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A Matrix of Success

Uzbekistan has been working on its own formula for overcoming the global crisis

Experts warn that 2016 may come with big challenges for the global economy. Plunging oil prices, economic downturn in China, uncertainty in global commodity markets and other factors are capable of slowing down the development of many countries. Being a part of the global market, Uzbekistan will also have to overcome the impact of these challenges. Uzbekistan Today reporters have made an attempt to find out how we are going to handle them.

2015 was a time of serious reconsideration for many industries. The time of unrestrained growth, lending and irrepressible consumption is over. Today, new trends like efficient performance, energy efficiency and moderation in demands come to the fore. Previously, investors were ready to invest and absorb resources to just stake a claim for a niche in the market, while today everybody realizes that it is time for targeted and well-thought-out projects.

In this regard, Uzbekistan, it appears, is riding high. The country has always selected specific investors for its projects, who would not just purchase existing facilities or build new ones, but would also ensure the introduction of modern technologies, have a specific program of development for the future, and create new jobs. The government provided strategic partners with a serious package of privileges and preferences, and built the entire engineering and communication infrastructure they needed at its own expense. As a result, dozens of modern manufactures have sprung up in all regions of the country in a short span of time. Today, they are actively making a presence in the national and foreign markets.

In 2016, Uzbekistan is planning to sink more than $17.3 billion in the development of its economy, including 23.5% of foreign investment. In addition, there are plans afoot to put into operation 164 big production facilities worth $5.5 billion. As a result, the economy is projected to grow by 7.8%, real income per capita - by 9.5%, wages, pensions, stipends and allowances from all sources – by 15% by the end of the current year, despite the raging global financial and economic crisis. One has to admit these are good objectives.

The national automotive industry appears most clearly in this context. Despite the challening situation in the major export market of Russia, GM Uzbekistan has rebranded itself into Ravon to promote the brand, and is currently getting prepared for several premieres.

Ravon in Uzbek means ‘easy way, open road’. Perhaps, the company's objectives for the current year can be described this very way, as suggested by the company's new slogan in export markets – ‘Tested by time, created from scratch’. That is, the domestic auto manufacturer is ready to grow and increase its presence in foreign markets despite the crisis, focusing on quality and low prices through the introduction of effective equipment, reducing costs and streamlining the marketing component.

There is a good reason behing the strategy. GM experts have been studying the leading export markets and consumer preferences over the last two years, coming to the conclusion that Uzbek cars are appreciated for proven quality and affordability.

The launch of a new car Chevrolet Aveo (Nexia R3) this year is expected to be a symbolic present for the 20th anniversary of the domestic automotive industry. The total cost of the project on the development of its production exceeded 264 billion soums. Secured by new designs, the company is planning to win at least 5% of the Russian market by 2020. Debuted last year under the Ravon brand, Matiz and Gentra will be added with Ravon R2 (a new model of the compact A-class Chevrolet Spark - 2010), Ravon Nexia R3 (B-class bestseller Chevrolet Aveo), Ravon R4 (a new model of B/C intermediate class Chevrolet Cobalt) in 2016. In the future, the company is planning to develop a few more C-Class vehicles (so-called ‘European middle class’) and a compact SUV (crossover or SUV).

The launch of the manufacture of MAN-branded buses running on compressed natural gas in Samarkand is another interesting novelty. Assembled in Uzbekistan for the first time, the new models will roll-off the production line of the Uzbek-German JV MAN Auto-Uzbekistan in February 2016.

At the initial stage, the project envisages an SKD assembly on the finished chassis. A prototype has been already produced at MAN facilities in Malaysia, and the gas-cylinder equipment was installed on it in Uzbekistan. It is currently undergoing operational testing in Tashkent. The first batch of locally assembled buses will amount to about 50 items.

Designed for 90 people, the bus is equipped with a 310-liter engine in line with Euro 5 standards. The company has developed a phased program of localization of its components. It is planned to develop the production of fiberglass parts, windscreen and side windows, seats, stretchers and brackets by the end of 2018. The production of headlights, electrical harnesses, mirrors, flooring and external cladding, doors, locks, handrails and fixtures will be developed by 2020, and aluminum profiles – by 2022.

Two big infrastructure projects will be implemented by the National rail carrier Uzbekistan Railways.  The launch of the working motion on the Angren-Pap electrified railway line is scheduled for the second quarter of 2016. Exceptionally freight trains will run on the line in the beginning, and the passenger train traffic will be commissioned in September 2016.

The construction of the 123.1 km line was started in mid-2013. It is unique for passing through a pass Kamchik in mountains at the height of more than 2,200 meters. In order to overcome the barrier, the China Railway Tunnel Group is currently completing the construction of a 19-kilometer tunnel totaling over $455 million. Meanwhile, 285 support facilities, 22 bridges, six railway stations and two depots have been already built.

The launch of the new line will complete the international transit railway corridor China - Central Asia - Europe. Experts have estimated that in the first year of operation the new line will transport about 600,000 passengers and 4.6 million tons of cargo.

The total cost of the project exceeded $1.6 billion, more than $1.08 billion of which was invested by Uzbekistan Railways, the Fund for Reconstruction and Development of Uzbekistan and the national budget. Another $350 million was allocated by the Chinese Eximbank and $195 million – by the World Bank in loans.

The country's second high-speed railway line Tashkent-Bukhara will be commissioned in September. Its construction is estimated at more than $400 million. It will reduce the time for delivery of passengers and cargo by almost two hours, and cut operating costs by 30%. As part of maintenance of the new road, the national rail carrier of Uzbekistan signed a contract with the Spanish company Talgo for the purchase of two high-speed trains during the International Investment Forum in Tashkent.

“Unlike previous trains, the new ones will have two more passenger cars”, says the head of the Uzbekistan Railways Department for Traffic and Operation of High-Speed Passenger Trains Olim Kurbonov. “Comprising two locomotives, 10 cars and a dining car, the new train will carry 287 passengers. Expansion of railway electrification and number of high-speed trains will allow organizing the high-level passenger traffic not only in Tashkent, Samarkand and Karshi, but also in other regions.

Small business and private entrepreneurship will be undoubtedly attached special importance in 2016 as a basis of the domestic economy. For instance, it is planned to create dozens of new small industrial zones.

Today, there are 63 small industrial zones in the country, established in August 2014. Over 500 small businesses have started operation over the past years. They have not just handled the production of goods for the domestic market, but have been actively entering the neighboring markets.

The performance has been noticed, so it was decided to create new similar zones. They will be established on the basis of unfinished and idle industrial enterprises. There are more than 100 facilities of this kind throughout the country. There is a need to carefully study them and analyze the logistics and infrastructure. A special working group of representatives of the State Committee for Privatization, Demonopolization and Development of the Competition, State Committee for Architecture and Construction, State Committee for Land Resources, Geodesy, Cartography and State Cadastre, the Ministry of Economy and other institutions, who have been studying these objects, generates and summarizes the proposals on the creation of new industrial zones on their basis.

Upon selection of the most promising objects, district and urban administrations will build all the utilities and infrastructure at their own expense and with the support of Uzbekenergo and Uztransgas.

In order to get a territory in a new zone, entrepreneurs will need to submit their business plans to the commissions under the administrations. During the competitive selection, experts will identify the best projects, and their initiators will be allocated 0.2-0.3 hectares. Besides, entrepreneurs will have to assume investment obligations on the creation of new jobs.

Areas in industrial zones will be leased by entrepreneurs for 10 years. In the future, the term may be extended in case of the timely and full implementation of the obligations under previously signed leases. Once a lease contract is concluded, the administration will assist entrepreneurs with design documentation processing, and with preparation of documents for concessional lending, if necessary.

The national air carrier of Uzbekistan is intending to put new planes Boeing-787 Dreamliner into operation this year. The liner is the first passenger aircraft of this size, and its fuselage is made entirely of composite materials.

The purchase of the Dreamliner was conditioned by Uzbekistan Airways’ strategy to rank among the most competitive and popular airlines. After all, in addition to fuel efficiency, which is marked by almost 20 percent reduction of fuel consumption compared to its competiors, Boeing-787 differs with drastically new characteristics of passenger comfort.

A range of continuous flight of 16 hours ranks among the key features of Boeing-787. Humidity is another important aspect of a comfortable flight. A person can not fly in the thin and dry air for a long time, as it leads to discomfort. The Dreamliner provides an opportunity of increasing the humidity by 20%, unlike the traditional aluminum aircraft. In fact, Boeing-787 fuselage is made of composite materials, which suggest that it is not subject to corrosion like other aircrafts, so high humidity would not damage it.

Domestic aviators are currently constructing a special hangar for the new aircrafts, and are planning to commission the CIS only center for the repair of structural elements of the aircrafts that consist of composite materials. In the future, the center will provide maintenance of new generation aircrafts of the national air carrier and foreign airlines.

One of the real sector flagships - the Almalyk Mining and Smelting Plant - is going to commission a new melting furnace at the smelter in September. The $92 million project is funded through loans of the Fund for Reconstruction and Development of Uzbekistan and domestic banks, as well as AMSP own funds.

The new furnace is convenient and efficient, consumes less energy, flue gases are recycled, thus improving the environment. Besides, it provides a higher copper recovery.

This all is just a small part of hundreds of ongoing projects in all regions of the country. Most importantly, each of them implies a modern and competitive manufacture, new roads, transport infrastructure, new jobs, welfare, which empower the country to further move towards its strategic goal of joining the ranks of developed countries. 

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