The Baltic Course  

Uzbek "jeans" in America

by Olga Pavuk

Until recently, most of cotton grown in Uzbekistan has been exported. During last few years more and more joint ventures make clothes and knitwear, using local resources. Baltic textile producers, actively using Uzbek cotton in their export products in the last decade, ought to give it a good thought. 

It is a common knowledge that Uzbekistan is the leading cotton supplier of the so-called "white gold", i.e. key strategic Central Asia's resource, ranking fifth in the world by cotton fiber production and second by exports. Out of two million tons of cotton fiber made in the Central Asia, about 1.5 million tons is produced in Uzbekistan. 

Export dependency diminishes

Nevertheless, Uzbekistan has been diminishing year by year its dependency on cotton fiber exports as the key source of national income. Diversification of the existing narrow specialization in agricultural production was made a national policy priority already in the early years of the Uzbek independence. Today the focus has shifted to boosting domestic cotton processing.

Uzbek textile industry has centuries' long traditions in processing local raw materials, e.g. cotton fiber, raw silk threads, etc. Many countries in the world have known about the Great Silk Road and Uzbek handicraftsmen's goods, fabrics in particular, since the old times.

Today the textile industry occupies an important place in the Uzbek economy. Here are some figures confirming its great role in the national economy: textile industry generates one-fifth of the country's GDP and employs one-third of all labour force engaged in the manufacturing sector. Textile industry's distinguishing feature is its rather high profitability rate. An attractive point and good incentive for investors is that in the textile industry the capital turn-over can account for four times a year. The industry contributes 25-28% into the national budget revenues depending on the year; therefore the growth of public income is directly linked to success of textile companies.


Textile is popular with foreigners

Main features showing the industry's economic stability are that of growing production and exports, increasing foreign investments and larger share of import-replacing products.

Light industry accounts for the largest share (20.3%) in the total Uzbek industrial output. Foreign investments have been flowing into the industry in recent years. By foreign investments in the first half of 2003, Uzbek textile industry with a 23.8% share was second only to mining industry.

There are 94 large business enterprises in the state-owned stock company Uzbekengilsanoat with networks of branches and brand distribution shops, with fashion houses which work in export-import business too. Of these, 75 are open stock companies, 2 are limited liability companies and 17 are joint ventures. The latter produced goods for 79.5 million US dollars or nearly 42% of the industry's total output.

The importance of textile industry is also evident from its active role in foreign economic relations. Global textile market development is closely tied to the situation on the cotton market showing significant fluctuations. The cotton price is influenced by ups and downs of the market. The growing demand for products made of natural fibers on the world market creates broad opportunities for export of Uzbek textiles from threads to finished products (clothes and knitwear).

Let's take just one example: in 2000 Uzbekistan exported 120 million US dollars worth of textile products. In 2001 exports grew to 136 million US dollars. Production launched at newly built Kabul-Fergan, Chinoz Tukimachi Ltd., Ok Caroi Tukimachi Ltd. in 2002 allowed increasing exports to about 150 million US dollars. 

In the first half of 2003 exports reached 98.5 million US dollars. It is true, that cotton thread and fabrics still remain the key export products at 62.7 million US dollars and 24.6 million US dollars, respectively. Products from Uzbek cotton with a greater degree of processing (ready-made knitwear and clothes, terry towels, knitted fabrics, carpets) account for about 11% of export, or 12 million US dollars so far. In 2003 Karakalpak-based Eltex company started sending its jeans to the US (600,000 US dollars turnover in the first half of the year) and we are very pleased with this fact.

According to figures from Uzbekengilsanoat, three new joint ventures have been put into operation in 2003: Uniho organised together with Unitex (Germany) can produce 3,500 tons of cotton thread a year; Alatex with Vimatex (Switzerland) as a partner has annual production capacity of 3,000 tons of thread and 6 million meters of rough/crude thread. Uzbek-US joint venture Karakultex launched the second stage of knitting and dying facilities expected to produce 1,500 tons of knitted fabric and process 3,800 tons of fabric a year.

Financing has been arranged for another 12 projects. Joint ventures are being created in cooperation with Textima, Promatex, Hoff, Schultz (Germany), Sokay, Tekmen, Demi, Seddat Textile, Korkmaz (Turkey), BRI (US), Jizerka (the Czech Republic), Goltex (Switzerland).

Abundance of plans

The overall plan for 2002-2005 is to complete technical upgrading or construction of 40 plants processing cotton fiber to bring the production capacity up to 469,100 tons in 2005. In production of cotton, technical upgrading has to be done at 24 existing plants and 14 new facilities have to be built by 2005. Capital investments in the textile industry from 2002 to 2005 will account for more then one billion US dollars.    

As to production of clothes and knitwear, the latter will grow threefold (to 89.2 million units) by 2005 with capital investments planned above 12.5 million US dollars.

Foreign investors are

attracted first of all:

•           by support to the industry on the part of the Uzbek government which has recognized its development as a priority;

•            significant benefits and incentives to foreigners;

•            abundance of raw materials and labour force;

•           low cost of energy resources;

•            developed infrastructure

And all this is just a beginning. Uzbekistan does everything in its power to make profit not only from exporting its cotton but also finished products made of local cotton. The latter will undoubtedly yield greater profits.

This article was written with support of the Uzbek Embassy in Latvia.



companies' activities in 2003

From January to December 2003 the companies included into Uzbekengilsanoat produced 171.456 billion sums (Uzbek currency) worth of consumer goods, which is 110.6% growth increase as to 2002), and also various commodities worth 372.865 bilion sums in constant prices (a 113.4% growth).

Main types of products made by Uzbekengilsanoat companies:

•      Cotton fabrics – 369.6 million sq.m (100.1% gr.) 

•       Carpets – 1.606 million sq.m (184.2% growth);

•       Knitwear products – 31.0 million pieces (112.4% gr.)

•      Stockings and socks – 15.9 million pairs (double gr.) 

•       Sewn clothes – 9.468 billion sums (104.7% growth);

•        Chinaware – 3.926 billion sums (109.6% growth);

•       Cotton wool – 5,066 tons (double growth);

•       Non-woven fabrics – 19.9 million sq.m (107.5%  gr.)

•       Wool fabrics – 223,000 sq.m.

In addition, 150,500 tons of cotton threads (104.2 percent growth) and 2,667 tons of wool thread (136.1% growth) have been made.

In 2003 joint ventures produced 161.252 billion sums worth of market commodities and 28.331 billion sums worth of other consumer goods. Exports accounted for 147.1 million US dollars or 69% of actual total exports by the companies. The share of joint ventures in total production of Uzbekengilsanoat is 43.2% and 16.5% respectively.

As a result of the national localization program, products worth 2.617 million US dollars were made in 2003, a growth of 2.4 times from 2002. Of these, 40% were new commodities' models. Also, new production capacities for 70.7 billion sums were launched in 2003 (growth 3.3 times). Further increase in production capacities by 70.0 billion sums is planned for 2004.