The Pros and Cons of Privatizing Enterprises and Organizations: Exploring the Impact on Production Development in Uzbekistan
Abstract: The article raises the issue of withdrawing enterprises from state control and fundamentally renewing Uzbekistan's businesses. Currently, there are 2,819 state-owned enterprises in the country. The majority of them cannot even pay dividends due to their outdated and inefficient methods of operation. Additionally, there has been no modernization or reconstruction of these enterprises for years. The possibilities and development opportunities provided to enterprises through privatization are highlighted.
Key words: Privatization, oil and gas industry, market economy, private ownership, state ownership, production, products, modernization, reconstruction, raw materials, jobs.
Introduction
Since the early years of independence, the Uzbekistan government has given great attention to the privatization of enterprises and organizations. The main reason for this is the transition to a market economy. The privatization program was developed and is being implemented in line with the "Uzbek model" of the transition to a market economy, which takes into account the social, spiritual, and cultural aspects of the country and its people. The market economy is based on private ownership, and each consumer is more careful about their property. This ensures quality and efficient service of the property for many years.
The Law No. 425-XII "On Expropriation and Privatization" adopted on November 19, 1991, is the basis for many processes of privatization in Uzbekistan. For example, the privatization of banks in the country has turned them into joint-stock companies.
Relevance of the research topic is the need to fundamentally update approaches to privatization, attract international experts, and move to a system specific to the market economy is necessary. Specialists in privatization and corporate management need to be trained and their qualifications upgraded. In addition, managers of state-owned enterprises should be trained in this regard. Privatization of state-owned factories is also a major focus.
Setting a scientific problem. One such factory is the Fergana Oil Refinery, a subsidiary of Uzneftmahsulot joint-stock company located in the Fergana region. The plant produces more than 56 products, including octane gasoline, aviation kerosene, diesel fuel, coconut, various motor and diesel oils, and paraffin. However, the enterprise uses only 50% of its potential due to the lack of modernization and reconstruction of the enterprise over the past 20 years, the lack of basic raw materials for the full operation of the plant in Uzbekistan, and the COVID-19 pandemic. As a result, the demand for the enterprise's products has sharply decreased.
The purpose of the study is to highlight the central importance of the oil and gas industry in ensuring the economic freedom of any country. Minerals such as oil, gas, hydrocarbons, and coal are considered the raw material base of the oil and gas industry, which is more profitable than any other industry. According to the Decree of the President of the Republic of Uzbekistan dated February 11, 2021, No. P F-6167 on "Further Accelerating the Processes of Privatization of State Assets," 100% share in the authorized capital of "UzAssets" JSC, "FNQIZ" LLC had announced its desire to sell through a public sale process.
Scientific essence. Privatization of enterprises has been an ongoing process in many countries, including Uzbekistan. To achieve success in this endeavor, it is important to study the experiences of foreign enterprises while taking into account their achievements and shortcomings. In the case of the oil and gas industry, which relies heavily on a rich resource base, it is crucial to ensure its profitability.
Resource abundance has been a major factor in the growth of oil production in many countries. The oil sector is particularly focused on the utilization of this resource. Some of the largest representatives of countries rich in natural resources in the world are the USA, Canada, Australia, Spain, countries of the Persian Gulf, Malaysia, Norway, Lebanon, and Russia.
Studying the experiences of these countries can provide valuable insights into the best practices for privatization and resource utilization in the oil and gas industry. This includes strategies for increasing profitability, modernizing infrastructure, and improving efficiency. However, it is also important to consider the unique social, cultural, and economic contexts of each country in the development of privatization programs.
In Uzbekistan, the government has already taken steps to accelerate the privatization process through the sale of state assets. For example, UzAssets JSC and FNQIZ LLC have recently been put up for public sale. However, to ensure the success of privatization and development of the oil and gas industry, it is essential to continue learning from the experiences of other countries while adapting strategies to local conditions. This includes investing in the training and development of skilled professionals in privatization and corporate management. By doing so, Uzbekistan can unlock the full potential of its oil and gas resources and create a more prosperous future for its citizens.
Methodology used. Research at work grouping, categoriinge, comparing, induction, deduction, surveillance, statistics analysis were used.
The main part. We maintain state participation even in areas where it is not necessary. "There have been no significant changes in the management of state-owned enterprises, increasing the effectiveness of their activities, transferring their functions to the private sector," said Shavkat Mirziyoyev.
After the successful privatization of the Fergana Oil Refinery in Uzbekistan, the foreign company "Sanoat Energetika Group" (formerly Jizzakh Petroleum) has taken over the plant with a commitment to invest more than 380 million US dollars for the modernization of the plant. With their extensive experience and availability of necessary raw materials, the company is expected to bring numerous benefits to the country. These include the production of modern and environmentally friendly gasoline, diesel fuel that meets Euro-5 requirements, Jet A-1 jet fuel, and increased production of liquefied natural gas. The modernization of oil aggregates and an increase in production capacity by at least 2 million tons are also included in their investment plan.
To develop a privatized oil enterprise that can compete at the global level, it is important to follow certain suggestions and recommendations. Firstly, investing in liquefied natural gas (LNG) production and technology is a smart move that can enhance the enterprise's profitability. Additionally, searching for other sources of oil and gas can help secure the raw materials needed for production.
It is also suggested to organize new departments such as oil and gas processing, petrochemistry, and gas chemistry within the enterprise to expand its operations. Attracting equipment and technologies for gas stations, along with purchasing new non-destructive testing (NDT) and automated control systems (ACS) equipment, can further improve the quality of products and services. Finally, the wide introduction of information technology (IT) in the oil and gas industry can facilitate full deep processing of oil raw materials and help develop the enterprise's production capabilities.
It appears that America is the leader in the length of both pipelines, while the shortest pipelines are in Great Britain.
If we look at more specific data, the length of the oil pipeline in America was 276.0 km and the gas pipeline was 331.0 km. And with this index, it made a big difference from other countries. Following this, Russia also had longer pipelines than the rest of the countries, but gas pipelines were two times less than America, and oil pipelines were almost four times less. Mexico also had long oil pipelines with 39.7, but gas pipelines were 3 times less. The length of the oil pipelines of Germany and France was the same with 7.5, but the length of the gas pipelines was different, that is, the length of the first one was 97.6 and the second one was 24.7.
A similar phenomenon was observed in Italy and Great Britain, namely the oil pipelines were almost equal in both, but the gas pipelines were different and they were also lower than 20. Canadian oil pipelines were almost 3 times less than gas pipelines, and gas pipelines were estimated at 75.0. And in other countries, China and Argentina, oil pipelines were below 11 and gas pipelines were below 10, ie the former was 6.2 and the latter was 9.9
Overall, the successful privatization of the Fergana Oil Refinery and the commitment of the new owner to invest in modernization and expansion provide great opportunities for the development of the oil and gas industry in Uzbekistan. By following the recommendations and suggestions outlined above, the privatized enterprise can further increase its competitiveness and contribute to the country's economic growth.
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