history of tourism of uzbekistan

8/2/2019 History of Tourism of Uzbekistan

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Alisher Taksanov,Ph.D. (Economics)

UZBEK TOURIST INDUSTRY:BEFORE AND AFTER INDEPENDENCE

TENDENCIES IN UZBEK TOURISM. In Uzbekistan, tourism has always been regarded as the mostefficient sector of the national economy. Oriental amicability, developed infrastructure, abundance of uniquehistorical, religious and natural monuments couldnt but create certain auspicious prerequisites for itsdynamic development. And small wonder, then, that in Soviet times, Central Asia in general and Uzbekistanin particular attracted many tourists from the European part of the USSR and even from the Caucasus, which

was rightfully considered to the health-resort paradise. The formation and development of the Great SilkRoad, dating back to the 3rd millennium B.C., are universally viewed as the main historical prerequisites forthe development of tourism in Uzbekistan.

In an effort to maintain the countrys image as a hospitable and cordial nation, and preceding from theavailable potentialities of the Uzbek economy, the Government devoted particular attention to developing theindustry of hospitability. It should be said in all fairness that this was the case both before and after theacquisition of independence by Uzbekistan. Some two decades ago, the Soviet Government categorizedUzbekistan as a tasty morsel of the tourist pie.

Therefore, the history of national tourism should be broken down into 2 periods: before and after thecountrys embarking on the path of independent development. However hard you may try to make secret ofthe fact, the 1st period had a strong ideological bias (friendship of peoples, support of the countrys transitionfrom feudalism to socialism etc.). Despite its greater ideological, rather than economic, significance, the

sector was backed by budgetary funds and investments made by departments, enterprises and organizations.At that time, tourism was characterized by a variety of types and vectors, as different institutions wereinvolved in its development, including:

- organizations, whose activity had a direct bearing on tourism (the State Foreign Tourist Committee, theState Sports Committee, Ministries of Public Health and Culture, municipal services and suchlike);

- departments, which ran their own holiday homes, health-resorts and rest centers (Ministries of Defense,Internal Affairs, Industry and Agriculture etc.);

- public organizations (the communist party, VLKSM, trade unions etc.);- cooperative organizations (kolkhozs, consumers unions etc.).Such a situation in the tourist industry had its pluses and minuses. Among its negative consequences,

one can mention the absence of single policy and common standards imposed on tourism as a separatesector. This, in turn, led to a number of ways, in which its management, investment and planning were

carried out. The fact that each of these institutions invested in the creation of the material and technical baseof tourism, thereby promoting travel, sports and leisure activities, is on the plus side of the posture of affairsin tourism in that period.

TOURISM BEFORE THE ACQUISITION OF INDEPENDENCE. Traveling, beyond doubt, hasdeep roots in Central Asia. Suffice it to recollect the fact that it is across this very region that the Great SilkRoad was running. Innumerable caravans loaded with goods of every description and accompanied bymerchants, skilled craftsmen, scholars and travelers moved along the ancient route for centuries. En routethey stopped to stay overnight in caravanserais based in the worlds renowned cities of Samarkand, Bukhara,Khiva, Shakhrizabs, Tashkent etc. The primary aim of this review, however, is not the history of travelingwithin the region from time immemorial. Instead, its focus will be on the development of travel in CentralAsia over the past 90 years.

The period of proletarian tourism formation (1917-1930). After the Great October Socialist Revolution inRussia, the territory of Central Asia appeared under the communist partys overall control. A civil warcontinued the devastation of the leisure sectors infrastructure. In particular, the material base available at thetime was ruined. At this stage, it is worth mentioning that it comprised holiday hotels, guest houses, country


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rest homes for functionaries and army officers, as well as special farms intended for hunting and horse-racingbuilt by Russian colonizers. This means it was necessary to start forming the tourist industry practically fromscratch. Needless to say, the sector didnt top the list of economic priorities in that period. Thats whyemphasis was placed on those elements of tourist infrastructure that local authorities managed to preserve orreconstruct. To tackle the problem of accommodation shortage, dwelling houses of local aristocrats situatedon the territory of Turkestan Governor-Generalship and the Ferghana Valley were expropriated. With theconquest of Bukhara by the Red Army, the Emirates rich infrastructure, including beautiful country houses,

summer palaces and residences owned by local feudals changed hands. Later on, all those buildings wereused to accommodate holiday-making servicemen, Soviet and party functionaries, guests from Russia andUkraine. At the same time, some of the expropriated edifices were turned into orphanages for homelesschildren and shelters for refugees from different regions of the former tsarist empire. Between 1919 and1924, there were about 50 such establishments. Apart from merely providing a roof and rehabilitating theirvisitors, they were also involved in the organization of tourism. It was the period of close contact betweenRussians and local inhabitants, with the former getting to know the regional culture and traditions, as well asthe mode of life of its denizens.

1918 saw the creation in Russia of the first tourist organization, called the Bureau for School Excursions.Three months later, its branches emerged in Turkestan. Following the passage of decrees on health-improving areas, all sorts of resorts were opened across the region. Construction of tourist centers, sanatoria,

pioneer camps, resorts etc. was under way all over the place. Churches, country houses and estates ofdomestic landowners as well as other unique architectural masterpieces owned by rich people, which arenow regarded as historical monuments, were easily transformed into public rest houses. It needs to mentionin this context that although these decrees were mainly approved by the government of the RussianFederation, they were applicable to all territories of the former tsarist empire.

Let it be noted here that despite the fact that tourism was not prioritized as a separate sector, such issue asthe organization of recreation for working masses was raised time and again by new governments of thePeoples Soviet Republic of Bukhara and the Peoples Soviet Republic of Khorezm. The main problemfacing the local authorities was the scarcity of available resources, including accommodation facilities,foodstuffs, specially trained personnel etc. With the formation in 1924 of the Uzbek SSR and its subsequententry into the USSR, all directives issued by the communist party and the Soviet government were bindingupon all newly-established national republics. And the tourist sector was no exception. Almost all tourist

infrastructure facilities in the region were serviced by Russias representatives, who arrived in Central Asiato handle a range of socio-political and economic issues. The bulk of holiday-makers in local rest houses andresorts was accounted for by high-rank functionaries and their family members, with industrial workersmaking up a minor portion. By the start of 1929, there were already 160 tourist facilities in Turkestan, whosecapacity, however, was limited owing to a variety of reasons. Whats more, local inhabitants representedonly 20-30 per cent of their total staff, meaning that specialists from regions other than Central Asia werewidely employed there.

Since 1925, an important process of creation of new socio-economic prerequisites started to unfold in theregion, following the ongoing process of nationalization of feudal and capitalist enterprises based on theterritory of the Tashkent Province and in the towns of Namanghan, Andijan, Bukhara and Samarkand. Theexcursion and tourist movement initiated by Russian intelligentsia was gaining strength at the same time.Official documents stated that as a result of the restoration and reconstruction of the national economy and

the development of the cultural revolution, the first establishments of proletarian tourism started to appear,whose aim was to organize massive recreation of work people and to meet their cultural needs and demandfor studying the motherlands cultural values and nature. Schools, museums, komsomol organizations etc.were combining efforts to meet the target. Sub-divisions set up at tourist societies arranged all kinds ofexcursions and walking tours. In 1920, there was founded the United Lecture and Excursion Bureau inRussia, with a view to ensuring popularization of proletarian tourism and excursion activity. Its branches and

prototype organizations were then founded in Uzbekistan, in particular in Tashkent and the Tashkent andSamarkand Provinces, for workers and employees. Tourist visits and excursions were organized by tradeunions. It should be noted here that as this work was not paid for, it was carried out by enthusiasts andvolunteers who were not on permanent staff. In spite of this fact, they were the first to develop more or lesscomprehensive tourist programs and routes. In the Samarkand Province alone, there were as many as 23

popular tourist routes at the time. However, the profitability of tourist facilities and resorts remained low

some 20 per cent.Naturally, a complex criminal situation and social disturbances in some of the republics districts were

hardly conducive to the development of tourism in the region. For instance, peasant revolts took place in the


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Ferghana Valley and the Khorezm Province, whose inhabitants protested against the military communismpolicy and tyranny of Soviet administration. That several areas were dominated by basmatch counter-revolutionary robber bands made the situation worse. Armed bandits frequently robbed tourists, with localmilitia being unable to guarantee their safety. It is for this reason than the hospitality industry thrived only intwo locations, namely the Tashkent and Samarkand Provinces.

As the populations interest for active tourism and excursions grew, the necessity to train special cadrescame to the fore. Excursion centers were the first to start preparing professional guides and tourism

organizers. Their work was aided by certain steps taken by the government to develop the tourist sector. Allof them were focusing on creating a material and technical base and training professional cadres for tourism.Moreover, understanding the directions, which should be given priority attention, was gradually taking aclear-cut shape: centralization of tourist activity; provision of tourists and sightseers with means of transport,accommodation, food, guide-books and information on tourist destinations; preparation of professionalorganizers, guides and group leaders. Teachers and active komsomol members became the first professionalsin Soviet tourism. Special tourist bureaus set up at komsomol committees were tasked with providingassistance to local mass-travel societies and performing reference-instructing functions. These bureauscomprised the following sections: study of local lore, camp-based tourism, long-distance tourism andsuburban tourism. Apart from accumulating tourism-related materials, such as maps, route descriptions etc.,these organizations were busy building cooperative links with public-catering enterprises, hotels, municipaland transport services. In short, their efficient activity was highly contributive to the formation of tourism asan independent industry.

As the development of corresponding infrastructure continually gained in scope, a growing number ofpeople from Russia, Ukraine and the Caucasus showed interest for Uzbekistans attractive tourist routes.With the Turksib railway line put into service and new main lines being under construction, Central Asiaincreasingly turned into one of the USSRs most popular mass recreation destinations. Inhabitants ofUzbekistan, in turn, could visit tourist destinations in the European part of the country and the Caucasus.Concerted efforts by trade unions and komsomol organizations in the field of tourism made it possible tointroduce preferential tariffs on travel by railway for tourists, to lease premises for tourist camps, to acquirethe necessary tourist outfit etc. All this was needed to render tourist services, which were partially funded bytrade unions. At the same time, with the Soviet economy developing at a quick pace, there appeared astratum of people who could afford to pay for tourist services and travel, thus laying down the foundation of

elite tourism. A lot of commercial organizations emerging countrywide offered a range of travels andexcursions for solvent sections of the population in different regions of the USSR. By the end of 1929, theirnumber reached 45, of which 30 provided services to guests from other republics.

In 1925, in accordance with a decision by the Soviet government, the state joint-stock company, calledSoviet Tourist (GAO Sovtur) was set up in the USSR, with a view to organizing trips on motor-ships andtrains and servicing groups of holiday-makers traveling on certain routes. The territory of Uzbekistan wasincluded in Sovturs scheme of operation, since one of the latters functions was the formation of a networkof tourist centers and regional-study tours throughout the Soviet Union. This means that the period underdiscussion saw the introduction of planned management mechanisms, with tourism assuming a distinctcharacter of separate economic sector. Despite declarations of its orientation towards the servicing of work

people, Sovturs tourist centers quickly turned into the rest sites for its shareholders and their familymembers (who were high-paid intelligentsia, including high-rank party workers and Soviet bureaucracy).

Industrial and agricultural workers, however, had little chance of spending their holiday there. By the year1930, the number of commercial organizations specializing in tourism halved.

What characterized this period of tourism development was a clash of economic systems: a nascentmarket system and a centralized command control system, whose outcome was predetermined. With the

New Economic Policy curtailed, the Soviet system of management started reigning supreme across alleconomic sectors. The following trends characterizing that period are worth mentioning:

- creation of small and medium-sized commercial enterprises involved in tourism;- formation of the market for tourist services and the elite nature of their consumption;- creation of far-flung tourist infrastructure, including restaurants, hotels, transport networks etc.;- break-down of tourism into two distinct types: servicing of well-to-do layers of the population and

excursion (recreation) tourism for intelligentsia;- establishment of tourist firms, bureaus, companies, clubs, societies etc.

In the 1930s, however, all of them were either re-organized or liquidated.According to official statistics, in 1980, there were 31 young-tourist stations in Uzbekistan, which served

48,000 children (in 1985 32 and 107,400 and in 1990 36 and 65,000, respectively). Over a decade, the


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number of summer pioneer camps grew from 1,417 in 1980 (with 593,500 children served) to 3,880 in 1980(825,100 children served). So, in the Soviet period, the state paid much attention to the development oftourism for teenagers.

Let us now look at some more relevant figures. In the composition of aggregate income of workers andoffice employees, the share of subsidized vouchers to sanatoria, rest homes and pioneer camps reached 10.2

per cent in 1980, and 10.0 per cent in 1990 (10.0 per cent and 11.8 per cent, correspondingly, for farmers).On the other hand, a significant portion of the populations expenses on tourism and health-improving

services was covered from public consumption funds, which heightened the importance of social tourism inUzbekistan. For instance, in 1980, 778.2 million Rubles were paid from public consumption funds for freemedical service, treatment in sanatoria and health resorts and physical training. In 1988 and 1990, thisindicator was 1,25 billion Rubles and 1,58 billion Rubles, correspondingly.

Moreover, in 1990, the per capita indicator of tourist and excursion services came to 6.4 Rubles, culturalservices 4.2 Rubles, physical training and sports 0.4 Rubles and health-improving and resort 2.2Rubles. All in all, in the composition of paid services, the share of tourism and excursions amounted to 4.9

per cent in 1989 and 4.6 per cent in 1990 (physical training and sports 0.4 per cent and 0.3 per cent, healthimproving and resort treatment 1.6 per cent and 1.6 per cent, respectively).

It should be noted that in 1980, the state social insurances expenses on treatment of workers and officeemployees in sanatoria and resorts ran at 26.1 million Rubles, in 1985 36.8 million Rubles, in 1990 60.5million Rubles; on servicing of children in pioneer camps and their pre-school and extra-school education 8.8 million Rubles, 18.8 million Rubles and 21.8 million Rubles, correspondingly. The total amountappropriated from the state budget of the Uzbek SSR was 918.3 million Rubles in 1980 and 1.62 billionRubles in 1990.

No less dynamic and impressing are indicators characterizing the Republics hospitality industry in thefinal decade of Soviet power. (See Table 1).

In 1990, as many as 2,01 million workers and their family members underwent treatment and rested insanatoria and health resorts, holiday hotels and rest centers. Of these, 1.6 million people enjoyed a long-termtreatment and rest, with the remaining 413,500 resting within 1-2 days. At the same time, the number ofthose who took part in excursions was 7.26 million in 1990, compared with 4.07 million a decade ago. Insummer, approximately 900,000 children and teenagers rested in pioneer and school camps, tourist centersand country-cottages.

According to some estimates, in the period 1985-1989, the volume of domestic and regional tourism inUzbekistan made it possible to encompass 1.4-1.6 million people, with foreign tourists accounting for130,000-180,000. In 1992, the countrys tourist industry offered foreign visitors only 27 types of services. Tocompare, in Turkey, Italy and Spain, this figure ranged from 250 to 400. It is clear that, the scope of Uzbektourism was limited. The main reason for such a limitation lied in the planned system of management and thesocialist form of economy.

A sharp transition in the mid-1980s to the policy of regional self-financing and disintegration ofeconomic links, inflation, collapse of the Soviet state that followed, and as a result, a complicated politicalsituation in Central Asia caused a lingering crisis and stagnation, in which the tourist industry of Uzbekistanfound itself since 1990. It is necessary to observe in this context that the same fate overtook other sectors ofthe national economy as well. The number of foreign tourists coming to visit the Republic plummeted 4-5-fold, according to some tallies. The countrys tourist potential was used at no more than 6 per cent, with the

average per-tourist profit not exceeding US $12 per day. To attract tourists, services were often offered atreduced rates. Although the domestic hotel resources in that period were quite scarce, they metcorresponding international standards. By the end of 1992, almost 50 per cent of tourist facilities inUzbekistan were loss-making or of little profit. Whats more, both the shares of inter-republic exchange anddomestic tourism started to shrink. The number of national parks, nature reserves and shooting areas,involved in tourism, decreased from 13 in 1980 to 10 in 1990, with their acreage diminishing from 272.100ha to 239.900 ha. This produced severe impacts on the ecological types of recreation and natural tourism.

Before the acquisition of independence, tourism in Uzbekistan, as all other industries of the nationaleconomy, was toughly regulated by central authorities. The main centers of tourist activity in the USSRincluded the Caucasus, the Crimea, the Baltic states, the historical centers of Russia and Central Asia. In that

period, the historical significance of numerous architectural , archeological and cultural monuments andnatural sights of Uzbekistan were not advertised. Hence a low demand for them on the part of overseas

tourists. In Soviet times, tourism represented one of the elements of cultural work designed to performcertain ideological functions. Notwithstanding the latters dominant role in tourist activity, the sectorsfunding was not given a priority and its economic significance was low.


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There are several reasons why the tourist industry remains underdeveloped in Uzbekistan. Insufficientattention to tourism as a separate economic sector is the main reason for such a slow progress. This means alack of complex prognostication, long-term planning and territorial organization of tourism, as well asdisregard for non-governmental tour operators. Another obstacle in the way of the sectors sustainabledevelopment seems to be the non-recognition by local authorities of tourist activity as a priority economicdirection, in spite of the fact that a lions share of revenues derived therefrom goes to the local budget.

With the acquisition of independence, Uzbekistan set the stage for the restoration of the nations historical

and cultural heritage and regulation of tourist activity. Tourism affords ample opportunity to cognize theworld, while, at the same time, providing access to the international arena. We need to develop this importantsector and to capitalize upon its vast potentialities,- stressed the President Islam Karimov of the Republic ofUzbekistan at the session of the Khorezm Province Kengash of Peoples Deputies on 16 March 1996. Ourancient cities of Tashkent, Samarkand, Bukhara and Khiva are 2,500-3,000 years old. They represent anenormous spiritual legacy, which could be translated into material riches and prosperity through thedevelopment of tourism. The greater the number of foreign tourists arriving in our country, the more theinternational community will know about Uzbekistan and the more potentialities well be able to show. Tomaterialize these plans, we need, above all, to upgrade the quality of tourist facilities, for them to be in a

position to meet modern requirements and the performance criteria now demanded.There are countries in Europe, whose territory is so small that it is not always possible to discern them on

the map. However, the number of tourists they receive annually is 90-100 times as great as their population.This ensures their progressive development. As for the town of Khiva, whose 2,500 th anniversary we arecelebrating today, it was visited by a little more than 15,000 foreign tourists in the past four years. Such asituation cannot be explained by anything else than an inability to demonstrate our wide potentialities,feebleness and incompetence. (Newspaper Narodnoe Slovo, 17 March 1996). In this way, the head of theUzbek state pointed to the problems facing the national tourist industry and an inefficient utilization of theRepublics tourist potential.

TOURISM AFTER THE ACQUISITION OF INDEPENDENCE. As mentioned above, in the firstyears of Uzbekistans evolution as a sovereign entity, domestic tourism experienced certain difficulties,which were associated mainly with the following factors:

- transition from the centrally-planned economy to a market-oriented system of economic relationships;- functioning as a separate industry;

- formation of a single structure, encompassing the sectors entire resources (accommodation, transport,tour organization, personnel training and decision-making).

Meanwhile, in the space of 15 years since independence, Uzbekistan has succeeded in forming its ownmodel of tourist activity. On the one hand, it is characterized by the number of tourist visits, while on theother, by the state of its infrastructure. Table 2 provides indicators of tourist flows in Uzbekistan compiled bythe National Company Uzbektourism, customs authorities and a group of researchers from the World TradeOrganization.

These data clearly indicate that the dynamic of tourist flows tended to change depending on acombination of internal and external factors. It goes without saying that a model susceptible to externaldeterminants may lack stability. In particular, the 11 September tragic events in the US adversely affectedthe tourist market of Uzbekistan. Nowhere are the results more visible than in relevant statistics: in the

period 1993-1999, the number of tourist visits grew at 165.1 per cent , compared with 89.5 per cent in the

period 1999-2004. Overall, the growth rate reached 147.9 per cent during the 11-year period. In 2005, theRepublic was visited by 241.900 foreign tourists from 117 countries.

Data are also available on the dynamic of services provided only by tourist organizations, which enjoylicences from the National Company Uzbektourism. Table 3 shows that over the 9 years under review, thevolume of their services increased 11.1-fold.

The total number of Uzbek citizens going abroad in 2005 reached 380,000. The main destinationscomprised Russia, Ukraine, Kazakhstan, Turkey, China, UAE, South Korea, Israel, Greece etc. As regardslocal tourism, 334.100 citizens of Uzbekistan visited the towns of Samarkand, Bukhara, Shakhrisabz, andKhiva, as well as the mountainous areas of Chimgan and Charvak.

Comparing the tourist-related data for the past two years, one can clearly see that the number of foreigntourists visiting the Republic in 2005 (241,900 citizens from 117 countries) is 25.9 per cent lower than the2004 figure. Experts stress that the main countries, which provide a greater inflow of tourists to Uzbekistan,

remain Austria, Great Britain, Germany, Italy, Korea, the US, Russia, France and Japan. More than 90 percent of overseas tourists visit the Republic with cognitive purposes. It should be noted in this connection that


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in the last few years, interest for cultural and historic tours along the Great Silk Road, religious tourism(pilgrimage) and ecological tourism is on the rise.

Additionally, the formation of tourist infrastructure is in process. There are 408 enterprises in the sector,which carry out their activity on the basis of an appropriate licence. Of these, 326 enterprises are under

private ownership. In 2005, 80 organizations were granted the right to operate in the hospitality industry.Another positive tendency worth mentioning is certification of services. Services certified in accordance withthis procedure not only acquire legal status, but become in line with corresponding requirements.

In keeping with the data presented by the State Statistics Committee of the Republic of Uzbekistan, asmany as 168 hotels, under different types of ownership, are now functioning in the country. Their totalaccommodation capacity exceeds 14,000 rooms. More than 20 medium-sized and small private hotels andguest-houses came on stream in the last 6 years.

The development of interstate linkages in the field of tourism was also on a rising trend. Last year, forexample, the National Company Uzbektourism signed cooperation agreements with the leading touristadministrations of India, Poland and China. The Memorandum of bilateral cooperation was signed with theRepublic of Malaysia. Besides, the Uzbek delegation took part in the work of the UN General Assembly ofthe World Tourist Organization (Dakar, Senegal).

Whats more, in 2005, the Cabinet of Ministers of the Republic of Uzbekistan approved List of measuresto accomplish the stage-by-stage reformation of the tourist industry of Uzbekistan for the period 2006-2010. In accordance with this document, Uzbektourism worked out a package of regulatory documents to

be submitted to the Government and Parliament for consideration. These include, among others, a draftprogram for the development of tourist services up to the year 2010, as well as draft regional programs forthe development of tourism in the Khorezm, Ferghana, Namanghan and Kashkadarya Provinces and in theRepublic of Karakalpakstan for the period, in which a new version of the Law of the Republic of Uzbekistan,On tourism is in effect. Regional programs for the development of tourism in other provinces ofUzbekistan are in the making. As well as that, the classifier of tourist services was elaborated.

Interesting findings were received by the Center for Expert Estimates, Trans-Asia in respect of tourismdevelopment prospects in the Central Asian region. In accordance with the experts tallies, the tourist

potential was more fully utilized by national tourists in Uzbekistan, and by foreign tourists in Turkmenistan(Table 4).

By the way, the Manila Declaration on World Tourism (1980) accentuates, in particular, the fact that the

share of tourism in the national economy and international trade has turned it into a pivotal indicator ofglobal development.

Without doubt, within the framework of one country, efficient tourist activity is conducive to a morebalanced position of its economy thanks to the re-distribution of national revenues and development ofindustries, which are auspicious for the national economy as a whole.

Therefore, the development of foreign tourism should be accompanied by similar efforts to develop localtourism. Some estimates show that there are 8-12 local tourists per 1 overseas tourist in Uzbekistan, who usethe same services, ensure employment countrywide and contribute substantially to regional budgets.

OUTLINE OF THE UZBEK MODEL. Thus, the Uzbek model of tourism, which has taken shape inthe last 15 years, combines the elements of Oriental hospitality (cordiality, security, respect and esteem) andthe Western-type standards of servicing (hotel and transport services, reservation, excursions, simultaneoustranslation etc.) Of no less importance is the fact that the Uzbek model is predetermined by the specific

system of communal life that has endured the impact of urbanization processes. This communicates a certaincolor to the national tourist product. Local communities (makhallyas) continue to be the centers of traditions,mode of life and mentality of the Uzbek people.

Hence, it can be concluded that the Uzbek model of tourism is characterized by the following features:- a dynamically developing services sector is steadily increasing its contribution to the nations GDP;- efficient privatization and formation of a mobile private sector were conducive to turning tourism into a

profit-generating industry;- enforcement of basic laws helped create a favorable market environment, while stimulating the inflow

of foreign and government investments, technologies and managerial experience to the tourist sector andinfrastructure;

- an efficient personnel training system made it possible to raise the level of services offered;- established diplomatic relations strengthened Uzbekistans position on the world stage and initiated

much interest for the Republic on the part of Western tour operators;- air and rail communication links were established with many tourist centers of the world;


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- tourism-related agreements were signed with many countries , where tourism is an efficientlyperforming industry;

- a well thought-out system was introduced for organized arrival of foreign tourists in Uzbekistan.

Table 1. Number of people undergoing treatment and resting in sanatoria and rest-homes of

the Uzbek SSR, thou people

Indicators 1980 1985 1988 1990Total number (excluding 1-2-day rest) 811,3 1241,7 1497,1 1603,8

In sanatoria (fro adults and children) 95,9 140,7 170,5 175,0

In sanatoria and preventive clinics 76,8 133,0 180,4 187,8

In resort polyclinics 4,3 5,3 7,8 8,6

In rest-homes and holiday hotels 59,2 56,6 91,8 72,3

In rest centers and other restorganizations

16,2 18,1 31,6 24,1

In tourist hotels and centers 558,9 888,0 1015,0 1136,0

Table 2. Rated indicators presented by 3 tourist movement centers in Uzbekistan in the

period 1993-2005Period Uzbektourism data Customs service data Forecast data by WTO

group

Total

tourist

number,

thou

Foreign

tourists,

thou

Departure,

thou

Arrival,

thou

Tourist

number,

thou

Profit from

tourism,

billion

dollars

1993 332,2 92,35 - - - -

1994 309,5 60,9 - - - -

1995 305,8 92,02 - - - -

1996 368,3 173,9 - - 174 0,1981997 484,2 252,9 954,4 1030,5 270 0,351

1998 486,2 272,0 810,5 939,8 400 0,560

1999 549,7 274,0 486,8 - 500 0,750

2000 552,8 278,0 - - 650 1,04

2001 529,9 231,4 - - 710 1,136

2002 445,5 198,1 - - 800 1,320

2003 471,4 230,4 - - - -

2004 492,4 261,6 - 287,63 - -

2005 241,9 330,13 - -

Table 3. Tendencies observed in the tourist sector of Uzbekistan in the period 1996-2004Indicators/ Period

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Totalvolume ofservices,billionSoum

1,77 3,65 4,69 5,304 6,88 10,1 15,7 17,5 17,9

Profit,millionSoum

399,1 544,5 382,3 517,6 443,0 1111,8 -166,5 150,61 -258,7

Export ofservices,milliondollars

14,49 33,77 20,98 25,43 27,13 22,66 21,54 23,58 28,02


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Table 4. Respondent opinions on the use of tourist potentialities in Central Asia (average

figures)

States Use of the countrys potentialities by tourists

National Foreign

Republic of Kazakhstan 6 4

Republic of Kyrgyzstan 3 3

Republic of Tajikistan 4 1Turkmenistan 5 7

Republic of Uzbekistan 7 5

HISTORICAL EXCURSUS IN THE DEVELOPMENT OF UZBEK TOURISM

One would be mistaken to claim that tourism is a new sector in Uzbekistan, for its widespreaddevelopment started as far back as the 1960s, when the organization of mass recreation on the basis oflocal resources came to the fore. Following corresponding governmental resolutions and decisionsmade by non-state organizations, a solid material and technical base of tourism was established in theRepublic. By the end of the 1980s, its structure was as follows:

- 10 per cent of property was in the Unions ownership;- 30 per cent of property was owned by both the Union and the Republic;- 60 per cent of property was owned entirely by the Republic.The very organization of the tourist industry was not uniform by structure and composition, since

the following entities appeared in the role of participants and proprietors:- ministries, departments and committees, which built rest homes and tourist centers within the

framework of their sectors (some 40 per cent of the total number);- public organizations (the communist party, Komsomol, trade unions, womens committees

etc.) their share reached 20 per cent;- enterprises and institutions, with rest homes, sanatoria, childrens summer camps and tourist

centers on their balance (30 per cent);

- cooperatives and other economic establishments (collective farms, consumers cooperativesetc.), with rehabilitation and tourist facilities on their balance (9 per cent);- local administrations and self-government institutions (executive committees and village

soviets), which also run tourist centers on their territories for regional development purposes,but their share in tourist business was negligible less than 1 per cent.

There were some peculiarities that characterized the organizational structure of tourism in the period1960-1990. First of all, one should mention the many-vector pattern of development and the lack ofwell-coordinated development policy. This situation, however, was a natural result of the touristsectors extremely scattered character. The point is, it was composed of the following touristfacilities:

- enterprises incorporated into the USSR State Committee on Foreign Tourism (hotels and

tourist centers) and located on the Republics territory;- tourist centers and installations subordinated to the State Committees on Sports and Physical

Training of both the USSR and Uzbekistan;- rest homes and childrens summer camps owned by the ministries of industry, agriculture,

construction and internal affairs, as well as by industrial enterprises, research institutions andcollective farms;

- tourist installations incorporated into the trade union systems of both the USSR andUzbekistan;

- tourist facilities owned by Komsomol organizations of both the USSR and Uzbekistan, andpublic organizations;

- health resorts, rehabilitation clinics, health centers and sanatoria incorporated into the

ministries of public health of both the USSR and Uzbekistan;- tourist installations owned by local village soviets and executive committees.


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Needless to say that tourist facilities run by the State Committee on Foreign Tourism surpassedother categories in terms of technical equipment, architectural excellence and construction quality. Itis quite clear that tourist installations owned by local soviets and public organizations were on theopposite end of the range, i.e. they were poorly-equipped and offered low-quality services. A fiercestruggle for financing and investments required to build and maintain tourist facilities was carried onwithin decades and not only between the republics of the former USSR, but also between local

institutions of self-governance within the republics. As a consequence, the development of tourismdidnt take account of technical, natural and infrastructure potentialities of one or another region.Moreover, most ecological and geographical requirements were ignored, which could not butadversely affected the environment, employment and profitability of this sector. For all that, tourismcontinued to develop, with the following factors influencing the process:

- the availability of so-called iron curtain between the USSR and the rest of the world, thatmade mass foreign tourism impossible, but facilitated the exchange of tourists between therepublics;

- the existence of social economy, where tourism-related services were viewed as luxury andtherefore were very attractive for common citizens;

- the reinforcement of USSR state property on the territories of national republics, which led to

a centralized distribution of tourist flows;- the support of low-profitable and unprofitable tourist organizations by injecting state

subsidies, which scaled up the social importance of the sphere of recreation and tourism.According to some estimates, in the period 1985-1989, the number of domestic and regional

tourism in Uzbekistan approximated 1.4- 1.6 million people, including 130,000-180,000 foreigntourists. In 1992, the Republics tourist sector could offer foreign tourists only 27 types of services.Compare this indicator with 250-400 types of tourist services offered in countries well advanced intourism, such as Turkey, Italy and Spain. As you can see, the potentialities of Uzbek tourism werelimited. And the main reason behind such a deplorable state of affairs in the region, which hadeverything to become a tourist Mecca, was a planned-directive method of administration, combinedwith the peculiarities of socialist economy.

A sharp transition to regional self-financing in the former USSR in the middle of the 1980s, theensuing disintegration of economic links between the regions, inflation and a complicated politicalsituation in Central Asia resulted in a protracted crisis, which befell almost all the industries ofUzbekistan in 1990. Tourism was no exception. By 1992, the sector witnessed a 4-5-fold slump in thenumber of foreign tourists arriving in the Republic. Utilization of the national tourist potential didntexceed 6 per cent, with daily profit generated by a foreign tourist averaging US $12. Very often,tourist services were rendered at reduced tariff rates. By the most modest tallies, Uzbekistan receivedUS $3 million less in profit in 1992. It must be observed that the number of rooms, which metgenerally accepted international standards was insignificant in that period. By the end of 1992, almost50 per cent of tourist installations available in the Republic were loss-making or low-profitable.

Whats more, the situation exacerbated by a sharp drop in both the volume of inter-republic exchangeof tourists and the share of domestic tourism.On the other hand, at the end of the 1980s, the iron curtain was completely destroyed, and

international tourism entered the phase of continuous progress. In 1990, a total of 7.2 millionforeigners arrived in the USSR, of whom 2.2 million as tourists. At the same time, 9.08 million Sovietcitizens went abroad, including 2.1 million as tourists. The same tendency could be observed inCentral Asia, in particular in Uzbekistan and Kazakhstan. According to customs statistics for 1997,more than 1 million people left the Republic, for various reasons, mainly for the CIS member states.

The entire period of tourism development in Uzbekistan can be divided into several stages:The period of formation: 1990-1998. It started simultaneously with the introduction of the Law

on Foreign Economic Activity. This document allowed domestic enterprises to trade in their produce

and services in the international markets. The Law specified that each subject of foreign economicactivity may independently determine the form, type and direction of its participation in foreigneconomic relationships, to enlist, in accordance with the established procedure, cooperation of legal


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entities and natural persons on a contract or gratuitous basis, for the purposes of its foreign economicactivity. In addition, it was entitled to possess, use or dispose of the results of its foreign economicactivity, including foreign exchange receipts, in keeping with the legislation of the Republic ofUzbekistan. The objects of foreign economic activity encompass all kinds of industries, goods andservices created in all industries and sectors of the national economy, as well as securities, scientificfindings, intellectual and other values, with the exception of the objects, whose utilization in foreign

economic activity is banned under the law of both the USSR and Uzbekistan. Legal entities andnatural persons, including foreign and international organizations operating within and outside theRepublic and registered in Uzbekistan as participants of foreign economic activity may be thesubjects of foreign economic activity, irrespective of their type of ownership.

The second important step taken by Uzbekistan was the passage of laws on enterprise andcooperation, which enabled the private sector to join the process of market transformation in thetourist industry. Cooperatives and facilities taken on lease started to appear in the tourist sector. Theyspecialized primarily in public catering, accommodation and transportation, offering their services toforeign and home tourists. The Law on Citizenship constituted one more step in the development oftourism in the country. Under this document, Uzbek citizens may leave the Republic asrepresentatives of a sovereign and independent state, and their status was determined on the basis of

international agreements and conventions signed by Uzbekistan. It should be noted in this context thatover the 8-year period in question, more than two-third of intergovernmental and inter-departmentalagreements were concluded with foreign countries in the field of tourism. They formed the regulatoryand legislative framework for the expansion of cooperation with overseas tourist organizations. Theyear 1994 saw the signing of the Samarkand Declaration on Revival of the Great Silk Road, whichdefined Uzbekistan as the heart of the new tourism direction.

At the beginning of the 1990s, it became clear that the tourist sector needed root-and-branchreformation. The necessity to concentrate resources for joint action and a breakthrough to theinternational market took central stage. By that time, Moscow-based structures could no longerrepresent Uzbekistans interests abroad. The Republic had to elaborate its own vision and approachesto tourist business.

Established following the July 27, 1992 Presidential Decree, the National Tourist Company,Uzbektourism incorporated upwards of 150 economic operators functioning in the Republic. Later on,there were issued other governmental resolutions, bearing, directly or indirectly, on the developmentof national tourism. Let it be mentioned that experts and specialists positively assessed a decision toform a single tourism regulation center. In many countries, tourism is subordinated to the ministries ofcivil aviation, transport, foreign and home trade, internal affairs, the environment, manufacturing andcrafts, youth and sports, culture, labor, economy etc. This hampers the development of tourism as aseparate activity. A national tourist administration set up in Uzbekistan made it possible not only tocover a wide range of tourism-related issues, including advertising, information services, licensing,statistics, compilation of economic data, management etc., but also to champion the sectors interests

in the ministries of finance and macroeconomics, the Goskomimuschestvo Committee and otherinstances.To tell the truth, its establishment per se failed to radically change the situation in the tourist

sector at once. As of January 1, 1993, Uzbektourism ran 1.04 billion Rouble deficit of paymentbalance, including compensation for installations handed over to Uzbekistan after the demise of theUSSR. Among the reasons that led to such a posture of affairs were the departmental dissociation oflong standing, the lack of a single controlling abs coordinating body, plus hyper-inflation andvarious economic problems.

The newly- created tourist administration began elaborating a national tourism model. Whenworking out its general concept, domestic specialists studied the positive experience accumulated byTurkey, Israel, Greece and Spain and methodical recommendations of the World Tourist

Organization. The following priority directions were identified: national (home) tourism, internationaltourism on the basis of the Great Silk Road Project, the sphere of services and trade, training of

personnel and creation of new jobs, and, finally, re-establishment of state ownership rights in the


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sector. Delineating the main directions in which to perfect tourism, the Presidential Decree, Onmeasures to activate the participation of the Republic of Uzbekistan in the revival of the Great SilkRoad and development of international tourism in the Republic and the Resolution of the Cabinet ofMinisters of the Republic of Uzbekistan, On measures to create modern infrastructure ofinternational tourism in the Republic of Uzbekistan gave a new impetus to the development of theindustry of hospitality in our country. During the process of re-establishment of state ownership rights

and privatization, many tourist facilities were privatized and changed the form of ownership. In theperiod 1991-1995, the number of rooms available in Uzbek hotels grew 70 per cent, amounting to9,800. However, in 1996, their number decreased to 7,900, mainly as a result of reconstruction of 1st- and 2nd category rooms, which were subsequently categorized as top-class suites. A procedure forlicensing tourist activity introduced in 1994 created the legal framework for the emergence andfunctioning of private structures in the national hotel and tour business.

In 1993, the Uzbektourism National Company joined the World Tourist Organization and sincethen it has been upholding the right of Uzbekistan to become a coordinating center of the Great SilkRoad International Project. A year later, under the aegis of the UN and UNESCO, Uzbektourismconducted a WTO seminar, titled The Silk Road in Tashkent. At its visiting session on the RegistanSquare, the participating countries signed the Samarkand Declaration on the development of the Silk

Road route within the framework of the international project. Tenacious efforts made by domestictourist organizations to promote the national tourist product to the world arena bear witness to theiraspiration for penetrating the regional and global markets for tourist services. With this objective inview, they also take active part in large-scale international travel-business exchange-fairs held inLondon, Berlin, Milan and Moscow. In particular, at the WTO seminars in Japan and Teherandedicated to the Silk Road International Project, the Republic of Uzbekistan was defined as itsgeographical and coordinating center. Uzbektourisms successful international activity obtained therecognition at the 12th General Assembly of the World Tourist Organization convened in Istanbul inOctober 1997, where Uzbekistan, together with France and Italy, was elected a member of the WTOExecutive Council.

The 1st International Tourist Fair, Tourism on the Silk Road held in Tashkent in October 1995was attended by more than 100 firms from 33 countries and official delegations of national touristorganizations operating in the countries, through which the Great Silk Road runs. The 2ndInternational Tourist Fair held in 1996 brought together 150 companies from 100 countries. As manyas 170 firms took part in the 3rd International Tourist Fair. Such a steady rise in the number of

participants reflects the fact that the position of the Tashkent Tourist Fair in the rank of the mostprestigious international tourist forums solidifies year in, year out.

In 1996, the National Tourist Company incorporated 98 enterprises, under all types of ownership,including 24 state-owned organizations, 31 public joint-stock companies, 2 private joint-stockcompanies, 10 limited liability societies, 27 collective enterprises and 2 enterprises taken on lease.The high efficiency of economic and financial activity carried out by some of them was apparent,

while others didnt report such impressing results.In order to improve the situation, Uzbektourism decided to attract foreign capital and advancedmanagerial experience. A special program was worked out to ensure the attraction to the sector ofcapital investments from abroad. By 1997, the National Tourist Company completed reconstruction ofShodlik-Palace Hotel with 107 rooms. The projects total volume of capital investments came to DM15 million. Uzbektourism planned to channel US $31.5 million to a project to reconstruct the Uzbek-Malaysian joint venture, Hotel Uzbekistan. For the time being, two-third of the invested capital has

been already realized. Reconstruction of another hotel facility, the 60-room Hotel Khivahas also beenrecently brought to completion, with the amount of capital investments in excess of 20 million Soum.In addition, Uzbekistan received a 117.3 million Soum credit toward the development of motortourism in general and construction of gas filling stations nationwide in particular.

The March 17, 1994 Resolution of the Cabinet of Ministers of the Republic of Uzbekistan, Onthe procedure for entry to the Republic of Uzbekistan of foreign citizens and non-citizens specified a

procedure for visiting the country by foreigners and for visiting foreign countries by Uzbek citizens.


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Tourist flows started taking shape. By 1997, the number of foreign tourists arriving in Uzbekstangrew substantially. According to data furnished by the State Customs Committee of the Republic ofUzbekistan, in 1997, 53, 086 thou tourists came to the country from abroad with cognitive purposes,108,69 thou on business, 709,66 thou on private visas, and 83.01 thou as passengers in transit.As for tourists from the CIS and far abroad, their number reached 953.47 thou. At the same time,the flow of tourists leaving Uzbekistan for foreign countries increased as well. Uzbektourism data

demonstrate that domestic tourists went to 74 countries.The Resolution of the Cabinet of Ministers of the Republic of Uzbekistan, On professional

activity carried out by citizens of the Republic of Uzbekistan abroad and by foreign citizens in theRepublic of Uzbekistan dated October 19, 1995 made it possible to draw a distinction betweentourism and labor migration. This document freed domestic tourist agencies from problems associatedwith the sending of Uzbek citizens abroad as labor force, while re-orientating their overall

performance to a specific segment organization of tours.One more step in the development of Uzbek tourism was the approval by the Cabinet of Ministers

of the Republic of Uzbekistan of the National Program, Meros, aimed at preserving the Republicsrich historical and cultural heritage, including architectural and historical monuments, works of artsand suchlike. One should also mention in this context the Presidential Decree, On measures to

provide state support to folk crafts and applied arts to ensure their further development dated March31, 1997. The Uzbek Government also drafted Regulations on the establishment of special openeconomic zones of international tourism in the towns of Tashkent, Samarkand, Bukhara and Khiva.Unfortunately, this document is approved so far, in spite of the fact that it bears a great potential,substantiating the possibility for creating such zones in the world renowned touristy centers ofUzbekistan.

The period under discussion was also marked by a noticeable expansion of Uzbektourismsinternational relations. With a view to establishing direct linkages with foreign tour operators, the

National Tourist Company opened representative offices in countries, with which the Republic ofUzbekistan maintained direct air communication. These included Germany (Frankfurt-on-Maine),Great Britain (London), the US (New York), the United Arab Emirates (Shardge), Russia (Moscow),as well as India and Japan, where some employees from local tourist firms combined jobs. By theways, most western experts positively assessed their performance and even proposed to broaden theirfunctions. The international tourist community also recorded the accomplishments achieved byUzbekistan in the hotel industry. In 1996, Hotel Intercontinental won first place in Europe in theQuality of Services nomination. As a result of all these steps, by 1997, the Uzbektourism NationalCompany provided services to the tune of 3.26 billion Soum and US $18.84 million, compared withthe similar indictors for 1996 1.77 billion Soum and US $14.5 million. According to relevantstatistics for 1997, the domestic tourist enterprises serviced 730,000 tourists (8.2 per cent higher thanthe 1996 number), including 350,000 foreigners (12 per cent). Let us underline one more importantfact: in a move to augment the nations export potential and to put in place corresponding

infrastructure facilities in the tourist sector, a group of international and domestic experts worked outa plan of measures designed to ensure a sustainable pace of tourism development in Uzbekistan in1998. It comprised a number of projects, all directed at the improvement of the material and technical

base of tourism and recreation facilities, raising of the level of services, development of advertising,elaboration of new tourist tours and charter flights etc. However, by the end of 1997, Uzbektourismwas classified in the national industry classification system as sub-sector of the services industry,rather than a separate sector..

Notwithstanding the apparent progress made by Uzbek tourism, the sector faced certaindifficulties at that period. All of them were associated with factors such as conversion of the nationalcurrency, stagnation in the field of economic reform, excessive bureaucratism in the sectorsadministration, an increased number of check-ups and inspections on the part of controlling bodies,

impaired management practices and the lack of real marketing. In addition, low personal incomesdidnt allow the local population to spend money on traveling and recreation. The bulk of their tripsabroad and within the country were motivated by economic reasons. Thats why the overwhelming


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majority of charter flights and a lions share of tour firms activity were associated with the servicingof tourists involved in shopping and chelnok commerce. Meanwhile, the tour firms themselves lackeda corporate association, which could protect them from unfair competition, regulate theirinternational relationships, appear in the role of arbitrator, and introduce the codes of business ethicsfor domestic entrepreneurs.

Uzbektourism experts revealed that some 50 per cent of exchange receipts was generated by visa-

cards and transfers of money funds by foreign firms to settlement accounts of tourist enterprises andhotels of the Republic of Uzbekistan. 15 per cent of exchange receipts came from the exchange byforeigners of freely convertible currency at the Central Bank exchange offices in accordance with thefixed rate of exchange. Interestingly, 35 per cent of currency receipts received by Uzbektourism camefrom the exchange of freely convertible currency bypassing the Central Bank exchange offices,. Atthe same time, the amount received by foreign tourists via channels other than official ones reachedsome US $7.0 million or 549.5 million Soum at the effective rate of exchange, compared with 1.33

billion Soum received as a result of illegal exchange operations. The difference between the indicatorswas 780 million Soum, or US $9.9 million at the official rate of exchange that was in effect at thetime. It meant that the Republics budget lost about US $10 million that distorted the figure of serviceexports in the tourist sector.

According to experts, one of the ways for the resolution of this problem stipulated the receipt byUzbek tourist organizations of foreign exchange funds directly form overseas tour operators.

A significant role in the attraction of foreign tourists was played by tariffs on air, rail and buscommunication, as well as accommodation in hotels, catering and servicing en route. All these factorswere reflected in the contracts signed. However, transport tariffs tended to increase. Uzbektourismexperts calculated that in 1996, the cost of flights to such cities as Istanbul, Frankfurt-on-Maine and

New York, compared with that a year ago, grew 16 per cent on the average, while in 1997, it wasalready 62 per cent, 41 per cent and 49 per cent higher than the 1996 indicators, correspondingly.Although the cost of services offered by Uzbektourism hotels remained unchanged, the inflow offoreign exchange and tourists to the Republic decreased.

As far as tourist servicing is concerned, it accounts only for 20 per cent of the total volume oftourist services exports, with the rest 80 per cent being represented by works accomplished by otherministries and departments of Uzbekistan. Meanwhile currency revenues generated by the touristsector in the period of its stable development (1997-2002) may grow from US $82.4 million to US$192.6 million. This figure may be reached at the expense of those segments that spawn demand fortourist products (hotels, transport and other conveniences typically associated with the reception offoreign tourists). Besides, the proposed growth would depend on an increase in budgetaryappropriations for marketing and popularization of tourism.

However, all those calculations and forecasts were far from local realities, because lots ofproblems of macroeconomic character were not taken into consideration.

As is evident from what has been said above, national tourism made no headway in the period in

question. New approached were needed to state policy and management in the field of tourism, whichwere elaborated and introduced in the next period of development.1998-2002 the period of re-orientation. The tourist industry started analyzing the results

achieved and the situation in the tourist market as a whole, as well as looking for new ways anddirections of further progression. The Republic introduced the uniform rules for the provision of hotelservices. In addition, some hotels, including Le Meridian Tashkent, were granted a number of tax andcustoms privileges. To further improve the situation in the sector, the Ministry of Foreign Affairs ofthe Republic of Uzbekistan introduced the practice of issuing return certificates to those Uzbekcitizens, who encountered certain problems abroad following the loss of their passports. Whats more,a procedure for import and export of cash foreign currency was substantially streamlined. Proceduresfor examination of hand luggage and baggage by the homeland security authorities at airports, as well

as procedures for execution of frontier and customs control at the road, rail, air and river border postswere ameliorated. This made it possible to avoid lots of criminal and medical problems. The Law onFrontier became the fundamental document regulating the border crossing by natural persons, goods


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and material values. The Law On import and export of cultural values complemented the overalllegal framework for crossing the Republics frontier. It should be noted in this context that severallegal documents approved in the Republic of Uzbekistan contributed much to legalization of entry toand departure from the country. In particular, the February 26, 1999 Presidential Decree, On the

passport system in the Republic of Uzbekistan specified a procedure for drawing up nationaldocuments. Another document, the Resolution of the Cabinet of Ministers of the Republic of

Uzbekistan No 519 dated December 30, 2000 laid down a procedure for registering and issuingidentity cards to citizens of the Republic of Uzbekistan under the age of 16.

The most important landmark of the period under discussion was the passing by UzbekParliament of the Law on Tourism, which noticeably reinforced the status of tourist organizationsand the tourist sector as a whole. In particular, this document introduced the Temporary Procedurefor sending tourist groups abroad. According to the Resolution of the Cabinet of Ministers of theRepublic of Uzbekistan, On improvement of the organization of activity carried out by touristagencies, the Association of Private Tourist Organizations was conferred a status of corporate/publicstructure with precise powers. To tell the truth, this organization failed to win any special authority,despite the fact that it provided assistance within its powers to the private sector.

On the other hand, procedures relating to foreign exchange remained unresolved. This affected

many sectors of the national economy. Tourism was no exception, where the lack of convertibility ledto serious distortions. The problem came on a head with the approval on May 13, 1999 of theProcedure for providing services to foreign tourists for freely convertible currency. Needless to say,the document debased the situation by confusing mutual settlements between suppliers and consumersof tourist services. Besides, it exposed a number of other drawbacks and weaknesses that hadcontagion effects on the sectors development. It appeared that the location of tourist installations washighly deformed, which couldnt held leading to an uneven distribution of revenues and material

benefits, as well as a disproportioned employment of production capacities and labor force. Forinstance, up to 40 per cent of the tourist sectors total production potential was concentrated in theUzbek capital city and the Tashkent Province, 37 per cent in the Bukhara, Samarkand and KhorezmProvinces, and some 16 per cent in the Ferghana Valley and the Surkhandarya Province. Other

provinces making up 50 per cent of the Republics territory accounted for a mere 7 per cent of theestimated national tourist potential.

The number of companies involved in tourist activity remained stable. Uzbektourisms datashow that in 1998, 370 licensed tourist enterprises were functioning in the Republic at that period.The biggest non-state organizations in the sector included JV Hotel Uzbekistan, AO Shodlik-Palace,AO Hotel Sayokhat, AO Uzintour, AO Bukhorotourist, KTF Orient Star, KTF KATS, JV SitaraInternational etc. Some tourist firms terminated their activity for different reasons (violation of thelaw, bankruptcy, re-orientation of economic activity and the like), while a number of newly-established tourist companies emerged. Meanwhile, notwithstanding the difficulties referred toabove, the inflow of tourists tended to grow. In the period 1993-1997, it grew 2.7 times, including the

visits by foreign tourists, which increased 5.4 times. In 1993, 92.3 thou people arrived in Uzbekistan,in 1994 60.9 thou, in 1995 92.0 th0u, in 1996 173.0 thou and in 1997 252.9 thou. An upwardtendency on this front was evident. Domestic tourism grew 129 per cent in the period in question.

At the end of 2002, the Cabinet of Ministers of the Republic of Uzbekistan passed theResolution, On measures to ensure the completion of the BUMI Tashkent International Hotelreconstruction project. This document introduced amendments into the Resolution, On the sale ofthe hotel complex in Tashkent to the Bakri Investindo Indonesia Company issued in February1996. In particular, the Government extended the validity terms of property tax-related privileges. Inthe words of Gesang Budiarso, executive manager of this hotel complex, the edifice, bought in 2000for US $39.4 million, remains the biggest installation in the domestic real estate market. A year later,management of this 14-storeyed building was transferred to Choice, a US-based company. Under the

management contract, the operator masterminded a reconstruction project valued at some US $2million. In particular, hotel rooms were substantially widened. Two storeys of the hotel were allottedfor apartments in the form of mini-flats intended for residence over a long period of time. Beyond


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that, the hotels room reservation network was expanded. Reconstruction works were finalized by theend of 2003. It should be added that for the American company, it was the first hotel businessmanagement project not only in Central Asia, but in the CIS as a whole.

The Uzbek Government took measures to preclude any pressure on entrepreneurship in thetourist industry on the part of enforcement and other controlling authorities. The Law On guaranteesof freedom of entrepreneurial activity dated May 25, 2000 was an important step in this direction.

On April 23, 2001, the Republican Council for Coordination of Controlling Authorities Activityapproved the Regulations on the procedure for coordinating check-ups of economic operators

performance carried out by controlling authorities. This document streamlined the way in whichinspections and check-ups were conducted at non-state enterprises. Two other documents theProcedure for payment of duty on the purchase of freely convertible currency issued in 1998 and theRules for the transaction of operations in foreign currency issued in 2000 contributed much to theefficient regulation of the domestic foreign exchange market. However, certain limitations containedin the documents made it impossible to put an end to the functioning of the black market.

The period under discussion also saw the continuation of work on the reinforcement of thetourist sectors international legal base. More than 15 agreements were concluded between the UzbekGovernment and the Uzbektourism National Company on the regulation of tourist activity. Using the

data furnished by Uzbektourism, the World Tourist Organization compiled its own table highlightingthe development of tourism in the Republic of Uzbekistan.

The period 2003 up to the present time is marked by a sustainable growth of tourism in

the country. Since 2003, certain changes took place in the sector as a result of geopoliticaltransformations in the Central Asian region. They urged on the interest for Uzbekistan on the part ofoverseas tourists. In 2003, the Uzbek Government simplified visa registration procedures for certaincategories of citizens. Starting May 2004, new regulations governing the acceptance of foreigntourists by the Republics tourist organizations came into force. This facilitated an increase in thenumber of visitors arriving in Uzbekistan from abroad, while entrenching the sectors financial

position. In 2003, the tourist industry (within the framework of the Uzbektourism NationalCompany) rendered services to both foreign and domestic tourists to the tune of 16,857 billion Soum,up 105.2 per cent over the established forecast indicator. In 2002, this figure was 15,778 billion Soum(118.1 per cent), in 2001 10,118 billion Soum (144.4 per cent) and in 2000 6,882 billion Soum(128.5 per cent). The volume of tourists totaled 1.398 million man-days in 2003, 1.399 million in2002, 1.590 million in 2001, and 1.741 million in the year 2000. These figures provide a clearevidence of the tourist sectors increasing importance for the national economy. In 2003, theRepublics tourist infrastructure was significantly strengthened with the commissioning of thefollowing new and reconstructed tourist facilities: Tashkent-based hotels Grand-Mir, Le MeridianTashkent, Dedeman and Radisson-Tashkent, as well as President Hotel in the town of Samarkand.Additionally, two new Boeing-757-200 airliners were bought to solidify the tourist industrys air fleet,in a move to expand the geography of flights and thereby to attract more foreign tourists to the

Republic.According to statistical data, as many as 162 hotels, tourists centers and campings, with a totalcapacity to accommodate 8,900 tourists, functioned in Uzbekistan in 2004. The load coefficient in thetourist sector reached 22.2 per cent in 2003. 351 organizations under different types of ownershipenjoyed licences to carry out tourist activity. 290 of them were privately-run firms. The private sectoraccounted for 90 per cent of all services provided in the sector. Upwards of 15,000 people areemployed in the domestic tourist industry, of whom 30 per cent are university-degree specialists and70 per cent of workers finished specialized secondary educational establishments. Efforts were madeto further expand the network of tourist installations across the Republic. In November 2003, in

particular, the Uzbek Government issued a special resolution on the creation of a health resort area inthe town of Khanabad located in the Ferghana Valley. It will be built on the basis of an incomplete

rest home. With its construction due to be completed by the end of 2005, the regions population willhave the opportunity to rest and improve their health. The sanatorium will specialize on cardiology,neurology and lung and motor diseases.


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As recent studies graphically demonstrates, the Bukhara, Samarkand, Korezm and TashkentProvinces and the capital city account for 76.2 per cent of the total tourist inflow to the Republic. Atthe same time, interest is growing on the part of foreign tourists for the Ferghana Valley, the Djizak,Kashkadarya and Surkhandarya Provinces, whose share in the tourist sector now doesnt exceed 24.8

per cent. The greatest number of tourists come from countries such as Germany, Japan, France, Italy,the UK, Turkey, the US and the Russian Federation. At the same time, citizens from the CIS member

states stay 5 days on the average, whereas the duration of stay of tourists from far-abroad countriesreaches 3-4 days. 89 per cent of all non-residents arrive in Uzbekistan with business, professional and

private purposes. The marketing studies also show that, apart from travel-related expenses, foreigntourists readily spend money funds on additional services , which represent 60 per cent of their totalexpenditures.

Meanwhile, the marketing studies stress an insufficient development of tourist infrastructureand advertising in Uzbekistan, which narrows the national tourisms potential. According toestimates, the average expenditure per tourist in the world approximates US $2,000, while inUzbekistan this indicator was less than US $1,000 in 2003.

In this connection, the Cabinet of Ministers of the Republic of Uzbekistan issued theResolution, On further development of activity carried out by the Uzbektourism National Company

on July 24, 2004. The document was intended to optimize the organizations overall performance.Uzbektourism is an authorized state body in the field of tourism, incorporating the Samarkand,Bukhara and Khorezm regional sub-divisions, as well as state-run travel and excursion bureaus thatoperate in the regional centers nationwide, the Republican Research-Training Consulting Center, theCentral Directorate of Dispatching and Servicing and other departmental structures. The company

pursues a common state policy in the field of tourism and forms the national infrastructure of touristservices. Uzbektourism implements the state sector development program, including measuresdesigned to ensure a high level of tourist safety. In addition, the company accomplishes certificationand licensing procedures. Moreover, Uzbektourism is tasked to attract foreign credits andinvestments, to carry out advertising and information activity, to train and to raise skill levels of

personnel, as well as to encourage research in the field of tourism. On August 29, 2004, the Ministryof Justice of the Republic of Uzbekistan approved the Regulations on the imposition of tourist duty ontourist firms and hotel operators for tourist servicing, which made an appreciable contribution tocoordination of tourist activity in the Republic.

The Regulations, On the procedure for importation and exportation of national currency ofthe Republic of Uzbekistan dated March 1, 2004 also had a positive role to play in the developmentof national tourism. The document laid down that natural persons, both residents and non-residents ofthe Republic of Uzbekistan, may import to and export from the Republic of Uzbekistan nationalcurrency funds, whose amount doesnt exceed a total of 50 minimum wages. In other words, theRegulations fixed a quota on cash national currency funds that may be imported to or exported fromthe Republic by foreign and domestic tourists.

Uzbekistans international tourist-center status strengthened with the approval by the Cabinetof Ministers of the Republic of Uzbekistan of the Resolution, On preparation and conduct of the 4thWorld Tourist Organization (WTO) Meeting in the town of Bukhara No 356 dated October 12,2002. It was stated in the documents preamble that the event is held with a view to popularizingculture, history and traditions of the Uzbek people, and the tourist potential of Uzbekistan on the basisof ancient historical and architectural monuments that are part and parcel of the world civilizationstreasure-house, to ensuring a wider acquaintance of foreign tourists with the country as one of thefamous commercial centers along the Great Silk Road, as well as to attracting foreign investments tothe tourist industry. All expenses associated with the organization and conduct of this meeting, plusthe stay of the program director and WTO Secretariat employees in Uzbekistan, were born by theUzbektourism National Company. No consular duties were charged on registration of entry visas for

its participants. The most favorable regime was ensured for all guests and participators when theysettled customs formalities.


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The reinforcement of tourist infrastructure was accompanied by the approval of correspondingnormative and regulatory documents. For example, the Resolution of the Cabinet of Ministers of theRepublic of Uzbekistan, On measures to further develop the hotel business and international tourismin the Republic of Uzbekistan No 310 dated September 2, 2002 decreed to set up, on the basis of thehotel complexes Dustlik, Tashkent Rossiay and Chorsu located in the capital city, jointventure enterprises specializing on reconstruction, construction and subsequent running of these

tourist installations. These Measures aimed to prepare Tashkent-based hotels for the reception ofparticipants and guests of the Annual Meeting of EBRD Board of Governors in 2003, to furtherdevelop international tourism and to ensure the attraction of foreign investments to the hotel business.It should be noted that foreign partners of these joint ventures made contributions to their authorizedcapital in both foreign and domestic currency. Necessary funding for the projects was secured on

property of the newly-created joint ventures and their founders, with the subsequent mortgage of theirbuildings to banks upon completion of the construction and reconstruction projects.

In the period of credit repayment, the above-mentioned hotels and Hotel Uzbekistan wereexempt from customs payments on materials and equipment imported for reconstruction andconstruction purposes under the turn-key contracts signed. As well as that, they were grantedexemptions on payment of income (profit) tax, value-added tax, property tax, land tax and

environment tax. The Uzbek Government prescribed that the money funds thus exempt from taxationshould be directed, in keeping with the established procedure, to the repayment of credits attracted toimplement reconstruction and construction projects. In addition, foreign banks and insurance agenciestaking part in the financing of given projects were exempt from payment of profit tax imposed onnon-residents in the Republic of Uzbekistan. The reconstruction of the Chorsu Hotel complexstipulated the establishment of a joint venture between the Uzbektourism National Company and theTurkish firm, Emsash, which would take the form of a limited liability society, called Chorsu Hotelwith the authorized capital of US $10 million. The Uzbek side contributed US $3 million in the formof the Chorsu Hotel complex, while the Turkish sides contribution took the form of equipment andmoney funds to the tune of US $7 million.

As is evident from the facts mentioned above, the development of hotel facilities constitutes apriority policy objective in the field of tourism. The Uzbektourism National Company is determinedto intensify work in this direction. Its plans for reinforcement of the industrys material and technical

base provides for the construction, by the year 2010, of 56 hotels, capable of accommodating 2,100tourists; reconstruction of the hotels Bukhora (situated in the town of Bukhara) and Ziyorat(situated in the town of Ferghana) and AO Kumyshkan tourist center (located in the TashkentProvince). A network of campings will be built along the Tashkent Urgench motorway. Theintroduction of modern technologies is expected to more efficiently exploit the sectors 217 hotels,which will have 9.900 rooms and suites for 18,600 tourists. As a result, the load coefficient may reach66.9 per cent, which corresponds to the world level.

Development of the regulatory and legal framework. After acquisition of independence,

Uzbekistan began taking active steps toward the elaboration and introduction of a sound regulatoryand legal framework for a sustainable development of tourism, including the encouragement ofprivate entrepreneurs to set up in the tourist sector. In practice, these two processes were inseparable.Take, for instance, a resolution of the Cabinet of Ministers of the Republic of Uzbekistan aimed atimproving tourist infrastructure. This is bound up with the development of small and private

businesses, through which all programming documents are implemented. Some 60 per cent of thedocuments governing the tourist industry were approved in the period 1990-1997, when thefoundations of a market-oriented economy were laid down in the Republic. In the second period, thenumber of tourism-related regulatory and legal documents reached 30 per cent. Since 2003, the UzbekGovernment has passed 10 per cent of all documents that constitute the regulatory and legal base forcarrying out activities in the tourist sector. Needless to say, the documents approved in the first period

had the most important implications for the sector as a whole, by providing a precise definition of thenational tourism model and formulating the major directions of its future progression. The period


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1998-2002 can be classified as a period of re-orientation, when the earlier approved fundamentaldocuments were amended and supplemented to meet new requirements and challenges.

Re-establishment of state ownership rights and privatization. Tourism was one of thesectors, where re-establishment of state ownership rights started to unfold earlier than in otherindustries of the Uzbek economy. The process was triggered by the January 21, 1994 PresidentialDecree, On measures to further intensify economic reforms, to ensure protection of private property

and to develop entrepreneurship. The document allowed to sell, on a competition basis, commercialand servicing enterprises, together with the land plots adjacent thereto, to legal entities and physical

persons, including foreigners, without the requirement to declare the source of money funds they useto privatize these enterprises. The Government was commissioned to guarantee that enterprisesinvolved in trade and services, whose construction and creation is financed by private entrepreneurs,are located in the most prestigious parts of towns and populated areas. Additionally, the PresidentialDecree stipulated the granting of all necessary privileges, including credits and governmentguarantees, to legal entities and individuals, with corresponding resources and possibilities being

provided by the Government for the latter to operate successfully in the tourist sector. According toexperts, this document contributed to a further reinforcement of market infrastructure in the touristindustry.

The next period has seen the unfolding of a well-orchestrated process of tourism developmentin Uzbekistan, despite the fact that certain tourist installations remained in the states possession. Thelist of enterprises, objects and groups of state property, which were not subject to re-establishment ofstate ownership rights, privatization or redemption through the Uzbektourism National Company,included, in particular, the Khiva Tourist and Excursion Complex. Anotehr 13 objects were includedin the list of enterprises, installations and groups of state property, whose privatization requiredapproval by the Cabinet of Ministers of the Republic of Uzbekistan. Presented below are all theseobjects:

the Interim Board of Directors in the town of Bukhara (construction);

the Kuksaray Agency in the town of Samarkand (tourism);

the Interim Board of Directors in the town of Samarkand (construction); Uzbektourism in Tashkent (management);

the Dayokh Insurance Company in Tashkent (insurance);

the Central Directorate of Rest Homes in Tashkent (tourism);

the Education and Production Complex in Tashkent (tourism, education);

the Yoshlik-Show Enterprise in Tashkent (cultural tourism);

a new hotel in Tashkent (hotel services);

the Uztourstroy Enterprise in Tashkent (construction);

the Advertising and Information Agency in Tashkent (tourism, the press);

the Yordamchi Enterprise in Tashkent (sporting tourism);

the Board of Directors of the Great Silk Road Exchange in Tashkent (tourism).Later on, all these enterprises changed the type of ownership, and by the year 2005, almost 98per cent of agencies, organizations, enterprises and complexes operating in the tourist sector are nolonger under state ownership.

On November 5, 2002, the Uzbek Government approved a list of activities, to be carried outas prescribed in the law, exclusively by entrepreneurs with legal entity status. These include theorganization of hotels and campings and the provision of catering services in private houses or at

places specially allocated for these purposes by local authorities.Investment and crediting. The Government of the Republic of Uzbekistan views tourism as

the most promising industry. Evidence of the importance it attaches to this sector is reflected in thefact that tourism is included in the nations economic development plans and programs. The

Resolution of the Cabinet of Ministers of the Republic of Uzbekistan, On issues surrounding theorganization and performance of the Private Entrepreneurship and Small Business SupportFoundation (Business Fund) dated July 26, 1995 contained a provision that in the tourist sector,


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banks extend credits on preferential terms by implementing credit lines opened by the Business Fund,which, in turn, uses both its own money funds and attracted resources to finance the realization ofinvestment projects by small and medium-sized enterprises. The credits are to be repaid within 10years, with a grace period ranging from 2 to 5 years, depending on the term fixed for recoupment ofone or another projects. The interest rate on credits allotted on preferential terms is non-fixed. Instead,it is specified by the Business Fund in coordination with the Finance Ministry of the Republic of

Uzbekistan.During the implementation of the 1997 Privatization Program, a new joint-stock company,

called Sayekh Sugurta, and a limited liability company, Chimghantourstroy were set up within theframework of the Uzbektourism National Company.

The hotel business proves to be one of the most attractive sectors for domestic and foreigninvestors. In the November 22, 2001 Resolution of the Cabinet of Ministers of the Republic ofUzbekistan, On the Investment Program of the Republic of Uzbekistan for the year 2002, the totalamount of investments and credits provided against government guarantees to the Uzbektourism

National Company was estimated at US $29,16 million. Of this sum, US $22, 8 million wasappropriated for the construction of President Hotel in the town of Samarkand, and the remaining US$6.36 million for the construction of Khorezm Palace Hotel in the town of Urgench. Moreover, the

Uzbek Government earmarked 1 billion Soum toward the realization of the Charvak Cimghan AreaDevelopment Project.

The Government of Uzbekistan tries to provide lavish incentives and tax breaks to enterprisesspecializing in tourism. According to the Resolution of the Cabinet of Ministers of the Republic ofUzbekistan, On the provision of privileges to the hotel complexes run with participation of foreigninvestments dated July 12, 1999, starting January 1, 1999, the hotel complex Le MeridianTashkent of the Bakhri Investindo Company (Indonesia) and a new hotel built in Tashkent byFrances Boigue, were granted exemption from payment of value-added tax on hotel services for theterm of 3 years. As well as that, Le Meridian Tashkent didnt pay VAT, till January 1, 2000, onimported equipment and materials intended for reconstruction and equipment of its edifice. Moreover,the hotel was granted a 18-month delay of payment to the budget of VAT arrears as of January 1,1999.

In keeping with the 2004 Investment Program approved by the Uzbek Government, the HypoWereins Bank of Germany extended a US $6 mi

history of tourism of uzbekistan

Documents