Privatization - The Times Of Central Asia

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Oil refinery Privatization

Kazakhstan Proposes Privatization of Two Major Oil Refineries

Kazakhstan’s Agency for Protection and Development of Competition (AZRC) has proposed the partial privatization of the Atyrau and Pavlodar oil refineries. According to Rustam Akhmetov, the agency’s first deputy chairman, the proposal involves selling 50% of the state’s stake in these assets. Current Refinery Ownership Structure Kazakhstan operates three major oil refineries, located in: Pavlodar (northeast) Atyrau (west) Shymkent (southern region) The Pavlodar refinery is fully owned by KazMunayGas Refining and Marketing JSC, a subsidiary of the state-owned KazMunayGas (KMG). Similarly, the Atyrau refinery is 100% state-owned through KMG. In contrast, the Shymkent refinery operates under a 50-50 joint venture between KMG and China National Petroleum Corporation (CNPC) through PetroKazakhstan Group. Shymkent as a Model for Privatization AZRC cites the Shymkent refinery as the most efficiently operated among the three. “We see a successful example in Shymkent, where 50% is owned by the private sector. Most importantly, private management means fewer government officials in operational roles. As a result, there are significantly fewer accidents, fewer technological failures, and less downtime for repairs. This confirms that private sector management is more effective,” Akhmetov told reporters on the sidelines of Parliament. He also noted that preliminary discussions on privatization have already taken place within the government. Oil Refining in 2024 According to the Ministry of Energy, Kazakhstan is expected to refine 17.9 million tons of oil in 2024, yielding 14.5 million tons of oil products. The three main refineries processed similar volumes in the previous year: Shymkent refinery 5.74 million tons of oil processed 2.09 million tons of motor gasoline 1.78 million tons of diesel fuel 319,000 tons of jet fuel 335,000 tons of liquefied petroleum gas Atyrau refinery 5.5 million tons of oil processed 1.6 million tons of gasoline 1.6 million tons of diesel fuel 188,000 tons of jet fuel 213,000 tons of autogas Pavlodar refinery 5.5 million tons of oil processed 1.6 million tons of gasoline 1.8 million tons of diesel fuel 236,000 tons of jet fuel 321,000 tons of liquefied petroleum gas In addition to these major refineries, more than two dozen mini-refineries across Kazakhstan contribute to oil processing. Privatization of Other Key Sectors Akhmetov also revealed that AZRC has recommended the privatization of most municipal utilities in the housing and communal services (HCS) sector, including heat and power plants. Additionally, the agency, in coordination with sectoral government bodies, has agreed to privatize a significant portion of the defense-industrial complex, including firms handling government contracts. However, some strategically important enterprises will remain under state control. Akhmetov did not specify which companies would be exempt from privatization. As The Times of Central Asia previously reported, Kazakhstan plans to establish a major defense industry hub at Semey’s tank repair plant, the only such facility in Central Asia.

Kuwaiti Companies Invited to Participate in Privatization of State-Owned Companies in Uzbekistan

At a business forum dedicated to strengthening ties between Uzbekistan and Kuwait, in Tashkent on October 16, Deputy Minister of Investment, Industry, and Trade of Uzbekistan Akram Aliyev noted the importance of partnership with Kuwaiti businessmen, especially in healthcare, agriculture, and tourism. The forum focused on prospects for joint projects mining, energy, textile industry, and logistics. Proposals were also mooted for Kuwaiti investors to participate in the privatization program of over 1,000 state-owned companies in Uzbekistan and improve logistics infrastructure to turn Central Asia into an international trade hub. Over recent years, there have been several developments in cooperation between Uzbekistan and Kuwait. At an investment and trade forum hosted by Kuwait in August and attended by business and ministry representatives from both countries, Uzbek Foreign Minister Bakhtiyor Saidov encouraged Kuwaiti investors to explore prospects for partnership in agriculture, light industry, medical products, and renewable energy. The foreign ministers then met again, in New York in September 2024, to discuss further steps to strengthen bilateral cooperation, including the establishment of joint trade committees and new initiatives in logistics and infrastructure.

Samruk-Kazyna National Wealth Fund Privatization Legislation Strategy Economy Finance

Liberalizing Kazakhstan’s Economy Must Not Become Uncontrolled Privatization, Expert Warns

Last week, President Kassym-Jomart Tokayev signed a decree on reducing the state’s participation in the economy, aiming to help develop competition and private business. This could be a significant boost to the economy, financial analyst Rassul Rysmambetov, an Almaty-based expert in distressed assets and Director of the Financial Freedom Public Foundation, told The Times of Central Asia, though everything will depend on how the decree is implemented. Firstly, the decree envisages creating a National Office for Privatization under the Agency for the Protection and Promotion of Competition. This office is to develop criteria for state assets subject to privatization and create a list of them. In addition, measures are provided to increase the autonomy, quality, and independence of corporate governance at Samruk-Kazyna, the National Welfare Fund, and its subsidiaries. “The government must establish a specific list of large entities that will offer major stakes in the next two years in IPOs,” President Tokayev explained. According to Tokayev, the quasi-public sector – bloated and often ridden with debt – needs serious reform. “We need to put an end to the question of where state participation should continue and where competition can be developed. The largest share of the state in the economy is represented by the group of companies held by the Samruk-Kazyna fund, so that is where this work must start. New, systemic measures are required to fundamentally rehabilitate the fund,” the president stated. A separate section of the decree presents measures aimed at protecting the rights and legitimate interests of business, including decriminalizing offenses related to economic activity and coordinating with prosecutors on prohibitive and restrictive measures initiated by government agencies. This is not the first time Kazakhstan has tried to liberalize its economy – it has even privatized social institutions, such as hospitals, schools, and creative centers for children before – but previous attempts yielded no tangible successes. “We need to continue to work to improve the quality of services, consistently reduce state participation and eliminate excessive regulation and restrictions. This applies to all sectors of the economy,” Tokayev stressed. “Uncontrolled monopolies, unequal access to resources and unfair trade practices must be eliminated at the root. A pillar of economic liberalization will be effective privatization. There have been so many privatization plans, but every time we make the same mistakes.” Rysmambetov believes that professionals should take the lead. “Liberalizing the economy is a process. By no means can it be limited to a single decree – it is a strategic course. I see here dozens, if not hundreds of by-laws, industry reference documents and possibly new laws and codes. I'm afraid that parliament will prove unable to keep up with the pace at which these reforms should be carried out,” he stated. According to Rysmambetov, Samruk-Kazyna could be dissolved tomorrow, but the holding has taken on a lot of debt for its subsidiaries, meaning that in the near term its assets can only be partially privatized. In general, each Samruk-Kazyna company has a related supervising ministry, so, to...

Investments Strategy Central Asia Legislation Economy Uzbekistan Privatization

Uzbekistan Moves to Speed Up Privatization of State Property

Uzbekistan's president Shavkat Mirziyoyev has signed a decree that will put up for auction shares in 247 state enterprises and 1,028 units of real estate. Initial public offerings (IPOs) and secondary public offering (SPOs) of 12 large enterprises are also to be held on the domestic stock market. The Uzbek government is planning various incentives to speed up the sales. For example, if an asset is not sold within three months of the auction opening, its value will be phased down to 10% of the starting bid price. Lessees of state property will be able to buy the assets under contract directly at the appraised value, and those who purchase privatized state assets in installments will be able to pay just 15% of the purchase price in the first three months, and the rest only within the next 10 years. Additionally, the privatization program provides for simplified sale of land plots located along international highways, as well as the sale and registration of land assets for the construction of commercial and service facilities along those roads. Earlier this year Mirziyoyev criticized the slow pace of property privatization in the country and noted that it could bring 20 trillion sum ($1.5 billion) to the national budget. According to Mirziyoyev, many enterprises have artificially inflated their valuations to avoid transferring state assets to private ownership. The Ministry of Health (39), Uzpromstroybank (27), the Ministry of Preschool and School Education (21), the Committee on Roads (17), the Ministry of Higher Education, Science and Innovation (14), Uzbek Postal Service [Pochtasi] (14), and the Ministries of Culture and Water Management (13 each) have the most unrealized assets that should be transferred to the docket for privatization. Thanks to the incentives, significant revenues are expected from the sale of land to entrepreneurs through the auctions, which last year generated 1 trillion sum ($78 million) in windfall for the state budget. Among the most significant objects privatized in recent years were the Kokand Superphosphate Plant, in which a foreign investor invested $40 million and increased production fourfold. Furthermore, the sale of state stakes in Ipoteka Bank ($324 million) and in Coca-Cola Uzbekistan ($252 million) netted significant cash injections for the government.

Privatization World Bank

Uzbekistan’s Transition to Market Economy to Accelerate

Uzbekistan’s Transition to Market Economy to Accelerate The World Bank’s Board of Executive Directors on December 8th approved a Development Policy Operation to financially support the Government of Uzbekistan in implementing a new generation of economic, social, and climate reforms. The objective of these reforms is to expedite the country’s transition to a market economy, ensuring that economic opportunities are accessible to all citizens and creating a strong foundation for sustained growth. In Uzbekistan, despite significant progress in the transition to a market economy, there is a need to complete this process and to shift urgently towards a greener and more equitable economic model which would help the country achieve its development and environmental goals. The government aims to halve the poverty rate by 2026, and elevate the country to the status of an upper-middle-income economy by 2030. Achieving these objectives requires much faster growth, which is possible through reducing state control over the economy and empowering the private sector to become the primary driver of economic development. “The World Bank’s new operation supports key government priorities, including reducing state dominance in crucial sectors such as agriculture, railway, chemicals, and energy,” said Marco Mantovanelli, World Bank Country Manager for Uzbekistan. “This will allow for greater private sector participation in the given areas. The operation also aims to strengthen social and legal protection for vulnerable groups, and address pressing issues of climate change and environmental protection.” The World Bank will provide financial support to the government through a combination of highly concessional and low-cost loans totaling $800 million. The financing will offer the government a low-cost, long-term repayment option compared to what would be available in international financial markets, resulting in a significantly lower loan repayment cost. This, in turn, will free up more resources for the country’s urgent development priorities. “The Government has a strong commitment to reforms that will transform Uzbekistan into a more open and competitive market economy. The World Bank is supporting the country in achieving this goal by providing the necessary expertise, international experience, and financing,” said Jasur Karshibaev, Deputy Minister of the Economy and Finance of Uzbekistan. The financing from the World Bank operation will support the government’s reforms and actions in a number of critical areas, including: Energy sector: Establishing an independent energy regulator and implementing energy tariff reform to improve the energy sector’s performance, enhance the efficient use of energy resources, attract private investment in modernizing energy infrastructure, and promoting competition and private sector participation in the industry. Railway sector: Undertaking institutional reforms in the railway sector to modernize price setting for passenger and freight transportation and strengthen competition and the institutional environment in the industry. Chemical sector: Establishing a framework for institutional reforms in the chemicals sector and privatizing FerganAzot JSC, a large state-owned chemical plant, to liberalize the sector, attract private investments for its modernization, and enhance competition and efficiency in the industry. Agriculture sector: Abolishing the crop placement system for all crops to promote greater diversity and productivity in crop...

Privatization Women-owned Enterprises

ADB Helps Support Privatization, Expand Lending to MSMEs in Uzbekistan

According to a press release by the Asian Development Bank (ADB), the bank, in partnership with Sanoat Qurilish Bank (SQB) have signed a $50 million senior convertible loan to support Uzbekistan’s privatization of state-owned banks, which will strengthen the banking sector, and contribute to economic growth and job creation. The International Finance Corporation (IFC) and the European Bank for Reconstruction and Development (EBRD) are parallel lenders. The loan will be used to help SQB expand its financing to underserved micro, small, and medium-sized enterprises (MSMEs), including those owned or led by women (WMSMEs). Portfolio diversification will contribute to SQB's transition into a fully universal commercial bank by serving a broader customer segment. ADB will also provide technical assistance to help SQB implement its transformation roadmap. “ADB fully supports the Government of Uzbekistan in its transformation to a vibrant and inclusive market economy and its implementation of banking sector reforms”, said ADB’s Director General of the Private Sector Operations Department, Suzanne Gaboury. “This project will support the stability of the country’s banking system, capitalization and deposit levels, while strengthening resilience and lending to climate projects and underserved MSMEs and WMSMEs”. According to ADB’s Uzbekistan Country Director, Kanokpan Lao-Araya, “MSMEs continue to struggle to secure commercial financing to fund their growth, with women-owned enterprises being the most affected. ADB is supporting an enabling environment in Uzbekistan for MSMEs gain easier access to markets, as well as providing much needed financing to close the financing gap for MSMEs. ADB’s partnership with SQB builds on those two objectives”. MSMEs play a significant role in Uzbekistan’s economy, comprising the majority of registered businesses and employing 74% of the workforce. However, access to financing remains a challenge, with only 13% of the sector having access to commercial loans. Women-led businesses face an even greater financing gap, estimated at $2.7 billion, with loans to women-owned businesses making up just 2.5% of total bank loans.