Home Agenda How Uzbekistan’s Openness Program Boosted Exports

How Uzbekistan’s Openness Program Boosted Exports


Central Asia’s most populous country has made significant progress in recent years in its transition to a private sector-led economic growth model, and is already reaping the rewards.

According to Fitch Ratings, the Uzbek economy has transformed enormously since the introduction of a reform program in 2017, which aims to minimize state involvement in the economy as well as liberalize key sectors.

Large private companies based in Uzbekistan, such as Artel Electronics and BCT Denim – two of the most recognizable local brands – have both reported increased exports since the reforms were introduced, along with other benefits.

Bektemir Murodov, chief financial officer of Artel, Central Asia’s largest home appliance and electronics maker, says recent reforms that promote exports have supported Uzbek businesses outside the domestic market.

“For example, a reduction in corporate tax on export profits has allowed Uzbek companies to be rewarded for looking further afield, and the government is also subsidizing transport costs for exports, from of 2020, which also supports businesses like ours,” Murodov said. Emerging Europe.

Muzaffar Rahmatov, the founder of the successful Uzbek textile company BCT Denim, notes a positive development within his own company, as liberalization has also had a positive effect on the Central Asian country’s economic relations with the Union. European.

Since implementing reforms, which have included the complete eradication of child labor and other forms of forced labor in its lucrative cotton industry, Uzbekistan has been included in the Generalized Scheme of Preferences Plus (GSP+) of the EU.

The program grants developing countries significant reductions in their import duties in return for implementing 27 different international conventions on human rights, labor rights, the environment and good governance.

“Uzbekistan’s accession to GSP+ status has enabled duty-free trade with the EU for over 6,000 products, including textiles,” he says. “It made us more competitive in the eyes of European brands.”

What makes Uzbek products desirable

According to Murodov, one of the main reasons for the growing appeal of Uzbek products is an adaptable workforce and strong localization, which have made them affordable internationally.

“We have been able to aggressively increase our exports, especially to neighboring countries of Kazakhstan, Azerbaijan and Tajikistan, and we look forward to building on this momentum in the years to come,” adds Murodov. .

Rustam Mukhametshin, managing director of the Moscow branch of British accounting organization Big Four Deloitte, says “Uzbek products should have been in this position a long time ago.”

“The market has very low labor costs and good manufacturing standards, and the reforms have finally unlocked those trade barriers. It should also be noted that the strong localization within Uzbek manufacturing has been very advantageous during the supply chain crisis,” Mukhametshin said. Emerging Europe.

He further explains that the key factor for this was the liberalization of the currency, the so’m, which also took place in 2017.

“This has, for the first time, allowed so’m to be freely converted by businesses and citizens. This liberalization of the foreign exchange market has had a positive impact on the ability of Uzbek companies to trade abroad, to work with international partners, and the devaluation of the so’m makes exports much, much more competitive,” Mukhametshin points out. .

Boosting exports – a key priority

The Uzbek Ministry of Trade and Investment tells Emerging Europe that industrial and consumer goods make up the vast majority of the country’s exports.

These goods represent 85.1% of exports, while food products and live animals represent 8% and chemicals and similar products 6.5%.

Artel Electronics, the country’s best-known brand internationally, has seen a surge in overseas sales since government reforms.

The value of exports to Kazakhstan, the largest importer of Artel products, increased from US$12.8 million in 2017 to US$37.5 million in 2021.

During the same period, exports to the second and third largest consumers of Artel products, Tajikistan and Azerbaijan, increased in value by US$5.6 million to US$17.6 million, and by 6. 8 million to 14.6 million US dollars respectively.

“Naturally, given Uzbekistan’s geographical constraints (it is doubly landlocked), neighboring countries will be prime targets for export expansion, as can be seen in the case of Artel – whose current position in Kazakhstan has been achieved by strong growth over the past two years,” says Mukhametshin.

Overall, overseas Artel home appliance sales increased in value from $34.8 million in 2017 to around $95 million in 2021.

The future of Uzbek exports

To continue this upward trend, it is vital that the Uzbek government also continues its program of liberalization and opening up.

“In the speech of President Shavkat Mirziyoyev in parliament, it was noted that in order to increase the income of the population, create additional jobs, increase production, it is necessary to develop new markets,” the ministry adds.

The ministry says further opening of the Uzbek market will force local companies to improve product quality, reduce costs and introduce new technologies, allowing Uzbekistan to tap into the global production system, the market world and the processes of economic integration.

Thus, facilitating the country’s ambition to expand its global economic integration through continued negotiations with the World Trade Organization (WTO) will continue, while the conclusion of a new partnership and cooperation agreement with the European Union is another priority.

The Uzbek private sector, or at least its biggest player, Artel, also expects a lot from future reforms.

“The government is very attentive to private industry, and we often receive consultations on what can be done to support our business ventures overseas. We also know that the government hopes to speed up the process of digitizing customs, which will help us streamline our export operations,” says Murodov.

“Uzbekistan’s integration into the international banking system will also be extremely beneficial for companies like ours, allowing us to be more agile and profitable abroad. We fully support progress in this direction,” he added.

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