Can the creation of the Shavat-Dashoguz trade zone support Uzbekistan and Turkmenistan’s economy?

Shavat-Dashoguz trade zone
The border area between Uzbekistan and Turkmenistan where it would be established the Shavat-Dashoguz trade zone (Credits: Open Street Map)

Geopolitical Report ISSN 2785-2598 Volume 30 Issue 7
Author: Silvia Boltuc

The creation of the Shavat-Dashoguz trade zone might strengthen Uzbek-Turkmen’s economic cooperation and bilateral relations and attract foreign investors interested in establishing their business in Central Asia by exploiting local government’s trade agreements and logistic projects.

On April 15th, 2023, the President of Uzbekistan, Shavkat Mirziyoyev, had a phone call with his Turkmen counterpart, Serdar Berdimuhamedov. The heads of the two states discussed issues of further development of bilateral cooperation under the agreements reached earlier at the highest level.

The interlocutors focused on trade and economic cooperation issues, particularly the creation of the Shavat-Dashoguz border trade zone, the implementation of joint projects in priority economic vectors, and the continuation of active cultural and humanitarian exchanges.

They also appreciated the fruitful results of the recent meeting of the Intergovernmental Commission held by the Ministries of Foreign Affairs, the Ministry of Transport, and the Ministry of Culture of both countries.

Uzbekistan – Turkmenistan relations: a geopolitical scenario

Uzbekistan and Turkmenistan are two neighbouring countries in Central Asia with a long history of cultural, ethnic, and economic ties. The two countries have established diplomatic relationships since independence from the Soviet Union in 1991.

Despite having some occasional turbulence in their mutual relations in the past, both Central Asian republics have been making significant strides towards reinforcing their partnerships in recent years.

One of the main areas where Uzbekistan and Turkmenistan have been cooperating is in the domain of energy. Turkmenistan is rich in natural gas reserves, and Uzbekistan has become an important transit hub for exporting Turkmen gas to neighbouring countries. Uzbekistan also has significant energy reserves, including oil and gas, and these resources provide opportunities for Turkmenistan to explore and export in international markets. Thus, energy cooperation between the two Central Asian republics is vital.

Another crucial aspect of Uzbekistan-Turkmenistan relations is bilateral trade. Both countries have the potential to benefit from each other’s economic activities, given the similarities in the sectors they specialise in.

As pointed out before, Turkmenistan is known for its gas production, while Uzbekistan is a significant producer of textile production. Thus, both countries can access more markets and resources by establishing cooperative trade ventures.

The peaceful resolution of the issues relating to boundary demarcation has been one of the success stories of Uzbekistan-Turkmenistan relations. In recent years, Tashkent and Ashgabat have taken significant steps towards resolving their boundary disputes through dialogue, mutual agreements, and establishing joint economic zones.

The Shavat-Dashoguz trade zone

The Shavat-Dashoguz trade zone is a proposed border-free trade zone on the border of the Khorezm region of Uzbekistan and the Dashoguz region of Turkmenistan. The project plans to create trade and economic cooperation facilities and cultural and humanitarian exchanges. The trade zone was proposed during the visit of Uzbek President Shavkat Mirziyoyev to Turkmenistan in October 2022.

The trade zone is expected to give new impetus to the economic relations between the two countries. The total trade volume between Uzbekistan and Turkmenistan was nearly a billion US dollars in 2022. Uzbekistan has offered a full-fledged free trade regime with Turkmenistan, and the two countries are coordinating actions to launch the trade zone.

Tashkent and Ashgabat started building the facilities for the trade zone on the adjacent territory in the area of the Shavat-Dashoguz checkpoint.

The Shavat-Dashoguz trade zone: why does it matter?

The Uzbekistan-Turkmenistan relationship is vital to regional stability and prosperity. Both countries share many commonalities and can leverage their respective strengths to form mutually beneficial partnerships in various sectors. By continuing their constructive dialogues and cooperation, the two countries can further enhance their relationship and contribute to the development of Central Asia as a whole.

The Shavat-Dashoguz trade zone aims to attract foreign investments and boost the region’s economy. While the idea of a trade zone may seem promising, it is essential to consider whether it will successfully attract foreign investments.

One of the most significant advantages of the Shavat-Dashoguz trade zone is its strategic location. The region is situated on the border of Uzbekistan and Turkmenistan, providing access to the markets of both countries. Additionally, thanks to the Turkmen territory, the area has access to the Caspian Sea, which offers further trade opportunities. The location of the trade zone is ideal for businesses that want to expand their reach into Central Asia.

Another factor that may attract foreign investments to the Shavat-Dashoguz trade zone is Uzbekistan’s efforts to improve its business climate. The country has recently implemented several reforms to improve its business environment. These reforms include simplifying the business starting process, reducing bureaucratic red tape, and improving access to credit. The improved business climate may make investing in the region more attractive for foreign businesses.

However, some challenges must be overcome before the Shavat-Dashoguz trade zone can attract foreign investments. One of the biggest challenges is corruption, a persistent issue in Turkmenistan. Foreign investors may hesitate to invest in a region where corruption is prevalent, which can increase businesses’ costs. Additionally, the lack of transparency in the country’s legal system may make foreign companies hesitant to invest in the region.

In conclusion, while the Shavat-Dashoguz trade zone has the potential to attract foreign investments, several factors need to be considered. The region’s strategic location and recent business reforms are definite advantages, but corruption and a lack of transparency in the legal system may pose challenges. If the government of Turkmenistan can address these issues and Uzbekistan continues improving its business environment, the Shavat-Dashoguz trade zone may become an attractive destination for foreign investors.

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