Page 47 - bne_June 060618

bne June 2018 Eurasia I 47
turn Uzbek companies into modern corporations.”
Uzbekistan’s GDP growth was recorded at 5.5% in 2017, down from 7.8% reported in 2016 – however, the decline might be explained by dishonest practices for reporting GDP growth under the late president Islam Karimov, whom Mirziyoyev officially succeeded towards the end of 2016. The current Uzbek leader has himself admitted that
growth figures in the previous decade were “fiction”.
Mirziyoyev is attempting to improve the country’s transparency and more accurately reflect its economic realities. Last October, the Uzbek authorities reported GDP growth at 5.3% for the first nine months of 2017 – it was the first time the Uzbek authorities had acknowledged growth below 7% within the past decade.
The relative drop in growth could be related to a decline in foreign direct investment following the political and economic uncertainty that followed Karimov's death. The number of greenfield FDI projects dropped to four in January-August 2017, compared to
a total of 14 in 2016, but investment is expected to start growing following Mirziyoyev’s decision to lift the strict currency controls.
Privatisation drives fail to shift state out of Kazakh economy
Nizom Khodjayev in Tashkent
The Kazakh state remains in control of a large share of the economy – though the exact level of state control is unclear – despite
the government’s launch of large scale privatisation programmes. Under the latest programme seven state-owned companies will be IPO’d starting from this year, while a significant chunk of the privatisation drive covers small and medium-sized companies with the aim of boosting competition and decreasing the role of the state within the economy. However, Kazakhstan is not known for having well organised government ini- tiatives – a fact that becomes especially clear when government initiatives are combined with the post-Soviet country’s inability to commit to free markets.
The privatisation plan, which covers 904 companies, was originally set for
a four-year stretch between 2016-2020. The government supposedly wants to lower the state control in the economy to 15% by the end of the privatisa- tions and IPOs. It’s not clear what the starting point is though. Back in 2014, Kazakhstan’s finance minister said
that state control in the economy was estimated at 40%, but also admitted that the government doesn't know
the exact size of state control in
the Kazakh economy.
The latest figures reported by the Kazakh authorities in February 2018 show the current programme is 71% complete. It covers 622 companies but so far only 367 have been sold, while the remaining 255 facilities were put up for liquidation or reorganisation in 2016- 2017. These figures suggest that nearly half of the companies may never make it into private hands.
Mounting privatisation failures
The government’s privatisation failures can be traced back to the previous 2014- 2016 attempt, when it set out to sell off 782 state-owned organisations but only succeeded in pushing 254 of them or 32% of the total. As a result, the 2016- 2020 initiative was born to right the wrongs of the previous attempt.
There are further questions regarding the funds raised through sales of compa- nies in the last four years. The proceeds
period, according to figures cited by Kazakh economist and lower house of parliament member Aikyn Konurov in February.
The results appear even more dubious when the benefits of the programme to the Central Asian nation’s economy are evaluated. According to Konurov’s figures, 54% of the companies sold so far are municipal services companies, mostly focused on utilities distribution to residential areas. If the goal of the drive was to stimulate competition, it seems doomed to fall flat on its face
as municipal services companies in Kazakhstan are bound by infrastruc- tural and other limitations that prevent them from competing with one another. That leads to another question, the answer to which remains unknown:
by what criteria has the government structured its list of companies set for privatisation?
“Kazakhstan is not known for having well organised government initiatives”
from sales of state-owned entities amounted to KZT256bn (€643.7mn), which amounts to less than 1% of state budget revenues in the four-year
More importantly, the aforementioned goal of decreasing the state’s role in the economy is not achievable with such a minor scale of privatisation. Despite the
www.bne.eu