CAP UZBEKISTAN POLICY BRIEF by Richard Pomfret, February 2, 2026
Uzbekistan is experiencing a period when transport costs to major markets in Asia and Europe are falling. If accompanied by appropriate domestic polices to reduce the cost of doing business and of conducting international trade, this offers a window of opportunity for diversification of the Uzbek economy.
Richard Pomfret is Professor of Economics Emeritus at the University of Adelaide and Senior Associate Fellow at the Johns Hopkins University Bologna Center. He has acted as consultant to international organizations such as the Asian Development Bank, the OECD, the UNDP and the World Bank. In 1992-4 he was seconded to the United Nations, advising the Asian republics of the former Soviet Union. Three books on Central Asian economies were published by Princeton University Press in 1995, 2006, and 2019. His most recent book Connecting Europe and China: Prospects for the Middle Corridor will be published by Edward Elgar (UK) in January 2026.
Download the working paper/ Download the policy brief/
Download the working paper in Uzbek/ Download the policy brief in Uzbek
Uzbekistan’s economic performance since the adoption of a more outward-oriented development strategy in 2017 has been good. Primary products (cotton, minerals, gas, fruit and vegetables) or special arrangements (car exports to Russia) has historically dominated Uzbekistan’s exports. Improved economic efficiency has led to some new exports in recent years, primarily from large integrated producers (e.g. fertilizers and cotton textiles). Reduced transport costs could facilitate a wider variety of exports, including opportunities for small and medium-sized producers to identify niches in which they can be internationally competitive.
Russia’s invasion of Ukraine in February 2022 and ensuing sanctions increased interest in rail connections between China and the EU routes across Central Asia that avoided Russia. Combined with significant upgrades in Uzbekistan’s domestic transport system in recent years and construction of a new Kashgar-Andijan rail line starting in 2025, Uzbekistan’s connectivity to international markets will be substantially improved.
To take advantage of this situation requires a two-pronged policy focus. First, the transport connectivity must be upgraded by maintaining the rail and road infrastructure and by improving the soft infrastructure of simplified but effective regulation and digitalization. Second, a domestic business environment must facilitate starting and operating export-oriented businesses. Governments at all levels must be ready to provide services whose access is currently difficult for producers, especially small and medium-sized businesses.
Trade and Transport Facilitation
The primary shapes of Uzbekistan’s international transport structure are that increasingly efficient trains carry freight along east-west and north-south corridors. Some international trade, especially with Central Asian neighbors and occasionally over longer distances is by road, but electrified rail is the most efficient and sustainable long-distance transport mode.
Uzbekistan inherited long-distance corridors to the Caspian Sea, to Moscow and to Siberia from the Soviet era. The new element is east-west corridors connecting Europe to China, initially through Kazakhstan and Russia, but since 2022 there has been increased interest in a “Middle Corridor” crossing the Caspian and the EU, China and multilateral development banks are investing in upgrading this route. Uzbekistan has responded positively and in recent years trains have operated between Uzbekistan and Türkiye, the Middle East, Europe and China.
A major impediment to the success of such rail freight is the high cost in time and money of crossing national borders. Uzbekistan’s government can reduce these costs by continuing to improve border-crossing efficiency through the single window and through replacement of paper by e-documents. The process could be even better if coordinated with neighboring countries to have common forms and platforms.
Although electrified rail is the most desirable international freight transport mode, the ultimate users are unlikely to be on the rail corridor and a modal transfer to trucks will be necessary for the “final mile” to the factory or farmgate. The process can be facilitated by construction of transport and logistics centers (TLCs) at key points for access to the rail corridor. TLCs can provide services such as fuel stations, food and accommodation for truck drivers, freight forwarders and courier services, which will vary depending on the TLC location (e.g. near a city or large factory or serving a dispersed agricultural region). Public assistance in setting up a TLC may be desirable because it is hard for a private operator to recoup all the benefits; a public-private partnership may be optimal in some situations.
Business Friendly Policies
The Government of Uzbekistan has taken important steps in recent years to improve the business climate, and especially for export-oriented producers. There have been export successes, but so far these have mostly been large integrated firms or foreign-invested companies. The next step is to promote export diversification by small and medium-sized companies. A good target is participation in global value chains (GVCs) through which an Uzbek producer can target a particular specialization without having to be internationally competitive in the whole process from design to marketing.
Adoption of international standards is essential to advertise producers’ suitability for GVC participation. Government agencies can help to familiarize producers with the quality and consistency needed for standards like ISO or HACCP and with the process of gaining certification.
Public policy can help to establish the conditions of access to export markets. The best approach is to join the World Trade Organization whose almost universal membership recognizes WTO rules for conducting trade, levying charges on imported goods, and so forth, as well as a process for resolving disputes. Although the process is imperfect and the WTO is most often in the headlines for members breaking its rules, those rules remain the standard for how countries should behave with respect to international trade.
Uzbekistan has trade agreements with many partners that offer improved access for Uzbek exporters, but the complexity of differing rules works best when WTO law provides a basic benchmark. Nevertheless, to leverage the trade agreements the government could publish simple guides such as “How to Export to the EU under GSP+” and sponsor virtual trade weeks or online B2B meetings with target markets such as the EU, Türkiye, Kazakhstan, or the UAE), or creation of export-focused zones (e.g., textiles in Tashkent, dried fruits in Samarkand). The government should publish information about success stories of firms joining GVCs and collect feedback from participating businesses to adjust policies on tax, customs, transport, etc.
Many local companies lack direct access to global lead firms and buyers. Governments and business organizations can organize trade missions, online B2B matchmaking, and industry fairs, as well as helping firms to set up profiles on sourcing platforms such as Alibaba, Global Sources, or Tradekey. Governments could organize trade finance workshops to explain trade credit, letters of credit, and export loans and to help firms to partner with banks to secure such facilities. In general, governments can help to show producers how to leverage global networks by using digital platforms to connect with buyers worldwide.
Like all firms, export-oriented firms can benefit from stable policies and governance, with predictable regulations, clear trade policies, and legal protection for investors. Firms’ productive capacity can be strengthened by education and vocational training, tax incentives, and access to finance for small and medium enterprises, and by encouraging foreign direct investment or other collaboration with multinational companies.
To Summarize
Some of the steps described above have already been taken in Uzbekistan but more needs to be done. Uzbekistan has potential, especially given its strategic location, improving infrastructure, and recent economic reforms. To help local businesses in Uzbekistan to join GVCs, the focus should be on building capacity and knowledge starting from practical, low-barrier first steps—while creating conditions for scaling up. This requires cooperation between governments at all levels, business associations, and enterprises.
The first moves for an Uzbek business, including small and medium-sized enterprises (SMEs) seeking to find a niche in a GVC could include:
- Identify a product line with export potential.
- Research the top international markets with easiest access.
- Obtain a key certification that unlocks buyers’ trust.
- Start with a small batch export to test demand.
- Build relationships with one reliable foreign buyer or distributor.
- Start with low-value tasks but be ready to climb the value chain by moving toward higher-value tasks.
Finally, the government’s key role is to improve logistics and supply chain readiness; delays at customs and limited cold chain/logistics reduce GVC attractiveness. The focus on the Middle Corridor since 2022 provides a window of opportunity as the EU and China seek new rail transit routes that could pass through Uzbekistan and they, together with several multilateral development banks, stand ready to provide finance to upgrade the corridor.
Read the full working paper:
