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Editorial: Banks in Tajikistan

MAY 20 2016 (The Conway Bulletin) – The past nine months have been tough for Tajikistan. A recession in Russia has smashed into Central Asia and the South Caucasus, heavily denting the larger economies and taking great chunks out of the smaller ones. Tajikistan has suffered a sharp fall in remittances, the weakening of the somoni currency and a liquidity crisis in the banking sector.

This week’s news that TSB, one of the country’s largest commercial banks, needs a caretaker administration to help it navigate through problem loans is a sign of the fragility of the entire sector. After all, TSB holds around 33% of Tajikistan’s total loan portfolio.

But failing banks is not the only consequence of the economic downturn. Politically, Emomali Rakhmon’s regime has retrenched and used old-school Soviet techniques to tighten its grip on power.

The opposition has been outlawed and chased out of town, surveillance of pious Muslims has increased and a referendum that will extend Mr Rakhmon’s stay at the top now looms.

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(Editorial from Issue No. 281, published on May 20 2016)

Business comment: Corporate Governance in Central Asia

MAY 13 2016 (The Conway Bulletin) – These are tough times for corporate governance and the general business climate in Central Asia.

In rapid succession, news of a raid at a gold company in Kyrgyzstan, the seizure of a Kazakh refinery in Romania, an allegedly fraudulent scheme to fake sales of Uzbek cars and the freezing of a murky hotel sale linked to two exiled Kazakhs in New York came to our readers’ attention over the past two weeks.

Since the raid at its subsidiary’s office in Bishkek, Centerra Gold has reiterated its readiness to cooperate with the authorities and the government to negotiate a solution. We think the raid was a way for the government to flex its muscles.

A bizarre scheme to fake car sales from Uzbekistan to Russia was unearthed this month, perhaps reminding us of how two plus two is not always equal to four in Central Asia. Undoubtedly, the current economic crisis has sparked more corruption.

The seizure of KMG Romanian refinery allows us to look back into the murky deal that first brought Kazakh state-owned business into Romania. Authorities didn’t seem impressed with acrobatic financial manoeuvres performed by former managers at Rompetrol. They’re now seeking damages and a court sentence might negatively affect China’s CEFC, which just bought into the venture.

Lastly, it’s not a surprise that a US court froze the sale of a hotel owned by Mukhtar Ablyazov and Viktor Khrapunov, two Kazakh businessmen and arch-rivals of President Nursultan Nazarbayev. They seemed to be needing some cash but their involvement in court cases in Kazakhstan, the US and Europe turns their transactions into red flags.

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(News report from Issue No. 280, published on May 13 2016)

Pen portrait: Dariga Nazarbayeva

MAY 13 2016 (The Conway Bulletin) – From part-time opera singer, to the ex-wife of one of her father’s most hated enemies, Dariga Nazarbayeva, the eldest daughter of Kazakh President Nursultan Nazarbayev has led a life in the public eye.

She is now a deputy PM and had been an MP until quietly dropping off the Nur Otan party list, that’s her father’s party, at an election in March. But Ms Nazarbayeva, who turned 53-years-old on May 7, is never far from the headlines and this week she was revealed to have been the part- owner of a company registered in the British Virgin Islands. It is unclear what the company ever did or owned.

Although other public figures may be tarnished with such an association, Ms Nazarbayeva will no doubt be able to see out any fall out. Afterall, she has fallen from favour before and bounced back to be considered a potential next president of Kazakhstan.

Ms Nazarbayeva was married to Rakhat Aliyev, the one-time favourite of President Nazarbayev. Together they controlled some of Kazakhstan’s biggest industries before Aliyev rowed with his father-in-law in 2007.

He fled into exile, accused of murder and set himself up in Europe as an opponent. Ms Nazarbayeva, by contrast, stayed in Kazakhstan and slowly mended her relationship with her father. She disowned all links to her former husband and instead concentrated on building up her father’s trust. This seems to have paid off. Ms Nazarbayeva re-entered parliament as an MP at the parliamentary election in 2012 and was made a deputy PM last year.

More than a handful of analysts have now said that with no other clear contenders, Mr Nazarbayev could be grooming his eldest daughter to take over from him. She quit as an MP at the 2016 election, potentially making it easier for her to take the top job. It wouldn’t have been possible to be president and an MP.

Her father also now ensures that her profile is maintained by starring next to him at major events and speeches.

As for the opera singing, Ms Nazarbayeva is regarded as a decent amateur, even giving a concert at the Bolshoi Theatre in Moscow, as well as appearing on Kazakh TV.

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(News report from Issue No. 280, published on May 13 2016)

Revenues fall at VimpelCom’s regional subsidiaries

ALMATY, MAY 12 2016, (The Conway Bulletin) – Revenues at Russian mobile operator VimpelCom’s Central Asia and the South Caucasus operations were sharply down in the first quarter of 2016 compared to the same period in 2015, a sign of the continuing economic malaise that has undermined consumer confidence in the region.

In Armenia, Georgia, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan, VimpelCom operates under the Beeline brand. Its customer base in the region shrank by 6% to just above 24m, roughly in line with figures released last month by its rival TeliaSonera.

In Kazakhstan, VimpelCom said that revenue from its mobile operations was just under 24b tenge in Q1, 10% lower than 2015, and that its subscriber base had fallen 4% to 9.2m.

The Kazakh mobile market has become increasingly competitive. Sweden’s Tele2 merged with Kazakhstan’s Altel earlier this year and has been undercutting its bigger rivals.

In its quarterly report, VimpelCom said that prices would stay low.

“Competition remains intense, however, although the company continues to maintain its commercially rational pricing strategy,” it said. “Beeline expects the competitive environment to remain challenging throughout 2016.”

And, other than in Uzbekistan were a new pricing strategy had sustained revenues, it was a similar story in other subsidiaries. In Georgia revenues were down 30% in US dollar terms and in Tajikistan down 27%.

VimpelCom said of the drop in revenue in Tajikistan that this was “mainly due to lower incoming international traffic as a result of fewer migrants living abroad due to the macro-economic slowdown in the region and a weakening local currency.”

A recession in Russia has heavily reduced job opportunities for migrant workers from Tajikistan, hitting remittances and economies in Central Asia.

Earlier this year, VimpelCom paid a fine of $795m after it admitted paying bribes in 2007/8 to access the Uzbek mobile market.

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(News report from Issue No. 280, published on May 13 2016)

Manat stabilised, says Azerbaijan’s Bank chairman

MAY 9 2016 (The Conway Bulletin) – Elman Rustamov, chairman of Azerbaijan’s Central Bank, said the manat currency will maintain a stable exchange rate with the US dollar for the rest of the year, dismissing rumours of further depreciation. The Central Bank devalued the manat in February 2015 and later, in December, ditched the currency peg to the US dollar. It is now worth half its Jan. 2015 value.

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(News report from Issue No. 280, published on May 13 2016)

Kyrgyz police arrest alleged coup organisers

MAY 12 2016 (The Conway Bulletin) – Police in Bishkek arrested three leaders of the opposition People’s Parliament group for planning what they said was a coup. Sources at law enforcement agencies said that police had arrested leader Bekbolot Talgarbekov and his associates Torobai Kolubayev and Marat Sultanov. Talgarbekov had been a senior government official under Kyrgyzstan’s first post Soviet president, Askar Akayev. Kyrgyzstan has suffered two violent revolutions since independence in 1991.

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(News report from Issue No. 280, published on May 13 2016)

UN condemns clampdown in Kazakhstan

MAY 12 2016 (The Conway Bulletin) – The UN High Commissioner for Human Rights condemned what it said was the Kazakh authorities crackdown on protests against proposed amendments to the land code. “The government must immediately end all forms of persecution and take effective measures to protect civil society,” it said. The protests forced Pres. Nursultan Nazarbayev to delay planned changes to the land code. Mobile recordings of the protests showed police clashing with demonstrators.

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(News report from Issue No. 280, published on May 13 2016)

Loan plugs Kazakh government’s deficit

MAY 11 2016 (The Conway Bulletin) – Kazakhstan’s ministry of finance said it has agreed to take a $1b loan from the World Bank’s International Bank for Reconstruction and Development to plug a budget deficit that has opened up since an economic downturn hit the region. Finance minister Bakhyt Sultanov, said the loan will have a 20-year maturity and will be used to pay for government expenses in 2016.

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(News report from Issue No. 280, published on May 13 2016)

Editorial: Gay rights in Armenia and Azerbaijan

MAY 13 2016 (The Conway Bulletin) – A report by the lobby group IGLA-Europe makes for discouraging reading. Propping up the league table on gay, lesbian and transgender rights in 49 countries across Europe and its near abroad are Azerbaijan and Armenia, split by Russia.

They scored 5% and 7%. Above them, halfway up the table, was Georgia with 30%. The fine-print said that the report was primarily concerned with the legal framework established in each country to allow gays, lesbians and transgender people the same rights and protections as everybody else.

The IGLA’s assessment, in Armenia and Azerbaijan at least, was that this appears to be near zero.

And this is reflected in news reports of attacks on homosexuals and other minorities in Azerbaijan and Armenia.

Importantly, though, it is not just people with different sexual orienta- tions who are potential targets in these countries. The same group-think extends towards opposition activists, overly pious Muslims and journalists. They are all marginalised. This whole mentality needs changing.

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(Editorial from Issue No. 280, published on May 13 2016)

Tajik bank asks EBRD for emergency loan

DUSHANBE, MAY 9 2016 (The Conway Bulletin) — In the most serious indication so far that Tajikistan’s banking system is beginning to buckle under the pressure of this prolonged economic downturn, Tojiksodirotbank admitted it was on the brink of a liquidity crisis and that it had applied to the EBRD for a loan to save it.

Representatives of TSB, as Tojik- sodirotbank is commonly known, flew to London to meet with EBRD officials on the sidelines of its Annual General Meeting.

“Tojiksodirotbank, one of the country’s systemically important banks, needs financial assistance in the current situation,” TSB said in a statement.

Neither TSB, nor the EBRD commented on the size or the timing of the loan.

In March, Tajikistan’s Central Bank invited EBRD representatives to propose solutions to a worsening financial situation. The Tajik som has fallen heavily in value against the US dollar and all-important remittances are down by around 50% because a recession in Russia has wiped jobs for migrants.

This year nervous savers have been withdrawing money from banks they fear are on the edge of bankruptcy.

Also, the proportion of so-called non-performing loans (NPLs) in the system has skyrocketed. The proportion of loans that were 60 days or more overdue grew from 9.9% at the end of 2013 to 24% at the end of 2014, according to official data. Media has also said that this figure may be nearer 33% now.

Earlier this year the IMF said that TSB and its largest competitor, Agroinvestbank, were exposed to increased credit risk and could become insolvent.

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(News report from Issue No. 280, published on May 13 2016)