What is next for Uzbekistan?


Opening trade and financial channels with the rest of the world is essential for Uzbekistan to become a sound economic player.

What is next for Uzbekistan?

by Anna Poplasky

MBA Candidate at Cornell University, Emerging Markets Institute Fellow
Associate at the Davis Center for Russian and Eurasian Studies at Harvard University

2,500 years of being the storefront for the Silk Road made Uzbeks kind, giving, and open to change. The death of President Islam Karimov who ruled the country for 25 years has created uncertainty and the potential for positive changes. President Karimov’s history of dealing with external and internal conflicts with extreme methods of governance labeled him a dictator. The human rights violations such as forced labor, gender discrimination, and imprisonment of political opposition leaders must become something of the past – a past that included the occupation by the Soviet Union and its collapse, the Russian and U.S proxy wars of neighboring Afghanistan, and the rise of Islamic extremism.

Rather than view Uzbekistan in the context of political dictators or human rights abuses it would be more accurate to view it through its culture. A culture very similar to that of Turkey in its religious freedoms, a geo-strategic position, and inward focus on stability. Clearly, the average Uzbek longs for changes but where to start?

Uzbekistan is the largest republic in the central Asian region which has a potential to become the largest economy in the region with an attractive consumer market of 32 million people.

The country had a per capita GDP of USD 1,900 and PPP equivalent of USD 5,340 in 2013. According to government and alternative sources, 17 percent of the population live below the poverty level, 5.1 percent are unemployed, and approximately 50 percent of the employed population have low-productivity and low-income jobs.[1] Economic production is concentrated in commodities: Uzbekistan is now the world’s sixth-largest producer and the world’s fifth-largest exporter of cotton and the seventh world major producer of gold. It is also a regionally significant producer of natural gas, coal, copper, oil, silver and uranium.[2] Over the years, Uzbekistan has been trading with Russia, China, Kazakhstan, South Korea, and Turkey.

Despite government efforts to attract foreign capital, foreign investments have been sagging over the past decade. The challenges investors face are complex – they include high corruption, underdeveloped and unregulated banking sector, lack of reliable information, and high taxes. The government retains strong control over all economic processes and key industries, such as energy, telecommunications, airlines, and mining.

Uzbekistan has the largest labor force in the region – potentially about eighteen million, or 58 percent of the total population. At 97 percent, literacy is nearly universal and close to 45% of the population is under 25 years old.[3] Over the past decade, however, there has been a dramatic increase in the number of workers migrating to other countries, notably Russia, Saudi Arabia, and Kazakhstan. The young people of Uzbekistan need to come together and build a voice in the new government. The economic and political success of neighboring Kazakhstan should be a model to consider. Kazakhstan is an active participant in global organizations including warm relations with the West. Neither China nor Russia have shown particular dominance in Uzbekistan during Karimov’s leadership. The time for western influence is now.

The new government must make structural reforms to improve the investment climate for foreign investors, strengthen the banking system, and develop public infrastructure. Stabilizing the currency will reduce the need for the black market. Opening trade and financial channels with the rest of the world is essential for Uzbekistan to become a sound economic player.

As an Uzbek I hope world leaders are ready to help guide the next 25 years.

Link to Al-Jazeera interview: https://www.youtube.com/watch?v=FvIZIkOSg8E&feature=share

[1] Investment Climate Statement, Bureau of Economic and Business Affairs, 2015

[2] Guide to doing business and investing in Uzbekistan, PwC, 2014

[3] Investment Climate Statement, Bureau of Economic and Business Affairs, 2015

Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views and position of any Emerging Markets Institute personnel.