By Lieutenant Colonel Khalid TaimurAkram (Retd), Executive Director,
Center for Global & Strategic Studies (CGSS), Islamabad
Agriculture is one of the basic and vital sectors of the national economy of Uzbekistan and is considered as a backbone of the social, economic, and cultural development of the country. The agricultural sector in Uzbekistan is not just associated with providing food for the populous, the sector also provides the raw material for the progress and development of various industries. It is crucial in providing employment opportunities for the nation, therefore holds immense significance for the economic development of the country. Being one of the biggest industries, the agriculture sector is one of the top priorities for key reforms in Uzbekistan. The government pays great attention to the progress and development of the agricultural sector and is continuously taking measures to further strengthen and enhance its efficiency.
For the development in this extremely important sector, the Government in Uzbekistan under the meticulous and visionary leadership of the President of the Republic of Uzbekistan – His Excellency ShavkatMirziyoyev, has attempted to diversify agricultural policy and is extensively working on to bring radical reforms in the agricultural sector by transitioning into a liberal market economy. Efforts to optimize the effects of the reformed agricultural sector, new agribusiness enterprises, and industrial progress were the key achievements of public policy. As a result of the gradual transition strategy, Uzbekistan created its own expanding agricultural input-output market. To ensure food security in the country, the Government has increased wheat-growing areas and developed wheat production technologies, launched a quota-based system for cotton and wheat producers, reformed land ownership and tenure, and introduced a new type of farmers who acts independently under governmental support. The growing effect of economic diversification is mitigating the risk of the deterioration of the quality of life in the whole region. Over the last two decades, the agricultural sector in Uzbekistan has managed to maintain stable growth constituting an annual 6-7%. To diversify its economy, the country has adopted a more effective and competing strategy to overcome the issues faced by the agricultural sector.
Challenges to the Sector
The agricultural sector in Uzbekistan faces several challenges including population growth, climate change, desertification, deforestation, and scarcity of water for irrigation due to shared rivers among all five Central Asian Republics.The agricultural sector in Uzbekistan has experienced a significant slowdown in the recent past, however, due to progressive policies of the current leadership, the country has managed to raise the impetus for economic and agricultural development.
Food security is another important challenge in Uzbekistan. Major factors affecting food security include population growth, low incomes, increased demand for land, water, and energy resources, and increased risk of climate-change-related threats from droughts, flooding, hail, etc. In recent years, as a result of a series of measures to bolster food security in the country, Uzbekistan has strengthened its position in the world, gradually improving its position in the Global Hunger Index for 2018, where Uzbekistan is now ranked 52nd out of 119 countries. However, there remain significant on-going challenges to ensure the stable supply of food for vulnerable segments of the population, increasing the purchasing power of low-income households, and preventing sharp fluctuations in prices and outputs.
High-Cost Low Profit
An important factor in ensuring agricultural competitiveness is the development of more integrated and efficient value chains. The current high costs for collection, transportation, storing, processing, packaging, and certification of products from the field to final consumers significantly reduce the competitiveness and profitability of Uzbek agricultural producers and processes. The low level of development of the food industry limits the capabilities for increasing the volume of production of high value-added products. To attract investment in agri-food market infrastructure there is a need to develop new financial instruments, improve the business climate and design targeted measures aimed at expanding the agri-food processing sector and promoting the development of more integrated and accessible value chains.
Only 20% of the 20 million hectaresof cultivated agricultural land is currently irrigated. Over the last 15 years, the availability of irrigated land per capita has declined by 24% (from 0.23 ha to 0.16 ha). This is the result of population growth, reduced water supply, and the transfer of agricultural land to other categories of land fund. According to forecasts, over the next 30 years, irrigated land may be reduced by another 20% to 25%.Approximately 80% of the country’s water resources come from transboundary watercourses. The existing water infrastructure is facing challenges however, the government is taking prudent measures to overcome these challenges by reconstructing these facilities and introducing effective policies. Currently, drip irrigation is implemented on only 1.7% of irrigated lands yet water supply expenses are being augmented to adopt water saving technologies.
Agricultural development through multidimensional reforms in Uzbekistan underwent series of market-oriented reforms such as the introduction of business activity, different types of land ownership, permit to use natural resources for agricultural businesses, different types of agro-industrial plants, financial and technical support of the government. Multifaceted reforms have led to improvement in all aspects of the life of the population and an increase in economic performance. Crop diversification, yield maximization, and land use optimization frameworks were launched and have been operating in some parts of the country with considerable successes which can be seen in enhanced life quality of the population, market saturation, and ongoing industrial modernization programs. This allowed the diversification of the agricultural sector by developing animal husbandry, poultry farming, fish farming, horticulture, gardening, and beekeeping. Decreasing rate of poverty, quality growth, and economic activeness in people’s life reflects the socioeconomic wellbeing.
To bring a progressive change in the agricultural sector, several important reforms have already been introduced. This includes the abolition of the export monopoly of UzAgroExport which previously controlled all agri-food exports from Uzbekistan and the abolition of the system for the mandatory sale of 25% of hard currency earnings. Due to the introduction of a liberal economic system, today exporters are allowed to keep 100% of the value of their income. Liberalization of the transport service is another important aspect in this regard which has provided the agri-food exporters to use any form of transportation to move their products for export which was previously restricted to using only the national railroad system. to make the trade environment more conducive, the government in Uzbekistan has established a number of “green corridors” at various Uzbek border crossings, to ensure the smooth passage of agri-food products both into and out of the county. Furthermore, the elimination of minimum export prices; the removal of full prepayment requirements for export contracts; and a significant improvement in access to credit for horticulture agribusinesses to invest and modernize all are aimed at improving productivity, quality, and diversity of products grown and traded. All of these changes have significantly improved the efficiency of agri-food trade flows both from and to Uzbekistan.
Cotton production is of particular importance in achieving sustainable economic development of the country. It is known that Uzbekistan is one of the leading places in the production and export of cotton fiber. The government has also introduced a commercialization program that promotes the establishment of integrated private sector cotton clusters, and in 2019, these new cotton clusters were responsible for managing over 50% of the cotton-growing areas in Uzbekistan.
In the wheat sector, significant reform progress has also been made in recent years, including the removal of the state price subsidy for ‘social’ bread. This inevitably led to an increase in average household expenditures by 4% which was compensated for by the introduction of social measures to support targeted vulnerable households. To stabilize the market, wholesale market prices for flour were fixed in 2018. Subsequently, in 2019, the state wheat procurement price was increased, as part of a gradual policy of closing the gap between state and world market prices to be introduced over the next two years, thereby allowing for full liberalization of the wheat sector by 2022. Most significantly, the government launched a process for the design of a new agri-food development strategy.
Uzbekistan has strived for self-sufficiency in production and food security fields and the recent trends suggest that the country has been able to achieve this goal. Uzbekistan’s agricultural policy has undergone significant changes after His Excellency Mirzeziyov became the President. The country adopted a more liberal economic approach and abolished state-controlled agricultural enterprises and the collective sector. The farmers were given more liberty by providing ownership to them and above all new technologies were adopted by the government to revolutionize this extremely important sector. Currently, more than 67,800 agricultural farms are operating in Uzbekistan. In the year 2018, 17500 new farms were established in the country and the agriculture sector provided employment opportunities to more than 250 thousand people. Uzbekistan has introduced a system of preferential crediting of agricultural projects and expanded service networks in rural areas. Under this, the government supplies fuel and lubricants, biological and chemical fertilizers, plant protection products, seeds, and others to the farmers.
The share of horticulture in agricultural exports has increased rapidly in recent years. In 2017 horticulture exports rose to 43% and in 2018, to over 60% of total agricultural exports, with much of this export growth coming from non-traditional markets in East and South Asia. This emerging trend signals the beginnings of a very significant opportunity for the agri-food sector which will be further accelerated through targeted policy reforms and the attraction of new investment.