Uzbekistan hopes it will begin to see the first dividends of a much-touted privatization drive as early as this summer with the sale of state-owned assets in 55 enterprises.
Local news website Novy Vek on February 24 cited a decree signed by President Islam Karimov estimating that the privatizations could raise up to $437 million.
Those acquisitions would cement agreements reached during an international investment forum that took place in the Uzbek capital, Tashkent, in November.
A government commission has been formed to oversee the privatization process and will be headed by Uzbekistan’s most prominent proponent of economic liberalization, Finance Minister Rustam Azimov.
Negotiations on acquisitions between Azimov’s commission and investors should either be concluded by March 1 or the assets will be offered to alternative buyers by July 1, Novy Vek reported.
A Cabinet decree published on February 10 approved the formation of 89 joint stock companies in which stakes of at least 15 percent are to be sold to foreign investors.
Those companies include telecoms company Uzbektelecom, five banks — one of them being scandal-tainted Asaka Bank — the Uzbek postal service and trading company Uztadbirkorexport.
A 15 percent share is being made available in 64 of the joint stock companies by means of an issue of additional shares. Those companies include 17 servicing the oil and gas industry, nine alcoholic goods factories, and 10 construction companies operating under the auspices of the Uzbekenergo power company.
The Cabinet decree states that all joint stock companies listed should comprise a 15 percent foreign-owned stake by July 1. Any company failing to hit that target will by December 1 be re-registered under a different legal status and will accordingly become ineligible for a range of tax breaks.
In a bid to galvanize interest from international investors, the government has decreed that share dividends earned by foreign investors will be tax-exempt until January 2020. Particularly generous tax breaks are being afforded to companies with foreign ownership ranging between 15 percent and 33 percent.
But a big question mark remains over who is to buy all these assets. The government is bullish about its prospects and indicates that the investor forum in November was a success.
Pressing the government’s case further, the chairman of Uzbekistan’s state privatization committee, Davron Hidoyatov, met on February 19 with British Embassy Charge d'Affaires Fiona Maxton to discuss deals made with British companies — presumably to check that the investors were going to keep true to their pledges.
The list of concerns that could deter international companies is familiar and long: Dubious corporate management standards, corruption, inflation, weakly enforced property rights and currency restrictions, among others.
And as the U.S. government’s most recent Investment Climate Statement notes, Uzbekistan has a troubled history with outside investors.
“A pattern of expropriations and politically motivated business inspections has damaged Uzbekistan’s reputation as an investment destination and sharpened a critical element of risk in its business climate,” the statement says.
Considering the issue speculatively, another potential source of investment capital could come from local businessman looking to repatriate hoards of money stashed away in offshore accounts. If the unfolding Uzbekistan-focused telecommunications scandal has shown anything, it is that even keeping cash overseas doesn’t make it irrevocably immune to confiscation.