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Makhmud Islamov, a Uzbekistan citizen who currently [December 2015] lives in San Francisco, has completed a study of the home country government's economic policies as compared to the MIEPA list of policies as outlined above. The study on Uzbekistan is shown below. The ratings herein are based on the following rating scale:
5.0 Perfect Facilitation of Wealth Creation
4.0 Midway between Perfect and Neutral
3.0 Neutral Effect on Wealth Creation
2.0 Midway between Neutral and Obstructionist
1.0 Perfectly Obstructionist to Wealth Creation
[Rating scale copyright Mike P. McKeever, 2015. Used herein with permission]
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Comparison of Uzbekistan's economic policies to MIEPA criteria as prepared by native student of Uzbekistan, Makhmud Islamov, studying in the US in December 2015.
RATING SUMMARY POLICY NUMBER RAW SCORE ADJUSTED SCORE POSSIBLE PERCENTAGE 1 3.0 9.0 15.0 60% 2 3.0 9.0 15.0 60 3 4.0 12.0 15.0 80 4 5.0 15.0 15.0 100 5 4.0 12.0 15.0 80 6 3.5 10.5 15.0 70 7 4.0 12.0 15.0 80 8 4.5 13.5 15.0 90 9 3.0 9.0 15.0 80 10 5.0 15.0 15.0 100 11 4.0 12.0 15.0 80 12 4.5 9.0 10.0 90 13 4.0 8.0 10.0 80 14 5.0 10.0 10.0 100 15 5.0 10.0 10.0 100 16 5.0 10.0 10.0 100 17 5.0 10.0 10.0 100 18 3.0 6.0 10.0 60 19 2.8 5.6 10.0 56 20 3.0 6.0 10.0 60 21 4.5 9.0 10.0 90 22 4.5 9.0 10.0 90 23 3.5 7.0 10.0 70 24 3.5 7.0 10.0 70 25 3.0 6.0 10.0 60 26 2.5 5.0 10.0 50 27 4.5 9.0 10.0 90 28 2.5 5.0 10.0 50 29 3.0 3.0 5.0 60 30 4.0 4.0 5.0 80 31 5.0 5.0 5.0 100 32 3.0 3.0 5.0 60 33 5.0 5.0 5.0 100 34 4.0 4.0 5.0 80 TOTAL 132.8 274.6 365.0 75.2% ===== ====== ===== =====
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1. Freedom from Internal Control 3.0
National Security Service of Uzbekistan is powerful organization who has an influence on not only political environment but also business sector. In general, starting and running a business is not hard and greeted. However, getting noticed by NSS by doing illegal activity will have negative outcome which will last for a long time. It is true that certain sectors of business are hard to get into because of the internal control. Yet, small business and entrepreneurship is totally free in a big scale.
2. Freedom of Speech 3.0
The Press is under control of Uzbek government. The law prohibits untruthful publications in any type of media. Mostly, this is regarding political posts as the government doesn’t want the population to be injected with mass information which eventually may have negative effect. Today, information is used one of the most powerful weapon in international political arena. As regards business creativity discussions and idea exchanges or playgrounds for entrepreneurship, the government does not limit anyone.
3. Effective, fair police force 4.0
Police and overall law enforcements have strong authority and presence in terms of safety of citizens. There is visible amount of corruption rate in the system. However, residents are protected by the law and the police. Their operations are not barrier to open a business in the country. The Ministry of Internal Affairs is serious government organization who oversees the process.
4. Private Property 5.0
Since independence of the country from Soviet Union the law about private property and its protection is working perfectly and other rules are adopted constantly. One example is the decree of Uzbekistan’s president “On measures to ensure reliable protection of private property, small business and private entrepreneurship, removing barriers to their rapid development” dated May 2015
5. Commercial Banks 4.0
The banks of Uzbekistan were ranked “stable” by agencies like Moody’s and Standards and Poor’s. All 30 commercial banks have small business financing sector. In 2008 the Decree of the President about saving stability of local enterprises effected positively to the economy. Until 2013 large Uzbek banks took over 117 bankrupt businesses, invested around $200 million and re-established the previously unhealthy enterprises.
6. Communication systems 3.5
According to 2014 data 19 million or 60% of total population is subscribed to mobile communication services. As regards internet usage the percentage is 38.2% of total population. In general urban population of Uzbekistan uses all types of communication methods like, cell phones, internet, mail and media tools. However, it does not mean that less developed parts of the country are totally out of any type of communication. They use cell phones and limited amount of internet.
7. Transportation 4.0
There are variety of transportation types and vehicles for both citizens and visitors: bus lines, mini vans, taxis, metro (only in Tashkent). Transportation structure varies from city to city depending on local infrastructure. For example, Tashkent as a capital offers all types of well-established transportation system. Other cities may not have all the options but the options they have works effective; Samarkand city residents enjoy fast taxis or mini vans rather than buses. In addition, air transportation is also structured in high quality as an example of international transportation.
8. Education 4.5
Raw data provided by CIA shows that Uzbekistan has very high literacy rate: age 15 and over can read and write. 99.6% of total population, 99.7% of males and 99.5% of females can read and write. Overall relationship of population to education is positive. Uzbekistan has a higher index than some European countries such as Malta (0.86), Romania (0.90) and Croatia (0.90), as well as the most industrially developed country of Central America—Costa Rica (0.87) and even Hong Kong (0.88). Other countries with successful track records of technical progress and economic growth, largely due to oil, also have lower indexes than Uzbekistan—for example Bahrain and Brunei (0.88 each), Kuwait (0.87), Qatar (0.86), and the United Arabic Emirates (0.71), Mexico (0.86) and Malaysia (0.84).
9. Social Mobility 3.0
Until recent years family oriented mentality of Uzbekistan shaped barriers to social mobility. Government kept steady economic growth at annual 7-8% but it barely effected the overall wealth of the nation. However, starting 2009-2010 government made significant efforts on sole proprietorship which is one of the ways to be employed. Consequently, the social barriers to mobility is decreasing. People are realizing that there are more talented and hardworking candidates for jobs who are not relatives or family members.
10. Freedom of Outside Control 5.0
The citizen and the businesses of Uzbekistan are under legal control and protection of official government only. Any other unofficial powers or crime syndicates have no repressive authority over the businesses, population and foreign visitors.
11. Protection of Domestic Enterprises 4.0
Uzbekistan has a reputation of “closed economy”. It is extremely hard and almost impossible for foreign businesses and franchises to enter the country. The government only allows the foreign businesses that are extremely big so that the they will have impact on whole economic sector. Automobile production can be example of it.
In addition. According to World Bank Org. net flow of FDI in capital account of the country declined from 3.2% of GDP (2011 data) to 1% (2014 data). While the country’s reputation is negative in terms of openness, the government encourages domestic enterprises to prosper.
12. Foreign Currency Transactions 4.5
Uzbekistan strictly protects it`s national currency Uzbek sum. All business transactions are incurred using the currency. There is an official daily bank limit for exchanging foreign currency (around $5000). Exchanging foreign currency into Uzbek sum is easy while vice versa could be time consuming. The country has black market rate for foreign currency which under constant government threat. However, all officially registered businesses must and are using domestic currency for transactions.
13. Border Control 4.0
Five neighbor countries share borders with Uzbekistan: Afghanistan, Kazakhstan Kyrgyzstan, Tajikistan, and Turkmenistan. Despite having occasional conflicts with the neighbors, Uzbek government handles illegal border crossings, smugglers on time and implement the punishments per international and national laws. Controversial border crossing points like Jalalabad-Khanabad (with Kyrgyzstan), Panjikent, Bekobod (with Tajikistan) and Talimardzhan (with Turkmenistan) were closed to ensure security and decrease illegal border crossings.
14. Currency 5.0
Official national currency of Uzbekistan is Uzbek sum which gained the official status in 1994. Sum has very strong presence in the economy and is the only currency of the Republic. At the moment 100 Sum, 200 Sum, 500 Sum, 1000 Sum and 5000 Sum banknotes are in use. The currency is under protection of the government and black market transactions are strongly chased by the officials.
15. Cultural, language homogeneity: 5.0
The population of Uzbekistan is almost 30 million. 80% of the citizens are Uzbeks, 6% is Russian and the rest of the ethnicities are Tajiks, Koreans, Tatars. The main religion is Islam: 88% of the population is Muslim and 9% is Orthodox Christians.
All other nationalities or representatives of other religions are comfortable with their practices. The diverse religion and ethnicities live by the same cultural values and beliefs which positively effects to business running and targeting the segments of the market. Uzbek nation is popular with their hospitality and friendliness as it is one of the key distinctive characteristics of the culture.
16. Political effectiveness: 5.0
Uzbek government always showed on time and immediate reaction to threats. Since 1991 terrorists implemented two major bombings in Uzbekistan. First was in 1999 in Tashkent where 16 deaths were occurred. Government immediately started investigation and captured all the suspects. Second time was more serious in Andijan, 2005. This time it was close to color revolution however, the government used troops and stopped the potential threat. Different sources evaluate the situation differently. However, the fact is legitimate political powers stayed on their positions and did not let the unknown power to threat the government and the citizens.
For other emergency situations like, flood, dangerous earthquake and other natural disasters Ministry of Emergency Situations are responsible for public well-being. Until now, Uzbekistan never experienced massive natural disasters that could be threat to population.
17. Institutional Stability: 5.0
The Republic of Uzbekistan uses the government structure that is adopted in 1991 in other words for 25 years which indicates to the fact that there is strong stability. However, there were changes in the structure. For example in 2002 structure of Oliy Majlis was changed to bicameral parliament: Legislative Chamber and The Senate. The changes were done in accordance to the referendum and required amendments were made to constitution. The change is should be seen as upgrade and modernization of the system in order to increase the effectiveness of the operations.
The government institutions are strongly stable in terms of structural existence which increases the predictability factor.
18. Honest government: 3.0
Another source World Bank Group evaluated the capital and time required in order to register the LLC in Uzbekistan. The estimates show that it takes only five steps, three days if all the steps are started in one day and 168,400 sums (or $61) to do the paperwork of registration (2015 data).
Moreover, World Bank statistics indicate that slightly over 60% of the businesses said court system is not an obstacle to doing business.
However, Uzbekistan is considered to be highly corrupted country according to Transparency International. The country is in 166th place of total 175 countries. Yet, the organization uses public perception as a source for their data rather than actual number of bribers or corruption cases which makes their information questionable. In addition, it is unclear that what percentage of that public actually tried to open a business.
19. Common Laws: 2.8
According to the data of World Bank the indicator of bribe frequency in courts show that Uzbekistan has regression during 1999 to 2008 which is proves the improvement towards the fairness of the system. In addition, Uzbekistan scored 2.6 points (max of 3.0) on Court Quality Index (2008 data) and 65% of local firms agreed that courts are fair, impartial and uncorrupted (2008 data).
The law structure of Uzbekistan belongs to Romano-Germanic legal family. The government utilizes the principle of separation of power among the following three:
1. Legislative: Oliy Majlis (Parliament) of Republic of Uzbekistan, Jokargy Kenes of Republic of Uzbekistan and local representative bodies
2. Executive: The President, The Cabinet of Ministers, The Minister Kenesi of the Republic of Karakalpakstan, khokimiyats of regions and cities.
3. Judicial: the Constitutional Court of the Republic Uzbekistan, the Supreme Court of the Republic of Uzbekistan, the Supreme Economic Court of the Republic of Uzbekistan, the Economic Court of the Republic of Karakalpakstan, regional, Tashkent City, district, city, and economic courts, Supreme Military Court of the Republic Uzbekistan, etc
Overall, the numbers show that Uzbekistan is showing progress in terms of fair justice improvement.
20. Central Bank 3.0
According to the website of the Central Bank of Uzbekistan, the bank is economically independent institution exercising its costs from its own revenues. International banking practice laws require central banks of the governments should be independent from the government operations.
However, IMF was able to pressure the government to utilize the policy of the multiple exchange rate system which led to significant depreciation of the national currency (sum) in 2000. This fact says that the government and the banking system gives space to external pressure that could affect the financial operations.
21. Domestic budget management 4.5
The Ministry of Finance of Uzbekistan website provides with overall income and expenditure data for last ten years. The calculations for the last three years is the following:
1. 2015 Q2 – Total income from tax collections = 17 054.8 billion sums
Total expenditure = 16 934.9 billion sums
The difference is 119.9 billion sums
2. 2014 – Total income from tax collections = 31 730.5 billion sums
Total expenditure = 31 425.4 billion sums
The difference is 305.1 billion sums
3. 2013 – Total income from tax collections = 26 223.0 billion sums
Total expenditure = 25 825.9 billion sums
The difference is 397.1 billion sums
The numbers show that during last three years the government revenue is more than government expenditure.
22. Government debt 4.5
The debt to GDP trend of Uzbekistan for last decade indicates to the government’s progress towards debt-free economy. In 2006 total government debt was 21.34% of GDP when in 2014 the number decreased to 8.7%.
External debt is around 16% to GDP which is the limit that government wants to keep and internal debt is zero percent according to Vice-premier Minister of Uzbekistan Rustam Azimov.
23. Economic statistics 3.5
Google being initial source of research already provides enough economic statistics about Uzbekistan: GDP, poverty ratio, unemployment rate, approved loans and credits, mobile-cellular subscriptions etc. However, the specific data research could be challenging depending on the targeted industry.
Overall, secondary data about general economic statistics about Uzbekistan is provided in major reliable sources like UN websites or World Bank.
24. Protection of public health and safety 3.5
Then Ministry of Health of Uzbekistan achieved visible progress in terms of public health and preventing fatal diseases during last ten years. For example, the government created positive operational climate for organizations like CDC (The Centers for Disease Control and Prevention).
Statistics show that there is positive results in terms of decreasing infant mortality rate and number of deaths from tuberculosis. Currently, infant mortality rate is 19.20 per 1000 live births and death from TB is around 2 cases per 100,000 deaths in the country. The same rate in developed countries like US is the following: infant mortality rate is 5.87/1000 live births and TB death rate is 2.96 cases per 100,000 persons (2014 data).
25. High wage policies 3.0
Since September 1st, 2015 minimum monthly salary is 130,240 sums – 48.90 USD
Average employee with Bachelor’s degree earns $600-$650/ month or approx. $8000/year
The above given average salary may not give an option to have own apartment. However, by the cultural traditions the whole family lives together: Father, mother, recent college graduated child and possible two more kids. At least two of the family members work full time. Such family model always have refrigerator, at least one TV set and possible car.
A single person who earns $8000/year can afford medium quality apartment rent with majority of the household facilities (including refrigerator) and to go to local vacation area.
26. Environmental protection 2.5
During USSR membership era Uzbekistan was assigned to produce majority of cotton to whole USSR countries. This task systematically destroyed water system of the country especially Amudarya and Syrdarya which are two biggest rivers and of course Aral Sea which later became the biggest environmental issue of not only country but the whole region.
However, the government is successfully educating the new generation about the importance of fresh air, water economy and overall environmental issues. Looking at the numbers it can be seen that Uzbekistan budgeted 1635.55 USD Million and 57.63 Euro Million to implement environment and ecology protection program for 2013-17.
27. Strong Army 4.5
Uzbekistan is strategically one of the most important countries of the region. Including this fact the government constantly upgrades the structure of the army and the arms. The country’s army successfully overcame internal security threat during early 1990’s and from terroristic attacks during 1999-2000. Besides that Uzbekistan is renewing its arsenal with Russian and US weapons. The government has mandatory military service for all male citizens: short term of one full month training/service or long-term one year military service. The military power of Uzbekistan is in 54th place among 126 countries in global military power rating.
Military budget of the country is around 1.8 USD Billion and consists of 48 thousand military personal (2013 data). The military budget is significantly low comparing to overall GDP of the country approx. 62 USD Billion
28. Foreign trade impact 2.5
For the calculation the following formula is used:
(Total Exports + Total Imports) / GDP = %
Uzbekistan’s import volume (as of March, 2015) = $3294.40 (in millions)
Uzbekistan’ export volume (as of March, 2015) = $3462.40 (in millions)
Uzbekistan’s GDP (as of March, 2015) = $62.64 (in billions)
($3.294 + $3.462) / $62.64 = 11%
Perfect balance is when the percentage is %33
29. Management of foreign current budget 3.0
According to www.tradingeconomics.com the amount of exports and imports was 3462.40 USD million and 3294.40 USD million respectively until 2015 month of March. The difference between exports and imports is the following:
3462.40-3294.40 = 168 USD million
The data from above mentioned source presents that GDP of Uzbekistan is 62.64 USD Billion. 10% of the number is 6.264 USD Billion. It is obvious that the trade surplus of 168 USD Million is significantly less than 6.264 USD Billion (10% of GDP).
30. Layers of collective action: 4.0
In regards of solving important minor local problems Uzbekistan government adopted small community governments called “Mahalla”, in translation to English it means neighborhood. This type of small self-governing communities is based on hundreds of years of national tradition that represents community of people who know each other very well and learned to solve their common problems together. However, government does not fully leaves decision making responsibility to them but creates supportive conditions towards “Mahallas” and constantly upgrades legislative laws and organizations. One of the biggest example is “Mahalla” Charitable Public Fund of Uzbekistan.
31. Pro-business climate: 5.0
In Uzbek culture there are certain types of professions and careers that indicate to high status: lawyers, principal of educational institution, ambassador and businessman/entrepreneur. The positive attraction towards small business ownership really pushed the demand for being entrepreneur. Consequently, the government created flexible and encouraging legal climate in the country through adopting new laws and changing the old ones.
32. Government enterprises 3.0
Impressive amount of Uzbekistan’s GDP consists of SOE’s (State Owned Enterprises) contributions. While privately owned businesses inputs 52.2% of GDP share, simple math proves that the rest of the GDP share belongs to SOE. There is high possibility it is because national industry leaders like “UzbekEnergo” (Energy), “O’zbeskiton Temir Yo’llari” (Railway), “Uzbekistan Airways” and more belong to government.
33. International security agreements: 5.0
Taking into the consideration that Uzbekistan is neighbor with relatively unstable countries like Afghanistan and Kirgizstan, the government looks at its external and internal security seriously. The government of Uzbekistan has the following international agreements that directly proves that the country is one of the top countries that has support of the globe in terms of security in the region:
1. Agreement with UN since 1992, March.
2. Agreement with NATO about the collaboration in project “Partnership on the way of Peace” since 1991.
3. Agreement with UNODC - department of UNO in terms of battle against international drug dealing and organizational crime since 1993
4. Agreement with OSCE (Organization for Security and Cooperation in Europe) since 1992, February.
5. Agreement on partnership with CIS (Commonwealth of Independent States) since 1991, December.
34. Protection of domestic enterprises from government mandated costs: 4.0
After the independence Uzbekistan government put impressive amount of effort on developing small business. As a result, during last ten years GDP share of small and medium business rose from 31.1% to 52.2%. In addition, government’s assistance to population who wanted to establish their business increased overall employment percentage from 49.7% to 74.5%.
To be more concrete the assistance can be seen as cutting costs of domestic taxes to small businesses by 50%, significantly simplifying the process of registration and creating positive climate for the business to government networks. Most importantly for the businesses who are paying scheduled taxes on time and showing positive growth, the government established 3 years of free of tax bureau conduction. Startups are free of mandatory taxes during first three years of their operation.
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