Uzbekistan in trade with Central Asia

In Uzbekistan, since 2017, large-scale reforms have begun in all spheres of the life of the state and society. Significant changes affected the foreign trade policy, which allowed, even despite the pandemic, to increase the volume of Uzbekistan's foreign trade - writes Ruslan Abaturov

One of the most successful manifestations of reforms in this area is the change of the foreign policy vector to building mutually beneficial relations, first of all, with the nearest neighbours — the countries of Central Asia. Border crossing procedures were radically simplified — people from border areas were able to communicate freely, the level of transport communication with Central Asian countries was increased at times, and in particular, bus service was restored.

Emphasis was also placed on the accelerated increase of mutually beneficial economic and trade ties. Trade procedures have been significantly simplified, and the movement of goods across the border has become liberated. The way has opened for mutual investments. All this made it possible to multiply the volume of trade between Uzbekistan and the countries in our region. This article will focus on how Uzbekistan's trade cooperation with the Central Asian states has increased, and what qualitative changes have occurred in the structure of Uzbekistan's trade with them.

Advanced trade growth

Over 5 years, Uzbekistan's trade with Central Asian countries increased 2.6 times, from $ 2.5 billion in 2016 to $6.3 billion in 2021. Uzbekistan's exports to Central Asian countries increased 2 times — from $ 1.3 billion to $2.7 billion, and imports 3.2 times — from $ 1.2 billion. up to $3.7 billion.

The volume of trade with Central Asian countries grew faster than the total volume of Uzbekistan's foreign trade with the rest of the world, which increased by 1.7 times during the period under review, exports by 1.4 times, imports by 2 times. The share of Central Asian countries in the total volume of Uzbekistan's foreign trade turnover increased from 10.2% to 15.1%, in exports — from 10.8% to 16%, and imports — from 9.6% to 14.5%.

In addition, 2021 has become a record year in terms of trade with each of the Central Asian countries separately. Over 5 years, the volume of trade has multiplied with all Central Asian countries: with Kazakhstan — by 2 times, up to $ 3.9 billion, Kyrgyzstan — by 5.7 times, up to $ 952 million, Tajikistan — by 3 times, up to $ 605 million, Turkmenistan — by 4 times, up to $ 882 million.

Country changes in the structure of trade

Kazakhstan remains Uzbekistan's main trading partner in Central Asia by the end of 2021, but during the period under review, there has been a trend toward a decrease in its share. If in 2016 Kazakhstan accounted for 77% of Uzbekistan's trade volume with Central Asian countries, so in 2021 its share decreased to 62%. At the same time, the weight of trade with other countries has increased. The share of Kyrgyzstan increased from 7% in 2016 to 15% in 2021, Tajikistan — from 8% to 9.5%, and Turkmenistan — from 8.5% to 14%, respectively.

At the same time, structurally, Uzbekistan has significantly diversified its exports within the Central Asian region. If in 2016 Kazakhstan accounted for more than 70% of Uzbekistan's exports to Central Asian countries, then by the end of 2021, 44% were already sent to Kazakhstan. At the same time, the share of exports to Kyrgyzstan increased significantly — from 9.3% in 2016 to 30% in 2021. Accordingly, during the period under review, the share of Tajikistan in exports increased from 12.6% to 19%, Turkmenistan — from 6.1% to 7.2%.

Structural changes by country in imports are not characterized by such dynamism. The share of Kazakhstan in the total volume of imports to Central Asian countries decreased from 82% in 2016 to 74% in 2021, and Kyrgyzstan and Tajikistan remained virtually unchanged at 4% and 2.8%, respectively. Turkmenistan's role in imports has increased — from 11% to 19%.

Commodity changes in the structure of trade

As noted above, in recent years, the role of Central Asian countries in Uzbekistan's trade has increased and reached 15% of the total volume of foreign trade. Uzbekistan, being twice a remote country from the world ocean and limited in the use of all the advantages of maritime trade, strives to maximize the trade potential of the surrounding states. 

In 2017, almost 75% of Uzbekistan's commodity exports to Central Asian countries accounted for three groups of goods — food (30.8%), mineral products (29.8%, mainly fuel and energy products) and chemical products (13.9%). And in 2021, they already accounted for less than half of exports — 40%. At the same time, textile and clothing products (22%) and machinery, equipment, and electrical products (21.4%) took the first roles in exports.

The share of food in commodity exports decreased to 20%, mainly due to a decline in the volume of exports of fruits and nuts by almost 25% from the level of 2017 and more than 2 times compared to the level of 2019. The share of mineral products in exports decreased to 6.4%, mainly due to a decrease in natural gas exports.

The share of chemical products in Uzbekistan's exports to Central Asian countries in 2021 remained unchanged at 13.7%. In this group, the key export products are fertilizers, whose share in exports amounted to 5.9%, and polymers, whose share slightly decreased from 5.6% in 2018 to 4.9% in 2021.

Exports of textiles and clothing to Central Asian countries increased 4.4 times and amounted to $ 490 million in 2021. The growth was mainly due to an increase in clothing exports by 5 times — from $ 50 million in 2017 to $ 250 million in 2021. It is also necessary to note the increase in exports of silk products to Central Asian countries during the period under review from 111 thousand dollars to 22 million dollars. In addition, the export of knitted fabrics increased by 16 times, home textiles by 9 times.

Also, the countries of Central Asia are the main market for Uzbek shoes. The export of footwear products in 2017-2021 increased 3.5 times, from 10 to 35 million dollars.

In the years under review, Uzbekistan has been actively increasing exports of motor vehicles to the market of Central Asian countries. In particular, the volume of car exports increased by 8.7 times, from $30 to $264 million, and the share of Uzbekistan's total exports to Central Asian countries increased from 1.2% in 2018 to 15% in 2021.

If we consider the change in the structure of exports from the position of grouping goods according to the Standard International Trade Classification (SITC 2008), then the above-mentioned trends can also be traced:

• reduction of the share of fuel and energy goods from 36% in 2018 to 3.4% in 2021;
• increase in the share of industrial goods from 10% in 2018 to 24.4% in 2021;
• increase in the share of machinery and equipment from 4.3% in 2018 to 21.3% in 2021;
• increase in the share of finished products from 6% in 2017 to 16% in 2020-2021.;
• the share of raw materials in exports varied in the range of 1-6%, chemical products — in the range of 10-13%.

Therefore, Uzbekistan has significantly diversified its exports to Central Asian countries in recent years, mainly by increasing the volume of exports of higher-grade products.

Changes in the import structure. Traditionally, Uzbekistan mainly imports food products, mineral products (mainly fuel and energy), and metallurgy products from Central Asian countries.

The main structural changes in imports are mainly related to the growth of imports of mineral products, whose share increased from 31.5% in 2017 to 41% in 2021. At the same time, the share of imports of metallurgical products decreased from 29% to 17%.

In the import of food products from Central Asia, it is necessary to note some trends of recent years related to structural changes in consumption in the economy and the strengthening of the role of Central Asian countries in ensuring food security of Uzbekistan.

In the light of population consumption growth in 2017-2021, Uzbekistan significantly increased imports from Central Asian countries of livestock from 40 thousand in 2017 to 94 million dollars in 2019 and 85 million dollars in 2021, meat from 269 thousand dollars to 23 million dollars, grain and flour imports increased 3.5 times, which account for 14-20% of Uzbekistan's total imports from Central Asian countries. The import of sunflower oil increased 11 times. Currently, Central Asian countries account for a third of Uzbekistan's total imports of food products.

The share of imports of fuel and energy products increased from 20% to 27% during the period under review. And in the total volume of imports of fuel and energy goods by Uzbekistan, the share of Central Asia increased from 32% in 2017 to 64% in 2021.

Ferrous metals are mainly imported in metallurgy, but their share in the total volume of imports from Central Asian countries decreased from 23% to 14% during the period under review. Uzbekistan imports mainly semi-finished products and flat-rolled products, bars made of iron and non-alloy steel.

In addition, in recent years, the volume of cement imports from Central Asian countries has increased by 5.8 times, and copper ores and concentrates by 17.6 times.

Conclusion

Uzbekistan's trade with Central Asian countries has undergone significant changes from 2017 to 2021. During the period under review, as part of Tashkent's open policy aimed at mutually beneficial cooperation, the volume of trade with neighbouring countries has significantly increased, and their share in the total trade volume of Uzbekistan has increased.

The strengthening of the role of Central Asian countries in Uzbekistan's foreign trade clearly shows that our economies, existing natural and climatic conditions, and resources complement each other. There is a significant potential for cooperation and the need to further increase mutually beneficial cooperation between the countries in order to achieve a synergistic and multiplicative effect for the dynamic growth of the economies of the Central Asian countries.

RUSLAN ABATUROV is chief researcher, Center for Economic Research and Reforms
under the Administration of the President of the Republic of Uzbekistan

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