than UZS 100 billion.
  3. Beginning from January 1, 2008 incomes of the population are being really increased due to introduction of a new system of calculation and increase of taxable base from physical persons. The development and strengthening of the Institute of Exchequer Service of the State budget will considerably enhance the efficient use of budgetary funds. Introduction in a new wording of the Tax Code, which came into effect beginning January 1, 2008, takes on great significance in reforming the system of tax administration. In this regard, the Ministry of Finance, State Tax Committee along with the Ministry of Economy, State Demonopolization Committee, Chamber of Commerce, other interested ministries and agencies will create special Interagency Group to monitor practical realization of the new taxation legislation and give, if necessary, to the Cabinet of Ministers proposals aimed at further modernization of its specific norms and provisions.
  4. Significant attention will be paid to the issues of creation of the real competitive environment and combating manifestations of monopoly on the current level of development of economy. The high level of monopolization and relatively limited access of economic entities to recourses still persist on production markets of cement, slate, polyethylene, products of light and oil-fat mil industries and others, and allows to unjustifiably increase prices of these commodities due to the surge of demand. The State Demonopolization Committee, Ministries of Economy, Finance and Justice, State Taxation and Customs Committees and Chamber of Commerce along with other interested ministries and agencies will closely examine the situation in the above-mentioned spheres and in one month period give their proposals to the Cabinet of Ministers aimed at ensuring equal conditions of competition for all market players.
  5. It is vital to develop market infrastructure – banking and finance, leasing, audit, insurance, engineering and others, which will create conditions for effective functioning of market mechanism. Because different types of compulsory insurance in total are remaining extremely limited and amounts for only about 6%, a lot should be done so that highly professional and trusted not only by domestic, but also by foreign clients, audit, insurance, leasing and other companies will be present on the financial market of Uzbekistan. The Ministries of Finance and Economy, Central Bank, Chamber of Commerce, Associations of Auditors and Insurers are, in one month period, to analyze the realization of early adopted development programs of banking and finance, audit and insurance activities and along with the gained experience give additional proposals for stimulating of those activities.    

III. The third priority is the assistance and stimulation of development of small business and private entrepreneurship, sphere of services and in-house work.

  1. With the purpose to further improve the quality of life of the population an accelerated development of sphere of services, communication and transport, financial-bank services, public service and other branches of infrastructure is needed.
  2. It is necessary to provide not only quantitative, but also qualitative growth of sphere of small business, to pay special attention to transition from simple to more complex hi-tech manufactures with orientation not only to internal, but also to external markets. The share of small and private business in gross national product in 2008 is expected to raise up to 48%, by 2010 - up to 50-52%, and the share of sphere of services up to 45,0% and 49,0%, accordingly. By 2010 the number of new jobs is planned to be raised to 250 thousand on the basis of development of in-house work.

IV. The fourth priority is to increase the efficiency of the country’s agriculture on the basis of solving crucial problems on ameliorative improvement and fertility of the irrigated lands.

  1. We are concerned with the state of affairs which we have in ameliorative status of the lands. Today about 8% of the irrigated lands are not effective in terms of amelioration, with the level of salinity and underground waters being high. Most difficult situation still persist in the Republic of Karakalpakstan, Khorezm, Bukhara, Syrdarya, Ferghana, Tashkent and number of other regions.
  2. The resolution of this problem in many respects is linked with the implementation of the State program of land-reclamation of the irrigated soil for 2008-2012, which includes conducting of wide complex of works on construction, reconstruction of reclamation facilities, renewal of park of land-reclamation techniques. We have task in 2008-2012 to conduct the construction and reconstruction of the main, inter-district and inter-economic collectors which will extend for 3,5 thousand km and more than one thousand land-reclamation chinks is put, to restore drainage networks in the extent 7,6 thousand in km. Around 75 billion sums will be allocated for these purposes, from which the significant part will go to restoration and clearing of a collector-drainage network, equipment of the contractors and water-economic organizations by modern techniques on the basis of leasing.
  3. It is necessary to cardinally rebuild the mechanism of financing of reclamation works. Here the great role should lead to the Fund of reclamation of irrigated lands, which was established in 2007 under the Ministry of finance. Further widening and increasing effectiveness of cooperation with international financial institutions, banks and foreign partners takes great significance in realization of tasks on improving of reclamation of lands. For instance, soft loans of the World bank and SCO amounting to around 70 million USD were attracted for realization of the project on the removal of a drainage from Southern Karakalpakstan and improvement of a condition of soil of the Central Ferghana. The Ministries of agriculture, Economics, Finance, Foreign economic relations, investments and trade will revive the work on the additional attraction of foreign soft loans for realization of projects in this sphere.

Summarizing all above said, it is necessary to emphasize that in all affairs: whether there will be an issue of economic policy formation or realization of reform and modernization programs, definition of the major priorities on long-term perspective in social sphere, sphere of education and public health services – only one priority has prevailing and universal value for us - a priority of human interests.
Steady and forward increase of the level and quality of people’s life is the main principal issue, which all our plans, resources and opportunities finally must be subordinated to. Stable rates of growth of economic development and growing financial opportunities and reserves, stable satiation of internal market with the qualitative goods and services, mainly of domestic production, create reliable base for continuation of policy of progressive growth of payment and incomes of the population, stimulation of the consumer market in country. The main task for 2008 is to find sources for providing of growth of average salaries in not less than 1,5 times, thus without running out of the parameters of inflation stipulated on current year.
2008 will become a logic continuation of development and deepening of reforms and processes of renovation in a life of our society, it will give a powerful impulse on a way of realization of structural transformations, strengthening of potential, stability and equilibration of economy, prosperity of the country as a whole and what is especially important – it will be a new step in realization of the major social projects for improvement of the quality of life of people.

London, 7 March 2008

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