CPEC & Uzbekistan: The Bench mark of Regional Integration
China Pakistan Economic Corridor (CPEC) is the flagship project of Chinese One Belt & One Road Initiative (BRI) which is meant for greater regional connectivity, immense socio-economic integration and energy cooperation through infrastructural development. Both are projects of the century and have been termed as game and fate changer.
Drastic changes in regional security scenarios have started new game theory and, consequently, staged a new chessboard in which basic principles of political maneuvering, economic cooperation and diplomatic ties have been redefined. It gives rise to the concept of economic corridor and regional connectivity.
Moreover, changing dynamics of geopolitics have changed the composition of geo-economy in which Pakistan and Uzbekistan are at the forefront to achieve desired goals of regional stability, peace and harmony. CPEC has become a “benchmark” and the government of Uzbekistan, being an active and productive member of BRI, has shown keen interest in joining the CPEC. It is expected that the two-day visit of Uzbek President Shavkat Mirziyoyev to Pakistan will act as an economic stimulus and gear-up all sectors of the economy in the days to come.
Constant and a series of structural reforms since 2016 has transformed its national economy, productive channels, resources, society, governance and, above all, mechanism of human survival. It has substantially increased its economic competitive ratings. In this regard, the strategic vision of President Mirziyoyev has “revolutionized” its macro-economy and various sectors. It is hoped that the visit of President Mirziyoyev will further consolidate Pak-Uzbek bilateral relations and stimulate inflow of FDIs, imports & exports, joint ventures, transportation facilitations, energy cooperation and, above all, means of greater regional connectivity. In addition to this, structural reforms have now successfully “converted” it into an ideal hub of FDIs, joint ventures, industrialization and green energies through implementation of constant structural economic reforms.
According to Uzbekistan official statistics (2021) due to constant structural reforms the average annual investment growth rate was 22% during the last four years. The total volume of foreign investment reached $26.6 billion, including direct investment of $17.5 billion. Moreover, the total volume of investment over the past four years has increased by more than 2.1 times, including foreign investment by 2.7 times. The share of investment of GDP in 2019 exceeded 38% for the first time, which created a solid foundation for ensuring economic growth in the coming years. Thus CPEC has great scope in the Central Asian Region in which economic strength, stability and sustainability of Uzbekistan would be a game and fate changer.
Most recently, Chinese President Xi Jinping declared BRI green and thus opened a new chapter in its investment. It has a matching proposition in the shape of Uzbekistan which has made a commitment to reach carbon neutrality in power generation by 2050. It aims to develop power sources with low-carbon emissions, including solar, hydro, wind and nuclear, as well as modernize the electricity grid. There is a huge potential of future cooperation in the fields of “climate change”, “bio-diversity”, “ecological development”, “organic agriculture”, “water conservation” and last but not the least hybrid seeds between Uzbekistan and Pakistan in the days to come. So the visit of the Uzbek President will lay a foundation to counter threats of non-state actors in which CPEC phase-II consisting of green energy would play a vital role.
Furthermore, the energy sector of Uzbekistan offers numerous opportunities for investment. There are multiple major renewable projects. The government desires the share of renewable energy in energy generation to hit 25% by 2030. It seems that “economics of energy” has great befitting propositions for both countries and businessmen and investors of Pakistan should seriously avail this golden opportunity in Uzbekistan which should be tapped during the visit of the Uzbek President to Pakistan.
Moreover, most of the International Rating Agencies have upgraded Uzbekistan’s rating due to its successful economic diplomacy and external and fiscal buffers. Fitch Ratings (2021) predicted Uzbekistan’s economy to expand to 6.2% as accumulative figures get compiled for 2021. It also predicted that in 2022-23 growth will maintain strong momentum, to average around 5.7%. According to this report, Uzbekistan has drastically improved governance standards and dominance by reducing its presence in the economy, growth of private sector, rule of law, accountability, regulatory quality, continuation of various structural reforms and control on corruption. Thus, Uzbekistan has great potential to create bridges of investment, joint ventures, industrialization, energy cooperation and socio-economic integration between the two countries.
Interestingly, Uzbekistan has surpassed its neighbors in terms of economic recovery, high growth rate, gradual fiscal consolidation, continuing access to external financing, and reforms in agriculture, construction and industrial sectors. Thus Uzbekistan and CPEC have matching propositions to move forward and the visit of its President would catalyze the economic ties up to new levels of mutual cooperation and coordination.
Uzbekistan’s government reconsiders its investment policy to expand the number and scope of special industrial zones to accelerate the implementation of projects. Due to the activation of CPEC, Pakistan has rich experience of SEZs which should be shared with Uzbekistan for its further economic growth in different key sectors.
According to the latest Uzbek statistical data during 2021 total exports were $16.5 billion, an increase of about $1.3 billion compared to 2020. New projects worth $12.4 billion had been launched at the national and district levels. While net-tax receipts from products and export-import operations amounted to 7.4%, the added value in the projected gross domestic product amounted to 92.6% of GDP, with the largest share of value (35.8%) contributed by the service sector. Industries will bring 25.9% and construction 6.3%, followed by agriculture, forestry and fisheries making a combined contribution of 24.7%. Despite regional regression, recession and aggression and ongoing human sage of COVID-19 its macro-economy is on the stage of robust recovery which provides necessary strength and stimulation for CPEC greater integration with Central Asia Region.
Due to the strategic vision of President Shavkat Mirziyoyev, Uzbekistan’s position has improved markedly in a number of international rankings, including the Index of Economic Freedom, the World Bank’s Doing Business Index, the OECD Country Risk Rankings and the World Open Data Rankings.
Furthermore, the EU has granted Uzbekistan ‘GSP+’ trade beneficiary status and recently the UK did so too. The country is in the process of joining the WTO. Thus future economic prospects of Uzbekistan are healthy and positive. It is estimated that Uzbekistan’s GDP will grow by 6% in 2022.
The policy-makers of Uzbekistan should accelerate digital transformation. Investment in broadband infrastructure, digital skills and the information technology ecosystem is essential to enable remote working and learning for all groups of the population. The government should adjust reform priorities in the light of the post-Covid-19 situation.
Hopefully, President Shavkat Mirziyoyev’s visit to Pakistan during, starting from today, would be a “giant step” towards persuasion of greater regional connectivity, peace and stability and infrastructural development in which CPEC would play a vital role.
