KOTRA Knowledge - Sharing - Program - Industry - Trade - With - Uzbekistan

2016/17
Knowledge Sharing Program

(Industry & Trade) with
UZBEKISTAN
2016/17 Knowledge Sharing Program (Industry & Trade)
with Uzbekistan
Project Title Policy Consultation for the Development of the Textile Industry in Uzbekistan
Prepared by Korea Federation of Textile Industries
Supported by Ministry of Strategy and Finance (MOSF), Republic of Korea

Korea Trade-Investment Promotion Agency(KOTRA)
Prepared for Government of Uzbekistan
In Cooperation with Uzbekyengilsanoat

KOTRA Tashkent Office
Project Directors Yun, Won Sok Executive Vice President for Biz info & Trade, KOTRA
Hong, Sang Young Director General, Development Cooperation Office, KOTRA
Senior Advisor Heo, Beom Do Pusan National University
Project Manager Yoo, Dong-Gil, Development Cooperation Office, KOTRA
Project Officer Kim, Jongwook, Development Cooperation Office, KOTRA
Authors Yoon, Kee Jong, Principal Investigator, Professor of Department of Fiber System
Engineering of Dankook University
Kim, Bu Heung, Director, International Cooperation & Trade Team, Korea

Federation of Textile Industries
Park, Jong Sik, Global Business Support Group Deputy Director, Korea Institute
of Industrial Technology
Kim, Youngmoo, Team Manager, Technology Support Team, Korea Federation

of Textile Industries
Research Support:
Jang, Un Deok, Senior Manager of Korea Federation of Textile Industries
Joo, Sungho, Manager of Korea Federation of Textile Industries
Kook, Hyun, Researcher of Korea Institute of Industrial Technology
Project Management:
Ryoo, Han Seok, Assistant Manager of Korea Federation of Textile Industries
Jun, So Hee, Staff of Korea Federation of Textile Industries
Government Publications Registration Number 11-1051000-000806-01

ISBN 979-11-6097-667-0 (93320)
979-11-6097-668-7 (95320)(PDF)
Copyright ⓒ 2018 by Ministry of Strategy and Finance, Republic of Korea
UZBEKISTAN
2016/17 Knowledge Sharing Program

(Industry & Trade) with Uzbekistan
Policy Consultation for the Development of the
Textile Industry in Uzbekistan
2016 KSP with Uzbekistan


Outline

Chapter 1. Strengthening of the Value Chain in Uzbekistan’s

Textile Industry
Chapter 2. FDI Attraction in Uzbekistan’s Textile Industry

Chapter 3. Policy Application of Uzbekistan Textile Technopark

Preface
The Knowledge Sharing Program (KSP), sponsored by the Ministry of Strategy and Finance, is
the representative knowledge-based development cooperation program in Korea that supports
the economic and social development of partner countries, and establishes a friendly economic
cooperation base with Korea. KSP has been used strategically for economic cooperation, and the
demand for creating new growth engines in overseas markets has increased in recent years. As
such, Korea Trade-Investment Promotion Agency (KOTRA) has been participating as a joint
general organization of KSP since 2014, providing advice to promising industries such as trade
and investment and contributing to the project, thereby making KSP a cornerstone of bilateral
economic cooperation.
KOTRA has been carrying out nine KSP projects including a project with Uzbekyengilsanoat
as a general organization of the ‘2016/17 KSP Industrial and Trade Investment Policy Advisory
Program’, and has sought to focus on the following two aspects. First, we emphasized the
importance of knowledge sharing gained during the economic development process of Korea
with partner countries, and provided meaningful policy advice in accordance with KSP’s goals.
Rather than delivering the experience of Korea to the partners unilaterally, KOTRA sought to find
common implications through communication and cooperation with various participants,
including senior officials of partner countries. Second, we have improved the effectiveness of
policy advice by upgrading the KSP project into practical economic cooperation and allowing
Korean companies to participate. In particular, the Uzbekistan KSP organized investment
promotion seminars and corporate meetings for Korean textile companies in accordance with
the theme of ‘Development Plan for Textile Industry’. Moreover, a Corporate Social Responsibility
(CSR) project was conducted to introduce Korea’s dyeing technology to local Uzbekistan textile
companies to actively explore the economic cooperation agenda between the two countries and
also to encourage participation of Korean companies to expand public-private partnerships.
This report, which is organized by the Ministry of Strategy and Finance with the cooperation
of the Ministry of Trade Industry and Energy, directed by KOTRA, and conducted by Korea
Federation of Textile Industries, covers the results of research and policy consultations. KOTRA
carried out the project under the title “Development Plan for Textile Industry in Uzbekistan” as
Uzbekistan’s government has designated the textile industry as a national key industry, and
continues to announce plans to foster it at the government level. However, due to the lack of
technology, Uzbekistan’s textile industry is heavily focused on cotton and spinning processes,
urging an immediate establishment of a value chain.
Chapter 1, “Optimal Value Chain Proposal for Textile Industry Development”, analyzes the
strengths and weaknesses of Uzbekistan’s textile industry, and draws strategic priorities
accordingly. Chapter 2, “Measures for Attracting FDI in Textile Industry”, presents the
development direction and implementation strategy for Uzbekistan’s government that connects
the foreign investment and industrial policies. Chapter 3, “Policy Utilization Plan of Textile
Technology Park”, proposes a policy to utilize the textile technology park in Tashkent which is
being established through the Korean ODA project. We wanted to share Korea’s experiences on
each topic and draw policy implications for Uzbekistan’s textile industry.
Prior to the publication of this report, I would like to express my sincere appreciation to Dr.
Kee Jong Yoon, principal investigator and professor of department of fiber system engineering at
Dankook University; Mr. Bu Heung Kim, director of Korea Federation of Textile Industries
(KOFOTI); Mr. Youngmoo Kim, Technical Support Team manager of KOFOTI; Mr. Un Deok Jang,
Mr. Sungho Joo, Mr. Han Seok Ryoo and Ms. So Hee Jun, representatives of KOFOTI; Mr. Jong
Sik Park, deputy director of Korea Institute of Industrial Technology (KITECH); Mr. Hyun Kook,
general manager of KITECH for sharing the experience of Korea's economic development. I am
also grateful to Dr. Beom-Do Heo, professor at Busan University who is a senior advisor of
Uzbekistan KSP project and Uzbekyengilsanoat representatives for their active cooperation in the
local area. I would also like to thank KOTRA’s overseas office in Tashkent and the Korean
Embassy in Uzbekistan. Furthermore, I am thankful to those who have given valuable advice for
the completion of the report, such as Mr. Young-Soon Chang, Mr. Sang-Nam Park, Mr. Hoon
Park, Mr. Kyung-Sik Lee and Mr. Myung Goo Lee.
Lastly, I would like to disclose that the contents of this report are opinions of experts who
participated in the project, and are not official opinions of KOTRA.
August, 2017
Wonsok Yun
Executive Vice President for Business Information & Trade Affairs, KOTRA
Contents
2016 KSP with Uzbekistan ·················································································································· 1
Outline ······················································································································································ 6
Chapter 1
Strengthening of the Value Chain in Uzbekistan’s Textile Industry
1. Introduction (Background and Objective) ···················································································· 12
2. Current Conditions of Uzbekistan’s Textile Industry ··································································· 15

2.1. Overview ····································································································································· 15
2.2. Current Conditions of Textile Industry and Relevant Policies ··········································· 16
2.3. Textile Industry Analysis by Stream (Value System Analysis) ············································ 23
2.4. Key Agendas (through a SWOT Analysis) ············································································· 44
3. Sharing Korea’s Experience in the Development of its Textile Industry ································ 50

3.1. Changes in the Textile Trading Environment ······································································· 50
3.2. Current Conditions of Korea’s Textile Industry ····································································· 53
3.3. Policy Changes in Korea ··········································································································· 54
3.4. Sharing Successful Cases of Adapting to Changes in the Textile Industry Environment ·· 62
3.5. Promotion of Fashion Design ································································································ 72
4. Policy Suggestion (Reinforcement of Value Chain) ····································································· 82

4.1. Deriving Strategies ···················································································································· 82
4.2. Action Plans ································································································································ 84
4.3. Conclusions ································································································································ 90
4.3. Conclusions ································································································································ 90
Reference ·············································································································································· 93
Reference : Survey Results ·················································································································· 96
Contents
Chapter 2
FDI Attraction in Uzbekistan’s Textile Industry
1. Introduction ····································································································································· 104
2. Purchasing Trends in the Global Textile and Apparel Market ················································· 109
2.1. Determinants of Supply Price in Textile and Apparel Industry ········································ 109
2.2. Changes in Purchasing Patterns of Buyers ········································································· 112
3. Korea’s Experience in Attracting FDI and Making Global Investments in the Textile and
Apparel Industry ···························································································································· 114
3.1. Process of Growth and FDI Attraction in Korea’s Textile and Apparel Industry ··········· 114
3.2. Current Conditions of Overseas Investments of Korean Textile and Apparel Companies · · 116
3.3. Investment of Korean Textile and Apparel Industry in Key Regions ······························ 122
4. Implications of Foreign Investment Experiences of Korea Textile & Apparel Industry and
Investment Decision Factors ········································································································ 134
4.1. Implications of Foreign Investment Experience ································································· 134
4.2. Determinants of overseas investment ················································································· 136
5. Uzbekistan’s Investment Environment ························································································ 138

5.1. FDI Status of Uzbekistan ········································································································ 138
5.2. Political·Economic Environment ··························································································· 142
5.3. Infrastructure Condition ········································································································ 145
5.4. FDI related Laws and Institutional Environment ································································ 149
5.5. Results of Survey on Foreign Investment ··········································································· 153
6. FDI Policy Recommendations for Uzbekistan’s Textile and Apparel Industry ····················· 157
6.1. FDI Competitive Analysis of Uzbekistan’s Textile and Apparel Industry ······················· 157
6.2. Direction of Policy Recommendation ·················································································· 161
6.3. Policy and Strategic Proposals ····························································································· 164
Contents
Reference : Characteristics of the Russian Textile and Apparel Market, Opportunity Factors for
Uzbekistan and Investment Cases ·············································································· 166
Reference ············································································································································· 176
Chapter 3
Policy Application of Uzbekistan Textile Technopark
1. Introduction ····································································································································· 182
2. Significance of the Textile Technopark Construction Support Project ·································· 183

2.1. Why the Textile Technopark? ································································································· 183
2.2. Korea’s Industrial Policies and Regional Development Policies, and Case Studies of its
Technoparks ······························································································································ 184
2.3. Theoretical Background and Function of Technopark ······················································ 192
2.4. Policies to Promote the Textile Industry in Korea, Uzbekistan and Vietnam, and Their
Implications ······························································································································ 196
3. Progress and Goals of the Textile Technopark Construction Support Project ····················· 210
3.1. Progress of the Textile Technopark Construction Support Project ································· 210
3.2. Contents and Objectives of the Textile Technopark Construction Support Project ····· 216
4. Policy Applications of the Textile Technopark ··········································································· 224

4.1. Textile Industry Manpower Enhancement through Education and Training ················ 224
4.2. Product Diversification and Technology Advancement through Business Support
Utilizing Equipment ················································································································ 236
4.3. Constant R&D for Future Development of the Textile Industry ······································ 245
4.4. Independence of the Textile Technopark and Ripple Effects ··········································· 249
Reference ············································································································································ 258

Contents┃List of Tables
[Table 1] Uzbekistan KSP Korean Researchers and Roles ································································· 3

[Table 2] 2016/17 Uzbek KSP Demand Survey and Subject Selection ·········································· 4
[Table 3] Major Economic Indicators of Uzbekistan ·········································································· 7
Chapter 1
[Table 1-1] Number of textile companies affiliated with Uzbekyengilsanoat ····························· 17

[Table 1-2] Number of textile companies per region (in 2014) ··················································· 17
[Table 1-3] Uzbekistan textile export (data from Uzbekyengilsanoat) ······································· 18
[Table 1-4] Uzbekistan’s textile exports ··························································································· 25
[Table 1-5] Uzbekistan textile import ································································································ 26
[Table 1-6] Cotton export ·················································································································· 27
[Table 1-7] Raw cotton production by country ··············································································· 29
[Table 1-8] Uzbekistan’s cotton production ····················································································· 29
[Table 1-9] Uzbekistan cotton supply and demand structure ······················································· 30
[Table 1-10] World’s cotton yarn producing countries and production amounts ····················· 30
[Table 1-11] World’s cotton fabric producing countries and production amounts ················· 31
[Table 1-12] Changes in fiber materials export ··············································································· 32
[Table 1-13] Raw cotton prices of key export countries from 2011 to 2015 ····························· 32
[Table 1-14] Change in Uzbekistan yarn export ·············································································· 34
[Table 1-15] Export prices of yarns in 2015 ····················································································· 35
[Table 1-16] Changes in Uzbekistan’s fabric export ········································································ 36
[Table 1-17] Export prices of fabrics in 2015 ··················································································· 36
[Table 1-18] Changes in Uzbekistan’s articles export ····································································· 37
[Table 1-19] Export prices of articles in 2015 ·················································································· 37
[Table 1-20] Hourly wages of textile workers in major countries ··············································· 38
[Table 1-21] Prospect for 2017 and 2018 (as of 2016) ··································································· 39
[Table 1-22] Level of difficulties experienced by textile enterprises in Uzbekistan ··················· 40
[Table 1-23] Self-assessment of capacities of textile enterprises in Uzbekistan ························ 41
[Table 1-24] Comparison of the unit price of export for product in each stream (as of 2015)
············································································································································· 46
Contents
[Table 1-25] Process of changes of textile trade agreements ······················································· 50

[Table 1-26] Changes in Korea’s textile trade balance ··································································· 53
[Table 1-27] Status of Korea’s textile industry (in 2014) ······························································· 54
[Table 1-28] Textile exports from the 1950s to the 1970s ····························································· 57
[Table 1-29] Textile exports in the 1980s ·························································································· 58
[Table 1-30] Summary of textile industry development in Korea ················································ 69
[Table 1-31] The design industry’s development process ····························································· 72
[Table 1-32] Details of the textile and fashion invigoration program and the fashion business
foundation establishment program ··············································································· 79
[Table 1-33] Summary of government support for the fashion industry ·································· 80
Chapter 2
[Table 2-2] Overseas investment of the Korean Textile and Apparel Industry by target ······ 118
[Table 2-3] Changes in overseas investment of Korean textile and apparel industry ············ 119
[Table 2-4] Structural changes in overseas investments by the Korean textile and apparel
industry ··························································································································· 119
[Table 2-5] Korea Textile Apparel Industry Domestic and Foreign Exports ····························· 120
[Table 2-6] Global business performance of Korean major apparel vendors ··························· 121
[Table 2-7] Investment Trends of Southeast Asian and West South Countries in Korea Textile
Apparel Industry (unit: number of new enterprises) ················································ 123
[Table 2-8] Investment Trends in the Central American Region of the Textile Apparel Industry
in Korea ··························································································································· 126
[Table 2-9] US apparel market share of major apparel exporting countries ···························· 127
[Table 2-10] Korea-Honduras Textile Trade Trend ········································································· 127
[Table 2-11] Korea's Textile Apparel Industry Investment Trends in Major Countries in Africa
········································································································································· 130
[Table 2-12] EU-US textile apparel export volume of major African countries (2016) ··········· 130
[Table 2-13] Current status of amount of FDI inflow of 5 CIS countries (2015) ······················ 139
Contents
[Table 2-14] The Yearly Status of Investment by Foreigners announced by the Government of
Uzbekistan ····················································································································· 140
[Table 2-15] GDP to Total FDI Inflow in 5 CIS Countries (2015) ················································· 140
[Table 2-16] Country Risk Index (CRI) of CIS Countries ······························································· 143
[Table 2-17] Direct Investment Country Risk Index (CRI) ···························································· 143
[Table 2-18] Societal Safety and Security by Country ·································································· 143
[Table 2-19] Degree of Satisfaction with Foreign Investment by Korean Textile Apparel
Enterprises ···················································································································· 153
[Table 2-20] Textile Import Amount of Russia and Trends* in Share of Uzbekistan Items in
Russia ···························································································································· 167
[Table 2-21] Russia’s Import Amount by Major Item and Trend of Uzbekistan’s Share ········· 168
Chapter 3
[Table 3-1] 50-year path of the Korean economy ········································································· 185

[Table 3-2] Changes in Korea’s key export items, by decade ···················································· 186
[Table 3-3] An example of funding for a Technopark ································································· 189
[Table 3-4] Theoretical background of the Technopark ······························································· 193
[Table 3-5] Functions of the Technopark 1 ··················································································· 194
[Table 3-6] Functions of the Technopark 2 ····················································································· 195
[Table 3-7] 2030 Vietnam’s textile industry development goals ················································ 197
[Table 3-8] Major policies for the development of Vietnam’s textile and apparel industry ·· 198
[Table 3-9] Roles played by key textile industry organizations in Korea ·································· 202
[Table 3-10] Direction of change in the function of Korea’s textile industry organizations to
support enterprises ······································································································ 203
[Table 3-11] Key functions of Uzbekistan’s textile industry organizations ································ 205
[Table 3-12] Roles played by key textile industry organizations in Uzbekistan ······················· 205
[Table 3-13] Tools and fields of utilization in Textile Technopark ··············································· 209
[Table 3-14] Overview of Uzbekistan Textile Technopark building ············································· 211
[Table 3-15] Justifiability of equipment installation in each field ··············································· 212
Contents
[Table 3-16] Progress details for 2015–2017 ·················································································· 213

[Table 3-17] Room assignment in Textile Technopark (TTP) building (plan) ···························· 215
[Table 3-18] The three key functions of the Textile Technopark and details ···························· 217
[Table 3-19] Roles of the organizations in the Textile Technopark ············································ 220
[Table 3-20] Objectives and features of the Textile Technopark in Uzbekistan ······················· 222
[Table 3-21] Project Design Matrix (PDM) for the Textile Technopark Construction Support
Project ···························································································································· 223
[Table 3-22] Educated manpower demand in each sector of the Textile Technopark (Textile TP
workers) ·························································································································· 225
[Table 3-23] Teaching materials in the textile and apparel sectors ············································ 226
[Table 3-24] Departments in the undergraduate school at the Tashkent Institute of Textile and
Light Industry ················································································································ 226
[Table 3-25] Undergraduate curriculum in “Technologies and Designs of Light Industry
Products” ························································································································ 227
[Table 3-26] Departments in the graduate school at the Tashkent Institute of Textile and Light
Industry ························································································································· 228
[Table 3-27] Mid-to-long term organization of faculty members for education and training at
the Textile Technopark (plan) ···················································································· 229
[Table 3-28] Education demand grouping in Uzbekistan ···························································· 232
[Table 3-29] Operation of the Technology Leader Training Program ········································ 233
[Table 3-30] Overseas Training Program ························································································· 234
[Table 3-31] Subjects and items of the demand survey ······························································ 235
[Table 3-32] Development and operation of the Field Worker Training Program ·················· 236
[Table 3-33] Summary of technical details for business support activities in textile field ····· 239
[Table 3-34] Summary of technical details for business support activities in the apparel field
········································································································································· 240
[Table 3-35] Expected effects for enterprises in Uzbekistan’s textile industry ························· 241
[Table 3-36] Subjects of the technical exchange session (draft) ··············································· 244
[Table 3-37] Projected annual operation cost of the Textile Technopark ·································· 250
[Table 3-38] A plan to secure annual cost for independence (profit model, estimate) ········· 250
[Table 3-39] 2019 Independence Plan (draft) ··············································································· 251
Contents
[Table 3-40] Measures to be implemented for implementation of Textile Technopark (TTP) 252
[Table 3-41] Possible Risks and Solutions in Textile TP ································································ 254
[Table 3-42] Summary of Mid to Long-term Development Plan of Uzbekistan Textile
Technopark ···················································································································· 255
[Table 3-43] Summary of the themes for ripple effects of the Textile Technopark ················· 256
Contents┃List of Figures
Chapter 1
[Figure 1-1] Uzbekistan’s export structure (in 2016) ······································································ 22

[Figure 1-2] Uzbekistan textile trade ································································································· 24
[Figure 1-3] Uzbekistan’s textile exports by country ······································································ 28
[Figure 1-4] Uzbekistan textiles time series import and export rates ········································· 31
[Figure 1-5] Changes in global textile demands ············································································· 34
[Figure 1-6] Countries of export and planned targets of expansion ··········································· 42
[Figure 1-7] Changes in Uzbekistan’s textile export by value chain ············································ 45
[Figure 1-8] Changes in Uzbekistan’s export of cotton related products ·································· 45
[Figure 1-9] SWOT analysis ················································································································· 49
[Figure 1-10] Industrial development within the apparel value chain (cases in Asia) ·············· 52
[Figure 1-11] Process of added value development in the global apparel value chain ··········· 63
[Figure 1-12] Skills and qualifications required for each job position in the apparel industry
········································································································································· 65
[Figure 1-13] Policies and export performance in Korea’s textile industry ································· 68
[Figure 1-14] Production clusters, institutes and dyeing complexes by item ···························· 71
[Figure 1-15] Phased implementation of projects based on priority ··········································· 91
Chapter 2
[Figure 2-1] Changes in global textile demand ············································································· 107

[Figure 2-2] Changes in unit price for apparel import in the USA ············································ 110
[Figure 2-3] Price components of a shirt ······················································································· 110
[Figure 2-4] Dimensions of sourcing decisions of global buyers ··············································· 111
[Figure 2-5] Sourcing regions of fashion retailers in the USA ·················································· 112
[Figure 2-6] Factors influencing sourcing cost of fashion retailers in the USA in 2015 ········· 113
[Figure 2-7] Yearly overseas investment of Korean Textile and Apparel Industry ·················· 117
[Figure 2-8] Global Investment map of Korean major apparel vendors ·································· 121
[Figure 2-9] Ethiopian Government Internet Investment Information ······································· 133
Contents
[Figure 2-10] Global investment determinants in the textile and apparel industry ················ 137
[Figure 2-11] Uzbekistan’s GDP & investment attraction trends ················································ 139
[Figure 2-12] Satisfaction Factors for Foreign Investment ··························································· 154
[Figure 2-13] Dissatisfaction Factors for Foreign Investment ······················································ 154
[Figure 2-14] Investment Potential of CIS Region for the Next 5 years ··································· 156
[Figure 2-15] Investment Concerns in Uzbekistan ········································································ 156
[Figure 2-16] SWOT Analysis ··········································································································· 157
[Figure 2-17] Import Trends of Knitted Fabric Apparel to Russia, by Country ························ 166
[Figure 2-18] Items to Strengthen Uzbekistan’s Export Competitiveness (Example) ·············· 170
[Figure 2-19] FDI Attraction Strategy (SO/ST/WO/WT) for Uzbekistan’s Textile and Apparel
Industry ························································································································ 175
Chapter 3
[Figure 3-1] Korea’s industrial policies in each decade ································································ 184

[Figure 3-2] Shift from light industry to heavy and chemical industries from the 1970s to
2010s ······························································································································ 187
[Figure 3-3] Specialized fields and regional distribution of Technoparks in Korea ··············· 188
[Figure 3-4] General organization of Korea’s Technoparks ························································ 190
[Figure 3-5] Fields of specialization and distribution of textile research institutes ················· 191
[Figure 3-6] The six purposes of a Technopark ············································································ 192
[Figure 3-7] A diagram describing the relationships, functions and effects of the Technopark
········································································································································· 193
[Figure 3-8] Support and assistance throughout the manufacturing process ························· 201
[Figure 3-9] Changes in R&D roles performed by Korea’s textile industry organizations ·· · 204
[Figure 3-10] Changes in manpower training functions of Korea’s textile industry organizations
······································································································································· 204
[Figure 3-11] Key roles played by textile industry organizations in Uzbekistan ···················· 206
[Figure 3-12] Roles played by innovative bodies in Korea and China’s textile industry ········ 207
Contents
[Figure 3-13] Uzbekistan Textile Technopark (TTP) model picture ············································· 210
[Figure 3-14] A schematic diagram describing the operation of the Textile Technopark ······ 216
[Figure 3-15] Organizational structure suggested by KITECH ···················································· 218
[Figure 3-16] Organization chart announced through a Presidential decree in Uzbekistan · 219
[Figure 3-17] Development flow of the Textile Technopark’s organizational structure ·········· 221
[Figure 3-18] Procedure for education and training ···································································· 224
[Figure 3-19] Diagram illustrating the education·training system of Textile Technopark ····· 231
[Figure 3-20] Mid-to-long term plan for education and training ·············································· 233
[Figure 3-21] Expansion process of the Overseas Training Program ········································· 234
[Figure 3-22] Field worker training procedure ·············································································· 235
[Figure 3-23] Fields of equipment utilization in the Textile Technopark (number of employees)
······································································································································· 237
[Figure 3-24] Vulnerable areas in Uzbekistan’s textile industry ·················································· 238
[Figure 3-25] Mid-to-long term plan for business support activities ········································ 243
[Figure 3-26] Mid-to-long term R&D plan ···················································································· 247
[Figure 3-27] Technology demand survey procedure ·································································· 247
[Figure 3-28] Assistance in resolution of technical difficulty (short-term R&D) procedure ··· 248
[Figure 3-29] Process of improvement research ··········································································· 249
2016 KSP with Uzbekistan
Yoon Kee Jong (Dankook University)
1. Project Background
The KSP (Knowledge Sharing Program) is an economic policy consulting program for
strategic economic cooperation partner countries that combines policy research,
consultation and training. The purpose of the KSP is to share Korea’s experience in
economic and trade development, and to support the partner country’s economic and
social development. The goal is to utilize the experience of Korean companies for exports
and overseas market expansion in the KSP to contribute to the sustainable growth of the
partner country, and at the same time, to provide policy consultation on sectors in
industry and trade where there is good potential for cooperation between the two
countries and for possible follow-up programs in the future. KSPs relating to industry,
trade and investment are organized by Korea Trade-Investment Promotion Agency
(KOTRA), and for the Uzbekistan program, Korea Federation of Textile industry (KOFOTI)
and Uzbekyengilsanoat will cooperate under the supervision of KOTRA.
Light industry represents 14.1% of Uzbekistan’s total industrial production. Within light
industry, the textile industry1) has a 92.1% share, making it a key industry in Uzbekistan.
Currently, the Uzbek government is making efforts to revitalize the economy, introduce
1) The term “textile and apparel” as used in this study refers to textiles (HS 50-60), apparel (HS61, 62) and other
textile products (HS63) under the Harmonized Commodity Description and Coding System (HS). Thus, for
textile, as materials used for finished products, emphasis is placed on its functional aspect, while apparel refers
to finished or half-finished products made of textile. In this study, the term “textile industry” is used as a
comprehensive concept to refer to the “textile and apparel” sector, and the term is used globally to refer to
all organizations that produce or use textile in a broad sense. For apparel, the terms “apparel,” “clothing” and
“garment” are used accordingly. Terms used in other cases are described specifically in the main text.
1
2016 KSP with Uzbekistan 
advanced technologies and capital and expand domestic production of high value
products through the “2015-2019 Productive Structure Reformation and Modernizationㆍ
Diversification Program.” Moreover, the Uzbek government has established a 5-year plan
for the development of the textile industry, and in this area approximately 140 new
projects are being reviewed. For the Uzbekistan KSP, the objective is to establish measures
that will support the development of Uzbekistan’s textile industry, in cooperation with
Uzbekyengilsanoat. Moreover, based on an understanding on Uzbekistan’s economic and
social characteristics, industrial policy development and execution consultation, the
sharing of Korea’s industrial development experience as well as invitational training can be
carried out in a comprehensive manner under the Uzbekistan KSP. Through these
activities, a solid foundation for economic cooperation between the two countries and
business cooperation among enterprises will be established.
Based on Uzbekistan’s request that Korea share its experience in the development of
the Korean textile industry, this KSP focuses on the provision of policy proposals for the
development of Uzbekistan’s textile industry, and to this end, policy consultation and
practical training are carried out with a focus on three subjects: ➀ Expansion of foreign
direct investments, ➁ Strengthening of the value chain in Uzbek textile industry, and ➂
Utilization of Uzbekistan’s Textile Technopark.
2. Progress
A. Research Team Organization

The research team consists of professionals with experience in and expertise on the
three research subjects, and a background in international cooperation and consultation
relating to Uzbekistan and CIS. The Uzbekistan KSP Research Team was organized as
shown in <Table 1>.
2 2016/17 Knowledge Sharing Program (Industry & Trade) with Uzbekistan

[Table 1] Uzbekistan KSP Korean Researchers and Roles
Role Name Affiliation and Position

Project Manager Yoo Dong Gil Expert Advisor / KOTRA
Project Officer Kim Jongwook Researcher / KOTRA
Director of Tashkent Representative Office /
Local Supervision Choi Jo-Hwan
KOTRA
Professor of Department of Fiber System
Uzbek KSP Supervision Yoon Kee Jong
Engineering / Principal Investigator
Korea Federation of Textile Industries
Kim Youngmoo Team Manager of Technical Support Team /
1) Optimum Value Chain Researcher
Establishment Korea Federation of Textile Industries
Jang Un Deok Senior Manager of Technical Support Team /
Research Support
Kim Bu Heung Director of International Trade & Cooperation
Team / Researcher
2) FDI Expansion
Joo Sungho Manager of International Trade & Cooperation
Team / Research Support
Korea Institute of Industrial Technology Global
Park Jong Sik Textile Deputy Director of Technology Support
3) Policy Application of Group / Researcher
Technopark Korea Institute of Industrial Technology Textiles
Kook Hyun General Manager of Technology Support Group /
Research Support
Ryoo Han Seok Assistant Manager of International Cooperation
Data Collection and & Trade Team / Program Management
Program Management Korea Federation of Textile Industries
Jun So Hee Staff of International Trade & Cooperation Team
/ Program Management
B. Demand Survey Submission and Research Subject Selection

The demand survey and subject selection for the 2016/2017 Uzbekistan Textile
Industry Development Measures Establishment KSP were carried out as follows. Demands
of the policy making authorities were adjusted and the research subject was finalized
through the procedure described in <Table 2>.
3
[Table 2] 2016/17 Uzbek KSP Demand Survey and Subject Selection
Program Title 2016/17 Economic Development Experience Sharing KSP

PM Supervisor Program Manager
Demand On May 27th, 2014, the Uzbek Minister for Foreign Affairs sent a letter to the
Survey Korean Ministry of Foreign Affairs hoping that the countries could cooperate in
Submission the fashion industry, and the Uzbek Ministry for Foreign Trade requested
and cooperation to support the development of its textile industry and investments
Contents of Korean companies.
Based on the above demand, it was decided that the 2016/12017 Uzbek
Economic Development Experience Sharing KSP would concentrate on the
development of Uzbek textile industry. As such, the following research subjects
were proposed, focusing on the three fields that are essential for the
I. Subject
development of Uzbek’s textile industry (Nov 22nd, 2016).
Candidate
Subject <Proposed Research Subjects>
Proposed Cooperation
Proposed Subject
by Korea Organization
Subject: Development of Uzbek’s Textile Industry
① Strengthening the Value Chain
Uzbekyengilsanoat Detailed
➁ Expansion of Foreign Direct Investment
Subjects
➂ Utilization of Textile Technopark
II.
Final
Subject Uzbekistan agreed to the three research subjects proposed by Korea.
Selection
Process
C. Demand Survey and Factual Survey (with a Launch Briefing Session)

Together with the 2016/2017 Uzbekistan KSP Launch Briefing Session, a demand
survey and a factual survey were carried out in Tashkent, Bukhara and Samarkand in
November 2016. After examining the demands of Uzbek policy-making authorities, the
scope of the policy consultation proposed by Korea was determined, and then through
the 1st factual survey, the conditions and issues in Uzbek’s textile industry were examined.
D. Detailed Factual Survey

In February 2017, a detailed factual survey for Uzbekistan KSP was carried out in
Tashkent and neighboring cities for an additional demand survey and factual survey.
Additional demand backgrounds to strengthen Uzbek’s design industry and exports of
specific products were examined, and through discussions, the scope of the policy
consultation proposed by Korea was accepted. Then, through the 2nd factual survey, the
conditions and issues in Uzbekistan’s textile and apparel industry was examined.

E. Intermediate Briefing Session and Invitational Training for Field
Workers
In April 2017, supervisors and working groups at Uzbekyengilsanoat, Institute of Textile
and Light Industry and Textile Technopark were invited to Korea for an intermediate
briefing session and training for the development of its textile industry. Also, a briefing
session on investment in Uzbek textile and apparel industry was held for Koreans involved
in textile and apparel companies.
F. High-ranking Policy Dialog and Final Briefing Session

In June 2017, the research findings were shared with Uzbekistan’s high-ranking
policy-makers, and a final briefing session to report the research results was held in
Tashkent. Also, a spot inspection was carried out at the socks production project site, a
large-scale project currently being implemented by the Uzbek government, to examine
the efforts being made by Uzbek policy-making authorities for the development of
Uzbekistan’s textile and apparel industry.
G. Final Report Submission

Based on the results derived for each research subject, a final report that proposes
effective policies to develop Uzbekistan’s textile industry is submitted in Korean and
English.
5
Outline
The objective of this KSP (Knowledge Sharing Program) is to propose measures to

strengthen the industrial value chain, expand foreign direct investment and utilize the
Textile Technopark for the development of Uzbekistan’s textile industry. In particular, this
study aims to make suggestions for the development of Uzbekistan’s textile industry
based on Korea’s experience of establishing global production systems all over the world,
to secure a competitive edge in the global textile and apparel markets.
Uzbekistan is a country located in Central Asia that achieved independence from the
Soviet Union in 1991. According to the World Bank, Uzbekistan’s GDP was 13.36 billion
USD in 1990, 13.76 billion USD in 2000, 39.33 billion USD in 2010 and 66.73 billion USD in
2015. The data indicates that Uzbekistan has been achieving economic growth in recent
years, with annual GDP growth of 1.6%, 3.8%, 8.5% and 8.0%, respectively. The share of the
agricultural sector in GDP has been decreasing since 2000, as it was 33% in 1990, 34% in
2000, 20% in 2010 and 18% in 2015.2) Currently, annual GDP growth is maintained at 8%.
The table below shows Uzbekistan’s major economic indicators, and is based on data
obtained from the Trading Economics website.3)
2) http://databank.worldbank.org/data/Views/Reports/ReportWidgetCustom.aspx?
Report_Name=CountryProfile&Id=b450fd57&tbar=y&dd=y&inf=n&zm=n&country=UZB
3) https://tradingeconomics.com/uzbekistan/indicators

[Table 3] Major Economic Indicators of Uzbekistan
Indicator Value
Currency 3910 so’m/USD
Population 32.12 Million
GDP 66.73 USD Billion
GDP Annual Growth Rate 7.8%
Unemployment Rate 8.9%
Inflation Rate 5.7%
Interest Rate 9%
Balance of Trade 455 USD Million
Exports 12871 USD Million
Imports 12416 USD Million
Under the state’s strict economic controls, Uzbekistan has been implementing import
substitution industrialization policies with the aim of protecting and promoting its
domestic industries. Thus, Uzbekistan’s economy has a low level of dependence on
external factors, and the global financial crisis in 2008 did not have much effect in
Uzbekistan. However, the rapid economic decline in Russia and Kazakhstan due to the
recent drop in oil prices is affecting Uzbekistan as well, as the two countries are the major
importers of products made in Uzbekistan. Uzbekistan’s economy is at an early stage in a
transition to a market economy, and is best characterized as close to a government-run
economy.
Of the banks in Uzbekistan, the National Bank, which is strictly controlled by the
government, is of great importance, and the largest shareholder of 77% of all banks is the
government. Through the National Bank, Uzbekistan’s government strictly controls wire
transfers and exchanges. In the general market, the exchange rates are more than twice
the official exchange rates at the bank.
Another important factor in Uzbekistan’s economy is its unique geographic

environment: to reach the ocean from Uzbekistan, one must go through two countries,
making it one of only two doubly-landlocked countries in the world. Since marine
transportation is unavailable in Uzbekistan, the rate of transportation cost in prime cost is
higher than in other countries such as Vietnam.
Uzbekistan has the largest population of all of the Central Asian countries, and is the
sixth-largest producer of cotton in the world. The Uzbek government is highly interested
in industrial modernization and diversification based on the textile and apparel industry.
7
Outline 
Also, Uzbekistan is the 11th-largest producer of natural gas and crude oil in the world,
and in recent years, has privatized a number of its public enterprises in the energy sector.
For the textile and apparel industry, the Textile Technopark is being constructed.
Therefore, Uzbekistan’s hardware-based infrastructures for the development of its textile
and apparel industry are improving.
The textile industry provides high employment, parallel development with longitudinal
industries and great ripple effects. It is one of the leaders in the consumer goods industry,
is based on fast trends, and is an industry of mutual growth for hardware and software.
Thanks to these qualities, the textile industry is one of the greatest contributors to
economic growth and industrialization in developing countries. The Uzbek government is
also implementing a balanced industrial strategy through projects to develop energy and
infrastructure industries and promote light industry.
In Uzbekistan, efforts are already being made to reduce yarn exports and increase
product exports, and finished products are being exported. However, further development
will be enabled through strategies established based on Korea’s experience, and thus, the
key subjects of this KSP were drawn together. In cooperation with Uzbekyengilsanoat, the
three subjects - strengthening the value chain, expanding FDI and applying policy based
on Textile Technopark - were determined, and the key results can be summarized as
follows:
First, for strengthening the value chain, four strategies (SO strategy, ST strategy, WO
strategy and WT strategy) were established through a SWOT analysis. The SO strategy
(strengthening the cotton cluster value chain) is a priority strengthening strategy for the
CIS market through buyer network incorporation and quality improvement and joint
material development with cooperation among the streams by improving the raw cotton
distribution structure, mechanizing raw cotton cultivation and utilizing the price
competitiveness. The ST strategy (advancement of cotton sewing industrial structure) is to
construct apparel sewing clusters, cultivate field workers and management professionals,
promote the design sector for diversification of materials and construct testing
infrastructures. The WO strategy (establishment of a medium and long-term plan for
chemical fiber production) is to establish a general plan to expand government support
and introduce chemical fiber facilities for the production of various chemical fiber
materials. Finally, the WT strategy (improvement of internal structure to enhance business
environment) is depreciation of the Sum, financial incentives for exportation and technical
development support, construction of dyeing clusters for promotion of middle stream,
data development and statistics management and strengthening of international

cooperation.
Second, for the expansion of FDI, strategies for infrastructure development, legal and
institutional framework establishment, promotion of FDI attraction and reinforcement of
strengths were proposed. For infrastructure development, suggestions were made to
enhance the transportation infrastructure, improve industrial complexes, construct
industrial clusters for raw material producers and pursue technical development and
training. For the establishment of the proper legal and institutional framework,
suggestions were made on improving examination for domestic production possibilities,
strengthening governance transparency and efficiency, making institutional improvement
and diplomatic efforts to enable entry into the WTO, providing and expanding general
preferential duties and rationalizing the regulations for textile industry. For the promotion
of FDI attraction, suggestions were made on approaches to resolving the issues regarding
foreign currency and raw materials, rationalizing customs procedures, utilizing the foreign
invest attraction service center in the MFERIT, providing incentives for foreign investment
attraction, activating the attraction of investments from Korean companies and reviewing
the promotion system for attraction of investments from foreign companies. For the
reinforcement of strengths, suggestions were made for an in-depth analysis and strategy
development for easily accessible markets in Russia and CIS, active investment attraction
for sectors with relatively simple production processes using domestically produced raw
cotton on a short-term basis and promotion of product items with the potential for
additional market entry.
Third, for policy application related to the Textile Technopark, suggestions were made
on business support activities and activities to support business cooperation among
enterprises utilizing education, training and facilities, R&D, independence of TTP and
effect diffusion.
It is hoped that the suggestions made in each chapter will be reflected progressively in
Uzbekistan to strengthen mutual cooperation between Korea and Uzbekistan in the textile
industry.
In closing, it is urged to note that when the project's research was conducted, the
currency of Uzbekistan has not been liberalized, but according to the Decree of the
President of the Republic of Uzbekistan, currency liberalization has become officially
effective in September, 2017.
9
Outline 
(Industry & Trade) with Uzbekistan Chapter 1
Strengthening of the Value Chain in

Uzbekistan’s Textile Industry
1. Introduction (Background and Objective)

2. Current Conditions of Uzbekistan’s Textile Industry
3. Sharing Korea’s Experience in the Development of its Textile Industry
4. Policy Suggestion (Reinforcement of Value Chain)
 Chapter 1
Strengthening of the Value Chain in

Kim Youngmoo (Korea Federation of Textile industry)
1. Introduction (Background and Objective)

The textile and fashion industries involve multi-level production processes that include
upstream (fiber and yarns), midstream (fabrics, dyeing and finishing) and downstream
(apparel and distribution) areas. It is an integrated industry with a high employment
induction effect and added value, with technical standards among the value chains and
cooperation among the streams being the key element of success. While it is a globalized
industry, with many countries participating in the fabric and apparel production network,
high tariff rates are imposed on imported textile products for the protection of domestic
industries.
In the past, the textile and fashion industry was a labor-intensive industry with mass
production products, but during the 1980s and 1990s, production facilities for low value
products in advanced countries were moved overseas or reduced. Instead, advanced
countries are focusing on development of high performance textiles, and international
trade deals are thriving thanks to the global division of labor among the value chains.
Also, there are major enterprises and markets in each stream within the value chain, and
the streams are cooperating more closely through joint development, etc. Moreover, high
value products are being developed through integration with other industries.
The apparel industry, which belongs in the downstream, is a typical initial industry for
new export countries due to its characteristics as a labor-intensive industry with low fixed

costs. As experienced by the early developing countries, the apparel industry is an initial
industry and an important catalyst for economic growth. Thus, the textile and apparel
industry has been playing an important role in the economic development of low-income
countries.
In Uzbekistan, the textile industry occupies about 2.7% of the country’s GDP, 9.7% of
industrial output, 34% of non-food consumer goods production, 18% of annual growth
and 10% of export growth.4) In 2012, agriculture took up 19% of total GDP, and
cotton-growing industry took up 67% of the agricultural sector. Cotton production, which
forms the backbone of cotton textile and cotton product industries, is one of the key
resources in Uzbekistan, the sixth-largest cotton production country and the third-largest
cotton exporter in the world. Uzbek’s government also acknowledges the cotton and
cotton-related industries as a key future growth engine for the country.
The government has designated the textile industry as a national promotion industry,
and carried out the Textile Industry Development Strategy (2011-2015), but Uzbekistan’s
textile industry is still dependent on exports of low value raw cotton due to its high level
of dependence on advanced countries for technologies and capital and its low level of
domestic technical skills. For this reason, the government is introducing policies to
increase exports of high value fabrics and products by 2019 through cotton processing. To
this end, Uzbekistan is aiming to establish a complete value chain of cotton fiber from raw
materials (cotton, etc.) - fiber yarn (cotton yarn, etc.) - fabric (cotton fabric, etc.), which will
enable the advancement of the industrial structure and high value creation.
In the global textile market, the boundary between everyday clothing and sports
clothing has recently been blurred thanks to the growing trend of outdoors and athleisure
clothing. The market trend that focuses on synthetic fiber will continue for a while, a
limiting situation for the Uzbek textile industry that mainly produces cotton fiber. As such,
from a long-term perspective the promotion of chemical fiber industry or diversification of
products through the introduction of chemical fiber materials should be carried out for
the development of Uzbek textile industry.
In today’s world, the concept of international trade is going through changes. Whereas
the concept used to be “trade-in-goods,” now it is becoming “trade-in-tasks.” This change
of perception in international trade is related to the international division of labor in
manufacturing activities. In other words, the goods and services traded in today’s global
economic society are produced all over the world at the optimal place for the production
of each item, instead of being produced domestically. Thus, end goods are produced
4) Source: O’zvekyengilsanoat
13
Chapter 01_Strengthening of the Value Chain in Uzbekistan’s Textile Industry 
through a complex process of trading for intermediary goods among various countries
and industries.
This study provides not only short-term promotional measures utilizing cotton fiber,
but also discusses mid-to-long term developmental measures for Uzbek textile industry.
At the same time, this study takes an approach based on the fundamental concept of the
formation of a global value chain through cooperation between Korea and Uzbekistan.
The purpose of this study is to analyze the value chain of textile businesses and the
value system within the textile industry by examining the structure for added value
creation in Uzbek textile and fashion industries. The analytic models - the value chain and
the value system - have different applicability. Value chain is a flow of internal/external
activities of an enterprise to create added value of goods and/or services, from research
and development to procurement, production, marketing, sales, logistics and service.
While a value chain analyzes the structure for added value creation in a company from
an internal perspective, a value system is an expansion of the unit of creation of added
value and a competitive advantage to connections among the companies participating in
the structure for added value creation within the industry. Each company must establish
the optimal value system through efficient cooperation among the value chains within the
industry.
This study consists of four parts. In Part 1, the backgrounds, objective and
methodologies of this study are introduced. Part 2 examines the current conditions of the
Uzbek textile industry. It consists of an overview on the general conditions and policies in
the textile industry and an analysis on the value system within the textile industry and the
value chain structure focusing on cotton spinning. In Part 3, Korea’s history of textile
industry development is outlined in chronological order. Lastly, in Part 4, policy
suggestions for Uzbekistan and their implications are introduced based on Korea’s
experience.

2. Current Conditions of Uzbekistan’s Textile Industry
2.1. Overview
In Uzbekistan, Uzbekyengilsanoat, a public enterprise-like organization, controls all
aspects of the textile industry including spinning, fabric and apparel. As of 2016,
Uzbekyengilsanoat has a total of 381 member companies: 176 spinning companies, 35 silk
companies and 170 sewing companies. Among these, 135 or 35.4% are foreign companies
(up from 103 in 2015). As of 2016, 105,000 people are engaged in the Uzbek textile
industry, up 23.5% compared to the previous year.
Exports by the member companies are increasing rapidly, from 660 million USD in
2011 to 1.2 billion USD in 2016. Export items include cotton yarn 55.4% (60.8% in 2015),
apparel and socks 26.1% (16.2% in 2015), fabric 14.4% (6.3% in 2015) and silk 4.1% (2.2%
in 2015). Export destinations include the CIS region (44%), East Asia (24%) and Europe
(12%).
Uzklopkoprom, a public enterprise, is in charge of the purchasing and distribution of

cultivated cotton, while the Ministry of Agriculture and Water Resources is in charge of
wool. About 40,000 people work in cotton plantations, and 95% of the work is done
manually. There are three textile universities including the Institute of Light Industry &
Textile in Tashkent City, and High Education Institutions in Bukhara and 39 colleges are
contributing to human resources cultivation and industry-academic cooperation.
Under Uzbekyengilsanoat’s 2017-2021 Industrial Development Program, it is planning

to invest 2.3 billion USD in 140 projects – including 17 adjusted and expanded preexisting
projects and 123 new projects - to achieve 2.5 billion USD in exports and create more
than 25,000 jobs. Compared to 2016, the goal is to increase yarn from 557k tons to 900k
tons, fabric from 485 million m2 to 1.238 billion m2, apparel from 411 million products to
1.062 billion products and socks from 85 million pairs to 291 million pairs.
Uzbekyengilsanoat states that Uzbekistan’s competitive edge includes: raw material
production including 10 million ton of raw cotton and 490k ton of yarn; superior human
resources; access to a domestic market of 32 million people and a CIS market of 300
million people; and cheap water (0.13 USD/m2), electricity (0.06 USD/Kw/h), natural gas
(0.06 USD/m2) and oil (0.71 USD/liter). As a raw cotton producing country, Uzbekistan has
achieved self-sufficiency in cotton yarn, and currently is targeting the export market for
fabrics and products by securing processing technologies, while making efforts to increase
exports of finished apparel products based on cheap labor.
Based on the aforementioned survey, Uzbekyengilsanoat seeks a potential export
15
increase in apparel products including half-finished products, and measures for the
development of the design industry. To this end, an analysis will be carried out on
preferential tariff and trade for expansion into foreign markets including Asia, and
opportunity factors in expansion into each region.
In this part, production, import/export and employment conditions in the Uzbek textile
industry will be examined, and its competitiveness for raw materials, yarns, fabrics and
products will be analyzed. In Section 2, which is titled Present Conditions of Textile
Industry and Relevant Policies, conditions of the textile industry will be described based
on Uzbekyengilsanoat’s factual survey. In Sections 3 and 4, the conditions and the
competitiveness of the textile industry are analyzed based on international statistics and
surveys.
For international trade statistics, data from the International Trade Centre was used as
none were available from the UN or the WTO. Based on the HS code, products between
HS 50 (silk) and HS 63 (product) were classified as textile industry products. Raw materials
classified as primary agricultural products such as 5001 (cocoon) - 5003 (silk waste), 5101
(wool) - 5005 (carded or combed), 5201 (cotton) - 5203 (carded or combed) and 5301
(flax) - 5305 (coconut) are also included in the analysis as textile materials. For production,
cotton-related data from IACA5) and USDA6) were used.
The data used are obviously different from the import/export data presented by
Uzbekyengilsanoat and the raw cotton related data published by the State Committee of
Uzbekistan on Statistics or Uzklopkoprom. It shall be noted that the analysis is performed
to analyze competitiveness.
2.2. Current Conditions of Textile Industry and Relevant Policies

A. Current Conditions of Textile Industry
According to Uzbekyengilsanoat, there are at least 3,000 - 6,000 companies in
Uzbekistan’s textile industry; however, no proof of this has been provided. About 400
textile, knitting and sewing companies have joined Uzbekyengilsanoat, which also
operates “Shark Liboslari,” a design center, and “Uztextile Agency,” a marketing center, as
affiliated organizations.
As of 2016, Uzbekyengilsanoat has a total of 381 member companies: 176 spinning

companies, 35 silk companies and 170 knitting and sewing companies. Included among
5) ICAC : International Cotton Advisory Committee

6) USDA : United States Department of Agriculture

them are 135 foreign companies (103 in 2015), representing 35.4% of the total. 105,000
people are engaged in the textile industry, which is an increase of 23.5% compared to the
previous year.
[Table 1-1] Number of textile companies affiliated with Uzbekyengilsanoat
Item 2014 2015 2016 Total

Number of companies 294 334 381 54
- Foreign companies 159 103 135 3,356
Percentage (%) of foreign
54.1 30.8 35.4 897
companies
Number of people engaged 85,000 85,000 105,000 134
Source: Uzbekyengilsanoat
Spinning and weaving companies that produce cotton yarn are distributed across
Tashkent (19.5%), Fergana (18.9%), Namangan (14.8%), Andijan (14.1%) and Khorezm
(6.3%). Knitting and sewing companies are concentrated in the capital area - Tashkent
(60.5%) and Andijan (14.1%) - with a large labor force and high demand for apparel
products. Included among them are 25 dyeing facilities: 11 in Tashkent, 4 in Fergana, 2 in
Bukhara and 6 in other regions (Namangan, Khorezm, Andijan, Kashkadarya, Samarkand,
Syrdarya and Jizzakh).
[Table 1-2] Number of textile companies per region (in 2014)
Region Spinning Silk Knitting/Sewing Other Total

Tashkent 25 7 78 - 110
Fergana 23 7 7 - 37
Namangan 19 5 4 - 28
Andijan 18 3 22 - 43
Syrdarya 4 - 3 - 7
Jizzakh 2 1 2 - 5
Surkhandarya 4 2 - - 6
Kashkadarya 4 - 2 - 6
Samarkand 4 3 3 - 10
Bukhara 13 4 5 1 23
Navoiy 1 2 - - 3
Khorezm 8 1 1 - 10
Karakalpakstan Republic 3 1 2 - 6
Total in the textile industry 128 36 129 1 294
th
Source: Uzbekistan Textile Industry Survey (Korea Institute of Industrial Technology, Nov 7 , 2016)
17
Production capacity for cotton yarn of 2016 is 557,700 tons, up 13.7% compared to the
previous year (490,000 tons); for fabric, it is 48,540,000m2 (2,760,000m2 in 2015),
stockinette 1,013,000 tons (893,000 tons in 2015), apparel 41,130,000 products (2,800,000
products in 2015), socks 855,000 pairs (750,000 pairs in 2015), silk yarn 27,000 tons and
silk fabric 3,500,000m2. More than 80% of spinning and weaving equipment used was
produced by Rieter, Trutzshler and Toyota within the last 10 years.
Textile exports amount to 1.2 billion USD in 2016, up by 100 million USD compared to
the previous year, and for the last five years, these have been increasing rapidly, with an
annual growth rate of 12.7%. Export items include cotton yarn 55.4%, apparel and socks
26.1%, fabric 14.4%, and silk 4.1%.
[Table 1-3] Uzbekistan textile export (data from Uzbekyengilsanoat)

(Unit: one million USD)
Rate of change in
Year 2011 2013 2014 2015 2016
5 years
Export amount 660 825 827 1,100 1,200
12.7
Rate of change (%) - 25.0 0.2 33.0 9.1
Source: Uzbekyengilsanoat
Exports are made mostly to Russia and CIS regions (44%) and to East Asia including
China (24%) and Europe (12%). Beginning in 2014, export markets were expanded to
South America and the Baltic regions, and new export items have been introduced,
including bamboo yarn, melange yarn, silk and jacquard fabrics and silk carpets.
B. Textile Policies
Presidential Decree #4707 issued in March 4th, 2015 is a program implemented from
2015 to 2019 for the modernization, diversification and reorganization of textile industry,
and through the decree, 77 projects were introduced. With the new government
(December 4th, 2016), Presidential decree #2687 was issued on December 21st, 2016. The
Textile Industry Development Program announced in 2015 includes 41 new projects, 15
projects aiming at the modernization and expansion of preexisting facilities and 21
prospective projects with a total investment of 920 million USD.
Through the program, Uzbekistan plans to increase annual production to 522 million
USD and exports to 413 million USD, which will create 16,875 jobs each year. More
specifically, the goal is to increase production capacity from 490,000 tons (2015) to

608,000 tons (2019) for cotton yarn, 2,960,000m2 to 4,600,000m2 for fabric, 2.8 million
products to 6.85 million products for apparel and 750,000 pairs to 1,400,000 pairs for
socks.
Presidential decree #2687 is a program implemented from 2017 to 2019 for the
development of the textile, knitting and sewing industries, and includes 132 projects,
which are revisions of the projects in 2015.
Tasks were established to produce high value fabrics, knitted and sewn projects
through the development of cotton fiber and silk products, and the list of investment
projects for export production was approved. The tasks are to be completed through
cooperation among Uzbekyengilsanoat, the State of Tashkent, Karakalpakstan Republic
and other relevant public enterprises.
There are a total of 132 investment projects, including 112 new projects and 20
modernization and reconstruction projects, amounting to a total of 2.204 billion USD. 93
are cotton fiber advanced processing projects with a combined budget of 1.851 billion
USD, which represent 84% of the total amount. The rest consists of 36 cotton fiber
processing projects with a combined budget of 335 million USD, 2 silk material advanced
processing projects with a combined budget of 3 million USD and 1 manpower cultivation
project (Textile Technopark construction) with a budget of 15 million USD. The goal is to
expand production as follows: yarn production including cotton yarn, spun yarn, plied
yarn, colored yarn and blended yarn by 5,671,000 tons; fabric production including cotton,
denim, terry cloth and blends by 54,250,000m2; sewn products and bed linens by
19,870,000 products; and socks by 217.2 pairs.
Equity capital of 253.8 million USD from the enterprises involved will be introduced,
together with credit loans of 1.1528 billion USD from commercial banks and 798 million
USD from foreign investors and lenders. Credit loans from commercial banks shall not
exceed 75% of the total project amount, and loans and repayments shall be made in
foreign currencies.
Beginning in 2017, the compulsory sale of foreign currency revenues earned through
export of textiles, knitted and sewn products to banks has been abolished, and tariffs
(excluding the fees for processing of customs documents) on the import of equipment,
parts and finished products that are unavailable domestically by the companies on the list
finalized in Uzbek cabinet for implementation of the investment projects are exempted.
Moreover, benefits including exemption of corporate tax, property tax, social security tax
and road fund are provided, and tariffs on raw materials used for the production of daily
necessities are exempted.
19
Aside from the 132 projects, Article 15 approves the founding of Uztextile Expo as an
international trade agency under Uzbekyengilsanoat. The purpose is to increase export
potential through marketing, information consultation, export promotion, advertisement,
production of printed materials and buyer matching for individuals, small and
medium-sized businesses and companies affiliated with Uzbekyengilsanoat. Uztextile Expo
can also supply equipment, parts, raw materials, accessories and subsidiary materials that
are not produced in Uzbekistan. The founding of Uztextile Expo signifies the expansion of
the Uztextile Agency that is operated by 5 employees since it was founded in 2007
through a Cabinet decree.
Currently, the Uztextile Agency is in charge of: booth price negotiation for groups
participating in overseas exhibitions, joint advertisement, dollar exchange benefits, the
provision of information for buyers and publication of the annual textile magazine. With
its additional role as an export sales agency, Uzbekyengilsanoat expects to see an
expansion of the organization to more than 30 employees.
Shark Liboslari, the design center, was established based on Presidential decree #1554
issued in June 17th, 2011 (#PD-1554 "On the establishment of the Design Centre at JSC"
O'zbekyengilsanoat"). The Presidential decree provides a guideline on the establishment
and operation of the design center for the long-term development of light industry
products through designer fashion shows, conferences, international cooperation and
research. The design center is in charge of international fashion trend surveys, design and
size demand surveys for markets in each country, and cooperation with international
organizations (the 2015 Fashion Festival was participated in by 70 companies and 9
renowned brands). The design center is operated by about 30 employees - 4 designer, 10
seamstresses, 2 technicians and 4 marketers.
According to personnel in Uzbekyengilsanoat, the design center was operated on

government subsidies for the first three years, but has been profitable since 2015 and is
now operated on its own without government assistance. There also are similar design
centers and privately run design institutes in Uzbekistan. It was stated that the reason why
design was demanded in this study is because the design center - although it is
well-operated - lacks policies or systems, and for this reason, it is hoped that lessons can
be learned from Korea’s systematic design policies and systems.
Indorama Kokand Textile, one of the successful textile industry development projects,
was built with an investment of 1.64 million USD, 153,800 pieces of spinning equipment
and 1,050 employees, and has achieved an export amount of 1 million USD. Moreover,
UZTEX Group, a joint venture with a Swiss company that has a vertical system, invested 1.5

million USD, has 1,500 employees and achieved an export amount of 400,000 USD, while
Osbourn Textile has invested 500,000 USD, has 850 employees and achieved an export
amount of 210,000 USD. Rieter-Uzbekistan, a machine manufacturer invested in Tashkent,
has invested 120,000 USD and achieved an export amount of 2,000 USD through the
production of carding and spinning machines. In November 2016, it opened a training
center.
C. Current Conditions of Industrial Infrastructure in Uzbekistan

From early on, Uzbekistan has rejected neo-liberalism approaches such as privatization
and globalization, and implemented import substitution policies that are focused on the
protection and promotion of its domestic industries under the strict control of the state.
As such, Uzbekistan’s economy has a low level of dependence on external factors. The
level of integration with the global economy is also low, and as such the global financial
crisis of 2008 did not have much effect on Uzbekistan. The only effect was a slight
decrease in economic growth, from over 9% to 8%.
However, the rapid economic decline in Russia and Kazakhstan due to the recent drop
in oil prices is affecting Uzbekistan, because Uzbekistan depends highly on exports to
these two countries and the remittances it receives from immigrant workers. Overall,
Uzbekistan’s economy is at an early stage in transition to a market economy, and thus has
characteristics close to those of government-run economy.
Uzbekistan holds various natural resources including raw cotton. As of 2014, it is the
seventh-largest raw cotton production country and the third-largest raw cotton export
country. Although the export amount is decreasing due to the increase of domestic use, it
is still one of the major raw cotton export countries. Also, Uzbekistan holds reserves of 1.1
trillion m2 of natural gas and 600 million barrels of crude oil, and its annual natural gas
production is at 57.3 billion m2 (1.6% of the total production in the world). Uzbekistan’s
energy exports represent 13.6% of its total exports, while raw cotton represents 3.7%.
21
[Figure 1-1] Uzbekistan’s export structure (in 2016)
Source: Ministry of Foreign Economic Relations, Investment and Trade,

http://www.mfer.uz/en/export/statistics/
As of 2015, Uzbekistan had a total population of 29.9 million, the largest population of
any country in Central Asia, and its rate of population growth is 1.75%, which is much
higher than 1.18%, the global population growth rate. Considering that Uzbekistan’s
population was 20.6 million in 1991, the population has increased rapidly during the last
25 years. As such, the average age is quite low at 26, which means Uzbekistan has a high
rate of economically active population.
Therefore, Uzbekistan possesses rich human resources for industrial development and
the largest domestic market in Central Asia. However, its rate of population with higher
education is very low, which means that its work force is suitable for beginning-level
textile industry utilizing unskilled labor. Qualitative enhancement of Uzbekistan’s human
resources is an important task for the advancement of the textile industry through design,
research and development.
Banks play an important role in Uzbekistan’s finance sector, yet like other sectors, this
is still in an early stage of development. The National Bank, which is strictly controlled by
the government, has great importance. 77% of all banks are government-run, meaning
that the Uzbek government has strict control over remittance and currency exchange. This
controlled finance makes it difficult for companies to secure funds, and FDI is the only
option available for them to attract new investments.
Remittance and exchange of foreign currency are the most critical barriers for foreign

companies wishing to operate in Uzbekistan. For example, 50% of a payment for a trade
deal received in foreign currency must be exchanged to Sum, and it takes six months to a
year to exchange so’m for US dollars at the local bank. These issues are critical for foreign
companies operating in Uzbekistan when they purchase raw materials or make a
remittance of profits. This discordance between the strict control over currency exchange
and the market conditions has allowed a black market in foreign currency to flourish. In
early 2016, the official exchange rate in Uzbekistan was 2,822 so’m to a dollar, while it was
6,360 so’m to a dollar in the black market.
Transportation infrastructures are essential in Uzbekistan, where marine transportation

is unavailable. As such, the construction of transportation infrastructures has a great
impact on economic growth. However, most of the transportation infrastructures in
Uzbekistan require repair or modernization. There is only one railroad that connects to
Moscow, and most of the railroads need to be repaired. Roads are in poor condition as
well, and need repair or reconstruction. Only 40% of Uzbekistan’s domestic roads are
classified as first grade in the Asian Highway Network, and the rest are in the second or
third grades.7)
ICT infrastructures in Uzbekistan are at a very early stage of development. Info-

communications, in particular, is strictly controlled by the government. The internet access
rate has been increasing gradually, from 17% in 2009 to 40% in 2014. Expensive rates and
slow speed are the key factors that are currently hindering the wider diffusion of Internet
services.
2.3. Textile Industry Analysis by Stream (Value System Analysis)

A. Structure Focusing on Cotton Products and Exports to China
According to International Trade Centre statistics (HS code), Uzbekistan’s textile export
is 1.12 billion USD, down by 7.5% compared to the previous year. Textile imports amount
to 350 million USD, and the trade balance is 770 million USD. In 2001, the first year the
statistics were released, textile exports took up 43.9% of total exports, but the rate has
been decreasing and in 2015, was at 18.4%.
7) The road of first grade is a 4-lane road made of asphalt or cement, the road of second grade is a 2-lane road
made of asphalt or cement, and the road of third grade is a 2-lane road made of pitch.
23
[Figure 1-2] Uzbekistan textile trade
Source: International Trade Centre, Trade Map
More specifically, in 2015, HS code 52 cotton (raw cotton, cotton yarn and cotton
fabric) accounted for 76.8% of textile trade at 860 million USD while HS code 61 knitted or
crocheted apparel and clothing accessories represented 13.6% at 150 million USD; the two
items combined represented more than 90% of total textile exports.

[Table 1-4] Uzbekistan’s textile exports
(Unit: 1,000 USD)
HS
Item 2001 2010 2014 2015
Code
50 Silk 11,159 12,191 8,056 2,385
51 Wool 2,741 2,769 1,884 1,761
52 Cotton 934,261 1,580,326 923,631 862,283

53 Other vegetable textile fibers 135 0 601 954
54 Manmade filaments 280 122 653 893
55 Manmade staple fibers 5,905 13,164 7,821 6,604

Wadding, felt, non-wovens,
56 29,302 10,786 22,618 19,566
ropes and etc.
57 Carpets, textile floor coverings 128 7,475 19,501 12,786
Special woven fabrics, lace,
58 115 214 830 1,487
embroidery
Textile articles for industrial
59 200 23 336 190
use
60 Knitted or crocheted fabrics 434 36,508 33,574 45,889
Knitted or crocheted apparel
61 9,807 117,816 178,421 152,957
and clothing accessories
Other apparel and clothing
62 13,799 4,206 5,493 5,705
accessories
Other textile articles, worn
63 13,172 5,740 10,376 9,362
clothing, rags
Total 　 1,021,438 1,791,340 1,213,795 1,122,822
In terms of imports, HS code 54 and 55 manmade filaments and staple fibers represent
34.0% with 150 million USD while HS code 60 knitted or crocheted fabrics represent
17.3%, and thus, chemical fibers, chemical fabrics and knitted fabrics represent most of
the imported items.
25
[Table 1-5] Uzbekistan textile import
(Unit: 1,000 USD)
HS
Item 2001 2010 2014 2015
Code
50 Silk 10 15 838 367
51 Wool 259 938 2,561 706
52 Cotton 1,494 23,687 2,808 2,304
53 Other vegetable textile fibers 1,687 8,108 3,243 2,623
54 Manmade filaments 3,521 23,565 97,235 84,194
55 Manmade staple fibers 3,537 21,772 45,294 36,803

Wadding, felt, non-wovens,
56 553 11,952 24,777 20,526
ropes and etc.
57 Carpets, textile floor coverings 24,682 3,389 4,767 3,492
Special woven fabrics, lace,
58 5,732 8,131 16,103 15,477
embroidery
59 Textile articles for industrial use 3,992 9,864 26,834 22,813
60 Knitted or crocheted fabrics 6,977 68,639 89,282 61,472

Knitted or crocheted apparel
61 9,858 54,818 93,231 49,872
and clothing accessories
Other apparel and clothing
62 5,368 24,472 35,293 25,771
accessories
Other textile articles, worn
63 5,277 8,377 44,408 29,217
clothing, rags
Total 　 72,947 267,727 486,674 355,637
Looking at the cotton-related items, which are key export products for Uzbekistan, raw
cotton exports have continuously decreased while cotton yarn exports are increasing. Raw
cotton exports reached a high point in 2006 at 1.232 billion USD. Since then, they have
been decreasing by 13.46% every year, and in 2015, were at 335 million USD. Cotton yarn
exports, on the other hand, have been increasing rapidly, by 11% every year. In 2001,
cotton yarn exports stood at 113 million USD, but by 2015, had reached 488 million USD.
For cotton fabric, despite policies to increase cotton fabric export due to its high added
value, exports have decreased by 2.47% every year, going from 54 million USD in 2001 to
38 million USD in 2015. Similar trends are observed in quantity as well. Raw cotton
exports were increased from 670,000 tons in 2001 to 990,000 tons in 2007, but since then

have been decreasing continuously, and in 2015, stood at 210,000 tons. Cotton yarn
exports have been increasing continuously, from 55,000 tons in 2001 to 210,000 tons in
2015. Cotton fabric exports have been decreasing by 2.21% every year, going from 17,000
tons in 2001 to 12,000 tons in 2015. In the cotton sector overall, the quantity of export
items has decreased by 3.75% every year, but the amount has decreased by 0.57% every
year due to the increase of exports of cotton yarn, which has a higher added value than
raw cotton.
[Table 1-6] Cotton export

Average
HS code / Amount / annual
2001 2005 2010 2015
item Quantity increase
(2001-2015)
Amount
5201-5203
(unit: 1,000 766,691 1,037,910 1,155,920 335,410 -5.73
Raw cotton
USD)
(raw
Quantity
material) 668,557 897,711 609,413 208,840 -7.98
(tons)
Amount
(unit: 1,000 113,040 143,681 380,285 488,454 11.02
5204-5207
USD)
Cotton yarn
Quantity
54,592 68,114 138,414 211,840 10.17
(tons)
Amount
5208-5212 (unit: 1,000 54,532 39,708 44,079 38,418 -2.47
Cotton USD)
fabric Quantity
17,051 12,424 113,084 12,476 -2.21
(tons)
Amount
(unit: 1,000 934,263 1,221,299 1,580,284 862,282 -0.57
Total USD)
Quantity
740,200 978,249 860,911 433,156 -3.75
(tons)

Note: Raw cotton (HS 5201-5203), Cotton yarn (HS 5204-5207), Cotton fabric (HS 5208-5212)
Uzbekistan’s textile exports have been concentrated on China and the CIS regions. In
2015, textile exports to China stood at 550 million USD, representing 48.9% of total textile
exports that year, while exports to the CIS region stood at 460 million USD, 40.9% of total
textile exports; this means that exports to these two regions combined represented almost
90% of total textile exports. Exports to the 28 EU countries were decreased from 37.2% in
2001 to 4.1% in 2015, and exports to Korea have also decreased continuously, from 11%
27
in 2001 to 0% in 2015. Among the items being exported to China, HS 52 cotton
represents 99.7% of total exports, at 548 million USD.
[Figure 1-3] Uzbekistan’s textile exports by country
Uzbekistan’s textile imports are mainly from China. Imports from China were increased
from 2.6% in 2001 to 60.3% in 2015 (220 million USD); other major textile import
countries include Turkey (40 million USD), Korea (30 million USD) and the EU (30 million
USD).
The key import items from China include manmade filaments (67 million USD), knitted
and crocheted fabrics (40 million USD), manmade staple fibers (26 million USD) and
knitted or crocheted apparel and clothing accessories (24 million USD); of these,
manmade fibers (manmade filaments and staple fibers) represent 84% of total synthetic
fiber imports. Among the items of import from Korea, knitted and crocheted fabrics
represent 69%, at 21 million USD.
B. Current Cotton Production Conditions

According to ICAC, Uzbekistan is the seventh-largest raw cotton producing country in
the world, and in 2015, it had produced 857,000 tons (up by 0.4% compared to the
previous year), which is 3.6% of the total production in the world.

[Table 1-7] Raw cotton production by country (Unit: 1,000 tons)
2011 2012 2013 2014 2015

World Total 27,091 24,864 23,176 23,734 24,117
China 7,400 6,417 6,010 5,920 5,890
India 5,865 5,431 5,205 5,442 5,524
USA 3,391 3,667 3,385 3,470 3,488
Pakistan 2,294 1,999 1,922 2,039 2,100
Brazil 1,900 1,593 1,568 1,654 1,746
Australia 1,080 1,050 980 1,035 1,092
Uzbekistan 880 861 849 853 857
Turkey 750 630 419 421 411
Source: Japanese Chemical Fiber Handbook (original data from ICAC, Cotton World Statistics)
Note: Each fiscal year is from August to July in the following year.
Based on the data provided by KOTRA’s Tashkent Representative Office, the

Uzbekistan State Committee on Statistics and the Ministry of Agriculture and Water
Resources announced that Uzbekistan is the sixth-largest cotton producing country in the
world, with cotton production of 3.35 million tons and cotton processing of 1 - 1.1 million
tons in 2015, but USDA estimated its cotton production as only 830,000 tons due to the
high temperature during summer.
[Table 1-8] Uzbekistan’s cotton production (Unit: 1,000 tons)
2012 2013 2014 2015

Data from Uzbekistan State
3,460.1 3,361.2 3,400 3,350
Committee on Statistics
Data from USDA 1,002 893 849 827
Source: KOTRA Tashkent Representative Office, Present and Future of Uzbekistan’s Textile Industry
(December 26th, 2016)
Source: USDA, Cotton: World Markets and Trade, Foreign Agricultural Service, November 26th, 2015)
http://usda.mannlib.cornell.edu/MannUsda/viewDocumentInfo.do?documentID=1486
Note: Each fiscal year is from August to July of the following year.
Moreover, the USDA estimates that about 40% of the cotton produced in Uzbekistan is
consumed domestically. China and Bangladesh are the key export markets for
Uzbekistan’s cotton production, and it states that the Uzbekistan and Bangladesh
governments signed an agreement that Uzbekistan will supply 200,000 tons of cotton
29
every year, although the quantity might vary depending on the market conditions.
[Table 1-9] Uzbekistan cotton supply and demand structure (unit: 1,000 tons)
2012 2013 2014 2015 2016

Production 1,002 893 849 827 773
Import 0 0 0 0 0
Export 697 588 533 544 370
Consumption 316 327 337 327 337
Source: USDA, Foreign Agricultural Service, November 2016
As of 2014, total cotton yarn production worldwide is 50,438,000 tons. China

represents 72.3% of the total production, while Uzbekistan is the eleventh-largest cotton
yarn producing country, with a production amount of 219 tons. Since 2010, Uzbekistan’s
cotton yarn production has been increasing by 2.4% every year.
[Table 1-10] World’s cotton yarn producing countries and production amounts
(Unit: 1,000 ton)
2010 2011 2012 2013 2014

World total 39,970 41,832 46,031 48,546 50,438
China 27,170 28,946 33,333 34,890 36,447
India 3,292 3,302 3,297 3,603 3,853
Pakistan 2,616 2,960 2,948 3,053 3,156
Turkey 1,109 1,088 1,175 1,641 1,680
Brazil 1,115 1,051 995 998 986
Uzbekistan 199 200 202 213 219
As of 2014, total cotton fabric production worldwide is 17,234,000 tons. China, India
and Pakistan represent 80.73% of the total production. Uzbekistan is the twelfth-largest
cotton fabric producing country, with a production amount of 79 tons; similar to cotton
yarn, its cotton fabric production has been increasing by 2.7% every year since 2010.

[Table 1-11] World’s cotton fabric producing countries and production amounts
(Unit: 1,000 tons)
2010 2011 2012 2013 2014
World total 16,125 15,932 15,968 16,544 17,234
China 5,517 5,215 5,321 5,363 5,603
India 4,194 4,334 4,328 4,729 5,038
Pakistan 3,056 3,136 3,123 3,159 3,265
Indonesia 754 708 720 761 780
Brazil 724 675 633 648 640
Uzbekistan 71 72 73 77 79
C. Analysis on Competitiveness of Textile Industry by Stream

In this section, imports and exports of Uzbek textile industry are examined based on
the categories of fibers, yarns, fabrics and made-up goods. From 2010 to 2015, imports of
fibers and yarns were decreased by 4.5% and 1.6% every year, while exports of fibers were
decreased by 21.8% every year, from 1.18 billion USD in 2010 to 340 million USD in 2015,
and exports of yarns were increased by 5.2% from 380 million USD to 490 million USD.
Imports of completed goods were increased by 3.2% every year, from 110 million USD in
2010 to 120 million USD in 2015, and exports were increased by 6.3% every year, from
140 million USD in 2010 to 190 million USD in 2015. Imports of fabrics were increased by
10.5% every year, while exports were increased by 2.1%.
[Figure 1-4] Uzbekistan textiles time series import and export rates
Source: International Trade Centre, Trade Map, Analysis by Korea Federation of Textile industry
31
(1) Fibers (Raw Cotton, Silk and Wool)
Fibers produced in Uzbekistan include raw cotton, silk, wool and manmade fibers,
while raw cotton represents the majority of exports. As of 2015, the export amounts of
these items are as follows: raw cotton 208,651 tons, silk 506 tons, wool 2,145 tons and
manmade fibers 5,760 tons. Uzbekistan is the fifth-largest raw cotton export country in
the world after the USA (2,445,000 tons), India (1,298,000 tons), Australia and Brazil.
Chemical fiber is a typical process industry that requires large-scale production

facilities, while natural fiber is characterized as an agricultural product that can be
produced only in suitable natural environments in terms of climate and soil. These
characteristics are the reason why Uzbekistan has competitiveness in the fibers sector.
[Table 1-12] Changes in fiber materials export (unit: tons)
2001 2005 2010 2014 2015

Silk 771 1,141 1,783 861 506
Wool 7,163 4,632 3,724 1,920 2,154
Raw cotton 668,557 897,711 609,413 213,063 208,651
Hemp 127 0 0 0 0
Synthetic and artificial fibers 5,768 1,618 7,789 6,596 5,764
Total 682,386 905,102 622,709 222,440 217,075
Uzbekistan’s average unit price for raw cotton exports from 2011 to 2015 was 2.18
USD/kg, which is higher than India or Turkey but lower than the USA, China and Egypt. It
may be helpful to consider low-priced exports of raw cotton as a short-term strategy to
increase foreign currency holdings.
[Table 1-13] Raw cotton prices of key export countries from 2011 to 2015
(unit: USD/kg)
2011 2012 2013 2014 2015 Average

China 3.05 2.10 2.27 2.22 1.69 2.27
India 1.80 1.88 1.88 1.82 1.47 1.80
USA 3.02 2.26 2.01 2.03 1.63 2.21
Egypt 4.28 2.68 3.22 3.48 1.80 3.07
Uzbekistan 3.05 2.17 1.94 1.88 1.61 2.18
Turkey 2.53 1.66 1.63 1.45 1.25 1.69
Source: International Trade Centre, Korea Federation of Textile industry

One of the key characteristics of Uzbekistan’s raw cotton industry is that cotton crops
are harvested manually. The mechanization rate is approximately 5% in Uzbekistan, and
during the harvest season, about 40,000 workers are out in the fields to hand-pick the
cotton crops. One of the key reasons for the low rate of mechanization is the narrow farm
roads in cotton fields. Hand picking and mechanical harvesting have their own advantages
and disadvantages. Through hand picking, which is done more carefully and precisely, fiber
lengths are protected, and thus, long fibers can be achieved. Long fibers are used in cotton
yarn and cotton fabric manufacturing processes to produce fine cotton products. It also
has a social effect of generating a large number of jobs within a short amount of time.
However, hand-picked cotton crops can contain foreign materials such as wool, hair
and plastic pieces, which can cause defects during dyeing. Moreover, the associated field
labor sometimes gives rise to human rights issues such as child exploitation, which is the
main reason Uzbekistan’s cotton is shunned by buyers in the USA, the world’s major
textile market.
(2) Yarns
In the global textile industry, the demand for chemical fibers is far greater than the
demand for natural fibers. Through advancements in technology, chemical fibers, which
were invented to imitate the functions and shapes of natural fibers, have surpassed
natural fibers in terms of performance. During the initial years of development, chemical
fibers were used as ancillaries to natural fibers, but during the early 1990s, demand for
chemical fibers started to overtake that of natural fibers. Since then, the demand has been
increasing, and in 2015, reached about 57 million tons, which is 69.3% of the total
demand for fibers. The market share of natural fibers is decreasing, and between 1990 and
2015, average annual growth rate for chemical fibers was 4.6%, while it was 1.1% for
cotton fibers and -1.4% for wool fibers.
33
[Figure 1-5] Changes in global textile demands (Unit: 1000 tons)
Source: PCI, Petrochemical Institute
Uzbekistan’s textile industry is concentrated in natural fibers - mostly cotton yarn - due
to the large supply of raw cotton. If international trade is defined as an exchange relation
between goods and roles, Uzbekistan has advantages over other textile export countries.
Based on its dominant position in cotton fibers, a medium and long term strategy should
be applied to diversify items to cotton and chemical fiber blends and chemical fibers. In
this regard, increasing exports of chemical fiber yarns (man-made filament yarns and
man-made spun yarns) is a noteworthy phenomenon.
[Table 1-14] Change in Uzbekistan yarn export (Unit: tons)
2001 2005 2010 2014 2015

Silk yarn 136 19 47 55 1
Wool yarn 1 0 0 0 0
Cotton yarn 54,592 68,114 138,414 169,548 211,840
Hemp yarn and others 107 5 0 103 140
Manmade filament yarn 89 1 11 238 403
Manmade spun yarn 0 23 77 190 197
The average unit price for each type of yarn is affected by production amount and
production cost including the labor cost, and for some yarns, the prices are determined by
the procurement of materials and level of production technologies. As shown in the table
below, the reason why the unit cost of production in the USA is low is due to easy access
to local materials, advanced production technologies and the utilization of immigrant

workers. In these aspects, Uzbekistan has advantages in terms of quality manpower and
local access to natural fiber materials, including raw cotton. The unit price of production
for cotton yarn is 2.31 USD/kg, which is lower than in Turkey, Pakistan, Vietnam and China.
[Table 1-15] Export prices of yarns in 2015 (Unit: USD/kg)
USA Turkey China India Vietnam Pakistan Uzbek

Silk yarn 4.03 22.61 38.61 26.98 76.06 2.07 69.00
Wool yarn 11.36 10.24 30.74 11.73 18.81 2.56 -
Cotton yarn 2.71 2.89 4.86 2.83 3.29 3.01 2.31
Hemp yarn and others 8.88 6.32 6.68 1.48 6.33 3.84 6.73
Manmade filament yarn 6.09 2.96 2.19 1.63 15.37 2.82 2.19
Manmade spun yarn 2.99 5.15 3.32 2.72 4.18 2.69 3.83
Total 3.63 3.53 3.17 2.48 3.45 3.00 2.31
Source: International Trade Centre
The yarn industry is a large-scale process industry, in which the labor cost and
manufacturing cost are critical. For general purpose yarns, the unit price of production has
a significant impact on its marketability, and thus, production is concentrated in
developing countries with low labor cost. For high performance fibers, on the other hand,
factors other than price competitiveness such as quality and timely delivery are
emphasized, and thus, they are produced in advanced countries. Cotton yarns produced in
Uzbekistan are combed yarns rather than carded yarns that are hard to control quality.
New facilities and the development of technologies through cooperation within the value
chain are required.
(3) Fabrics
China has a dominant position in fabric and knit exports thanks to its high price
competitiveness based on its cheap labor and state-of-the-art production facilities.
Vietnam is making its way up in the global export market with increased weaving/knitting
facilities and foreign direct investment. For Uzbekistan, its fabric exports increased by
1.84%, but knitted fabric exports decreased rapidly, by 8.07% every year between 2010
and 2015.
35
[Table 1-16] Changes in Uzbekistan’s fabric export (Unit: ton)
2001 2005 2010 2014 2015

Woven fabric 20,623 15,079 16,485 18,088 18,055
Knitted fabric 236 2,323 8,646 8,112 12,746
Total 20,859 17,402 25,131 26,200 30,801
There are two categories of fabric in the fabric industry: general purpose fabrics which
are highly cost-sensitive, and premium fabrics that emphasize technologies and designs.
This has resulted in a market that combines elements of price competition and quality
(design and quality) competition. The unit price of export for fabrics in Uzbekistan is 3.09
USD/kg, which is quite lower than that of China (6.14 USD/kg) and Vietnam (6.84 USD/kg)
because its exports are concentrated in general purpose fabrics.
[Table 1-17] Export prices of fabrics in 2015 (Unit: USD/kg)
USA Turkey China India Vietnam Pakistan Egypt Uzbek

Woven fabric 8.45 7.54 6.35 11.88 5.69 10.26 8.29 2.74
Knitted fabric 10.85 6.14 5.53 3.97 9.99 10.24 10.35 3.60
Total 8.77 7.09 6.14 10.12 6.84 10.26 8.30 3.09
Source: International Trade Centre,
Technical prowess in the fabric industry is determined by the quality of yarns and
technical levels for dyeing and finishing. Similar to yarns, new facilities and organic
cooperation with yarn producers and dyeing and finishing vendors are required.
(4) Fashion Apparel
Fashion apparel industries consist of merchandising, sewing and marketing, and are
closely connected with front (fabrics) and rear (distribution) industries. Among these,
sewing is a labor-intensive industry with low entry barriers, and many developing
countries are achieving economic growth based on the sewing industry. Korea had also
promoted its sewing industry during the 1960s after the Korean War and took a leading
position in the global export market, but since the 1980s, overseas production has been
increasing - mainly in developing countries - due to a rising cost of labor and lack of
manpower at home.

In Uzbekistan, woven clothing production decreased by 14.89% every year from 2010
to 2015, but the production of knitted clothing and other textile articles was increased, by
6.70% and 10.72%, respectively.
[Table 1-18] Changes in Uzbekistan’s articles export (Unit: tons)
2001 2005 2010 2014 2015

Woven clothing 3,857 1,370 1,039 585 464
Knitted clothing 1,305 3,708 13,050 18,034 18,050
Other textile articles 46,087 14,833 11,523 21,486 19,173
Total 51,249 19,911 25,612 40,105 37,687
As of 2015, the export price of made-up articles in Uzbekistan is 5.08 USD/kg, which is
significantly lower than for Pakistan (6.91 USD/kg), Turkey (11.14 USD/kg) and India (12.38
USD/kg), because Uzbekistan’s exports are concentrated in general purpose articles.
[Table 1-19] Export prices of articles in 2015 (Unit: USD/kg)
USA Turkey China India Vietnam Pakistan Egypt Uzbek

Woven clothing 25.85 23.08 20.32 64.66 60.27 55.46 54.12 12.30
Knitted clothing 15.88 19.72 17.45 26.52 40.31 32.56 36.60 8.47
Other textile articles 3.66 4.13 6.02 6.26 12.95 5.46 13.45 1.71
Total 6.55 11.15 13.82 12.38 36.16 6.91 20.28 5.08
The hourly wage for textile workers in Uzbekistan is 0.75 USD (in 2011), which is higher
than in Bangladesh or Pakistan, but lower than in Indonesia, India and China. Due to the
recent trend of global sourcing, sourcing has been concentrated in countries producing
apparel products at low prices based on cheap labor as buyers seek cheap production
bases. This trend of fast fashion can serve as an opportunity to participate in the network
of the leading global enterprises.
37
[Table 1-20] Hourly wages of textile workers in major countries
Bangla Uzbeki Indone

Year Pakistan Vietnam India China Taiwan Korea USA
desh stan sia
2014 0.62 0.62 0.74 - 0.95 1.12 2.65 10.61 10.22 17.71
2011 0.58 - 0.60 0.75 1.08 1.06 2.10 9.84 8.22 17.57
2008 0.56 0.31 0.57 - 0.83 0.85 - 7.89 6.31 17.41
Source: Japanese Chemical Fiber Handbook (original data from Werner International), Uzbekyengilsanoat
Brand value is extremely important in the fashion industry. Buying patterns have been
diversified to include cross-border shopping over the Internet, and consumer preference
for global brands has been increasing as their purchasing power grows. The reason why
licensing distribution of the global SPA brands and popular overseas brands is increasing
is because brands matter in the fashion industry. In the global fashion industry, luxury
brands such as Hermes, Louis Vuitton and Gucci have dominant positions in terms of
brand value, while in the apparel sector, Nike, Adidas, Zara and UNIQLO are leading the
market.
Apart from textiles for apparels, industrial textiles to replace metal or plastic for
technical/functional purposes are important. However, the industrial textiles sector has
been excluded from this study because only a few companies are involved in this sector
due to the high level of technology required.
Design is of absolute importance in the fashion industry, and it is even more important
for premium fashion apparel products. Uzbekistan is also interested in the development of
its design sector, which will be discussed in another chapter.
D. Competency Evaluation (Survey)

(1) Overview
A survey was conducted through the Uzbekyengilsanoat from February 6th to April
th
14 , 2017 to examine the current conditions and difficulties in Uzbekistan’s textile
industry. Initially, the survey was planned to be conducted for two weeks, but the duration
was extended due to a low rate of response. In the end, the rate of response was 10.2%,
with a total of 39 companies surveyed (out of 381 in 2016).
Types of business of the participants were: 54% joint venture companies, 33% foreign
companies and 13% private companies. Their products are: 56% made-up goods
(excluding socks), 23% yarns, 15% fabrics and 5% socks. The average production amount

of the participants is 8,591,233,000 so’m, and their sales in 2015 were 35.4% domestic and
64.6% overseas. The average number of employees is 212.4.
(2) Current Conditions and Difficulties
As of late 2016, most of the workers (99.6%) had graduated from college (87.5% junior
college graduates, 10.2% college graduates and 1.9% graduate school graduates). 0.4% of
all workers were high school graduates, and only one company was employing high
school graduates. In terms of age, most of the workers are in their 30s (88.0%) and 40s
(7.5%). Workers in their 50s represented only 1% of the work force, which implies that
employment is concentrated in the young, well-educated group.
None of the participants showed less than 80% capacity utilization, and 21% answered
that their capacity utilization is over 95%. With 2016 as 100%, the average prospect for
2017 is 112.8%, and for 2018, it is 120.4%. The participants were particularly excited when
it came to large investment in facilities. However, their expectations for domestic sales and
R&D investment are relatively lower.
[Table 1-21] Prospect for 2017 and 2018 (as of 2016) (unit:%)
Production Sales Domestic Export No. of Facility R&D

Amount Amount Sales Amount Employees Investment Investment
2017 115.7 113.5 107.5 114.2 112.1 116.4 110.1
2018 122.9 121.0 114.1 122.9 119.7 126.4 115.5
The greatest difficulties in management are: excessive competition among domestic

companies (32%), product price drop (28%), imports encroaching on the domestic market
(14%) and weakening of global competitiveness/sluggish exports (8%). Difficulties in
production are: rise of materials price (24%), lack of skilled manpower (21%), deteriorating
facilities (17%), contraction of the domestic market (10%), and strengthened
environmental regulations (10%). Difficulties in marketing are: excessive competition
among domestic companies (26%), lack of skilled manpower (15%), contraction of the
domestic market (12%), lack of market intelligence (12%) and competition with cheap
imports (12%). Difficulties in export are: excessive competition among domestic
companies (21%), reduced global demand (17%), lack of competitiveness compared to
competing countries (17%), lack of overseas market intelligence (17%) and export price
drop (10%). Thus, many answered that their difficulties are based on outside factors such
as reduced global/domestic demands, price drop and excessive competition among
39
domestic companies, and they are also experiencing difficulties such as a lack of market
intelligence, a lack of competitiveness and a lack of skilled manpower.
Difficulties in facilities investment are: difficulty procuring manpower (26%), excessive

facilities issues (18%), low global/domestic demands (18%), difficulty in financing (24%),
site/environment regulations (14%) and business reduction due to financial difficulties
(20%). This finding implies that the participants are experiencing difficulties in procuring of
manpower, financing and regulations, as well as the issue of sales outlets.
In terms of the levels of difficulties, the participants answered that their levels of
difficulties were higher in procuring of management/investment funds, prototype
production, project development capacity, entry to new markets and procuring of skilled
manpower for R&D.
[Table 1-22] Level of difficulties experienced by textile enterprises in Uzbekistan

(No. of respondents, %)
Level
Item Very Very Score
low Moderate High
low high (max. 5)
Financing for
0 0 11 20 8 3.92
ManagementㆍInvestment
Production
Prototype and
Capacity 0 2 17 17 3 3.54
Manufacturing Facilities
Manpower for Manufacturing 0 3 15 16 5 3.59
Collection and Analysis of
0 2 16 17 4 3.59
Market Data
Production Development Capacity 0 0 9 26 4 3.87
Procuring of
0 0 19 12 8 3.72
Manpower for Design
Manpower Procuring of
Technology 0 6 10 18 7 3.82
Skilled Manpower for R&D
Marketing
R&D and Test Analysis 0 5 16 16 2 3.38
Prototype Production 0 1 8 24 6 3.90
Entry to New Markets 0 0 16 13 10 3.85
Domestic/Overseas
0 0 11 26 2 3.77
Certification Information
Cooperation with
0 3 16 19 1 3.46
Universities/Institutes
Network
Information Sharing and
0 0 16 19 4 3.69
Cooperation among Businesses
Total 0 22 180 243 64 3.69
Note: The numbers represent the number of respondents; higher scores indicate greater capacities.

In the self-assessment of capacities, textile companies in Uzbekistan evaluated
themselves highly in all sectors, including production capacity, manpower and technology
and marketing capacity. Overseas marketing strategies, management capacities and R&D
investments for technology advancement in particular were highly evaluated, while
domestic marketing strategies, management capacities and market analysis capacities
were low.
[Table 1-23] Self-assessment of capacities of textile enterprises in Uzbekistan

(No. of respondents, %)
Level
Item Very Very Score
low Moderate High
low high (max. 5)
Productivity level 0 0 7 28 4 3.92

Production Securing of production facilities
0 0 17 11 11 3.85
Capacity to meet demand
Quality/process control levels 0 1 15 20 3 3.64
No. of researchers with expertise/skill,
0 0 16 19 4 3.69
and their capacities
Skills and capacities of
0 0 17 15 7 3.74
manufacturing workers
Patents for technical development 0 0 9 24 6 3.92
Patent analysis and
0 2 18 11 8 3.64
technical evaluation capacities
Market analysis capacities 0 3 17 19 0 3.41
Level of facilities investment
0 3 8 23 5 3.77
for technical development
Manpower
Technology R&D investment for technical prowess 0 1 11 15 12 3.97
Capacities
0 0 11 26 2 3.77
to develop innovative products
Product design skill level 0 0 16 19 4 3.69
Test analysis level 0 1 16 10 12 3.85
Design development capacities 0 1 20 12 6 3.59
Capacities to utilize technology
0 0 16 20 3 3.67
in product improvement
Capacities for
0 0 10 24 5 3.87
technology commercialization
Domestic marketing strategies and
0 0 26 6 7 3.51
management capacities
Marketing
Overseas marketing strategies and
0 0 9 21 9 4.00
management capacities
Total 0 12 259 323 108
Note: The numbers represent the number of respondents; higher scores indicate greater capacities.
41
(3) Assessment of Global Competitiveness
Currently, major export markets are Russia and Central Asia (46%), other Asian
countries (19%), EU (15%), China (5%) and the Middle East (4%). Participants are planning
to expand their export markets into other Asian countries (23%), the USA (22%), the EU
(22%), the Middle East (10%) and Central and South America (7%). Currently, 1% of the
participants are exporting to the USA, the largest market in the world, and 23% are
planning to expand their market into the USA.
[Figure 1-6] Countries of export and planned targets of expansion (%)
Marketing channels for overseas sales include partnerships with local businesses (36%)
and joint use of overseas distribution networks (33%). Other answers included founding of
local sales companies (10%) and direct sales such as online B2B (12%).
Marketing channels for overseas sales include partnerships with local businesses (36%)
and joint use of overseas distribution networks (33%); other answers included founding
local sales companies (10%) and direct sales such as online B2B (12%). 46% answered that
they take the leading position both in the global and domestic markets in terms of their
technical levels for their anchor products, while 31% said that they are making progress as
newcomers, and 23% said that they take the leading position in the domestic market.
When asked about the quality competitiveness of their key competitors (up to three
countries) with the quality competitiveness of their anchor products at 100, Turkey was
mentioned 36 times with their average quality competitiveness being 110. Korea (5 times,
105), China (29 times, 104), India (8 times, 104), Singapore (2 times, 105) and EU (1 time,
120) were evaluated to be higher than the participants, while Russia (24 times, 97) and
Vietnam (9 times, 97) were evaluated to be lower.

(4) Competitiveness Improvement and Industrial Revitalization Measures
With regard to measures to improve competitiveness (up to three measures),

participants answered: R&D expansion (20%), strengthening of marketing capacities (15%),
improvement of manufacturing facilities for new products (12%), transition to high value
products (12%), strengthening of quality competitiveness (9%) and cost reduction and
profitability improvement (9%). In terms of priorities based on importance, participants
answered: transition to high value products (21%), R&D expansion (15%), improvement of
manufacturing facilities for new products (15%), cultivation of skilled manpower (8%), cost
reduction and profitability improvement (8%) and efforts to reduce costs (8%).
In relation to government assistance measures (up to three measures), participants

answered: assistance for industry-academic cooperation (18%), subsidies for facilities
improvement (16%), marketing support (15%), support for the development of new
technologies and products (15%), support for technologies for environment and energy
saving (13%) and cultivation of skilled manpower (13%). In terms of priorities based on
importance, participants answered: support for technologies for environment and energy
saving (26%), marketing support (21%), subsidies for facilities improvement (18%), support
for the development of new technologies and products (15%) and assistance for
industry-academic cooperation (10%).
In terms of fields of support from the Textile Technopark (TTP), participants answered:
cultivation of technicians/designers (25%), resolution of technical difficulties (19%),
support for technology commercialization (17%), prototype production (14%) and text
analysis and performance evaluation (12%).
(5) Implications
The survey to assess the capacities of textile companies in Uzbekistan was conducted
on members of the Uzbekyengilsanoat instead of all textile companies in Uzbekistan. The
rate of response was low, and the respondents tended to provide positive answers rather
than providing accurate answers to the situation. For capacity utilization, none of the
participants chose less than 80%, and none selected “very low” for all questions, while
2~4% selected “low.” The average scores for difficulties assessment and self-assessment of
capacities were 3.96 and 3.75, respectively. The item with the lowest score was “market
analysis capacities,” at 3.41.
In a similar survey that was conducted in Korea by the Korea Institute for Industrial
Economics & Trade in June 2016, the highest score in the capacity assessment for textile
companies in Korea was 3.43 for “quality/process control levels,” which is similar to that of
43
Uzbekistan. For “market analysis capacities,” Korea’s score was 2.70.
The result of the survey is shown in a table at the end of this chapter. Through the
survey, it was learned that textile companies in Uzbekistan have quality manpower that
consists mainly of college graduate workers in their 30s. Major difficulties were product
price drop due to excessive competition among domestic companies and a lack of skilled
manpower for marketing and design. Most participants answered that they are taking the
leading role in both the domestic and the overseas market in terms of their technical
levels for their anchor products, which implies that they are focusing more on general
purpose articles for which price-competitiveness is the priority than on high value
products of fine quality.
In terms of measures to improve competitiveness, most answered the transition to

high-value products, R&D expansion and strengthening of quality competitiveness. Most
hoped for the government to provide support for industry-academic cooperation and for
financing/manpower/marketing. These responses indicate that the industry needs to make
a transition from the production of general purpose articles to high-quality, differentiated
products. Finally, their answers on measures to improve competitiveness, government
support and TPP support shall be reflected in strategies and policies for textile industry;
although, the fact that the textile companies in Uzbekistan have difficulty expressing their
complaints and difficulties due to the strict control of the government shall be considered.
2.4. Key Agendas (through a SWOT Analysis)

As learned from the stream analysis, Uzbek textile industry is showing changes in the
value chain. The items of textile export were changed from fibers (raw cotton), yarns,
fabrics and products in 2001 to yarns, fibers (raw cotton), products and fabrics more
recently. Textile materials, which used to be the item with the highest export amount,
were replaced by yarns in 2014. Textile materials exports are decreasing rapidly by 21.8%
every year, dropping from 1.183 billion USD in 2010 to 345 million USD in 2015, while
yarn exports are increasing by 10.8% every year, rising from 117 million USD in 2001 to
491 million USD in 2015. Fabric exports have been increasing constantly, by 3.2% every
year since 2001. Products export was also increased by 13.4% every year from 2001 to
2013, but has since been decreasing, from 274 million USD in 2013.

[Figure 1-7] Changes in Uzbekistan’s textile export by value chain
A similar graph is formed in cotton-related products, which are the key export items
for Uzbekistan. Raw cotton exports are decreasing constantly, and have been overtaken by
cotton yarns, while cotton fabric exports are decreasing slowly.
[Figure 1-8] Changes in Uzbekistan’s export of cotton related products
Uzbekistan produces quality raw cotton, and as such has price competitiveness for
cotton yarns, cotton fabrics and cotton products. However, it is problematic that the
quality level of the products is low and added value is concentrated in general purpose
articles with low value. Although the goal is to avoid raw cotton export and to increase
45
high value finished products, the fact is that Uzbekistan has been unable to add value to
its products when compared to other competing countries. For example, this can be easily
recognized by comparing the unit price of export for product in each stream with China.
The unit prices of export show little difference in the raw cotton stage, but at the apparel
stage, the difference is more than twice between the two countries - 5.08 USD/kg for
Uzbekistan and 13.82 USD/kg for China.
[Table 1-24] Comparison of the unit price of export for product in each stream
(as of 2015) (unit: USD/kg)
Raw cotton Cotton yarns Cotton fabrics Products
Uzbekistan 1.61 2.31 3.09 5.08
China 1.69 4.86 6.14 13.82
Difference -0.08 -2.55 -3.05 -8.74
The strengths of Uzbekistan’s textile industry lie in its rich materials (raw cotton and
cotton yarns), cheap labor, low-cost energy sources such as electricity, gas and water, a
large domestic market (32 million consumers), access to the CIS and European markets,
duty exemption and tax benefits for raw materials, and an organization that can
implement strong textile policies (Uzbekyengilsanoat).
Its weaknesses include its weak basis for chemical fibers, which are essential given the
recent trend of functional textiles in the global market, and its low technical level focusing
on the export of cheap, general purpose articles. Other issues include weaknesses in the
logistics environment in terms of duration and cost due to its inland location, government
control and lack of cooperation among branches, lack of water and low mechanization
rate in the cotton industry and its dependency on import materials due to the
unavailability of local materials for apparel production.
Opportunity factors include expansion of the fast fashion trend through global
sourcing, production with buyer compliance, possible growth of the high-potential CIS
market, entry to the Eurasia Economic Cooperation and the USA’s regulations on Chinese
exports. Threats include environmental policies and CSR reinforcement in advanced
countries, technical subordination by advanced countries and mid to low price market
encroachment from China and Vietnam.
There also are structural issues hindering the development of the textile industry. The
first is the dual exchange rate system8) and difficulties in financial transactions. The dual
8) In the system, there is difference between an official exchange rate and a market exchange rate. It is different
from the Multiple Exchange Rates System in which preferential exchange rate rather than official exchange rate

exchange rate system is problematic for both domestic and foreign companies, because it
weakens the credibility of financial statements due to the exchange rate differences, which
leads to distrust. Due to the system requiring compulsory disposal of foreign currencies,
all exporters in Uzbekistan are obliged to sell 60% (30% for foreign invested companies)
of all foreign currency incomes earned through export to the National Bank for Foreign
Economic Activity (NBU).
For example, if 100 dollars are earned, 60 dollars is exchanged at the official exchange
rate, and the sales amount is reduced by the difference between the official exchange rate
(2,605 so’m / 1 USD in 2015) and the market exchange rate, which then leads to a
reduction in money (in So’m) that can be spent within Uzbekistan. Moreover, the
difficulties in financial transactions lead companies to avoid investments. Foreign
currencies remitted to business accounts can be withdrawn upon approval after
identifying the purpose of use, and companies are charged excessive withdrawal fees- 3%
for business accounts and 0.5% for private accounts.
Second, the management system for textile industry is unclear. Although the
Uzbekyengilsanoat, a public enterprise, is in charge of textile industry management, it
does not even provide statistics on the scale of textile enterprises and production of
textile materials such as cotton and wool. In order to establish a consistent policy keynote
that connects materials - yarns - fabrics - products, Uzbekyengilsanoat must have the
management capacity to supervise all textile industry.
Third, it is difficult to secure credible statistical data because Uzbekistan has not joined
the UN or the WTO. The production amount of raw cotton, for instance, has been
reported as more than 3 million tons in the data provided by Uzbekistan’s government,
but the US Cotton Committee reports that Uzbekistan produces 830,000 tons of cotton
and exports 480,000 tons. This gap is overwhelming even when the difficulties in statistics
collection are considered. If the statistic provided by the Uzbek government includes
made-up amounts, it can lead to more serious consequences. Not only will the policy for
allotment of domestic use and export become useless, but there will also be problems in
supplying cotton for domestic production.
Fourth, the government intervention is excessive. It is necessary to regulate the export

of scraps and wastes of cotton fibers and cotton yarns. However, the demand and supply
must be balanced by the market price instead of government intervention in domestic
and export transactions. While its policy to promote cotton exports to earn USD has
earned Uzbekistan USD in the short-term, there has been an incident in which it was
is applied in trade,
47
necessary to suspend cotton yarn production facilities due to a lack of cotton for domestic
use. For cotton yarn producing companies with foreign investment, the merits of investing
for a stable supply of materials despite the distribution costs are gone. Businesses will
achieve growth and provide guarantee of employment through low fluctuation in prices
and stable supplies of materials, which will then lead to a greater tax collection on dollars.
Fifth, Uzbekistan lacks policies to promote its chemical fiber industry for the
strengthening of its cotton industry. It is a global trend that more buyers are looking for
chemical fiber products. Although tariff duties are exempted on domestically unavailable
chemical fibers (over 30% on chemical fiber yarns and fabrics), there is still no policy or
assistance to attract investment on chemical fiber production facilities.
Lastly, Uzbekistan lacks phased, practical textile policies. The textile policies in
Uzbekistan are merely an aggregation of the projects of the member companies of
Uzbekyengilsanoat planning for investments. Tax benefits and duty exemptions are
centered around these companies. In general, the policies pursued in developing
countries in the early stages of economic growth are focused on the export of
labor-intensive apparel products based on cheap labor. Initially, they import fabrics from
other countries and export after simple processing, and as the labor cost rises, they move
on to the export of materials including yarns and fabrics. Through this approach, they can
enhance the price competitiveness of export items through a stable supply of raw
materials, and can export the raw materials as well. By producing fabrics that used to be
imported from other countries, they not only can procure fabrics for domestic products
but also can export the fabrics produced. Then, they move on to domestic production of
yarns both for domestic use to produce fabrics and for export by constructing factories for
synthetic fibers, and the organic compounds produced in petrochemical plants are
supplied at the international price and sold to other countries. It does not have to be in
the exact order described above, but a systematic textile policy must be established in
Uzbekistan.

[Figure 1-9] SWOT analysis
Strength Weakness
ㆍRich materials and cheap labor ㆍProduction structure focusing on natural
Internal ㆍLow-cost energy sources (electricity, gas, fibers, low production of chemical fibers
Environment water, etc.) ㆍLow technical level (export of cheap
ㆍDomestic consumers (30 million) and general purpose articles)
access to CIS market ㆍWeaknesses in logistics environment
ㆍDuty exemption for raw materials and tax (duration, cost)
External benefits ㆍGovernment-controlled, lack of
Environment ㆍPrivate organization implementing textile cooperation among branches
policies (Uzbekyengilsanoat) ㆍLack of water and low mechanization rate
in cotton industry
Opportunity SO Strategy WO Strategy

ㆍExpansion of the fast fashion trend ㆍStrengthening of cotton cluster value ㆍEstablishment of a long-term plan for
ㆍProduction with buyer compliance chain chemical fiber production to fulfil the
ㆍPossible growth of CIS market with ㆍEntry into buyer networks based on price global trend
high potentials competitiveness ㆍMechanization of cotton harvest to fulfill
ㆍEntry to the Eurasian Economic ㆍPriority on the CIS market the needs of buyers
Community
ㆍUSA’s regulation on Chinese export
Threat ST Strategy WT Strategy

ㆍEnvironmental policies and CSR ㆍStrategy for structural advancement in ㆍInternational cooperation to reinforce
reinforcement in advanced countries cotton sewing industry technical competitiveness
ㆍTechnical subordination by advanced ㆍPromotion of high value fashion design ㆍInternal structure improvement to
countries industry enhance business environments (exchange
ㆍMid-to-low price market rate, finance, control, statistics
encroachment from China and management, etc.)
Vietnam
Based on the factors derived above, an SO strategy that shall be executed as a

strategic priority, an ST strategy to minimize external threats while utilizing the strengths,
a WO strategy to utilize opportunity factors and a WT strategy to counter weaknesses and
threats on a long-term basis are established.
In conclusion, the domestic supply of quality raw cotton shall be expanded, and cotton
yarns, high-quality fabrics and high performance products shall be produced. It is also
important to achieve competitiveness with a priority on the sewing industry. In other
words, the SO strategy is to reinforce the cotton cluster value chain that consists of raw
cotton, cotton yarn and cotton fabric, and the ST strategy is for a structural advancement
of the cotton sewing industry through ODM and brand promotions. The WO strategy is to
prepare for chemical fiber production to fulfill the global trend, and the WT strategy is to
form the basis for the execution of the above strategies through internal structure
improvement and international cooperation. Details of these strategies will be provided in
Part 4.
49
3. Sharing Korea’s Experience in the Development of
its Textile Industry
3.1. Changes in the Textile Trading Environment

A. Changes in Textile Trade Agreements
During the1960s, when cotton fabrics represented the majority of textile production,
advanced countries in Europe enforced the “Short Term Arrangement on Cotton Textiles”
for the first time in October 1961 to regulate the import of cotton fabrics in order to
protect their own industries. This import regulation was later expanded to wool and
manmade fibers through the “Long Term Arrangement on Cotton Textiles (1962)” and
“Multi-Fiber Arrangement (1974)” before complete liberalization in 2005.
[Table 1-25] Process of changes of textile trade agreements

Arrangement Duration Note
- Regulation on cotton products only
ㅇ STA: Short Term October 1961 –
- The first international arrangement regulating
Arrangement on September 1962
international trade of textiles
Cotton Textiles (1 year)
* Entered by 16 countries.
- Extended implementation of the STA
ㅇ LTA: Long Term October 1962 –
- Korea joined as the 28th country in Dec 1964,
Arrangement on December 1973
and the LTA became effective for Korea from
Cotton Textiles (11 years 3 months)
Jan 1965.
January 1974 –
ㅇ MFA: Multi Fiber - Regulation on cotton, wool and manmade
December 1994
Arrangement fibers
(21 years)
- Launch of WTO in 1995
ㅇ ATC: Agreement January 1995 – - Uruguay Round: gradual abrogation of the MFA
on Textiles and April 2012 - 16% in Phase 1, 17% in Phase 2, 18% in Phase
Clothing (10 years) 3 – Complete liberalization from Jan 2005,
integration to GATT
At the time, developing countries including Korea, Taiwan and Hong Kong were using
their cheap labor advantage to export low-priced products to advanced countries such as
the USA and Europe. Thus, advanced countries aimed to enhance their productivity and
quality in addition to applying protective trade measures, and made efforts to increase
their competitiveness in areas other than price by developing the design and marketing
sectors. Since 2005, textile trade has been liberalized, and transactions are made actively
through international/regional FTAs.

B. Geographical Changes in Apparel Industry’s Global Value Chain
Among the sectors in the textile industry, the downstream sectors are considered to be
an important catalyst for national development and the starting point for developing
countries. The dyeing and finishing, fabric, cotton spinning and chemical fiber industries,
which come before the apparel industry, are less labor-intensive and more
facility-intensive process industries as they reach the upstream sectors. There have been
many changes in the global apparel industry through the course of changes in trade
agreements and various economic crises.
In the MFA (Multi-Fiber Arrangement) system before 2005, industries in the USA and
Europe were protected through the regulation of imports from highly competitive textile
supplying countries. At the time, the key apparel export countries were Korea, Hong Kong,
Taiwan and China. Once these countries were limited by export regulations due to the
textile quota, many textile companies in those countries started to build factories in
neighboring countries with none or weaker quota restrictions.
In this process, regions with tariff benefits for trade deals with the USA or Europe with
cheap labor were the first to be considered. Bangladesh, Sri Lanka and Vietnam were the
optimal countries for investment. As a result, apparel export, which used to be limited to a
few countries, was expanded to many developing countries with cheap labor. Exporting
countries, once they became part of the apparel value chain, started to make efforts to
support strategies that would advance the apparel industry.
The apparel export situation faced great changes as a result of the abrogation of MFA
in 2005 and the global economic crisis in 2008. The global economic crisis led to a rapid
decrease of demand in the advanced countries including the USA, and many factories
were closed in exporting countries. Exporting powerhouses with high supplies grew
stronger, while small exporting countries lost their competitiveness.
In this market environment, China became an unparalleled textile export powerhouse.

Other countries that also achieved growth include Bangladesh, India, Vietnam, Indonesia,
Sri Lanka, Pakistan and Cambodia. Korea, Hong Kong, Taiwan, Philippine, Mexico, Thailand,
Romania and Poland experienced decreased textile exports. Turkey, Tunisia and Morocco
were able to maintain their positions through the economic crisis.
In the apparel industry, the supply chains are specialized by country. In general, high
income countries are dominant in capital-intensive sectors, while low income countries
tend to be dominant in labor-intensive sectors. The apparel industry is the most
labor-intensive industry in the textile sector, followed by textile (yarn and fabric) industry.
The chemical fiber industry and textile machinery industry are the most capital-intensive
51
industries in the textile sector, and as such are located on very top of the upstream sector
with high entry barriers. As a country’s economic power grows and wages rise, its
comparative advantage in the manufacturing industry is weakened, and thus a transition
to high value products and/or other industries in which cheap labor is of less importance
must take place. In other words, the country must shift from low value production to high
value production.
Also, countries of different technical levels participate in the value chain with different
roles in hierarchical structures. For example, the USA provides product designs and creates
demand. Japan provides sewing machines, and Korea and other newly industrialized
countries provide fabrics, while the latecomers produce the finished apparel products. In
this way, a country does not leave the textile industry even after it has gone through all
the stages of development shown in the figure below. Instead, it moves on to the next
level of higher value through its expertise and distribution network.
[Figure 1-10] Industrial development within the apparel value chain (cases in Asia)
Note: The dotted arrows describe the flow of production and export capabilities within the country, while
the solid line arrows describe the flow of international trade or the direction of foreign investment.
Source: Gereffi, G. (2005): 172

3.2. Current Conditions of Korea’s Textile Industry
Korea’s textile industry is an export-oriented industry, in which raw materials are
partially imported for processing and then the finished products are exported, and it has
played an important role in the economic growth of Korea. Korea has balanced
production bases from upstream (cotton spinning, chemical fiber) to middle stream
(fabric, dyeing) and downstream (fashion, apparel), with evenly developed production
technologies.
After achieving 10 billion USD exports in 1987, Korea’s textile industry showed a trade
surplus of over 10 billion USD every year until 2001, and since 2015, it has been
transforming into a developed structure, in which imports exceed exports. Although textile
exports have been stagnant since 2011, Korea is still the eighth-largest textile exporting
country in the world, holding a 1.8% share of the global market with an export amount of
13.65 billion USD as of 2015. Textile imports have been constantly increasing, and in 2016
were 14.65 billion USD.
[Table 1-26] Changes in Korea’s textile trade balance (unit: million USD)
2000 2005 2010 2011 2012 2013 2014 2015 2016

Textile
18,783 13,946 11,634 15,943 15,595 15,955 15,939 14,304 13,651
export
Textile
4,788 6,765 7,407 12,524 11,987 13,520 14,655 14,461 14,638
import
Balance of
13,995 7,181 4,227 3,419 3,608 2,434 1,284 △157 △987
trade
Source: Ministry of Trade, Industry and Energy, KOTIS
Textile production has been decreasing for the last three years after reaching 471
million KRW in 2011. As of 2014, the total production amount in the textile industry is 439
million KRW, down 2.9% compared to the previous year, and this includes 20.7 trillion
KRW in textiles, 17.7 trillion KRW in apparel and 5.5 trillion KRW in chemical fibers.
During the 1970s and 80s textile companies represented more than 24% of the total
manufacturing industry in terms of the number of companies, but by 2014 the share had
decreased to 11.9%. Similarly, textile workers represented 30% of all workers in the
manufacturing industry during the1970s and 80s, but with the decrease in domestic
investment and increase in overseas investment since the 1990s, their number was
reduced to 304,993, or 7.7% of all manufacturing industry workers. Including the
manufacturing sectors of leather, bag, shoes and textile machines and the dye, pigment
53
and wholesale/retail sectors, the textile industry employs 853,325 workers, which is 11.0%
of all workers in the manufacturing industry.
The textile industry in Korea is going through a process of development from a

labor-intensive industry to a technology/capital-intensive industry with high value brands.
Its importance in Korea’s economy has been reduced due to the development of other
industries, but it is the key industry that led Korea’s economic and industrial development,
with a trade surplus of 297 billion USD from 1977 to 2016.
[Table 1-27] Status of Korea’s textile industry (in 2014)

Production
Export (2016) No. of No. of Added Value
Amount
(100 million USD) Businesses workers (Billion KRW)
(Billion KRW)
Manufacturing 4,955 397,171 3,957 1,489,213 484,485
Textile Industry 137 47,408 305 43,874 16,394
Rate (%) 2.8 11.9 7.7 2.9 3.4
Source: Statistics Korea, National Business Survey (businesses with one or more employees in Korea,
numbers of businesses and workers)
Statistics Korea, Mining and Manufacturing Industries Survey (businesses with 10 or more
employees, production amount and added value)
3.3. Policy Changes in Korea

A. Before 1960
The modern textile industry in Korea began with the establishment of Korea’s first
cotton spinning factories, including Joseon Textile in 1917 and Gyeongseong Textile in
1919. However, most of these were destroyed during the Korea War in 1950. Joseon
Textile was the first textile company in Korea, and was established by Mitsubishi to exploit
the cheap raw cotton and labor in Korea at the time, while Gyeongseong Textile is the first
cotton spinning factory in Korea that was established with national capital. After the
Korean War ended in 1953, Korea became self-sufficient in natural fibers including cotton
and wool, establishing up-to-date production facilities with aid funds from other countries
and importing cheap raw cotton from the USA. Cotton producing facilities were swiftly
reconstructed through the Emergency Cotton Textile Reconstruction Policy that was
implemented by the government between 1953 and 1957.
At this time, the use of foreign currency in Korea was strictly regulated, and
investments in facilities were promoted through low interest rates, while import
substitution was achieved through strict import regulation policies including high tariffs

and quantitative restrictions through the quota system. After achieving self-sufficiency,
textile exports were promoted to overcome the limited domestic market and resources.
The goal was to reduce the scarcity of foreign currency that had been caused by the
reduction in aid funds, and improve Korea’s current account balance through the
expansion of textile export. By the end of the 1950s, production in the cotton spinning
sectors had exceeded domestic demand.
In 1951, Dongyang Rayon started to produce nylon by importing technologies from

DuPont, and in 1957, Kolon imported nylon production technology from Japan. In 1947,
Master’s and Doctoral degree courses in textile engineering were established at Seoul
National University; Chungnam National University and Chonnam National University
(1952), Pusan National University (1953) and Hanyang University (1958) soon followed.
B. 1960s
The labor-intensive textile industry, which creates a large number of jobs, was
promoted as a key export industry through the First Five-Year Plan for Economic
Development (1962-1966). Under the Plan, significant policies were implemented
including import regulation, securing of social overhead capital (cement, petrochemical,
etc.), financial incentives to promote private investments and government guarantee on
foreign investments. Local manufacturing of textile materials such as synthetic fibers was
carried out. For apparel production, fabric factories were first established to enable the
local manufacturing of fabrics, and then yarn factories were constructed for self-sufficiency
in yarns to produce fabrics. Finally, petrochemical factories were established to enable
Korea’s self-sufficiency of synthetic materials.
The Second Five-Year Plan for Economic Development (1967-1971) was focused on
export-led industrialization. The multiple exchange rate system was changed to a single
floating exchange rate system, and the Korean Won was allowed to depreciate to
strengthen the price competitiveness of export products. The export promotion
recompense system was abrogated, while financial incentives were provided for export.
Moreover, customs duty and internal tax were exempted for materials that were imported
for use in export products, and accelerated depreciation was allowed for fixed assets for
export.
Once the production of synthetic fibers such as nylon and polyester was regularized,
supply of textile materials including fiber yarns and fabrics was stabilized, and production
was switched from natural fibers such as cotton and wool to synthetic fibers. Increased
production of synthetic fibers led to an oversupply of cotton products, and the Special Act
55
on Textile Industrial Facilities (1967-1979) was put into effect to reduce the excessive
facilities. Facilities adjustment and decrepit facilities repairs were carried out in six
industries including spinning and weaving to promote exports, and industrial
rationalization was induced by requiring approval and registration for facility installations,
as well as the regulation of new installations. Stable production was maintained by
alleviating excessive competition among the domestic companies through limited scale of
installation for each industry, optimizing the scale of businesses and priority approval for
exporting companies.
In 1967, Guro Industrial Complex was established in Guro-gu, Seoul, and became a
solid base to attract Korean Japanese apparel exporters and OEM for Japanese companies.
In 1969, Daegu Industrial Complex was established to promote the clustering of small and
medium-sized businesses, and the chemical fiber cluster was formed by a number of
chemical fiber producers.
During this time, a number of universities introduced textile engineering courses,

including Kyung Hee University (1962), Chonbuk National University (1963), Dong-a
University (1965), Soongsil University and Yeungnam University (1967), Konkuk University and
Dankook University (1968) and Inha University (1970). Also, three test and inspection
institutes - Textile Test and Inspection Office (1961, now KOTITI Testing & Research Institute),
Korea Stockinette Test and inspection Office (1965, now Korea Apparel Testing Research
Institute) and Korea Fabric Test and Inspection Office (1969, now FITI Testing & Research
Institute) were established for the testing and inspection of textile products for export.
C. 1970s
With the completion of Ulsan Petrochemical Industrial Complex in 1972, the
production of chemical fiber materials including TPA and caprolactam was made possible.
By increasing the production of chemical fibers, import substitution was achieved, and
thanks to its high price competitiveness based on cheap labor, Korea joined Hong Kong
and Taiwan to become one of the top three textile exporting countries in the world.
In 1951, Korea’s textile industry was responsible for 6.9% of all exports. This was
increased to 46.5% by 1970, but after peaking at 53.6% in 1971 was reduced to 29.1% in
1980. With the policy to promote the six strategic industries of steel, chemical, machinery,
electronic, shipbuilding and nonferrous metal under the Heavy Chemical Industrialization
Plan in 1973, the share of total export held by the textile industry was reduced, but textile
exports continued to achieve high annual growth rates, growing 58% from 1960 to 1970,
and 29.4% from 1970 to 1980.

[Table 1-28] Textile exports from the 1950s to the 1970s (unit: million USD)
1951 1955 1960 1965 1970 1975 1980

Textile export 1.1 2.3 4 53 388 1,870 5,099
Total export 16 18 33 175 835 5,081 17,505
Rate (%) 6.9 12.8 12.1 30.3 46.5 36.8 29.1
In 1973, Gumi National Industrial Complex I was established in Gumi, Gyeongsangbuk-do,

and in 1977, the Textile Technique Training Institute (now Korea Textile Development
Institute) was established in the chemical fiber complex in Daegu. In the Gumi National
Industrial Complex, large textile enterprises including Kolon, Cheil Chemical and Hankook
Polyester and small and medium-sized textile enterprises moved in to form the Textile
Cooperative Complex.
With the oil shocks of 1973 and 1979, chemical fiber prices increased rapidly, and the
combined factors of the textile quota system in the USA and Europe (MFA, 1974) and the
market expansion of developing countries based on cheap labor presented new difficulties
for Korea’s textile exporters. For this reason, the government enacted the Promotion of
Textile Industry Modernization Act (1979-1986). The Textile Industry Modernization Fund
was established through a joint investment from the government and the private sector.
The Fund was managed by Korea Federation of Textile industry and had the purpose of
strengthening the innovative capacities of enterprises by repairing decrepit facilities,
establishing mass production systems, and promoting technical development and product
advancement.
D. 1980s
In the 1980s, a number of new issues emerged, including the investment competition
among enterprises for benefits given to exporting companies, rapidly increased interest
rates due to the oil shock in 1979 and an excess of facilities due to the global economic
downturn. Textile exports showed negative growth in 1982 and 1985. From 1986 to 1989,
however, this trend reversed and textile exports again showed high growth rates thanks to
low interest rates, an oil price drop and a rise in the value of the yen in 1986. In 1987,
textile exports exceeded 10 billion USD; this was a first for a single industry in Korea. The
first Textile Day was held on November 11th, 1987 to celebrate the achievement of 10
billion dollars in exports, and a Textile Day Ceremony is still held every year on the same
day, with awards presented to major contributors to the textile industry.
57
[Table 1-29] Textile exports in the 1980s (Unit: one million USD)
1981 1982 1983 1984 1985 1986 1987 1988 1989 1990
Textile
6,282 6,002 6,138 7,195 7,084 8,815 11,834 14,171 15,237 14,766
exports
Rate of
23.2 -4.5 2.3 17.2 -1.5 24.4 34.2 19.7 7.5 -3.1
increase
To restructure industries in order to resolve the issues of overlapped and excessive

facilities, the Korean government abolished seven acts9) affecting certain industries
including textiles in 1986, and enacted the Industrial Development Act with the aim of
promoting balanced development and rationalization in the industries. Nine targets for
industrial rationalization were selected from among industries that were experiencing a
structural recession, declining industries and promising industries. The targets were
provided with government support, including prohibition of entry of new businesses,
regulation on new construction, and enlargement of facilities and repair of decrepit
facilities. The government also aimed to enhance the technical capabilities of the
industries by promoting promising new industries and establishing the Industrial
Development Fund.
Among the textile industry, the fabric industry and the dyeing and finishing industry
were selected as industries that had lost their competitiveness. For the fabric industry,
assistance in disposing of and replacing decrepit weaving machines and in changing or
closing down business was provided for three years, from July 1986 to June 1989. The
assistance program was extended three times until December 1997, with the introduction
of the weaving machine registration system and regulation on new construction and
enlargement of facilities. For the dyeing and finishing industry, subsidies on disposal and
replacement of decrepit equipment were provided, together with the introduction of the
dyeing machine registration system and regulation on new construction and expansion of
facilities for two years from January 1987 to December 1988. Through the industry-based
technical development program and the Industrial Development Fund, technical
enhancement and quality improvement were achieved, but the issue of oversupply
remained unresolved due to a delay in disposal of decrepit equipment.
After the declaration of liberalization on June 29th, 1987, organizations of labor unions
and wage struggles were accelerated, and with the increased labor cost and shortage of
9) Textile Engineering Modernization Promotion Act, Machinery Industry, Shipbuilding Industry, Electronic Industry,
Petrochemical Industry, Steel Industry, Non Ferrous Metals Industries

labor, apparel companies started to move their production bases to developing countries
that offered low wages and abundant manpower, including China. Apparel exports were
decreased after reaching a peak at 10.17 billion USD in 1989, while textile exports were
increased, with polyester fabrics, knitted fabrics and woven fabrics.
In 1981, Daegu Dyeing Industrial Complex was completed through the addition of
wastewater treatment facilities that can treat up 85,000 tons of wastewater, cogeneration
facilities and spaces to accommodate about 110 chemical fiber dyeing and finishing
companies. In 1983, Gyeonggi-do Banwol Dyeing Industrial Complex (dyeing and finishing
of cotton and knitted fabrics) was completed, which led to cost reduction and technical
development in the dyeing and finishing industry with joint wastewater treatment and the
joint use of steam. High value dyeing and finishing technologies in the dyeing and
finishing industry, considered to be the bottleneck in the textile value chain, contributed
significantly to an increase in woven and knitted fabric exports.
E. 1990s
Since the late 1980s, Korea’s textile industry had been kept out of the high-value
market by advanced countries and threatened by developing countries in the mid-to-low
value market due to rising labor costs, intensified competition due to oversupply,
anti-dumping suits from advanced countries to protect their industries and threats from
developing countries including China and Indonesia. With the accelerated overseas
relocation of apparel companies, apparel exports were decreased and demand for fabrics
produced in Korea was increased. In 1993, fabric exports overtook fiber exports after years
of rapid growth.
Competition in the global market was intensified with the USA’s amendment of the
Generalized System of Preferences (GSP) in 1989, the launch of the WTO in 1995 and
Korea’s joining of the OECD in 1996. After the launch of the WTO, textile quotas in
advanced country markets such as the USA and the EU were gradually abolished by 2005,
and direct supports from the government such as provision of subsidies were no longer
available. Then, after the IMF financial crisis in 1998, enterprises were reduced or
readjusted through restructuring. Large enterprises in the chemical fiber and cotton
industries suspended their production of general purpose mass products in Korea and
opted for overseas production or import, while increasing their production of high quality
and/or high performance textiles in Korea.
The new Industrial Development Act was enacted in 1999 to replace the old one and
promote the advancement of industrial structures through strengthening their
59
competitiveness, increasing the efficiency of organizations, promoting restructuring and
enhancing international cooperation. Industries were encouraged to establish
development prospects, long-term strategies, company guidelines and blueprints for the
future.
In 1999, the plan to promote the textile industry in the Daegu region was established.
The Daegu Fashion Apparel Valley project was implemented to promote the Chemical
Fiber Complex in Daegu as a hub of the fashion, design and apparel industries.10)10) It was
named the Milano Project, and a total of 680 billion KRW - 367 billion from the central
government and 51.5 billion from the local government - was invested. Phase I of the
project was carried out from 1999 to 2003. About 245.1 acres of land were developed to
house industrial facilities (plant), research facilities (fashion center) and commercial
facilities (fashion mall, textile convention, etc.), and infrastructures for six industries
including yarn processing/weaving, dyeing and finishing and fashion design were
constructed. Phase II, which is called the Post Milano Project, was implemented from 2004
to 2008 for R&D, human resources training, prototype production and marketing
assistance utilizing the infrastructures constructed during the Phase I. Issues faced by the
Milano Project include a lack of participating enterprises and criticism of a bias in the
central government, as it provided support to the Daegu region only.
F. After 2000
In 2005, the textile quota was abolished completely, and competition among the
developing countries including China, Vietnam and India was intensified in the global
market. Under the Industrial Development Act, policies to concentrate support on a
specific industry can no longer be implemented, and thus there are limits to the extent to
which policy support can cater to the specific needs of the textile industry. Medium and
long term policies to enhance the productivity of industrial textiles, IT convergence in
textile and apparel industries, innovation of textile and apparel production bases,
strengthening of design/brand competitiveness and development of original technologies
and strategic materials are being carried out. The policy direction for the development of
Korea’s textile sector into a high-tech, high value industry was established as follows:
The first policy direction is to support convergence and new growth engines to meet
the global trends. To this end, medium and long term policies for the development of
original technologies and strategic materials are implemented, and a foundation for
10) Korea Development Institute, Preliminary Feasibility Report of the Daegu Fashion•Apparel Valley Project
(June 1999)

convergence among industries is established through the Industrial Convergence
Promotion Act enacted in 2011.
The second policy direction is to provide small and medium-sized enterprises with
support for R&D and industrialization to strengthen their competitiveness. Small and
medium-sized enterprises are provided with support to expand their production of high
value products and strengthen their overseas marketing, as well as the Global Specialized
Enterprise Cultivation Program for export competitiveness and commercialization.
The third policy direction is to establish differentiation strategies that can maximize the
effects of FTAs. In the short run, the objective is to enhance price competitiveness through
tariff elimination, and in the long run, it is to enhance export competitiveness by
improving productivity through technical development.
The fourth policy direction is to establish a foundation for R&D cooperation for
accompanied growth among streams and enterprises. As part of the Structural Innovation
Strategy for Textile and Fashion Industries established in 2006, cooperative activities
between the textile and fashion streams11)11) are provided with subsidies for R&D. Also,
Korea Federation of Textile industry has been holding the Textile-Fashion Stream
Cooperation Conference since 2013 to provide a channel for communication among
textile industry, fashion industry and global apparel export vendors in seeking win-win
strategies through sharing marketing, fashion and technical information.
The fifth policy direction is to develop high value new fiber materials to adapt to the
rapidly changing industrial paradigm. To create new markets through convergence with
new technologies such as IT, BT and NT and cooperation with other industries, large-scale
R&D projects including Industrialization of Super Fiber Convergence Products
(2010-2014), Daegu Textile Complex Project (2010-2014), High-tech New Medical Material
Development Project (2011-2016), Carbon Valley Construction (2011-2021) and
Industrialization of New Marine Convergence Material Project (2015-2020) are
implemented.
11) The activities have been carried out for fostering global businesses through cooperative technology development
by consortiums consisting of 3 to 5 streams since 2007.
61
3.4. Sharing Successful Cases of Adapting to Changes in the Textile
Industry Environment
A. Changes in the Global Value Chain in Textile Industry
All textile exporting countries, including Korea, have experienced the same process of
change in the global textile market. During the early stage, the focus of industrial
development is to shift from simple production utilizing cheap labor to high value
production utilizing skilled labor. The boundaries are also expanded to upstream sectors
such as chemical fibers and spinning, which require heavy investments and higher-caliber
work forces.
The process of economic advancement within the value chain of the apparel industry is
described as a smile curve, which means that higher value activities within the apparel
production process occur before and after the sewing stage. The pre-production stage
involves the processes of R&D, design and improvement of materials, while the
post-production stage includes the processes of distribution, marketing and service.
Advancement in the apparel industry consists of four phases: CMT (Cutting, Making,
Trimming); OEM (Original Equipment Manufacturing); ODM (Original Design
Manufacturing); and OBM (Original Brand Manufacturing). CMT, the first phase, is a form
of subcontract, in which the fabrics are provided for sewing. It is a process in which
apparel is produced by cutting the fabrics provided by clients, and sewing and finishing
the cut fabrics according to the client’s directions. The manufacturer is not involved in the
design, and receives a fixed processing fee (commission).
OEM, the second phase, involves producing products to be sold under the client’s
name. The contractor procures fabrics and funds, and takes charge of all services,
processes and packaging until the products arrive at the store. In the OEM method in the
apparel industry, products are produced according to the directions and designs provided
by the client, using fabrics specified by the client.
ODM, the third phase, is a business model focusing on adding design capacities to
apparel production. Finally, OBM is a business model focusing on sales of one’s own
brand. Then, the advancement process reaches its peak by enhancing apparel products
through R&D into improvement of materials, development of textile machinery and
expansion of services, including information and logistics technologies.

[Figure 1-11] Process of added value development in the global apparel value chain
Source: Gereffi, G. (2013). International trade and industrial upgrading in the apparel commodity chain.
Journal of International Economics, 48(1), 37-70.
Initially, developing countries enter the sewing industry, which is the lowest point in
the global value chain, for its many benefits such as advantageous trade arrangements,
cheap labor and proximity to the end market. The reason why the low-growth countries in
Africa and Central/South America were able to benefit through preferential trading
arrangements such as AGOA and CAFTA is because they served as the key production
bases of apparel products within the global value chain.
There are elements that developing countries at the early production stage on the
global value chain will need to achieve industrial advancements. First, there needs be an
upstream and middle stream for securing of various materials. Furthermore, manpower
development is essential for design development and brand organization, in addition to
joint efforts between the public and private sectors for industrial growth.
B. Human Resources Development for Upgrading in the Value Chain

With the abolition of textile quotas in 2005, labor cost, productivity and manpower
quality have become the important elements that determine a country’s competitiveness
in the textile value chain. As the low-cost countries including China, Vietnam, India and
Bangladesh have solidified their place in the sewing industry, which is the subordinate
sector in the global value chain, small-scale countries have lost their competitive edge in
the sewing industry and have had to switch to higher value sectors such as design and
branding, which require high--quality human resources. As a result, the cultivation of
63
professional human resources in design, technology and marketing is becoming more and
more important for a country to maintain its place and move upward in the global textile
value chain.
More than half of all workers in the textile industry are concentrated in manufacturing
fields, and most of these workers are unskilled females. Among the factory workers, only a
few are high-caliber talents such as managers, planners, engineers and technicians.
Moreover, with the increasing demand for specialized talents in the fields of logistics,
design, finance, R&D and marketing who can upgrade the value chain, the level of
technology required is increasing rapidly.
To maximize the effect of human resources development, the following are extremely
important: First, on-the-job-training to narrow the technical gaps among the workers is
more important than formal training during the early production stage (prior to OEM).
On-the-job-training is preferable because it provides hands-on, on-site experiences while
saving both money and time. Second, exchanges with overseas, advanced enterprises
must be pursued, to foster professional technicians and management specialists.

[Figure 1-12] Skills and qualifications required for each job position in the apparel
industry
Formal Education Training/ Skill
Position Job Description
Requirements Experience Level
CMT / Assembly / Production
Sew, join, reinforce, or finish-usually with needle and thread-a No Formal Required
Hand Sewers
variety of manufactured items. Includes weavers and stitchers. education required experience
No formal
Sewing Operate sewing machines to join, reinforce, decorate, or perform Experience: Need
education required,
Machine related sewing operations in the manufacture of garment or of speed and
literacy and
Operators non-garment products. accuracy skills
numeracy skills
Experience: Need
Garment Clothing pressers use steam irons and vacuum presses to shape No formal
of speed and
Pressers garments and remove creases. education required
accuracy skills
Cutting
In automated facilities, cutters electronically send the layout to a
Machine Technical education Technical training
computer-controlled cutting machine.
Operators
High school
Management
Line Leaders Supervisory roles; ensure work flows expeditiously along the line. diploma/ technical
skills
education
Production Supervisory roles; oversee the pace of the work and ensure
Technical education/ Management
Flow stoppages are minimized, monitor production levels, train new
Bachelor’s degree skills
Supervisors workers, and manage constant problem solving.
OEM / Full Package
High school
Maintain final quality prior to distribution of product, monitored Knowledge of
Quality Control diploma/ technical
by buyers. quality systems
education
Sourcing,
Purchasing, Capabilities related to OEM production: Workers must have Technical education/
Industry
and Supply financial skills related to purchasing inputs and coordinating Bachelor’s degree in
experience
Chain production schedules. finance/management
Management
ODM
Fabric and Create the blueprint or pattern pieces for particular apparel
Technical education
Apparel design. This often involves grading, or adjusting the pieces for Experience
in apparel
Patternmakers different sized garments.
Tailors,
Technical education
Dressmakers, Design, make, alter, repair, or fit garments. Experience
in apparel
Custom Sewers
Workers must have training in the ‘aesthetics’ of product Technical education/
Designers development, some market and consumer knowledge, and Bachelor’s degree in Experience
technical skills required to translate ideas into samples. clothing design
Bachelors/Master’s
Senior Creative talent within the industry that can develop new design
degree in clothing Experience
Designers lines for production.
design
OBM
Bachelor’s/Master’s
General Responsible for financial management supply chain optimization,
degree in Experience
Business Skills quality control and or strategy, and new business development
business/engineering
Branding and Marketing
Responsible for market research, marketing/advertising. Bachelor’s/Master’s
Marketing specialization
networking, and positioning brands in the market. degree in business
Capabilities and experience
Source: Duke CGGC.

Low Low-Medium Medium Medium-High High
Skill Level
Literacy and Technical education
No formal education; Technical University degree and
numeracy skills, /undergraduate
experience education/certification higher
experience degree
65
Particularly in developing countries, a company’s performance depends more highly on
the capabilities of its management executives than on its production workers.
Plans and measures to utilize the Textile Technopark, currently being constructed
through cooperation with Korea, shall be established. Third, production processes shall be
improved and a national qualification system shall be introduced to support efficient
production management. These measures will form the basis for developing professional
human resources.
Most countries have state-led vocational training programs, but only a few are
producing satisfactory results. Thus, measures must be put in place to support businesses
in developing their own training programs. In Korea, a sector council for human resource
development in the textile industry is operated to adjust cooperation between the public
and private sectors. The sector council develops educational programs based on the
needs of the private sector, and provides businesses with the developed programs and
instructors to promote their human resources development activities.
C. Recent Environmental Changes in the Textile Industry

Recent environmental changes in the textile industry can be summarized as follows.
First, following the trade liberalization in 2005, the EU (28 countries, 32.7%) and the USA
(14.1%) are the two largest importing countries in the global textile and apparel markets
as of 2014. Their dependence on imports from Asian countries has been increasing based
on price competitiveness and GSP. Second, the demand for sustainability through
corporate social responsibility (CSR) is growing. Autonomous standards of private
enterprises such as SAC (Higg Index) and ZDHC are now being expanded into national
and international movements. Third, digital fashion, in which mobile platforms play key
roles in fashion distribution, is spreading widely. O2O (On-line to Off-line) omni-channels
are being strengthened, while more attempts are being made to utilize 3D design and
virtual reality. Fourth, consumers are smarter and more fastidious about prices and styles.
In light of this trend, stores that combine products in relevant fields such as home
furnishing and food & beverage are increasing. Fifth, the athleisure markets are growing,
with more people choosing sportswear as their daily attire. As a result of this trend, style
and functionality are being emphasized through the combination of sportswear and
everyday wear.
Changes in sourcing countries can be observed as well. Developing countries including

China, India, Bangladesh and Vietnam are serving as the world’s manufacturing plants
through investments from advanced countries. China, for instance, has expanded its field

of focus to fiber materials since 2000, and although its price competitiveness has been
weakening due to rising labor costs and the appreciation of the Chinese yuan since 2008,
it is still the greatest production base in the world. Countries in the ASEAN region are
emerging as the new export bases with the diversification of production bases of global
enterprises due to the rising labor costs and difficulties in procuring manpower in China.
Vietnam’s apparel exports to the USA have increased greatly due to the abolition of the
import quota in 2002, and many of the global enterprises are transferring their production
bases to Vietnam as it is known as the greatest benefactor of the TPP, which is currently
under discussion. India, with its expansion of export items from fiber materials to apparel,
is emerging as the future alternative to China.
D. Characteristics of Development Process of Korea’s Textile Industry

In this section, the success and failure experienced in Korea’s policy changes are
analyzed for application to Uzbekistan’s model. Of course, the models used during the
time when Korea was achieving growth shall not be applied directly to Uzbekistan. Here,
the main focus is to present the government policies executed during Korea’s growth
period, and fields that were advantageous for Korea.
First, during the period from the 1950s to the 1980s, when Korea achieved significant
growth, Korea gained many advantages in expanding its exports with the booming global
post-war economy. Thanks to the global aid funds and the availability of cheap labor,
Korea became self-sufficient in natural fibers, promoted its chemical fiber industry by
introducing technologies and machinery from Japan, and achieved high export growth
through export-oriented policies. During the time between the 1970s and the 1980s,
despite the two oil shocks, Korea thrived in the global export market, essentially unrivaled,
as China had yet to open itself up to the world. Moreover, many universities established
textile engineering courses to cultivate specialized human resources, and through
government policies to promote exports and the petrochemical industry, Korea was able
to achieve steady growth.
67
[Figure 1-13] Policies and export performance in Korea’s textile industry
Source: Korea Federation of Textile industry, Policy Changes in Textile Industry and Prospect Update, 2012
To expand imports, which is the main objective of Uzbekistan, the Korean government
executed several policies during its time of high economic growth. The first was the
reformation and modification of its exchange rate system. The multiple exchange rate
system was changed to a single floating exchange rate system, and depreciation of the
Korean Won was allowed to strengthen the price competitiveness of export products.
Second were financial incentives for exports, such as loans for export promotion funds
and financial support for import of raw materials to produce export products. Third was
the reinforcement of benefits in the tax system, such as duty exemption and domestic tax
exemption on imports of raw materials to produce export products, permission of
accelerated depreciation, subsidies to repair decrepit facilities and subsidies for technical
development. Fourth, testing and research institutes to support exporters and specialized
production technology research institutes to support technical development and small
and medium enterprises were established. Fifth, human resources were developed
through textile engineering and design courses at universities and vocational training
centers.

[Table 1-30] Summary of textile industry development in Korea
External/ Changes in
Policy Direction
Internal Domestic Issues Key Policies Infrastructures
Performance
Environments Conditions
Introduction of
Production Emergency nylon
facilities Cotton Textile technologies
expansion (aid Import Reconstruction (Dongyang
Outbreak of Need to
funds) substitution Plan Rayon, Kolon,
Korean War obtain foreign
Before Supply of for and (1953-1957) etc.)
in 1950, currency due
1959 cheap raw self-sufficiency * Swift Textile
armistice in to the reduced
cotton from in natural reconstruction engineering
1953 aid funds
the USA fibers of cotton courses in
Abundant producing universities
manpower facilities (Master’s/
Doctoral)
Special Act on
Textile
Industrial
Facilities
First & Domestic
Oversupply of Promotion of (1967-1979) Guro Industrial
Second production of
cotton and export-led * Facilities Complex
Five-Year synthetic
intensified industry adjustment, (1967),
Plans for fibers,
1960s competition through regulation of 3 testing and
Economic Swift transition
among strategic new inspection
Developmen from natural
domestic industries for installations, institutes
t fibers to
companies export etc. in 6 (1963-1968)
(1962-1971) synthetic fibers
industries
including
spinning and
weaving
Ulsan
Promotion of
Petrochemical
Price surge of Textile Industry
Industrial
chemical fiber Rational Modernization
Heavy Increased Complex
materials, promotion of Act (1979-1986)
Chemical production and (1972), Gumi
Intensified textile industry, * Textile
Industrializati import National
import “Big 3” in Industry
1970s on Plan substitution of Industrial
regulation in global textile Modernization
(1973), chemical fibers, Complex I
advanced exports with Fund (joint
Oil Shock High growth of (1973),
countries Hong Kong investment
(1973, 1979) apparel exports Daegu Textile
(textile quota and Taiwan from
Technique
system) government/pri
Training
vate sector)
Institute (1979)
Improvement Industrial
Interest rate of areas other Development
Transfer of
6.29 rise, global than price Act (1986-1999) Daegu Dyeing
production
Liberalization economic competitivenes * 9 targets of Industrial
basis to
(1987) depression s (quality industrial Complex (1981)
latecomers
1980s * labor (-1984), low enhancement, rationalization, and Banwol
such as China
unions and interest rate, oil design prohibition of Dyeing
and South East
wage price drop, development), new entry, Industrial
Asian countries
struggles strong yen Achievement of regulation on Complex (1983)
(late 1980s)
(1986) 10 billion dollar new
export (1987) construction
69
[Table 1-30] Continued
External/ Changes in
Policy Direction
Internal Domestic Issues Key Policies Infrastructures
Performance
Environments Conditions
Industrial
Deregulation of
Promotion of Development
facilities, Accelerated
WTO launch industrial Act
Transition from overseas
(1995), structure (1999-present)
government-le relocation and Milano Project
OECD join advancement, * Development
1990s d direct corporate Phase I
(1996), Fabric export prospects and
promotion to restructuring (1999-2003)
IMF financial overtook long-term
competition of (downscale/
crisis (1998) apparel export strategies:
market readjustment)
(1993) blueprints for
economy
future
Directional Milano Project

change to Phase II
high-quality, Promotion of (2004-2008),
high-performan rationalization Super Fiber
Industrial
ce textiles and and balanced Convergence
Convergence
industrial development Products
Promotion Act
textiles, among all (2010-2014),
Textile trade The age of (2011-present),
After Active industries, High-tech New
liberalization unlimited Inter-stream
2000 government Profit Medical
(2005) competition Cooperative
support for enhancement Materials
Technical
technical through high Development
Development
development added value Project
(2007-present)
and policies and (2011-2016),
promoting differentiation Carbon Valley
components Construction
and materials (2011-2021)
The fields of Korea’s experience and strength can easily be applied to Uzbekistan.
Here, Korea’s capacity to support Uzbekistan in reinforcing its value chain is examined. As
explored above, Korea has an industrial structure with balanced streams, with particularly
high competitiveness in the middle stream. In textile industry, Korea has six export items
for which it held the largest share in the global market as of 2014: manmade staple fiber
fabrics (HS 551291) 42.1%; garments or clothing parts (fabric) (HS 621790) 28.9%; pile
fabrics and chenille fabrics of other textile materials (HS 580190) 24.9%; other synthetic
filament yarn (polypropylene) (HS 540248) 24.0%; and other made up clothing accessories
(fabric) (HS 621710) 18.0%.12)
There also are infrastructures such as research institutes and dyeing complexes to
support and promote local manufacturers together with regionally specialized industrial
complexes. Seoul and Gyeonggi-do region is specialized in apparel and knitted products,
12) Institute for International Trade, Korea International Trade Association (Feb. 2016), Korea’s competitiveness in
exports seen from No. 1 export items in global markets.

and has specialized research institutes including Korea Institute of Industrial Technology
and Korea High Tech Textile Research Institute, three testing & research institutes
including FITI Testing & Research Institute and several dyeing complexes. Daegu and
Gyeogsangbuk-do region with upstream chemical fiber and middle stream chemical fiber
fabric and dyeing and finishing facilities has three specialized research institutes including
Korea Textile Development Institute, Korea Dyeing and Finishing Technology Institute and
Korea Research Institute for Fashion Industry, as well as several dyeing complexes. Other
regions have specialized production bases and research institutes - convergence fiber and
carbon fiber in Jeollabuk-do, shoes and apparel products in Busan and silk in Jinju.
[Figure 1-14] Production clusters, institutes and dyeing complexes by item
A global production network has been established, and has high competitiveness with
global enterprises. A dualistic global labor division production system has also been
established, in which labor-intensive toll processing roles are transferred to developing
countries with low wages and abundant manpower, and design and marketing roles are
performed domestically. Through this system, products are swiftly supplied in the market,
and the optimal global value chain is established through diversification of supply regions
and strengthening of partnerships within supply chains. Youngone Corporation, Hansae,
Sae-A Trading and Hansoll Textile are operating actively in overseas markets and growing
into global enterprises. Sae-A Trading, for instance, is a sewing company that takes orders
from global brands including DKNY, GAP and Zara. In 2000, its sales were 150 billion KRW,
but grew rapidly to reach 1.3 trillion KRW in 2013 after switching to ODM.13)
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Design capacity and competitiveness should also be mentioned. It is true that Korea
still lags behind the advanced countries in high value markets due to inferiority in design
and a lack of global brands. But Korea has abundant human networks in design, with
5,000 new designers entering the field every year after graduating from design schools.
Also, Korea has the structural advantages of a varied, yet balanced brand structure
(individual designers, national brands, etc.). Designers working in Dongdaemun Market
perform various tasks from procuring of fabrics and materials to planning and design,
patterning, sewing and wholesale/retail distribution in nearby areas to attract domestic
and overseas consumers with trendy, fast fashion products. Based on these areas of
strength, measures for technical cooperation and international cooperation with Korea’s
textile industry other than the currently implemented TPP are suggested in Section 4.
3.5. Promotion of Fashion Design

A. Significance of Design Industry
(1) Significance of Design Industry
The domain of design is spread widely through all industries, and is expanding from
manufacturing and service industries to the public service, politics, economy, social and
cultural sectors. Korea’s industry is going through a transition from a labor-intensive
industry to a technology convergence industry. The design industry is also developing to
play a greater role in the lives of consumers.
[Table 1-31] The design industry’s development process
1970s 1980s 1990s 2000s

Industrial Technology-inten
Labor-intensive Capital-intensive Technology-conv
Development sive
(textile, shoes) (auto, ship) ergence
Process (IT, BT, NT)
Human (sensibility)-oriented, better
Design Industry quality of life
Development Functionality and quality of function-oriented products
Process Added decoration of
appearance-oriented products
Source: KOTRA, Korea’s Design Industry and its Current Conditions, 2012
13) MBN TV: Hidden Power ODM in the manufacturing industry, Global Amazing Growth, April 14, 2014

Design applied in industry is defined in Article 2 of the Industrial Design Promotion
Act (Republic of Korea Act No. 13595). It says that industrial design is “any act of creation
and improvement (including any act of technical development for creation and
improvement) to satisfy the physical and psychological needs of producers and consumers
by optimizing the aesthetic, functional, and economic values of products, services, etc. and
the output thereof, and includes product design, packaging design, environmental design,
visual design, service design, etc.” However, this definition is made on the basis of the
manufacturing industry as the key policy target, and certainly has limits in its applicability
to the design domain, which is developing into various forms. In this study, the term
“design” is limited to designs relating to textile industry.
The goal of textile and fashion design is to create and express beauty and fashion in
the process of producing textile products. It can be defined as work to increase the quality
and added value of finished products by creating patterns and colors on structures and
surfaces of yarns, woven fabrics and knitted fabrics, and producing beautiful, creative
products. Design in the textile industry is categorized into textile design, in which the
objects are materials to produce apparel such as textiles and fabrics, and clothing design,
in which the objects are finished apparel products. However, the term “fashion design” is
used to refer to both categories simultaneously. Textile design can bring about the
development of new materials, weave constructions and processing technologies and
increase the added value of fabrics. Fabrics made of identical fibers can have different
aesthetic value depending on their colors and designs.14) Textile design is applied to
pre-dyeing, weaving, knitting, printing and embroidery. Textile designers develop unique
and original designs based on references to apply colors, patterns and designs that suit
the purpose of the textile. In addition, they develop unique products based on the trends,
consumer demand and creative ideas. They create images, develop concepts, select
materials and produce samples as well while considering the final marketing. Clothing
design is to create the final products by cutting and sewing woven or knitted fabrics
according to the purpose. It is also called costume design. In the clothing design field,
subjects other than clothing design itself are studied, such as the characteristics of fabrics
used to produce clothing and effective ways to sell the produced clothing. In this way,
clothing design generates creative images in various fashion fields, and is a field that
applies design and aesthetics to clothing and accessories.
Textile design and fashion design are defined separately in the National Competency
Standards set by Human Resources Development Service Korea under the Ministry of
14) Naver Encyclopedia: Textile design

http://terms.naver.com/entry.nhn?docId=2083799&cid=44415&categoryId=44415)
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Employment and Labor. Here, textile design is defined as encompassing the work of
textile design research, design planning, design conception, fabric design and textile
prototype production to develop textile design products that suit a specific purpose.
Fashion design is defined as encompassing the work of creating functional, aesthetic
fashion products through design planning, design element analysis (colors, materials,
styles, etc.), fashion design and prototype development and evaluation.15)
In today’s world, where designs have become products and indicators of national
competitiveness, the development of design is essential for product differentiation, and
added value creation for design has a direct impact on the value of products. Design is a
tool that enables differentiation, quality improvement and added value creation in a
shorter period of time and with less investment than technical development. For two
clothing products with identical functionality, design represents more than 70% of the
differentiating elements; as well, the sale price can differ by a factor of 2-4 based on the
design. With a series of changes in lifestyle brought about by the rapid growth of industry
and economy, consumer tastes and desires are becoming enhanced and diversified, and
consequently, design has become a critical element that determines the success or failure
of products in the market. Design leads the integration and convergence of industries,
and various policies to support design are being implemented at a national level, as it is a
key element of value innovation and competitiveness.
(2) Current Conditions of Design in Korea
Korea’s attempts to promote its design industry began in the mid-1960s, when policies
for export-led economic growth were implemented. Poor design was the main cause of
complaints and claims related to Korea’s textile export products. In 1970, full-scale
promotion of the design industry was initiated with the establishment of Korea Design
Packaging Center (KDPC, later changed to the Korea Institute of Design Promotion) by
combining Korea Export Design Center, Korea Export Packaging Center and Korea
Packaging Technology Association, a decision made in the Fourth Blue House Export
Expansion Conference. In 1977, the Design Packaging Promotion Act was enacted to
provide assistance in the establishment, financing and operation of the Korea Institute of
Design Promotion. At the time, the focus was to manage and operate the Korea Institute
of Design Promotion instead of the overall contents on promotion of design and
packaging, which were weaknesses of exporting companies.16)
Since 1985, Korea Institute of Design Promotion has evaluated the design, functions
15) https://www.ncs.go.kr
16) 2013-2014 MOTIE White Paper, Ministry of Trade, Industry and Energy

and quality of products, and awards the GD (Good Design) mark to products with good
design and functionality in accordance with the Industrial Design Promotion Act.
The focus of the Korea Institute of Design Promotion shifted from government-led
operation and maintenance to support for industries in 1991 when the Industrial Design
Packaging Promotion Act was revised. At the time, the importance of design in overall
industries emerged, and the policy direction for strengthening of competitiveness shifted
towards the promotion of design. In 1993, the First Five-Year Plan for Industrial Design
Development (1993-1997) was established and implemented, and through the Second
(1998-2002), Third (2003-2007) and Fourth (2008-2012) Five-Year Plans, the Design
Industry Convergence Strategy Implementation Plan (2014-2017) was established in 2013.
In addition to the Five-Year Plans, the Design Industry Vision and Development Strategy
(1999), the Design Industry Development Strategy (2003), the Ministry of Trade, Industry
and Energy’s Design Industry Development Strategy (2005), the Design Industry
Promotion Master Plan (2011) and the Design Industry Convergence Strategy (2012) were
established and implemented.
Legislation related to the design industry includes the Industrial Design Promotion Act,
the Framework Act on the Promotion of Cultural Industries, the Industrial Design
Protection Act and the Copyright Act. The Industrial Design Promotion Act was first
enacted as the Design Packaging Promotion Act in December 1997, and the Industrial
Design Protection Act was enacted in 1961 to encourage design creations by promoting
the protection and use of designs. The Framework Act on the Promotion of Cultural
Industries (1999) stipulates matters required in supporting and fostering cultural
industries, while the Copyright Act (1957) stipulates matters related to the protection of
the rights of authors and the fair use of works.
Government organizations with “design” in their name include the Design and
Consumer Goods Division, the Korea Institute of Design Promotion and regional Design
Centers under the Ministry of Trade, Industry and Energy. In addition to these, there is the
Design Examination Policy Division under the Korean Intellectual Property Office, and the
Visual Arts and Design Division and the Korea Craft and Design Foundation under the
Ministry of Culture, Sports and Tourism. Also in local governments, rules and ordinances
are enacted as local regulations and tasks relating to design are performed in relevant
divisions including the Design Policy Division, the Public Design Division and the Urban
Design Division.
In Korea, design policies have been led by the government, and the Ministry of Trade,
together with the Ministry of Industry and Energy and the Korea Institute of Design
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Promotion, played a central role in the implementation of promotion policies in
recognition of the importance of the design industry as an independent field.
Design-related policies were constantly established and implemented for design
technology development, design foundation establishment, design expert cultivation,
education and promotion and design company promotion. Fashion design is a part of the
government's design development policies, and programs to strengthen capabilities in the
fashion industry and support and foster new designers are being implemented by the
Ministry of Trade, Industry and Energy, Ministry of Culture, Sports and Tourism, City of
Seoul, etc. Detailed government support activities in the fashion design field will be
discussed later.
Thanks to these government-led design policies, continuous investments in design

were made by large enterprises such as Samsung, Hyundai and LG, and the difficulties
small and medium enterprises had in investing in design were resolved to promote the
quantitative development of the design industry. Moreover, design companies have
achieved quantitative and qualitative development through various benefits provided by
the government to maintain the ecosystem of the design industry.
Currently, Korea perceives a need to promote the expansion and qualitative

development of its design market as well as increase the skill level of its human resources
in the design field to overcome present issues such as the fact that the design investment
structure is concentrated in large enterprises, and most design companies are small in
scale and uncompetitive. Cultivation of creative design capabilities and introduction of an
innovative design education system are discussed as the key issues design policies should
resolve.
(3) Development Process of Fashion Design in Korea
The development of fashion design is deeply related to the growth of the fashion
industry, designers and brands. After the Korean War in 1954, designer Choi Gyeong-ja
opened a Western-clothing specialty shop and Kookje Fashion Academy, Korea’s first
fashion education facility. The term “designer” was first used in 1955; in 1956, the first
fashion show was held in Korea by a designer named Norah Roh. Korea Fashion Designer
Association was founded in 1961 to promote both competition and information exchange
among designers. In 1962, a design competition was hosted by Korea Fashion Designer
Association, and the first international fashion show in Korea was held at Gyeongbokgung
Palace Industrial Expo. In 1964, the first school for fashion models was opened to cultivate
professional models. During the 1970s, an era in which custom tailored Western-style
clothes became popular in Korea, clothes were purchased either in tailor shops or in

traditional markets as ready-to-wear. With the emergence of ready-to-wear brands,
distribution channels such as department stores and retail clothing shops were developed.
Large enterprises including Hwashin Group (1972), Bando Fashion (1974), Kolon, Cheil
Industries and Samsung Corporation (1977) made their entry into the ready-to-wear
market, which brought about a rapid expansion of the domestic market.
During the 1980s, textile industry achieved qualitative growth, advancing the industrial
structure to form the basis of the fashion industry. As mentioned above, with the
Industrial Development Act of 1986, the efficiency of the industrial structure was
supported through the selection of industrial rationalization targets. Korea Federation of
Textile industry provided loans for the development of fashion design through the
Fashion Design Promotion Fund. During this time, small and medium-sized clothing
companies established themselves by introducing overseas license brands or by creating
their own brands. Comfortable casual wear such as jeans and t-shirts became widely
popular with the liberalization of overseas travel and school uniforms. In the women’s
wear market, Handsome Corporation, a newcomer, launched women’s wear brands called
Time and System to compete with the forerunners such as Shinwon and Nasan. With the
1986 Asian Games and the 1988 Olympics, sportswear brands led the fashion trends at
the time, and with the spread of color television, consumers began to take an interest in
overseas fashion.
During the 1990s, a number of casual brands and jean brands were launched, and new
generation street fashion trends and designer character brands were introduced. Through
the Uruguay Round in 1995, premium European brands including Chanel and Louis
Vuitton were brought to Korea to intensify competition with domestic brands. With the
complete opening up of the distribution market, overseas distributors made their way into
the Korean market, while private capital, large-scale distribution centers including Migliore
and Doota were established, mainly around Dongdaemun. Chain store operations were
deployed, and discount stores such as outlets were established for the multilateral
expansion of the domestic market.
After designer Icinoo made her Paris debut in 1992, Hanbok designer Lee Young-hee
(1993) and designer Lee Sang-bong (1997) made their Paris debuts as well. In 2000,
designer Ji Haye presented a collection of clothes made of traditional ramie fabric at Paris
Haute Couture. In 1990, Seoul Fashion Artists Association (SFAA) was formed, and
designers such as Icinoo, Jin Tae-ok, Seol Yun-hyeong, Lee Young-hee and Lee Sang-bong
led the globalization of Korean fashion.
Since 2000, an era of intensified global competition has arrived. With the global trend
77
of the fashion industry’s transition from market domains to limitless competition, the
fashion industry was expanded into cultural industry through the increased introduction of
foreign capital and contents. Consumers turned from luxury designer goods to unique,
personalized styles. The Red Devils became globally popular with the 2002 World Cup,
and in 2004, the television series Winter Sonata enjoyed huge popularity in Japan. This
phenomenon, which came to be called the “Korean Wave,” spread to China, South East
Asia, Europe and North America. Through the Korean Wave of television shows, films and
K-pop music, young designers in Korea were offered increased opportunities to expand
into overseas markets. With the overseas expansion of Korean designers and new designer
brands being introduced through domestic distribution networks, various fashion products
have been making their way into the market. New designer brands are solidifying their
status in the distribution market by addressing the tastes of young consumers, who seek
uniqueness rather than to follow trends.
Today, consumption is subdivided into various consumer groups who seek

trend-oriented consumption, value-oriented consumption, leisure-oriented consumption
and self-oriented consumption. Thus, fashion companies are launching brands that target
these subdivided consumer groups. Companies are expanding their capabilities by
forming their brand images and developing brands for each target.
As the fashion industry expands to a high value industry, numerous brands are being
launched, and these brands are categorized diversely according to their scale, form of
management, ownership, etc. By the 1990s, it became general practice for designer brands
to use the name of the designer as the brand name. Recently, the definition of “designer”
has been changed to mean a person who creates a new added-value market based on
their own creativity.
(4) Policies and Policy Direction to Support Fashion Design in Korea
The Ministry of Trade, Industry and Energy, together with the relevant organizations,
provides support for the fashion design industry through the Textile and Fashion
Invigoration Program and the Fashion Business Foundation Establishment Program. The
Textile and Fashion Invigoration Program supports fashion information sharing and
fashion market research, designer development and cultivation, apparel production
capability enhancement and textile development capability enhancement to promote
added value creation and the globalization of the textile and fashion industries. The
Fashion Business Foundation Establishment Program provides support for the
establishment of fashion apparel production assistance centers, K-fashion total business
invigoration and the establishment of fashion business centers.

[Table 1-32] Details of the textile and fashion invigoration program and the fashion
business foundation establishment program
Unit program Program contents

Enhancing the design planning abilities of small and
Fashion information
medium-sized fashion businesses through research, analysis
sharing and fashion
and diffusion of trends and information in the
market research
overseas/domestic fashion industry
Designer development Development of young designers and marketing and business

and cultivation related support
Strengthening the capabilities of sewing industry through the

Apparel production
construction of an overseas/domestic production
capability enhancement
Textile and infrastructure and human resources development
fashion Support for production development of materials
Apparel/living textile
invigoration manufacturers through provision of the information needed
development capability
for apparel and living material development and customized
enhancement
consultation
Global textile and fashion Establishment of networks among textile apparel producers,
distribution network vendors and buyers and export support for textile and fashion
capability enhancement businesses through developing textile and fashion footholds
Industrial textile Research and analysis of industrial textile production

production capability capabilities, support for the development process of materials
enhancement and products, support for the globalization of business
Establishment of a joint-use production support system for

Fashion apparel work environment improvement of small fashion businesses in
production assistance the region, and support for sewing machineries and
center technologies (specialized sewing machineries, prototype
production support, etc.)
Development of marketing strategies and business platforms

Fashion K-fashion total business that combine the textile and fashion industries with cultural
business invigoration contents, brand marketing assistance for domestic fashion
foundation companies
establishment
Construction of “Urban K-fashion Cultural Complex’ through
K-fashion total business
the development of fashion, beauty and culture experience
center
spaces linked with the Korean Wave and tourism industry
Construction of fashion business center with designer creation

Fashion business center studios, product exhibition halls, education facilities and
designer total support facilities.
Source: Ministry of Trade, Industry and Energy 2014-2016
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Seoul Design Center, an affiliated organization of Seoul Metropolitan Government,
runs Seoul Fashion Week. It also operates the Fashion Designer Start-up Center, which
offers showrooms and studios. As well, it organizes a start-up incubation contest for new
fashion designers, and provides fashion business start-up assistance through cooperation
with the private sector.
The Ministry of Culture, Sports and Tourism provides support for the overseas
expansion of Korean fashion companies, overseas market entry of new designers and
participation in fashion weeks. Korea Creative Content Agency, an affiliated organization
of the Ministry of Culture, Sports and Tourism, organizes Fashion Kode, a fashion designer
fair show, in cooperation with the Council of Fashion Designers of Korea. It also provides
support for pop-up stores and prototype production through sponsorship from
department stores.
[Table 1-33] Summary of government support for the fashion industry
Ministry of Trade, Industry Ministry of Culture,

City of Seoul
and Energy Sports and Tourism
Overseas exhibition
Overseas Overseas marketing
participation assistance ConceptKorea
expansion (exhibition, 10soul)
Global brand cultivation
New designer
New overseas expansion
Korea Fashion Contest Creation studio
business Prototype
Designer incubating Mode List, sewing
promotion production
assistance
Apparel production
Fashion Support Center
Production capability enhancement
(Dongdaemun,
base Fashion business
Seongdong, Jungrang)
foundation establishment
Event Indie Brand Fair Fashion Kode Seoul Fashion Week
Fashion information and

market research
Fashion Domestic/overseas global The K-wave contents
information forums integration
Fashion database
establishment
Source: Korea Fashion Association, 2035 Development Strategy for Fashion Industry in Korea, December
2015

Korean Apparel Industry Association, Korea Fashion Association and Korea Research
Institute for Fashion Industry also engage in various support activities. The Korean Apparel
Industry Association operates a sample room (purchasing 300 samples in each S/S or F/W
season, a total of 2,000 samples in the collection) for ODM development, and member
companies can rent out the samples for free. LEDOMEㆍSmall Business Development
Center provides marketing assistance including planning and consultation through trend
analysis, pattern and sample production assistance and a business showroom. The Textile
and Fashion Intellectual Property Protection Center provides support for investigations of
possible infringements, customized information service, consultation and education
programs. Korea Fashion Association organizes the Korea Fashion Contest and Indie Brand
Fair to promote the fashion design industry and designers. It provides phased assistance
for new designers to enter the indie brand stage, and then to enter the actual business
stage through business exchange conferences. It also organizes forums for fashion
designers and brands that help them to learn about trends in the fashion business. Korea
Research Institute for Fashion Industry operates the Design Fashion Industry Promotion
Program to provide fashion brands, material brands and living brands with assistance in
design and product development. It has established an online viewer system, and offers
trend books and fashion flashes. It also operates the Creation Design Studio to provide
new designers with consultation services and assistance in prototype production, together
with the Fashion Start-up Camp.
With a constantly expanding market, the fashion apparel industry provides high added
value and creates many jobs. In the fashion design field, many new designers are
cultivated thanks to the support provided through government policy. However, design
college graduates tend to avoid small and medium-sized enterprises, and they lack field
experience and production capability. The turnover rate for new designers is high due to
the low wage, which hinders their development into skilled designers. Designers working
actively in the domestic market have low awareness in the global market, and most focus
on copying the designs of overseas designers rather than creating original designs.
Moreover, although it has many brands with the potential for overseas market expansion,
Korea still lacks global brands. Small and medium-sized enterprises tend to avoid making
investments in their brands, while large enterprises have settled for the domestic market.
Today, Korea needs to enhance the value of its products by promoting the fashion design
industry.
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4. Policy Suggestion (Reinforcement of Value Chain)
4.1. Deriving Strategies

In Uzbekistan’s textile industry, the competitiveness of the industrial value chain must
be reinforced, while settling into the global value chain to solidify its place in the global
market as a key textile producing country. To reinforce the domestic value chain’s
competitiveness, the value chain completed at the business level must be linked to the
advancement of the value system in the overall textile industry. The term “value chain” is a
concept that includes the development process prior to the production process and the
marketing and distribution after the production process. For this reason, policy
suggestions made in this section are focused on effective manufacturing and sales, but
marketing activities to find markets - in other words, expansion of demand - are more
important.
There are many projects that should be implemented to strengthen competitiveness

through reinforcing the value chain in Uzbekistan’s textile industry. In Section 2, SO
strategy, WO strategy, ST strategy and WT strategy were suggested. The SO strategy
includes cotton cluster value chain reinforcement, buyer network incorporation utilizing
price competitiveness and a priority strengthening of the CIS market. The WO strategy
includes the establishment of a medium and long-term plan for chemical fiber production
and the mechanization of cotton cultivation to fulfill the needs of the buyers. The ST
strategy includes the structural advancement of the cotton sewing industry and the
promotion of the high value fashion design industry. The WT strategy includes
international cooperation to strengthen technical competitiveness and internal structural
improvement to enhance the business environment.
However, the most important thing is to set priorities through a realistic approach and
carry out a step-by-step implementation of the projects. While all projects are essential, it
is recommended to implement the SO strategy first to utilize advantageous fields and
external opportunities. Then, it is recommended to move ahead to the ST strategy and
WO strategy. The WT strategy is based on internal weaknesses and unfavorable factors in
the external environment. In other words, it is an avoidance strategy. Weaknesses shall be
resolved over a relatively longer period of time.
Based on the four groups, nine strategies were derived from the SWOT analysis, and
key projects to represent each group were established considering the importance and
range of implementation of each strategy. The key projects are: reinforcement of cotton
cluster value chain, structural advancement of the cotton sewing industry, establishment

of a medium and long-term plan for chemical fiber production, and internal structural
improvement for the enhancement of the business environment. Focusing on the four
strategies, each project was modified and detailed action plans were suggested to provide
policy suggestions of a total of 15 projects.
Reinforcing the cotton cluster value chain is important because Uzbekistan has a
comparative advantage in the cotton industry. The government is aware of this fact, and
has been gradually reducing the rate of raw cotton export to expand into high value
products. But Uzbekistan is still one of the major raw cotton exporting countries in the
world. Reinforcement of the value chain needs to be applied in all streams, from yarns to
fabrics, dyeing and finishing and products.
Apparel production is developing in regions where there is abundant, cheap labor

rather than in regions with technical or geographic advantages. In the global textile
market, multinational textile enterprises are transferring their production bases to
countries with low production costs. These regions are also equipping themselves with
production facilities for textiles and raw materials. Large-scale apparel companies are
strengthening local production through outsourcing and promotion agencies while
focusing on planning, design and distribution.
Currently, developing countries in Asia including China, India, Pakistan and Bangladesh
possess abundant manpower, and in these countries, the entire process of apparel
production - yarns, knitting, embroidery, dyeing, sewing, etc. - can be performed in a
single location (securing of a vertical production line). Thus, they offer the benefit of short
lead time. This is the field that should be promoted as a priority, as it is suitable for the
fast fashion trend and enables production by buyer compliance.
The chemical fiber industry is a process industry that requires large-scale production
facilities, which serves as an entry barrier. However, industries in this sector in China and
India readily procured capital through government policies to promote the chemical fiber
industry, and advanced countries such as Japan and Germany that produce the related
machinery and equipment are transferring their technologies through a turn-key
approach. As such, the entry barrier to the chemical fiber industry has been greatly
lowered. The constant production capacity increase in China is causing an oversupply.
However, the importance of chemical fiber was already described in the above. Internal
capacity is important for market entry into the high performance sportswear market
utilizing chemical fibers, but it shall also be combined with plans for basic infrastructure
and human resources.
Lastly, suggestions are made related to the exchange rate and financial incentive for
83
exports, the construction of textile industrial complexes, the utilization of export assistance
organizations and the development of precise data.
4.2. Action Plans

A. Reinforcement of Cotton Cluster Value Chain
(1) Improvement of Raw Cotton Distribution Structure and Mechanization of Cotton
Cultivation
The distribution structure of raw cotton shall be reformed to promote price stability,
stock reduction and the profitability of spinning companies. In other words, supply and
demand shall be left to the market while the government performs indirect adjustment.
Cotton shall be distributed through the supply and demand of the market to resolve the
issue of excessive manual labor and low productivity, except in special circumstances, such
as export and import adjustment or increase and decrease in national deposits to control
extreme price fluctuations.
The advantages and disadvantages of hand picking were described earlier in this
document. Although the child labor issue has been resolved to some extent, buyers in
America and the EU, the major textile markets in the world, are still raising the human
rights issue with regard to cotton workers. Limitations in quality control are sometimes
exposed through the defects caused by foreign materials collected during manual
cultivation. Uzbekistan’s government announced a plan to improve the mechanization rate
to over 90% by 2017, but this goal has been delayed. Another alternative to increase the
quality of raw cotton is to find a way to remove foreign materials more precisely during
ginning17), which is the first stage of processing cultivated cottons. Thus, a more precise
ginning machine shall be developed through cooperation with domestic and overseas
machine producers.
(2) Buyer Network Incorporation Utilizing Price Competitiveness
The sewing industry is a labor-intensive, urban-type manufacturing industry with a low

entry barrier. Uzbekistan - with its low cost, abundant manpower - has the optimal
conditions for the sewing industry. It shall participate in the networks of global leading
enterprises by competing with major apparel producing countries such as Bangladesh,
Vietnam and Pakistan. For infrastructure and other required conditions, please refer to the
FDI attraction.
17) Process of getting rid of seeds, particles, etc. from cotton. About 50 grinning factories are in operation in
Uzbekistan and each factory is equipped with two to five grinning lines.

The goal shall be to start as an OEM production base through buyer network
incorporation and to expand into self-sufficiency in raw materials while developing
merchandising abilities; then, ultimately, to switch from buyer-oriented production to
manufacturer-oriented production.
(3) Quality Improvement and Joint Material Development through Cooperation

among Streams
An environment optimized for cooperation among streams (raw materials - yarns -

fabrics) shall be created, as producers of raw materials and cotton yarns can achieve
quality improvement and develop new materials through networking with their clients
such as knitting or dyeing and finishing companies. Through cooperation among the
streams, investments can be made to develop new processing technologies and
composite materials according to the needs of buyers, and through such investments,
quality enhancement and added value creation are enabled.
Moreover, the same effect as vertical systemization through merger and acquisition
can be achieved through the establishment of partnerships among the streams.
Competitiveness will be increased through economies of scale to respond to demand and
cost reduction.
(4) Priority Strengthening Strategy for the CIS Market
Russia and the CIS markets are the greatest customers of Uzbekistan. As of 2016, the
rate of textile imports from Uzbekistan on the market in the CIS region is about 5%
overall, with Uzbekistan holding a 38% share of the HS 52 cotton market and a 16% share
of HS 60 knitted fabrics. It is recommended to examine the market trends, import and
export statistics and activities of competitors and share information through regular and
occasion meetings and briefing sessions with relevant industries to actively respond to
changes in market conditions.
Moreover, marketing centers shall be established in key footholds in the CIS region to
support joint marketing activities of companies, resolve difficulties in exports and provide
assistance for companies participating in exhibitions and expos.
B. Structural Advancement of the Cotton Sewing Industry

(1) Construction of Apparel Sewing Clusters to Drive Synergies in Production
Apparel sewing clusters shall be constructed to shorten the delivery period in all
85
processes of planning, design, sewing and marketing, to reduce costs and to improve
production efficiency. It is recommended to construct apartment-style factories in urban
areas with abundant manpower to provide joint workspaces, prototype production
assistance and joint equipment use. For 40-50 companies in an apartment-style factory,
assistance must be provided to resolve their difficulties, such as to offer joint workspaces
for processes that require large spaces including cutting and maintenance and repair of
sewing machineries.
(2) Cultivation of Field Workers and Management Professionals through Job

Training and Management Training
On-the-job-training programs shall be developed to improve the job training of

workers. It is recommended to develop and spread a specific competency standard for
knowledge, skills and etiquette required to perform tasks in industrial settings. Since 2000,
Korea has been developing the National Competency Standards through the Ministry of
Employment and Labor and Human Resources Development Service of Korea to utilize
these in educational training, qualification and career development. Standards such as
these need to be developed and operated at the national level for educational training
courses focusing on practical performance, introduction and redesign of national
qualification, competency-oriented human resources management through NCS
employment and lifelong career development of workers.
Cultivation of skilled manpower in the sewing industry must also be pursued. To this
end, educational programs of elementary, intermediate and advanced level sewing,
pattern CAD, reform and marketing and practical training for college students shall be
operated. Quality enhancement will be achieved through the cultivation of skilled labor.
Specialized education for administration and management professionals shall be offered
as well. Through education, administrators and managers will be developed into the
global talents that can lead Uzbekistan in the future. Educational training can serve as an
opportunity to broaden one’s perspective and knowledge through skills acquisition,
management field experience and network building for global business. Currently,
educational training programs are implemented in cooperation with Korea Institute of
Industrial Technology, but there will need to be more training programs, both in
Uzbekistan and abroad.
(3) Promotion of the Design Sector for Diversification of Materials
Design, like export, belongs in the business domain, but the establishment of
information services and the promotion of design must be supported by the government.

New designers and small businesses do not have sufficient resources to develop designs.
Research and analysis on material and color trends shall be provided, together with a
design database containing successful design cases and trends.
To cultivate design professionals, specialized colleges that are focused on practical

training in the advanced skills required in the field shall be established to offer specific
courses for each field of fashion design, pattern-making and merchandising. In this
process, voluntary investments from industry can be attracted by offering a human
resource matching service. It is also recommended to develop new talents through design
competitions for students and new designers, and to expand the base by organizing
international conferences and festivals.
For independent designers with less than 7 years of experience and small-scale brands,
assistance in prototype production shall be offered. Prototype and small quantity
productions are made possible by offering assistance from pattern-making to sample
production and material development, to develop new designers and lay the foundation
for start-up brands.
(4) Construction of Testing Infrastructures for Quality Stabilization
Textile companies can resolve technical difficulties through test analysis and enhance
their product quality through technical development. Some of the large enterprises have
their own test analysis facilities but their operation is limited due to issues of cost,
operation specialists and credibility. Tashkent Institute of Textile and Light Industry also
has test and analysis facilities provided by Japan, but these were installed to be used for
educational purposes. For this reason, infrastructures for enterprises must be constructed.
In Korea, three testing and research institutes to support exporting companies were
established as early as the 1960s. These institutes are expanding to overseas countries
including China, Indonesia and Vietnam, and have formed cooperative relationships with
credible institutes abroad. Test analysis and prototype assistance services are also offered
at specialized production technology research institutes, including the Korea Textile
Development Institute.
C. Establishment of a Medium and Long-term Plan for Chemical Fiber

Production
(1) Expansion of Government Support for the Supply of Various Chemical Fibers
In the short run, facilities shall be upgraded to hold equipment suitable for chemical
87
fiber, and will produce the functional yarns and fabrics to develop high performance
activewear made of chemical fibers. During the factual survey, it was very impressive to
find out that IDEAL, a domestic brand in Uzbekistan, is producing chemical fiber and
cotton blend jackets and trousers.
Through a Presidential decree, a policy to waive the tariffs on domestically unavailable

chemical fiber items (30% or more chemical fiber in chemical fiber fabric) has been
implemented, but the quick examination of “domestically unavailable items” needs to be
provided to expand production and sales of chemical fiber products. It is recommended
to provide tariff exemption and low-interest loans for chemical fiber machinery, and to
create a technical development project with companies in all streams, as well as to offer
government support for the resolution of technical difficulties.
(2) Establishment of a General Plan to Introduce Chemical Fibers Facilities
Although the entry barrier has been lowered, the construction of chemical fibers
facilities is a medium to long-term project that requires a large amount of investment, a
stable supply of electricity and professional human resources. Chemical fiber specialists
must be cultivated through colleges, and the issue of unstable electricity resolved. On a
chemical fiber production line, which is operated 24 hours a day, the quality of chemical
fiber products is determined by the stability of the supply of electricity. Defective products
cause claims, and in some extreme cases, can lead to serious damage to a facility.
In Uzbekistan, a plan shall be established to construct a chemical fiber complex next to

the Petrochemical Plant. The plan shall be designed to form a chemical fiber cluster that
combines yarns and fabrics.
D. Improvement of Internal Structure to Enhance Business Environment

(1) Depreciation of the Sum to Secure Export Competitiveness
Although the exchange rate for the Uzbekistan so’m has been continually increasing,
depreciation of the so’m compared to the dollar is necessary to secure price
competitiveness in the export market. Most of the products produced in Uzbekistan are
general purpose goods, and thus, price competitiveness is the priority concern. The
appreciation of market exchange rates accompanied by the difficulties of foreign
exchange transaction due to the dual exchange rate system is an issue that must be
resolved swiftly by the government.

(2) Financial Incentive for Exportation and Technical Development Support
To expand exports, permission for accelerated depreciation on machineries and VAT

refund for raw materials for export products are required, in addition to the exemptions
on customs duty and internal tax for domestically unavailable items.
To strengthen the quality competitiveness of exporting companies, there also must be

policies to support R&D, such as inter-stream technical development and costs for the
overseas certifications demanded by buyers.
(3) Construction of Dyeing Clusters for Promotion of Middle Stream
Export Processing Zones (industrial complex) for the textile industry or dyeing clusters
shall be constructed. Currently, there are three industrial complexes in Uzbekistan, but
only a few textile companies are operating there. To promote the middle stream, which is
the weak point for Uzbekistan, investment in the dyeing and processing industry is
essential. Dyeing is closely related to the environment, as it involves steam, water and
wastewater, which is why it is difficult for private enterprises to operate dyeing facilities on
their own. The benefits of a dyeing cluster include technical development and joint
activities to address environmental issues as well as cost reduction through cogeneration
facilities, water intakes and purification facilities and joint wastewater treatment.
(4) Data Development and Statistics Management to Support Government Policy

Establishment
The development of precise data and phased textile policies are essential. A statistics
system in the textile industry shall be established through cooperation among the
Uzbekistan State Committee on Statistics, Uzbekyengilsanoat and Uzklopkoprom. Statistics
are important because they enable the development of textile industry policies based on
precise data on export, production, etc. It is important to provide institutional support to
ensure that textile policies are supervised by the Ministry of Economy and implemented
by Uzbekyengilsanoat‘s public enterprise sector and association sector.
The dichotomy of the functions of Uzbekyengilsanoat is also a consideration.

Uzbekyengilsanoat is a public enterprise that stands somewhere between a branch of the
government and a trade association. Like a trade association, it has about 400 member
companies, yet it handles government tasks such as “examination of domestically
unavailable items,” and is engaged directly in government policies. The suggestion is to
divide it into two separate entities: a public enterprise for investment and research and an
association to represent the textile industry. In Vietnam, for instance, Vinatex, a public
89
enterprise, and Vietnam Textile and Apparel Association are operated separately. During
the early stages of economic development, a powerful representative enterprise shall take
the initiative in carrying out government policies. In Korea, some of the conglomerates
that had achieved growth led the textile industry by reinvesting their profits in research
and development. Also, the association shall supervise all streams, including raw materials,
cotton spinning, chemical fiber, wool, silk, woven fabric, and products etc. to represent the
overall textile industry.
(5) International Cooperation for Strengthening of Technical Competitiveness
Enterprises in Uzbekistan identified human resources cultivation and resolution of

technical difficulties as the fields in which they would like to receive support from the TPP.
In advanced countries, as well as in Korea, various technical guidance programs are
offered for latecomers in the textile industry. It is recommended that Uzbekistan enhance
its technical competitiveness through active participation in technical exchanges and
international conferences.
4.3. Conclusions
Korea achieved remarkable growth after World War II and the Korean War based on its
cheap labor, aid funds from advanced countries and the policy support of the
government. Of course, it was a propitious time to expand export through export
promotion policies, as China was yet to make its debut in the global market. Through
competition with Japan and Taiwan, Korea was able to establish a balanced production
base of all streams. However, today’s export market is filled with strong competitors that
have an abundance of cheap labor, including Vietnam, Bangladesh and India, and some of
these countries are making their way forward to chemical fiber, a large-scale process
industry.
There are many difficulties when it comes to analyzing the current condition of
Uzbekistan’s textile industry due to the direct/indirect control of the government and a
lack of references. Statistics on the textile industry are unavailable, and for the surveys
conducted in Uzbekistan, the respondents tend to provide positive answers rather than
accurate answers to the situation. There are separate managing entities for raw materials
and wool, and the Uzbekyengilsanoat, which is in charge of the overall management of
the textile industry, is making policies with a focus on its member companies rather than
on the textile industry as a whole. However, Uzbekistan has infinite growth potential in the
textile industry thanks to its production of cotton, potential for earning dollars through

export and abundant labor. Uzbekistan can utilize the nearby CIS market as a domestic
market, increase added value by reducing raw cotton exports and through the processing
of raw cotton, and grow into a global apparel production base based on its price
competitiveness.
Through the SWOT analysis on Uzbekistan’s textile industry, four strategies (SO
strategy, ST strategy, WO strategy and WT strategy) and 15 projects were established.
Through the SO strategy (strengthening of cotton cluster value chain), improvement of
the raw cotton distribution structure, mechanization of cotton cultivation, buyer network
incorporation through price competitiveness, quality improvement and joint material
development with cooperation among the streams and the priority strengthening strategy
for the CIS market were suggested. Through the ST strategy (advancement of cotton
sewing industrial structure), construction of apparel sewing clusters, cultivation of field
workers and management professionals, promotion of the design sector for diversification
of materials and construction of testing infrastructures were suggested. The WO strategy
(establishment of a medium and long-term plan for chemical fiber production) is to
establish a general plan to expand government support and introduce chemical fiber
facilities. Lastly, through the WT strategy (improvement of internal structure to enhance
the business environment), depreciation of the so’m, financial incentives for export and
technical development support, construction of dyeing clusters for promotion of the
middle stream, data development and statistics management and strengthening of
international cooperation were suggested. The figure below illustrates a phased
implementation of the strategies based on priority.
[Figure 1-15] Phased implementation of projects based on priority
• Strengthening of the • Structural advancement of • Establishment of chemical

cotton cluster value chain cotton sewing industry fiber production to meet
the global trend
(long-term)
Improvement of internal structure to International cooperation to

enhance the business environment strengthen technical competitiveness
91
The order shall be reorganized to fit the present conditions of Uzbekistan based on
the priority of policies.
The reality of Uzbekistan’s textile industry must be examined thoroughly in

cooperation with the relevant government departments and industrial associations, and
institutional measures shall be applied to fit the reality and to suggest the future direction
for the textile industry. It is also important to maintain the partnership with Korea to
establish plans for execution.
In D of sub-section 4, Section 3, Characteristics of Development Process of Korea’s

Textile Industry, Korea’s experience and strengths were examined. Korea has a competitive
edge in the middle stream, a weak area for Uzbekistan, and Korea Institute of Industrial
Technology, the organization constructing the TPP in Uzbekistan, together with regionally
specialized production bases and textile institutes, establishment of a global production
network, design capabilities and competitiveness were mentioned. With the TPP as a
medium, Uzbekistan shall establish a cooperative system with outstanding research
institutes in Korea to improve its capacity to provide the industry with support for testing
and analysis and prototype production. Moreover, it is recommended to benchmark the
National Competency Standards (http://www.ncs.go.kr) that were established and
operated in Korea to support the efficient management of human resources. The NCS was
established through a large investment of money after many trials and errors, and can be
utilized in the design (fashion and textile) fields as well as in the production fields.
It is also recommended that Uzbekistan learn from Korea’s experience for the
production plans suggested, including the medium and long-term plan to introduce
chemical fiber facilities. Korea’s key export items include chemical fiber fabrics and knitted
fabrics, which are used as high performance materials, and Korea has the highest level of
expertise in the fields of high performance fabrics.
Uzbekistan has the highest population of all of the countries in Central Asia, and is
located at the head of the Silk Road connecting Asia and Europe. It is also a strategic key
point to enter Russia and the CIS region. With Uzbekistan’s strength in cotton fiber and
Korea’s expertise in chemical fiber fabric, we will be able to achieve complementary
cooperation rather than compete with each other.

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Reference
<Reference: Survey Results>
ㅇ General Status of Company

ㅇ Difficulties in Management
ㅇ Difficulties in Production Activities
97
ㅇ Difficulties in Marketing Activities
ㅇ Difficulties related to Exports
ㅇ Difficulties in Equipment Investment

ㅇ Purpose of Technical Innovation and Development
ㅇ Technical Level of Key Products
ㅇ Overseas Sales Channels
99
ㅇ Advantages of Investment/Production Activities in Uzbekistan
ㅇ Disadvantages of Investment/Production Activities in Uzbekistan
ㅇ Measures to Improve Competitiveness at the Industrial Level
ㅇ Priority Field of Government Support
ㅇ Priority Field of Support from TPP
101
FDI Attraction in
1. Introduction
2. Purchasing Trends in the Global Textile and Apparel Market
3. Korea’s Experience in Attracting FDI and Making Global Investments
in the Textile and Apparel Industry
4. Implications of Foreign Investment Experiences of Korea Textile & Apparel
Industry and Investment Decision Factors
5. Uzbekistan’s Investment Environment
6. FDI Policy Recommendations for Uzbekistan’s Textile and Apparel
Industry
 Chapter 2
FDI Attraction in Uzbekistan’s

Textile Industry
Kim Bu Heung (Korea Federation of Textile industry)
1. Introduction
The textile and apparel industry is a key strategic industry for developing countries
seeking to achieve economic growth and industrialization. In general, a developing
country develops its textile and apparel industry from production of textile materials →
cutting-making-trimming (CMT) → OEM → ODM by attracting foreign direct investment
(FDI) to maximize its industrial and economic potential.
Throughout the last 50 years, most countries that have successfully achieved
industrialization, including China, Southeast Asian countries and Central American
countries, have utilized the textile and apparel industry as their main driving force of
economic growth during the early stages of industrialization and made dedicated efforts
to attract FDI. In this regard, major countries in Central Asia including Uzbekistan are
exploiting strategies similar to those of countries in other regions to achieve
industrialization and economic growth by attracting FDI.
With the trend of global textile supply bases moving from China to Southeast Asian
countries over the last 10 years due to rising production costs in China, the strategies
utilized by Central Asian countries to achieve industrialization and the development of
their textile and apparel industry through FDI are considered to be legitimate. It is thought
that major countries in Central Asia such as Uzbekistan, Kazakhstan and Turkmenistan can
partially replace countries in Southeast Asia and Central America as the key sourcing
bases in the global value chain, thanks to their competitiveness in production elements
such as abundant raw cotton resources and cheap land.
Uzbekistan, in particular, has been achieving steady growth for the last 10 years, with
its yearly average GDP growth at 8%. To maintain this steady growth, Uzbekistan’s
government has been implementing some key strategies to promote the manufacturing
industry, such as the “Reformation, Modernization and Diversification of Productive
Structure.”
Moreover, Uzbekistan’s government, in recognition of the benefits that the textile and
apparel industry can bring, including job creation and securing of foreign currencies
through increased export during the early stages of industrialization, has announced the
“2017-2021 Implementation Strategies for Future Growth of Uzbekistan,”18) and
emphasized the importance of light industry in reformation of the economic structure,
modernization and diversification of industries and securing of export competitiveness.
More specifically, Uzbekistan’s government is implementing “Reformation, Modernization

and Diversification of Productive Structure” to upgrade its textile industry, which is at a lower
level of cotton cultivation and simple processing of cotton, to a structure with higher added
value, and at the same time, to achieve local manufacturing of textile materials for which it
has a high dependency on overseas imports. Moreover, Uzbekistan’s government recognizes
that attraction of FDI can be a powerful tool in securing capital for its textile and apparel
industry, localizing advanced production technologies and cultivating domestic textile and
apparel businesses, and provides various benefits for foreign direct investors.19)
Despite the active policies pursued by Uzbekistan’s government to attract FDI for its
textile and apparel industry, it has to complete with over 100 countries in the early stages
of industrialization to attract global textile and apparel enterprises.
Uzbekistan’s competitors have various competitive edges such as cheap labor costing
less than 50 USD in a month, access to a large domestic market, outstanding production
and export infrastructures including road, railroad and electricity and preferential trade
arrangements with major markets such as the USA. Thus, Uzbekistan is faced with the
challenge of pitting its strength and opportunity factors against competitors in the global
textile and apparel industry.
Meanwhile, the global textile and apparel market has been experiencing oversupply for
a long time due to the increased supply capacity and productivity, and as a result, the
18) Uzbekistan Presidential Decree (Feb 7th, 2017). Strategy actions in five priority areas of the Republic of
Uzbekistan in 2017-2021 years
19) Uzbekistan Presidential Decree No. 2687 (Dec 21st, 2016). On the Further Development of the Textile, Garment
and Knitwear Industry in 2017-2019
105
Chapter 02_FDI Attraction in Uzbekistan’s Textile Industry 
marketplace requirements are diversified and complex, with intensified price competition
and demand for fast delivery. The textile and apparel suppliers, who are also the global
investment groups, are also faced with a free-for-all in securing export competitiveness,
and thus it is thought that the global competition to attract FDI in the textile and apparel
industry will be further intensified in the future.
Therefore, the development strategy for the textile and apparel industry through FDI
attraction implemented by Uzbekistan’s government has various obstacles and challenges
when compared to its competitors in the global textile & apparel industry value chain.
For example, buyers are concerned with the quality and forced labor issues when it
comes to cotton and cotton products produced in Uzbekistan, while other obstacles
include: regulations on profit remittance by overseas investment enterprises; the large
difference between the official and market exchange rates; and the cost and time involved
in logistics.
Thus, it is essential for Uzbekistan’s government to recognize the above weaknesses

and challenges, and provide active measures to correct them in order to achieve global
competitiveness in the textile and apparel industry.
Meanwhile, global textile demand has been showing steady growth since the 1990s
despite the oversupply and intensified competition, and the experts believe that global
textile demand will continue to increase, from 84 million tons in 2016 to 120 million tons
in 2030.20)
Although the long-term growth in global textile demand does not serve as an
exclusive opportunity for Uzbekistan, such long-term growth in the market offers an
opportunity for Uzbekistan’s textile and apparel industry to secure its place in the global
value chain, depending on the efforts made by Uzbekistan’s government and industry.
As mentioned above, Uzbekistan’s government must address its weaknesses and

challenges in attracting FDI and make the best use of its strengths and opportunity factors
while adhering to the perspective of the global value chain system, to establish its
position in the long-term growth of the global textile and apparel industry based on
Uzbekistan’s resources and policy capabilities.
20) PCI Wood Mackenzie Red Book 2016
[Figure 2-1] Changes in global textile demand (unit: 1,000 tons)
* Source: PCI Wood Mackenzie Red Book(2016). www.woodmac.com
For this purpose, this study suggests development directions and strategies that
combine policies for FDI and industry for Uzbekistan’s government to attract FDI to its
textile and apparel industry by analyzing the strengths, weaknesses and challenges in
Uzbekistan’s investment system from the perspective of the current global textile and
apparel businesses.
This study consists of: 1) an analysis on the decision-making process of the major
buyers in the global textile and apparel market; 2) an analysis on the global investment
experiences of Korean enterprises, which are playing an important role in the global textile
and apparel supply value chain; 3) an analysis on the strengths and weaknesses of the
investment environments and the policies of Uzbekistan’s textile and apparel industry
under the global value chain system; and 4) policy reinforcement and strategic action
plans for Uzbekistan’s government to attract foreign direct/indirect investments in the
textile and apparel industry; and throughout the research process, in-depth interviews
with relevant personnel and experts, a detailed factual survey of policy-making authorities
in Uzbekistan, training sessions in Korea to strengthen capabilities and the final briefing
session in Uzbekistan were carried out.
Specifically, this study looks at the implications for overseas investment by analyzing
the changes in the decision-making elements, trends and patterns of buyers in the global
textile and apparel market.
107
To consider the experience of Korea’s textile and apparel industry, the Korean
government’s experience in attracting FDI to its textile and apparel industry and policies in
Korea related to foreign investment for incorporation into the global value chain are first
examined; then, present conditions and characteristics of the overseas expansion of
Korean enterprises - mainly in Asia, Central America and Africa - based on the
backgrounds and progress of the Korean textile and apparel industry’s overseas
investment are examined, to provide implications for Uzbekistan’s government. In this
process, determinants of foreign investment sourcing are examined together with the
result of the survey from the perspective of Korea’s textile and apparel enterprises and
global buyers, based on the overseas investment experiences of Korea’s textile and
apparel enterprises.
For an analysis of the investment environment, the significance of foreign direct

investment in Uzbekistan’s textile and apparel industry, current conditions of investment
and characteristics and issues in Uzbekistan’s politics, macroeconomics, infrastructures and
legal/institutional environments are examined.
Finally, strategic improvements and advice are suggested for Uzbekistan’s government
for the attraction of investment through a SWOT analysis on its strengths, weaknesses,
opportunities and threats in attracting FDI to the textile and apparel industry based on the
analysis made above.
For an analysis on the investment environment in the textile and apparel industry, in
particular, determinants of global buyers to make purchases and determinants of global
enterprises supplying finished products to the buyers in making investments, as well as an
approach to the investment environments and systems of the country, shall be integrally
reflected to describe the competitiveness, strengths and weakness in FDI on the country’s
The main purpose of this study is to share Korea’s experience, and thus, directions are
suggested to establish legitimate policies to attract FDI in accordance with the current
economic and industrial conditions in Uzbekistan based on the development, cases of
overseas expansion and investment factors of Korea’s textile industry.
On this basis, following an interim briefing report Uzbekistan’s policy-making

authorities were invited to Korea for capability strengthening workshops and investment
briefing sessions for attraction of foreign investment and policy programs for the
development of the textile industry. Also, the results of this study were shared through the
final briefing session in Tashkent that included an exchange of opinions among persons
and organizations concerned in this program, including those from Uzbekistan’s
government, Uzbekyengilsanoat, affiliate organizations of Uzbekyengilsanoat, universities
and institutes, domestic enterprises in Uzbekistan and foreign investment enterprises,
including investors from Korea and the World Bank.
2. Purchasing Trends in the Global Textile and

Apparel Market
From a supply-demand perspective, the global textile and apparel industry is in a
condition of oversupply, in which the supply exceeds demand by more than 30%, and this
oversupply has been increasing steadily since the mid-1990s.21)
In this regard, the global textile and apparel industry is driven by the buyers, and as
mentioned in Part 1, the suppliers in the global textile and apparel industry including
China are experiencing fierce competition.
Thus, it is critical for a supplier in the global textile and apparel industry to understand
the determinants of sourcing, the key determinants for the buyers in making purchases,
and changes thereof, and for Uzbekistan’s government, this provides important
implications when analyzing the external environments and competitiveness to attract
foreign investments.
2.1. Determinants of Supply Price in Textile and Apparel Industry

The USA has the largest textile and apparel market of any country in the world, and is
the key market in global textile and apparel trade. The unit price for apparel import in the
USA has been decreasing, especially during the last five years.
More specifically, the average unit price for apparel import in the USA has been
steadily decreasing, from a previous high of 3.77 USD in 1997. In 2012, it was 3.24 USD,
which is a decrease by 0.3% compared to the previous year, and the price has since been
dropping continuously - 3.21 USD in 2013, 3.19 USD in 2014, 3.13 USD in 2015, and 3.00
USD in 2016.
21) PCI Wood Mackenzie, World Fibers Conference (Nov 10th, 2016)
109
[Figure 2-2] Changes in unit price for apparel import in the USA (unit: (left) one
million USD, (right) $/㎡)
* Source: Department of Commerce OTEXA
As shown in <Figure 2-3>, the price of an apparel product consists of cost of

materials, labor cost, logistics cost, factory margin and overhead, and duties. Supplier’s
production capacity and flexible supplying capability and design are also critical, as well as
the materials, labor and freight.
Thus, the supply price is not determined by one or two elements such as “labor” or
“materials,” nor is the purchasing mechanism of buyers operated based on such few
elements. However, this fact provides another perspective that a certain component of
supply price can affect the decision-making process of buyers in a market, in which the
strengths of a supplier such as low costs of labor and materials are emphasized.
[Figure 2-3] Price components of a shirt (unit: (left) million USD, (right) $/㎡)
* Source: “What does that $14 shirt really cost?” Maclean’s Magazine (May 2013),
http://www.macleans.ca/economy/business/what-does-that-14-shirt-really-cost/
Through the analysis of the supply price components for textile and apparel products,
the following implications can be derived:
First, in a market where there is little or no qualitative difference among the

determinants of supply price other than labor, such as logistics, duties and supply
capacity, labor becomes the critical factor for a supplier to make a decision for an
investment.
Second, however, based on the diversity of the global market, labor must not be
considered as the greatest factor in price determination.
Third, among the multi-dimensional factors of price determination, a supplier can have
competitiveness with buyers of a certain market if it implements strategies to maximize its
strengths and make up for weaknesses.
The above implications have been proven to be valid through literature on the
purchasing decision factors of global buyers. Thus, in today’s world, in addition to labor
and materials costs global buyers must consider multi-dimensional factors including
preferential tariffs, quick delivery, productivity, supply capacity of additional labor,
exchange rate, political factors and socioeconomic stability.
[Figure 2-4] Dimensions of sourcing decisions of global buyers
Economic Consumer
and Social Buying Power
Stability Change in the
Distribution
and
Consumption
Method
Political
Stability
Logistics
Raw Material
Price
Trade/ Labor
System
Currency
($,£,€,¥) Labor
Personnel of
Wage Production
Country
* Source: “The Sourcing Landscape & Changing Face of Retail”, Robert Sinclair, ITMF (International Textile
Manufacturer’s Federation) Annual Conference (Sept 13th, 2015)
111
2.2. Changes in Purchasing Patterns of Buyers
In 2015, a survey of 30 fashion retailers in the USA was conducted by the United States
Fashion Industry Association, and their preferences in terms of overseas sourcing regions
were found to be as shown in the figure below, which is similar to the actual apparel
import conditions in the USA. China is a widely-preferred sourcing country, while Asian
countries in general are highly competitive in the sourcing market.
Moreover, the survey result indicates that stable maintenance and qualification of the
African Growth & Opportunity Act (AGOA) is the key determinant of sourcing in African
regions.
Meanwhile, the respondents answered that labor cost, materials cost, shipping cost
and costs related to compliance with trade policies regulations are the major factors
affecting sourcing cost.
[Figure 2-5] Sourcing regions of fashion retailers in the USA
* Source: 2015 US Fashion Industry Benchmarking Study, US Fashion Industry Association (June 2015)
[Figure 2-6] Factors influencing sourcing cost of fashion retailers in the USA in 2015
* Source: 2015 US Fashion Industry Benchmarking Study, US Fashion Industry Association (June 2015)
This result re-confirms that the major determinants including labor, materials, logistics
and preferential tariffs are deeply involved in the decision-making process of the buyers,
and at the same time, shows the importance of the factors other than labor, such as
materials and compliance with trade preferences. The fact that the importance of shipping
cost was regarded as higher in 2015 compared to 2014 is deeply related to changes in
purchasing patterns of buyers based on time-to-market access, with growing tendencies
of reduced order size and increased frequency of orders on the part of buyers reflecting
the trends of fast fashion, subdivision of consumers and distinct characteristics in the retail
market.22)
The findings above are the results of an analysis on factors influencing the purchasing
decision made in the global textile and apparel market, and changes thereof.
Among the results, the analytic implications of the components of supply price for
textile and apparel products and determinants of buyers in the making of purchases
suggest that Uzbekistan’s government must determine what its priorities shall be in
handling Uzbekistan’s competitive advantage and disadvantages. Uzbekistan’s
government must also determine what factors it shall focus on to lead the directions of
policies, ranges of programs and establishment of relative investment bases to attract FDI.
22) Global Sourcing Highlights and Trends for 2015 Onwards, Kurt Salmon. World Sports Forum (Feb 4th, 2015)
113
To maintain and strengthen its price competitiveness in the global textile and apparel
industry, and to react sensitively to the sourcing trends of buyers, Korea has been actively
participating in the changes in the global market as the major axis of suppliers in the global
value chain by making constant efforts to develop overseas investments since the 1980s.
Korea’s experiences can provide important implications for Uzbekistan as it

establishing policies to attract foreign investments, and thus, the next part focuses on
describing Korea’s experiences in attracting foreign investments and overseas expansion.
3. Korea’s Experience in Attracting FDI and Making

Global Investments in the Textile and Apparel
Industry
3.1. Process of Growth and FDI Attraction in Korea’s Textile and

Apparel Industry
Korea’s textile and apparel industry went through some dynamic changes in the
process of its development. After the Korean War in 1950, Korea made a fast recovery due
to foreign aid, and achieved self-sufficiency in cotton, wool, and silk. During the 1960s,
Korea’s textile industry had become the key strategic industry for export, achieved rapid
growth based on cheap labor, and began its domestic production of polyester synthetic
fiber.
During the 1970s, large enterprises producing synthetic fabrics and yarns such as
Kolon, Hanil Synthetic Fiber(Tongyang) and Seonkyeong achieved significant growth, and
Korea became one of the top three textile exporting countries in the world. In this
process, the Korean government actively supported the textile industry to improve its
industrial competitiveness as a strategic industry for national development. To this end,
the Korean government established the Guro Export Industrial Complex in Seoul for the
first time in 1967, together with government-supported research institutes in order to
support private businesses to improve their product quality. For 12 years after the
completion of the Guro Industrial Complex, textile products represented 44.4% of the total
export products produced in the complex.
The main purpose behind the construction of an industrial complex was to establish a
textile stream and industrial ecosystem that would promote job creation and enhance
exports, and efforts to attract FDI were not actively made in the textile and apparel
industry. From this perspective, Korea’s experience in FDI attraction during its early stages
of industrialization may not provide sufficient information for Uzbekistan to establish
strategies to attract FDI, a point that has been proven in similar studies.23)
Based on Korea’s experience during the early stages of industrialization in the textile
and apparel sector, considering the consensus that indirect foreign investments such as
loans and introduction of foreign capitals made a greater contribution to Korea’s textile
and apparel industry than foreign direct investment, in addition to the policy suggestions
for developmental strategies through FDI attraction that are the main subject of this
study, it is suggested that Uzbekistan’s government should consider growth strategies
through the introduction of foreign capital and through technical cooperation and joint
ventures with foreign enterprises. This point will be explained later in detail, in Part 5
Policy Suggestions.
However, the Korean government reformed its exchange rate and export support
system and promoted exports in the textile and apparel industry through its Second
Five-Year Plan for Economic Development (1967-1971). The multiple exchange rates
system was changed to the single floating exchange rate system, financial incentives were
provided for exporting companies, customs duty and internal tax were exempted on
materials imported to be used in export products, and accelerated depreciation was
allowed for fixed assets for export. These institutional changes and policy supports
improved the industry’s reliability in the eyes of foreign investors and buyers, created
positive effects in terms of the purchase of textile and apparel products produced in
Korea, and contributed to the attraction of mid-to long-term foreign investments in Korea.
During the 1980s and 1990s, the Korean government focused on the promotion of its
heavy chemical industry, and for this reason, government supports for the textile and
apparel industry were reduced. At the same time, Korea’s textile industry had lost its price
competitiveness due to an increase in labor cost and a lack of manpower. The
anti-dumping suit by the US government against man-made sweater products produced
in Asian countries including Korea, Taiwan and Hong Kong and the deprivation of the
Generalized System of Preferences (GSP) in 1989 had triggered the overseas expansion of
Korea’s textile industry. Later on, Korean textile and apparel companies transferred their
production bases to Southeast Asia, China and Central America to contribute to
modernization, industrialization and job creation in these countries while forming the link
23) Joo, Dong-ju, Cha, Moon-jung, Gwon, Yul et. al. Establishment of Korean ODA Model (2012), National
Research Council for Economics, Humanities and Social Science Future Society Cooperative Research Series
12-02-01, Korea Institute for Industrial Economics & Trade Research Report 2012-622. Korea Institute for
Industrial Economics & Trade
115
in the supply chain - especially in the downstream sector - in the overseas textile and
apparel market.
The textile quota was later alleviated gradually through the WTO Agreement on Textile
and Apparel in 1995, and by 2005, the textile quota was abolished completely. As a result,
overseas expansion of Korean textile companies became more active with the
liberalization trend in global textile trade.
Thus, it is thought in this study that the experience of Korean textile and apparel
companies in their overseas investments through about 6,000 production bases
throughout the world would provide Uzbekistan’s government with a more effective
experience model than the experience of the Korean government in attracting foreign
direct investment in the textile and apparel industry.
3.2. Current Conditions of Overseas Investments of Korean Textile and

Apparel Companies
A. Overview on Overseas Investment
As explained in section 2, Korea’s textile industry has been striving to establish optimal
production bases in the ever-changing global textile and apparel market. To improve price
competitiveness and to reduce production and labor cost, production bases were
established in foreign countries with low labor costs, while R&D and marketing activities
were conducted domestically.
The major incidents that had highlighted the need for overseas expansion by Korea’s
textile and apparel industry are the US government’s antidumping suit against man-made
sweater products that were produced in Asian countries including Korea, Taiwan, and
Hong Kong, and Korea’s removal from the Generalized System of Preferences (GSP) in
1989.
At the time, the US government decided to remove Korea, Singapore, Hong Kong, and
Taiwan from the GSP, and the International Trade Commission (ITC) ruled that the sweater
products produced in newly industrialized countries in Asia are sold at a price lower than
the authorized rate, to an extent that was damaging to the textile and apparel industry in
the USA.
These are two major incidents that had triggered the overseas expansion of Korea’s
textile industry, as the Korean government implemented export diversification policies and
deregulation policies on foreign investment, and by the late 1980s, overseas investment
made by Koran textile and apparel companies had increased to 50 million USD per year.
When Korea and China established diplomatic ties in 1992, it led to a rapid increase in
investments in China, and by the mid-1990s, the annual investment amount was increased
to 200 million USD.
However, the investment amount decreased during the late 1990s due to a currency
crisis, and the overall investment in China decreased after the mid-2000s as the labor cost
in China increased by 25-30% with the amendment of the labor law. The investment
amount increased again after 2011 to 500 million USD as the targets of investment were
changed to less developed countries in Asia, including Vietnam and Myanmar. As of 2016,
the accumulated overseas investment of Korea’s textile and apparel industry is 8.4 billion
USD with 5,711 investment deals, which is 18.5% of the total number of corporations in
the manufacturing industry and 72% of the total investment amount.
[Table 2-1] Overseas investment of Korean Textile and Apparel Industry

(unit: number of corporations, 1,000 USD, year-on-year rate (%))
No. of New Corporations Investment Amount
Year Rate of Rate of
Proportion Proportion
Change Change
2015 103 △8.8 9.5 450,126 24.9 5.8
2016 108 4.9 10.1 578,495 28.5 7.0
Total 5,711 - 18.5 8,391,147 - 7.2
Source: Export-Import Bank of Korea 「Overseas Investment Statistics」. The totals are accumulations from
1968 to 2016.
[Figure 2-7] Yearly overseas investment of Korean Textile and Apparel Industry
Source: Export-Import Bank of Korea 「Overseas Investment Statistics」. The totals are accumulations from
1968 to 2016.
117
[Table 2-2] Overseas investment of the Korean Textile and Apparel Industry by target
(Unit: number of corporations, 1,000 USD, year-on-year rate (%))
Total Accumulation (1968-2016)
Rank Country No. of New Investment
Corporations Proportion Amount Proportion
- Total 5,711 100.0 8,391,147 100.0
1 China 3,269 57.2 2,596,135 30.9
2 Vietnam 772 13.5 2,106,996 25.1
3 Indonesia 319 5.6 989,870 11.8
4 USA 367 6.4 497,339 5.9
5 Uzbekistan 27 0.5 235,208 2.8
6 UK 6 0.1 166,714 2.0
7 Swiss 1 0.0 160,382 1.9
8 Bangladesh 92 1.6 157,356 1.9
9 Germany 4 0.1 150,570 1.8
10 Cambodia 73 1.3 119,792 1.4
Source: Export-Import Bank of Korea 「Overseas Investment Statistics」
B. Forms of Investment by Periods

During the 1980s, the investments were placed in the developing countries and the
least developed countries that could offer an abundance of cheap labor, such as Sri Lanka
and Bangladesh. Investments in Central American countries were made as well to utilize
the preferential tariff and quota benefits provided by the USA to Central American
countries, including Guatemala and Costa Rica. Overseas investment during this time was
mostly material-oriented in order to utilize abundant and cheap materials.
During the 1990s, investments in China increased after Korea established formal
diplomatic relations in order to utilize the advantages China offered, such as its close
proximity and cheap labor. In addition, investments were mainly made in countries with
relatively cheaper factors of production and higher productivity, such as China and
Indonesia.
After the mid-2000s, investment in China rapidly decreased for the purpose of toll
processing, but market-oriented investment targeting the domestic market in China
increased. However, the overall investment in China decreased due to the rapid increase
in labor cost in China, while investments in the ASEAN countries including Vietnam and
Indonesia increased.
[Table 2-3] Changes in overseas investment of Korean textile and apparel industry
Before 1992 1992-2001 2002-2010 2011-2014

Indonesia China China Vietnam
Central America Indonesia Vietnam Indonesia
Sri Lanka Vietnam Indonesia China
Philippines Central America Central America Cambodia
Bangladesh Bangladesh Myanmar
Source: Analyses of Structural Changes and their Impact on Overseas Investments by the Korean Textile and
Apparel Industry. Korea Federation of Textile industry (Nov 2015)
[Table 2-4] Structural changes in overseas investments by the Korean textile and
apparel industry
(unit: %)
North Central
Classification Asia (Vietnam) (China) Europe Others
America America
Before 1992 54.8 0.0 7.8 10.0 26.3 1.2 7.7
1992-2000 86.0 2.9 66.6 6.4 4.4 1.9 1.3
No. of New 2001-05 91.0 11.7 71.7 5.8 1.5 0.8 0.8
Corporations 2006-09 87.2 22.8 37.6 8.1 2.2 2.0 0.5
2010-14 89.6 32.1 28.9 5.7 2.0 2.0 0.8
Total 87.1 10.5 61.4 6.6 3.7 1.4 1.2
Before 1992 62.0 0.0 4.7 10.8 22.4 0.7 4.1
1992-2000 79.3 3.9 45.5 6.7 7.0 1.1 5.9
Investment 2001-05 88.4 24.8 46.9 4.0 6.1 0.8 0.7
Amount 2006-09 73.5 27.9 15.7 7.1 4.4 14.8 0.2
2010-14 72.4 30.9 12.8 7.0 3.4 16.8 0.3
Total 80.2 22.3 29.9 6.1 6.1 5.6 2.0
Source: Analyses of Structural Changes and their Impact on Overseas Investments by the Korean Textile and
Apparel Industry. Korea Federation of Textile industry (November 2015)
C. Global Investment Company of Korea Textile & Apparel Industry

As mentioned above, advancement of the Korean textile and apparel industry's global
investment was aimed at maintaining and strengthening competitiveness in the US
market, and was actively developed in Southeast Asia and Central America. These global
investments include large retail buyers such as Wal-Mart, JC Penny, and Sears, and sports
brands such as Nike and Adidas, and recently, vendors have begun to supply apparel to
leading buyers such as H&M, Zara, Gap, and UNIQLO in large scale investments.
119
Korea's major global apparel vendors have achieved sales of 1.5 trillion KRW to 2
trillion KRW in annual sales at global production bases such as Asia, Central America, and
Africa at the end of 2016. Moreover, sales of Youngone, Global Sae-A, Hansae, and
Shinsung Tongsang, the top five companies in Korea, amounted to approximately 7.8
trillion KRW in 2016.
Although these top five companies mainly supply knitwear products such as t-shirts,
sweaters, pants, and skirts to the US market, Youngone Corporation has made functional
woven products as the main items, and Panco Co., Ltd mainly supplies knitted garments
to Japanese buyers such as UNIQLO.
In addition to top-selling apparel vendors, major textile companies such as large-sized

yarn companies, small & medium-sized apparel vendors, woven & knitted fabrics, and
dyeing processing industries have achieved an export amount of about 19.7 billion USD in
2016 from their overseas production bases.
[Table 2-5] Korea Textile Apparel Industry Domestic and Foreign Exports
(unit: million USD)

2010 2011 2012 2013 2014 2015 2016
Direct Export
13.9 15.9 15.7 16.1 16.1 14.5 13.7
(Korea → World)
Indirect Export
15.1 15.7 16.3 16.9 17.6 18.2 19.7
(Overseas Mills→World)
Sum 29.0 31.7 32.0 33.0 33.7 32.7 33.4
Source: Korea Federation of Textile Industries (2017)
[Figure 2-8] Global Investment map of Korean major apparel vendors
[Table 2-6] Global business performance of Korean major apparel vendors
Company
Sales
Name Investment Destinations Main Buyers Item
(2016)
(Est. Year)
2,015 mn Bangladeshi, Vietnam, Woven

North Face, Nike
(1974) USD China, El Salvador (Outdoor)
1,660 mn Guatemala, Nicaragua, Haiti, Walmark, Kohl’s, Knit,

(1988) USD Cost Rica, Indonesia, China J.C.Penny Woven
Guatemala, Nicaragua,
1,931 mn Gap, Hollister,
Vietnam, Indonesia, Knit
(1982) USD Kohl’s
Philippines
Guatemala, Nicaragua,
1,152 mn Walmart, GAP,
Vietnam, Indonesia, Knit
(1992) USD Kohl’s
Cambodia, Philippines
841 mn Nicaragua, Vietnam, Gap, Target, Kint,
(1968) USD Indonesia, Myanmar Forever21 Woven
Source: Korean Financial Supervisory Board (2017)
121
3.3. Investment of Korean Textile and Apparel Industry in Key Regions
As discussed above, global production and investment network of the Korean textile
and apparel industry have been strategically developed to maintain and expand the
industry’s competitiveness in accordance with the market trends throughout time. In this
study, investment experiences of Korean textile and apparel companies in Southeast Asia,
Central America, and Africa will be discussed, and the interactions between investment
environment and decision making factors in each region will be analyzed.
A. Southeast Asia
1) Investment Situation of Korea
In the past decade, Southeast Asia has received attention as a sourcing destination for
global textile and apparel buyers, resulting in the most active investment, and the
establishment of the global textile and apparel value chain has been relatively successful.
In particular, at the beginning of this study, Uzbekyengilsanoat, Uzbekistan KSP project’s
local partner, has expressed much interest about examples and causes of foreign direct
investment in textile and apparel sector in Vietnam in particular.
As shown previously in <Table 2 -3>, Vietnam ranked 2nd in the foreign investment
made by Korean textile apparel companies, followed by China, and Indonesia ranked the
3rd. Since the start of overseas investment, cumulative investment in China has remained
at the top, but Vietnam's investment growth rate has increased significantly over the past
five years. As a result of Vietnam's investment exceeding China in 2014, 772 Korean textile
and apparel companies invested 2.11 billion USD, accounting for 25.1% of the total
investment. At the end of 2016, 319 companies invested in Indonesia 9.90 billion USD,
accounting for 11.8% of the total investment.
The majority of global apparel vendors from Korea such as Youngone, Global Sae-A,
Hansae, and Hansoll, as well as leading synthetic and cotton spinning companies such as
Hyosung, Kolon, Kyungbang and Ilshin Spinning, and other major companies of Korea’s
streamline including woven and knitted fabrics have invested in Vietnam or Indonesia. In
Cambodia, 73 apparel companies including global apparel vendors such as Global Sae-A,
Hansoll, and Yak-Jin Trading have invested in 168 million USD by the end of 2016, but the
investment amount is smaller than that of Vietnam and Indonesia.
On the other hand, for Bangladesh, a major investment destination in Southwest Asia,
global outdoor apparel vendor companies like Youngone and apparel sewing companies
have entered Bangladesh, and as of 2016, a total of 92 companies have invested in 160
million USD. South Korea’s investment in Bangladesh was concentrated in the 1990-2000s,
and unlike Vietnam and Indonesia, new ventures in recent decades have diminished.
Moreover, for India, which is ranked third in the global textile and apparel export
market with 4.8% share (35.5 billion USD in 2015, based on WTO), investment from
Korean textiles and apparel companies is very low compared to Bangladesh and other
Southeast Asia countries.
It is notable that in relation to the investment of Korean companies in Asia, the size of
textile and clothing trade between Korea and targeted investment countries has remained
static. For example, textile and clothing trade with Korea and the Association of
South-East Asian Nations (ASEAN) increased from 2.45 billion USD in 2000 (1.99 billion
USD in exports and 460 million USD in imports) to 9.8 billion USD in 2016 (4.49 billion
USD in exports and 4.85 billion USD in imports), which has grown roughly four times in 16
years.
On the other hand, for South Asian Preferential Trade Agreement (SAPTA), it is
estimated that textile and clothing trade with Korea has decreased from 1.37 billion USD
in 2000 (850 million USD in exports, 520 million USD in imports) to 1.22 billion USD in
2016 (480 million USD in exports and 740 million USD in imports), resulting in 10.9%
decline.
The static relationship between textile and apparel trade between Korea and investee
countries can be regarded as a mutually complementary relationship, for South Korea has
developed a trade of supplying fiber to local investee countries and importing textile raw
materials or finished apparel products from investee countries.
[Table 2-7] Investment Trends of Southeast Asian and West South Countries in Korea
Textile Apparel Industry (unit: number of new enterprises)
1990-1999 2000-2009 2010-2017.3 2014 2015 2016

Vietnam 60 342 341 57 58 72
Indonesia 85 130 83 2 8 3
Cambodia 9 25 39 2 3 0
Bangladeshi 52 20 19 0 1 4
India 9 9 1 0 0 0
123
2) Investment environment and major investment decision factors
It can be evaluated that diverse investments have been placed in Southeast Asia by
Korean textiles and apparel companies and have been relatively active in the Philippines,
Myanmar, Cambodia, Vietnam, and Indonesia.
The FDI competitiveness of the textile and apparel industry in Southeast Asia is based
on stable domestic and foreign political condition, population, labor supply capability,
proficiency, and trade preference.
Southeast Asian countries, such as Vietnam and Indonesia, are stable in political and
economic terms, centered on the central government's power, while maintaining the
developmental political and diplomatic relations with major importing countries such as
the US, EU and Japan, and other preferential trade partner countries. In the case of
Myanmar, the GSP was resumed from the EU in 2013, and the GSP was re-designated
from the US in 2016. In the case of Vietnam, the FTA negotiations with the EU were
concluded in 2015. With the expected entry into force in 2018, most of the textile and
apparel items will be subjected to duty-free benefits when exporting to EU.
In order to establish trade preferential relations, labor and environmental standards

such as level of guaranteed freedom, safety of workplace, prohibition of child labor and
forced labor, working hour compliance, and management of hazardous substances must
be observed.
Population and labor force are also important factors. As of 2016, there are 260 million
people in Indonesia, 95 million people in Vietnam, and 57 million people in Myanmar. On
the other hand, Cambodia has a population of 16 million, which is different from other
Southeast Asian countries, so there is a limit to the supply of labor force.
Restrictions on population and labor supply are likely to surface as a barrier to local
investment as the country progresses its industrialization centered on light industries
including textile, clothing, shoes, and bags. For example, in Cambodia, the minimum wage
has risen sharply from 60 USD in 2013 to 130 USD in 2015, while Vietnam has experienced
similar environmental changes such as high wage growth and labor strikes. It was possible
to provide inland cities and sufficient manpower to provide lower wages. On the other
hand, Cambodia, unlike Vietnam, is said to have changed the direction of FDI policy by
upgrading its industrial structure to produce and export higher quality textile and clothing
because it is difficult to provide enough manpower for new investment and expansion
investment.
However, there is a difficulty in improving labor productivity and proficiency because it
is not easy to improve complex factors such as R&D capability, textiles quality, and policy
implementation over a short period of time.
On the other hand, major investment determinants and similarities and differences can
be found in Bangladesh in South and West Asia. Some of the similar factors include:
population of 160 million people, low monthly labor costs of 60 USD per month, and
stable political and diplomatic relations with the market of US and EU, and beneficiaries of
the GSP system although it is Islamic country. Furthermore, other FDI attraction and
export promotion policies in terms of environment and infrastructure are estimated to be
similar to that of Southeast Asian countries.
Nonetheless, the management of labor and environmental standards at workplace is

inadequate, resulting in the collapse of the Lana Plaza in 2013, suspension of the US GSPs,
and delayed purchasing from buyers. In addition, investment infrastructure is inadequate
due to frequent power outages, shortage of inland roads and industrial complexes, and
instability of investment related tax. Investor protection measures are significant factors in
making investment decisions. In India, despite the advantages of easy procurement of raw
materials such as cotton and man-made fibers and a smooth supply of large-scale human
resources, the Korean textile and apparel companies’ investment is almost negligible.
When the investment determinants of Korean textile and apparel companies are
compared with the investment environment of Southwest Asia, Korea’s global apparel
vendors have not made investments, resulting in scarce investment from raw material and
textile material companies. Southeast Asia's investment environment is more competitive
than Southwest Asia in terms of investment decision factors, concentrating Korean
companies’ investment.
B. Central America
1) Investment Situation of Korea
Central America region is considered to be a strategic investment area for the Korean
textile and apparel industry along with Southeast Asia because it has a close proximity to
North American market such as USA and Canada, South American market including Brazil
and Argentina, and an access to the European market through the North Atlantic. In
particular, as the US government recognizes Central America as an important political,
diplomatic, and economic partner, the entry of American textile and apparel companies
and the investment of US capital are active in Central America.
As of the end of 2016, 36 textile companies (12 textiles, 24 apparel) have invested in
Honduras and invested 94 million USD, while Guatemala has 72 companies (14 textiles, 58
125
apparel), invested 91 million USD. There are more than 10 Korean companies in other
countries such as Nicaragua, El Salvador, and Costa Rica, and most of them produce and
export finished garments for the American market.
Korean companies that have entered the Central America have invested mainly in
garment sewing, with certain yarn spinning and dyeing companies, as well as major
clothing vendors such as Global Sae-A, Hansae, Youngone, Shinwon, Shingsung, and
Willbis.
Looking at the investment trends in Central America from the late 1980s to 1990s, the
industrialization of Guatemala and Honduras became full-fledged, and Korean garment
investments were concentrated in the 1990s. In the 2000s, as the investment conditions in
Honduras deteriorated, investment has transferred to Nicaragua and El Salvador.
In 2010, the US government provided a significant amount of trade privileges to the

Republic of Haiti to support the economic recovery due to the strong earthquake in the
Republic of Haiti. As a result, a small number of Korean major apparel vendors such as
Global Sea-A and Hansae invested in Haiti.
[Table 2-8] Investment Trends in the Central American Region of the Textile Apparel
Industry in Korea
(Unit: number of corporations, million USD)
Total Total
1990-1999 2000-2009 2010-2017.3 number of investment
corporations amount
Honduras 25 8 1 36 94.0
Guatemala 30 25 5 72 90.9
Nicaragua 2 12 3 17 51.0
El Salvadore 8 18 3 11 42.0
Haiti 0 0 3 4 37.3
Costa Rica 2 0 1 10 18.0
On the other hand, exports of textile apparel in Central America are growing in
amount, but analysis of US market share shows that there is no big change in Guatemala,
Honduras, and El Salvador except Nicaragua and Haiti. In addition, the static relationship
between Korea's investment in textile and clothing in Central America and textile and
clothing trade with local investors are relatively weak compared to that of the East Asia
region.
In case of Central America, a clear correlation between exports of Korean textiles(fibers,
yarns, and fabrics) can be found during the start of the investment period. However, since
the growth of the local textile industry and the vertical production investment of Korean
companies from 2000, imports have steadily declined. In addition, a minor amount of
finished apparel produced in Central America is imported into Korea, and most of the
apparel produced locally is exported to the North America and Europe.
Although the import volume from Central America to Korea is small, Honduras, where
textile and apparel producing capacity is expanding, and Haiti, where much investment
from Korean companies is recently placed, manifests how Korea's textile and apparel
investment plays a positive role in textile and clothing trade between Korea and the
Central America region.
[Table 2-9] US apparel market share of major apparel exporting countries
2010 2011 2012 2013 2014 2015 2016

China 39.2% 37.8% 37.8% 37.3% 36.4% 35.9% 34.6%
Vietnam 8.2% 8.6% 9.2% 10.2% 11.3% 12.4% 13.4%
DR-CAFTA 9.8% 10.1% 10.2% 9.9% 10.0% 9.8% 10.1%
Honduras 3.4% 3.4% 3.3% 3.1% 3.2% 3.1% 3.2%
El Salvador 2.3% 2.2% 2.4% 2.3% 2.3% 2.3% 2.4%
Nicaragua 1.4% 1.7% 1.8% 1.8% 1.8% 1.7% 1.8%
Guatemala 1.6% 1.7% 1.6% 1.6% 1.6% 1.7% 1.7%
Haiti 0.7% 0.9% 1.0% 1.0% 1.0% 1.1% 1.1%
Dominica Rep. 0.9% 0.8% 0.8% 0.8% 0.9% 0.9% 1.0%
Source: U.S. Department of Commerce, OTEXA
[Table 2-10] Korea-Honduras Textile Trade Trend
2011 2012 2013 2014 2015 2016

Export 12,909 11,935 9,796 5,479 2,973 2,277
(%) △29.6 △7.5 △17.9 △44.1 △45.7 △23.4
Import 4,744 5,684 2,884 1,901 5,798 8,408
(%) △15.3 19.8 △49.3 △34.1 205.0 45.0
Balance 8,164 6,252 6,912 3,577 -2,825 -6,131
Source: Korea International Trade Association
127
The textile and apparel industry in Central America is heavily influenced by the export
environment of the US market, and the investment motivation of Korean textile and
apparel companies is highly correlated with the US trade preference system.
The United States' trade preference system in Central America began in 1984 under the
Caribbean Basin Initiative (CBI) Act of 1984, to promote economic development and
stability of the Central American and Caribbean countries. It was an important policy to
form the so-called 'Maquiladora' in the Central American region, providing an import tariff
exemption for US textile companies and processing apparel with preferential trade policies.
However, the competitiveness of the Central American region weakened due to the rise of
Mexico through the effect of the North American Free Trade Agreement (NAFTA). Afterwards,
in 2006, the free trade agreement (DR-CAFTA) with five Central and South American
countries (Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua) and the Dominican
Republic became stronger in China and Vietnam, and strengthened the preference for the
Central American region and restored the export competitiveness to the US.
In the course of the above process, major Korean companies have withdrawn their
investment in Honduras due to constant wage increases, strikes and sabotage, rising
investment competitiveness in nearby Central America, and political turmoil. Instead, as
investments were actively promoted in Nicaragua and El Salvador, as shown in <Table 2-8>,
investments in three countries clustered in Guatemala, Nicaragua, and El Salvador in the 2000s.
The source of investment competitiveness in Nicaragua was tariff preferential levels

(TPL) for origin rules that guaranteed the use of third parties’ fabrics for cotton and
synthetic apparel over a certain amount unlike other DR-CAFTA countries. TPL ended in
late 2014 with the United States and Nicaragua bilateral agreement. Accordingly, it can be
analyzed that foreign investment companies including that of Korea have decided to
transfer to Haiti, where TPL is still valid or to improve local productivity in Nicaragua. In
case of Korea, both of these measures have been utilized, and major apparel vendors such
as Global Sea-A, Hansae, and Hansoll are still active in Nicaragua.
In Haiti, the Haitian Hemispheric Opportunity through Partnership Encouragement Act

(HOPE), which became effective since 2007, has been expanded and revised to buttress
the economic recovery after the earthquake in Haiti in January 2010. In November 2010,
the Haiti Economic Lift Program Act became effective. Notably, unlike US trade preference
agreements that are granted to Central America, such as CBTPA and DR-CAFTA, the HOPE
and HELP Act mitigate stringent rules of origin that mandate the use of US yarn and
fabrics to provide duty-free benefits.
The preferential trade policy of the USA is a very important decision factor for
investment of textile apparel in Central America. In addition, the population of major
countries in Central America is usually relatively small, about 10 million, and the wage
level is higher than that of Southeast Asia. According to the International Labour
Organization (ILO), the minimum wage in El Salvador in 2015 was more than 200 USD,
Guatemala 300 USD, and Honduras 350 USD.
The wage level in Central America is about twice as much as that of East Asia, and the
investment environment factors of other textile and apparel industries are not highly
competitive. In terms of domestic political and social stability, there is a relatively high risk
of union strike or sabotage, and it cannot be said that the supply of textile raw materials
is abundant or its quality is never higher than that of Southeast Asia. In addition,
instability of electric power supply or price is high.
However, the Central America region is close to the US and Canada, making it
attractive for US buyers to buy items in Central America that are not easily sourced in
Southeast Asia and require short-term needs. As described in the purchase trend of global
textile apparel buyers, the textile and fashion market has a tendency to pursue fast
delivery, order division or small scale orders due to the trend of fast fashion since 2000. In
addition, as seen previously in <Figure 2-6>, the importance of shipping costs in
purchasing decisions of US buyers has become more important in Central America.
Despite the high wage levels, the Central America region indicates its value as an
important supplier to the US market.
C. Africa
1) Investment situation of Korea
Although Africa is a region with high prejudice, as China's infrastructure support and
industrial cooperation activities in Africa have expanded due to China's “One-belt, One
road” policy, Africa is receiving much attention as a potential investment region for the
Africa’s textile and apparel industry has developed cotton and garment sewing
industry. Since it is geographically close to Europe, the share of EU exports is more than
four times that of the US and has traditionally been aimed at the EU market. According to
a survey conducted by McKinsey on behalf of a sourcing company for fashion brand
retailers in 2015, it can be seen that East Africa is recognized as a new site for sourcing
from nearby Sahara, and around 900 million working population is expected24)
129
Korean textile and apparel companies' investments in Africa are very low compared to
that of Asia and Central America. In the 1990s, Korean companies invested in South Africa
and Egypt, and investments in North Africa and East Africa, including Egypt, Kenya, and
Ethiopia have recently become active.
In Egypt, one of the major cotton companies in Korea, Dong-Il Spinning has advanced
into producing and exporting high-quality cotton yarn using Giza cotton, which is a
high-grade ELS (Extra Long Staple) in Egypt. In Ethiopia, Korean apparel vendors such as
ShinTS and Youngone Corporation have exported outdoor apparel to Europe.
[Table 2-11] Korea's Textile Apparel Industry Investment Trends in Major Countries in Africa
(Unit: number of corporations, million USD)
Total number Total investment

1990-1999 2000-2009 2010-2017.3
of corporation amount
Egypt 1 0 2 3 14.9
Ethiopia 0 0 2 2 9.6
Morocco 1 0 0 1 1.5
Tanzania 2 0 0 2 1.3
South Africa Rep. 2 2 0 4 0.5
Kenya 0 1 3 2 0.1
[Table 2-12] EU-US textile apparel export volume of major African countries (2016)
Export Amount(Million USD)

Rank Country
To E.U. To U.S. Sum
1 Morocco 3,787 133 3,920
2 Tunisia 2,831 61 2,892
3 Egypt 1,049 863 1,912
4 Mauritius 339 197 536
5 Madagascar 397 103 500
6 Kenya 16 341 357
7 Lesotho 1.5 296 298
8 South Africa Rep. 221 20 241
9 Ethiopia 53 33 86
10 Tanzania 8 37 45
11 Cote d’lvoire 13 - 13
…. ……….. …. … …
20 Swaziland 0.5 1 2
Total 8,757 2,096 10,854
Source : ITC(International Trade Center) Trade Map, U.S. Department of Commerce, OTEXA
24) Achim Berg, et al.(2015). Sourcing in a volatile world-the east africa opportunity. McKinsey & Company
African textile and apparel industry is growing more export-oriented than domestic
market-oriented due to low GDP level and poverty, and the application of tariff preference
granted by the EU and the United States plays an important role in attracting FDI.
The EU's trade preference system for textile and apparel in Africa includes: 1) the
Everything But Arms (EBA), a type of GSP system, 2) the Euro-Mediterranean Partnership
Agreements’ duty-free benefits25)
North Africa, such as Algeria, Egypt, and Morocco, is subject to tariffs through
‘Association Agreements’ with the EU, while East Africa is subject to EBA preference.
The USA introduced the Africa Growth & Opportunity Act (AGOA) in October 2000 to
strengthen economic and trade cooperation for sub-Saharan African countries. In October
2015, it has been extended to be valid until 2025. Currently, AGOA preferential tariffs are
applied to 26 countries including Kenya and Ethiopia, and tariff preferences are provided
for over 7,000 items on HS 8 unit basis, including textiles, clothing, footwear, and other
light industry products.
African textile and apparel industry’s another strong factor in attracting FDI is its low
labor costs and abundant human resources26). In recent years, Ethiopia has been
attracting a lot of attention from global buyers. As of 2016, Ethiopia has population of
approximately 120 million people with abundant working labor force and potential
spending power.
Kenya has a population of 47 million, GDP per capita of 3,156 USD (based on PPP in
2016), stable economic growth, the largest domestic market in East Africa, wages of
between 70 and 130 USD per month (Nairobi export industrial complex in the capital),
which is higher than Ethiopia, but it is estimated to be relatively productive27).
In North Africa, labor costs are higher than that of China and Southeast Asia due to rising
wages over the past 10 years. According to the International Labor Organization (ILO) survey
in 2015, Morocco is valued at 600 USD per month for unskilled workers in apparel
production, 500 USD for Egypt, and 400 USD for Tunisia28), making the labor cost
competitiveness of North Africa is low for production29). In this regard, global textile apparel
25) European Commission(2017). Trade/Policy/Countries and regions/Euro-mediterranean partnership.

http://ec.europa.eu
26) Ethiopia Investment Commission(2014.4). Investment opportunity profile for cotton spinning mill in ethiopia
(http://investethiopia.gov.et→opportunities→strategic sectors→textile&garments)
27) Africa Textile Apparel Production Mecca’ (2016.1.26.) Maekyung Business News Korea.
28) Labour standards in global supply chains. A program of action for asia and the garment sector(2015.12).
International Labour Organization(ILO)
131
buyers ranked Ethiopia and Kenya to be number one and two respectively in terms of
sourcing venue until 2020, making East African region to be a feasible investment location30).
Accordingly, the key factors of competitive advantage for attracting FDI in the African
textile and apparel industry, especially in East Africa, are tariff and trade preference,
abundant manpower, and low labor cost. The geographical proximity to the EU and the
cotton-making convenience of local investment companies through major cotton
producing countries in Africa, such as Bureugina Paso, Mali and Cote d'lvoire are positive
factors. In addition, the supply of cheap electricity and water is being promoted as a
competitive factor. However, it is difficult to say that it is superior compared to the
above-mentioned Southeast Asia and Central America regions in terms of electricity
supply stability, water quality problems, and wastewater treatment infrastructure.
On the other hand, notable obstacles in attracting FDI in the African textile and
apparel industry are logistics and infrastructure factors such as roads, ports, railways,
transportation, and customs clearance. For example, in Ethiopia, inland countries that do
not have their own ports can inevitably use the nearby Djibouti port, but in case of road
transport from the Ethiopian capital Addis Ababa to Djibouti, the import (Djibouti Port →
Addis Ababa) takes 10-14 days, costing 4,500 USD, and takes 4-5 days for export (capital
→ Djibouti Port), costing about 2,500 USD. There are at least two times more cost burden
than the booming Vietnam and Bangladesh maritime transport and customs clearance
conditions31).
As a result, the government of Ethiopia has been working on the construction of
electric railways through the Chinese government's aid from 2011. The opening time from
the capital to Djibouti will be reduced from 3 days to 12 hours, and the reduction in
transportation cost by 30% is expected to be possible.32)
The Ethiopian government is also making efforts to improve logistics infrastructure by

simplifying customs clearance, improving roads near the industrial complex, and
constructing expressways.
The fact that there is a system that can provide appropriate and rapid FDI information
or that the fact-based, active investment and publicity capacity is an important factor in
attracting FDI in the textile and apparel industry. In this regard, the following cases related
29) 2016/17 Uzbekistan KSP Project Interview. Results from 5 Korean Apparel Production Companies. (2017.2)
30) Achim Berg, et al.(2015). Sourcing in a volatile world-the east africa opportunity. McKinsey & Company.
31) Results of Ethiopia Bole-Lemi Export Production Zone Analysis. (2016.1). Internal data from Korea Federation
of Textile Industries (KOFOTI)
32) Djibouti Ports & Free Zones Authority(DPFZA).(2017.1.10.) Ethiopia:Addis Ababa-Djibouti Railway Officially
Completed, Creating High Speed Link Between Djibouti and Ethiopia. AllAfrica(http://allafrica.com)
to the opening of new railway in Ethiopia described above can provide implications for
FDI attraction policy.
The railroad opening date between Ethiopia and Djibouti is being changed from the
first half of 2016 to the end of 2016 and then to the second half of 2017. In addition to
railways, the ongoing delays or changes in the infrastructure and institutional
improvement measures of local investors weaken the credibility of investment information
for foreign investors. At the same time, the Ethiopian government authorities are making
efforts to provide more updated information on investment. For example, the Ethiopian
Railway Corporation has provided its own homepage as well as Social Network Service
(SNS) such as Facebook to provide information on recent construction progress and
interviews with related parties.33)
Ethiopia's efforts to attract FDI through the Internet can also be confirmed through the
website of the Ethiopian Investment Commission. In particular, investment information on
textiles and apparel is provided in important categories along with other industries, and it
is evaluated positively34)
[Figure 2-9] Ethiopian Government Internet Investment Information
Source: www.facebook.com(ethiopian railways corporation), ethiopian investment commission
Finally, administrative services, such as preferential treatment and protection of

investors including political and economic stability, are important variables in investment
decisions in Africa. The basic premise of expansion of FDI attracts is safety and legal
protection, and rapid and fair judicial service is an invisible infrastructure for providing
foreign investors with trust.
33) www.facebook.com(ethiopian railways corporation)

34) Ethiopia Investment Commission(http://investethiopia.gov.et)
133
In this respect, the political instability in Ethiopia in October 2016 and the subsequent
declaration of the state of emergency can be considered as a risk factor to offset the
determinants of competitive investment in Ethiopia. Indeed, the results of these political
risks and disturbances are very meaningful to global buyers' purchasing decisions35),
therefore, the reliability and stability of political and administrative services in attracting
FDI needs to be recognized as an investment decision factor that is considered important
as infrastructure such as railways, ports, electric power, and export industries.
4. Implications of Foreign Investment Experiences of

Korea Textile & Apparel Industry and Investment
Decision Factors
4.1. Implications of Foreign Investment Experience

So far, the global investment situation and the investment environment and
determinants of the Korean textile and apparel industry by Southeast Asia, Central
America, and Africa have been examined. Through these regional investment experiences,
the following implications can be drawn.
First, foreign investment of the Korean textile and apparel industry contributes to the
expansion of textile and apparel trade between Korea and local countries. In particular,
local countries have a tendency to create opportunities to export apparel products to
Korea. Therefore, local policy makers can expect a positive effect from mutual growth of
investing companies and the investee countries if they are interested in exploring ways to
support and create policies to fortify the value chain after completing local investment
and production activities.
Second, in spite of the first implication, enlargement of textile and apparel trade
between Korea and geographically distanced countries can be limited (i.e. Central America
and Africa) even with the placement of investment by Korean companies. Recently, global
buyers have been emphasizing the importance of 'Speed-to-market', but due to physical
distance between apparel production bases and consumer markets, it is not easy to
expand trade between Korea and countries in long distance.
Nonetheless, it is essential to note that textile and apparel trade can expand with
35) Douglas Holt, John Quelch, and Earl L. Taylor(2004.9.) Turn social responsibility into entrepreneurship. How
global brands compete. Harvard Business Review(http://hbr.org/2004/09/how-global-brands-compete)
Korea to a certain extend if the investor and the relevant government authorities of the
investee country can meet the buyers’ supplementary purchasing decision factors that can
supplant desired rapid delivery capability. Korea's fashion market has exceeded 36 billion
USD in 201636), and in addition to fast fashion brands such as H&M and Zara, markets for
basic items that are not easily influenced by trends and industrial textile products also
exist in Korea.
Third, based on the two implications mentioned above, if the government of the
investee country further subdivides the policy of supporting production and export
activities of the domestic textile and clothing industry and in particular, provides
differentiated incentives and infrastructure and policy support measures in FDI policies,
competitiveness of FDI attraction can be improved. As Vietnam's labor costs have been
rising steadily, Vietnamese government authorities endeavored to maintain or improve
Vietnam's investment competitiveness by adopting policies to offset labor costs in the
textile and apparel industry and to enhance investment infrastructure such as electricity,
water, and wastewater treatment (WWT). Furthermore, Youngone Corporation, which has
invested heavily in Bangladesh, has established a variety of infrastructure that is optimized
for local activities through utilization of the KEPZ (Korea Export Processing Zone),
provided by the Bangladesh government to employ approximately 60,000 workers solely
in Bangladesh. Ethiopia is actively using social network services to promote its improved
infrastructure both domestically and internationally to further its credibility.
Fourth, the FDI policy commonly focuses on investment attraction but tends to neglect
the intangible factors that can expand investment and strengthen the value chain after the
placement of investment. For example, if an abundant labor force and cheap wages are
the main competitiveness factors for attracting FDI, the governments of the investee
countries should take necessary measures to cope with the core competitiveness factors
such as increased wage after the investment, frequent union strikes, or workers’
suppression. In addition, investment support systems (i.e. the human resources education
and training centers) should be established if the investor is experiencing problems due to
low productivity or if such problems are expected, and post-investment support system
should be established as well. For instance, in Cambodia, increased labor costs and
insufficient supply of manpower have hampered investment expansion by Korean
companies, while the competitiveness of investment competitors has been relatively
favorable. Furthermore, the government of El Salvador has raised the minimum wage of
the Apparel Export Processing Zone by 40% in February 2017, and such a rapid wage
36) 2016 S/S research analysis & 2016 F/W Market Forecasting(2016.7).Korea Fashion Industry Index Research.
Korea Federation of Textile Industries(KOFOTI)
135
increase is a significant investment constraint for foreign textile and apparel investors.
However, it should be clarified that the viewpoint of this study is not to raise objections to
the government's policy decisions for raising the minimum wage and poverty eradication.
4.2. Determinants of overseas investment

Many previous researches have suggested market size, wage level, official exchange
rate, trade barriers, economic growth rate, tax rate, and institutional and political stability
as FDI determinants. According to researches on FDI determinants for Korea, various
factors such as the size of trade and economy between countries, the index of
government corruption and democratization, and the degree of integration of
foreign-invested companies have been recommended.37)
For the textile and apparel industry, it can be said that the preceding researches are
closely related to the determinants that are commonly presented. This study suggests that
the determinants of FDI need to be dynamically approached under the value chain system
of textile and apparel industry. This approach is closely related to the decision-making
process of the market or buyer, and the determinants of FDI and FDI attraction
competitiveness to the changes of market are essential due to the components of the
supply sector of the textile and apparel value chain are linked to the purchase decision
mechanism of the market.
Accordingly, the global investment determinants in the textile and apparel industry are
shown in <Figure 2-11>, from the viewpoint of the buyer's purchasing decision factors.
These investment decision factors are diverse and complex, affecting final investment
decisions, and can be defined as matters common to all textile and clothing investors
worldwide as well as Korea. In addition, simplification of investment decision factors can
be classified into 1)intangible infrastructure factors such as political, economic, and social
stability, 2)tangible infrastructure factors such as logistics and energy, and 3)input factors
such as manpower, wages, and raw materials.
Korean textile and apparel companies' overseas investment experience manifests that
all of the investment decision factors are taken into consideration during the investment
decision-making process, but the companies make a decision based on characteristics of
the investing market and its environment that can both undermine and maximize specific
investment determinants.
37) Lee Seungrae, et al.(2015.12). The determinants of greenfield and M&A foreign direct investment. KIEP(Korea
Institute for International Economic Policy).70-90.
[Figure 2-10] Global investment determinants in the textile and apparel industry
In this approach, it is assumed that global textile and apparel investors analyze their
investment environment with the aim of maximizing the investment efficiency and
minimizing the drawbacks, unless the minor investment determinants are critical in the
decision-making process.
For Uzbekistan, for example, it would be possible to consider a plan that can offset
high logistics expenses against low utility expenses, or offset high labor costs (about USD
120 to 140) compared to emerging textile industry countries in Africa against the costs of
cheap and high quality raw materials such as cotton or silk.
However, to supplement or offset such drawbacks with such advantages, the

importance of more flexible legal and institutional measures related to foreign direct
investment, political and economic stability and the government's devotion to the
attraction of foreign direct investment should not be ignored.
An analysis of the comments by the overseas corporate personnel and investment

consultants interviewed during this study has revealed that what is more important is how
137
the government resolves investment obstacles and problems together with the investors
and potential investors, rather than whether or not such obstacles or problems exist. In
particular, the fact that investors care more about the political and economic factors in
their investment decisions suggests additional implications for the government of
Uzbekistan.
Based on these experiences of Korea, Uzbekistan textile and apparel industry’s main
investment environment will be explored.
5. Uzbekistan’s Investment Environment
5.1. FDI Status of Uzbekistan

The scale of FDI worldwide in 2014 decreased by 16% year-on-year due to the
European Economic Crisis and various unstable factors in the global economy; however, in
2015 the world’s FDI scale increased by 38% compared to 2014 to reach USD 1.76 trillion,
which is the highest growth rate since the 2008-2009 global economic financial crisis. The
main reason for this investment recovery is a 66% year-on-year increase in international
M&A in 2015, to reach USD 7.2 billion. If this large-scale international corporate
restructuring is excluded, it is evaluated that a moderate growth of about 15% has been
recorded. The 2016 FDI inflow worldwide is expected to decrease by 10-15% due to a lack
of global demand as well as economic uncertainties; in 2017 and 2018, a moderate
recovery in the range of USD 1.8 trillion is expected.38)
The FDI inflow in the CIS economies in 2015 contracted rapidly due to international
commodities prices, a domestic market downturn, institutional change, and direct and
indirect geopolitical uncertainties, dropping to USD 28.8 billion, a decrease of 42.5%
compared to 2014, and project-type investments also declined (359 cases in 2014 → 342
cases in 2015).
According to UNCTAD’s announcement on international standards, the FDI inflow of

Uzbekistan rapidly declined in 2012 (2011: USD 1,635 million → 2012: USD 563 million),
and after a period of stagnation, sharply increased in 2015 (2014: USD 626 million →
2015: USD 1,068 million), with the number of project-type investments also increasing (16
cases in 2014 → 19 cases in 2015).
38) United Nations Conference on Trade and Development, UNCTAD (2016). World Investment Report 2016:
Investing in the Transition Economy: Uzbekistan.
[Table 2-13] Current status of amount of FDI inflow of 5 CIS countries (2015)
1995-2005
Country 2010 2011 2012 2013 2014 2015
(Yearly Avg.)
Kazakhstan 1,903 11,551 13,973 13,337 10,321 8,406 4,021
Turkmenistan 201 3,632 3,391 3,130 3,732 4,170 4,209
Uzbekistan 106 1,636 1,635 563 629 626 1,068
Kyrgyzstan 55 438 694 293 626 248 404
Tajikistan 46 74 160 232 105 263 227
Source: United Nations Conference on Trade and Development, UNCTAD (2016). World Investment Report
2016: Investing in the Transition Economy.
[Figure 2-11] Uzbekistan’s GDP & investment attraction trends
* Source: World Bank Open data (2017), World Development Indicators. http://databank.worldbank.org.
On the other hand, according to the government of Uzbekistan, the amount of FDI
inflow in 2015 was USD 2.4 billion, an increase of 8% compared to USD 2.2 billion in 2014.
But as this statistic has a wide gap with international standards, and other detailed
information such as investment country, investment scale by country, number of
investments, etc. are not open to the public, there is lack of confidence in its accuracy.
139
[Table 2-14] The Yearly Status of Investment by Foreigners announced by the
Government of Uzbekistan
Country 2010 2011 2012 2013 2014 2015

Total Amount of Foreign
3,284.64 3,872.5 3,277.4 3,016.69 2,949.2 3,300
Investment
Guaranteed Loans by the
527.28 554 751 836.49 737.1 891
Government of Uzbekistan
Amount of FDI 2,77.26 3,316.74 2,526.4 2,180.2 2,212 2,409
* Source: The Ministry of Foreign Economic Relations, Investment and Trade of Uzbekistan (MFERIT).
The increase in FDI inflow to Uzbekistan is the result of government efforts to improve
the national fiscal balance and foreign exchange soundness through government-led,
large-scale privatization of state-owned enterprises and resource development-type large
project orders following the fall in oil prices and currency value.39)
However, Uzbekistan’s GDP against FDI ratio fell short of the international average, and
even among the CIS economies it is considered to be maintained at the lowest level.
Uzbekistan has the largest population (31 million) of the CIS countries, and despite the
fact that it has outstanding investment conditions such as natural energy resources,
Uzbekistan’s GDP against FDI level is very low. Thus, there is a need to expand the scale of
FDI inflow two-fold, to the level of 20% of current GDP.
[Table 2-15] GDP to Total FDI Inflow in 5 CIS Countries (2015)
Country 2010 2011 2012 2013 2014 2015

Kazakhstan 55.8 57.1 58.9 54.0 61.4 65.2
Turkmenistan 60.7 57.6 56.8 57.8 58.1 66.5
Uzbekistan 13.6 15.2 14.5 14.3 14.0 15.0
Kyrgyzstan 35.4 38.9 40.5 45.3 48.0 57.2
Tajikistan 20.6 19.8 20.4 19.1 20.4 24.0
* Source: United Nations Conference on Trade and Development, UNCTAD (2016). UNCTAD STAT. Data
Center. FDI inward stock, percentage of GDP
The industrial policy of the Uzbekistan government has been a progressive type of FDI
attraction policy, which boosts industrial potential based on industrialization that aims for
39) United Nations Conference on Trade and Development, UNCTAD (2016). World Investment Report 2016:
Transition Economies, the revival of privatization plans in CIS countries.
import substitution, but recently the government has been implementing economic
policies that secure economic growth drivers through natural energy resources
development and export by introducing advance technology and capital through FDI
procurement. Currently, other major CIS countries have taken a similar stance on their FDI
policy and expanded job creation, developed lagging areas, guaranteed substantial
investment on preferential economic development projects and provided incentives.
According to an announcement made by the government of Uzbekistan, of 150

foreign investment projects in 2013, 13 investments (USD 1.6 billion) in the area of
petroleum and gas development represented 54.2% of the total foreign investment
amount. On the other hand, there were 16 cases of foreign investment in light industry,
leather industry, textile industry and animal hides, which amounted to 3% of the total
foreign investment amount, a comparatively low level.
To expand foreign investment in the textile and light industry areas, the government of
Uzbekistan announced various initiatives through Presidential Decrees, including “The
2015-2019 Production Modernization & Diversification, Structural Reform Program, “The
2017-2019 Textile & Knit, Sewing Industry Development Program,” and further provided
preferential treatment to FDI investors. As a result, Uzbekyengilsanoat reports that FDI
procurement performance in the textile and light industry areas increased from USD 700
million in 2006 to USD 2.5 billion in 2016, and over 300 cases of textile projects have also
been implemented.40)
Nevertheless, in the 2016 Economic Freedom Index evaluation41) Uzbekistan was

ranked second-lowest in Central Asia at 166th, with Turkmenistan ranked 174th. Moreover,
in the Economic Freedom Category, Uzbekistan is categorized as Repressed. As well, in the
Doing Business Index perspective, of 189 countries, Uzbekistan was ranked 87th, giving it
the lowest ranking in Central Asia of any country other than Tajikistan (128th).42)
In addition, the FDI performance scale reported by the Uzbekistan government does
not agree with the data reported by international organizations. Furthermore, since 2013
the announcement of detailed FDI data by the government has been suspended, and thus
the FDI performance and data on the textile·apparel industry is inconclusive. Accordingly,
since a statistical comparative analysis between competing countries or countries subject
to benchmarking is difficult, it is urgently necessary to secure objectivity in terms of
national statistics on the FDI area.
40) From Uzbekyengilsanoat announced material (Mar. 2017).

41) World Economic Freedom Index 2016, The Heritage Foundation.
42) Doing Business 2017, World Bank (Dec. 2016): Ease of Doing Business ranking.
141
5.2. Political·Economic Environment
Political instability makes predictions on the future investment environment difficult,
and thus serves as a negative factor for investment procurement and economic growth.
Politically, Central Asia in general can be categorized as an area with high unstable
political risk. Uzbekistan gained its independence from the former Soviet Union in 1991,
and for the last 25 years has been a dictatorship and evaluated as relatively highly
politically unstable. To ensure political stability after his long-term rule, the late Islam
Karimov, President of Uzbekistan, gradually implemented a policy of greater economic
openness. Following his death, President Shavkat Mirziyoyev was elected as his successor
in September 2016, and it was announced that the new President will maintain the
political direction of the former government.43)
The political command of the new administration of Uzbekistan has been stable on the
whole, and its direction of economic operation has been maintaining the existing stance.
Furthermore, the new president, Mirziyoyev, is known to have pro-Russian tendencies, and
thus the possibility of economic cooperation with Russia is highly expected in the future.
Although there are some uncertainties due to the recent replacement of key political
leaders, it is expected that the government of Uzbekistan will continue to promote
openness and maintain the initiatives pursued for national economic development as well
as development and cooperation in the economy.
In terms of international political risk, Uzbekistan is classified as a high-risk country.

While there are various evaluation indexes published by private and international
organizations on national risk, the political risk of Uzbekistan is rated as high. In the “2017
OECD Country Risk Index (CRI),” Uzbekistan is given a rating of “6,” which is the same as
nearby Kazakhstan and Turkmenistan, but is a lower rating than the rating of “7” given to
Kyrgyzstan. But compared to the ratings given to the leading textile investment countries
such as Vietnam (5) and Indonesia (3) it is considered as very high. Also, if you look at the
details of the national risk index, compared to the countries in Southeast Asia, Latin
America, and Africa that are actively investing in their textile areas, Uzbekistan is evaluated
to have higher risk in the areas of political stability, political violence, possibility of forced
detention, and currency exchange and remittance. On the other hand, in the “Societal Safety
& Security” evaluation, which assesses safety from crime, Uzbekistan is evaluated more
highly than Kazakhstan (2.463) and Vietnam (2.232), but is evaluated as safer than Ethiopia
(2.704), Guatemala (3.049), and Turkmenistan (2.759). In particular, since 2008 it has been
evaluated that the degree of social safety of Uzbekistan has been improving steadily.
43) Harvard Political Review (Dec. 29, 2016): The Evaporation of the Status Quo in Uzbekistan.
[Table 2-16] Country Risk Index (CRI) of CIS Countries
Kyrgyzstan Uzbekistan Turkmenistan Kazakhstan Russia Korea

7 6 6 5 3 0
* Note: A high-risk country is classified as “7,” a low-risk country is classified as “0.”

Source: OECD (2017).
[Table 2-17] Direct Investment Country Risk Index (CRI)
Risk related to Direct Investment

Foreign Exchange &
Political Violence Forced Detention
Remittance Regulations
Ethiopia 6 5 6
Guatemala 3 3 4
Kazakhstan 3 4 6
Turkey 4 5 5
Uzbekistan 5 6 6
Korea 3 1 1
* Source: Credendo (2017.3), Country Risk. Direct Investment. www.credendo.com.
[Table 2-18] Societal Safety and Security by Country
Guatemala Ethiopia Turkey Vietnam Kazakhstan Uzbekistan

3.049 2.704 3.102 2.232 2.463 2.559
* Note: The index reviews 163 countries around the world; higher points indicate higher risk.
Source: Global Peace Index 2016(2017.6). Institute for Economics & Peace (IEP).
http://www.economicsandpeace.org
Economically, Uzbekistan has abundant underground resources,44) and with 31 million

people has the largest population of any Central Asian country. Since 2014, it has
maintained an annual economic growth rate of 7%. Significantly, as its foreign economic
dependency is low, Uzbekistan recorded moderate economic growth even during the
2008 global financial crisis, as well as through the 2014-2015 Russia and CIS economic
downturn. However, Euromonitor International and some of the economic specialist
44) Uzbekistan has 1.1 trillion ㎥ in confirmed natural gas deposits, and along with 600 million barrels of crude
oil, has abundant mineral resources such as uranium, gold, etc. (B.P. Statistical Review of World Energy, June
2015).
143
organizations predict it will be difficult for Uzbekistan to improve product exports and
service its balance of payment, and thus there is skepticism on the potential for
continuing GDP growth in Uzbekistan.
Uzbekistan’s inflation rate continues to decline, dropping from 26.8% in 2008 to reach
single-digit status at 9.5% in 2015. The total domestic savings rate against GDP is 22.3%
(2015), which is higher than the average rate of the neighboring UN poorest nations
11.8%, Community of Latin American and Caribbean States 17.6%, and Sub-Saharan Africa
15.4%. This high savings rate enables the activation of local investment, and once the
conditions are set, the expansion of domestic consumption expenditure is also possible.
The current account balance in 2011 was maintained at USD 2.62 billion, but due to the
decline in international commodities prices and Russia’s economic stagnation it decreased
considerably to USD 73 million in 2014 and again to USD 170 million in 2015, but slightly
increased to USD 220 million in 2016. Moreover, along with the decrease in the current
accounts balance, the proportion of GDP against current accounts shrank from the 2%
level to 0.1% in 2016 and in 2017 it is expected to increase to 0.8% compared to GDP.45)
Furthermore, goods exports decreased by 18% year-on-year to USD 11.2 billion in 2012,
but with steady increases grew to USD 13 billion in 2015.
The government of Uzbekistan has been pursuing a prudent fiscal policy that focuses
on macroeconomic stability, and as such, the government finance has been maintained at
a surplus. But in 2016, the government was faced with a fiscal deficit of USD 100 million.
The debt level against GNI in 2010 was 19.3%, which increased to 21.8% in 2015 but
remains quite low compared to the neighboring countries like Kyrgyzstan (118.6%) and
Kazakhstan (89.3%), and also is somewhat low compared to countries like Ethiopia (33.3%)
and Vietnam (42.5%). In addition, the short-term debt represents only about 4.5% of the
total debt, so the debt repayment risk is low.
To summarize, Uzbekistan’s macroeconomic stability is being properly managed. At

the domestic and at the international level, there are risks that threaten overall political
stability and trust, and thus it is analyzed that the major issue for attracting foreign
investment into Uzbekistan is resolving these political risks.
45) Asia Development Bank (ADB), 'Asian Development Outlook 2016', European Bank for Reconstruction and
Development (EBRD) 'Transition Report 2016-17.'
5.3. Infrastructure Condition
When all other conditions are equal, infrastructure is an important factor in investment
decisions. Investors select regions with relatively favorable infrastructures, and various
empirical studies have found a correlation between FDI inflow amount and infrastructur
e.46) Electricity, water, waste treatment facilities, communications networks and roads are
necessities for the textile and apparel business, which has effective, seasonal ∙ fashionable
qualities, and thus it is understandable that a company may select its business location
based on the condition of the infrastructure.
In this regard, Uzbekistan, as a doubly landlocked country, from which one must pass
through at least 2 other countries to access marine logistics, has many issues to be
resolved. Since Uzbekistan has very limited access to sea routes it mostly uses railway and
road networks, and for this reason was ranked 118th of 160 countries in the 2016 World
Bank’s Logistics Performance Index (LPI). Compared to Vietnam (64th), Uzbekistan was
ranked lower in all areas, including customs, infrastructure, international cargo transport,
capacity of distribution companies, cargo tracking and timely transportation, etc.47)
Calculating the logistics cost through simulation using the current standard, after
importing Korean textile subsidiary materials to Tashkent, Uzbekistan and exporting the
finished product to major markets like Korea, Europe, and American, it is evident that the
burden of logistics cost, if apparel were produced in Uzbekistan, would be great.
For example, based on a 40-foot container, if textile materials are sent from Busan Port
in Korea or from Shanghai, China to Tashkent using TSR railway, it would take a minimum
of 25-28 days and the shipping cost would be USD 5,100-5,500. If TCR railway was used it
would take a much longer time and cost; if Bandar Abbas Port in Iran and
Iran-Turkmenistan land route were used in combination, the cost would still be USD
5,600-6,000 and it would take more than 40 days.
On the other hand, under the same conditions, if a 40-foot container of textile
materials was sent from Busan Port, Korea to Mumbai, India using ship transportation, the
cost would be USD 700 and it would only take about 25 days; if it was sent to Vietnam
from Busan Port, it would cost USD 300 and only take about 15 days.
In addition, if textile materials imported from foreign countries are used to make final
apparel products in Uzbekistan that are exported to Busan (Korea), Frankfurt (Germany) or
New York (USA), this would involve an approximate cost of USD 6,500-7,000 in all cases
46) Cheng, L. K. & Kwan, Y. K. (2000). What are the Determinants of the Location of Foreign Direct Investment?
The Chinese Experience. Journal of International Economics 51 (2): pp.379-400.
47) World Bank. Global Rankings 2016-Logistics Performance Index. http://lpi.worldbank.org/.
145
and would take 25-30 days for Busan, 30-35 days for Frankfurt, and 45-50 days for New
York. Even exporting to a relatively close destination like Moscow (Russia) would cost USD
4,000-5,000 and require about 15 days. On the other hand, the cost of ship transportation
from Hanoi, Vietnam to Frankfurt is USD 1,500 and the time required is about 30-35 days.
In this sense, the competitiveness of Uzbekistan is lower in terms of logistics flow
connecting textile raw materials from highly competitive countries like Korea, Taiwan,
China, Vietnam, and Southeast Asia to Uzbekistan.48)
Similarly, in terms of accessibility to the world’s major textile ∙ apparel markets such as
the US, Europe, and East Asia, it is difficult to view Uzbekistan’s geopolitical position as a
strong point from the perspective of global sourcing for the main markets. Accordingly, if
Uzbekistan is going to claim a position in the value chain of the global textile ∙ apparel
industry, the need to reduce transport cost and time to Tashkent are issues that the
government of Uzbekistan must resolve.
Meanwhile, the geopolitical positioning of Uzbekistan is as the hub of Central Asia, a

strategic landmark of the Eurasian continent, and it has great accessibility to Russia and
the Middle East, putting it in competition with neighboring Central Asian countries.
Therefore, if Uzbekistan’s railroad logistics capability becomes more competitive, its
competitiveness in Russia and Middle Eastern markets would be substantially improved
compared to now.
For example, from the perspective of a railway connection between Russia and China,
experts point out that Kazakhstan would be more effective than Uzbekistan as a
connecting destination.49) Also, most of the neighboring countries including Uzbekistan
are still under the bureaucratic administration system, and thus Uzbekistan is evaluated as
having the most difficult logistics environment in the world.
For Uzbekistan, 90% of its annual cargo handling volume is dependent on road
transport. Railway transport has just a 5% share, while air transport is less than 0.1%. Most
distribution is dependent on container truck transport, but the road conditions are poor,
and the railroad tracks are also severely deteriorated, having been built during the former
Soviet era. Recognizing the importance of improving infrastructures, the government of
Uzbekistan announced plans to invest about USD 10 billion in its road transport
infrastructure by 2019. As well, if Uzbekistan aggressively participates in the Central Asia
Regional Economic Cooperation (CAREC) program and substantially improves its land
48) The 2016/17 KSP Study on Uzbekistan data. The results from Interviews and simulation conducted on 5
domestic and overseas professional companies (Feb. 2017).
49) Bae, I.H. & Elmurod Honkeldiev (2016). An Exploratory Study on Logistic System and Transportation System in
Uzbekistan. Focus on Domestic Transportation in Uzbekistan. Korean Logistics Review. Vol. 26.No.1: pp.73-81.
route to neighboring Turkmenistan and Iran, the port transport cost and time to the
markets of Europe, America and Asia will be greatly reduced.
Uzbekistan was ranked as the 11th largest natural gas producing country in the world.
The government’s interest in developing the gas and crude oil sector is strong. Recently,
the government has also been supporting the development of solar and hydro renewable
energy. As of 2016, Uzbekistan has the capacity to produce 12,500MW of electricity
through 45 power plants using thermal and hydro energy, and the electricity production
amount is 59,000MWh. Of this amount, 90% is produced through thermal power
generation using natural gas. The government of Uzbekistan is pursuing power generation
and export expansion through the development of substitute energy to reduce its high
dependency on natural gas, and is also working to improve energy efficiency. Its basic
electricity rate is USD 0.065/kWh (World Bank, 2017), which is considered low from a
global perspective. However, there are problems in the quality of the power supply in
Uzbekistan, including issues with the usability of electricity, as well as frequent power
failures (blackouts), power outages, etc. In the 2017 World Bank’s Getting Electricity
ranking, Uzbekistan was ranked 83rd among 188 countries. Its power supply procedures
are quite complex, and the power supply takes 89 days, compared to 46 days for Vietnam
and 39 days for Guatemala, a representative textile producer in Central America.50) To
address this problem, the Uzbekistan government is adopting various programs from
international organizations and foreign governments to improve electricity metering and
supply stability.
Meanwhile, Uzbekistan depends on the neighboring countries for water supply, with
about 80% of its water requirements fulfilled by Kyrgyzstan, Tajikistan, and Kazakhstan.
But due to the deterioration of irrigation waterways and poor maintenance, about 50% of
water is lost to leakage and evaporation. Annual precipitation is about 100-150mm, which
is considerably lacking, and the water resources problem is causing issues in cultivating
major crops such as raw cotton. In producing textile apparel there seems to be no
problem in dyeing or supply of industrial water, but the water in Uzbekistan contains a
significant amount of calcareous components, and thus before dyeing materials a separate
filtering process must be performed. Currently, the dye industry is not well developed;
however, if the demand for dyeing processes rises there are concerns over the lack of
industrial water supply.51)
Uzbekistan’s communication capacity is so far behind the standard that in the 2014
Information Communication Technology Index (ICTI), Uzbekistan ranked near the bottom
50) World Bank Open Data (2017). Access to electricity. http://databank.worldbank.org.

51) The 2016/2017 Uzbekistan KSP Study data.
147
of the list, at 155th place among 166 countries and the lowest of all Central Asian
countries, including Kazakhstan (53rd).52) The wire communication network installed in
Uzbekistan was built during the former Soviet period, and for areas outside Tashkent and
rural areas, internet services have been installed based on the deteriorated phone lines, so
the quality of internet service is very poor. For wireless mobile communication, the
distance between wireless networks is so wide that there are problems in using the service
underground or in the outskirts of the city. Also, overseas transmission using the internet
is operated under a monopolistic system run by Ucell, so the speed of transmission is very
slow. For example, if a company established in Tashkent wants to download an attached
file from an e-mail, it takes a very long download time and frequently will fail, causing
problems when big documents need to be transferred.53) Despite these shortcomings,
according to the International Telecommunication Union (ITU) 52.4% of Uzbekistan uses
the internet as of 2016; compared to 14.2% in 2013, the number of users is growing at a
steady rate. In addition, the number of mobile subscribers in 2015 was 21.78 million
people, a distribution rate of about 73.32% of the entire population. As such, based on
the growing number of wireless communications and Internet users, the investments from
domestic and foreign companies and the government’s mid-to-long-term plans are being
carried out (i.e.: the 2012-2030 Information & Communications Strategy), and thus it is
forecast that the communications infrastructure in Uzbekistan will be improved.
Moving beyond the “hardware” infrastructure to the “software” infrastructure, the most
commonly mentioned problem in the Uzbekistan government system is the practice of
corruption and bribery. The level of corruption in Uzbekistan is quite high. In the 2016
Transparency International report, Uzbekistan was ranked 156th of 176 countries in the
Corruption Perceptions Index (CPI). Neighboring Turkmenistan was ranked 154th, Tajikistan
151st, and Kyrgyzstan 136th, indicating that Uzbekistan’s corruption level was the highest in
the CIS region. On the other hand, Vietnam (115th), Indonesia (90th) and other major textile
exporting and investment-target countries in Southeast Asia were ranked in the
mid-range, while some investment countries in Central and South America, East and North
Africa were also ranked in the mid-range. Fortunately, Uzbekistan’s corruption index is
improving.
A majority of CIS countries including Uzbekistan have vulnerable legal and institutional
systems, a lack of consistency in their economic policy due to a government-led economic
system, and a lack of a foundation for a credible society. For this reason, when conducting
52) International Telecommunication Union, ITU (2014). Measuring the Information Society Report, p. 42.
53) The 2016/2017 Uzbekistan KSP Study data. The results of interviews with companies that entered the local
market. (Feb. 2017)
business, one’s human network is considered to be more important than the regulations.
This practice of bureaucracy has been deeply-rooted since the former Soviet Union times,
and together with the aforementioned institutional political risk it is assessed as a major
impediment to the business environment for foreign investors.
The corruption of administrative services not only exacerbates the dysfunctional

elements of the hardware infrastructure, but also serves as an important, decisive variable
in investment decisions by foreign investors. As such, it can be considered one of the
factors that need to be urgently resolved by the government of Uzbekistan.
5.4. FDI related Laws and Institutional Environment

Uzbekistan’s first law on foreign investment was the Foreign Investment Guarantee Act
enacted in 1994; in 1998, it was replaced by the Foreign Investment Act (Law No. 609-I)
and the Foreign Investment Protection Act (Law No. 611-I). In addition, there are other
laws under the foreign investment related laws, such as laws on investment activities (Law
No. 719-I), laws on stock market investor protection (Law No. 262-II), etc.
To strengthen the protection of foreign investors’ rights and expand FDI attraction, the
government of Uzbekistan revised the Foreign Investment Act (Law No. 609-I, Law No.
611-I) on January 21, 2014. The key item of the revision was the addition of a regulation
(Article 19 of the same law) that states, “Government agencies, law enforcement agencies,
and banks cannot make additional demands or limitations on foreign investors and their
investment activities.” With this revision, the government legally protects the investor’s
activities, and has strengthened the legal status of investors.
The main points of Uzbekistan’s foreign investment law are to guarantee the free use
of investment profits, to guarantee remittance, to ensure the freedom to withdraw
investment assets, to prohibit the nationalization of investment assets, and further, to offer
special preferential treatment to project investment enterprises, SMEs, raw material
processing enterprises, and enterprises related to consumer goods production, which is
particularly favorable to the textile apparel area. Moreover, under the relevant law foreign
investment enterprises are required to pay only USD 150,000 as paid-in capital and
foreign ownership of above 30%. In addition, in the event that an unfavorable provision is
introduced, there is a grandfather clause that sets the investor protection period to 1 year.
Additional incentives for foreign-invested enterprises in 1996, a Presidential Decree on the
provision of preferential treatment, and various tax exemptions are being applied to
Enterprises with Foreign Investment (EWFI) in the high-tech, cutting-edge technology
industry.
149
The details on investment benefits for foreign investors are stipulated by Presidential
Decree. If more than 60% of the sales of the EWFI are self-produced or sold in the form of
service, the company is legally recognized as a Production Enterprise with Foreign
Investment (PEWFI). If a PEWFI invests in one of the projects included in the investment
programs announced by the government of Uzbekistan, that enterprise will be entitled to
benefits such as a 7-year exemption from profit tax, a 2-year exemption from land tax,
and the abolition of worker pay restrictions. For the textile apparel industry, as of March
2017, 132 projects with a total budget amounting to about USD 2.2 billion have been
announced by Presidential Decree. Moreover, the government is reviewing
foreign-invested projects and providing differentiated investment incentives. For
investments over USD 20 million, separate incentives are being provided through cabinet
meetings. In Uzbekistan, a Presidential Decree proclaimed immediately after the
conclusion of an investment takes priority over the existing investment laws, and as such
there is a need to pay careful attention to the Presidential Decree on each project in
addition to the investment laws.
When a foreign-invested enterprise (including foreign-invested production enterprises)

produces a specific product and a fixed proportion of the product is exported, it is entitled
to additional benefits such as tax reduction. Depending on the importance of the project,
additional tax reductions may be granted through a special resolution of the Cabinet.
Specifically, if a foreign-invested production enterprise purchases textile materials from
within Uzbekistan, it is entitled to a tax reduction on business profit tax and land tax. If the
enterprise exports textile apparel products, excluding textile materials, it can also receive a
reduction in its corporate tax.
Private Enterprise was first introduced through the 2003 revision of the “Uzbekistan
Private Enterprise Law,” and there are no limits on the rights of foreigners to establish a
private enterprise. However, since a foreign private enterprise is classified as a type of
business established with foreign capital such as a corporation, a limited liability
enterprise, or a partnership enterprise, it is excluded from special preferential treatment.
The procedure for registration of a foreign-owned corporation may vary based on the
USD 150,000 standard. If the capital is over USD 150,000, as an Enterprise with Foreign
Investment (EWFI), the owner is obliged to register it with the Ministry of Justice; if it is
less than USD 150,000, as a Company with Foreign Participation (CWFP), it must be
registered with the local authority where the corporation is set up. A foreign-invested
corporation must have one or more foreigners included in the list of founders, and the
foreign shareholding ratio must be over 30%.
In January 2016, the Single Window was established to provide public service to
investment enterprises. Through this, the government of Uzbekistan provides 16 public
services including access to various utilities, land lease and factory establishment permits,
and 600 relevant public institutions and organizations are participating in the project.
Also, Uzinfoinvest, an investment authority under the Ministry for Foreign Economic
Relations Investment and Trade (MFERIT), has been established to serve as an FDI window,
but access to the relevant website is often difficult, highlighting the need for
improvement.54)
When investment laws and policy direction of the Uzbekistan government were
analyzed, it seems that the government prefers large foreign investments, and is less
interested in small-to-medium sized foreign investments. For example, the import
prohibition on textile machinery 3 years old or older ultimately served as an entry barrier
for textile apparel SMEs trying to enter the local market. Moreover, based on the
self-sufficiency policy, the government particularly prefers foreign investors that produce
locally and export, or those that produce import-substitute products. Speaking on
Uzbekistan’s investment method, local investment enterprises and investment experts
stressed that simple transaction-oriented investment must be avoided. The following
problems are known to have occurred: the government of Uzbekistan levied heavy tax and
carried out tax audits on a trading-oriented foreign enterprise (i.e.: Holland Jahn
International of the Netherlands), the joint venture partner (i.e.: British American Tobacco)
was at risk of expulsion because the joint venture partner in Uzbekistan learned how to
procure local subsidiary materials, and the government of Uzbekistan strengthened tax
audits on foreign investment partners with a higher profit rate of investment project and
induced closure/bankruptcy to drive out foreign investment partners.
Uzbekistan no longer has an export tax since it was abolished in 1997, and the surtax
on foreign currency acquiring export goods has been waived. Uzbekistan is a non-WTO
country and thus applies an import tax in the range of 5-100%. When there are new or
revised Technical Barriers to Trade (TBT) they are often not relayed to the relevant
enterprises, and may not be recognized.
There is no import tax on self-use purpose products for foreign-invested enterprises

and related laborers. The rate of surtax on general imported goods is 20%, and the rate of
the import tariff on textile products is 30%. In particular, for products that are produced
locally and for consumer goods, there are high import duties as well as a consumption
54) The research team of this study attempted to access the website (www.uzinfoinvest) of the Ministry of
Investment of Uzbekistan from January to February 2017 (for 2 months); however, access to the website failed
continually and in general there were no messages such as “Website Under Construction.”
151
tax. For example, for textile materials, a customs tax of 30% and a surtax of 20% are
applied. For automobiles, the customs tax, surtax, and special consumption tax are
applied, and thus the total tax applied is 130%. Also, for cosmetics a 100% tax is applied.
Currently, in the tax-investment area, 37 countries have concluded an agreement on
“Most Favored Nation (MFN)” treatment; outside these designated countries, double the
customs tariff rate is applied.
Relating to the clearance and tariff system, to improve the clearance procedures the
One-Stop Service has been introduced and export-related country of origin, sanitary
certificate, etc. are being handled digitally. However, Uzbekistan’s computerized customs
clearance is limited to the hardware of the customs clearance administration, and thus in
cargo inspection, certification and various issuance of documents there is widespread
procrastination and corruption among customs officers.55)
To protect domestic products, selective currency exchange is being carried out on

import sales. To exchange currency, an application must first be submitted to the main
transaction bank, and then approval from the Central Bank must be obtained on a
case-by-case basis. It usually takes more than 6 months for the whole process to be
completed. In addition, the remittance of profit by foreign investors is guaranteed by the
Investment Law, but there is a continuing problem of the declining value of the so’m,
Uzbekistan’s national currency. Thus, there is severe control over cash holdings and
settlement of enterprises and for dollar sales, depending on the enterprise a 50% forced
sale by the bank may be obligatory. Fortunately, the new administration has lowered the
50% obligatory currency exchange to so’m on export revenue to 25% on foreign exchange
revenue. Although this is a great risk from the perspective of foreign-invested enterprises,
for export and foreign capital enterprises, there is actual hope for improvement of the
regulations related to the so-called “foreign currency tax” collected by the Uzbekistan
government.
Although Uzbekistan has a cheap and high-quality work force, it is severely lacking in
professional manpower. The official illiteracy rate of Uzbekistan is quite low (less than 2%)
and in general, foreign enterprises prefer to hire young people. For the textile and apparel
industry, professional manpower is being fostered through specialized advanced
education institutions such as Tashkent Institute of Textile and Light Industry, and in
addition to vocational training centers established by Rieter (Switzerland) and KOICA
(South Korea) there are other local job training centers established by foreign enterprises
and organizations providing support. Thus in the mid-to-long term, the problems of a lack
55) The 2016/2017 Uzbekistan KSP Study data. The results from the interviews with companies that entered the
local market (Feb. 2017).
of professional manpower can be expected to be resolved. Meanwhile, it is very difficult
for foreign investors to obtain a local entry visa, and the shortness of the visa period acts
as a major constraint on their business activities. After the establishment of the new
government in 2017, while the abolition of visas was reviewed, it will take quite a long
period before visas actually become abolished.
5.5. Results of Survey on Foreign Investment

In a survey of Korea’s textile apparel investment enterprises that was conducted by the
Korea Federation of Textile industry in November 2016, when asked to indicate their
satisfaction with the initial expected investment, 56% answered “Agree” and 9.4%
“Disagree”; as such, many are satisfied with their investments. In general, for investment
enterprises, in the areas of sales and achieving initial investment goal, their satisfaction
level was high. Furthermore, it is shown that investors in the apparel area are more
satisfied than investors in the textile area.56)
[Table 2-19] Degree of Satisfaction with Foreign Investment by Korean Textile

Apparel Enterprises (Unit: %)
Very Generally Dissatisfied Don’t’ Generally Very Satisfied
Dissatisfied Dissatisfied (Overall) Know Satisfied Satisfied (Overall)
(1) Sales
Textile 0.0 14.3 14.3 57.1 28.6 0.0 28.6
Apparel 0.0 10.9 10.9 20.0 58.2 10.9 70.1
Total 0.0 11.4 11.4 27.9 52.9 8.6 61.5
(2) Profitability
Textile 0.0 21.4 21.4 42.9 31.7 0.0 31.7
Apparel 3.6 8.9 12.5 51.8 37.2 0.0 37.2
Total 2.8 11.3 14.1 50.7 34.5 0.0 34.5
(3) Achievement of Initial Investment Goal
Textile 0.0 21.4 21.4 14.3 64.3 0.0 64.3
Apparel 0.0 1.9 1.9 47.2 39.6 11.3 50.9
Total 0.0 5.9 5.9 41.2 44.1 8.8 52.9
(4) Overall Evaluation
Textile 0.0 21.4 21.4 28.6 50.0 0.0 50.0
Apparel 3.3 3.3 6.6 35.0 51.7 6.7 58.4
Total 2.7 6.7 9.4 34.7 50.7 5.3 56.0
Note: n=67, Data: Korea Federation of Textile industry (2017). Results of survey of Korea’s textile industry.
Unpublished internal data.
56) This survey of foreign investment enterprises was conducted by the Korea Federation of Textile Industries
from November 8 to December 5, 2016.
153
In terms of profitability, there were no enterprises that answered “Satisfied,” but
numerous enterprises answered “Generally Satisfied.” Also, in terms of sales and
achievement compared to the investment goal, there were no enterprises that answered,
“Very Dissatisfied.” Considering this, for the enterprises that answered “Satisfied,” what are
their reasons? Generally, the enterprises surveyed identified the low labor cost (38%), ease
of securing skilled manpower (27.8%), and reduced production cost due to mass
production (18.3%), easy supply of raw materials (10.4%), etc. as their points of
satisfaction.
[Figure 2-12] Satisfaction Factors for Foreign Investment (Unit: %)
Source: Korea Federation of Textile industry (2017). Results of survey of Korea’s textile industry. Unpublished
internal data.
[Figure 2-13] Dissatisfaction Factors for Foreign Investment (Unit:%)
internal data.
On the other hand, as reasons for dissatisfaction, low labor productivity (47.6%), weak
infrastructure (22.9%), competition among investment enterprises (16.2%), difficulty in
managing and securing foreign exchange and difficult access to raw materials (2.9%) were
identified.
There were conflicting responses when it came to accessibility to raw subsidiary

materials and infrastructure. Some of the enterprises were satisfied with the infrastructure,
but others were not satisfied at all with the inefficient infrastructure of investment target
countries. These conflicting responses seemed to emerge because of differences between
the business types and characteristics of investors and the investment target country.
Furthermore, it can be interpreted that enterprises that wanted to emphasize their interest
in improvements in specific infrastructure features such as roads, railroads, sewage
treatment facilities, communication systems were more likely to respond.
Despite these conflicting responses of investment enterprises, over half of the

enterprises surveyed identified labor-related issues as the most difficult problem, and thus
problems such as low labor productivity and difficulty in personnel management should
be the point of focus.
To the question regarding targeting textile apparel investment in the 5 CIS countries in
Central Asia including Uzbekistan in the next 5 years, 47.3% of the enterprises answered
“no investment potential” or “not interested,” showing a negative response. On the other
hand, 13.3% of enterprises answered “high investment potential,” a positive response.
As such, investment concerns for Uzbekistan are foreign exchange and remittance
(36.9%), high logistics cost and time (28.2%), lack of detailed information on investment
(20.5%), labor productivity and securing workers (7.2%) and political risk and various
regulations (2.9%). Compared to the dissatisfaction factors by foreign-invested enterprise
mentioned earlier, the listed factors are similar, but the fact that the problems of foreign
exchange and lack of investment information were intensively highlighted when
enterprises were considering Uzbekistan as an investment-target country suggests there is
much that Uzbekistan’s government needs to consider.
155
[Figure 2-14] Investment Potential of CIS Region for the Next 5 years (Unit: %)
internal data.
[Figure 2-15] Investment Concerns in Uzbekistan (Unit: %)
internal data.
6. FDI Policy Recommendations for Uzbekistan’s
Textile and Apparel Industry
6.1. FDI Competitive Analysis of Uzbekistan’s Textile and Apparel

Industry
Earlier in this document, the FDI attraction status and environment of Uzbekistan’s
textile and apparel industry were analytically reviewed. Based on this analysis, if we
organize the results of the analysis on FDI attraction competitiveness in the textile and
apparel sector as an extension of the framework of SWOT analysis, which is described in
Chapter 1. Strengthening Measures for Uzbekistan’s Textile Industry Value Chain, the
results are shown in Figure 2-14 below.
[Figure 2-16] SWOT Analysis
Strength Weakness
* Abundant cotton * High cost/time consumption for logistics and transportation /
* Affordable gas, oil, electricity, and water communication
* Low foreign economic openness
* Preferential system for foreign invested enterprises
* High direct investment risk
* Possess 30 million population and labor force * Lack of legal, administrative transparency
* Government’s commitment to nurture textile industry * Lack of credibility for investor protection
* GDP growth rate, safety improvement * Foreign exchange regulation, lack of professional manpower and
technology
* Buyer awareness of forced labor for cotton harvesting
Opportunity Threat
* Access to Russian, CIS, and Middle East Market * Improving production capacity and productivity of
* Rising labor costs in Asia and Latin America textile producers such as China, Vietnam, and etc.
* Reduced risk of cotton-related forced labor * FTA, mid- and long-term expansion of trade privileges
* Willingness to expand and cooperate with EU GSP * Entering of new industrialized country into textile
industry
* High dependence on external economies (Russia
Market, water resource, and port accessibility)
A. Investment Strengths of Uzbekistan’s Textile & Apparel Industry

Uzbekistan’s affordable raw cotton, electricity and energy cost and the various tax cuts
provided by the government to attract FDI, including a system of trade preferences, are
the most positive strengths or advantages when considering a location for investment.
Currently, as the governments of Central Asian countries are trying to accelerate their
development of energy resources including natural gas, mid-to-long term investment
activities in the infrastructure industry including the petroleum & petrochemical industry,
construction, road, railroad, communications, etc. and various machinery industries are
expected to become very active. These efforts by the Central Asian governments are
157
expected to have positive impacts on the future investment and trade environment, and
as such Uzbekistan is considered as one of the most important countries in Central Asia to
keep an eye on.57)
Uzbekistan is the largest country in Central Asia based on population, with a

working-age population that represents 67% of the total population.58) It is expected that
both the overall population and the working-age population of Uzbekistan will continue
to increase until 2030, making it possible to supply manpower suitable for manufacturing
production.
With regard to labor cost, the result of a local survey conducted by the World Bank,
Uzbekyengilsanoat of Uzbekistan, and this KSP study showed the minimum wage in
Uzbekistan is about USD 120-140 per month, while workers with a certain level of skill are
paid over USD 200 per month.59) Although the minimum wage in Uzbekistan is higher
than in Vietnam (USD 100) and Bangladesh (USD 68), it is much lower than in Guatemala
(USD 323) and China (USD 500), and thus it can be said that Uzbekistan is relatively
competitive in terms of wage.60)
Finally, the economic policy management of the Uzbekistan government, the relatively
high GDP growth rate, and its gradually increasing openness to outside trade and
investment make it possible to predict that in the long run, Uzbekistan’s socioeconomic
structure will become more market-friendly and will move in a direction that provides an
appropriate environment for foreign-invested enterprises to engage in business activities.
In this regard, Uzbekyengilsanoat, which was established by the government of Uzbekistan
to provide policy support for the textile and light industry; Korea Desk, exclusively
provided for Korea under the Ministry for Foreign Economic Relations Investment and
Trade (MFERIT); and Textile Techno Park, which is under construction in a project
promoted by the Korean government to help support the development of Uzbekistan’s
textile industry, are all evaluated as very positive in terms of local investment support for
foreign textile enterprises.
57) Jo, B.R. & Chang, T.K., FDI Environment & Attraction Policy of Central Asia (2015). Asia-pacific Journal of
Multimedia Services Convergent with Art, Humanities, and Sociology. Vol.5, No.4, pp.731-742.
58) The Center for Economic Research of Uzbekistan (CER) (2015). Social Policy for Economic Transformation and
Social Substantiality. p. 3.
59) Labor Market Regulation. Doing Business 2017. Economy Profile Uzbekistan (2017). World Bank. p.108.
Uzbekyengilsanoat. Unpublished internal data (Feb. 2017).
60) Minimum Wages in the Global Garment Industry. Labour Standards in Global Supply Chains (Dec. 2015).
International Labour Organization (ILO).
B. Investment Weaknesses of Uzbekistan’s Textile & Apparel Industry
The investment weak points of Uzbekistan have already been mentioned in Chapter 4.
Investment Environment, and thus only the major factors and detailed problems related to
the expansion of FDI attraction are explained below.
1) Problems of Logistics, Transpiration, and Communication Infrastructures
Lack of port connection, high cost of inland railway transportation, and Uzbekistan’s
unstable domestic transportation and communication infrastructure all act as significant
impediments in securing competitiveness in textile and apparel investment attraction.
While the problems of the logistics, transportation and communication infrastructure

can be resolved by constructing an industrial complex that is optimized for textile and
apparel investment, there is a need to provide excellent and stable services by
constructing very basic infrastructures such as a domestic road network and entry and exit
to industrial complexes, water and wastewater treatment system, factory and warehouse,
and a speedy clearance system such as Green Channel.
Also, the government of Uzbekistan needs to make it possible for investors to launch
their businesses immediately as soon as the foreign enterprises settle in their operation
sites. The government should make it easier for current investors to expand their
investment, and facilitate the entry of new investors.
2) Problems of Foreign Economic Openness, Reliability and Transparency
In Chapter 4, this study explained that Uzbekistan’s GDP to FDI ratio is 15%, which is a
low level compared to other CIS countries, and further explained that the current FDI level
could be increased two-fold. This low FDI/GDP ratio is due to manipulation and control by
Uzbekistan’s government, and is reflected in the lack of foreign exchange and the
country’s vulnerability to external stress on the financial system. During the course of this
study, we have gained a fuller understanding of the Uzbekistan government’s efforts for
improvement and political concerns through interviews with the government authorities.
But to expand FDI attraction, the authorities must not only boost economic openness
externally - the government’s legal, administrative transparency and reliability must also
be improved. That is, to attract global investors and incorporate Uzbekistan’s textile and
apparel industry into the global value chain, the government must realize that not only
wages and logistics costs but also the intangible infrastructure of the country is very
important.
Furthermore, foreign currency remittance regulations, anxiety over foreign exchange
159
and disparity between market exchange rates, and government, non-government, and
global buyers’ recognition of the issue of compulsory labor in the cotton harvest are also
included as issues for improvement.
3) Raw Materials and Lack of Professional Manpower
Having the capability to secure a sufficient amount of high-quality raw materials at a

competitive price and to produce and export finished products that meet customer
demand are very important in order to be competitive in the global textile and apparel
market.
Textile apparel enterprises in Uzbekistan are faced with the obstacle of a low supply of
raw materials due to the lack of a domestic production base and value chain, and as a
result, most raw materials used in the apparel industry such as sewing threads, buttons,
zippers, etc., as well as synthetic materials, Uzbekistan is completely dependent on imports.
Moreover, due to a lack of professional workers and manpower it is difficult to develop

and smoothly produce the functional, high value-added products demanded by the
current trend.
C. Investment Opportunity Factors for Uzbekistan’s Textile & Apparel Industry

The most positive aspect for Uzbekistan’s textile and apparel industry in terms of
external factors is its geographical proximity to Russia, CIS, and the Middle Eastern
markets. While the market size of Russia and CIS is much smaller than that of the US,
Europe, and Asia and the speed of growth is much slower, if an emphasis is put on the
expansion of textile consumption in Russia and the CIS countries including Uzbekistan and
there is an improvement in the long-term consumption sentiment, this will provide the
best opportunity for Uzbekistan’s textile and apparel industry to grow.
Furthermore, it is clear that more improvements are needed in the labor situation. The
labor issue is continually being highlighted by consumers and buyers in the US and
Europe, as well as in the media, due to the former use of compulsory child and adult labor
in the cotton harvest. According to a report by the International Labour Organization
(ILO), as of 2016, child labor within Uzbekistan is socially unacceptable. Thus, the European
Parliament is reviewing negotiations to provide customs benefits to the textile and apparel
products of Uzbekistan. 61)
61) European Parliament News (Dec. 14, 2016). MEPs back textile trade deal with Uzbekistan, Welcome End to
Child Labour. http://www.europarl.europa.eu/news/en
Finally, the fact that the labor cost in the textile producing countries in Asia and Central
and South America such as Vietnam, Indonesia, Cambodia, El Salvador, etc. is sharply rising
can be used as an opportunity to attract investment in Uzbekistan’s textile and apparel
sector. However, despite the sharp rise in China’s labor cost, due to its productivity and its
balanced growth in the value chain, China still has the export advantage in the global
textile and apparel market, and as Vietnam, Indonesia, and later producers are making
efforts to provide manpower supply and a low labor cost structure locally by developing
their rural areas, the government of Uzbekistan should consider similar efforts.
D. Investment Risk Factors for Uzbekistan’s Textile & Apparel Industry

As described above, the external risk factors for Uzbekistan’s textile and apparel
industry are on the one hand, production capabilities and productivity enhancement of
leading textile producing countries such as China and Vietnam, and on the other hand,
newly industrialized countries entering the textile industry. In other words, as the players
on opposite ends of the global value chain firmly establish their positions in the global
market, Uzbekistan’s textile and apparel industry will be faced what is referred to as the
“Nutcracker” risk.
In terms of trade preference as a part of the global trade infrastructure and retaliatory
trade measures, we cannot overlook the fact that Uzbekistan is still relatively vulnerable,
which acts as a risk factor in terms of its competitiveness in attracting foreign investment.
Finally, the fact that Uzbekistan’s textile and apparel exports are highly dependent on
Russia, and that Uzbekistan is highly influenced by the conditions of neighboring
countries regarding water resources and access to ports serve as external risk factors,
which the government of Uzbekistan must deal with.
6.2. Direction of Policy Recommendation

To summarize this study, first, based on the demand-supply trends of the global textile
and apparel industry, the global investment experience of Korea’s textile and apparel
industry and the local investment environment were analyzed. Also, an analysis on the
investment environment for the advancement of direct investments by global enterprises
into Uzbekistan as well as a survey and interviews of Korean enterprises and experts were
conducted. Based on these results, the strengths, weaknesses, opportunities and risk
factors for Uzbekistan’s textile and apparel industry were analyzed.
As stated above, there are many elements involved when textile and apparel
161
enterprises make overseas investment decisions, and no enterprise makes investment
decisions based solely on a specific supply cost such as labor cost, transportation cost,
production factory construction cost, etc. On the contrary, based on the various decision
factors, cost-benefit is reviewed. In particular, it is found that potential risk factors for cost
such as investor protection, or intangible factors such as legal and institutional
uncertainties related to investment profit, can also play an important role in making an
investment decision.
Likewise, another factor to consider in cost-benefit-oriented investment

decision-making is that an advance local feasibility study should be conducted to
minimize the weaknesses and maximize the strengths of the textile and apparel
enterprises. For example, depending on the market pursued by the enterprise or the
characteristics of the product, if there are deficiencies in labor cost or logistics factors,
they can be pushed back in the list of investment decision, compared to factory
construction cost and policy support for investment companies.
Accordingly, even if the successful investment story of a Korean textile and apparel
enterprise that decisively carried out large-scale investments in Asia and Central America
and the investment environment do not coincide with the reality of Uzbekistan, the
growth trajectory of the textile and apparel industry of Uzbekistan will not be damaged by
following the lessons that can be learned.
In particular, when we look at the experiences of Russian and Turkish enterprises that
are currently investing in Uzbekistan, and Korean enterprises that are focusing on America
and Europe, there are differences in multiple dimensions, such as domestic demand and
export markets, business item, speed of supply, order size, etc.
This means that to attract Asian enterprises from China, Hong Kong, Taiwan, and
South Korea, an investment profit model that is customized to the existing market and the
characteristics of the item or a differentiated business model should be suggested.
As a case in point, there is a big difference between fabrics that are appropriate for
Islamic costumes, transformed traditional costumes or less-trendy, common products for
Turkey, Russia, and the Middle East and the distribution of finished products targeting
Western markets or high-fashion markets. For this reason, the delivery schedules are less
sensitive, or price conditions can overcome the weakness of the logistics period.
In this regard, the government of Uzbekistan must attempt to carry out strategic plans
and programs to obtain technological and commercial production capabilities and market
procurement for synthetic materials and various high-fashion items, in which Korean
enterprises have a competitive edge as mentioned earlier. In fact, for the mid-to-long
term fostering of the synthetic materials industry and the procurement of the relevant
technology capacity, the government of Uzbekistan should aggressively implement the
policy recommendations presented in Chapter 1. (Strengthening of Value Chain) and
Chapter 3. (Utilization of Textile Techno Park), which will be provided in the latter portion
of this study. Furthermore, even after the conclusion of this KSP study, the government of
Uzbekistan must continue to discover and implement practical follow-up cooperation
projects in the textile and apparel industry with Korea.
But for Uzbekistan to pursue synthetic materials and high-fashion, high value-added
items through its industrial policy, it must first develop cotton-synthetic or cotton-artificial
blended materials based on cotton, which is Uzbekistan’s advantage, and strengthen the
capacity of the related spinning industry. To this end, in the short-run, the government
should first practically review import liberalization of synthetic textiles, attraction of
foreign investment in related fields, expansion of investment by attracting blended fabric
dyeing enterprises, and the strengthening of related energy, water, and wastewater
treatment infrastructures. Also, rather than hastily introducing product development of
high-cost synthetic apparels and export expansion policy programs, it is more appropriate
to pursue the refinement of items with relatively low labor dependency that need
automated engineering in their production, such as socks, gloves, scarves, etc.
With that said, one of the special points discovered in the course of this study was that
in the foreign investment decision making process of Korean textile and apparel
enterprises, the decisions of other related enterprises regarding whether to enter the
market, even when unofficial, serve as a very important factor. Corresponding to this,
successfully establishing other business models such as finished apparel products and
professional material processing enterprises within Uzbekistan, other than enterprises like
Daewoo and Shindong in the spinning area, will play an important role in improving the
interest not only of Korean enterprises but also of various global textile and apparel
enterprises in investing locally.
In Korea’s early experience of industrialization, it was not FDI but loans and the
introduction of foreign capital that contributed more to the advancement of the textile
and apparel industry. Taking into consideration the Uzbekistan government’s goal of
maintaining stability and the subsequent possibility of gradual market opening, this study
recommends that rather than uniformly and blindly fostering the textile and apparel
industry through FDI attraction, the government of Uzbekistan should review flexible
policy measures to stimulate domestic investment, foster startups and attract foreign
SMEs through the privatization of public enterprises, procure professional CEOs, and
procure foreign capital and loans, joint ventures and technical partnerships.
163
6.3. Policy and Strategic Proposals
A. Strengths · Opportunities (SO) Strengthening Strategy
The existing strengths and opportunities for Uzbekistan’s textile and apparel industry
are cotton production and the Russian market. Having said that, to maximize the
strengths, measures to thoroughly analyze and establish strategy accordingly with regard
to Russia, the biggest market, nearby CIS and the Middle Eastern markets is necessary.
Moreover, instead of switching the cotton production capacity from a quantitative to a
qualitative perspective, creating cotton industrial clusters, attracting related foreign
enterprises, and joint ventures can become a foundation for pioneering overseas markets
and fostering the domestic textile industry.
Along with creating cotton clusters, this study recommends establishing a mid-to-long
term fostering strategy, which includes strategic plans and programs to obtain technical
and commercial production capacity and to secure the market for various synthetic
materials and high-fashion items, for which Korean, Chinese, and Taiwanese enterprises
have a competitive edge, while simultaneously developing cotton-synthetic textiles, which
occupy over 70% of the global textile and apparel market, along with the cotton clusters.
To this end, it is recommended in the short term that the government of Uzbekistan
implement policies that support the import liberalization of synthetic fabrics and related
investment attraction of foreign enterprises, the expansion of investment attraction for
blended yarn and blended fabric dyeing enterprises and the enhancement of related
energy, water, and wastewater treatment infrastructures.
On the same note, rather than introducing high unit priced synthetic apparel and
export expansion policy programs, it is more suitable to upgrade the quality of socks,
gloves, scarves, etc., which have a relatively low labor dependency but require automated
engineering in their production.
To strengthen the cotton-synthetic textile industrial cluster, it is essential to attract

investors from Korea and East Asia. Korea has proceeded with an investment in sewing
targeting vendors in American and European markets through its foreign investment
experience, and subsequently, further investments were made by the cooperative
enterprises related to fabric production and fabric processing that was connected to the
sewing enterprises. Equally important is the fact that the Korean enterprises’ local
investments were not only made in the US and Europe but also were made domestically
as well as in Japan and Asian consumption markets, and this brought about an additional
expansion-inducement effect, widening the market scope for Korean enterprises. Thus, the
investment attraction of Korean enterprises had great significance in mid-to-long term
investments.
In this context, there is a need for the government of Uzbekistan to prepare a more
competitive incentive system than other investment competitor countries. Beyond just
providing tax and financial benefits, we hope that Uzbekistan’s Investment Desk will
develop a more aggressive incentive system using the market approach towards Korean
enterprises to provide new market information.
165
Reference
Characteristics of the Russian Textile and Apparel

Market, Opportunity Factors for Uzbekistan and
Investment Cases
Russia is the world’s 12th largest textile and apparel importing country. In 2015, Russia
imported USD 8.3 billion worth of textile and apparel, amounting to about 61.5% of the
total textile and apparel import amount of the CIS region. Russia’s apparel product import
amount is USD 5.59 billion, which is 67% of textile and apparel imports to the region.
Excluding the considerable reduction seen in 2015, when textile and apparel imports
dropped 33.9% compared to the previous year due to an economic downturn, Russia’s
textile and apparel import market scale is about USD 12-13 billion on a yearly basis, and
its domestic consumption apparel market scale is about EUR 33 billion on a yearly basis.62)
Conversely, Uzbekistan’s textile and apparel product export amount to Russia is USD
360 million, which is only 32.1% of the total textile export amount (USD 1.13 billion).
However, considering that of Russia’s entire textile import amount, Uzbekistan represents
less than 4.4%, while imports from China represent 37.5%, there is a need to immensely
increase Uzbekistan’s export volume to Russia.
[Figure 2-17] Import Trends of Knitted Fabric Apparel to Russia, by Country
Source: International Trade Center (ITC).Trade Map.(2017.3), Product: HS61. www.trademap.org.
62) "A Change in Russia’s Apparel Consumption Trends, Opportunity for Korea” (Mar. 8, 2016), Global Windows,
KOTRA & Fashion Consulting Group (FCG). "A Change in Russia’s Apparel Consumption Trends, Opportunity
for Korea” (2016.3.8), Global Windows, KOTRA & Fashion Consulting Group (FCG).
Of Uzbekistan’s textile products, cotton (cotton, HS52) and knitted fabrics (knitted
fabrics, HS60) both have a relatively high share of Russia’s textile import market, with
market shares of 42.9% and 24.7%, respectively. Uzbekistan’s major export to Russia is
pure cotton fabric (HS52) that has a low metric count, representing 81% of its exports to
Russia. Other textile products exported to Russia include unbleached cotton fabric (8.6%),
seed cotton, and cotton waste. Of these, for pure cotton yarn, Uzbekistan’s share of total
import amount of Russia in 2016 was 74.4%, and its share of cotton fabrics and other raw
cotton reached 40%. Thus, we can say that for certain items, Uzbekistan’s market
competitiveness in Russia is quite adequate.
But of Russia’s total knitted apparel imports, which amounted to USD 2.56 billion in
2016, Uzbekistan only provided 6.3%, or USD 160 million. When considering the high
value-added and modernization goals for the textile industry, which the Uzbekistan
government is pursuing, it should be noted that the competitiveness of Uzbekistan’s
apparel products in the Russian market is much lower than its potential.
[Table 2-20] Textile Import Amount of Russia and Trends* in Share of Uzbekistan
Items in Russia (Unit: %, USD one million)
HS Share Share Share Share Share

2012 2013 2014 2015 2016
(2 Unit) (%) (%) (%) (%) (%)
50 0.1 0.27 0.0 0.1 0.0 0.03 0.0 0.19 0.0 0.16
51 2.5 4.60 2.0 5.60 1.0 4.16 0.7 3.53 1.0 5.27
52 166.7 27.91 177.9 31.59 202.7 39.80 169.0 40.45 200.3 42.88
53 0.0 0.00 0.0 0.04 0.4 0.88 0.5 1.34 0.4 1.12
54 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 0. 0.00
55 0.1 0.01 2.1 0.28 6.2 0.96 5.6 1.20 9.5 1.97
56 7.7 1.61 11.7 2.14 8.3 1.41 7.0 1.75 11.0 2.58
57 2.8 0.95 2.5 0.86 3.0 1.16 0.8 0.57 1,6 1.22
58 0.5 0.27 0.3 0.21 0.2 0.19 0.7 0.79 1.6 1.89
59 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00
60 20.5 4.17 29.9 5.32 28.1 5.63 38.6 14.31 58.8 24.69
61 182.5 4.46 188.0 4.62 153.7 4.13 128.7 5.33 160.1 6.25
62 4.7 0.12 5.5 0.13 4.3 0.11 2.9 0.11 5.5 0.21
63 4.3 0.34 5.3 0.49 6.2 0.67 6.7 0.99 13.1 2.04
Total 392.6 2.91 425.2 3.22 414.1 361.3 361.3 4.35 463.0 5.48
* Note: Proportion (%) is the ratio of Uzbekistan’s import to Russia’s textile import amount.
Source: Trade Map (2017). Trade Statistics for International Business Development. International Trade
Center. Webdata. http://www.trademap.org.
167
As it can be seen in <Table. 2-21> below, based on the 2016 standard, within Russia’s
apparel import market, Uzbekistan’s market share was relatively high for cotton T-shirts
and Singlets (HS6109100000, market share of 21.4%), cotton knitted apparel for children
and accessories63) (HS6111209000, market share of 18.5%), cotton pants for women
(HS6104620000, market share of 18.4%), and cotton terry towels and household linen
(HS6302600000, market share of 19.6%).
[Table 2-21] Russia’s Import Amount by Major Item and Trend of Uzbekistan’s*
Share (Unit: %, USD 1,000)
Item Share Share Share Share Share
2012 2013 2014 2015 2016
(HS10 Unit) (%) (%) (%) (%) (%)
6109100000 20.1 434,618 17.7 476,064 15.6 441,761 18.5 282,405 21.4 308,631
6201930000 0.0 336,701 0.0 416,185 0.0 410,257 0.0 247,252 0.1 250,758
6202930000 0.0 252,207 0.0 309,947 0.0 321,538 0.0 202,398 0.1 212,593
6110309900 0.0 282,428 0.0 341,592 0.0 312,032 0.0 200,416 0.0 206,936
6204623100 0.0 153,335 0.0 180,265 0.0 189,403 0.0 152,156 0.1 165,540
6203423100 0.0 161,056 0.0 196,446 0.0 173,833 0.0 123,144 0.2 146,511
6110209100 4.8 175,520 3.4 227,642 2.8 201,484 4.4 129,108 4.5 143,390
6115210000 0.0 236,786 0.0 237,899 0.0 198,422 0.0 137,285 0.0 142,816
5502004000 0.0 0 0.0 0 0.0 0 0.0 49,164 0.0 126,367
6205200000 0.1 173,243 0.1 190,766 0.2 184,782 0.1 125,584 0.5 125,829
6307909900 0.0 126,762 0.0 137,406 0.0 128,578 0.0 77,520 0.0 121,288
6206400000 0.0 105,984 0.0 137,889 0.0 153,086 0.0 113,454 0.0 118,455
6309000000 0.0 152,847 0.0 161,240 0.0 140,085 0.0 117,096 0.0 117,298
5503200000 0.0 163,846 1.1 201,005 3.5 176,619 3.9 115,853 5.8 116,770
6110209900 4.2 173,658 2.6 205,621 2.3 185,260 2.9 111,961 2.9 116,128
6212109000 0.0 210,096 0.0 193,498 0.0 174,280 0.0 98,169 0.0 115,475
5205120000 74.3 109,777 72.0 104,430 82.0 92,358 77.6 88,573 64.5 108,284
6109902000 0.0 121,235 0.0 112,991 0 0 0.1 23,301 0.0 107,479
6203423500 0.6 118,003 0.9 141,981 0.3 142,830 0.5 97,231 0.3 106,267
5601221000 0.0 75,489 0.0 92,838 0.0 117,995 0.0 94,973 0.0 101,352
6204430000 0.0 148,704 0.0 166,370 0.0 145,763 0.1 97,952 0.0 97,258
6204623900 0.1 119,909 0.1 146,720 0.2 143,095 0.0 95,771 0.0 95,723
5201009000 15.9 125,216 20.2 100,226 30.4 106,758 5.4 67,665 18.5 80,011
6111209000 9.6 92,255 10.0 115,085 8.4 103,924 13.3 74,500 16.5 79,156
6104620000 7.3 83,337 7.6 103,273 7.4 98,489 10.0 69,245 18.4 75,905
6302600000 2.0 157,716 3.6 120,606 5.4 100,312 9.4 65,261 19.6 57,389
* Note: Among Russia’s textile and apparel import items, this includes the 26 highest import priced items
from Uzbekistan and their share (%). Of Russia’s import amount for the relevant items (HS10 unit),
this is the import amount ratio taken up by Uzbekistan.
Source: ITC (International Trade Center)(2017). Trade Map. http://www.trademap.org.
63) Relevant items are matinee coat, pixie suits, rompers including bibs, tights, woolen shoes, etc. (Based on the
Russian Federation Customs Item Classification Standard, 2013)
A common feature of these products is that they are cotton products, their
manufacturing process is relatively simple or easy, and they are less sensitive to fashion
trends and considered as very basic items, and thus in other apparel item areas their share
is at the 0.1-0.3% level.
This analysis finding shows the current competitiveness of Uzbekistan’s textile industry,
and thus the strategic implications for Uzbekistan’s government concerning FDI attraction.
To put it another way, the government of Uzbekistan, in the short term, should
aggressively attract investment in relatively simple manufacturing areas using domestic
cotton as the main raw material. As explained above, this group includes not only
products for which Uzbekistan has a 20% share in the Russian market, but also socks, hats,
scarves, and less trendy T-shirts. In addition to Russia, the value of T-shirts imported by 6
countries of the Gulf Cooperation Council (GCC) in 2015 was USD 1.5 billion, while the
value of children’s apparel was USD 500 million, and the value of socks was USD 270
million. Therefore, the import shares of the neighboring Middle Eastern market, in general,
are greater in most of the import items than that of the CIS countries.
Relatedly, the government of Uzbekistan announced64) on last October 2016 that it is

planning to establish the Khazarasp Free Economic Zone (FEZ) at the western part of
Khorezm, and that Uzbekistan’s largest textile enterprise, UZTEX Group, had ordered 1,024
sock knitting machines from Lonati (Co.), an Italian sock machinery maker, in May 2016.65)
According to Uzbek government authorities, it is expected that a minimum of USD 60
million will be invested in this project, and the Uzbekistan will ultimately be able to produce
140 million pairs of socks yearly as a result.66) Moreover, the government of Uzbekistan will
provide exemptions on land tax, corporate property tax, capital profit tax, and social
overhead capital development tax for all enterprises entering the FEZ, as well as tariff
exemptions on parts, equipment, and raw materials, and provide benefits so that foreign
currency settlement is possible for contracts being concluded within the special zone.
This project maximizes Uzbek’s sock production capacity, and at the same time,
coincides with the goals of turning Uzbek-made cotton into a high value-added product
and expanding into overseas markets. In sum, this project is evaluated as a very strategic
choice given the present condition of Uzbekistan’s textile industry.
64) The Presidential Decree on the creation of FEZ at Kokand, Xirazm, Gyoduban, and Urgut. The Ministry of
Foreign Economic Relations, Investment and Trade of Uzbekistan (MFERIT) (Nov. 21, 2016).
65) ‘Lonati received EUR 40 million orders from Uzbekistan based socks company.’ (Jun. 24, 2016). Knitting
Industry.com (http://www.knittingindustry.com).
66) ‘Overview of Socks Production Project of Joint Company at Katqala Teks in Xorazm Region’ (ИНФОРМАЦИЯ
ПОПРОЕКТУ«ОРГАНИЗАЦИЯЧУЛОЧНО-НОСОЧНОГОПРОИЗВОДСТВАНАСПООО[KATQALA TEKS] ВХОРЕЗМС
КОЙОБЛАСТИ). Uzbekyengilsanoat. Unpublished internal data (Apr. 7, 2017).
169
The Uzbekistan Policy Authority needs to discover additional items to expand market
penetration based on this strategy and run policies that stimulate FDI in relevant areas.
For example, according to <Table 2-29>, the share of (HS6110209100) including jerseys,
pullovers, cardigans, and waistcoats made in Uzbekistan in Russia’s import market was
4.5%. The Policy Authority needs to review measures to enhance market share in the same
area based on detailed information of the textile marketing and production areas.
Furthermore, it is desirable to find an approach that advances the production capacity of
local enterprises while searching for measures to attract foreign enterprises in related
areas. In particular, to improve the production capacity of local enterprises, the Textile
Techno Park (TTP), which is being supported by Korea, should be actively utilized to
expand technical support, relocation and production capacity.
[Figure 2-18] Items to Strengthen Uzbekistan’s Export Competitiveness (Example)
* Note: Values in parentheses (%) indicate the ratio of Uzbek-made items in Russia’s Import market based
on 2016.
** Source: Korea Federation of Textile industry.
B. Strengths · Risks (ST) Strategy

First, Uzbekistan is currently not a member of the World Trade Organization (WTO),
which means that the country does not have the reciprocity in international relations and
objectivity in trade system in the operation of tariff and non-tariff barriers to trade. This in
itself weakens Uzbekistan’s competitiveness under the global trade system, and is
vulnerability when competing with other countries worldwide to attract FDI. The
Uzbekistan government needs not only to become a member of the WTO, but also
through this membership must create an opportunity to bring the country’s trade-related
system closer to global standards.
Along with membership in the WTO, Uzbekistan must make efforts to expand or
receive the Generalized System of Preference from the major markets of the EU, the US,
etc. through exterior ∙ interior system improvement and diplomatic efforts. Uzbekistan is a
basic GSP-standard applied country in the world’s largest textile and apparel market, the
EU, and thus its benefit range is much smaller than the countries in Southeast Asia, Latin
America and Africa, which are the major emerging textile producing countries. Also, GSP is
not applied in the US, which is the world’s largest textile and apparel market. Export
expansion opportunities in the two largest textile and apparel markets will be an
important chance to further promote Uzbekistan’s textile industry.
Third, while maintaining its market competitiveness in low-cost, general-purpose

products, Uzbekistan must improve its production technology to pioneer the functional,
high value-added textile product market. To accomplish this, it is highly recommended
that Uzbekistan along with Uzbekyengilsanoat strengthen its market research capacity,
such as overseas market research conducted by textile and apparel industry supporting
organizations and monitoring the global market share of Uzbekistani products.
To this end, Uzbekistan needs to strengthen the capabilities of its workers through
appropriate technological development and training to improve their skills, and further,
must actively build its human resources development infrastructure by fostering
professional engineers in the textile and apparel area using the Tashkent Institute of
Textile and Light Industry and joint operations with domestic and foreign organizations
such as Textile Techno Park (TTP).
C. Weaknesses Opportunities (WO) Strategy

First, the government of Uzbekistan must adopt an aggressive attitude when
approaching potential investment enterprises and investors, so that the numerous global
textile and apparel enterprises considering overseas investment can obtain sufficient
information on Uzbekistan, and understand the investment environment.
For example, there is a wide gap in awareness between Uzbek’s policymakers and
foreign buyers and textile and apparel enterprises with regard to national security and
labor exploitation issues. The government of Uzbekistan must re-examine its PR (public
relations) system, and needs to engage actively in investment procurement activities by
distributing information on Uzbekistan’s comparative advantages, producing mass media
or brochures to promote a positive image of Uzbekistan, and sending out promotional
e-mails to disseminate a positive image of Uzbekistan while creating various opportunities
to promote the country.
171
Of equal importance, the government of Uzbekistan should understand that potential
investors have different investment strategies, decision factors, and priorities, depending
on the type of enterprise or country. For this reason, it would be worthwhile to consider
providing promotions and incentives that are customized to each investor. In the same
vein, to accomplish this, the government should organize an international investment
advisory board composed of global textile industry buyers and investors, or actively
participate in the international textile organizations such as the International Textile
Manufacturers Federation (ITMF) or International Apparel Federation (IAF), which will
greatly aid in examining the global awareness situation and strategic direction of FDI.
In addition, it is very urgent to strengthen the operation efficiency of industrial

complexes and ensure their support systems are operating appropriately. In particular,
considering that the customs administrative service has been identified as a serious problem
several times, through the operation of Green Channel, which is exclusively for textile and
apparel products, the customs procedures, can be streamlined and the related paperwork
improved. In addition, procedural efficiencies related to work permits and visas, and power
supply should be resolved by creating a channel for the textile and apparel industry.
Both the transparency and the efficiency of the government’s work related to
attracting FDI must also be strengthened. As was discussed in Chapter 2, lack of
transparency and inefficiency remain the biggest hurdles for Uzbekistan’s governance.
Corporate establishment and administrative procedures must be simplified, and to
promote speedy operation, the procedures related to preferential scope and conditions,
moving into the industrial complex, production and export must be simplified and
clarified through documentation/internet, etc. Also, punitive tax investigation and
deportation should be prevented. To strengthen its external credibility, we suggest that
the government actively introduce the Investment Ombudsman mechanism.
To accomplish these objectives, it is necessary to effectively operate a collaborative

system of various regulatory bodies and service providers, including MFERIT, UzInfoInvest,
Uzbekyengilsanoat, the industrial complex corporation, the power corporation, and the
Environment Ministry, among others. Among the priority tasks for improvement of
governance, ensuring that the statistics announced by the government on the economy
and industrial activities are consistent and internationally trustworthy must be included.
Finally, we recommend improvements related to the logistics environment. It is

important to improve the road environment for inland export routes within and
surrounding the capital Tashkent, and to minimize the inland transportation cost by
accelerating the rationalization and efficiency of railway lines.
D. Weaknesses · Risks (WT) Strategy
Fist, the Uzbek government should guarantee the liquidity of exporters’ foreign
exchange holdings and improve compulsory currency exchange and remittance procedures.
The government of Uzbekistan commonly imposes an obligation to exchange 25% of the
foreign currency receivables into the national currency, the so’m. Furthermore, when foreign
exchange reserves are insufficient, it takes a minimum of 6 months to perform a foreign
currency exchange, making the procedures and time required to import raw materials from
overseas very long. This often acts as a great impediment to exporting enterprises, so there
is a need to adjust the regulations on current foreign exchange system.
Second, the evaluation procedures to decide whether to allow domestic production,

which were put in place to protect Uzbekistan-made cotton and domestic enterprises,
restrain the freedom of foreign textile and apparel investors to engage in business
activities. To address this, Uzbekistan’s government needs to gradually obtain global
competitiveness by advancing the quality and productivity of domestic cotton, in
particular. For other products such as fabric yarns, fabrics and raw materials, the
government should omit evaluation procedures on production or simplify the application
and evaluation procedures so that the enterprises will not be overburdened.
In this regard, mechanisms to protect specific domestic fields should be applied

regularly through a general tariff, or more desirably through the use of the safeguard tariff
mechanism. When relevant tariff measures are applied, this should be done by sufficiently
listening to the position of local demand industries with regard to relevant textile
products before deciding on the tariff measures and the scope of the tariff rate.
Moreover, the government should re-examine the measures that prohibit imports of
used textile machinery more than 3 years old and policies that repress the domestic use of
such machines. Seeking to enhance industrial competitiveness by importing used textile
machinery to strengthen price competitiveness for domestic production and export is
natural business logic, and the fact that the government has sought to restrain this due to
its goal of achieving facility modernization does not help in expanding FDI attraction.
Introducing used textile machinery will increase the domestic import of related parts,
and through this, repair, production, and distribution enterprises for such parts will be
created domestically. Also, for colleges and manpower fostering institutions, this will
provide the opportunity to expand research and applications related to parts. For these
reasons, the revision of this regulation is recommended.
173
Third, of the government-developed and government-operated industrial complexes in
Uzbekistan such as Navoi FIEZ and Angren SIZ, there is currently no dedicated textile
industry complex. As well, for textile factories that are operating on lease in locations
outside the industrial complex, there are concerns that they may be faced with problems
of insufficient road management, unstable power supply, and a lack of water supply.
Accordingly, to attract Korean textile and apparel enterprises into Uzbekistan’s
industrial complexes, a better infrastructure environment should be pursued. The
government should also strategically work to attract enterprises related to cotton-blended
yarn, cotton-blended fabric, knitted fabric producing, and dye processing so that
made-in-China fabrics and accessory materials, which are very popular import items, can
be produced domestically. In short, it is recommended that the government operate the
water supply, wastewater treatment facility, and a safe, affordable, and stable energy
supply facility (i.e.: combined heat power plant) or a system of supply preferences.
In conclusion, it is important to improve access to CIS and the Middle Eastern markets
and not only focus on the Russian market, as well as to improve access to ports while
strengthening the economic cooperation system with the neighboring countries to
support a stable water supply. For example, as Uzbekistan is a land-locked country, Bandar
Abbas Port in Iran is the only shipping export route, and the major infrastructure that can
reduce logistics costs for Uzbekistan. Similarly, if the railway and road networks with the
neighboring countries, which the government of Uzbekistan is currently pursuing, become
rationalized, the logistics time and cost will be substantially reduced.
[Figure 2-19] FDI Attraction Strategy (SO/ST/WO/WT) for Uzbekistan’s Textile and
Apparel Industry
Strength Weakness
* Abundant cotton * High cost/time consumption for logistics
Internal * Affordable gas, oil, electricity, and water and transportation / communication
Environment * Preferential system for foreign invested * Low foreign economic openness
enterprises * High direct investment risk
* Possess 30 million population and labor * Lack of legal, administrative transparency
force * Lack of credibility for investor protection
External * Government’s commitment to nurture * Foreign exchange regulation, lack of
Environment textile industry professional manpower and technology
* GDP growth rate, safety improvement * Buyer awareness of forced labor for cotton
harvesting
Opportunity SO Strategy WO Strategy

* Access to Russian, CIS, and Middle East * Cooperation of cotton cluster-related * Improved awareness of the EU and
Market product and technology and attraction of European countries, expand cotton
* Rising labor costs in Asia and Latin FDI marketing and GSP negotiation
America * Strengthen investment attraction from * Active participation of international textile
* Reduced risk of cotton-related forced Middle East and Asia organization (e.g. ITMF, IAF)
labor * Foreign loans and privatization of * Expand information of FDI desk / website
* Willingness to expand and cooperate state-owned enterprises * Improve road / railroad near the export
with EU GSP * Mid- and long-term fostering strategy of route
cotton-synthetic textile industry
Threat ST Strategy WT Strategy

* Improving production capacity and * Join the WTO and strengthen the use of * Improve foreign exchange and financial
productivity of textile producers such as GP policy/system
China, Vietnam, and etc. * Strengthen production competitiveness of * Optimized industrial complex for textile
* FTA, mid- and long-term expansion of low cost-general purpose products and industry
trade privileges improve production technology of * Foster enterprise clusters for subsidiary
* Entering of new industrialized country high-value products materials
into textile industry * Introduce fostering program for fabric * Strategy to expand investment attraction
* High dependence on external economies engineers and operate jointly with of small and medium foreign enterprises
(Russia Market, water resource, and port foreign enterprises * Strengthen economic cooperation
accessibility) structure of nearby countries
175
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179
Policy Application of
Uzbekistan Textile Technopark
1. Introduction
2. Significance of the Textile Technopark Construction Support Project 183
3. Progress and Goals of the Textile Technopark Construction Support Project
4. Policy Applications of the Textile Technopark
 Chapter 3
Policy Application of Uzbekistan

Textile Technopark
Park Jong Sik (Korea Institute of Industrial Technology)
1. Introduction
On the strength of its rich raw cotton resources and geographical features, Uzbekistan
is one of the top five raw cotton producers/exporters in the world. However, the spinning
sector, a lower value added sector, represents a significant share of the country’s raw
cotton industry. The textile industry is an industry in which roles are divided according to
the streams of the manufacturing process, including raw material production, intermediate
process and sewing, and for this reason, it is essential to increase the value of the industry
through the development of manufacturing technologies that can be applied after
spinning. For this purpose, it is necessary to develop measures to promote the textile
industry in Uzbekistan through shared growth between Uzbekistan and Korea, by bringing
the manufacturing technologies of Korea and the resources (raw cotton, silk and
manpower) of Uzbekistan together based on industrial technology cooperation between
the two countries.
It is essential to establish a textile production value chain that can be systematized

from raw materials to materials and products by implementing a textile production chain
in Uzbekistan – which offers the geographic advantage of easy access to Russia, a new
market - as an industrial technology cooperation project (ODA) based on our experience
of forming a textile production belt in China and Southeast Asia.
Korea has established a solid foundation in the production stream in the

manufacturing industry, and Uzbekistan and Korea will engage in mutual technical
cooperation. To share the know-how Korea has built through its experience of the
technical development of its textile industry, the need for an ODA project for the
development of textile industry and technical improvement in Uzbekistan is on the rise,
stressing the need for a Korean-type industrial technology ODA project. Economic and
industrial cooperation between the two countries to support the private sector capacities
in Uzbekistan through an industrial technology ODA of Korea is absolutely essential, and a
practical way to increase incomes in a developing country.
2. Significance of the Textile Technopark Construction

Support Project
2.1. Why the Textile Technopark?

While Uzbekistan has rich raw cotton resources, its manufacturing technology lags
behind global standards. Thus, through an industrial technology ODA project of the
Korean government, technical cooperation in the textile industry has been in progress for
eight years since an industrial cooperation MOU between the two countries was signed
with the aim of bringing the superior manufacturing technology of Korea and the rich raw
cotton, manpower and utility of Uzbekistan together in the name of shared growth (May
10th, 2005).
With Korean companies obtaining orders from Uzbekistan and textile companies
entering local markets, Uzbekistan has been making constant requests to implement the
assistance project to build the Textile Technopark in Uzbekistan with H/W. It was
determined that Korea’s successful development of its textile industry based on the
introduction of industrial technology is the most effective model to apply to the
development of the textile industry in Uzbekistan.
In June 2014 when the president of Korea visited Uzbekistan, the two countries
entered into a basic agreement and joint declaration in various fields from 2014 to 2017,
agreed to expand their industrial cooperation in various fields including the textile
industry, and most importantly, agreed to build the Uzbekistan Textile Technopark
through Korea’s industrial technology ODA.
183
Chapter 03_Policy Application of Uzbekistan Textile Technopark 
2.2. Korea’s Industrial Policies and Regional Development Policies, and
Case Studies of its Technoparks67)
First, we will take a look at Korea’s industrial development policies.
Beginning with its 1st 5-year Economic Development Plan in 1962, Korea aimed to
achieve economic development through high-growth industrialization policies. As shown
in <Figure 3-1>, during the 1960s, Korea focused on promoting exports in the area of
light industry based on cheap labor. During the 1970s, Korea made constant, large
investments that aimed to cultivate its heavy and chemical industries. During the 1980s,
Korea focused on the cultivation of technology-intensive industries. During the 1990s, the
main focus was high-tech industry. During the 2000s, Korea promoted the
commercialization of technologies including information technology (IT), and in recent
years, has focused on the cultivation of environmental-friendly technologies and new
growth engine industries through innovation and technical convergence.
[Figure 3-1] Korea’s industrial policies in each decade
Looking at science policy, during the 1960s, Korea established science-related

institutions including the Ministry of Science and Technology, enacted the Science and
Technology Promotion Act, and worked to develop human resources. During the 1970s,
Korea expanded the infrastructure for science and technology, established
67) Excerpted from Dankook University Professor Shin Jin’s presentation materials presented at the Light Industry
Ministry Seminar held on December 16th, 2015 as a part of the Uzbekistan Textile Technopark Construction
Support Project.
government-funded research institutions and cultivated high-quality human resources
through the enactment of the Research and Development Promotion Act. During the
1980s, Korea created the research and development fund and supported research and
development activities in the private sector by promoting the establishment of private
research institutes. During the 1990s, Korea focused on the cultivation of strategic
industries, established a high-level strategic cultivation policy, and strengthened the ties
among industries, universities and research institutes by reinforcing the research capacities
of universities. During the 2000s, Korea focused on research and business development
(R&BD) and investment expansion, implemented strategic plans for technical
commercialization, and promoted new technical commercialization and investment
through the globalization of technology. In the 2010s, Korea is focusing on the cultivation
of environmentally-friendly green technologies.
<Table 58> provides a brief overview of the 50-year path taken by the Korean
economy that was developed through the industrial policies described above. In the last
50 years, Korea’s population has doubled, going from 25 million to 50 million, while its
GDP was increased by a factor of 500, from 2 billion USD to 1 trillion USD. Exports were
increased by a factor of 17,000, from 3 million USD to 500 billion USD.
[Table 3-1] 50-year path of the Korean economy
185
Along this path of development, the industrial structure in Korea went through many
changes as well. Looking at employment, 63% of employment was in the primary
industries in 1960 – this had fallen to 5% by 2012. Employment in secondary industries
went from 7.9% to 16.9%, which is an increase by a factor of 2.1. Employment in the
service industry went from 28.3% to 78.1%, which is an increase by a factor of 2.8. In the
manufacturing sector, the share represented by primary industries was decreased to 1/13
its previous level, from 37% to 3%, while share represented by secondary industries was
doubled and the share of tertiary industries was increased by a factor of 1.4.
As a result of its industrial development policies, Korea’s key export items have gone
through constant changes over the last 50 years. As shown in <Table 59>, which lists
Korea’s key export items, during the 1970s, textiles represented 40.8%, plywood 11.0%,
wigs 10.8%, iron ore 5.9% and electronics 3.5%. During the 1990s, clothing took up 11.7%,
semi-conductors 7.0%, footwear 6.6%, media equipment 5.6% and ships 4.4%. In 2014,
semi-conductors took up 10.9%, petroleum products 8.9%, automobiles 8.5%, ships 7.0%
and displays 5.8%.
[Table 3-2] Changes in Korea’s key export items, by decade
Korea’s industry has developed through a process of ‘learning by doing.’ Companies in

Korea have learned how to produce better products, and introduced more precise
management techniques. They also have studied successful cases of technical innovation
and the competition process in overseas markets.
Now, we will take a look at regional development policies in Korea.
For 40 years since the early 1960s, the Korean government successfully implemented
various strategies for economic growth, and based on these strategies, the government
started to reorganize the priorities, implementation plans and means of its policies. At the
same time, there was an attempt to shift the paradigm of Korea’s regional development
policies, and ultimately, the main focus of the country’s economy was successfully shifted
from agriculture to advanced technology and knowledge-intensive industries. The
traditional paradigm was characterized as decentralization, improvement of economic
efficiency and balanced economic growth led by the central government. The new
paradigm focuses on acceleration of development, securing of a competitive edge and
strengthening of innovative capacity, and is led by local governments and private sector
organizations.
Thus, Korea has been implementing a phased development strategy, with a different
focus in each phase. These can be described as follows. Phase 1 was an early chase strategy,
with the aim simply being one of growth. Phase 2 involved changes in the industrial
structure and a shift to export-led growth. Phase 3 focused on technical advancement and
improvement of learning and skills. As a result, Korea’s economy was able to achieve a
continued increase in productivity through the industrialization process. Also, the focus was
changed from light industry including food, beverage tobacco, textiles, furniture, printing
and wood to heavy and chemical industry including petroleum, non-ferrous metals,
machinery, electronics and precision engineering, as shown in <Figure 3-2>.
[Figure 3-2] Shift from light industry to heavy and chemical industries from the
1970s to 2010s
187
The paradigm shift in Korea’s industrial policies also had an effect of improving
regional competitiveness. But to accomplish this paradigm shift, governance, resource
distribution and adjustment of the policy structure were required. The Regional
Development Committee was founded, and the Ministry of Science, ICT and Future
Planning and the Ministry of Trade, Industry and Energy were placed in charge of
establishing the regional development policies and programs. The National Research
Foundation of Korea and the Korea Institute for Advancement of Technology
implemented the policies, and the Regional Economic Growth Committee was in charge of
adjustments and assessments. The Leading Industry Office managed the implementation
of projects, and the Technopark and local government administered regional tasks.
[Figure 3-3] Specialized fields and regional distribution of Technoparks in Korea
Now, we will take a look at the Technoparks in Korea. Over a five-year period from 1997
to 2002, Korea’s central government established six Technoparks throughout the country,
with an investment of 25 billion KRW each. At the time, about three metropolitan cities
and/or provinces were assigned to each Technopark. Currently, there are 18 Technoparks in
Korea, and each has established a co-organizational structure with industries, universities
and research institutes. There is one Technopark for each city or province in Korea, with
ones to be added in Pohang (Gyeongsangbuk-do) and Daejin (Gyeonggi-do). The locations
and specializations of the Technoparks are shown in <Figure 3-3>.
Under the Metropolitan Economic Region Program, the objectives of the regional
bodies are: cooperation among the Metropolitan Economic Regions for the five Super
Metropolitan Economic Regions, cultivation of leading industries for the 5+2 Metropolitan
Economic Regions, cultivation of strategic industries for the 13 cities and provinces
(excluding the capital area- Seoul, Gyeonggi and Incheon), and cultivation of regional
specialization industries for the 163 basic local governments (cities and districts excluding
Seoul and metropolitan cities).
[Table 3-3] An example of funding for a Technopark
For the funding of the Pilot Technopark, the central government provided a total of 25
billion KRW – 5 billion a year for five years – and the remainder was provided by local
governments (city and/or province), basic local governments and local universities. The
central government contribution was approximately half of the budget, while the local
governments contributed 40% and the universities 10%.
189
In this case, the leading industry cultivation program, with the goals of job creation
and local economic growth, cultivated 12 leading industries within the seven Metropolitan
Economic Regions and promoted cooperation among enterprises and universities in the
regions. The program also provided support for research and development activities for
more than three years, and created brands through new product development and the
creation of new value chains.
<Figure 3-4> shows an example of the general organization of Korea’s Technoparks. It

consists of the Board of Directors, 1 President (CEO), Business Support Department (11 in
Business Incubation and Technology Commercialization), Administration Department (11
in Finance & Accounting and General Affairs), Industry Planning Department (11 in Policy
Research and Evaluation), Human resource Institute (5) and Strategic Industry Centers (4
centers, 13 staff*4= 52).
[Figure 3-4] General organization of Korea’s Technoparks
Lastly, in the textile industry in Korea, regionally specialized research institutes for
testing and development purposes are distributed evenly across the country, instead of
being organized as parts of the Technoparks. The institutes are distributed as shown in
<Figure 3-5>.
Each institute has its own fields of specialization: clothing and sewing for Seoul, knitted
textiles for northern Gyeonggi, chemical fiber textiles for Daegu and Gyeongbuk, fashion
apparel and industrial – particularly marine – fibers for Busan, silk fabrics for Gyeongnam
and Jinju, knitted apparel for Jeongbuk and jacquard for Chungnam.
We will take a look at the structure of the textile industry through the examples of
Gyeonggi-do and Daegu/Gyeongbuk. First, in Gyeonggi-do as of 2015, there are a total of
1,476 textile producers with 10 or more employees. 54% of the knitted textile producers
and 53% of the dyers in Korea are located in the region. Among them, 79% of the knitted
textile producers and 75% of the dyers are located in northern Gyeonggi-do.
[Figure 3-5] Fields of specialization and distribution of textile research institutes68)
Dyeing, Post-processing
Korea High Tech Textile Research
Clothing, Institute
Fashion
Chemical Fiber Yarn, Textile

DYETEC, Korea Textile Development
Industrial Textile Institute, Korea Research Institute for
Korea Jacquard Textile Fashion Industry
Institute
Raw Material
Knit Textile, Carbon/Fusion Fiber

Korea Institute of Convergence Textile
Clothing, Shoes
Korea Institute of Footwear & Leather
Technology
Silk
Korea Silk Research
Institute
In the past, most of the dyers in northern Gyeonggi were operated independently, but
since 2000, industrial complexes have been formed for the integration of facilities,
including waste water treatment and energy supply, and spaces are being offered to dyers
in a manner similar to that of the Technoparks. The Korea High Tech Textile Research
Institute (KOTERI) is in charge of research and development works and support of textile
companies in this region.
In Daegu/Gyeongbuk region, textiles represent a large part of the manufacturing

industry – 35.6% in Daegu and 10.3% in Gyeongbuk. In terms of exports, textiles produced
in this region represent 20.7% of all Korean exports, and 21.1% of the total exports from
the region.
In terms of the structure of the textile industry in Daegu/Gyeongbuk region, the

product manufacturing structure is concentrated in yarns and fabrics made of chemical
fiber (polyester). Production of yarns and fabrics takes up 72.5% of the textile industry in
this region (37.9% of the nationwide textile industry), while knitted goods and apparel
68) Source: Korea Federation of Textile Industries
191
take up only 19.1% (55.4% nationwide).
The textile producers are distributed by field across eight industrial complexes, which
means that they are distributed in a form similar to an expanded version of the
Technopark. The Korea Dyeing & Finishing Technology Institute (DYETEC), the Korea
Textile Development Institute (KTDI) and the Korea Research Institute for Fashion Industry
(KRIFI) are in charge of research and development works and support of textile companies
in this region.
69)
2.3. Theoretical Background and Function of Technopark
As shown in <Figure 3-6>, a Technopark pursues six different purposes: business

incubation, integrated business support, education and training, joint research and
development, common equipment and networking.
The Technoparks in Korea, as shown in <Figure 3-7>, are operated in close and
organic relationships and cooperation with the government, industries, universities and
research institutes. Through functions such as technical and industrial innovation and
manpower enhancement, the Technoparks are contributing greatly to the advancement
and stabilization of the industrial structure through self-reliance.
[Figure 3-6] The six purposes of a Technopark
69) Excerpted from Dankook University Professor Jin Shin’s presentation materials presented at the Light Industry
Ministry Seminar held on December 16th, 2015 as a part of the Uzbekistan Textile Technopark Construction
Support Project.
[Figure 3-7] A diagram describing the relationships, functions and effects of the
Technopark
The theoretical background of the Technopark, as shown in <Table 3-4>, is to provide

new types of services, play the role of an intermediate organization, and to be the engine
that drives the development of industry and the local economy, as a powerful source that
promotes innovation. The new types of services provided by the Technopark include
providing enterprises with: infrastructures and location facilities for business and R&D
activities; business services that include management, marketing and technical services;
and knowledge contents services.
[Table 3-4] Theoretical background of the Technopark
The Technopark is an engine for the development of industries and local economies
□ A Technopark provides new types of services:

- To provide infrastructures and location facilities for business and R&D activities
- To provide enterprises with business services including management, marketing and
technical services, and
- To provide knowledge contents services
□ A Technopark is an intermediate organization and a powerful source that promotes
innovation.
The functions of the Technopark can be listed as follows. First, it serves as a

department that assists businesses. Second, it plays the role of a department that provides
193
strategic plans for industries. As the business assistance department, its functions include
the following, and are described more specifically in <Table 3-5>.
Incubation of new enterprises


Assistance for technology commercialization and R&D

Assistance for local innovation centers

Support programs

Technology transfer center

[Table 3-5] Functions of the Technopark 1
Functions of the Technopark 1. Roles of the business assistance department

1. Incubation of new - Technical and management consulting, customized benefits,
enterprises business matchmaking and education
2. Assistance for - Commercialization cost for new enterprises with a promising new
technology technology
commercialization - On-site resolution of technical difficulties using technical
and R&D infrastructures, and R&D cost
3. Assistance for local - Assistance for local innovation centers, promotion of exchanges
innovation centers among them, and use of technical infrastructures
- Connection between clients and financial funds
- Comprehensive consultation for problem solving
- Recommendation of government support, funding, human
resources and equipment for clients
- Assistance for promising small or medium sized enterprises in
overseas market research and securing of new business partners
4. Support programs
- Provision of equipment/facility and support for utilization
- Assistance for commercialization and marketing in the fields of
eco-friendly industries, ginseng and herb industries and auto parts
industries
- Funding for human resource training and technical development
suitable for local industries
- Assistance in finding new trading partners through exhibitions
5. Technology
Technical consulting, development, assessment and marketing
transfer center
As the strategic planning department, its functions include the following, and are
described more specifically in <Table 3-6>.
Policy research

Program evaluation

Based on the above, Uzbekistan, whose industry is dominated by the raw materials
sector, including raw cotton and textile industry, shall expand Textile Technoparks across
the country with the Textile Technopark that are to be built through Korea’s industrial
ODA fund as a model. (Based on a structure that combines industries, universities and
research institutes)
[Table 3-6] Functions of the Technopark 2
Functions of the Technopark 2: Roles of the strategic planning department

- To establish plans to promote local industries and to build local
innovation systems
- To establish and suggest integrations of mid-to-long term strategies for
industrial development
- To introduce the latest technologies and establish partnerships with
6. Policy overseas research institutes through international exchanges
research - To establish and implement industrial policies to be reflected in the local
policies
- To conduct research and build a DB on local industry distribution for
innovative capacities and R&D resources
- To select operational programs and support industrial-academic
cooperation
- To plan, select, confirm and evaluate technical development works
relating to the strategic industries in the region
- To conduct research on industrial technology guidance, and establish
and plan mid-to-long term R&D tasks
- To establish participatory systems in the R&D fields relating to the
7. Program
industrial production areas and local strategic industries
evaluation
- To conduct research on the platform industries in the region and to
present prospects of advanced, future industries
- To build a network focusing on mainstream social technology innovation
- To research and analyze the conditions, speed of integration and
innovative resources of the local strategic industries
Then, in the next phase, the domains of education & training, research & development
and test analysis shall be separated, and the Technoparks shall be activated as
independent, professional organizations, yet operate under a co-organizational structure.
(A structure in which industries, universities and research institutes are separated yet
operate in close cooperation to complement one another)
195
2.4. Policies to Promote the Textile Industry in Korea, Uzbekistan and
Vietnam, and Their Implications
Before suggesting policy applications of the Textile Technopark in Uzbekistan, research
on Vietnam’s textile industry, which has seen rapid growth in recent years, and on the
changes in the policies to promote the textile industry was carried out in order to provide
a reference. Then, the systems to promote the textile industry in Uzbekistan and Korea,
which has reached the level of advancement, were compared and analyzed to examine the
implications with regard to the roles of the Textile Technopark in Uzbekistan. Lastly,
suggestions for the policy applications of the Textile Technopark in Uzbekistan were
established.
The reason why Vietnam’s textile industry and the changes in the policies to promote
the textile industry were used as a reference is because even if Uzbekistan utilizes the
Textile Techno park with a policy of developing the textile industry, the textile industry in
Uzbekistan must be aggregated and analyzed every year for an assessment, and then
based on the result, Uzbekistan’s promotion policies shall be maintained, revised,
improved and/or developed according to their effectiveness, and referring to Vietnam’s
case is necessary for this process. Of course, there are differences between the two
countries, as Vietnam does not have any textile materials while Uzbekistan produces raw
cotton, but it is thought that making a reference to Vietnam’s promotion policies can be
helpful.
First, we will analyze Vietnam’s environment for promotion of the textile industry.70)The
current status of Vietnam’s textile industry can be summarized as follows:
ㅇ As of 2015, Vietnam’s exports of textiles/apparel have increased by 16.3% compared to

the previous year, and at 29.7 billion USD, are the fourth largest in the world.
ㅇ As of 2015, there are approximately 5,200 enterprises and 2.5 million workers in Vietnam’s
ㅇ Vietnam’s textile and apparel industry has achieved rapid growth, mainly in the apparel
sector, based on its low wages and rich human resources, and textile exports are done
by processing imported materials.
- Vietnam imports textile materials including fiber yarns and fabrics from China, Korea and
Taiwan (70-80% of its materials), and finished apparel products are exported to the USA,
the EU and Japan.
70) Trends in Vietnam’s Textile Industry, Korea Federation of Textile Industries, 2016
For the changes in the policies to promote the textile industry in Vietnam, in April
2014, the government had announced a mid-to-long term industry promotion plan that
set various goals, including: modernization of the textile and apparel industry,
development of high-value products such as technical textiles, increase of self-sufficiency
through production of raw materials, sustainable growth through protection of the
environment, manpower development and the generation of Vietnamese fashion brands.
<Table 3-7> describes the “2020 Vietnam’s textile and apparel industry development plan
and 2030 vision goals.”
[Table 3-7] 2030 Vietnam’s textile industry development goals
UnitGoal Item 2015 2020 2030

Export Amount Billion USD 23-24 36-38 64-67
Proportion of manufacturing
% 15-16 13-14 9-10
industry
2. Workforce 1,000 2,500 3,300 4,400
3. Production Goals for Key Products
- Cotton yarn 1,000 ton 8 15 30
- Chemical textile 1,000 ton 400 700 1,500
- Spun yarn 1,000 ton 900 1,300 2,200
- Fabric million 1,500 2,000 4,500
- Needlework products million SP 4,000 6,000 9,000
4. Localization Rate % 55 65 70
ㅇ Expansion of apparel exports through improvements in the production structure, such as

diversification and advancement of apparel products and development of high value products
- Establishment of original brand manufacturing (OBM) system through a shift in the apparel
production structure from consignment processing of cutting, making and trimming (CMT) to
original development manufacturing (ODM)
- Transfer of apparel production bases in major cities to rural areas after achieving improvements
in labor productivity, project management, design development, quality control and trade
promotion abilities and considering labor power and transportation
ㅇ Establishment of textile production bases for the promotion of technical textile and medical
textile exports
- Development of technical textiles and medical textiles to maximize the effects of free trade
agreements, including TPP and FTA
- Intensive development of key processes such as weaving, dyeing and finishing for improvement
of quality and customer trust
- Investment in the fields of fiber, weaving and dyeing by selecting proper technologies that can
increase quality and emit less pollutant substances
197
- Construction of ODM system that can produce raw materials and needlework products by
establishing a plan to build upstream textile factories with facilities including water supply and
waste water treatment in certain regions, and by promoting investments in value chain
industrial complexes of modernized apparel production
ㅇ Establishment of production bases for synthetic fiber and agricultural products including cotton
- Building of home-grown cotton supply system by establishing cotton farming areas and cotton
development programs to increase cotton fiber production and quality
- Promotion of additional investments in fiber production factories to achieve the localization
goal and to meet domestic demands
ㅇ Establishment and implementation of regional development plans for seven regions while
considering transportation, labor power, industrial complexes and agricultural areas
Major policies for the development of Vietnam’s textile and apparel industry are
summarized in <Table 3-8>.
[Table 3-8] Major policies for the development of Vietnam’s textile and apparel
industry
Category Content
Export ㅇ Diversification of export market by expanding to niche markets such as
expansion Korea, BRICs, AEAN, Africa and Turkey while continuing export to
traditional markets including the USA, the EU and Japan.
- Strengthening of roles and negotiation capabilities of the trade leader, and
establishment of trade promotion strategies that meet the needs of
overseas retailers and buyers for expansion of the textile market
- Simplification of administrative procedures, fortified censorship,
strengthening of market supervision to counter smuggling and tax
avoidance, and administrative reform on taxation and import duties
- Dissemination of international trade laws to help textile and apparel
enterprises overcome barriers in importing countries
Investment ㅇ Promotion of investments in the manufacturing of cotton and
petrochemical products to strengthen support for the production bases of
fabric, technical textiles, medical textiles, apparel and accessories
ㅇ Construction of infrastructures such as electricity and water supply,
establishment of environmental preservation policies such as waste water
treatment, and promotion of investments on manpower development
ㅇ Construction of infrastructures such as harbors, railroads and logistics
centers in major cities
Industrial ㅇ Establishment of a manufacturing standard to enhance productivity and
policy and quality, and reinforcement of e-commerce application for the efficient use
management of technical intelligence
measures ㅇ Establishment of production networks by stream through the construction
of textile industrial complexes, and strengthening of the roles of the
Vietnam Textile and Apparel Association (VITAS) and the Vietnam Cotton
and Spinning Association (VCOSA)
ㅇ Implementation of technical development projects such as training with
overseas technical experts to provide textile enterprises with professional
knowledge in fields of concern
Category Content
Manpower ㅇ Establishment of manpower development plans for technical development,
development management, design and market research in the textile industry to
improve the competitiveness of Vietnam’s textile industry
ㅇ Establishment of textile and fashion colleges to build professional training
systems, while the VITAS implements overseas dispatch programs by
strengthening ties between industries and educational institutes
Technical ㅇ Research on new material development and new technology application,
development and operation of eco-friendly manufacturing programs for energy
conservation, productivity and quality improvement and consumer product
safety
ㅇ Application of software programs for production, quality management and
design of textile products
ㅇ Reinforcement of quality management through the establishment of a
testing, analysis and certification system in accordance with international
standards and the technical regulations and standards for textile products
ㅇ Support for design and quality control research and an evaluation/testing
support center for textile products to overcome technical trade barriers in
importing countries
ㅇ Strengthening of international cooperation for overseas technology
transfer and management research
Raw Material ㅇ Establishment of textile material supply centers in major cities including
Supply Hanoi and Ho Chi Minh City for the timely supply of raw materials
ㅇ Financial assistance and attraction of foreign investments to promote
investments on chemical textile industry including fiber, yarn and chemical
fiber
Environmental ㅇ Development of a technical roadmap for the cultivation of an eco-friendly
protection textile industry – development of eco-friendly products, clean textile
manufacturing processes, regulations on chemical substances and dye and
conservation of gas, water
ㅇ Research and development of eco-friendly technologies to conform with
international environmental regulations and to overcome technical barriers
relating to environment issues
Financial ㅇ Encouragement of the participation of textile and apparel enterprises in
support the stock market, to promote foreign investments and to diversify channels
for capital acquisition
ㅇ Government subsidies for enhancement of technical development
capabilities in research institutes and construction of educational facilities
and infrastructures for textile industry
ㅇ Utilization of national credit loans, ODA and environment funds for
environment-related projects in textile industry
Source: Trends in Vietnam’s Textile Industry, Korea Federation of Textile industry, 2016
To conclude, Vietnam’s promotion policies and development strategies for the textile
and apparel industry can be summarized as follows. Please note that the contents on
Vietnam are included purely for reference.
199
ㅇ The textile industry is a main industry in Vietnam, and the government is implementing
policies for its advancement.
- Vietnam’s textile industry has seen rapid growth based on cheap labor.
- The Vietnamese government has announced the “2020 Vietnam Textile and Apparel Industry
Development Plan and 2030 Vision Goals,” which aims to modernize the industry, develop
high value products, increase self-sufficiency in terms of raw materials, and promote
sustainable growth, manpower development and brand development.
ㅇ It also includes a plan to designate regionally specialized textile products and to form
clusters in seven different regions considering transportation, labor power, industrial
complexes and agricultural areas.
ㅇ For the advancement and value addition of the textile industry, the government has
established promotion policies with active support of enterprises centering around the
public research institutes.
- The Ministry of Industry and Trade and the Ministry of Planning and Investment are in
charge of attracting foreign investments and ODA while establishing and managing policies
to develop the textile industry.
- People’s Committees in districts and cities are in charge of establishing and implementing
development plans for clusters in each region.
- Vietnam Textile Research Institute is in charge of supporting enterprises by providing
assistance on technology transfer, testing/assessment/certification and education while
conducting R&D and policy research.
Now, before making policy suggestions for the Textile Technopark in Uzbekistan, we
will compare the systems to promote the textile industry in Uzbekistan and Korea and
analyze the differences to examine the implications.71)
For this purpose, we shall take a look at the relevant organizations in Korea’s textile
industry. These organizations play various roles to contribute to each phase of the
manufacturing process, and the roles, as shown in <Figure 3-8>, are research and
development, technical support and training of the workforce.
In terms of research and development, the organizations conduct research through

demand surveys on technologies needed for enterprises or by finding promising future
technologies. They also conduct R&D in cooperation with industries, universities and
research institutes. For technical support, they provide enterprises with technical
intelligence, equipment instruction, resolution of technical difficulties and
testing/assessment. They also provide training for R&D workers and short to mid-term
re-education courses.
71) Uzbekistan Textile Technopark Construction Support Program Master Plan, December 2016, TBNA Co., Ltd.
[Figure 3-8] Support and assistance throughout the manufacturing process
Second, the organizations in Korea’s textile industry support enterprises in their

development of new technologies and processes of technical innovation by providing
R&D assistance, market knowledge and expertise and research equipment instructions
through multiple research institutes and technical support organizations. Third, the
workforce training is done through universities and institutes.
Korea Institute of Industrial Technology (KITECH) under the Ministry of Science, ICT
and Future Planning (MSIP) and professional manufacturing technology institutes under
the Ministry of Trade, Industry and Energy (MOTIE) engage in research and development
and business incubation, and Korea Federation of Textile industry (KOFOTI), which is an
alliance of textile industry organizations formed by enterprises, provides technical and
industrial intelligence and networks, while some provide manpower training. Universities
offering courses on textile and apparel cultivate R&D workforces as well.
<Table 3-9> shows a summary of the three roles – research and development,
technical support and manpower training – played by the organizations in Korea’s textile
industry.
201
[Table 3-9] Roles played by key textile industry organizations in Korea
Manpower
Business Incubation
training
Resolution
Name R&D
of Prototype Testing/ Information For For field
technical Assistance Analysis service students workers
difficulties
Korea Federation of Textile
○ ○
industry
Korea Institute of Industrial
○ ○ ○ ○ ○ ○ ○
Technology
Korea High Tech Textile
○ ○ ○ ○ ○ ○
Research Institute
Korea Institute of
○ ○ ○
Convergence Textile
Korea Jacquard Textile
○ ○ ○ ○
Institute
Korea Dyeing & Finishing
○ ○ ○ ○ ○
Technology Institute
Korea Textile Development
○ ○ ○ ○ ○ ○
Institute
KOTITI ○ ○
Korea Apparel Testing &

○ ○
Research Institute
FITI Testing & Research
○
Institute
Korea Textile Machinery
○ ○ ○
Research Institute
Technopark ○ ○ ○ ○ ○
Universities ○
What is more important is the fact that the roles of these organizations – research and
development, business incubation and manpower training – are evolving from
single-function performance to multi-function performance. Thus, the role of research and
development is evolving from independent research by each organization to joint
research between industries, universities and institutes, or to inter-industry R&D (see
<Figure 3-9>), while the role of business incubation is being developed from
single-function assistance of technical support or prototype assistance to multi-function
assistance, or to growth support consultations (see <Table 3-10>). For manpower training,
it began with student education in universities and then diffused to re-education
programs for field workers, and now is being developed into manpower training in linkage
with R&D and technical support (see <Figure 3-10>).
[Table 3-10] Direction of change in the function of Korea’s textile industry
organizations to support enterprises
Function Direction of Change Function Direction of Change
Testing/ Equipment
Analysis Utilization
Prototype Manpower
Production training
Information Technical
Service Guidance
Resolution New
of Technical Business
Difficulties Incubation
203
[Figure 3-9] Changes in R&D roles performed by Korea’s textile industry
organizations
Convergent R&D among

Done solely by R&D Linked R&D Convergence
Industries
• Each institution sets the • Conduct all-stage linked • Expand convergent

independent research R&D that covers research development
areas and conduct R&D companies, research with research centers of
in the corresponding centers, and universities other fields or
areas to convert basic R&D to co-research among
commercialization companies
• Conduct comprehensive
support R&D by linking
the R&D and corporate
technology support
functions
[Figure 3-10] Changes in manpower training functions of Korea’s textile industry

organizations
Re-training for fostering R&D and technology

Training for Students
students and employees support linked training
• Grant degree in textile • Conduct • Conduct R&D linked or

field mainly in short-term/mid-term technology support
universities training for employees in training for students and
research centers and employees
technical support • Offer employment-linked
institutions program after on-the-job
training to students
On the other hand, the relevant organizations in Uzbekistan’s textile industry – the
Ministry of Foreign Trade, the Light Industry Ministry, the Cotton Industry Association and
the Tashkent Institute of Textile and Light Industry – play the following roles (<Table
3-11>) to support the development of Uzbekistan’s textile industry. However, their roles in
the more specific areas of research and development, business incubation and manpower
training are partially limited (see <Table 3-12>).
[Table 3-11] Key functions of Uzbekistan’s textile industry organizations
Name Key Functions

Ministry of Foreign Trade - Investment attraction and export management
Cotton Industry Association - Farm exchange and financial support
- Establishment of enterprise policies
Light Industry Ministry - Promotional/marketing assistance including exhibitions
- Skilled manpower training
Tashkent Institute of Textile and
- Manpower training
Light Industry
[Table 3-12] Roles played by key textile industry organizations in Uzbekistan
Business Incubation Manpower training

Name R&D Resolution
Prototype Testing/ Information For For
of technical
Assistance Analysis service students manufacturers
difficulties
Cotton Industry
○
Association
Light Industry
○ ○
Ministry
Tashkent Institute
of Textile and ○ ○
Light Industry
Fashion Center (?)
Meanwhile, after a careful examination of the development processes and policies

applied to textile industry in several countries around the world, it is thought that Korea
has entered Phase II of its Innovation Period, China is in the early stage of Phase I of the
Innovation Period, Vietnam is going through the Fostering Period, and Uzbekistan is in the
Fostering Period.
205
[Figure 3-11] Key roles played by textile industry organizations in Uzbekistan
Growth Development Advanced Innovation Innovation

Early Stage
Stage Stage Stage Stage I Stage II
Growth Stage
by Countries
Low income
 Focused on
 Acquiring High wage,
 High wage,

labor-focused low-income labor production knowledge-foc knowledge-focu
stage Combined the
 capabilities by used type sed type
Domestic
 production of products/fabric Conversion to
 Expansion of

market focused natural and value chain small-quality high-quality
self-supplied chemical fabrics Expansion the production of strategic
natural fabrics (build industrial production of variety of products to
Introduction of
 platform) chemical fabrics products enter the
cotton weaving,  Quantitative in large scale Conversion to
 market
small-scale knit, growth of Weakened self-designed/b Exporting

Industry
and wool industry and product rand industrial fabrics
Characteristics companies industrialization competitiveness ODM/OBM Monopolizing on

Expansion of
 of export due to the products high-performing
production increase in Expansion of
 materials by
facilities labor and raw ratio of technologically
Replacement of
 material prices exporting advanced
old facilities, Increased ratio industrial countries
need for of old facilities fabrics Focus on the

improving Need for having
 competition to
product quality own brand acquire original
raised technology
Lowered interest
 Promotion of
 Restructuring to
 Cutting on
 R&D of strategic

rate to export (tax solve the low-profit areas products such
stimulate reduction, export problems of Expansion of
 as
investment in fund, etc.) overlapping/over the production high-performan
facilities Promotion of
 supplied facilities of industrial ce high-tech
Stimulation of
 inducing foreign Replacement of
 fabrics material,
replacement for capital old facilities and Focusing on
 convergence
imported Improved
 reduction of fostering material, smart
products by production, R&D human resource fashion/design/ fabric, and
restricting for acquiring R&D for
 apparel/brand medical fabric
importing production improvement of Focusing on
 Investing mainly

consumer technology by production and high-value on acquiring the
products value chain acquiring R&D high-tech key original
Restriction of
 Building clusters
 production and technology,
Industry foreign by products technology by eco-friendly taking over
Training currencies Support for tests
 value chain materials standards, and
Policy Partial
 and certification Support for
 linking
encouragement Training
 introducing R&D industries
of export well-skilled facility
(multiple rates human resources equipment
of exchange for technology Support for

system) linkage of R&D
and
commercializa-
tion
Strengthening

tests and
certification
Fostering

high-level skilled
human resource
[Figure 3-12] Roles played by innovative bodies in Korea and China’s textile industry
Innovation
Innovation
Development Advancement Stage I
Subject Early-stage Stage II
Stage Stage (Knowledge-int
(Advanced)
ensive)
Department Establishment/Promotion of Industry Fostering Plan
Establishment/Promotion of Industry Fostering Plan and Linkage/Cooperation

Support between Subjects
Association
Collection and Provision of Industry Information
Production Technology R&D by

Fiber Value Chain
Research
Institution
New Material, New Product R&D
Verification and Certification and Production and Standardization of

Test Products
Certified
Institution Re-education of Industrial Manpower
New Material, New Product R&D
Education
Fostering High-Level Professional Manpower in Textile Field
Institution
Based on the above, the following implication can be derived for the development of
Uzbekistan’s textile industry: Since the key roles played by the innovative bodies in the
nation’s textile industry are determined by phase in accordance with the maturity level of
the country’s textile industry, the innovative bodies in each field of innovation shall be
formed first; then, the innovative bodies shall play the roles assigned to them.
To sum up, the Textile Technopark to be constructed in Uzbekistan shall successfully

perform the three roles of research and development, business incubation and manpower
training to serve as a basis for the establishment of the innovative bodies in each field. This
role is of great importance and shall be performed according to a carefully designed plan.
207
For the roles to be performed by the organizations, the Light Industry Ministry shall
function as a control tower for manpower training, business incubation and research and
development, and assign each organization – Technopark, universities, enterprises and
organizations (Associations, federations, unions and etc. shall be formed in a timely
manner) – with roles to fulfill. Thus, the functions, ranges and plans for each organization
shall be established and implemented, and policies to diffuse the range of roles to all
streams of the textile and apparel industry such as yarn, fabric (knitted and woven),
dyeing, design, pattern and sewing shall be established and enforced.
Second, for the ties among the organizations, the Textile Technopark shall perform
roles in all ranges of manpower training, business incubation and research and
development; however, the Tashkent Institute of Textile and Light Industry and other
universities offering courses on fashion design and sewing, together with textile and
apparel enterprises, shall cooperate to create synergies. Thus, research and development
activities shall be done as joint works with Tashkent Institute of Textile and Light Industry
and other universities, and in the future, enterprises shall also come into the picture to
expand the activities into joint research among industry, universities and research
institutes. For business incubation, the function of technical support such as equipment
assistance and equipment-based technical support shall gradually be expanded to secure
more inter-organization exchange opportunities and further expansion of the function.
Third, for operational stages, it shall perform the roles of manpower training and
business incubation in the short run to contribute to the expansion of added value in the
current fields of focus. In the next stage, a system that allows the Technopark to
concurrently perform roles of manpower training, business incubation and research and
development shall be formed to contribute to the development of Uzbekistan’s textile and
apparel industry. In other words, the functions needed for the development of
Uzbekistan’s textile and apparel industry shall be prioritized and expanded successively,
just as the institutes and organizations in Korea were developed from single-function
performance to converged, multi-function performance.
[Table 3-13] Tools and fields of utilization in Textile Technopark
Tool Contents of the Tool Fields of Utilization of the Tool

Pilot Production complex, Education and

Experiment complex Education and research
(laboratory, research room, lecture room) Business activity
1. Building Office and conference hall
 Overseas/domestic
Conference hall
 conference/presentation/
Fashion show hall, exhibition hall
 exhibition
Guest house, cafeteria, etc.

Knitting / dyeing / test and analysis /

2. Equipment design / pattern / sewing facilities
Other equipment
 Education / Training
- Lecture
3. Instruction
Theory, practice, manual
 - Field practice
materials
Enterprise support

4. Program - Prototype production
design / pattern / sewing curriculums
- Test and research

R&D
5. Instructors design / pattern / sewing experts from
- Industrial R&D
Korea and Uzbekistan
- National R&D
Workers (administration and operation)
 - Policy development
6. Operation
Equipment operation

organization
Operation management

Operation plan for Textile Technopark
 TTP independence

7. Master Plan
(mid-to-long term) Textile TP diffusion

The greatest challenge is how to utilize the Textile Technopark for manpower training,
business incubation and research and development based on the above implications. In
other words, the questions are: what are the proper ways to utilize the Textile Technopark
for the present and future development of Uzbekistan’s textile and apparel industry? In
which stages shall it be utilized to maximize the effect? In these contexts, as a part of the
policy consultation for the development of Uzbekistan’s textile industry, suggestions of
policy applications of the Textile Technopark are made below.
In order to utilize the Textile Technopark, the tools to be provided within the Textile
Technopark and their fields of application shall be examined properly. As shown in <Table
3-13>, there are seven categories of tools in the Textile Technopark, and these tools can
be used for enterprise support activities, education and training, research and
development and policy development.
209
3. Progress and Goals of the Textile Technopark
Construction Support Project
3.1. Progress of the Textile Technopark Construction Support Project

The Uzbekistan Textile Technopark Construction Support Project is a 5-year project
that was initiated in 2015 and is planned to be completed in 2019. By 2018, the building
will be completed, equipped with textile and fashion machineries, and normal operation
will begin after a trial run. Beginning in 2018, the operation system and independence
plans will be established and completed by 2019, and in early 2020, the Textile
Technopark will be handed over to a relevant organization in Uzbekistan. <Figure 3-13,
Figure 3-14>
[Figure 3-13] Uzbekistan Textile Technopark (TTP) model picture
[Table 3-14] Overview of Uzbekistan Textile Technopark building
Complex Purpose and Size Residents and Facilities

▲ Administration /
▲ Business support room, residents
Education Training,
▲ Education and training space, seminar
Education and Test / Certification /
room, research space
Experiment Assessment / Analysis
▲ Test / Certification / Assessment /
▲ 1 floor underground, 6
Analysis / Convenience facilities
floors aboveground
▲ Prototype production, ▲ Prototype production facilities and
Technical development / laboratory
Pilot
support
Production
▲ 1 floor aboveground ▲ Technical development, research
(duplex) facilities
ㅇ Location: Babur Street, Tashkent, Uzbekistan
ㅇ Site area: approx. 0.7ha (approx. 7,025㎡)
ㅇ Building area: 3,293㎡
ㅇ Total floor area: 7,245.30㎡
ㅇ Purpose: technical development, prototype production facility,
education·experiment·administration·research facilities
ㅇ Building: Education and Experiment Complex (1 floor underground, 6 floors
aboveground), Pilot Production Complex (1st floor, duplex)
ㅇ Construction period: commenced on November 2016 – completion by the end of April
2018
The Uzbekistan Textile Technopark is located on Babur Street in Tashkent, Uzbekistan.

The site area is approximately 0.71ha (approximately 7,100㎡), and the total floor area is
7,411㎡. The buildings that are being constructed are divided to two complexes: Education
and Experiment Complex (1 floor underground /6 floors aboveground) and the Pilot
Production Complex (1 floor/duplex), and the purpose is to utilize the prototype
production facility and the education/experiment/administration/research facilities for
technical education, testing and research, technical development and R&D.
Before installing equipment in the Textile Technopark, the justifiability of each field in
the textile industry was reviewed in consideration of the present conditions of
Uzbekistan’s textile and apparel industry and the budget assigned for equipment in this
project. As shown in <Table 3-15>, natural fiber spinning, synthetic fiber spinning and
weaving were excluded, and knitting, dyeing and finishing, test analysis, design and
sewing were selected.
211
[Table 3-15] Justifiability of equipment installation in each field
Field Result Justifiability of equipment installation

Natural
Takes up too much space, costs are too high

fiber Excluded
The textile school currently has spinning equipment.

spinning
Unnecessary considering the fact that there are no synthetic fiber

Synthetic
producers in Uzbekistan.
fiber Excluded
Takes up too much space, costs are too high. Electric spinner shall be

spinning
reviewed instead.
There are only a few weavers in Uzbekistan.

Weaving Excluded 
Takes up too much space (creel, warper, sizer, weaver, etc.) and has
high costs.
Most fabric producers in Uzbekistan produce knitted fabric.

Knitting Selected 
Can be installed in a small space with low costs and good effect of
utilization.
There are few dyers in Uzbekistan, but dyeing is an important part of

the Textile Technopark, as the final quality of a textile is determined
during the dyeing and finishing.
It is essential to improve dyeing and finishing techniques and the

quality of the final products by implementing prototype developments
Dyeing & and R&D through the establishment and enhancement of basic and
Selected
Finishing applied dyeing and finishing technologies.
It is an essential field in the completion of Uzbekistan’s textile industry

stream, and can contribute to the future development of the industry.
It is a field that can be utilized for imported unprocessed knitted

fabrics, which makes it essential when Uzbekistan starts to produce
synthetic fibers (fabric and yarn).
Test analysis is done on fiber, yarn and fabric (dyeing and finishing),

and at the Textile Technopark, equipment will be installed only for
Test
Selected fabric for fiber, and yarn will be excluded.
Analysis
It shall also be developed into an official test organization for

certifications.
Design is a field that can create new value.

It is essential to train skilled professionals through education programs

Design Selected that involve not only the equipment needed for design but also the
software, and the trainees shall be assigned to national, or university
tasks to enhance the design field.
Sewing is essential, as designs are made into products through

sewing.
Professional training in Pattern CAD and patternmaking shall be

Sewing Selected
followed.
It is an essential field to enhance sewing techniques used on knitted

fabrics as well as woven fabrics.
The Textile Technopark Construction Support Project has been in progress since 2015,
and details of the project are described in <Table 3-16>. As of April 2017, room
assignment in the Textile Technopark (TTP) building is planned as shown in <Table 3-17>.
[Table 3-16] Progress details for 2015–2017
Year Sector Details

- Comparison and review of the construction sites and optimization of
space utilization in cooperation with Uzbekistan government ministries
Construction
- Establishment of an overall construction plan and site clearance
- Bidding for planning/detail design and design process
- Liaison office and operation: task management at the site (local staff and
2015 Light Industry Ministry)
(Year I) Education - Dispatch of Korean professionals (1st): education and training,
Operation purpose/target/field inspection/consultation, preparation of technical
education materials/manuals (1st)
- TTP Briefing Session in Uzbekistan
Equipment - Equipment review for Pilot Production Complex and Test and Experiment
Complex (1st) – selection made mainly for equipment produced in Korea
- Completion of TTP basic/detail design, licensing application/process
- Preparation/bidding for construction supervisor/selection/commencement
Construction of work/construction: preparation/holding of groundbreaking ceremony
- Detailed measurement for optimized arrangement of
equipment/apparatus
- Dispatch of Korean professionals (2nd): education and training, program

consultation, seminar, preparation of education material/manuals (2nd)
Education
- Textile technician training in Korea: 1st, 20 technicians (knitting, dyeing
and finishing)
- Plan, review, revision and supplementation of in-room layout for

2016
equipment/apparatus
(Year II)) Equipment
- Review of detailed specifications of equipment in the Pilot Production
Complex (2nd): budget/space/utilization effect
- Preparation to attract Korean companies: survey, perspective/effect,

support
Enterprise
- TTP Briefing Session in Korea (1st): in cooperation with
associations/organizations, promotion to target companies, etc.
- Operation of the liaison office (3 staffs) and organization: task

performance at the site
Operation
- Consultation on Mid-to-Long term TTP Operation Plan: education and
training, equipment utilization, independence measures, etc.
213
Year Sector Details
- Administration/supervision of construction for Pilot Production

Construction Complex/Education and Experiment Complex, checking of the connection
system between the two countries
- Dispatch of Korean professionals (3rd): education and training (practical

affairs), program consultation, seminar, preparation of education
Education material/manuals (3rd)
- Textile technician training in Korea: 2nd, 20 technicians (dyeing and
finishing, test analysis, design/sewing)
- Final decision on detailed specifications of equipment in the Pilot

2017 Production Complex, bidding, purchase, shipment and customs clearance
Equipment
(Year III) - Review of detailed specifications of equipment in the Education and
Experiment Complex (3rd): budget/space/utilization effect
- Preparation to attract Korean companies: survey, perspective/effect,

support
Enterprise
- TTP Briefing Session in Korea (2nd): in cooperation with
associations/organizations, promotion to target companies, etc.
- Operation of liaison office (3 staff members) and organization: task

performance at the site
Operation
- Mid-to-Long term TTP Operation Plan: detailed consultation on education
and training, equipment utilization, independence measures, etc.
[Table 3-17] Room assignment in Textile Technopark (TTP) building (plan)
Building Field Floor Equipment/Room/Facility(㎡) Laboratory, Office, etc.

Duplex
Knitting 275.5 Laboratory
2nd
Technical
Support Pilot hall 1275.6
Center st B/T lab 63.8
1 Laboratory 31.9
Storage 31.9
Pilot
Mixing 31.8
Pattern 81.2
Fashion
Duplex Sample 40.5 Design room 41.8
Design
2nd Sewing(1) 168.1 Cad room 41.6
Center
Sewing(2) 40.3
DPT Room 37.4

Test 3rd Product evaluation room 54.4 Laboratory 37.6
Certification SEM room 30.0
Center Wet test room (1) 75.7
2nd Laboratory 37.6
Wet test room (2) 37.6
Lecture Hall Conference hall 145.7
and Exhibition hall 125.5 Information room
1st
Exhibition Small lecture room 37.2 Office 38.1
Education Hall Small lecture room 36.8
& Office 10
Business 3rd -
Experiment Information room 16.3
Office
2nd - Office 10
Director room 34.5, Reception room 20.1,

6th Deputy Director 32.1
Financial accounting 29.5, Assistant reception 12
Management
Support Medium conference hall 29.5, Office 26.1,
5th
Large conference hall 62.7
4th VIP room 62.5, Double room x 3 20.6x3
ㅇ Technical Support Center: prototype production facility (dyeing, processing, B/T, DTP, etc.)
ㅇ Test Certification Center: wet/dry test rooms (test analysis equipment)
ㅇ Fashion Design Center: Design, Cad, Sample, Sewing(1), Sewing(2)
ㅇ Final setting of lecture hall, laboratory, office sizes (number of rooms)
ㅇ 20 offices for Korea/Uzbekistan enterprises
ㅇ Management Support: 4th, 5th and 6th floors in Education and Experiment Complex, President’s
room/office/conference hall/guest house
215
3.2. Contents and Objectives of the Textile Technopark Construction
Support Project72)
The direction for the operation of the Textile Technopark can roughly be divided into
three key functions, and it shall carry these out in combination for the development of
Uzbekistan’s textile and apparel industry. A schematic diagram describing these functions
is shown below.
Function I: Goods Production

Function Ⅱ: Manpower Training
Function Ⅲ: Research & Development
[Figure 3-14] A schematic diagram describing the operation of the Textile Technopark
Thus, the Textile Technopark will serve as a base for exchange among enterprises,
universities and research institutes in Uzbekistan’s textile and apparel industry for their
technologies, research and industrial development strategies through these three key
functions. Details of the three key functions are described in <Table 3-18>.
72) Uzbekistan Textile Technopark Construction Support Project Yearly Report, December 2016, Korea Institute of
Industrial Technology
[Table 3-18] The three key functions of the Textile Technopark and details
Key Function Detail

I. Support for enterprises in
- Support for goods production, test analysis,
improving their level of
equipment utilization
technology and cooperation
- New business incubation and attraction of overseas
through assistance in goods
investment
production
- Support for textile majors entering the industry and
Ⅱ. Education for manpower training of administrators in the industry
training and skills development - Linked education- equipment and R&D
- Overseas training for local technicians
Ⅲ. Long-term R&D for the
- Resolution of technical difficulties
development of new products
- Development of manufacturing technologies
and new textile fields
The Textile Technopark will consist of three centers for business support, goods
production and education, and an organization that manages the overall Textile
Technopark. The details of this organization are shown in <Figure 3-15>. Based on the
suggestion, the Organization Chart for the Textile Technopark shown in <Figure 3-16>
was specified in Uzbekistan through a Presidential decree on February 7th, 2017.
However, the organization chart contains only the organizations and number of
employees in managerial positions suggested by Korea, and thus, sub-organizations and
employees to operate goods production facilities and test analysis equipment and
organizations and employees for operation management (bookkeeping, accounting,
human resources, general affairs, legal, safety, environment, expenses, etc.) must also be
organized.
217
[Figure 3-15] Organizational structure suggested by KITECH
[Figure 3-16] Organization chart announced through a Presidential decree in
Uzbekistan
Organization Chart of Textile Technopark for Training and Practice Offered by
Tashkent Institute of Textile & Light Industry
Board of Directors
(8)
Director of Technopark
Deputy Director of
Accounting Training
Department (1)
Personnel
Department (1) Textile Fabrics Dyeing and Final
Technology and Processing Technology
Design Studio (7)
Research Experiment and Research
Legal Counsel (1) Room (5) Experiment Room (5)
Total number of employees (excluding staff in charge of maintenance) – Of 22 in total, 5 are managers
The number of people in charge of maintenance depends on the regulation of the higher education institution.
The organizational structure of the Textile Technopark is subdivided into four sectors
(three technical sectors and one management sector): dyeing and finishing technical
support center for textile enterprises, fabric test analysis and certification center, fashion
center for design development and sewing techniques in the apparel industry and the
administration office that operates and manages the Textile Technopark.
The three centers in the technical sectors will establish and offer educational/training
programs with their own faculty and teaching materials for undergraduate, graduate and
doctoral students in universities, as well as programs to enhance the skills and techniques
of workers in the field in addition to the basic roles of goods production, test analysis and
certification and design and sewing technique enhancement.
219
[Table 3-19] Roles of the organizations in the Textile Technopark
Organization Role
- Technical Education - Dyeing R&D
Technology - Dyeing & Finishing - DTP R&D
Support Pilot M/C Operation - Finishing R&D
Center - Test production - Business Support
- Fabric R&D
Testing & - Technical Education - Test Evaluation
Certification - Equipment Operation - Certification
Center - Test Analysis - Business Support
- Technical Education
- Pattern/CAD R&D
Fashion - Design Development
- Sewing Technical Level-up
Design - Fashion R&D
- Business Support
Center - Fashion Show
- Test production
- Finance - Building Security
- Accounting - Electric & Facility
Administration
- General Affairs - Management
Office
- Education Planning - Wastewater Treat.
- TTP Promotion
In addition, they may conduct R&D for purposes including quality improvement, new
product development and product diversification of textile and apparel enterprises. They
can also conduct industrial R&D and national R&D in the textile and apparel fields.
The overall organizational structure of the Textile Technopark, which includes its
management organization, key functions and roles and utilization of equipment, was
planned in 2016 as shown in <Figure 3-17>. In 2017-2018, building, equipment,
employees, organization and teaching materials, programs and faculty for education and
training will be established in stages. In 2019, the system will be completed after a process
to resolve issues in the initial implementation stage, and to secure budgets. From 2020,
the Textile Technopark will be headed towards its independent operation.
[Figure 3-17] Development flow of the Textile Technopark’s organizational structure
However, the independence from 2020 means that the Textile Technopark will
operating based on its own organizational structure and budget, and thus, know-how on
technologies and management software shall constantly be advanced after 2020 to
achieve the successful completion of the Textile Technopark.
The objective of the Textile Technopark to be achieved through its management

organization, equipment and education/training system is to systematize business support
activities through technology and establish a stronger foundation for Uzbekistan’s textile
and apparel industry (see <Table 3-20>).
221
[Table 3-20] Objectives and features of the Textile Technopark in Uzbekistan
Objective Content
- Education/research of manufacturing technology utilizing raw cotton, and

establishment of goods production technology
- Establishment of theoretical and practical education systems on core
technologies in knitting/dyeing/finishing/test
1. Technology analysis/certification/design/sewing
Establishment - Establishment of a technology development system in connection with
various streams for the development of Uzbekistan’s textile industry
- Technology establishment for value addition of cotton blend composite
materials
– Joint research and resolution of technical difficulties
- Establishment of a foundation for equipment utilization in

experiment/test/analysis/evaluation/goods production
- Establishment of a foundation for goods production/evaluation for the
commercialization of developed products
2. Foundation - Establishment of a foundation to support technical innovation for
Establishment enterprises utilizing the Pilot Plant and research equipment
- Establishment of a network that connects the key industries and practical
education of universities
- Establishment of a foundation to provide technical support for Korean
textile enterprises to enter Uzbekistan
- Supply of manpower for local enterprises after practical education

- Enhancement of the textile industry’s technology level through
customized education for middle-grade technicians
- Development and diffusion of key manufacturing technologies for
3. Business
new/differentiated materials
Support
- Support for added value technologies incorporated into the dyeing and
finishing technologies of preexisting products
- Investigation of technology levels of small and medium sized enterprises
in the local area, and suggestions regarding development directions
<Table 3-21> is a Project Design Matrix (PDM) created after a systematic review of the
objectives and progress of the Textile Technopark Construction Support Project.
[Table 3-21] Project Design Matrix (PDM) for the Textile Technopark Construction
Support Project
Project Summary Index Index Measures Consideration

(Objective) Satisfaction level of the

Support the development
 persons concerned in the
Satisfaction level report

of Uzbekistan’s textile recipient country (90% or
Satisfaction survey method

industry higher)
Evidentiary documents of
 Proof of residence

Market development and
 Korean enterprises in the

relevant enterprises
export expansion for Textile Technopark (10
Korean textile enterprises enterprises)
(Objective)
(UZ) Construction of the

Textile Technopark to Construction of the Textile 
 Construction supervision
Methods to inspect

support manpower Technopark report
execution rate
training and enhancement (Process rate 100%) Uzbekistan Textile

Systematic foundation

of textile technologies Utilization level of the
 Technopark result
such as benefits for
(KR) Securing a foothold
 Textile Technopark (40 or certificate
Korean enterprises
for market expansion of more times a year)
Korean textile enterprises
(Result: Output) Production of 100

 Result certification from

Uzbekistan’s cooperation

Production of professional
 professionals per year Uzbekistan
System approval

manpower in Uzbekistan  Official document for
New system establishment 
procedure
Master Plan
 through the Master Plan system approval
Review of connectivity with

 Export deals- 3, joint
Expansion of inter-country  Contract/investment

the project
business venture – 1 documents
(Input element) (Precondition: MOTIE approval)

(Korea)  Securing of sufficient funds
Securing of finance
  Contractor selection
Design and construction of the Textile Technopark
 procedure/ execution capacity
(Activity: project contents) Selection, shipment and test operation of
 Validity of the equipment plan
Construction of the Textile
 equipment  Substantiality of teaching
Technopark Production of teaching materials and operation of
 materials and education
Installation and utilization of
 education/invitational training programs  Selection standard/roles of
equipment Selection of experts for dispatch
 dispatched experts
Support for the operation of 
 Consultation for establishment of the Master Plan  Feasibility of the Master Plan
the TFT Committee and
expert dispatch (Precondition: Presidential
Education·training program
 decree)
(Curriculum) development Appropriateness of the site

Teaching material production
 (Uzbekistan)
provided
Invitational training
 Site provision

Licensing capacity/schedule

Master Plan establishment
 Licensing for design and construction of the

adherence
Briefing sessions
 Textile Technopark
Fulfillment of customs

Customs clearance/tax exemption/domestic

clearance, shipment and
shipment/security/manpower for equipment
security
Visa, residential permit and safety support for

Speed of administrative

Korean workers
procedures
Selection of manpower for education and training

Appropriateness of education

Improvement and establishment of systems

and training manpower
Appropriateness of system

improvement
223
4. Policy Applications of the Textile Technopark73)
4.1. Textile Industry Manpower Enhancement through Education and

Training
The following are suggestions for policy application regarding Textile Technopark in
the field of education and practical training, in order to best apply the tools of the Textile
Technopark.
From a marketing perspective, in general, products are manufactured in factories

because there is a demand for them in the market. The same applies in the field of
education and training. In other words, there must be demand for educated/trained
manpower. Thus, demand for the education and training shall be examined first, and this
is shown in <Figure 3-18>.
[Figure 3-18] Procedure for education and training74)
Establishment of
Announcement/A
Survey of Training Selection of
dvertising of
Training Demand Schedule and Training Subjects
Training
Program
So, is the Textile Technopark, which is being constructed in Uzbekistan for the first
time based on Korea’s ODA funding, a consumer or a supplier of educated manpower?
During the early period of the formation of the organizational structure, the Textile
Technopark is a consumer of educated manpower; once the organizational structure is on
track, the Textile Technopark becomes the supplier.
According to the Presidential decree given by President Mirziyoyev (No. 2795, February
th
7 , 2017) regarding the construction of the Textile Technopark in Uzbekistan, 22 key
employees are needed in the organizational structure of the Textile Technopark, and other
employees shall be recruited as needed to perform specific tasks in each sector. The
organization chart suggested by Korea specifies that the Textile Technopark shall be run
by a total of 63 employees, including those performing specific tasks. This means that a
demand for 63 educated employees was created through the Textile Technopark (see
<Table 3-22>).
73) Uzbekistan Textile Technopark Construction Support Project Yearly Report, December 2016, Korea Institute of
Industrial Technology
74) Uzbekistan Textile Technopark Construction Support Program Master plan, December 2016, TBNA Co., Ltd.
However, the 63 employees at the Textile Technopark currently being constructed are
not a simple education market. Instead, they shall be developed into professional
instructors that can educate and train others to meet new education demand in the
future.
[Table 3-22] Educated manpower demand in each sector of the Textile Technopark
(Textile TP workers)
Organization Sector Education Demand

1. Manpower for plant operation
2. Manpower for goods production
1. Equipment Operation
3. Manpower for
testing/analysis/evaluation/certification
1. Manpower for development and improvement
Textile of teaching materials
Technopark 2. Manpower for development of
2. Education·Training
education·training programs
3. Manpower for education·training
(theory/practice) instruction
3. R&D 1. Manpower for R&D
Therefore, the very first stage for the enhancement of manpower in the textile industry
through education and training at the Textile Technopark is to select the manpower to
perform education and training at the Textile Technopark and to train them as skilled
professionals by inviting skilled experts from Korea. This is merely a preparation process,
and it is these preparation processes that are the most important stage for the Textile
Technopark in Uzbekistan.
Another important stage in the preparation is to establish education and training

programs that are customized according to the goal levels in the education demand. In
order to plan and execute the programs, teaching materials including theory material,
practical material and equipment manuals are needed in each sector (see <Table 3-23>)
as well as curriculums. The teaching materials and curriculums are currently being
produced in Korea, and these shall be reviewed and completed by Tashkent Institute of
Textile and Light Industry.
225
[Table 3-23] Teaching materials in the textile and apparel sectors
Category Development Field Title

1) Textile Material - Yarns and Composite Materials
2) Knitting - Knitting
Textile 3) Dyeing - Dyeing
4) Finishing - Finishing
5) Test Analysis - Test and Analysis of Textile Products
6) Design - Fashion Design
7) Pattern, CAD - Production Design of Apparel Products
Apparel
8) Sewing Techniques, - Production and Quality Control of Apparel
Management Products
The departments and curriculums of the undergraduate/graduate courses offered at

the Tashkent Institute of Textile and Light Industry are shown below, to allow for
comparison with the educational materials of the Textile Technopark as a reference. At the
Tashkent Institute, there are 11 departments in the undergraduate school (see <Table
3-24>). The names of the departments are either too inclusive or too detailed, and it is
difficult to guess the curriculum taught in each department.
[Table 3-24] Departments in the undergraduate school at the Tashkent Institute of

Textile and Light Industry75)
Course Dept. No. Department Name

5111012 Technologies and Designs of Light Industry Products
5150900 Design
5310900 Weights and Measures, Standardization and Quality Control
5311000 Management and Automation of Manufacturing and
Undergraduate Technology Process
5320300 Engineering and Equipment
(total 11
5320400 Chemical Technology
departments)
5320800 Publishing and Packaging Technologies
5320900 Technologies and Designs of Light Industry Products Design
5321200 Primary Operation Technologies of Natural Fiber
5610600 Service and Technical Service
5231900 Business Administration
75) Uzbekistan Tashkent Institute of Textile and Light Industry’s departments and curriculum materials
[Table 3-25] Undergraduate curriculum in “Technologies and Designs of Light
Industry Products”76)
1.00 Humanities and Social Economics

1.01 History of Uzbekistan 1.08 Education, Psychology
1.02 Jurisprudence, Constitution 1.09 Basic Understanding and Principles
(Uzbekistan) of Idea
1.03 Philosophy (Ethics, Aesthetics, Logic) 1.10 Theories and Practices of Uzbekistan
1.04 Spirituality, Religion Democratic Society
1.05 Cultural Study 1.11 Uzbek Language (Russian)
1.06 Economics 1.12 Foreign Language
1.07 Social Science 1.13 Physical Education and Sports
2.00 Math and Natural Science
2.01 Advanced Math 2.04 Chemistry
2.02 Information Science and Information 2.05 Theory Dynamics
Technology 2.06 Ecology
2.03 Physics
3.00 Major
3.01 Descriptive Geometry and 3.08 Science of Textile Material
Engineering Graphic 3.09 Textile Fashion Study and Quality
3.02 Physics and Polymer Chemistry Control
3.03 Electric Science, Electronic and 3.10 Economics and Management
Electric Drive 3.11 Research Methodology
3.04 Technical System Management 3.12 Safety and Critical Function
3.05 Technology Planning 3.13 Chemical Technology (Textile
3.06 Basic Weights and Measures, Material)
Standardization and Certification 3.14 Application Program Mechanism
3.07 Primary Operation of Natural Fiber (Select) 1. Fabric Structure, 2.
Thermodynamics
4.00 Major
4.01 Weaving Preparation (Optional Training)

4.02 Weaving Technology 1. Industry Introduction
4.03 Fabric Organization and Planning 2. Professional Technology and
Engineering Document
5.00 Additional Courses
Training
Field Placement (Freshman- Educational training, Junior- Test
Evaluation
Practice,
Junior- Practical Training, Senior- Pre-graduation Field Practice)
227
This may be due to the differences in Korea and Uzbekistan’s economic conditions and
education systems. Thus, the undergraduate curriculum in “Technologies and Designs of
Light Industry Products Design” was examined in detail (see <Table 3-25>), and with the
exception of the common and basic subjects in the undergraduate course, the major
subjects consist of studies on textiles (materials and natural fiber processing), fabric
(weaving and knitting) and apparel (fashion study and quality control) as well as courses
on subjects other than textile and apparel.
Next, the departments in the graduate school were examined. There are a total of 15
departments (see <Table 3-26>), and the major fields are more specific than
undergraduate courses, while the major departments for textile and apparel are
subdivided in detail. However, not all fields in the stream of textile and apparel – raw
cotton-cotton ginning-spinning-weaving/knitting-dyeing/finishing-design-pattern-sewing
– are included in the graduate course.
[Table 3-26] Departments in the graduate school at the Tashkent Institute of Textile
and Light Industry 77)
Course Dept. No. Department Name

5A150901 Design
5A311001 Automation of Manufacturing and Technology Processes
5A320302 Mechanics
5A320310 Textile Mechanics
5A320315 Machinery and Equipment of Cotton Industry
5A320402 Chemical Technology of Organic Matters
5A320405 Chemical Technology of Polymer Combination
Graduate
5A320802 Printing Design and Technology
(total 15 5A320901 Finishing Techniques for Textile Materials
departments) 5A320902 Sewing Apparel Engineering
5A320903 Leather and Fur Product Engineering
5A320904 Textile Product Manufacturing Technology
5A320905 Material Science, Quality Control and Testing of Textile and
Light Industry Product
5A320906 Art Planning and Design of Textile Industry Products (Textile
Design)
5A321201 Primary Operation of Raw Cotton and Seed Processing
Considering that the projects currently executed by the Uzbekistan government are
oriented towards the complete stream of the textile and apparel industry, it is thought
that the undergraduate and graduate departments and curriculums at the Tashkent
Institute of Textile and Light Industry shall be modified (to include dyeing, finishing and
spinning of synthetic fiber by adding to the preexisting departments or by creating new
departments) to fit the future projects of the Uzbekistan government as part of the
enhancement of manpower in Uzbekistan’s textile and apparel industry.
This issue can easily be resolved by applying the contents of the education and
training programs at the Textile Technopark (teaching materials of theory, practice and
equipment manual and curriculums in each sector).
The third preparation stage is to organize faculty for education and training at the
Textile Technopark. Even if the education and training programs are executed after the
construction of the Textile Technopark, it would not initially be easy to teach all programs
with only instructors in Uzbekistan.
[Table 3-27] Mid-to-long term organization of faculty members for education and
training at the Textile Technopark (plan)
Affiliation Qualification
College - Professors and instructors at Tashkent Institute of Textile and Light
professors Industry
- Experts at the Textile Technopark with R&D experience and knowledge on
Experts in
technology trends in the textile industry, or
research
- Textile technicians dispatched to the Textile Technopark from Korea or
institutes
other overseas countries
- Textile experts with field experience dispatched to the Textile Technopark
Industry from Korea or other overseas countries, or
- Technology experts at foreign textile enterprise in Uzbekistan
Thus, the faculty shall first be organized with education and field experts in Uzbekistan,
and then the faculty members shall acquire skills and qualifications through education and
training. This education and training of the faculty members will be conducted through a
training program in Korea in 2017, and from 2018 to 2019, experts in Korea will be
selected to teach in Uzbekistan.
It may seem that the selection and training of employees at the Textile Technopark in
the first stage and the organization and training of faculty members in the third stage are
overlapped, but the employees of the Textile Technopark in the first stage are assigned to
229
operate equipment and support field practices, while the faculty members in the third
stage are required to provide theoretical education and practical training. Some of the
faculty members may work at the Textile Technopark and teach at the same time, but it is
not necessary for all of them to work at the Textile Technopark, and it is perfectly fine for
them to maintain their positions in other organizations while teaching at the Textile
Technopark in accordance with the educational programs after acquiring qualifications as
education and training instructors. (For example, a professor at the Tashkent Institute of
Textile and Light Industry can teach at the Textile Technopark.)
The reason why the employees and faculty members are organized separately is
because it will be difficult for the employees to operate equipment for the purpose of
business support, which will be described in Section 2, as well as teach at the same time.
Thus, the roles of the employees at the Textile Technopark recruited during the first stage
are limited to the operation of equipment and the provision of support during practical
training.
Once the tools of the Textile Technopark for education and training are perfectly
achieved through the above stages – equipment establishment, recruitment of employees,
organization of faculty and establishment of educational programs – an excellent
education and training system of the Textile Technopark will be formed, as shown in
<Figure 3-19>. Through the education and training system, first, undergraduate, graduate
and doctoral students majoring in textile and/or apparel will enhance their capabilities
and enter the industry, or acquire abilities to execute long-term R&D to contribute to the
development of Uzbekistan’s textile and fashion industry.
Also, field workers in managerial positions will improve their capabilities for quality
control, technical development and manufacturing management to contribute to the
development of their companies. Moreover, educational courses will be offered for
beginners in the industry to train a new work force.
[Figure 3-19] Diagram illustrating the education·training system of Textile
Technopark
Produce manual for the

Establish equipment  installed equipment  activate equipment
support the onsite

OJT (operation and
1. Recruit workforce for training (operation and
the Textile Techno-Park  employment of the  employment of the
equipment)
equipment)
Build
training
negotiate with and seal system
2. Prepare materials,
the deal with the  Complete the course
education and training  Tashkent Institute of  book and program
program
Textile & Light Industry 
Theory and on-hand

3. Form the lecturers for OJT (theory, on-hand
the Textile Techno-Park  education, application)  education and
application
In Uzbekistan’s textile and apparel industry, demand for education manpower will
increase greatly as more enterprises form research institutes and/or R&D departments,
and with new private organizations such as education institutes, research institutes, testing
and certification institutes, association and organizations and new Technoparks, the
demand will increase rapidly.
In the future, promotional policies and projects relating to textile will be implemented
constantly, and it is thought that demand for education will also be constantly created.
The future demand for education in Uzbekistan is summarized in <Table 3-28>.
231
[Table 3-28] Education demand grouping in Uzbekistan
Organization Type Sector Target of Education

1) Manpower for production and management
1. Production, Quality
2) Manpower for quality improvement
Enterprise
1) Manpower for goods production
2. R&D
2) Manpower for R&D departments (institutes)
1) Faculties in new universities (department)
2) Manpower for production/management from
enterprises (undergraduate, graduate)
1. New university 3) Manpower for R&D from enterprises
Educational (graduate-)
Institute 4) Manpower for the development of teaching
(University) materials
1) Manpower for joint research with enterprises
2. Industry-Academic
2) Manpower for research on university/state
Cooperation
subjects
Research Institute
Textile/Apparel
(future) ※ Shall be established in each region for each
Certification field with the Textile Technopark as a model.
Textile/Apparel
Institute (future)
Government 1) Policy establishment, information
1. Department
Organization gathering/analysis/service
1) Marketing support
1. Association 2) Deduction/proposal/selection/commission/
Private
2. Organization execution of business tasks
Organization
3. Technopark 3) Business support, education and training, R&D,
etc.
* The colored blocks indicate organizations and fields to be created in the future.
To promote the ongoing enhancement of textile industry manpower through

education and training, a mid-to-long term plan is essential, and <Figure 3-20> illustrates
one that consists of the operation of a Technology Leader Training Program, the
development and operation of the Field Worker Training Program and the expansion of
the Overseas Training Program.78)
[Figure 3-20] Mid-to-long term plan for education and training
2020 2021 2022 2023 2024 2025 years
Employ
Technology
Employ Technology leader nurturing program
leader nurturing
program
Determine the number of Plan demand

personnel in charge of questionnaire /
education program
Expand overseas
dispatch Recruit trainees
program
Employ education program for

R&D task personnel
Research for other

countries that can
Develop and cooperate
operate
education Negotiate on program and the
program for number of personnel to dispatch
R&D task
personnel
Select people to invite and dispatch
First, a summary of the Technology Leader Training Program is provided in <Table

3-29> below.
[Table 3-29] Operation of the Technology Leader Training Program
ㅇ Faculty will consist of textile technology experts from domestic and overseas research
institutes, universities and industries.
ㅇ Using university graduates who majored in textile (undergraduate, graduate and doctoral)
as the subjects, conduct a survey on their preference for schedule and curriculum.
ㅇ Based on the result, prepare a yearly schedule and program plan that includes subject
matter assignments for the faculty members.
ㅇ Announce and promote the program – schedule, curriculum and faculties – to domestic
and overseas university graduates who majored in textile.
ㅇ Conduct interviews with applicants focusing on their future plans, goals and intentions,
and finalize the participants.
ㅇ At the end of the program, conduct a satisfaction survey on the pros and cons of the
program, and reflect the findings in the planning of the next year’s program.
Second, the Overseas Training Program shall be expanded gradually, as shown in

<Figure 3-21> and <Table 3-30>.79)
233
[Figure 3-21] Expansion process of the Overseas Training Program
  
Request for collaboration Negotiate for fields for Determine specific
with the institutions dispatch and scalce of program for overseas
professing in textiles located personnel invitational dispatch
in advanced countries.
  
Implement follow-up Dispatch overseas Designate personnel
program for TTP after invitational personnel for the overseas
completion of dispatch invitational program
[Table 3-30] Overseas Training Program
ㅇ In the long term, partner countries of the Invitational Training Program held in Korea
shall be expanded to key countries with highly developed textile industry.
ㅇ Request institutes and industries conducting textile research in the USA, the EU and
Japan for promotion of the Textile Technopark and cooperation.
ㅇ Consult with partner organizations about the fields and sizes of the training focusing
on their fields of strength – dyeing, finishing, sewing, design, etc.
ㅇ Consult on and finalize the details of the program including screening schedule, training
schedule, number of faculty members in each subdivision and procedures for
dispatching participants.
ㅇ Promote the program to textile workers and students (undergraduate, graduate and
doctoral) and finalize the participants (textile major graduates from domestic and
overseas universities)
ㅇ Dispatch the participants and continue to monitor the progress of the program.
ㅇ After the program has ended, offer post programs for the participants at the TTP for
the ongoing management of manpower.
Third, for the Field Worker Training Program, conduct a survey as shown in <Table
3-31> to develop the program, and operate it as shown in <Table 3-32> in accordance
with the procedure shown in <Figure 3-22>.80)
[Table 3-31] Subjects and items of the demand survey
Subject Item
- Number of new recruits in the future
Industries
- Sectors and utilization plan of new recruits in the future
- Desired fields of education
Students
- Desired time of education
Light Industry Ministry

- Fields recommended for the program
and Textile Colleges
[Figure 3-22] Field worker training procedure
Uncover on-site practice

corporations
Uncover Uzbekistan
Feedback
textile industry overseas
corporations
Assess onsite practice Employ onsite practice

training program
Guide onsite practice, Institute program
Write a report on the customized to the
survey result of the demand of the onsite
satisfaction of the practice corporations
participating corporations
and students
Linking the students

with the industrial
entities
Arrange with the onsite
practice industrial
entities and linking with Linking with TTP/Textile
the professors stationed university industrial entities
in the textile university
235
[Table 3-32] Development and operation of the Field Worker Training Program
ㅇ Conduct a demand survey of industries and students.

- Based on the result, determine the fields of education, duration and level of difficulty,
and plan the program.
- Organize a short-term program (ranging from a day to a week in length) for textile
workers in the fields of technology, development and management.
- Provide theoretical and practical education on overseas textile technology trends and
goods production to employees of Uzbekistan enterprises planning to expand to
overseas markets.
ㅇ Promote the program in cooperation with universities to receive applications, and

operate an R&D field worker training program that includes an outline of technologies
and field practices.
- At the end of the program, conduct a satisfaction survey and reflect the result in the
planning of the next year’s program.
ㅇ Over the long term, create links with foreign enterprises in Uzbekistan to offer
participants employment opportunities after graduation.
To implement the above plans, Tashkent Institute of Textile and Light Industry and the
Ministry of Higher and Secondary Education shall take charge of the contents of the
education and training, while the Light Industry Ministry will take charge of expansion to
R&D departments in textile enterprises and relevant organizations, and for the
establishment and execution of the long-term plans, the Tashkent Institute of Textile and
Light Industry, the Ministry of Higher and Secondary Education and the Light Industry
Ministry shall work together.
4.2. Product Diversification and Technology Advancement through

Business Support Utilizing Equipment
To be able to support businesses utilizing the equipment at the Textile Technopark,
the employees at the Textile Technopark must be fully adept in the equipment. Even if the
employees are capable of operating the equipment through the education and training
mentioned in Chapter 1, there are differences between simple operation of equipment
and applied utilization of equipment.
Thus, it is important that the employees of managerial positions build their skills in
utilizing the equipment within the Textile Technopark. Even if they were hired based on
their ability to utilize the equipment, they must improve their ability in order to expand
their scope of activities to support businesses.
The most effective way to improve the employees’ ability to utilize the equipment,
which is an essential part of business support activities, is to provide them with constant
opportunities to build up their experience. Thus, during the early period, the equipment
shall be operated with the perspective that such operation is preparation for business
support activities, and it is recommended to continuously operate the equipment for one
to two years by signing MOUs with certain enterprises for the utilization of equipment.
The enterprises to sign the MOUs shall be selected from among the enterprises in the
fields listed in <Figure 3-23> through an open bid, and the selection shall be made by the
Administration Office at the Textile Technopark.
[Figure 3-23] Fields of equipment utilization in the Textile Technopark (number of

employees)
The partner companies, who signed the MOU, shall be able to utilize the equipment
for small production of prototypes, condition tests for quality improvement and quality
analysis and evaluation of fabrics, and the Textile Technopark shall continue to build
technical skill and expertise. The effect would be greater if experts and technicians from
Korea provide guidance and assistance throughout the process of building technical skills
and know-how.
Now, we will take a look at what is to be achieved, and what should be achieved
through business support activities. Korea Institute of Industrial Technology (KITECH) is
examining the vulnerable areas in Uzbekistan’s textile industry (see <Figure 3-24>) to
237
identify and select the equipment that is needed to address such vulnerabilities, and by
2018, the equipment will be installed for operation.
[Figure 3-24] Vulnerable areas in Uzbekistan’s textile industry
Technical details of business support activities to be executed in the fields of textile

and apparel at the Textile Technopark are illustrated in <Table 3-33> and <Table 3-34>.
[Table 3-33] Summary of technical details for business support activities in textile field
Field Sector Business Support Details
- Production of circular knit fabrics (prototypes)

- Condition test for quality improvement of circular knit
1. Knitting Room fabrics
- Evaluation of knittability of yarns
- Textile design of circular knit fabrics
2. Beaker Test - Setting of dyeing recipes (CCM/CCK)

Room - Color Matching
- Production of dyed/finished fabrics (prototypes)

- Pretreatment of fabrics
- Functional finishing of dyed fabrics
3. Dyeing/Finishing - Establishment of dyeing/finishing techniques for different
Pilot textile materials
- Establishment of dyeing/finishing techniques for different
Textile fabrics (knit, woven)
- Diversification of dyed/finished fabrics
- Production of printed fabrics (prototypes)

4. Digital Print
- Condition test for quality improvement of printed fabrics
Room
- Development of print pattern designs
- R&D for dyeing/finishing

- Evaluation of characteristics of dyes and auxiliaries and
5. Wet Test Room dyeing properties
- R&D for dyed/finished goods
- R&D for improvement of color fastness
- Test analysis, evaluation and R&D for color fastness
- Analysis/evaluation of cause of faults in dyed/finished
6. Evaluation Room
fabrics
- Morphology studies through SEM
In the textile field, the quality of a yarn can be determined and textile design achieved
through knittability, and a fabric is completed into a final product in the dyeing and
finishing processes. For this reason, technical know-how in the dyeing and finishing
processes is extremely important. Test analysis is also critical in business support activities
because the final evaluation of a fabric product is done through test analysis.
239
[Table 3-34] Summary of technical details for business support activities in the
apparel field
Field Sector Business Support Details

- Utilization of design ideas, concept setting and planning
- Development of designs for various attire
7. Design Room
- Design creation and development of prototypes and new
products
- Pattern making and pattern grading
8. CAD Room - Training of CAD experts and R&D for patterns
- 3D apparel and virtual fashion shows through 3D S/W
- Patterning of design contents (sample instruction)

9. Pattern Room - Establishment of patterning techniques for various attires
Design - Training of pattern experts
&
- Modification and revision of designs through prototype
Sewing
production
10. Sample Room - Modification, revision and completion of patterns for design
products
- Establishment of sewing techniques for design products
- Establishment of sewing techniques for various attire
- Enhancement of sewing techniques for knit and woven
fabrics
11. Sewing Room
- R&D for apparel production process efficiency
- Establishment of special sewing techniques
- Training of regular and special sewing technicians
In the apparel field, designs for various attire can be developed; experts in design,
patterning, CAD and sewing can be trained; and R&D to build sewing techniques for
various attire and improve the efficiency of the apparel production process can be
conducted through business support activities.
Through these technical support activities, enterprises will be able to achieve results
such as quality improvement, process improvement and product development in the
sectors of knitting, dyeing, test analysis, design and sewing, and as results are
accumulated through the repetition of business support activities, cooperation and shared
growth models can be built between the Textile Technopark and enterprises. The effects
for enterprises in Uzbekistan are summarized in <Table 3-35>.
[Table 3-35] Expected effects for enterprises in Uzbekistan’s textile industry
Company Expected Effects

- Quality improvement of knitted fabrics
- Diversification of knitted fabric products (yarns, structure, weight,
1. C/Knitting etc.)
- Acquisition of textile design ability (disassembly design for knitted
fabrics)
- Improvement in dyeing techniques for natural fiber (cotton, silk, etc.)
- Establishment of dyeing techniques for synthetic fiber (polyester,
nylon, etc.)
- Establishment of dyeing techniques for union cloth (P/C, P/N, etc.)
- Improvement in color fastness and diversification of dyed products
Dipping
- Improvement in color matching techniques and securing of dyeing
2. Dyeing recipes
- Improvement in pretreatment techniques and evaluation ability for
dyes and auxiliaries
- Improvement in test analysis and R&D capabilities
- Establishment of digital print techniques

Print
- Improvement in print pattern design capabilities
- Improvement in finishing techniques for fabrics (softening, crease
proofing, shrink proofing, water-repellent, antibacterial, etc.)
3. Finishing
- Diversification of finished fabric products
- Improvement in test analysis and R&D capabilities
- Improvement of design capabilities for various styles
Design - Improvement of design capabilities using various materials
- Improvement of design creation ability
4. Brand
- Improvement in ability to improve style of products
Pattern
- Improvement in material cost management ability
/CAD
- Systemization of product size
- Securing of production capabilities for various attire
5. Sewing - Enhancement of sewing techniques for knit and woven fabrics
- Improvement of manufacturing processes and productivity
Based on these expected effects, business support activities shall be continuously

pursued to achieve a diversification of production technologies and the advancement of
the R&D capabilities of the enterprises. Currently, Uzbekistan’s textile and fashion industry
is achieving development based on simple materials - mostly cotton - and at the Textile
Technopark, test productions and long-term R&D shall be conducted using various
materials, including regenerated fiber and synthetic fiber. It is thought that the scope of
Uzbekistan’s textile and fashion industry can be expanded greatly through these
measures.
241
In other words, diversification of products in different processes such as knitted and
woven products and dyed and finished products within the stream of the textile industry
beyond spinning, and product diversification can be expanded greatly with the R&D and
production of products that blend cotton fiber with regenerated fiber or synthetic fiber.
In the apparel industry, the scope of the apparel industry can be expanded greatly if
the design field takes the lead and develops products in various attire (shirts, jackets,
coats, trousers, training wear, outdoor, fashion accessories, etc.), moving away from
simplicity of cotton and working with all kinds of materials including natural fiber,
synthetic fiber and blends of natural and synthetic fibers, and creating designs that
combine knitted and woven fabrics or two different materials.
As a result, enterprises shall achieve quality improvement and diversification of

products through cooperation with the Textile Technopark, and ultimately, shall make
constant efforts to enhance the competitiveness of their products and their enterprises.
To implement the above plans for business support activities, the Light Industry
Ministry shall take charge of building relationships with enterprises through MOUs, and
then the Tashkent Institute of Textile and Light Industry, together with the enterprises,
shall come up with themes for the enterprises’ utilization of the Textile Technopark to
contribute to product diversification and technology advancement of the enterprises by
executing business support activities utilizing the equipment at the Textile Technopark.
For the Light Industry Ministry, it is important to establish a long-term plan for business
support activities based on the technical skills and know-how accumulated at the Textile
Technopark. An example of a mid-to-long term plan is illustrated in <Figure 3-25>.81)
It is recommended to establish a mid-to-long term plan for business support activities

in four categories: assistance for equipment utilization and goods production;
equipment-based complex support; intensified support for export businesses; and
business cooperation support.
[Figure 3-25] Mid-to-long term plan for business support activities
2020 2021 2022 2023 2024 2025 years
Support
equipment Support equipment employment
employment
and
prototype Support prototype production
production
Implement
Conduct training for the equipment employment
equipment-
based
comprehens Present technology expertise and consultation for the
ive support corporations that are supporting prototype production
Special
Manage technology
support to exchange forum
the
companies
Market research on foreign
exporting
market/support global entry
to overseas
Begin
business Promotion to attract
cooperation investment in Uzbekistan
Assistance for equipment utilization and goods production is the basic program for
business support activities, and thus shall be pursued on an ongoing basis. Details are
described below:
ㅇ Assign staff in charge of equipment management to manage the utilization plan and keep
track of availability of the equipment at the Textile Technopark.
ㅇ Analyze the results achieved by the enterprises through utilization of the equipment, and
use as reference data for equipment management.
ㅇ Provide enterprises in Uzbekistan with assistance in prototype production, utilizing the
equipment at the Textile Technopark.
For equipment-based complex support, some of the details overlap with the contents
of the education and training. However, the education method will take the form of
presentation for diffusion in the industry focusing on cases and effects, instead of
providing regular or degree courses.
ㅇ Hold a seminar every year for those currently employed in the industry, and instruct them
with effective methods to utilize the equipment and utilization cases.
243
Intensified support for export businesses and business cooperation support are critical
support activities for the globalization of Uzbekistan’s textile industry. Some examples of
these are as follows:
ㅇ Provide enterprises in Uzbekistan attempting to expand their fields to dyeing/finishing with

assistance for growth to secure researchers.
ㅇ When an enterprise in the textile industry is producing a prototype for commercialization
or export, the researchers at the Textile Technopark shall visit to provide a complex service
that includes product design, testing and resolution of technical difficulties.
ㅇ Provide complex support that combines equipment utilization and joint R&D, or provide
integrated assistance throughout the production process that includes R&D, test/evaluation
and prototype production.
Finally, for business cooperation support, it is only natural that enterprises or countries
compete with one another in pursuit of profits, but at times, enterprises can achieve
growth or create new products by sharing technologies and information (see <Table 93>).
Business cooperation activities can achieve effects on a higher level, and thus are very
important in business support. Details of such activities are listed below:
ㅇ Organize technical exchange sessions and support information exchange for foreign and
domestic enterprises in Uzbekistan.
ㅇ Exchange textile industry information, policy information and overseas expansion
information between Uzbekistan and neighboring countries
ㅇ Organize exchange sessions with key textile enterprises in neighboring countries for
industry-university-research institute cooperation.
ㅇ Promote to overseas enterprises seeking to invest in Uzbekistan, and provide information
on Uzbekistan’s policies and industries.
[Table 3-36] Subjects of the technical exchange session (draft)
Time Subject Participant

- Trends in Uzbekistan’s textile industry and
First market information - Industry (Domestic and foreign
Quarter - Difficulties in the industry and gathering of textile enterprises in Uzbekistan)
opinions
- Present policies in Uzbekistan
Second
- Difficulties in the industry and gathering of - Light Industry Ministry, Industry
Quarter
opinions
- Trends in overseas textile industry
Third
- Policies and market statuses in key export - Industry
Quarter
targets
- Trends in Central Asia’s textile industry - Textile enterprises in Uzbekistan
Fourth
- Information in textile enterprises and - Organizations and enterprises in
Quarter
research institutes in Central Asia Central Asia
4.3. Constant R&D for Future Development of the Textile Industry
The third policy application for the Textile Technopark is to conduct long-term R&D by
developing an industrial theme. For R&D, there may be projects the Tashkent Institute of
Textile and Light Industry or other universities would like to carry forward, and some other
projects that enterprises wish to carry out. However, the R&D carried out by universities is
done through their own independent methods, and thus are excluded here.
First, we would examine some practical R&D tasks. For R&D in dyeing and finishing,
the focus during the initial stage shall be on the establishment of dyeing recipes for
cotton fiber. In Uzbekistan, circular knit fabrics are widely produced, and thus, a dyeing
technique system that connects theory with production through dyeing recipes of
outstanding color fastness for circular knit fabrics of different structures and weights
would be very useful in dyeing factories.
Second, there are a few factories that produce woven fabrics in Uzbekistan, and in
dyeing factories, woven fabrics are not handled often. However, the production of woven
fabric will increase rapidly after constructing woven factories, and thus, a dyeing technique
system for woven fabric shall be established at the Textile Technopark through R&D that
establishes dyeing recipes for woven fabrics with different structures and weights.
Next, it is necessary to conduct R&D on dyeing techniques of synthetic fibers, which

are rarely produced in Uzbekistan. As with cotton fiber, dyeing technique systems for
circular knit fabric and woven fabric of synthetic fiber shall be established.
The R&D on circular knitted fabric and woven fabric of natural fibers such as cotton
and silk and on circular knitted fabric and woven fabric of synthetic fiber will contribute
greatly to the streaming project for Uzbekistan’s textile industry. While conducting the
R&D, research on dyes, auxiliaries and dyeing machinery shall also be conducted.
Meanwhile at the Test Analysis Center, it is necessary to standardize the items of test
analysis for evaluation of fabric products while evaluating products as part of the business
support activities, and once the evaluation level through test analysis has reached a
certain level, the center shall be developed into a state authorized test analysis
certification institute through an R&D policy.
For design and sewing, it would be quite effective to carry out R&D to design and
produce work uniforms – spring/fall, summer and winter – for employees at the Textile
Technopark. The uniform shall have different designs for employees in different sectors
such as the Pilot Room for goods production, Laboratory for test analysis and
Administration Office for clerical and administrative works of the Textile Technopark, and
245
certainly for male and female employees.
It will take a year for the R&D with the four seasons and an additional year to address
any undesirable elements in the aspects of design, pattern, sewing technique, material
(fabric) selection and raw material selection, or for areas where the technology is lacking.
However, the effect derived from the project will be substantial.
Moreover, data and expertise will continue to be developed if the Textile Technopark
can design and supply uniforms for organizations and enterprises in various industries.
Ultimately, it will reach a level at which a nationwide system for uniforms can be formed,
and furthermore, it could be possible to conduct national R&D – “Size Uzbekistan” – if the
accumulated data are utilized effectively.
Now, we will examine the mid-to-long term plan for R&D. To carry out ongoing R&D
for the development of Uzbekistan’s textile industry, the Light Industry Ministry shall take
the lead. So that the Textile Technopark can support the R&D activities of enterprises,
there shall be a mid-to-long term R&D plan that breaks down into sectors including an
annual technology demand survey of textile enterprises, resolution of technical difficulties
for enterprises and research on improvement of manufacturing technologies.
An example of such a mid-to-long term R&D plan is shown in <Figure 3-26>. On

subjects of textile enterprises in Uzbekistan, a demand survey for technologies that can be
researched in the short term and long term shall be conducted, and based on the result,
R&D task candidates shall be selected while considering the trend in the textile industry
(in Uzbekistan, overseas and neighboring countries) and national policies.82)
For the technology demand survey, a taskforce team shall be formed to establish a
plan, conduct the survey, organize and analyze the result, find R&D tasks, and apply them
to the policies. The procedure is illustrated in <Figure 3-27>.
[Figure 3-26] Mid-to-long term R&D plan
2020 2021 2022 2023 2024 2025 years
Conduct Conduct research on technology difficulties of the textile corporations

research on
technology
demand of
the textile Conduct research on R&D
corporations demand of the textile
corporations
Support
resolving
corporation’s’ Support resolving corporation’s’ technology difficulties (Short-term R&D)
technology
difficulties
(Short-term Implement R&D that links with the education training program
R&D)
Implement
research on
improvement
for the Technology Improvement Plan
production Plan
technology
process
[Figure 3-27] Technology demand survey procedure
Form up task force in charge of research on the technology demand
Establish plan for implementing the research on the technology demand
Design schedule and structure


Confirm the purpose of the research on demand

Designate the research field and its scope

Determine the research item

Determine the items to be disseminated

Determine the research template

Conduct research on demand
Post up and disseminate announcement


Register and retrieve paper of research on demand

Conduct research on demand
Compile and analyze the results


Write up the report

Uncover the R&D agenda and reflect the policy

247
Through the R&D derived through the technology demand survey, the technical
difficulties experienced by enterprises in the process of performance improvement or
commercialization are diagnosed by experts in the Textile Technopark, and then the issues
are developed through short-term R&D of less than six months to provide resolutions.
Once the Textile Technopark’s technical skills have improved significantly (by
approximately 2021), the scope of business support shall be expanded to include the
resolution of technical difficulties experienced by enterprises, and it is recommended that
this be carried out in the following order: identification of a technical difficulty - diagnosis
and matching – preparation of a support plan – evaluation – selection and agreement. The
procedure and details are summarized in <Figure 3-28>.
[Figure 3-28] Assistance in resolution of technical difficulty (short-term R&D)

procedure
Grasp the Audience: Invited corporations

technological Method: Directly search out the corporations, receive questions via the
difficulties homepage
Audience: Assistant Manager (Personnel in charge of corporation

Diagnose and support management)
matching Method: Diagnose the technology field and matching appropriate
researchers who are capable of support
Audience: invited corporations

Write and submit
Method: Hand out detailed diagnosis on the technology difficulties via
support planning onsite visit to the corporations and write up support planning
paper paper
Audience: Technology Assessment Committee

Method: Discuss and conduct assessment on the appropriateness of
Assess appointment the technology and its repercussions in the committee, to
which the internal experts of TTP are assigned with
Audience: TTP researcher

Appoint and seal the
Method: Give technology support to the corporations and seal
deal
short-term R&D deal with them
After the further skills and expertise are accumulated through experience
(approximately 2023), the Textile Technopark will have the capabilities needed to carry out
R&D on the improvement of manufacturing processes.
For this purpose, a labor pool of experts at the Textile Technopark, or experts with rich
industry experience who have been hired as researchers or specialists, can significantly
increase the effects of the R&D. It is also necessary to provide assistance services in
connection with sectors other than R&D activities of enterprises, such as testing, analysis
and certification. This process of research to achieve improvements is shown in <Figure
3-29>.
[Figure 3-29] Process of improvement research
  
Induce field that Designate the Assess the candidacy
should be supported corporations that of the corporations
with should be that should be
commercialization supported supported and appoint
 
Commercialize and Seal the deal and
unveil the product conduct research
Then, the Light Industry Ministry shall establish R&D strategies and provide funds through
matching funds or government R&D subsidies to support the industry-university-institute
collaboration R&D.
So far, policy applications have been suggested in three areas: education and training,
business support and R&D. To summarize, Tashkent Institute of Textile and Light Industry,
the Light Industry Ministry and the Ministry of Higher and Secondary Education shall
make efforts to realize the infinite potential of Uzbekistan’s textile and fashion industry
through the effective systematization of the three key roles of the Textile Technopark.
4.4. Independence of the Textile Technopark and Ripple Effects

The independence of the Textile Technopark shall be achieved after 2019, when
Korea’s ODA project comes to an end. However, at this time, the Textile Technopark will
merely assume its responsibilities, rights and obligations related to the operation and
management of the facility, and it will take more time to achieve its substantive
independence.
Beginning in 2020, the Textile Technopark will have to create a profit source on its own
to secure the budget needed for operation. The operation cost for independence is
expected to be one billion KRW (approx. 870K$) a year. Securing of the funds may be
planned as shown in <Table 3-38>.
249
[Table 3-37] Projected annual operation cost of the Textile Technopark
Item Projected Cost Basis

- Labor 250 million KRW - 63 employees
- Material 300 million KRW - Knitting, dyeing, finishing, printing, sewing, etc.
- Power driving 150 million KRW - Electricity, steam, waste water, etc.
- Maintenance & Repair 100 million KRW - Facilities, equipment, apparatus, etc.
- Research activity 100 million KRW -
- Other 100 million KRW -
1 billion
Total -
KRW/year
[Table 3-38] A plan to secure annual cost for independence (profit model, estimate)
Item Projected Cost Basis

- Goods production 200 million KRW - Knitting, dyeing, finishing, printing,
support sewing, etc.
- Rent 120 million KRW - $500/month x 20 x 12 months
- Test fee 30 million KRW - Test analysis, evaluation/certification fees
- Commissioned education 50 million KRW -
- Technical development 50 million KRW - Including quality improvement support
support
- Other 50 million KRW -
- National projects (100 million KRW) - A part of the joint research &
development cost, etc.
500 (+100) - Total profit is estimated at 500 million
Total
million KRW KRW/year
However, the shortfall shall be made up through Uzbek government subsidies on light
industry and technology businesses. It is impossible to operate the Textile Technopark
without securing this budget, and it is essential that the operation described in <Table
3-39> takes place first.
While performing the roles of the Textile Technopark – business support, education
and training of undergraduate, graduate and doctoral students at Tashkent Institute of
Textile and Light Industry and textile industry workers and continuous R&D – all of the
activities of the Textile Technopark shall be oriented toward generating profits. Such
profit-earning activities are the basis and resource of the operating fund for the Textile
Technopark.
Thus, in all activities of the Textile Technopark’s profit-making businesses, it is

absolutely important to satisfy the customers – enterprises, universities, R&D institutes,
etc. – at all times. In other words, the Textile Technopark will be able to achieve true
independence - both in terms of securing funds and satisfying customers - as a result of
all profit-making activities only when the strategies and applications suggested above are
fulfilled successfully to satisfy the customers. In order to effectively implement the three
applications suggested above, it is critical for the Administration Office to provide
well-planned support.
[Table 3-39] 2019 Independence Plan (draft)
Classification Content
1) Targeted level of - Independence level at 50% or greater
independence in - Independence level (percentage) = TTP self-operation profit /TTP
2019 total expanse
2) Yearly total budget - Self-earned profit is estimated at 500 million (+a) KRW.
for 2019 is approx. - 500 million (-a) KRW shall be procured through Uzbek
1 billion KRW government subsidies on light industry and technology business.
- Procured through Uzbek government subsidies on light industry

3) Procuring of
and technology business.
shortfall after
- Subsidy through a purpose business in the form of operating cost
independence
or technical development cost
Of the functions of the Administration Office, building management, facility

management, equipment management, human resource management and budget
management are the basic tasks, while the strategic activities of the Textile Technopark,
including the planning and operation of education and training programs, business
cooperation support activities and the R&D determination plan for constant R&D
performance, are crucial in maximizing the operation of the Textile Technopark.
However, at this moment while the organizational structure and plan for the Textile
Technopark are being established, it is necessary to examine present issues or matters of
concern.
First, while it is a positive sign that the Light Industry Ministry, the Tashkent Institute of
Textile and Light Industry and the Ministry of Higher and Secondary Education are fully
cooperating for the effectiveness and execution of the Presidential decree regarding the
Textile Technopark Construction Support Project, it seems that they are not entirely
committed to the exchange of opinions and cooperation on detailed matters. In other
words, they are inclined towards execution of the matters specified in the Presidential
decree.
251
While the Presidential decree must certainly be executed, it is important that Korea
and Uzbekistan make the utmost effort to take care of the details as well (Refer to Table
3-40). This is because all projects are completed only when the framework and details are
combined in balance.
[Table 3-40] Measures to be implemented for implementation of Textile Technopark

(TTP)
No. Measures to be implemented

1 Modification of Textile TP's articles of incorporation
Selected as UZ representativ for Textile TP field
1) Textile TP construction support person
2) external infra support person
2
3) recruitment of textile TP personnel
4) person in charge of customs clearance
5) person in charge of legal support
About TP Cabinet Command
3 1) discussion on the cabinet order
2) confirmation and reflection of cabinet order
Establish the lower(detailed) organizational structure of the textile TP operating
4
organization
About Textile TP operation budget
5 1) establishing an operational budget plan
2) reflect operating budget
Introduction equipment
1) ROD agreement for equipment
6
2) list agreement to be introduced in 2017
3) list agreement for equipment introduced in 2018
About customs clearance
1) preparation for customs clearance
7
2) customs clearance for 2017
3) customs clearance for 2018
About external infra
8 1) providing information on what the Korean side should prepare
2) completion of external Infra
Detailed layout of Textile TP building
9 1) discussion on the allocation and use of the room in Textile TP building
2) layout of equipment in TP Room
Invitation training in 2017
1) deciding when to invite
10
2) selection of applicants for training(TTP will work)
3) preparation for departure(and training)
No. Measures to be implemented

Textile TP staff selection
1) top
2) administration office
11
3) corporate support center
4) test analysis center
5) design center
Teaching textbooks in education
1) educational curriculum agreement
12 2) examination of theoretical textbooks
3) examination of textbooks for the practice
4) translation of equipment manual
Registered and published in MHSSE
1) registration of educational curriculum
13
2) registration of textbook
3) Textbook publishing
Appointment and determination of Uzbek teachers in TTP.
1) dyeing & finishing field
14
2) field of test analysis
3) design / sewing
Textile TP education demand survey
15 1) TITLI or others
2) industry
Derivation of Textile TP education program
16 1) Bachelor, Master, Ph.D course
2) industry course
A method of self-sufficiency of textile TP budget
(profit model after 2020)
17
1) establish a profit activity plan
2) promotion of revenue business contract
Regarding Textile TP operation regulation and system
18 1) preparation of operational regulations
2) establishment of various systems
Established companies(KOR/UZ) confirmed
19 1) consultation for tenant companies
2) confirmation of tenants
Deriving the R&D theme
1) theme to support companies
20
2) theme for textile industry development
3) theme for development of the clothing industry
* ROD: Record of discussion,

* TITLI: Tashkent Institute of Textile and Light Industry
* MHSSE: Ministry of Higher and Secondary Specialized Education
253
Second, during the early periods of activities in new sectors such as equipment
operation, goods production support, implementation of education and training programs
and R&D, both staff members and managers might not perform perfectly due to
inexperience. Labor intensity and wage dissatisfaction issues may arise for full-time
workers at the Textile Technopark, those who are also attached to Tashkent Institute of
Textile and Light Industry. Other issues may emerge, such as cultural conflicts between
Uzbek employees and Korean experts dispatched for guidance. Such possible risks and
the solutions for them are summarized in <Table 3-41>.
[Table 3-41] Possible Risks and Solutions in Textile TP
Possible Risks Solutions
1. Select the candidates among those who have completed

technology training in Korea by invitation
2. Operate the work ability grading system for workers and
1. Lack of skills by workers managers
and managers 3. Have Korean specialists run regular supplementary training
4. Operate leader group among the workers and managers
5. Establish and manage the task goals of workers and
managers
1. Establish wage system according to the labor intensity as

an independent operating system although it is a
2. Problems in labor
corporation under the textile university
intensity and pay
2. Establish new work discipline, education, awareness change
compared to textile
and implementation in schedule for future development of
university
Uzbekistan
3. Operate incentive system according to work efficiency
1. Introduce TP workers about Korea’s workplace culture,

system, habits, and sentiments so that they can
understand and recognize the workplace sentiments of
Korea
2. Introduce Korean specialists about Uzbekistan’s workplace
culture, system, habits, and sentiments so that they can
3. Problems caused by
understand and recognize the workplace sentiments of
different sentiments
Uzbekistan
between Korea and
3. Develop an atmosphere of understanding and cooperation
Uzbekistan
of the differences in sentiments between the two countries
in constructive ways
4. Both Korea and Uzbekistan shall make an operational
management department and organize the problems that
may arise due to sentimental differences by cases and
handle them
In this sense, the role of the Administration Office is critical. The employees in the
Administration Office must be aware that their work may affect the entire operation of the
Textile Technopark, and it is recommended that the Light Industry Ministry, together with
Tashkent Institute of Textile and Light Industry, take a sense of responsibility and seek
fallback plans.
For such plans and activities to run continuously and be upgraded step by step, a
comprehensive mid and long-term development plan for textile technoparks should be
established and implemented.
Mid to long-term development plan of textile technopark can be established with

contents such as mid and long-term master plan, business modeling, and know-how
transfer of Korean technopark (TP). The framework of the contents has been summarized
in <Table 3-42>.
[Table 3-42] Summary of Mid to Long-term Development Plan of Uzbekistan Textile

Technopark
Item Index Achievement Details
1) Establishment of short,
medium and long-term yearly Devise and run action plan
and step-by-step plan
1. Establishment of Mid
to Long-term 2) Vision, mission, strategy, core Industry-technology-TP
Master Plan project, vision system connection
3) Textile Industry Technology Act as a base for industrial
Roadmap ecosystem
1) Technology Management
Business Model
Product innovation
Process innovation Operate specialist group

Service innovation Develop corporate-oriented

2. Business Modeling 
collaboration program
2) Cooperation Exchange Joint Research & Joint

Business Model Venture
Commercialize technology
transfer
Operate contact center
Consider the absorption

1) Localization of Korean-style TP capacity of textile TP
3. Korean-style TP
2) Training given by workers and Apply local situation factors

Know-how transfer
dispatch specialists Optimization of technopark
in the local area)
255
Lastly, we shall also note the ripple effects of the Textile Technopark. If a textile
technopark that is similar to the current textile technopark is needed, they should be built
in the provinces of Fergana, Andijon, Namangan, and Samarkand where textile industry is
active in Uzbekistan, with each leading the textile companies in the area. (Currently, a
textile technopark is being built in Tashkent, Uzbekistan) For this, the light industry, textile
universities, and the companies should strategically utilize the textile technopark to obtain
positive outcome, and accumulate various know-hows such as human resource,
technology and quality, product diversification, and operation methods. Through this
process, the government and the textile industry-related industry should focus on the
expansion of textile technopark by implementing policies and budget. Before anything
else, activities related to such ripple effects also fall under the duties of the Administration
Office, and for the ripple effects of the Textile Technopark, there shall be additional
attempts at transformation. The themes related to ripple effects of the Textile Technopark
are summarized in <Table 3-43>, with some examples in the aspects of diversification,
informatization and advancement.
[Table 3-43] Summary of the themes for ripple effects of the Textile Technopark
Classification Contents of Theme
1. Construct new Textile Technoparks to perform similarly to the first

Textile Technopark in the textile and apparel industrial park in each
region to spread the effects of business support, R&D and policy
development throughout the country.
2. The Textile Technopark shall engage in education and training during
the early period, and ultimately, shall fulfill its fundamental roles of
business support, constant R&D and policy development. Thus, it is
Diversification
necessary that the Textile Technopark be separated from Tashkent
Institute of Textile and Light Industry and operated independently as an
industrial organization. (Education and training function will be
transferred to universities within 5 – 10 years.)
3. Fields in which the effects derived from the Textile Technopark can be
applied to academic subjects at universities (i.e. dye engineering) shall
be established at Tashkent Institute of Textile and Light Industry.
Classification Contents of Theme
1. A system improvement shall be made to compile statistics in the textile

and apparel industry monthly for informatization of the result of
analysis and evaluation.
2. International information shall be provided to and utilized by Uzbek
Informatization
enterprises through exchanges with organizations in advanced
countries, such as the Korea Federation of Textile Industries.
3. Policies to attract investments in areas lacking in Uzbekistan’s textile
industry stream shall constantly be developed.
1. All methods of test analysis at the Textile Technopark shall be

standardized on a national, or global level to register as a state
approved, official test analysis institute (for fabric), and certification
systems on products as an official evaluation institute shall be
implemented.
Advancement 2. ISO certifications shall be achieved across the whole of the Textile
Technopark.
3. Fields of technology and research shall be enhanced further by utilizing
overseas (i.e. Korean) experts according to their field of specialization.
4. Development will be achieved by continuously incorporating elements
of the international system in textile and apparel industry.
In this paper, measures to enhance manpower in the textile industry through

education and training at the Textile Technopark, measures to achieve product
diversification and technology advancement through business support activities utilizing
the equipment at the Textile Technopark, measures to conduct constant R&D for future
development of the textile industry, and measures to achieve the independence of the
Textile Technopark and ripple effects were suggested.
In the future, it is certain that Korea and Uzbekistan, through understanding and
cooperation, will achieve fruitful results in Uzbekistan’s textile industry by pursuing the
above measures in the development of the Textile Technopark.
257
References
<Domestic and Foreign Reference>

Korea Institute of Industrial Technology, Uzbekistan Textile Industry Value Addition
Support Project Final Report, 2015
_______, Uzbekistan Textile Technopark Construction Support Project Yearly Report, 2015
_______, Uzbekistan Textile Technopark Construction Support Project Yearly Report, 2016
_______, Uzbekistan Textile Technopark Construction Support Project Plan, 2016
_______, Uzbekistan Textile Technopark Construction Support Project Plan, 2017
_______, Uzbekistan Textile Technopark Construction Support Project PPT Material Plan,
2016
Dankook University, Industrial Development Policy in Korea and Uzbekistan (Professor Jin
Shin), 2015
Korea Federation of Textile Industry, Present Condition of the Textile Industry in Key
Production Regions in Korea, 2014
TBNA, Uzbekistan Textile Technopark Construction Support Program Masterplan, 2016
Uzbekistan Tashkent Institute of Textile and Light Industry’s department introduction and
curriculum materials
<Internet Website>
Korea Federation of Textile Industry: www.kofoti.or.kr
Korea High Tech Textile Research Institute: www.koteri.or.kr
Korea Dyeing & Finishing Technology Institute: www.dyetec.or.kr
Korea Textile Development Institute: www.textopia.or.kr
International Textile and Fashion News: www.itnk.co.kr
TIN News: www.tinnews.co.kr

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2016/17

Knowledge Sharing Program

Prepared by Korea Federation of Textile Industries

Supported by Ministry of Strategy and Finance (MOSF), Republic of Korea

Prepared for Government of Uzbekistan

In Cooperation with Uzbekyengilsanoat

Senior Advisor Heo, Beom Do Pusan National University

Project Manager Yoo, Dong-Gil, Development Cooperation Office, KOTRA

Project Officer Kim, Jongwook, Development Cooperation Office, KOTRA

Kim, Bu Heung, Director, International Cooperation & Trade Team, Korea

Kim, Youngmoo, Team Manager, Technology Support Team, Korea Federation

Government Publications Registration Number 11-1051000-000806-01

2016/17 Knowledge Sharing Program

2016 KSP with Uzbekistan

Strengthening of the Value Chain in Uzbekistan’s Textile Industry

1. Introduction (Background and Objective) ···················································································· 12

2. Current Conditions of Uzbekistan’s Textile Industry ··································································· 15

3. Sharing Korea’s Experience in the Development of its Textile Industry ································ 50

4. Policy Suggestion (Reinforcement of Value Chain) ····································································· 82

FDI Attraction in Uzbekistan’s Textile Industry

1. Introduction ····································································································································· 104

5. Uzbekistan’s Investment Environment ························································································ 138

Reference ············································································································································· 176

Policy Application of Uzbekistan Textile Technopark

1. Introduction ····································································································································· 182

2. Significance of the Textile Technopark Construction Support Project ·································· 183

4. Policy Applications of the Textile Technopark ··········································································· 224

Reference ············································································································································ 258

[Table 1] Uzbekistan KSP Korean Researchers and Roles ································································· 3

[Table 1-1] Number of textile companies affiliated with Uzbekyengilsanoat ····························· 17

[Table 1-25] Process of changes of textile trade agreements ······················································· 50

[Table 3-1] 50-year path of the Korean economy ········································································· 185

[Table 3-16] Progress details for 2015–2017 ·················································································· 213

[Figure 1-1] Uzbekistan’s export structure (in 2016) ······································································ 22

[Figure 2-1] Changes in global textile demand ············································································· 107

[Figure 3-1] Korea’s industrial policies in each decade ································································ 184

Yoon Kee Jong (Dankook University)

A. Research Team Organization

2 2016/17 Knowledge Sharing Program (Industry & Trade) with Uzbekistan

Role Name Affiliation and Position

B. Demand Survey Submission and Research Subject Selection

Program Title 2016/17 Economic Development Experience Sharing KSP

C. Demand Survey and Factual Survey (with a Launch Briefing Session)

D. Detailed Factual Survey

4 2016/17 Knowledge Sharing Program (Industry & Trade) with Uzbekistan

F. High-ranking Policy Dialog and Final Briefing Session

G. Final Report Submission

The objective of this KSP (Knowledge Sharing Program) is to propose measures to

6 2016/17 Knowledge Sharing Program (Industry & Trade) with Uzbekistan

Another important factor in Uzbekistan’s economy is its unique geographic

8 2016/17 Knowledge Sharing Program (Industry & Trade) with Uzbekistan

Strengthening of the Value Chain in

1. Introduction (Background and Objective)

Strengthening of the Value Chain in

Kim Youngmoo (Korea Federation of Textile industry)

1. Introduction (Background and Objective)

12 2016/17 Knowledge Sharing Program (Industry & Trade) with Uzbekistan

14 2016/17 Knowledge Sharing Program (Industry & Trade) with Uzbekistan