To predict the future economic path of Uzbekistan, it is beneficial to compare the critical stages of the economic and demographic development path of the Korean economy, which is now entering the aging stage, to the Uzbek economy. Analyzing economic indicators of both countries allow us to draw the conclusion that Uzbekistan’s current economic condition resembles Korea’s indicators after the Asian crisis of 1997.
Korea developed quickly before the crisis. The average growth rate of real GDP between 1981 and 1996 was 9.3%, which fell to 3.7% during the 2003-2014 period (Whang et. al, 2015). The Korean development path was so impressive that as result Korea was recharacterized as a developed country (Lee&Lee, 2013). Uzbekistan’s average annual GDP growth rate was 8% from 2005 until 2015 (Malikov et.el, 2016). In both countries agriculture was the dominant sector and the service sector was undeveloped. In Korea during the 1960’s the share of the service sector in GDP was 39.4 % and in Uzbekistan 39.3 %. This distribution completely changed in Korea in 2018 with 1.98% for agriculture and 53.56% for services (World bank, 2020). Uzbekistan’s GDP distribution across economic sectors in 1991 was 37% for agriculture and 26.5% for services, which changed only slightly in 2017 with 17.9% for agriculture and 48.5% for services (World bank, 2020).
Uzbekistan still has a high dependency on agriculture. The structure of an economy influences how employment is shared across the sectors, which changed dramatically in Korea. Agriculture had 58.4% of the total employment in 1965, and only 5% in 2018, whereas in the service sector the share more than doubled with 31.2% in 1965 and 70.4%
in 2018 (Lee&Lee, 2013, World bank, 2020). There is no visible change in Uzbekistan, in
104 2018 33.6% of all employees still worked in agriculture. Similar employment shares were observed in Korea in the 1980’s.
The comparison of the main demographic indicators showed that nowadays Uzbekistan’s conditions are like those of Korea in the 1970-1980 period. In 1971 the total population of Korea was almost 33 million with a 1.8% population growth. This is almost identical to Uzbekistan’s population growth in 2018. A similar pattern can be seen on the two countries’ fertility rates. In Korea in the 1960s, the fertility rate was 6.1 children per woman and decreased rapidly by 1982 to 2.39 children and this decline continued until today. The fertility rate in Korea in 2018 was 1.05, while Uzbekistan’s fertility rate in the same year was 2.45, however it is expected to fall further (UNICEF, 2018). Korea had a decrease in infant mortality rate, from 36.5 infant per 1,000 live births in 1975 to 2.7 in 2018. While, in Uzbekistan the infant mortality rate was still higher, 19.1 infant in 2018. In Korea during the 1970-1995 period the share of people aged 15-64 grew by 2.5% yearly on average, which decreased to 0.6% in the 1996-2010 period, with an expectation to decrease further in the future decreasing the share of the working age population (UNICEF, 2018).
The working age population in Uzbekistan was 18.12 million in 2018 and it is still expected to increase further. An increase in the number of the active population (aged 15-64) puts pressure on the government to create new jobs, otherwise this boom can end up in social problems. In Korea, the government supported youth entrepreneurship and gave them simpler credits deals. As a result, 28.8% of the total Korean workforce was self-employed in 2010 and most of them were small business owners (Lee&Lee, 2013).
Moreover, the number of poor people38 decreased from 40.9% in 1965 to 5.1% in 1987 (Kim, 1991). One main reason for the decrease in poverty in Korea is the increase in the education level of the people. The Korean case shows how education could exploit the opportunity provided by the first demographic dividend.
In Uzbekistan despite positive changes have been made to improve education, there are challenges that should be tackled. First, the low rate of participation of preschoolers to early childhood education. Despite by 2018 almost 30% of children had
38 A person is defined poor it their cost of living per day was less than $1 according to the International Poverty Line, which is set by the World Bank but since 2015 the last update, it became $1.90 per day as the new global line.
105 the chance to go to preschool, while it was only 25% in 2016 (UNICEF, 2020 and Stat Uzbekistan, 2020), it is still a very low number. It is noteworthy that in Korea kindergarten attendance increased during the rapid industrial growth in the 1970s as more labor force was needed. In the late 1980’s many women participated in the labor force and the enrollment rate in pre-school education increased (Lee & Cho 1977; Cho &Koo 1983). At the same time literacy grew from 30% in 1953 to 80% in 1963 and became one of the highest in the world by 1970 (Kim, 1991) in Korea.
In the meantime, the female labor force participation rate in Korea increased from 35.4% in 1964 to 43.1% in 1986 and to 52.7 in 2018. In Uzbekistan the female participation rate was a little higher 53.8% in 2018 (UNICEF, 2018) but this is more of a heritage from the Soviet era, and not a good indicator of effective use of human workforce, because in Uzbekistan women work mainly in less prestigious jobs, while in Korea females supposed to have higher positions more often.
In Uzbekistan, all girls have access to primary education, but this tendency does not keep up to tertiary education, contrary to the Korean practice. In Uzbekistan early marriage of girls is still typical, which hinders girls from entering higher education. Besides, not every girl can continue her studies at a higher educational institution due to higher costs.
Only children from wealthy families can pay for extracurricular training courses which increase the chance of admittance to a university, while with the regular school curriculum and quality it is hard to be admitted to a university without paying the tuition fee. Wealthy families can afford the tuition fee, so their children have access to higher education even if they cannot obtain good results on the enrollment exam. The higher education coverage of school graduates in Uzbekistan (access to higher education) is still low, but this indicator has increased from 9% to 20% recently in 2018 and some further increase can be expected. As the Korean case shows, increasing enrollment in the higher education is inevitable for a country if it wants to use the window of opportunity of the first demographic dividend.
In Korea, the share of people with a tertiary education went up from 58% in 2008 to 68% in 2018, which is still the highest among OECD countries (OECD, 2019). As a result, highly educated people are overrepresented in the workforce of Korea, the share of employees with a tertiary education was 78% in 2018, while it was only 10-12% in Uzbekistan. So, a key ingredient in the Korean miracle were human recourses, especially
106 workers having higher education, which could reap economic growth and equal the distribution of income (Lee&Lee, 2013).
We estimated the connection between GDP per capita growth and several demographic variables. The demographic variables used were the fertility and mortality rates, share of the population aged 15-64, share of the population aged 65 and older, the share of urban population, the share of employees in the service sector, and school (primary and secondary) enrollment rate. The source of the data was World development indicators (2020). The analysis was conducted at an individual level, for the period between 1975 and 2018 for Korea and between 1991 and 2018 for Uzbekistan. We included data for Uzbekistan only after 1991 because that is the year when the country became independent from the USSR. A time-series regression method was used.
Checking stationarity, we found variables were stationary on the first difference level.
According to our regression in the case of Korea, the fertility rate and urban population have positive effect on GDP, while others have negative. Especially the share of population aged 65 and higher reduces GDP rapidly, which indicated that Korea might face an aging problem soon. In the case of Uzbekistan school enrollment rate, the share of employees in the service sector and the share of population aged 15-65 affect GDP positively, while other variables have a negative effect. From the regression analysis it is clear that Uzbekistan can only benefit from the demographic dividend, if other changes will also happen. These changes must boost the development of human recourses, such as tertiary education enrollment rate, increase the share of urban population, and raise employment level in services.