APRIL 15-30, 2023: Uzbekistan Market Report
EUROUZ.EU & Uzbek.Review present the bi-weekly report on key developments in Uzbekistan for APRIL 15-30, 2023.
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"We are grateful that Uzbekistan is against the use of its territory to circumvent sanctions... I want to emphasize - we do not intend to impose sanctions on third countries, on Uzbekistan in particular, we also have no desire to interfere with the development of Uzbekistan and its trade relations with other countries, including Russia”.
David O'Sullivan, EU Special Envoy for Sanctions
"In Uzbekistan, you will find everything you need for business - peace, stability, and reliable guarantees."
Shavkat Mirziyoyev, The President of Uzbekistan
"Uzbekistan receives 80% of its water from aboard and only 20% from domestic sources. Population growth and depletion of reserves will lead to the fact that by 2030 the country will lack 7 billion cubic meters of water. Therefore, it is necessary to promote the rational use of water."
Azim Nazarov, Deputy Minister of Water Resources
UPCOMING EUROUZ & MEMBER EVENTS
EUROUZ will be hosting a European Reception at the EBRD Annual Meetings & Business Forum in Samarkand
May 17th, 2023 | Samarkand
To highlight the growing partnership with the European Union and Central Asia’s economic integration processes impacting the region’s trade links with the EU, EUROUZ will welcome its members, business & political leaders attending the EBRD Annual Meeting in Samarkand for an informal networking session, a dinner and a discussion panel on Central Asia’s new place in global connectivity & trade.
Interested participants can register by filling out a form to attend the event.
Sponsorship packages are still available, and an email can be sent to email@example.com with inquiries on this subject.
Preview for EBRD's annual meeting in Samarkand on May 16-18.
Second EU-Central Asia Economic Forum
May 18-19, 2023 | 13:30 Almaty time | Almaty (Kazakhstan)
The Forum, at which EUROUZ Founding Board-Member will be speaking on "Improving Business Climate at Central Asia", seeks to enhance and put into practice the involvement of the EU and Central Asia in three crucial priority areas: the green and digital transition, improving the business environment, and promoting trade and connectivity. Drawing on the outcomes of the Economic Forum in Bishkek on November 5, 2021, the event will evaluate the advances achieved thus far and deliberate on strategies for policies, programs, and investments necessary to foster a more unified and interconnected regional market participation.
Read more about the Forum
The open call to members & partners to join the new EUROUZ Life Sciences & Healthcare Committee is still open. The goal of the Committee is to engage with Uzbekistan's government and all relevant local & international stakeholders to establish regular dialogue and help improve the pharma, healthcare, insurance, and related sectors.
More information is available via the following link.
EUROUZ & MEMBER NEWS
EU Sanctions Envoy met with Uzbekistan’s largest companies
On April 27th, the Europe-Uzbekistan Association for Economic Cooperation (EUROUZ) together with the Delegation of the European Union to Uzbekistan organized an informal meeting between the European Union Sanctions Envoy the H.E. Mr. David O'Sullivan, and prominent Uzbekistan and EU business representatives in the country.
Dentons, Artel Electronics, Orient Group Management, Nooter/Ericsen (Italy), Signify N.V. and Hellman East Europe (Germany) discussed the impact of EU sanctions on their Uzbekistan operations with the EU's top representative on the matter. Both parties agreed that more information on EU sanctions should be accessible to Uzbek businesses to clarify what they affect and what they don't regarding Uzbekistan's trade with Russia.
Link to the Press Releases in EN, UZ, and RU languages
EUROUZ was the official partner of the Second annual Tashkent International Investment Forum (TIIF-2023)
Several EUROUZ members participated in the 2nd Tashkent International Investment Forum that was held for two days (April 27-28) in Tashkent, Uzbekistan, taking part in the expert discussion meetings, including panel sessions, roundtables and B2B negotiations, supporting its members and partners in holding a number of important B2B & B2G meetings.
EUROUZ is very proud to be the official event partner and had 7 of our members speaking or moderating various panels.
EUROUZ welcomes New Association members: CC7 Europe & Ernst & Young (EY)
CC7 Europe, an independent subsidiary of CC7 (China National Chemical Engineering & Construction Corporation Seven), one of the world's largest EPC contractors, brings cutting-edge technology that goes beyond engineering, procurement, and construction, including machine learning technologies and real-time engineering. The company provides value creation, financing, and product off-takes, delivering its end-to-end solutions from its office located in Hague, the Netherlands.
CC7 Europe recently signed a contract to execute the full EPC package for the construction of the second PVC plant located on the premises of the existing factory in Navoiy. This project marks the second undertaking of CC7 in Uzbekistan, demonstrating the company's expertise and commitment to delivering exceptional results.
Learn more about CC7 Europe: www.cc7europe.com/
Ernst & Young is a global leader in assurance, tax, transaction and advisory services.
EY established its Tashkent office in 1995 as one of the first international advisory firms to do so. It is part of our EMEIA practice, covering Europe, the Middle East, India, and Africa.
EY's professional experience is used by a wide range of organizations, including large companies in Uzbekistan, as well as foreign corporations investing in this market.
With over 70 professionals, EY's Tashkent office offers specialized advisory and auditing services in various sectors such as oil and gas, mining, finance, telecommunications, manufacturing, tourism, and hospitality.
More information about the activities of EY Uzbekistan can be found at: www.ey.com/en_uz
We look forward to supporting CC7 Europe & EY in Uzbekistan and Europe.
Not a member yet?
Join EUROUZ to access exclusive market support for your business activities in the country.
1. INTERNATIONAL COOPERATION
The EU praises Uzbekistan's efforts in resisting the use of its territory to circumvent sanctions.
Uzbekistan’s effort to resist the circumvention of sanctions was praised by the EU's Special Envoy for Sanctions, David O'Sullivan, during his visit to the country. The Uzbek government received a list of goods from the EU that the Russian military can use. These include high-tech block diagrams, microchips, optical equipment, and more. Recently, there has been a 125% increase in the exports of such goods through Uzbekistan. With that in mind, the Uzbek government assured that it would closely monitor the transportation of such goods.
The EU supports the progress made in the realm of human rights.
Source: Presidential Administration
The EU's Special Representative for Human Rights, Eamon Gilmore, complimented the work done by the government to promote and protect human rights. The representative emphasized that the EU supports the upcoming constitutional referendum due to the proposed amendments aimed at strengthening laws on human rights and freedoms.
Czech Republic and Uzbekistan to expand cooperation.
Source: Presidential Administration
During the visit of the prime minister, the Czech side showed interest in buying uranium and copper and supplying trams, trains, and planes. In the past few years, the volume of trade and the number of joint ventures between the countries has risen significantly. Among other things, the sides agreed to cooperate in the extractive industry, modernization of the energy sectors, agriculture, and the organization of direct flights.
The EU-Uzbekistan Cooperation Council's seventeenth meeting
The President will pay an official visit to Germany on May 1-2
1.2. CENTRAL ASIA & CAUCASUS
Trade and manufacturing between Kazakhstan and Uzbekistan
The joint export-import company, Uzkaztrade, will wholesale fruits and vegetables from Uzbekistan to Kazakhstan. More on that, Uzkaztrade will not profit and add commercial margin to goods. Furthermore, the sides recently discussed over 50 other joint investment projects in areas such as deep processing of raw materials.
On the China-Kyrgyzstan-Uzbekistan railway
At the Tashkent Investment Forum, the Chairman of the Cabinet of Ministers and Head of the Presidential Administration of Kyrgyzstan stated that the railway would lead the region out of the transport impasse and connect four billion people. The feasibility study for the railway construction project will be prepared by June 1 by a Chinese institute.
1.3. RUSSIA & CHINA
Uzbekistan to import 300,000 tons of oil from Russian Gazprom
In addition, Russian Tatneft showed interest in modernizing the Bukhara Oil Refinery. In the oil and gas industry, over 30% of companies were created with the participation of Russian capital. Overall, 751 new enterprises with foreign capital were opened in the first three months, with 243 of them with Russian capital.
The demand for international road transport of goods in Uzbekistan continues to grow.
In light of the sanctions, the number of applications for export shipments from Uzbekistan has increased by 50%. Requests for the delivery of goods to Russia increased by 65%, which is twice more than to Belarus. Despite the increasing demand, the rates slightly decreased due to a growing supply of transportation services.
1.4. MIDDLE EAST, SOUTH-EAST ASIA
Uzbekistan donates 185 tons of humanitarian aid to Afghanistan.
1.5. INTERNATIONAL ORGANISATIONS
G7 foreign ministers will cooperate in helping Central Asia
In their joint statement, the G7 foreign ministers stated " We affirm our intent to support the sovereignty, independence, and territorial integrity of Central Asian countries. We commit to working together with Central Asian countries to address regional challenges, including the consequences of Russia’s war of aggression, the destabilizing effect of the situation in Afghanistan, food and energy insecurity, terrorism, and the consequences of climate change. We are determined to foster sustainable connectivity, transportation, and trade and energy links to enhance regional prosperity".
2. PUBLIC POLICY
Tashkent International Investment Forum 2023
Source: Presidential Administration
Tashkent International Investment Forum is a platform for dialogue where the investment potential of Uzbekistan is presented to international investors and business communities. At the second forum, 164 investment agreements worth USD 11 billion were signed, which is 40% more than in the first forum. One of the largest agreements was the construction of new power plants with Chinese Gezhouba Investment and Turkish Cengiz Enerji for USD 1.3 billion.
In his speech, the President highlighted the existing investment opportunities and work done by the government to foster a business-friendly environment. Among other things, the government announced its goal to become a member of WTO as soon as possible and discussed the administrative reforms aimed at reducing bureaucracy, eliminating corruption, and introducing effective management in the executive system. In the energy sector, the President estimated the market for the production of solar panels, wind generators, inverters, and other electrical products to stand at USD 8 billion. Moreover, the President announced the creation of the International Commercial Court with the support of foreign experts.
ADB loan to help modernize three cities.
The government received a USD 59 million loan from ADB to help modernize infrastructure in Jizzakh, Khiva, and Yangiyer.
Reimbursement of social tax for young employees.
Until January 1, 2025, employers can continue reimbursing the amount of social tax paid for employees under the age of 25. In less than two years, the procedure benefited over 9,000 enterprises that employ over 100,000 young employees and receive over UZS 150 billion.
IsDB loans for improving infrastructure, education, and rural development.
The Islamic Development Bank will provide USD 400 million for the integrated development of rural areas, improvement in the quality and facilities of preschool education, and repair of roads.
The growing concern for water security.
Uzbekistan receives only 80% of its water from abroad and 20% from domestic sources. Estimates suggest that by 2030 the country will lack 7 billion cubic meters of water. As such, the government aims to promote rational use of water and modernize the infrastructure for water delivery. Furthermore, Boston Consulting Group suggests that USD 10 billion is needed to implement water-saving initiatives in the region.
3.1. LEGISLATIVE CHANGES
Constitutional referendum: over 90% vote in favor
Source: Presidential Administration
The turnout at the referendum was 84.54%, where 90.21% (15,040,055) voted in favor of the constitutional amendments and 9.35% (1,559,200) voted against them.
As a reminder, Uzbekistan’s new draft constitution text was published on March 15th. The new constitution introduces corrections and additions amounting to 65% of the previous document. It expands the presidential term from five to seven years and allows the incumbent to run for two additional terms. Other amendments involve strengthening the guarantees that protect the rights and freedoms of citizens and expand certain exclusive powers of both chambers of parliament. The new draft also allows courts to be held in a language other than national languages, which opens the door to the establishment of special court jurisdictions (such as English common law courts).
3.2. GOVERNMENT & BUSINESS APPOINTMENTS
o Foreign Minister of Uzbekistan
Appointed - Bakhtiyor Saidov
Previously served as - Acting Foreign Minister of Uzbekistan
o Deputy Foreign Minister of Uzbekistan
Appointed - Bobur Usmanov
Previously served at - Presidential Administration
Source: Statistics Agency
4.1. KEY ECONOMIC INDICATORS, LOANS, & PUBLIC FINANCE
Economic growth in the first quarter exceeds the government's forecast.
In the first quarter, the GDP grew by 5.5%, a significantly higher figure than January's forecast presented to the President. In particular, the government projected slowed growth of 3.5% if it were not to resolve interruptions in energy supplies and the subsequent halts in production worth UZS 7 billion. Furthermore, the GDP growth was largely driven by increases in the volumes of industrial production and construction.
Foreign trade in the first quarter exceeds last year's figure.
In the first quarter, foreign trade reached USD 14.8 billion, which is 11.9% more than in the same period last year. China overtook Russia and became the main trading partner with USD 2.3 billion. Russia came second with USD 2.2 billion, Kazakhstan third with USD 1.1 billion, Turkey fourth with USD 821 million, and Germany fifth with USD 674 million. Furthermore, the negative foreign trade balance more than doubled to USD 3.4 billion. More on that, exports decreased by 2.6% to USD 5.68 billion, and imports increased by 23.4% to USD 9.09 billion.
The total income of the population significantly increases.
In the first quarter, the total income in real terms increased by 10.8% and amounted to UZS 144 trillion. For comparison, the incomes increased by 5.4% in 2022. This year's growth has been driven mostly by changes in income from employment (60.4%) and income from transfers (27.9%).
The total number of tourists in the first quarter amounted to 1,487,700.
4.2. BANKING & FINANCE
The minimum share of the authorized capital is to be increased in stages.
The President approves amendments to increase the minimum size of a bank's authorized capital in three stages - UZS 200 billion soums from September 1, 2023, UZS 350 billion soums from April 1, 2024, and UZS 500 billion soums from January 1, 2025. The current minimum stands at UZS 100 billion.
TBC's income more than tripled and loan payments quadrupled.
In the first quarter, Georgian TBC bank's net income amounted to UZS 51.18 billion soums relative to a loss of UZS 8.57 billion soums last year. This was driven by a 4.3-fold increase in proceeds from credit and leasing operations amounting to UZS 178 billion.
Aloqabank prepares for an IPO on the Tashkent Stock Exchange and intends to place up to 5% of its shares on the exchange.
Agrobank signed two cooperation agreements worth USD 50 million with German banks Kreditanstalt für Wiederaufbau and Commerzbank.
4.3. TRANSPORTATION & LOGISTICS
Russian car manufacturer AvtoVAZ plans to significantly expand its operations in Uzbekistan.
The company plans to produce 30,000 vehicles per year and capture 10% of the local market. Furthermore, the company intends to introduce a variety of its models, like Lada Vesta.
Four airports are to be transferred to businesses.
The management of the airports in Andijan, Namangan, Bukhara, and Urgench will be transferred to businesses to improve efficiency and increase profitability.
4.3. AGRICULTURE, MINING, & MANUFACTURING
World Bank to Help Uzbekistan Develop a Productive, Sustainable, and Market-Oriented Livestock Sector
Livestock accounts for 13% of the GDP, 50% of agricultural GDP, and generates 45% to 67% of rural household income. In addition, it also accounts for over 13% of the total greenhouse gas emissions. Given its importance, a loan of USD 240 million will finance developing public livestock support services, strengthening market and value addition infrastructure and facilitating trade, and promoting green and climate-resilient livestock value chains.
Chinese CITIC to build an agro logistic park.
The company will invest USD 50 million in the construction of warehouses and workshops covering 32 hectares for the processing of agricultural products. When completed, the warehouses will have a capacity of 50,000 tonnes and a turnover of 300,000 tonnes of agricultural products.
Preventing disruptions and shortages in the sugar market.
In March, sugar prices rose by 4.4% and over the year by 31.1%. In light of the growing demand, the government aims to prevent domestic disruptions in the supply. In particular, it plans to increase the capacity by 25% compared to last year, increase production to 2,500 tons of sugar per day, and annually produce from 600,000 to 1 million tons.
As part of the government's efforts to support the agricultural sector, loans of up to UZS 50 million will be provided to fish farms without collateral. Additionally, USD 35 million will be allocated to support the growth of poultry farms.
To promote water-saving technologies and improve energy efficiency, pumping stations in the fields will be handed over to businesses based on a PPP basis.
Farmers will receive 500 tons of seeds of high-quality varieties of potatoes free of charge.
4.5. CONSTRUCTION & REAL ESTATE
To promote tourism development near Charvak, eight plots have been put up for auction under the condition that buyers must invest a total of USD 17 million in developing tourist facilities.
4.6. INFORMATION TECHNOLOGY & R&D
Russian Service-Telecom plans to enter the market and become the first independent mobile communications tower operator.
4.7. ENERGY & PETROCHEMICALS
Source: Statistics Agency
Energy market dynamics
In the first quarter, there was a decrease in gas and electricity production by 9.6% and 5%, respectively, compared to the same period last year. Gas production amounted to 12.3 billion cubic meters, while electricity production amounted to 18.5 billion kWh. Additionally, there was a decrease in thermal energy production by 16.5%, coal by 14%, and gas condensate by 9%, but there was an increase in oil production by 6.7%. In light of the falling production in the first three months, Uzbekistan imported gas worth USD 152.9 million, which is more than half of the imports for the entire previous year (USD 281.9 million). In the same period this year, the country exported gas for USD 94.4 million, imported coal worth USD 45.2 million, and increased deliveries of oil and oil products to USD 510 million.
ACWA Power raises another USD 174 million for two wind farms.
The ADB will provide the loan to build wind farms with a capacity of 500 MW each in the Bukhara region. Each plant will include 79 turbines, have a total generation capacity of 3,235 GWh of electricity per year, and prevent the emission of about 2 million tons of carbon dioxide.
Foreign investors will build 4 power plants.
Turkish Cengiz Enerji will build a combined cycle thermal power plant worth USD 300 million with a capacity of 400 MW in the Jizzakh region. Chinese Gezhouba Group Overseas Investment will build two 500 MW solar photovoltaic power plants worth USD 500 million each in Bukhara and Kashkadarya. Finally, Korean Sejin G&E Co. Ltd will implement a project that uses technologies for collecting biogas worth USD 55 million in the Akhangaran region.
USEFUL LINKS & NOTABLE ARTICLES, PUBLICATIONS
Uzbekistan in focus amid Central Asia’s growing investment appeal (Euromoney)
Traces of Ancient Uzbekistan (The Wall Street Journal)
Uzbekistan - Electricity Sector Transformation and Resilient Transmission - Procurement Plan (The World Bank)
Uzbekistan’s president clings to power while passing liberal reforms (The Economist)
Uzbekistan/Germany: Make Human Rights Key Component of Talks (Human Rights Watch)
Uzbek referendum to allow president to extend rule (Reuters)