treatment of all types of property; regulate business and create a new market infrastructure;
ensure the constitutional and legal rights for all people and guarantee popular social support.
The main thrust of institutional reform has been in the sphere of international relations. The
recently established Ministry of Foreign Economic Relations analyzes international services and
commodity markets, designs strategies for international economic activity, facilitates the few
remaining items of export and import under the state order system, and coordinates all foreign
economic activity conducted by organizations in the republic.
5. Economic Trends
In 1995, Uzbekistan achieved considerable success in macroeconomic stabilization. Measures
taken by the government helped slow down the decline in production, led to a noticeable
decrease in the inflation rate, encouraged investment, and contributed to the maintenance of a
low state budget deficit. Institutional reforms and policies directed toward priority areas also
helped to foster positive results, particularly in the oil, gas, and agricultural sectors.
A substantial part of Uzbekistan's success derives from the Government's macroeconomic
policies. Unlike the governments of many CIS countries, the Uzbek government has rejected the
shock - therapy approach. Instead it has followed a slower, more cautious and balanced
approach, so that the short - term goals of stabilization have not been so rigidly pursued as to
strangle any potential for economic growth.
Taking 1990 as a base year, economic decline in Uzbekistan has been relatively moderate. Its
level of GDP in 1995 was only 18.2% lower than its 1990 level. This contrasts with the dramatic
drops in GDP that have occurred in surrounding CIS countries, in which the levels of GDP have
been between 40 - 60% lower, over the same period. The biggest drop in
Uzbekistan's GDP occurred in 1992, when it fell by about 11%. In comparison, the fall in 1995
was only 1.2%.
At the same time, the goal of limiting budget deficits to less than 3.5% of GDP has been
achieved, and the government has also succeeded in directing 40–50% of previous social cost
allocations to current social needs. The proportion of the budget allocated to investment has
increased from 3.9% of GDP (10,4%of total expenditures) in 1994 to 6,7% of GDP (18,4% of
total expenditures) in 1995. Thus the current policy, combined with a functioning state
apparatus, has helped to maintain and stimulate production growth in some sectors. This includes
not only agriculture, but also energy and power, chemicals and petrochemicals, mechanical
engineering, and metal- working. Moreover, the average monthly rate of inflation has decreased
considerably and totaled only 6,7% in 1995 compared with almost 24.50/0 in 1994.
A substantial portion of the Uzbek population lives and works in rural areas. Problems of excess
labor supply in rural areas have existed for some time and remain a priority issue in the country's
economic reform. Compulsory employment, which occurred under the Soviet regime, was not
conducive to improving human development or stimulating economic growth. At the same time,
this policy did not create sufficient employment opportunities in regions with labor surplus, such
as the Central Asian republics.
The state artificially created the conditions for employment by encouraging the rural population
to grow cotton. Visible unemployment did not exist because all individuals worked as collective
farmers or employees of the sovkhozes. Low levels of labor productivity and incomes resulted
from this policy.