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If war breaks out in Ukraine, Belarus will stand with Russia
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If war breaks out in Ukraine, Belarus will stand with Russia
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Multicolor textile revolution in Uzbekistan
Navoi Mining & Metallurgy Kombinat, the golden giant of Uzbekistan
Uzbekistan's economy is taking off. President Shavkat Mirziyoev, who had just been re-elected for five years, took office five years ago and initiated a radical reform plan. He reopened the country to the rest of the world. The government started frantically trying to modernize and build the country on the market. At the same time, the President initiated diplomatic efforts to better integrate Uzbekistan into the region and beyond, and tried to establish something similar to a common market with neighboring countries in the region. Now, all this work is beginning to bear fruit.
The visit to the country in October showed extraordinary progress. The entire cotton industry has achieved unspoken success-which has long been the backbone of the country's economy, and cotton cultivation is part of the country's symbol-has been completely privatized, and the entire industry has been privatized. The wheat industry also has important strategic significance and is also part of the national emblem. It is currently undergoing the same transformation and will be completed next year.
A series of banks are preparing for privatization. The first major bank, Ipoteka Bank, a mortgage specialist, has been sold to Hungarian investors, and 9 of the other 12 banks will soon be placed under the gavel.
But what is even more impressive is that every factory and kombinat visited during the tour is in or has completed an investment project to expand and modernize production to meet the rapidly growing demand and rapidly growing exports.
The abolition of currency controls in 2017 changed the foreign trade system, which meant that Uzbekistan's largest and best companies seized the opportunity to start exporting, and exports surged. Initially, the first round only involved the country’s close neighbors. Since then, foreign trade has expanded and now exports to the entire CIS (CIS), China, Turkey and even the African market. Goods made in Uzbekistan. In April, the country received the popular general preferential trade status for EU textile exports; this allowed it to sell cotton fabrics and fibers without tariffs or quota restrictions. Textile exports have more than doubled this year, and the privately-owned white goods manufacturer Artel has become the largest consumer gadget manufacturer in the entire CIS. Its factory is located in the ruins of the Kizilkum Desert and is becoming a truly international enterprise.
The feeling of optimism is obvious. The lives of ordinary people have improved substantially. Mirziyoyev's re-election on October 24 was criticized for not having any real opposition candidates at all, but according to voters surveyed by the publication, even if there is competition, he would have won an overwhelming victory. People are very satisfied with the progress of things and are happy to let Mirziyoev move on.
In an interview with bne IntelliNews, the Central Bank of Uzbekistan stated: “We are currently not facing major risks or difficulties. Our task now is to manage growth, allow the Republic to gain a foothold, and modernize the economy.”
When I first came to this country as a young reporter in 1995 to cover its first attempt to open up to the rest of the world, the country almost completely collapsed. The industry is not functioning. The currency has depreciated so badly that it is almost worthless. The inflation rate reached triple digits. The power went out and the shop was empty. Without open-air markets and legendary agricultural output in Uzbekistan, the situation of Uzbek citizens would be impossible.
The lifeline of the country's livelihood is cotton. As a major producer during the Soviet era, cotton exports are still the main source of hard currency income for the newly independent Uzbekistan, about 3 billion U.S. dollars a year.
Nonetheless, investors flocked to it because it is the largest and most populous country of the five so-called Stans (Tajikistan, Turkmenistan, Kyrgyzstan, Kazakhstan, and Uzbekistan), and has a lot to offer. The large population of 35 million and mainly young people makes it by far the largest retail market in Central Asia. As the only country that shares borders with all other steins-Uzbekistan is also one of only two dual landlocked countries in the world-making it a natural production and distribution center for the rest of the region. The lack of massive oil and gas resources means that it already has a relatively diversified economy based on industries such as textiles, manufacturing, gold mining, and food processing.
It should take off. However, when the country’s former President Islam Karimov received a trade opening bill in the form of a $1 billion trade deficit, he lost his composure. "We will not spend our hard-earned foreign exchange on imported chewing gum," he said in a famous speech. He suppressed and introduced strict foreign exchange controls, stifling business.
The next 20 years were a story of stagnation and self-sufficiency. Karimov tried to make the faltering republic function by using the tool he was most familiar with: a state-led, centrally planned and commanded economy. It is commendable that the economy has indeed made progress. The industry was rescued and a complex automobile industry was established, exporting its UzDaewoo cars to the entire CIS countries. After Daewoo collapsed a few years ago, it is now renamed UzAvto. The rise in gold prices has added another source of income, and Karimov has introduced some market reforms such as special economic zones, but this is not enough. Uzbekistan lags far behind its local rival Kazakhstan, even if it has not become a complete basket like Tajikistan and Turkmenistan.
Many people interviewed for this article praised the stability and improved living conditions under Karimov, who was not widely regarded as a dictator in the West. Of course, the new government did not demonize or severely criticize Karimov, but at that time Mirziyoyev served as his prime minister for several years, so the current government is more inclined to emphasize continuity.
The first stop of the tour is the remote western town of Nukus, a lost settlement in the desert of Qizilqum (aka Kyzyl-Kum) and the capital of Karakalpakstan, the birthplace of the Turkic people.
When I visited Nukus for the first time more than 20 years ago, a Turkish friend and I went to a Turkish friend who was running a UN project that provided women with chickens so that they could feed themselves by selling eggs, and at the same time Add some protein to your diet. The city was an ecological disaster. Over-irrigation caused the groundwater level to rise to the surface. The fields were covered with salt and spread on the ground like snow. The local company has no money. They pay their workers with bags of pasta so that they can at least eat something.
White goods manufacturer Artel established a Hoover assembly plant in Nukus under the license of South Korean consumer electronics giant Samsung during his tenure at Karimov in 2011, but has since expanded production to include some private label products, which are now not only It sells well in Uzbekistan but in the entire Central Asia and CIS countries.
After a short stop at Khiva, the transit station of the ancient Silk Road, we will head to Navoi, an industrial mining town where Muruntau, the world's largest open-pit gold mine, is located, as well as the large petrochemical plant NavoiAzot and the country's largest cement plant Qizilqumsement.
When I visited the gold mine 20 years ago, the city was a dirty and run-down place, with almost no shops, and almost no people on the streets, mainly Russians and Ukrainians, who knew the mining industry well in their hometown. The US Newmont Company has opened a gold processing plant that is processing thousands of tons of tailings from decades of gold mining in the Soviet Union. These tailings are still rich in yellow ore. A simple process turns the rock into gold. A sturdy shed next to the factory was piled with gold bars from floor to ceiling.
Today, the mine is booming. Newmont has long ceased to exist after a dispute with Karimov over the taxation issue, but the mine is still mining tailings, but is expanding its open-pit operations and is expected to increase production by 30% in the next five years. However, the main event will be its 100% privatization, that is, the stock will be sold on the open market. The enthusiastic director of the gold mine told bne IntelliNews that the gold mine will be privatized from January 1.
"We are 90% ready!" Chief Engineer Nikolai Snitka told bne IntelliNews in an interview. "This may start on January 1. The company has been reorganized and transformed into a joint stock company [JSC]. International consultants like McKinsey are currently auditing these assets. We want transparency and everything meets international standards!"
The international consultant McKinsey is currently auditing and appraising assets, but the company's restructuring has been completed and the sale of the company is waiting for the government's decision.
NavoiAzot has been investing in several new product lines and has just started producing PVC plastics that Uzbekistan has never produced before. The demand is so great that the company has launched a second project to more than double production with some Chinese investors. Previously, the company borrowed money to expand, but its business grew so fast. Now the company uses its own funds to invest, borrows from commercial credit or invites investors to participate.
The factory was built in 1977 as an old-fashioned cement factory in the Soviet era and the largest cement manufacturer in Central Asia. If the construction industry is one of the main driving forces of economic growth, then the frenzied activity of cement plants may be a good indicator of Uzbekistan's economic changes. As domestic demand exceeds the domestic supply of 6 million tons, Uzbekistan is forced to import cement. The huge silo of the original production plant is located behind the territory and continues to produce about 3 million tons of cement for the domestic market every year.
Qizilqumsement is investing US$112 million to add a fourth production line, which is the first major investment since 1986. As the new silos are towering high, the ground of the factory is full of materials and equipment, and more than half of it has been completed. 81% of the company's investment comes from retained earnings, and the remainder is used as a commercial loan from the Bank of Uzbekistan.
“In 1994, we had to close one of the three production lines because there was no demand,” said Abduqahhor Salomov, general manager of Kyzylkum Cement. "Today we cannot produce enough products. Even after the new production line is put into use, we will still produce at full capacity. You can feel the difference in this country."
This article comes from the monthly magazine of bne IntelliNews, covering business, economics, finance and politics in more than 30 countries in New Europe.
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