Dynamism, prospects for economic cooperation between Korea and Uzbekistan

The Republic of Korea (south) is one of the key partners of Uzbekistan in the realization of strategic investment projects and in the adoption of modern technologies in various industries.
The dynamism of relationship has been tested for resistance in the face of continuing global financial and economic crisis, the instability of the global economy. This is demonstrated by the success of the "creative economy" model of South Korea and the "Uzbek model" of development of Uzbekistan.
The Republic of Korea remains one of the largest investment partners of Uzbekistan during the last two decades. The volume of attracted investments in different areas of the Uzbek economy exceeded $6 billion. There are more than 420 enterprises established with foreign capital from the Republic of Korea.

Fruitful cooperation can be exemplified by projects for the development of engineering & construction of Ustyurt gas chemical complex, as well as projects in the power, oil and gas, electrical, textile, information technology and communications, and other fields. The cooperation in the field of education is actively developing. In 2014 a branch of Korean Inha University was opened in Tashkent. It prepares specialists in the field of computer engineering and programming.
The agreements and conventions reached during the visit of the President of the Republic of Korea Park Geun-hye in 2014 to Uzbekistan, as well as the signing of a joint declaration in a recent visit of the President of the Republic of Uzbekistan Islam Karimov to the Republic of Korea would attach a new impetus to the dynamic development and the definition of new priorities of bilateral cooperation in the future.
As a result of the last meeting of the heads of the states, 60 documents relating to trade, investment, finance, technical cooperation and other areas were signed, totaling nearly $7.7 billion. The successful implementation of the above-mentioned and other new projects to a certain extent depends on the awareness of entrepreneurs and investors about what a modern Korean economy means for Uzbekistan, and vice versa, which opportunities and potential there are for further mutually beneficial cooperation for Korean investors.
Of course, Uzbekistan is very impressed with the success of Korea to implement the "catch-up" model to ensure not only high economic growth, but also to create a competitive economy.
For in-depth study of the dynamic model of the cooperation, since 2004, the two countries have conducted joint work within the framework of the knowledge sharing program (KSP). In 2013, taking into account the particular importance of relations between the two countries, Uzbekistan was chosen as a strategic development partner country (SDPC). A joint study conducted within the framework of this program by the Korean Development Institute (KDI) and the Institute of Forecasting and Macroeconomic Research under the Cabinet of Ministers of the Republic of Uzbekistan (IFMR) shows a number of important factors of further development of relations between the two countries.
In the framework of the KSP priority development sectors were identified on the base of the revealed comparative advantages (RCA) of goods. These are primarily mechanical engineering, metallurgy, chemical and petrochemical industries. In addition, it should be given a special importance to the prospects for cooperation in sectors such as light industry, textile, food industry and production of construction materials.
For the development of light and textile industry Uzbekistan has a rich source of raw materials: high-quality cotton fiber, silk, moth, wool and others. Taking into account the fact that the industry is labor-intensive, there are a corresponding employment potential in Uzbekistan, a long tradition of carpet weaving, production of cotton and woolen goods, clothing, etc.
In this regard under the cooperation with "Daewoo International" some textile companies were created in Ferghana and Bukhara regions, with Korean "Shindong Enercom" and "Textile Technologies" in Surkhandarya and Tashkent regions of Uzbekistan. It should be noted that almost all regions are able to develop the production in this industry. It is equally important that in conditions of Uzbekistan it is very important to establish cooperation linkages of major players in the major manufacturing industry with small business.
The next priority area of cooperation is a food industry. The comparative advantage for the development of this industry is the availability of qualitative agricultural raw materials on taste parameters and reserves for in-depth processing of fruits and vegetables in Uzbekistan.
Over the past two decades there is a positive dynamics of production of fruits and vegetables in Uzbekistan. During this period, the production of fruits has increased more than 4 times, grapes and vegetables 3 times, and melons nearly twice. The increase in production of fruits and vegetables accompanied with an increase in their processing. For these purposes more than 130 enterprises have been established in the country for processing of vegetables and grapes with a total capacity of more than 500 thousand tons of raw materials per year. Uzbekistan has mastered to release more than 145 new kinds of products.
Nevertheless, the processing share of vegetables, grapes and fruit does not exceed 20-25%. Key problems of the industry relate to advanced technologies for the processing, creation, appropriate market economy, harvesting of fruits and vegetables, storage and cooling chambers. All these points to the need for building modern logistics industry.
Tashkent, Samarkand, Kashkadarya, Namangan, Ferghana and Andijan regions have large sources of raw materials to build a production facility for fruit processing. Jizzakh, Syrdarya, Khorezm and Karakalpakstan have dominant positions in processing melon, both in volume and quality. Samarkand, Tashkent, Kashkadarya, Namangan and Ferghana regions have a long tradition and unique climatic conditions for growing a variety of grapes for wine, grape juices and dried fruits.
Another branch directly connected with raw materials of agriculture is oil and fats industry. This industry is essential in providing the consumer market with vegetable oil, margarine and other products for special purposes. The production of vegetable oil is carried out by 23 enterprises of Association "Maslojirtabakprom". There are sufficient reserves to increase the capacity of oil mining organizations in Ferghana, Andijan, Samarkand and Tashkent regions. For development of raw material base, in addition to plant cotton seeds, there are alternative sources of raw materials sunflower, sesame, safflower, soybean, food production waste (grape, peach, apricot, almond seeds, pumpkin seeds, watermelon, etc.). The implementation of joint projects on modernization of the existing capacities for deep processing of vegetable oils to improve the consumer properties of products has a great importance.
Uzbekistan is rich in the presence of various types of non-metallic minerals. It makes possible to expand production of building materials in almost all areas, not only to meet domestic needs, but also to expand exports. These include: cement raw materials, natural stone cladding, stone sawing, building stones, sand for construction, mineral paints, clay for coarse ceramics, expanded clay raw material, limestone for firing lime, sand and gravel, brick-tile raw materials, gypsum and anhydride, glass raw material, chalk-like rock, kaolin, etc. The highest concentration of proven mineral reserves is located in Tashkent, Navoi, Kashkadarya, Jizzakh, Surkhandarya regions and Karakalpakstan.
The prospect of joint use of mineral deposits may be accomplished due to:
- vein quartz engaging in the production process which is not previously involved in the testing; barite (Navoi and Jizzakh region); dolomite for mineral wool; talc (the Republic of Karakalpakstan, Kashkadarya and Surkhandarya regions);
- the most complete involvement and the effective use of insufficiently processed quartz sand, gypsum, bentonite clay for expanded clay, chalk-like rock, marble, granite, and phosphate, which will increase to expand the range of building products with the creation of new industries in the Republic of Karakalpakstan, Navoi, Tashkent, Samarkand, Surkhandarya, Kashkadarya and Jizzakh regions;
- for the production of the imported raw materials there is an opportunity possibility of using vermiculite and basalt (the Republic of Karakalpakstan and Surkhandarya region) for the production of mineral fiber of wollastonite (Jizzakh region) as a substitute for asbestos, gypsum, magnesite and magnesite rock (Navoi region) to produce raw materials for porcelain production.
Naturally, for the convergence of the interests of investors and entrepreneurs of the two countries in the development of the above mentioned trends it is required a further improvement of the business environment and investment climate in Uzbekistan. In this regard, Korea's experience in creating preconditions for the transformation of the economy to a more advanced level is instructive. Among them, the creation of conditions to facilitate the organization and conduction of business, reduction of transaction costs associated with registering and doing business present a particular interest. At that point, Uzbekistan also consistently works to eliminate barriers and constraints to the development of entrepreneurship, to reduce state involvement in the economy. For these purposes, a program of measures approved by the Head of State, to ensure reliable protection of private property, small business and private entrepreneurship, the removal of barriers to their rapid development has been adopted recently. The program is aimed at increasing the accountability of government officials, law enforcement and regulatory authorities for obstruction and illegal interference in entrepreneurial activity, violation of private property rights and the strengthening of guarantees for the protection of private property, to continue the process of liberalization of administrative and criminal legislation regulating entrepreneurial activity.
Another important event is that the President of Uzbekistan adopted a decree "On measures for the introduction of modern methods of corporate governance in joint stock companies", aimed at creating favorable conditions for the attraction of foreign direct investment, a radical increase in the efficiency of the joint-stock companies, ensuring their transparency and attractiveness to potential investors, introduction of modern corporate governance, strengthening the role of shareholders in the strategic management of enterprises.
Acceptance of these policy documents will serve to enhance the dynamic cooperation between the Uzbekistan and the Republic of Korea on the implementation of mutually beneficial investment projects.
About the author:
Name: Nazarov Sharofiddin Khakimovich, Ph.D. (Economics), project manager, Institute of Forecasting and Macroeconomic Research under the Cabinet of Ministers of Uzbekistan, Tashkent, Tel (99871) 237-23-71, Fax (99871) 237-06-57 k