McKinley, Terry. "The Puzzling Success of Uzbekistan’s Heterodox Development". London: Center for Development Policy and Research, 2010.

McKinley, Terry. The Puzzling Success of Uzbekistan’s Heterodox Development. London: Center for Development Policy and Research, 2010.

• Uzbekistan's post-independence economic development has been characterized by what international economics refers to as the 'Uzbek growth puzzle'. This phenomenon refers to the relative economic success of Uzbekistan despite limited reforms and the frequent expectations of collapse within international economic circles.
• Like all other former Soviet republics Uzbekistan experienced a large drop in revenue and associated standards of life following the collapse of the Soviet Union, including an the departure of over 300,000 skilled workers and an immediate loss of 7-9% of revenue.
• The effects of the collapse in Uzbekistan were largely mitigated, especially when compared to its neighboring states. From 1991 to 1995 the economy only shank by 18%, and by 2001 Uzbekistan became the first post-Soviet state to reach its 1989 GDP level.
• Furthermore, the effects of the massive economic downturn on quality of life in Uzbekistan was mitigated thanks to decentralized social programs through the mahalla system, which allowed targeted aid towards the most needy with the help of localized knowledge.
• Ignoring IMF advice on introducing deregulation and free trade initiatives, Uzbekistan adopted an economic policy of import substitution, relying on exports of profitable cotton, precious metals, rare earths, and hydrocarbons to pay for the development of domestic industries.
• This process began with targeting areas of strategic importance, such as wheat and hydrocarbons -- both of which had been supplied from other Soviet republics. Whereas the UzSSR had imported 60% of oil, by 1995 Uzbekistan had become self-sufficient. By the early 2000s, Uzbekistan produced enough grain and wheat to cover 90% of its domestic consumption.
• The economic policy of import substitution also involved the diversification of the economy, especially export goods. The government specifically sought to destroy the cotton monoculture, and promote agricultural diversification.
• In the period immediately following independence, Uzbekistan still cooperated with the IMF and other international monetary organizations. What really solidified Uzbekistani economic policy along the model of import substitution was the Cotton Crisis of 1996, when the global price for cotton fell by 15% at a time when cotton exports still accounted for half of Uzbekistan's foreign exchange earnings. The Russian financial crisis of 1998 further crippled exports and deterred investment, prompting the government to abandon IMF and World Bank plans for development.
• From the turn of the century, Uzbekistan averaged a GDP growth rate of around 4%, which increased to 7% and then to 9% in 2004 and 2007 respectively, following a massive increase in the global market prices of gold and gas, as well as development in domestic industry. By 2007, over 25% of capital investment was from domestic sources, a figure that has continued to rise since.
• The diversification of Uzbekistani exports within an import substitution model was been very successful. At the time this paper was published, energy constituted 14% of all exports, gold accounted for 29%, and cotton accounted for around 21% of exports. The revenue generated from these exports is in excess of 12.8% of GDP and continues to increase. It is assumed that this surplus has been put towards industrial development, as 47% of imports during this period were industrial machinery.
• The Uzbekistani economy was uniquely well suited to survive the 2008 Great Recession. Whereas most developing countries were hit by sudden increases in energy and food prices, Uzbekistan had achieved relative autarky in these areas by 2008, with food only accounting for around 9% of imports and energy only 4% of imports. 
• Both overall growth and the current account surplus of Uzbekistan took a hit during the Great Recession, mostly due to a decline in overall global demand and a drop in remittances from elsewhere. The decline in the global export market, however, was largely offset by a massively increased demand for Uzbekistani oil and gas, which more than doubled in the year following the Great Recession.
• Uzbekistan further mitigated the negative economic effects of the sudden decrease in export markets through a stimulus and spending package equivalent to around 5%, which poured funds into infrastructure and public investment, especially concentrated in the construction sector.
• This massive stimulus program was only possible due to Uzbekistan's large current account surplus and high rates of government revenue; it is unlikely than any other low income country could mobilize such a large amount of its revenue for investment. Recent Uzbekistan has institutionalized the public investment of revenue surpluses, channeling its current account surpluses into a Fund for Reconstruction and Development.
• Despite frustrating many orthodox economists, the 'Uzbek Model' of growth has served the country well to overcome its particular challenges. The policy of targeted import substitution has allowed the nation to maintain standards of living following the collapse of the Soviet Union, become self-sufficient in necessary commodities, and avoid most effects of the 1998 and 2008 economic crises. 
• The two areas of the 'Uzbek Model' which are most open to criticism are the slow growth in employment compared to economic growth as a whole, and the lack of progress in poverty reduction. These remain serious social issues that are not solved by an economic policy that mainly raises living standards for all-ready-employed industrial workers.