Page 57 - BNE_magazine_05_2020

bne May 2020 Eurasia I 57
Lower prices on Asian markets
The boycott has been supported by international companies including Amazon, Calvin Klein, Adidas and Inditex, although the US lifted its market ban on Uzbek cotton last year. As things stand, Uzbekistan, a nation of 34mn and one of the world’s biggest exporters of cotton, mostly sells cotton and textiles on Asian markets, which the government has said means lower prices and limited growth opportunities.
The government has forecast that this year the country will boost its textile exports to $3bn from $2bn last year.
If the boycott was lifted, export volumes could double year-on-year, it has
also stated.
The UN’s ILO in a February report said that 1.75mn people took part in the annual cotton harvest in Uzbekistan
last year. Around 102,000 of them
were victims of forced labour, down
by 40% compared to the number of people forced to pick cotton in 2018. The UN labelled this as "major progress", since 94% of cotton pickers worked voluntarily, while just a few years ago the entire sector relied on forced labour.
Other public servants ‘forced to work’
The Uzbek-German Forum for Human Rights said the 2019 government ban
on the recruitment of students, teachers and health workers to work in the cotton fields led to other public servants being forced to work instead.
Government-imposed cotton quotas lead to local officials resorting to forced labour when if there were not enough willing workers. In March, Uzbek President Shavkat Mirziyoyev signed
a decree to finally cancel cotton
crop quotas.
Mirziyoyev said in January the government will phase out its role in cotton production and wheat trading
to create more opportunities for private companies. The plan is to process the entire harvest domestically by 2025
to help develop the textiles industry.
Uzbekistan's annual cotton harvest cur- rently stands at just below 3mn tonnes.
Mongolia scraps $3bn IPO for shares in flagship coal mine
Mongolia has scrapped plans to sell up to $3bn of shares in the country's flagship coal mine in a Hong Kong initial public offering (IPO).
Statements from officials previously indicated that the long-planned offering for around 30% of Erdenes Tavan Tolgoi in the Gobi Desert would take place before legislative elections scheduled for late June. But a combination of political campaign considerations and the disruption on international financial markets caused by the coronavirus (COVID-19) pandemic appear to have caused the shelving of the plan.
The coronavirus turmoil has led to the cancellation of a string of planned Hong Kong stock market IPOs. At the same time, the intended Tavan Tolgoi listing—which was also to involve share sales on the London Stock Exchange and the Mongolian Stock Exchange – seems to have been partly derailed
by the heated pre-election political environment in Mongolia. Mongolians are often suspicious of potential corruption or exploitation of the country's resources when it comes to foreign interests buying into their country’s natural assets. Such concerns have continuously put a brake on Tavan Tolgoi's development.
In explaining the IPO decision, the Mongolian cabinet has pointed to turbulence caused by a legal challenge from a Tavan Tolgoi miners' union. It is unhappy with a capital restructuring conducted in preparation for the stock sale, saying it should have meant a full shareholder vote, not just approval from the government, which owns 85% of the mine.
"There has been no information or solutions to questions raised about the restructuring," Dorjdari Namkhaijantsan, country manager for the international advocacy group Natural Resource Governance Institute, was quoted as saying by Nikkei Asian Review on April 28.
Mongolia is export-dependent and, given the economic hit China and other economies worldwide will take from the ramifications of the COVID-19 emergency, Fitch Ratings last week anticipated that Mongolian economic growth would be flat this year. It pointed to weakening demand and prices for Mongolia’s coal, copper and gold.
The Tavan Tolgoi deposit holds estimated coking coal reserves of 7.5bn tonnes.
Erdenes Tavan Tolgoi generated Mongolian tughrik (MNT) 2.66 trillion ($1.01bn) in 2019 revenue, up 43% y/y. Net profit was up 38.8% to MNT1 trillion.
Eight years ago, 2.5mn Mongolians received free shares in the mine amounting to 15% of its stock. Next month they should receive their first dividends of between MNT67,500 and MNT96,480 per shareholder.
www.bne.eu