Uzbekistan Market Overview

Trade and Investment between Uzbekistan and Canada

Bilateral merchandise trade in 2021: Canadian exports to Uzbekistan $6.7 million, Canadian imports from Uzbekistan $253.7 million (Source: Statistics Canada)

Why Uzbekistan Matters

• With population of 35.27 million (Source: Statistics Uzbekistan) Uzbekistan has the largest potential consumer market in Central Asia. Uzbekistan is also a young country with more than two-thirds of the population being of working-age (15-64), contributing to a strong labour force. (Source: World Bank)
• Uzbekistan has maintained a high GDP growth, averaging 5.8 percent over the last 10 years. Growth forecast until 2025 is from 4.5 to 5.5% per annum. (Source: IMF World Economic Outlook)
• Since 2016, the Uzbekistan’s government has been undertaking large-scale reforms of its economic and political systems, and has achieved substantial progress in transforming its economy and society. The most important changes include: currency exchange liberalization, simplified business registration procedures, tax incentives, improved private property protection and privatization. The Government is now moving on to the next stage of economic reforms to address structural constraints, such as the absence of factor markets and the state’s economic dominance in the economy.
• Despite the COVID-19 pandemic, thanks in part to reforms to liberalize prices and remove barriers to domestic and international trade, the country’s economy was one of the few in the Europe and Central Asia (ECA) region to avoid negative dynamics in 2020, showing GDP growth of 1.7%.
• Uzbekistan ranked 69^th in the Ease of Doing Business ranking for 2020, an improvement of 18 places from 2016. (Source: World Bank)
• Strategically located, Uzbekistan is the only country that borders each of the four other Central Asian nations, plus Afghanistan, enhancing its attractiveness for investment. Regionally, it is a major economic engine and influencer of peace and stability.
• Uzbekistan has rich natural resources such as gold (8^th in the world for production in 2020), natural gas (17^th for production in 2020), and cotton. These offer attractive opportunities for investors. Uzbekistan is also the world’s 7^th-ranking uranium supplier (2021), and is expanding production. (Source:  World Nuclear Association, World Gold Council and Enerdata Yearbook)
• Doing business in Uzbekistan is not without its challenges. The continued presence of state-owned enterprises in the economy and low corruption perception index ratings (140/180 in 2021) are contributing factors. (Source: Transparency International)

Sectoral Opportunities in Uzbekistan

Agriculture

Uzbekistan’s agricultural sector is undergoing reforms aimed at progressively diversifying away from labour- and water-intensive cotton into higher value-added production and processing, including fruits and vegetables and livestock.  Over the past few years, the Government of Uzbekistan has supported poultry and animal farming and encouraged increased mechanization as well as the adoption of new technologies in order to increase farmers’ productivity. This has created opportunities for agricultural machinery and equipment, irrigation technologies, greenhouses and related technologies, animal genetics (poultry as well as dairy and beef cattle), cold storage facilities, and processing equipment.

As Uzbekistan is progressively growing richer, thanks to its business- and investors-friendly reforms, the taste of its consumers is evolving in tandem with their increased means. Coupled with the recent relaxation of Uzbekistan’s visas regime, which helps increase the number of tourists and business visitors, consumption of fish and seafood, meat and other higher income agrifood products are rising, thus creating opportunities for Canadian exporters.

Education

Canada is a partner of choice in the education sector in Uzbekistan. The most populous country of Central Asia, Uzbekistan has the advantage of a large and growing population, with 40% of population being under the age of 18, and counts over 700,000 high school and college graduates every year. Uzbekistan lacks in workers with the advanced technical skills needed to reform and modernize the country’s economy and infrastructure, and Canadian institutions have the solutions and expertise, at both the vocational and higher levels, to contribute to the education and the professional skills development of the population. In recent years, the signing of several MoUs with some of Canada’s well-renowned universities reinforced Canada’s position in the recruitment of foreign students from Uzbekistan.There are also commercial opportunities in the local market for establishing branches of foreign universities in Uzbekistan, sale of language programs, professional training and online courses. Uzbekistan has one of the highest rates of public spending on education in the world, and the government wants to attract foreign universities interested in establishing branches in Uzbekistan, by offering tax exemptions and pre-existing facilities at no cost. Disciplines that attract most interest include: chemistry, energy, mechanical engineering, industrial technology, biotechnology, construction and architecture, irrigation and water resources, medicine, and pharmacology.

Information and Communication Technology

In the context of its broad economic and social reforms, the Uzbek government is looking to find solutions for providing e-government services in all spheres of society and the economy, including regional development, agriculture, health, education and banking by using innovative technology. The government is also supporting the commercialization of technology and business growth, through the creation of innovation centers such as the Mirzo Ulugbek Innovation Center.

Mining

Uzbekistan has the world's fourth-largest gold reserves and is ranked twelfth in the world and second among the CIS countries in terms of mining. Metallurgy is one of the largest domestic industries, and the most mined minerals are copper, gold, silver and uranium. As reported by the State Committee on Geology and Mineral Resources (Goscomgeology) in 2019, only 20 percent of Uzbek territory has been explored, with potential mineral resources being evaluated at US $5.7 billion. The country’s explored reserves comprise more than US $1 billion.

There are two dominant state mining enterprises: the Almalyk Mining and Metallurgy Complex (AGMK) and the Navoi Mining and Metallurgy Complex (NGMK); the latter was recently transformed into a joint-stock company, with uranium and rare earth metals production hived off into a separate state enterprise, Navoiuran. Both AGMK and NGMK are working to enhance their management structures, the methods for assessing and accounting for mineral reserves and their financial reporting, which opens a niche of opportunities for Canadian companies. Investment opportunities in the gold mining sector abound, particularly in the Navoi region.

The government remains a primary regulating body in the industry, which adopts policies for the development of the mining sector and provides licensing. The long-term industry development programs adopted by the government in recent years (2019-2021) are aimed at accelerated development, modernization and the expansion of production of the large enterprises of the mining and metallurgical industry. In accordance with Presidential Resolution No. PP-4124 dated 17 January 2019, it is planned to increase production by 30 percent at NGMK by 2026, attract investments in the amount of $2.9 billion to AGMK and increase copper production by 28 percent and zinc by 75 per cent by 2023.

Currently, there is no special law on environmental requirements for mining activities. In general, irrespective of the type of activity, all companies must comply with the environmental regulations. The legal basis for environmental controls is laid down by the Law on Environmental Protection. Compliance with environmental regulations is supervised by the government and EcoCom - the State Committee for Ecology and Environmental Protection. However, the industry will be reorientating to the decarbonization route as inevitable part of modernization agenda, global demand for carbon-free production, social and corporate governance.

Oil and Gas

The oil and gas industry is one of the main sources of Uzbek GDP, its budget revenues and foreign exchange earnings, and also plays a significant role in the structure of industrial production and attracting investment. Uzbekistan is the second largest natural gas producer in Central Asia, and is believed to have significant hydrocarbon reserves. Currently, the Ministry of Energy coordinates the development of the entire fuel and energy complex of Uzbekistan.

In 2019, the government broke up the national monopoly UzbekNefteGaz into three independent companies focused on production (UzbekNefteGaz), transmission (UzTransGaz), and domestic sales (HududGazTaminot), with the goal of improving transparency and operating on market-based price standards. Implementation of an automated system for monitoring and metering of natural gas started in 2020, and should dramatically improve resource accountability. UzbekNefteGaz and UzTransGaz have been instructed to file for an IPO by 2023.

Country’s ambition is to triple its gas output by 2030 alongside pushing for growth of renewable energy projects with solar, wind and hydropower in the mix. In order to achieve this goal, the Ministry of Energy of the Republic of Uzbekistan is gradually implementing large-scale projects for the deep processing of natural gas and renewable generation, vigorously coordinating the processes of reforming the industry in order to increase its efficiency and transfer to market relations as well as attracting investment. As a result, there could be increasing opportunities for Canadian technology and equipment providers in Uzbekistan as they pursue these steps towards modernization of the industry.

In order to increase the effectiveness of scientific and practical research in the fields of renewable and hydrogen energy, as well as to ensure the transition of the Republic of Uzbekistan to a "green" economy, a resolution of the President of the Republic of Uzbekistan of 09.04.2021 was adopted. №PP-5063 "On measures for the development of renewable and hydrogen energy in the Republic of Uzbekistan". Together with the World Bank and international consultants, an assessment of the technical potential of the Republic of Uzbekistan for the production of "blue" hydrogen is planned in 2022, in the context of its comparative advantages and disadvantages, as well as the expected development of regional and global demand for low-carbon hydrogen. Based on the results of the study, a "Roadmap" will be developed for the development of "blue" and "green" hydrogen in Uzbekistan. The anticipated outcomes of these developments may also provide additional opportunities for Canadian companies.

Useful Links

• Uzbekistan Economic Outlook - the World Bank Website
• Uzbekistan Economy Profile - the World Bank Doing Business (2020)
• Doing Business in Uzbekistan - Baker&McKenzie (2021)
• Upcoming trade fairs in Uzbekistan - Uzbek Chamber of Commerce and Industry (CCI)
• Import of goods by legal entities - Uzbek State Customs Committee