Is Uzbek Business Climate Ripe for Kazak Investment?
Is Uzbek Business Climate Ripe for Kazak Investment?
Uzbekistan is keen to get Kazak investors to buy into some of the 1,500 firms that it wants to privatise, but NBCentralAsia analysts say the business environment would need to be significantly improved before that happens.
Visiting Tashkent on July 26, Kazak prime minister Karim Masimov urged businessmen from his country to play an active part in the Uzbek privatisation process and signed a strategy agreement with his Uzbek counterpart Shavkat Mirziyoev envisaging economic cooperation for the period until 2016.
“I have agreed this with the Uzbek president, and I want to tell the Kazak business community on the record that Uzbekistan is waiting for investors from Kazakstan,” said Masimov.
On July 20, Uzbek president Islam Karimov signed a decree to privatise 1,500 enterprises and bring in new investment by 2011. The firms that will be privatised include such giants as the petroleum products company Uzbeknefteprodukt, the oil extraction company Uzbekneftedobycha, nine thermal power stations run by Uzbekenergo, the Fergana chemical plant and the Kokand textiles factory.
Kazakstan is already Uzbekistan’s second largest investor, after Russia. Trade between the two countries reached over 700 million US dollars last year and experts predict that it will rise to one billion dollars by the end of this year.
Overall, though, last year as the worst year yet for foreign direct investment, FDI, in the Uzbek economy since independence in 1991, and the privatisation plan clearly aimed at redressing that situation.
NBCentralAsia economist Anvar Muminov says the Uzbek leadership may now be counting on its neighbours to provide investment.
Other NBCentralAsia analysts, however, say that Uzbekistan still lacks the right conditions to attract substantial inflows of FDI in the mid-term.
Independent political analyst Ikram Khaitov doubts that Uzbekistan will see a sharp rise in Kazak investment because the national currency is not fully convertible, making it hard for foreign firms to conduct international transactions.
Khaitov cited the unhappy experience of Russian investors who moved into Uzbekistan after 2005, when the government announced guarantees of a good investment climate. “Of course Russian firms flocked to our country. But they found they came up against the same obstacle as the western firms that preceded them – they were unable to repatriate their profits because converting Uzbek soms into American dollars remains a major problem,” he said.
A World Bank study from 2004 found that Uzbekistan’s “business environment does not facilitate economic development through small and medium-sized business”, and concluded that the enterprise sector was in steady decline.
At that time, the World Bank said the main obstacles to foreign investment were difficulties in both exporting and importing goods, high taxation, problems in obtaining cash from the banks, the risk that business account information would be passed to third parties, and excessively bureaucratic procedures for obtaining registration and operating licenses.
(News Briefing Central Asia draws comment and analysis from a broad range of political observers across the region.)
Visiting Tashkent on July 26, Kazak prime minister Karim Masimov urged businessmen from his country to play an active part in the Uzbek privatisation process and signed a strategy agreement with his Uzbek counterpart Shavkat Mirziyoev envisaging economic cooperation for the period until 2016.
“I have agreed this with the Uzbek president, and I want to tell the Kazak business community on the record that Uzbekistan is waiting for investors from Kazakstan,” said Masimov.
On July 20, Uzbek president Islam Karimov signed a decree to privatise 1,500 enterprises and bring in new investment by 2011. The firms that will be privatised include such giants as the petroleum products company Uzbeknefteprodukt, the oil extraction company Uzbekneftedobycha, nine thermal power stations run by Uzbekenergo, the Fergana chemical plant and the Kokand textiles factory.
Kazakstan is already Uzbekistan’s second largest investor, after Russia. Trade between the two countries reached over 700 million US dollars last year and experts predict that it will rise to one billion dollars by the end of this year.
Overall, though, last year as the worst year yet for foreign direct investment, FDI, in the Uzbek economy since independence in 1991, and the privatisation plan clearly aimed at redressing that situation.
NBCentralAsia economist Anvar Muminov says the Uzbek leadership may now be counting on its neighbours to provide investment.
Other NBCentralAsia analysts, however, say that Uzbekistan still lacks the right conditions to attract substantial inflows of FDI in the mid-term.
Independent political analyst Ikram Khaitov doubts that Uzbekistan will see a sharp rise in Kazak investment because the national currency is not fully convertible, making it hard for foreign firms to conduct international transactions.
Khaitov cited the unhappy experience of Russian investors who moved into Uzbekistan after 2005, when the government announced guarantees of a good investment climate. “Of course Russian firms flocked to our country. But they found they came up against the same obstacle as the western firms that preceded them – they were unable to repatriate their profits because converting Uzbek soms into American dollars remains a major problem,” he said.
A World Bank study from 2004 found that Uzbekistan’s “business environment does not facilitate economic development through small and medium-sized business”, and concluded that the enterprise sector was in steady decline.
At that time, the World Bank said the main obstacles to foreign investment were difficulties in both exporting and importing goods, high taxation, problems in obtaining cash from the banks, the risk that business account information would be passed to third parties, and excessively bureaucratic procedures for obtaining registration and operating licenses.
(News Briefing Central Asia draws comment and analysis from a broad range of political observers across the region.)
