According to countryaah, Uzbekistan’s business community, like many of the other CIS states, still has clear traces of Soviet planning in the Soviet period. Independence has meant greater opportunities for local decision-making power over the resources available. However, relations with previous suppliers and customers have weakened, while at the same time the business sector has remained poorly integrated.
Throughout its independence, Uzbekistan has been heavily dependent on the world market price of its important export goods: gold, cotton and natural gas. At the beginning of the 2000s, high prices for these led to an economic upturn, and the country was able to make some much-needed infrastructure investments. In the 2010s, however, world market prices have fallen and the country has again experienced an increased trade deficit.
Despite the acute economic situation, the country has continued to apply centralized production planning. A privatization program was started in 1992, but has limited itself to housing, commerce and other parts of the service sector as well as limited parts of the light industry. In addition, Uzbekistan remained in the ruble zone for a long time and did not resign until November 1993.
The economic structure has also retained much of its appearance from the Soviet period when the country largely served as a raw material supplier with a limited domestic processing industry.
Otherwise, existing legislation guarantees protection of private property, allows foreign direct investment and regulates the forms of support for new and small businesses. However, large parts of the civil law regulation that is important for a market economy are still missing. Private right of use (but not ownership) is granted for agricultural land and urban real estate.
The primary sector plays a very important role for Uzbekistan’s economy. Agriculture, which at the beginning of the 1990s was organized into approximately 1,000 state and 1,150 collective farms, has slowly begun to transform towards more decentralized and smaller farming units. However, since the acquisition and marketing organization has not changed and since the pricing of the more important crops is still on administrative grounds, the positive effects have been waiting.
Only 10 percent of Uzbekistan’s territory is suitable for arable farming. The majority, or 4.2 million ha, are irrigated through a 170,000 km long system of canals that conducts water mainly from the Amu-Darja and Zeravshan rivers as well as from the upper course of Syr-Darja. The dominant crop is cotton, which at the end of the Soviet period occupied 60 percent of the cultivated area. Since then, about half a million have been transferred to other crops, mainly cereals and vegetables. With a cotton harvest of 4 million tonnes per year, Uzbekistan is one of the world’s five leading producers. In total, cotton accounts for about 40 percent of all agricultural production.
Other crops that are grown to a significant extent are rice, wheat, vegetables, potatoes, fruits and grapes. Cereal production covers only 1/4 of the domestic need. Silk cultivation is also conducted on a commercial scale.
In addition to agriculture, livestock management, mainly with cattle, sheep and poultry, plays a significant role in the country’s food supply. Preparation and sale of hides, skins, wool and fur are also available.
Minerals and energy
Uzbekistan has large recoverable raw material resources. This is particularly true of fossil fuels, where Uzbekistan developed during the Soviet era into one of the Union’s leading producers of natural gas. The extraction takes place mainly in central Uzbekistan and in the Fergana Valley. A large part is exported, mainly through the pipeline drawn between Buchara and the Ural Mountains of the Russian Federation. The gas is not only an important export commodity, but is also of central importance for the energy and raw material supply of the domestic industry. The extraction of oil and coal covers most of the domestic need. Findings at Namangan and Fergana in the eastern part of the country have been exploited with the help of Russian and Chinese investments. Extractable deposits of coal are found in the Fergana Valley, while lignite is mined in Angren near Tashkent.
Other commodity assets include silver, copper, lead, zinc, Antimony and tungsten, all of which are already mined or considered worthwhile for the future. However, the mining industry’s most important activity is the extraction of gold.
At the time of the collapse of the Soviet Union, Uzbekistan had diversified industrial production. The most important elements were the engineering, textile and food industries. In addition, there were elements of the metallurgical and chemical industry as well as the building materials industry. With the exception of parts of the textile industry and the manufacture of means of transport (especially aircraft) and certain electrical and electronic products, the intention was primarily to supply the local or, secondly, the regional market with goods.
The industry came to recognize a significant loss of production in connection with independence. Deliveries of inputs and semi-finished goods were disturbed, but above all, for financial reasons, it became impossible to maintain large parts of the unprofitable production. It was mainly the heavy engineering and chemical industries and the construction sector that were affected, while the construction equipment industry, thanks to the privatization of the housing stock, went relatively unanswered by the difficulties. More recently, foreign direct investment and domestic new entrepreneurship have been encouraged, and investment has been made in the production of consumer goods such as textiles, household appliances, soap and detergents and food.
With independence, foreign trade has been reoriented from having essentially supplied the Russian Federation with raw materials (cotton and gas) to a greater extent to trade with neighboring countries and the rest of the world. China, Switzerland and South Korea have emerged as new trading partners alongside the Russian Federation and the other Central Asian republics. However, exports are mainly made up of natural gas and cotton, but increasing elements of other raw materials (mainly gold), leather and leather products and textiles can be noted. Imports are primarily machinery and food products, including cereals. Other important commodity groups are oil and petroleum products, means of transport and consumer goods.