Uzbekistan’s foreign economic policy plays an important role in the implementation of its economic reforms. The country actively supports Central Asian integration, became an observer state in the Eurasian Economic Union, and deepens its cooperation with the European Union and China. At the same time, Uzbekistan’s cooperation with the countries of South Asia such as Afghanistan, Pakistan, and India is widening. Therefore, this commentary aims to analyze the state and progress of the cooperation between Tashkent and its Southern partners.
Uzbekistan actively strengthens its economic partnership with Pakistan. In March 2022, the President of Uzbekistan Shavkat Mirziyoyev visited Pakistan. President Mirziyoyev and the Prime Minister of Pakistan Imran Khan signed a Joint Declaration on further steps to develop a strategic partnership. The two countries adopted 10 documents between the ministries and departments, including agreements on preferential trade, cooperation in the field of environmental protection, pilgrimage tourism, railways, and agreements between the regions and capital cities. In addition, within the framework of the business forum held on the eve of the visit, agreements were reached on the implementation of joint trade and investment projects worth $800 million. Over the past year, the volume of mutual trade between the countries increased by 50%, and by March 2022 the indicator surged by 70%. To date, 177 enterprises created with Pakistani investors operate in Uzbekistan. During the talks, the goal was set to increase the trade turnover to $500 million in the coming years, and in the long term to bring it to $1 billion [Podrobno.uz, 2022a].
Figure 1 shows the dynamics of bilateral trade between Uzbekistan and Pakistan. During the period 2003-2017, Pakistan’s exports to Uzbekistan demonstrated almost no changes and amounted to around $3 million. In 2018, the country’s exports to Uzbekistan jumped to $17.4 million, and in 2021 reached a record $48.9 million. Since 2017, Uzbekistan’s exports also have demonstrated positive changes. In 2021, the country’s supplies to Pakistan’s market increased substantially and amounted to almost $37.7 million, while in 2020 it was equal to $9.1 million. Data shows that bilateral trade between the two countries mainly consists of agricultural and food products. For instance, Uzbekistan’s local media reported that according to the results of January-February 2022, Pakistan became the main supplier of potatoes to Uzbekistan. Uzbekistan’s potato imports from Pakistan equaled 91.3 thousand tons, while from Kazakhstan and Kyrgyzstan the country purchased 12.6 thousand tons and 4.3 thousand tons, respectively. Moreover, in March 2022 Uzbekistan received the first shipment of meat from Pakistan worth $40 thousand (18 tons), and another 50 containers with meat with a volume of 900 tons were expected to be sent. The head of the Pakistani company Shaheen, Malik Sher Khan, notes that Pakistan began to look closely at the Uzbek market after the conclusion of the Preferential Trade Agreement [Podrobno.uz, 2022b].
Figure 1. Pakistan’s trade with Uzbekistan, million $
Source: The Author’s compilation based on the International Trade Center (2022) data
It is worth noting that India also sent commercial cargo to Uzbekistan. A truck convoy with 140 tons of goods, mostly sugar, has transited through Pakistan and was moving through Afghanistan. The shipment was privately arranged by the Indian side. The agreement on transit trade between Uzbekistan and Pakistan made it possible. For Uzbekistan, Islamabad has simplified transit for Uzbek truckers – trucks can enter the country without paying a deposit on entry fees. Mawlana Zahir, Minister of Industry and Trade of the Government of Afghanistan, called it an important step towards establishing trade links between South and Central Asia. It is important to note that in 2018, a format was created at the level of India-Central Asia foreign ministers. Its first summit was held in Samarkand [Nezavisimaya Gazeta, 2022]. Figure 2 shows bilateral trade between India and Uzbekistan. Data illustrates that exports of India increased substantially due to growth in supplies of pharmaceutical products. In particular, while in 2019 India’s pharmaceutical product exports amounted to $79.4 million, in 2020 and 2021 the indicator correspondingly equaled $167.7 million and $137 million. It is important to note that India’s exports to Uzbekistan also consist of machinery and agricultural products. Uzbekistan, in turn, supplies agricultural products and precious metals, which mainly consist of silver. However, India’s purchases of silver from Uzbekistan are not regular. For instance, in 2019 India’s imports of silver exceeded $81.5 million, while in the following period it stopped importing the product.
Figure 2. India’s trade with Uzbekistan, million $
Source: The Author’s compilation based on the International Trade Center (2022) data
One of the most important projects for the cooperation of Uzbekistan and the South Asian countries is the Termez – Mazar-i-Sharif – Kabul – Peshawar trans-Afghan railway, the cost of which is estimated at $5 billion. The 600 kilometers long railway will open access for the countries of Central Asia to the major seaports of Pakistan. It is expected that the transportation of goods from Pakistan to Uzbekistan through the railway will take 3-5 days instead of the current 35 days. Moreover, the cost of transporting one standard cargo container can be reduced by almost three times. The volume of cargo transportation along this route can reach 10 million tons. President of Uzbekistan Shavkat Mirziyoyev called the project a common future of the region [KUN.UZ, 2022a].
Uzbekistan’s role in the peace and future economic development of Afghanistan remains important. According to the United Nations data, today 24 million people in Afghanistan have reached the level of poverty, and 49% of the population is unemployed. It is important to note that Uzbekistan has sent humanitarian aid to Afghanistan four times. Moreover, the country is reconstructing the International Airport in Afghanistan’s Mazar-e-Sharif as it is the main transit area not only for the country but also for Asian and European countries. In addition, Mazar-e-Sharif is one of the major economic regions of Afghanistan and a distribution complex for almost all goods imported through Uzbekistan. As a result, communication between the two countries has been established at almost all levels [KUN.UZ, 2022b]. Uzbekistan is also an important supplier of electricity to Afghanistan. Annually, Afghanistan imports electricity worth $300 million, of which $108 million it pays to Uzbekistan [KUN.UZ, 2022c].
Therefore, South Asia remains an important region for Uzbekistan’s economic policy. The region is a huge export market for Uzbekistan’s producers. Through strategic logistic projects, Uzbekistan diversifies its exports, improves competitiveness, food and national security, and reduces political risks. Uzbekistan’s South Asia economic ties can significantly contribute not only to its economic growth but also to the development of the whole Central Asian region.
References:
International Trade Center (2022). Bilateral trade between Pakistan/India and Uzbekistan. Retrieved from https://www.trademap.org/Index.aspx. Accessed on 25.07.2022.
KUN.UZ (2022a) Practical implementation of the trans-Afghan railway project kicks off. Retrieved from https://kun.uz/en/news/2022/07/19/practical-implementation-of-trans-afghan-railway-project-kicks-off. Accessed on 19.07.2022.
KUN.UZ (2022b). Internal and external problems of the “Taliban” government, its friends, relationship with Uzbekistan – interview with Uzbek Ambassador to Afghanistan. Retrieved from https://kun.uz/en/news/2022/07/12/internal-and-external-problems-of-taliban-government-its-friends-relationship-with-uzbekistan-interview-with-uzbek-ambassador-to-afghanistan. Accessed on 12.07.2022.
KUN.UZ (2022c). Afghanistan owes over $100 million to Uzbekistan and Tajikistan for electricity. Retrieved from https://kun.uz/en/news/2022/05/19/afghanistan-owes-over-100-million-to-uzbekistan-and-tajikistan-for-electricity. Accessed on 19.05.2022.
Nezavisimaya Gazeta (2022). India opened a trade route to Uzbekistan. Retrieved from https://www.ng.ru/cis/2022-03-21/5_8396_uzbekistan.html. Accessed on 25.03.2022.
Podrobno.uz (2022a). Uzbekistan and Pakistan signed about 10 documents, including the Preferential Trade Agreement. Retrieved from https://podrobno.uz/cat/politic/uzbekistan-i-pakistan-podpisali-svyshe-10-dokumentov-v-tom-chisle-soglashenie-o-preferentsialnoy-tor/. Accessed on 07.03.2022.
Podrobno.uz (2022b). Pakistan has started deliveries of meat to Uzbekistan. Retrieved from https://podrobno.uz/cat/proisshestviya/pakistan-nachal-postavki-myasa-v-uzbekistan/. Accessed on 18.03.2022.
Note: The views expressed in this blog are the author’s own and do not necessarily reflect the Institute’s editorial policy