Accessibility links

Breaking News

Uzbekistan: Investment Possibilities Draw International Interest

By Ulugh Normatov/Bruce Pannier

Prague, 17 November 1997 (RFE/RL) -- This year's international conference on investment possibilities in Uzbekistan showed a marked rise in interest on the part of foreign investors.

Prime Minister Utkur Sultanov led a team of Uzbek officials and business people at the London conference, the fourth in as many years (held Nov. 6 and 7). The difference in attendance between the latest conference and that of four years ago is evidence of the growing interest in the wealth of Uzbekistan. In 1994 about 30 people attended, the latest one however drew over 300 people from 25 countries.

Political issues such as human rights did not arise: the topic was money and the theme was kept economic.

Speakers from financial organizations currently helping Uzbekistan, such as the European Bank for Reconstruction and Development, the International Finance Corporation and others, and current investors such as the Korean heavy industry giant Daewoo, and the U.S. farm equipment manufacturer Case, accented the positive. Uzbekistan's achievement in lowering annual inflation from 1,200 percent in 1994 to 64 percent in 1996 was noted in several speeches, as was the 6 percent increase in the volume of industrial production and 7.8 percent increase in the production of consumer goods in 1996.

Note was taken that since the 1996 conference, the budget deficit has been brought down, a fact supported by the Economist Intelligence Unit (EIU) third quarter report for 1997, and inflation continues to decrease and the tax system is currently being reformed.

Again according to several speakers, among them H. C. Chung, the Executive Vice President of Daewoo and Lord Waverly, chairman of the British-Uzbek Parliamentary Group, in terms of world production, Uzbekistan ranks fourth in uranium, fifth in cotton, seventh in gold and tenth in natural gas, as well as possessing other minerals. There was opportunity to invest in the national airline - Havo Yollari, and the Tashkent airport.

Despite these endorsements there was room for skepticism. First, it was pointed out that Uzbekistan carries the dubious distinction of being the world's only "double-landlocked" country, meaning it is a land surrounded by other landlocked countries. Thus there is, as yet, no good means of bringing equipment into Uzbekistan and riches out of it.

But the problems raised most often at the conference were those the Uzbek government itself has created. After a bad cotton and grain harvest in fall 1996, the Uzbek government decided to restrict access to foreign currency to protect its foreign reserves. The result was the imposition of multiple exchange rates. This led the International Monetary Fund to suspend a stand-by loan and later the World Bank Enterprise Reform Loan did the same.

Currency convertibility and access to hard currency were concerns at the conference. Prime Minister Utkur Sultanov said currency convertibility will not come any time soon. Rustam Azimov, the chairman of the National Bank of Uzbekistan justified the delay, saying his country's hard currency is needed for reconstructing Uzbekistan and there are still fears that unscrupulous individuals may make quick money and get out. Defending against this possibility, bank rules and restrictions make it impossible to obtain hard currency in less than two to three months.

Ian Healy of the Arthur Anderson accounting company, talked about such difficulties in a pre-conference seminar but noted that the Uzbek government is taking measures to conform their taxation and accounting procedures to international standards.

That Uzbekistan has potential for foreign investors is beyond doubt. Equally beyond doubt is the country's need for direct investment. According to the Economist Intelligence Unit quarterly report Uzbekistan has the least per capita foreign direct investment in all of Central Asia, including Tajikistan, which is just emerging from five years of civil war. It should be noted that Uzbekistan's population is four times larger than Tajikistan's.

Uzbekistan is also trying to break out of the cotton monoculture which characterized it in Soviet times. Diversification will require sources of outside capital. In his closing speech Utkur Sultanov promised that suggestions made at the conference as to changes in legislation to promote foreign investment had been noted, and would be presented to the Uzbek government when he returned.