Jan 26- Uzbekistan Study

 I have been reading up a bit on Uzbekistan and thus thought I will pen down some of the notions that are coming into my mind as I consider this ex-Soviet republic. After all, it is not a bad day to consider a republic, given it is my own nation's Republic Day today. One can certainly ask why I am inclined not to consider my own republic and instead to divert my gaze nominally from New Delhi to Tashkent. 

One reason is that we are a1.4B strong nation- there will be many who will no doubt spare no effort to interrogate my country on multifarious fronts - with intellectual probity and without.  My efforts here are bound to be superfluous. Another reason is that like India, the CIS countries in general have been clocking a reasonably high GDP growth rate over the last decade. And amongst the CIS countries, Kazhakstan is already a moderately high income economy. In fact, it may well be the highest income economy with the highest GDP growth rate- well on its way to become a high income economy of the likes of France or Germany rather soon. Kyrgystan and Tajikistan are miniscule economies and so are not yet relevant for serious scrutiny. Turkmenistan is a enigma because of its closed nature- there is very little publicly available informatio on it. So that leaves Uzbekistan. 

At the time of breaking away from the Soviet Union in 1990- it remained for all practical purposes a Soviert state until around 1994 when it finally established its own currency. The leader of the state was Islam Karimov even before the fall of the Soviet Union, and he had simply continued on. The period in the 1990s was rife with extreme currency protection by fixing exchange rates. This could be somewhat understandable since the Som was a new currency being floated for the first time. However this led to problems wherein the official exchange rate was superseded on the ground by a "Black market" exchange rate- and this created amongst other things, corruption, smuggling and other inefficiencies, all of which did not help Uzbekistan on its journey as a new sovereign nation. Having said that, it did not do as badly as many other new Soviet states- partly because it was in a decent place in the beginning itself. The economy was dependent on Cotton,  and mining of  Gold, Uranium and Copper. Because the exchange rate was forcibly strong as a policy choice, it could not participate in the open market for the export of these commodities at at a time when pricing for these was high- which means Uzbekistan would have left a lot of money on the table that could otherwise be used for its further development.  In addition, there was a distinct "closed economy" spirit that Asimov had opted for wherein he was promoting import-substitution by spending a lot of capital on creating petrochemical factories that did not amount to much. The misallocation of capital also beleagured the nation somewhat. These issues were partly offset by good governance and stability - wherein the government was able to collect rents on its cotton and mining industries.  All the sales of these items had a large amount of proceeds directed to the government by taxes - and this money was then used to build much-needed infrastructure. This could be said to have been accomplished at a decent level. Corruption was still endemic, though

However, at the time of death of Karimov in 2016, the new leader Shavkat Mirizoyev introduced major reforms by letting the currency flow with the market and get rid of the black market exchange rate. This alone encouraged Foreign investment as well as SME investment domestically- as people could now work around a real exchange rate that there would be a way to predict the value of and plan around.  There were also other reforms in Agriculture wherein prices and quotas that had been in place before were gradually lifted moving the nation towards a markedly more open economy- although not completely open.  Aside of economic reforms, there were many political prisoners freed, official channels to complain about the government were set up ( unheard of previously) and so on- but stopped short of a free press wherein anyone could print anything. Legal reforms also progressed and international companies were given aribitration protection. State banks were recapitalised and foreign banks allowed entry. All in all, several reforms were undertaken gradually from 2016 onwards all of which has seemingly helped Uzbekistan charge forward. However, it is difficult to say if all the economic data around GDP growth rate is a consequence of these reforms or whether it is more to do with overall improved external conditions. One had to buttress these reforms against the fact that there was no massive privatization, no political pluralism and not yet the presence of a significant capital market.  This is potentially a line of inquiry that could be pursued.

In any case if we look at GDP per capita, and show that it has grown- it does not reveal the improved human condition. It can be skewed to a few rich oligarchs that does not help the common Uzbek. Median Income is a better indicator but information on this is not publicly available. It can be estimated but it has to be estimated not simply as a flat factor of GDP per capita- since Median income can vary non-linearly to GDP per capita. If it can be shown that Median Income has indeed increased at a HIGHER rate in the post 2016 period than in the period from 1990- 2016, then it could perhaps be argued that Mirizoyev Reforms have been a force of net good.