Uzbekistan – Saudi Arabia: mutually beneficial cooperation

Uzbekistan – Saudi Arabia: mutually beneficial cooperation

The development of relations with the Kingdom of Saudi Arabia (KSA) is one of the priorities of the updated foreign policy of the Republic of Uzbekistan.

Saudi Arabia is an important partner of Uzbekistan, which has great authority and financial and economic potential not only in Arab-Muslim countries, but also around the world.

KSA is the center of Islam, where the main shrines of the religion of Islam are located – the Al-Haram Mosque in Mecca and the Mosque of the Prophet Al-Masjid an-Nabawi in Medina. In this regard, the Kingdom plays a leading role in the lives of Muslims around the world, including Uzbekistan, who perform Hajj and Umrah.  At the same time, Saudi Arabia considers Uzbekistan as one of the “cradles” of Islamic civilization.

In Saudi Arabia, which is also home to more than 34 million people, the policy is characterized by the participation of the state in the main sectors of the economy. A course is being pursued to simultaneously expand the activity of national private capital.

In this context, the experience of the KSA in implementing its “Vision 2030” program, which is aimed at maximizing the liberation of the country’s economy from raw materials (oil) dependence, is attractive.

The social policy of the KSA includes the provision of social guarantees to the population, support and subsidization of youth and families.

At the current stage, this is combined with stimulating the training and retraining of national personnel to work in industry and the private sector of the economy.

Uzbekistan and Saudi Arabia are connected by close historical, cultural and spiritual values.

This similarity, as well as the presence of powerful financial and economic resources, Saudi Arabia is very attractive for the Republic of Uzbekistan.

The Kingdom of Saudi Arabia was among the first to recognize the state independence of the Republic of Uzbekistan (December 30, 1991). In February of this year, Uzbekistan and Saudi Arabia celebrated the 30th anniversary of the establishment of diplomatic relations.

The legal framework of bilateral cooperation consists of 13 documents. The parties are developing bilateral cooperation based on the framework agreement “On Cooperation in Political, Economic, Trade, Investment and Technological Spheres, Youth Affairs and Sports”, as well as on the agreements “On Protection and Promotion of Investments” and “On Avoidance of Double Taxation”.

An important stage in the history of bilateral relations, which gave an additional impetus to the development of bilateral relations, was the visit of President Shavkat Mirziyoyev to the Kingdom of Saudi Arabia at the invitation of King Salman bin Abdulaziz Al Saud on May 20-21, 2017, during which our President participated in the Summit of Arab-Muslim Countries and the United States.

Since then, bilateral political, economic and cultural and humanitarian ties are showing positive dynamics, being filled with practical content. Regular contacts and exchanges at the highest and highest levels have raised cooperation to a qualitatively new level. Thanks to the efforts of the Leadership of Uzbekistan, the coordinated actions of the relevant ministries and departments of the two countries, coordinated on the IPC platform, have significantly increased the pace of development of Uzbek-Saudi cooperation.

Over the past five years, trade between Uzbekistan and Saudi Arabia has increased 1.2 times.

In January-June 2022, mutual trade increased in almost 12.8 times compared to the same period in 2021 and amounted to $95.5 million. This indicates great opportunities for further increase of Uzbek-Saudi trade turnover in the near future.

(For information: in 2020, the trade turnover amounted to $27.4 million, exports – $0.7 million, imports – $26.8 million. In 2021, the trade turnover amounted to $17.2 million (-40%) (exports – $4.8 million, imports – $12.4 million).

Over the past five years, the number of enterprises operating in the Republic of Uzbekistan with Saudi capital, increased 4.1 times and reached 38 (19 sole proprietors and 19 joint ventures).

According to the estimates of the Center for Economic Research and Reforms under the Administration of the President of the Republic of Uzbekistan (CERR), industrial cooperation and expansion of production of demanded products will give a powerful impetus to the further development of bilateral relations in the economic sphere in order to increase joint production of products with high added value. For example, the involvement of “Saudi Aramco” in the exploration, production and processing of oil and gas in Uzbekistan.

The participation of Saudi companies in the implementation of major investment projects in our country is of great importance.

By the end of 2021, the volume of investments in the economy of Uzbekistan amounted to more than $1.5 billion ($88 thousand in 2017).

At the moment, projects with such leading Saudi companies as “Al-Habib Medical Group” and “ACWA Power” have been successfully implemented and are being implemented.

With the assistance of “Al-Habib Medical Group”, modern technologies of digitization and centralization of all medical information and processes of interaction with patients are being introduced into the healthcare management system of Uzbekistan. Medical Academy by “Al-Habib Medical Group” is to be established in Uzbekistan for training and advanced training of medical workers. It is also planned to improve their skills in hospitals in the KSA. In addition, work is underway on the implementation of an investment project to create a modern multidisciplinary medical complex in Tashkent in accordance with the standards of KSA clinics and hospitals equipped with advanced and modern technologies.

Saudi Arabia has become one of the largest foreign investors in projects to modernize energy infrastructure and develop “green” energy in the regions of Uzbekistan. The volume of KSA investments through “ACWA Power” in this industry will exceed $2.5 billion (the current investment portfolio includes 4 projects).

As known, the Republic of Uzbekistan in 2018 ratified the Paris Agreement with the aim of developing environmentally friendly energy sources, having undertaken a quantitative commitment to reduce specific greenhouse gas emissions per unit of GDP to 10% by 2030 compared to the level of 2010.

In this regard, the Ministry of Energy of Uzbekistan, “ACWA Power” and “Air Products” (USA) signed an Open Agreement on the development of renewable and hydrogen energy in the Republic of Uzbekistan. As part of the implementation of this project, together with Saudi Arabia, it is planned to build a pilot power plant with a capacity of 40-50 kW and attract five specialists from the KSA to study the application of new innovative technologies in the production of hydrogen energy.

In addition, together with the KSA, work has begun on the construction of wind power plants (WPP) in the Republic of Karakalpakstan (with a combined capacity of 1,500 MW), Bukhara and Navoi regions (1,000 MW). According to experts, the start of the operation of the WPP in the Republic of Karakalpakstan will cover the electricity demand of 4 million households and it compensates for 2.5 million tons of carbon dioxide per year. In February of this year, the construction of one WPP with a capacity of 100 MW was launched in the Republic of Karakalpakstan.

According to CERR experts, the application of the KSA’s experience in the transition to a low-carbon economy will make a great contribution to the development of environmentally friendly technologies and will make it possible to produce 25% of electricity from renewable energy sources by 2030. This, in turn, will be another step in the implementation of tasks to achieve the Sustainable Development Goals of fast-growing Uzbekistan.

A project for the construction of a 1,500 MW thermal power plant in the Syrdarya region is under implementation.

Uzbekistan and the Saudi company “SABIC” are establishing practical cooperation, i.e., the implementation of investment projects in our country using MTO (methanol to olefins) and MTP (methanol to propylene) technologies, as well as projects to create new production facilities producing chemical fertilizers.

Special attention is paid to projects aimed at ensuring food security. Taking into account the rich experience of Saudi Arabia, the parties are working on the formation of a separate investment portfolio in the field of agriculture of Uzbekistan and processing of agricultural products, providing for the introduction of advanced innovative and water-saving technologies.

An agreement has been reached with large Saudi companies such as “Savola Group”, “SALIC”, “Almarai”, “Tamimi Group” on the joint creation of high-tech greenhouses and fruit and vegetable processing plants in Uzbekistan with the prospect of exporting to markets with high demand.

In Uzbekistan, a Fund for the Empowerment of Microenterprises has been established jointly with the financial support of the Islamic Development Bank to support small and medium-sized businesses.

An important mechanism for the further expansion of the Uzbek-Saudi investment partnership is also the agreements between the Fund for the Expansion of Economic Opportunities, established in Uzbekistan in 2021 jointly with the Islamic Development Bank, and the Saudi Development Fund, which has already allocated about $200 million for the implementation of social and infrastructure projects in our country. In addition, the State Investment Fund of Saudi Arabia (one of the largest sovereign wealth funds in the world with total assets of $390 billion) believes that investing in the economy of our country is a promising area of cooperation in the light of large-scale socio-economic reforms and measures to improve the investment climate implemented under the leadership of the President of Uzbekistan. Significant financial support in the implementation of socio-economic reforms in Uzbekistan is provided by the Saudi Development Fund.

The parties cooperate in the implementation of the proposals and initiatives of President Shavkat Mirziyoyev, in particular, on the construction of the Mazar-I-Sharif–Herat railway and Surkhan–Puli-Khumri power transmission lines. Saudi Arabia participated in financing the construction of part of the Samarkand–Guzar highway.

KSA and the Republic of Uzbekistan interact within the framework of the international transport corridor “Uzbekistan–Turkmenistan–Iran–Oman–Qatar”, which allows to intensify economic cooperation between the two countries, and also contributes to the access of Central Asian countries to world markets and strengthen cooperation with the Gulf states, including the KSA.

In this context, according to the CERR staff, it is important to take into account that the KSA has a huge consumer market and provides a good opportunity for Uzbek exporters of food, textile (clothing, carpets, home textiles) and agricultural products (fruits, vegetables, legumes, etc.).

A number of Saudi travel companies are interested in sending tourists from the KSA to Uzbekistan. In particular, the travel agency “Zahid Travel Group” plans to organize trips to Uzbekistan of tourists from government agencies or the private sector. This will also be facilitated by a Memorandum of Understanding between “Uzbekistan Airways” JSC and “Flynas” airline on the development of tourism. A joint program of cooperation between the tourism departments of the two countries is also being developed with an emphasis on the development of pilgrimage tourism.

According to CERR experts, in order to attract tourists from the KSA to Uzbekistan, it would be possible to consider establishing a joint venture in Uzbekistan with large Saudi Arabian travel companies such as “Masarat Adventure Club” to provide high-quality international services, as well as adopt a Roadmap for cooperation in achieving the goals of tourism development programs, including the exchange of best practices (including in the cancers of the KSA “Vision 2030” program), mutual internships for travel companies, attraction of grants and financial resources for the development of tourist facilities and landscaping.

Cooperation between the countries in the field of labor relations has prospects. To this end, the parties are interested in signing an intergovernmental agreement on cooperation in the field of external labor migration, which defines priority areas of practical cooperation on labor issues, based on the needs for qualified labor resources in the context of the sectors of the economies of the two countries.

There are opportunities for expanding bilateral cooperation in the field of science and technology as a key factor in improving the competitiveness of the economies of the two countries. This will be facilitated by the establishment of direct links between the Tashkent Technopark and the King Abdulaziz City for Science and Technology.

The upcoming Uzbek-Saudi talks during the visit of President Shavkat Mirziyoyev to the Kingdom of Saudi Arabia are aimed at strengthening bilateral cooperation in the fields of trade and investment, information technology, electronics, biotechnology, energy, oil and gas, gas chemical and chemical industries, light and food industries, the production of building materials, agriculture, healthcare and pharmaceuticals, including when implementing the principles of public-private partnership.

The favorable conditions created for closer rapprochement of the business circles of the two countries and direct ties between the leading Uzbek and Saudi manufacturers are the basis for further deepening business cooperation and the development of industrial cooperation. This will increase the joint production of products with high added value, which is formed due to the high volume of domestic consumption as well as access to regional and foreign markets.

The agreements reached following the visit will raise the Uzbek-Saudi multifaceted relations to a new level of development, including the development of financial support tools for joint programs and projects, including the creation of investment companies and microfinance organizations in Uzbekistan.

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