In the context of globalization, interstate interaction of economic entities of the national economies of Central Asian countries go beyond the framework of foreign trade transactions, developing into new forms of economic cooperation. One of such forms is industrial cooperation, which over the past 20 years has become one of the essential factors in achieving high rates of economic growth both in developed industrial countries (Japan, USA, EU) and in developing countries (India, China, Vietnam, Turkey, etc.).
Industrial cooperation can be defined as long-term cooperation based on the distribution of functions between enterprises in the production of certain products. Enterprises can join forces to efficiently use capacity and compensate for missing resources, especially when the complexity of products or production conditions.
At the same time, the special advantages of industrial cooperation are cost reduction due to a focus on key processes, capacity utilization and optimization of the production process, an incentive to introduce innovations and develop new competencies, increase product quality and flexibility in relation to demand and its stability for manufactured products and services, development of employees, new values, corporate culture.
Also, Uzbekistan attaches great importance to the development of industry and cooperation in this area, in particular, over the past 4 years, comprehensive measures have been taken and implemented to strengthen the country’s industrial potential, as a result of which the volume of industrial production increased by 23%.
A powerful impetus to the further development of industrial cooperation and the expansion of production of popular products was given by the adopted in May 2019. the decree of the President of the Republic of Uzbekistan, by which the strengthening of cooperative ties in industry, the creation of favorable conditions for the interaction of business entities with the aim of producing products in demand in the domestic and foreign markets are determined by the most important conditions for the accelerated modernization of the country’s economy.
To achieve this goal, the development of industrial cooperation on a regional scale is also a priority of the country’s foreign economic activity. This is evidenced by the initiatives of the President of the Republic of Uzbekistan Shavkat Mirziyoyev, put forward at consultative meetings, an international conference in Samarkand, the CIS forum, at the ECO summit, etc., where he notes the importance of further deepening regional trade and economic ties, which will make it possible to form the largest and capacious regional market with really huge potential.
The correctness of the chosen course is also confirmed by the calculations of UN experts, according to which effective cooperation of the Central Asian countries could increase regional GDP at least twice in 10 years. Also, interstate cooperation in the field of industrial cooperation, according to the UN Economic Commission for Europe, reduces the preparation time for the production of new products by an average of 14-20 months compared to organizing it exclusively on its own, and also reduces the cost of mastering new production by 50-70%.
In this vein, historically established economic ties, geographical proximity, the presence of complementary resources, as well as the preservation of common scientific and technical schools and standards between the countries of Central Asia, presuppose the further maintenance of industrial ties, increased cooperation with neighboring countries and the search for new forms of joint use of available resources.
So, at present, with the initiatives put forward by Shavkat Mirziyoyev, Uzbekistan is strengthening the industrial development of the country, pursuing a policy to reduce raw materials exports and diversify the production of products with high added value. In particular, from 2020, the export of raw cotton has been legally terminated and by 2025. natural gas export is expected to stop. At the same time, the development of industrial production with high added value objectively faces tough competition in the world market. In addition, the increase in the production of products with high added value will require the attraction of resources, including those that are not produced in Uzbekistan or which are currently not profitable to produce. In this regard, an increase in the level of cooperation with neighboring countries can provide new opportunities for the industrial development of Uzbekistan.
On 1 May 2021 the number of operating enterprises with the participation of capital from the business circles of Kazakhstan amounted to 991 units, Tajikistan – 183 units, Turkmenistan – 162 units, Kyrgyzstan – 187 units.
At the same time, today in Central Asia there are already several successful examples of industrial cooperation:
In Kazakhstan, on the basis of “Saryarka Auto Prom”, the production of “Ravon” cars has been launched in Kostanay, which are currently the best-selling cars in the country. The Kazakh-Uzbek trade and industrial company “Alliance” has launched a textile enterprise in Shymkent. The Uzbek “DentafillPlyus”, which is the leading concern of Uzbekistan, is implementing a project for the production of medicines and medical supplies; a horticultural cluster is being created in Turkestan in the desert zone based on Uzbek irrigation technologies.
In Tajikistan, Krantas Group LLC (Uzbekistan) and the Talco Aluminum Company (Tajikistan) have jointly created a plant for the production of special equipment “Talko-Krantas”, established a textile production, JV “Artel Avesto Electronics” is operating for the production of household appliances, there are also plans on the launch of auto production. To financially support joint projects, an Uzbek-Tajik interregional investment fund is being created with an authorized capital of US$50 million. Moreover, in May of this year. An agreement was reached between Tashkent and Dushanbe that the Center for the Development of Investment Projects under the MIFT of the Republic of Uzbekistan, together with the relevant ministries and departments of Tajikistan, will take measures to analyze promising directions for the development of industrial cooperation and develop specific project proposals in these sectors. In addition, experts from relevant ministries and departments of the two countries have begun to develop a “Road Map” to expand trade and develop industrial cooperation.
In March 2021, following the talks between the Presidents of Uzbekistan and Kyrgyzstan, an agreement was reached on deepening cooperation between the countries in the field of industrial cooperation, which provides for the implementation of 60 projects in the fields of production, construction, processing, logistics, etc., worth more than US$550 million.
Economic relations with Turkmenistan are intensifying. 65 joint ventures and 92 enterprises with 100% Turkmen capital operate in Uzbekistan. Main areas of activity: trade and services, textile industry, production of facing materials and furniture. Also in Turkmenistan there is a distribution enterprise KhO “Turkmen-UzAVTO”, the founders of which are JSC “Uzavtosanoat” – 51%, the State Trade Center of Turkmenistan – 49%.
These examples testify to the growing contribution of the manufacturing industry to the development of industrial cooperation. At the same time, for the further development of industrial cooperation, experts suggest:
First, to diversify the exports of the region’s national economies. This is due to the fact that the high degree of dependence of the Central Asian economies on commodity exports carries significant risks and problems. The risks are associated with the volatility of world commodity prices. Their reduction can negatively affect the economies of exporting countries, which makes them highly dependent on external factors;
Secondly, to develop the systems of credit and financial institutions by attracting large foreign banks to the region, since the development of a balanced financial system remains an urgent task for the emerging markets of CA countries. The initial period of rapid development and expansion of lending activity, relying on foreign capital, helped to bring a wide range of firms and households into the financial market. But this period also led to instability and low financial efficiency – today practically all banking systems of the Central Asian countries are experiencing problems against the background of a decrease in income growth.
Thirdly, to form the basic production assets and technologies: to modernize and automate equipment, which will make the production process less costly; to improve techniques and technologies, since all technical and economic indicators of the enterprise’s activity depend on them; to introduce the achievements of modern scientific and technological progress and, first of all, non-waste, low-waste, resource-saving technologies and equipment for their implementation, which increases the output of products from the same volume of processed raw materials.
Fourth, to expand access to international markets, that is, to develop the sphere of transport and transit corridors that provide the shortest and most efficient access to foreign markets.
Fifth, to create a unified system of technical regulation of the countries of the region, which would eliminate technical barriers to industrial cooperation that hinder the foreign trade of countries.
Gradual improvement in these areas, as well as the activation of significant scientific and technical potential in Central Asia and the optimal use of the most promising forms of industrial cooperation for the region will lead to a change in the situation in this area.
The leader of our country notes the need to create joint clusters in the agro-industrial sector, mechanical engineering, electrical engineering, light and food industries, pharmaceuticals and other priority sectors. Uzbekistan has a high potential for creating a system of clusters in the main sectors of the economy based on the development of cluster policy.
According to official data, today there are 259 clusters in all regions of Uzbekistan. According to the results of the first half of this year, their industrial output amounted to 4.8 trillion soums, which is 4.3 times higher compared to the same period last year. At the same time, the volume of exports amounted to 980.5 billion soums.
Also, the development of industrial clusters will allow our countries, in particular, businesses to increase the competitiveness of cluster members by deepening specialization, expanding the scale of production (the action of the so-called “economies of scale”) and the introduction of new technologies. In addition, this will reduce costs and improve the quality of services related to production (purchase, transportation and storage of raw materials and materials, transportation, delivery and sale of finished products, research, advertising campaigns, etc.), primarily due to the effect of synergy and unification. approaches and cooperation in quality, logistics, engineering, information technology, joint use of common transport and communication systems, etc. Moreover, it will provide employment through the growth of existing and new businesses, outsourcing of work and services to local companies. At the same time, such a production approach will provide consolidated access for business representatives of the region’s countries to world markets.
Today it is already obvious that the situation with the spread of coronavirus infection, which led to the closure of borders, the suspension of flights between countries and other restrictive measures, has shown the vulnerability of even the most powerful powers. Despite this, the states of the Central Asian region have shown a high level of cooperation and mutual support by combining efforts to prevent the spread of infection, actively cooperating in the exchange of information in the field of health, coordinating their actions in the field of transport, food security, crossing borders and creating intraregional production and supply chains. Against this background, industrial cooperation has become more relevant and a priority format of cooperation in Central Asia as never before. In this regard, the expansion of trade and economic cooperation and cooperation ties between the countries of the region will also contribute to the early recovery and growth of economies.
The economic agenda of negotiations between the countries of Central Asia at various levels shows that the states of the region are already interacting to create a mechanism for joint entry into the markets of third countries in order to promote jointly manufactured products. In addition, a search is underway for mechanisms and instruments to stimulate the development of cooperation, measures are being taken to encourage mutual purchases and supplies of goods and services produced in Central Asia to the markets of their countries. One of the basic conditions for the progressive development of national economies and ensuring the growth of their efficiency is the cooperation of the efforts of many economic agents.
Undoubtedly, industrial cooperation is one of the most effective forms of combining the efforts of companies, which allows not only to make a profit, but also to meet the competition. It is important to note that the peculiarity of industrial cooperation is that it is a source of not only individual profit, but also collective benefit.
In general, an increase in the level of industrial cooperation and production cooperation in Central Asia, undoubtedly, meets the interests of all countries in the region. This will contribute to strengthening the market model of development in the Central Asian countries during the transition period, joint access to foreign markets and a consolidated response to global competition, a change in the structure of economies in favor of a non-resource orientation and their diversification, the development of high-tech production and reduction of unemployment.
Jalilov Bobir
Leading Researcher of
Institute for Strategic and Interregional Studies
under the President of the Republic of Uzbekistan
