 Industry and trade
focusing on self-sufficiency |
One of the priorities of the young independent Uzbekistan became the development of trade, as the world suddenly offered the whole new market potential and diversity. Therefore, President Islam Karimov begun actively to visit many countries abroad aiming at opening doors for a wide spectrum of potential for foreign investment. Investors were particularly invited to take part in the development of the existing industrial sectors such as oil and gas, textiles and food processing, and the establishment of new industries, an example of which is car manufacturing of UzDaewoo Auto operating since 1994.
"Our position in attracting foreign investors is followed by main principles. First, to produce high quality and compatible goods and materials, the second, to introduce new technologies and know-how, and the third -very importantly, to create new jobs for local manpower. These are main principles in implementing structural reform of economy", says Mrs. Shakhlo Abdullaeva, Deputy Minister of Foreign Economic Relations.
The industrial sector contributes approximately 10% to the country's GDP and employs 18% of the working population. The fastest growing industrial sectors in Uzbekistan are chemical and gas production, machinery building, heavy engineering for cotton machinery, paper and pulp, silk, textile and light industry, food products, and tobacco. All of these specialised sectors need modernisation and upgrading in order to increase production and become cost effective. An emphasis on processing raw materials inside the country is one of Uzbekistan's goals for the near future, resulting in becoming self-sufficient in high quality finished cotton and silk fabrics.
"Also, one of the tasks of attracting foreign capital is to make the projects as much self-sufficient as possible. The government gives the guaranties, incentives and other favourable business conditions to all those self-sufficient projects, which are oriented first of all, to supply local demand, and also nonetheless important, to export to foreign markets", Mrs. Abdullaeva continues.
Much thought and energy has been devoted to changing the agricultural situation in Uzbekistan, turning it into a state-of-the-art, highly efficient sector. Therefore, in order to introduce new techniques that may contribute to a more productive exploration of the sector the entire tractor and agricultural machinery fleet needs to be modernised. The company that is responsible for this task is Uzselkhozmash Holding. An other significant contributor to the development of the agricultural sector is a JVC called Case Corporation.
It is important to bear in mind that cotton, since Soviet times, has been the major agricultural product of Uzbekistan comprising a large percentage of the country's GDP. Most of Uzbekistan's cotton crop is still exported as raw material, a practice brought over from Soviet times when cotton was grown in Uzbekistan and sent to other countries within the Soviet Union for processing. Today, the cotton refining industry is presently very small and inadequate, as only about 15% of cotton fibre is produced domestically - the goal is to increase this figure substantially.
The silk industry is presently one of Uzbekistan's fastest growing light industries and is supervised by Uzbek Ipagi, a government organisation established in 1998. The government plans to increase its production, attract foreign investment and increase export figures. President Karimov, during his visit to South Korea in 2000, signed an inter-governmental loan agreement for the modernisation of the silk industry. Potential export growth could reach $50 million per year, as significant increase given the fact that silk export did not exist until 3 years ago. The Fergana Valley, the silk-growing area of Uzbekistan, produces 20 000 tonnes of silk cocoons, 2 000 tonnes of silk thread and 10 million metres of various silk materials and carpets annually, aiming at making Uzbekistan the 2nd largest cocoon producer in the world.
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Uzbekistan, a country with a legacy of skilled farmers, has long been known for its abundance of all year around fruit and vegetable production. Despite all this, Uzbekistan has a surprisingly underdeveloped food processing and packaging sector, making it an attractive emerging market for overseas exporters. The Uzbek government has declared the food processing industry to be a high priority. In August 1998, a decree was issued eliminating interest payments due to the previous year's loans and delays in the payment of federal taxes, and gave the sector a priority for bank loans as well as it instructed local authorities to speed up bureaucratic procedures. The decree also requested that the National Airline Company and the State Railway facilitate the expeditious shipment of fruits and vegetables.
Ardus, an Uzbek, American and Swiss JVC, established in 1995, is the largest supermarket network in the country, presently operating seven retail supermarkets in Tashkent. Although they initially sold mostly imported goods, the increase in production of high quality locally produced items has enabled them to sell more reasonably priced goods. The Ardus chain of supermarkets is a model example of how free enterprise and capitalism has successfully taken root in Uzbekistan. As opposed to the Soviet style "product" shops, Ardus offers customer-centred services, market research based products, high-quality goods and a wide range of choice. Mr. Jahangir M. Usmanov, General Director of Ardus explains, "As our country is young the market is also very young and therefore in my opinion certain kinds of rules in the market that we studied are not valid sometimes because our market has its own peculiarities."
Two examples of very successful million dollar investments operating in Uzbekistan soon after independence are Coca Cola and British American Tobacco. Coca Cola has been producing and bottling their beverages in Uzbekistan since 1992 covering basically the whole country. Mr. Nick Evangelopoulos, General Manager of Coca Cola Bottlers Uzbekistan Ltd., is pleased with the company's progress so far: "I look at my own employees how they have progressed in the past four years that I have been working with them and their progress and development gives me great hope for the future." British American Tobacco, the largest investment in Uzbekistan to date has been operating in Uzbekistan since 1994 growing tobacco and producing cigarettes for the local market as well as for export.This is a reasonably new industry for Uzbekistan - British American Tobacco's investments of $200 million have brought new technologies, modern equipment and training, launching the sector into the 21st century production standards.
The investment climate is favourable as the government fully supports anyone wanting to establish long term relationships in almost any sector. Potential is substantial and much is still to be covered and explored, but the advantages are the existing infrastructure, the skilled workforce and rich raw materials, as well as the financial incentives and guaranties set by the government. Moreover, not only the government, but also the population of over 24 million is ready to welcome companies who would bring more goods to satisfy local demands as the options are endless. |
