Economic relations between Uzbekistan and Korea and ways to improve
those relations.
Abstract. This thesis explores the economic partnership between Uzbekistan and
the Republic of Korea, tracing its development since Uzbekistan's independence
in 1991. Korea quickly established diplomatic ties, leveraging its significant
investments in Uzbekistan's energy and automotive sectors, despite global
sanctions against Uzbekistan in 2005. By 2022, Korea exported $2.26 billion in
goods to Uzbekistan, while Uzbek exports to South Korea totaled $31.3 million,
indicating an imbalance.
The thesis highlights the need for improved legal and judicial systems, tax
incentives, and strategic investment in Uzbekistan’s emerging technology sector
to enhance bilateral economic relations. It argues that by addressing these areas,
both nations can strengthen their partnership and unlock greater mutual benefits,
fostering sustainable economic growth and deeper bilateral ties.
Key words: Uzbekistan, Korea, investment, import, export, production, law,
economic partnership.
Historical overview of the partnership.
The Republic of Uzbekistan, which declared its independence on August 31,
1991, has established a noteworthy relationship with the Republic of Korea
quickly after. This connection is particularly notable given the historical context,
with Korea being one of the first nations to open an embassy in Tashkent in 1992.
The presence of a significant ethnic Korean community in Uzbekistan, a remnant
of Stalin's deportations, further underscores the natural affinity between the two
nations. While global discourse has often centered on Central Asia's strategic
importance to major powers, Korea has emerged as a significant yet understated
player, forging important agreements with Tashkent to develop oil and gas
resources critical to Korea's energy needs.
Korea stands as Uzbekistan's largest trading partner in Central Asia. Following
the 2005 Andijan unrest and subsequent sanctions from the United States and
European Union, Korea, alongside China, Japan, and Russia, maintained its
economic and trade relations with Uzbekistan, notably without imposing human
rights conditions.
In 2022, Korea exported goods worth $2.26 billion to Uzbekistan. This marks a
significant increase from $1.25 billion in 2017, reflecting an annual growth rate
of 12.6%. Conversely, Uzbekistan's exports to South Korea totaled $31.3 million
in 2022, with a notable decline from $46.3 million in 2017, driven by an
annualized decrease of 7.53%. The primary Uzbek exports to Korea include
refractory cements, recovered paper pulp, and non-retail pure cotton yarn.
The automotive sector highlights a key aspect of the trade relationship. Korea's
automotive brand, KIA, has made substantial investments in Uzbekistan. In
January-October 2021, South Korea supplied 5,112 cars to Uzbekistan, a
significant figure amid the broader import landscape, which also includes
vehicles from China and Russia. In 2022, Deputy Prime Minister Sardor
Umurzakov met with KIA’s leadership to discuss expanding local production
capabilities. Plans were set to enhance production capacity to 100,000 vehicles
annually and to localize production components, aiming to boost job creation and
reduce vehicle costs.
Improving Economic Partnership
Currently, Korea primarily imports energy resources from Uzbekistan, while
Uzbekistan's exports are relatively modest, with a concentration on gold, oil, and
cotton, and minimal diversification, as was stated above. This imbalance indicates
an opportunity for strategic development to enhance bilateral economic relations.
Uzbekistan, a burgeoning economy emerging from its post-independence phase,
is on a path of growth, evidenced by a recovery in its Gross Domestic Product
(GDP) after previous declines. Korea, as a major global economy with a GDP
exceeding $1 trillion, is well-positioned to influence and benefit from
Uzbekistan’s economic ascent.
Given the substantial volume of Korean direct investments exceeding $7.5 billion
in Uzbekistan, there is considerable potential to optimize these investments,
particularly in the energy and production sectors. Korean imports, primarily
composed of advanced circuits and digital machinery, highlight an area of mutual
benefit. Uzbekistan’s burgeoning technology sector, which saw an export value
of $2 million in 2022, stands poised for expansion. On top of that, although Korea
imports integrated circuit products from abroad, they have their own developed
industry with a projected revenue of $15.59 billion in 2024, and with biggest
suppliers in the market being STMicroelectronics, NXP Semiconductors N.V.,
SK hynix Inc.. With targeted investments and strategic partnerships, this sector
could evolve into a significant driver of economic growth, offering reciprocal
advantages for both nations.
The cost.
Every investor aims to ensure that their capital will be recovered after circulating
within a country's economy. To achieve this, certain actions are required from the
host country’s government.
Firstly, legal and judicial reforms are essential. This necessity is rooted in
fundamental economic principles, which dictate that governments must guarantee
that suppliers can operate freely in the market without the risk of having their
assets unjustly seized. A dependable judicial system fosters long-term economic
stability by creating a secure environment for sustained investment. Investors are
more inclined to engage in long-term projects and ventures when they have
confidence in the legal framework's reliability and fairness.
Conclusion
To fortify the economic partnership between Uzbekistan and South Korea, both
countries must leverage their complementary strengths and address existing trade
imbalances. By directing South Korean investments towards Uzbekistan’s energy
and technology sectors, and by enhancing bilateral trade dynamics, there is
substantial potential to bolster economic ties. As Uzbekistan continues to develop
its economy, it presents new opportunities for South Korea to deepen its
engagement, fostering a mutually beneficial relationship that could yield
significant gains for both nations in the near future.
links
1. Uzbekistan’s economy
2. export and import between Uzbekistan and Korea
3. Korea’s economy
4. integrated circuits market in Uzbekistan
5. Korea’s investment to Uzbekistan (and more)
6. GDP of Korea
7. GDP of Uzbekistan
8. what Korea imports from other countries
9. SK hynix
10. NXP Semiconductors
11. STMicroeSK hynixlectronics N.V.