Tashkent, Uzbekistan (UzDaily.com) -- The Center for Economic Research and Reforms continues to monitor changes in the conjuncture of foreign economic activity between Uzbekistan and the EAEU, which is currently developing in the context of COVID-19. In his author’s article, CERR expert Ruslan Abaturov analyzes the impact of the pandemic on the export of textile and clothing products to the markets of the EAEU countries.

As you know, Uzbekistan is studying the issues of the possibility of expanding foreign economic cooperation with the EAEU countries. The EAEU countries are traditional trading partners, accounting for a quarter of the republic’s foreign trade turnover.

The EAEU is a major consumer of textile and clothing products. The own production of the EAEU countries is not able to cover the demand of the 184 million population, which explains the rather significant volumes of imports of the products in question. At the end of 2019, the EAEU countries imported textiles and clothing from third countries for US$ 13 billion, imports over the last 3 years increased by 38%.

In recent years, an accelerated dynamics of development of cooperation in the textile and clothing industries has been noted between Uzbekistan and the EAEU. Thus, the export of the domestic textile industry to the EAEU countries increased by 44% over 3 years. In particular, to Russia by 35%, to Kyrgyzstan - 2 times, to Belarus - by 80%. There is also an increase in investments from the EAEU countries in the textile and clothing industry of Uzbekistan. If in 2017 investments were attracted in the total account of US$ 1.4 million, then in 2019 it was already US$65.2 million.

The development of cooperation between Uzbekistan and the EAEU in 2020 is taking place under the influence of the coronavirus pandemic. As you know, the passenger transport service was stopped, there were delays in the supply of goods, and production was suspended.

Production

According to the EEC, in January-July 2020, the production of textiles in the EAEU countries increased by 3.7% compared to the same period of the previous year. Despite the pandemic, growth continued in the main producing countries - Russia, Belarus and Kazakhstan.

Meanwhile, the decline in clothing production is continuing. So, in January-July, the production of clothes decreased by 4.4%. The decline in production is noted in all countries.

In Uzbekistan, despite the negative impact of the pandemic, the production of clothing managed to maintain positive dynamics, and in the production of textiles, it even reached double-digit growth - 13.1%, while in January-July 2019 the increase was only 2.1%.

Import

The coronavirus pandemic has led to a decrease in imports of clothing and textiles to the EAEU countries. At the end of the six months, the EAEU imports of textiles and clothing (TN VED group 50-63) amounted to US$5.8 billion and decreased by 6% compared to the same period last year. A fairly serious decline is noted in the import of knitted clothing - by 27%.

For the main supplying countries of textiles and clothing to the EAEU market, a decrease is noted in imports from Turkey - by 27.7% compared to the first half of 2019, Bangladesh - by 19.4%, Italy - by 30%. On the contrary, imports from China, the main exporter to the EAEU market, increased by 17.4%.

Impact of the pandemic on Uzbek textile exports

The export of textiles and clothing of Uzbekistan to all countries in January-August 2020 continues to maintain positive dynamics. Exports of textile and clothing products (TN VED group 50-63 excluding raw cotton) amounted to US$1.2 billion and increased by 12%.

The export of textile and clothing products of Uzbekistan to the EAEU in January-August 2020 made up US$666.2 million, which is actually half of the total volume of exports of textiles and clothing. Despite the impact of the pandemic, there is a significant dynamics of export growth to this market. An increase relative to volumes in January-August 2019 by 27%, against the background of a decrease in exports to other countries by 17%. Such a significant increase was primarily due to an increase in the export of knitwear by almost US$ 85 million, or 41.1%. Also, the export of knitted fabrics increased significantly by 47%. The export of bedding, table dressing, kitchen linen has been increased by 60%.

In the EAEU, the main countries - importers of domestic textile products this year are Russia and Kyrgyzstan, exports to which, following the results of seven months, increased 2.7 times.

A consistent increase in the share of finished products in the volume of exports is important for the domestic textile and clothing industries. So, for example, the share of exports of only clothing to the EAEU reached 47.1%, while in 2017 it was 37.1%. Thus, despite the difficulties caused by the pandemic, Uzbekistan is increasing its exports to the EAEU countries.

Problematic issues

Despite the results achieved in recent years, it is necessary to say about the persisting problems of Uzbek exports of textiles and clothing, both in the market of the EAEU countries and in general.

The share of Uzbekistan in the EAEU imports of textiles and clothing remains insignificant, despite the existing potential, and has not actually changed in recent years. Over the past 3 years, among the five leaders of the exporting countries of textiles and clothing to the EAEU market (China, Turkey, Bangladesh, Italy, Uzbekistan), Uzbekistan had the lowest value growth rates.

Uzbekistan seeks to diversify the export of textiles and clothing, both in terms of product nomenclature and geography of supplies. The need to diversify in terms of product nomenclature is largely associated with the achievement at the present time of some limits on the main export commodity items in traditional markets such as the EAEU.

In addition, most of the export of finished products (for most items of the commodity nomenclature - more than 80%) falls on the EAEU market, and in particular, Russia, which indicates an extreme level of dependence on this market. In this direction, the government of Uzbekistan is making efforts to open, first of all, the capacious market of the EU countries. To do this, firstly, work is underway to abolish the boycott of Uzbek textile products by world brands, and secondly, to obtain GSP + status from the EU, which will significantly reduce tariff barriers for exported domestic products to the EU.

Thus, in its foreign trade policy in the textile sector, Uzbekistan intends to expand its product offer in traditional markets, as well as enter new markets.

Conclusion

In Uzbekistan, in September last year, targets for the development of exports of textile and clothing products were approved with a target of US$7 billion by 2025. To achieve this indicator, both an active increase in production and an active expansion of positions in foreign markets will be required, which implies the application of significant efforts to improve the quality of products and simplify the entry of domestic products to foreign markets. From this perspective, the EAEU market for Uzbekistan is currently the most accessible.

In this regard, it should also be noted that the observer status of Uzbekistan in the EAEU will allow, among other things, to study the mechanisms of participation in public procurement of light industry products of the EAEU countries, opportunities for industrial cooperation, technological platforms. All this will allow in the future, regardless of whether Uzbekistan joins the EAEU as a full partner, to strengthen its position in the EAEU textile and clothing market, to work out the possibilities of expanding cooperation in the light industry. Ultimately, this will help strengthen Uzbekistan’s position in the world textile and clothing market.