Page 62 - bne IntelliNews monthly magazine October 2024

62 I Eurasia bne October 2024
“Uzbekistan has moved very fast in the last five years. A total of 142 clusters have been set up that are responsible for 100% of the country’s textile production,” says Karim Shafei, a textile expert based in Switzerland who was speaking to the delegates of the International Textile Manufacturers Federation (ITMF) Annual Conference and fashion convention in Uzbekistan on September 9. The ITMF is an international trade federation for the world’s textile industries. “In the last eight years textile exports are up 200% from less than $3bn [in] 2022 to almost $4bn for this year. Within that, apparel exports have grown from $300m in 2017 to $1.4bn 2023 – a huge gain –
and finished product exports are up five-fold.”
Kamalak Cluster
Just outside the legendary city of Samarkand is the Kamalak Cluster. The total of 16,000 hectares of cotton fields, stretching away from the administrative buildings, are almost ready to harvest. The yellow flowers of the small shrubs have given way to fat green pods full
of cotton that will burst in the coming weeks ready for the mix of advanced John Deer harvesters and a workforce of 1,500 professional cotton-pickers to move into the fields.
From there the raw cotton is transported to factories less than an hour’s drive away to be processed into thread before finally being worked into textiles
and turned into finished products by companies that belong to the group.
The cluster already generates some $20mn worth of finished products every year that are exported to over 58 countries, according to Tadjiev Mukhiddinovich, the chairman of the cotton-textile cluster association, who travelled to Kamalak to show-case the farm.
The company is owned by Zafar Hakberdiev, a local entrepreneur, who invested $30mn into the business, partly from his own funds and partly using
a credit from Germany’s LBBW Bank. One of the weaknesses of the Uzbekistan economy is that borrowing rates in soum, the local currency, are still prohibitively high, leading companies to prefer the much cheaper credits denominated in foreign currencies; however, these expose the economy to an FX risk, should
a shock cause a deep devaluation.
Like all the clusters, it is privately owned and the investment capital comes from investors who are free
to funds the project, as they are able. The distribution of over a hundred lots means no one company dominates the business, although there are no formal restrictions on how many clusters a company can own, which suggests eventually the sector will consolidate into a few large players. The only aid the government offers is through long 25-year leases on the land and some so-called loose loans to buy machinery.
In addition to its own business, Kamalak has a joint venture with the Singaporean multinational company Indorama, which is investing into the development of
the textile sector around the world. It also cooperates with the US financiers Silverleafe and the Turkish Maroqand Development Cluster. Germany’s Federal Ministry for Economic Cooperation and Development (BMZ) is acting via the German Cooperation Agency for International Development (GIZ), a German state-owned company, and implements the majority of BMZ's technical development cooperation, which is active in Uzbekistan.
“After the 2016 reforms, foreign investors are treated like locals and given the same opportunities,” says Mukhiddinovich. “The foreign investors are allowed to open a cluster and the right to rent the land for up to 25 years, which remains owned by the state.”
Mukhiddinovich says the reforms have been very successful. Previously the sector was divided into farmers and textile producers, but now it has been united in the cluster system and under private management, the output of the farms has soared.
Closer to town on the outskirts of Samarkand is the textile factory where the raw cotton is transformed into thread and even closer to the city is
the Samarkand Carpets (SAG) rug and clothes showroom, and shirt factory.
On the first two floors of the modern business is a swanky showroom for the company’s carpets, for which Uzbekistan is famous, and these are a must-have household item in Uzbek culture. Families and couples are strolling in
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