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bne February 2019 Companies & Markets I 11
executives at the TSE told us, but it seems obvious that this is not on the immediate horizon as “a lot needs to be learned about the process,” the TSE team told us.
On the bond side, the government is planning to issue its first Eurobond in 2019. The initial target amount was $200-300m, but to get the attention from a larger group of international investors, about $1bn has been rumoured. Much smaller Tajikistan had its own debut $500m international bond debut in September 2017, which was oversubscribed. With investors awareness that the much larger Uzbekistan could become a very attractive growth story – it is the third biggest country by headcount in the eastern block after Russia and Poland – it is not difficult to imagine the issue would be a similar success.
The country needs an international sovereign credit rating first though, which is expected for early 2019. There have been delays in this process but given the country’s inexperience with capital markets this can’t come as a complete surprise. In any case, the issuance of an international bond only two years ago would be completely unthinkable.
The Ministry of Finance admits that capital markets do not yet work in an efficient way. The government is cautious and realises a privatised company might shed workers in an effort to become more productive, increasing unemployment and, potentially, social unrest. But it also aware that to attract the
necessary investments there needs to be a smoothly working capital market.
One of the biggest hurdles to achieve this are the capital con- trols that despite many other reforms in this sector, are still in place. The byzantine currency controls were introduced by Kari- mov in 1996 when he got the foreign exchange bill for allowing easy trade across the board. In those days Uzbekistan’s only significant export was cotton, from which it earned about $3bn a year in foreign exchange. With imports running at a $1bn
a year, the government was afraid of running out of dollars and so simply took complete control of the exchange mechanism. The move killed off foreign investors interest overnight.
These controls are being eased now but portfolio investors still need approval from the Central Bank to repatriate money. Until this is solved the country cannot expect any flow of portfolio investment into the country. The Finance Ministry says changing this has to come from the top and will be a slow process. According to the Central Bank the issue will be submitted to the government and parliament by the end of 2019. Until then, no new money will flow into the system.
Many low hanging fruit changes in the reform process in the country are largely carried out, but for measures such as abolishing of capital control, more time and determination is needed.
Telia sells bribes-tainted Uzbek telecoms holding
Kanat Shaku in Almaty
Nordic telecoms operator Telia has sold its direct holding in Uzbekistan's Ucell to the Uzbek government for $215mn on a debt free basis, as part of its strategy to exit its Eurasian businesses, the company said on December
5. Ucell became corruption-tainted during a major bribes-for- licences scandal that last year resulted in massive fines.
Telia is streamlining its operations to focus on growing its core Nordic business – it previously exited another Central Asian country, Tajikistan, in 2016 and sold its Georgia subsidiary Geocell in January last year.
The company announced it was pulling out of Central Asia amid an international investigation, in which Telia, as well
as Russian companies VimpelCom (later renamed VEON) and MTS, were accused of paying hundreds of millions of dollars in bribes to win licences for the Uzbek market.
In September 2017, Stockholm-based Telia and its Uzbek subsidiary Coscom LLC agreed in the US to pay a global foreign bribery penalty amounting to $965mn to resolve charges related to the bribes.
Along with VimpelCom and MTS, Telia was pursued by prosecutors for bribing entities connected to Gulnara Karimova, the now disgraced eldest daughter of late Uzbek President Islam Karimov, to win licences to operate 3G and 4G services on the Uzbek mobile market. VimpelCom was fined $795m by US and Dutch authorities for the bribes it paid in Uzbekistan. Telia gave over $331mn in bribes to an Uzbek official between 2007 and 2010, according to US prosecutors. Telia’s settlement included $548mn in criminal penalties split between the US and the Netherlands and another $457mn
for disgorgement of profits to the US Securities and Exchange Commission (SEC).
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