INTERVIEW: “The weekend’s protests were the Russian peoples’, not the opposition’s” – Maxim Reznik
Western Balkans citizens legally resident in EU equal to 14% of region’s population
International Ice Hockey Federation (IIHF) has stripped Belarus of the right to hold the World Championship this year
Alexei Navalny arrested on arrival as he returns home
Russia's NorNickel adopts blockchain for supply chain management
Russia goes ahead with eSIM technology
Russia's retailer X5 Group posts 13% sales growth in 4Q20
National Bank of Ukraine retains a key policy rate at 6%, the outlook of the CPI deteriorates
Western Balkans and Ukraine urged to scrutinise coal subsidies
Oligarchs trying to derail Ukraine’s privatisation programme, warns the head of Ukraine’s State Property Fund
VISEGRAD BLOG: Central Europe's populists need a new strategy for Biden
LONG READ: The oligarch problem
OUTLOOK 2021 Lithuania
EBRD says loan to Estonia’s controversial Porto Franco project was never disbursed
Czech MPs pass protectionist food law in violation of EU rules
M&A in Central and Eastern Europe fell 16% in value in 2020, says CMS report
Hungarian vehicle makers hit by supply chain shortage
COVID-19 and Trump’s indifference helped human rights abusers in 2020
Polish industrial production continues boom in December
OUTLOOK 2021 Poland
OUTLOOK 2021 Slovakia
BRICKS & MORTAR: Rosier future beckons for CEE retailers after year of change and disruption
FDI inflows to CEE down 58% in 1H20 but rebound expected
Pandemic pushes public debt close to 80% of GDP in Albania and Montenegro
BALKAN BLOG: Superstition and resentment surround vaccination plans
Albania needs reforms for e-commerce to thrive, says World Bank
Bosnia's exports in 2020 amounted to BAM10.5bn, trade deficit to BAM6.3bn
Retailers and restaurant owners threaten protests in Bulgaria if reopening is delayed
Bulgaria's Biodit first company to IPO on new BEAM market
Bulgaria’s government considers gradual easing of COVID-related restrictions
Spring lockdown caused spike in online transactions in Croatia
ING: Growth in the Balkans: from zero to hero again?
Labour demand down 28% y/y in Croatia in 2020
Kosovo’s biggest opposition party risks being unable to run in general election
OUTLOOK 2021 Moldova
Storming parliaments: New Europe's greatest hits
World Bank revises projection for Moldova’s 2020 GDP decline to 7.2%
Montenegro’s special prosecution probes finance minister over €750mn Eurobond issue
North Macedonia plans to cut personal income tax in IT sector to zero in 2023
Romania government to pursue “ambitious” timetable for justice reforms
Private finance mobilised by development banks up 9% to $175bn in 2019
OUTLOOK 2021 Romania
BALKAN BLOG: US approach to switch from quick-fix dealmaking to experience and cooperation
Slovenia’s economic sentiment indicator up 2.2 pp m/m in January
Slovenia lost €10bn by neglecting wood industry for decades
OUTLOOK 2021 Slovenia
Slovenia’s opposition files no-confidence motion against Jansa cabinet
D’S Damat franchise deals ‘show Turkey’s hard-pressed mall operators becoming their own tenants’
Turkey’s benchmark rate held as concerns over faltering recovery come to fore
Turkish lira breaches HSBC’s stop-loss, Turkey ETF signalling outflows
CAUCASUS BLOG : What can Biden offer the Caucasus and Stans, all but forgotten about by Trump?
Armenia ‘to extend life of its 1970s Metsamor nuclear power plant after 2026’
OUTLOOK 2021 Armenia
OUTLOOK 2021 Azerbaijan
OUTLOOK 2021 Georgia
Iran’s President Khamenei menaces private citizen Trump
Iran’s technology minister indicted for failing to properly implement internet censorship
No US move to rejoin Iran nuclear deal imminent, say Biden national security nominees
TEHRAN BLOG: Will Biden bet on a quick return to the Iran nuclear deal?
Central Asia vaccination plans underwhelm, but governments look unruffled
Fears of authoritarianism as Kyrgyz populist wins landslide and backing for ‘Khanstitution’
Mongolia, island of democracy
OUTLOOK 2021 Mongolia
Mongolia's PM quits amid protests over treatment of mother with coronavirus and newborn baby
Mongolia's winter dzud set to be one of most extreme on record says Red Cross
OUTLOOK 2021 Tajikistan
OUTLOOK 2021 Turkmenistan
Turkmenistan: How the Grinch stole New Year
COMMENT: Uzbekistan is being transformed, but where are the democratic reforms?
Download the pdf version
In the spirit of openness and transparency, the Uzbek government, represented by State Asset Management Agency (SAMA), has called on a large meeting of stakeholders such as development financial institutions (DFIs), news agencies including popular bloggers and Big Four consulting and audit firms and other interested parties to discuss the large privatization efforts it is undertaking, that were briefly announced in the press few weeks ago.
These are the results of reviews of eight government groups, who delved into analysis of the economy and they recommend these reductions to the President (three versions of potential presidential decrees were presented at the meeting).
From 2,965 companies currently on the list of state owned assets, it plans to keep only 554, reducing its stock of assets by 81%. The number of government unitary companies will go down even more drastically, by a whopping 96% from 1,718 to 70.
During the next two years they would like to conduct 20 major IPOs, including some household names and the version of the Presidential Decree that will be signed will be chosen based on the feedback they receive from the expert community, including International Financial Institutions (IFIs), investors and media.
Currently, the state-owned entities account for 55% of Uzbek GDP, bring in 47% of tax revenues, but only 33% pay dividends and they provide meagre 6% of the employment in the country. These companies provided a return on assets of 1.6% and return on equity of 6.4%. Given the cost of capital in Uzbekistan they are all practically de facto loss-making. Hence, the government wants to dump them, retaining only a handful for strategic reasons.
The Uzbek government is using the Singaporean “yellow pages’ approach on deciding which companies to keep and which to cut; during the meeting examples of road construction were given, where the state-owned Avtoyol has 200 road construction companies, whereas there are 70 private companies that are successfully competing in the sector.
The playing field is not level, with the state-owned enterprises (SOEs) enjoying significant advantages over the private sector. Some 30% or 900 state owned companies have tax and customs duties privileges costing the state budget money, whereas the private companies are competing without any state support. Analysis has showed that in certain areas that require licensing, some SOEs were able to operate without a license. In government tendering process, some SOEs received government orders without onerous tender process, whilst the private companies had to compete to win contracts.
SAMA will be reporting to the Oliy Majlis (the lower house of Parliament) on the progress and justify why certain assets must be kept by the state. If cannot justify, they will sell the asset.
The World Bank, EBRD and Asian Development Bank have provided extensive technical assistance to assist with this review and their technical assistance brought in expertise from international experts SAMA is assisted by ex-senior government officials who have been involved in very successful privatization efforts in Poland, and international experts on corporate governance from Ukraine and the UK.
The World Bank representative pointed out that Uzbek companies are not in dire situation and this transformation is more aimed at improving efficiencies. Uzbekistan Airways, for example, could improve on its the customer experience, but it is capable of maintaining United States FAA certificate and satisfying aviation regulators globally in terms of safety and technical maintenance standards. Navoi Mining and Metallurgical Combine (NGMK) has third of the borrowing capacity of its international peers, however it still produced reportedly 90 tons of gold the last year. However, the number of privatizations within the given timeframe might be too ambitious.
The PwC representative pointed out at the experience of countries such as UAE, where the fully state owned companies such as Emirates Airlines are successful, as they found a good mix of state support and autonomy, well rewarded management team, who can run the businesses without too much corporate interference from the shareholders. So, privatization for the sake of privatization may not bring the desired economic abundance. It is important not to just conduct a fire sales of assets, as for certain companies just changing the management and bring it u p to international standards could achieve desired efficiencies, without selling the company off.
Indeed, Uzbekistan’s privatization efforts is not in the same state of desperation and collapsing industries of 90s in Soviet Union. However, for the economy to grow and adopting international technological innovations, it must modernize and attract private capital and talent.
The Uzbek government is facing the typical conundrum of a country undergoing a privatization: not to sell out too cheap, because the assets belong to the people of Uzbekistan, and at the same time, to make the investment attractive so there will interest from the market. The solution seems to make it a transparent process and involve public discussion.
However, most of these discussions have just started and are on paper. For example, the ADB studied 6 companies and made recommendations on corporate governance and they have not yet been followed. Experience shows that the actual implementation is very important in Uzbekistan and this is not just about giving recommendations. Also, the goals that SAMA set itself maybe too ambitious and to achieve these goals a more hands-on approach from DFIs may help with the process. To see actual progress DFIs may want to participate in the implementation via investments in the actual privatization as investors and provide feedback on the shortfalls of the system to the government. If there is a lack of capacity, then this can be outsourced to private asset managers.
Fiezullah Saidov is the CEO of Uzbekistan Equity Fund and a banking sector consultant for the IFC. He can be contacted here.
here to continue reading this article
and 5 more for free or purchase
12 months full website access including
the bne Magazine for just $250/year.
Register to read the bne monthly magazine for
Password could contain only
and have 8-20 symbols length.
Please complete your registration by confirming your
A confirmation email has been sent to the email
address you provided.
can't be empty.
No user with
this email address.
Access recovery request has expired, or you are using
the wrong recovery token. Please, try again.
Access recover request has expired.
Please, try again.
To continue viewing our content you need to complete
the registration process.
Please look for an email that was sent to
with the subject line
"Confirmation bne IntelliNews access". This email will have
instructions on how to complete registration
process. Please check in your "Junk" folder in
case this communication was misdirected in your
If you have any questions please contact us at email@example.com
Sorry, but you have used all your free articles fro
this month for bne IntelliNews. Subscribe
to continue reading for only $119 per year.
Your subscription includes:
For the meantime we are also offering a free
digital weekly newspaper to subscribers to
the online package.
Click here for more subscription options,
including to the print version of our
flagship monthly magazine:
Take a trial to our premium daily news
service aimed at professional investors that
covers the 30 countries of emerging
For any other enquiries about our
products or corporate discounts please
contact us at
If you no longer wish to receive
Magazine annual print
Website & Archive
Combined package: web
access & magazine print
Take a trial to our premium daily news service
aimed at professional investors that
covers the 30 countries of emerging Europe: