New vectors of Baku and Tashkent: Stake on industrial and transport cooperation Economic review by Caliber.Az

The state visit of Azerbaijani President Ilham Aliyev to Uzbekistan, bilateral meetings and negotiations, and a joint business forum marked a new stage of economic relations between the two countries. Business circles of the two friendly states intend to not only multiply the trade turnover but also noticeably strengthen the investment component, seeking to implement joint business initiatives and transport cooperation. Numerous agreements, memorandums, and other important documents defining the long-term prospects of business cooperation between Azerbaijan and Uzbekistan have been signed during the visit.

"I think this is actually a breakthrough visit because in terms of the essence, form and content of the topics discussed, the decisions we have reached, this visit and agreements will be the basis for the future development of our relations," President Aliyev said in a statement to the media on Tuesday. Touching on the economic reforms implemented in Uzbekistan in recent years on the initiative of President Shavkat Mirziyoyev, the Azerbaijani leader praised these reforms, and emphasized the progress in the investment attractiveness of the country, increasing its industrial capacity, and solution of social issues.

In this regard, the similarity between Baku and Tashkent's policy of diversification of the non-oil sector and new industrialization, increasing exports and expanding regional cooperation, primarily in the transport and logistics sector, as well as in industrial, agricultural and IT areas can be seen. With their positive demographic dynamics, Azerbaijan and Uzbekistan have become countries with growing markets and production bases. Moreover, in recent years Baku and Tashkent have been actively cooperating both bilaterally and within the Organization of Turkic States, CIS and other international organizations.

All these factors together contribute to the steady growth of mutual trade, believes Eldor Tulyakov, executive director of the Development Strategy Center operating in Uzbekistan. "In 2016, Azerbaijan's trade turnover with Uzbekistan amounted to a relatively small $17.1 million, but by the end of 2021, it increased almost sevenfold, to $118.9 million," the Uzbek expert said. A certain slowdown in trade dynamics, observed during the peak of the pandemic crisis, was relatively quickly overcome last year, the trade turnover increased by 42% compared to 2020. In January-May 2022, the trade turnover between the countries grew by another 49.1% compared to the same period last year, reaching $66.4 million.

However, business ties between Azerbaijan and Uzbekistan are not limited to trade - in recent years the activity of Azerbaijani entrepreneurs who have invested over $64 million in the economy of this Central Asian country has increased markedly. So, today there are about 238 Azerbaijani companies operating in Uzbekistan. The activity of these companies covers mainly the spheres of trade and services, mechanical engineering and metalworking, finance and insurance, real estate operations, energy, food industry, light industry, and jewellery production.

Uzbek business is also interested in the Azerbaijani market, and at the moment, there are 53 companies with Uzbek capital operating mainly in Baku, functioning in the service and trade, transit freight, and industry. Among them, two large Uzbek enterprises are worth mentioning: the representative office of Uzbekistan Airways and the dealer centre of Uzavtosanoat - UzAuto Baku LLC.

"The number of joint ventures created by entrepreneurs of our two countries has quadrupled. Among the successful, landmark projects are the launch of joint car production in the Hajigabul industrial district and cooperation in the field of silk production. However, the figures are still very modest and indicate the need to use the existing huge potential of complementary factors of our economies," Uzbek President Shavkat Mirziyoyev said.

What do Azerbaijan and Uzbekistan plan to do to boost trade turnover and in which business areas do they want to expand investment cooperation? First of all, the two countries plan to significantly increase foreign trade turnover by expanding transport cooperation and more active cargo transshipment through transit corridors. Uzbekistan expects to increase the volume of transit transshipment of cargo from the current about 10 million tons to 23 million tons by 2030. Azerbaijan plays a special role in these plans, being the key country through which the main routes of the "middle corridor" from the Central Asian region to Türkiye and European countries pass. Given the current very difficult geopolitical situation and sanctions restrictions on logistics on Russian territory, Uzbekistan, which has no access to seaports, is interested in using the combined ferry-rail and road transit routes through our country to transship containers and other non-oil cargoes.

In particular, there is already a railway corridor in the western direction Tashkent - Aktau - Baku - Tbilisi - Poti - European countries, as well as a road corridor AH5 ("International Asian Network") connecting China - Kazakhstan - Kyrgyzstan - Uzbekistan - Turkmenistan - Azerbaijan - Georgia - Türkiye - Bulgaria, and another route (E60) in the reverse direction, originating in France and passing through a number of EU countries, Georgia, Azerbaijan, Central Asian states, including Uzbekistan, and ending in China. The development of the transport route connecting the Asia-Pacific region and China with the countries of Central Asia, South Caucasus, Türkiye and the European Union seems very promising. Last year, the volume of freight traffic along this route doubled, and from January 2022 its key component - transshipment of industrial cargo of Uzbekistan through Azerbaijan to Türkiye - was launched. According to experts, the implementation of these transport corridors reduces the time of movement of goods from Central Asian countries by half or three times, in addition, the further development of multimodal transport corridors connecting Uzbekistan and Azerbaijan, in addition to transit rent, contributes to a significant increase in bilateral foreign trade turnover.

About two dozen different documents and memorandums of cooperation were signed at a business forum in Tashkent organized by the Agency for Export and Investment Promotion of Azerbaijan (AZPROMO) and the Chamber of Commerce and Industry of Uzbekistan, indicating that the two countries are going to increase business ties, including through new areas of the economy.

"A package of investment agreements and trade contracts worth over half a billion dollars was signed as part of the business forum. They include promising projects in the oil and gas, petrochemicals, energy, pharmaceuticals, production of construction materials, wine-making, food, textile products, silk production and jewellery industry," President Shavkat Mirziyoyev said.

The sides also outlined opportunities for the implementation of joint projects with high export potential on the basis of Alat FEZ in Azerbaijan. The two countries also agreed to expand cooperation in the defence industry, space field, and plans to expand the production volume and range of Chevrolet cars, assembly of which is launched in Hajigabul by joint venture LLC SamAuto, created by JSC UzAuto Motors and Azermash.

There is no doubt that the visit of Azerbaijani President Ilham Aliyev to Uzbekistan, which ended the day before, will give a new impetus to bilateral and multilateral relations between the two countries, greatly expanding opportunities for industrial and transport cooperation.