Special Report UZBEKISTAN - Capital Markets News, Data & … · 2019-05-08 · capital markets —$1bn of 5-year and 10-year ... private and public sectors have largely ... into a

Special Report UZBEKISTAN

In association with

2_12-27_Uzbekistan.qxp_2_12_Uzbkistan 07/05/2019 20:00 Page 13

Since late 2016, Uzbekistan hasembarked on large-scale institu-tional, economic and socialreforms under President Mirziy-

oyev’s administration.Looking at the economic reforms, we

have liberalised the currency markets(2017), significantly lifted trade restrictions(2017-2018), started liberalising administra-tive prices (from 2018), improved the qualityof statistics (joined e-GDDS in 2017) andstrengthened Central Bank’s independ-ence. Early results are very encouraging.We have managed to improve the business

climate — World Bank’s Doing Businessranking improved to �76 in 2018 from �166in 2012 — increased the foreign tradeturnover (by 40% within 2 years) whileretaining macro-economic stability. Uzbek-istan has also recently received good inter-national credit ratings (BB- with stableoutlook by S&P and Fitch) and joined theclub of emerging nations active in globalcapital markets —$1bn of 5-year and 10-yearEurobonds were issued in February thisyear creating a transparent benchmark toprice the sovereign credit.The priority reform agenda for this year

includes adoption of a new tax code, andfurther price liberalisations which go hand-in-hand with reforming the State OwnedEnterprises (SOEs). We would like to createan attractive eco-system for businesses(including SOEs) to operate efficiently andprofitably. In parallel, we are drasticallyimproving the corporate governance andcommercialisation of the SOEs to preparethem for successful privatisations (includ-ing IPOs in global markets).

STRONG ECONOMIC FOUNDATIONSUzbekistan’s strong economic foundationssupport reforms and underpin future devel-opment. Average GDP growth constituted5.3% during 2016-2018 outpacing the worldaverage while the IMF forecasts real GDPgrowth will accelerate from 5.5% to 6.0%during 2019-2021.Low external debt provides a margin of

safety for the economy as both Uzbekistan’sprivate and public sectors have largelyavoided debt financing for growth. As of 2018,total external debt amounted to 33.7% of GDP,of which 19.8% of GDP is external public debt.Solid economic and fiscal management

has kept the budget in surplus, and the fis-cal stance remains prudent as the govern-ment undertakes public spendinginitiatives. Moreover, the tax reforms areaimed at reducing the tax burden whilebringing more small businesses into theformal economy.

GLOBAL RANKINGSUzbekistan’s strong external position isreflected in remaining in a significant netlender position for several consecutiveyears and holding robust foreign exchangereserves equivalent to 16 months of imports.The government is keen to implement

large scale reforms in a sequenced andtransparent manner in close cooperationwith international organisations such asthe World Bank, IMF, Asian DevelopmentBank, EBRD and UNDP to adopt the bestinternational practices.We have introduced compulsory online

publication of legislative acts during draftingstage to ensure high levels of transparencyand public involvement. This way we haveachieved overwhelming public support onreforms, however painful these can be.Uzbekistan is also tracking the reform

progress based on 24 international ratingsand indices, among which are sovereigncredit ratings, Doing Business ranking,Global Competitiveness Index, EconomicFreedom Index, Global Innovation Index,Worldwide Governance Indicators andOECD country risk classification (Uzbek-istan was upgraded to 5th classification inFebruary 2019). These together withinvestor perception in capital markets willserve as barometer of reform success ensur-ing irreversibility of our strategic course.Some key challenges will remain as we

reform and open our economy. Theseinclude the impact of price liberalisation onlow-income households. We are currently

working on a targeted subsidies programmeto address this issue. Lifting trade restric-tions has exposed Uzbek companies toglobal competition. Therefore, through theSOE reforms and privatisation, we intendto increase the efficiency of our companieswhich will thrive at home and abroad.With an open minded approach and ben-

efitting from the experience and advice fromour international partners, we will overcomethese challenges and transform Uzbekistaninto a modern and competitive economy.Uzbekistan is open for business! l

14 ¬ A VIEW FROM UZBEKISTAN

EBRD EDITION THURSDAY MAY 9, 2019

UZBEKISTAN IS REFORMING ANDOPENING UP TO THE WORLD

Odilbek Isakov, Deputy Minister of Finance

The government is

keen to implement

large scale reforms

in a sequenced and

transparent manner

in close cooperation

with international

organisations

‘‘

‘‘

GlobalMarkets

Uzbekistan: asolid platformThe most populous nation inCentral Asia with 33.2m people,Uzbekistan is pursuing reformsto more productively and posi-tively leverage on its favourabledemographics, natural resourcesand strategic location.

According to the World Bank,the country is among the leadersin the world with 99.98% literacyrate. It is a young nation withpeople of working age exceedingthose in retirement by nine times.

The country’s diverse and richnatural resources endowmentprovide a solid platform forgrowth — globally Uzbekistanranks within the top three ingold deposits, top nine in pro-duction and is among the top 10-20 countries in natural gas, cop-per and uranium deposits andproduction.

With 320 days of sunshineeach year, the country is ideallypositioned to transform its ener-gy system to sustainable solarenergy.

Given its strategic location inthe heart of Eurasia, Uzbekistanbenefits from access to marketswith over 3.3bn people within950kms. The country’s Silk Roadtrade location central to China’sBelt and Road initiative linksUzbekistan to large-scale invest-ment in infrastructure connect-ing Asia to Europe.


By Olly West and Virginia Furness

Emerging m

arket bond markets are vul-

nerable to further interest rate rises in

the US, analysts have told GlobalM

arkets,

warning of an alarm

ing disparity between

a hot market and declining credit quality.

Moritz K

raemer, global chief ratings offi-

cer at Standard & Poor’s, said that “as long

as the debt accumulation goes on, the big-

ger the risks will be w

hen rates do rise”.

Many investors claim

to be calm ahead

of an expected 25bp hike from the Fed in

Decem

ber — despite the severe sell-offs

that followed the Fed’s announcem

ent it

would begin tapering in 2013, and its pre-

vious rate hike at the end of 2015.

And if fundam

entals do not improve,

the market rem

ains susceptible.

“Worries about T

reasury rate risesFears of ‘unsustainable’

EM bond m

arket as Fed

rate rise looms

WASHINGTON D

Elvira

Nabiullina

ge 29

Y EDITION WORLD BA

NK/IMF

Continued on page 3

NEWS

but economically it m

akes no sense,”

said Moham

ed El-Erian, chief economic

adviser at Allianz.

The topic has dominated discussions

across the IMF and Institute of Interna-

tional Finance meetings this w

eek, as

Continued on page 3

FINAL

WORD

B up for sale

Russia 4

dollar is a dollar’ 4

t of the Woods 4

cs bank’s green niche 6

R ‘key to monetary

erhaul’ 6

raine gives Deutsche

sons 6

ile: borrowing w

hile

tting deficits 6

htening conditions

Africa 8

ENA urged to reform

blic sector 8

ilippines opens

to China 10

een bond standards

t a burden’ 10

banon claims

ilience 10

terview: CM

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gentina: Sovereign

ndtable 18

ok review:

anislas Yassukovich 24

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WORLD

BANK

Annointed?

PAGES 12-14

PAKISTAN

21st Gateway to

the East and West

PAGES 18-33

40 YEARS

AGO

UK bailout

PAGE 16

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By Olly West and Lucien Chauvin

Officials of the w

orld’s most vulnerable

nations are growing increasingly anx-

ious that they will not receive their fair

share of money dedicated to sustainable

development —

even though these coun-

tries are often at the forefront of climate

finance innovation.

As H

urricane Matthew

sends a devas-

tating reminder of how

unprepared many

countries are to deal with clim

ate events,

small island states w

arned that the money

pledged for climate change is not yet ending

up in the hands of those that need it most.

Although officials and experts recog-

nise the achievements of last year’s Paris

agreement, financing “is too slow

relative

By Lucien Chauvin

The United States and Europe

must reconsider their “anti-

bank” regulation in order to

deliver the boost to world eco-

nomic grow

th that ultra-low

interest rates have failed to

produce, Peru’s president said.

In an interview w

ith Glob-

alMarkets,

Pedro Pablo

Kuczynski accused Western

policymakers of forgetting

basic economic theories about

VVuullnneerraabbllee nnaattiioonnss’’

ffuurryy aatt cclliimmaattee

ffiinnaannccee bbeettrraayyaallContinued on page 3

EEMM lleeaaddeerr kkiicckkss bbaacckk

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bbaannkk rruulleess

Kuczynski: policies have to

change if we w

ant growth

Exclusive

By Owen Sanderson

and Anthony Row

ley

The failure to invest in infrastructure

when interest rates are negative in

Europe is a terrible waste of opportunity,

one of the world’s leading investors said

yesterday. “I know the politics are tricky,

Continued on page 29

Adams: clim

ate finance bureaucracy

‘unacceptable’

Failure to borrow for infrastructure

‘makes absolutely no sense’

By Anthony Rowley

The head of the International Monetary Fund

has made a dramatic intervention in the debate

over the health of the European banking sector,

saying the problems are the result of their failure

to follow the US in carrying out tough reforms in

the wake of the global financial crisis.

In an exclusive interview with Emerging

By Anthony Rowley

If you thought the colossal volume of world

debt revealed by the IMF yesterday at

$152tr was scary, look away now. According

to the leading trade body representing

global banks, the Institute of International

Finance, the figure is much worse, at $162tr,

or 243% per cent of world GDP.

The new number, which goes up to

June 2016, was revealed to Emerging

Markets by Hung Tran, executive man-

aging director of the IIF, and trumps the

IMF total which was generated on a new

database that covers 130 countries cov-

ering the 15 years to the end of 2015.

Tran added that if bank debt is added

in, global debt soars even higher to an

enormous $216tr, or 327% of GDP. Even

though bank debt is in the form of loans

to the non-financial sector and “washes

out,” it still represents “loan contracts”

By Owen Sanderson

Kemi Adeosun, the finance minister of

Nigeria, has attacked the “hypocrisy” of

Western governments in stopping devel-

oping countries accessing development

bank finance for coal power.

Record world debt much worse

than IMFnumbers —

$162tr says IIF

Nigerian finance minister slams

‘hypocrisy’ in climate finance

Lagarde: problems need to be addressed

WASHING

Jim O’NeillPage 30

SPECIAL DAILY EDITION WORLD BANK/IMF

Coverage of the RMB market

straight from Hong Kong

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ddrraaggggiinngg oouutt rreeffoorrmm’’

Markets, Christine Lagarde said she was con-

cerned by “market trepidation around one Ital-

ian Bank, one German bank and questions

around some of the more southern European

countries’ banking systems”.

Last week shares in Germany’s Deutsche

Bank fall sharply amid concerns over whether

it could survive the impact of a $14bn fine by US

authorities, while Monte dei Paschi, Italy’s third-

largest bank, has been ordered by the European

Central Bank to reduce its holdings of bad debts.


“We’re being blocked from coal because

it’s not green, and there’s some hypocrisy

in that,” said Adeosun. “We had an entire

Western industrialisation that was built

Continued on page 3

Tran: borrowers could be ‘in trouble’

FINALW

ORD

China’s day of debt

reckoning 3

Nationalism crimps

Turkish growth 4

Colombia downgrade

threat 4

Out of the Woods 4

Tanzania ‘champion of

the world’ 6

EIB calms fears on

rate divergence 6

Europeans tuck into

Argentine bond spree 6

GCC bond sales on track

despite oil price 8

Africa eyes regional

debt market 8

Air Astana IPO to

take flight 8

New tools to unblock

infra logjam 9

Can an airport issue a

green bond? 9

Apprentice star gets

Brazil job 9

Venezuela to be kicked

out of trade club 30

BREXITDash for EM

tradePAGES 12-14

GREENBONDS

Asia blossoms

PAGES 16-18

IRANGently does itPAGES 20-22

EMERGINGM

ARKETS

MARKETS | DEVELOPM

ENT | ECONOMY

WWW.GLOBALCAPITAL.COM/GLOBALM

Exclusive

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By Phil Thornton, Virginia Furness,

Olly West and Thierry Ogier

Advanced economies in Europe have rebuffed

the call by the head of the International

Monetary Fund, Christine Lagarde, for a co-

ordinated switch towards fiscal policy and

away from relying on unconventional mone-

tary policy at the annual meetings this week.

By Elliot Wilson,

Virginia Furness,

and Olly West

With exactly a month to go until

the polls open in the most im-

portant American presidential

election in living memory, emerg-

ing market policymakers and

economists appear dangerously

unprepared for and vulnerable

to the possibility of Donald Trump

entering the White House.

Gorky Urquieta, co-head of emerging

market debt at investment manager

Neuberger Berman, said that at the

moment, the Mexican peso was the only

market that is reflecting a “Trump risk”.

By Owen Sanderson

New York will be the big winner from

Brexit rather than any of the European

financial centres, the head of Morgan Stan-

ley said yesterday, while JP Morgan’s CEO,

Jamie Dimon, said Brexit made the

chances of the eurozone not surviving five

EM unprepared for Trump

as candidate divides IMF

meetings

Morgan Stanley hails New York as

winner from Brexit

Hammond: told GlobalMarkets there would

be no big fiscal reset

WASHI

n Liqun

55

ON WORLD BANK/IMF

Continued on page 3

SLLaaggaarrddee''ss bbiigg ffiissccaall

ppuusshh hhiittss EEuurrooppeeaann

bbrriicckk wwaallllLagarde used a series of speeches and an inter-

view with GlobalMarkets to urge ministers to

embark on a three-pronged approach, which

includes monetary policy, fiscal policy and struc-

tural reforms. “What is key is now action. So, my

message to the members of the IMF tomorrow

will be action, please,” she said this week.

But both the European Commission, which


years from now five times higher.

James Gorman, Stanley’s chief exec-

utive and chairman, told the Interna-

tional Institute of Finance that for rea-

sons including financial infrastructure,

Continued on page 3

Mark Mobius: full of praise for Trump

INAL

WORD

gulation

genda 3

ussels to

wn business 4

still

China 4

the Woods 4

erature rises

d of COP22 6

mystery of Mexico’s

rowth

6

D and IADB

h out

6

d’s poorest ‘can

ct $75bn’

8

ia looks to draw

pension 8

uay is no euro guy 8

pe and China ‘great-

hreats to growth’ 9

uro launches a coup

ainst himself 9

a central bankers

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Ms

54

MARKETSLOBA

L | DEVELOPMENT | ECONOMY

PREVIOUSLY KN

EMERGING

MARKETS

WWW.GLOBALCAPITAL.COM/GLOBALMARKETS

IMFBack to the

Future

PAGES 11-13

GOLDFAJN

Exclusive EM

interview

PAGES 16-17

EUROPEAN

BANKING

Under a cloud

PAGES 28-30

www.globalcapital.com

News – Data – Opinion

For more information please contact: Mark Goodes,

Email: [email protected] • Tel: +44 (0) 207 779 8605

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Derivatives • LevFin • Asia • Equity • Syndicated Loans

Corporate Bonds • FIG • RMB • Securitization

Emerging Markets • SSA • SRI/Green Bonds

By Ellio

t Wils

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By Virg

inia F

urne

ss,

Phil T

horn

ton,

Elliot

Wils

on

Fear

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onom

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ill be

hit b

y risi

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US inter

est r

ates a

nd th

e re

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euro

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Centra

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costs

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clea

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Croa

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NICOSI

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AY 11

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Liviu

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DAILY ED

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multi

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3Draghi:

scali

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push

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CEE

yields

?

FINAL

WORD

Syria

: the f

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Semed

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Green b

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MARKET

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GLOBAL

MARKETS |

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YOKOHAMA, MAY 5 2017

SPECIAL DAILY EDITION ADB

NEWSDB: we can build it 3

997 revisited 4

etting shovel

ady

4

Who will lead

orld trade? 5

ndia's infra IPO 5

What an OBOR! 5

genda 21-22

hina bonds turn

vals green 23

MARKETS

GLOBAL

ADBInfrastructure

imperative

PAGES 6-7

JIN LIQUN

Exclusive

interview

PAGES 8-9

ASIA’S

LATAM

PIVOT

PAGES 10-11

PREVIOUSLY KNOWN AS

EMERGING

MARKETS

By Anthony Rowley

The outbreak of a military conflict between

the United States and North Korea would

threaten the entire Asian “economic ecosys-

tem”, analysts have warned as the head

of the Asian Development Bank urged

the two sides to find a peaceful solution.

North Korea this week accused the US of

pushing the Korean peninsula to the “brink

of nuclear war” after a pair of bombers flew

training drills with the South Korean and

Japanese air forces in a show of strength.

Jesper Koll, a veteran Japan analyst and

chief executive officer of investment com-

pany Wisdom Tree in Tokyo, said height-

ened country risk was a “clear negative for

North Asia”, with the Korea-Japan-China

triangle at the centre of attention. “It is not

just about one or two isolated markets, but

the entire economic ecosystem is poten-

tially threatened,” Koll told GlobalMarkets.

While a conflagration is still seen as

unlikely, even the war-like rumours

threaten to damage Asia’s image as an

investment destination.

50 YEARS OF STABILITY

ADB president Takehiko Nakao told Glob-

alMarkets that the possibility of a con-

frontation over North Korea was a “very

important issue both for the region and

for the international community”.

“I hope this issue can be resolved soon

and in a peaceful manner,” he said. “For 50

years, we have had geopolitical stability in

Asia and if we cannot keep this stability

we lose much. Leaders must make utmost

efforts to ensure that we keep stability.”

However Kim Eng Tan, senior director,

sovereign ratings Asia Pacific, S&P Global

Ratings in Singapore, said there was only

“small probability” recent events could

have a “lasting impact” on investor percep-

tion about Northeast Asia generally.

“People are not seeing risk rising in a

meaningful way,” Tan told GlobalMarkets.Kim Jong-un: warning of nuclear war


By Elliot Wilson

A trade war with the United

States would deliver a severe

jolt to growth and employment

across Southeast Asia, dele-

gates at the Asian Develop-

ment Bank annual meeting in

Yokohama told GlobalMarkets.

Policymakers and corporate

leaders across Asia remain

fearful of the protectionist

inclinations of Donald Trump

despite signs the prickly and

Softer Trump talk

fails to diffuse Asian

trade conflict fears

Trump’s $1tr infra plans no

problem for Asia investment,

says ADB’s Nakao

By Anthony Rowley

The Asian Development Bank’s president, Takehiko Nakao,

has dismissed fears that rising interest rates in the United

States along with US president Donald Trump’s promised

major infrastructure spending initiatives could draw global

funds away from Asian projects.

In an exclusive interview with GlobalMarkets, Nakao also

said that while foreign funds were needed to finance Asia’s

vast infrastructure spending requirement, investment from

domestic corporate and other investors would become

increasingly important in the future.

The ADB estimates in a new report that the Asia Pacific

Exclusive

MARKETS | DEVELOPMENT | ECONOMY WWW.GLOBALC

APITAL.C

OM/GLOBALM

ARKETS

Amando

Tetangco

age 23

Indonesian

Borrowers

Roundtable

ages 12-17

FINAL

WORD

SPECIAL

Continued on page 3

Continued on page 3

NNoorrtthh KKoorreeaa--UUSS wwaarr wwoouulldd

ddeettoonnaattee AAssiiaa ‘‘eeccoossyysstteemm’’

Trump: targetting ‘cheaters’

MARKETS | DEVELOPMENT | ECONOMY WWW.GLOBALCAPITAL.COM/GLOBALMARKETS

WASHINGTON DC, FRIDAY OCTOBER 13 2017SPECIAL DAILY EDITION WORLD BANK/IMF

GlobalMarketsIMFSeeking balance

PAGES 14-16

CLIMATEThe people vs.Trump

PAGES 20-21

AFGHANISTANTurning the corner?

PAGES 24-25

By Elliot Wilson and Katie Llanos-Small

Bankers, politicians and analystswere united last night over thedanger that the rising trend inprotectionism led by the increas-ingly isolationist US administra-tion could have on world tradeand economic growth.

As the key meetings betweenfinance ministers from the USand the 188 other members ofthe IMF begin this evening, theywere determined to reaffirmtheir commitment to a border-less ideal of globalisation, dereg-ulation and free trade ideals.

The chief concern, inevitably,

arrives in the lumbering shape ofDonald Trump. America’s presi-dent is easily cast as an anti-free-trade figure, having scrapped one

multilateral trade deal, the Trans-Pacific Partnership, and threat-ened to remove the US from the

By Virginia Furness, Katie Llanos-Small and Elliot Wilson

Amid a growing perception thatDonald Trump will lead the USoff the world stage, top officialsand analysts at the IMF-WorldBank annual meetings in Wash-ington DC told GlobalMarketsthat they expect a multipolarworld will replace the old orderas power shifts eastwards —

and towards corporations.“It’s the end ofPax Americana,”

Paul Sheard, chief economist ofS&P Global Ratings, told Global-Markets. “The feeling that the USwas the big, benign hegemon thatunderwrote global security, wasthe global policeman and the con-sumer of last resort, for decades.But it makes no sense that the USis the sole global hegemon.”

Sergey Storchak, Russia’s

deputy finance minister, agreedthat the global influence of theUS had waned and that a single

End of Pax Americana asemerging powerssense global shift

By Lucien Chauvin

Antigua and Barbuda’sprime minister, GastonBrowne, wants wealthynations responsible formuch of the world’s pol-lution to pay for thereconstruction of hisislands following a devastating hurricane in


Ma Jun

Page 51

FINALWORD

Continued on page 3

PPrrootteeccttiioonniissmm ffeeaarrssiinntteennssiiffyy aass wwoorrllddggaatthheerrss iinn WWaasshhiinnggttoonn

Trump: shot down TPP. Is Nafta next?

Kim: frosty respose to Trump

Browne: debt swaps

NEWSIndia’s state debt danger 3

Mexico defianton Nafta 4

Schäuble backsMacron 4

Out of the Woods 4

Brazil rebuffsdeficit fear 6

Secure route toinfrastructure 6

Nigeria defendsFX system 6

Pakistan: China vs IMF 8

EMs’ bad loan burden 8

‘Phenomenal’ IDA bond 8

IMF backs USTon regulation 10

Saudi eyes up M&A 10

Investors stillseek Myanmarfortune 10


Continued on page 3

PREVIOUSLY KNOWN AS EMERGINGMARKETS

Hurricane-ravagedCaribbean islandsdemand polluterspay for rebuild

WASHINGTON DC, SUNDAY OCTOBER 15 2017SPECIAL DAILY EDITION WORLD BANK/IMF

GlobalMarketsEUROPEAN BANKSCan they compete?PAGES 14-16

VALDISDOMBROVSKISExclusive interviewPAGES 18-20

SERBIAReformagenda

PAGES 30-31

By Virginia Furness

The European Bank of Recon-struction and Development’sdecision to close five offices inRussia last week has dealt apotentially fatal blow to relationswith its founding partner, DenisMorozov, Russia representativeat the EBRD told GlobalMarkets.He said it was evidence the bankis not living up to its foundingprinciples as a multilateral devel-opment institution, .

“The EBRD is an agent ofgood change,” he said. “If theEBRD shareholders want to seesome more positive develop-ments in Russia — private sec-tor development, creation of amiddle class, greater trans-parency, support for SMEs —blocking all activity of this kindin Russia is a crazy decision.”

The offices closed by theEBRD last week in Ekaterin-burg, Krasnoyarsk, Rostov,Vladivostok and Samara werefocussed on the EBRD’s Advicefor Small Business Programme.

He believes the office closuresalso hint at a full exit from thecountry and says that even if the

By Elliot Wilson

Political leaders and develop-ment bank chiefs are urging eachother not to fall out of love withglobalism and multilateralism,even as the US under presidentDonald Trump steps back fromworld affairs.

Since his election last year,Trump has rebuffed WorldBank requests for extra funding,removed the US from the Trans-Pacific Partnership, a multilat-eral trade deal and questionedits commitment to Nafta.

Senior politicians and develop-ment bank officials fretted loudly

at this week’s meetings — in pub-lic and private — that the US canno longer be relied to act as theworld’s policeman and funder oflast resort. “There is some kindof tiredness about having to sup-port other countries,” said Take-hiko Nakao, president of theAsian Development Bank. “Amer-ica seems be fatigued about play-ing such an important role.”

“It is a concern,” said Philip-pines finance minister CarlosDominguez. “The Trump admin-istration talks about lookinginward not outward. It should be

Politicians rally round globalist standardas US shuns multilateral legacy

Countries must feel‘ownership’ when usingEuropean Monetary FundBy Owen Sanderson

A new financing line beingtouted to cover short-termeconomic pain in Europeneeds to be marketed diplo-matically to borrowing coun-try populations, a leadingeurozone politician has said.

Ricardo Mourinho Félix,Portugal’s secretary of statefor finance, argued for the cre-ation of a financial instrument via a new European


Humberto de la Calle

Page 39

FINALWORD

Continued on page 3

FFrruussttrraatteedd RRuussssiiaabbllaassttss EEBBRRDD ffoorrffuunnddiinngg bbaann

Morozov: ‘crazy decision’

Jin: China needs to play biggerrole

NEWSCaution over cryptocurrencies 3

Africa bets on China 4

Market nerves onTrump/Iran 4

LatAm hedgesagainst quake risk 6

Lebanon anger overrefugees bill 6

Neighbours calm onVenezuela 6

S. Africa urged tostop wrangling 8

Rate hikes could hit Asia 8

Election season in LatAm 8

India recaps an ideato help banks 10

World Bank to the(storm) rescue 10

Financial cops on the beat inAfrica 10 Continued on page 39

Exclusive

Continued on page 3


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Mourinho Félix:‘never a politicallyeasy time’

BALI, SUNDAY OCTOBER 14 2018SPECIAL DAILY EDITION WORLD BANK/IMF

GlobalMarketsBRAZILIlan Goldfajnexclusive interview

PAGE 14

AfDBSecuritizationbreakthrough

PAGES 8-10

SPECIAL REPORT 1

SUSTAINABLE AND RESPONSIBLECAPITAL MARKETS

Finance can no longer stand by

SRITime to act

PAGES 16-21

By Jackie Horne and Rashmi Kumar

The United States is shaking upits development finance modelto issue a direct challenge toChina’s use of economic powerto underpin its growing ascen-dency on the world stage.

David Bohigian, executive vice president of US developmentfinance agency Overseas PrivateInvestment Corp (OPIC), toldGlobalMarkets that its expandedbudget, remit and re-organisationwould create the modern equiva-lent of the 20th century’s MarshallPlan, which financed Europe’sreconstruction after World War II.

“What’s revolutionary will be

the private sector, developmentfinance agencies and govern-ments all working together on ascale the world has never seen,”

he said. “It’s going to be all aboutleveraging private sector capital.”

The re-organisation will createthe International DevelopmentFinance Corp (IDFC) with anexpanded budget of $60bn, upfrom $29bn. Bohigian said privatesector investment was typicallycatalysed on a 2:1 ratio, poten-tially unlocking tens of billionsmore dollars. The agency willalso be able to invest in equity forthe first time, enabling it to sharea project’s risks and rewards.

More importantly, it has signedagreements with its Japaneseand Australian peers and is nego-tiating one with India. Bohigian

By Elliot Wilson and Owen Sanderson

France is leading efforts to push Europe’s two main develop-

Bank for Reconstruction andDevelopment and EuropeanInvestment Bank to join forcesto boost their lending capacity,

Europe’s push for greater globalinfluence driving EIB-EBRD tie-up talks

By Owen Sanderson and Elliot WilsonIMF managing director Christine Lagarderisked international condemnation yesterdayafter she insisted she would go ahead with avisit to a Saudi Arabian investment conferenceamid claims that the Kingdom was behind thebrutal murder of a journalist in Turkey.

Business leaders such as Richard Branson


FINAL

UUnnccllee SSaamm’’ss BBeelltt && RRooaadd::UUSS tthhrroowwss ddoowwnn $$6600bbnnggaauunnttlleett ttoo CChhiinnaa

Bohigian: new Marshall Plan

Chakrabarti: focus on Africa

NEWSEMs prep defences for‘crazy’ Fed 2

Inflation rears its ugly head 2

Out of the Woods 2

Africa debt fears 4

Oxfam irked byWorld Bankworkplace vision 4

Lean on me,MDBs tell Turkey 4

Philippines aimsto keep growthon track 6

Go-Jek: from apot and a bike toAsian giant 22

LatAm musttackle state debt 24

Seeking shelterfrom climatechange 27

Continued on back page



Spotlight onIMF as Lagarderefuses to pullSaudi visit

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BALI, FRIDAY OCTOBER 12 2018

SPECIAL DAILY EDITION WORLD BANK/IMFGlobalMarketsIMF

BolsteringmultilateralismPAGES 6-8 CATASTROPHEBONDSTheir time has come

PAGES 10-12 QATARSpecial ReportPAGES 17-30

By Rashmi KumarIndia’s standing on the global

stage has fallen as China steals

all the focus, according to Raghu-

ram Rajan, former governor of

the country’s central bank.

But in an interview with Glob-

alMarkets the former IMF chief

economist insisted it was too early

to write-off the south Asian coun-

try just yet, so long as reform was

top of the government’s agenda.

“In general, India has slipped

off to some extent, as China has

become more front and centre,”

said Rajan. “And even though

India is growing faster than

China, China has more attention

as it is bigger. But the promise

from India has been: ‘we will do

the right things to become

another China’. “That’s the reason people had

faith in India, as the population

is similar to China and the hope

was that India will follow that

path. In the last few years, that

hasn’t panned out.” Rajan acknowledged that there

was a substantial amount of for-

eign direct investment coming

into India, but said the country still

needed to do more to find oppor-

By Jackie HorneThe trade war between China and

the US is likely to escalate again

once the American mid-term elec-

tions are out of the way as the real

battle lines between the two coun-

tries start to come into sharper

focus, economists have warned.

S&P Global Ratings global chief

economist Paul Gruenwald told

GlobalMarkets that the war was

not really about trade at all, at

least as far as the US was con-

cerned. “The US could reduce its

trade deficit by getting consumers

to save more,” he said. “In our

view, the real issue is the struc-

ture of the Chinese economy.”

Gruenwald said the world was

now starting to get a more coher-

ent picture about what America

was seeking from Chinese presi-

dent Xi Jinping, which appeared

to be a level playing field for its

companies, less state-owned enter-

prises and even fewer subsidies

for sensitive sectors such as tech.

He added that since these

issues formed the lynchpin of

China’s economic model, “it’s

not clear that Beijing will make

the concessions the US wants”.

Fitch’s global chief economist,

Brian Coulton, agreed. “If you look

US-China trade war

to intensify after mid-term elections

By Rashmi Kumar Indonesia will not change its rhetoric to take a

more inward-looking strategy to navigate the

rising sentiment of protectionism driven by the

US, according to Sri Mulyani Indrawati, the coun-

try’s minister of finance.

Speaking exclusively to GlobalMarkets,

Indrawati was adamant that Indonesia, which has


Steve KeenPage 34

FINALWORD


UUnnddeerrppeerrffoorrmmiinngg IInnddiiaa

hhaass ‘‘sslliippppeedd ooffff’’ gglloobbaall

ssttaaggee —— RRaajjaann

Rajan: “India needs to be doing

more than beat its breast”

Xi: facing US demand for less

state interference

NEWSWorld Bank towin or losepoverty race in

Africa 2JYK talks uphuman capitalindex 2Out of the Woods 2Equities quake

at trade war 4AfDB securitizesown balancesheet 4Worst over for

Turkey? 4EIB on sustainability 14Agenda 31-32Philippines backsChina over cat bonds 35MENA infra moves

into investors’sights 35IFC looks tomake an impact

with investing 35




Indonesia pledgesfirm stance against

protectionismExclusive Interview

Exclusive Interview

overNews_IMF18.qxp_2_00_News 11/10/2018 13:43 Page 1

GlobalMarkets

• IMF & World Bank Annual Meetings18-20 October, 2019 Washington, DC

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At the forefront of the international economic debate. Published daily at the key meetings of the major international financial institutions, highly acclaimed for its authoritative, incisive and hard-hitting editorial with access to an audience that includessome of the world’s most influential opinion-formers from both public and private sectors. Please contact Melissa Roache: tel +44 20 7779 8276 / [email protected]

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www.globalcapital.com/globalmarkets16 ECONOMIC OVERVIEWEBRD EDITION THURSDAY MAY 9, 2019

SPECIAL REPORT: UZBEKISTAN

By Elliot Wilson

The Republic of Uzbekistan has spentmost of the past four decades doing pre-

cious little. For most of the 1990s and 2000sit was all but economically inactive, whileto most Western investors, if it had an iden-tity, it was as a flyover state on the way tothe likes of Kazakhstan. According to WorldBank data, Uzbekistan’s economy was actu-ally smaller in 2007 than it was in 1991, theyear it declared independence from thewithered husk of the Soviet empire. Life began to change in 2016 with the pass-

ing of former president Islam Karimov, a fig-ure of stability in his early years who cameto rule with an iron fist, jailing opponentsand keeping foreigners, including mostpotential investors, at arm’s length. Karimovwas replaced by Shavkat Mirziyoyev, primeminister since 2003.But despite being part of the old,

entrenched system, Mirziyoyev appears tobe cut from a different cloth. Once president,he freed political prisoners, sacked many ofKarimov’s cronies, and promoted capable,forward-thinking technocrats. A “virtualreception hall” was launched, allowing nor-mal Uzbeks to vent their spleen against theauthorities online without fear of repercus-sion. Millions did so in the first few months.

But there has been no Uzbek spring:reforms have been progressive and steady,not sharp and jolting. Travel restrictionswere eased, and in September 2017, Mirziy-oyev lifted exchange restrictions on theUzbek som, devaluing the currency by 90%,a decision that at a stroke eliminated one ofthe key obstacles to foreign investment andtrade. He made all the right noises, promis-ing to champion the private sector and breakup state monopolies, and to convince leadingcorporates to issue shares and bonds andsell them to global investors. By any measure, the process appears to

be working. In its latest World EconomicOutlook, published in April 2019, the IMFtipped economic output to expand by 5% in2019 and 5.5% in 2020, rising to 6% by the mid-dle of the 2020s. In a credit opinion publishedby Moody’s in February 2019, the ratingsagency highlighted the country’s “robustgrowth potential”, underpinned by “positivedemographic trends and relatively low gov-ernment debt”. It said the economy wouldcontinue to post “strong nominal GDPgrowth” and a modest budget deficit ofaround 1.5%. “Uzbekistan is on an exciting path to open-

ing up its economy,” Alkis Vryenios Draki-nos, head of the resident office in Uzbekistanat the EBRD, tells GlobalMarkets. “It wel-

comes investors that are ready to take along-term approach”, and who look for“impressive reforms, macro-economicrobustness, a young and growing populationand an economy rich in natural resources.”

DEBT ISSUANCEIn June 2018, the International Finance Cor-poration, the private sector arm of the WorldBank, issued UZS80bn ($9.5m) worth of two-year bonds on the London Stock Exchange.The so-called ‘Samarkand’ bonds were aglobal first for the country and the multilat-eral, with the proceeds used to boost fundingto local SMEs. Another key moment in Uzbekistan’s

development came in February 2019, whenit secured an international credit rating, andprinted $1bn worth of Eurobonds — thestate’s first foray into the international capitalmarkets. More sovereign prints are set to fol-low, with Uzbekneftegas, the dominant localoil and gas firm, looking to sell debt to inter-national investors before the end of the year.In its first quarter 2019 investor presen-

tation, Tashkent-based Ipak Yuli Bankpointed to three key reforms helping to drivechange and boost growth. Liberalising for-eign currency rules made it easier, the banksaid, to repatriate profit, while lower busi-ness taxes encouraged firms to reinvest.

Uzbekistan: coming in from the cold

After years of isolation, Uzbekistan has started to forcefully address its economic challenges and

exploit its inherent advantages in a way that offers the potential to make this resource-rich market a

stronger player in the global economy


Finally, efforts to slash red tape created amore responsive government willing to sup-port inward foreign investment. In the World Bank’s 2019 Doing Business

Rankings, Uzbekistan ranked 76th, up from87th in 2017, the first full year of Mirziyoyev’srule, and 141st in 2015, the year before hewas elected and sworn in as president. In itslatest survey, the bank pointed to a host ofpositive moves made by the new adminis-tration, from strengthening the rights ofminority investors, to making it easier topay taxes and trade across borders.In his first year in office, Mirziyoyev chose

to stay close to home, shoring up power inTashkent and meeting friends and alliesaround the region. The new leader travelledto Turkmenistan and Tajikistan — broker-ing a peace deal with the latter that includedthe re-opening of the shared land border —and visited Kazakhstan on no fewer thanfour occasions. Despite having a smallerpopulation, Kazakhstan, with president Nur-sultan Nazarbayev at its helm until he leftoffice in March 2019, spent decades courtingglobal investors, sucking foreign capital intoenergy and mining projects.

NATURAL AND HUMAN RESOURCESKazakhstan and its canny former presidentcan act as handy benchmarks for, respectively,Uzbekistan and Mirziyoyev. The two sover-eigns are very similar to one another. Theyare blessed with an overwhelmingly youngpopulation keen to build better, richer lives.Ipak Yuli Bank reckons that 72% of Uzbek-istan’s 33m people are under the age of 40. Bothare also incredibly rich in natural resources,including oil and gas, gold and silver, and cop-per and cotton. Uzbek officials have estimatedthe total value of all of the country’s mineraland energy resources at $5.7tr. It is surely only a matter of time before the

world’s energy and natural resources giantsstrike profitable commercial joint ventureswith leading local groups. The EBRD’s Draki-nos reckons reforms will transform Uzbek-istan into “a more open, mainstream andprivate sector-oriented economy that isalready well positioned to become one of themost most advanced in the region”. Whether it has the capacity to transition

into a middle or higher-income market, dig-itally and financially innovative and with astrong manufacturing base, remains to beseen. “Mercedes-Benz and [the Norwegiantelecoms firm] Telenor found it very chal-lenging to invest here, and those memoriesare still fresh,” notes Gunter Deuber, headof economics, fixed income and foreignexchange research at Raiffeisen Bank Inter-national. “It will take time to turn that [rep-utation] around, so I don’t see sizeable FDI

flowing in — first we will need to see moreprogress on opening up.” Yet Mirziyoyev is clearly keen to continue

to forge ahead with reforms. In the final yearsof Karimov’s life, Uzbekistan was a virtual no-go zone for foreign corporates and capital.After peaking at $1.6bn in 2010 and 2011,according to data from UNCTAD, inboundFDI fell off a cliff, tumbling to $133m in 2016,and $96m in 2017. More promising newsarrived in 2018, when FDI rebounded to$255m, scattered across 13 greenfield projects.

GLOBAL TOURThat may explain why the president hasemerged in the past 18 months as somethingof a globe-trotter. In the second half of 2018,he visited Russia, the United States, SaudiArabia and also China, to attend the secondBelt & Road Forum, held in Beijing inNovember. Uzbekistan is integral to the Belt& Road Initiative, China’s grand plan toredraw the world trade map in its image. Alloverland trade routes between Beijing andEurope that pass north of Afghanistan andsouth of the atrophied body of the Aral Sea,have to pass through Uzbekistan. Belt & Road capital has not been wel-

comed everywhere with open arms. Softloans from China’s twin development banks,China Exim Bank and China DevelopmentBank, have, critics say, caused endemicindebtedness in a host of emerging states,from Tajikistan to Sri Lanka and Pakistanto Djibouti. But Uzbekistan, so far at least, has been

amenable to Beijing’s overtures, and morethan happy to channel mainland money intoinfrastructure projects. China has helped toelectrify a 355km rail line linking Bukharawith Misken, and co-financed a highway con-necting Tashkent with Turkmenbashi onthe Caspian Sea. Mirziyoyev has continued this year to

operate as a one-man international invest-ment bureau. In February, he visited theUnited Arab Emirates, signing $10bn worthof deals with the sovereign and with the AbuDhabi-based Mubadala Investment Com-pany, spanning a number of sectors rangingfrom renewable energy to infrastructure toagriculture. Another key trip, scheduled forthe second half of 2019, will see the presidentvisit Belgium, with the aim of strengtheningsovereign relations with the EuropeanUnion. In February, Uzbekistan held the firstround of negotiations in Tashkent, on anEnhanced Partnership and CooperationAgreement.

ROAD TO REFORMBut while much has already been achievedover the past two years, this is a country

that is by any measure still at the beginningof a very long sovereign journey. Fourdecades of self-imposed isolation is notgoing to be negated overnight. Scroll backto the start of the decade, and you find acountry ranked 172nd in TransparencyInternational’s Corruption PerceptionsIndex, ahead of just four other nation states,including Afghanistan and Somalia. It hasinched up steadily ever since, but it was stillranked 158th in 2018, sandwiched betweenMozambique and Zimbabwe. Uzbekistan’s capable president is making

all the right moves: visiting old friends andmaking new ones; opening once-closed bor-ders; securing credit lines from China’s bigdevelopment banks; and seeking to strikeeconomic and co-operation partnershipswith Europe. But Deuber’s point about Western corpo-

rate reservations remains important andrelevant. In 2014, a Swiss money-launderinginvestigation targeting four Uzbek men withlinks to the daughter of then-president Kari-mov, also ensnared a Swedish telecoms firmand, indirectly, Telenor. It eventually costthe chairman of the Norwegian telecomsfirm his job. Events like these are not quicklyforgotten by Western CEOs. They linger foryears in the collective corporate memory. Nor is the overhaul of an economy kept

isolated from the world for decades aninevitable and foregone conclusion. Uzbek-istan has little experience of trading withthe outside world, let alone dealing with thelabyrinthine complexity of adhering to theever-evolving tenets and rules of Western-style corporate and financial governance.There will inevitably be growing pains as aconservative country used to following itsown, self-penned rule book, learns to adapt. The road to reform in any country is

strewn with obstacles, whether economic,financial, societal, political — or all of theabove. Mirziyoyev’s route to power was lin-ear and, as these things go, unusually seam-less and painless. But he wasted no time inremoving individuals close to his predeces-sor from positions of power. They may begone, but will they have forgotten the man-ner of their departure? Little wonder Moody’s, in its February

credit note, warned the biggest threat tofuture stability stems from political risksthat “stem from potential opposition to thereform programme in the face of short-termeconomic and social costs”. There are trialsand tests ahead for an economy still findingits feet and its identity as it opens up to theoutside world. But they are challenges thatare worth facing, and which, moreover, willonly make this resource-rich marketstronger. GM

www.globalcapital.com/globalmarkets


ECONOMIC OVERVIEW 17SPECIAL REPORT: UZBEKISTAN

“Uzbekistan is on an exciting path to opening up itseconomy. Itwelcomes investorsthat are ready totake to take a long-term approach—Alkis Vryenios Drakinos,the EBRD’s resident officein Uzbekistan


UZPROMSTROYBANK

Uzpromstroybank builds on economic reform

18 ¬ S P O N S O R E D B A N K I N G R E P O R T U Z P R O M S T R OY B A N K

Few countries are generating as much excimentamong the global investor community asUzbekistan. Over the past three years, Central

Asian’s most populous state has undergone anunprecedented economic and social transformation.

Under the leadership of reformist president ShavkatMirziyoyev, the government has pushed through aseries of landmark measure to liberalize the economy,including the introduction of free conversion of thenational currency, and the removal of barriers to foreigntrade and investment.

Further measures to improve the business climateand attract investment are promised under the gov-ernment’s Development Strategy 2022, includinga reduction of the tax burden and improvementsto the customs administration, negotiations onaccession to the World Trade Organization (WTO)are underway.

Active work on obtaining credit ratings from inter-national agencies paved the way for Uzbekistan’shugely successful $1bn debut on the eurobond marketin February.

With a rapidly growing population of 32 million —half of whom are under 30 — and a wealth of naturalresources, Uzbekistan offers unparalleled opportunitiesfor investment. Funding for sectors from manufac-turing to tourism has surged as locals and foreignersfight to finance the country’s economic recovery.

The greatest interest, however, has centred on thefinancial sector. Not only do local banks offer uniqueexposure to Uzbekistan’s broader growth story, butbanking penetration in the country is low even byregional standards, offering huge potential for expan-sion and profitability.

LEADING LENDERAs one of the country’s oldest and most respectedfinancial institutions, Uzpromstroybank is ideallypositioned to play a key role in this economic ren-aissance.

The history of Uzpromstroybank began in 1922 withthe opening of the Central Asian office of Prombank(Industrial Bank) in Tashkent. Ten years later, thelender was transformed into a specialized bank forlong-term investments, responsible for financingcapital construction, local industry and foreign trade.

After the country’s independence was declared,Uzpromstroybank was transformed into a Joint-StockCommercial Bank.

In 2018, Uzpromstroybank conducted a rebranding.A new brand and logo reflect the improvement inbusiness processes, quality of services and types ofproducts. The rebranding is an important step towardsexcellence in Uzbekistan’s banking.

Within Uzbekistan, the lender now operates underthe Sanoat Qurilish Bank (SQB) brand, with a newthree-colour circular logo that represents its commit-ment to the national interest, its support for industryand construction, and its pledge to find banking solu-

tions for every corporate and individual customer. “The new image of Uzpromstroybank is devised to

become a symbol of large-scale changes within itsstructure, reflecting the bank’s ambition to becomemore transparent and flexible, professional and atten-tive to the needs of the clients and anticipating theirexpectations,” says chairman Aziz Voitov.

2018 was a special year for the bank, as it made aquantum leap in development and successfully startedits aggressive growth, taking leading positions in manysegments of the banking business and fulfilling thevast majority of the tasks set in the strategy.

As of January 1, 2019, the bank’s total capitalamounted to US$ 341.6 million, which is 127% higherthan the beginning of 2018, the authorized capitalamounted to US$ 225.1 million and increased by129% compared to the beginning of 2018, assetsreached US$ 3.67 billion and increased by 127%from the beginning of 2018. Credit investments rep-resent 90% of the bank’s assets.

The bank is constantly striving to increase itsresource base. As of January 1, 2019, the balance ofcustomer deposits was US$ 576.7 million, or 147%growth year-on-year.

In 2018, Uzpromstroybank JSCB actively partici-pated in financing investment projects that wereincluded in the modernization, reconstruction, tech-nical and technological renewal programs in the oiland gas, chemical, electric power industry, electricalengineering and other leading industries.

Key projects funded by the bank in recent yearsinclude the construction of the Bukhara refinery,the expansion of the Angren thermal power plant

and the electrification of the Samarkand-Bukhararailway line.

In total, in 2018 Uzpromstroybank allocated invest-ment loans worth US$ 427.2 million.

In 2018, much attention was paid to the aggressivedevelopment of operations with the private sector.Investments in retail lending increased by 2.7 timesto total US$ 185.9 million (5.7% share in the loanportfolio), investments in small business lendinggrew 2.9 times to reach $ 182.5 million (6% share inthe loan portfolio).

According to the results of activities in 2018, thebank as a whole received a net profit of US$ 28.4 mil-lion. The bank ensured an increase in net profit by276% year-on-year while its overall profitability wasat the level of 11.4%.

Based on its traditional strengths, today the bankis undergoing radical transformations to meet theneeds of the rapidly developing economy of Uzbek-istan. This involves changes in all areas of banking,including the introduction of new products,changes in operating technologies and moderniza-tion of the branch network.

The bank is also working to position itself at the fore-front of digital development in Uzbekistan throughinvestment in IT modernization, upgrades of softwareand hardware, and the introduction of cutting-edgemultichannel banking technology.

Also, given the dynamic growth of the insurancemarket in Uzbekistan (in 2018 alone, the total insur-ance premiums for the market grew by 90.5% andreached US$ 143.9 million), in March 2019, the insur-ance company “PSB Insurance” was created in the


LEADING BY DESIGNPromstroybank’s new three-dimensional logo in the form of a three-color ring com-bines the first letter of Uzbekistan’s name in three key languages: ‘U’ in English, ‘O’ inUzbek and ‘У’ in Russian. The colour scheme of the logo visualizes the main initial tasks of Uzpromstroybank

in supporting industry and construction. Grey represents metal, red symbolizes firemelting and cutting metal, and blue stands for water, an essential element of industri-al production.This choice demonstrates the bank’s strong commitment to the interests of

Uzbekistan, its direct participation in all major national projects for the constructionof industrial, urban and rural infrastructure, as well as its role in ensuring the economic and financial stability of the state.

UZBEKISTAN’S OLDEST BANK IS REINVENTING ITSELF TO MEET THE DEMANDS OF A DYNAMIC NEW GENERATION OF CORPORATE AND RETAIL CUSTOMERS


form of a limitedliability company.The company willcarry out volun-tary insurance inthe 17th class of thegeneral insurancesector in suchareas as insurance

against accidents and diseases, insurance of groundtransportation vehicles, aviation and marine insur-ance, property insurance in transit, insurance of prop-erty against fire, natural disasters and harm, thirdparty motor liability insurance, insurance of loansand collateral and other financial risks.

RETAIL FOCUSAnother key focus is increasing Uzpromstroybank’sshare of the Uzbek retail banking market. In 2018 thebank made a qualitative breakthrough in the devel-opment of retail business by offering a wide rangeof products and services to individuals. In one year,the retail loan portfolio grew 2.7 times.

The active increase in retail volumes has alloweda significant increase in its share in the bank’s businessas a whole. Thus, the share of loans to individuals inthe structure of the bank’s loan portfolio increasedfrom 2.8% in 2017 to 5.7% at the end of 2018.

The bank’s retail customer base includes employeesof large customers and their small business partners.Today, the number of employees of the bank’s corporateclients is more than 650,000 people while the numberof employees of the SME enterprises exceeds 56,000.

In 2019-21 the bank intends to build a retail businessof new scale and efficiency, while continuing to aggres-sively increase its share in this segment.

In addition, with the rapid development of infor-mation technologies, characterized by a high level ofdevelopment of software and telecommunicationssystems, the requirements for banks’ software andhardware are changing.

Taking into account the increasing requirementsfor the quality of the services provided, the bank beganupgrading its own IT infrastructure for the issuanceand servicing of international plastic cards such asMastercard, Visa, UnionPay International and JCB.

Belgium’s OpenWay Group, one of the leadinginternational companies for building automatedsystems in the area of cashless payments, was chosenas Uzpromstroybank’s partner. Cooperation withthe OpenWay Group will allow the bank to improveits banking platform, increasing its reliability, safety,speed and productivity, which in turn, will allowbank customers to enjoy modern banking servicesanywhere and anytime.

Based on the products of the WAY4 solution, it isplanned to implement projects that will allow the bankitself and partner banks serviced at Uzpromstroybank’sprocessing center to introduce new products and serv-ices, such as contactless payments, issuance of virtualcards, international credit cards and installment pay-

ment cards, e-commerce on the basis of 3D securetechnology.

CORPORATE COMMITMENTMeanwhile Uzpromstroybank has maintained itscommitment to providing an outstanding service forits rapidly growing corporate client base.

As well as a full range of settlement and cash services,the bank boasts correspondent relations with leadingUzbek and foreign credit institutions. It has beenimproving its offering in cash management, as wellas ensuring the availability of a comprehensive rangeof services Uzbek firms operating internationally.

Uzpromstroybank participates actively in the inter-bank lending market and constantly raises and placesshort-term loans with banks in Uzbekistan, Europeand CIS, including the Russian Federation. Interestrates and the amount of raised and allocated inter-bank loans are set through supply and demand onthe national and international financial markets.

On the credit side, Uzpromstroybank’s offeringfor corporates includes project financing for newinvestment projects, as well as the expansion andrenewal of existing operations. These loans coverpurchasing equipment, materials, new product sam-ples, other material values and technologies.

In addition, in order to facilitate the promotion ofinvestment activities and the financing of projects ofdomestic entrepreneurs and foreign investors, at thebeginning of this year, the bank opened the Centerfor the Coordination of Investment Activities andProject Management.

Services are provided on the basis of the “single-win-dow” principle, which contributes to the developmentof business plans, feasibility studies, identification ofmechanisms and sources of financing. The centerassists foreign investors in successfully starting a busi-ness in Uzbekistan, obtaining funding and finding alocal partner. Such centers are already open in allbranches of the bank throughout the country.

SOCIAL RESPONSIBILITYThe bank actively participates in social projects andpays special attention to the development of corporatesocial responsibility. In particular, the bank helps fam-

ilies from remote regions of the republic to open theirbusiness and succeed in family entrepreneurship. Thebank, together with the International Finance Corpo-ration, has identified Green banking as one of the strate-gic directions for future activities.

The bank also pays attention to increasing thepotential of young professionals and makes sure theyobtain up-to-date training. Together with the KoreanInha University in Tashkent and SAP, the bank createdthe Financial and Technological Center, which pro-vides university students with the opportunity to testtheir theoretical knowledge in all areas of the bankingbusiness and hone their skills in this area with thehelp of modern IT technologies.

INTERNATIONAL RELATIONSIn 2018, Uzpromstroybank has continued to coop-erate with leading international financial institu-tions (IFIs) and foreign banks to establish jointsupport for companies of the real economy, as wellas small businesses and private entrepreneurship.

IFIs that have provided funding to the bank includeAsia Development Bank, European Bank for Recon-struction and Development, World Bank Group,Islamic Development Bank Group and others.

Uzpromstroybank also has more than 380 corre-spondent banks, including 361 foreign institutionsin 58 countries, represented by first-class banks inEurope and the USA, such as Commerzbank AG,Landesbank Baden-Württemberg, Banque de Com-merce et de Placements SA, Raiffeisenbank Interna-tional AG, Citibank NA, JP Morgan Chase Bank NA.

The bank’s financial credentials have been rati-fied by international rating agencies. Fitch ratesthe bank at BB- with a stable outlook, while Standard& Poor’s has assigned a B+/B rating. The bank pro-vides over 50 types of traditional and advancedbanking services for all fields of the economy. l

Contacts details: Uzpromstroybank JSCB100000, Uzbekistan, Tashkent, Shakhrisabz str., 3Afzal Musakhanov, Department for cooperationwith IFIs and banksTel: +998 78 120 4500, email: [email protected] www.uzpsb.uz

S P O N S O R E D B A N K I N G R E P O R T U Z P R O M S T R O Y B A N K ¬ 19EBRD EDITION THURSDAY MAY 9, 2019

BANKING ON HISTORYUzpromstroybank’s Mirzo-Ulugbek branch isboth a historical and architectural landmark.Built at the end of the 19th century, the two-storeybuilding — now part of Amir Temur Square — wasdesigned by architect V. Geinzelman. The exteriordesign of the bank is made in the neoclassicalstyle typical of buildings of that period. The inte-rior is a collection of parts preserved from thetimes of the State Bank of the Russian Empire andrecreated in our time. Visitors will be able toappreciate the original architectural elements ofthe 19th century and enjoy the historical photos ofUzbekistan in the era of the Russian Empire.

Aziz Voitov, Chairman


20 CAPITAL MARKETSEBRD EDITION THURSDAY MAY 9, 2019


By Elliot Wilson

When the Republic of Uzbekistan sold$1bn of Eurobonds in February 2019 —

its first foray into the international debt mar-kets since declaring independence from theSoviet Union — global investors jumped allover the sale.

And for good reason. The inaugural printby the Central Asian state was well timed,shrewdly managed, and marketed directly atglobal money managers on a desperate questfor yield, arriving less than 18 months afterneighbour Tajikistan printed its own $500minaugural bond.

The deal was telegraphed long in advance,with JP Morgan hired the previous year asglobal co-ordinator, joined on the books by Citiand Gazprombank. The dual-tranche traderaised $500m worth of five year bonds priced at4.75%, and $500m worth of 10 year bonds, pricedat 5.375%. The sale drew $3.8bn in orders, ensur-ing the books were comfortably oversubscribed.

Alkis Vryenios Drakinos, head of the resi-dent office in Uzbekistan at the EBRD, saysthe sale was an “important and very success-ful venture” for the country. “The Eurobondshelped place Uzbekistan on the map, con-firmed the recently obtained internationalrating, and provided an affordable benchmarkfor further international borrowings.”

Officials in Tashkent hope this is just thestart. The print, notes Gunter Deuber, headof economics, fixed income and foreignexchange research at Raiffeisen Bank Inter-national, was priced “relatively tight, and losta bit in secondary trading”. But it was, headded, a big hit among emerging marketinvestors who bought into “the clarity on the[country’s] macro-economy, statistics, andresources story”.

INVESTOR FRIENDLYThese are key points worth exploring. While

other regional economies, including Tajik-istan’s, rely heavily on earnings from inwardremittances from labour migrants, Uzbek-istan’s tale is clear, consistent and avowedlyinvestor-friendly. After becoming president in2016, and replacing hardline leader Islam Kari-mov, Shavkat Mirziyoyev set out to transitionthe economy from closed shop to open market.

Currency controls were eased, along withsome travel restrictions. Slowly, investorsbegan to take notice of a market whose creditprofile was, Moody’s Investors Service notedin February 2019, “supported by robust growthpotential, underpinned by positive demo-graphic trends, and relatively low governmentdebt, which is currently financed at a low cost”.

Yes, there are inherent weaknesses, manylikely to persist for decades. There is scantcompetition in an economy still dominated bya powerful and overweening state. It is poor— nominal per capita income was less than$1,300 in 2018, according to IMF data, rankingit 156th worldwide. And while there is strongsupport for the reform programme, Moody’squestions the government’s “institutionalcapacity to deal with significant and challeng-ing reforms” if growth slows, prices rise, andpolitical stability makes a unwelcome return.

For the time being, though, the outlook isbright. In February this year, Moody’sassigned Uzbekistan its first ever long-termissuer rating: B1 with a stable outlook, basedon low government debt and positive demo-graphic trends. While an upgrade wasunlikely in the near-term, its credit profilewould, the ratings agency said, be enhancedby “a sustained increase in productivitygrowth and competitiveness”.

Like so many countries in the region,Uzbekistan, cut off from the world for so long,is also a beneficiary of simple circumstance.Yes, a reform programme driven by PresidentMirziyoyev has helped to put the country onthe investment map. But it also has a story —actually, several of them — to tell investors.

For one thing, it stands to benefit fromChina’s desire to link Beijing with Europeoverland by road and rail, putting Uzbek-istan at the heart of the Belt and Road Ini-tiative. For another, it is blessed with anabundance of natural resources, includingoil and gas, coal, copper, uranium, gold, andcotton. In 2018, the State Committee for Geol-

ogy put the sum value of all of the country’smineral and energy resources at $5.7tr.Global exploration giants are regular visi-tors these days to Tashkent, while an Uzbek-German investment summit, held in Berlinin January 2019, saw €4bn ($4.5bn) worth ofdeals inked on day one.

FLUSH WITH CASHYield-hungry emerging market investors whocovet diversity and variety in their portfolioswill continue to eye the country with interest.It boasts a budget surplus, a large sovereignwealth fund, and around $27bn worth of for-eign reserves. In its latest World EconomicOutlook, published April 2019, the IMF tippedeconomic output to expand by 5% in 2019 and5.5% in 2020, rising to 6% by the mid-2020s.

This year’s sovereign bond sale is likely tobe the first of many, with the government hop-ing to return to the market on an annual basis.In February, Odilbek Isakov, head of the coun-try’s debt management office, said pointedlythat issuing bonds offered “diversification offunding. It is an opportunity to establish a rela-tionship with the capital markets, and itanchors reform progress. This will help com-panies to improve in terms of corporate gov-ernance, such as getting credit ratings. Theseare important steps as companies becomemore resilient and better governed.”

A host of corporates are keen to issue bondsin the wake of the sovereign print, led byUzbekneftegas. In January 2019, UlugbekSayidov, deputy chairman of the state-runenergy group, said the first order of businesswas to secure an international credit rating,allowing it to “expand co-operation… with for-eign partners [and to] attract credit fundsfrom world financial markets”. He saidUzbekneftegas was “conducting a systematicreview for the preparation of a debut issue ofEurobonds this year”.

The EBRD’s Uzbekistan head Drakinossays upcoming IPOs and bonds sales by localfirms will “boost corporate sector valuationsand capital markets by introducing interna-tional international reporting standards, bet-ter governance and transparent decisionmaking”. It is another sign that, four decadesafter declaring independence, Uzbekistan isfinally growing up and engaging with theworld on its own terms. GM

Investors attracted by lure ofUzbek capital markets

“Issuing bondsoffereddiversification of funding. It is an opportunity to establish arelationship withthe capitalmarkets, and itanchors reformprogress—Odilbek Isakov, headof Uzbekistan’s debtmanagement office

Four decades after declaring independence,

a successful Eurobond issue and major

reforms show Uzbekistan is finally growing up

and engaging with the world on its own terms


Please describe the history, background and develop-ment of Ipoteka-Bank.

Our launch dates back to 1996, when TashkentHousing Savings Bank opened following govern-mental efforts to support Uzbekistanis’ welfare,particularly to improve the facilities for housing.Later it becomes Uzbek Housing Savings Bank, asPresidential Decree from March 1997 points outthe necessity of nation-wide dissemination ofcapital’s experience on housing financing. In2005, the Uzbek Housing Savings Bank wasmerged with Zamin bank and established asJSCBM “Ipoteka-bank” as the first in the countryspecialized mortgage lending bank.

Today we are offering our services in all industriesof economy. Ipoteka Bank has received stable out-look in Moody’s and Standard and Poor’s ratings.

What are your Bank’s areas of operation, products andservices that Ipoteka-bank can offer to institutions inUzbekistan and abroad?

To date, we render our services to our corporateand individual clients through 39 branches and150 mini banks in the country, deserving leader-ship among Uzbekistan’s banks by the scope ofservices.

In 2018, Ipoteka-bank upgraded its activity inall of its branches, designing new banking prod-ucts. Now Ipoteka-bank wants to keep growingalong with country’s economic reforms. We arecommitted to investing in various sectors ofnational economy, financially supporting smallbusinesses and entrepreneurs and offering mort-gage and consumer lending to wide population.

What are some of your financial fundamentals — capital, turnover, RoE, market share, etc. ?

As of January 1, 2019:• Authorized capital: UZS 985,6 billion

($118,2 million), • Total capital: UZS 1.610,7 billion

($193,2 million), • Loan portfolio: UZS 17.195,8 billion

($2.062,7 million),• Net assets: UZS 19.754,9 billion

($2.369,7 million), • Deposit base: UZS 6.749,2 billion

($809,6 million),• Net profit: UZS 250,2 billion

($30,0 million), ROE – 15,5%, • Market share (assets): 9,22%, market share

(capital) – 6,06%.

Please tell us more about your cooperation with the in-ternational financial institutions such as the IFC.

With our agreement signed during the visit of thePresident of the Republic of Uzbekistan to NewYork in September 2017, IFC has been helping toIpoteka-bank prepare for privatization, strength-ening corporate governance, ensuring opera-tional autonomy and improving banking model.

In late November 2017, we had the first workingmission of the IFC that included experts on cor-porate governance, strategic development andbusiness process optimization as well as experts

on sales, risk management, loan processing, tech-nologies and HR.

The mission evaluated the efficiency of ourbank’s interaction with clients, its lendingprocesses, branch networking and capacity oftransforming to commercialize as well as thevision of its strategic growth. Following the evalu-ation report and recommendations of IFCexperts, we have discussed the ways we canadvance our operation in all terms and startedstepping up to reach strategic goals.

The proposed IFC investment in the Bank com-prises a senior loan for IFC’s own account. Thesenior loan will have a conversion option at IFC’sfull discretion.

As part of agreements, more than 10 IFCexperts are working with different divisions of thebank on 14 key areas of the Transformation Plan.

Which segments and products currently offer thegreatest growth opportunities for banks in Uzbekistan?

With $48,8 billion, Uzbekistan’s GDP increased by5.1 percent in 2018. Main contributor for this wasthe 10.6 percent growth of the industry, which, inits turn, was affected by 25.4 percent boom inmining industry and quarrying as well as 22.6percent increase in water supply, sewerage, wastecollection and disposal.

Construction is one of the most significantareas of the economy and one of the attractiveareas of investment here. At the time, serviceindustry comes next as an important market fordeveloped economies. In Uzbekistan it is one ofthe fastest growing sectors, as stats from January2019 says that around 213 thousand enterprisesout of 323.5 thousand are active service providers.

Therefore, rapid growth in the important seg-

ments such as construction, service industry,mining industry and quarrying, manufacturing,electricity, gas, water supply, sewerage, waste col-lection and disposal businesses are attractivespheres for banks in Uzbekistan.

How important are technology and innovation in theUzbekistan banking sector?

Digital banking optimizes the processes, it intro-duces a new organizational culture and flexibletechnological solutions that eventually speed upthe product launches and helps personalize theoffers. That is how we see the importance of tech-nology and innovation.

With gradual increase of smartphone users andtech-savvy population, we strive preserving ourcompetitiveness with smart solutions as using AI-driven consultants, including chat bots and virtu-al assistants, digitalizing back-office operationsand boosting automation and predictive analytics.

Currently, banks are investing heavily in devel-oping digital banking business model inUzbekistan.

What can Ipoteka-Bank do to promote the develop-ment of Uzbekistan’s economy and financial system?

Today, an attraction of foreign and local capitalto our economy is a specific source of funds for afinancing large investment projects.

Ipoteka-bank has great potential for financinglarge investment projects. In 2018, we have fur-ther grew in terms of selecting, evaluating andfunding investment projects.

For instance, in 2018, we allocated UZS 2.825,5bln ($338,9 mln) in credits of investment natureand by the year-end, the investment credits port-folio amounted to UZS 7.300,5 billion ($875,7 mln).

What are your strategic plans and major goals for 2019and beyond?

Considering the expected changes in the bankingmarket and the current strengths and weaknessesof the Ipoteka-bank, we plan to:

• Improve the quality of customer services,standardize and optimize services processes;

• Diversify bank assets and liabilities and bal-ance their maturity;

• Develop marketing and branding service;• Transform Ipoteka-bank into a bank that

meets international standards.As for financial results for 2019, we plan to

reach:• An annual average annual net profit growth

of 63%;• An increase in the share of non-interest

income in total revenues up to 40%;• ROE (return on capital) ratio of 18%, and ROA

(asset profitability) ratio not less than 1.7%;• Cost income ratio around 46%. l

IPOTEKA BANK

Leadership in targeted markets

WE ARE COMMITTED TO INVESTINGIN VARIOUS SECTORS OF NATIONAL ECONOMY, FINANCIALLY SUPPORTINGSMALL BUSINESSES AND ENTREPRENEURSAND OFFERING RETAIL AND CONSUMER LENDING TO WIDE POPULATION— SHUKHRAT ATABAYEV,

CHAIRMAN OF THE BOARD

S P ON SOR ED B ANK I NG R E P O RT I P O T E K A B A N K ¬ 21EBRD EDITION THURSDAY MAY 9, 2019

100000, Uzbekistan, Tashkent, st. Shahrisabz, 30Phone: +998(78) 150-89-56, (78) 150-18-88Fax: +998 (78) 150-98-25Website: www.ipotekabank.uzEmail : [email protected]


22 ¬ S P O N S O R E D B A N K I N G R E P O RT A G R O B A N K

Agrobank JSCB has played a key role in thetransition of Uzbekistan as a Soviet satel-lite state into a market economy. In an

interview with GlobalMarkets, RustamMamatkulov, the bank’s chairman explains howAgrobank is gearing up to meet the challenges ofthe 21st century

What is the history, background and developmentof Agrobank.

The history and development of Agrobank isinextricably linked with the independence ofUzbekistan in 1991, when the economy andfinancial system experienced a difficult andturbulent process of transformation from theSoviet administrative and planning environ-ment into a market system. From the earlydays of independent Uzbekistan,Uzagroprombank became one of the four com-mercial banks established by the state. First ofall, the need to create such a bankwas due to the important role ofthe agrarian sector in the structureof the economy and employment.The newly created bank played amajor role in financing projects tosupport and restructure agricul-ture in the difficult conditions oftransition to the market economy.

The objectives and branding ofthe bank changed in the course ofreforms to the economy and thebanking system. Our accumulatedbanking experience, increasedbanking competition, and thedevelopment of our competitiveadvantages constantly required usto search for our own niche in the bankingsystem. Therefore, for almost two decadesafter the country gained its independence, thename of the bank changed twice.

In 1995, Uzagroprombank was transformedinto Pakhta-bank in order to concentrate thepredominant share of banking operations inlending and servicing the agrarian sector ofthe republic. In 2009, the bank acquired thebrand Agrobank, which emphasises its mis-sion as a major player in serving the needs ofvarious participants in the agricultural sector.

If in its first years most attention was paidto agriculture, today Agrobank is a universalbank providing quality services to a widerange of corporate and retail customers.Successful strategy and well-balanced diversi-fication of banking operations allow Agrobankto consistently be in the top five banks ofUzbekistan.

What are your bank’s areas of operation, productsand services as well as strengths and competitiveadvantages?

The mission of Agrobank is, above all, the pro-motion of sustainable development of theagricultural sector. Such a mission is based ona solid competitive basis: as part of its opera-tions, the bank has accumulated considerableknow-how in working with participants in theagrarian sector.

In 2018, the contribution of the agriculturalsector to Uzbekistan’s GDP amounted toalmost a third (about 29%). The potential hereis huge given the prospects for the develop-ment of the agricultural sector, a gradualincrease in productivity and efficiency of agri-culture. Various participants of the agricultur-al sector today are engaged in the productionand collection of agricultural products, theirstorage and transportation, and processing

into products with higher added value.The agricultural sector accounts for more

than a third of Agrobank’s loan portfolio.Agrobank covers more than 35% of this sec-tor’s borrowing needs, thereby maintaining itsleading position in the country’s agriculture.

Our branch network allows us to provide awide range of banking services not only for theagricultural sector, but also for other sectors ofthe economy, as well as for the public. Today,Agrobank’s network includes 13 regionaloffices, 178 branches, 248 points of sale (mini-banks) and 231 money transfer kiosks. Such acompetitive advantage today allows more than8,000 employees of the bank to provide qualityservices to more than 250,000 corporateclients and over 2.5m retail customers.

Please provide some of your financial fundamentals

Agrobank has a good track record of capital

support to ensure the solvency of its liabilities.Over the past two years, the size of the bank’sown capital has increased four times from$63.8m at the beginning of 2017 to more than$260m at the end of 2018. This representsabout 8.3% of the capital of all banks.

The bank’s assets grew 2.5 times over thesame period. As of December 31, 2018, thesize of assets exceeded $1.2bn, twice than atthe beginning of the year. The income-gener-ating assets by the end of 2018 amounted to$1.1bn, or 88.5% of total assets. The loan port-folio maintained a similar trend and by theend of 2018 reached a size of over $1bn,which means an increase of almost 2.6 timesyear-on-year.

What is the bank’s current market share in Uzbekistan’s banking sector? Do you have plans toincrease it?

2018 was an important milestone inthe growth of Agrobank’s financialindicators, as the bank significantlystrengthened its position in thebanking sector at the end of lastyear. In particular, in terms of assetsand liabilities, it ranked ninth in2017, and by the end of 2018, it roseto fifth place.

Today, our bank is the leader in thenumber of issued bank cards innational currency, as well as POS-ter-minals for cashless payments. In addi-tion, the bank ranks second inUzbekistan in terms of the number ofbranches and employees. These posi-tions help the bank to maintain and

increase its market share.The bank does not stop at this; today, proj-

ects are being developed and implemented toimprove the skills of personnel, introduce newbusiness processes in the branches, introduceinformation technologies to improve the qual-ity, and reduce the cost of banking services.This trend should further increase the com-petitiveness of Agrobank in the country’sfinancial markets.

The bank consistently holds fifth place interms of assets, which at the end of 2018amounted to 4.8% of the market share. Also,the growth of the loan portfolio ensured thebank’s rise in this position to the fifth positionin the ranking of local banks, with 5.2% of themarket share. In the new strategy that is beingdeveloped today, we forecast a twofold growthof assets and the loan portfolio in 2021 com-pared to the 2018 level.


AGROBANK

A systemically important bank for Uzbekistan’s economy


What have been your bank’s key achievements over the past 12 months and your most successfulprojects that you have managed to implement?

In 2018, Agrobank was twice awarded theprestigious Asian Banking & Finance Awardsin the categories Best Corporate andInvestment Bank of the Year and BestTechnological and Operating Bank of theYear. In 2018 for the first time in its historyAgrobank began the introduction of interna-tional quality management standards. In early2019, the bank successfully passed a certifica-tion audit and was awarded the ISO 9001:2015international standard certificate. An important event was the upgrade of rat-

ings by the international rating agency FitchRatings, which at the beginning of the yearraised its long-term issuer default rating forthe bank from B+ to BB- with a stable outlook.This brought the bank’s rating in linewith thecountry’s sovereign rating. This confirms theincreasing resilience of the bank to changingmarket conditions.

Which segments and products currently offer thegreatest growth opportunities for Agrobank?

The bank’s attention is focused onretail clients, as well as on servicingthe agricultural sector as promisingdirections for business development.In particular, in the retail business,

the bank carries out a series of activi-ties to develop areas such as co-branded products and loyalty pro-grammes, new online banking oppor-tunities, including fully-fledged cus-tomer experience in mobile banking,long-term and short-term lending toretail customers, including on thebasis of a revolving microcredit andcross-sales.In the corporate sector, the bank

adheres to a steady increase in thecustomer base and an active credit policy,offering bundled products along with compre-hensive services, as well as developing newproducts such as credit cards for farmers.Also, the development of financing of foreigneconomic activity and foreign exchange oper-ations is one of the areas of development.To ensure a stable resource base and an ade-

quate liquidity level, the bank intends to takesteps to attract external funding on the inter-national capital markets, including the issueof corporate debt securities.

Please tell us more about your bank’s cooperationwith the international financial institutions.

One of the bank’s top priorities is to attractloans, investments and grants from interna-tional financial institutions and leading for-eign banks, which help to successfully dealwith support, restructuring, technological

modernisation of the production base and customer infrastructure, including agriculture.Today Agrobank is working closely with

such banks as Ziraatbank in Turkey, theIslamic Corporation for the Development ofthe Private Secto, Landesbank BadenWurttemberg, and Commerzbank. As a resultof cooperation with nine international finan-cial institutions and foreign banks, in 2019 thebank expects successful attraction of foreigncredit lines worth about $370m to financepromising investment projects.Agrobank plans in the near future to attract

borrowings from reputable banks such as theChina Development Bank and the Industrialand Commercial Bank of China.

How important are technology and innovation inthe current Uzbeki banking sector? What isAgrobank’s position in this segment?

In the face of growing competition, our bankattaches great importance to improving thelevel of technology and innovation in the pro-vision of its services.The bank continues the policy of develop-

ing digital banking services for its corporate

and retail business and provides a wide rangeof online banking services. In particular, atthe end of 2018, the internet banking servicewas used by about 40,000 clients, which isalmost 20% of all corporate clients.The popular mobile banking service

Agrobank Mobile has more than 100,000users. It provides access to more than 100services, including bank account manage-ment, payments for various utilities and com-munication services, tax payments and loansfor individuals.Agrobank continues to develop its own plastic

payment card system. More than 2m bank cus-tomers use this service for cashless paymentsfor goods and services through POS terminals.We try to raise the standards of technologies

and introduce innovations not only in offer-ing financial products and services to cus-tomers, but also in our management system.

Increasing competition requires the imple-mentation of technologies and innovations ina wide range of business processes like marketing, communications, planning, budg-eting, control, and risk management.

What can Agrobank do to promote the successfuldevelopment of Uzbekistan’s economy and financialsystem?

Historically, Agrobank has been a systemicallyimportant bank for the country’s economy: asignificant amount of lending goes to the agri-cultural sector of Uzbekistan. In this direction,Agrobank will continue to meet the growingdemand for loans from businesses in this sector.We can help enterprises to fully exploit the

potential of agriculture, to contribute toincreasing income in the agricultural sectorand maintaining the sustainability of econom-ic growth. The state strives to raise agricultureto a qualitatively new level by increasing thecompetence of managers and entrepreneurs,updating the production base and expandingaccess to new technologies and know-how.

What are your strategic plans and goals for 2019and beyond?

An important strategic plan is thedevelopment and implementationof a long-term strategy based oninternational standards. For this,the bank works closely with KPMGconsultants. Our experts also con-tinue to actively explore the usefulexperience of leading advanced for-eign banks such as Ziraatbank(Turkey) and Sberbank (Russia).The new strategy will take into

account trends and forecasts of eco-nomic development in the horizon ofthree to five years. By 2021, the bankexpects to double its total volume ofassets, including loans for all cate-

gories of customers, compared with 2018.Of course, our active credit policy will be

accompanied by the introduction of modernrisk management systems to monitor thebank’s financial stability. Developing newbanking products and services for a wide rangeof corporate and retail customers is an impor-tant task for the bank. Our goal is to becomethe best bank for the public and business.Improving IT systems, digitising banking

operations and providing online services areamong the most important goals in the bank’slong-term strategy.Special attention will be paid to our HR policy.

The liberalisation of the country’s markets, thegrowth of openness of the economy and finan-cial system for the world market make it neces-sary to invest in raising the qualifications andskills of our bank’s staff and management. l

www.agrobank.uz

S P O N S O R E D B A N K I N G R E P O RT A G R O B A N K ¬ 23EBRD EDITION THURSDAY MAY 9, 2019

Asset Liabilities Capital

Dynamics of financial indicators ($m)

1,243.1

977.5

265.6169.2

444.3

1,400

1,200

1,000

800

600

400

200

0

613.5

2017 2018


By Elliot Wilson

There was an era, not so very long so,when deregulation was de rigueur in

banking. Regulators strove to break downwalls harder and faster than their peers,with some seeking to be as invisible as pos-sible, while foreign investment, notably inmarkets emerging from the grip of commu-nism, was actively sought and put to goodwork. Across central and eastern Europe, huge

swathes of countries’ banking sector cameunder the control of mostly western Euro-pean lenders, from Italy, Austria, Germanyand the Benelux countries. In June 2018,Raiffeisen Bank noted that while the overallmarket share of foreign lenders was inchinglower, after peaking in 2006, they stillexerted an unusually high level of controlacross the CEE region. At the end of 2017, according to data from

the Vienna-based lender, foreign institu-tions collectively owned over 80% of thebanking sectors of Albania, Romania,Bosnia and Herzegovina and the CzechRepublic, while in Slovakia, the share isclose to 100%. But most of the deals that sawWestern lenders crowd into the region werecompleted long ago. It has been years — adecade, perhaps longer — since a bankingsector in emerging Europe or Central Asiaflung open its doors to foreign investors. But very quietly, a question is being

asked: will Uzbekistan be next? It is notsuch an outlandish idea. Until Islam Kari-

mov, a dictator who jailed opponents andbrooked no dissent, passed away in 2016,the country’s financial sector was all butoff limits to outsiders. Few expected his suc-cessor, Shavkat Mirziyoyev, to be any dif-ferent: after all, he was after all part ofKarimov’s inner circle, having been primeminister since 2003.

NEW BROOMYet the new president surprised everyoneby reaching out to financial investors, for-eign lenders, and multilaterals. The EBRDwas invited back in after a decade’s absenceand quickly got to work, extending credit tolocal banks in order to spur private sectorcredit growth. Funding also flowed in fromthe Asian Development Bank (ADB) and theWorld Bank and its private sector arm, theInternational Finance Corporation (IFC). In September 2017, Mirziyoyev lifted

exchange restrictions on the Uzbek som,devaluing the currency by 90%. At a stroke,that eliminated a key obstacle to foreigninvestment, and brought the official rate inline with the prevailing rate on the blackmarket. Capital controls were eased, albeitpartially, and in February 2019, the countrycelebrated a much-coveted double-first, bysecuring its inaugural sovereign credit rat-ing, and printing $1bn worth of Eurobonds,which it marketed and sold, with consider-able success and no little fanfare, to inter-national investors. Foreign direct investment started to flow

in. That process has been hesitant: some ofthe world’s most valuedcorporate brands, accus-tomed to posting profits inthe toughest conditionsand markets, have beenbadly burned in the past.But it seems inevitablethat Uzbekistan will strikean abundance of deals inthe years ahead, enablingforeign mining and energygiants from London, Mel-bourne, Beijing and Rio deJaneiro, to tap into its vastreserves of energy andminerals. If Uzbekistangets it right, the partner-ships it strikes will benefiteveryone. The banking sector

looks set to open up too. True, the govern-ment is still “heavily involved in the econ-omy, especially in banking”, Moody’s saidin a credit opinion on the sovereign, pub-lished in February 2018. State-run banksare overwhelmingly predisposed to chan-nelling valuable capital to state-run firms,as is the case not just in Central Asia, butin other big economies like Russia, Chinaand India. Meanwhile, the few local private sector

lenders that do exist, while ambitious, arehamstrung by a paucity of capital and fund-ing. Hamkorbank, the largest of its kind inUzbekistan, a well-run outfit that focuseson SMEs and micro-lending, posted totalassets of just UZS5.43bn ($640,000) at theend of 2017, its financial records show. But there is little doubt that the sector is,

slowly but surely, opening its doors to for-eign investors. The ADB owns an 11.05%stake in Ipak Yuli Bank, a joint-stock com-mercial lender founded in 1990 that employs1,700 staff across 16 branches. In November2018, Ipoteka Bank asked the IFC to planand oversee a complete overhaul of its oper-ations and strategy. And in November 2018,Zurich-based impact investor responsAbil-ity bought half of the IFC’s 15.4% stake inHamkorbank.TBC Bank, Georgia’s largest commercial

lender, has also entered the fray, securinga licence to operate a mobile banking serv-ice called Space, with the aim of becomingan onshore leader in the digital space. Nextup, TBC aims to open physical branches inthe country’s leading cities. And in 2018,Sturgeon Capital, a London-based invest-ment manager that specialises in buyingassets in frontier markets along the NewSilk Road, bought a 39.6% stake in UniversalSug’urta, an insurer that owns a little under10% of Universal Bank, a local joint-stocklender founded in 2001. “If you look at the overall data, it is still

astonishing how little exposure foreignbanks have to the country — around $4bnin total funding and loans,” says GunterDeuber, head of economics, fixed incomeand foreign exchange research at RaiffeisenBank. “It’s next to nothing. But it haschanged and it continues to change. Theoverall exposure is increasing. This usedto be an isolated market, but across thebanking sector, the feeling is that Uzbek-istan is really starting to open up.” GM


Uzbek banks open doors to foreign moneyAfter being off limits to foreign investors for many years, Uzbekistan has raced to catch up for lost

time by seeking investments by European banks and international financial institutions

24 BANKING

“This used to be anisolated market,but across thebanking sector, the feeling is thatUzbekistan is reallystarting to open up’ — Gunter Deuber, headof economics, fixedincome and foreignexchange research atRaiffeisen Bank



Index of transaction transparancy8.0 7.0 7.0 5.0Index of manager’s responsibilty3.0 5.0 9.0 5.0Index of shareholders’ power 6.0 6.0 4.0 8.0Index of investor protection5.7 6.4 6.5 6.0

Country comparison for the protection of investors

Doing Business – latest available data

Sou

rce:

San

tand

er

UNCTAD – latest available data

FDI Inward flow (million USD) 66 133 96

FDI Stock (million USD) 9,023 9,156 9,252

Number of greenfield investments 18 23 10

FDI Inwards (% of GFCF) 0.3 0.3 n/a

FDI Stock (% of GDP) 13.6 13.5 n/a

Foreign direct invesment 2015 2016 2017

Uzbekistan Eastern Europe & CEE United States Germany


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GM EBRD 19 _Ads.qxp_1_sxx_ 03/05/2019 15:12 Page 7

By Elliot Wilson

When talk turns to cities or states thatlie at the heart of regional or global

trade, certain names and places spring inex-orably to mind. In the late 20th Century,Germany, Japan and the United States dom-inated global trade. Before that, it was theturn of the commercially oriented BritishEmpire. Receding further into antiquity thenames of Athens and Aden, Calicut andColombo, Siraf and Singapore spring tomind. Then of course there is China, thesovereign giant that dominated global tradeuntil the 18th Century and looks ready todo so again. Yet such lists tend to overlook a region

and more specifically a country that formore than 16 centuries lay at the crossroadsof commerce. Between 130 BCE, whenChina’s Han Dynasty formally opened traderoutes to the West, and 1453 AD, when theOttoman Empire closed them, the Silk Roadwas the greatest trading network the worldhad ever seen. Paper, spices, gunpowderand, naturally, silk, flowed west from Chinaand the littoral states of the Pacific, whilenew technologies like glass-making,invented in the Islamic world, spread east.The old Silk Road wasn’t a point-to-point

affair: it ruptured and reconnected multipletimes along its route, interconnecting withkey rivers: the Indus in modern-day Pak-istan, and the Tigris and Euphrates, whichempty into the Persian Gulf. But at the heartof the Silk Road stood a handful of tradinghubs, rich oasis-cities like Bukhara,Samarkand, Fergana and Andijan, alllocated in modern-day Uzbekistan, a coun-try with a troubled and turbulent past that,if all goes to plan, it hopes to transform intoa bright and brilliant future.

HERMIT STATETo understand how far Uzbekistan hadfallen off the trade map, it is important tounderstand its recent history. After the dis-solution of the Soviet Union in 1991, itdeclared independence but, unlike someregional sovereigns, notably the moreexternal-facing Kazakhstan, it shrank intoitself, choosing to fear rather than embracethe outside world. Under Islam Karimov, atyrant-president who ruled with an ironfist, it became Central Asia’s hermit state,regularly ranked low by democracy watch-dog Freedom House alongside North Koreaon issues such as political freedoms andcivil rights. Most foreign investors wisely gave it a

wide berth, and Uzbekistan slowly and sys-tematically fell behind its regional peers.According to data from Unctad, foreigndirect investment as a share of gross fixedcapital was 6.8% in the three full yearsbefore the global financial crisis of 2008 —a time when the price of everything fromcoal to copper to oil and gas, resourcesfound in abundant supply beneath Uzbek-istan’s rich soil, were going through theroof. Compare that with Kazakhstan, whereFDI as a share of gross fixed capital, duringthe same pre-crisis period, came in at 26.9%. Yet for a long time, that was as good as it

got for political leaders in Tashkent. Inwardinvestment fell steadily through the post-crisis era, hitting a nadir in 2017, whenUzbekistan attracted just $96m in foreigncapital. The same year, just shy of $40bnworth of total FDI flowed into the five nationstates that make up Central Asia. In thequarter-century to the end of 2016, accord-ing to World Bank data, Kazakhstanattracted $52bn in total FDI, against just$9.6bn for Uzbekistan.

A NEW DAWNPerceptions began to change in 2016. In Sep-tember of that year, Karimov died and wasreplaced by long-standing prime minister

www.globalcapital.com/globalmarkets26 INTERNATIONAL TRADE & ECONOMIC RELATIONS

© W

u Hong/Po

ol via Reuters



The heart of the New Silk Road


Shavkat Mirziyoyev. The new presidentquickly got to work, pushing throughreforms that included easing visarequirements and making the Uzbek somfully convertible. Azim Akhmedkhadjaev,chair of the state committee for invest-ments, said it promised to usher in a “newepoch… of intense development”.In the wake of the presidential elec-

tions of December 2018, Mirziyoyevworked hard to burnish Uzbekistan’sbadly tarnished image, meeting corpo-rates and investors, and leading policy-makers in Delhi and Beijing, Tokyo andWashington. He applied to restart talksto join the World Trade Organisation,stalled for a decade, and embarked onlucrative investment trips to Russia,India, China and the United Arab Emi-rates. Seven special economic zones werecreated, offering favourable tax breaksto investors.The EBRD re-opened its office in

Tashkent after a decade’s absence fromthe country. Since September 2017, theEuropean multilateral has signed andstarted 23 onshore projects, financinghotels, power stations and wastewaterfacilities, and extending credit to locallenders including Ipak Yuli Bank, IpotekaBank and Davr Bank.

Mirziyoyev is peering east and west inhis quest for everything from workingcapital to institutional and geopoliticalsupport. This makes good sense. To theeast stands China, whose Belt & Road Ini-tiative (BRI), also known as the New SilkRoad, aims in the long-term to convey bil-lions of dollars of goods a year (priced,China hopes, in its currency, the ren-minbi) overland by road and rail betweenEast Asia and Europe. For Uzbekistan’s president, the initia-

tive could not have arrived at a bettertime. China’s desire for the bulk of itstrade to bypass the US-controlled Straitof Malacca works to Uzbekistan’s favour.The New Eurasian Land Bridge and theChina-Central Asia-West Asia EconomicCorridor, two of the BRI’s chief traderoutes, pass through Uzbekistan: the for-mer officially terminates at the Dutchseaport of Rotterdam, while the lattercomes to a full stop on the shores of theMediterranean. For both routes to oper-ate at full capacity, China knows therecannot be any missing links.That explains its drive to channel cap-

ital into a host of key infrastructure proj-ects across the country. A new and fullyelectrified $5bn rail line linking westernChina with Tashkent is already under-

way, the first phase of which is funded bya $400m loan from the Export-ImportBank of China (Chexim). The two coun-tries are working on a host of other proj-ects, ranging from water management tologistics to astronomy.In June, Mirziyoyev is slated to attend

the next Shanghai Cooperation Organi-sation summit, which brings together theleaders of China, Russia and the CentralAsian states, and is set to take place inTashkent for the first time.Some nation states, fearing the conse-

quences of rising levels of national debt,are reluctant to accept funding fromChexim and China’s other big develop-ment lender, China Development Bank,but so far at least, Uzbekistan, a countrylong on ambition and short on high qual-ity infrastructure and investment part-ners, is not one of them.

LOOKING WESTThen there is the vast single market atthe western end of the Belt & Road. InFebruary, Uzbekistan and the EuropeanUnion held the first round of talks on anEnhanced Partnership and CooperationAgreement, which aims to boost two-waytrade with the EU.Later this year, Mirziyoyev is sched-



INTERNATIONAL TRADE & ECONOMIC RELATIONS 27SPECIAL REPORT: UZBEKISTAN

After decades of self-imposed isolation, Uzbekistan is embarking on a range of projects with

the help of Chinese assistance — and finance — to slowly start to stitch a recently remote

country back into the global economy

China, history tell us, is one ofthe most inventive of

countries. Over the centuries, ithas given us everything frompaper to gunpowder, tea to silk,and the compass to movable typeprinting. But perhaps no inventionis more relevant in the moderneconomic and financial world thanthe special economic zone (SEZ).

The secret to their success liesin context. China was judiciousfrom the outset, setting out amaster plan but infusing it withenough institutional flexibility. Itsmore advanced cities (Shenzhen,Shanghai) started the ball rolling,

focusing on heavy manufacturing(clothes, shoes, plastics).

As these SEZs moved upstreaminto higher-margin goods andservices (robotics, AI,biotechnology), old-stylemanufacturing moved inland, tosecond or third-tier cities, or,increasingly, overseas. China wascareful not to build too manySEZs, thus avoiding a surfeit ofprice competition, but it promisedto move heaven and earth to keepits key investors happy, andusually delivered.

Foreign corporates set downproductive roots, often for

decades. Developedand developingnations, recognisingthe model’s simple,elegant effectiveness,sought to replicate it.

Now, Uzbekistan, afast-growing countryrapidly opening up tothe outside world, hasjumped on board. SEZs of all typesand sizes are springing up acrossthe Central Asian state, with theaim of sucking in foreign capitaland giving the country’s 33mpeople a better and richer life. InOctober 2018, president ShavkatMirziyoyev set out plans to buildseven special zones dotted aroundthe country, including an SEZ inSirdrayo, an area located between

Tashkent and Samarkand, thatwill offer corporate tax breaks,and free investors from the costof paying a land tax. Other specialzones, in Tashkent, Samarkand,Bukhara and the eastern Ferganavalley, are springing up, focusingon industries including logistics,agribusiness, light industry,pharmaceutical production andtourism.—E.W.

Zones of influence

Syr Darya river crossing, Sirdrayo

Uzbekistan is opening up fastfinancially andeconomically, withforeign portfolioinvestors, notablyfunds that specialisein unlockinginvestable assets in frontier markets,taking their first,tentative onshoresteps


uled to visit Belgium and Switzerland. Hisadministration continues to ease travelrestrictions on tourists and business trav-ellers. In February 2019, Uzbekistan said itwould allow visa-free travel to the countryfor visitors from 45 countries, including theUK, Italy, France, Germany, Singapore,Japan, and Austria.An e-visa scheme introduced in 2018 will

be extended in the second half of the yearto cover nationals from 76 countries andwill permit double and multiple entries —a boon for regular business travellers. Itseems to be working: according to data

from the foreign affairs ministry, 5.3m peo-ple visited the country in 2018, more thandouble the previous year’s figure of 2.6m. Air travel, once costly and rare, is boom-

ing as the sector opens up. Uzbekistan Air-ways, the national flag carrier, is addingnew routes to Europe and Asia, andexpanding its roster of Airbus A320s andBoeing 787 Dreamliners.In 2017, the president inked a $250m loan

from Export-Import Bank of Korea, tofinance the construction of a new terminalat Islam Karimov Tashkent InternationalAirport. Set to open in 2021, it will be able to

process 3m-4m passengers a year andaccommodate up to 36 aircraft. Plans are alsounder way to convert Tashkent-VostochnyAirport, a military-and-cargo facility to theeast of the capital, into a business aviationhub by 2020, a project slated to cost $150m. Thanks to projects like these, and dozens

of others either planned or pending, a once-isolated country is slowly being stitchedtogether. Global mining and energy firmsfrom Europe, Asia and the Americas areengaging with the government, with theaim of forging joint ventures with leadingcorporates, and of exploiting vast reserves

www.globalcapital.com/globalmarkets28 INTERNATIONAL TRADE & ECONOMIC RELATIONS



For decades after the collapse ofthe Soviet Union, Russia’s

influence in Central Asia endured.Then as now, Russia saw the areaas part of its “near-abroad”, ornatural sphere of influence. Itmaintained a strong militarypresence in the likes of Uzbekistan,and financed projects aimed at,among other things, cuttingpoverty and fortifying society. The Collective Security Treaty

Organisation (CSTO), anintergovernmental military alliancefounded in 1992, may have beenregional in theory, but it washeavily reliant on Russian mindsand money. In 2014, Russiaunveiled the Eurasian EconomicUnion (EEU), in the hope ofpermanently binding the regiontogether, economically andfinancially. Russian influence remains, but

there is little doubt it has wanedsharply in recent years, acrossCentral Asia in general, and morespecifically in Uzbekistan. WhenIslam Karimov, a hard-linedictator, died in 2016 and wassucceeded by current presidentShavkat Mirziyoyev, Russia wastedlittle time reminding the new guy

who was boss. One of Mirziyoyev’sfirst official trips abroad was toMoscow, where he signed a slew ofenergy, food and military dealsworth $15bn. Yet Mirziyoyev has been more

than willing to tread his own path.His predecessor withdrew from theCSTO in 2012, and the currentpresident has evinced no desire tore-engage militarily with Russia.Nor does he show any wish to jointhe dead-in-the-water EEU, apaper tiger of a multilateralproject. Russia’s dilemma is exacerbated

by the fact that there is now amore powerful and ambitioussuperpower operating in its ownbackyard. Regional sovereigns thatonce instinctively turned to Russiafor funding and protection, nowcourt China, coveting itsdiplomatic strength and seeminglylimitless capital reserves.Chinese development banks,

operating under the aegis ofpresident Xi Jinping’s flagship Belt& Road Initiative, are financingand facilitating much-neededinfrastructure, building airports,highways, and new rail lines. InNovember 2018, while attending

the second Belt & Road Forum inBeijing, Mirziyoyev revived plansfor a high-speed railway linking theeastern Uzbek city of Fergana,with Xinjiang in western China. Afew months earlier, he returnedfrom his maiden overland voyageto the People’s Republic, havinginked dozens of deals worth $23bn,spanning sectors from oil refiningto power plants, and chemicals toagriculture. Once the region’s primary

trading partner, Russia now rankssecond or lower in many markets,Uzbekistan included. The countryposted exports of $11.5bn in 2017,according to data from the CIAWorld Factbook, of which morethan half, mostly in the form ofenergy and minerals, was shippedwest to Switzerland and east toChina, with Russia accounting for atenth of the total. In 2017, Chinaovertook Russia, to become, for thefirst time, Uzbekistan’s largestsource of imports.

ECONOMIC WINTERThe long, slow decline in Russianinfluence is easy to explain.Russia’s economy grew by anannual average of 0.4% over the

half-decade to the end of 2018.Events such as the 2014annexation of Crimea and thesubsequent rouble crisis acted as adestabilising force in a regiondesperate for financial, economicand political stability. Westernsanctions did not fatally undermineRussia, but they did remindregional nation states likeUzbekistan that Russia wouldalways march to the beat of itsown drum.By contrast, China, with its

constant and comfortable refrainof “trade and more trade”, came toappear to be a far more reliablelong-term commercial partner.“China’s Belt & Road Initiative iseverywhere in Central Asia,” notesGunter Deuber, head of economics,fixed income and foreign exchangeresearch at Raiffeisen BankInternational. “You see it in tradeand cropping up in FDI data acrossthe region, and the stark truth isthat Russia has completely lostout. Central Asian states willalways seek to manage the balanceof their relations with bothcountries, but China matters farmore these days and Russiamatters far less.”—E.W.

Russia wanes, China rises


of energy, metals and cotton. Better infra-structure, again, is key to its success.

IN FROM THE COLDUzbekistan is opening up fast financiallyand economically, with foreign portfolioinvestors, notably funds that specialise inunlocking investable assets in frontier mar-kets, taking their first, tentative onshoresteps. The Tashkent stock market’s freefloat is a mere $300m, but it is set to growas more firms, in the private and the publicsector, sell shares to local and foreign insti-tutional investors.

A key moment in the country’s capital

markets development took place in Febru-ary, when the Republic of Uzbekistan sold$1bn of Eurobonds to internationalinvestors; leading local corporates are setto follow suit, with oil and gas groupUzbekneftegas tipped to print its inauguralcorporate bond by the end of 2019.

And while foreign lenders are in mostcases barred from buying stakes in Uzbekbanks, those restrictions are widelyexpected to be removed or eased in the com-ing years.

Looking ahead, there are many good rea-sons for investors to put their money towork in the Central Asian state. China is

ploughing untold capital into infrastructureprojects that will link Beijing with Europevia one of the youngest and fastest-growingeconomies anywhere in the developingworld. In its latest World Economic Out-look, published in April 2019, the IMF tippedeconomic output to expand by between 5%-6% every year through the mid-2020s, andpointed to a host of other positive macro-economic signs, including narrowingdeficits and easing inflation. It seems thatafter years of self-imposed isolation, Uzbek-istan is finally, to the delight of globalinvestors, corporates, lenders and policy-makers, coming in from the cold. GM



INTERNATIONAL TRADE & ECONOMIC RELATIONS 29SPECIAL REPORT: UZBEKISTAN

Three years of wide-ranging reforms havetransformed Uzbekistan into one of the

world’s most dynamic and fastest-growingeconomies.

Since 2017, Central Asia’s most populousstate has jumped 13 places in the World BankDoing Business rankings, while February sawthe successful placement in London of thefirst Uzbek sovereign eurobond.

The change in business climate has createdunprecedented opportunities forUzbekistan’s small and medium-sized enter-prises (SMEs), which are driving develop-ment in sectors from agriculture to tourism.

As an established leader in SME banking,Ipak Yuli Bank is ideally placed to takeadvantage of this trend.

Founded in 1990, Ipak Yuli Bank hasgrown rapidly to become the

third-largest private sectorlender in Uzbekistan. With a

network of 16 branchoffices, 49 express centres

and 245 ATMs across eight regions, it offersexcellent access to the country’s young andrapidly growing population of 33.3 million.

Ipak Yuli Bank has an existing loan portfo-lio of $323m, with SMEs accounting for morethan 74% of the total.

Over the next three years, the bank’s share-holders plan to increase the total loan portfo-lio three times up to $1bn, primarily throughincreases in SME lending.

Key growth areas include lending toagribusiness, trade finance, green financing,micro lending, and the promotion of bankingproducts for women entrepreneurs.

This expansion will be partially funded bycredit lines from Ipak Yuli Bank’s long-terminternational financial partners, includingFMO, KFW, EBRD, IFC, Commerzbank,World Bank, etc.

The bank will also be supported by one of thelargest shareholders, Asian Development Bank,which acquired a stake in the bank in 2013.

Other shareholders includes a clutch of

strong local and international financialinstitutions as well as nearly 700 smallerfirms and individuals. Ipak Yuli Bank hasbeen listed on the Tashkent Stock Exchangesince 2007.

The bank also boasts professional andhighly experienced management, and iswidely recognized as a leader in Uzbekistanin corporate governance and transparency.

The 2022 development strategy will bebased on strong fundamentals. Last year,Ipak Yuli Bank posted a return on equity of36.5%, making it one of the five most prof-itable banks in Uzbekistan.

Non-performing loans stood at just 1.8% ofthe total at the end of March, while an equityincrease of more than 50% since the end of 2017boosted the capital adequacy ratio to 14.1%.

Taking into account ambitious develop-ment plans, Ipak Yuli is considering seekingequity investment from insitutionalinvestors, who would share the SME supportand financial inclusion values of the bank.l

Ipak Yuli Bank serves Uzbekistan’s SMEsS P O N S O R E D B A N K I N G R E P O R T I PA K Y U L I B A N K

2, A.Qodiriy str., Tashkent, 100017, UzbekistanTel +998 78 140 6900/7800

[email protected] www.ipakyulibank.uz #ipakyulibankuz


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Special Report UZBEKISTAN - Capital Markets News, Data & … · 2019-05-08 · capital markets —$1bn of 5-year and 10-year ... private and public sectors have largely ... into a