Urus Advisory

#Uzbekistan🇺🇿-#Kuwait🇰🇼 forum discusses mass privatisations in Uzbekistan economy On October 16, at a business forum in Tashkent aimed at strengthening ties between Uzbekistan and Kuwait, Uzbekistan's Deputy Minister of Investment, Industry, and Trade emphasised the importance of collaboration with Kuwaiti businessmen, particularly in healthcare, agriculture, and tourism. The forum focused on opportunities for cooperative initiatives in mining, energy, textiles, and logistics. Uzbekistan encoruaged Kuwaiti investors to help engage in the privatisation of over 1,000 state-owned firms in Uzbekistan, which is trying to liberalise a previously heavily centrally planned economy. Kuwaiti investment in logistics infrastructure is also being encouraged in order to transform Uzbekistan and Central Asia as a whole into an international trade hub, given the region's strategic location and benevolent neutrality in ongoing world affairs. Uzbekistani-Kuwaiti collaboration has progressed in recent years. During an investment and trade forum hosted by Kuwait in August, which was attended by business and ministry representatives from both countries, Uzbekistan's Foreign Minister Bakhtiyor Saidov encouraged Kuwaiti investors to invest in the agriculture, light industry, medical products, and renewable energy sectors of Uzbekistan. The foreign ministers met again in New York in September 2024 to consider other ways to boost bilateral collaboration, such as the formation of joint trade committees and new logistics and infrastructure initiatives. Kuwait, along with the other Gulf States, have been active in investing in Central Asia, with the GCC representing the Arab Gulf States and Central Asian states engaging in annual meetings, the second of which was held in April of this year. The GCC is investing in Central Asia for economic reasons but also partly in an effort to contain the GCC’s rivals Iran and Turkey. 

#Kazakhstan’s 🇰🇿 plans to refill Northern Aral Sea 🌊 succeed For the first time in five years, nearly a billion cubic meters of water were transported to the Aral Sea, allowing the Northern Aral Sea to be filled to desired levels. The Aral Sea used to be the keystone of the regional economy and society, but the USSR diverted water from the rivers feeding the Aral Sea to be used in agriculture, especially cotton growing, a policy which only exacerbated during the 1990s when the USSR collapsed. This resulted in the sea almost drying up by 2000 and its split in to the North and South Aral Seas.  This has had a ruinous effect on life in the surrounding area, especially in Uzbekistan where the much greater desiccation of the South Aral sea  has resulted in effects that have been far more drastic than in the North. Typically, 400 million cubic meters of water enter the Northern Aral Sea from the Amu Darya River, but this year the number more than doubled. The Northern Aral now contains 22 billion cubic meters of water, down from a recent peak of 27 bilion cubic metres but representing a reversal from a recent low of 17 billion cubic metres. Because of the increased water level, fishermen will be able to catch 8,000 tonnes of fish per year, up from 400 tonnes previously. Kazakhstan with aid from the World Bank had previously managed to revive the viability of the North Aral Sea, which lies solely in Kazakhstan via the construction of the Kok-Aral dike and dam, finished in 2005, which separates the two water bodies and prevents flow out of the North Aral into the lower-elevation South Aral, which has only continued to dry up. Earlier in June, Kazakhstan's Minister of Water Resources and Irrigation, Nurzhan Nurzhigitov, had revealed plans for the a plan to conserve the Northern Aral Sea, to be completed in conjunction with the World Bank. According to Nurzhigitov, the project aims to raise water volume by five billion cubic meters, covering 1,000 square kilometres of dried-out seabed, reducing the salt and dust storms that have blighted the region and stabilising the adjoining lakes.

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#Germany 🇩🇪 invests in new infrastructure at Khorgos dry port in #Kazakhstan 🇰🇿 On September 16, Kazakhstan's Ministry of Transport and the Kazakh-German consortium SKYHANSA signed a framework agreement for the construction of a cargo-passenger airport in the special economic zone (SEZ) Khorgos-Eastern Gate on Kazakhstan's border with China. The document was signed during the official visit of Germany's Federal Chancellor Olaf Scholz to Kazakhstan, part of a total of USD 6.2 bn of bilateral deals signed at the event. The Khorgos-Eastern Gate Special Economic Zone is located in Kazakhstan, one kilometre from the Kazakhstani-Chinese border at the Chinese border city of Khorgos. The SEZ is conveniently placed along the Western Europe-Western China highway, which connects Lianyungang in China on the Yellow Sea to St. Petersburg in Russia on the Baltic Sea. It is also a major hub on the Trans-Caspian International Transport Route (TITR) or middle corridor which links China and Europe along a route that bypasses Russia. The SEZ comprises a dry port and a multimodal logistics zone. Kazakhstan uses Russian broad-gauge for its railway system, while China uses standard gauge. Kazakhstan also predominantly uses right-hand traffic on its railway system, while China has left-hand traffic. These issues necessitate a dry port to transfer cargo between the two railway networks. The first phase of construction of a China-Kazakhstan industrial park on the SEZ's land began in November 2023. The Kazakh-German project calls for the construction of an airport with a passenger terminal that can handle up to 500 passengers per hour, a cargo terminal that can handle up to 250,000 tonnes per year, a fuel storage facility that can hold 550,000 tonnes, a technical centre for aircraft maintenance, along with tourist, shopping, and entertainment facilities. This will make Khorgos far more important than it currently is by diversifying the nature of the facility. Private investment in the project is estimated to top USD 500 m, with more than 300 permanent jobs being generated. The administration of Kazakhstan's Zhetysu region, where the SEZ is located, has now assigned a land plot for the investors to commence building work on the airport after the investment agreement is finalised.

New luxury hotel to open in #Armenian 🇦🇲 ski resort Accor, a French hospitality corporation, has announced plans to open a new Mövenpick Resort in Tsaghkadzor, Armenia as a joint venture with Armenian property company 4A Capital LLC. The hotel will open in 2026 at the well-known ski resort of Tsaghkadzor, offering guests top quality services. Accor will join other global hospitality chain Best Western and Marriott in Tsaghkadzor, but the Mövenpick hotel will be the largest in Tsaghkadzor with 198 rooms. The hotel is intended to become a popular tourist destination, attracting both international guests and locals, and will boost tourism and create new jobs in Armenia, and demonstrates that international businesses see the potential for a major expansion in luxury tourism. The new hotel will be built in the middle of Tsaghkadzor, near key tourist attractions. Tsaghkadzor has been a major tourist attraction since Tsarist and even Persian times thanks to its mild climate and Kecharis monastery. Since 2000, the area has also developed its snowsports sector to become a winter resort as well. The main origin countries for tourists to Armenia are Russia, Georgia and Iran, with Russia in particular contributing 48% of the total. In 2023, Armenia reported 2.3 million tourists, a major increase of 22% from the pre-pandemic high in 2019. This is a considerable number for a country with a population of 3 million. Armenia has been making efforts to grow the tourism sector. In September 2023, the Syunik airport was re-opened in the south of the country, with 40-minute flights from Yerevan, opening up this part of the country to visitors from Armenia and abroad. Tourist flows have changed somewhat as well, with numbers from Russia falling 23% from 2023-2024, amidst just a 6% downturn in visitors overall, suggesting that tourism from western countries like Germany and the USA is increasing as well to compensate, mirroring Armenia’s geopolitical realignment with the west.

#Kazakhstan 🇰🇿 seeks to triple #MiddleCorridor capacity by 2027 The Kazakhstani government is actively working on implementing a roadmap to improve the capacity the Trans-Caspian International Transport Route (TITR), otherwise known as the Middle Corridor, to ten million tons annually by 2027. The TITR connects Europe and China via overland and maritime infrastructure through Kazakhstan, Azerbaijan, Turkey, and Georgia as well as the Caspian Sea. It serves as an important alternative to land routes through Russia and maritime routes, both of which have seen geopolitical problems related to conflicts in Ukraine and the Red Sea respectively. Agreements with China in November 2023 have boosted transit cargo flow from East to West, including China-Europe container freight via rail. This involved the construction of a dry port in Xi’an that handles 40% of goods shipped to Kazakhstan. This was part of a joint venture by China and Kazakhstan, the China-Kazakhstan Trade and Logistics Company. It has significantly increased transit traffic along the TITR, nearly doubling the transit volume from China by consolidating the Chinese logistics of shipping goods to Kazakhstan. TITR has seen a 65% increase in 2023, reaching 2.76 m tonnes compared to 1.7 m tonnes in 2022. In the first seven months of 2024, the volume reached 2.56 m tonnes, a 63% increase from the previous year. Therefore, the target of 10 m tonnes annually will be to roughly triple the amount of cargo carried in the span of just three years, a very ambitious target. Efforts have been made to integrate the IT systems of Kazakhstan Temir Zholy, Kazakhstan’s state-owned railway company with a digital customs and trade platform called Global Digital Trade Corridor. Customs checks are a major problem on this international route spanning numerous countries with very different regulatory regimes. To enhance competitiveness, a joint venture called Middle Corridor Multimodal has been established to digitize and optimize transport operations along the route. There are still problems associated with the TITR however. Other than customs regimes, goods still have to be offloaded and reloaded for the trip over the Caspian Sea, and the land component is complicated by China and Kazakhstan’s use of different railway gauges.

#Georgian 🇬🇪 #YouTube sensation heads to #Hollywood 📽️ American director Michael Bay, one of the highest-grossing directors in history, and the former president of Paramount Adam Goodman have announced that they are collaborating to make a media series around the Skibidi Toilet franchise via their production company, Invisible Narratives. Since its release in 2023, Skibidi Toilet, currently a series of short videos distributed on YouTube and Tiktok has become an enduring global sensation, with 500m people watching it a month, down from a peak of 3 billion, which made it at one time the most-watched series in the world. This is an incredible achievement for a small country like Georgia with just 4 million people. The series revolves around an army of singing toilets who fight an army of people with appliances for heads, which thanks to its lack of dialogue had global appeal. The series was created by a Russian-Georgian animator, 23 year old Alexey Gerasimov, using free software. The series debuted on YouTube in February 2023, where it went viral and achieved incredible popularity, especially with children. Currently, the series has grown to such heights that slang from the show is now being used by children and young people worldwide. Before this announcement, the series had announced that it would begin producing official merchandise, which would be available in the autumn of this year. This was a collaboration with Invisible Narratives and Bonkers Toys, a US based toy company. Bay and Goodman announced that they thought the action-packed series had the potential to rival other media juggernauts such as Transformers and Marvel, the former helmed by Bay. There has been some controversy over the impact the show might have on young children, especially in Russia, where lawmakers and concerned citizens have criticised the show as well as other media franchises like Huggy Wuggy on the grounds of their content being inappropriate for children, as well as Skibidi Toilet's usage of digital assets from Valve Corporation in its videos.

#Hyundai begins producing #cars 🚗 in #Uzbekistan 🇺🇿 The production of South Korean Hyundai cars has begun at the Asaka Motors plant in the Syrdarya region of Uzbekistan. A long-term partnership between Asaka and Hyundai was signed in April. Kazakhstan's Astana Motors will manage sales, technical service, and dealership network growth. Currently, components are still imported from elsewhere but there are plans to produce those domestically as well, with a new plant for component production being planned next to the factory. South Korea is a major investor in Uzbekistan, with South Korean investment in the country totalling USD 7.5 bn and bilateral trade totalling USD 2.5 bn. This is largely due to historical reasons: Many Koreans were deported to Uzbekistan during Soviet times which has created a cultural and economic connection between the two countries. For instance, there are 7 state-funded King Sejong institutes, analogous to China’s Confucius institutes, in Uzbekistan, where the Korean language and culture are taught. South Korea has been a key partner in the development of Uzbekistan’s infrastructure as well: The first ever export of South Korean high-speed rail technology was a USD 195m deal in June with Uzbekistan that will allow Uzbekistan to connect its key cities of Bukhara, Khiva and Tashkent via a new 1216km long high-speed rail network. Uzbekistan is also a source of labour migrants to South Korea, with Uzbekistanis making up the fourth largest group of migrant workers in South Korea. Furthermore, this is only set to continue, as the South Korean government has increased the number of sectors that Uzbek migrants are able to work in to include service jobs, and 100,000 Uzbekistani workers will be eligible to apply for visas in South Korea this year, though not all will qualify. Asaka motors signed a similar deal with China in 2023 to produce cars for Chinese manufacturer Exeed.

#Uzbekistan🇺🇿 and #Kazakhstan 🇰🇿 plan to introduce #freetrade regime Uzbekistan and Kazakhstan plan to introduce free-trade regime On July 11 and 12, the 21st meeting of the Joint Intergovernmental Commission on Bilateral Cooperation was held, hosted by the Prime Minister of Kazakhstan Olzhas Bektenov and his Uzbekistani counterpart Abdulla Aripov. It was announced that both countries would soon begin establishing a full free-trade regime, with digitised border-crossing procedures to cut transit times. The two prime ministers announced that the two countries were aiming to more than double bilateral trade volume to USD 10bn annually in the near future. Trade between Kazakhstan and Uzbekistan currently makes up about 57% of all trade in Central Asia, at USD 4.4bn in 2023. This is a 30% rise from 2018. However, projections for 2024 suggest that trade between the two countries this year may fall below the 2023 figure. The joint pledge to lowering trade barriers is consistent with a US-facilitated initiative known as the B5+1, which aims to stimulate commerce along the Middle Corridor. Economic cooperation between the two countries has grown in recent years, with 69 joint industrial projects worth USD 3.1 bn being built, set to employ an estimated 14,700 people. 12 cooperative projects with a total cost USD 217m have already been completed, providing around 4,500 jobs. In addition, three investment projects with a total value of USD 178m are underway, including a large electrometallurgical plant in Taraz, Kazakhstan capable of producing 500,000 tonnes of steel products. Kazakhstan and Uzbekistan have also announced that they are cooperating on shortening and improving the quality of air routes between the two countries by coordinating their air traffic control. Intra-regional cooperation in Central Asia will undeniably lead to economic gains for these states, but it has also been seen by both Central Asian countries and the west as a way of making the region more resistant to Russian and Chinese pressure by providing them with economic alternatives to the region’s two massive neighbours.

#Kazakhstan 🇰🇿 to privatise #railway🚂 network On June 24 it was announced that Kazakhstan would privatise their flagging state-owned rail network, Kazakhstan Temir Zholy. Government reforms to Kazakhstan's huge railway network, estimated to be 15,500 km in size, have widely been seen as a failure. The network dates back to Soviet times and is in desperate need of investment and modernisation, which privatisation is seen as able to provide. The railway receives limited state funding and is heavily dependent on freight charges for revenue. Although half of all freight in Kazakhstan is transported by train, attempts to raise rates by a large amount were met with a widespread revolt from potential clients and were therefore abandoned, with rates going up by just 5% instead. The former President of Kazakhstan, Nursultan Nazarbayev has been accused by the current Transport Minister of Kazakhstan of burdening the company with 6bn USD of debt and transferring lucrative routes to the private sector. 73% of all rail freight carried by Kazakhstan Temir Zholy is carried at a loss. The rail network currently suffers from congestion at key points between China and Kazakhstan due to a 50% year-on-year rise in rail traffic between China and Europe that mostly passes through Kazakhstan via the Middle Corridor. Further investment will be necessary to help the Middle Corridor function, which the state currently has been unable to or unwilling to provide. Under Kazakhstan’s Nurly Zhol economic policy, 9.2bn USD has been allocated to road-building with only 16.1m USD allocated to rail expansion, despite their stated goal of building 1,300 km of track and upgrading 4,800 km of track to double-track as part of this policy. In order to alleviate these issues, Kazakhstan is also building a third railway between itself and China via a partnership between the government of Kazakhstan and an unspecified private investor. This was announced in 2024 and aims to be complete by 2027. The railway will increase capacity from 28m tonnes to 48m tonnes and cost 670m USD.