Landlocked Uzbekistan is surrounded by crisis. Afghanistan is just to the south of it and Ukraine is to the west, just to name a few. They didn’t make these themselves, which is good news. Russia, its largest trading partner, has been shattered by sanctions due to the war in Ukraine. China, its No. 1 source of imports and No. 3 export destination, is facing a resurgence of Covid-19 in its busiest corporate city, Shanghai. During this period, Uzbekistan decided to host its first international investor conference.
The Tashkent International Investor Forum was held from March 24th to 26th. The session was moderated by Jonathan Charles, Director of Communications at the European Bank for Reconstruction and Development, a former BBC World News anchor.
Over the past few years, starting in 2016, President Shavkat Mirziyoyev launched a series of economic reforms and declared the country open for business. Leaders from the European Bank for Reconstruction and Development, the Asian Development Bank and officials from the Asian Infrastructure Investment Bank attended the investment forum.
The main topics of the forum are to restore and stimulate the development of economic activity in post-Covid Uzbekistan; reduce poverty; adjust monetary policy; support the privatization of private and state-owned enterprises, and develop banking and financial markets.
“I am a big fan of the new Uzbekistan, even though Westerners still know nothing about it,” Jim Rogers, a prominent investor, told me in August. “It used to operate like a dictatorship, but the new government seems to know what they are doing. They deserve credit for what they have accomplished over the past few years.”
Some of these achievements include the elimination of forced labor on cotton plantations in Uzbekistan, the privatization of state assets (still in progress), and the reform of the judicial system. They issued Eurobonds for the first time in 2019. The interest rate is 17%. Their bonds are all double-B speculative grade credit. As of February, 12-month rolling consumer price inflation was around 9.7%.
On April 13, the International Monetary Fund released their country visit report. Uzbekistan has weathered the epidemic “relatively well”, they said.
Strong fundamentals, ample policy buffers (room for rate cuts) and high gold prices allow authorities to take decisive action to mitigate the social and economic impact of the outbreak, while maintaining economic stability at a time when the world appears to be crumbling around them.
It can be said that Afghanistan is next door.
Uzbekistan’s economic recovery that began in late 2020 gained momentum in 2021, with growth accelerating to 7.4%.
But just when Uzbekistan appeared to have passed the severe stages of the pandemic and was ready to resume business, the IMF said, the war in Ukraine and the sanctions imposed on Russia have created new uncertainty and clouded the outlook for Uzbekistan. come under pressure.
Russia is the main source for Uzbeks living there to send and send money home. It is also a source of financing, especially in the energy and mining sectors. Spillover effects from the crises in Russia and Kazakhstan, combined with disruptions to Chinese supply chains, will mean new headwinds for Uzbekistan as it wraps up the dramatic end and prepares to move on.
“Volatility and uncertainty are expected to remain elevated for some time,” the IMF report said.
Growth in Uzbekistan is expected to slow to 4 percent this year, down from an earlier forecast of 6 percent, due to new headwinds. Inflation is set to rise again and is expected to hit 12% due to sanctions on Russian commodity producers and China’s zero-coronavirus policy of closing the world’s largest port.
Everyone wants a breath of fresh air. This is especially true for countries that are already ringing. Uzbekistan has been on a standstill since the collapse of the Soviet Union. It doesn’t know what to do with itself. Mirziyoyev, who came to power in 2016, has been hailed by the West as someone who could change that.
In a March 9 meeting with Uzbekistan’s Foreign Minister Abdul Aziz Kamilov, Secretary of State Anthony Blinken said: “We appreciate the strategic partnership between Uzbekistan and the United States and what has been done to this end. All work.”
This partnership is now about two decades old. It remains primarily a political arrangement due to its border with war-torn Afghanistan, close ties to Russia and geostrategic location. However, Washington was also interested in making friends and doing business in the former Soviet space. This is what the private sector has to believe.
At last month’s forum, Mirziyoyev basically took the time to describe an ancient world trying to fit into the new.
“We have been known since ancient times for caravan routes connecting different parts of the world,” he said. “Mutually enriching civilizations and cultures have been formed in China, India, Iran, Byzantium and Egypt. With a history of more than 3,000 years of statehood, our country has long been one of the world’s highly developed trade, economic, scientific, cultural and artistic centers .”
For history buffs in the market, Mirziyoyev mentions Abu Ali Ibn Sino, or Avicenna as it is known in Europe. He was one of the early founders of modern medicine and imposed quarantine measures.
Muhammad Khwarizmi was an early mathematician to whom the term algorithm is associated.
The local ruler, Timur’s grandson, the founder of the observatory, Mirzo Urubek, established an observatory in Samarkand in the 15th century.
That’s how it was then.
Uzbekistan is now a frontier market for alternative investors and risk-takers like Rogers.
Business has picked up. Annual foreign direct investment has tripled since Mirziyoyev took office in 2016. He is the country’s second president. Foreign direct investment reached $25 billion last year, with some 59,000 investment projects implemented over the past six years, opening up more than 2.5 million new jobs, according to government figures.
The government of Uzbekistan said that within the next five years, it aims to achieve a GDP of $100 billion, double exports to more than $30 billion, and private sector production of 80 percent of GDP . By 2030 or earlier, Uzbekistan hopes to join the WTO and become a country with an upper-middle-income GDP per capita. Only 8 years from now. If they do, they will have to be the Singapore of Central Asia.
As with all new markets, global companies and dealmakers see the country as a promising opportunity zone in Eurasia.
The country recently joined Europe’s Generalized System of Preferences (GSP+) for certain products that can be transported, which will reduce tariff costs.
Between now and 2026, more than 25 industries are expected to privatize state-owned assets.
For locals, the total number of taxes was reduced from 13 to 9. The property tax rate was more than tripled from 5% to 1.5%. Personal income tax is reduced from as high as 40% to 20%. Capital gains tax is about 10%, according to PwC.
“Our work over the past five years has yielded positive results,” Mirziyoyev told forum participants from about 50 different countries. The economy under the new government will grow at an average annual rate of about 5%, and the industry will grow at an average rate of about 8%. Their central bank’s foreign exchange reserves increased from $27 billion to $35 billion, which is still small, but equates to around $1,000 per person. In Brazil, central bank reserves are equivalent to about $1,600 per person, and total reserves stood at $357.8 billion as of February.
In 2020, during the coronavirus pandemic, Uzbekistan’s economy fared much better than Brazil, which has a negative GDP. Last year, Uzbekistan’s GDP grew by more than 7 percent.
“This motivates us to explore new areas,” Mirziyoyev said at the meeting. He wants Uzbekistan to be a transport corridor for exporting goods eastward, by rail to Kyrgyzstan and China, southward through Afghanistan and westward through the intermodal corridor of the South Caucasus.
Uzbekistan reportedly signed deals and investment agreements worth $7.8 billion at the forum, including preliminary agreements or memoranda of understanding, with an estimated value of $3.5 billion.
Of course, China also participated in the Ukrainian-Chinese sideline forum entitled “Industrial Cooperation”. new opportunities. ”
However, Russia remains a problem.
Neighboring Kazakhstan is in crisis. Their first deputy foreign minister, Akan Rakhmetulin, told European media in mid-April, “The U.S. has imposed unprecedented sanctions on Russia. We are deeply integrated with Russia and have the longest land border, and we cannot help but feel these sanctions. Influence.”
Some global investors remain bullish on Uzbekistan.
“The economy is finally opening up, and I believe international investors will take advantage of this opportunity to tap into its growth potential,” Rogers said. “I’ll keep an eye on it.”
Uzbekistan intends to make it the annual investor event in Central Asia.