Review of Business and Economics Studies, 2016, том 4, № 1
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Review of Business and Economics Studies EDITOR-IN-CHIEF Prof. Alexander Ilyinsky Dean, International Finance Faculty, Financial University, Moscow, Russia ailyinsky@fa.ru EXECUTIVE EDITOR Dr. Zbigniew Mierzwa EDITORIAL BOARD Dr. Mark Aleksanyan Adam Smith Business School, The Business School, University of Glasgow, UK Prof. Edoardo Croci Research Director, IEFE Centre for Research on Energy and Environmental Economics and Policy, Università Bocconi, Italy Prof. Moorad Choudhry Dept.of Mathematical Sciences, Brunel University, UK Prof. David Dickinson Department of Economics, Birmingham Business School, University of Birmingham, UK Prof. Chien-Te Fan Institute of Law for Science and Technology, National Tsing Hua University, Taiwan Prof. Wing M. Fok Director, Asia Business Studies, College of Business, Loyola University New Orleans, USA Prof. Konstantin P. Gluschenko Faculty of Economics, Novosibirsk State University, Russia Prof. George E. Halkos Associate Editor in Environment and Development Economics, Cambridge University Press; Director of Operations Research Laboratory, University of Thessaly, Greece Dr. Christopher A. Hartwell President, CASE — Center for Social and Economic Research, Warsaw, Poland Prof. S. Jaimungal Associate Chair of Graduate Studies, Dept. Statistical Sciences & Mathematical Finance Program, University of Toronto, Canada Prof. Bartlomiej Kaminski University of Maryland, USA; Rzeszow University of Information Technology and Management, Poland Prof. Vladimir Kvint Chair of Financial Strategy, Moscow School of Economics, Moscow State University, Russia Prof. Alexander Melnikov Department of Mathematical and Statistical Sciences, University of Alberta, Canada Prof. George Kleiner Deputy Director, Central Economics and Mathematics Institute, Russian Academy of Sciences, Russia Prof. Kwok Kwong Director, Asian Pacifi c Business Institute, California State University, Los Angeles, USA Prof. Dimitrios Mavrakis Director, Energy Policy and Development Centre, National and Kapodistrian University of Athens, Greece Prof. Steve McGuire Director, Entrepreneurship Institute, California State University, Los Angeles, USA Prof. Rustem Nureev Head of the Department of Economic Theory, Financial University, Russia Dr. Oleg V. Pavlov Associate Professor of Economics and System Dynamics, Department of Social Science and Policy Studies, Worcester Polytechnic Institute, USA Prof. Boris Porfi riev Deputy Director, Institute of Economic Forecasting, Russian Academy of Sciences, Russia Prof. Svetlozar T. Rachev Professor of Finance, College of Business, Stony Brook University, USA Prof. Boris Rubtsov Chair of Financial Markets and Financial Engineering, Financial University, Russia Dr. Minghao Shen Dean, Center for Cantonese Merchants Research, Guangdong University of Foreign Studies, China Prof. Dmitry Sorokin Chairman for Research, Financial University, Russia Prof. Robert L. Tang Vice Chancellor for Academic, De La Salle College of Saint Benilde, Manila, The Philippines Dr. Dimitrios Tsomocos Saïd Business School, Fellow in Management, University of Oxford; Senior Research Associate, Financial Markets Group, London School of Economics, UK Prof. Sun Xiaoqin Dean, Graduate School of Business, Guangdong University of Foreign Studies, China REVIEW OF BUSINESS AND ECONOMICS STUDIES (ROBES) is the quarterly peerreviewed scholarly journal published by the Financial University under the Government of Russian Federation, Moscow. Journal’s mission is to provide scientifi c perspective on wide range of topical economic and business subjects. CONTACT INFORMATION Financial University Leningradsky prospekt, 53, offi ce 5.4 123995 Moscow Russian Federation Telephone: +7 (499) 943-94-53 Website: www.robes.fa.ru AUTHOR INQUIRIES Inquiries relating to the submission of articles can be sent by electronic mail to robes@fa.ru. COPYRIGHT AND PHOTOCOPYING © 2016 Review of Business and Economics Studies. All rights reserved. No part of this publication may be reproduced, stored or transmitted in any form or by any means without the prior permission in writing from the copyright holder. Single photocopies of articles may be made for personal use as allowed by national copyright laws. ISSN 2308-944X
Вестник исследований бизнеса и экономики ГЛАВНЫЙ РЕДАКТОР А.И. Ильинский, профессор, декан Международного финансо вого факультета Финансового университета ВЫПУСКАЮЩИЙ РЕДАКТОР Збигнев Межва, д-р экон. наук РЕДАКЦИОННЫЙ СОВЕТ М.М. Алексанян, профессор Бизнесшколы им. Адама Смита, Университет Глазго (Великобритания) К. Вонг, профессор, директор Института азиатско-тихоокеанского бизнеса Университета штата Калифорния, Лос-Анджелес (США) К.П. Глущенко, профессор экономического факультета Новосибирского госуниверситета С. Джеимангал, профессор Департамента статистики и математических финансов Университета Торонто (Канада) Д. Дикинсон, профессор Департамента экономики Бирмингемской бизнесшколы, Бирмингемский университет (Великобритания) Б. Каминский, профессор, Мэрилендский университет (США); Университет информационных технологий и менеджмента в Жешуве (Польша) В.Л. Квинт, заведующий кафедрой финансовой стратегии Московской школы экономики МГУ, профессор Школы бизнеса Лассальского университета (США) Г. Б. Клейнер, профессор, член-корреспондент РАН, заместитель директора Центрального экономико-математического института РАН Э. Крочи, профессор, директор по научной работе Центра исследований в области энергетики и экономики окружающей среды Университета Боккони (Италия) Д. Мавракис, профессор, директор Центра политики и развития энергетики Национального университета Афин (Греция) С. Макгвайр, профессор, директор Института предпринимательства Университета штата Калифорния, Лос-Анджелес (США) А. Мельников, профессор Депар та мента математических и ста тистических исследований Университета провинции Альберта (Канада) Р.М. Нуреев, профессор, заведующий кафедрой «Экономическая теория» Финансового университета О.В. Павлов, профессор Депар та мента по литологии и полити ческих исследований Ворчестерского политехнического института (США) Б.Н. Порфирьев, профессор, член-корреспондент РАН, заместитель директора Института народнохозяйственного прогнозирования РАН С. Рачев, профессор Бизнес-колледжа Университета Стони Брук (США) Б.Б. Рубцов, профессор, заведующий кафедрой «Финансовые рынки и финансовый инжиниринг» Финансового университета Д.Е. Сорокин, профессор, членкорреспондент РАН, научный руководитель Финансового университета Р. Тан, профессор, проректор Колледжа Де Ла Саль Св. Бенильды (Филиппины) Д. Тсомокос, Оксфордский университет, старший научный сотрудник Лондонской школы экономики (Великобритания) Ч.Т. Фан, профессор, Институт права в области науки и технологии, национальный университет Цин Хуа (Тайвань) В. Фок, профессор, директор по исследованиям азиатского бизнеса Бизнес-колледжа Университета Лойола (США) Д.Е. Халкос, профессор, Университет Фессалии (Греция) К.А. Хартвелл, президент Центра социальных и экономических исследований CASE (Польша) М. Чудри, профессор, Университет Брунеля (Великобритания) Сун Цяокин, профессор, декан Высшей школы бизнеса Гуандунского университета зарубежных исследований (КНР) М. Шен, декан Центра кантонских рыночных исследований Гуандунского университета (КНР) Издательство Финансового университета 123995, Москва, ГСП-5, Ленинградский пр-т, 53, комн. 5.4 Тел. 8 (499) 943-94-53. Интернет: www.robes.fa.ru. Журнал "Review of Business and Economics Studies" («Вест ник исследований бизнеса и экономики») зарегистрирован в Федеральной службе по надзору в сфере связи, информационных технологий и массовых коммуникаций 9 июля 2013 г. Свидетельство о регистрации ПИ № ФС77-54658. Подписано в печать: 05.04.2016. Формат 60 × 84 1/8. Заказ № 322 от 04.04.2016. Отпечатано в ООП Издательства Финуниверситета (Ленинградский проспект, д. 49). 16+
CONTENTS Secrets and perspectives of Uzbekistan’s industrial policy Vladimir Popov . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 Russia: searching for friendly-oriented countries Zbigniew Mierzwa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26 How technology drove the shale oil industry and what it means to Russia Art Franczek . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .63 Under which conditions can an import substitution policy be a driver for re-industrialisation? Jean-Louis Truel, Yanina Pashchenko . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .68 Bounded rationality: psychological analysis of debt behaviour Anna Smurygina, Maria Gagarina. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .75 Experiences of green credit development — lessons learned to Vietnam Do Thi Van Trang . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .85 Review of the book of Alexander Melnikov “Risk Analysis in Finance and Insurance” Roman Makarov . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .92 Review of Business and Economics Studies Volume 4, Number 1, 2016
Вестник исследований бизнеса и экономики № 1, 2016 CОДЕРЖАНИЕ Секреты и перспективы промышленной политики Узбекистана Владимир Попов . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 Россия в поисках дружественно ориентированных стран Збигнев Межва . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26 Как технологии стимулируют сланцевую индустрию и какое это имеет значение для России Арт Франчек . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .63 При каких условиях политика импортозамещения может стимулировать реиндустриализацию Жан-Луис Трюэль, Янина Пащенко . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .68 Ограниченная рациональность: психологический анализ поведения должников Анна Смурыгина, Мария Гагарина . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .75 Опыт развития «зеленого» кредитования: уроки важные для Вьетнама До Тхи Ван Транг . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .85 Обзор книги Александра Мельникова «Риск-анализ в финансах и страховании» Роман Макаров . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .92
Review of Business and Economics Studies Volume 4, Number 1, 2016 I. INTRODUCTION Uzbekistan in the past 10 years has been a successful economy. It attained high growth (8%), low unemployment, reasonable macro-econom ic stability, low domestic and international debt and relatively low inequality. Of note are the structural shifts, which occurred in the recent 25 years post-independence: What can Uzbekistan tell us about industrial policy that we did not already know Vladimir Popov, Ph.D. in economics, professor, CEMI RAN (Central Economics and Mathematics Institute of the Russian Academy of Sciences), Laboratory of Mathematical Economics, Institute of European and Russian Studies at Carleton University in Ottawa popovv@vn.org Abstract. This paper discusses Uzbekistan’s recent experience with structural shifts and industrial policy and the larger implications for existing theories of industrial policy. The paper has a particular focus on various industry policy instruments. Two major hypotheses are discussed: (1) the hypothesis of Haussmann, Hwang and Rodrik (the more technologically sophisticated the export structure, the better for growth) and (2) the hypothesis of Justin Yifu Lin (export specialization should build on existing comparative advantages and not jump over the necessary technological stages). Keywords: Uzbekistan, economic growth, economic diversifi cation, industrial policy, exchange rate policy, wages policy. Секреты и перспективы промышленной политики Узбекистана Владимир Попов, д-р экон. наук, профессор, ЦЭМИ РАН, Институт исследований Европы, России и Евразии Карлтонского университета (Оттава) Аннотация. В статье обсуждается опыт Узбекистана в области структурных преобразований и промышленной политики, а также важные последствия для существующих теорий промышленной политики. Проверены две основные гипотезы: гипотеза Хауссмана, Хванга и Родрика (чем более технологически диверсифицирована структура экспорта, тем лучше экономический рост) и гипотеза Джастина Ыифу Лин (экспортная специализация должна строиться на существующих сравнительных преимуществах и не перешагивать через необходимые технологические стадии). Узбекистан, создавший автомобильную промышленность с нуля, сегодня производит более 200 тыс. автомобилей в год, половина из которых экспортируется. Это, несомненно, успех промышленной политики. Вместе с тем ставка на развитие тяжелой химии может привести к замедлению экономического роста страны. Ключевые слова: Узбекистан, экономический рост, экономическая диверсификация, промышленная политика, политика валютного курса, политика заработной платы. JEL classifi cation: O14, O25, O4, O53
Review of Business and Economics Studies Volume 4, Number 1, 2016 (1) A decrease in the production and export of cotton (previously a mono-culture), an increase in food production and the attainment of food self-suffi ciency. (2) An attainment of country’s energy selfsuffi ciency. (3) An increase in the share of industry in GDP and the share of machinery and equipment production in industrial output, and export as well. Point in case, a competitive export oriented auto industry was created from the ground up. In addition, in recent years, Uzbekistan promoted heavy chemical industries such as the production of synthetic fuel and polypropylene goods from natural gas. This paper argues that Uzbekistan’s achievements in development have been due to deliberate government policies rather than simply the result of economic liberalization reforms to conform to its factor endowment and/or the result of a natural comparative advantage. The paper acknowledges Uzbekistan’s enjoyment of a favourable external environment; however, it attributes its rapid growth to reasonable macroeconomic stability and industrial policies. It begins with a brief discussion of industry policy and economic diversifi cation in the post-Soviet States in Central Asia and Eastern Europe including Russia. The rest of the paper is organized as follows: • Section III compares Uzbekistan’s transition and economic performance vis-à-vis other post-Soviet States; • Section IV discusses changes in the economic structure of Uzbekistan; • Section V shows that the main instrument of Uzbekistan’s industrial policy has been the under-valuation of the exchange rate; • Section VI reflects on the issues of industrial upgrading — the dilemma of choosing “winning” industries in the context of the general debate about the nature of industrial policy, especially the hypothesis advanced by Haussmann, Hwang and Rodrik vis-à-vis that by Justin Yifu Lin; • Section VII contains concluding remarks on the lessons learned from Uzbekistan’s industrial policies and the lessons which Uzbekistan can benefi t from vis-à-vis the experiences of successful East Asian countries, especially Singapore, in the attempt to upgrade industrial structures. II. INDUSTRIAL POLICY AND ECONOMIC DIVERSIFICATION Industrial structure is important for economic development. The Chenery (1960) hypothesis states that countries at similar levels of economic development should have similar patterns of resource allocation between sectors. But in theoretical models it is often assumed that there are externalities from industrialization and industrial export (Murphy, Shleifer & Vishny, 1989; Polterovich & Popov, 2004, 2005). There is growing evidence that countries which are more industrialized and countries with more technologically sophisticated industrial export are growing faster than others (Hausmann, Hwang & Rodrik, 2006; Rodrik, 2006). Not all countries are able to climb the technological ladder, diversify, and upgrade the structure of their economy and export. In most transition economies a “primitivization” of the industrial structure occurred. In other words, secondary manufacturing and high tech industries proved to be uncompetitive and their output was curtailed after the deregulation of prices and the opening of the economy. As a matter of fact, an increase in the share of the service sector, especially trade and fi nance, at the expense of industry (deindustrialization) occurred in all post-communist economies. Previously in the centrally planned economies the service sector, in particular trade and fi nance, were underdeveloped. It seems, however, that in many of these economies deindustrialization went too far. In Tajikistan, for example, the share of services in GDP nearly doubled, increasing from about 30% in the early 1990s to 57% in 2010, whereas the share of manufacturing in GDP fell from 25% in 1990 to 10% in 2010. In Russia the share of industry in GDP fell from about 1/2 in 1990 to about 1/3 in the mid 1990s, whereas within industry itself the share of the primary sector (fuel, energy, steel and non-ferrous metals) in the total industrial output increased from 25% to over 50%. The structure of exports in most post-Soviet states also became more primitive in the recent two decades; the share of manufactured goods in total exports either declined or did not show any clear tendency towards increase (Figure 1). This was partly caused by the increase in resource price and resource boom: expansion of fuel production and exports in Azerbaijan, Kazakhstan, Russia, and Turkmenistan. In Russia the share of fuel, min
Review of Business and Economics Studies Volume 4, Number 1, 2016 erals, metals and diamonds in total export grew from 52% in 1990 (USSR) to 67% in 1995 and 81% in 2012. In contrast, the share of machinery and equipment in total export fell from 18% in 1990 (USSR) to 10% in 1995 and 4.5% in 2012. Such changes in the industrial structure were not solely the result of an “invisible hand of the market”. Greenwald and Stiglitz (1986, 2013) state: market failures are pervasive, private rewards and social rewards virtually always differ. Governments, then, are inevitably involved in shaping the industrial structure of the economy, both by what they do and do not do. As many authors point out, the secret of “good” industrial policy in East Asia, as opposed to “bad” industrial policy in the former Soviet Union, Latin America and Africa may be associated with the ability to reap the benefits of export externalities (Khan, 2007a; Gibbs, 2007). Exporting to world markets, especially to developed countries, enables the upgrade of quality and technology standards and yields social returns in excess of the returns to particular exporters. The greatest increases in productivity are registered at companies that export to advanced (Western) markets and which export hi-tech goods (Harris & Li, 2007; Shevtsova, 2012). In addition, it has been shown that the gap between the actual level of development and the hypothetical level, which corresponds to the degree of sophistication of a country’s exports, is strongly correlated with productivity growth rates (Hausmann et al., 2006). In other words, it pays off to promote exports of sophisticated and high tech goods. Not all countries which attempt to promote such exports succeed, but those that do not try, virtually never engineer growth miracles1. It is worth noting that there is an opposite view as demonstrated, for example, in a recent paper from the World Bank (Gill, et al, 2014). The paper concludes that it is not clear whether diversifying exports and production is necessary for development and that governments need concern themselves less with the composition of exports, profile of production and more with their national asset portfolios — the natural resources, built capital, and economic institutions. III. UZBEKISTAN’S TRANSITION AND ECONOMIC PERFORMANCE After the collapse of the USSR and the market oriented reforms in successor states the comparative performance in the post-Soviet space varied greatly (Figure 2). In retrospect, it is clear that rapid economic liberalization did not pay off: many gradual reformers (labelled procrastinators at the time) 1 Botswana may be the only exception as it has one of the highest rates of per-capita GDP growth in the last 50 years (5% during 1960–2010), which was primarily driven by exports of primary commodities (namely, diamonds) and not of high-tech goods. Figure 1. Manufactures exports, % of merchandise export Source: WDI.
Review of Business and Economics Studies Volume 4, Number 1, 2016 from the former Soviet Union (FSU) performed better than champions of big-bang liberalization (Baltic States and Central Europe). In Belarus, Turkmenistan and Uzbekistan, for instance, privatization was slow; over 50% of GDP is created in state enterprise (Figure 3), yet their performance is superior to that of more liberalized economies. Recently when resource prices were high, resource abundance helped exporters such as Azerbaijan, Kazakhstan, Russia and Turkmenistan, to maintain higher income. However, this was not a sine qua non for growth; resource poor Belarus and selfsuffi cient in fuel and energy Uzbekistan did much better than resource rich Russia. As recent research shows, the crucial factor in economic performance is the ability to preserve the institutional capacity of the state (Popov, 2007, 2011 for a survey). The story of transition was very much a government capability, rather than a market failure. In all former Soviet republics and in the East European countries, government spending fell during transition and the provision of traditional public goods, from law and order to health care and infrastructure, worsened. This led to an increase in income inequalities, shadow economy, corruption, crime and mortality2. But in countries with the smallest decline in 2 State capacity is understood as the ability of the state to enforce rules and regulations and is measured by objective indicators such as crime rate, murder rate, the share of shadow economy, i. e. the degree of compliance with tax rules and criminal code (the murder rate is better than the crime rate due to statistical registration problems, see Popov, 2008). There are well known problems with subjective measures of institutional capacity, such as corruption perception indices of Transparency International and the World Bank indices of government effectiveness, rule of law, etc. (Khan, 2007b; Popov, 2011). The institutional capacity declined dramatically in the 1990s in many transition economies; all three traditional monopolies of the state (on violence, tax collection and issuance of currency) were undermined (Popov, 2004). Figure 2. GDP change in FSU economies, 1989 = 100% Source: EBRD Transition Reports for various years. Central Europe is the unweighted average for Czech Republic, Hungary, Poland, Slovakia and Slovenia.
Review of Business and Economics Studies Volume 4, Number 1, 2016 government spending (countries which are diverse in other respects — Central Europe, Estonia, Belarus, Uzbekistan), these effects were less pronounced and the dynamics of output was better. Uzbekistan is an economic success story in the post-Soviet space. Its transformation-stage recession was very mild as compared to other countries of the former Soviet Union: its GDP more than doubled in 1989–2012, a better result than even in Central European countries (Figure 2). Its life expectancy, currently at 68 years, may have not increased much, but it did not fall as it did in other former Soviet republics in the 1990s. Its population increased from 20 million in 1989 to 30 million in 2013; and its murder rate is low (3 per 100, 000 of inhabitants, a fi gure lower than in the US). In 2009 during the economic recession, only Kazakhstan and Azerbaijan showed higher economic growth rates than that of Uzbekistan, whereas most postcommunist countries experienced a reduction of output. Uzbekistan’s performance is not as spectacular as that of China; nevertheless, it is exceptional for the post-Soviet space. This is partly due to a good external environment; Uzbekistan exports the commodities cotton, gold and gas, which have experienced an international increase in prices in the past 2 decades. However, reasons that are more important are attributed to the good macroeconomic and industrial policies. Uzbekistan is the only country in the post-Soviet space that succeeded in increasing the share of industry in GDP and the share of machinery and equipment in the total industrial output, and export. It created a competitive export-oriented auto industry from the ground up. In 2011, it became the 15th country in the world to launch a high-speed train line (between Tashkent and Samarkand to be extended to Bukhara and Karshi by 2015). The train is made by the Spanish Talgo and runs a distance of 344 km in 2 hours, 8 minutes. The inclusiveness of growth appears to be higher in Uzbekistan as well. In 2012, Uzbekistan’s offi cial estimates for the Gini coeffi cient was just above 30% (World Bank estimates for 2002–03 is 35–36%). This is lower than in most transition economies. Meanwhile, in the more liberalized economies of Russia, Lithuania, Georgia and Kyrgyzstan income distribution is noticeably more uneven, ranging between 0.38 and 0.45 (Appendix Figure A1). Figure 3. The share of private sector in GDP in some former Soviet republics, 1989–2009, % Source: EBRD.
Review of Business and Economics Studies Volume 4, Number 1, 2016 Another indicator of income distribution is the number of billionaires3. The 2013 Forbes count placed Russia and Georgia ahead in billionaire-intensity (number of billionaires per $ 1 trillion PPP GDP), followed by Ukraine, Czech Republic and Kazakhstan (Table 1). Other former USSR countries do not have billionaires yet, although their PPP GDP is higher than that of Georgia. For example, Azerbaijan and Uzbekistan are supposed to have about 3 billionaires had they the same level of billionaire-intensity as Russia. However, in fact, they do not. The relatively successful economic performance is even more impressive given that Uzbekistan is not a major oil and gas exporter and 3 The statistics on the number of billionaires published by Forbes annually allegedly characterize income distribution at the very top of the wealth pyramid. The number of billionaires depends mostly on the total size of the country’s GDP. Much less important is the per capita GDP. The relationship is non-linear: Number of billionaires in 2007 = –0.9 + 0.367y – 0.0049y2 + + 2.6Y2, where y — PPP GDP per capita in thousand $ in 2005, Y — PPP GDP in 2005 in trillions. N = 181, R2 = 0.95, all coeffi cients signifi cant at 1% level. Countries which exceed the predicted number of billionaires considerably (2 times and more) are: Canada, Israel, Germany, Spain, UK, India, Turkey, Saudi Arabia, Egypt, Hong Kong, Malaysia, Philippines, Brazil, Russia, Ukraine, Kazakhstan. In contrast, countries where the number of billionaires is considerably lower than predicted are Japan, China, most countries of Western Europe, Oman, Argentina, Romania, Czech Republic (Popov, 2014c). that it is one of two (the other being Liechtenstein) double landlocked countries4 in the world. It is important, however, to distinguish between growth rates and the level of per capita income. Uzbekistan remains a poor country with PPP GDP per capita of below $US 6000 in 2014 against over $ 20,000 in Russia and Kazakhstan, $ 17,000 in Azerbaijan and over $ 14,000 in Turkmenistan. Many Uzbeks are migrating to find jobs in Russia. The reverse is not true. It is necessary to separate the effects associated with the dynamics of output from the effects of the terms of trade and fi nancial fl ows. At the end of the Soviet period, in the 1980s, real incomes in Uzbekistan were about half of those in Russia. After the collapse of the USSR, real incomes in non-resource republics fell dramatically due to the change in relative prices; oil, gas and other resources became several times more expensive relative to ready-made goods. Uzbekistan was a large importer of oil and its trade with all countries, including other Soviet republics, if recalculated in world prices, yielded a defi cit of 9% of GDP (Soviet economy, 1990). To make matters worse, the collapse of the Soviet Union dried up fi nancial fl ows from Moscow. In 1990, inter-budgetary transfers 4 Double landlocked countries are countries fully surrounded by other landlocked countries. Table 1. Billionaires in former USSR, Eastern Europe China and Vietnam Number of billionaires Total wealth PPP GDP, 2012 Number per 1 trillion PPP GDP Wealth of billionaires to PPP GDP, % China 122 260.9 12471 9.8 2.1 Russia 110 403.8 3380 32.5 11.9 Ukraine 10 31.3 338.2 29.6 9.3 Kazakhstan 5 9.2 233 21.5 3.9 Czech Republic 4 14.0 277.9 14.4 5.0 Poland 4 9.8 844.2 4.7 1.2 Georgia 1 5.3 26.6 37.6 19.9 Vietnam 1 1.5 322.7 3.1 0.5 Romania 1 1.1 352.3 2.8 0.3 Uzbekistan 0 0 107 0.0 0.0 Source: Forbes billionaires list. (http://www.forbes.com/billionaires/#page: 1_sort: 0_direction: asc_search: _fi lter: All%20industries_fi lter: All%20countries_fi lter: All%20states); WDI.
Review of Business and Economics Studies Volume 4, Number 1, 2016 from the Union budget amounted to 31% of the revenues of the republican budget (Soviet Economy, 1991). Hence, the sharp reduction of real incomes in the early 1990s was larger than the reduction of output and was primarily due to a poor external environment and circumstance, rather than policy and choice. However, the dynamics of real output, i. e. the physical volume of output (Figure 1) which is dependent on circumstances and policy, was better than in all countries of Eastern Europe and former USSR with the exception of Turkmenistan. IV. CHANGES IN UZBEKISTAN’S ECONOMIC STRUCTURE Since the 1991 independence, Uzbekistan encouraged and carried out three important structural shifts in its economy: (1) a decrease in cotton production and export and an increase in food production, achieving food self-suffi ciency, (2) an attainment of energy self-suffi ciency and an achievement of net fuel export, (3) an increase in the share of industry in GDP and the share of machinery and equipment in industrial output, export. Diversification in agriculture was carried out mostly via state orders: less for cotton, more for cereals. Thus, the production of cotton decreased by 50%as compared to the late 1980s, and the output of cereals and vegetables increased several folds (Figure 4). The increase in gas output was due mostly to state investments: gas and oil are produced by the state holding company “Uzbekneftegaz”. The diversifi cation in industry and the expansion of manufacturing exports was mostly the result of protectionism and of the policy of low exchange rate by the government / central bank. Like China, Uzbekistan maintained a low (undervalued) exchange rate due to rapid accumulation of foreign exchange reserves. In addition, there were non-negligible tax measures to stimulate the export of processed goods (50% lower tax rates for manufacturing companies that export 30% and more of their output). Although comparable statistics from WDI for Uzbekistan is lacking, national statistics suggests that the share of non-resource goods in exports increased to over 70% against less than 30% in 1990, before independence (Foreign Affairs Department of Uzbekistan, 2013). Uzbekistan is one of the few transition countries where the share of industry increased in recent years (Figure 5). It also was able to upgrade its structure of industrial output; the share of machinery, equipment and chemicals increased at the expense of light industry (Table 2). Other post-Soviet economies also experienced the decline of light in Figure 4. Diversifi cation in agriculture Source: State Committee on Statistics of Uzbekistan (http://www.stat.uz/en/).
Review of Business and Economics Studies Volume 4, Number 1, 2016 dustry, but it happened together with the decline of machine building that created space for the expansion of fuel, energy, steel and non-ferrous metals. During the Soviet era, in a centrally planned economy, resource rent was removed from resource industries and given to secondary manufacturing through the pricing mechanism; prices for commodities and low processed goods were set at levels below the world marker, whereas prices for finished goods were established at an artificially high level. Once prices were allowed to be determined by the market after the deregulation in 1992, they got closer to the world levels and terms of trade for resource industries improved, but deteriorated for the secondary manufacturing. After independence, an automobile industry was created in Uzbekistan from the ground up. Car production was supported by the government and the Korean auto company Daewoo. After Daewoo declared bankruptcy, US General Motors became the government’s partner. The government also bought a stake in Turkey’s Koc in SamKochAvto, a producer of small buses and lorries. Afterwards, it signed an agreement with Isuzu Motors of Japan to produce Isuzu buses and lorries. In 2014 Uzbekistan produced 250,000 cars and nearly a quarter were exported5. In 2011 a joint venture of State Auto Company and General Motors, the engine plant in Tashkent, became operational with a capacity of 360,000 engines a year. Uzbekistan’s exports increased dramatically: from $ 2 billion in 1992 to $ 15 billion in 2011, or from $ 100 to $ 500 per capita (Figure 6). The share of former USSR countries in exports fell from over 60% in 1992 to less than 40% in 2012 (Appendix Figure A2). The share of cotton in export fell from 65% in 1992 to only 9% in 2012. The share of fuel (mostly gas) and oil products 5 In 2013 Uzbekistan sold over 60,000 cars to Russia and 33,000 to Kazakhstan. In 2014–15 export fell dramatically due to a recession in Russia. In 2014 car output was 246,000 including over 55,000 for export (38,000 to Russia, the rest to Kazakhstan, Azerbaijan, Ukraine, Belarus and also to Indonesia, Brazil, Turkey, South Korea). The share of joint venture company “GM Uzbekistan” in the Russian car market fell to 1.5% in 2014 from 2.2% in 2013 (UzDaily.uz, 2015 — http://www.uzdaily.uz). Figure 5. GDP structure by sectors of the economy, % of total Source: WB, 2013.