Uzbekistan-Ukraine: Aspects of Interaction

Today Uzbekistan is one of the fastest growing economies in the world, with a high economic potential that is consistantly increasing. A comprehensive analysis of the development of innovative development of 141 countries was made in the report “Global Innovation Index” 2012 by the International Business School “Inssad” (France) and this was prepared jointly with the World Intellectual Property Organization (WIPO). One of the main components of the analysis is the level of human capital development on which Uzbekistan took 35th place in the list. Regarding the development of the educational system, Uzbekistan took second place overall among 141 countries in the world.

The most important source of sustained high rates of growth of the economy in the past year has been the growing volume of investment in fixed assets, which amounted to 22.9 percent of GDP. Domestic and foreign investment in the equivalent of $11.7 billion was raised. It has increased by 14 percent over the previous year. Since independence, Uzbekistan has focused on the creation of a favorable investment climate and the dynamic growth of investment, as the most important conditions and sources of measurement to modernize and upgrade the country.

Only recently, in 2012, the government issued approximately 10 laws and regulations to create a favorable investment climate and improve the business environment. Approximartely 50 documents were issued in total for the country within this direction.

Thus, in accordance with the Presidential Decree “On additional measures to stimulate foreign direct investment” on April 2012, additional significant tax benefits were set for investors and exporters. The decree of the President of Uzbekistan to reduce drastically statistical, financial, tax reporting, licensed activities and procedures and further radical improvement of the business environment and providing of greater freedom for entrepreneurship were issued.

Unprecedented conditions are provided for the development of production in Uzbekistan in the free industrial economic zone “Navoi”, special industrial zone “Angren”, newly created special industrial zone “Namangan,” where significant investment incentives and preferences are provided.

Measures taken to improve the investment climate could significantly increase the volume of foreign direct investment. Annual volume growth of attracting foreign investment is more than 20%.

A central feature on the issue of attracting foreign investment is given to implementation of the adopted program of modernization of the economy by 2015, providing for the implementation of more than 500 investment projects totaling over $50 billion, in such industries as oil and gas, chemical, petrochemical, mining, engineering, electrical, pharmaceutical and light industries, electric power and other areas of industrial infrastructure.

Modern Uzbekistan is a leading industrial state in Central Asia, providing stability and economic development of the region.

Since the incipient days of independence, Uzbekistan had a consistent transformation of its economy. Government efforts are directed primarily on creating efficient and effective institutional foundations of a market economy, systemic reforms and liberalization of the economy, further modernization of industries, the development of trade and economic relations with various other countries of the world.

Over the years Uzbekistan has made extensive structural institutional reforms, which resulted in the republic became the first among the CIS states to have entered a phase of economic growth and by 2000 restored the pre-reform level of gross domestic product. Thanks to the consistent implementation of the Uzbek model of reforms over the past 12 years, the economy of Uzbekistan has been doubled. Stable macroeconomic stability and balance of its internal and external sectors were achieved, that reflected in such areas as balancing of the state budget, which in 2005 was a surplus, the sustainability of external positions, characterized by stable positive balance of trade and balance of payments and the progressive rise in foreign exchange reserves.

These ongoing structural reforms create the conditions for sustained high economic growth of Uzbekistan, more than 8% a year for the past seven years. Since 2000, the share of industry in the national economy increased from 17% to 26% in 2012. The average level of investment in the economy each year is not less than 20% of GDP, the share of small and private businesses in the GDP has exceeded 50%. Cash incomes are growing by 22% -24% per year, stimulating domestic demand for various types of goods and services.

In 2012, the GDP grew by 8.2%, industrial production grew by 7.7%, agriculture by 7% and retail trade by 13.9%. Other macroeconomic indicators are also positive. With regard to the banking system of Uzbekistan, it has high capital ratios, reliability and stability. The capital adequacy ratio is 24%, which is 3 times higher than the Basel standards.

An investment of more than $120 billion, among which more than 50% are direct foreign investments, were involved during the years of independence in the economy of our country. In 2012 the total volume of foreign investments amounted to more than $6 billion, of which the share of foreign direct investment accounted for approximately 80%.

The macroeconomic situation in Uzbekistan is characterized by two major trends. Firstly, it is macroeconomic stability and balance in the economy and secondly, the high rates of economic growth.

Uzbekistan is one of five countries, which over the last five years have shown a significantly high rate of economic growth. Since 2005, this figure was not less than 7%. The core of these economic reforms and sustainable growth of the economy are strong growth within industrial production.

Along with the rapid economic growth, Uzbekistan is characterized by macroeconomic stability. There is a favorable inflationary background (7% -8% per year). This controlled inflation does not depress and conversely, stimulates economic growth and the interests of producers.

Uzbekistan has three positive balances: the state budget, trade balance and balance of payments. The external debt of Uzbekistan in recent years ranges from 11% to 16%. In comparison to international standards this is one of the lowest external debts in the world. A further great example that is unique to Uzbekistan is the internal debt of the republic, which today is 0%. That means the budget is developed on a sound basis, which is the key to good monetary and fiscal policy.

Uzbekistan is an export-oriented country.

Uzbekistan implements medium-term program of priorities of industrial development, which includes more than 500 major investment projects totaling nearly $50 billion. The basis of this program lies in projects aimed at the production of high added value, with a high level of innovative components associated with structural changes of industry and production of finished products.

It is estimated that by 2015 the share of industries producing final finished products in the industrial structure will rise from 41% to 49%, while the share of exports in total industrial production, from 42.3% to 63%. Thus, all of the structural transformation of the economy associated with the high-tech industries and export orientation of Uzbek economy.

In this regard, a road infrastructure development is paramount. Consequently, the construction and reconstruction of sections of more than 2,300 km of roads, part of the Uzbek national highway are being conducted, half of them are the upscale roads with cement concrete pavement.

In addition, Uzbekistan has a large-scale program for the construction, reconstruction and repair of roads of internal use, including rural roads, which allows to develop the economy not only in major cities and regional centers, but in general, throughout the territory of Uzbekistan.

Today Uzbekistan is rehabilitating more than 1000 km of railways and building more than 80 km of new railways. The new program already has planned the electrification of over 300 km of railroads. High-speed passenger trains “Talgo-250” are purchased and high-speed passenger trains on the railway line in the Tashkent-Samarkand are already opened.

The Government of Uzbekistan has decided to build a new railway at an estimated cost about $2 billion, which will connect the center of Uzbekistan with its eastern regions. In addition, in conjunction with the projected railway connecting the Central Asian republics and China with Europe, Uzbekistan will realize its potential as a major transit country.

Currently all domestic airports are also almost fully reconstructed, as well as aircraft fleets being renovated. Today Uzbekistan uses only modern aircraft.

All of these changes taking place in our economy would have been impossible without the active support of the state. This is primarily due to the creation of favorable tax incentives and conditions. Thus, since 1993 the tax burden was reduced by 2 times, from 45 to 22% of GDP.

Uzbekistan has consistently pursued policies to improve the business environment, which now has international recognition. Thus, according to a World Bank study «Doing business in 2013″ Uzbekistan is in the list of the top 10 countries which have demonstrated significant improvements in the ease of doing business for the last year.

According to research by the British consulting company «Maplecroft» Uzbekistan was the only Central Asian country, which entered the top 20 of the most promising countries in the world for doing business in 2013.

Uzbekistan took 11th place among the 26 fastest-growing countries in the world (according to research of HSBC bank « the World in 2050″).

Uzbekistan joined the top five countries with the fastest growing tourism industry in 2013 according to study by the World Council on Travel and Tourism.

Furthermore, the project of construction of Ustyurt MCC recognized as unique and the best project in 2012 within the petrochemical industry, the largest of petrochemical project in the former Soviet Union and the largest investment project in Central Asia (according to research by the agency of business information “Thomson Reuters”).

One of the key factors for successful investment within the Uzbekistan economy is its political and economic stability, well-developed legal framework, energy independence, diversified industry, favorable geographical location of the country and the availability of highly qualified young professionals.

It was also noted that in Uzbekistan, large-scale projects, including within the automotive industry are being implementing. One such project is the engine factory established jointly with «GM», as well as large enterprises producing heavy trucks together with the German company «MAN».

Milestones achieved by the Republic of Uzbekistan have opened up new opportunities for enhancing comprehensive and fruitful cooperation with the friendly Ukraine, which also has a huge industrial potential, developed agriculture, industrial and social infrastructure. All this is an attractive basis for a serious and mutually beneficial expansion of Uzbek-Ukrainian dialogue across all spheres.

Ukraine is a state with which Uzbekisatan wants to have a long-term and solid relationship and wants to keep our agreements and good intentions always implemented.

Uzbekistan sees Ukraine as an important partner not only in the Commonwealth of Independent States, but also in the world.

Our countries have similar and close positions on many issues of international and regional politics and fruitfully cooperate in the framework of various international organizations.

Due to its geopolitical and economic potential and strategic location in the key regions of Eurasia, Ukraine and Uzbekistan play an important role in determining trends and processes in the CIS. With this in mind, Tashkent and Kiev have always understood the need to continue the systemic nature of the Uzbek-Ukrainian dialogue.

In this context, today it is considerably important to build relationships between the two countries in accordance with the indigenous and vital interests of the two countries in a rapidly changing world, to properly provide favorable conditions for the independent political and sustainable socio-economic development.

An important contribution to the intensification of this process was the recent visit of the Minister of Foreign Affairs of Ukraine Leonid Kozhyry to Uzbekistan in October this year. During this visit, the President of the Republic of Uzbekistan, Islam Karimov, received Mr. Kozhara. During a meeting with the Minister of Foreign Affairs of the Republic of Uzbekistan, topical aspects of Uzbek-Ukrainian relations were discussed and forms and mechanisms of regular contacts between the Foreign Ministries were considered.

Today the Uzbek-Ukrainian relations have a solid legal base consisting of 149 bilateral agreements, of which 40 are within the domain of trade and economics. This testifies the desire of the parties to cooperate closely and fruitfully in trade and economic spheres, as well as actively promoting the entry of business circles of the two countries in each other’s markets.

During 2012, bilateral trade amounted to 1068.0 million dollars and increased by 60.4%. While there has been a significant increase compared to the year 2011, the current level of trade and economic cooperation does not meet the potential of Uzbekistan and Ukraine.

Despite strong growth, the structure of trade remains limited, and therefore, new product items of mutual interest need to be involved in the turnover. During January-June 2013 the trade between the countries has increased by 141.2 % and amounted to 576.4 million dollars, including exports of 333.4 million (195.5 %), imports of 242.9 million (102.3 %). There is a real opportunity and most importantly, the political will of both countries to expand our range of bilateral trade and increase the volume of trade in the coming years to 2.3 billion U.S. dollars.

I am pleased to say that over time, trade and economic relations have acquired a qualitatively new structure, namely products with high added value being widely represented in the Ukrainian market. In particular, Ukrainian motorists are well aware of cars produced on the basis of an entirely new industry, the automotive industry, which appeared after Uzbekistan gained its independence.

Currently there are 48 enterprises with Ukrainian capital on the territory of Uzbekistan, including five companies with 100% representation of business in Ukraine.

31 joint ventures with Uzbek capital operate in Ukraine. The principal areas of activity are the production of consumer goods, supplying a wide range of export products and services to the Ukrainian market.

With regard to the interests of Ukrainian business in Uzbekistan, these are mainly concentrated in the area of wood, food, the chemical industry, construction and services.

There is a huge potential for further expansion of bilateral trade and increases in areas for mutual investment. Therefore, trade and economic ties between Ukraine and Uzbekistan should continue developing in the future.

The Intergovernmental panel on full cooperation established in March 1997 and headed by the Prime Ministers of the two countries is an effective mechanism of state support for the development of bilateral relations. The question of the next 8th meeting of the IGC in Tashkent must be carefully considered.

Thus, bilateral cooperation in the sphere of transport communications is the most relevant. There is significant interest in the use of Ukraine’s transport infrastructure for the export and import of Uzbek goods, as long as the Ukrainian authorities provide acceptable tariff preferences.

Uzbekistan is ready to consider joint projects, including the expansion of investment components in industries such as construction machinery, agro-processing, livestock creation, pharmacology and others.

The development of cultural cooperation between Uzbekistan and Ukraine is equal to the interest of both countries.

A significant factor of cultural cooperation is the presence of Ukrainian and Uzbek diaspora in each other’s respective countries.

One of the important aspects of this interaction is that more than 100 thousand ethnic Ukrainians, who live Uzbekistan and the 45 thousand Uzbeks who live and work in Ukraine, make a worthy contribution to the rapprochement of cultures of the Uzbek and Ukrainian people. Representatives of the two countries regularly participate in festivals and exhibitions, conferences, symposia and seminars in Ukraine and Uzbekistan.

The Republican Ukrainian Cultural Center “Slavutich” and urban Ukrainian Cultural Center “Motherland now operate in Tashkent”

 According to materials of the Embassy of the Republic of Uzbekistan in Ukraine