Tag Archives: Uzbekistan

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)

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)

Uzbek authorities investigate GM

MAY 13 2016 (The Conway Bulletin) – A GM Uzbekistan executive in Russia said that the authorities in Uzbekistan had opened an investigation into the company for losses incurred by its Russian division.

Yelena Kuznetsova, director of marketing at the Russian representative office for Ravon, GM Uzbekistan’s brand in Russia, refused to confirm to Reuters, though, whether a news report on the opposition website Uzmetronom that police had detained an executive at

“The company (GM Uzbekistan) is being investigated because the Russian distributor was unable to repay its debt,” she said.

An earlier report by Uzmetronom said police had detained Tokhirjon Jalilov, the former GM Uzbekistan CEO, for a scam involving Ravon cars bound for Russia.

GM Uzbekistan is one of the country’s most important joint ventures. The Uzbek government owns a 75% stake in the project. GM owns a 25% stake.

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

Uzbekistan plans to sell bank stake

MAY 6 2016 (The Conway Bulletin) – Uzbekistan’s government plans to sell a 15% stake in Asaka Bank to foreign investors for $58m, in a drive to privatise state assets.The bank says it has $2.6b in assets, making it one of the largest banks in the country. Last month, the Uzbek government said it wants to raise $72m from the sale of its stakes in two other banks.

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

Telenor manager quits due to Uzbek corruption incident

MAY 9 2016 (The Conway Bulletin) – Norwegian telecoms company Telenor said that its deputy chair- man Frank Dangeard had stepped down as the company continued to grapple with corruption allegations over VimpelCom’s dealings in Uzbekistan. Telenor owns a 33% stake in Amsterdam-based, Russian telecoms operator VimpelCom. Telenor wants to sell its stake in VimpelCom, valued at around $2b.

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

Western Uzbekistan faces salary problems

MAY 11 2016 (The Conway Bulletin) – Last year, teachers in Nukus, in western Uzbekistan, received chickens, potatoes and carrots in lieu of their salaries because the authorities had run out of cash to pay them, RFE/RL reported. Wage arrears and liquidity shortages have become commonplace in Uzbekistan. Last week, teachers in Tashkent complained that they had not received salaries for two months. An economic downturn has hit Uzbekistan and its neighbours in Central Asia hard.

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

GM Uzbekistan’s car sales to Russia fall in April

MAY 12 2016 (The Conway Bulletin) – Sales of GM Uzbekistan’s cars to Russia fell 5% in April compared to the same month last year, dashing hopes raised last month that sales were starting to improve.

Russia is GM Uzbekistan’s biggest market, leaving it badly exposed to a Russian economic recession.

Car sales to Russia had started to pick up in February and March for GM Uzbekistan, a joint venture between US-based GM and state owned UzAvtosanoat, raising hopes that the worst of the economic down- turn had been weathered.

But data from the Moscow-based Association of European Businesses (AEB), which publishes monthly sales numbers in Russia, said GM Uzbekistan had sold just 1,571 units in April, down from 1,677 in March. As a comparison, this is around a third of the sales number of the same month in 2012.

Joerg Schreiber, AEB chairman said, that the outlook wasn’t any better.

“The volume of absolute sales [in Russia] has fallen to the lowest level in 10 years,” he said in a statement.

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

Huawei and Uzbek telecom start JV

MAY 9 2016 (The Conway Bulletin) – China’s Huawei Technologies and Uztelecom, Uzbekistan’s state owned telecoms company, said they will start a joint venture, called Broadband Solutions, to produce telecoms kits. The new company will be based in the Jizzak special economic zone, around 100km northeast of Samarkand. Uztelecom will take a 51% stake in the joint venture, Huawei will own the rest. The deal valued the company at around $6m.

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

Editorial: Uzbek state salaries

MAY 6 2016 (The Conway Bulletin) – Paying salaries on time to its armies of state employees is one of the Uzbek government’s central tasks. If it doesn’t, it means there are some serious cracks in the system.

According to news reports, arrears for salaries in Uzbekistan now extend to a couple of months for teachers in schools and colleges.

There is a heavy economic crisis blowing through Central Asia and the South Caucasus, but where is the government’s money in Uzbekistan?

Some sources say it is being funnelled into short-term construction and renovation projects ahead of the summit of the Shanghai Cooperation Organisation coming up in June.

Last year, a leaked letter sent from the Central Bank said that the budget was short of around $620m.

Reports from Turkmenistan, another reclusive country, said that the government had been paying salaries in kind or with vouchers to some of its employees for months.

These are tough times for many Central Asians.

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(Editorial from Issue No. 279, published on May 6 2016)