Opening Session of the 43rd Annual Meeting of the Board of Governors of the Asian Development Bank - Islam Karimov

Speech | 4 May 2010

Address by the President of the Republic of Uzbekistan H.E. Mr. Islam Karimov at the Opening Session of the 43rd Annual Meeting of the Board of Governors of the Asian Development Bank on 4 May 2010 in Tashkent, Uzbekistan

Dear President Kuroda,
Esteemed Governors,
Distinguished representatives of foreign states and the guests,
Ladies and Gentlemen,

First of all, allow me to cordially welcome the participants of the 43rd Annual Meeting of the ADB Board of Governors, the representatives of the high–profile international organizations and all guests who have arrived in Tashkent.

It is a great honor for us that the capital of our country is the first among the states of Central Asia and Caucasus that was chosen as a venue to hold this important event, and we would like to express the sincerest gratitude to the governments of the ADB member–countries that took this decision.

In my speech I would like to briefly touch upon some issues which have an immediate relation to the today's agenda.

The past 2009 became truly the year of serious stress test for the world economy, and practically there was not a single country which avoided the negative consequences of the global financial and economic crisis.

And today, despite the assessments of the respected international analysts and experts that the most acute and rather hurting phase of the crisis is overcome, nevertheless we are facing very complex, quite painful and lasting process of economic recovery.

While analyzing the problems that emerge in the course of addressing the crisis of the world economy, we ought to pay our attention, above all, to unstable and low growth rates, outstanding high unemployment, notable deterioration of financial state of the real sector of economy and decreasing of the population's real incomes.

The large fiscal deficits taking in some countries threatening scales and growth of a public debt may lead to a serious tension with regard to paying off these debts and possible defaults.

The low level and in some cases decline of domestic demand are being observed, and this, in its turn, hinders return to stable and sustainable output growth rates.

We believe that we should agree with the opinion of many leading world experts that the excess liquidity and further pumping banking and financial sector with financial resources create conditions for an outburst of speculative capital, inflating the so–called bubbles on the stock and commodities markets and these factors may well lead to a new collapse on the financial and foreign exchange markets with all related consequences in the future.

It goes without saying that growing emission and increase of money supply bring about a potentially dangerous situation of inflation processes.

We have to speak time and again that many, especially the developed countries, are carried away by protectionist measures, which first and foremost trigger significant problems for the developing countries and in general for recovery and development of the world economy.

I am not mistaken, if I say that the most debated topic on the regional and global levels by experts and officials is a state regulation of the banking and financial sector, mechanisms and instruments to ensure a systemic control over banking capital, as well as the role of the international financial institutions in this.

In the course of discussions on this topic it is of interest some suggestions, in particular, related to establishing an international financial institution which could control the operations of financial and banking sector on the global scale. There are proposals to entrust this institution the control over speculative banking operations on the world market, including the sphere of derivatives and other similar securities, which can imbalance the international trade and international financial market as a whole.

In this respect, in our opinion, the reforms proposed by the U.S. President Barack Obama arouse a big interest and deserve support in terms of establishing a special agency to control the operations of the U.S. financial institutions and limit the risky deals with derivatives at the expense of taxpayers.

It is believed that if the ongoing and long–lasting discussions and debates on this topic result in a reasonable solution acceptable to all parties, then, undoubtedly, this will become one of the biggest achievements in resolving the crisis.

Dear participants of the meeting!

It is obvious that there is no need to prove that the degree and depth of susceptibility of each particular country to the impact of the world crisis, above all, depends on the model of reforms being implemented, sustainability and reliability of the financial–economic and banking systems and to what extent the protective mechanisms put in them are strong.

In this respect, I would like to briefly touch upon the Uzbek model of development and reforming the economy adopted in the early years of our independence in 1992. This model is built on the five principles, the essence of which is as follows:

First – deideologization of the state system and priority of economy over politics.

Second – in the transition period from a planned and distributive system to the market system the state must take on the role of a principal reformer.

Third – to ensure the rule of law, i.e. the law is equal for everyone.

Fourth – step–by–step and gradual implementation of reforms. We say: "Don't destroy the old house, until you build a new one".

Fifth – implementation of a strong social policy during the transition period from one system to another.

Today we have all grounds to state that during the past period, in particular, during the period of extreme impact of the crisis processes, this model has completely justified itself.

The sufficient resources and a reliable margin of safety of the financial and banking system created during the past period, prudent and balanced economic policy, the measures to protect the economy against the influence of a speculative capital, unmanageable turmoil and lack of control on the world financial and stock markets, as well as the strict control over the macro—economic balance of the economy, — have had a profound importance in mitigating the destructive impact of the crisis.

The timely, adequate and targeted nature of the Anti–crisis program for 2009–2012 adopted in Uzbekistan have played an enormous role in countering the crisis and neutralizing its negative consequences.

Along with rendering the needed assistance to the banking sector, the support, firstly, of the financial stability of the real economy, easing the tax burden and providing this sector, especially the export–oriented enterprises with necessary privileges and preferences, as well as the measures to reduce costs and raise profitability through modernization, technical and technological re–equipment and diversification of production, — stood as the most important priorities in implementing the Anti–crisis program.

The exclusive attention being paid in the country to developing the services sector, small businesses and private entrepreneurship played a vital role in tackling the crisis and ensuring sustainability of the economy's development.

The implementation of the large–scale social, infrastructure, transport and communication projects, through which we have addressed the tasks of creating new jobs and raising the population's incomes were rather important in achieving the objectives of the Anti-crisis program.

I would like to emphasize that the measures taken in the framework of the Anti-crisis program pursue the prospective targets that go far beyond simply countering the crisis and neutralizing its consequences.

We do realize that those countries which have by now already started laying the foundations and launching the long–term innovative projects aimed at deep structural changes and diversification of production will definitely benefit in the post–crisis period.

In 2009 Uzbekistan adopted the Program on implementing the most important projects of modernization, technical and technological re–equipment for 2009–2014. It envisages more than 300 priority investment projects worth in total over 42,5 billion dollars to renew the leading core branches of the economy, implement extensive transport and communication projects, create new modern production facilities and introduce resource-saving technologies.

Certainly, we well understand that it will be quite difficult to reach the set objectives without attracting foreign investments and providing them with necessary conditions and preferences.

Along with this, in financing the investment programs we attach an enormous significance to mobilizing the domestic resources. In 2009, in the total volume of capital investments channeled to the economy of Uzbekistan the share of domestic sources made up 68 percent and in 2010 this indicator will make up not less than 70 percent.

In implementing the long–term and large–scale projects we accord a big importance to further consolidating the potential and capacities of the Fund for Reconstruction and Development of the Republic of Uzbekistan set up in 2007. The capital of the Fund now makes up about 5 billion dollars. The main purpose of the Fund is to finance primarily the infrastructure projects and participate together with foreign partners in implementing the prospective projects to modernize and reconstruct the facilities in the core branches of economy.

For example, in 2009 the assets of the Fund were channeled to launch the construction of the state–of–the–art combined–cycle plant worth 470 million dollars at the Heat and Power Plant in the city of Navoi where we are now establishing the Free Industrial and Economic Zone and the international multimodal logistics center on the basis of the Navoi Airport.

I would like to say a few words about the enormous importance that we attach in Uzbekistan to the reform of the education system and training the qualified personnel.

Back in 1997 we started to implement the State program that envisaged full denial of the old system and transition to a 12–year free education, the integral parts of which are the 9–year general secondary school and 3-year professional-technical colleges and lyceums.

For over the last years more than 1 million 500 thousand young people have already obtained the secondary–technical and humanitarian education at more than 1,5 thousand newly built colleges and lyceums. The graduates have 2–3 majors and speak a foreign language, as a rule, English.

If we take into account the aforesaid and consider that for over the last years the education expenditures exceed 37 percent and along with healthcare expenditures make up more than 50 percent of the country's State budget, then it becomes clear what an enormous potential of qualified cadres and human capital Uzbekistan possesses.

Summarizing the aforementioned, I would like to note with satisfaction that the implementation of the development strategy and the Anti–crisis program have allowed Uzbekistan among a few countries in the world to ensure in 2009 8,1 percent GDP growth rate and the growth of industrial output by 9 percent. The growth of investments in the economy exceeded 26 percent and direct foreign investments grew 1,8 times.

In 2009 we created more than 940 thousand jobs.

The export of goods grew by 2,4 percent having ensured the considerable foreign trade surplus and stable growth of official reserves.

We have secured sustainable surplus of the state budget and by January 1, 2010 the external debt did not exceed 10 percent.

According to the projections of leading rating agencies and international institutions, the economic growth of the Republic of Uzbekistan in 2010 is expected at 8,5 percent.

Dear friends!
Esteemed guests!

Uzbekistan highly values the growing cooperation with the Asian Development Bank and considers it as the most important strategic partner which for over the last years has become for us a leading international financial institution both by the size of credit portfolio and in the framework of regional cooperation in Central Asia.

Since 1996 we have completed 11 projects worth over 520 million dollars out of allocated 1 billion 200 million dollars of credit resources. We are continuing to implement other 15 projects worth over 650 million dollars.

We note with a great appreciation that nowadays our cooperation is considerably expanding and reaching a new level. During the ADB Annual meeting in Tashkent we have signed additional four loan agreements worth in total more than 1 billion 150 million dollars, i.e. the ADB in fact has doubled its credit portfolio in our country.

Today we are fully convinced that such significant components of our cooperation as reliability and commitment to partnership, and certainly, a purposeful utilization by Uzbekistan of the provided funds shall be ensured furthermore.

Now, allow me briefly touch upon our vision of the priorities of our cooperation with the Asian Development Bank.

First, we believe that the ADB could become for us a key partner in implementing the programs of structural reforms and diversification of the economy that are extremely important for Uzbekistan. They are aimed at the deep processing of rich natural resources, mineral, hydrocarbon and agricultural raw materials to change the quality and increase the share of the high–technological and competitive goods in the export structure.

We mean implementation of the projects of modernization, technical and technological re–equipment of the leading branches of Uzbekistan's economy, including mining, oil and gas, chemical and textile industries.

The most important priorities of our modernization strategy include development of modern transport communications system, implementation of such projects as construction of the Uzbek national highway, establishment of the inter—modal logistics center at the Navoi Airport, extensive renewal of the rolling—stock and extension of the railway network.

We highly appreciate the fact that during the ADB Annual Meeting we have signed the agreement on allocating the loan worth 600 million dollars for the purposes of construction and modernization of the Uzbek national highway.

Second, this is a support and further development of the private businesses and non-state sector of the economy.

If in 1991 the non–state sector made up just less than 3 percent of our economy, then today its share in the GDP is over 80 percent, and in the certain leading branches of economy, i.e. agriculture, construction, telecommunications, retail and services, the private form of ownership equals to about 100 percent.

Along with this, we see a large prospect in further expanding and enhancing the positions of the private sector of economy, in particular, in such sectors as electric energy, chemical, light, food, electro–technical and machine–building industry, in the banking and financial services, and other leading branches of the economy.

Third, to develop cooperation to further reform and strengthen material resources of agriculture and related branches.

One should not forget that in the Republic of Uzbekistan more than 95 percent of agricultural products are cultivated on irrigated lands, therefore introduction of the latest water–saving technologies is vitally significant given growing shortage of water resources in the region.

In such conditions we will have to accomplish the large–scale works to radically improve and reclaim irrigated lands that suffer from massive salinization and here we see a prospective direction of cooperation with the ADB.

Fourth, to support social sector development, strengthen the modern basis of the education and healthcare systems.

The support of the country's potential of secondary, professional–technical and higher education, the sphere of healthcare, motherhood and childhood, providing them with cutting–edge equipment, computer and information–communications technology, implementation of the advanced methods of diagnostics and treatment in healthcare, — all these aspects stand as very important directions of cooperation, where we feel a huge need.

Fifth, we appreciate that the ADB takes an active part in developing financial and banking system of Uzbekistan, including projects of improvement of public finances, allocation of credit lines for commercial banks and non–banking credit institutions, and participating in the capital of the rapidly developing private Uzbek banks.

We are convinced that in this sphere of cooperation we have good prospects, too.

Uzbekistan fully supports the ADB projects aimed at the economic rehabilitation of Afghanistan. For instance, the construction of the power line Surkhan–Naibabad–Kabul allowed in 2009 to increase the volume of electric power supplies from Uzbekistan for 6 times and ensure the round–the–clock supply of electricity to Kabul. In 2010 the volume of electricity supplies will additionally increase twofold, including the supplies to other regions of Afghanistan.

We have supported the ADB in implementation of the project on construction of the railway Khairaton–Mazari–Sharif, and consider it necessary yet to further develop the railway infrastructure in Afghanistan. This will permit to implement the project of construction of the Trans–Afghan corridor and open the shortest route for a railway transit of cargoes from Central Asia to the nearest ports of the Indian Ocean and will promote economic development of Afghanistan.

Dear participants and guests of the Annual Meeting!

During the uneasy period of the global financial and economic crisis the Asian Development Bank, its Board of Governors and the ADB President Mr. Kuroda demonstrated effective and well–coordinated work, which provided a timely reaction to challenges caused by the crisis, were able to elaborate and introduce the new instruments and non–trivial approaches to mitigate the consequences of the crisis.

Nowadays, the countries of Asia — the most dynamically developing region of the world, which managed better than others the destructive impact of the crisis, are facing the new challenges both in the sphere of economic development, ensuring balanced economic growth and in the matters related to regional stability and security. The solution of these issues requires concerted and well–coordinated work of international organizations, financial institutions and governments.

Allow me once again to express support to the Asian Development Bank and its President Haruhiko Kuroda in accomplishing their tasks and wish the participants of the Annual Meeting a successful and fruitful work.

Thank you.