Uzbekistan is on a mission to woo foreign investors, touting a massive privatization drive that will see the state relinquish some control over an economy in which it retains a heavy hand.
However, investors may be leery of channeling their cash into a country with a reputation for seizing foreign assets without recompense.
Uzbekistan is putting up stakes for sale in a whopping 1,247 enterprises, First Deputy Prime Minister Rustam Azimov said at an investment forum in Tashkent on November 6, as reported by the UzA state news agency.
Foreign investors are being offered the opportunity to snap up state-owned stakes in 68 companies and bid at auctions against local investors for another 667 enterprises, Azimov said.
They will also have the chance to take on 512 (evidently loss-making) businesses for free, if they take on investment obligations.
Azimov’s announcement was widely reported as breaking news, but the privatization drive was, in fact, announced in February and approved in April. (Tashkent is not the only one touting a privatization drive that was previously announced: Kazakhstan was this week drumming up cash in Europe for its own privatization plans, announced last year.)
Azimov, who wields enormous influence over the economy and holds the portfolio of finance minister as well as first deputy prime minister, was using the opportunity of the biggest investment forum held in years in Uzbekistan, at which some $12 billion worth of deals were signed, to sell the privatization drive to foreign investors.
It is not yet clear how many will be buying in Uzbekistan’s extremely challenging investment climate.
“The greatest operational concerns facing foreign and private investors are access to currency conversion, frustrating bureaucratic processes, an onerous tax system, overregulated banking, and punitive customs laws and procedures,” the US government’s Investment Climate Statement says.
“In addition, 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.”
Western, Turkish, Asian and Russian firms have all come to grief, with the list of foreign investors who have suffered state asset grabs including American company Newmont Mining, Britain’s Oxus Gold and Russian telecommunications company MTS.
Embroilment in corruption scandals is also a risk for foreign investors, as highlighted by the arrest in the same week as the investment forum of a Norwegian business executive who was charged with corruption relating to a multimillion dollar international bribery investigation involving the president’s daughter, Gulnara Karimova.
Against this backdrop, the privatization drive may be a hard sell.