Page 38 - Uzbekistan rising bne IntelliNews special report

38 I Special Report: Uzbekistan Rising bne December 2021
in a series of interviews conducted by bne IntelliNews in Tashkent.
In the first nine months of this year the government has already raised $370mn from privatisations and is expecting to clear a total of $600mn by the close of the year; a total of $160m worth of privatisations were sold in all of the preceding four years.
The Coca-Cola deal also highlights the role of international consultants which the administration of Uzbek President Shavkat Mirziyoyev have been relying on heavily to get its transformation and privatisations right. Mukhamatkulov and Okhunov say that no big deal is contemplated without the participation of a major international consultant that helps in the restructuring and valuation
of the assets being put up for sale.
“We are keen to create sustainable businesses and want to the process to be transparent,” say Mukhamatkulov and Okhunov. “It’s important to build
The government has already privatised Poytakhat Bank (Capital bank), a smaller state-owned bank that has signed a MoU with Russia’s Expobank that has plans to create
a digital bank in Uzbekistan.
“That is another important part of the privatisation process: its not just about valuations; the investor should also bring some sort of added value to the deal. The bank sector reform must develop much faster, and deals like this help,” say Mukhamatkulov and Okhunov.
However, the privatisation programme is not a fire sale and each auction is tailored to the needs of each company. Another major asset up for sale is
the Fergana Oil Refinery, which is going to be sold piecemeal starting in the first quarter of 2022 and in the second quarter part of its equity might be listed on exchanges.
Real estate was an early entry into the sell-off. As bne IntelliNews reported,
class or of the process being overtaken by insiders, SAMA has tried to set high standards of transparency and fairness in the sell-off. Mukhamatkulov and Okhunov emphasised throughout
the conversation that transparency and trust are the key elements of the auctions. International consultants provide a measure of objectivity
to valuations and as part of the restructuring the accounts of the target companies are transformed into the IFRS standards. The international financial institutions (IFIs) have also been invited to take stakes in the
first round as an added safeguard
to transparency and a hands-off approach to the sales. For example, the EBRD and IFC have bought a
20% in the TBC Uzbekistan, after Georgia’s TBC bank bought a local bank in one of the first sales of an Uzbek bank to a foreign player.
The legislation supporting privatisation has been on the books for several
years already but work to fine-tune it
is ongoing. New laws are on the way
in the New Year that the government hope will improve the situation further by introducing a new mechanism
to bring the valuations closer into
line with the bids being offered by potential buyers, for example.
All this is leading up to the sale of the largest 15 state-owned companies, including the biggest, Navoi Mining and Metallurgical Kombinat, one of the biggest gold miners in the world.
“The big 15 will probably sold via
an IPO; maybe on the Tashkent Stock Exchange (TSE); maybe a dual listing on an international exchange as well,” say Mukhamatkulov and Okhunov. “Now we are working on preparing them, but its very likely that some of the shares will be sold on TSE as part of the government’s efforts to develop the domestic capital market as well.”
“Mirziyoyev is betting on privatisation. He wants to reduce the government share in the economy by 75% by 2025. That’s the goal”
trust during the sales process. Coca- Cola was sold to an international buyer but most of the smaller companies [are] being sold to local buyers, but the same rules apply to them.”
Mukhamatkulov and Okhunov say the government is agnostic to sales to local or international investors; there is no preference. “The best bid wins. That is all there is to it,” says Mukhamatkulov and Okhunov.
The entire cotton sector has already been sold off, mostly to domestic investors, and the wheat production sector is currently in the middle
of being privatised, which should be finished by the end of 2022. Next up is the banking sector.
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the first to go was the iconic Hotel Uzbekistan in the heart of the capital that has been there since Soviet times and was bought by Malaysian investors in May of 2020, who paid $23.2mn
in another competitive auction. Next
up is the Hyatt Regency and the Hotel Tashkent, which are due to be sold soon.
“The government is also going to sell
its resorts, its government-owned tourist assets. It’s going to sell other real estate assets,” says Mukhamatkulov and Okhunov. “Mirziyoyev is betting
on privatisation. He wants to reduce the government share in the economy by 75% by 2025. That’s the goal.”
To make all this work smoothly, and to avoid the danger of creating an oligarch