Uzbekistan relocates production of its goods to Kyrgyzstan
Uzbekistan relocates the production of cars to Kyrgyzstan and opens a joint structure set up for cotton processing, textile production and tailoring in the republic. These are the first steps of the roadmap on trade, economic and investment cooperation, signed in Osh by the heads of government of the two countries, Abdulla Aripov and Muhammedkaliy Abylgaziyev. However, border issues remain unresolved.
Kyrgyz Minister of Economy Oleg Pankratov told journalists about the plans for future cooperation between Bishkek and Tashkent. According to him, the parties are discussing the possibility of opening an assembly shop for the production of cars in Kyrgyzstan. Uzbekistan already has experience in relocating production to neighboring countries, in particular, to Kazakhstan. A joint venture was established on the basis of the two countries' leading factories - GM Uzbekistan, SamAuto and Asia-Auto. According to experts, this is an attempt by Uzbek automakers to circumvent restrictions on the export of Uzbek cars within the EEU, where Uzbek cars are subject to serious restrictive measures, related to the localization of passenger cars production.
In the case of Kyrgyzstan, as noted by Oleg Pankratov, in addition to membership in the EEU, the republic is a member of the WTO and participates in the GSP+, which enables Kyrgyz exporters to deliver goods to the EU at zero tariff rates, that is, virtually duty free. "Without possessing geographic preferences, our country is a confident competitor in Central Asia," Pankratov noted. The minister stressed that Uzbekistan is interested in entering the European market, but does not yet have such status. He also noted the difficulties of entering the EU market. "Unfortunately, there are other problems in trade, besides tariffs. There are many other factors affecting trade volumes. It is very difficult to multiply trade volumes to the European Union because we are far away and the transport leg increases the cost of our products," Pankratov said. The minister added that the second reason is the EU's complicated technical regulation procedures. "The requirements themselves are not as complicated as the procedure for confirming the compliance of goods with the regulations. This also complicates the EU markets entry by our products. Nevertheless, even by removing barriers in the form of tariffs, we were able to increase exports and became more interesting for investors," the minister noted.
In the meantime, Kyrgyzstan imports cars, agricultural machinery, mineral fertilizers, cable products, rubber products, ceramic tiles, yarn, linen and even lemons from the neighboring country. As for the Kyrgyz products going to Uzbekistan, its list is limited. At the meeting in Osh, the resumption of potato supplies was discussed. The parties agreed to speed up the procedure for issuing permits for the import and export of regulated products. There have been cases of raw materials supplies from the quarries located in the southern regions of Kyrgyzstan. In a short time, the trade turnover between the countries doubled and reached $325 million.
The researcher at the Center for the Study of Central Asia, the Caucasus and Urals-Volga Region of the Institute for Oriental Studies of the Russian Academy of Sciences, Alexander Vorobyov, told Vestnik Kavkaza that Uzbekistan is interested in Kyrgyzstan primarily due to its market and as a transit country. "The republic is part of the EEU. But it is perceived as an outsider in this integration union, because Kyrgyzstan cannot yet offer a large range of its products to the EEU market. Therefore, it uses its transit potential," the expert noted. This is a good niche for Uzbekistan, which it can enter with its products. And for Kyrgyzstan, it also creates jobs.
According to Vorobyov, expanding cooperation is a useful step for both Kyrgyzstan and Uzbekistan. In addition to the economic dimension, there is also a political one: good first-person relations will promote the development of industries in Kyrgyzstan. In addition, Uzbekistan will strengthen its influence in the neighboring republic, especially since 14% of southern Kyrgyzstan's population are ethnic Uzbeks. Diaspora becomes an instrument of Uzbekistan's influence in Kyrgyzstan. Which means that many citizens will be provided with jobs.
Kyrgyz MP Ulan Primov, speaking with Radio Azatlyk (Radio Liberty), noted that it is important for Kyrgyzstan to use the potential of a strong Uzbek economy and the country's investment opportunities. "We must learn from their success and share our achievements with them. At the same time, Kyrgyzstan should always put its national interests first in cooperation with any state. For example, we are interested in buying many Uzbek goods. Their fruit and vegetables ripen 15-20 days faster than in Kyrgyzstan. This year, Uzbek farmers managed to sell their agricultural products through us not only to our market, but even to the EEU markets. And this situation had a negative impact not just on the Kyrgyz peasants. Our government has failed to take timely and necessary measures to protect interests of domestic farmers," the MP said.
If on trade and economic cooperation the two countries' delegations had no disagreement, then the border issues have yet remain unresolved. The delimitation of the Kyrgyz-Uzbek state border is planned to be completed in the near future, in order to begin the demarcation process. The heads of Uzbekistan and Kyrgyzstan signed an agreement on on coordination of 85% of the Uzbek-Kyrgyz border in September last year. Issues on the remaining 15% of state borders linked to enclaves/exclaves remain unresolved. This not only creates tensions at the local level, but also contributes to the preservation of gray areas on the border, where criminals are more powerful than public authorities. Moreover, the successful resolution of border issues would be pretty convenient for Kyrgyz President Sooronbai Jeenbekov, whose administration has recently been experiencing difficulties with successes that could be reported to the public.
"Bishkek has other concerns - fierce political battles around ex-President Almazbek Atambayev, who criticizes the new head of state. This provokes a political crisis. Local politicians consider these fights as something titanic and epoch-making. However, in reality they are just political microbiology, which has remote connections to the real problems of Kyrgyzstan. There is no doubt that these controversial 15% will still be involved in the legal space, but thanks to Tashkent's efforts and emerging economic realities," Deputy Director General of the Center for Strategic Estimations and Forecasts Igor Pankratenko told Vestnik Kavkaza.