Uzbekistan Update: September 15-30, 2023
Uzbekistan Update: September 15-30, 2023
Biweekly update on key developments in Uzbekistan
Notable Quotes
“The noblest goal of our national policy is to ensure family stability, legal protection, and peaceful life for women”
“We need an open, peaceful, and sustainable Afghanistan that is actively engaged in regional cooperation initiatives and ready for mutually beneficial partnerships with its neighbors and other countries”
The President of Uzbekistan at the United Nations General Assembly session in New York City.
UPCOMING EVENTS
I. 1st Annual Europe-Uzbekistan Business Meetings - Connecting Europe's and Uzbekistan businesses in the heart of Europe
Date: Friday, 27 October, 2023
Time: 09:30-17:00 Brussels time
Type: In-person
Location: Brussels, Belgium
EUROUZ is organizing the First Annual Business Meeting Europe-Uzbekistan in Brussels with the participation of high-ranking representatives of the government of the Republic of Uzbekistan and the European Union, as well as European companies and investors from throughout the European Union.
You can find the program and register to attend on the event website.
EUROUZ & MEMBER NEWS
1. EUROUZ kicks off the work of the Healthcare & Life Sciences and ESG & Compliance Committees in Uzbekistan.
On September 22, EUROUZ conducted Open Healthcare & Life Sciences Committee Initiation Meeting, a pivotal initiative providing a space for companies to share their healthcare expertise from Europe and seek guidance on operating effectively in Uzbekistan, fostering collaboration and knowledge exchange.
On September 29, EUROUZ also conducted an Open ESG & Compliance Committee Initiation Meeting, which brought together 18 companies actively engaged on the subject. The committee will aim to become a new multi-stakeholder, private-sector driven platform to promote and engage with the EU and Uzbekistan’s government on matters related to ESG & Compliance practices development in the country.
If you are interested in knowing more or taking part in the new committees, please contact the EUROUZ Secretariat.
EUROUZ Board Chairman takes part in a summit with the five heads of the Central Asian states.
Today EUROUZ Board Chairman, Prof. Dr. Klaus Mangold took part in a Historic economic summit between five heads of state from CentralAsia in Berlin and the leaders of Germany’s business community organized by Ost-Ausschusses der Deutschen Wirtschaft.
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1. INTERNATIONAL COOPERATION
1.1 EUROPE
Source: The Presidential Administration of Uzbekistan
The sides discussed strengthening cooperation in various sectors, including political, trade, economic, and humanitarian. The bilateral relations have witnessed significant progress, as evidenced by a 35% increase in Uzbekistan's trade with EU countries this year, the successful execution of investment projects with top European companies, and the hosting of notable cultural events. The meeting also addressed the development of international transport routes, the situation in Afghanistan, and the schedule for forthcoming multilateral events.
Source: The Presidential Administration of Uzbekistan
On 29 September, Uzbekistan's President attended a meeting in Germany with Central Asian leaders and the Federal President of Germany, Frank‑Walter Steinmeier. They discussed strengthening political dialogue, trade, transportation, cultural collaborations, and regional security, with a special focus on collaboration in the "Central Asia – Germany" format, emphasizing areas like high technology, green energy, and cultural exchanges.
Source: The Presidential Administration of Uzbekistan
The President also participated in the Economic Forum in Berlin, attended by leaders of Central Asian countries and prominent German business figures, including representatives from companies like Siemens Energy, Deutsche Bank, and Airbus. The forum focused on the increasing interest of German businesses in the Central Asian market, discussing investment, technological cooperation, green energy, logistics, and personnel training.
Source: The Presidential Administration of Uzbekistan
During the first Central Asia - Germany summit in Berlin, the President held talks with Germany's Chancellor, Olaf Scholz. They discussed enhancing Uzbek-German cooperation, emphasizing the growth in business partnerships, investment, and areas like energy and transport. The two leaders also conversed about regional security, including the situation in Afghanistan, and the President extended an official invitation to Chancellor Scholz to visit Uzbekistan.
The Joint Uzbek-German Economic Chamber was established in Hamburg.
The chamber aims to support entrepreneurs from both countries by ensuring smooth access to relevant institutions, fostering good communication, and facilitating direct exchanges between companies in Uzbekistan and Hamburg.
Uzbekistan and Germany are exploring collaborative opportunities in the field of labor migration.
A recent visit by an influential Uzbek delegation to Baden-Württemberg in Germany aimed to discuss the employment of Uzbek professionals in German regions with a shortage of skilled workers. Specialists from Uzbekistan undergo both linguistic and professional training for work in Germany, with an educational fair planned in Uzbekistan in March 2024 for German employers.
The Central Asia and European Union summit is scheduled to take place in Uzbekistan next year.
On September 22, ambassadors from Central Asian countries met in Bruges, Belgium, with Federica Mogherini, the former EU High Representative for Foreign Affairs and Security Policy. Mogherini highlighted the strengthening of bilateral relations and mentioned the forthcoming summit, emphasizing the valuable partnership between Central Asian countries and the EU in various sectors including trade, sustainable development, and security.
In Switzerland, the indictment against Gulnara Karimova has been submitted to court.
The Swiss Attorney General's office has concluded a five-year investigation, charging Gulnara Karimova, daughter of former Uzbekistan President Islam Karimov, with crimes including involvement in a criminal organization, laundering illegal proceeds, accepting bribes as a foreign official, and forging documents. The accusations cover the period from 2005 to 2013. During previous investigations from 2018 to 2021, four individuals were convicted related to money laundering and document forgery, with over 340 million Swiss francs confiscated to be returned to Uzbekistan; currently, over 440 million Swiss francs are frozen in bank accounts concerning Karimova's case.
1.2 CENTRAL ASIA & CAUCASUS
While the project's roadmap was agreed upon in May and construction was set to begin in the fall, differing financial views among Beijing, Bishkek, and Tashkent halted progress. The intended railway, estimated at $1.34 billion, aims to connect China and Uzbekistan through Kyrgyzstan, extending to Europe via Turkmenistan, Iran, and Turkey; Kyrgyzstan anticipates an annual revenue of up to $200 million from transit cargo on this route.
1.3 RUSSIA & CHINA
The documents signed included a joint communiqué, trade and industry agreements, a collaboration for creating a state cadastral valuation system, a memorandum of understanding in nuclear medicine, and an action plan related to the Tashkent branch of the Russian National Research Medical University. Furthermore, the Uzbek Prime Minister mentioned the success of existing industrial parks in Tashkent and Jizzakh regions and mentioned ongoing preparations for parks in Navoi and Bukhara.
The discussions centered on enhancing transport and communication collaboration between China and Central Asian nations, establishing efficient transport corridors, and boosting transit traffic. A memorandum of understanding was signed to further the "One Belt, One Road" initiative and promote collaboration between China and Central Asia in the transport sector.
The initiative comes in response to current practices where many migrants are housed in substandard conditions, and the proposed legislation, which carries fines for non-compliance, also stipulates that companies can decide whether to cover housing costs themselves or deduct them from the migrants' salaries.
Uzbekistan and Russia have agreed to increase the number of flights between their countries.
The frequency of flights from Tashkent to Moscow is set to rise to 50 per week and to Saint Petersburg to 14 per week.
1.4 NORTH & SOUTH AMERICAS
Source: The Presidential Administration of Uzbekistan
Established eight years prior, the "C5+1" platform facilitates constructive dialogue between Central Asian nations and the U.S., with Uzbekistan's President emphasizing the growing friendship and partnership in the region, presenting opportunities for expansive cooperation. The summit concluded with commitments to strengthen mutual understanding and enhance collaborative efforts among the participating nations.
The forum highlighted the expanding trade and investment relationship between the two countries, with Uzbekistan showcasing its economic advancements and the welcoming environment for investors, noting the presence of 300 U.S. companies in Uzbekistan, over double the number from 2017. The event culminated in the signing of 12 agreements spanning sectors such as energy, ICT, agriculture, and pharmaceuticals, emphasizing mutual interests and deepening ties.
The agreement covers maintenance, provision of new spare parts, and the restoration of dismantled parts, integrating advanced, energy-efficient equipment into the national electricity industry.
During his state visit to the US, the Uzbek President
1.5 MIDDLE EAST, EAST ASIA, & SOUTH-EAST ASIA
They emphasized the growth in mutual trade, with a 24% increase in trade turnover last year, and noted that Korean investments in Uzbekistan have exceeded $7 billion. President Mirziyoyev also extended an invitation to President Yoon Suk Yeol for a state visit to Uzbekistan.
This new mechanism aims to foster economic cooperation, strengthen trust, and promote developments in supply chains, digital, and biotechnology fields. During this period, the Uzbek Foreign Minister also held discussions on bilateral cooperation in energy, infrastructure, mining, and defense, and launched a Strategic Dialogue between the foreign ministries of both nations.
He stressed that international security is intrinsically linked to Afghanistan's situation, and highlighted the risks of ignoring the country or imposing sanctions, which worsen conditions for ordinary Afghans. Mirziyoyev emphasized the importance of maintaining humanitarian aid and utilizing Afghanistan's frozen international assets to alleviate the nation's pressing social challenges.
The two nations have agreed on initiatives in areas like agriculture, food industry, green energy, infrastructure, household chemicals, and construction materials production.
1.6 INTERNATIONAL ORGANIZATIONS
Source: The Presidential Administration of Uzbekistan
They acknowledged the significant growth in cooperation, citing 140 joint projects, the adoption of six UN General Assembly resolutions initiated by Uzbekistan, and a trust fund for the Aral Sea region. The meeting concluded with an agreement to devise an action plan to further strengthen the Uzbekistan-UN partnership.
Source: The Presidential Administration of Uzbekistan
The President addressed global challenges, notably the need to adapt to climate change, with Central Asia being particularly vulnerable, and proposed various initiatives, including a UN General Assembly Resolution on Central Asia's climate threats. Regarding Afghanistan, Mirziyoyev called for a compassionate international approach, urging the unfreezing of Afghan assets to help its citizens and advocating for an inclusive Afghan nation.
Source: The Presidential Administration of Uzbekistan
The discussions built upon agreements made during a previous bilateral meeting in June in Samarkand. Georgieva acknowledged Uzbekistan's progress in its reform program and expressed the IMF's continued commitment to supporting the country, including advising on economic policy and enhancing the skills of Uzbek specialists.
Uzbek President met with the World Bank Group's new President.
Source: The Presidential Administration of Uzbekistan
The leaders discussed enhancing the cooperation between Uzbekistan and the World Bank, with particular emphasis on expert assistance, privatization, public administration, and projects related to decarbonization, alternative energy, and infrastructure.
Uzbek President met with the WTO Director-General to discuss Uzbekistan's accession to the WTO.
Source: The Presidential Administration of Uzbekistan
Mirziyoyev emphasized the significance of joining the WTO for Uzbekistan's medium and long-term development goals. The preparations for the upcoming Working Group meeting and enhancing the qualifications of involved specialists were also highlighted. Okonjo-Iweala appreciated Uzbekistan's efforts and assured full WTO support, expressing confidence in the country's imminent accession.
The agreement emphasizes the construction and renovation of essential social infrastructures, including hospitals and schools, and UNOPS' ongoing commitment to aiding Uzbekistan in achieving its national development goals and the Sustainable Development Goals.
2. PUBLIC POLICY
The procedure for providing public services for trademark registration has been determined.
The Uzbek government has approved regulations for registering trademarks and service marks. Managed by the Ministry of Justice, individuals can apply directly or through a representative. Applications can be made via the information system of the authorized body, my.gov.uz, or by post.
The President approves the "Uzbekistan-2030" Strategy.
The Uzbek President approved the "Uzbekistan-2030" Strategy, aiming to empower citizens, promote health and education, boost the economy, and ensure justice and safety. This initiative follows the recent constitutional changes and presidential elections. The strategy builds upon previous development plans set in 2017 and 2022.
Uzbekistan's 2024 Notarial Reforms:
From 1 January: Automated notary system for vehicle agreements; no document demands from applicants.
Property transactions can be digitally registered via videoconferencing from March.
By the end of 2024: Judges to sanction investigative actions.
State to allocate $816 billion for public projects; and 4 trillion for village and mahalla programs.
New multi-lane roads must have pedestrian crossings with lights.
First-time offenders may avoid liability if they compensate the state before trial.
Public defenders to protect entrepreneurs during trials.
3. LEGISLATION
3.1. GOVERNMENT APPOINTMENTS
Ambassador of Uzbekistan to Germany.
Appointed - Dilshod Akhatov.
Previously served as - Ambassador to India.
General Director of Saneg.
Appointed - Tulkin Yusupov.
Previously served as - First Deputy General Director - Executive Director of the Production Division of Saneg.
Deputy Minister of Investment, Industry and Trade.
Dismissed - Sarvar Khamidov.
Deputy Minister of Investment, Industry and Trade.
Dismissed - Olimkhon Rustamov.
4. ECONOMY
4.1 KEY ECONOMIC INDICATORS, LOANS, & PUBLIC FINANCE
The bank explained its elevated forecast by the substantial rise in exports of food and textile products to Russia and increased investment. To provide context, projected growth for the Caucasus and #CentralAsia region is estimated at 4.6% and 4.7% for 2023 and 2024, respectively. Furthermore, projections for annual inflation rates, driven primarily by price liberalization reforms, remain the same at 11% in 2023 and 10% in 2024. Regional projections stand at 10.6% in 2023 and 8% in 2024.
Key growth drivers include international trade, China's openness, government spending, and remittances from Russia. However, challenges like higher borrowing costs, water and energy supply disruptions, and deteriorating infrastructure may slow down growth.
Uzbekistan's state budget deficit reached $3.2 billion.
Over eight months, Uzbekistan's state budget has faced a deficit of around 40 trillion som, with a significant increase in expenditures. The Ministry of Economy and Finance confirmed these figures. Within the first half of 2023, government expenditures rose faster than revenues. August saw a marked rise in VAT refund volumes and a decrease in VAT collections and income tax revenues. Social expenditures also surged. There's a proposed increase in the maximum consolidated budget deficit for 2023, and if the government overspends, it might result in a $1.8 billion increase in government costs. The current budget deficit is higher than in previous years, with the government historically struggling to maintain deficit limits.
The nation's trade relations extend to 190 countries, with significant trading partners being China, Russia, Kazakhstan, Turkey, and the Republic of Korea. Moreover, the government has been focusing on enhancing its export potential, evidenced by a 9.2% growth in goods and services exports.
Conversely, a decrease of 5.2% was noted in services related to architecture, engineering surveys, technical testing, and analysis. Other sectors, like trade and transport services, saw growth ranging from 0.8% to 14.7%.
Uzbekistan had 12,750 enterprises and organizations with foreign investment as of 1 September 2023.
Russia accounted for the highest number with 2,849 units, followed by China with 1,929 units and Turkey with 1,719 units. Kazakhstan and South Korea also contributed significantly with 949 and 696 units respectively.
4.2 TRADE AND BUSINESS
The retail trade turnover from January to August 2023 escalated to $15 million, representing a 107.2% increase from the same timeframe in 2022. Notably, regions like Tashkent, Fergana, and Navoi witnessed substantial growth, with Tashkent accounting for 26.1% of the overall retail trade turnover.
4.3 BANKING & FINANCE
During this event, Andrew Torre, the President of Visa for Central and Eastern Europe, Middle East, and Africa, announced the inauguration of a new Visa office in Tashkent.
BCG representatives discussed this collaborative project with the regulatory heads, emphasizing the digital transformation of banking processes.
In August, business loan rates in the national currency saw a significant decrease.
With an overall average of 22.8% per annum, the interest rates for entrepreneurs plummeted to a low of 21.3%, not seen since March 2022. On the other hand, rates for personal loans surged to a three-year high, settling at 24%.
4.4 TRANSPORTATION & LOGISTICS
At present, the warehouse space spans roughly 207,000 sq.m, with over 5% unoccupied, higher than rates in Kazakhstan and Kyrgyzstan. A scarcity of top-tier warehouse infrastructure exists, with only 16% being Class "A", but the influx of global companies like Fix Price and Wildberries has amplified warehouse demand.
This move comes in response to public dissatisfaction with issues such as ticket sale corruption and poor service on trains, signaling a need for reforms in the railway sector. Furthermore, there's a proposal to shift freight railway stations outside urban areas, aiming to decrease inner-city cargo movement and bring in more regional investments.
During a joint commission meeting regarding international road transport between the two nations, challenges encountered by national transporters were addressed. From 2024 onwards, the permits will be classified into three types: transit, bilateral, and trilateral.
Initiatives in Uzbekistan will also include manufacturing audio-visual equipment, setting up surveillance systems, and developing a facility for recycling solid household waste, while South Korea commits to enhancing projects in various sectors, including health, education, and energy, in Uzbekistan.
Interested entities can submit their expression of interest by October 23, 18:00 Tashkent time, accompanied by relevant company details and financial statements from the last three years. Founded in 2002 as a specialized arm of Uzbekistan Railways, "Uztemiryulkonteyner" provides container transportation services within Uzbekistan, with its shares' partial sale being part of a privatization strategy endorsed by the president earlier in March.
4.5 AGRICULTURE, MINING, & MANUFACTURING
China's Dongfeng Motor is set to produce electric buses in Uzbekistan's Fergana region.
The project is valued at $100 million, with the first phase estimated at $45 million. Following discussions between Fergana's regional leadership and Dongfeng Motor's executive, a foreign entity named "Dongfeng Special Vehicle" was established in the area.
This represents a fourfold increase in sales volume compared to the same timeframe in the previous year. Gold transactions represent $49.8 million and silver $163,200
They deliberated on broadening BYD's presence in Uzbekistan, notably by establishing a hybrid and electric car production site in the Jizzakh region, targeting an eventual capacity of 300,000 vehicles. The emphasis was also on local component production to reduce costs and introducing BYD electric buses in Uzbekistan, complemented by dedicated engineering and service centers.
This pact safeguards Israel's wheat needs amid the current global food shortage and the ongoing conflict in Ukraine. As Israel imports over 90% of its wheat needs annually, primarily for animal feed, diversifying its sources has become essential, especially in light of surging commodity prices due to the Ukrainian war and the economic repercussions of COVID-19. In exchange for wheat, Azerbaijan and Uzbekistan will benefit from Israel's state-of-the-art agricultural technologies.
Uzbekistan is looking to renew a project dedicated to extracting aluminum materials from kaolin.
Globally, alumina production predominantly uses bauxite, which is imported chiefly from Africa, South America, and Australia. Uzbekistan plans to partner with the South Korean company Sebine Technology to resume the extraction of aluminum and alumina from kaolin ores in the Tashkent region. Although there's no primary aluminum production in Uzbekistan, it's estimated that of the 900 million tons of kaolin clay in the Angren site, about 450 million tons could be harnessed for producing alumina and aluminum.
4.6 CONSTRUCTION & REAL ESTATE
The primary focus was potential collaborations in public-private partnership projects in transportation. Cengiz Holding expressed particular interest in upcoming toll road construction projects in Uzbekistan.
Amirsoy Ski Resort intends to invest up to 40 million euros in infrastructure developments.
Despite a 130 million euro investment, the current facilities can't meet the demand, especially from international guests. Expansion plans include elongating ski routes, adding new cable cars, creating freeride tracks, and connecting with the neighboring "Beldersay" resort. Additionally, Amirsoy is nearing the completion of its 4-star and 5-star hotels, accommodating 350 guests.
4.7 ENERGY & PETROCHEMICALS
The actual cost for 1 kilowatt-hour of electricity is 970 soums, yet individuals pay only 295 soums, with the state covering the discrepancy. The situation is similar for natural gas, priced at 1,890 soums per cubic meter, while consumers pay 390 soums.
Despite challenges from high leverage, the company's financial outlook is set to enhance in 2023 due to the recent commencement of its gas-to-liquids (GTL) plant. UNG's robust ties to the government mean approximately 65% of its debt is backed by the state.
In the mentioned span, the country supplied 13.06 billion kWh of electricity to its citizens, marking an 18.4% rise from 2022. For perspective, in the same eight months of 2022, Uzbekistan produced 49.3 billion kWh and distributed 11.04 billion kWh to its population.
The Distribution Network Digital Transformation and Resiliency Project will see 26 distribution substations across Uzbekistan transformed into digital substations equipped with advanced technologies. Alongside the loan, ADB will provide a US$250,000 technical assistance grant to bolster gender inclusion in the energy sector and enhance the financial management of Regional Electric Power Networks (REPN), the state-owned distribution firm.
They discussed the potential for deepening ties in the alternative energy sector, with particular interest in establishing solar panel projects in Uzbekistan. Following a Memorandum of Cooperation signed in October 2022, the Ministry of Economy, Trade, and Industry of Japan allocated HANWA US$200,000 for alternative energy initiatives in Uzbekistan. The meeting concluded with an agreement to kickstart a collaborative solar panel project in Uzbekistan.
Uzbekistan's gas exports to China decreased by 40% compared to the same timeframe the previous year.
For August, the monthly gas shipments from Uzbekistan to China were $75.27 million, marking an 18% reduction from July, despite a consecutive two-month rise in exports earlier. Between January and August, Uzbekistan's natural gas exports to China totaled $370.57 million, reflecting a 40% drop from 2022. Turkmenistan remains the leading supplier of gas to China with an eight-month export value of $6.63 billion, a 5% year-on-year increase.
Uzbekistan has readied its infrastructure to import Russian gas transiting via Kazakhstan.
Russian gas exports to Uzbekistan through Kazakhstan are slated to commence in the fourth quarter of 2023, with a two-year contract estimating daily supplies at 9 million cubic meters, or approximately 2.8 billion cubic meters per year.
The heads of the region engaged with business figures from China, concluding in 29 agreements in the investment and trading arenas worth $1.37 billion. The bulk of this amount, around $1 billion, is for four firms: China Power International, CAMC Engineering, Shaanxi Xiangsheng Industrial Group, and China Huadian Engineering, to initiate the solar facilities.
The State Asset Management Agency announced the start of selecting a professional consultant for the privatization process. Proposals can be submitted by individual companies or consortia, and details about the evaluation criteria are available on the AУГА website.
USEFUL LINKS AND NOTABLE PUBLICATIONS
How the Russia-Ukraine War Is Reshaping EU-Uzbekistan Relations (The Diplomat)
Why Central Asians are flocking to Britain (The Economist)
Gulnara Karimova: Swiss say Uzbekistan ex-leader's daughter ran huge crime network (BBC)
‘Princess of Uzbekistan’ accused of running international crime org, laundering millions of dollars (NY Post)
Beijing Postpones China-Kyrgyzstan-Uzbekistan Railway Line (Silk Road Briefing)
How the EU Can Contribute to the Green Transition in Central Asia (The Diplomat)
Uzbekistan May Be America’s Key to Combating the Islamic State (The Diplomat)
C5+1 Leaders’ Joint Statement (The White House)
Uzbekistan Walks Careful Line in a Fractured World (Bloomberg)
Türkiye's vice president proposes joint global energy marketplace with Uzbekistan (AA)