According to the available data, stable economic growth can be observed in Uzbekistan in the last decade, which ranged from 5 to 6%. In 2020, despite the covid-19 pandemic, Uzbekistan’s GDP grew by 1.6%, which means that Uzbekistan, as the only country in the Central Asia region and one of the few countries in the world, recorded positive economic growth in this crisis year. The inflation rate shows a high value of 12.9%. According to estimates, over 33 million people live in the country and the GDP per capita exceeds USD 1,600. Uzbekistan’s current account is slightly in deficit.
Uzbekistan’s economic outlook remains positive as market reforms increase incentives in the economy for more efficient use of resources and private sector growth. The easing of restrictive measures, sustainable agricultural production and the partial return of remittances by workers abroad will lead to an increase in economic activity in 2021.
However, the pace of recovery will depend on the duration of the pandemic, access to vaccines, and the rise in international trade and investment flows. Assuming further easing of restrictions, easing of state borders and broader global economic recovery, GDP growth of 5.2% is expected in 2021. Inflation will moderate in the medium term, but will continue to be boosted by further price reforms.
In January 2021, the Government of Uzbekistan approved the so-called post-crisis economic recovery program for the period 2021-2022, the aim of which is to eliminate the negative impact of the covid-19 pandemic on the socio-economic development of Uzbekistan, restore investments and foreign economic activity of business entities, and create conditions for further deepening economic reforms.
The program defines two phases: stabilizing and reviving growth until the end of 2021 and continuing reforms to ensure an economic growth rate of 5.0-5.5% from 2021 onwards. As a priority, the government of Uzbekistan has defined economic measures aimed at strengthening the self-sufficiency of the local economy in the form of technology transfer from foreign suppliers and localization of production locally, and at increasing the added value of key export items – mineral raw materials and cotton.
Post-COVID-19 opportunities for foreign exporters
Transport industry and infrastructure
According to allcountrylist, the development of transport infrastructure and public transport is one of the defined priorities of the Uzbek government. The program for the development and modernization of engineering and transport infrastructure envisages the reconstruction, modernization and construction of more than 1,200 km of roads and highways. In addition to normal construction works, the program includes the introduction of modern telematics systems, especially on highway sections and 1st class roads, as well as in the ongoing modernization of urban transport infrastructure in the capital city of Tashkent and in other larger cities. At the national level, a plan to modernize the infrastructure and manage rail transport is being implemented, including the acquisition of know-how for making international rail transport and air traffic more efficient.
Mining, mining and oil industry
More than 40% of Uzbek exports are mineral resources. The current average level of export processing of these commodities is only 30%. Uzbekistan is currently looking for technologies for local processing of locally mined minerals in order to increase their added value for export, and at the same time it is looking for technologies to intensify geological exploration of the country’s territory in order to find new mining sites. For this purpose, the Uzbek authorities have already developed the Concept for the Development of the Geological and Mining Industry of Uzbekistan for 2020-2024. The sector of the mining, extraction and oil industry is an opportunity for Czech solutions, mainly in the field of geological exploration.
The construction of new production capacities will put pressure on the energy infrastructure, which is still very insufficient in the country. The 2020-2024 Electricity Generation Modernization and Diversification Program plans to implement 30 projects with a total value of more than USD 9 billion. Specifically, it will involve the construction of new energy blocks with a steam-gas cycle with a total output of 14 GW and the reconstruction and modernization of small and medium-sized hydroelectric power plants with the aim of increasing production capacity by 3 GW. An integral part will be the modernization of transmission systems and distribution networks, including transformer stations, control centers, etc.
In 2020, the construction of six new power plants began, with a total cost of 2 billion USD, with a total generation capacity of GW. A separate chapter in the energy sector is the construction of a nuclear power plant, which will be built in Uzbekistan according to the Russian model. Construction work will be carried out by the Uzbek side together with the Russian state company Rosatom.
The nuclear power plant will consist of two blocks with a total capacity of GW, the construction will cost 11 billion USD. Although the start-up of the first unit is not planned until 2028, the construction of the power plant already represents a significant opportunity for the involvement of Czech companies from the nuclear energy segment in the preparation of the project as subcontractors, or consultants.
So far, the Uzbek army and security forces of the state are mainly equipped with outdated Soviet equipment. A gradual modernization of all levels of the components is underway in connection with the strengthening of the country’s external and internal security. A unique opportunity is presented by the National Center for Defense Industry, which the Ministry of Defense of Uzbekistan is building in the city of Chirchik (approx. 80 km north of the capital city of Tashkent) and in which it plans to carry out all modernization and reconstruction of equipment and technology used by the Uzbek armed forces locally.
For the center under construction, the Uzbek side is asking for the technologies needed to carry out general repairs and modernization of land and air and air defense equipment. As mentioned, the equipment of the Uzbek armed forces comes from the times of the USSR, it is identical to the equipment of the troops of the former Warsaw Pact, there is therefore considerable complementarity with the equipment of the former ČSLA, with which Czech companies have extensive experience.
Textile and footwear industry
Uzbekistan is the world’s leading exporter of cotton. Under the previous regime, the cotton grown was almost exclusively exported in the raw, unprocessed state. One of the main economic goals of the current executive is to achieve a higher added value for exported cotton of local origin. The objective to achieve this status is investment incentives for foreign investors in the textile industry sector. Investments are requested in the segments of processing raw cotton, production of threads, yarns, fabrics, as well as sewing ready-made clothes and bedding, textile products, clothing accessories, etc. The sector represents promising opportunities for Czech textile and engineering companies.
Healthcare and pharmaceutical industry
Uzbekistan’s economic development strategy envisages expanding the production base of the pharmaceutical industry. The condition for this is the purchase of appropriate technologies from abroad. Expanding the range of pharmaceutical production will go hand in hand with the purchase of patents and licenses from foreign companies. At the end of 2020, Uzbekistan already started the construction of an innovative scientific and manufacturing pharmaceutical cluster in the Tashkent region. Other clusters are in the preparation stage.
The goal of the clusters is the realization of the production of innovative medicines, medical preparations and high-tech medical devices. To finance the construction of the industrial zone, the Uzbek government wants to attract foreign investors from countries with a developed pharmaceutical sector, including the Czech Republic. Clusters are an opportunity for Czech pharmaceutical companies to gain a share of the Uzbek pharmaceutical market with a view to the possibility of subsequent export of production to neighboring Central Asian countries with a capacity of 100 million inhabitants.