By Viktor Abaturov, Center for Economic Research and Reforms
Victor Abaturov in his analytical article examines the socio-economic development of the Republic of Karakalpakstan in recent years and the prospects for further transformations within the framework of the New Uzbekistan Development Strategy.
The President of Uzbekistan visited the Republic of Karakalpakstan to get acquainted with the development of the region and the life of the population. It is no coincidence that the head of state paid so much attention to the region.
On the one hand, the Republic of Karakalpakstan has a huge development potential – large natural, mineral and agricultural resources, labor potential, road, transport and engineering and communication networks, industrial infrastructure, convenient geographical location and a considerable territory. But, on the other hand, the republic is in a difficult environmental situation associated with the Aral Sea. Climate change on a global scale creates many negative problems for this region. According to the UNEP Aridity Index, most of the region is classified as an arid zone and therefore highly prone to land degradation. This has an extremely adverse effect on people’s health, incomes and living standards. That is why the issues of socio-economic development of the Republic of Karakalpakstan are in the focus of special attention of the country’s leader.
Last year, for example, Shavkat Mirziyoyev began his election campaign with Karakalpakstan in order to learn more about the situation in this difficult region. During that visit, he ordered the creation of more than 160,000 new jobs in the region in order to solve one of the main problems of the republic – unemployment, and as a result of a promise made during that visit, schools in Karakalpakstan began to provide free lunch for students in grades 1-4 at the expense of the budget. Earlier, on November 11, 2020, a Presidential Decree “On measures for the comprehensive socio-economic development of the Republic of Karakalpakstan in 2020-2023” was issued, which set out the tasks of increasing the economic potential of the region, employment and the welfare of the population, the effective use of opportunities and resources of Karakalpakstan.
This year, attention to the socio-economic development of the Republic of Karakalpakstan has increased significantly. Ahead of this visit, teams of experts visited the region to analyze the situation and identify existing problems, on the basis of which the necessary decisions will be made. Each district of Karakalpakstan is assigned to one of the regions of Uzbekistan. During this trip of the President, for the first time in history, all the khokims of the regions of Uzbekistan were in Karakalpakstan, who came with their teams to develop specific projects to support this region. In particular, the city of Muynak is assigned to the Tashkent region, and the capital of Karakalpakstan, Nukus, to the khokimiyat of the city of Tashkent, which will assist in the development of the drivers of the city of Nukus – the food industry, the building materials industry, and tourism. With this in mind, a program of complex socio-economic development of Nukus in 2022, which provides for the implementation of 10 projects worth 1 billion 361 million soums with the creation of 3 thousand jobs. It should also be noted that this year the campaign “Do Business in Karakalpakstan” is actively carried out in all regions of Uzbekistan. Within the framework of this company, 264 projects have already been developed for a total of $350 million. In total, 811 projects worth $332.1 million should be launched in Karakalpakstan this year, due to the implementation of which more than 14.7 thousand new jobs can be created in the region.
The economy has developed especially dynamically in recent years. The region’s gross domestic product (GRP) over the past five years (at the beginning of 2022) increased by 32%, industrial production – by 30.5%, agricultural production increased by 20%, the volume of market services by 75%, the volume of foreign investment increased by 3,810.6 million US dollars, the number of operating enterprises increased by 59%, and the number of new jobs amounted to 127.3 thousand. Particularly noticeable progress in the development of the economy was achieved in 2021, when the economy of the Republic of Karakalpakstan was recovering steadily after the pandemic-related decline in growth rates in 2020. Gross Regional Product in 2021 grew by 7.4% compared to 2020 and reached 26.3 trillion soums, and its per capita volume grew by 6.0% compared to 2020 and amounted to 13.6 million soums. Industry developed dynamically in 2021. Industrial products worth 16621.3 billion soums were produced, which is 7.4% more than in 2020, thanks to which the republic took 8th place among the regions of the country in terms of industrial growth. At the same time, 22.4% of industrial output was produced by small businesses and private entrepreneurship. In 2021, the share of textile products increased to 13.6% (12.6% in 2020), the share of chemical products increased to 61.6% (59.8% in 2020), while the share of food decreased slightly by increasing the share of other sectors- to 14.9% (16.4% in 2020). The volume of industrial production per capita also increased by 17.3% compared to 2020, amounting to 8584.9 thousand soums. According to this indicator, the region already ranks 6th among other regions.
But the most dynamic development in Karakalpakstan last year was in the service sector, which accounted for 8.3 trillion soums, which is 19.3% more than in 2020. The share of services in the structure of the gross regional product of the region reached 33.6%. Moreover, the growth of individual areas of the service sector occurred unevenly. In 2021 relative to 2020, education services increased by 36.3%, financial services by 27.7%, health care services by 22.5%, transportation services by 22.0%, real estate services by 20.9%, repair services for various personal appliances by 19.2%, and personal services (hairdressers and beauty salons) by 15.3%. Here it should also be noted that 43.6% of the volume of services provided in the region in 2021 was the share of Nukus. But, nevertheless, in a number of districts the growth rate of the sphere of services grew rapidly. Thus, in Takhtakupir, Muynak and Buzatau regions, they were 123.5%, 121.1% and 129.5%, respectively. Dynamic growth rates in 2021 were also observed in construction (10.5%), retail trade turnover (8.8%), consumer goods production (6.1%). In agriculture, they were slightly lower – the growth was 3.7% compared to 2020, and the volume of output was 12.3 trillion soums. Investments in fixed capital grew by 2.1%, reaching 7.9 trillion soums. Karakalpakstan’s participation in Uzbekistan’s foreign economic activities is also expanding. Thus, in 2021, the foreign trade turnover of the region was about $657.2 million. The trade balance of the region maintained a positive balance. In 2021, the Republic of Karakalpakstan traded most with China, the share in trade with which was 23.2%, Russia – 18.9%, Turkey – 16.4%, Kazakhstan – 9.7%, Latvia – 5.0% and the Republic of Korea – 4.7%. Exports increased by 15.4% compared to the previous year and amounted to 418.6 million dollars. It is quite indicative that the export of machinery and equipment, i.e. products with high added value, increased sharply, which increased by 7.62 times. At the same time, export of cotton fiber increased by 1.75 times, and goods of chemical industry – by 1.12 times.
In 2021, there was also a significant increase in imports by 35.3%, which reached $238.6 million, due to the need to modernize the economy of Karakalpakstan. This is evidenced by a significant increase in imports of machinery and equipment at 1.71, which accounted for 46% of total imports. Import of services increased by 1.58 times, energy resources by 1.44 times and chemical industry goods by 1.16 times.
Due to Karakalpakstan’s negative environmental situation, “green energy” is receiving a lot of attention in its economic growth. As a result, all districts will gradually adopt new renewable energy capacities, including at the home level, in compliance with the corresponding resolution of the head of state. In the Khodjeili district, for example, 48 solar modules with a total capacity of 14.4 kW were installed on the top of a recently constructed multi-story residential building.
Wind energy is also developing in Karakalpakstan, so last year an international tender was announced for the construction of a wind power plant in this republic, in which about 20 foreign companies applied. This tender was won by ACWA Power from Saudi Arabia, which is investing $108 million in this project. The company offered the lowest tariff – 2.56 cents per 1 kilowatt-hour of electricity produced under a public-private partnership. According to the contract, the power plant, located on the territory of Karauzyak and Beruni districts of Karakalpakstan, should be launched in mid-2023. It will generate 360 million kilowatt/hours of environmentally friendly electricity per year. The project provides for the installation of 25 windmills, the construction of a 20-kilometer power transmission line with a capacity of 220 kilowatts, which will be fully integrated into the country’s energy system.
President Shavkat Mirziyoyev laid a capsule in the first stone of this station during his current visit to Karakalpakstan. “Three wind farms with a capacity of roughly 1,800 megawatts will be operational in the region in the next five years,” the head of state remarked.
The Republic of Karakalpakstan’s innovative development is also a priority under the current program. Shavkat Mirziyoyev signed a resolution in July last year titled “On measures to implement the remarkable resolution of the United Nations General Assembly of May 18, 2021” declaring the Aral Sea region a zone of environmental innovation and technology.
According to this decree, the Academy of Young Scientists and the Technopark of Youth are being created in Nukus to support novice scientists and researchers, which will open a laboratory with a genetic bank of plant seeds, a business accelerator and a training center at the International Innovation Center of the Aral Sea Region. It is also planned to introduce electronic mapping and create a database of endangered flora and fauna.
Testing laboratories will be modernized and logistics services will be established for the delivery of samples to the laboratory. It is planned to form a complex center for biochemical analysis in order to determine the bonitet score of saline soils. A comprehensive assessment will serve to identify the health needs of local residents against the backdrop of dramatic environmental and socio-economic changes.
Ecological innovations are already being successfully implemented. So, last year in the Chimbai region, a generator for the production of drinking water from atmospheric air was put into pilot operation, which allows producing from 12 to 30 liters of water per day. This device is adapted to places where drinking water is not available, and its delivery is quite expensive.
Participation in international life
Thanks to the ongoing policy, the participation of the Republic of Karakalpakstan in international life is also growing. Thus, last year the chairmanship of the SCO passed to Uzbekistan. Among the main initiatives put forward by President Mirziyoyev in his capacity as chairmanship is the SCO Green Belt program, which provides for increasing cooperation between the organization’s member countries in the field of environmental protection. And it is very symbolic that the first event under the chairmanship of Uzbekistan in the organization took place in the most environmentally difficult region of the country – in the city of Nukus, where in October last year a meeting of the Council of National Coordinators of the SCO member states was held with the participation of representatives of Russia, China, Uzbekistan, Tajikistan, Kazakhstan, Kyrgyzstan, India and Pakistan.
In order to successfully achieve the goals of socio-economic development, the effectiveness of the mechanism for managing these processes is of great importance, which should ensure the coordination of efforts at the republican, regional and local levels. And this year, such a mechanism is being introduced in the Republic of Karakalpakstan.
A new system of interaction between mahallas and authorities is being introduced. “Project groups” have already been created in the region, headed by khokims of districts and cities, which will become a link between ministries and departments, commercial banks and other structures and residents of mahallas. The purpose of the activities of such groups is to identify untapped economic potential, attract interested entrepreneurs to its implementation and organize their interaction with mahallas.
In addition, a situational center for investment projects has been created in the city of Nukus, the activities of which the head of state got acquainted with during his current trip to the region. On the basis of this center, a unified system for the formation, implementation and monitoring of business projects has been formed, which makes it possible to ensure operational interaction between ministries, departments, regions and organizations on the principle of a “single window”. Three groups operate in the center – regional projects, strategic development and operational assistance to entrepreneurs. In addition, the Council of Entrepreneurs has been established in Karakalpakstan, which effectively interacts with project teams in discussing new ideas and proposals, and also actively involves entrepreneurs in their implementation.
In conclusion, it should be said that the special attention shown in recent years to the socio-economic development of the Republic of Karakalpakstan is already bringing very significant positive results. The Republic has significantly improved its positions in a number of important indicators. This year, a mechanism is being created to ensure the consolidation of efforts of all levels of government and all regions of Uzbekistan to support the development of this region. And we can confidently say that these efforts will not be fruitless, and the most difficult region in terms of its environmental conditions will be able to achieve impressive results in its development this year.