Uzbekistan puts up ‘for sale’ sign amid chill of Ukraine war

Uzbekistan puts up ‘for sale’ sign amid chill of Ukraine war
The state oil and gas firm is among the companies Tashkent wishes to float on foreign stock exchanges. / Uzbekneftegaz.
By Joanna Lillis for Eurasianet March 28, 2022

Never mind the warnings of global economic gloom, Uzbekistan is open for business.

That was President Shavkat Mirziyoyev’s sales pitch at the inaugural Tashkent International Investment Forum, which opened on March 24.

“The assurance of success in our country is guaranteed by the president and the government,” Mirziyoyev vowed.

Everything must go, he said. Almost.

Qishloq Qurilish Bank will become the first bank in Uzbekistan to float on a stock exchange. It isn’t yet fully clear where the shares will be floated, or how much of the joint-stock bank will be sold off, but Mirziyoyev has set an October 1 deadline for the listing to happen. Mirziyoyev also ordered Sanoat Qurilish Bank and Asaka Bank to list state-owned stakes for sale this year, without providing further details.

The clock is ticking for another five lenders: Xalq Bank, Mikrokreditbank, Aloqabank, Agrobank and the National Bank of Uzbekistan must finish preparations for a listing by July 2023, Mirziyoyev has demanded.

This lender-focused turn to the private sector met with approval from delegates.

“Privatisation of state banks should be the key,” Umut Shayakhmetova, the chair of Kazakhstan’s Halyk Bank, which in 2018 became the first foreign bank to dip its toe into Uzbekistan, told the audience at the Tashkent City Congress Hall.

Uzbekistan’s market “is very high risk, but also very high return,” she said.

Mirziyoyev insists that the fundamentals of the economy are strong. Gross domestic product will grow by nearly one-third, to $100bn, over the next five years, he assured the audience.

The state controls 82% of banking sector assets and owns 12 of the country’s 33 banks, according to Central Bank data.

The plan is for that to be whittled down to 40%, said First Deputy Finance Minister Omonullo Nasritdinhojaev.

Uzbekistan took a notable step toward diluting the state’s role in the finance sector with an agreement reached last year for Hungary’s OTP Bank to acquire a majority stake in Ipoteka Bank.

Earlier this month, though, another semi-foreign investor, Alisher Usmanov, a Russian oligarch of Uzbek origin now targeted by Western sanctions, scuttled away from Uzbekistan’s banking sector by selling off his stake in the privately owned Kapitalbank to a couple of associates.

Organisers of the Tashkent investor forum were insistent on the mantra of transparency. Critics of the Uzbek business scene are sceptical. Alleged cronyism still plays a dominant role.

Usmanov, who is related by marriage to Mirziyoyev, again raised eyebrows last year when the government sold him a controlling stake in a large telecoms company, Ucell, in exchange for a $100mn investment. No other bidders were offered the opportunity to get in on the action.

Mirziyoyev has now ordered the privatisation of state-owned Universal Mobile Systems, or UMS, which operates under the Mobi brand, by April 2023.

Regional precedent for grand public offerings is not encouraging, as neighbouring Kazakhstan has found with its own long-delayed IPO programme.

But this fire-sale has important champions.

Zsuzsanna Hargitai, managing director for Central Asia at the European Bank for Reconstruction and Development (EBRD), described what is being offered as the economy’s “crown jewels.”

Back in 2019, the government was thinking about 20 or so companies it wanted to see floated on stock exchanges. The updated list published in April 2021 has since been trimmed down, but it still includes the likes of Uzbekneftegaz, the oil and gas company; Uztransgas, the gas transporter; Uzbekistan Airways, and the Navoi and Almalyk mining and metallurgy plants.

Uzbekistan’s state-owned automobile manufacturer UzAuto Motors is moving ahead with plans to list a stake of up to 30%, despite experiencing some production issues of late.

The company will place up to 5% of shares on Uzbekistan’s stock exchange this year, and then another 25% in a foreign trading house in 2023, news website has reported.

There may well be investor appetite.

When UzAuto Motors issued a $300mn eurobond last year, it was swamped with $1.4bn worth of bids.

Uzbekistan has been trying to develop a domestic capital market for several years, but progress has been limited. The value of shares traded as of last year – around $6bn – was equivalent to around 11% of Uzbekistan’s GDP. In Kazakhstan, where capital markets have been developing since the 1990s, the figure was around 39%.

Only two Uzbek companies have so far conducted IPOs, and only on the domestic stock exchange. They have not been roaring successes.

Glass factory Kvartz attracted just 7.5bn som ($940,000 at the exchange rate at the time) with its listing in 2017. Plastics producer Jizzax Plastmassa attracted 1.35 billion som (then worth about $140,000) with its 2019 IPO, according to data published by

The behemoths that are now planning international listings are far more attractive propositions.

The negative repercussions of Russia’s invasion of Ukraine are already coming to bear on the economies of Central Asia, and the situation is only likely to worsen. Uzbek officials at the Tashkent forum were not eager to address this elephant in the room.

“We’ll hope for the best and the soonest resolution of the situation,” offered Atabek Nazirov, director of the government’s Direct Investment Fund.

Joanna Lillis is a journalist based in Almaty and author of Dark Shadows: Inside the Secret World of Kazakhstan.

This article originally appeared on Eurasianet here.