Director of the Center for Economic Research and Reforms
under the Administration of the Republic of Uzbekistan
Regarding social and economic trends in Uzbekistan
According to the updated Constitution, “Uzbekistan is a sovereign, democratic, rule-of-law, social and secular state with a republican form of government.” For the first time in the history of our country, it is fixed in the Constitution that Uzbekistan is a social state.
What is a social state?
A social state is a model of a state whose policy is aimed at redistributing material goods, income and wealth in accordance with the principles of social justice in order for each citizen to achieve a decent quality and standard of living, smoothing social differences and helping those in need. The concept of “social state” was first used in 1850 by Lorenz von Stein (although in a slightly different way).
Mention of the social state is contained in the constitutions and other supreme legislative acts of many countries. It is believed that it was the implementation of the ideas of the welfare state that ensured the well-being of Western countries after the Second World War. The Constitution of the FRG of 1949 proclaimed Germany a “democratic and social federal state”. Since 1958, according to the Constitution, “France is an indivisible, secular, social, democratic Republic.” Since 1978, Spain, according to the Constitution, has become a “legal, democratic, social state”. In an indirect way, the provision on the social state is fixed in the Italian Constitution of 1948. Since 1993, according to the Constitution, Russia has been officially proclaimed a social state.
However, by the beginning of the eighties of the last century, the enthusiasm of Western countries for the ideas of the social state began to wane, as liberal approaches of Reaganomics and Thatcherism prevailed in politics. Among the modern examples of the implementation of the ideas of the social state, the countries of the Scandinavian Peninsula, Finland, the Netherlands, Canada, Switzerland, Germany, Belgium are usually cited.
Indicators such as the rate of poverty, the relative effect of social programs on the rate of poverty, the share of GDP on expenditures related to social programs are often used as quantitative criteria for the implementation of the ideas of the social state.
If we analyze the trends of social policy in Uzbekistan, especially those carried out in recent years, it becomes obvious that, firstly, the idea of a social state and social justice is close to the people of Uzbekistan in ideological terms, and, secondly, the social policy of the country in recent years has been formed precisely in the paradigm of the ideas of a social state, that is, the process of its formation has been underway.
Social trends in Uzbekistan
Uzbekistan has always had a strong social policy. During all the years of Independence in Uzbekistan, unlike many other countries, the need for a strong social policy has not been questioned. Why not? Since ancient times in our traditional mindset there has been a postulate that people should help each other, and the poor and weak, who have faced hard times, should receive support from those who can provide it: from neighbors and society. Therefore, the concept of social justice and the social state is an important part of our national mindset. But previously, the state’s ability to implement a strong social policy was limited, owing to insufficient economic growth rates and since tax revenues to the budget were not enough to ensure adequate spending for social purposes.
But in recent years, due to the ongoing reforms, the economy has been growing dynamically, which made it possible to allocate more funds for solving social problems. If in 2018 the country’s spending on social policy amounted to 35 trillion sums, then in 2019 — 61.3 trillion sums, in 2020 — 74.2 trillion sums, in 2021 — 85.3 trillion sums, and in 2022 — 105.5 trillion sums. And this has made it possible to consistently strengthen social policy over the past five years.
Due to the implementation of state programs of vocational training of people, assistance in establishing entrepreneurship directly in makhallas, 1 million people were brought out of poverty.
According to a survey conducted by the Center of Economic Research and Reforms (CERR), the Statistics Agency under the President and the World Bank, by the end of 2022, the poverty rate in Uzbekistan decreased by 3% compared to the previous year and amounted to 14.1% (in 2021 it was 17%). The so-called Gini coefficient, or Income Inequality Index, in 2022 decreased in Uzbekistan to 0.327, compared with 0.329 in 2021, which indicates that the property stratification with the deepening of market relations is also inherent in Uzbekistan as well as around the world, but is quite moderate, which means inclusive approaches in government policy.
It is an active social policy that best contributes to the development of human potential and positive changes in this direction are already noted in the ratings of international organizations. If Uzbekistan ranked 93rd in the Global Innovation Index in 2020 and 86th in 2021, then in 2022 it ranked 82nd. In the Human Capital Index in the quality of education, Uzbekistan received 0.729 percent in 2020 and took 106th place among 189 countries.
And in the Social Progress Index, which takes into account the basic needs, well-being and opportunities for human development, Uzbekistan rose by 11 positions from 2020 to 2022 and took 91st place out of 169 countries, overtaking China, which took 94th place.
In compliance with the constitutional status
In Uzbekistan in recent years, all the necessary prerequisites have appeared for the creation of a social state and the consolidation of this status in the Constitution. Moreover, this status should not just be fixed in words, but confirmed in practice by both the social policy pursued by the state and the achievements already reached in all areas of social life, otherwise it will not inspire confidence either in the country or abroad. And what has been achieved in recent years already allows us to consolidate this status in the Constitution.
The President’s Address to the Oliy Majlis (Parliament) and the people of Uzbekistan on December 20 last year set a goal to build a New Uzbekistan based on the principle of a “social state”, to create equal opportunities for people to realize their potential and the necessary conditions for a decent life and poverty reduction. At the same time, the President proposed to reflect the duties of the state in the Constitution: to provide housing for the population, strengthen the economic and spiritual foundations of the family, create conditions for the full development of children, support people with disabilities, protect human health and the environment.
It should be noted that the updated Constitution reflects almost all the features and functions of the social state. It fixes norms aimed at supporting socially vulnerable categories of the population, smoothing social inequality in society, creating decent living conditions, strengthening the social responsibility of the state to citizens so that no one is left without attention.
State and private property
Since the economy is the basis and prevails over politics, let us focus in more detail on the economic aspects of the new Constitution. The new version of the Constitution, submitted to a referendum, significantly strengthens the constitutional mechanisms that ensure the development of market relations, the protection of private property, entrepreneurship, and the social orientation of the market economy.
In the economic part of the current Constitution, adopted in 1992, the following was rather vaguely stated. “The basis of the economy of Uzbekistan, aimed at the development of market relations, is property in its various forms. The state guarantees freedom of economic activity, entrepreneurship and labor and legal protection of all forms of ownership.
Private property, along with other forms of ownership, is inviolable and protected by the state.” As can be seen from the wording, they are of a general nature and do not specifically define the functions and responsibilities of the state on the listed issues. So, the economy is only “aimed at the development of market relations,” and it is unclear what the functions of the state are and what constitutional guarantees are available.
In the new wording submitted to the referendum, all these issues are clearly outlined. The state creates conditions for the development of market relations and fair competition. Private property is inviolable, the Constitution establishes mechanisms that ensure its reliable protection. It is established that the owner cannot be deprived of his property except in cases and in accordance with the procedure provided for by law and on the basis of a court decision (article 65).
This formulation clearly defines the role of the state in the development of market relations, which consists in creating the necessary conditions for this. And here it should be noted that in recent years, deep reforms have been constantly carried out in this direction. Constitutional guarantees of private property have also been significantly strengthened. A lot of work has also been done in this direction in recent years, numerous legislative acts have been adopted and supplemented to ensure reliable judicial protection of private property.
Expanding the freedom of entrepreneurial activity
Moreover, in the updated Constitution, the block of issues directly related to the economic sphere has been significantly expanded. It reflects the importance of a favorable investment and business climate for normal economic development and the responsibility of the state for its formation (“the state provides a favorable investment and business climate”). The rights and freedoms of entrepreneurial activity have been expanded (“entrepreneurs, in accordance with the law, have the right to carry out any activity and independently choose its directions”), which was not reflected in the current Constitution.
Moreover, at the same time, constitutional guarantees are given for the removal of any barriers that hinder entrepreneurial activity in our country (“the integrated economic space, free stock movement, services, labor resources and financial resources are guaranteed on the territory of the Republic of Uzbekistan”). The necessity of this constitutional provision is due to the facts that took place when entrepreneurs faced administrative barriers when trying to sell their goods, and citizens — when trying to carry out labor activities in other regions of the republic.
The new version of the Constitution also reflects the issues of combating monopolies and limiting monopolism (“monopolistic activity is regulated and restricted by law” (Article 67). The inclusion of these norms in the new version of the Constitution will be a reliable basis for the smooth implementation of entrepreneurial activity, and will also have a positive impact on the development of the business environment in Uzbekistan.
Private ownership of land
Also, one of the most significant achievements of the updated Constitution is the constitutional consolidation of the right of private ownership of land, the debate on the introduction of which has been going on for decades since the nineties of the last century. Article 68 of the new edition establishes the norm that “land may be privately owned on the terms and in the manner prescribed by law and ensuring its rational use and protection as national wealth.”
The economic significance of this norm is very important, since land becomes an element of economic relations and it can be actively used as an operational tool of commercial relations in the real estate market, when obtaining a loan, as collateral, and so on, which contributes to the growth of capitalization of the relevant markets related to land relations, and ultimately the growth of the economy as a whole. In addition, the introduction of this norm makes it possible at the constitutional level to consolidate the right of ownership of citizens and business entities to land, which in turn will serve as a reliable protection and guarantee of the rights of owners, as well as consolidate their obligations to careful attitude to the land.
When assessing the importance of introducing this provision into the Constitution, it is necessary to take into account that land reforms are among the most complex and important reforms in world practice. This is evidenced by both the experience of Southeast Asian countries (China, Japan, South Korea) and the experience of CIS countries (Kazakhstan and Azerbaijan). At the same time, Uzbekistan is currently just beginning a cardinal land reform, making consistent steps in this direction in recent years, introducing the right to private ownership of land into legislation. And securing the right of private ownership of land at the level of the Constitution is an important step in promoting land reform and a reliable legal basis for its further implementation.
In conclusion, as world experience shows, poor countries with underdeveloped and modernized economies cannot afford to pursue a sufficiently strong social policy. Countries with dynamically developing economies can afford it. But the dynamic development of the economy, in turn, requires trained personnel, that is, improving the quality of the human capital of the population. And there is no way to do it without a strong social policy. This explains the post-war transition of Western countries to the policy of the welfare state, which, in fact, provided them with a significant gap in economic and human development from other countries of the world.
Uzbekistan right now, after six years of dynamic reforms, is in the same situation as the developed countries in the post-war period. A dynamically developing economy generates enough income to strengthen social protection, but without improving the quality of human capital, further economic growth will be increasingly problematic, since the economy is already experiencing a shortage of qualified personnel.
Therefore, it is now becoming the highest priority to direct the necessary efforts and resources to solving social issues, strengthening social protection, improving the quality of healthcare and education, training personnel for an increasingly complex modernized economy not only today, but also tomorrow.
In other words, based on global development trends, Uzbekistan’s transition to a model of a social state at the constitutional level is very relevant and timely at the very moment of its dynamic development.
The Center for Economic Research and Reforms (CERR) under the Administration of the President of the Republic of Uzbekistan is both a research center and an Accelerator of socio-economic reforms. CERR provides comments and advice on suggestions for socio-economic programming and policies by the Ministries to solve the main development issues in a swift, operational and efficient way. CERR is in the Central Asian Top-10 by the «Global Go To Think Tank Index Report 2020» (USA).