March 1999

by Umida Khaknazar and Kelly Raftery

This year promises to bring the privatization of a number of Uzbekistan's key industries and enterprises as part of President Karimov's two-year privatization plan. January began with the announcement of a tender to privatize the Almalyk Mining and Metallurgical Combine. According to the tender announcement, 46.5 percent of the shares in the Joint-Stock Company Almalyk MMC will be sold. Indications of interest from bidders were due at the Uzbek Tender Commission by January 15, and bid documents are due by March 15, 1999.

The Almalyk sale is the first in a series of tenders to be conducted by the Government of Uzbekistan this year. Other well-known enterprises Uzbekneftegaz's Fergana Refinery, Uzkhimprom, Uzbekiston Havo Yullari (Uzbekistan Airlines), the Bukhara Hotel (as part of Uzbektourizm), Uzjeldormash (part of railway infrastructure), parts of the Uzbek post and telecommunications agency, and many others are slated for privatization over the coming 24 months. In all, more than 200 enterprises are to be sold off. Most of the enterprises will be converted to joint-stock companies. Foreign investors will be able to purchase between 25 and 95 percent of the shares in an enterprise, depending on the project.

This new push to privatize follows a two-year slowdown in the privatization process in Uzbekistan and recent government statements insisting that the oil and gas sector would not be privatized, pending a reorganization of local firms' financial records. However, recent documents indicate that Uzbekneftegaz is scheduled to privatize a couple of subsidiaries in late 1999 and 2000. These tenders, and the privatization process as a whole, are a welcome sign of possible reform on the part of the Government of Uzbekistan.

The current privatization program offers a unique opportunity for U.S. companies to invest directly in some of Uzbekistan's most prized holdings, many of which have been unavailable to foreign investors until now.

The executive director of the American-Uzbekistan Chamber of Commerce, Robert Pace, commented that "This is an encouraging step, providing further confirmation of the Government of Uzbekistan's commitment to the development of a free market economy. In addition, these measures should help stimulate the growth of a dynamic sector of small- and medium-sized enterprises: a major goal of President Karimov's reform program."

Bureau on Post-Privatization Support

In an effort to ensure the success of the privatization process, the Uzbek State Property Committee has established a special assistance bureau. The Bureau on Post-Privatization Support of Enterprises, funded with an US$18 million credit from the World Bank, will provide support to enterprises after they have undergone the privatization process.

Services to be provided by the bureau will include:

• Full evaluations of the financial soundness and business potential of the enterprise;
  
• Assistance in preparing business plans;
  
• Assistance in attracting foreign investors;
  
• Implementing government resolutions on restructuring and modernizing privatized enterprises;
  
• Rendering consulting services aimed at increasing the liquidity of enterprises and obtaining credit lines and investments;
  
• Introducing modern accounting systems, financial, and commercial management; and
  
• Developing marketing strategies and quality control systems.
  

When the need arises to invite specialists from international institutions to assist with these services, the bureau will cover (in hard currency) 100 percent of the cost of services rendered. The enterprise receiving the services will then reimburse the bureau (in soums) for 25 percent of the cost of services rendered, according to the Central Bank exchange rate.

Privatized enterprises interested in using the bureau's services must meet the following criteria:

• The state share of the company must not exceed 50 percent;
  
• The foreign investor's share must not be less than 30 percent; and
  
• Restructuring the enterprise should have a positive impact on other enterprises and industries.

For updates and tender announcements for Uzbekistan, visit BISNIS Online at www.mac.doc.gov/bisnis.

Other sources of information:

American Business Center in Tashkent
tel: +998 (71) 120-6705, fax: +998 (71) 120-6676

U.S. Foreign Commercial Service in Tashkent
tel: +988 (71) 120-6705, fax: +988 (71) 120-6692

American-Uzbekistan Chamber of Commerce
tel: (202) 828-4317, fax: (202) 659-7010

Embassy of the Republic of Uzbekistan, Wash., D.C.
tel: (202) 887-5300, fax: (202) 293-6804

Bureau on Post-Privatization Support of Enterprises
tel: +998 (71) 139-22-23;e-mail: bpps@naytov.com

Umida Khaknazar represents BISNIS and is collocated with the U.S. Foreign Commercial Service/ABC in Tashkent.

Kelly Raftery covers Uzbekistan for BISNIS in Washington, D.C.

This report is provided courtesy of the Business Information Service for the Newly Independent States (BISNIS)