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Speech 
"Privatization process in the Republic of Uzbekistan" Annual conference of the American - Uzbek Chamber of Commerce, Hotel "Intercontinental - Tashkent", May 23, 2001 Mr. Chairman, AUCC members, ladies and gentlemen! As you may know, the major strategic aim of the Republic of Uzbekistan is building of an open democratic state with market economy, forming the basis of multi-structured economy and a class of real property-owners. For years of independence more than 40 laws regulating processes of denationalization, privatization, entrepreneurship support and attraction of investments were adopted. The independent securities market infrastructure is rendering services to the business - they render consulting, marketing, engineering, leasing, insurance and other services to private business. At the initial stage of the economic reforms during so-called "small privatization" trade entities, state housing fund, small and medium enterprises, mainly, of services sector were transferred into property of citizens. At the second stage, in 1995-1997, as a result of wide-scale privatization of all branches of industry (except the basic ones), including agricultural complex, the solid basis for development of economy's private sector was created in the country. Since 1998, privatization of industrial giants and subsidiary enterprises of fuel and energy complex, chemical, metallurgy and machine industries with widespread attraction of foreign capital into the privatization process is being carried out. With the purpose of increasing transparency of the Program on denationalization and privatization to investors the foreign experts and financial advisers are attracted to its realization. We are using proceeds from the Credit Agreement between the Republic of Uzbekistan and the International Bank for Reconstruction and Development. The sum of the credit is USD 28 mln. The Project includes three parts: A) Ten million US dollars are directed to the program of individual (case-by-case) privatization, task of which is selling shares of the biggest enterprises of Uzbekistan to foreign investors; B) Fifteen million US dollars are allocated to the program of post privatization support of enterprises, task of which is consulting on restructuring and attraction of foreign investors to medium enterprises; C) Three million US dollars are allocated on capital market development that will significantly accelerate upgrading of depositary and clearing systems as well as stock exchange itself, and bring these systems in compliance with the world standards. With the purposes of effective utilization of borrowed assets the Bureau on Case-by-Case Privatization (CCPB) was created for part A of the Project and Bureau on Enterprise Institution Building (EIBB) - for parts B and C of the Project. The privatization process of the largest enterprises is carried out through CCPB and consists of three phases: enterprise valuation, preparation of privatization plan, and conclusion of the sale and purchase agreement. All three phases are carried out by the same investment bank, which receives a major part of compensation from sales commissions. Investment banks are selected through open tender procedure pursuant to recommendations of the World Bank. The State Tender Commission, headed by the Prime-Minister Mr. U. Sultanov, and Interdepartmental Working Groups were formed by the Government of Uzbekistan for solution of urgent issues arising during individual privatization and for final selection of investors. The payment for services, provided by foreign appraisal companies, auditors, consultants and financial agents shall be effected by the State Property Committee at the expense of proceeds of the World Bank Enterprise Institution Building Loan as well as at the expense of general proceeds from state property privatization with following compensation of expenses from entities (shares) sales proceeds. Representatives of Europe and European Union, such as Great Britain, Switzerland, Turkey, Germany, France, Netherlands, countries of CIS (Russia), Saudi Arabia, Indonesia, Malaysia and others become as main strategic investors in the privatization process in Uzbekistan. The State Property Committee has attracted the foreign investments in 36 enterprises of the country. The total last year's proceeds from all sources amounted to 14 bln. soums, actual proceeds from foreign investors totaled USD 9,96 mln. and 1,77 bln. soums, while investment obligations of foreign investors made up USD 43,04 mln. and 1,3 bln. soums. The Cabinet of Ministers of the Republic of Uzbekistan has recently issued the Resolution #119 "On further measures on denationalization and privatization with participation of foreign investors in 2001-2002" dated March 9, 2001. The Resolution gives a start to qualitatively new stage of privatization and denationalization process in the Republic of Uzbekistan. The second stage of a large-scale privatization includes 1244 enterprises in four basic directions. For comparison - 167 enterprises were included in the previous program. To attract foreign investors in the process of privatization of large entities of strategic branches 38 structure- and town-forming enterprises and banks shall be privatized on the case-by-case projects basis with participation of foreign investors. The foreign investor is offered to buy shares in the ratio from 39 up to 70 percent. For example, the financial consultant - consortium led by "Commerzbank AG" (Germany) may offer to potential investors, including international institutional investors, of up to 70 percents of shares of Joint-Stock Company "Uzbektelecom". The Program stipulates privatization of National Holding Company "Uzbekneftegas" and 7 joint-stock companies affiliated to it. The Investment Bank "BNP-Paribas" (France) became the winner of the tender on hiring of financial consultant for NHC "Uzbekneftegas" privatization. The investment banks "Raiffeizen Investment AG" (Austria) and "HSBC CCF" (France) are working on the project of privatization of State Joint-Stock Company "Uzcable" and Joint-Stock Company "Akhangarancement", and etc. The privatization of banks included in the program of denationalization and privatization, is carried out with attraction of international advisers, for which the World Bank allocated USD 25mln. For the purpose of organizing joint activity of authorized state bodies, banks being privatized, and also attracted expert companies the State Tender Commission and Bureau for Privatization of Banks under the Ministry of Finance have been formed. 49 enterprises, which are of significant interest, are included in the list of enterprises subject to sale entirely as a property complex to foreign investors. Last year a number of enterprises were sold entirely to foreign investors as property complexes. The list of enterprises assets of which subject to free sale on stock exchange and over-the-counter market, including to foreign investors and private owners, is considerably extended. The total number of such enterprises is 535 representing practically all branches of economy of the Republic. It is necessary to take into account that percentage of shares offered for free sale, including to foreign investors, is from 50 up to 100 percents. Entities and social infrastructure of State Joint-Stock Company "Uzbekenergo", State Joint-Stock Railway Company "Uzbekiston temir yullari", National Joint-Stock Company "Uzbekiston havo yullari", bus stations of State Corporation "Uzavtotrans" are included in the list of privatization for the first time. Institutions under the Ministry of Public Health Care, kindergartens under the Ministry of People's Education, Houses of Culture under the Ministry of Culture form a large list. It is necessary also to take into account that the property belonging to the Republic of Uzbekistan in Russian Federation, significant quantity of enterprises of the Ministry for Agriculture and Water Resources are included in the list. The Resolution determines the list of 622 privatized enterprises state share of which subject to realization on stock exchange and over-the-counter market. Thus, the sale of the state-owned share of 10 to 25 percents, and in a number of cases of up to 60 percents and more is envisaged. The implementation of the given project will undoubtedly promote further formation of the class of real owners, increase the share of private sector in economy and establish a system of economic motivation. Taking into consideration proposals of foreign investors, the Resolution provides additional terms to stimulate their participation in the privatization process. Thus, if investments including foreign ones are attracted to increase statutory capital of joint-stock companies, the state share is allowed to be decreased except for enterprises state share of which is fixed by certain Resolutions of the Government. Based on experience of privatization during recent years, the Resolution grants the State Tender Commission the right to make decisions on flexible application by foreign investors of various forms of payments for purchased shares and entities, as well as creation joint ventures on the basis of entities subject to privatization in accordance with established procedure. The State Property Committee developed a complex of measures for implementation and information support of the Resolution of the Cabinet of Ministers. The press conference on the denationalization and privatization program in 2001-2002 with participation of Uzbek and foreign mass media was held at the National Press Center. The press releases in Uzbek, Russian and English were sent to foreign embassies in Uzbekistan, representations of international organizations, large foreign companies and firms. The State Property Committee of the Republic of Uzbekistan constantly cooperates with the largest American organizations, companies, financial institutions such as United States Agency on International Development (USAID), American Uzbek Chamber of Commerce (AUCC), with law firms "Chadborne and Park LLP", "Roshanian Payman Irvin International" and others as well as with the United States Embassy in Uzbekistan. One may note that American entrepreneurs are taking active participation as in the largest privatization projects so in creation of joint ventures. As of December 31, 2000 there are about 40 functioning Uzbek-American joint ventures with state share in the charter capital. The State Property Committee in collaboration with the Embassy of the USA in Uzbekistan regularly informs American investors, representative of business community of America about the investment climate in Uzbekistan, as well as with the current privatization process in order to attract them. In June we are planning to release the second edition of the book "Privatization perspectives for foreign investors in 2001-2002", and to conduct a wide-scale presentation among the personnel of the diplomatic corps and representation offices of foreign companies in Uzbekistan and abroad under individual schedule. It is necessary to note that the Website of the State Property Committee has been awarded as the best corporate site on the National Internet Festival "InternetUz-2001" held in March. The Website address is www.gov.uz/government/spc. The Government of Uzbekistan has made a significant step in direction of development of mutually beneficial cooperation with serious investors and international organizations. In sense of its importance, scope and volume of envisaged works the Resolution of the Cabinet of Ministers as of March 9, 2001 #119 is the most important document, successful implementation of which will bring the key contribution in execution of economic reforms and enter into the economic history of Uzbekistan as the start of new stage of realization of the large-scale privatization, formation of multi-structural economy and civilized transfer of property to the real investors. Taking this opportunity, on behalf of the Government of Uzbekistan I invite American business circles and companies to actively participate in the enterprises privatization process in our country. |