"Foreign trade should be fair rather than free."
Lyn Nofziger, former White House political director
Uzbekistan, a country at the crossroads of Central Asia, has immense potential to be a major player in global trade. However, its trade relations have long been stifled by a combination of outdated standards, logistical challenges, and stringent import policies. Key voices in the trade and business sectors have recently highlighted these issues, sparking discussions on the necessary reforms to boost Uzbekistan's export potential.
The Challenge of Technical Regulations
One of the most pressing issues holding back Uzbekistan's exports is its outdated technical regulations . As Azizbek Urunov, chief negotiator for Uzbekistan's World Trade Organization (WTO) accession, aptly stated ;
“I am more and more convinced that one of the areas that is holding back our export opportunities is the area of technical regulation. Almost no country recognizes our certificates, standards, and technical regulations. It’s high time to get rid of these GOSTs , which were even refused by the country that introduced them.”
The GOST standards, inherited from the Soviet era, no longer align with international norms. As a result, Uzbek goods face significant barriers when trying to enter global markets. The lack of recognition of these standards means that products from Uzbekistan often do not meet the requirements for export to other countries, leading to missed opportunities and economic losses . The need for Uzbekistan to adopt internationally recognized standards is crucial if it is to compete on the global stage.
On the bright side, President Shavkat Mirziyoyev of Uzbekistan and US Trade Representative Ambassador Katherine Tai recently reached an agreement set to reshape the export landscape. US federally authorized meat and poultry establishments are permitted to export their products to Uzbekistan as of June 1. This new export opportunity marks a milestone, opening the door for American producers to enter the Uzbek market while providing Uzbek consumers with a broader selection of high-quality products.
The Necessity of International Standards
The call for reform is also echoed by Peter McCann, a seasoned advisor in strategy and development, who emphasized the importance of international standards for Uzbekistan's progress.
“Yes. You are absolutely correct. Uzbekistan cannot make large progress without international standards for all consumables - foods, medicines, etc - and industrial goods. Voluntary programs are not adequate: one bad producer will ruin the reputation of all Uzbekistan producers,” McCann stated .
This comment underlines the risk posed by maintaining voluntary programs rather than mandatory compliance with global standards. The integrity of the entire Uzbek export market is at stake, as one substandard product could tarnish the reputation of all producers, making it harder to gain and retain the trust of international buyers.
Logistics: The Other Hurdle
In addition to technical regulations, logistics remain a hurdle in Uzbekistan's trade landscape. Elbek Rikhsiyev, Managing RE, voiced concerns over this issue.
“Another slowing area, I believe, is logistics. And what else? And, most importantly, is it possible to enter export markets with only one or two difficulties?!” Elbek Rikhsiyev voiced .
Efficient logistics are the backbone of any successful export strategy. In Uzbekistan, however, the challenges of moving goods efficiently—whether due to inadequate infrastructure, bureaucratic red tape, or border delays—hamper trade. The inability to streamline logistics can lead to delays, increased costs, and ultimately, lost competitiveness in international markets.
Reforming Import Policies: A Step Toward Openness
Uzbekistan’s trade policy has historically been characterized by protectionism, with high import duties, licensing requirements, and restrictions on access to hard currency. The government’s approach to import substitution and stringent regulations has led to a decline in both imports and exports, with imports being hit particularly hard. These policies, while aimed at protecting local industries, have also made imported goods prohibitively expensive, limiting consumer choice and stifling competition.
However, there are signs of change. The recent decision to abolish the requirement for the mandatory marking of imported goods in the Uzbek language started on January 1, 2024, marked a shift. This reform is part of broader efforts to align with international trade practices and reduce barriers to trade.
Yet, challenges remain. The continued existence of excise taxes, unofficial duties, and the requirement for certificates of origin and customs receipts complicate the import process. These barriers not only increase costs but also create opportunities for corruption and inefficiency.
Regional Context and Emerging Projects
In addition, Central Asia's trade landscape is rapidly transforming. In the past five years alone, trade turnover among Central Asian nations has surged by $11bn, reflecting a dynamic shift towards greater regional economic integration.
New trade agreements are emerging in Central Asia. Uzbekistan's collaboration with Kyrgyzstan on joint infrastructure projects and trade facilitation is a notable example. These initiatives aim to boost regional trade and integrate Central Asia’s markets more effectively.
In fact, Uzbekistan has been striving to transform itself into a key land-linked hub by capitalizing on its strategic location. Azizbek Urunov earlier touched upon several major infrastructure projects, such as the Trans-Afghan Railway and the China-Kyrgyzstan-Uzbekistan Railway, designed to bolster trade routes.
"Our president consistently introduces new initiatives to connect Uzbekistan with various regional and global economies," Urunov remarked. "Our goal is to shift from being landlocked to becoming a land-linked country in terms of foreign trade and broader economic relations." He further emphasized the role of economic corridors, noting, "We aim to establish these corridors to integrate our industries into the global value chain."
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The Path Forward: Embracing Global Standards and Improving Logistics
For Uzbekistan to unlock its full trade potential, comprehensive reforms are necessary. First and foremost, the country must overhaul its technical regulations and align them with international standards. This change will not only open doors to new markets but also enhance the credibility of Uzbek products globally.
In parallel, improving logistics infrastructure and processes is critical. Streamlined logistics will enable faster and more cost-effective movement of goods, enhancing Uzbekistan's competitiveness in the global market.
Finally, Uzbekistan must continue to reform its import policies, reducing barriers and creating a more open and competitive trade environment. These efforts, combined with a commitment to international standards, will pave the way for Uzbekistan to become a key player in global trade, benefiting its economy and its people.
WTO Accession: Uzbekistan’s Opportunity or Risk?
Uzbekistan’s long pursuit of WTO membership, which started in 1994 and has recently gained momentum, holds promise for addressing many of its trade challenges. The country aims to achieve full membership by 2026 and has been actively aligning its policies with WTO requirements, such as Decree 85 to curb monopolies and ensure fair commercial practices. WTO membership is expected to bolster Uzbekistan’s credibility, attract investment, and ensure that practices adhere to established laws.
While WTO accession could introduce risks like increased competition for domestic producers and potential short-term job losses, it also promises benefits such as enhanced consumer choice, lower prices, and growth in sectors like finance and construction. The government will need to manage these transitions with strategic investments and support measures to mitigate negative impacts on vulnerable industries.
Nowadays Uzbekistan is increasingly catching the eye of the world, whether it's in investment, trade, partnerships, or education. In the first five months of 2024, the country's foreign trade turnover reached $26.7bn, an increase of 3.0% from the previous year. Exports climbed to $10.85bn, up by 1.9%, while imports grew by 3.7% to $15.87bn. Despite these positive trends, Uzbekistan faced a trade deficit of $5.02bn, with imports outpacing exports .
In addition, as of July 2024, nearly 14,000 enterprises in Uzbekistan have foreign investment, with the trade sector leading the charge. Well-known brands like KFC, Costa Coffee, Domino’s , and Papa John’s have already set up shop in the country, and Pizza Hut and Hardee’s are on their way. As Uzbekistan is preparing to join the WTO, even more international names are likely to enter the market, offering more choices to consumers while posing new challenges for local businesses.
Uzbekistan's path to becoming a major global trade player involves addressing several key challenges through comprehensive reforms and strategic initiatives. Outdated technical regulations and logistical inefficiencies hinder its trade potential, requiring modernization and improvements. Reforming import policies to create a more open and competitive environment is also crucial. Additionally, Uzbekistan's regional integration efforts through infrastructure projects and its pursuit of WTO membership offer opportunities for growth. Effectively addressing these areas will enable Uzbekistan to enhance its global trade position, attract investment, and drive economic development.
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