BRI and Comparative Advantage of Uzbekistan: An Expert Opinion
Rapidly changing “priorities”, “parameters” and “fault-lines” of regional geopolitics and global geostrategic conflicting equations & alliances have reaffirmed the importance of greater regional connectivity.
Thus Chinese One Belt & One Road Initiative (BRI) vividly reflects its strategic importance, utility, scope and futuristic value-addition for immense socio-economic integration, massive infrastructural development, transportation connectivity and, above all, inflows of foreign direct investment.
In this connection, the “jewel” and “catalyst’ of Central Asia integration, Uzbekistan has a special status in the BRI.
According to data provider Refinitiv (2021) the value of BRI’s road projects has exceeded to more than US$4.5 trillion for the first time. Among these, 1,590 projects valued at US$1.9 trillion were BRI projects.
The BRI was announced in 2013 aimed to improve international transport infrastructure and increase economic integration.
It was meant to achieve better transport connections and greater economic integration through substantial Chinese financing of transport infrastructure and other complementary infrastructure in the BRI countries, better policy coordination among those countries and larger flows of outward foreign direct investment (FDI) from Chinese private firms and SOEs, all aimed at promoting orderly and free flow of economic factors, highly efficient allocation of resources and deep integration of markets.
In this connection, Uzbekistan is “well placed” and is now rated as one of the “biggest beneficiaries” of the BRI.
It seems that ongoing structural reforms in the country have now further “consolidated” its position as regional “connecting hub”.
The financing and support for building common cross-border transport network provided by BRI has actually revolutionized its transport connectivity.
It is estimated that completion of numerous mega transport projects of the BRI will “drastically” reduce “shipment time” and the rise in exports of Uzbekistan. It will further enhance trade facilitation and logistics services.
It will reduce Uzbek shipment time by almost 15 percent, the largest reduction among BRI countries. Falling shipment time will in turn raise Uzbek exports by between 13 and 23 percent.
Uzbekistan is blessed with rich resources with a relatively young population of 33-34 million, the largest in Central Asia.
It is a geographic axis for the region, bordering all other Central Asian countries and Afghanistan, with transit connections in all directions. It has also a large industrial labor force with good manufacturing skills, better than most countries in the region.
Moreover, it also has a robust agricultural sector that has increased at an average annual rate of more than six percent since 2003. The strongest growth has come from crops other than wheat and cotton, mostly from horticulture.
The transport infrastructure of Uzbekistan has been improving since 2000 and the BRI offers the prospect of improving it substantially. Its cargo transportation depends more on road than rail because of the difficult mountainous terrain.
The BRI increasing investment in transport projects along six BRI corridors connecting China by rail to cities in Russia, Europe, Turkey, Iran, West Asia, South Asia and South East Asia.
Two of those BRI corridors transit through Central Asia and the Caucuses (CAC) region using five different routes to connect China to Europe, Turkey, Iran and West Asia.
Of these, two routes pass through Uzbekistan connecting its cities to China and Iran faster than before. Tashkent can also use the other routes through Kazakhstan to connect more speedily to Europe.
Hopefully, improved cross-border transport connections/corridors can stimulate growth and reduce poverty.
The BRI infrastructure projects can be a main actor for increasing Uzbek exports, FDI, and GDP because of its constant structural reforms and business/investment friendly policies. In addition to this, Uzbekistan is already implementing reforms and plans to continue doing so to build a more open and market-oriented economy.
On its part, the BRI is opening the corridor to the Persian Gulf, enabling expansion of commercial and trade routes for the country. Exporting Uzbek goods to more regions is a highly attractive incentive for Uzbekistan.
In this connection, at the First Belt and Road Forum held in 2017 both Presidents, Shavkat Mirziyoyev of Uzbekistan and Xi Jinping of China, spoke positively of future collaboration in BRI advancement.
During those meetings, the two countries signed 115 deals worth more US$23 billion on enhancing their cooperation in electrical power, oil production, chemicals, architecture, textiles, pharmaceutical engineering, transportation, infrastructure and agriculture.
In 2019 Uzbekistan established a new government group in charge of aligning their own country’s development plan with China’s BRI ambitions.
China is Uzbekistan’s largest trade partner (both in imports and exports) and has more than 1,500 Chinese businesses within its territory. In 2018, China-Uzbekistan trade surged 48.4 percent reaching US$6.26 billion.
Uzbekistan is also a significant Central Asian market, with a GDP of US$276 billion and a per capita income of slightly less than US$10,000, about the same as China but five times higher than the South Asian average. This has the potential of making Uzbekistan an “attractive” market for South Asian exporters.
Trans-railway project connecting three regional countries: Uzbekistan, Afghanistan and Pakistan, was agreed last year between the governments of Uzbekistan, Afghanistan and Pakistan.
Total estimated cost of this project is US$5 billion and it will provide access for Uzbekistan to Pakistani seaports on the Arabian Gulf. It is part of the Quadrilateral Traffic in Transit Agreement (QTTA) which also links to the CPEC. In Uzbekistan, the deal has been called the “event of the century” by Tanzila Narbaeva, the Chairman of the National Senate.
Moreover, the China-Ferghana Valley Railway route would connect east with Kyrgyzstan through an existing rail line connecting Uzbekistan’s Andijan to Osh in Kyrgyzstan.
A southern route would cross Kyrgyzstan and enter China at the Erkeshtam border crossing, near to Kashgar.
In time, that could possibly connect south to another proposed railway running from Kashgar to Gilgit in Pakistan, joining Pakistan’s national rail network and again through to Ports on the Arabian Sea.
To conclude, Uzbekistan is full of the “romance” of the old “Silk Route” with ancient and internationally famous cities such as Samarkand, Tashkent and Bukhara all in possession of Central Asian myths, beauty and romance.
Uzbekistan with the “largest” and “youngest” labour force in the region and considerable agricultural and manufacturing capacity, the potential for significant BRI dividend is high.
It is suggested that policy makers of Uzbekistan should further transform macro-economy through systemized liberalization, privatization, public-private partnership, channelization & operationalization of domestic savings, trade facilitation and logistics, export oriented policies/growth, attraction of FDIs and removing sector-specific constraints to expansion in agriculture and manufacturing, so that FDI and exports can respond to BRI improvements.
It is also suggested that to reduce the spatial concentration of benefits from BRI, policies Uzbekistan must encourage worker mobility and expand access to services across the country.
Moreover, the visit of Uzbekistan’s President Shavkat Mirziyoyev to Pakistan next month (March) will further widen its trans-regional connectivity options, economic diversification, foreign policy dividends and last but not the least, security strategies to fight against terrorism, radicalization, economic terror financing and drugs & human trafficking in the days to come.
