November 1998

by Murod Majidov and Kelly Raftery

Uzbekistan, located in the heart of Central Asia, has traditionally been known for its superior produce. Due to Uzbekistan's long and sunny growing season, fruits and vegetables are available in abundance from late spring to early fall. Nevertheless, despite the abundance of produce and its importance to the economy, Uzbekistan has a surprisingly underdeveloped food processing and packaging sector.

The U.S. & Foreign Commercial Service (US&FCS) in Uzbekistan has identified the food processing and packaging sector as a "best bet" for U.S. exporters and for possible direct investment. As the most populous state in central asia and the third largest republic in the former Soviet Union, Uzbekistan has been long overlooked as a market for agribusiness equipment.

Food Industry Facts and Trends
In 1994, the food industry accounted for 13 percent of the gross national product (GNP). Uzbekistan's food industry is not able to provide enough quality food products due to a lack of food processing and packaging technology. The average annual production of produce is 5 million tons, which results in only 107,000 tons of canned fruits and vegetables. About 40 percent of fruits and vegetables spoil because of the lack of means to process and store them.

Agriculture, which constitutes approximately 40 percent of the country's GNP, continues to be one of the highest development priorities of the government of Uzbekistan. In 1996, for example, the government boosted the amount of land dedicated to grain production in an effort to reduce Uzbekistan's dependence of food imports. Modernization is a high priority for the government of Uzbekistan, which has created incentives for domestic production, such as tax breaks and priority access to currency conversion, while creating disincentives for companies dealing with imported processed food goods, such as imposing an extremely complex system for registering all import transactions.

Imported foods in attractive packaging have given the population a new taste for foreign products. Imports have also shown local companies that they need to upgrade their food packaging technology. Meanwhile, only in the last several years have companies become concerned with issues such as quality, production efficiency, and the appearance of processed goods. Companies are now seeking the capital and technology essential to produce high-quality food goods and package them in convenient and hygienic containers.

Signs of Change?
Currently, most food processing companies are using outdated equipment, though there are signs of modernization. One modern water bottling facility in Bukhara uses two machines: one to form plastic bottles and another to bottle the water and seal the bottles with caps. This small facility produces 1,000 bottles of water daily, for distribution on the local market. In stark contrast, a state-owned bread factory in Samarkand is operating with Soviet equipment produced in 1945. Though the machinery is designed to pour and place bread dough in loaf-sized lumps into pans, when the machinery is broken, it has to be done by hand. The cooked loaves are then hand-carried from the final conveyer and placed into large rolling carts, then into trucks, without packaging, for distribution.

Many companies in Uzbekistan are already producing superior food products and are lacking only attractive standard packaging. One company in Bukhara has already invested in equipment to produce sugar cubes, but does not currently have quality boxes in which to place the sugar cubes for sale. This company also lacks proper equipment to wrap the boxes in cellophane, which would lengthen the shelf life of the product.

While many Uzbekistani companies are familiar with european and turkish food processing and packaging equipment, there is a general lack of familiarity with U.S. equipment. There is, however, great interest in it. While the current situation in Uzbekistan makes it difficult to do business, long-term opportunities are numerous for those companies willing to make a commitment to the market. European producers of food processing and packaging equipment are already in the market, waiting for the time when the economy will pick up.

For more information, visit bisnis online at http://www.iep.doc.gov/bisnis/country/cntasia.htm#uzbekistan.

Murod majidov covers agribusiness for FCS - Tashkent.
Kelly raftery covers Uzbekistan for bisnis.

For more information, contact Murod Majidov, Group Coordinator, at FCS in Tashkent at tel:+ 998 (71) 120-67-05, + 998 (71) 120-66-92 (fax) or via e-mail: murod@abc.freenet.uz until November 5, or through Kelly Raftery at tel: 202-482-4655, ext. 24.

This report is provided courtesy of the Business Information Service for the Newly Independent States (BISNIS)