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Abstract
The agricultural sector plays a strategic role in the development process of a country. However, the tools used to trigger economic development are objects of controversy in theory and practice. While neoclassical theory contends that state interventions and protectionism create inefficiencies and sub-optimal allocation of resources, heterodox authors argue that those measures can be instrumental in fostering growth. Uzbekistan has applied heterodox distortive measures in agriculture. This paper investigates the implications of those distortions for the Uzbek economy. I argue that state interventions in agriculture, through surplus extraction and economies of scale, have facilitated investments in added-value industries, driving national structural transformation.
Notes
1. A further distinction exists between direct and indirect invisible transfers: direct invisible transfers include price controls, export taxes, quotas and import subsidies. Indirect invisible transfers occur through interest rates or appreciated real exchange rates (Winters, De Janvry, Sadoulet, & Stamoulis, Citation1998).
2. This represents 8% of world production and 9% of exports.
3. There is 3% special tax on agricultural enterprises with profitability under 25%.
4. The rate declined dramatically from 20% of total tax revenue in 1992 to less than 1% in 1998.
5. The Government of Uzbekistan has arguably been able to reject the IMF’s prescriptions due to its geo-political power. Being an Afghan neighbour has granted it high bargaining power and self-determination over its own politico-economic strategy since 2001.
6. If the effects of overvaluation and trade protection of industry are taken into account, the total nominal protection rate of agricultural exports declines considerably (Krueger, Citation1978).
7. In November 2015 the cotton procurement price was around 1200 Soms/kg at the official rate, with an average productivity of cotton at 2.3 tonnes/ha. The costs saved by farmers through subsidies for water, fertilisers, diesel, seeds, etc. have been taken into account. The international price was US$0.69 per pound in November 2015 (Cotlook A Index), based on the official exchange rate (2700 Soms/US dollar).
9. In the former Soviet Union the procurement price for cotton was 37 times higher than for grain and one third above the international price (Khan, Citation2004).
10. The 1990s registered a fall in agricultural employment of 207,000 people each year.
12. EUCAM (Citation2011, p. 7).
13. Rosenberg, Ruocco, and Wiegard (Citation1999) argued that 30% of the implicit subsidy on imported capital due to appreciated interest rates is compensated by capital good purchases that are not credited under VAT.
14. Some 2.7% in 2011.
15. In 2012 private consumption rose by 6% due to a public-sector wage increase (WB, Citation2013).
16. State Committee on Statistics of Uzbekistan, UNICEF 2015.
17. Investments planned through FDI projects, especially in coal, oil and natural gas extraction (FDImarkets.com, 2014).