CPEC and Uzbekistan: Prospects of Greater Regional Connectivity & Socio-Economic Integration | By Dr Mehmood

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CPEC and Uzbekistan: Prospects of Greater Regional Connectivity & Socio-Economic Integration

The China-Pakistan Economic Corridor (CPEC) has “brightened” the prospects of greater regional connectivity and socio-economic integration with the Central Asian Region in which the Republic of Uzbekistan has played an important role. It has now become an “effective” and “sustainable” connecting hub between Central Asia and South-East Asia.

In this connection, a trans-regional mega project of railway amounting to US$ 4.5 billion will connect Uzbekistan, Afghanistan and Pakistan which will hopefully “revolutionize” all the regional economies. The ML-1 has already been approved and “included” in the CPEC Phase-II which would be clubbed with a trans-regional railway project in the future. It would connect Termez-Mazar-e-Sharif-Kabul-Peshawar and Karachi. Ultimately it would further enhance connectivity of Central Asia with Southeast Asia, Middle East, Europe and the Caucasus. It would be a lifeline for an integrated Eurasia.

The most recently published report of the World Bank (December 2022) approved the “Advancing Uzbekistan’s Economic and Social Transformation Development Policy Operation” which supports the continued implementation of economic and social reforms in Uzbekistan. Hopefully these structural reforms will help support an inclusive transition to a private-sector-led economy by strengthening market institutions and ensuring all citizens take part in the benefits of economic growth.  It appreciated Uzbekistan’s government’s strong commitment to constantly implement crucial reforms despite a challenging situation globally and in the Europe and Central Asia region.

Undoubtedly, Uzbekistan has made impressive economic development gains over the past five years by relentlessly pursuing the path of market-oriented reforms. It will need to sustain momentum to achieve its ambitious goal of reaching upper-middle-income status by 2030.

According to the latest report of the IMF (November 2022) continuation of structural reforms since 2017, Uzbekistan has become much more resilient to external socio-economic and geopolitical shocks. Its GDP is projected to expand by 5.3 percent in 2022. Uzbekistan will be one of the fastest growing of the Europe and Central Asia region’s 23 countries, along with Armenia, Croatia, Georgia and Montenegro. Interestingly, its GDP is projected at 4.9 percent next year, currently the region’s highest forecast growth rate.

Critical analysis reveals that Uzbekistan has an impressive record of market-oriented reforms. In the last five years, it has streamlined and systemized a  foreign exchange mechanism and trade restrictions, liberalized prices and improved the business environment which has attracted substantial inflows of FDIs in the country.

Moreover, an overhaul of the tax system has made the budget more transparent and oriented to the socio-economic basic needs of vulnerable groups. Inflation targeting and new fiscal rules will help keep consumer prices and public debt in check which is indeed a good omen for its economic stability and sustainability.

Uzbek President Shavkat Mirziyoyev has initiated “holistic” and comprehensive structural reforms to strengthen social protection systems in the country which has reduced the economic development gap between urban and rural regions. Financial freedom, allocation of funds, transparency and utilization mechanism have been implemented throughout the country which has now transformed its overall economic outlook in the region and beyond.

Moreover, since January 2020, the Uzbek Government has more than doubled the number of poor households receiving social assistance, helping them to get back on their feet (0.6 million in 2019, 1.2 million in 2021, and nearly 1.8 million beneficiary households by April 2022) which has further reduced the poverty ratio in the country.

For the further strengthening of bilateral relations and achieving the desired goals of socio-economic integration and greater regional connectivity, the Uzbek Deputy Prime Minister, Minister of Investment and Foreign Trade Khodjave Jamshid Abdukhakimovich visited Pakistan and met with various federal ministers and signed a number of MOUs.

In this connection, Federal Minister for Commerce Syed Naveed Qamar has signed nine different MoUs with Uzbek Deputy Prime Minister, Khodjave Jamshid Abdukhakimovich. During the meeting it was mutually decided to prepare an action plan to enhance the trade turnover to USD 1 billion. Both agreed to a joint action plan proposed by Uzbekistan.

The two sides agreed to implement the Pak-Uzbekistan Preferential Trade Agreement from February 1, 2023. Uzbekistan will complete internal formalities by Jan 2023 while Pakistan has already completed them. Both sides agreed to start awareness sessions for business communities of the two countries.

Furthermore, both sides also agreed to the implementation of a transit trade agreement between the two countries. The notification of rules is now awaited from the Uzbekistan side in February 2023. Both sides would take up all the issues with Afghanistan during a visit to Kabul to address the problems being faced by the Pakistani/ Uzbek Transporters.

Moreover, they also agreed to formulate a joint strategy for transit trade through Afghanistan. A regional understanding on Transit and Trade Framework would be prepared including creation of a joint fund/mechanism for upkeep of road infrastructure in Afghanistan.

 The Pakistani side extended its full support for the Uzbek side’s inclusion in the WTO during 2023. The Uzbek side requested for an off dock terminal for Uzbek Cargo at Karachi and Gwadar for which Pakistan offered full facilitation. Both sides agreed to organize trade exhibitions in each other’s country and prepare strategy for e-commerce cooperation. They also agreed to finalize MRA for SPS measures on a priority basis. The Uzbekistan delegation informed the Pakistani side about the incentives offered by Termiz Economic Zone, while Pakistan agreed to disseminate information to the business community about it. Earlier in a meeting between Finance Minister Ishaq Dar and Uzbekistan Deputy Prime Minister Khodjaev Jamshid Abdukhakimovich agreed to explore possibilities for establishing road and rail links between the two countries.

The delegation comprised Kudratov Laziz Shavkatovich, 1st Deputy Minister-Ministry of Investment and Foreign Trade, Mahkamov Ilkhom Rustamovich, Minister of Transport, Siddikov Furqat Ahmedovich, 1st Deputy Minister- Ministry of Foreign Affairs, Yuldashev Kahramon Anvarjanovich, Deputy Minister-Ministry of Agriculture, Ergashev Ibrohim Kenjaboevich, Chairman Agency of Plant Protection & Quarantine and Oybek Arif Usmanov, Ambassador of Uzbekistan to Pakistan.

To conclude, both countries enjoy cordial and brotherly relations based on common faith, shared history and cultural affinities. Policy makers and private sectors of both countries should participate in “constructive strategic dialogue”. There are immense potential for cooperation in economic and investment sectors which should be “channelized” and “diversified” to achieve optimal levels of bilateral trade and economic linkages between the two countries.

Sincere efforts should be made to promote various economic corridors in terms of “aviation”, “TIR”, “Cluster transport trading facilities”, a road and “rail link” between the two countries through Afghanistan.

In this regard, improvement of road infrastructure from Tashkent to Pakistan, Pakistan-Afghanistan-Uzbekistan Rail link, export/import facilitation, etc. should be expedited. For further strengthening of bilateral trade relations the establishment of “Reciprocal Trade Houses” in Tashkent and Karachi may be a value addition. Moreover, the same model of mutual cooperation may also be applied in “Special Economic Free Zones” in “Navoi” and “Gwadar”.

Both sides must cooperate in further strengthening of “financial and banking” sectors. Qualitative cooperation in e-commerce, digitalization, science & technology, automobile, pharmaceutical, agriculture, IT, industrialization, green energy, higher education and last but not least health should be further strengthened to achieve the desired goals of immense socio-economic integration and regional connectivity through CPEC-BRI platform in the days to come.

From ideal strategic “geographies” to converging “geo-political understanding” and from “genie of geopolitics” to “gamut of geo-economy” both countries are getting momentum to make bridges of mutual trust, cooperation, coordination and connectivity. It is hoped that the “grand economic agenda” and “regional strategic priorities” of President H.E. Shavkat Mirziyoyev will further accelerate economic ties between the two countries.

It seems that CPEC has great potential in Central Asia and its synergies with other existing regional connectivity projects, both regions get the chance to cooperate with each other to expand economic relations and to overcome financial and energy deficits in which strategic partnership between Pakistan and Uzbekistan would play very important role in the days to come.