Uzbekistan on the New Silk Road

Photo: iStock

Bálint Ráczkevi 01/08/2023 06:00

In the last two decades, Central Asia's economic and geopolitical role for Europe has increased significantly. The five countries of the region owe this not only to their fortunate geographical location but also to their dynamic economic development.

Uzbekistan, along with Kazakhstan, is a leading player in the Central Asian economy. After the break-up of the Soviet Union, Central Asia emerged as a new geopolitical region in the world economy. This region traditionally includes five former Soviet republics - Kazakhstan, Uzbekistan, Tajikistan, Turkmenistan and Kyrgyzstan - rich in raw materials and energy resources such as oil, gas, coal and uranium. Central Asia is now an important transport hub in the middle of the Eurasian supercontinent, as the Belt and Road (BRI) linking China to Europe passes through the region. Central Asia's geography and natural resources mean that its countries could increasingly become the focus of great power games.

Since his inauguration in 2016, Uzbek President Shavkat Mirziyoyev has pursued an open foreign policy and his reforms have led to social and governmental modernisation and economic development. The first important measure taken by the new president was the convertibility of the Uzbek national currency, the som. According to the independent news organisation Eurasianet, this was a major blow to the black market in particular. According to statistics, the openness of the Uzbek economy has increased to 20%, resulting in a dynamic increase in foreign trade.

Exports have tripled, although the export of goods is still essentially characterised by the export of raw materials. Natural gas is Uzbekistan's number one export. Natural gas, non-ferrous metals and cotton together account for 67.6% of exports. Exports of various non-ferrous metals, mainly gold, account for 25%. In addition, Uzbek agricultural exports are also significant: mainly cotton, vegetables and fruits. The main markets for Uzbek exports are Russia, China and Turkey. However, the EU's share of 3.7% is very low and needs to be improved.

These figures confirm that Uzbekistan is now one of the most developed countries in Central Asia. The spectacular results of foreign policy openness and liberalisation have led The Economist magazine to award Uzbekistan the title of "Country of the Year" in its 2019 annual report.

This honour is given each year to the country that has made the most progress in political and economic reform among the world's states. Till Lauer's striking graphic symbolises the steps taken on the road to progress.

According to the publicist for The Diplomat, the most spectacular paradigm shift in President Mirziyoyev's foreign policy has been in the area of neighbourhood policy, where he has visited the leaders of all his neighbours in the first year of his presidency.

Pál Gyene believes that Mirziyoyev's foreign policy opening could fundamentally change the dynamics of competition and cooperation in post-Soviet Central Asia.
Another important question is Uzbekistan's relationship with the major powers in the region.

The possibility of joining the Eurasian Economic Union (EAEU) has been raised in the past.

László Vasa considers the Eurasian Economic Union to be the most viable geopolitical and geo-economic project in the post-Soviet space. He notes, however, that the fundamental aim of the EAEU is to increase Russia's international weight. The member states have entered into a kind of union not with each other but with Russia. So each of the EAEU member states is more dependent on Russia than on each other. President Mirziyoyev has delegated the final decision on membership to the parliament in January 2020. Umida Hashimova reported in The Diplomat that on 28 April, Uzbekistan's parliament approved the government's proposal to become an observer state of the Eurasian Economic Union. A year later, Mirziyoyev told an annual meeting of the EGU heads of state and government that he would like to see greater trade and investment between Uzbekistan and EAEU member states. He also wants greater movement and job opportunities for Uzbek workers. In other words, he wants his country to receive trade, financial and labour migration benefits that are typically reserved for member countries. Uzbekistan seems to be in no hurry to apply for full membership. The socio-economic development concept foreseen for the period up to 2030 only includes a coherent study of accession to the EAEU.

Mirziyoyev prefers the Chinese-dominated Shanghai Cooperation Organization (SCO), which Uzbekistan joined when it was founded in 2001. According to László Vasa, the ultimate goal would be the creation of a free trade area, which Russia does not support.

Since 1991, large Chinese companies have invested billions of dollars in Uzbekistan, mainly in transport infrastructure and telecommunications. Infrastructure development is badly needed because Uzbekistan has a poor logistics performance index (LPI): Hungary ranks 32nd in the world in terms of logistics, Kazakhstan 77th, while Uzbekistan is only 117th. Chinese investment has received a new boost with the announcement of the BRI in logistics investment. From a trade perspective, the 'Middle Corridor' has been upgraded, linking Uzbekistan as a 'new silk road' into the main flows of world trade.

Uzbekistan is increasingly seeking an active role in foreign policy, e.g. in the Organisation of Turkic States (OTS). On 30 April 2018, Uzbekistan officially joined the OTS, making Uzbekistan the second largest member of the Turkic Council. According to a correspondent for The Diplomat, membership currently offers little benefit to Tashkent, as the Turkic Council is primarily a political organisation. The most notable joint tourism project is the Modern Silk Road Joint Tour Package. Tashkent is considering the introduction of a Silk Road visa with several Central Asian countries to develop tourism in the ASEAN member countries.

Photo: iStock

Hungary is a member of the Turkic States Organisation. In his analysis, László Vasa points out that the search for Turkish links is in fact an integral part of the "multi-vectoral" strategy of the Hungarian foreign economy. The member states of the Turkic Council are resource-rich, economically open, but in terms of infrastructure they need to be developed, which makes them an excellent foreign trade partner for Hungary. A fruitful cooperation between our country and Uzbekistan has recently started and is likely to continue in the future. According to Foreign Minister Péter Szijjártó, the two countries have created the necessary conditions for this, e.g. a strategic partnership agreement has been signed.

Another important step was the opening of a Hungarian embassy in the Uzbek capital, Tashkent. To create a stable financial basis, OTP Bank will acquire the Uzbek Ipoteka Bank, Uzbekistan's fifth largest bank. Investments in agriculture and food will soon be launched in the production of animal feed and cattle breeding. Hungarian pharmaceutical exports will also increase. Richter has been present in Uzbekistan for 25 years, where it is the 13th largest player in the market. Hungary is also expected to play a significant role in boosting Uzbekistan's nuclear energy production. Uzbekistan is building a new nuclear power plant and the design of the cooling system is based on a Hungarian patent.

All these achievements and plans prove that Hungary's policy of opening up to the East was worthwhile. In the future, both countries are likely to benefit from the development of Hungarian-Ukrainian relations.

The author is a student at the Budapest Metropolitan University (METU)

#Uzbekistan #Central Asia #SCO #EAEU #OTS

Uzbekistan on the New Silk Road

In the last two decades, Central Asia's economic and geopolitical role for Europe has increased significantly. The five countries of the region owe this not only to their fortunate geographical location but also to their dynamic economic development.

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