Tag Archives: business

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)

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)

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)

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)

US freezes Kazakh businessman’s assets

MAY 6 2016 (The Conway Bulletin) – A US court froze a $21m payment that Kazakh businessmen Mukhtar Ablyazov and Viktor Khrapunov had sought from the sale of their stakes in Chetrit’s Flatotel, a hotel located in New York City. In 2013, French police arrested Ablyazov, charging him with embezzlement. Courts in Kazakhstan, Switzerland and the US have opened investiga- tions into corruption allegations aimed at Khrapunov when he was mayor of Almaty between 1997 and 2004.

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

Russia says it needs to approve Turkmen-Azeri trans-Caspian pipeline

MAY 12 2016 (The Conway Bulletin) – Russia’s ambassador-at-large for Caspian affairs, Igor Bratchikov said that the Kremlin will not allow the construction of any projects across the Caspian Sea that are not sanctioned by all littoral states. “Unilateral action on construction of Trans-Caspian pipelines is inadmissible,” Mr Bratchikov said. Azerbaijan and Turkmenistan have discussed for years the possibility of building a trans-Caspian gas pipeline.

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

Azerbaijani SOCAR announces gas deal with Russia

MAY 11 2016 (The Conway Bulletin) – The head of SOCAR, Azerbaijan’s state energy company, Rovnag Abdullayev, announced that the company would buy from Russia’s Gazprom 5b cubic metres annually. SOCAR needs the gas to hit growing demand and also to inject into oil wells to expand production. Relations between Russia and Azerbaijan have been improving.

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

ADB lines up $1.5b loan for Azerbaijan’s Shah Deniz

MAY 6 2016 (The Conway Bulletin) – The Manila-based Asian Development Bank (ADB) said it is considering a series of loans worth a total of $1.5b to fund the second phase of Azerbaijan’s Shah Deniz offshore gas project, local media reported.

In March, the ADB had said it was considering lending $450m to Shah Deniz, which will be the main supplier for the so-called Southern Gas Corridor network of pipelines designed to pump gas from the Caspian Sea to Europe.

“The proposed investment plan will support the Azerbaijani government’s efforts to finance Shah Deniz- 2 project,” the bank said in a statement. “The investment plan is expected to be approved on August 22 by ADB’s board of directors.”

A consortium led by BP and SOCAR, Azerbaijan’s state-owned energy company, which will be the beneficiary of ADB’s loans.

The ADB said it will reach a final decision on the amount of the loans after a site visit in June.

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

Uzbekistan Airways opens new routes to Russia

MAY 6 2016 (The Conway Bulletin) – National carrier Uzbekistan Airways said it will open a new route to the Russian city of Voronezh, in south- western Russia. It will fly once every week connecting Tashkent and Voronezh from June 14. Thousands of Uzbek migrants work in Voronezh, in factories and in the construction sector.

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