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Business Connections #11/2008

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Business Sector News and Information

Foreign investment into the economy of Uzbekistan

                Last year the volume of foreign investment into the national economy increased by 20 percent.
                According to the information from the Ministry of Economy, in the framework of Investment program there were 895.7 millions of US dollars of foreign investment attracted in 2006, which is 120 percent in comparison to figures of 2005.
                In 2006 the investment stream was directed mainly to oil and gas complex, electrical energy, non-ferrous metallurgy, mechanical engineering and light, primarily textile, industry. 34.6 percents of investment were directed to the sphere of fuel and energy complex, chemistry, metallurgy and mechanical construction. Then, agricultural and water industry, processing of agricultural and consumer goods  17.8 percent. Specific illustration of structural reforms conducted within country is anticipatory development of light industry. Components of this process are creation of organizations, equipped by modern technologies, creation of joint ventures with foreign partners.

Investment funds: results of the year.

Currently, there are 14 investment funds functioning in the Republic. Assets of investment funds are controlled by 12 companies.
                According to “Birja” newspaper, analysis of financial activities of functioning investment funds showed a slight rise of their total assets and financial results at the end of the year. The total cost of net assets of investment funds on January 1st, 2007 amounted at 3.5 bln soums (increase of 7.3% against previous year).
                According to the results of 2006, total profit, earned by the funds was equal to 777.3 millions soums (increase of 4.1% in comparison to 2005), and on the contrary total profitability of investment portfolio sharply decreased and amounted at 394.3 millions soums (by 35%). Only a few had a tendency of growth in profitability of investment portfolio. These are “Baraka”, “Kumkurgan Invest”.
                The main factor, which influenced the decrease of profitability of investment portfolios of funds, is the modification in the dividend policy towards reduction of joint-stock companies, belonging to the investment portfolios of funds. Another factor that has negatively influenced the decrease in profitability of funds is that under the tendency of fall in profitability of funds total expenses of funds have decreased only by 1.7% (4.5 millions soums). Some funds, according to the results of 2006, have sharply increased their expenses.
                Also, it should be noted that total net profit of funds, according to the end-year results, has increased by 35.1 million soums (6.9% increase) in comparison to 2005, and IF “AUM Kapital” has finished the year 2006 with loss of 1.4 millions soums, which may lead to the dissatisfaction of shareholders of the fund. It is not the first time when it could be stated that the management of companies of nearly all investment funds do not work sufficiently on diversification of investment portfolios, reduction of costs (expenses) of funds, collecting debt payments. 

Oil. Gas. Investment.

                The government of Uzbekistan in its inner-economy politics pays much attention to the future development in all spheres of industry. A special attention is given to fuel and energy complex and gas and oil and chemistry complex. Today Uzbekistan collaborates with a number of countries in the sphere of exploration and developing of hydrocarbon fields, by attracting foreign investment.
                At the instance of our readers, editors of “Business Connections” decided, starting from this issue of the magazine, to cover regularly the latest developments in this field.

“Gazprom” has obtained a license in Uzbekistan.

                The government of Uzbekistan gave Russian “Gazprom” license for geological survey of perspective gas-condensate field in the west of the country, as reported by
On January 2006 “Gazprom” and “Uzbneftegaz” have signed two agreements, stating the principles of geological survey of bowels of seven investment blocks of Ustyurtsk region and main aspects of agreement on division of production of fields in Urg, Kuanysh and Akchalak group of Ustyurtsk region in the west of the country.
                “Gazprom” plans to spend 260 millions of US dollars on geological survey in 2007-2011 and more than 350 millions of US dollars on filed construction in Urg, Kuanysh and Akchalak group. “Gazprom” committee of directors has adopted a program of investment during the nearest years, which in 2007 amounted to 20 billions of US dollars. According to the representative of “Uzbekneftegaz”, “Gazprom” obtained a license on geological survey of seven investment blocks of Ustyurtsk region. For these activities, a subsidiary of “Gazprom”  “Ustyurt-Zarubejneftegaz” was registered in Uzbekistan. In 2007-2008 years “Gazprom” will conduct exploration seismology and preliminary drilling in two stages, and in 2009-2011 years -survey of already explored fields. “Gazprom”, which requires gas of Central Asia to increase its export into Europe, anticipates increase in supply of raw materials via existing trunk pipelines from Uzbekistan to Turkmenistan. In 2002 “Gazprom” has signed an agreement on strategic partnership with Uzbekistan, which anticipates the increase of gas supply, and in 2003  framework agreement on joint exploration of fields of perspective Ustyurtsk region. In 2004 “Gazprom” and “Uzbekneftegaz” adopted a pilot agreement for the period of 15 years on development of gas field Shahpahta with the volume of investment equal to 15 millions of US dollars. Uzbekistan is one of two main natural gas getters in Central Asia  60 billions of cubic meters annually. Our country also participates in a number of large projects, related to exploration and extraction of hydrocarbons with Russian company “Lukoil” and Chinese CNPC.


                World demand for refined petroleum products supplied by Uzbekistan remains stably high, which is confirmed by the  results of export deals made at the exchange platform for trading goods in hard currency, Uzbek Commodity Exchange (UzCE) said.
                In particular, over 74,200 tonnes of different types of oil products were sold for export at the exchange last year, of them 66,7% (or 49,300 tonnes) is oil, and the rest is bitumen, heating oil, gatch, paraffin and kerosene. Industrial and motor oils account for more than 58% of oil traded at the exchange. In 2006, the total of 31,600 tonnes of industrial oil was sold for US$17,7 million. Motor oil sales made up 10,400 tonnes (US$5.8 million)
                In January 2007 the President of the Republic of Uzbekistan Islam Karimov conducted state visit to the Republic of Singapore. During the visit much attention was paid to cooperation in oil-and-gas industry. An agreement on cooperation in oil-and-gas industry, on creation of joint-venture on planning and manufacturing of automation systems and equipment, introduction of modern technologies was achieved between national company “Uzbekneftegaz” and a number of Singaporean companies. These agreements anticipate investment into 6 oil-and-gas projects amounting at 1.421 billions of US dollars. Thus, with participation of holding company “Temasek”, implementation of three projects amounting at 1.395 billion US dollars is planned. Out of this amount 300 millions of US dollars are directed to increase the volume of existing facilities in polyethylene production in Shurtansk gas-chemical industrial complex to 225 thousands tones a year, 1 million of US dollars on creation of production of synthetic diesel fuel on a basis of Ustyurt gas-chemical industrial complex with processing of 1 billion of cubic meters of natural gas per year.
Holding company “Termasek” will also participate in the project of exploration works in oil fields in Eastern Shurtan zone. According to preliminary analysis the cost of this project will be equal to 9.5 millions of US dollars. Another Singaporean company “CW Singapore Pte Ltd” together with “Societe General” bank anticipates joint realization of the project on construction of compressor station near Kungrat town, at the cost of 20 millions of US dollars.
                Chinese oil-refining company China Petroleum & Chemical Corp. (Sinopec) refused to participate in a mining project in Uzbekistan, estimated at 110 millions of US dollars, as reported by Gazeta.Ru with reference at Reuters.
                In summer 2005 state company “Uzbekneftegaz” announced that Sinopec would invest the money till 2010 in exploration and rehabilitation of lengthy developing fields in Ferghana valley in the east of the country. According to the government of Uzbekistan, after creation of joint-venture parties have not started the operations. “According to priorities it [project] is seen in the long run. The memorandum was planned but the project was not started. Here they [Sinopec] did not participate”, - was said.       
                The representative of Chinese embassy in Uzbekistan has confirmed this information. However, he has not commented on itSinopec is also unavailable for comments. According to the words of a government insider, with leaving of Sinopec, Uzbekistan will concentrate on other two projects in cooperation with another oil company of China  CNPC (China National Petroleum Corp.)

Bank news
Report of Asian Development Bank

                Asian Development Bank has published its 19th annual report on tendencies and perspectives of economy of the region from the standpoint of global changes. Uzbekistan is mentioned among those who have significantly moved forward in structural reforms in the sphere of banking sector and transformation of infrastructure, privatization of small objects, optimization of tax regime, improvement in the sphere of foreign investment and others.

IMF highly appreciates financial and economical politics of Uzbekistan

                International Monetary Fund (IMF) in overall highly appreciates financial and economical politics of Uzbekistan in 2005-2006 years.The Fund confirms this fact in information for publication in the upshot of regular annual review of Uzbek economy.
                IMF noted that according to official data a real increase in GDP of Uzbekistan exceeded 7 percents, balance of payment came to large positive value, gold and exchange currency reserves increased. According to the specialists of IMF, success was achieved, due to “significant correction of macroeconomic politics and favorable foreign-economic conditions”. During discussion of the results of the review members of committee of directors of IMF pointed out that future economical perspectives of Uzbekistan remain favorable. Also they stressed that for implementation of courageous middle-term program of economic growth, developed by Tashkent, the government needs to “restrain inflation. Strengthen intermediary functions of financial institutions and trust to banking system, improve business climate, including liberalization of trade and payments”.

Business Connections #7/2007

Business Connections #7

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