This Country Study provides an outline of a Strategy for Growth, Employment and Poverty Reduction in Uzbekistan. It recommends that the country seek to achieve a six per cent trend rate of economic growth based on increases in domestic public and private investment, instead of relying, as it currently does, on external demand for primary commodities. It also recommends measures to increase the employment intensity of growth and reduce inequality so that the country?s pattern of growth could become broad-based and inclusive. In order to achieve these goals, the study calls for more expansionary fiscal policies, focused on increasing public investment; moderately more accommodating monetary policies, designed to maintain positive but low real rates of return to stimulate private investment; and a managed exchange rate, targeted to boost the country?s international competitiveness and diversify its economy. The study notes that Uzbekistan does not lack savings; what it lacks are the means to mobilize its ample but underutilized private domestic savings. For mobilizing such savings and directing it to productive private investment, the study recommends an industrial policy, which could deploy various measures, such as tax and subsidy instruments, directed commercial credit and public-sector matching funds for private investment. The study recommends that an investment bank, based on joint public-private ownership, should spearhead industrial policy. Directing resources from capital-intensive sectors, formerly favoured by the government?s import-substitution policies, to internationally competitive employment-intensive sectors would be part of such an industrial policy, especially in order to enhance productive employment. The study favours supplementing such measures, which promote growth and employment, with more poverty-focused policies and programmes, such as an enlarged, rural-focused public works scheme, doubling public investment in agriculture and providing small farmers with greater access to land, other productive resources and credit. The study also calls for strengthening the country?s social policies, education and health in particular, and its system of social protection. For health, it emphasizes strengthening primary health care and, for education, it stresses ensuring a full 12-year cycle of secondary education, including professional and vocational education. It also calls for improving the efficiency and equity of the country?s community-based mahalla system of social protection, which it believes has functioned fairly well during the transition period.
