Uzbekistan: Central Asia's Next Electrical Engineering Hub?

Uzbekistan is positioning itself to become Central Asia's electrical engineering hub, a vision outlined by President Shavkat Mirziyoyev during a government meeting. The nation has made significant strides in this sector, attracting investment and expanding production; however, numerous challenges remain in realising this ambitious goal.

Over the past seven years, approximately $1 billion has been invested in Uzbekistan's electrical engineering industry. According to President Mirziyoyev, 762 enterprises have been commissioned during this period, and production output has increased by 1.8 times. The country also places considerable emphasis on exports. Of the 200 types of products manufactured, 195 are exported to international markets. The number of countries receiving these exports has doubled in the past three years, reaching 62, and the total volume of electrical equipment exports now stands at $1 billion, making the sector the second most significant after textiles.

Despite these achievements, various obstacles continue to impede further development. President Mirziyoyev has highlighted disruptions in production and logistics chains, insufficient working capital, and high production costs. Additionally, an increasing number of countries are adopting protectionist measures to shield their domestic markets, making it more difficult for Uzbekistan to export its goods. This has pushed the nation to enhance the competitiveness of its products to remain viable in the global marketplace.

To address these challenges, the President has underscored the importance of improving product quality, reducing production costs, and enhancing inter-industry cooperation, which is currently underdeveloped. For instance, Uzbekistan has only four enterprises manufacturing cables required by the automotive industry, which is insufficient to meet the rising demand.

In response, the government has introduced several initiatives. Mirziyoyev announced plans to develop technology parks through industrial cooperation with related sectors. Specific zones in Akhangaran, Fergana, Karshi, and Urgench will be allocated for enterprises involved in processing composite materials, metal and plastic, as well as mould and packaging production.

To support these initiatives, tax incentives will be offered to participating entrepreneurs. For example, companies will be able to use industrial mortgages to purchase pre-built facilities and receive reductions of up to 50% on property and income taxes. Uzbekistan is also engaging in active collaboration with international partners. Recently, representatives from Uzbek enterprises, led by Mirziyod Yunusov, chairman of the Uzeltekhsanoat Association, visited Azerbaijan to discuss joint projects in the production of household appliances and aluminium radiator heaters. This visit followed the memorandum of cooperation in the electrical industry signed between the two countries in August 2023. Both sides agreed to place production projects in special industrial zones and develop a bilateral roadmap to expedite their implementation.

President Mirziyoyev is confident that Uzbekistan has the potential to become a regional hub for electrical engineering, supplying not only products but also skilled professionals and cutting-edge technologies to neighbouring markets. To this end, he has instructed enterprises to promote new products under national brands in foreign markets, a strategy aimed at boosting the country's competitiveness on the global stage.

While Uzbekistan's production of household appliances is growing, there remains significant room for expansion. The rapid development of housing, including apartment buildings, has created substantial demand for electrical industry products such as cables, heating and cooling systems, elevators, and video surveillance equipment.

Uzbekistan's ambition to become Central Asia's electrical engineering hub has far-reaching implications for both domestic and international businesses. This initiative creates opportunities for business growth and expansion but also imposes new demands in terms of competitiveness, product quality, and adherence to international standards.

For Uzbek companies, the prospects for growth in the electrical engineering sector are substantial. Government measures such as tax incentives, the expansion of technology parks, and access to industrial mortgages aim to stimulate local businesses. These initiatives will enable small and medium-sized enterprises to enter the market at reduced costs and integrate innovative products into their production processes. The potential for collaboration with related industries will also facilitate business diversification, thereby strengthening supply chains.

The focus on exports offers additional opportunities to penetrate international markets. However, this also heightens the demands on product quality, certification, and competitiveness. Uzbek companies will need to conform to international standards and work proactively to enhance efficiency, reduce costs, and promote their brands globally. Those that can adapt to these challenges will gain access to new markets and boost their revenues.

For international companies, Uzbekistan’s development as an electrical engineering hub presents new prospects for cooperation and investment. The country offers attractive conditions for businesses interested in localising production and accessing Central Asian markets. Tax incentives for enterprises in the electrical engineering sector make Uzbekistan an appealing platform for production.

This is particularly relevant for companies operating in related fields, such as components for electrical equipment, materials and metal processing, the automotive industry, and construction. The establishment of technology parks, access to ready-made production facilities, and government support make Uzbekistan an attractive destination for foreign investors.

Additionally, the expansion of electrical product exports is creating new supply chains that benefit both Uzbek and international companies. This will lead to increased international trade, improved access to innovative products and technologies, and opportunities for mutually beneficial cooperation.

The growth of Uzbekistan's electrical industry has the potential to significantly diversify the nation's economy, a crucial factor given the global economic shifts and the challenges posed by globalisation. For businesses, this means a more stable and predictable environment with a strong focus on innovation and export potential.

By strengthening integration with international partners and expanding market reach, Uzbekistan is poised to enhance its global standing. This, in turn, creates new opportunities for multinational companies that can use Uzbekistan as a strategic base for accessing Central Asian and neighbouring markets.

Uzbekistan's drive to establish itself as a leading electrical engineering hub is likely to bring substantial changes to the country's business landscape. Domestic companies stand to gain from new markets and technologies, while international investors will find favourable conditions for business development and collaboration. To achieve its goals, Uzbekistan must continue to attract investment, foster inter-industry cooperation, support entrepreneurs with tax incentives, and develop export opportunities. Enhanced international cooperation, such as that with Azerbaijan, will open additional avenues for growth and solidify Uzbekistan’s position as a key player in Central Asia’s electrical engineering sector.