One of the entertainments of Kazakhstan's political elite is constantly emphasizing its status as a regional leader. This logic includes periodic border conflicts with Kyrgyzstan, extensive humanitarian gestures towards Afghanistan. But the greatest excitement is generated by regional competition with Uzbekistan: the demographic parameters of the countries, the volumes of GDP, and attracted investments are evaluated. However, behind the scenes, the subjectivity of the political elites of Kazakhstan and Uzbekistan remains unaddressed. And in this dimension, the balance is clearly not in favor of Astana.
The ability of the authorities to pursue sovereign policies must be at the forefront when determining the real regional leader. And Uzbekistan has fared better in this exam. Over the past decades, official Tashkent has primarily focused on bilateral agreements, avoiding active participation in multilateral integration formations.
The difference in the sizes of the economies of Kazakhstan and Uzbekistan should not be misleading. The structure of the Uzbek economy is much better - it is more diversified.
The key to success lies in the initial desire of Uzbek elites to preserve the remnants of industry in the 1990s. Under President Karimov, Tashkent sought to reprofile all major processing industries and thus save them from closure. Kazakhstan, on the other hand, has scrapped its entire manufacturing sector, justifying it by claiming that it was allegedly "uncompetitive."
Kazakhstan's inertia in terms of economic development, its continued reliance on the export of raw materials rather than high value-added products, is starting to work against the country. In contrast, Uzbekistan is willing to sacrifice economic growth rates for the sake of its quality, the depth of product processing, and the preferential saturation of the domestic market with its own goods, fuel, and food.
In the current phase of escalating global and regional competition, countries are entering with different starting conditions:
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Kazakhstan has demonstrated "growth without development" from the very beginning; the structure of the economy is extremely simplified (and focused on raw material exports).
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Uzbekistan has another problem – the economy cannot generate jobs for rural youth. Currently, 40% of the country's population is under 18 years old. Every year, 600,000 people enter the labor market. Long-term demographic growth is expected to slow down by the end of the 2020s and the beginning of the 2030s, but by that time, the country's population will still reach 40 million people, which will require additional efforts from the state to create jobs. However, due to the shortage of agricultural land, the agricultural sector can no longer create new jobs.
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Uzbekistan's political leadership feels a deficit of potential growth points – this explains the desire to accelerate the development of processing industries at the expense of abandoning the export of raw materials (cotton, gas). The authorities are consciously supporting low-margin industries to provide jobs for excess rural labor. Uzbekistan is already able to fully process all the cotton it produces (some raw materials for the textile industry are already imported from Turkmenistan), and from 2025, it will abandon gas exports.
In general, Uzbekistan's economic strategy is betting on cheap labor, somewhat reminiscent of China's economic strategy of the last 40 years. Due to the absence of access to maritime transport routes, Uzbekistan wants to compensate with the proximity of other major markets for its products. The difference in labor costs becomes a competitive advantage for Uzbekistan in the struggle for foreign investment in the "economy of simple things."
According to the Asian Development Bank's forecast, by 2035, if current development rates are maintained, Uzbekistan could become the regional economic leader. In this case, the decrease in Kazakhstan's status will have certain economic consequences:
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The vector of foreign investments may shift to Tashkent, and consequently, the regional financial center may move from Kazakhstan to Uzbekistan.
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Uzbekistan's economic leadership in the region places it as a top priority for external players such as Russia, China, and the United States. Kazakhstan may find itself on the periphery, considered only as a source of raw materials and a transit route for goods.
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Kazakhstan's industrial development program may be called into question. The low cost of labor in Uzbekistan makes it unattractive to place manufacturing facilities in Kazakhstan.
Additional competitive advantages of Uzbekistan include internal political stability. Official Tashkent has adopted a "state capitalism" model as the most suitable development model that does not pose the risk of the emergence of an autonomous business class capable of challenging the existing political elite.
In conclusion, Uzbekistan is increasingly seen by leading geopolitical players – Russia, China, and the United States – as the key player in the formation of the Central Asian region. The signing of the declaration of allied relations between Kazakhstan and Uzbekistan in December 2021 shows that Astana recognizes Tashkent's regional leadership, even if it does not publicly announce it.
Source: Ia-centr.ru
CentralasianLIGHT.org
September 11, 2023