Uzbek President Shavkat Mirziyoyev’s go to to Astana in August 2024 marked the inaugural assembly of the Supreme Interstate Council of Kazakhstan and Uzbekistan. As each events celebrated strides made in bilateral cooperation, Kazakh President Kassym-Jomart Tokayev called for the accelerated improvement of an Worldwide Heart for Industrial Cooperation, positioned within the border areas of Syrdarya and Turkestan. The middle, with particular financial zone standing in Uzbekistan and industrial zone standing in Kazakhstan, gives vital investment appeal via tax and regulatory incentives designed to attract larger overseas capital.
International funding has lengthy been a spotlight for Central Asia, as web recipients of overseas direct funding (FDI), however regional nations are actually more and more investing inside the area itself. As of the primary half of 2023, the Eurasian Growth Financial institution reported 27 large-scale mutual FDI initiatives amongst Central Asian nations, valued at $1.1 billion, nearly double the amount in 2016. The EDB recognized Kazakhstan (87 p.c) and Uzbekistan (13 p.c) as the biggest regional buyers, with Kyrgyzstan receiving nearly all of intra-regional FDI (63 p.c). Tajikistan can also be a web recipient of Central Asian capital.
Current developments counsel an growth in each the size and scope of funding cooperation, together with via joint ventures and portfolio investments.
A key milestone in these efforts was the trilateral settlement signed by Kazakhstan, Kyrgyzstan, and Uzbekistan to assemble the Kambar-Ata-1 hydropower plant on the Naryn River. Introduced on the Worldwide Power Funding Discussion board in Vienna in June 2024, the $4.5 billion undertaking has garnered curiosity from main donors, together with the World Bank, Eurasian Development Bank, and the Asian Development Bank. Financing may also come from the three Central Asian governments, every taking an fairness stake within the joint-stock firm established to supervise the undertaking.
What’s noteworthy about this funding cooperation just isn’t solely its sheer scale, however that it focuses on the vitality sector, signaling a regional dedication to sustainable improvement and vitality safety.
The truth is, downstream nations Kazakhstan and Uzbekistan are more and more investing in renewable vitality in upstream republics, partially to deal with vitality safety issues. For instance, Uzbekistan is backing two hydropower vegetation (with a mixed capability of 275 MW) alongside the Zarafshan River in Tajikistan, totaling $552 million that can present electrical energy to Uzbekistan as properly. Uzbekistan can also be supporting a 6.7 MW hydropower plant in Jalal-Abad, Kyrgyzstan, via the Uzbek-Kyrgyz Growth Fund. Kazakhstan is investing in solar energy in Kyrgyzstan with the $35 million “Kun-Bulagy” power plant within the Issyk-Kul area.
Past vitality, Central Asian nations are making inroads in joint logistics initiatives, important for facilitating intra-regional commerce. PTC Holding from Kazakhstan is establishing a logistics hub close to Tashkent with an preliminary funding of $70 million, anticipated to develop to $230 million by 2034. The middle will channel cargo flows from China, Southeast Asia, CIS nations, and West Asia to Uzbekistan and the opposite method spherical, additionally benefiting Kazakhstan as a transit location. In flip, Uzbekistan is financing logistics initiatives in Tajikistan, such because the Oybek and Fatekhobod trade-industrial zones and the Andarkhon logistics center within the Sughd area.
Industrial cooperation between Kazakhstan and Uzbekistan continues to develop, with Kazakh officers projecting 60 joint initiatives value $2.6 billion. Present Kazakh initiatives in Uzbekistan embody an autoclaved aerated concrete plant within the Tashkent area ($12 million), and three cement vegetation – Kusavaycement, Bekabadcement, and Kyzylkum Cement. In Kyrgyzstan, one among Kazakhstan’s main investments is KazMinerals’ Bozymchak gold and copper mine, valued at $350 million.
Uzbekistan’s investments throughout Central Asia prioritize high-value manufacturing, with initiatives in Kazakhstan resembling an metallurgical plant in Taraz ($121.3 million), a metal rolling facility in Almaty ($60 million), a household appliances manufacturing plant within the Karaganda area ($54.2 million), a steel blanks plant within the Kostanay area ($40 million), and an car manufacturing partnership in Kostanay with SaryarkaAvtoProm ($50 million). In Kyrgyzstan, UzAuto collectively with Kyrgyz DT Technic oversaw the launch of the Tulpar Motors plant ($50 million). In 2023, Tashkent and Bishkek signed 15 intergovernmental agreements, together with funding agreements on the joint pharmaceutical manufacturing facility ($10 million), and a joint manufacturing of plastic pipes, plastic merchandise and furnishings in Kyrgyzstan ($3 million). In the meantime, in Tajikistan, Uzbek companies have established a textile manufacturing plant and a utility appliances manufacturing plant.
Uzbekistan’s method to regional industrial investments regularly entails joint funding funds, a mannequin demonstrating long-term dedication to neighboring markets. The Uzbek-Kyrgyz Development Fund, based in 2021 with $50 million in capital, reportedly holds a portfolio of 33 projects valued at $186 million. Equally, the Tajik-Uzbek Investment Company, fashioned with a capital pool of $12 million (later elevated to $50 million), is planning to implement 14 initiatives valued at $135 million in Tajikistan. Uzbekistan can also be considering the potential of making a joint funding fund with Kazakhstan.
Within the monetary sector, Kazakhstan stands as a frontrunner in regional investments. The Uzbek subsidiary of Kazakhstan’s Halyk Financial institution, Tenge Financial institution, holds an FDI inventory exceeding $100 million, together with $400 million in direct loans for Uzbek initiatives. Halyk used to have a subsidiary within the Kyrgyz Republic, which was bought to Visor, an organization majority owned by Kazakhstani businessman Aidan Karibzhanov, for round $38 million, and is now known as “O! Financial institution.” The brand new homeowners of the rebranded financial institution are planning to create a “monetary ecosystem.” As well as, Kazakhstan’s Freedom Financial institution introduced plans to open a subsidiary in Tajikistan.
The export of Kazakhstan’s fin-tech experience to neighboring markets represents one other exceptional tendency in mutual investments. In comparison with investments from exterior actors, which regularly focus closely on extractive industries, intra-regional investments in Central Asia are notably extra numerous, protecting sectors with greater added worth, resembling manufacturing, infrastructure, and monetary providers. This mirrors regional commerce patterns, which a latest study by CAPS Unlock confirmed are extra diversified and fewer commodity-focused in comparison with Central Asia’s commerce with exterior markets.
Regardless of these promising traits in mutual funding, challenges stay. Most incoming capital in Central Asia nonetheless originates from exterior the area. Structural challenges – small markets, restricted infrastructure, property rights points, informality, regulatory hurdles, and monetary pressures – proceed to complicate funding situations for each overseas and regional buyers. Nevertheless, the latter maintain a aggressive benefit whereas getting into the Central Asian markets, not less than based on the Uppsala mannequin of internationalization. In that mannequin, companies’ entry into worldwide markets begins with the neighboring markets given geographical and cultural proximity in addition to related enterprise environments.
Whether or not regional companies can totally leverage such familiarity benefit depends upon the tempo and scale of enhancements to enterprise environments and enhanced infrastructure. The impetus for deeper funding cooperation from the highest seems regular.
