THE EMBASSY OF THE REPUBLIC OF UZBEKISTAN
Address: Av. Franklin Roosevelt, 99, 1050 Brussels, Belgium
It has become a good tradition in Uzbekistan on the eve of the most important and dearest national holiday to look back from a distance of the passed years, to analyze thoroughly the wide-ranging reforms implemented, to summarize what the country has achieved and make plans for the upcoming years. The achievements of our republic over the period of independent development make our hearts not only fill with pride, but also entrust us with responsibilities to enhance them even further.
For this historically short yet comparable to
centuries period, under the leadership of the Head of state wide-ranging
reforms in all spheres of socio-economic life, including banking system, have
been implemented. As a result in a short period of time the banking system with
firm basis and advanced infrastructure has been founded, which currently plays
a crucial role in reforming and modernizing the economy, as well as in overall
modernization of the country. It is noteworthy that the main factor behind
these achievements is the implementation of ‘The Uzbek Model’ of social and
economic development with five main principles formulated by President of the
VIABLE AND REASONABLE DECISION
It is worth of mentioning that for the past
twenty three years of independent development
Of course, the path to these achievements has
been full of challenges. It is known that in
At this point it is appropriate to mention the
evaluation of severity and complexity of that period, provided by the Head of
state at the 10th session of the Supreme Council of the
The President emphasized that after the
It proved to be difficult to sell at our own prices what we produced, and to bring in the earnings in this manner. Our major companies that required supplies from other regions and countries were on the verge of standstill. We faced a huge challenge to feed the population of 21 million people. The most difficult matter was the acquisition of the hard currency. These problems were solved in extreme conditions. The provision of people and economy was threatened by real danger.
In-depth knowledge, huge potential and courage were required to address these complex issues. From the first years of independence, the President drew attention to the creation of a solid foundation for the effective development of the republic’s economy in the future. More precisely, available foreign currency resources were directed to the areas critically important for the development of the country, first of all, to the sectors, specializing in production of import-substituting and export-oriented goods.
One of the main issues on the agenda was generation of our own foreign currency through rational use of natural resources, as well as production of high quality and competitive goods that meet the international standards.
In implementation of this complex task above all it was essential to achieve energy and grain self-sufficiency, the development of food, as well as automotive and electrical industries.
Let’s look at, for instance, the issue of
supplying the country with petroleum products. In the 1990s the price of 1
As a result of rational agrarian policy, cotton
monoculture was ended and land areas for cultivation of various other crops
were expanded. Due to this, the demand of the population for grain, flour,
meat, milk, fruit and vegetables has been fully met by domestic production, and
In the years of independence, loans by
commercial bank were directed primarily to the development of major sectors of
the economy, financing the investment projects directed to creating modern and
competitive enterprises in these sectors. Thus, thanks to the loans of
commercial banks hundreds of new enterprises were built, and a foundation was
laid for the development of new industries in
The pillars of the society
It is now impossible to imagine the modern
country without a developed banking system. In 1991, after attaining the
independence the government of
Another problematic point of the banking system of the first years of independence was derangement in internal accounts. At that time obsolete banking methods of calculations were used, which did not meet new requirements of market economy. The turnover in the economy was slow, and the payments between entities were carried out through the mail, which required 1-2 months and more to be settled.
Characterizing the banking and financial sector of the country at the 11th session of the Supreme Council of the Republic of Uzbekistan held on December 8, 1992 the Head of the state noted the following: “As we want to build a society based on market economy, the formation and gradual development of market infrastructure is a strategic task. This kind of infrastructure is the foundation for the market economy. Without development of market infrastructure - a network of commercial banks, modern financial and tax systems, audit and insurance mechanisms – it is out of the question to speak about the transition to a civilized market. Unfortunately, we have to admit that currently this direction is the weakest link in our policy”.
Due to the special emphasis of the President on
the issue of creation and development of the banking system, the pivotal
foundation of society, Central Bank led two-tier banking system was
implemented. Regulatory framework meeting the international standards was
developed. National currency, one of the symbols of the country’s independence,
was introduced and put into circulation.
WHO WERE WE … AND WHO WE ARE TODAY?
Thanks to independence we have acquired
opportunity to choose our own path and decide our own destiny. Now, especially
in the context of the global financial and economic crisis, life repeatedly
confirms how right and practically justified was ‘The Uzbek Model’ of economic
development chosen by
Proof for the great success of the model is provided by high rates of growth in all areas, stable and reliable functioning of the banking and financial system, ongoing modernization and transformations of the economy, and as a whole, confident steps of the country on the way to modernization, which are acknowledged by the international community, as well as International Monetary Fund, World Bank, Asian Development Bank and other reputable international financial institutions.
The most of all political stability, peaceful life for citizens and interethnic accord has been provided in the country. Regarding this issue it is worth to mention the words of the President: “We should not forget one thing. Nobody wants to invest billions of his money in instable place. Our stability and peace - is our greatest wealth.”
Indeed, it is difficult to carry out large-scale structural reforms in the economy without attraction of foreign investment, as well as its modernization, technical and technological renovation. Deeply thought-out policy carried out in this direction together with ensuring of political and economic independence of the country provided the effective protection of our economy against various economic and financial crises.
It is known that many countries after gaining independence in early stages of reforms used major part of their own and borrowed foreign currency funds primarily for expanding import of goods. Thus, they unwittingly pushed their own producers out of the domestic market. We did not choose this easy path. Using resources and reserves on structural transformation of the economy, we moved towards the creation of modern enterprises equipped with advanced technology producing export-oriented goods and satisfying internal market with domestic products.
External loans were used only to finance long-term investment projects at preferential interest rates, aimed at modernizing strategic sectors of the economy, supporting small business and private entrepreneurship.
It is appropriate to bring the views of the President regarding external debts and problems associated with their repayment, which were stated in his speech at the 10th session of Supreme Council of the Republic of Uzbekistan of the 12th calling on July 2, 1992, according to which: “The country established relationships with the world market, international banks, and commercial firms. This is rather delicate issue: which country, on what terms, and at what rate would provide us with investments and loans? Do those states providing us with loans have political conditions? And whether we get trapped after receiving a loan, and come under their pressure?”
To thousands of such questions we needed to find answers.
It is not difficult to get a loan, but debts eventually have to be repaid. We have to think not only about today, but about tomorrow, about future generations. Any of our mistakes today will affect our children tomorrow.
Take a note that current stage of development of
our country clearly demonstrates how true those words and substantiated ideas
were expressed by the President 16 years before the global financial and
economic crisis. Governments and central banks of many countries spent enormous
funds in order to mitigate negative consequences of the crisis, foreign credit
policy was carried out wrongly, as a result, external debt of some EU
At a time when in the world, especially in developed countries, rising foreign debt is causing serious concerns, external debt of Uzbekistan amounts to only 17 percent of GDP. This, as noted by the experts of International Monetary Fund, is considered as one of the lowest in the world. And, since 2005 the government budget has been executed with surplus relative to GDP, which is an indication of implementation of effective fiscal policy in the country.
The official statement of International
Monetary Fund’s mission, which visited our republic in September and October
2013 for evaluation of the state of the country’s economy, notes that despite
of worsening of global economic situation,
It is worth to note that at the present time
the world recognizes the economic progress of our country. In July of this
year, the World Bank announced a new ranking of countries in terms of economic
development. According to this document, the gross domestic product of the
country is estimated at the amount of 5,340 dollars per capita, and in terms of
the total domestic product, calculated on the basis of purchasing power parity
of the national currency,
In addition, most reputable international rating companies, in particular, including Moody’s, Standard & Poor’s, and Fitch Ratings for many years have been acknowledging the activities and sustainable development of not only commercial banks, but the entire banking system of the country. This, in turn, is inseparably linked with the appraisal of our entire economy.
In 2010, only 13 commercial banks in
Gradual and targeted reforms being implemented in the banking system of Uzbekistan provide an opportunity not only to shield the country from negative impacts and consequences of the global financial crisis, but also to carry out important and qualitative transformations in the banks’ activities, to expand lending to the real sector of the economy and to radically improve the quality of banking and financial services.
In this regard the special attention deserves the measures being implemented on increasing the capitalization level of banks. It is confirmed by the following data: during the past thirteen years the total capital of banks increased by 43 times, while the total capital of the banking system in the first half of 2014 increased by 24.6 percent in comparison with the same period of last year.
As a result, the capital adequacy ratio of the banking system is equal to 24.2 percent, which is 3 times higher than the minimum requirement approved by Basel Committee (8 percent), the current level of liquidity of the banking system exceeds 65.5 percent. It is 2 times higher than the approved minimum level (30 percent).
These indicators conform to positive results
when assessed by evaluation system, defined in the resolution of the head of
our state “On the program of measures for deepening and expansion of reforms in
economy of Uzbekistan in 2011-2015, definition and introduction of a system of
criteria and assessment of formation of the business environment in the
country”, dated January 7,
The growth of deposits of legal entities and individuals along with the increase in capital of banks testifies about strengthening of public confidence on the banking system. The total amount of deposits in commercial banks has increased by 112 times in comparison with 2000, and during the last 6 years by 6.7 times.
As of July 1, 2014, the volume of bank deposits has increased by 30.4 percent in comparison with the same period of the last year, and population deposits increased by 31.2 percent.
Expansion of banks’ resource base and reducing the key interest rate of the Central Bank to 10 percent level starting from January 1 of 2014 will serve for expansion of the volume of loans and investment activities of banks, for increasing of the volume of bank assets.
In comparison with the last year, the total volume of bank assets increased by 28 percent, and during the last 3 years it increased by 2.1 times, and as of July 1, 2014, it amounts to 47.9 trillion soums. (Currency rates of CB from 13.08.2014 1$= 2340.19 soums)
RELIABLE PARTNER TO ENTREPRENEUR
It should be noted that one of the causes of global financial and economic crisis was the problems with liquidity of major banks and financial institutions, namely their diminishing solvency. In leading world stock markets indexes and market stock value of major companies fell to critical level, as a result of which the sharp decline in rates of production and economic growth in many countries led to unemployment and social crisis.
In expanding social and economic capacity of the country, achieving high economic growth in the conditions of global financial and economic crisis the Program of anti-crisis measures thoroughly developed by the President and its complete implementation occupies a special place. Proceeding from the requirements of the President’s decrees and resolutions, approved within the program of anti-crisis measures, additional funds have been allocated into the capital of major commercial banks. Specific feature of measures directed at enhancing capitalization of commercial banks in Uzbekistan is that in USA, Europe and the CIS countries the funds, allocated for increasing banks’ capitalization were used primarily for maintaining liquidity and purchasing banks’ toxic assets, while in Uzbekistan increase of capitalization of the banking system was carried out for expansion of their investment activities through redirecting additional resources into the economy.
In this regard it is worthy to note the measure being implemented for financial improvement of the bankrupt enterprises, transferred to the balance of banks due to nonpayment of the bank loans.
This new mechanism, which does not have analogues in the world experience, envisages restoration of a production activity of economically insolvent enterprises, additional investments by banks for modernization, technical and technological re-equipment of production, production of new types of goods, introduction of modern methods of management, restoration of former and creation of new jobs.
The Decree of the President ‘On measures for further enhancing financial stability of the enterprises of real sector of economy’, dated November 18, 2008, serves as a program document in this direction. According to this decree, since 2009, 173 insolvent enterprises have been transferred to balance of commercial banks. Thanks to investments of banks the production activity in 120 enterprises was restored, and they have been sold to new owners. Production has been arranged in 44 of 53 enterprises that remain on balance of banks, while the rest 9 are in the process of restoration.
In all 576 billion soums were invested for restoration of production and modernization of these enterprises, which resulted in creation of more than 21 thousand new jobs.
It should be noted that the restored enterprises have produced finished goods for almost 3 trillion soums, and products in the amount of $730 million have been exported.
As a whole, the loans allocated for financial support of real sector of the economy during the last 13 years have increased by 44 times, and as of July 1, 2014, they increased by 27 percent in comparison with the same period of the last year. In the first half of the current year for the modernization, technical and technological upgrading of production, organization of production of competitive and highly demanded products on the basis of advanced technologies, banks have allocated the investment loans in volume of 4.1 trillion soums.
FINANCIAL SUPPORT FOR WELFARE
From the first years of independence the President of the country entrusted the banking system with several tasks, including provision of wide-scale financial support for small business and private entrepreneurship, and on the basis of it assisting in solving employment issues and improving well-being of the population.
Financial support of small business and private entrepreneurship is one of the priorities of banking sector, the scale of which is expanding. In particular, since 2000, allocation of loans to small business and private entrepreneurship entities increased by 67.3 times, micro loans volume increased by 129 times. During 6 months of 2014 the volume of the loans, allocated by the banks to small business and private entrepreneurship entities has increased by more than 31 percent and has amounted to 4,8 trillion soums. At the same time, within simplification of requirements for doing business in the banking sphere a number of privileges and preferences have been introduced.
In particular, the term of consideration of applications for allocation of loans to small businesses and private entrepreneurs was limited to three bank working days; collection of payments for bank services was abolished as well as requirements on provision of notarized copies of signatures for opening bank accounts, bank fees on payment of taxes and other obligatory payments to the government budget from their settlement accounts were abolished, the volume of payments for electronic types of services in settlement accounts of small businesses was reduced by 20 percent, as well as 8 types permission procedures were cancelled.
For simplification of the use of loan resources by small businesses through preparation of the relevant project documents and financing their development, in 2012 under the Association of Banks of Uzbekistan the Fund for financing of preparation of documents on investment projects was established. Only in 2013, the Fund financed 50 projects on development of project documentation for which the bank loans were allocated in the amount of 40 billion soums.
In August 2013 the Fund for Support of Export of Small Businesses and Private Entrepreneurs with branches in all the territories of the Republic was established under the National Bank for Foreign Economic Activity. Its main objective is to provide necessary legal services, financial and organizational aid to small businesses and private entrepreneurs in exporting the production. Within the activity of the Fund, 153 business entities were assisted with compiling export contracts for total sum of more than $56 million.
As a whole, during the last 10 years, the volume of the loans allocated by commercial banks to small business and private entrepreneurship increased by almost 20 times, including the micro loans by 31.7 times.
During the first half of 2014 small businesses and private entrepreneurs received loans in the amount of 4,8 trillion soums, including 1 trillion soums of micro loans, and growth rate made up 1,3 times in comparison with this period of 2013.
It should be noted that business registration
MANIFESTATION OF GREAT ATTENTION AND CARE
A key factor in achieving significant results in life of our rural areas has been the organization of farmers’ movement as the main form of organization of agricultural production and providing large-scale opportunities for its development. At the present time the farmers’ movement is turning into a leading production link in agricultural sphere.
The banking system pays particular attention to supporting reforms in agriculture, formation of the market relations in rural areas, financial support of the farmers’ movement, and expansion of scales of introduction of advanced production technologies in agricultural sector.
In particular, commercial banks have been taking measures for financing through bank loans technical and technological upgrading of production in agriculture, strengthening its material and technical base, improving reclamation condition of the soil, developing agricultural infrastructure, as well as developing diversified farms.
Currently, more than 2 thousand mini-banks and special cash desks in rural areas provide high-quality and modern banking services.
It is known that agricultural production, unlike industrial production, has seasonal nature. Work term of farms, starting from a sowing season and finishing harvesting, lasts 7-8 months. During the period when farms are engaged in cultivation of crops and can not cover costs from sale of the raised crop, it is natural that there would be demand for bank loans for preparation and cultivation of plants, purchase of mineral fertilizers and fuel, financing expenses associated with harvesting. For financing expenses for grain and cotton cultivation under the state procurement scheme as of July 1 of this year banks have allocated to the agricultural enterprises more than 2 trillion soums of loans on preferential terms on an annual rate of 3 percent.
This year, farmers have achieved rather impressive results – for the first time in the history of the country they managed to harvest 8 million 50 thousands tons of grain. It is pleasant to point out that in this important achievement towards strengthening grain independence of the country, there is also a contribution of our banks.
At the same time, for farms, agro-firms and other entrepreneurship entities, banks allocate loans on preferential interest rates for construction of greenhouses and for implementation of drip-feed irrigation systems. The total volume of loans allocated for these purposes during the first 6 months of 2014 amounted to 19,9 billion soums.
On June 6, 2014,
As a result of reforms and transformations being implemented in the country’s agriculture, the volume of agricultural production increased by 2 times. Consumption of meat per capita has increased 1.3 times, milk and dairy production – 1.6, potatoes – 1.7, vegetables – 2, fruits – almost 4 times.
On a national scale, nearly 16 million tones of fruit and vegetables are produced annually. Nearly
The banking system makes substantial contribution through bank financing to provision of the population with agricultural products, as well as to exporting more than 180 types of fresh and processed fruit-and-vegetable products to 80 countries of the world.
For stable provision of population food needs, ensuring full-fledged supply of domestic markets with domestically produced food, during the last five years commercial banks of the republic allocated preferential loans in the amount of 4 trillion soums.
During the first half of 2014, loans in the amount of 144.3 billion soums have been allocated for procurement of food processing equipment and drip-feed irrigation systems, and further 630,1 billion soums for procurement of raw materials. These loans are provided on the interest rate not exceeding the refinancing rate of the Central Bank.
It is worthy to note that these loans account 20 percent of banks’ total credit portfolio. Moreover, 50 percent of all micro-loans, allocated in the amount of a thousand times of the minimum wage for the organization and development of agricultural production, is authorized to be extended in cash for 1,5 years of period only for the purchase of cattle, poultry, saplings, seeds and forages from the population.
At the same time, a mechanism has been implemented for allocating micro loans for the development of livestock farming in private subsidiaries and farming entities. In accordance with this mechanism, micro loans are allocated by the Fund for Employment and assets of commercial banks for 3 years period at creditors’ will in the form of transfer or cash.
Interests of the people is a key priority
Today, 26 commercial banks with 843 affiliates in regions, more than 4,2 thousand mini-banks and special cash offices provide high quality banking services to the country’s population and legal entities.
The following data demonstrate the indicators of the services provided by banks: the level of use of banking services is equal to 49,7 banking institutions for every 100 thousand adults and corresponds to the ‘high level’ assessment mark, indicator of the number of individuals with bank accounts to every thousand adults is equal to 1028, which also corresponds to the ‘high level’ assessment mark (over 1000).
According to the survey, conducted by the
International Monetary Fund,
Financing the social sphere development, creating new jobs, providing employment, constructing new houses and improving the living conditions in settlements, reforming and improving education and healthcare has always been in the focus of the banks, operating in the republic.
One of the effective ways of social support of the population, through meeting their housing needs, is allocation of mortgage loans by commercial banks. Qishloq Qurilish Bank was established specifically for improving the living conditions of rural population, and during the last five years since its foundation the bank has provided mortgage loans in the amount of more than 2 trillion soums for the construction of 33,557 modern private houses in rural areas.
At the International Conference ‘Modern housing construction as a driving force of comprehensive development and transformation of rural areas, enhancing the living standards of population’, held in Tashkent 16 - 17 April, 2013, heads of international organizations, as well as leading international experts highly praised the systemic actions being undertaken in our country aimed at changing the appearance of villages and improving the wellbeing of the population. They highlighted these achievements as a worthy example. For changing the appearances of rural areas, improving the living conditions of local population and developing the social infrastructure, as well as for the purposes of providing long-term privileged mortgage loans in 2009-2013, Uzbekistan attracted the funds of the Asian Development Bank in the amount of $291.4 million, and this year it is scheduled to receive additional loans amounting $106.8 million.
Thanks to the implementation of systemic measures being carried out in accordance with the National Program for Personnel Training, highly skilled young specialists meeting the present time requirements get trained to whom we can entrust the future of the country.
For the implementation of this Program the Decree of Cabinet of Ministers was adopted on July 26, 2001 ‘On providing educational loans for studying at higher education institutions on a fee basis’ that affirms the Regulation on providing educational loans for studying at higher educational institutions on a fee basis. In accordance with the regulation requirements, only during 6 months of this year, commercial banks allocated preferential loans to 8 779 students in the amount of 25.7 billion soums.
In accordance with the Decree of the President ‘On additional measures to involve graduates of educational institutions in entrepreneurship activities’, dated July 28, 2010, the opportunities for young graduates for engaging in entrepreneurship activities have increased substantially, and graduates of professional colleges are being provided with jobs.
During 2010-2013 for graduates of professional colleges loans in the amount of 222.3 billion soums were allocated for starting their own business. In 2013 the amount of such loans increased by 140.1 billion soums or 2.8 times compared with 2012.
In case when a graduate does not qualify for a loan, commercial banks provide loans based on a guarantee by family members (parents, brothers, sisters), based on the information about their earnings.
Economic reforms in the banking system are carried out in full accordance with the statement of the Head of the state: “Reforms are not for the sake of reforms, but for the man, in the name of his interests.”
Commercial banks of the country pay special attention to the implementation of the State Program ‘Year of the Healthy Child.’ For the implementation of the tasks entrusted to the banking system within this program, during the first 6 months of the current year commercial banks allocated loans on preferential terms in the amount of 2 trillion soums for the implementation of the State Program, compared with 1.6 trillion soums originally planned.
In particular, as a result of implementation of comprehensive measures for the throughout development and financial support of women’s and family entrepreneurship, the banks provided to women, small businesses as well as to private entrepreneurs who employ more than 50 percent of women’s labor, preferential loans in the amount of 521.5 billion soums.
Based on the requirements of the State Program, within the project ‘Expanding economic opportunities for women in Karakalpakstan’, the Microcreditbank organized training courses to improve the financial literacy of low-income women, compiling business projects, and currently, based on the principle of ‘group lending’, their business plans are being developed. As of July 1, 2014, 105 women received 210 million soums of preferential loans.
Within support of women’s entrepreneurship activities, banks hold a number of activities in collaboration with foreign partners. People’s Bank and Microcreditbank cooperate with the Savings Bank Foundation for International Cooperation of Germany, with financial support of which the Funds for Microcrediting of Small Businesses have been established in these banks.
During 2012-2013, from resources of the Fund for Microcrediting Small Businesses, the People’s Bank allocated micro loans to financial support of women-entrepreneurs working in Karakalpakstan, Navoi and Sirdaryo regions, as well as ‘Microcreditbank’ – to those women working in Navoi, Tashkent and Surkhandarya regions, in the amount of over ˆ525 thousand.
Today, on the eve of the 23rd anniversary of the country’s independence, we can assert that macroeconomic policy implemented under leadership of the Head of the state has ensured creation of independent banking system that fully meets the international standards, which in the future will serve for the stable development of the economy based on the principle of ‘Not a customer for a bank, but a bank for a customer.’
FAYZULLA M. MULLADJANOV, Chairman,
The Central Bank of
Honored Economist of