Page 47 - bneMag Dec22

bne December 2022 Special Report I 47
Orient Group is one of Uzbekistan's three biggest corporations, playing to the country's strengths. Now it is getting ready to tap the international capital markets to catalyse its growth. / bne IntelliNews
hydrocarbon resources that more or less cover its domestic needs. But what it lacks in oil and gas it made up for with people: Uzbekistan has one of the youngest and fastest growing populations in all of the CIS.
As incomes start to rise, a middle class
is emerging and the demand for real estate is insatiable. Orient Group has already built, and sold to UzOMAN, half a dozen shopping malls that play on this theme. In total, the group’s Golden House subsidiary has sold 185,000 square metres of residential housing and 102,000 square metres of commercial space.
As construction is one of the three
big economic growth drivers, the government is supporting the building of residential housing to keep pace with the necessity of providing accommodation for a population with an average age of 29.
The government has launched a subsided mortgage scheme that caps mortgages at affordable rates of 17-18% for properties costing up to $35,000 (the typical price of a house), after which buyers have to raise the money from banks or other means.
“The share of mortgage in the country's GDP in Russia is 4%, in Kazakhstan
3%, in Uzbekistan 0.4%; i.e. we see the potential of market growth by 10 times,” says Maslov.
Another problem Maslov says is that banks won’t offer mortgages until
Andrey Maslov,
Active CEO of Orient Group
ESG has become a key focus for the government that is building in good ESG practices to all its projects to increase their appeal to international investors.
Orient Groups is intending to be a pioneer in corporate ESG, which is one of the motivations to being first to switch to an IFRS account as part of its drive to improve the G in ESG.
“At Orient Group we have created rules for corporate governance to build on the confidence of our investors. In our joint ventures with the UzOMAN fund [which has bought several of Orient’s shopping malls] all the decisions
of the supervisory board have to be unanimous, despite the fact they are a minority investor. We are also looking at hiring some independent directors,” says Maslov, referring to the joint Uzbek-Oman sovereign wealth fund.
As for the social part, the group has focused on improving safety standards and procedures at work. Traditionally when there is an accident the victim
is blamed for carelessness, but in the new regime the company regards accidents as the result of failures in the environment; something was wrong with the procedures and checks, which led to an accident.
“We need to create a safety culture and not blame the individual, as the work environment is to blame,” says Maslov. Maslov adds that the environmental concerns are the least problematic, as
the manufacturing the company has set up in the last five years, especially in its Bakan Tex and FT Textile Group subsidiaries, all use state-of-the-art machinery, which is already extremely environment friendly.
“In textile production our equipment is already energy-efficient, [uses] closed waste cycles and [is] clean. We care about ecology and sustainability,” says Maslov.
In the meantime, Uzbekistan’s financial system is still working with Russia’s and it is one of the places that will transfer money both in and out of Russia but at the same time its bank’s credit cards still work in the West. This banking business has been another source of inbound Russian capital. Nevertheless, Uzbek banks have become increasingly careful and for Russians, getting an Uzbek bank account has recently become more difficult.
“We have strict system of Know Your Customer (KYC) if someone from
Russia wants to open an account. You have to provide documentation not only proving this money is yours but also what the origin of the money is – that it was earned legitimately. And if someone is on the US SDN lists they are barred from Uzbekistan and its banking system,” says Maslov.
Subsidised mortgages
fuelling growth
Uzbekistan is poor in the natural resources that finance its neighbours, and in particular only has meagre
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