International trade is exchange of goods, services and capital across the boundary lines of different states. No state in the universe has all the natural resources present in sufficient measure to prolong uninterrupted development. So the states trade with each other by exporting those goods or merchandises which they have in copiousness while importing those which they are lacking in. International trade tends to be by and large more costlier than domestic as most states imposes extra duties or responsibilities on the goods going through their boundary lines. International trade between two states comprises both – the trade between 2 companies present in different state and trade between the authorities of a state and the concern house nowadays in other state.
The chief aim of this audit is to analyse the handiness of International Business chances present in the Uzbekistan. The study starts with analyzing the state ‘s attitude to international trade. Then a brief analysis of the state ‘s Cultural, Political and Economic Environments is done. After that the state ‘s concern environment is analysed utilizing some of the proposed theories of international trade and besides Porter ‘s diamond theoretical account of national fight. Finally recommendations based on the above analysis are offered.
An Overview of Uzbekistan
Uzbekistan or Republic of Uzbekistan ( Ozbekiston Respublikasi ) is a state which is portion of Central Asia holding largest population within the part. Uzbekistan became an independent province on September 1, 1991, from former Soviet Union. Uzbekistan elected Islom Karimov as its president who continues his office boulder clay day of the month. Uzbekistan is a land locked state surrounded by Kazakhstan, Kyrgyzstan, Tajikistan, Afghanistan and Turkmenistan.
Uzbekistan Essential Facts:
Government
Republic ; Authoritarian Presidential Rule
Capital
Taskent
Geographic Area
447,400 sq kilometer
Population
27,865,738
Literacy Rate
99.3 %
Labour Division
Agribusiness: 44 % , Industry: 20 % , Services: 36 %
Budget
Gross: 10.54 Billion, Outgo: 10.48 Billion ( 2009 estimations )
GDP ( GDP Growth )
$ 77.55 Billion ( 6.7 % )
GDP – Per Capita
$ 2,800
Inflation
14.1 %
Industries
Fabrics, Food Processing, Machine Building, Metallurgy, Gold, Petroleum, Natural Gas, Chemicals
Beginning: CIA World Fact Book ( hypertext transfer protocol: //www.cia.gov/library/publications/the-world-factbook/geos/uz.html )
Uzbekistan attitude to International Trade
Uzbekistan joined United Nations in 1992 as to the full fledged member and cooperates with 8 UN bureaus including The World Bank which supports Uzbekistan in its national reform attempts ( United Nations, n.d. ) . Currently Uzbekistan has foreign diplomatic dealingss with approximately 124 states of the universe ( Ministry of Foreign Affairs – Uzbekistan, n.d. ) .
Uzbekistan has rank in legion, more than 33, International Organizations including Asian Development Bank ( ADB ) , Commonwealth of Independent States ( CIS ) , International Finance Corporation, International Monetary Fund, Islamic Development Bank, Shanghai Cooperation Organization and World Trade Organization ( observer position ) ( Library of Congress, 2007 ) . The chief intent of these organisations is to advance and ease international trade among assorted states.
Commonwealth of Independent States ( CIS ) states are the biggest trade spouses of Uzbekistan. Russian secures first topographic point as foreign trade spouse of Uzbekistan. Other states like Ukraine, Kazakhstan and Afghanistan etc. are besides heavy trade spouses.
Uzbekistan has really active trade dealingss with European Union. Bilateral trade between Germany and Uzbekistan amounted to 470 million USD in 2008. France, UK and Spain are other major trade spouses ( Ministry of Foreign Affairs – Uzbekistan, n.d. ) .
Figure: Major Trade Partners of Uzbekistan ( 2009 )
Beginning: hypertext transfer protocol: //www.buyusainfo.net/docs/x_6613529.pdf
Business Environment of Uzbekistan
Culture of Uzbekistan
Figure: Cultural Group Composition
Beginning: hypertext transfer protocol: //www.cia.gov/library/publications/the-world-factbook/geos/uz.html
Figure: Major Religions
Beginning: hypertext transfer protocol: //www.cia.gov/library/publications/the-world-factbook/geos/uz.html
Figure: Spoken Languages
Beginning: hypertext transfer protocol: //www.cia.gov/library/publications/the-world-factbook/geos/uz.html
Uzbekistan since ancient clip was the place of Arab Muslims and Turks. And so in Mid-Nineteenth century, Russia seeing the part ‘s possible captured Uzbekistan. That is why there are hints of Russian linguistic communication and ethnicity can be found in the state dominated by Uzbeks. Islam being the major faith ( about 88 % ) the civilization of state is bit conservative. For both Men and Women conservative concern suits are expected, insouciant apparels like denims, jerseies etc are considered inappropriate. While recognizing person it is common for handshaking between same sexes but simple hullo is done between opposite sex. During a meeting it is of import to travel and talk to the most of import individual in the room foremost. These local imposts must be observed in order to hammer good concern relationship in the state ( Culture Crossings, n.d. ) .
Political & A ; Civil Environment of Uzbekistan
When Soviet Union broke in 1991, Uzbekistan gained its independency and appointed Islom Karimov as the Presidential caput ( Angus Reid Public Opinion, 2008 ) . Since so Karimov have led an bossy regulation by widening his term of office in 2000 and 2007 in a series of democratic election that has come into ferocious unfavorable judgment from the international community ( Harding, 2007 ) . Following elections are scheduled to be held in 2014.
In about all international political and civil parametric quantities Uzbekistan has shown downward tendencies bespeaking its deterioration of the state of affairs overtime.
Figure: Uzbekistan Political Indexs.
Beginning: Writer
Uzbekistan besides has highly high degree of corruptness. Harmonizing to recent Transparency International ‘s Corruption Perception Index ( CPI ) , Uzbekistan ranks among the underside of the 180 states at rank 174. It has highly hapless assurance scope of 1.5 – 1.8 ( Transperency International, 2009 ) .
Figure: CPI Index 2009
Beginning: hypertext transfer protocol: //www.transparency.org/policy_research/surveys_indices/cpi/2009
Due to this houses often have to pay informal payments ( payoffs ) to authorities to acquire the things done. About 67 % per centum of the houses are expected to do these payments to acquire things done ( Enterprise Surveys, 2009 ) .
Figure: Informal Payments Statisticss
Beginning: hypertext transfer protocol: //www.enterprisesurveys.org/documents/CountryNotes/Uzbekistan_09.pdf
Economic Structure of Uzbekistan
Uzbekistan when it got freedom had comparatively slow economic growing rate for first 12 old ages. Uzbekistan GDP, between 1994 to 2003, grew at mean rate of 3.9 % per twelvemonth. But from 2005 onwards the state witnessed mean growing of 8.2 % ( Asiatic Development Bank, 2010 ) . Although the official information is dubious as it likely overstates the degree of economic growing. The U.S. Department of State – Background Note for Uzbekistan provinces that “ many perceivers believe that employment growing and existent pay growing have been dead ” ( U.S. Department of State – Background Notes, 2009 ) . The poorness is rather prevailing in the state with 76.7 % of population populating below $ 2 a twenty-four hours ( United Nations Development Programme, 2009 ) .
Although authorities is taking some positive stairss to rage up the economic system. Policies like “ Anti-Crisis Program ” for 2009-2012 that authorities adopted in 2008 to battle the planetary recession had rather good impact on Uzbekistan economic system. Part of the policy was to advance foreign investing, for which authorities established free industrial economic zones in 2008, which provided foreign investors with revenue enhancement and usage preferential installations. Due to this authorities was able to bind up with 37 foreign investors for $ 500 million investing. This resulted in immense addition of 80 % in foreign investing in 2009. Uzbekistan besides observed really high import growing rate of 25.8 % in 2009, chiefly in substructure development, indicates authorities ‘s credence to let foreign investing in the state ( Asiatic Development Bank, 2010 ) .
Figure: Uzbekistan Import/Export Indexs
Beginning: hypertext transfer protocol: //www.adb.org/Documents/Books/ADO/2010/UZB.pdf
Petroleum, Gold, Natural Gas and Cotton are the chief 4 exports merchandises of the Uzbekistan. Harmonizing to the IMF appraisals, energy merchandises ( Petroleum and Natural Gas ) comprised about 26.3 % of entire exports in 2008 followed by gold at 15.7 % and cotton at 13.1 % ( International Monetary Fund, 2008 ) .
International Trade of Uzbekistan
International Trade Theory Framework is all about analyzing from a state ‘s position about with whom they should merchandise and what merchandises to merchandise. Harmonizing to Daniels, Radebaugh and Sullivan ( 2010 ) , there are five theories which try to explicate a state ‘s advantage in International Trade.
Figure: Theories of International Trade
The advantage in international trade of Uzbekistan will be explained utilizing two theories – Natural Advantage and Factor Proportion Theory.
Natural Advantage in instance of Uzbekistan
Harmonizing to this theory a state produces those goods in which it has some natural advantage by manner of its clime, people, resources etc.
Uzbekistan has significant advantage over most of the states in the universe in production of cotton due to favorable climatic conditions and handiness of low cost labor. Climate in Uzbekistan is by and large hot which is suited for cotton growing. Hence Uzbekistan is the universe ‘s 6th largest Cotton manufacturer and 3rd largest Cotton exporter ( National Cotton Council of America, 2010 ) .
Figure: World Cotton Export Rankings ( 2009 )
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Besides the state has abundant energy resources. Uzbekistan is a major manufacturer and exporter of Natural gas. Natural gas production was 2,387 billion three-dimensional pess in 2008 ranking it at 14th topographic point in the universe. Out of this Uzbekistan exported about 22.20 % , i.e. 530 bcf of natural gas ( US Energy Information Administration, 2010 ) .
Factor Proportion Theory
Harmonizing to this theory different states have different degree of gift of land, labor and capital. And the factor which is in more copiousness will hold lower costs than other factors. So the state tends to take advantage of this in the international trade by exporting those merchandises that utilize the abundant factor and importation merchandises that requires use of lacking factor.
Uzbekistan has the advantage of low cost and skilled labors. It besides has comparatively low land. The state has really high literacy rate of 99.3 % in 2003. There is deficiency of significant capital or high degree engineering nowadays in the state. Therefore Uzbekistan ‘s export chiefly comprises of agricultural merchandises, mined natural resources, services or low tech industrial merchandises like chemical, fictile etc.
Figure: Percentage Distribution of Entire Exports
Beginning: hypertext transfer protocol: //www.statistics.uz/data_finder/128/
On the other manus the state is badly missing in the modern substructure and necessary engineering or capital required to develop it. Therefore the majority of its import, about 50 % comprised chiefly of machinery and equipments.
Figure: Percentage Distribution of Entire Imports
Beginning: hypertext transfer protocol: //www.statistics.uz/data_finder/128/
Porter ‘s Diamond of National Competitiveness
Figure: Drawn-out Porter ‘s Diamond Model of National Competitiveness
Beginning: Porter ( 1990 )
Michael Porter introduced a diamond shaped theoretical account to analyse the countries of strength or failing that gives a state a competitory advantage or disadvantage. This theoretical account includes four interrelated cardinal elements:
Figure: Cardinal elements of Porter ‘s Diamond
Factor Conditionss:
Uzbekistan has inconsistent substructure development. Main roads in the capital Tashkent and other major metropoliss are comparatively kept up outside the metropoliss their conditions are hapless. Suppliers have problem in transporting goods from one topographic point to another. The state has extended rail web but merely 17 % is electrified. Although authorities late announced large programs to better both its national main road and rail web. Literacy in the state is really high at 99.3 % for 15 old ages and up. The state besides has abundant energy resources. The state is able to about run into its coal demand and produces adequate natural gas that it manages to export 22 % of it.
Firm Strategy or Rivalry:
About all the Industrial houses in the Uzbekistan are authorities owned and as such there is small to no competition among them. There are merely few industries like energy, gold, foodstuff etc. nowadays in the state which have some foreign investing. Most foreign investment companies are merely allowed to put by making joint venture with province owned company in which the authorities owns bulk bets.
Related and Supporting Industries:
One of the most of import supporting industry to set up a house is fiscal sector which is earnestly developing in Uzbekistan. It is dominated by state-owned Bankss and deficiencies competition. The authorities Bankss give loans to province owned companies at subsidised rate and for all else the involvement rate is really high. Due to this private investors seldom take loans from local recognition market.
The whole state has entree to electricity but the substructure is rather old and need modernisations. And as such there are frequent power outages.
Demand Conditionss:
Due to widespread poorness of 76.7 % there is non much demand of merchandises apart from basic demand like nutrient, apparels, energy demands etc. And in these basic need the state is self-sufficing hence demand ne’er exceeds supply. The authorities of Uzbekistan is the major importer of goods and services. Most of the imports comprises of equipments in energy, telecommunication and Information Technology hardware and package.
Role of Government
The authorities did non liberalize the economic system sufficiently plenty since freedom. It owns all major companies, purely regulates foreign trade and follows the policy of import permutation. Monopolistic environment created by state-owned companies stifle the development of private sector.
Recommendations for Uzbekistan
The followers are the recommendations the Uzbekistan authorities should implement for sustained growing of the state:
Bettering Business Climate: Government should halt prosecuting the policy of import permutation and do it easier for foreign investing to put in the state.
Prolonging Macroeconomic Stability: Need improved macroeconomic policies to command rising prices, extinguish limitations on currency transition, better ordinance of fiscal sector would assist in keeping high economic growing rates.
Hiking Agriculture Productivity: Better agricultural reforms, abolishment of province dictated harvest production, more power to husbandmans and investing in modern machinery would raise per capita income and cut down poorness.
Improve Accountability and Transparency: The state ranks really hapless in Transparency International Index at 174 of 180 states. Corruptness is rampant and Firms are often subjected to pay payoffs. The authorities must set attempts in bettering transparence for the houses to hold any assurance in making concern in the state.
Promote Open Competition: Government should stop the policy of commanding all industries and making monopolistic environment. Government should let free control of industries by private sector. This will make more competition, promote invention and would better overall efficiency of the industries and hike economic system.
