In May 2024, the fruit and vegetable industry of Uzbekistan faced an unexpected challenge when the government introduced minimum export prices for fresh produce. This decision, aimed at regulating the market and preventing the concealment of export proceeds, has led to negative consequences for exporters, farmers, and the country’s economy. The policy, which replaced previously recommended prices with minimum acceptable ones, has created a rigid and inflexible mechanism that has not accommodated the dynamic nature of the fresh produce market, Eastfruit reported.
Introduction of Minimum Export Prices
At the beginning of May 2024, the Uzbek government introduced recommended prices for the export of fruits and vegetables. Shortly thereafter, on May 11, 2024, these recommended prices were replaced by mandatory minimum export prices. Exporters were initially allowed to supply products at prices no lower than 20% below the recommended prices. However, the new policy required prices to be set and reviewed once a week, a process that proved to be inadequate given the rapid fluctuations in market prices for fresh produce.
Immediate Negative Consequences
Nodirbek Musaev, head of Musaevs Exim, highlighted the practical challenges posed by the minimum export price policy. According to Musaev, the process of setting and applying these prices is slow and inflexible, causing significant delays in the export process. He explained,
“The minimum export prices for fruits and vegetables are reviewed and set once a week. After prices are set, everyone must wait another two days for their official application. But during the export season of fresh vegetables and fruits, the market is much more dynamic, i.e. prices can change every day.”
Musaev provided a specific example involving the export of apricots to Belarus. In early June 2024, a shipment of 20 tons of apricots was delayed for two days at the foreign trade post while waiting for new minimum prices to be established. During this time, the purchasing price of apricots had dropped significantly, yet the minimum export price remained unchanged.
Musaev pointed out, “Purchasing prices for apricots, which started at the end of May at $1, dropped almost by half within a week, and the minimum acceptable price remained unchanged at $1.2.”
Impact on Quality and Competitiveness
Delays caused by the rigid pricing mechanism can be disastrous for perishable goods like apricots, leading to loss of quality and potential complete loss of shipments. This also incurs additional costs due to transport downtime. Musaev noted that similar issues have arisen with the export of other products, such as onions and early white cabbage, both significant exports for Uzbekistan.
“This year, purchase prices for early cabbage and onions in Uzbekistan have dropped to record lows. Farmers from the southern and central regions suffered huge losses. Market participants believe that one of the key reasons for this situation is the entry into force of the export restrictions due to the minimum export price mechanism,” Musaev explained.
While Uzbek exporters face delays and higher costs, competitors from neighboring countries like Kazakhstan are taking advantage of the situation. Kazakh exporters are quickly filling the market gap in Russia, the primary market for Uzbek produce, thereby increasing their market share at the expense of Uzbek exporters.
"Windows of Opportunity" and Market Dynamics
Uzbekistan’s geographical location and climatic conditions provide “windows of opportunity” for exporting fresh produce. These periods allow Uzbek suppliers to enter markets earlier than competitors. However, the inflexible minimum price policy has hindered the ability of Uzbek exporters to capitalize on these opportunities. EastFruit analysts emphasized that these measures not only fail to support the increase in export volumes but also act as a negative factor.
The Paradox of Transparency and the Shadow Economy
The government's rationale for establishing minimum export prices was to combat the concealment of export revenues and reduce the shadow economy. The resolution stated that the aim was to prevent the “unreasonable understatement of export prices” and ensure “control of the timely receipt of foreign currency.” However, this policy has inadvertently pushed small exporters towards “crooked” export schemes to bypass the minimum prices.
Exporters might resort to signing parallel contracts to return amounts exceeding the actual delivery price or creating complex financial chains to return excess amounts. Such practices increase costs for exporters and reduce the tax base, ultimately hurting the national budget.
The minimum export price policy, intended to enhance transparency and control over export revenues, has had the opposite effect. It has led to revenue losses, decreased competitiveness, and potential increases in the shadow economy.
As Musaev concluded, “What is more important – to achieve export transparency by regulating export prices, which leads to a decrease in the competitiveness of Uzbek products in foreign markets, or to export more without setting minimum prices, which in turn helps to increase the production of fruits and vegetables?”
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