Readers may know that I am extremely bullish on the economy of Uzbekistan. I am invested in the country via the AFC Uzbekistan Fund.
The recent monthly report from the fund administrators just validates my optimism on the future of the country.
The combination of a young population, low debt, strong balance sheet, and a diverse economy set in the middle of central Asia is becoming recognized as very prime investment destination.
Valuations remain cheap and money is coming into the country from foreign investors.
One of facts I wanted to point out is the opportunity for the country to cash in on what I expect to be a decade long commodity bull market.
Uzbekistan has a very large and growing gold mining industry. The country is currently producing around 100 tons (3.2 million ounces) of gold per year.
The country is underexplored and has lacked investment for some time. That is now changing as this article from Resource World points out:
Uzbekistan aims to become one of the world’s largest gold producers
Uzbekistan aims to become one of the world’s largest gold producers within the next several years that will be achieved through more development of its domestic gold regions.
According to the latest data, published by the Uzbek State Committee for Geology, the country currently has 63 large-scale gold mining fields, which have total reserves of more than 2,500 tonnes of gold, and probable reserves (in categories C1 and C2) of 5,990 tonnes. Of these, at least nine are currently in the developmental stage and there is a possibility the number of such fields will increase already shortly.
Implementation of these plans will be also part of the last year’s order, which was given by the Uzbek President Shavkat Mirzeev to the national government and which involves an increase of domestic gold and silver production by almost two times by 2021-2022.
Most of gold will be produced at plants operated by the Navoi Mining and Metallurgical Combine (NMMC) which already accounts 70% of gold production in Uzbekistan.
That is over $5 billion in revenue just from gold mining.
The country is also a large miner of uranium producing 2800 tons (5.3 million pounds) as recently as 2018.
Agriculture is also a very large industry in Uzbekistan and accounts for 28% of employment and 24% of GDP.
Continued discussion around increasing the amount and speed of privatizations of state-owned enterprises could also lead to increased interest and capital flows into Uzbekistan.
The economy of Uzbekistan is growing and the necessary reforms for continued growth are taking place.
Returns for the fund in 2020 were 22.6% and so far in 2021 are 21.9%. This is the vehicle I am using for my investment in Uzbekistan.
The stock market is cheap compared to many countries in the west and has not seen investment flow from large institutions yet (I like cheap). I am very bullish on the country and will be increasing my allocation over time.
I would note one more encouraging sign of the coming of age of Uzbekistan. The first Starbucks store was announced for central Tashkent and will open in 2022.