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    Features

    The Central Asia Ink Market is on the Rise

    With a population of 32 million, Uzbekistan is the largest ink market in Central Asia, followed by Kazakhstan.

    The Central Asia Ink Market is on the Rise
    Vladislav Vorotnikov, Russia Correspondent11.15.18
    The consumption of inks has been growing over the past few years in Kazakhstan and Uzbekistan, fueled primarily by a general economic upturn in these countries.

    With a population of 32 million, Uzbekistan is the biggest ink market in Central Asia. In 2014, Islam Karimov, the late president of the country, listed inks among the goods on which the national government must target import replacement. In this regard, it was decided to provide state support to the Tashkent-based Uzbek-Korean joint venture Print Ink Production JV Ltd. – the only company manufacturing printing inks in Central Asia.

    Karimov ruled that the state support to the manufacturer must be quite broad, so it should be exempted from payment of import duties on raw materials, as well as from income tax and net worth tax. He also ordered that Print Ink Production had to invest funds that it had obtained subjected to the state support measures either to expand production capacities or to increase localization, shifting to using more raw materials of Uzbek origin.

    The idea of the top government officials was not only to provide financial assistance to the company but also to convince other foreign investors to begin some projects in the ink industry of Uzbekistan, by creating a nearly-perfect investment environment.

    Print Ink Production started manufacturing inks in Uzbekistan in 2012 under the brand name Cleen Tec for news and offset printing. The project has been launched by Korean company SEDA Co Ltd, which supplied a state-of-the-art production line, and some local businessmen. The main goal of the project was to meet the demand for high-quality inks at affordable prices on the domestic market in Uzbekistan.

    The Economy Ministry estimated that in 2015, Print Ink Production was running production capacities designed to manufacture 350 tons of inks per year. The localization level was estimated at 35%, as the company had to import most raw materials used in the production process.

    The ministry believes that import replacement on the ink market of Uzbekistan is far from being over yet. Marketing research showed that most inks used by printing shops in the country are still imported from abroad, including from Europe, Russia, Turkey and China, the ministry said.

    There were several non-Uzbekistan investors who were negotiating with authorities on some potential projects in the country’s ink industry during the past several years, with some of them well-recognized leaders of the world’s market, the ministry added. So far positive final decision on none of those projects has been made, the ministry noted.

    The ministry earlier reported that it was primarily interested in attracting foreign companies to start some projects in Uzbekistan, as long as ink production was listed among the knowledge-intensive industries, where the local companies could not manufacture competitive products on their own, simply because they as the rule don’t have strong R&D abilities.

    The Economy Ministry earlier estimated that the consumption of printing inks jumped nearly 10-fold in Uzbekistan over the past decade. The country has been experiencing a strong growth in the number of printing shops, with the number jumping from only 178 officially in 1991 to 1,514 in 2012 and almost 2,000 as of early 2018.

    On this background, the domestic market of printing products has an estimated size of around $120 million. It is believed that the printing shops in Uzbekistan not only fully meet the internal demand in the country, but also export goods with the total worth of some $10 million per year to neighboring Asian countries and the export flow proved to be only growing in recent years.

    The only plant for production of flexographic inks in the region is also located in Uzbekistan. It was launched by a local company Arhat Holding next to Tashkent 10 years ago. Arhat Holding maintained a pace of revenue growth at nearly 60% per year over the past five years, and expected this figure to be even higher in the years to come, the company said in a statement on its website in 2017.

    In addition, Arhat unveiled plans to expand production, and from 2018, to start manufacturing inks for offset printing. The company reports that it is also exporting some products to the other Central Asian countries.

    There are also several other companies registered in the state databases to produce inks in Uzbekistan. All of them are based in Tashkent and only a few in the city of Samarkand. However, there is no clear information whether they are actually running any production capacities or not.

    Only Imported Inks in Kazakhstan
    The picture is different for Kazakhstan, the second biggest ink market in Central Asia with a population of approximately 18 million as of early 2018.

    There is no information on how many printing shops are operating in the country, but in 2016, the total size of the printing market in the country was around KZT41 billion ($115 million), the National Economy Ministry estimated.

    The printing industry is not in its best shape, as the sales in 2018 are 20% lower as compared to 2015, but they are still nearly three times higher than 10 years ago and the forecasts on the foreseeable future are mostly bright.

    Ivan Shilov, the director of Osta Print, one of the major retailers on the ink market of Kazakhstan, said that there was no domestic ink production in the country, or at least he has not seen it. He added that quite often the local customers are opting for less expensive inks primarily imported from China with a very low price.

    Alongside with Osta Print, there are two major ink distributors in Kazakhstan. Inksystem is believed to be the leader of the domestic market, and Chernil.net also has rather strong sales, Shilov estimated. All companies are based in Astana, but over the past few years have been opening dealerships in other regions of the country, as the market grows more sophisticated.

    Osta Print was founded more than 20 years ago, and like all other companies in this industry, in the beginning, it was engaged in cartridge refilling and printing unit repairing, Shilov noted.

    For any new brand, it would be not easy to enter the ink market of Kazakhstan, according to Shilov. It would not be just enough to offer competitive products since the knowledge about the local market and customers’ tastes are also needed, he added.

    Asset Sakirov, a private entrepreneur selling imported inks in Kazakhstan, believes that one of the reasons why there are no localized capacities for ink production in Kazakhstan is because of the Eurasia Economy Union. He explained that the economic bloc the country is a part of had no import duties on certain products, including coatings and inks, so for a foreign investor it is more feasible to build a plant in Russia, which is the biggest sales market in the region, and to just export part of its products to Kazakhstan.

    Despite the large distances, several companies from Russia export their products to Kazakhstan, Sakirov said. There are also some sales representatives of companies from outside the post-Soviet region that have warehouses in Russia, primarily near Moscow, and supply their products to Kazakhstan from those locations, Sakirov explained.

    In this way, they are reducing logistics costs and this proved to be especially effective for European supplies, while on the contrary some Chinese companies still supply their products directly to Kazakhstan, he added.

    Underground Inks
    At the same time, research conducted by the Russian Gazette, the official publication of the Russian government, in early 2017 showed that the Asian part of the Eurasia Economy Union might have what is called a shadow printing industry, with thousands of tons of less expensive inks produced that reportedly could be dangerous to human health. The Russian Gazette claimed that this problem was clearly seen in Kyrgyzstan, but may also be relevant for the other countries of the region.

    Local analysts believe that the market for counterfeit printing products, especially school textbooks, have the third highest turnover among all criminal businesses in Kyrgyzstan after the drug business and illicit trafficking in human beings, the Russian Gazette said.

    Local doctors have been repeatedly raising strong concerns, as counterfeit textbooks pose a serious danger to the health of schoolchildren, the Russian Gazette added. In order to reduce the cost of illegal products, the “pirates” use the cheapest possible inks, in which the content of harmful substances exceeds the permissible standards by several times.

    These underground businesses in the region produce cheap inks by mixing some components, widely adding substances limited or prohibited by technical regulations of the Eurasia Economy Union. These inks have rather poor quality because printed text as the rule is blurred and unclear, according to the Russian Gazette.

    Following the investigation of the Russian Gazette, the government of Kyrgyzstan promised to sort out this problem. However, no information has been revealed so far. 
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