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KAZAKHSTAN

by EOS Intelligence EOS Intelligence No Comments

Driving Growth in Kazakh and Uzbek Passenger Vehicles Markets

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The past two years have brought a mixed bag of experience for both Kazakh and Uzbek automotive industries. Passenger vehicles sales volumes witnessed growth, however at a varied rate, affected by internal as well as external macroeconomic disruptions and regional developments. Amid these conditions, 2016 is likely to be an uncertain year for the automotive industries in both countries. Although growth is likely to be challenging, by re-thinking its current focus along with the help of the right government policies, growth prospects over the long term are promising.

While the Kazakh and Uzbek economic and automotive industries scenarios differ to quite an extent, and both countries have witnessed a varied growth in recent years, their macroeconomic and sector dynamics have continued to remain under a strong impact of the global slump in oil prices, volatile economic and political environment in neighboring regions, as well as currency devaluations. While Kazakhstan automotive industry, with sales volume CAGR of 67.8% during 2010-2014, was one of the fastest growing auto markets worldwide, the country’s GDP was witnessing a fluctuating y-o-y growth ranging from 7.5% in 2011 to 4.4% in 2014. At the same time, while Uzbek’s economy posted strong and steady GDP growth at around 8% annually between 2011 and 2014, its car sales volume grew at a mere CAGR of 1.4% during 2010-2014.

1-Fluctuating Economic & Automotive Industry Growth

Uzbekistan’s automotive industry is currently around twice the size of the industry in Kazakhstan, however its sales volume growth has recently stalled putting a question mark on Uzbek industry future growth dynamics. Kazakhstan might soon be seen to be catching up, with more than healthy sales volume growth rate, much of it supported by recent government reforms to boost local production and sales.

2-Automotive Industry Landscape

3-Industry Challenges & Opportunities

4-Industry Challenges & Opportunities


EOS Perspective

With Russia’s economy still struggling to recover amid Western sanctions, banking on vehicle exports is unlikely to take Kazakhstan and Uzbekistan any further. Passenger vehicles sales and production figures in most likelihood will continue to be impacted by internal as well as external macro-economic factors in 2016. In order to grow in the current environment, OEMs will have to look beyond their status-quo. Automakers will have to start focusing on domestic markets, which are still underserved with rapidly increasing demand for new cars.

The governments will have to work together with industry participants to create consistent as well as comprehensive industry policies that can attract more investments and stimulate growth. Measures such as financial incentives, special land allotment, creating SEZs, and various other schemes can significantly boost investor (both local and foreign) confidence. At the same time, reforms such as increasing local content requirement will drive more local producers to enter the industry. This might be a great help to the overall vehicle manufacturing and auto components industry in its development and growth trajectory.

5-What Can Drive Growth

With automakers trying to scale down their operations in Russia and Ukraine, growth opportunities are ripe for region’s manufacturers to capture and fill the market gaps in neighboring regions such as EEU and CIS. By leveraging their strategic location and proximity to European, CIS, and Asian markets, Uzbekistan and Kazakhstan could potentially attempt to reinvent themselves as the region’s next automotive export hub.

by EOS Intelligence EOS Intelligence No Comments

Central Asia – A Region of Uneven Growth and Investment Potential

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Although all Central Asian countries have been performing well on the overall economic growth front over the past several years, this good performance cannot be assumed to imply an investment growth (especially FDI-related growth)registered by all these countries. Despite government efforts and certain industries playing a critical role in bolstering growth of each Central Asian economy, various factors are standing in the way for these countries to realize their full growth and investment potential. Frequently, FDI-driven investment is hindered by unfavorable government policies, among other reasons. Central Asia remains a region of uneven development, with a need for a holistic approach to boost both economic and investment growth.

Projected to record a positive GDP CAGR in medium term with the aid of governments’ initiatives to boost both growth and investment, Central Asia’s economic progress can be characterized as unique in nature. Unlike in most cases where a country’s overall prosperity goes hand-in-hand with, say, FDI growth (such as in case of Kazakhstan, Kyrgyzstan, and Tajikistan), Turkmenistan and Uzbekistan are gearing towards around 10% GDP CAGR during 2013-2020 with negative FDI growth rates recorded in the period of 2010-2013 (which can be attributed to factors such as restrictive visa regime and constrained access to foreign currency).

While certain industries such as oil and gas, construction, and agriculture are playing an important role in driving Central Asian economies’ growth and investments, weakening Russian economy, among other challenges, is expected to have an adverse effect on the overall growth in the region.

Growth and Investment

GDP and FDI Growth



Key Government Initiatives to Boost Growth and Investment
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Chief Industries Driving Growth and Investment in Central Asia Region
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While these Central Asian countries show good growth and investment performance, aided by government initiatives to propel development and selected industries that continue to fuel economy growth, still an unequal growth and investment potential prevails in Central Asian countries.

Uneven Growth and Investment Potential in Central Asia Region
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Growth Challenges and Proposed Solutions
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EOS Perspective

To remain competitive in the global market, Central Asian countries will be required to overcome, or at least considerably minimize the growth hurdles. All of these countries rely on Russia in varying degrees, thus deteriorating Russian economy is likely to have an adverse effect on these countries in different ways, e.g. as inflated poverty rates primarily due to reduced remittances. Since Russia’s growth projections are almost negligible in short term, it might make sense for these countries to strengthen their trade relationship with the Eurozone countries which have started to experience nascent recovery.

Cases of Central Asian countries such as Kazakhstan (equipped with the maximum investment potential and minimum growth potential) and Turkmenistan (holding the minimum investment potential and maximum growth potential), indicate the fact that the region has an uneven growth and investment potential. In order to reduce the level of unevenness, reforms which encourage investment driven growth need to be implemented. It is of utmost importance for Central Asian countries to make their economies resilient (to a larger extent) to prevailing harmful extrinsic factors as well as to overcome intrinsic challenges. Also, it would be beneficial if the countries created a more suitable environment for private sector growth, improve quality of workforce, promote inclusive growth through better access to finance for SMEs, and create a dynamic non-oil tradable sector to diversify economies.

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