Uzbekistan: Welfare Impact of Slow Transition

Uzbekistan is typically seen as one of the slowest reformers among the countries in transition from central planning to a market-oriented economy. This paper evaluates the welfare impact of gradual transition in Uzbekistan, asking whether it has avoided the short-term disruption associated with more rapid transition while remaining on course for long-term economic success. By the usual output criteria Uzbekistan has performed well relative to other former Soviet republics. To some extent this reflects favourable initial conditions and absence of military conflicts, but the lack of radical change contributed to the limited output decline. Whether slow reform will thwart long-term economic success is more problematic, but Uzbekistan has undertaken some reforms and these are generally in the desirable direction - unlike its neighbour Turkmenistan which has tried to avoid reforms, at least up until 1996, and is in a far less promising situation. The most interesting aspect of Uzbekistan's transition strategy has been the explicit concern with the welfare impact on those members of society least able to deal with the shift to a market-oriented economy. The paper examines the labour market, social expenditure and institutional reform strategies adopted to protect disadvantaged individuals. Although some of these measures have been ineffective (e.g. unemployment assistance) and others contain long-term dangers (e.g. the generous pension arrangements), together the social protection measures have softened the impact of transition on disadvantaged groups.