Our comprehensive assessment of Uzbekistan's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect Uzbekistan, as well as the latest industry developments that could impact Uzbekistan's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in Uzbekistan before your competitors.

Country Risk

Uzbekistan Country Risk

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CORE VIEWS

  • In light of the extreme oil price weakness into 2016, the macroeconomic and social stability outlook for Kazakhstan - the biggest oil exporter in Central Asia - has deteriorated even further, prompting us to take an even more bearish outlook on the country's growth prospects. Nevertheless, the possibility of economic and/or banking sector collapse remains limited due to the strong sovereign risk profile.

  • While the Kyrgyz som has been stable in recent trading against the US dollar, we expect the currency to depreciate significantly in 2016. The National Bank of Kyrgyzstan, which has propped up the som through heavy FX intervention, will discontinue this policy due to limited FX reserves. As a result, mounting depreciatory forces in the form of lower remittances from Russia and reduced gold exports will come to the fore, significantly weakening the som....

Uzbekistan Operational Risk Coverage (9)

Uzbekistan Operational Risk

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BMI View: Uzbekistan poses multiple risks to investors with regards to crime and security, the majority of which relate to the endemic corruption which permeates at all levels of society and the country's proximity to unstable countries such as Afghanistan, which increases the threat of terrorism. Businesses therefore face considerable costs associated with bribery and extortion, while instability along Uzbekistan's borders increases conflict risks. Uzbekistan receives a score of 31.0 out of 100 for overall Crime and Security Risk, placing it second from bottom out of 31 states in Emerging Europe.

High Risk Operating Environment
Uzbekistan & Emerging Europe Regional Average - Crime And Security Risk Scores
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Uzbekistan Crime & Security

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Uzbekistan poses a high degree of security risks to foreign business travellers, expatriates, and tourists. For the most part, the greatest risks to these groups are petty crime such as pick-pocketing and theft, rather than violent crimes. Uzbekistan's murder rate, at 3.7 per 100,000 in 2012, was significantly lower than its fellow Central Asian republics Kazakhstan and Kyrgyzstan, where the rate is around nine per 100,000. Organised crime and drug-related crime also exist in Uzbekistan, but are unlikely to affect foreigners. Corruption is a major problem in Uzbekistan, and erodes the integrity of the country's law enforcement agencies.

Terrorism poses a significant threat to the Uzbek state, and combating this is arguably the government's top security priority. The main threat has stemmed from the Islamic Movement of Uzbekistan (IMU), although a major crackdown drove its militants into neighbouring countries. Uzbekistan's adjacency to...

Uzbekistan Labour Market

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There are significant risks to investors associated with both the labour market and the education system, with particular problems including low levels of workforce participation, low levels of secondary school enrolment and poor educational attainment by those who do attend. These disadvantages are compensated for somewhat by the benefits of a cheap and flexible workforce. We have awarded Uzbekistan a score of 45.2 for Labour Risk, putting it close to the bottom of the table when compared to regional peers; only Albania and Bosnia-Herzegovina perform worse.

Weaknesses in the availability of labour are perhaps the most disappointing element of the employment landscape in Uzbekistan, given the country's strong economic growth, low costs and flexible legal regime. Despite a good level of female employment, participation in the workforce is 54.4%, the third lowest proportion in the region. Causes include the country's low level of urbanisation...

Uzbekistan Logistics

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BMI View: Uzbekistan's geographic location, as a double-landlocked country in the middle of Central Asia poses considerable risks to potential investors. A lack of adequate road and rail connectivity hampers supply chains and importing and exporting goods is costly and time-consuming. Although fuel and electricity costs are low, this benefit is largely offset by the extensive risk of interruptions to supply due to poor quality power infrastructure. The lack of adequate water protection is also a substantial risk, with Uzbekistan considered to be one of the world's most vulnerable states in terms of water security. Overall, Uzbekistan is a regional underperformer on the BMI ...

Uzbekistan Trade & Investment

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Although it has enjoyed economic growth above 7% for the past three years, Uzbekistan is a challenging investment destination, with foreign direct investment (FDI) into the country faltering in recent years. Key deterrents for investors include a deeply corrupt and inefficient public administration, stifling border controls and high levels of government involvement in private economic activity. However, a stable financial system and lucrative natural resource opportunities mean investors are likely to continue to take an interest in the country.

We have given Uzbekistan a score of 40.8 out of 100 for Trade and Investment Risks in our Logistics Risk Index. This is low by regional standards, putting Uzbekistan ahead only of Kyrgyzstan and Tajikistan. Uzbekistan's poor performance results from a number of factors, with a government policy of discouraging and replacing imports probably the most serious issue facing the country, particularly as it...

Uzbekistan Industry Coverage (17)

Autos

Uzbekistan Autos

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BMI View: A combination of a still-sluggish economy and a weakening currency will lead to further challenges for the Kazakh new vehicle sales market in 2016. We are forecasting 2% sales growth for the sector as a whole, with commercial vehicles set to outperform passenger cars. For Uzbekistan, the near-term outlook is also challenging and we are forecasting 1.5% sales growth for the sector, with commercial vehicles again set to outperform passenger cars.

Vehicle Sales By Country
(2013-19)
f = BMI forecast. Source:...

Defence & Security

Uzbekistan Defence & Security

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BMI View: Kazakhstan's determination to develop a solid domestic defence manufacturing base has been exemplified in its strong push to setting up numerous joint ventures and partnerships with key foreign industry players as well as its efforts to organise its own international exhibition of weapons and military equipment - KADEX. With a somewhat unstable regional environment, Kazakhstan will see to its defence expenditure being increased over our forecast period in an effort to be ready to combat any potential breaches in security. However, BMI believes that if it is to truly excel in this field and achieve its goal of creating a strong...

Infrastructure

Uzbekistan Infrastructure

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BMI View: Economic headwinds are taking their toll on Uzbekistan's Construction industry. However, growth will resume its moderate long-term trajectory in 2016, with a raft of major projects in a pipeline that receives significant development bank and government investment, as well as from key trade partners such as China and South Korea. Growth will average 4.5% annually over our 10 year forecast to 2025, when the industry value will reach UZS53.9bn (USD9.3bn).

Latest Updates And Structural Trends

  • Uzbekistan announced a five-year USD55bn plan to carry out 900 projects to modernise industrial facilities and build infrastructure, especially in the gas petrochemical sectors and construction of roads and airports.

  • Uzbek President Islam Karimov signed a resolution...

Metals

Uzbekistan Metals

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BMI View: Tin prices will be capped by US dollar strength in 2016, leading us to trim our price forecast to USD14,500/tonne. Beyond 2016, prices will recover gradually as the global tin market posts sustained market deficits and inventories dwindle.

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Global - Tin Supply, Demand & Price Forecasts
2014 2015e 2016f 2017f

Uzbekistan Metals

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BMI view: We will maintain our aluminium price forecast for 2016 at USD1,575/tonne. Although prices will bottom in H116, production will outstrip consumption until 2018 and anchor prices. In particular, cheap Chinese exports will keep the market well supplied.

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Global - Aluminium Supply, Demand & Price Forecasts
2014 2015e 2016f 2017f

Uzbekistan Metals

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BMI View: Globally, iron ore prices will remain subdued due to weak demand growth in China and expanding output by major miners in Australia and Brazil. China will see output slow as the country's iron ore miners operate on the higher end of the global iron ore cost curve.

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Global Iron Ore Forecast
2014 2015e 2016f 2017f 2018f

Uzbekistan Metals

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BMI View: Nickel prices will bottom in 2016 as weak production drags the global market into deficit. For instance, we expect Chinese imports of nickel to grow over the coming quarters. Prices will begin 2016 weaker than we had previously expected and we have thus revised down our 2016 average price forecast to USD9,000/tonne from USD10,500/tonne.

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Global Nickel Forecasts
2013 2014 2015e

Uzbekistan Metals

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BMI View: We have revised down our average copper price forecast for 2016 to USD4,900/tonne. We expect prices to find a floor over the first half of 2016, and begin to stabilise thereafter, supported by production cuts and modest consumption growth.

Global - Copper Supply, Demand & Price Forecasts
2014 2015e 2016f 2017f 2018f ...

Uzbekistan Metals

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BMI View: Gold prices will prove resilient in 2016 due to a dovish shift in global monetary policy and elevated systemic financial sector risks. However, we do not foresee a sustained multi-year recovery and the mining sector will thus remain under significant stress. We forecast slowing mine production growth and increasing consolidation.

BMI Gold Forecasts
2014 2015 2016f 2017f ...

Uzbekistan Metals

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BMI View: Global steel prices will remain subdued due to a persistent steel oversupply over the coming quarters. From 2017 onwards, steel prices will gradually edge higher as the global steel surplus will narrow due to Chinese supply moderation.

Steel Price Forecast
2014 2015 2016f 2017f 2018f 2019f...

Uzbekistan Metals

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BMI View: We maintain our average zinc price forecast for 2016 of USD1,750/tonne. We expect zinc prices to reach a floor over the first half of 2016, and begin to stabilise thereafter, as production cuts shift the market to a deficit.

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Global - Zinc Supply, Demand & Price Forecasts
2014 2015e 2016f 2017f 2018f

Uzbekistan Metals

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BMI View: Lead prices will gradually edge higher as the global lead market will shift into deficit by 2017 as production growth will slow over the coming years.

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BMI Lead Price Forecast
Current* 2016f 2017f 2018f 2019f 2020f

Oil & Gas

Uzbekistan Oil & Gas

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BMI View: Our outlook for Uzbekistan's gas sector remains positive as we expect gas production and export figures to remain strong across our forecast period to 2024. However, the country's oil sector will continue on a downward slope leaving the country increasingly more dependent on refined fuels imports and subjecting it to potential fuel shortages.

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Headline Forecasts (Uzbekistan 2013-2019)
2013e 2014e 2015f 2016f

Petrochemicals

Uzbekistan Petrochemicals

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While Uzbekistan and Kazakhstan are set to open new petrochemicals facilities, there are strong downside risks associated with depressed export markets, uncompetitive feedstock prices and sluggish domestic demand. Investment decisions are being postponed and plant construction is being delayed due to ongoing problems facing the Central Asian economies.

In 2015, Central Asia's petrochemicals capacities include 240,000 tonnes per annum (tpa) ethylene, 125,000tpa polyethylene (PE) and 120,000tpa polypropylene (PP). The size of the industry was far less than the size of just one world-scale petrochemicals complex in the Middle East, yet Central Asia is only just leveraging its significant potential in terms of feedstock due to massive upstream resources.

  • Uzbekistan should begin commercial operations in 2016 at an ethane cracker with capacity to produce 400,000tpa of ethylene as well as downstream units with...

Pharmaceuticals & Healthcare

Uzbekistan Pharmaceuticals & Healthcare

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BMI View: Non-communicable conditions will remain the leading contributors to Uzbekistan's burden of disease. Nevertheless, the country will be challenged in managing a tuberculosis epidemic and improving its relatively poor prognosis for infectious diseases control. Pharmaceutical companies with drug portfolios addressing both infectious diseases and chronic diseases will see commercial opportunities arise in Uzbekistan. However, we expect that this will be moderated by the low affordability of pharmaceuticals and the limited capacity of the Uzbek healthcare system to purchase medicines.

Headline Expenditure Projections

  • Pharmaceuticals: UZS2.78trn (USD956mn) in 2015 to UZS3.43trn (USD1.14bn) in 2016; 23.1% in local currency terms and 19.7...

Power

Uzbekistan Power

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BMI View: Gas-fired power will remain the dominant source of electricity in Uzbekistan as strong domestic gas production, limited gas export outlets and modernisation of ageing gas-fired power generating capacity will slow efforts to diversify the power mix. Economic headwinds will further weigh on power sector expansion, as plummeting prices for gold, cotton and copper will shrink export revenues significantly - representing a pertinent obstacle to an uptick in government-backed investment.

Latest Updates And Structural Trends

  • The development of Kyrgyzstani and Tajikistani hydropower will remain a contentious issue in Central Asia, as Uzbekistan strongly opposes developments due to worries that the downstream of the Amu Darya and Syr Darya rivers will suffer negative...

Telecommunications

Uzbekistan Telecommunications

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BMI View: Our Q2 2016 update on Kazakhstan's telecommunications market presents a revised outlook for the country's mobile and broadband subscriber sectors. We have also extended all of our forecasts through to 2020. The revised mobile and fixed-line subscriber forecasts are based on Q4 2015 data for the three largest mobile network operators. With penetration reaching over 146% at the end of 2015, saturation has set in to the mobile market, with organic growth opportunities limited for companies. Going forward the emphasis will be on the promotion of 3G and 4G services. The introduction of mobile number portability (MNP) at the start of 2016 will help operator growth strategies; however, this will not...

Latest Uzbekistan Articles

Latest Uzbekistan Blogs

  • China's ambitious plan to build connections with Europe and the Middle East...

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