As an air of economic despondency descends over Central Asia, Turkmenistan and Uzbekistan have decided to eat their way out crisis.
A government meeting in Turkmenistan on August 28 examined areas in which the country might be able to pursue an import substitution policy, which would mean banning imported goods in favor of locally produced equivalents.
Deputy prime minister Palvan Taganov said the bulk of imported goods was accounted for by technical industrial goods, but the state news agency report on the Cabinet discussion gave no details about what those mostly comprise.
Instead, more talk was seemingly devoted to the purportedly more promising area of food imports.
Import substitution was initially touted as Turkmenistan’s ticket out of economic doldrums in a government meeting in April, when President Gurbanguly Berdymukhamedov instructed officials to develop a program on the policy. He also used that meeting to complain of excess spending and the bloated state of the government.
But figures produced by Taganov indicate that if the import substitution agenda is to be applied mainly to food, its benefit will be virtually negligible, if not detrimental in the long term. The policy favors local producers in the immediate term, but typically ends up yielding poor returns to the consumer.
As Taganov explained in his presentation, food accounts for 6.1 percent of imports. The state news agency cited state on four goods and the proportion that the consumption of locally produced goods takes up in the domestic market: fruit juices - 96.9 percent; non-alcoholic drinks - 91.8 percent; tinned foods goods - 87.2 percent; and sausage goods - 61.8 percent.
Taganov said domestic production was more than enough to provide for demand, however, so an import ban is more than possible. If the regular information bulletins about happy and busy food factory workers aired on state television are to be believed, the minister may well be right. Talk of an import duty on some consumable goods was also aired at the Cabinet meeting.
Drawing from anecdotal observations, it is Turkish and Russian producers that are likely to feel whatever pain the policy brings, although the figures can hardly be that great in the broader scheme of things.
Berdymukhamedov said more measures needed to be put in place to ensure new enterprises are created to produce goods from local raw materials. The state news agency report on the Cabinet meeting described Berdymukhamedov as giving “concrete instructions” on how to boost domestic production and thereby do away with the need for imports, but did not dwell on what those instructions were.
Uzbekistan is going down a similar route and slapping new import tariffs on a range of goods in line with an August 13 decree signed by President Islam Karimov.
From September 1, a 30 percent excise duty, or a minimum of $1 levy per kilogram, will be imposed on meat goods, such as pork and poultry.
Milk and condensed cream will be taxed at 10 percent, or no less than $0.30 per kilogram. That is double the rate previously in force.
The list goes on at length and the rates vary — apples, pears, onions, hazelnuts, almonds, sugar, yeast, baking powder, confectioneries, biscuits, ketchup, chewing gum, soap, detergents and cleaning products, clothing, shoes, clothes, ceramics, tableware and lighting fixtures.
Industry too will pay more for imports as tariffs are hiked for imports of ferrous metals, aluminum products, nuclear reactors, transformers and automobiles, among other things.
With Uzbekistan’s currency suffering like all the others in the region, this will naturally translate into a stiff rise in prices for regular consumers.
Further applying inflationary pressure is Karimov's regular decree on increasing state salaries, pensions and benefits. which typically also causes a rise in prices for groceries.
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