In March, Zafar Khoshimov, the founder of the Korzinka.uz supermarket chain, spoke about the impact of the Russian-Ukrainian war on the economy of Uzbekistan. Four months later, the businessman shared his thoughts again.
According to Zafar Khoshimov, there are still great uncertainties about the future, as in the early days of the war.
Over the past months, the Russian military machine has firmly established itself in the south and east of Ukraine. The whole progressive world is actively helping the Ukrainians with humanitarian aid, money and weapons, and now it is becoming increasingly clear that the war will most likely continue for a long time," the businessman said.
“As long as the war continues, sanctions, bans and various restrictions will also remain in place. All the economic consequences will affect us to a certain degree, that won’t go away soon,” he says.
The tycoon also pointed out that international organizations are forecasting global price increases, inflation, and energy and food shortages.
He said that some of these predictions have already begun to affect the consumer markets of a number of countries around the world, and the consequences will certainly intensify in the near future.
“Unfortunately, this situation will have serious consequences for our region. The total income of the population in our country is not very high. In addition, Russia is our largest trade and economic partner, and most of the transport and logistics corridors coming to us pass through Russia, and this country, as you can see, is becoming more and more isolated, - Khoshimov continues.
Zafar Hoshimov also listed the problems that have just begun to have a negative impact on our daily life:
- leaving the leading international companies Russia;
- downsizing and stopping production of firms;
- disruption of supply chains;
- lack of raw materials and components;
- the impact of sanctions imposed on the banking sector;
- currency restrictions and obstacles in money transfer systems.
In addition, the businessman said that Russian ships and trucks are not allowed to enter foreign ports and roads, and in response, Russia restricts the movement of European transport on its territory.
As a result, a number of large logistics companies refuse to transport goods through the territory and ports of Russia. All these are only the most visible parts of the problems that can have a negative impact on our consumer market, - says Zafar Khoshimov.
In his opinion, our consumer market is more connected to Russian manufacturers and suppliers than to other sectors of our economy.
The entrepreneur cited several reasons:
- relations in production sectors preserved from the Soviet era;
- similarities in which products consumers prefer;
- standards, convenient logistics, penetration of advertising through Russian mass media;
- well-known brands and various other factors.
The main reason why our domestic market is dependent on Russian products is the favorable duty-free trade regime with Russia and CIS. At the same time, import tariffs are much higher compared to the products of other countries of the world, Khoshimov says.
Imported goods from CIS are exempt from duties, while other countries’ products are subject to much higher rates. This system was canceled by the decree of the president on May 1 of this year. By the same decision, duties on 22 groups of goods were also removed until the end of 2022.
For example, before the war, a lot of chocolate was brought into the country from Russia and Ukraine, and these products had tax benefits, but when importing that chocolate from Europe, Turkey or other countries, the duty rate is still 30 percent.
In the current situation where there are disruptions in production and logistical difficulties in Russia, Ukraine and Belarus, the issue of supplying the consumer market with enough goods in Uzbekistan is becoming more and more difficult.
In addition, these countries impose a strong ban on the export of certain goods from their territory, for example, Kazakhstan applies restrictions on the export of products to protect its domestic consumer market.
“4 months ago, I wrote that such tariff asymmetry in favor of "near" foreign countries is a clear threat to the country's food security from the point of view of the new reality. "Unfortunately, due to the ongoing hostilities and sanctions, the potential dangers at that time are gradually becoming a reality," Zafar emphasizes.
The businessman said that the state has taken very effective emergency measures to maintain the domestic market and maintain the prices of the most important food products, such as sugar, meat, wheat, flour, butter, potatoes and a number of other products.
But these measures will not be enough to prevent possible supply interruptions and sharp price increases if the sources of the full range of food and basic industrial goods are not diversified more actively, "Korzinka.uz" owner says.
According to Zafar Hashimov, there is a first and unique step to prevent food shortages and put an end to price increases:
Complete abolition of import duties and excise taxes on all types of food products, the most necessary industrial consumer goods, and all raw materials for their production and processing, - he says.
The fact is that with the withdrawal of several countries with the largest volumes of food production from the world market, the price of food products has already started to rise sharply all over the world.
But this is not the only problem. The entrepreneur said that it is becoming increasingly clear that in the next few years, the global food shortage will turn from a temporary complication into a permanent reality, and world prices will only increase.
Due to the lack of diesel fuel and the ongoing hostilities, Ukrainian farmers could not carry out the planting campaign, and in Russia, due to the sanctions, the planting process was stopped due to the lack of seeds, certain types of fertilizers, and equipment.
That's why all the spot volumes of food products sold on the stock exchange are being bought up on world markets now, and futures prices are growing steadily and rapidly.
In our case, all this is aggravated by logistical difficulties caused by our geographical location, Hoshimov noted.
From this point of view, the more we can bring into the country any, I repeat, any food products, the better. I would like to say specifically to the supporters of the ideology of total protectionism. "If all tariff restrictions are not removed now, we will have nothing left to protect," says Zafar Hoshimov.
Many of our production facilities are already experiencing difficulties with raw materials and may soon be forced to reduce production, the entrepreneur writes.
According to him, it is clear that new imports, geographically diversified, cannot displace local production in terms of volume.
"I am not sure that even after all duties and excises are canceled, the volume of deliveries from Russia, Kazakhstan, Ukraine and other CIS countries will be covered, even partially," said the "Korzinka.uz" supermarket chain. the founder of i.
Khoshimov wrote that the possibility of survival for local producers will be preserved and even significantly increased, but they should have time to increase the volume of production themselves.
In addition, it is clear that the prices of imported products will be objectively significantly higher than they have been so far, at least due to logistical difficulties, increasing fuel and other costs.
Moreover, if duties and excises are maintained, the share of illegal imports and the black market in the consumer sector will increase dramatically, and it will become difficult, if not impossible, to protect domestic producers from the black market.
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