Wsj com East of the Oder February 8, 2002

producer of gold and oil, and a regionally significant

producer of chemicals and machinery. Following

independence in December 1991, the government sought to

prop up its Soviet-style command economy with subsidies

and tight controls on production and prices.

Faced with high rates of inflation, however, the

government began to reform in mid-1994, by introducing

tighter monetary policies, expanding privatization,

slightly reducing the role of the state in the economy,

and improving the environment for foreign investors. The

state continues to be a dominating influence in the

economy and has so far failed to bring about much-needed

structural changes. The IMF suspended Uzbekistan's $185

million standby arrangement in late 1996 because of

governmental steps that made impossible fulfillment of

Fund conditions. Uzbekistan has responded to the

negative external conditions generated by the Asian and

Russian financial crises by tightening export and

currency controls within its already largely closed

economy. Economic policies that have repelled foreign

investment are a major factor in the economy's

stagnation. A growing debt burden, persistent inflation,

and a poor business climate led to stagnant growth in

2000, with little improvement predicted for 2001.

Industries: textiles, food processing, machine building,

metallurgy, natural gas, and chemicals

Agriculture - products: cotton, vegetables, fruits,

grain; livestock.

Exports - commodities: cotton, gold, natural gas,

mineral fertilizers, ferrous metals, textiles, food

products, and automobiles.

Imports - commodities: machinery and equipment,

chemicals, metals; foodstuffs.

Database of companies in Uzbekistan

GENERAL INFORMATION:

Facts at a Glance, Flag Description, State Symbol,

National Anthem, Country Map, Survival Info, Embassies,

Passport and Visa, Money and Costs, Public Holidays,

Voltage, Weight, Metric System, Useful links, Add Your

Link
COUNTRY PROFILE:

Geography, Environment, Main Cities, Climate, History,

Different nations, Religion, State Structure, Economic

Overview, Export, Import, Investors, Special Topic,

Picture gallery
TO AND IN:

How to get there, Air, Road, Culture & Arts, Museums,

Theaters, Cinemas, National music samples, Where to

stay, Telecommunication, Uzbek Cuisine, Leisure,

Recreation possibilities, ABC, Phrases

Copyright © 1999-2002 The Times of Central Asia

News / The Times of Central AsiaDaily news from Central Asia!

EBRD Chief to Meet Karimov Amid Criticism on Board

Meeting in Tashkent
Uzbekistan, November 27, 2002 [ 18:15 ]

By Ron Synovitz, RFE/RL

More news on:

PRAGUE. The latest "Transition Report" by the European

Bank for Reconstruction and Development (EBRD) confirms

that Uzbekistan ranks alongside Turkmenistan and Belarus

as one of the most tightly controlled republics in the

former Soviet Union. Despite Tashkent's poor record on

both economic and democratic reforms, the EBRD is, for

now, still planning to conduct its annual board meeting

in the Uzbek capital next May. But RFE/RL that EBRD

President Jean Lemierre is conducting a personal

investigation of the situation in Uzbekistan during a

three-day visit to the country that starts tomorrow.

The decision of the European Bank for Reconstruction and

Development to conduct its annual board meeting in

Uzbekistan next May has opened the London-based

institution up to strong criticism from human rights

groups.
That's because the EBRD has a mandate to foster

democracy and market economics within the 27 former

communist countries that it operates. Yet according to

the EBRD's own latest data -- which was released this

week in the bank's annual "Transition Report" --

Uzbekistan continues to rank alongside Turkmenistan and

Belarus as the former Soviet republics that have the

worst reform records.

Sources within the EBRD told RFE/RL today that bank

President Jean Lemierre will personally investigate the

political, economic, and human rights situation in

Uzbekistan during a three-day visit to the country that

starts tomorrow.
Lemierre is scheduled to meet with Uzbek President Islam

Karimov. The agenda of those talks includes Tashkent's

poor record on economic and political reforms, as well

as next May's EBRD board meeting. One EBRD official, who

requested anonymity, told RFE/RL that the human rights

situation in the country will be discussed in "broad

terms." That EBRD official stressed that there has not

been any decision to move the board meeting away from

Tashkent. The official said that if there is a decision

to cancel the Tashkent meeting, it will not be announced

until after Lemierre's visit this week.
EBRD Chief Economist Willem Buiter told RFE/RL yesterday

that the newly released "Transition Report" shows the

bank is not downplaying concerns about the lack of

reform in Uzbekistan. "We did point out in the specific

section of the ["Transition] Report" that deals with

Uzbekistan -- and elsewhere in the report -- that

Uzbekistan had not made any reform progress this year,

at any rate, and very little for quite a long time now.

[Also] it pointed out that [Uzbekistan] is amongst the

least advanced of the transition countries [that are]

our 27 countries of operations. We made that very clear

and very open. We are not mincing our words there."

Buiter said it would be wrong for Karimov's regime to

suggest that the bank's board meeting in Tashkent

signals EBRD support for the record of Karimov's regime

on democratic and economic reforms. He also said it

would be wrong to suggest that having the meeting in

Tashkent is the result of pressure from Washington to

reward Uzbekistan for the role it played in the U.S.-led

antiterrorism campaign in neighboring Afghanistan.

"In the 11 years that the bank has been operating, we

have never had an annual meeting in Central Asia. And it

was time. We decided this [before 11 September], but I

think the events of 11 September point out that the

region doesn't just have human and economic

significance, but it has also got global strategic

significance. So an annual meeting in Central Asia was

overdue. The center, the core of Central Asia, is

Uzbekistan. It has 25 million people. That's as much as

the rest of the region combined. So that was the place

to go. We are going there not to approve or disapprove.

We say very clearly what our views are on the economic

development in the country. We also will very clearly

bring our message to the country that political

pluralism and successful economic reform go hand in

hand. There can be no sustained growth [or] sustained

development in the economic sphere that is not also

reflected in the political sphere."

New York-based Human Rights Watch is one of several

groups that has been trying to convince the EBRD to use

the meeting in Tashkent as a way to pressure Karimov's

regime into changing oppressive practices. Marie

Struthers, a Human Rights Watch researcher based in

Moscow who has conducted extensive field research in

Uzbekistan, told RFE/RL today that she thinks it would

unrealistic to expect the EBRD to change the location of

the meeting at the last minute.
But Steve Crawshaw, who directs the London office of

Human Rights Watch, said that the EBRD should, indeed,

threaten to move the meeting elsewhere if Karimov's

regime doesn't immediately bring an end to the use of

torture and arbitrary detention against potential

political opponents and activists. "It is

extraordinarily important that if this meeting is to go

ahead, it must not be perceived as an endorsement -- let

alone that Islam Karimov, the Uzbek president, should be

able to use this as an endorsement of his regime and all

that is happening there. We are very worried that the

EBRD -- that the bank-- is at the moment allowing this

[board meeting] to go ahead believing that this will go

in the direction of democracy. What, in practice, is

happening is the regime is taking this as an endorsement

of its appalling behavior which already exists."

Considering the tight press controls that exist in

Uzbekistan, Crawshaw said he expects the Uzbek media to

characterize an EBRD board meeting in Tashkent as a sign

that the international community approves of the

behavior of Karimov's regime. "The EBRD still believes

somehow that by going ahead with the meeting it will

send the right message. We think that under present

circumstances, that is absolutely wrong. It is

extraordinarily naive of the bank -- which, after all,

has had dealings with many of these kinds of regimes

over the years -- it's extraordinarily naive not to

understand how a regime like that will use [the EBRD's

meeting.] It will be top of the TV. [State-controlled

broadcasters will say,] 'Isn't it marvelous. All these

limousines are appearing in town.' [And they will] link

it precisely to [claims by Tashkent that it has made

progress on] democracy. The fact that the bank says [the

meeting] is not meant as an endorsement will absolutely

be swallowed up. You're not going to hear that from the

Uzbek regime."

Human Rights Watch isn't alone in its criticism of

Uzbekistan's poor record on democracy and market

reforms. The United Nations Committee Against Torture

last May released a highly critical report charging that

Tashkent is in violation of the international convention

against torture. The UN group has demanded an

investigation into thousands of cases of arbitrary

arrests and the alleged torture of individuals who have

been critical of Karimov's regime.
A U.S. State Department report issued this year widely

echoes the findings of the UN committee. It charges that

Uzbek police and the country's National Security Service

have routinely used torture and mistreated detainees to

obtain confessions or incriminating statements. The U.S.

State Department says Uzbekistan's record on human

rights is very poor and that officials in the country
continue to commit serious abuses.
It says citizens of Uzbekistan face difficulties if they

try to exercise the right to change their government

peacefully. It notes that the Uzbek government does not

permit the existence of opposition political parties. It

also says the Uzbek government severely restricts

freedom of speech and the press -- and that an

atmosphere of repression stifles public criticism about

Uzbek President Islam Karimov and his government.

On economic reforms, the U.S. Department of State notes

that Uzbekistan's banking system remains closely

controlled by the state through a complex set of

regulations, decrees and practices. It says most loans

are directed by the government, financed through the

Central Bank of Uzbekistan and guaranteed by the

Ministry of Finance. There are few private banks, and

those that exist are very small.

Another study critical of Uzbekistan's record on

economic reform is the "Index of Economic Freedom,"

which was released earlier this month by the U.S.-based

Heritage Foundation and "The Wall Street Journal." The

"Index of Economic Freedom" ranks Uzbekistan near the

bottom of its list -- placing it 149th out of the 156

countries surveyed. The authors of that study

categorized Uzbekistan as "repressed" in terms of

economic freedom.
The "Index of Economic Freedom" says Uzbekistan's trade

policies reveal a "very high level of protectionism." It

says the country's banking and finance sector suffers

from a "very high level of restrictions," which

discourage foreign investment. Regulations faced by

emerging private businesses also were described as "very

high." It also says protections for those who own

private property in Uzbekistan are weak. It also notes a

high level of corruption and black-market activity in

the country.

The Economist Intelligence Unit (EIU), elaborating on

the issue of corruption, has described the Uzbek

judiciary as "subordinate" to Karimov's regime. It says

Uzbekistan's judicial procedures fall far short of

international standards -- and that this "contributes to

widespread corruption."

The EIU also warns that reforms in Uzbekistan's

agricultural sector have been undermined by prohibitions

against private ownership of land, which can only be

leased. Indeed, there is no land market in Uzbekistan.

And although leasehold rights are legally permanent and

inheritable, they often are curtailed by local

authorities who have considerable discretion over the

rights of private farmers.

Last month, the British-based "The Economist" magazine

published a report about the EBRD's choice of Uzbekistan

for next year's meeting under the headline "European

Bank for Repression and Dictatorship?" That report asked

rhetorically what the EBRD's leadership could have been

thinking of when they decided upon Tashkent for its next

meeting.

Copyright © 1999-2002 The Times of Central Asia

News / The Times of Central AsiaDaily news from Central Asia!

FINANCE - Corporate Bond Market Developing in

Uzbekistan

Uzbekistan, November 30, 2002 [ 09:31 ]

TCA
TASHKENT. Uzbekistan is fourth in the CIS after Russia,

Ukraine, and Kazakhstan in terms of the amount of

corporate bonds issued.

The corporate bond market in Uzbekistan was marked by an

increase in the number of issues and the development of

a secondary market. However, demand on the second market

is weak due to high interest rates, thus only a small

number of companies have decided to issue bonds.
Financial consultants

The first corporate bonds in Uzbekistan were issued in

1999 by companies and banks that generally had a

significant share of foreign capital. Corporate bonds

were used only as a better way of borrowing for short

terms and there was no secondary market.

The mechanism for placing the bonds also indicates that

they were not market instruments. Almost all corporate

bond issues at the time were sold directly by the

issuing company and were bought by affiliated companies.

Only a subsidiary of Naitov networks in 2000 engaged

Uzbek bank Business-Bank to be the underwriter for two

bond issues.
More than 10 corporate bond issues worth 600 million sum

were issued from 1999 to August 2001 and a third of this

was issued at the start of 2001.
For comparison the Ministry of Finance issued nearly 120

billion sum in GKO during the period, which indicates

that the corporate bond issues remained small even for

the local stock market. The corporate bond market just

one year ago accounted for less than 0.5% of the debt

market.
The need to develop borrowing instruments and the active

efforts by several financial companies and banks to

advertise and create a market niche for underwriting

bond issues led in August 2001 to the formation of the

International Issue Syndicate. This new organization

specialized in organizing bond issues, assisting in

their placement and acting as payment agent, and

creating and supporting a liquid secondary market.
A group of Uzbek banks - Business-Bank, Alp Zhamol Bank,

Capital Bank, KHIF Bank, A&TM electronic information

center, and a subsidiary of Britain's Carthill

Investment Company, were the initiators and the first

members of the new structure. The Carthill subsidiary,

Carthill Assets Management Company, is the biggest

management and investment company in the country. This

company became the organizer of most projects in the

syndicate and coordinated securities issues.
Another non-bank member of the consortium, A&TM,

analyzed the financial situation at companies planning

bond issues and prepared the prospectuses for the

issues. It works with Carthill to promote and present

the new issues.
The other members of the syndicate serve as underwriters

for bond issues, support the secondary market and act as

payment agents.
In addition to the banks already mentioned the syndicate

now includes ABN Amro Bank NB Uzbekistan A.O., Aviabank,

Pakhta Bank, Zamin Bank, Trust Bank, Tashkent Bank (a

subsidiary of the Interstate Central Asia Bank for

Cooperation and Development), Ravnak Bank, Ipak Iuli

Bank, and Uzprivatbank. Thus, a third of the country's

banks are members of the corporate bond syndicate.
The International Issue Syndicate is essentially a

monopoly in assisting corporate bond issues.

A consortium of brokers and depositary-registrars -

Tatat, also plays an important role on the corporate

bond market. Tatat often acts as the market maker on the

secondary market.

Market development
Laws that would allow the successful development of the

corporate bond market did not begin to appear until this

year and were largely the result of lobbying by the

issue syndicate, namely the efforts of Carthill Assets

Management Company.
The allowable size of corporate bond issues was changed

only in March of this year. Corporate bond issues were

previously limited to 20% of charter capital but have

now been increased to the equivalent of charter capital.

Following the issue of a presidential decree on measures

to restrict the increase in money supply and increase

liability for financial discipline, which stipulated the

development of a corporate bond market, it became

possible to process a bond issue quickly.
Another obstacle to the development of a market for

corporate fixed income instruments was a restriction

established by the Central Bank instructions on the

capital of bond organizers and underwriters. After the

syndicate was formed (which bears joint liability and

has combined capital of more than 12 billion sums) it

became possible to service bond issues by the country's

biggest enterprises. Each issue generally has one main

underwriter and several co-underwriters.
In the standard agreements for bond issues the bank

underwriters assume the obligation to buy the bonds from

secondary investors. One important change that was

brought about by the International Issue Syndicate was

the organization of a secondary bond market that began

to function in April of this year. A trading floor for

corporate bonds was organized at the Tashkent Stock

Exchange that is a specialized exchange for fixed income

corporate securities.
Trading requires the 100% deposit of cash and securities

and is held through a dual auction with automatic

quotes.
The market maker sets the firm price for the bonds

within 15 minutes after the start of trading. The

electronic system enables accelerated bidding and

one-time posting on each terminal. This lends the

necessary transparency to the market. In order to be

admitted the trading bonds must undergo a standard

listing procedure. Trading on the specialized floor for

corporate bonds is held each business day from 2 to 4

p.m. local time.
In addition to the trading floor organized on the

country's biggest exchange, corporate bonds are also

traded on the Internet in a system organized by Carthill

Assets Management Company. Unlike the exchange, trades

can be made in the Carthill system round the clock every

day.
Despite the broad opportunity to invest in corporate

bonds the organized secondary market is very small. From

April to October volume on the Tashkent exchange totaled

900.6 million sum, which is just 10% of the corporate

bonds issued during that time.

Volume was highest in the third quarter of this year. In

the period since trading opened on July 1, just one

transaction was conducted on the secondary market. Tatat

as the market maker sold bonds of subsidiary NCI

Projects Inc worth 278.5 million sum at 103.15%.
Main projects
Since the International Issue Syndicate began

functioning it has organized seven corporate bond issues

worth 4.87 billion sum.
The first corporate bonds issued with the help of the

syndicate were bonds of Uzbek-German M.A.X. Huroson, a

leader in the production of mineral water and beverages

in Uzbekistan. Alp Zhamol Bank was the main underwriter

for the issue and co-underwriters were Business Bank,

Capital Bank, and KHIF Bank.

The placement began on October 26, 2001. The issue was

worth 100 million sum and face value was 1 million sum.

The bonds mature in nine months, thus they have been

almost fully redeemed (according to a schedule

established previously). The interest rate on the

placement was 27% annually, which was close to the

Central Bank refinancing rate of 30%.
The next two projects undertaken by the International

Issue Syndicate were bond issues for Uzbek-American

N.COM, the biggest supplier of computers and software in

Uzbekistan, and NCI Projects, a subsidiary of NCI

Projects International (U.S.), also a software

developer.

These two issues were adapted to the secondary market.

Their face value was lowered to 100,000 sum and the

entire issue was placed in a non-certificate form

involving centralized depositary. The issue size was

increased to 200 million sum and 300 million sum,

respectively.

The Business Bank was the main underwriter for these two

issues and it signed an agreement on behalf of the

syndicate making Tatat the market maker on the secondary

market.
Despite the fact that the new bonds differed

considerably from those issued by M.A.X. Huroson in

their term (N.COM bonds were issued for one year and NCI