Uzbekistan Economy Thrives Under New Leadership

Uzbekistan Economy Thrives Under New Leadership

September 25, 2018

According to global rating agencies, Uzbekistan’s economy is set to bloom in Central Asia which may be partly attributed to President Shavkat Mirziyoev’s nation building policies since his appointment in 2016.

By Viraj Desai

The ushering of changes by President Mirziyoev is providing a much needed boost to the country, which for many years stagnated under the tenure of former President Islam Karimov, whom was President since independence in 1991 until 2016. Uzbekistan has also improved ties with its neighbours, increased broader human rights for citizens and loosened state control over media agencies.

The Government has embraced a series of measures including currency convertibility and privatizing various industries, which may help the country become more competitive and dynamic, which may improve its standing with the International Monetary Fund.

Transformation in foreign policy and building good relations with neighbours is opening up more doors for trade. The surge in trade between Tashkent and its neighbours increased more than 10 percent since 2016.

There are talks of potential flight links between Tashkent and Tajikistan on the south and a rail network to Kazakhstan in the north will be transformative in the coming decade. The country’s road connectivity is also improving leading to better connections with Kyrgyzstan and China. Additionally, Turkmenistan can now export electricity to Tajikistan through Uzbekistan’s territory.

These shifts over the past two years has been seen on the country join forces global financial institutions to obtain requisite support. To-date, seven special economic zones have been created, offering tax breaks for foreign investors. Multilateral lender, The European Bank for Reconstruction and Development, restarted operations in Tashkent in November 2017, almost after a decade of absence. The country is also likely to resume talks for joining the World Trade Organisation too.

Ratings agency Moody’s recently affirmed that it expects the country to maintain a high growth rate, faster than other Commonwealth of Independent States. Moody’s suggested a healthy banking system would give confidence to foreign investors to invest in domestic markets.

With a population of 32 million, Uzbekistan enjoys a the strategic location bordering five Central Asian countries, which is home to over 100 million people. Historically it has fallen short of growth levels seen in other parts of Asia and the Middle East. These latest changes however, means Uzbekistan may become an influential player in the US, Russia and European markets over the next decade.

Uzbekistan is home to a population with over 50 percent aged below 30 and almost half a million entering the workforce every year. This demography will be a major mover in driving fast economic growth.

The country’s immediate neighbour, Kazakhstan, has a population of just 18 million, yet attracts USD 152 billion of FDI within 25 years vis-à-vis less than USD10 billion by Uzbekistan.

Uzbekistan’s per capita income was USD 6,000 in 2016 as compared to USD 25,000 of Kazakhstan, demonstrating the former’s need to move rapidly; and investors are taking notice.

Investments and funding are pouring in from many quarters. Recently, the Singapore medical company RV Healthcare PTE LTD had confirmed pharmaceutical production in the Khorezm region of Uzbekistan, a move that will establish the country as a destination for the pharma sector. RV, one of the largest pharmaceutical manufacturers in Asia, has manufacturing plants spread across Central Asia including one in Kazakhstan.

Uzbekistan also has large reserves of oil and gas and the interest shown by Credit Suisse to finance projects in the sector demonstrates the growing interest of international financial institutions. This can lead to development of resources and faster growth due to exports.

Uzbekneftegaz, a company engaged in diverse aspects of exploration, production and sale of oil and gas, is the largest state company in Uzbekistan and 11th largest producer of natural gas in the world.

The country has already involved Asian Development Bank (ADB) for its transformation. ADB has prepared a new five-year Partnership Strategy with the country, with the aim to create a robust foundation for comprehensive and sustainable economic growth, promoting regional cooperation and connectivity. This strategy will involve mobilization of over USD 1 billion a year over three years for improving water supply, building transport infrastructure, job creation in rural areas and expanding access to universal health care.

Earlier, Uzbekistan lured consulting firms McKinsey and BCG for the development of the chemical and oil and gas industries, J.P. Morgan for the first Eurobonds in its history and the World Bank Group for the reform of the aviation market.

Mobility is an important aspect for movement of people and goods. Uzbekistan sold 110,690 units in 7 months, a growth of 21 percent compared to the same period in 2017.

The Central Asian country’s change is not just economic in nature. According to the UN Development Program report which gauges education, life expectancy, gender equality, woman empowerment among other parameters, Uzbekistan has moved up three places to 105, leaving its other neighbours behind, except for Kazhakstan.


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