Uzbekistan
In-depth country-focused analysis on Uzbekistan's economic, political and operational risk environment, complemented by detailed sector insight

Our comprehensive assessment of Uzbekistan's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect Uzbekistan, as well as the latest industry developments that could impact Uzbekistan's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in Uzbekistan before your competitors.

Country Risk

Uzbekistan Country Risk

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CORE VIEWS

  • Kazakhstan will not face the Russian annexation of regions heavily populated by ethnic Russians as occurred in the Ukrainian region of Crimea in early 2014. While northern Kazakhstan does have a high proportion of ethnic Russians, any aggressive action by Russia would spark backlash from rising regional power China, and put on hold any expansion of the Eurasian Economic Union.

  • Kyrgyzstan's reliance on gold exports and workers' remittances from Russia will mean the economy remains vulnerable to external shocks in the years ahead. In 2014 and 2015 the drought in northern Kyrgyzstan combined with increased demand from Russia for Kyrgyz agricultural imports will see food price inflation rise, subduing private consumption growth.

  • Despite an increase in violence along Turkmenistan's Afghan border, and more...

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Uzbekistan Operational Risk Coverage (9)

Uzbekistan Operational Risk

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BMI View: There are several pertinent security risks to foreign workers and business operations in Uzbekistan. Although the country does not have particularly high crime rates, organised criminal gangs retain some degree of influence, and the capacity of the police services is limited. A more significant threat is posed by terrorist activity and regional insecurity, with Uzbekistan located in the volatile Central Asian region, sharing a border with Afghanistan. Islamist terrorist groups pose a threat to Western visitors and businesses , and   t he heavy handed security forces of President Karimov's regime have not been able to prevent terrorist attacks from occurring. Consequently, Uzbekistan is one of the lowest scoring countries in the Emerging Europe region for our overall Crime and Security Risk Index, with 30.4 out of 100...

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Uzbekistan Crime & Security

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Uzbekistan poses a high degree of security risks to foreign business travellers, expatriates, and tourists. For the most part, the greatest risks to these groups are petty crime such as pick-pocketing and theft, rather than violent crimes. Uzbekistan's murder rate, at 3.7 per 100,000 in 2012, was significantly lower than its fellow Central Asian republics Kazakhstan and Kyrgyzstan, where the rate is around nine per 100,000. Organised crime and drug-related crime also exist in Uzbekistan, but are unlikely to affect foreigners. Corruption is a major problem in Uzbekistan, and erodes the integrity of the country's law enforcement agencies.

Terrorism poses a significant threat to the Uzbek state, and combating this is arguably the government's top security priority. The main threat has stemmed from the Islamic Movement of Uzbekistan (IMU), although a major crackdown drove its militants into neighbouring countries. Uzbekistan's adjacency to...

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Uzbekistan Labour Market

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There are significant risks to investors associated with both the labour market and the education system, with particular problems including low levels of workforce participation, low levels of secondary school enrolment and poor educational attainment by those who do attend. These disadvantages are compensated for somewhat by the benefits of a cheap and flexible workforce. We have awarded Uzbekistan a score of 45.2 for Labour Risk, putting it close to the bottom of the table when compared to regional peers; only Albania and Bosnia-Herzegovina perform worse.

Weaknesses in the availability of labour are perhaps the most disappointing element of the employment landscape in Uzbekistan, given the country's strong economic growth, low costs and flexible legal regime. Despite a good level of female employment, participation in the workforce is 54.4%, the third lowest proportion in the region. Causes include the country's low level of urbanisation...

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Uzbekistan Logistics

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BMI View: Uzbekistan's logistics network offers considerable risks to supply chains and business activity, which along with its command-style economy make it an unattractive location for investment. The country's geographic position conveys a number of disadvantages, including making access to seaports difficult, and restricting the availability of freshwater resources. Even though it enjoys substantial oil and gas reserves, electricity and fuel shortages pose a substantial risk to business operations. A lack of investment in the transport network also means that internal supply chains are subject to disruption and delays, and regional trade flows are restricted. Consequently, Uzbekistan is one of Emerging Europe's underperformers in the overall BMI Logistics Risk Index, with a score of   39.6 out of 100 placing it sixth from...

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Uzbekistan Trade & Investment

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Although it has enjoyed economic growth above 7% for the past three years, Uzbekistan is a challenging investment destination, with foreign direct investment (FDI) into the country faltering in recent years. Key deterrents for investors include a deeply corrupt and inefficient public administration, stifling border controls and high levels of government involvement in private economic activity. However, a stable financial system and lucrative natural resource opportunities mean investors are likely to continue to take an interest in the country.

We have given Uzbekistan a score of 40.8 out of 100 for Trade and Investment Risks in our Logistics Risk Index. This is low by regional standards, putting Uzbekistan ahead only of Kyrgyzstan and Tajikistan. Uzbekistan's poor performance results from a number of factors, with a government policy of discouraging and replacing imports probably the most serious issue facing the country, particularly as it...

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Uzbekistan Industry Coverage (6)

Autos

Uzbekistan Autos

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BMI View: BMI holds an optimistic outlook on auto production and sales in Kazakhstan and Uzbekistan. Both countries boast solid macroeconomic fundamentals and both are seeing strong demand for cars from their citizens.

Turning to production first, Kazakh auto production looks set for strong growth over BMI's five-year forecast period to 2017. This reflects new production plans by three carmakers; Japan's Toyota Motor, France's PSA Peugeot Citroen and Russia's AvtoVAZ.

Toyota announced its new production plans in February 2013. At that time, the automaker stated that it plans to commence production of its Fortuna SUV in Kazakhstan from late 2014. Following investments totalling some US$35mn, local plants will begin painting,...

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Defence & Security

Uzbekistan Defence & Security

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BMI View:   At present, Kazakhstan and the other four Central Asia countries, Turkmenistan, Tajikistan, Uzbekistan, and Kyrgyzstan   have limited defence budgets, yet numerous requirements. While BMI expects these budgets to increase incrementally over the coming years, BMI also expects the budgetary and underdevelopment challenges to limit those increases considerably.   These countries face numerous internal and external security challenges. Border disputes, criminality, domestic infighting and domestic and transnational terrorism are just a few of those challenges.

BMI expects Kazakhstan's defence spending to have reached USD2.8bn by the end of 2014 and...

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Oil & Gas

Uzbekistan Oil & Gas

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BMI View:   Uzbekistan's gas sector is expected to continue its expansion with the production and export figures rising over the forecast period to 2023. However, the country's oil sector is set to remain on a downward slope rendering the country increasingly more dependent on refined-fuels imports and subjecting it to potential shortages.

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Headline Forecasts (Uzbekistan 2012-2018)
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Petrochemicals

Uzbekistan Petrochemicals

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BMI View: Central Asia is a rapidly evolving and growing market for petrochemicals that has been heavily import dependent in recent years. Over the medium term, the two most industrialised countries, Kazakhstan and Uzbekistan, are set to become net exporters with the construction of world-scale complexes likely to stimulate downstream investment in plastic and rubber conversion industries .

In the Central Asia region, only two states are active participants in the petrochemicals sector - Kazakhstan and Uzbekistan. Neither has significant existing ethylene capacity. In fact, their combined cracking capacity of 240,000 tonnes per annum (tpa) is less than that of Nigeria or Egypt. Uzbekistan is landlocked, and hence is faced with considerable transportation costs for its energy exports. Overall demand for chemicals has been on...

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Pharmaceuticals & Healthcare

Uzbekistan Pharmaceuticals & Healthcare

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BMI View:   We expect Uzbekistan ' s healthcare spending to continue outpacing the country ' s economic growth, creating opportunities for most health industries over the medium term. This is illustrated by mounting spending in medical technologies and equipment on the back of the upgrading and construction of healthcare facilities .   I ncreasin g pharmac eutical demand has also been driven by private consumption growth and rising exports to neighbour ing countries...

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Telecommunications

Uzbekistan Telecommunications

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BMI View: Uzbekistan became the fifth and final Central Asian market to receive 4G LTE this quarter, as Beeline ( VimpelCom ) commercially launched the service in September 2014 . While it represents an important development for the region, we are largely bearish on the technology's short-term future , as the prohibitive cost will keep it out of reach of most subscribers, while 3G remains underdeveloped. Internet costs are some of the highest in the world, due to the landlocked nature of the region and government motivations to censor content. While t here is strong potential in the Central Asia telecoms industry, 4G will not see a significant uptake over our five...

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