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Localizing high-value-added products of Uzbekistan, mutually beneficial for exports to Korea: deputy minister

June 27, 2022 - 11:48 By Sanjay Kumar
Laziz Kudratov, Uzbekistan’s first deputy minister of investments and foreign trade and director general of the agency for strategic development. (Embassy of Uzbekistan in Seoul)
The localization of high-value-added products by Korean companies in Uzbekistan would be a good basis for mutually beneficial cooperation, Laziz Kudratov, Uzbekistan’s first deputy minister of investments and foreign trade, said in an interview with The Korea Herald.

Kudratov said that Korea and Uzbekistan shared a reliable and time-tested relationship with a special strategic partnership stressing Uzbekistan-Korea cooperation had reached a new level.

Uzbekistan-Korea trade turnover almost doubled over the past five years, from $1 billion in 2016 to $1.9 billion in 2021, according to Kudratov.

“In the first quarter of 2022, despite the ongoing pandemic, bilateral trade increased by 51.5 percent up to $630 million compared to 2021,” said Kudratov, who doubles as director general of the Agency for Strategic Development of Uzbekistan.

According to Kudratov, Uzbekistan and Korea are to sign a free trade agreement to accelerate consultations on Uzbekistan’s accession to the World Trade Organization and receive additional phytosanitary permits to expand Uzbek agriculture products into the Korean market.

Discussing opportunities in engineering, procurement and construction, he said that Uzbekistan’s economic environment is changing rapidly with promising opportunities in public-private partnerships for Korean engineering, procurement and construction companies.

Kudratov also stressed that a new law on a public-private partnerships made a wider range of projects in Uzbekistan -- including in health care, education and infrastructure development including the construction of roads, railways and energy facilities -- available for investments.

“There are also promising opportunities abound in energy generation,” he said.

He cited investment agreements signed by the Uzbekistani government with energy producers such as Masdar, Total Eren, France’s EDF group, Veola and others to renovate and build solar, wind and thermal power plants.

Masdar is a renewable energy company owned by the United Arab Emirates government.

“Uzbekistan government intends to increase solar plant capacity from virtually zero in 2020 to 2.5 gigawatts, and wind turbine capacity to 2 gigawatts by 2025,” he said, stressing Uzbekistan started implementing several socially important projects with the Export-Import Bank of Korea.

Citing the framework arrangement between the Uzbekistani and Korean governments signed in 2021, he said there are ample opportunities.

The agreement envisages attracting loans from the Economic Development Cooperation Fund of Korea for the period of 2021-2023 to implement projects totaling $1 billion in the social sphere.

“There are no challenges but big opportunities for cooperation that are not discovered yet,” the deputy minister stressed.

According to Kudratov, the government of Uzbekistan is prioritizing expanding investment cooperation and attracting advanced Korean technologies and know-how for the development and implementation of new projects in information and communication technologies, science, health care, pharmaceuticals and agriculture.

Asked how Uzbekistan would play a role for Korean companies to reach the consumer markets of China and India, the deputy minister said that Uzbekistan’s open, mutually beneficial and constructive foreign policy with China and India, high-level government exchanges and Uzbekistan’s comprehensive strategic relations and intensified cooperation as a foundation for the purpose.

“Trade turnover of Uzbekistan with China and India has increased up to 50 percent since 2017 and reached $7.4 billion and $400 million in 2021, shows the growing interest of Chinese and Indian consumers to products made in Uzbekistan,” he said, underlining Uzbekistan as a source for half of the total amount of mung beans imported in China.

“There is a significant amount of mutual trade accounts to yarn, which is also a vital product in the production of consumer textiles,” he said.

“China is one of the largest investors in the Uzbek economy,” said Kudratov, adding that Chinese investments increased fivefold, hitting more than $8 billion since 2017.

Korean companies interested in producing value-added products in Uzbekistan can take advantage of investment and trade opportunities to further supply products to China and India, he stressed.

Kudratov underlined the Uzbekistan government’s recent policies in the textiles industry, saying Uzbekistan is shifting toward higher-value-added production in the textiles industry.

“Starting from 2020, Uzbekistan canceled raw cotton exports to motivate companies into investing in added-value production of finished and semi-finished products such as textiles and fashion,” he said.

Kudratov pointed to textiles as the first industry to be fully privatized by Uzbekistan to create a system of vertically integrated “textile clusters” run by private companies that control all operations, starting from cotton cultivation to finished goods.

“Most of the cotton is now produced by 96 textile clusters in all regions of the country,” Kudratov said.

Uzbekistan is to increase textile product exports by up to $7.1 billion by 2025 to consumers in the Commonwealth of Independent States, China, Turkey and the EU, according to Kudratov.

Describing his country’s diversified market size and stable economy, Kudratov highlighted that 35 million Uzbek consumers, a high literacy rate and a 15 million-strong labor force as substantial attractive aspects for industries.

“Uzbekistan is one of the youngest nations of the world with 60 percent of the population under 30 years of age,” he said.

According to Kudratov, Uzbekistan established a business ombudsman as well as the council of foreign investors under President Shavkat Mirziyoyev to raise the standards of investment and industrial and innovative development.

He said that Uzbekistan reduced the tax types from 13 to nine, and introduced lightweight tax payment mechanisms with the option of deferment or an installment plan.

Uzbekistan established unified centers as a “single window” for business entities to ease business registration procedures within 30 minutes, simplified permit application procedures by canceling 42 types of licenses and permits and reduced the number of required documents, said Kudratov.

Referring to the adoption of a new unified law on investments, the minister said that the law preserves all previous guarantees and privileges for investors with new incentives such as tax credits and government investment subsidies for the construction of external infrastructure.

“Uzbekistan improved by more than 18 points from its 166 rank in 2012 to 69 in 2022 in World Bank Doing Business Index,” he said, adding that Uzbekistan’s credit risk in the Organization for Economic Cooperation and Development’s ranking from the sixth to fifth group in 2019 put Uzbekistan on level with countries such as Brazil, Turkey and Vietnam.

Explaining the regional potential, Kudratov said that Uzbekistan has regular freight transportation to the markets of Pakistan and South Asia with a total population of more than 1.5 billion people.

“Twenty-two FEZs (free economic zones) are operating in Uzbekistan to provide investors privileges and preferences for three to 10 years depending upon the volume of investments, with 538 projects worth almost $3 billion already implemented in the FEZs,” according to Kudratov.

Uzbekistan received the EU’s beneficiary status of Generalized Scheme of Preferences Plus as well as the UK’s GSP Enhanced Framework, which creates additional opportunities to solidify Uzbekistan-Korea bilateral industrial cooperation, the deputy minister added.