Uzbekistan seeks to privatise banking sector

TSAHKENT -- Uzbekistan last Friday (January 24) said it was planning to sell shares in banks to "strategic investors" as part of a drive to transform the country's outdated financial sector.

"Banks with partial government ownership will gradually be sold to strategic investors," President Shavkat Mirziyoyev said in a state of the nation address.

The Central Asian country's banking system was "10-15 years behind modern requirements", he said.

The move will happen "step by step", said Mirziyoyev, but he did not propose a time frame or the investor profile Uzbekistan would look to attract.

A state-dominated banking sector

The state's share of the banking system overall is more than 80%, according to the central bank.

Five out of 30 banks are fully state owned, and a further eight are 50% state owned.

The government has a stake in three foreign banks.

Uzbekistan will continue to make forays into international bond markets after a debut $1 billion (9.6 trillion UZS) issue last February proved successful, said Mirziyoyev.

Mirziyoyev has been credited with opening up the former Soviet republic to tourism and investment after more than a quarter of a century of isolation under his hard-line predecessor, Islam Karimov.

Badly needed reform

Observers agree on the need to shape up Uzbekistan's banking system.

"The Uzbek banking sphere is still in an embryonic stage," said Uzbek economist Shukurullo Mavlonov. "Under the rule of President Karimov, banks were unable to become independent financial institutions as other countries understand them. There was no market economy. It could take a decade even to match Kazakhstan's banking system. Services, capital, potential -- all of them are poorly developed. The [banking] market has no major foreign players, so banks don't feel any competition."

"State-owned banks in Uzbekistan do terrible work," said Tashkent resident Ozoda Nasimova. "I try never to go into them. You can't expect the services to be computerised. They do everything on paper, by hand. They have long lines and rude employees. Supposedly in recent years, they tried to conduct reforms, but I saw no changes. I think that privatisation is the right move."

[Maksim Yeniseyev contributed to this article.]