Brief overview of the Privatization program in the Republic of Uzbekistan
At the first stage of economic reforms (1992-1993) the privatization of state housing fund, small and medium enterprises of trade, service, local, light and food industries, automobile transport and construction formed 52268 owners of trade, consumer services, public catering, consumer cooperation entities, 95% of which did not have a legal entity status previously.
At the second stage (1994 - 1996), as a result of a wide-scale privatization of all branches of industry (except the basic ones) including agricultural complex the class of real property-owners was formed. It consisted of 2 million shareholders of privatized enterprises, 3 million owners of personal household plots, 85 thousand owners of private and small enterprises and 14 thousand of real estate owners.
The critical mass of the new class of real property-owners was created, managerial personnel were prepared, and the necessary experience for re-organization of large-scale basic enterprises was accumulated.
Since 1998 the privatization of industrial giants, subsidiary enterprises of fuel and energy complex, chemical, metallurgical and machine-building industries is conducted, and starting from 1999 it's carried out with wide attraction of foreign capital.
Denationalization and privatization in 2000 is characterized as a stage of individual approach in changing ownership form of largest, strategic enterprises of the Republic's economy with wide attraction of international technical and financial consultants.
The main attention in the process of denationalization is paid to provide for the most effective utilization of property, achievement of the best production indicators of privatized entities, wide attraction of foreign investors to this process and creation of the multi structural economy on the basis of privatized property.
Resolution by the President of the Republic of Uzbekistan dated July 20, 2007 No PP-672
"ON MEASURES AIMED AT FURTHER DEEPENING OF THE PRIVATIZATION PROCESSES AND ACTIVE ATTRACTION OF FOREIGN INVESTMENTS DURING THE YEARS OF 2007-2010"
With the aim of the cardinal reduction of the state-owned share at the charter funds of the enterprises belonging to the core strategic branches, rise of role of the private property in the country's economy, as well as the wide attraction of foreign direct investments for modernization, technical and technological re-equipment of production facilities, providing on that basis increase in the output of the high-quality, competitive, export-oriented products:
1. To approve the List of:
enterprises and sites, the state-owned assets of which are to be entirely sold into private property through public sales, in accordance with the Appendix No 1;
joint-stock societies belonging to the core branches of the economy, the state-owned stock packages of which, including the controlling ones are subject to sale through public sales on basis of decisions by the State Tender Commission under condition of the concrete investment obligations on modernization, technical and technological re-equipment of production facilities, increase in output of the high-quality, competitive, export-oriented products, in accordance with the Appendix No 2;
inactive and ineffective enterprises, including uncompleted construction sites possessing all the necessary engineering services' networks, at which unplaced state-owned assets are subject to sale at a "zero" purchase price in return for concrete investment projects and obligations on their overall financing on the account of new investors, in accordance with the Appendix No 3.
To allow the State Tender Commission, with participation of the State Property Committee of the Republic of Uzbekistan, upon the results of privatization of the enterprises and sites included into the Appendix No 1, to adopt decisions on their sales at a "zero" purchase price in return for the concrete investment obligations to be undertaken by investors.
The State Property Committee of the Republic of Uzbekistan, together with the ministries, institutions, economic management bodies, the Council of Ministers of the Republic of Karakalpakstan, khokimiyats of the regions and the city of Tashkent, shall within the one-month period get approved the time-tables and provide the performance of valuation, putting up for sale and selling of enterprises, sites and other state-owned assets included into the Appendixes No 1 - 3. Cabinet of Ministers of the Republic of Uzbekistan shall, within a one-month period at the established order, adopt the appropriate resolution on distribution of cash amounts received from sales of state-owned stock packages of the enterprises, which were previously transferred into the charter funds of economic management bodies (joint-stock and holding companies), included into the Appendixes No 1 and 2.
2. To consider expedient the application of the right empowered by the Decree by the President of the Republic of Uzbekistan dated July 20, 2007 No UP-3897 "On the additional measures aimed at the deepening of privatization processes of enterprises belonging to strategic branches of economy", on utilization of the "golden share" in respect of the enterprises of the cotton-processing and fat-and-oil industry, "Tashkent tractors' making plant" JSC.
The State Property Committee shall, at the established order, present to the Cabinet of Ministers the proposals on expediency of application of the special right of the state for participation in the managing process of the joint-stock companies ("golden share") in course of privatization of the enterprises included into the Appendix No2 of the present Resolution.
3. It shall be established that:
the state order for the property right on sites of state ownership sold at the "zero" purchase price, shall be issued after fulfillment by an investor of the undertaken investment obligations, foreseeing the modernization, technical and technological re-equipment of an enterprise and start-up of production of the competitive products and (or) services;
in case of non-fulfillment within the established periods of the investment obligations undertaken by the investors at the moment of privatization of enterprises or sites, the concluded sale-purchase agreements shall get annulled in the established order, with their consequent sale to new private owners under condition of their undertaking the concrete investment obligation on modernization, technical and technological re-equipment of production facilities and output of competitive products and services.
4. The order shall be established, in accordance with which at selling the state-owned assets with undertaking the investment obligations, the investments brought in by an investor in form of the free-convertible cash shall be placed at a separate bank account of an enterprise and shall not be subject to compulsory sale.
At that, cash amounts and property, brought in as fulfillment of the investment obligations, shall not be subject to taxation for income (profit), for social infrastructure development and land improvement, value added tax, and also, within the investment period, in accordance with the concluded sale-purchase agreement, shall not be collected in a forced order for repayment of the debts previously accrued by an enterprise.
5. To allow the State Tender Commission and the State Property Committee of the Republic of Uzbekistan the repeated putting for sale of state-owned assets having been sold in accordance with the previous privatization programs, related to which the sale-purchase agreements were annulled by reason of non-fulfillment of the obligations undertaken by an investor.
6. Cabinet of Ministers (Azimov R. S.) upon the results of privatization of the enterprises included into the Appendixes No 1 and 2 to the present Resolution, shall consider and adopt decisions on restructuring of the debts related to payments due to the state budget and the specialized state funds accrued by the enterprises, the state-owned stock packages of which are to be sold to potential investors with undertaking of concrete investment obligations, for the period of their implementation in accordance with the concluded sale-purchase agreement.
7. The State Property Committee of the Republic of Uzbekistan together with the Ministry of Justice and other interested ministries and institutions shall, within the one-month period, present to the Cabinet of Ministers the proposals on amendments and addenda into the legislation arising from the present Resolution.
8. To recognize invalid the Appendixes No 1, 2 and 3 to the Resolution by the President of the Republic of Uzbekistan dated July 10, 2006 No PP-407 "On deepening of the denationalization and privatization processes during the years of 2006-2008".
9. Control over the implementation of the present Resolution shall be put upon the Prime Minister of the Republic of Uzbekistan Mirziyoyev Sh.M.
President of the Republic of Uzbekistan I. Karimov
COMMENTS to the Resolution by the President of the Republic of Uzbekistan
dated July 20, 2007 No PP-672 "On measures aimed at further deepening of the privatization processes and active
attraction of foreign investments during the years of 2007-2010"
Privatization of enterprises and sites, being implemented in our country consequently and step-by-step since the year of 1992, provided elimination of the state-owned property's monopoly, formation of the private property as the determining form of the economic relations, created conditions for coming into being of the real owners' social class.
By the present moment the share of non-governmental sector constitutes at branches of: the industry - over 80%, construction - 88,4%, telecommunications - 96,6%, agriculture - 99,9%, trade - almost 100%.
Formation of the private property, rise of its role and share in the economy's structure constitutes the most important priority among the economic reforms being implemented in the country. As a result of the formation of the multistructured economy in the country, the private sector has become predominant at almost all its spheres, thus providing presently over 75% of the General Domestic Product (GDP).
Together with that, as mentioned by the President of the Republic of Uzbekistan Islam Karimov in his report made at the Cabinet of Ministers' meeting dedicated to the results of the country's social and economic development during the year of 2006 and most important priorities for deepening of the economic reforms during the year of 2007, "... we shall radically change our attitude and approaches to the cause of privatization, undertake decisive steps on putting up for auction sales the stocks of the enterprises belonging to the core branches of economy, such as chemical, electrotechnical industries, agricultural machines' building, construction materials' production and other ones...». Many critical comments were made concerning the situation in the republican stocks' and securities' markets. There are serious gaps and shortcomings at the system of corporate governance practiced at the privatized enterprises.
With the aim of radical solution of the abovementioned problems existing at sphere of privatization, the present Resolution by the President of the Republic of Uzbekistan, approving the renewed Privatization Program meant for the three and a half-year period, has been issued.
In accordance with the approved Program, during the period up to the year 2010 it is foreseen to sell:
entirely into the private property through the public sales - 994 enterprises and sites belonging to the non-production sphere;
state-owned stock packages, up to the controlling ones, of 363 enterprises and sites belonging to the core branches of economy (chemical, electrotechnical construction materials' production, fuel-energy industries etc.) - through tender sales to investors under condition of the investment obligations on modernization, technical and technological re-equipment of the production facilities and output of the competitive and export-oriented products;
substantial quantity of the inactive, ineffective enterprises and uncompleted construction sites at the "zero" purchase price - to the investors ready to undertake the obligations on their overall financing and implementation of the investment projects on reconstruction and expansion of the activity of those enterprises and sites.
Decisive steps have been undertaken aimed at significant liberalization of approaches to privatization of the enterprises belonging to chemical, electrotechnical automobile and aircraft making industries, as well as the enterprises of agricultural machines' building, silk and textile branches and telecommunications where the state maintains its participation exclusively at single enterprises, while selling out entirely the state-owned shares at the remaining enterprises.
The most important and principal provision of the present Resolutions by the President of the Republic of Uzbekistan contain the solution of the following issues:
the State Tender Commission is awarded with the right to adopt decisions on selling the enterprises and sites not having met the demand after several public sales, - at the "zero" purchase price in return for the concrete investment obligations;
cash amounts and property, brought in by the investors in course of fulfillment of the investment obligations, are not subject to taxation for income (profit), for social infrastructure development and land improvement, value added tax, and the cash investments made in foreign currency shall not be shall not be subject to the compulsory sale;
the order is established, according to which during the investment period, the investments brought in by the investors shall not be subject to collection in a forced order for repayment of the debts previously accrued by an enterprise, while the debts of an enterprise before the state budget and the state's specialized funds, at selling of its state-owned share to an investor undertaking investment obligations, may be restructured for the investment period defined by the sale-purchase agreement. Simultaneously norms are foreseen aimed at raising the investors' responsibility for the fulfillment of the investment obligations undertaken at privatization of an enterprise;
the Cabinet of Ministers is charged with the task to consider and adopt decisions on restructuring the enterprises' debts related to payments due to the state budget and the state's specialized funds at selling their state-owned shares to an investor undertaking investment obligations, for the period of their fulfillment in accordance with the concluded sale-purchase agreements;
within the framework of the approved Privatization Program the utilization of the "golden share" in respect of the enterprises in respect of the enterprises of the cotton-processing and fat-and-oil industry has been foreseen. Along with that, the State Property committee is charged with the task to present at the established order to the Cabinet of Ministers, the proposals on expediency of application of the "golden share" in course of privatization of other enterprises belonging to the core strategic industries of economy.
The issued Resolution by the President of the Republic of Uzbekistan "On measures aimed at further deepening of the privatization processes and active attraction of foreign investments during the years of 2007-2010" is not only the most important step aimed at further deepening of privatization, but also determines the strategic direction on the road of the consequent implementation of the economic reforms aimed at radical increase of the share of private sector at the economy of the country, wide attraction of the foreign investments into modernization and technical re-equipment of the facilities being the most important factor for the economic growth and integration of Uzbekistan into the international worldwide economic relations.
Press-release on the results of the first half-year of 2008 on the work performed by the State Property Committee of the Republic of Uzbekistan and the Market Infrastructure Organizations during the first half-year of 2008
The work performed by the State Property Committee of the Republic of Uzbekistan and the Market Infrastructure Organizations during the first half of 2008 was aimed at implementation of the most important priorities highlighted by decisions adopted at the Meetings of the Cabinet of Ministers held on February 8 and April 18, 2008, contents of the Resolution by President of the Republic of Uzbekistan dated July 20,2007 NoPP-672 "On Measures aimed at Further Deepening of Privatization Process and Active Attraction of Foreign Investments during the years of 2007-2010" as well as other governmental resolutions.
For the purpose of further perfection of the Legislative Basis, the State Property Committee had prepared and presented to the Cabinet of Ministers drafts of the Resolution by President of the Republic of Uzbekistan "On Measures aimed atenhancement of Private Owners' Responsibility for Stable and Effective Functioning of Privatized Enterprises" and Resolution by the Cabinet of Ministers "On Measures aimed atperfection of Mechanismsfor arrangement of Sales of the State-owned Assets at Stock Exchange and Over-the-Counter Securities Market and performance of control over fulfillment of Investment Obligations".
Work is being done on revision and presentation to the Cabinet of Ministers of drafts of the following Laws of the Republic of Uzbekistan "On Privatization of the State-owned Property", "În the Realtor Activity", "On the Mortgage Securities", "On State Registration of the Real Property Rights and Deals concerning It".
The State Property Committee continued its work on implementation of the Resolution by President of the Republic of Uzbekistan dated July 20,2007 NoPP-672 "On Measures aimed at Further Deepening of Privatization Process and Active Attraction of Foreign Investments during the years of 2007-2010", which determines cardinal reduction of the State-owned share sizes at Charter Funds of the Enterprises belonging to Strategic Sectors of Economy, attraction of Foreign Investments for modernization, technical and technological re-equipment of production processes.
35 meetings and talks with representatives of more than 70 foreign companies, those including potential investors from UAE, Russia, Japan, Switzerland, Korea, Kazakhstan, Italy, Belgium, Great Britain, Finland, Turkey and other states, 30 seminars and "round tables" on Privatization Issues were held with participation of international institutions and foreign countries' organizations.
At the State Property Committee's official www.gki.uz web-site, works on updating the Brief Company Profiles of Enterprises included into the Privatization Program for the years of 2007-2010 are being done. Lists and contents of Legislative and Normative-legal documents regulating Processes of: Privatization, De-monopolization of Economic Branches, State-owned Property Management and further perfection of Corporate Governance have been placed at that web-site as well. During the recent 6 months over 127 visits to the State Property Committee's web-site by almost 19 users were registered.
During the first half-year of 2008with sale-forecast for 156 State-owned Assets, in fact 174 (111,5%) were sold, the total deals' sum amounted 48,69 mln. US Dollars and 61,5 billion Uzbek Soums, at which the Investment Obligations undertaken by investors according to the signed Sale-Purchase Agreements, constitute 36,35 mln. US Dollars and 44,96 billion Uzbek Soums (74 percent of the total deals' sum). Within that volume 38 (21,8 percent) pieces of the State-owned Assets were sold through the Stock Exchange and 136 (78,2 percent) - at the Over-the-Counter Securities Market.
The State Tender Commission adopteddecisions on sale of 6 pieces of the State-owned Assets with the total Investments' volume of 40,17 mln. US Dollars and 0,23 billion Uzbek Soums, within that amount the Investment Obligations on modernization of the enterprises subject to privatization constitute 32,34 mln. US Dollars and 0,12 billion Uzbek Soums.
67 objects were sold through Auction and Competition Sales, including those with the Investment Obligations undertaken for the total sum of 2,0 mln. US Dollars and 10,08 billion Uzbek Soums (as compared with the similar period of 2007 - 2,3 folds increase in national currency has been achieved).
43 objects were sold at "Zero" Purchase Price with the Investment Obligations totaling over 34,45 billion Uzbek Soums (increase by 32,8 folds) and 1,01 mln. US Dollars (during the first half-year of 2007 the State-owned Assets were sold at "Zero" Purchase Price with the Investment Obligations offered only in national currency).
Within the 6 months the State-owned Property status of 237 State-owned Enterprises and Objects has been transformed into the Non-State one. On their basis 5 Limited Liability Societies (2,1 percent) were created and 232 were purchased by Private Owners (97,9 percent). The main part (103) of those objects belonged to Hokimiyats (local State Governance bodies), Ministries of: Health (42), Popular Schooling (15), Agriculture and Irrigation (10) and other economic branches. The biggest portion of privatized enterprises is represented by the City of Tashkent (59), Tashkent (43), Qashqadarya (20), Namangan (18) Regions.
By July 1, 2008 based on results of General Stockholders' Meetings, out of total 1259 Economic Enterprises with presence of State-owned Shares at their Charter Funds (including those previously transferred into Charter Funds of Economic Associations), such meetings were actually held at 1227 (97 percent) enterprises.
Together with the State De-monopolization Committee, Hokimiyats of Regions and the City of Tashkent, Regional Programs for Financial Rehabilitation of Previously Privatized Enterprises covering 882 economically inconsistent, low-profit and inactive enterprises were approved. Upon the results of analysis made over those enterprises' financial and production activity, Business Plans on their further development were elaborated.
As a result of implementation of measures determined by those Business Plans, investments in total volume of 43,2 billion Uzbek Soums and 78,7 mln. US Dollars were brought in on the owners account, 3346 new job-places were created, total production volume constituted 234,2 billion Uzbek Soums. At 102 enterprises works on their reconstruction and renovation are being performed. At 373 enterprises improvement of production and financial activity data has taken place, based on property of the previously sold enterprises, 17 new enterprises were created. Owners of 92 enterprises took a decision on sale of their enterprises to other potential investors.
General turnover of the Securities Market during the first half-year of 2008 constituted 315,76 billion Uzbek Soums. As compared with the similar period of 2007, volume of deals related to corporate securities has increased by more than 2,5 folds. At the formal Securities Market, stocks for the total amount of 71,02 billion Uzbek Soums and corporate bonds for the amount of 1,01 billion Uzbek Soums were sold. At the informal Securities Market, stocks for the total amount of 242,30 billion Uzbek Soums and corporate bonds for the amount of 1,43 billion Uzbek Soums were sold.