Uzbekistan seeking Singapore's cooperation to develop market economy
|Uzbekistan, an ancient centre of world civilisation, is seeking Singapore's cooperation to bolster its drive to develop a modern market economy. In an exclusive interview with Today (Singapore), President of Uzbekistan Islam Karimov talked about the growth of democracy in the country, opening it to foreign investment and its tourism potential. |
President Karimov, who arrived in Singapore on a three-day state visit, said his people were impressed with the way a small country like Singapore was able to develop its high-tech industries and keep pace with the challenges of the global economy. "There is wide scope for Singapore investment and entrepreneurial opportunities in Uzbekistan," President Karimov said.
- Your Excellency, Uzbekistan has made remarkable progress under your leadership since it gained independence. Has the time arrived for more multi-sectoral representation in the governing of Uzbekistan so that the people will have a greater voice in the democratic process?
- Since Uzbekistan gained independence it has clearly defined for itself a secular way of development and building a civil society. This path is based on the universally-recognised principles of democracy and freedom. At the same time, it is based on historical, national and spiritual values and mentality of our people.
Mostly thanks to this we have been able to preserve the social and political stability, sustainable rates of economic growth and gradually implement the large-scale reforms in the country. The model we have chosen for economic development and the liberalisation of public life, according to the recognition of many high-profile international organisations, entirely justifies itself.
The processes of liberalisation are already bearing positive results in the economic sphere, and firstly, owing to accelerated development in private entrepreneurship and small businesses.
In 2006, the positive tendencies continued in the dynamics of macroeconomic parameters and acceleration of the growth rates in all spheres of the real sector. Thus, the economic growth rate continued to remain sustainable and accounted for 107.3%, exports grew almost by 30%, gold-currency reserves by 33%, the State Budget grew by 27%, the real wages of employees, pensions, stipends and allowances rose by 36% approximately, but the level of inflation did not exceed 7%.
In this regard, I would like to note that the International Monetary Fund (IMF), which visited Uzbekistan in December 2006, rated the efficiency of economic model highly, the stage-by-stage reforms carried out in our country.
As far as the second part of your question is concerned Ц hardly can anyone decide to assert that the creation of a democratic society is possible with a wave of one's hand.
The building of a democratic state and civil society is a long continuous process with enormous problems and difficulties.
Its success firstly depends on the dynamism of the change of mentality of the population and how solidly democratic and liberal values are adopted in the consciousness of the people. People have to be convinced of the necessity and benefit of the reforms being accomplished.
Therefore, in light of our development strategy, we went along the evolutionary path, which meets, above all, the interests of our people.
The modernisation and liberalisation of society on all levels is being accelerated: The processes of renewal of state governance and reforming of the court-legal sphere, liberalisation of mass media, upholding of human rights, and establishing civil institutions that represent the interests of various social layers of the country's population.
Since 2005 the bicameral parliament has been operating effectively in the Republic. I would like to note that in our country there are five political parties, which carry out their activities through their factions in the lower Legislative Chamber, and in the local level Ц through the deputy groups.
Establishing the upper chamber of the country's Parliament Ц the Senate, a representative body of the local (in all there are 14 subjects) electoral structures, has cardinally increased opportunities for the people to participate in drafting and adopting legislative acts and norms.
The active system of checks and balances is being established in practice, which ensures that the high level of adopted laws given a harmonious balance of interests is preserved in society.
At the same time, the future of the civil society being established in Uzbekistan and efficiency of the ongoing reforms, above all, depend on further activity of population, its drawing into the political life of the country, allocation of bigger rights to political parties and social movements that represent various mostly disagreeing interests of the people.
In the context of this conclusion, therefore, the draft constitutional law, "On strengthening the role of political parties in the renewal and further democratisation of state governance and modernisation of the country", was submitted for nationwide discussion at the end of 2006. It is aimed at a broader drawing of the people into the processes of social and state construction.
I am convinced that reforming the political system and democratising state governance will have an immediate impact on resolving problems related to sustainable economic development and efforts to raise quality of life for the people.
- How far has Uzbekistan opened up and succeeded in the attraction of foreign investment for the development of the country's economy and from which countries is this investment coming?
- Since the first days of independence, there is systemic work being carried out in our country to establish and improve the favourable investment climate, create comfortable conditions for activity and protect foreign investors' rights.
Certainly, it is impossible to address all these issues within the framework of one article. I will dwell upon just some legislative and legal guarantees, finance and tax preferences for foreign investors in Uzbekistan.
Above all, it should be noted that we have adopted a special law "On guarantees and measures of protection of foreign investor rights", under which the inviolability and protection of rights and ownership of foreign investors are ensured in Uzbekistan. The legislation, which is in force to the date of investing, is applied to foreign investors during 10 years from the time of investing. The foreign investor has a right at his own discretion to apply those provisions of the new legislation that improve the conditions of his investment. Besides, the free repatriation or reinvestment of profits from investing is guaranteed without any limitations.
From the economic viewpoint, it is important to note that from Oct 15, 2003, the Republic of Uzbekistan joined Article VIII of the IMF Charter and without restrictions converts its national currency. We realise that the convertibility of our national currency Ц the soum is of special significance to attract the foreign investments, modernise the economy and promote exports.
In this, owing to the vast system of tax privileges and preferences we have created a climate even far more attractive for investors than the national producer. Thus, the enterprises established in Uzbekistan with participation of foreign capital are free from income tax payments from three to seven years, property tax for up to two years and customs duties in bringing in the technological equipment.
Foreign investors may participate in privatisation of enterprises in any spheres of our economy, including at the expense of reinvesting their income earned in Uzbekistan.
Uzbekistan is attractive for foreign investors also from the standpoint of geographic location. Therefore, considering the central geo-strategic position of Uzbekistan in entire Central Asia the country during the short period of time provided the integration of its own automobile and rail roads with intercontinental and transport corridors between Europe and Asia, and established the direct flights with all continents and largest cities of the world. This has allowed the country to become the large logistical center to penetrate the markets of the Commonwealth of Independent States (CIS), European countries, as well as the countries of Central and South Asia.
Uzbekistan is also attractive with cadre potential. The system of continuous education, which was established within the framework of the specially adopted national programme for training cadres, has allowed ensure 100% literacy of the population. The broad network of educational and scientific institutions is developed in Uzbekistan - ranging from specialised scientific research institutions to multi-profile universities that are a firm basis for the innovative development of the country and training of advanced engineering and science workers.
All these preconditions allowed Uzbekistan to become the most attractive country in Central Asia for foreign investments. Currently, there are more than 3,500 joint ventures operating in Uzbekistan. And over the past three years, mastered direct foreign investments grew four-fold. Direct foreign investments account for 76% in structure of the volume of the assimilated foreign capital. As a whole, the volume of the assimilated foreign investments now accounts for over US$20 billion.
About 30% of the total volume of mastered foreign investments is made up by prospecting and development of oil and gas deposits projects, 15% by the development of information systems and telecommunications, 13% by implementing textile projects, and 7% by the financial sector.
Over the past years, hundreds of new large industrial sites have been commissioned with participation of foreign capital. Thus, the industrial facilities, the largest in Central Asia, such as the Shurtan gas and chemical complex, Bukhara oil refinery, an automobile plant in Asaka, a soda factory in Kungrad and large textile complexes have been built and put into operation. Besides, the five banks with foreign capital, about 10 international insurance and audit companies are functioning in Uzbekistan.
The measures taken in this area led to an increase in foreign trade turnover over the past 10 years by more than five times. The share of products with a high value-added cost in the structure of exports grew by up to 65% or almost four times.
The largest investor countries in our economy and also our main trading partners are Japan, South Korea, the Russian Federation, China, Germany, France, Turkey. They and other countries engaged in investment activity from the early days of independence.
I hope that in the nearest future, Singapore will also join this list of countries with whom we look forward to close cooperation.
- What other measures are being undertaken by Uzbekistan to promote and grow the economy?
- Based upon the historical, national specifics, the way of life and mentality of people that has been formed over the many centuries Uzbekistan chose its own way of development. The reforming of Uzbekistan's economy is based on five main principles.
First, we have declared the priority of economy over the politics, freeing both internal and external economic relations from ideology.
Second, we believe that the state must act as a main reformer and consistent initiator of democratic and market reforms.
Third, maintaining the supremacy of law.
Fourth, it is of an exclusive importance for us to have a strong social policy that protects the interests of the people who are in need of support by the state and society.
And, finally, in our conditions the transition to market relations is accomplished gradually and in an evolutionary way.
Implementation of these principles has predetermined the achieved successes of development of our economy.
From 1996, our economy entered the course of the sustainable economic growth. Between 2000 and 2006, the economy of Uzbekistan increased by 50%, and over the past three years, GDP growth rates have exceeded 7%. Sectors such as light and automobile industries, communications services, and transport are seen to be outstripping growth rates against the GDP. This has led to positive changes in the structure of economy. Thus, the share of industry in the structure of GDP over the past four years grew 1.5 times and exceeded 22% in 2006, and the share of services by nearly 40%.
The tough monetary and fiscal policy sharply decreased inflation, the rate of which during the past three years has not exceeded 7%, and the state budget in 2005-2006 had a surplus.
In turn, the low rate of inflation provides stability for the national currency exchange rate.
In this, the consolidated state expenditures towards the GDP have decreased from 38% in 2000 to 31.6% last year. In the same period the income tax rate was reduced from 31% to 10%, and the maximal rate of income tax for physical entities from 40% to 25% and deductions to the pension fund from 40% up to 24%.
The achievement of the national currency convertibility on the current operations alongside with the measures on export's stimulation has provided the stable growth of exports of goods and services which has increased for more than 1.7 times from 2000 to 2006. Last year the surplus of balance of payments accounted for 9,1% of the GDP, the gold-currency reserves of the country increased almost five times over the last five years.
The policy of structural and institutional transformations is under way, which is very important for a transitional economy.
In this regard, above all, it should be noted that more than 6,750 medium and large enterprises were privatised in the last five years and 980 of them were privatised in 2006.
On the other hand, a considerable administrative reform was carried out, as a result of which approximately 20 ministries and agencies were abolished, over 500 state functions on administrative regulation of economy were liquidated, and the number of the administrative and managerial staff was reduced to 75,000 people or 22% from the total number.
These measures significantly lowered the regulating role of the State in economy and removed its superfluous administrative interference in economic processes.
We are attaching a profound importance to reforms in the agricultural sector, which provides almost 30% of the GDP, where the main attention is paid to the development of private farms. Last year, the farms produced more than 90% of raw cotton, while yet only five years ago the farms provided less than 10% of the raw cotton production. Today, the farms and private sector produce practically more than 90% of agricultural products.
At the moment, the share of the non-state sector accounts for about 78% of the GDP, 80% out of the total number of all employed in the economy work for the non-state sector.
For several years, Uzbekistan has been one of the largest exporters of cotton and gold, and in addition to these traditional exports it should be said that for the third year in a row our automobiles are becoming the bestselling foreign cars in the fast growing markets of Russia and other CIS countries.
The achievements in the sphere of economy and stability of the state finances allow us to successfully implement large-scale social programmes such as the National Programme for Cadres Training, the State Programme for Reforming the Healthcare System, the National Programme for Developing Secondary Education, and others.
- What are the areas of economic cooperation and investment do you want developed in collaboration with Singapore? In this respect, how easy is it for a Singapore company to set up business in Uzbekistan?
- Many people in Uzbekistan and I personally with a special interest follow the economic achievements of Singapore. In our view, its economy is unique and a bright example of effective economic policy of the country's Government.
You were able to build a flexible economy, which reacts timely and accommodates to the trends and challenges of the global economy. If to look at the history of development of Singapore's economy, then one could see the classic example of the development stages of national economy, when the simple handicraft production on the initial stage has grown up to date into the modern and diversified high-technology economy.
We know that the economy of Singapore has been one of the world's top five most competitive economies for several years in a row and the people of Singapore had proved that the size of the country and its population are not a determining factor for finding its own place and role in the world economy.
Your solid economic foundations have allowed the country to overcome the Asian economic crisis of the late 90s with minimal losses.
The economic potential of Singapore and Uzbekistan's natural resources, its geographic location and the available legal basis for investment and entrepreneurship activity open up broad opportunities to develop bilateral relations with Uzbekistan. In our view, the most fruitful and mutually beneficial directions of cooperation between our countries may become:
First, cooperation in finance and banking has good prospects. The expansion of ties between financial institutions and banks must play a decisive role in facilitating the growth of mutual investments and trade.
Second, the availability of natural and raw resources in Uzbekistan and high-technology industry in Singapore supported by financial resources is a prerequisite for the participation of Singapore companies in prospecting, mining and processing of hydrocarbon and other types of raw.
Third, in addition to this it should be noted the high potential effectiveness of attracting the investments from Singapore into the mining and processing of nonferrous and precious metals.
As you know, there are large deposits of gold, silver, copper, molybdenum, tungsten, uranium, and other metals and poly-metals in Uzbekistan.
Fourth, I would like to specially underscore our interest in attracting the Singapore companies, which are making business in the sphere of high-tech, since the information and telecommunication technologies are developing in Uzbekistan with the highest rates, and such companies earn the highest profits in Uzbekistan.
The attractiveness of this sector is confirmed by the presence of the biggest companies from South Korea, Japan, Germany, Russia, China and other countries in the market of modern technologies of Uzbekistan.
Fifth, the natural and climatic conditions, the availability of the unique historical and religious monuments, as well as the direct air routes to all continents and biggest cities of the world, and consequently the existing conditions for tourism, mountain skiing and re-creative leisure on the high mountainous areas predetermine the cooperation in the sphere of tourism as one of the prospective directions of investing into the economy of Uzbekistan.
Sixth, Uzbekistan is also interested in developing the ties in the cadres training, scientific exchange and education.
And finally I would like to offer the potential investors to consider the possible cooperation in the sphere of establishing and administering the specialised economic and export zones in Uzbekistan. It is strengthened by the fact that the transport infrastructure of our country is integrated with intercontinental transport corridors.
I would like to specially note that at the moment 12 enterprises with direct Singapore investments including the two enterprises with 100% Singapore capital are actively operating in Uzbekistan. Certainly, this is not a big indicator in comparison with available enormous potential of development of bilateral trade, economic and investment cooperation.
We welcome the interest of the Singapore companies to the operations in the Republic of Uzbekistan and invite them to more active cooperation with our country. On our side, we will render the necessary efforts to create the comfort conditions for the work of the Singapore companies in Uzbekistan.
- What are the major problems confronting Uzbekistan and what are the measures being undertaken to counter these problems? Would you identify the drug trafficking and terrorism as two of the major problems facing Uzbekistan?
- For over the 15 years of its independent development our country and people had to face and find the solution to many tough problems and tests.
Certainly, the selfless work, creative potential of our people, the course and model of social and economic development chosen by our country has served as a major support in addressing these tasks.
Our goals are clear and open. In their essence they are based on the strife to create the democratic state and civil society with a steady rise of the people's welfare in it, which is impossible without peace and interethnic accord. And this is not only in relations with the close and far neighbors, but also with an entire world community.
Undoubtedly, today we clearly see serious problems for our stable and steady progress on the selected and already tested course of development and progress.
In this regard I would like to emphasise that the threats and challenges in this way, first of all, the security threats and destabilisation of the situation proceed from and directly depend on the state of affairs in the entire vast Central Asian region and the region of South Asia, and on resolving the Middle East problem.
The tendency of integration of various destructive forces and international centers, which strive to create the situation of the so-called "managed destabilisation" both in the region and particular country to achieve their geo-strategic and geopolitical goals, causes one's profound alarm and apprehension.
Not less important and tangible problem is the international terrorism and drug trafficking. They cannot be considered separately within the borders of Uzbekistan since these problems have long become the painful spot for the entire civilised world.
The transit of drugs through the states of Central Asia also remains the critical problem both for the country and the entire region, as a whole. Are our concerns valid? According to the United Nations, in 2006 the record harvest of opium was collected in Afghanistan Ц 6,100 tons, the quarter of which passes through our region.
In October 2002, during the visit of the United Nations Secretary-General to Uzbekistan the Republic put forward the initiative to create the Central Asian regional information-coordination Center for the struggle against the trans-border crime related to illegal circulation of drugs (CARIC). At the moment, the creation of the Center is in its final stage.
Another our initiative Ц the creation in Central Asia of a nuclear-weapon-free zone has also been completely realised. The UN General Assembly in its four resolutions and two decisions has expressed support to the initiative of Uzbekistan. Completion of the acceptance of our initiative took place on September 8, 2006, in Semipalatinsk, where all five Central Asian states signed the Treaty on a nuclear-weapon-free zone in Central Asia.
In conclusion, I would like to note that modern challenges and threats require the formation of a new and effective model of international cooperation in the struggle against them.
Uzbekistan, while hoping for the understanding and support in these issues on the part of the international community has always been and remains the state open for the equal cooperation. This aspect is important for all of us and only jointly we can achieve successes that would promote the prevention of conflicts and maintenance of stability not only in the Central Asian region, but also all over the world.
- What would you say are the main tourist attractions that would draw more visitors to your country?
- The territory of modern Uzbekistan is one of the most ancient centers of the world civilisation. Since the far antiquity the powerful state formations appeared on its territory replacing one another. It is the region where the West and the East, their cultures and religions met, where the great scholars and thinkers lived and created, who with their work had enriched the treasury of the world civilisation.
Yet in the period of antiquity our blessed soil has been named a country of thousand cities. There are truly precious pearls of the world civilisation in here, which are the contemporaries of Rome, Athens, Alexandria and Carthage Ц the cities of Samarkand, Bukhara, and Khiva that have been included into the UNESCO World Heritage List.
Brilliant works on philosophy, medicine, mathematics, astronomy, geography, history and literature have come into being in this very place. These works later stimulated the European Renaissance and provided the basis of the European science for many hundreds of years ahead. The representatives of the Uzbek soil: Amir Temur, Mirzo Ulugbek, Zakhiriddin Muhammad Babur, Al-Khorezmi, Abu Reyhan Beruni, Abu Ali Ibn Sino, Al-Ferghani and others had added a vivid page to the world history chronicle.
The rich historical and cultural heritage of the republic is reflected in the centuries-old history of the region, which is related firstly to the history of the Great Silk Road that had extended from the antique Rome to the ancient capital of Japan Ц Nara. Being located at the crossroads of this road the region had intensively developed and imbibed the various cultures and traditions.
The greatest monuments of Islamic culture such as the necropolis "Shahi Zinda" of the 11th century (Samarkand), the ensemble "Registan" of the 15th century (Samarkand), the tombs of Imam Al-Bukhari of the 9th century (Samarkand), Khaji Bakhouddin Nakshbandi of the 14th century (Bukhara) and At-Termizi of the 9th century (Termez) are located in Uzbekistan.
In its turn, it should be noted that the world's most ancient temples and statues of Buddha were discovered along the archeological excavations in the territory of historical settlements in the south of Uzbekistan.
The unique geographical and natural conditions are attractive for the development of ecological tourism in Uzbekistan. In these directions the extreme and winter tours are organised in the finely equipped tourist complexes in the mountainous regions of the country. The new direction of tourism - a natural history tourism in the territories of large reserves and parks is developing.
One should not forget that Uzbekistan has always been famous for its handicrafts. At the moment, there are about 500 enterprises in Uzbekistan, which produce the souvenir goods based on the national craft: the porcelain and ceramic ware, national knives, ceramic toys, gold embroideries, carpet-weaving, and other.
The tourist infrastructure is dynamically developing. The new hotels and pleasure resorts were built and the new tourist routes have been introduced. There are 168 hotels in the republic. At the moment, there are 408 tourist operators in the tourist market of Uzbekistan, which are ready to provide the full range of services for the international tourists.
Annually about one million tourists from a wide variety of countries of the world including Japan, France, Korea, Russia, Germany, Austria, the Great Britain, Italy and others visit our country. The guests visiting Uzbekistan are delighted with our ancient and ever young cities, customs and traditions, distinctive art and culture, wonderful nature of our soil, enormous creative work and transformations accomplished by our people. I am convinced that should the tourists from Singapore once visit Uzbekistan they will want to return to our country by discovering Uzbekistan again and again.
It has been a great honor for us that the city of Tashkent was conferred on the high title of capital of Islamic culture by the Organization of Islamic Conference Ц the International Islamic Educational, Scientific and Cultural Organisation.
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