Uzbekistan – Opportunities for investors [ENG]
Summary
TLDRDenis Sokolov discusses Uzbekistan's economy and Tashkent's real estate market, highlighting the country's rapid development since its isolation ended in 2018. With a growing GDP, urbanization, and increasing consumer power, opportunities arise in retail, infrastructure, and real estate. Sokolov emphasizes the need for international business involvement to foster growth and address challenges like inequality and lack of global connectivity.
Takeaways
- 🌏 Uzbekistan is one of the largest countries in the former CIS and was isolated for about 20 years, which has affected its global visibility.
- 📈 Since 2018, Uzbekistan has been experiencing rapid development with a GDP growth of 17.1% in 2021, and forecasts of 4% for 2022 and 4.5% for 2023.
- 🏙️ The real estate market in Tashkent is underdeveloped and not fully counted in the GDP, indicating a potential for significant growth in this sector.
- 🏢 The Atashkan City project in Tashkent is a significant development with a business complex, office towers, hotels, and residential areas, showcasing the potential for urban development.
- 📉 Inflation in Uzbekistan is decreasing, from 13% in 2020 to an estimated 9% in the current year, with an outlook of 8% for the next year.
- 👥 Urbanization is a key trend, with Tashkent's population expected to reach almost 4 million by the 2030s, up from 3 million currently.
- 💹 The purchasing power in Tashkent is expected to grow at a rate of 12-15% per year, similar to Moscow's growth in the early 2000s.
- 🛍️ There is a high potential for growth in the FMCG and retail sectors as consumer markets are set to boom with the opening of new shopping malls.
- 🚧 Infrastructure is a significant area for improvement and investment, with needs in road infrastructure, power stations, and water supply.
- 🏫 Education is a growing concern with a high demand for quality schooling, presenting opportunities for international educational institutions.
- 🌐 Connectivity with the global economy is a challenge after years of isolation, but the government is proactive in seeking advice and opening up to international business.
Q & A
What was Dennis Sokolov's previous role at Cushman Wakefield?
-Dennis Sokolov used to run the Central and Eastern European research team at Cushman Wakefield.
How has Uzbekistan's economy been performing since the regime change in 2018?
-Since the regime change in 2018, Uzbekistan's economy has been developing rapidly with a GDP growth of about 17.1 percent in 2021, and forecasts of about 4 percent for 2022 and 4.5 percent for 2023.
What is the current per capita GDP of Uzbekistan?
-The current per capita GDP of Uzbekistan is about two thousand dollars per person.
What is the significance of the Atashkan City project in Tashkent?
-The Atashkan City project is a business complex and mixed-use development in the center of Tashkent, featuring a big park, a huge mall, office towers, hotels, and residential areas. It is significant as it represents a major development in a country with little experience in this sort of project.
What is the current inflation rate in Uzbekistan?
-The inflation rate in Uzbekistan has been decreasing from 13 percent in 2020 to an estimated 9 percent for the current year, with an outlook of 8 percent for the next year.
What is the expected population growth rate of Tashkent?
-The population growth rate of Tashkent is about several percent per year, with expectations for the city's population to reach almost 4 million by the 2030s.
What is the current state of urbanization in Uzbekistan?
-Uzbekistan is experiencing a significant urbanization trend, with restrictions on internal mobility lifted, leading to an increase in people moving to Tashkent.
What are some of the challenges faced by Uzbekistan due to its rapid growth?
-Some challenges faced by Uzbekistan due to rapid growth include uneven development across different areas of the country and increasing inequality.
Why is the middle class in Uzbekistan considered a problem for the economy?
-The middle class in Uzbekistan is considered a problem because it is currently very small, which is a hindrance to the growth of a consumer economy that drives middle-class expansion.
What are some of the business opportunities that Dennis Sokolov identifies in Uzbekistan?
-Some business opportunities identified in Uzbekistan include FMCG and retail, infrastructure improvements, real estate, and advising on urban planning to cope with rapid growth.
What is the current state of international business and investment in Uzbekistan?
-International business and investment in Uzbekistan are in the early stages of emerging, with many international retailers operating through franchise partners.
Outlines
🌏 Uzbekistan's Economic Overview and Real Estate Insights
Dennis Sokolov, previously heading the Central and Eastern European research team at Cushman Wakefield, discusses the Uzbekistan economy and Tashkent's real estate industry post the Russian invasion of Ukraine. Uzbekistan, one of the largest countries in the former CIS and Soviet Union, was isolated for 20 years but has seen rapid development since 2018 with a new president implementing economic liberalization. In 2021, Uzbekistan's GDP growth was 17.1%, and the per capita GDP is around $2,000. The country's real estate operations are currently not counted in GDP, suggesting a significant potential for growth in this sector. Sokolov has been involved in projects to help Uzbekistan establish connections with global markets and prepare its real estate market for international investment.
🏙️ Tashkent's Urban Development and Market Potential
The script highlights a project called Atashkan City, a mixed-use development in Tashkent, which includes office towers, hotels, and residential spaces. Located on an eight-hectare plot with excellent transport accessibility and a wonderful location, the project is impressive for a country new to such development. Uzbekistan's inflation is decreasing, and urbanization is on the rise as restrictions on internal mobility have been lifted, leading to a significant population increase in Tashkent. The city's growth rate is several percent annually, and it is expected to reach almost 4 million inhabitants by the 2030s. The purchasing power in Tashkent is expected to grow at a rate of 12-15% per year, following a similar path to Moscow's consumer market development in the early 2000s.
📈 Challenges and Inequalities in Uzbekistan's Growth
The script discusses the uneven growth across different areas of Uzbekistan, with some parts of the country growing rapidly while others lag behind. A significant problem is inequality, as the economy is not transparent, and there is a lack of middle class. The country has a large number of both rich and poor people, but very few in the middle. This is a challenge for the economy, as a growing middle class is necessary for urban development. Education is also highlighted as a problem, with a high demand for quality education, but a lack of international business opportunities. The script suggests that international companies have opportunities to bring expertise and improve local knowledge and skills.
🛍️ Business Opportunities in Uzbekistan
The script identifies business opportunities in Uzbekistan, particularly in FMCG and retail sectors, due to an overdue consumer revolution. Despite the presence of customs duties, there is room for retailers as the strategy of retailers in Uzbekistan focuses on profit margins rather than sales volumes. The country is in great need of infrastructure improvements, and there is significant room for more companies to join efforts in this area. Connectivity with the global economy is also a key issue, with a need to increase flights and airport capacities. Real estate is undervalued, and there are opportunities for value-added investments. Lastly, there is a need for advice from investors and urban planners to help the city manage rapid growth without making mistakes.
📢 Closing Remarks and Call to Action
Denis Sokolov concludes by emphasizing the importance of facilitating business activities in Uzbekistan to improve the lives of its people. He invites anyone interested in additional information or advice to contact him, highlighting the potential for profits and a better life through business engagement in the country.
Mindmap
Keywords
💡Uzbekistan
💡Tashkent
💡Economic Liberalization
💡GDP Growth
💡Real Estate Operations
💡Urbanization
💡Inflation
💡Consumer Market
💡Middle Class
💡Connectivity with Global Economy
💡Business Opportunities
Highlights
Dennis Sokolov, previously leading the Central and Eastern European research team at Cushman Wakefield, is now focusing on Uzbekistan's market in Tashkent.
Uzbekistan is one of the largest countries in the former CIS and was isolated for 20 years from the global economy.
Since 2018, the new president of Uzbekistan has implemented strategies to liberalize the economy and lift restrictions on people's mobility.
Uzbekistan's GDP growth was 17.1% in 2021, with a forecast of 4% for 2022 and 4.5% for 2023.
The per capita GDP in Uzbekistan is about $2,000, but the real estate operations are not counted towards GDP.
Dennis is working on various advisory projects in Uzbekistan since 2018, helping to establish connections with other markets.
Atashkan City, a major project in Tashkent, is a mixed-use development with a big park and a large mall set to open in March 2023.
Inflation in Uzbekistan is decreasing, from 13% in 2020 to an estimated 9% in the current year, with an outlook of 8% for the next year.
Urbanization in Uzbekistan is leading to rapid growth in Tashkent, with the population expected to reach 4 million by the 2030s.
Purchasing power in Tashkent is expected to grow at a rate of 12-15% per year.
The Uzbek economy is expected to see a peak in the consumer market as international retailers emerge.
Uzbekistan does not consider itself as a legacy of the Soviet Union and has a strong cultural identity.
Problems in Uzbekistan include fast growth leading to inequality and a lack of transparency in the economy.
Education is a significant issue in Uzbekistan, with a high demand for private and international schools.
Connectivity with the global economy is a challenge for Uzbekistan after 20 years of isolation.
Business opportunities in Uzbekistan include FMCG, retail, infrastructure, real estate, and urban planning advice.
Custom duties on consumer products in Uzbekistan are expected to decrease, and joining the WTO is planned.
Dennis Sokolov is available for additional information and advice on the Uzbek market.
Transcripts
[Music]
hello my dear friends and dear
colleagues my name is dennis sokolov i
used to run
central and eastern european research
team at cushman wakefield announced
since a
russian invasion in ukraine i am now
focusing on uzbekistan market in
tashkent and today i wanted to share you
some thoughts some knowledge some
insights about
uzbekistan economy and
tashkent real estate industry
so basically i know that many of you are
wondering about the uh central asia
countries because a lot of a lot of
things there are unknown about that
territory we all think uh you used to
think that this is kind of
all the countries are the same but
they're they're they're obviously not so
uzbekistan what is special about
uzbekistan uzbekistan is uh one of the
largest country is in the former uh cis
and former soviet union reality and uh
this country was isolated unsurprisingly
isolated because a lot of again a lot of
asian countries go towards this path
for 20 years it was isolated from a
world global economy from international
business and uh their travel was
restricted they travel ian travel out
and so on and so forth so that's why
there is no uh everyone knows about
kazakhstan but no one knows about
neighboring uzbekistan so since
2018 uh after the change in the regime
so the uh the president uh the president
had changed and uh the new president
implemented new strategy it was not well
widely announced it was just started
with a small let's say small tiny
changes
in let's say in liberalization of
economy in the
lifting restrictions for people mobility
and so on and so forth so what do we uh
what do we have today uh today we have
the situation when country is developing
uh rather rapidly in 2021 gdp growth was
about 17.1 percent two thousand two
forecast is about four percent the 2003
forecast is four point five percent so
it's it's above average it's not
really for such uh kind of such emerging
market it's not really astonishing
growth rates but but it's stable it's
stable and the per capita gdp is now
about two thousand dollars per uh person
which is which is low which is obviously
low but again we need to understand that
it's in such countries in such uh
let's say conservative countries they do
not have very good experience of
counting the urban economy of city
economy so for example if we look at
their gdp structure we will see that for
example uh real estate operations they
are
they are zero they have construction but
no real estate operations so all the
leasing market everything are connected
to related to real estate is not counted
towards gdp and i believe that uh for
such country gdp uh let's say gdp
transactions should account for about at
least at this point for about at least
five percent of gdp and uh in future it
can be up to 15 percent of gdp so that's
why as a real estate specialist we see a
strong upside i am working in uzbekistan
on a different uh scale of advisory
projects since uh 2018 since basically
the country started opening uh itself to
the world so basically our first project
uh within cushman and wakefield within
cushman wakefield team was the major aim
was to help country uh to establish
connections with other markets to
prepare a real estate market to for the
uh for the international investor for
service for the international opera
operators so uh that's that's what we
did we've done a project called atashkan
city tashkent cities well it's it's ken
city it's a business center business
complex uh mixed-use development in the
center of uh tashkent with a big park
with a huge mall that is due to be open
in uh march as far as i remember march
2023
uh for office towers hotels residential
so it's uh it's pretty pretty decent
project it's located on the eight
hectare uh plot which is again ideal for
development it's a dream of any
developer just imagine 80 hectares plot
perfect square brown field three metro
stations yes uh there's metro in
tashkent and uh four highways around so
transport accessibility is wonderful
location is wonderful the shape of the
plot is wonderful the project itself uh
i wouldn't say that this is one of the
best projects in the world but for
therefore for country without any
experience in uh this sort of
development it was really really
impressive so what else uh
what else import is important to
understand inflation inflation in
uzbekistan is uh going down from 13
in 2020 to uh 9
this year estimated inflation and
outlook for next year is eight percent
so basically for the uh cis for
post-soviet country this sub ni sub 10
inflation is something which is uh which
is perfectly perfectly natural uh
natural thing uh so uh
what's uh the most important part of the
story is their urbanization is the
urbanization because for a long period
of time uh uzbekistan was the kind of
the mobility of people was restricted in
uzbekistan so people from one uh let's
say one city could not move without
serious reason to another city so now
these all these restrictions had lifted
and that's basically and that's by the
way one of the reasons why there are
lots of uzbek people are working in
other countries because their uh
mobility within country was really
really limited so now uh these
restrictions are lifted and then uh
people are moving to tashkent and
tashkent growth rate is about is several
percent uh a year so basically now it's
a three million city and we expect in
30s these by the population of the city
to reach for almost 4 million so it's
it's just a city i'm not talking about
agglomeration agglomeration probably
will be about 5 million tashkent
agglomeration i think will uh reach 5
million by year 2030. so uh and then com
the if we combine these two things
combine growth in disposable income and
combine growth and population so we will
see that purchasing power in
tashkent itself is expected to grow at a
rate 12 13 15
a year uh the same growth rate we were
seeing in moscow in moscow in early 2000
but it was kind of it was short shorter
periods so in many cases in many to many
risk
respects tashkent is going to follow
that path in terms of moscow consumer
market development i hope that tashkent
will not follow the same path that
moscow is moving now but that's that's
another story so uh what uh what is our
outlook for the evolution of tashkent uh
of uh uh
of uzbekistan economy so we are now we
are in the period 2002 2006 where we see
high growth rates almost in every
industries and especially we are uh we
are expecting a
big
peak in consumer market because people
are where
people used to used to used to live used
to shop in the old style
old-fashioned street markets so now the
first shopping malls are due to be open
and we are expecting international
international retailers uh to emerge in
uzbekistan so there are there is already
a number of international retailers
however they are working through
franchise partners and uh it will be
great to see direct uh let's say
direct involvement of international
retail in the uh in the country economy
what's also important to understand it's
often missed from a lot of uh let's say
a lot of reports research and so on uh
is that
that country is not consider itself as
let's say as a legacy of the soviet
union so i would even say that there was
a decentralization of uh this country uh
over last
i think 15 years probably so there is no
kind of uh there is no sentiment uh
about soviet times about great uh great
period of uh soviet empire and so on and
so forth so uzbekistan is pretty well
kind of self-sustainable in terms of
culture in terms of understanding and in
terms of identity which is in fact to my
understanding it's here it's it's a
really good news uh
what is what are the problems now in
uzbekistan obviously the problems are
coming from the fast growth because the
growth in uh this uh
the growth is not even in all areas so
we see kind of we see parts of the city
parts of the country uh growing really
fast and doing doing a lot of course
making mistakes and the second uh big
problem is uh
is inequality
because if we look at
uzbek population it it's also important
to understand that economy is not really
transparent
and it's not transparent not because
it's secret or let's say uh government
does not publish data it's not
transparent because there is no kind of
long track record of interpretation of
this data so the data is in place but
there are not many specialists looking
at this data trying to make judgments
trying to understand what's behind that
and the reason is simple if the country
was closed for 20 years who cares who
cares what is happening there because
anyway you cannot invest you cannot do
business there you just you so you do
not care about the economy you do not
care how people live there so now
situation is changing but again it takes
it takes years to learn how to interpret
data how to make sense of those data but
what is what is obviously the problem is
inequality because even from uh looking
at the streets even from talking to the
business from anecdotal evidence you
understand that there are kind of there
are
quite substantial number of rich people
in uzbekistan uh there is a huge number
of poor people and there is tiny a tiny
tiny slice of middle class because again
there are no uh almost no international
business uh there are no uh almost
almost no uh carrier opportunity in
international business it's starting
emerging but again it's just in in the
beginning so that's one of the biggest
problems i think for uzbek economy
because it's a problem it's uh it's a
lack of middle class once middle class
will start growing we will see a city
city changing even even even faster so
education education is also a problem
because there is a huge demand from
local people uh to educate their kids
it's also interesting thing that there
is a big chunk of rural population in
the country and people in rural areas
they want they want their sons and
daughters they want them to live better
life to be integrated in the world
economy to see all the opportunities to
see the world so there is kind of there
is very strong
even though it's conservative country
there is very strong demand for this
sort of cosmop
cosmopolitan lifestyle so that's why
they send people uh to they send their
uh their kids to schools to private
schools and there is lots of lots of
private schools international private
schools quasi international private
schools so you walk along tashkent and
you see for example you see
oxford school cambridge school uh
american school whatever i don't know i
don't know about the quality of those
schools and i really i'm really afraid
that the quality is not is not uh on par
with the with the pricing but it's it's
a reality there is a huge demand huge
demand for knowledge and uh this demand
is not yet satisfied so that's one of
the opportunities for international
business for international uh companies
to work with uh people in uzbekistan uh
to bring expertise we are trying we're
we're doing also our best we're doing
trainings we are now we plan to launch
uh educational program together with a
city city mayor uh educational program
targeted in uh property management and
facility management of commercial real
estate so because i think that's
important i think you cannot around
successful business you cannot uh do you
cannot build complex projects without
local knowledge and expertise you cannot
rely only on uh let's say on
international expat rates and so on so
that's another thing and um
what is uh uh and other problem is uh
poor connectivity with global economy
again after 20 years of
after 20 years of uh
kind of isolation of course it's
difficult to establish new connections
and people in uzbekistan they do not
have enough connections uh and uh enough
uh let's say enough i would say
relatives representatives in another in
other countries to make sure that this
all this connection works so that's why
i think probably western business if
wants to uh be there on that on that
ground uh should be a little bit more
proactive because it's not it's it's
it's not like for example iran uh when
you can uh you can find a
representatives of iran iranian let's
say culture iranian uh
business in almost all in industries all
over the world it's pretty pretty small
economy but with a big with it with a
big big potential so that's another task
to make sure that this country is
connected to global capital markets
financial markets and so on of course
someone will tell me okay they have very
heavy
high duties for consumer products they
have strong restrictions for uh banking
industry uh but uh a reality is that
government now is willing to remove a
lot of restrictions uh
just they need to understand why what
and when to do so basically they are
looking they're looking there and
they're listening they're listening for
our advices they're listening for uh
let's say for advices of other
consultants and uh there even even
during the previous five years we see
that there there are lots of lots of
things had been changed so that's why i
think uh connectivity with uh global
economy is tasks that can be solved so
just couple of words about not to spend
lots of your time couple words about
business opportunities and i think
they're kind of the most the top
opportunities fmcg fmcg and retail
basically because the consumer
revolution consumer revolution is long
long overdue in uzbekistan i know that i
previously said that
middle class is very poor uh kind of
kind of middle class is very thin in
uzbekistan but it doesn't contradict the
message you cannot have middle class
strong middle class without consumer
economy because consumer economy drives
this middle class so that is that is why
i am sure that uh the kind of there is a
lots of room for uh consumer goods for
retail and now there are new shopping
malls being uh
kind of that that will be that are
opening now and will uh will open soon
and uh that that is why there is there
is a room for retailers of course
of course the issue with the custom
duties for consumer products are still
in place uh but again this i i think
that this uh problem this problem is
overestimated i would say uh because uh
custom duties custom uses here first of
all there is a plan to decrease custom
duties uh they also there is also a plan
to join at certain point wto and uh also
itself custom duty on the kind of on the
value of sku at custom border does not
really affect that much the uh the sale
price what affects the sale price in uh
in the shop in the store is the strategy
of retailers so if retailer wants to
increase the sales uh and are ready to
kind of to squeeze a little bit profit
margins so uh that's one side of the
story if for example retailer and that
what happens now in uzbekistan if
retailer thinks okay instead of selling
uh for example 1 000 pairs of shoes
with a with a margin of let's say
uh
20 dollars per pair i will say i will
sell 100 pairs of shoes with a margin of
200 dollars per pair so basically the
overall the overall uh
revenue will be about the same profit
will about will be about the same but
the prices in the stores will be higher
so that's what happens now in uzbekistan
because uh retailers because retailers
they are focusing on their profit
margins not on the sales volumes and
market shares and
i mentioned that most of retailers they
work through franchises franchisees
franchise partners and uh of course
franchise partners they look at uh this
thing uh from the different angle they
have uh the the they they sell the whole
portfolio of their uh of the retail uh
of the whole the whole portfolio of the
brands and they want they they want
always to balance their brands no they
do not want that those brands to compete
between each other so that is why uh if
we saw that in russia then when uh do
when we see direct uh
uh penetration of international retailer
to the market the uh sales strategy
changes completely and the volumes go up
so next thing is infrastructure
infrastructure country is a very in
great need for infrastructure
improvements that means the road
infrastructure that means the uh
electricity
power stations uh
that that means that the water supply
and so on and so forth and i know as far
as i know there are french companies uh
working with uh uzbek government but i
think that there is a room uh
significant room for more for more uh
for for more companies to join that
because there are there are problems
with electricity there are problems with
water supply and the country the
landscape the landscape the climate is
uh not really easy to cope with so
that's why infrastructure is a key thing
also uh al also i mentioned the
integration with the global economy and
that uh that means uh that means a very
simple thing that means that
uh
that means that there is a great need to
increase the number of flights to
increase the airport capacities so they
increase their let's say even the
transportation the traffic flow between
uzbekistan and other countries as the
country is pretty uh pretty much remote
uh you can rely only on air
transportation
so uh other thing is uh real estate of
course real estate is undervalued in
uzbekistan so there are lots of uh lots
of projects uh that uh that need to be
improved that need to be uh to uh to get
through some reconstruction to through
value added investments also it's
important uh just to remind you that
tashkent city itself was destroyed in uh
1966
uh by earthquake and it was completely
rebuilt in 70s and 80s so the city
itself in terms of planning in terms of
zoning in terms of the even construction
is pretty pretty pretty modern so that's
why even oldest buildings uh let's say
office buildings obsolete office
buildings these buildings are about uh
30 years old no more so this building
can go through their reconstruction and
uh value added investments so the prices
we believe we believe the prices have
upside uh within five years maybe
in some cases maybe two times in some
cases uh maybe 10 15 percent uh again
due to changes in the city city
structure also other other opportunities
uh uh for international business is
probably to help city with uh advice
from the
investors and urban planners because
again cities facing lots of lots of
problems uh generated by rapid growth so
they understand that they need to do
things fast but they are afraid of
making mistakes so that's why probably
uh
urban planning specialists will be in a
great demand uh in uh tashkent pretty
soon so thank you very much for your
attention my name is denis sokolov you
can find me on the social networks you
can if you want additional information
we've done a couple of reports uh that
are available uh to public uh on uzbek
market if you want additional
information contacts advices
please contact me and
i will make sure to help you because i
think it's now very important for
uzbekistan is to facilitate business
activities in various areas not
specifically in real estate if we will
see business activity in this country we
will make sure we will see how that we
will be able to earn profits and make
life of those people and our life better
thank you very much dennis circle of
commonwealth partnership uzbekistan
[Music]
you
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