Mechanisms for deepening trade, economic and investment interaction between the SCO countries and the EAEU the example of Uzbekistan

Today, in the context of accelerated globalization processes, humanity strives to create a world that will develop on the basis of harmony, mutual trust and respect for different cultures. Trust is one of the most important factors in establishing mutual understanding in bilateral and multilateral relations.

Uzbekistan supports the efforts of the Shanghai Cooperation Organization (SCO) in the areas of multifaceted trade, economic, cultural and humanitarian cooperation, as well as in the fight against transnational organized crime. Within the framework of the SCO, bilateral cooperation between member states is intensively developing. The activities of the Regional Anti-Terrorist Structure (RATS) of the Shanghai Cooperation Organization located in Tashkent are of great importance for strengthening peace and prosperity, as well as in jointly fighting against various threats. In 2001, when the Shanghai Cooperation Organization was formed, the main elements of interaction were security issues. Today, cooperation between states covers an immeasurably wider range of issues, including cultural, humanitarian, environmental, and economic. The SCO Center for Public Diplomacy in Uzbekistan contributes to successful interaction between states, as well as the creation of an atmosphere of mutual trust and good neighborliness, interethnic and interfaith harmony, and the development of inter-civilizational dialogue among the countries of the Shanghai Cooperation Organization.
At the plenary meeting of the first Russian-Uzbek educational forum “New Personnel for a New Economy” on October 18, 2018 at the Academy of Public Administration under the President of the Republic of Uzbekistan, Vladimir Mau, Rector of RANEPA under the President of the Russian Federation, speaking with a report “Prospects for cooperation between Russia and Uzbekistan in the field training of personnel for public administration”, recalled the need for “joint training of competitive, adaptive and comprehensively developed management personnel for the public sector in order to solve the problem of innovative development of society”
Development guidelines and main challenges of our time
Uzbekistan is interested in further strengthening trade and economic ties and interaction in the transport and transit sector with the SCO member countries and expanding the countries’ opportunities to enter the world market. Rail transport plays an important role in the development of the economy of Uzbekistan, which is due to several factors:
– the peculiarity of the convenient geographical location of Uzbekistan and its place in the geopolitical space of Central Asia;
– the presence of a developed transport communications system;
– The highest density of the road network in Central Asia is 41 kilometers per 100 square meters. kilometers (for comparison: in Tajikistan - 19.4 kilometers per 100 sq. kilometers, Kyrgyzstan - 17 kilometers per 100 sq. kilometers, Kazakhstan - 4.7 kilometers per 100 sq. kilometers, Turkmenistan - 2.8 kilometers per 100 sq. kilometers. kilometers).
Thus, while remaining the crossroads of all land and air communications in the region, modern Uzbekistan has unique opportunities to participate in international transit and creates conditions for increasing transit potential. Active work is underway to build modern railways and highways, and the reconstruction of international airports is underway. Regulatory documents are being adopted to ensure the transit of goods through the territory of the country. International transport terminals have been created for this purpose. To date, Uzbekistan has joined 70 international transport conventions and treaties. According to statistics, transit traffic through the territory of Uzbekistan is carried out by foreign carriers on 99 routes. Resolution of the Cabinet of Ministers of the Republic of Uzbekistan dated December 15, 2018 No. 10223 Certain rules for transit transportation through the territory of the state have been adjusted. In addition, 47 new routes have been opened for the transit movement of foreign road carriers across the territory of Uzbekistan.
An analysis of the structure of world trade shows that the political and economic situation in any one region affects the situation in other regions of the world. A number of economic analysts believe that in the near future the influence of Southeast Asia, whose economic activity has increased significantly in recent decades, will increase on both the global economy and the European economy. The problem of delivering goods from Europe to Asia and back is already acute. China is interested in implementing large infrastructure projects in Central Asia.
Close interaction between Uzbekistan and the countries participating in the Shanghai Cooperation Organization is extremely important for the implementation of the strategic goals of the state.
Using the enormous potential of the Shanghai Cooperation Organization will increase the effectiveness and authority of the association on the world stage. In this context, the interaction of the Shanghai Eight countries within the framework of the One Belt Initiative
– one way” significantly increases the chances of success. The President of the Republic of Uzbekistan Shavkat Mirziyoyev spoke about this, in particular, at a meeting of the Council of Heads of State of the Shanghai Cooperation Organization in Qingdao (PRC). Promising areas of cooperation are transport communications.
In the long term, the most important strategic direction of the Shanghai Cooperation Organization should be the launch of international transit transport corridors. The creation and expansion of a transport communications network is important for Uzbekistan; this is beneficial for turning the region into one of the global transit and logistics centers.
In modern conditions, a diversified economic structure is one of the main conditions for sustainable development and socio-economic stability. In this regard, the prospects for expanding investment cooperation in such areas as mechanical engineering and household electrical appliances, construction and chemistry, agricultural processing, and production of building materials may become a priority area of cooperation within the Shanghai Cooperation Organization.
New challenges for the development of the transport and logistics sector
In the process of integrating the transport system of Uzbekistan into the global logistics infrastructure, it is necessary to take into account the importance of implementing the policy of bringing together the transport and communication systems of the countries that are its closest neighbors. This step, in turn, will ensure increased efficiency in the implementation of the transport and transit potential of Uzbekistan through more active participation in the functioning of international transport corridors running through its territory.
The geostrategic location of Uzbekistan, bordering all the states of Central Asia, with rail, road and air connections with all neighboring countries, is a key factor determining the country’s transport and logistics system in the expanding trade and economic cooperation between the SCO member countries. The EAEU should be considered as one "from existing customs unions with their achievements and problems”. In Uzbekistan today, large-scale measures are being taken to accelerate and qualitatively develop the transport and logistics system. In particular, railway lines connecting Uzbek Termez with Afghan Hairatan and Mazar-i-Sharif were put into operation, as well as the Angren-Pap line, built with the participation of Chinese specialists within the framework of the One Belt, One Road initiative, connecting the Uzbek and Kyrgyz regions of the Fergana region. valleys with the center of the Republic of Uzbekistan and subsequent access to the territory of Kazakhstan and Russia.
The key centers for the formation of cargo within the East-West corridor are China and the European Union, which simultaneously form the largest segment of international and continental trade. Sino-European trade at the end of 2018 amounted to 604.604 billion euros, of which EU exports to China accounted for 209.906 billion euros, and Chinese exports to the EU amounted to 394.698 billion euros.
For Uzbekistan, there is a strategic interest in relation to the international transport corridor “North
– South” consists of a general increase in the interest of leading Eurasian economies in using land transport routes. If the countries participating in the North-South corridor manage to establish schemes for stable, fast and cheap transportation of goods, the interest of Indian business in Uzbekistan will strengthen. Let us not forget that, according to World Economic Forum (WEF) forecasts, by 2030 India “will become the third largest economy in the world (with a nominal GDP of $2.6 trillion) (with a GDP at the official exchange rate of $6 trillion )", which meets the interests of exporters from Central Asian countries.
Uzbekistan’s planned and currently under construction transport infrastructure projects will be represented mainly by railway projects, which account for 71% of the total US$8.3 billion investment in the transport sector. The implementation of such projects increases the geo-economic attractiveness of Uzbekistan as a link between East and West, North and South, and also opens up new strategic opportunities for creating a short route from China and other countries of the Asia-Pacific region to the huge markets of Central and South Asia, the Middle East and Europe.
Plans for the implementation of the “One Belt – One Road” project are fully consistent with the tasks outlined in the Development Strategy of Uzbekistan for 2017–2020; they complement each other. It is relevant and important for Uzbekistan to provide direct access to seaports, such as Uzbekistan - Kyrgyzstan - China. We must not lose sight of the efforts to create the Trans-Afghan Transport Corridor (TATC), the development of southern directions and the
"Central Asia - Western Europe". From this point of view, within the framework of the One Belt, One Road project, we have a lot in common. Let us recall that during his speech at the “One Belt - One Road” forum, which was held in Beijing in April 2019, the President of the Republic of Uzbekistan Shavkat Mirziyoyev noted the urgent importance of unlocking the transit potential of the Central Asian region and the formation of the economic corridor “China - Central Asia - Western Asia”. Asia". At the same time, he proposed introducing a through tariff for rail transportation along the following route: ports of the Yellow Sea - Central Asia - Europe.
Among the priority areas for the implementation of the SCO development program until 2035, which covers all key areas - from the economy, trade and investment to agriculture, logistics and the cultural and humanitarian sphere, there is a need to create additional working groups on industry, energy and territorial development. The exchange of experience and best practices in the field of increasing energy efficiency, including clean energy technologies, is of great interest and prospects for interaction between the countries of the Shanghai Cooperation Organization.
The EAEU and the SCO respect the interests of the participating countries, for which the national interests of the states are the primary guideline. According to a study by the Eurasian Economic Commission, the EAEU is considered the most advanced integration project in the CIS and represents the second deepest regional economic integration structure in the world after the European Union.
The key priority for the development of the EAEU remains the pooling of financial and economic resources of the member countries, strengthening integration interaction within this union, and the active use of common potential in the trade, economic, transport, communications and energy spheres.
Within the EAEU, a large market for goods, services, capital and labor has already been formed. The combined GDP of the participating countries is $1.8 trillion and the population exceeds 180 million. The EAEU member states have enormous potential in leading sectors of the economy, such as: oil, gas and coal production, production of mineral fertilizers, electricity production, iron and steel production, collection of grains and legumes, meat production.
Countries 2015 2016 2017 2018
Russia 4455.8 4192.7 4728.7 5729.8
incl. export 1821.1 1794.9 2019.2 2192.9
Kazakhstan 2697.1 1898.9 2055.7 3022.2
incl. export 1849.4 945.0 1057.6 1457.7
Kyrgyzstan 136.0 167.4 253.7 481.0
incl. export 99.9 121.5 178.3 348.2
Belarus 109.1 112.6 182.4 420.0
incl. export 20.1 18.2 27.4 43.2
TOTAL 7398.0 6370.7 7220.5 9653.0
incl. export 3790.5 2879.6 3282.5 4042.0
In addition to the above, the Eurasian Economic Union has an advantage that no other integration association in the world has, namely, a common history and experience of running a single economy within one state. Therefore, in many respects in the early 1990s, the driving forces for the development of Eurasian integration were the industrial, transport, and energy complexes. The absence of a language barrier and understanding of national cultures is an important factor in Eurasian integration processes. The EAEU vector makes it possible to preserve norms and cultural values; this direction of EAEU integration is especially advantageous in comparison with the Chinese and partly with the European vector.
According to the main directions of economic development of the EAEU until 2030, within the framework of the Eurasian Economic Union it is planned to create a single transport space, common markets for energy resources and electricity, as well as a coordinated agro-industrial policy.
The priority direction is the formation of a single financial market of the Eurasian Economic Union. In 2025, it is planned to create the Financial Regulator of the EAEU - a supranational body for regulating the common financial and foreign exchange market, guaranteeing the implementation of a unified macroeconomic policy.
To meet the internal needs of Uzbekistan, about 400 thousand tons of oil are imported from Kazakhstan annually. According to the forecasts of the Ministry of Energy, by 2030 the volume of oil imports will be about 3.4 million tons (an increase of more than eight times), the increase in consumption and production of petroleum products will be 217% compared to 2018.
The EAEU contains 20% of the world’s natural gas reserves (about 50% of world exports), more than 22% of the world’s coal reserves (17.2%), and 7.8% of the world’s oil reserves (18%). The share of this industry in the GDP of the EAEU countries is 20%, and in industrial production – 35%.
During 2016–2018, the total trade turnover of Uzbekistan with the countries of the EAEU, thanks to the bilateral agreements reached, increased by 52% - to 9.65 billion US dollars, which amounted to about 30% of the foreign trade turnover of Uzbekistan. The Republic exports products worth more than $4 billion to the countries of the Eurasian Economic Union, which is 40.4% higher than the level of 2016.
Currently, trade within the EAEU accounts for 52.6% of the volume of foreign trade of Belarus, 42.8% of Kyrgyzstan, 29% of Armenia, 23% of Kazakhstan, which indicates the interest of these countries in the single EAEU market.
In 2018, the share of EAEU member countries in the total volume of transportation along railway routes for export, import and transit of goods in Uzbekistan amounted to 67%, 71% and 78%, respectively.
About 90% of the total volume of Uzbek export cargo to the EAEU member countries is sent through Kazakhstan. At the end of 2018, the volume of transit by rail to the Republic of Kazakhstan amounted to 17 million tons.
The EAEU has rules for a common market for transport services, which will contribute to the emergence in Uzbekistan of the services of large operators and transport and logistics companies of the EAEU countries and, as a result, increased competition and reduction in the cost of transporting goods and services; ensuring access for airlines of the EAEU countries to the aviation infrastructure of Uzbekistan and vice versa, which will allow optimizing tariffs for the transportation of passengers and cargo through additional and new flights.
In 2018, the share of EAEU member countries in the total volume of transportation of export, import and transit goods along Uzbekistan’s road routes amounted to 51.4%, 58.2% and 41%, respectively.
After Armenia joined the EAEU in 2015, the cost of cargo transportation services by road and rail routes decreased by 18% and 21%, respectively. Kyrgyzstan’s participation in the EAEU as a full member helped reduce the cost of air tickets for international flights by 14%, and the price of air cargo transportation by 17%.
Uzbekistan is a key player in Central Asia and has strategic importance for regional development. Over time, the country actively sought to diversify its economic ties and expand foreign trade relations. The expansion of cooperation between the SCO countries (including Russia, China, India and others) and the EAEU countries (primarily Russia, Kazakhstan, Belarus and others) represents an important opportunity for Uzbekistan to deepen its economic integration in the region.
The Eurasian Economic Union (EAEU) has become a vibrant engine of cooperation in the Eurasian region. Since its founding in 2015, the union has been considered a key factor for the development of trade and economic relations between its members. Using the example of Uzbekistan, one can see how these mechanisms affect its economic development within the EAEU.
Uzbekistan, geographically located in the center of Eurasia, plays a strategically important role in the economic dynamics of the region. Having joined the EAEU as an observer in 2021, Uzbekistan is taking an active interest in deepening its economic ties with union members. According to United Nations (UN) analytical reports until 2021, Uzbekistan’s trade with other EAEU member countries has increased significantly. The total volume of trade between Uzbekistan and the EAEU countries has increased by 30% over the past five years.
Investment flows have also increased. Over the past three years, Uzbekistan has attracted significant investment from EAEU countries, increasing the volume of investments in various sectors of the economy, including energy, manufacturing and agriculture.
The first step taken by Uzbekistan in obtaining EAEU observer status will allow establishing dialogue with partners and participating countries. This is an opportunity to get acquainted with the functioning mechanisms of the EAEU. Integration within the EAEU will facilitate access to continental transport hubs. Uzbekistan will be able to use the developed transport and communication system of the Eurasian Economic Union, which provides the shortest routes of communication between Europe and Asia, access to markets and sea routes of the Near and Middle East, China, Russia and Europe. At the same time, together with partners, the country’s transport infrastructure will be improved, taking into account integration into the most important transcontinental international transport corridors passing through the territories of the countries of the Eurasian Economic Union.
However, the implementation of these opportunities faces obstacles in the form of inconsistencies in the legal framework of different countries and technical standards, the lack of a unified railway track along the entire route, as well as long downtime of transit cargo at the borders due to lengthy customs clearance in the countries participating in the transport process along the route from China to the EU via Uzbekistan. These reasons reduce the interest of the Railway Transport Council of the Commonwealth member states (CIS and Baltic countries) and international railway organizations of other countries in implementing projects.
Uzbekistan is on the verge of strengthening its trade, economic and investment ties with both the SCO and the EAEU. The country’s ongoing efforts and political will are strengthening its role in regional development. However, for more successful integration, attention must be paid to overcoming obstacles such as customs barriers, differences in trade and investment rules. All this requires further efforts and cooperation between all stakeholders.
Dilfuza Rakhimova,
Doctor of Economics, Professor,
Head of the Department of “Theory and Practice of Management”
Academy of Public Administration
under the President of the Republic of Uzbekistan
/IA "Dunyo"/.