Left behind forever

**Left Behind Forever**

Uzbekistan cannot enter the high-income country bracket merely by attracting investment, purchasing modern equipment, and opening new factories. To advance further, domestic production must be accompanied by the retention of technologies and the emergence of local suppliers, engineers, standards, services, and proprietary developments. This is pointed out by analysts from the Eurasian Development Bank (EDB), who have proposed a new model of industrial transformation for developing economies.

**Competence Cannot Be Bought**

Today, the middle-income group includes 108 economies, home to about 6 billion people. Since 1990, only 34 of them have managed to transition into the high-income category. At the same time, in 2021–2023, 95 out of 143 developing economies remained commodity-dependent, with raw materials accounting for more than 60% of their merchandise exports. High resource prices can deliver rapid growth, but they do not guarantee a sustainable transition to a wealthier economy.

The EDB explicitly emphasizes that for a developing economy, it is not enough to increase investment and acquire modern equipment. External technology must become an internal productive capability—engineers and technologists, a network of suppliers, standards, service, maintenance, design, and the ability to improve processes.

This is not a call to close off from imports or reject foreign investors. On the contrary, openness remains essential. However, it is proposed to evaluate its outcome not by the number of imported machines or even the number of launched enterprises, but by how much equipment imports, foreign direct investment, and participation in international chains increase local value added and transfer knowledge within the country.

Why is industry so important here? According to estimates cited in the new report, the manufacturing sector was linked to 64% of economic growth episodes over the past 50 years. One job in industry, on average, supports another 2.2 jobs in logistics, construction, services, education, and other related fields.

**Is Uzbekistan Transforming?**

In the EDB's regional model, Uzbekistan, along with Kazakhstan, is classified under the group of "resource-scale transformers." By this, analysts mean countries that simultaneously possess a resource and energy base, agricultural potential, and a sufficiently large domestic demand. Their task is not to stop at raw materials and primary processing, but to move up the value chain: turning resources into chemical products, more complex metals and goods, electrical engineering, machinery, and components.

For Uzbekistan, the highest scores on the sectoral map were awarded to chemicals and polymers, as well as industrial machinery—each receiving 4.71 points. These are followed by the food industry and deep agricultural processing at 4.62, transport components at 4.61, agricultural and irrigation machinery at 4.58, fertilizers and agrochemicals, as well as light industry and technical textiles, each at 4.55. Electrical engineering and pharmaceuticals received 4.50 points each.

Importantly, these scores do not imply a single "stage of development" for the entire country. Chemicals and industrial machinery are assigned to the second stage—where suppliers, engineering competencies, standards, and project finance are already important. The food industry, agricultural machinery, fertilizers, and textiles are situated between the first and second stages. Pharmaceuticals are between the second and third, where proprietary research and the commercialization of solutions are added to the production platform. In other words, basic production, mature industrial platforms, and individual innovative niches can coexist simultaneously within the same economy.

The EDB suggests choosing directions not based on prestige, but on a combination of demand, resources, already existing competencies, technological proximity, infrastructure, and the feasibility of financing the project. Therefore, a hypothetically complex factory, for which the country lacks engineers, suppliers, and a testing base, might yield beautiful investment statistics but a weak effect on the overall economy.

**Neighbors Have Different Tasks**

The report does not compare Uzbekistan with its neighbors on a "who is better" basis. Countries are assigned different roles within a single regional industrial system. Russia and Belarus are designated as the industrial core: they possess higher starting competencies in complex machinery, components, engineering, and a number of technological niches. Kazakhstan, like Uzbekistan, must process its own resource base more deeply. Armenia, Kyrgyzstan, and Tajikistan are viewed more as niche and cooperation hubs capable of specializing in specific components, services, and segments.

The figures clearly illustrate the differences. In Russia, industrial machinery receives 4.97 points, transport components 4.94, and chemicals and polymers 4.91. In Belarus, machinery leads with 4.93 points, followed by agricultural and irrigation machinery at 4.84 and transport components at 4.83. For Kazakhstan, chemicals and polymers rank first with 4.87, followed by high-value-added metallurgy at 4.84 and critical materials at 4.83.

Smaller economies have a different profile. In Armenia, pharmaceuticals and medical devices are rated highest at 4.49, followed by electronics and components at 4.47. In Kyrgyzstan, light industry and technical textiles lead with 4.40, followed by food and agricultural processing at 4.29. In Tajikistan, metallurgy and metalworking received the highest score of 4.27, followed by light industry at 4.21 and critical materials at 4.15.

**Three Steps Instead of One Giant Leap**

The model proposed by the EDB is built on three consecutive stages. The first is the basic production foundation. Here, a country needs reliable energy, transport, water, industrial sites, warehousing infrastructure, basic standards, and mass vocational skills. The main goal is to ensure stable output and establish the first supplier networks.

The second stage is the industrial platform. At this level, simply producing is no longer enough: deeper processing, machinery, chemicals, and metallurgy emerge, along with certified suppliers, engineering centers, long-term financing, and the ability to adapt imported technologies to local conditions. For many of Uzbekistan's priority sectors, this stage currently appears to be key.

The third stage is the knowledge economy. This involves applied research, pilot lines, intellectual property, new products, and their commercialization. However, analysts specifically warn that jumping here without building a production platform is difficult. Individual tech companies may appear earlier, but the mass sophistication of an economy requires personnel, suppliers, standards, and financing.

**What This Means for Uzbekistan in Practice**

A new factory should not be launched in isolation. Around it, training programs, local suppliers, engineering support, testing laboratories, certification, services, long-term financing, and market access channels must emerge simultaneously. The EDB proposes to consider as a full-fledged industrial transition project only one that includes four mandatory packages: personnel, technological assimilation, quality infrastructure, and financing for piloting followed by scaling.

This also changes the meaning of localization. Assembling a finished product from imported components is only the first step. A more valuable stage begins when local companies start manufacturing components, repairing and upgrading equipment, redesigning processes, meeting international standards, and selling products beyond the domestic market.

The same logic applies to foreign investment. From 2016 to the first half of 2025, the volume of mutual accumulated direct investment in the Eurasian region reached $48.4 billion. However, manufacturing accounted for $9 billion, or 18.4%. The EDB suggests attracting investors not merely with tax incentives, but with a prepared package: a site, infrastructure, local partners, personnel, future suppliers, financing, and an export market.

Another principle is market validation. Broad subsidies and major programs should not be launched solely because an industry looks promising. First comes a pilot, private co-financing, demand, and proven competitiveness. If a project fails the market test, scaling it up risks creating expensive capacities that exist only through constant support.

**Why It Is Important for Uzbekistan to Develop Foreign Markets**

For some complex industries, the Uzbek market may be insufficient. The combined market of the EAEU and Central Asia is estimated at approximately 180–220 million people. Already, the region accounts for an average of about 59% of sales for second-stage processing products.

This is precisely where the logic of dividing specializations arises. Uzbekistan and Kazakhstan can deepen chemicals, metallurgy, electrical engineering, and equipment manufacturing; Russia and Belarus can supply more complex components, technologies, engineering, and standards; smaller economies can occupy specialized niches. The EDB formula essentially boils down to "different competencies—a single industrial system," where national enterprises gain access to a market larger than their own.

The bank rates the potential of such a model highly. In a previous EDB study, the scenario-based development of four interconnected clusters—chemicals, machinery, high-value-added metallurgy, and the food industry—yielded over $510 billion in annual additional output in 2019 prices.

**The Main Conclusion**

The republic's industrial base is viewed as the foundation of growth. However, the commissioning of capacity itself is the beginning, not the end. If, after its launch, an enterprise remains a technological island dependent on imported parts, foreign service, and external engineers, its contribution to long-term development is limited.

The more complex and far less visible work begins after the workshop opens: local specialists must be trained to maintain and improve the technology, dozens of suppliers must be nurtured around the large enterprise, their products must be brought up to standards, engineering and testing competencies must be established, and the chain must be geared toward export. It is this transition—from purchased equipment to proprietary production knowledge—that analysts consider the boundary between a merely growing economy and one capable of sustainably transitioning to a higher income level.

For Uzbekistan, this is particularly relevant right now: the most promising areas in the EDB's assessment are already at the stage of increasing sophistication. Chemicals, machinery, transport components, agricultural machinery, electrical engineering, and pharmaceuticals require not only capital but also engineering depth.