Page 7 - bne_newspaper_January_18_2019

Top Stories
January 18, 2019 www.intellinews.com I Page 7
of the process of opening the door.
However, unlike Belarus, Mirziyoyev has already wracked up a string of real reforms to show he
is serious about change. In addition to the more liberal visa regime, Tashkent has just introduced private ownership of land, albeit only for buildings and not agricultural land, that also gives a foreign owner an automatic residency visa. This reform lays the basis for a real estate boom, which is usually one of the first sectors to take off in the early days of a transition.
The government is also in the process of easing rules pertaining to the ownership of banks and could spark a wave of acquisitions such as Kyiv saw in 2005 and 2006 when international banks rushed in with their eye on the large domestic market for financial services, paying crazy x6 book value for bank licences until the first Maid- an revolution popped the bubble. The London- listed TBC bank from Georgia is already planning to enter the market with mobile-only banking services.
Most importantly of all, one of the first things Mir- ziyoyev did was to liberalise the exchange mecha- nism in September 2017. Until recently Uzbekistan was one of the very few former Soviet Union (FSU) countries that still had a black market currency exchange rate. The liberalisation reforms are ongoing.
First flush of enthusiasm
I was in Tashkent in 1995 when it went through its first flush of investor enthusiasm. All the above reasons to invest were there then too and the capital was full of companies and entrepreneurs hoping to cash in on Uzbekistan’s promise. The locals were plying “suitcase trading”, flying off
to buy hard to find goods brought back as airline baggage and sold at a huge mark-up. the Turks had moved in with the first supermarkets.
But then Karimov got the bill and gave a famous speech. “We are not going to waste $1bn of our precious hard currency reserves to pay for [im- ported] chewing gum.” He clamped down on ex- change and within six months, unable to get their hands on dollars and repatriate profits, all the investors were gone.
This time round it will be easier. Neighbouring Kazakhstan, Uzbekistan’s regional rival, has flour- ished and as bne IntelliNews reported recently the heatmap of per capita GDP and average wages shows the Kazakh economy and average incomes at a three times higher level than Uzbekistan. It's now obvious what needs to be done. Mirziyoyev even intends to go one step further and is cur- rently in talks with his neighbours to create a “Silk Visa” that would effectively untie the whole region into a single economic union and create an even bigger market.
The UzRoadShow was off to a good start. Part of the summit included a string of contract sign-
ing ceremonies and the Finance Ministry hopes foreign direct investment (FDI) will increase from $1.68bn in 2018 to more than $4bn by 2020. The country is currently hot. The number of enter- prises with foreign capital operating was up by a third last year (33.8%) y/y to 7,371 as of 1 Decem- ber 2018. Mirziyoyev’s arrival next week will surely lead to more deals and agreements, but there is still a long way to go.
Mirziyoyev has a very ambitious plan. The Uzbek government’s investment programme for 2019 is set to include 3,000 projects worth $16.6bn, Pod- robno.uz news agency reported on January 9. Still, Uzbekistan’s very backwardness coupled with its clear commitment to make a change, on display in Berlin this week, makes it a convincing proposition. The country’s debut eurobond expect- ed in the first quarter of this year will be the next acid test of how big the renewed enthusiasm is.