Chemical Industry of Uzbekistan

Yuriy Kutbitdinov, Center for Economic Research and Reforms under the Administration of the President of the Republic of Uzbekistan

Potential of the chemical industry

The chemical industry of Uzbekistan plays an important role not only in diversifying exports and strengthening the macroeconomic indicators of the republic, but also in providing the necessary products of other industries, and in meeting the vital needs of citizens. The number of consumers of chemical industry products includes agriculture, furniture, mining, electronic and electrical, oil and gas, construction, food industry, and others.

To date, 44 enterprises and organizations operate in the system of JSC "Uzkimyosanoat", of which 30 enterprises and organizations with a share of JSC "Uzkimyosanoat" in the authorized fund, 14 enterprises and organizations operating (associated) with JSC "Uzkimyosanoat".

Currently, such large enterprises as JSC "Navoiazot", JSC "Maxam-Chirchiq", JSC "Fargonazot", JSC "Ammophos-Maxam", JSC "Dehkanabad Potash Plant", JSC "Kungrad Soda Plant", LLC "First Rubber Plant" and others operate in the Uzbek market. Today, the enterprises of JSC "Uzkimyosanoat" produce more than 180 types of chemical products.

Leading enterprises of the chemical industry

JSC "Navoiazot" has the following production capacities: ammonium nitrate — 950 thousand tons, carbamide — 577.5 thousand tons, PVC (polyvinyl chloride) — 100 thousand tons, methanol — 300 thousand tons, caustic soda — 75 thousand tons, etc.

JSC "Fargonazot" produces 530 thousand tons of ammonium nitrate, 400 thousand tons of urea, 20 thousand tons of sodium chlorate, 4.5 tons of sodium nitrate, 3.0 thousand tons of baking soda, etc. 

JSC "Maxam-Chirchiq" produces 450,000 tons of ammonium nitrate, 270 thousand tons of urea, 294 thousand tons of ammonium sulfate, 60 thousand tons of low-density ammonium nitrate (LDAN), and others.

The capacity of JSC "Ammophos-Maxam" for the production of phosphorus fertilizers is 217.5 thousand tons.

In JSC "Dehkanabad Potash Plant" the production capacity for the potassium chloride is 600 thousand tons.

The capacity for the production of soda ash in LLC 200 thousand tons. 

LLC "First Rubber Plant" has the following automobile tires — 3.0 million units, agricultural tires conveyor belt — 100 thousand linear meters.

Industry dynamics in 2022

Chemical enterprises in January-November 2022, produced products worth 14.4 trillion sums (growth rate — 108.1%). In particular, 1,424.4 thousand tons of mineral fertilizers were produced in pure form (growth — 102.5%), of which 1,097.5 thousand tons of nitrogen fertilizers (growth — 101.0%), 149.7 thousand tons of phosphorus fertilizers (growth — 118.9%) and 177.2 thousand tons of potash fertilizers (growth — 100%). The industry exported (to Tajikistan, Turkmenistan, Russia, Japan, Turkey, China, Afghanistan and Thailand) chemical products worth $461.2 million (130% o f the plan, 1.4 times more, compared to the same period last year).

According to the investment program, $170.9 million of investments should be disbursed in 20 investment projects in 2022, including: $60.0 million in the framework of the project "Organization of production of complex mineral fertilizers at the enterprise of JSC Samarqandkimyo", $35.0 million in the framework of the project "Organization of production of polyvinyl chloride at JSC Navoiazot" (stage II), $37.3 million within the framework of the project "Production of dry cyanols at JSC Navoiazot" and $39.0 million at the expense of the enterprises' own funds.

On February 3, 2022, the Decree of the President of the Republic of Uzbekistan No. PP-116 "On measures to create a chemical-industrial technopark "Chirchiq" in the Tashkent region" was adopted. A joint project of the Republic of Uzbekistan and the Republic of Tatarstan to create a chemical-industrial technopark "Chirchik" was launched in March last year. As part of this project, in 2022, Uzkimyosanoat JSC allocated funds in the amount of $18 million for the 1st stage of construction and installation works of technopark facilities, as a result of which 6 production units were built.

Currently, 16 projects totaling more than $50 million are being implemented in the technopark due to foreign direct investment. Thanks to the implementation of these projects, the production of over 30 new import-substituting goods with high added value will be mastered and 800 new jobs will be created. The production of such goods as polypropylene foam and products made of it, thermoplastic elastoplast and products made of it, fiberglass polymer products, fuel combustion catalysts for diesel engines, biofertilizers for plants, CPL panels for the furniture industry, stationery, charging stations for electric vehicles, cosmetics and household chemicals, medical simulators will be established.

Decree of the President of the Republic of Uzbekistan No. PP-388 dated October 10, 2022 "On approval of the Target Program for strategic development of the chemical and gas chemical industry" defines the creation of technological clusters "Navoi Chemical Technopark", "Fergana Chemical Technopark" and "Karakalpakstan Chemical Technopark", within which 44 investment projects will be launched in 2022-2027. As a result, about 4,000 new jobs will be created and the production of various chemical products with high added value will be ensured, as well as direct investments and foreign loans in the amount of $9.9 billion will be attracted. It is planned to establish production of methanol, polyethylene terephthalate (PET), monoethylene glycol (MEG), PVC, soda ash and other types of products in the new technoparks.

In total, at the end of last year, 1,467.9 thousand tons of mineral fertilizers should be produced, of which 1,114.2 thousand tons of nitrogen, 160.0 thousand tons of phosphorus, 193.7 thousand tons of potash fertilizers, the volume of production has been brought to 15.3 trillion sums (or 106.2% o f the plan), and annual export figures — up to $473.2 million with over-fulfillment of the established plan by 118.1%.

Plans for 2023

In 2023, the volume of chemical industry goods is planned to reach the level of 18.5 trillion sums (growth — 112.0%). In total, 1605.7 thousand tons of mineral fertilizers in pure form will be produced (growth — 109.4%), of which: nitrogen — 1,217.6 thousand tons (growth — 109.3%), phosphorus — 160.1 thousand tons (growth — 100.1%), potash fertilizers — 228.0 thousand tons (growth - 117.7%).

In 2023, based on the investment program, $417.5 million of investments will be disbursed within the framework of 17 projects, in particular, $357.1 million of foreign direct investment and loans, 3 projects with a total cost of $280.0 million will be launched and 570 new jobs will be created.

At the same time, due to the launch of the project "Organization of a complex for the production of mineral fertilizers at JSC "Samarqandkimyo", it is planned to produce 600 thousand tons of mineral fertilizers per year. As a result of the implementation of the project "Production of dry cyansols at JSC "Navoiazot", 40 thousand tons of cyansols per year will be produced. The implementation of the project "Production of technical gas (CO2) on the basis of JSC "Navoiazot" will serve the annual production of technical gas in the amount of 20 thousand tons.

In 2023, the chemical industry enterprises of the republic plan to export products worth $492.9 million (an increase of 104.2%), including mineral fertilizers worth $390.6 million.

In accordance with the Decree of the President of the Republic of Uzbekistan No. PP-388 dated October 10, 2022 "On approval of the Target Program for Strategic development of the chemical and gas chemical industry", it is planned to implement measures to sell shares of JSC Fargonazot and JSC Dehkanabad Potash Plant, privatize the share of JSC Uzkimyosanoat in LLC Kyzylkum Phosphorite Complex, realization of a share in the authorized capital (100.0%) of LLC "First Rubber Plant". The mechanism of work on the privatization of industrial enterprises and the continuation of transformation processes in the chemical industry has also been determined.

Conclusion

In order to establish the production of innovative chemical and biological plant protection products (herbicides, insecticides), seeds of field crops (corn, wheat, animal feed, etc.) in Uzbekistan, it is advisable to attract foreign investors with innovative technologies to the development of the industry to establish domestic production, since the share of imports of foreign chemical products in the domestic market will remain high.

Such well-known manufacturers of household chemicals as Bayer AG, Procter&Gamble, Henkel, Colgate-Palmolive, Amway, deserve special attention, taking into consideration that they have left the Russian market and with which it is possible to establish joint production of personal hygiene products, household chemicals (cosmetics, shampoos, shower gels and deodorants), washing powders and other products in Uzbekistan, as well as organize their export to other countries.

The foundation created in the industry in recent years is able to ensure the dynamics of sustainable growth of the potential of the chemical industry in the coming years.

At the same time, the creation of a solid base for the long-term consistent development of all areas of the chemical industry creates the need to accelerate the transformation of the sphere, taking into account the most advanced foreign experience. The acceleration of the privatization of large industrial enterprises of the chemical industry will make a great contribution to the development of the chemical industry. 

by 1.4 times in 2022-2026, including products with high added value in the electrical industry by 2 times and exports by 3 times.

In the perspective of state attention

Currently, there are about 500 manufacturing enterprises operating in the electrical industry, most of them are small, which produce products of more than 2 thousand names. The number of employees in the industry has reached 32 thousand people. The largest 88 enterprises of the industry, which produce more than 95% of the volume of all electrical products, are members of the Uzeltexsanoat association, 18 of them produce cable and wire products, 36 — household appliances and 34 — electric power equipment and other products. It should be noted that almost all enterprises in the industry are private.

A number of customs and tax benefits, as well as subsidies, have been provided to industry enterprises. For example, until January 1, 2025, they are exempt from paying customs duties for raw materials, materials, components and equipment imported for their own production needs. Due to this, over the past 5 years, $560 million has been invested in the industry, 163 new projects have been launched. Currently, 205 projects worth $1.2 billion are being implemented. As a result, the volume of manufactured products increased 5 times, exports — 3 times, and the number of jobs increased 2 times.

Industry in production indicators

During the period 2017-2021, the volume of products produced by enterprises of the electrical industry increased 5 times, from 3.4 trillion sums to 16.7 trillion sums, household appliances — 6 times, cable and wire products — 1.5 times, power equipment and other products — 8.7 times.

By the end of 2022, it is expected that the volume of production of electrical products will grow by 19% and amount to about 19.9 trillion sums. At the same time, the largest growth is expected in the production of cable and wire products by 46.2% up to 6.9 trillion sums and the production of household appliances by 20.5%, up to 6.8 trillion sums, and the volume of production of power equipment and other products may decrease by 2.5% up to 6.2 trillion sums.

By the end of 2022, the share of cable and wire products in the structure of the total production of electrical products will be 34.9%, household appliances - 34.0%, and power equipment and other products — 31.2%.

Expanding export opportunities

It should be noted that within 5 years, both the nomenclature of export products of industry enterprises and the geography of export countries have expanded. To enter new markets, industry enterprises have received more than 40 international certificates, the number of exported goods additionally includes water pumps, elevators and escalators, industrial coolers, solar water heaters and other products.

This year, the industry enterprises exported more than 120 types of electrical goods to 48 countries, whereas in 2017 the export structure included only about 25 types of goods, which were mainly supplied to the CIS countries. 13 enterprises of the Fergana, Samarkand, Kashkadarya and Tashkent regions entered the foreign market for the first time. The new export countries include the EU countries — Great Britain, Romania, Slovenia, Czech Republic, Hungary, etc., where products are delivered under the preferential trade regime (GSP+), as well as several countries of the Middle East, Africa, and Mongolia.

The growth in the production of electrical products contributed to the growth of exports, which over the past 5 years increased 3 times — from $189.7 million (in 2017) to $562.5 million (in 2021). At the same time, exports of household appliances increased 6.6 times — from $20.6 million to $135.2 million, cable and wire products by 2.6 times — from $146.9 million to $386.7 million, power equipment and other products by 1.8 times — from $22.1 million to $40.7 million.

In 2022, according to preliminary data, the volume of exports of electrical products increased by 42.4% and reached a record value of $800.8 million, of which exports of cable products amounted to $518.1 million (an increase of 34.0%), household appliances — $226.5 million (an increase of 67.5%), power equipment and other products — $56.2 million (an increase of 38.1%). At the same time, cable and wire products accounted for more than half of the total exports - 64.7%, about one third — household appliances (28.3%), the rest — power equipment and other products (7.0%).

The main countries exporting electrical products are Turkey (38% of total exports), Russia (20%), Kazakhstan (12%), China (5.4%), Tajikistan (5.4%), Azerbaijan (4.1%), Kyrgyzstan (4.0%), Georgia (1.8%), Belarus (1.0%), Lithuania (1.0%), Turkmenistan (1.0%), Hungary (0.6%) and others. At the same time, it should be noted that Turkey's share in exports is the highest due to the supply of the main volume of exported copper wire and copper tubes to this country. Moreover, the bulk of finished electrical goods are exported to the CIS countries.

Attracted investments

During 2017-2021, the total amount of mastered investments in the electrical industry amounted to $561.0 million. As a result of the implementation of investment projects in the electrical industry, the production of new types of products that were previously imported has been mastered. In particular, the production of modern models of televisions, household washing machines, electric stoves and gas stoves, air conditioners, refrigerators, electric and solar water heaters, LED lamps, electric and gas meters, transformers, modern electric cables and LAN wires has been established.

By the end of 2022, the volume of disbursed investments will amount to $169.7 million, of which $46.4 million is foreign direct, 36 new projects will be launched and more than 2.5 thousand additional jobs will be created.

In accordance with the approved Presidential Decree in the electrical industry in the next three years, it is planned to master only $604.9 million investments, including $183.0 million of foreign direct investment. At the same time, in 2023, it is planned to master $191.5 million as part of the implementation of 29 new investment projects and 7 projects for the modernization and reconstruction of enterprises. investments, of which $58.0 million will be foreign direct investment.

Development prospects in 2023

At the meeting of the President on September 26, it was noted that the analysis of the situation on world markets shows that in two years the export of electrical products can be increased to $1.5 billion. In 2023, it is planned to increase the volume of output in the electrical industry to 22 trillion sums, and exports to $1 billion.

In the Address of the President to the Oliy Majlis and the People of Uzbekistan dated December 20, 2022, it is noted that next year the supply of electrical equipment and other finished products to European markets will at least double, and special engineering schools will be created to train engineers of a new formation in the field of electrical engineering. At the same time, the practice of compensating exporters for transport and other expenses will continue, and the current 9-stage customs clearance procedure for exporting products will be reduced by 3 times. The following tasks will contribute to the achievement of the goals set for the industry.

Increasing export supplies of products not only to traditional, but also to new markets. In addition, taking into account the increased demand for electrical products in the CIS countries, as well as the agreements reached to expand trade and economic ties with them, in particular, with neighboring countries, in 2023 it is planned to increase the volume of exports of electrical products to Kazakhstan by 1.3 times - up to $110 million, Tajikistan by 1.5 times — up to $40 million, Kyrgyzstan 1.5 times — up to $22 million, Turkmenistan 2.4 times — up to $10 million.

In our country and in neighboring markets, the demand for semiconductors and electronic boards is growing, which is estimated at $6 billion. In this regard, the task has been set to increase the number of enterprises producing such products, as well as to finance research, development and startup projects in the field of electronics and microelectronics.

1. The increase in export indicators will also be facilitated by the establishment of a processing system in the customs territory. In particular, the free economic zone "Urgut" was chosen for the placement of capacities for the production of electrical products.

2. In the next 5 years, it is planned to increase copper production in the country by 3 times and bring the share of its processing into finished products to 70% by 2026 (in 2021 — 37%, in 2022 50% is expected). To this end, a "copper industrial cluster" is being created in the Akhangaran district of the Tashkent region, where capacities for processing 90 thousand tons of copper will be created within the framework of 12 projects worth $168 million. Cluster participants will be given the opportunity to purchase copper under long-term contracts at a discount to exchange prices.

The enterprises of the electrical industry within the framework of the copper cluster have launched 9 projects worth $120 million to create capacities for processing 63.5 thousand tons of copper into finished products, while an additional 965 new jobs will be created. In total, by the end of the year, the enterprises of the electrical industry plan to process 70 thousand tons of copper into finished products.

3. The implementation of Uzbekistan's transition strategy to a "green" economy provides for the development of alternative energy. Electrical industry enterprises get the opportunity to participate in projects to create renewable energy systems (RES), which will require components of at least $1 billion. It is planned to increase the production capacity of renewable energy sources to 15 GW and bring their share in the total volume of electricity production to more than 30%.

In the next 3 years, solar panels and hot water collectors will be installed in all state organizations. For this purpose, investments in the amount of $2 billion will be attracted, due to this, 60% of electricity and gas consumption will be transferred to "green" energy.

4. The transition to a "green" economy also provides for the expansion of the use of electric vehicles in Uzbekistan. The State Program for 2022 for the implementation of the Development Strategy included measures related to the production and use of electric vehicles in Uzbekistan, including the creation of production facilities for charging stations and their components.

5. The enterprises of the industry have a large unrealized potential for the supply of products to the domestic market. In this regard, the head of state instructed, by studying the needs of the population and the composition of imports, to increase the output of products in demand on the domestic market, implement new projects in the regions and create additional jobs.

For example, Uzbekistan imports $1.3 billion worth of electrical goods, some of which are produced in our country. In this regard, it is necessary to create new local productions and attract foreign brands to produce products of proper quality, which will help win the trust of buyers.

It should be noted that in order to prevent low-quality products from entering the domestic market, in accordance with the government decree of April 2, 2022, mandatory digital labeling of manufactured and imported household appliances was introduced in Uzbekistan. Currently, more than 90% of all manufacturers and importers of household appliances are registered in the system, which will protect consumers from buying counterfeit products, and will help businesses keep records of the sale of their products.

Therefore, in Uzbekistan, the necessary conditions have been created for the enterprises of the electrical industry to increase production volumes and increase the supply of their products to both domestic and foreign markets.

At the same time, the following factors will play a key role in increasing the volume of exports of products manufactured by enterprises of the industry: ensuring the quality and certification of products in accordance with international standards, the production of goods under well-known brands, as well as price competitiveness in the foreign market of exported goods.