Addressing Urban Poverty in Uzbekistan in the Context of the Economic Crisis
capital has gone to the fuel and energy sector. Nevertheless, without
the investment boost and an associated, but more moderate, increase
in government consumption, the drop in Uzbekistan’s exports would
have substantially dragged down economic growth in 2009.
Uzbekistan has had the ‘fiscal space’ to finance an ambitious
investment program, which will pay future dividends of faster
economic growth. But much of the investment is directed to a narrow
capital-intensive economic base, which will be unable to generate the
future productive employment that Uzbekistan’s growing labour force
will need.
B. Recommendations for Economic Policies
The employment intensity of Uzbekistan’s growth is clearly
suboptimal. Since 2000, the country’s strong growth has been driven
primarily by a narrow range of export sectors, namely, energy, gold and
cotton. Most recently, the exports of the energy complex have been
sustaining the country’s growth.
The elasticity of formal-sector employment with respect to growth
is low: for every percentage point increase in average income, there is
only a 0.3-0.4 percentage point increase in employment (see McKinley
2007).
While the labour force continues to grow each year, the current
rate of job creation remains anemic by comparison. Between 2004
and 2007, for example, the size of the economically active population
increased faster than that of the employed labour force (Figure 4). This
implies that workers facing a shortage of employment opportunities
(especially in small towns or rural areas) migrate abroad or search for
informal-sector employment in Uzbekistan’s more prosperous cities,
mainly in Tashkent City.
Indeed, this migration, exacerbated by the break-up of shirkats
and the consolidation of production in larger private farms, is already
underway and is leading to unregulated and imbalanced urbanization,
which will further squeeze the available housing stock and public
utilities in the larger urban areas. This is also undoubtedly leading to
a mushrooming informal sector, surviving on income flows that trickle
down from the narrow range of prosperous – that is, export-oriented
and capital-intensive – sectors of the economy.
In response, the government has embarked on a program of rural
development that hinges, in part, on stimulating the growth of small
industrial enterprises. However, the experience of other countries
suggests that the success of such rural industrialization largely depends
on agricultural prosperity. Various constraints such as the diminishing
supply of arable land could hinder this strategy from dramatically
boosting rural incomes, though.
Because a more rapid and employment-intensive process of
industrialization and the growth of a more modern service sector in
A more
rapid and
employment-
intensive
process of
industrialization
and the growth
of a more
modern
service sector in
urban areas will
draw increasing
numbers of
rural workers
into large urban
complexes
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