Cooperation between Uzbekistan and Kazakhstan at the modern stage of development

Cooperation between Uzbekistan and Kazakhstan at the modern stage of development

Within the framework of the foreign policy initiated by the President of the Republic of Uzbekistan Shavkat Mirziyoyev to expand cooperation with neighboring countries, the development of multifaceted cooperation between Uzbekistan and Kazakhstan has become a priority.

Economic cooperation

It is noteworthy that during his first state visits in March 2017, the President of Uzbekistan visited Kazakhstan. During the visit, 13 documents were signed, including the "Strategy for Economic Cooperation for 2017-2019", an industrial fair and business forum were held with the participation of more than 500 entrepreneurs from the two countries, contracts and investment agreements worth a billion dollars were signed. In mutual trade there has been set the goal to increase the mutual commodity turnover to USD 5 billion by 2020.

Subsequent high-level visits consolidated the trend towards increasing mutual trade and investment, cooperative ties, expanding cooperation in the field of energy, water and agriculture, transport, reconstruction and modernization of border checkpoints.

It should be especially noted that agreements were reached on expanding interaction and direct contacts between the regions of the two countries. Forums of interregional cooperation began to be held on a regular basis.

The Interregional Forum, which was held for the first time in the history of bilateral relations in November 2018 in Shymkent,at which 16 memorandums of direct interregional cooperation were signed at the regional level of the two countries, and regional economic entities signed agreements on the implementation of 26 investment projects worth USD 110.5 million and 69 trade contracts for USD 209.3 million.

In February 2020, the second Interregional Forum was held in Urgench, which was attended by more than 400 representatives from 21 regions and business circles of Uzbekistan and Kazakhstan, including representatives of the administration of 8 regions and more than 150 business companies of Kazakhstan. Within the framework of the forum, "Exchange dedicated for contracts " was held, at which 34 bilateral agreements were signed for a total of about USD 431.4 million, including 17 agreements in the trade and economic sphere worth over USD 366.6 million, in particular on supplies to Kazakhstan cars, fruits and vegetables, textiles, building materials, electrical goods and so on. In addition, 17 agreements were concluded in the investment area worth USD 64.8 million in such areas as the food industry, the production of building materials, textile products, the creation of an agro-industrial cluster, the opening of new trading houses, the provision of financial services and others. Exhibitions of products from leading enterprises of the two countries were held with the participation of 36 companies from Uzbekistan and 27 companies from Kazakhstan.

The third Interregional Forum on the topic "Cross-border cooperation as new growth points" was held on November 25-26, 2021 in Turkestan with the participation of the heads of governments of the two countries, who held a meeting of the Joint Intergovernmental Commission on Bilateral Cooperation. The forum was attended by about 200 people - heads of government agencies, regions, as well as representatives of business circles of the two countries.Within the framework of the forum, 54 investment and commercial contracts were signed in the fields of mechanical engineering, agro-industrial complex, production of building materials, electrical products, medical products, infrastructure development and other industries for a total amount of USD 611.3 million.

First state visit

An important event in bilateral relations will also be the upcoming state visit of the President of Uzbekistan to Kazakhstan in December 2021. It should be noted that this will be the first state visit of President Shavkat Mirziyoyev after his re-election to the presidency, since the foreign trips made earlier by the head of state were of a working nature.

Within the framework of the upcoming visit, it is planned to sign a number of important documents that will expand the legal base of bilateral cooperation, as well as new investment agreements on the implementation of joint projects in the field of industry, mechanical engineering, transport and logistics, agriculture and other areas.

The foreign trade indicators

It should be recalled that the heads of the two states set the task for the governments to bring the mutual trade turnover between Uzbekistan and Kazakhstan in 2022 to USD 5 billion, and within five years to reach the indicator of the volume of mutual trade up to USD 10 billion.

In the foreign trade turnover of Uzbekistan with foreign countries, Kazakhstan in 2020 took the third place with a share of 8.3%, the second - in the trade of our country with the CIS countries with a share of 25.5% and the first - in trade with the Central Asian countries with a share of 61.1 %.

At the same time, the share of Kazakhstan in the total volume of foreign trade of Uzbekistan since 2016 has increased from 7.8% to 8.3%, and at the end of 10 months of 2021 increased to 9.7%.

In the period from 2017 to 2019, the volume of trade between Uzbekistan and Kazakhstan increased almost 1.8 times: from 1.9 to USD 3.34 billion, including exports increased 1.5 times - from 0.95 to USD 1.39 billion. In 2020, in connection with the coronavirus pandemic, there was a decrease of about 10% in trade turnover to USD 3.01 billion and exports to USD 0.91 billion.

At the end of 10 months of 2021, compared to the same period in 2020, the indicators of foreign trade between Uzbekistan and Kazakhstan increased significantly: trade turnover by 36.5% to USD 3.16 billion, exports by 30.5% to USD 0.95 billion, imports by 39.3% to USD 2.21 billion.

Mutual trade between Uzbekistan and Kazakhstan at the end of 2020 was represented by the following consolidated commodity groups:

- Uzbekistan's exports to Kazakhstan: food products - USD 278 million (30.7% of export volume), machinery and equipment - USD 208 million (22.9%), chemical products and products from them - USD 89 million (9.8 %), metals and metal products - USD 54 million (6%), textiles and clothing - USD 43 million (4.7%), as well as services - USD 142 million (15.6%);

- imports of Uzbekistan from Kazakhstan: food products - USD 867 million (41% of imports), metals and products from them - USD 369 million (17.4%), energy and oil products - USD 274 million (13%), cars and equipment - USD 140 million (6.6%), chemical products and products from them - USD 82 million (3.9%).

It should be noted that in the structure of total exports of Uzbekistan and Kazakhstan, the main share (50-60%) is occupied by raw materials (mineral products, non-ferrous and precious metals, etc.), which are supplied mainly to third countries.

At the same time, with regard to commodity items that are not raw materials, there are great prospects for increasing mutual trade, especially in finished products, in which both countries are interested.

In particular, in 2020, Uzbekistan exported agricultural products to Kazakhstan for USD 251.4 million, or 24.9% of the total export of this type of product, cars for USD 150 million, or more than 85% of all car exports. The products of the domestic company Artel have expanded their position in the market of Kazakhstan, in particular, for kitchen stoves - up to 65%, washing semiautomatic devices - up to 50%, water heaters - up to 37%.

Investment collaboration and cooperation

Investment cooperation between our countries is growing at a high rate, the number of enterprises with the participation of the capital of Kazakhstan has increased 2.1 times since the beginning of 2019 - from 510 to 1,056 enterprises, in particular, since the beginning of this year, 166 enterprises with Kazakh capital have been created.

At present, the "Astana-Motors" company is considering the issue of building a plant for the production of Hyundai cars in the city of Jizzakh. Halyk Bank of Kazakhstan is present in the financial market of Uzbekistan, whose subsidiary Tenge Bank opened its branch in Tashkent in 2019.

Uzbek capital also began to actively invest in the economy of Kazakhstan. In the field of mechanical engineering, UZAuto Motors JSC and MAN Auto-Uzbekistan JSC have established joint ventures with SaryarkaAvtoProm LLP in Kostanay for the production of Chevrolet cars and MAN trucks. In Kostanay, in November of this year, a joint venture for the production of agricultural machinery Nurafshon was created in the Localization Center of "AgromashHoldingKZ" JSC. In the field of light industry, the Kazakh-Uzbek commercial and industrial company Alliance has established a joint textile venture, and a Turkestan Textile garment factory was launched in Turkestan.

A project is being worked out on the creation in Turkestan by the domestic company Artel Electronics, together with the Orbis Kazakhstan, an enterprise for the production of kitchen stoves and electric water heaters, which will require USD 85 million in investments, the capacity of the plant will amount to 500 thousand per year of each type of product.

Another thing to note is that the existing potential opportunities imply the implementation of new joint projects in the field of mechanical engineering, the construction industry and the pharmaceutical industry.

In total, according to the statistics department of the Republic of Kazakhstan, currently 2,144 enterprises with Uzbek capital (5.8% of the total) are registered in Kazakhstan, of which 1,414 are operating.

Most of these businesses are small and operate in the wholesale and retail trade, auto repair, construction, manufacturing, and accommodation and catering services.

Transport and logistics sector

Cooperation between the two countries in the transport sector has received new development, including the creation of international transport corridors and international transport infrastructure, which will help reduce transport costs when supplying export products across the territory of the two countries for their delivery to third countries.

In April 2021, near the checkpoint "Gisht Kuprik" - "Zhibek Zholy" on the Uzbek-Kazakh border, the prime ministers of the two countries took part in the ceremony of launching the construction of the International Center for Trade and Economic Cooperation (ICTEC) "Central Asia" and signed an action plan on the organization of its activities.

The total area of the center will be 400 hectares, the throughput capacity is 35 thousand people and 5 thousand trucks per day in both directions. The center is intended to become a large industrial, trade and logistics platform for the implementation of joint investment projects of Kazakhstan and Uzbekistan.

In order to help build up mutual trade, it is planned to create a single commodity distribution system between the countries by opening three wholesale distribution centers in the Surkhandarya and Fergana regions of Uzbekistan with a total investment of USD 22.5 million and a transshipment capacity of 67 thousand tons per year.

It should be noted that the railways of Kazakhstan are participating in the implementation of the Agroexpress pilot project launched on November 18 this year for the accelerated delivery of agricultural products in refrigerated trains along the Moscow-Tashkent-Moscow route, which will contribute to the integration of the railways of the three countries.

The interaction of the two countries in the transit and transport sector has great prospects, the implementation of new large joint projects for the development of railway infrastructure, the modernization of road checkpoints is planned, a favorable tariff policy has been formed for the carriage of goods. The indicators of cargo transportation are growing, in just 10 months of this year the volume of railway traffic between Uzbekistan and Kazakhstan accounted for 20.5 million tons.

Prospects for expanding cooperation

Uzbekistan and Kazakhstan have great unrealized potential for a significant expansion of economic cooperation both in bilateral and multilateral formats with the participation of other Central Asian (CA) countries.

Thus, calculations carried out according to the methodology of the International Trade Center (ITC) show that there is an unrealized export potential of the CA countries in mutual trade in the amount of more than one billion dollars.

Another fact should be noted that in Central Asia the population of Kazakhstan and Uzbekistan is 71%, while the two countries account for 78% of the total GDP and 74% of the mutual internal trade of the countries of the region.

Uzbekistan and Kazakhstan set goals to increase the share of non-primary exports and increase the output of finished products with high added value.

In this regard, a promising area of cooperation is the creation of joint industrial clusters in the manufacturing industry, taking into account the complementarity of economies and the resource base available in the countries.

The promising areas of industrial cooperation include the manufacturing sector of the economy, including mechanical engineering, the agro-industrial complex, light industry, as well as the transport and logistics sector.

Expansion of cooperation in the transport sector will contribute to the formation of end-to-end transport routes in the north-south direction and back with a single tariff policy, which will increase the transit potential of the two countries.

One of the important projects in the transport sector, which can help diversify the used transport routes and enter new export markets, is the construction of the Mazari-Sharif-Kabul-Peshavar railway, which will be an extension of the Termez-Mazar-i-Sharif railway. The creation of this trans-Afghan corridor will help connect the regions of Central and South Asia with a short and economical transport route, in which the railway networks of Uzbekistan and Kazakhstan will be actively involved, which will increase their load and profitability.

The expansion of economic ties between Uzbekistan and Kazakhstan and the measures taken to improve the business environment will also contribute to the redistribution of foreign investments attracted by countries from extractive to manufacturing sectors of the economy.

In conclusion, it should be noted that with the growth of the economies and populations of Uzbekistan and Kazakhstan, the total potential of the internal market of the two countries will increase, and the expansion of cooperative ties and mutual trade between them will increase their investment attractiveness, which will accelerate the pace of development of the economies of the two countries.

Obid Khakimov.

Director of the Center for Economic Research and Reforms under the Administration of the President of the Republic of Uzbekistan.

Казахстанская правда 03.12.2021

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