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WAYS TOMODERNIZATION OF THE AGRICULTURAL SECTOR IN UZBEKISTAN
Allaerov Shamsiddin Amannullaevich, Associate Professor, PhD,
Deputy Dean of Finance and Economics Department, Tashkent Financial Institute
The importance of agriculture in the economies of many countries in the world can not be overestimated.The abundance of solar heat and light, mild short winters, fertile irrigated soil, good pasture give the opportunity to grow cotton and other valuable heat-loving culture, to obtain high and stable yields, to raise cattle in Uzbekistan. Currently, in Uzbekistan, the main objectives and framework of modernization are determined and now the key terms and mechanisms are being formed. Despite the state programs of agricultural development provided significant financial funds, in my opinion, foreign investments should be the additional mechanism for development and modernization of agriculture and agro-industrial complex in general, as an effective instrument of technology transfer, development of processing industries and infrastructure.
Keywords:modernization, the global financial crisis, agriculture, foreign investments and innovation.
At present, the most important issue in developing countries and countries with transition economy is modernization of economic processes and transition to innovative development. Without this, it is impossible to overcome the gap between developing anddeveloped countries and strengthen the position in the global economy. Modernization became more significant since the beginning of world economic crisis in 2008. The global financial economic crisis spread to most countries over the world, demonstrated the exhaustion of various models of inertial development based on a simple reproduction of existing economic potential. The experience of many countries shows that the modernization is long and complicated process which takes decades. The importance of agriculture in economy of many countries can not be overestimated. Agro-industrial complex and agriculture as its main component, is significant share of gross domestic product of CIS countries. Despite the fact that the share of agriculture in gross regional product has a tendency to reduce through the development of other sectors, it still plays an important role in the national economy of some countries in the region. For example, in 2008 in Russia the share of agriculture in GDP was 4.5percent, in Kazakhstan - 5.6percent, in Belarus - 8.3percent and in Ukraine - 8.6percent . In Uzbekistan, agriculture as a major industry is one of the priority directions of Uzbekistan's economy. Natural conditions are favorable for the development of agriculture in the republic. The abundance of solar heat and light, mild short winters, fertile irrigated soil, good pasture give the opportunity to grow cotton and other valuable heat-loving culture, to obtain high and stable yields of fruits and vegetables and to raise cattle, poultry and fish. Speaking at the government meeting on the socio-economic development of the country in 2010 and key priorities for 2011, President of the Republic of Uzbekistan, Islam Karimov noted that "Over the past 10 years the share of agriculture reduced from 30.1 percent to 17.5 percent. At the same time reducing of the share of agriculture in GDP has occurred with high rates of growth of agricultural production, which amounted to 6,8 percent in 2010 against 2009 and rose 1,8 times against 2000" . At present the share of agriculture amount to 25.6 percent of GDP, 90 percent of food, 55 percent of foreign exchange earnings and about 70 percent of total turnover.
Table № 1 
Registered companies and organizations in agriculture
Agricultural outputs, billion soums
percentage against GDP
N / A
This sector provides with necessary food the country and with raw materials various industries. Annually growing 3,5 - 4 million tons of raw cotton the country is the world largest producer and exporter of cotton. Other important products of agriculture are raw silk, fruits, vegetables, grapes, melons, astrakhan, wool, many of which are exported to neighboring countries. According to expert estimates due to export of fruit and vegetables the Republic could increase foreign exchange earnings up to 8,10 billion euro per year.
Gross production of agriculture in 2010 amounted to 15,810.7 billion soums, which is 25,1 percent of growth against 2009. Last year Uzbekistan had yield more than 7.0 million tons of grain, of which about 2,61 million tons of marketable grain and 272,1 thousand tons of seed grain has been deposited in the state. In all categories of farms about 8,267 million tons of vegetables, fruit and potatoes were produced with the growth rate from 2,1percent to 5,5 percent . As a result of the gradual realization of economic reforms in cattle breeding farms the number of cattle (8,893 million heads) was increased, and at the same time growth rate was 6,9 percent. It could be noted that the proportion of farms in the gross agricultural production makes up 34,5 percent. This rate is 100 percent in cotton growing, 84 percent - in grain growing and 97 percent - in cocoon production. Commercial banks of Uzbekistan directed lax credits worth 1.228 trillion soums to agriculture (750 million US dollars) including 332.8 billion soums (138 million US dollars) for grain production and 1,006 billion soums (612 million US dollars) for raw cotton. Currently all state farms and agricultural enterprises are privatized and transformed into “shirkats” and farms, cooperatives, joint stock companies and other entities. From existing 80.6 thousand farms about 13 thousand are specialized in cattle breeding, vegetable and potato growing and over 22 thousand are specialized in horticulture and viticulture. At present area under crop of all land categories is more than 4 million hectares or 87 percent of the total cultivated area served by an extensive network of reservoirs, pumping stations, canals, irrigation canals and other waterworks. Though in the Republic there are 22,6 million hectares of land suitable for cultivation of agricultural products and 10,2 million hectares of reserve land. Unfortunately, only 20 percent of required water is formed in the Republic, the remaining 80 percent comes from neighboring countries: Kyrgyzstan and Tajikistan. At the same time it should be noted that 92 percent of water is used for the needs of agricultural production. Therefore, it is necessary to emphasize that today the main issue for the government of the Republic is rational spending of water in order to achieve more significant outcomes. In addition, there is a lack of financial funds needed to create new farms, modernization of existing ones, as well as introduction of advanced technologies for growing and processing agricultural products. Despite the government programs of agricultural development provided significant financial funds, these measures are insufficient to create a competitive, efficient industry. Therefore, within the framework of modernization of agriculture it is necessary, primarily, to provide qualitative renewal of agricultural machineries, especially high-performance tractors, combines and transportation. Unfortunately, in the country it is not paid enough attention to the studying and applying experience of advanced countries, especially, in cattle breeding, grain and potato growing sectors as well as usage of modern irrigation systems and energy efficient technologies, which is especially, important in our climatic conditions. For example, in cattle breeding the average milk yield over the past five years has remained at 1.7 thousand kilograms, while in Denmark and South Korea this rate is 8-9,5 thousand kilograms, in Hungary, Germany and Netherlands is 6 -7 thousand kilograms.
Agriculture as a leading sphere of our economy needs modernization, technical and technological renovation of a whole complex including all sectors and industries. In my opinion, foreign investments should be an additional mechanism for development and modernization of agriculture and agro-industrial complex in general, as an effective instrument of technology transfer, development of processing industries and infrastructure. The main factor stimulating investments in agriculture is availability of land and water in certain areas, the rapid growth of demand as well as increase of agricultural product import in different countries including Brazil, India, China, Russia, and South Korea. International demand of investments in agriculture is increased also due to the development of new initiatives on bio-fuels, which leads to attracting investments in grain, sugar cane and oilseeds. These trends are accompanied by a rapid increase of food prices related with increasing level of consumption. Foreign investments in agricultural production are increased in the world economy, although their total size remains limited. Total volume of foreign investments amounted to 32 billion US dollars in 2007 (UNCTAD, 2009) . And if in the beginning of 2000's foreign investments were directed mainly at industries producing food and beverages, now multinational companies (MNCs) also invest in agricultural production and contract farming, thereby increasing the actual extent of their participation in this industry.
At present Uzbekistan attracted about 700 million US dollars to the agricultural sector for infrastructural and institutional projects through loans and grants from international financial institutions such as World Bank, Asian Development Bank, Islamic Development Bank. Also there are several programs of various countries for supporting the agricultural sector of the Republic. For example, 3 year program “Development of Agricultural Relations” (AgLinks) amounts to 5 million US dollars, financed by the United States Agency for International Development (USAID) that aims to improve grape yield and some kinds of fruit trees such as pear, apple, quince, cherry and peach. It informs that the program also collaborates with water users associations, agricultural firms, recently privatized collective farms, and other organizations inviting farmers to visit the demonstration parts of the project. The purpose of this program is to develop potential of fruit and vegetable farms in Uzbekistan.
Currently, in Uzbekistan the main objectives and framework of modernization are determined and now the key terms and mechanisms are formed and the number of agents on innovation development is increased. The country is at the beginning of a new modernization “shoot”. The new stage must develop the potential of agro-raw complex of the Republic.
Development of domestic agricultural production is possible only with integration of all correspondent business participants. However, despite a lot of advantages which are gained by industrial agricultural production subsystems of agro-industrial sector and which are implemented by them during integration, in many cases they are not used in full. As a result, firstly, this reduces the positive synergy between the participants. Secondly, this is evidence of a certain imbalance in management of organizational development and conjugation of target interests. It seems possible to eliminate these shortcomings and create conditions for mobilization of integration benefits through formation of cluster units.
Modernization of agriculture sector through innovation can provide more effective usage of competitive advantages in production of various kinds of food. Besides investments in development of resource base, modernization and development of new processing facilities for production of competitive products on foreign markets, it is necessary to mention other directions of investment in agriculture, which are equally important for development of viable, profitable sector of the countries in the region.