The FT’s FDI Magazine recently published an article titled “Clouds linger over Uzbekistan’s investment landscape”. The article contains analysis for adverse incidents occured with few foreign investors in Uzbekistan – like Oxus Gold, Shindong Enercom’s golf club, or Steinert’s bakery.
FDI Magazine asked Mr. Ignatov for his opinion on the matter.
“Uzbekistan Government – as well as the Governments in all other FSU states – look at foreign investments as at the tool for solving these or those nationwide tasks, from banking liquidity support to development of the particular regions”, Mr. Ignatov said. “Being the novice players in the FDI market, the FSU Governments still sometimes do not want to accept the idea that foreign investors usually go to the markets and industries with the high profits – while a list of such industries rarely coincides a list of the industries where the Governments want to see the investments. Thus gold-mining today is an industry that doesn’t require large FDI anywhere – the national gold operators have enough financial strength (provided with the highest gold prices) to finance most of the local gold projects. The same is with other mining segments – high commodity prices make it possible to finance local projects with national money, not involving FDI”.
“At the same time large projects in less profitable industries with high initial investments – such as powertrain plant or gas chemical plant – are among the priorities for the Uzbekistan Government”, he continued. “Of course high prices for oil and gas make it possible for Uzbekneftegaz to finance any gas chemical plant project with own money – but in this case the country needs modern technologies, not only money.”
So the last “tensions” with foreign investors in Uzbekistan mining may be perceived as the “clumsy” attempt with the Government to redirect FDI to the less profitable industries that have higher importance from the officials’ perspectives.
Another important factor is if any national government stands behind particular FDI project. So the Central Asian authorities will never “disturb” the Chinese investors – as everybody in the area knows that even if the project is done with a private Chinese firm, the CPC always stands behind the deal; and no one of the local Governments wants to have tensions with the Beijing – the forces are too incomparable. That’s why it’s so important that the US Secretary of State visits the GM’s new facility or South Korean President signs the gas-chemical plant project. While AIM-listed companies making deals in the Central Asia are just one of the many private firms risking their own capital.
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