Uzbekistan Update: December 1-15, 2023
Biweekly update on key developments in Uzbekistan
“We do not seek to harm Uzbekistan’s trade with Russia”
EU Special Envoy for Sanctions David O’Sullivan
EUROUZ & MEMBER NEWS
1 - EUROUZ Tashkent Inauguration event
On December 5th 2023, The Europe-Uzbekistan Association for Economic Cooperation (EUROUZ), joined by its members, the EU delegation in Uzbekistan, EU diplomats and Uzbekistan’s officials celebrated the official inauguration of the EUROUZ's new Tashkent Branch office. The event brought together over 140 guests to celebrate EUROUZ's official registration in Uzbekistan as a formal branch of an international nonprofit business association and as the first officially EU-supported business association in Uzbekistan.
The following EUROUZ members Montfort Eurasia, Mazars Advisory, AKFA building materials, Legalmax, KY & Partners, KPMG, Korzinka, International Beverages Tashkent, Ernst & Young LLC, Eckstein und Partner, BMB Trade Group, Bavaria Reha Group, Asaka Bank, AHK, "LavoroSolutions Veolia, NAII, ITECA Exhibitions, DNA, the French-Uzbek Business Club (CAFU), Avesta Investment Group, Austrum Logistics, AstraZeneca.
For more information, please visit this link (photos via this link)
2 - EUROUZ Open Healthcare & Life Sciences Committee Roundtable
On December 6, 2023, the EUROUZ Healthcare & Life Sciences Committee, led by EUROUZ members Vakidov & Partners and AstraZeneca, hosted an open roundtable in Uzbekistan. The participants included over 20 European business representatives, Uzbekistan's Deputy Minister of Healthcare, heads of pharmaceutical and regulatory agencies (including tax, customs & anti-monopoly), and EU, German, and French diplomats. The meeting aimed to address challenges European companies face in the Uzbekistan pharmaceutical and healthcare sectors, ways of overcoming the barriers and promoting dialogue and cooperation. This event marks a significant step for the EUROUZ Committee in fostering engagement between European businesses and Uzbek regulatory bodies. More information & possibility to join the committee here
3 - 'UZBEKISTAN-2030' HORIZONS
On December 12, 2023, an International Conference organised by the Center for Progressive Reforms and supported by EUROUZ convened experts and leaders from various national and international organizations in Tashkent. The conference focused on Uzbekistan's 2030 strategy, discussing economic transformation, societal inclusivity, and energy and climate strategies. Participants exchanged insights and discussed proposals for efficiently achieving the goals of the "Uzbekistan - 2030" strategy, emphasizing the integration of advanced technologies and innovative methods in reform processes. The event results in the form of specific proposals will be submitted to the highest level of Uzbekistan’s government for consideration in its development strategy.
For more information, please visit the link
4 - EUROUZ member Korzinka has become a partner of the SPAR multinational voluntary retail network in Uzbekistan
In mid-2024, Korzinka, a leading retailer in Uzbekistan, will launch the international grocery chain SPAR in Tashkent. This marks a significant development in Uzbekistan's retail sector, introducing SPAR's global presence and nearly a century-long history to the local market. SPAR, which originated in The Netherlands in 1932, now operates over 13,900 stores across five continents. The move is expected to enhance opportunities for local customers and the overall retail market in Uzbekistan.
5 - EUROUZ member Voltalia to build new PV plant in Khorezm region
Voltalia, an energy company, is slated to build a 100 MW solar plant in Uzbekistan's Khorezm region with a $68 million investment. Uzbek President Shavkat Mirziyoyev approved the project, which includes a $20 million bank guarantee from Voltalia. Additionally, Voltalia is working on a unique hybrid power plant in the Shurkul area, comprising 200 MW of wind and solar power each, plus a 60 MW battery system. Targeted for completion in 2026, this project is poised to be Central Asia's first.
6 - EUROUZ welcomes a new member - Legalmax
Legalmax, established in 2003, is a prominent law firm specializing in intellectual property services within Russian-speaking CIS countries. Their expertise spans litigation, customs protection, IP registration, licensing, unfair competition, and more. Unlike others, Legalmax boasts a team of attorneys, patent experts, and lawyers, offering comprehensive services. With offices in multiple countries, they efficiently serve international partners across jurisdictions. Legalmax's exceptional work has been consistently recognized in global rankings and professional guides like Chambers Global, The Legal 500, and Intellectual Property Magazine. They have made significant contributions to lawmaking and precedent-setting in intellectual property.
For more information, please visit the link
7 - EUROUZ welcomes a new member - Eckstein & Partner
Eckstein & Partner is a network of independent companies specializing in facilitating business relations between Western Europe and the former Soviet Union states. The network maintains a small permanent staff that collaborates with non-payroll employees across various locations. Standard tasks within the network's expertise are managed with full client responsibility. Pricing primarily relies on hourly rates, and for predefined standard tasks, fixed prices are offered based on experience. New clients are requested to make an advance payment to cover estimated costs for the next two months, with refunds available for cancellations before the advance is exhausted.
For more information please visit the link
7 - EUROUZ welcomes a new member - Fintech Association of Uzbekistan
The FinTech Association of Uzbekistan is a non-governmental, non-profit organization founded in early 2022 on the initiative of leading specialists working in the field of financial technologies. This is a unique platform for constructive dialogue between the regulator and business representatives. The association strives to be the voice of fintech companies, serving as a resource and forum for education, information exchange and networking between companies, regulators, government and the general public.
For more information please visit the link
Not a member yet?
1. INTERNATIONAL COOPERATION
Uzbekistan's Foreign Minister participated in the OSCE's 30th Ministerial Council in Skopje, expressing gratitude to OSCE Chairman and North Macedonia's Foreign Minister for hospitality. Saidov praised Osmani's successful chairpersonship in 2023. He reaffirmed Uzbekistan's commitment to cooperation with the OSCE and its values, aligning with Uzbekistan's "Uzbekistan 2030" Development Strategy, initiated by President. Additionally, Saidov met with German and Hungarian counterparts during the event.
Uzbekistan-EU Trade Surges by 36%
In 2023, Uzbekistan-EU trade grew 36% in 10 months, reaching $4.8 billion. Uzbek exports to the EU have increased 1.5 times to $794.6 million. The energy partnership aims to reduce Uzbekistan's energy intensity and increase efficiency by 2030, with several large-scale solar and wind projects underway. The EU supports Uzbekistan in diversifying transport corridors, including the development of the Trans-Caspian International Transport Route.
Germany Grants €9 Million for Uzbekistan's Green Industrialization
The Ministry of Economy and Finance has signed a €9 million grant agreement with the German International Cooperation Society to boost private sector capacity for "green" industrialization and support economic policy consultation in Uzbekistan. The project aims to assist the Ministry in economic reforms, focusing on sustainable development and enhancing state and private sector capabilities for a "green" economy. It includes providing expertise on greenhouse gas measurement and certification, facilitating Uzbekistan's involvement in international CO2 certificate trading, and adapting to the European Union's Transboundary Regulatory Mechanism.
1.2 RUSSIA & CHINA
Uzbekistan and Russia move forward on the contract for Nuclear Power Plant construction, says Rosatom CEO
The project, initiated in 2018, involves Rosatom constructing two VVER-1200 units, each with 1.2 GW capacity, near Lake Tuzkan in the Jizzakh region. Expected to take about six years, this plant aims to alleviate Uzbekistan's electricity shortages and reduce gas usage. Uzbekistan, a top 5 uranium producer, won't face fuel supply issues. The project, noted for its environmental and safety aspects, especially the VVER-1200 reactors, was further discussed in April at a ministerial level. Uzbekistan’s news media did not report on the subject oz Rosatom’s CEO statement.
Uzbekistan plans to increase Russian oil imports through Kazakhstan.
Uzbekistan aims to significantly increase Russian oil imports, planning a threefold rise from 154,000 to 500,000 tons annually, transiting through Kazakhstan. Kaztransoil mentioned that SANEG (Sanoat Energetika Guruhi) has applied for a 2024 transit of 500,000 tons, potentially scaling up to 1 million tons. A trilateral agreement among Uzbekistan, Russia, and Kazakhstan was recently reached to augment oil imports to 1 million tons in 2024.
1.3 MIDDLE EAST, EAST ASIA, & SOUTH-EAST ASIA
Source: Presidents Press Service
During his visit to Dubai, Uzbekistan President Shavkat Mirziyoyev engaged in high-level meetings with leaders from the UAE, India, Indonesia, Türkiye, Mongolia, Malaysia, and officials from international organizations, enhancing global ties and reinforcing Uzbekistan's economic and political presence. These meetings, part of his active international policy since 2016, have elevated Uzbekistan's global standing and attracted significant foreign investment.
1.4 NORTH & SOUTH AMERICAS
From 2025, Uzbekistan Airways plans to launch regular flights to Canada
This development comes after the aviation authorities of both countries, during the ICAN-2023 conference in Saudi Arabia, signed a document initiating the development of an air services agreement. This agreement will include the third and fourth levels of "freedom of air", which allow for the establishment of regular air services between Uzbekistan and Canada.
1.5 INTERNATIONAL ORGANIZATIONS
Uzbekistan's President and EBRD Chief Deliberate on Expanding Diverse Partnership
They discussed enhancing collaboration with the EBRD, an important financial institution. President Mirziyoyev commended the outcomes of the EBRD Board of Governors meeting in Samarkand earlier in May. He noted with satisfaction that the EBRD's investments in Uzbekistan have surpassed 3.5 billion euros, with 60% directed towards the private sector. The development of the Country Partnership Strategy was expected to significantly enhance cooperation, focusing on small and medium-sized enterprises, women's entrepreneurship, public-private partnerships, privatization in banking, irrigation modernization, road infrastructure development, and other sectors.
Uzbekistan Sets Up National Emission Registry to Fight Climate Change
Uzbekistan's Ministry of Ecology, Environmental Protection, and Climate Change established a national emission accounting register in collaboration with the Industrial Innovation Group, a transnational company. This agreement was formalized at the 28th UN Climate Change Conference (COP28) in Dubai. The register aims to integrate emission control systems and reduce emissions, enabling accurate environmental impact assessment and effective mitigation strategies in Uzbekistan.
2. PUBLIC POLICY
Prices for heat supply services change in Tashkent
The governor of Tashkent has approved new regulated prices for heat supply services provided by Veolia Energy Tashkent LLC, effective from December 1, 2023. This decision separates investment costs from the tariff structure to avoid sudden increases. The new prices remain unchanged for the general population, but for legal entities, the price increases by 50.04%, except for state-owned organizations, which will see 59.73% price increase.
3.1. GOVERNMENT APPOINTMENTS
The structure of the Ministry of Investment, Industry and Trade of Uzbekistan will be revised
Uzbekistan's President announced a restructuring of the Ministry of Investments, Industry, and Trade. Key responsibilities, including production, industrial zones, and regional exports, will now be managed by the Chamber of Commerce and Industry. Additionally, the Export Promotion Agency and related fund are being integrated into the Chamber. This overhaul is part of an effort to enhance the competitiveness of Uzbek products and streamline export processes.
Uzbekistan Bans Construction Designs in Mudflow and Landslide Risk Areas
At a recent plenary session of the Legislative Chamber of the Oliy Majlis, deputies considered the first reading of the draft law “On amendments and additions to Article 47 of the Urban Planning Code of the Republic of Uzbekistan”. This bill proposes amendments to Article 47 of the Town Planning Code, specifically aiming to prohibit the design and construction of buildings and structures in areas prone to mudflows and landslides. The goal is to safeguard human lives and prevent potential material damage.
3.2. NOTABLE APPOINTMENTS
Uzbekistan’s new ambassador to Belgium
Appointed - Gayrat Fazilov
Previously served as - Deputy Minister of Foreign Affairs
Uzbekistan’s new ambassador to Spain
Appointed - Farrukh Tursunov
Previously served as - Managing the General Department of Strategic Analysis and Forecasting of the Ministry of Foreign Affairs
Chairman of the Board of the Joint Stock Company "Uzbekistan Railways"
Appointed - Zufar Narzullaev
First deputy chairman of the board of the joint stock company "Uzbekistan Railways" on issues of transformation, digitalization and finance
Appointed - Khikmatulla Rakhmetov
Chief engineer of the joint stock company "Uzbekistan Railways"
Appointed - Khusnutdin Khasilov
Deputy chairman of the board of the joint stock company "Uzbekistan Railways" for transport and logistics
Appointed - Abdumalik Kamiljanov
Deputy chairman of the board of the joint stock company "Uzbekistan Railways" for the repair and construction of railway facilities
Appointed - Elyor Rizaev
4.1 KEY ECONOMIC INDICATORS, LOANS, & PUBLIC FINANCE
Inflation hits 7.4% in Uzbekistan
In November 2023, the consolidated CPI for the month in Uzbekistan was 101.1%, by December 2022 – 107.4%, the Statistics Agency of Uzbekistan said. In annual terms (as of November of the previous year), the consolidated CPI was fixed at 108.8%. The average monthly increase in the CPI for January-November 2023 reached 0.7%. This is 0.2 points less than in the same period last year, and 0.1 points lower than in January-November 2021.
IMRI: compared to prices in 2016, real wages increased by 52.6%
Experts from the Institute of Macroeconomic and Regional Research (IMRI) analyzed the growth in real wages across various economic sectors, adjusted to 2016 prices. Key findings include:
Significant wage growth was noted in finance (167.5%), information technology and communications (91.0%), healthcare (44.2%), and logistics (40.0%).
The least growth was seen in trade (0.2%), construction (16.0%), and the arts (17.1%).
Overall, real wages increased by 52.6% compared to 2016 prices.
With rapid digitalization and market dynamics advancements, labor mobility is increasingly important. Retraining is seen as both accessible and affordable. IMRI's study of 45 educational centers offering training in finance, IT, and logistics revealed:
Finance courses last an average of 4 months, with a monthly fee of 1 million soums. The total cost is recouped in about 1.5 months after employment.
IT courses average 6.5 months at 1.5 million soums per month, with costs recoverable within 2-3 months of employment.
Dispatcher training in logistics is typically 1 month, costing 2.3 million soums. Logisticians earn about 6 million sums on average, often working remotely.
Rapid retraining in in-demand professions can be a key factor in improving living standards. Government subsidies and preferential loans for educational courses can significantly aid this process. Individuals are encouraged to explore diverse career and field options, aiming for their goals with support from colleagues and family, which is crucial in this endeavor.
S&P Maintains Uzbekistan's 'BB-' Rating with Stable Outlook
This stable outlook is attributed to Uzbekistan's robust fiscal and external reserves position and a low-interest rate burden, which are expected to help the country navigate potential negative economic impacts from the Russia-Ukraine conflict. The agency projects a real GDP growth of 5.6% for Uzbekistan in 2023, with a projected budget deficit of 5.5% of GDP due to increased wages and social spending. Despite a decline from last year's peaks, Russia continues to be a major source of remittances for Uzbekistan. S&P assesses the risk of secondary sanctions from the United States and the European Union against Uzbek companies engaging with Russia as relatively low.
Uzbekistan attracted about $4 million in venture investments in six months
In the first half of the year, Uzbekistan ranked second in Central Asia for attracting venture investments, securing about $4 million, following Kazakhstan. A report from Innotechnics reveals that startups from Central Asia and the South Caucasus attracted $139 million in venture capital investments during this period, a sixfold increase compared to the same period in 2022. There were 64 transactions, a record high and 2.5 times more than the previous year.
4.2 TRADE AND BUSINESS
Emirati Firm Tadweer to Construct Waste Management Facility in Uzbekistan
The project will develop a comprehensive system for collecting, removing, sorting, processing, and disposing of solid household waste. Additionally, the project includes extracting landfill gas to produce electrical and thermal energy. It will also involve setting up waste sorting lines at municipal solid waste-producing enterprises and facilities for processing secondary raw materials like plastic, paper, glass, and aluminum.
South Korean Hyundai plans to build small NPPs in Uzbekistan
The company has partnered with the Korea Atomic Energy Research Institute (KAERI) to export small reactor technologies. KAERI will handle reactor design and licensing, while Hyundai will manage business planning, financing, engineering, and construction. The focus is on SMART (System-integrated Modular Advanced Reactor Technology) reactors, developed by KAERI since 1997, which use high-pressure water cooling systems and can produce up to 110 MW of energy. The company is considering expanding to Uzbekistan, the United States, and India.
Rieter opened the first technical service center in Tashkent
This new facility is aimed at providing repair services and support to local textile manufacturers in Uzbekistan. The Rieter service station specializes in mechanical and electronic repairs for all types of Rieter machines, including those used for spinning and winding. The station is also equipped with a warehouse that stocks various parts such as control units, sensors, and actuators, ensuring ready availability for repairs. Rieter collaborates with local Textile Service Solutions to offer these technical services.
4.3 BANKING & FINANCE
ADB approves a $100 million loan to support small and medium-sized enterprises in Uzbekistan
This loan is part of ADB's Small and Medium-Sized Enterprises Development Program, which focuses on strengthening the operational environment for SMEs. This second subprogram builds upon the initial phase's policy, regulatory, and institutional reforms. ADB Director General for Central and West Asia highlights the program's role in supporting systematic reforms and aiding Uzbekistan's transition from a state-owned to a market economy. The emphasis is on SMEs' role in driving diverse economic growth, and productivity and creating value-added formal employment.
WB approves allocation of $800 million to support development policy in Uzbekistan
The World Bank's Board of Executive Directors has approved a special operation to support development policy in Uzbekistan. This operation is a unique financial tool used by the World Bank to assist socio-economic reforms globally. The primary focus of this World Bank operation is to back key government priorities in Uzbekistan. These include efforts to reduce state control in critical sectors like agriculture, rail transport, chemicals, and energy. As part of this initiative, the World Bank will provide the Uzbek government with financial assistance through loans totaling $800 million, offered on special concessional terms.
EBRD to allocate €200 million for Youth in Business program in Central Asia
The program aims to support micro, small, and medium-sized enterprises (MSMEs) led or owned by individuals under 35 years old, a significant demographic in the region where up to a third of the population is aged between 18 and 34. In addition, the EBRD’s Advice for Small Businesses program will offer non-financial services, such as training, advisory services, and networking opportunities, to eligible small businesses to enhance their entrepreneurial skills.
ADB will allocate $240 million to improve rural roads in Uzbekistan
The project aims to enhance road capacity, quality, connectivity, safety, and climate resilience. It will cover local and inter-farm rural roads in 12 regions and Karakalpakstan, focusing on reinforced embankments, bridges, culverts, and drainage systems. The improved roads will facilitate access to markets, schools, health services, and district centers for rural communities and farmers. Additionally, the project will offer training in climate-resilient farming methods to empower rural women. Uzbekistan has been an ADB member since 1995, receiving $10.8 billion in support from the bank.
EBRD advances green lending and trade in Uzbekistan with $45mn financial package
This package consists of two components:
Senior Loan for Green Finance: The first component includes a senior loan of up to $20 million under the EBRD's Uzbekistan Green Economy Financing Facility II (GEFF Uzbekistan II). This loan is aimed at increasing access to green and climate-resilient technologies for local households and small to medium-sized enterprises in Uzbekistan. Notably, this loan will be disbursed in the local currency.
Trade Facilitation Program: The second component involves a $25 million limit increase under the EBRD's Trade Facilitation Programme (TFP). This increase raises Ipak Yuli Bank's total TFP limit to $50 million, making it one of the most active TFP-issuing banks in Uzbekistan. The TFP supports trade finance, helping Uzbek firms import essential goods, services, and equipment while also promoting the export of local products.
The EBRD's investment in Uzbekistan reflects its commitment to sustainable development, with nearly €4.46 billion invested in 146 projects in the country. This financial package for Ipak Yuli Bank contributes to Uzbekistan's journey towards a more sustainable and resilient future, promoting green initiatives and trade growth in the region.
EBRD provides about $10 million loan to promote green investment in Uzbekistan
This loan will help expand energy efficiency lending to businesses and households across Uzbekistan, supporting production modernization and climate resilience. GEFF II Uzbekistan, part of the EBRD's Green Economy Transition approach, receives technical cooperation funding from several international contributors. The EBRD aims to become a majority green bank by 2025, focusing more than half of its annual business volume on green financing.
4.4 AGRICULTURE, MINING, & MANUFACTURING
Uzbekistan grows 8.2 million tons of grain and 3.8 million tons of cotton in 2023
The president congratulated the agricultural workers of Uzbekistan on their achievements in 2023. According to him, Uzbekistan produced:
8.2 million tons of grain
3.8 million tons of cotton
Over 15 million tons of vegetables and melons
5 million tons of fruits and grapes
4 million tons of potatoes
26 thousand tons of silkworm cocoons
Uzbekistan to allocate $100 million to support the electrical engineering industry
Uzbekistan's electrical industry has seen significant growth, with 224 projects worth $640 million launched in the past six years. The country aims to reach $1 billion in exports by year-end, despite importing $800 million of electrical goods annually. To enhance competitiveness in the $3 billion regional market, Uzbekistan plans to collaborate with prestigious brands through 141 projects valued at $2 billion next year. Moreover, the country is expanding its renewable energy capacity, with plans to add 2 gigawatts of solar and wind power plants in 2023 and an additional 4 gigawatts in 2024. Localizing production and obtaining international quality certificates for electrical equipment are top priorities. To support technology adoption, the state will allocate $100 million. The government targets a 20% production increase next year, processing 140,000 tons of copper, and potentially raising exports to $1.5 billion and $2 billion by 2025.
4.5 CONSTRUCTION & REAL ESTATE
Austrian company developed a project for the Tashkent-Samarkand toll road
Austria's ILF Consulting Engineers has developed a project for the construction of the Tashkent-Samarkand toll road in Uzbekistan. The six-lane highway will stretch for 305 km and have a service life of 25 years. The European Bank for Reconstruction and Development (EBRD) provided a $350,000 grant for the initial feasibility study, with a total of $1.5 million allocated for the study's creation.
4.6 ENERGY & PETROCHEMICALS
SOCAR to launch production of chemicals in Kashkadarya
This move is aimed at achieving import substitution by establishing local production of chemicals and drilling fluids. Uzbekneftegaz and the Neftegaz Research and Design Institute of SOCAR have discussed the development of a preliminary business plan for the project.
The projects aim to enhance Uzbekistan's capabilities in various aspects of nuclear energy and technology.
Developing nuclear industry infrastructure.
Strengthening regulatory frameworks for nuclear energy.
Improving nuclear safety and operational performance.
Establishing a laboratory for monitoring water resources and pollution using stable isotopes.
Expanding and strengthening radiation medicine for cancer treatment.
Kazakhstan increases transit price for Russian oil
Starting from January 1, 2024, Kazakhstan's national trunk oil operator, Kaztransoil, will increase the prices for transit through the "Tuymazi – Omsk – Novosibirsk-2" (TON-2) oil pipeline by 20.9%. The new tariff for the transit of 1 ton of oil per 1,000 km through the Kazakh part of the main network will be $11.28 (without VAT), up from the current tariff of $9.33. This price increase is attributed to the fact that the tariff has remained unchanged since April 1, 2018.
Ferghana Oil Refinery to double gasoline production
The Ferghana Oil Refinery has made the strategic decision to increase the total production of AI-80 and AI-92 gasoline to 1,000 tons per day starting from December 11th. This move is in response to the growing demand for fuel during the winter season when vehicles require higher quality and cold-resistant fuel. The increase in gasoline production aims to ensure a stable supply in the fuel market and meet consumer needs effectively during the winter months.
ACWA Power, PowerChina break ground on green hydrogen plant in Uzbekistan
This plant will have an annual production capacity of 3,000 metric tons of green hydrogen and will be powered by a wind farm. The green hydrogen produced will be used to manufacture 500,000 tons of ammonia fertilizer annually, replacing 33 million cubic meters of natural gas.
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