On the Great Road from East to West

Kazakhstan and Uzbekistan are two countries located on the trade route from China to Europe, in the center of the vast territory formerly known as the Russian Empire. In the vastness of the former Empire, today there are many independent states united by economic and political alliances.

One of such economic and political unions is the Commonwealth of Independent States (CIS). It is a regional intergovernmental organization with nine members. It was formed after the collapse of the Soviet Union in 1991. It covers 20 million square kilometers where some 239 million people live. Eight of the nine member states are members of the CIS free trade zone.

Another powerful economic union operating on the lands of the former Russian Empire is the Eurasian Economic Union or EAEU. This international organization ensures the free movement of goods, services, capital and labor and implements a coherent and uniform policy within the Union. The Eurasian Economic Union ranks tenth in the world in terms of nominal GDP and fifth in purchasing power parity – about $ 5 trillion.

All countries participating in the CIS and the EAEU have concluded free trade agreements. Through trade agreements, market access from one country opens up the market to the entire region.

The keys to the entire region belong to Kazakhstan and Uzbekistan. Both countries are conveniently located right in the center of the region and on the path of China’s megaproject – One Belt – One Road or New Silk Road. Together, Kazakhstan and Uzbekistan own the keys to this trade route. This creates a good stimulus for growing trade in oil palm products.

Speaking about Kazakhstan and Uzbekistan we shall note that the population of the two countries exceeds 52 million. According to Oil World GmbH domestic consumption of oils and fats exceeds 600 thousand tons in Uzbekistan and 490 thousand tons in Kazakhstan.

For both countries sunflower oil remains the most consumed edible oil. Over the past 5 years, Kazakhstan has imported more than half a million tons of sunflower oil – an average of one hundred thousand tons per year. The import of sunflower oil to Uzbekistan is even greater – it exceeded 250 thousand tons in 2020.

On top of this, imports of margarines and specialty fats are growing. In 2020, Uzbekistan imported more than 31 thousand tons of margarines and more than 35 thousand tons of special-purpose fats, which includes palm oil. In 2019 Uzbekistan imported 71 thousand tons of special fats. Another big buyer of margarines is Kazakhstan – its import of the product picked up from 26 thousand tons in 2016 to 78 thousand tons in 2020.

Fig 1. Import of Margarine, other edible mixtures to Kazakhstan. Source: Eurasian Economic Commission statistics

As can be seen from the above data, both countries have a huge domestic market for oils and fats. Own production does not fully meet domestic needs, therefore, a large amount of oils and fats are imported both as raw materials and in the form of special fats.

In 2020 Malaysia was the top supplier of palm oil to Uzbekistan supplying 20,3 out of 20,8 thousand tons or 97% and the same applied to specialty fats where Malaysia ranked first – 51%. Malaysia’s top ranking in the exports  points out that Uzbek market is where Malaysian products can successfully compete with other suppliers.

Fig 2. Uzbekistan’s import of specialty fats partly or wholly hydrogenated, inter-esterified. Source: The State Committee of Republic of Uzbekistan on statistics

Thus, the favorable location on the route of goods from China along the routes of the New Silk Road, growing domestic consumption and access to the markets of neighboring states that are part of common economic and political unions make Uzbekistan and Kazakhstan a promising market for the export of fat and oil products from Malaysia.

Prepared by Aleksey Udovenko

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