In early Could, Uzbekistan’s capital performed host to the Tashkent Worldwide Funding Discussion board. The third installment of the annual occasion, which value an estimated $1.2 billion to arrange in 2022, was an opportunity for Uzbek President Shavkat Mirziyoyev to as soon as once more current the nation’s credentials as a vibrant and reforming rising financial system to overseas traders.
Since ascending to the presidency in 2016, Mirziyoyev has promised to throw open the once-tightly locked doorways of the Uzbek financial system to worldwide traders – a part of a wider liberalization and reform agenda, extensively dubbed by Uzbek authorities as “New Uzbekistan.” In 2020, the federal government promised to promote – or partially promote – 620 state-owned enterprises, together with a number of the nation’s greatest companies, akin to state oil and gasoline large Uzbekneftegaz and the Navoi Mining and Metallurgical Firm, operator of the world’s largest open-pit gold mine, Muruntau.
The constructive fundamentals of the Uzbek financial system are laborious for traders to disregard. Uzbekistan has a inhabitants of 36 million, the most important in Central Asia, which is projected to achieve 40 million by the tip of the last decade. Over 60 p.c of the inhabitants is underneath 30, the vast majority of whom are well educated in comparison with different decrease middle-income nations. Whereas nonetheless considerably underbanked, the inhabitants is exhibiting rising buying energy, with actual revenue per capita reaching roughly $1,500 in 2023, a 34.7 p.c enhance on 2017.
Nonetheless, to date, most of the guarantees of the privatization agenda are but to materialize. Deadlines on the sale or public listings of main enterprises have constantly been delayed. In 2021, Financial system and Finance Minister Jamshid Kucharov said that the state anticipated to promote 10-15 p.c of the Navoi Mining and Metallurgical Firm in 2022, but this was later postponed to 2024. The most recent authorities decree has pushed the deadline again additional to 2025 and the stake up on the market has shrunk to five p.c through a would-be worldwide itemizing.
In the meantime, the privatizations of two massive state banks, the Uzbek Industrial and Building Financial institution (SQB) and Asakabank, initially set for 2022 and 2023, have been postponed twice, most just lately to year-end 2024 and 2025, respectively. Worldwide scores company Fitch has said it expects additional delays amid considerations over the banks’ asset high quality, amongst different components.
Furthermore, the success tales of privatization to date have include caveats. In 2022, the outbreak of the conflict in Ukraine meant the state deserted a deal to promote UzAgroExportBank’s to Russia’s Sovcombank, as an alternative selling it with out public tender to an organization owned by Olimjon Chodiev, a relative of politically well-connected Uzbek billionaire Patokh Chodiev. In June 2023, the state offered a 73 p.c share of Ipoteka Financial institution to Hungary’s OTP Group. But virtually a 12 months for the reason that deal, Ipoteka has disclosed a worrying enhance within the share of non-performing loans in its books, rising from 2.7 p.c to 11.9 p.c between the beginning and finish of 2023 – seemingly a results of improved monetary disclosure introduced by OTP revealing a troubling quantity of poor-quality legacy loans.
Eight years into Mirziyoyev’s tenure, some are questioning whether or not Uzbekistan’s privatization agenda will ever attain its lofty objectives. However, whereas Uzbek authorities could have been sluggish to maneuver, there may be additionally a component of the “hen and egg” dilemma. With out concrete commitments from traders first, there may be little motivation for Uzbek authorities to upset the established order and dump belongings.
Worldwide monetary establishments, such because the European Financial institution of Reconstruction and Improvement (EBRD), have sought to bridge this hole. After resuming its operations within the nation in 2017, the EBRD has supplied billions in loans to Uzbek state-owned corporations. These embody so-called “convertible loans,” which might subsequently be remodeled into possession stakes. The concept is that the entry of establishments just like the EBRD into the share capital of Uzbek corporations will give personal traders the peace of thoughts that reform is going on and incentivize a sale.
With geopolitical instability in Uzbekistan’s neighborhood and rising uncertainty over the Mirziyoyev administration’s dedication to reform, the funding case for Uzbekistan is underneath query. However, the nation’s potential is difficult to disregard, and the promise of entry to Central Asia’s largest market means all eyes might be firmly fastened on Tashkent within the years to return.
