Tashkent, Uzbekistan (UzDaily.com) -- Opinion of international consultants of the Agency of State Assets Management of Uzbekistan Marek Grabarek and Weslav Kaczmarek on the creation of an investment company UzAssets. This was reported by the State Assets Management Agency of the Republic of Uzbekistan.

Thirty years of experience in conducting privatization processes in countries transitioning from a system of administratively managed economies to market economies allows us to formulate several key points that, apparently, have forever entered the canon of reflections on an efficient, developing economy.

One of them is the conviction that it is necessary to limit the role of the state in the economy and create conditions for the growth of the private sector in creating gross domestic product. Of course, one of the methods to increase the share and importance of the private sector in the economy is to start the privatization (sale) process of state enterprises to private investors.

There are several conditions that must be met in order for the privatization process to be carried out sequentially and efficiently. Among them, the most important one is the clear statement that privatization is a necessary mechanism for reforming the economy of Uzbekistan and enjoys the support of the President of the Republic and the government. We consider this condition to be fulfilled.

An equally important privatization strategy, which we understand as a set of goals and privatization actions that the government wants to implement, while trying to answer the questions:

- Why and why are we conducting privatization?

- Why is the privatization process important for the development of the economy of Uzbekistan?

- What benefits will this bring to citizens?

- What sectors of the economy will remain in state ownership?

Today there is no such document, but we believe that the Strategy for Management and Reform of Enterprises with State Participation of the Republic of Uzbekistan for 2020-2025, developed by the Agency for State Assets Management, represents both an in-depth analysis of the shortcomings of the state sector of the economy of Uzbekistan and a bold attempt to outline the directions of changes and ways of reforming enterprises with state participation.

Its approval by the Decree of the President of the Republic will be a serious step, but it should be added that, first of all, it provides tools for the development of specific actions that take place over time and will require coordination and decisiveness in implementation.

This is one of the reasons why we have taken with interest the information that the Cabinet of Ministers has adopted the concept of creating a special joint-stock company engaged in preparing for privatization and privatization of certain state assets.

In every country, decision-makers face a dilemma: what should the public sector look like and how should it be managed?

There is no universal recipe for a perfect solution. Some countries have decided to fully privatize, leaving the state with the role of regulator and budget redistribution. Another group is trying to strike a balance between the public and private sectors. Often these are hybrid solutions consisting in the privatization of most state-owned enterprises, and for the rest, important for the country state-owned companies, organizational structures are introduced that allow for efficient economic activity through commercialization and various types of investment funds.

One of the conditions for successful transformation of the economy is the liberation of enterprises from political influence on the nature of their entrepreneurial activity. The desires and decisions of political elites are not always accompanied by economic accounting and the rationality of managing business entities. After the declarations of the Uzbek authorities on reducing the share of the public sector in the economy and strengthening the private sector, it is time to act. And this means ensuring professional activity in several areas: asset management of companies, management of state assets, modern corporate governance. Uzbekistan needs to restore confidence in privatization, especially in the eyes of Uzbek entrepreneurs and foreign investors.

Each Head of State raises the question of how best to protect and use enterprises called the "family silver" of the economy. Such companies are located in every country and determine its identity and security. Many countries, as a solution to the problem, have established sovereign funds in which they accumulate their “family silver”. In addition to business goals in the form of multiplying the assets entrusted to them, there is also a goal associated with widely understood state security and protecting the interests of future generations. The fund is managed by professional managers. Most of these funds try to minimize the direct impact of politics and public administration on the decisions and operations of the fund. The mechanisms of public control over the activities of the fund are maintained using the institutions of supervisory authorities and the obligation to publicly report on the status and results of the activities of the fund. In the process of economic transformation, short-term goals are important - quick sale of low-profitable enterprises - and long-term goals - creating value of some assets with national identity, such as champions of Uzbekistan.

Creating an investment company UZAssets is a step in the right direction if we intend to transform it into a sovereign fund of Uzbekistan in the future, which will actively manage the country’s “family silver”.

This is the beginning of the path to a new management and privatization experience. In order not to be mistaken, the scope of this undertaking must be correctly selected and verified in action. UZAssets may be a pilot project for larger undertakings, such as a sovereign fund or private equity funds.

Let’s start with the company name. It sounds worthy, and it obliges. The company should become a showcase of Uzbekistan in the business environment, a source and example of good projects for potential investors. It should be associated with high quality assets and professional management.

UZAssets is also an opportunity for the development and training of young Uzbek managers. First, in a relatively small company, it is necessary to master all modern methods of business management, restructuring and reorganization of companies, developing strategies and identifying ways for their development - selling them to investors, creating joint ventures with investors, making these companies public by quotation on the Tashkent Stock Exchange. For these purposes, the knowledge and experience of many external companies and managers should be used.

UZAssets can become a good example for Uzbek companies on how to conduct their market activities in a competitive environment, use the opportunities of foreign markets and, above all, focus on the company’s economic indicators and its development. The success of this project will be determined not only by the competence of the managers managing the company, but also by the quality of the portfolio and the quality of managers of state-owned enterprises sent to UZAssets.

If the first goal of the company is the privatization of enterprises and the receipt of income from privatization in excess of the book value, then this "product" should be sold in the investors market. If the “product” is a non-selling one (constantly unprofitable, small-scale business), then the process of preparing the enterprise for privatization through restructuring of assets, financial restructuring, changing the organizational structure, financing modernization projects or even liquidating the enterprise for economic reasons is necessary. We strongly recommend that you do not send enterprises in a state of constant loss to UZAssets assets.

UZAssets can and should have a good ally in the banking sector in the form of a bank / banks, which will act as project partners. This increases the chances of its economic success. We associate the chances of supporting banks with the just adopted banking sector reform strategy. The tasks assigned to the banking sector will contribute to a reorientation of their activities from financing the public sector towards active participation in transforming the economy and promoting the private sector. We are convinced that it is in the private sector that the best customers of banks will be and this is the right way to improve the quality of their loan portfolio.

The activities of UZAssets should not be limited only to the sale of companies from its portfolio, as this is a rather passive attitude. Over time, UZAssets should become an active participant in the market, participating in active acquisitions in the enterprise market, restructuring enterprises in order to increase their value and prepare an attractive offer for potential buyers or even in development projects. She should pursue a conscious policy on the allocation of part of the funds of UZAssets to other business entities operating in the market.

The development strategy of UZAssets should consider whether the company itself can become an object of public offering on the Tashkent Stock Exchange. The company should have the right to raise capital from the financial market, the securities market to achieve its business goals. If after the first stage of the project the privatization of several companies is successful, it is worth considering the development of this mechanism of privatization and management, instructing him to create further closed investment funds in various sectors of the economy of Uzbekistan. This means entering a higher level of management and the market by creating a management company to manage investment funds.

The project undoubtedly has significant development potential, a program can be developed if the owner considers it reasonable.

We have at least three scenarios at our disposal:

Another increase in the authorized capital of UZAssets and making contributions in the form of shares of subsequent state-owned companies subject to privatization or requiring professional management, and ultimately the Company is transformed into a sovereign fund of Uzbekistan.

When developing a project, UZAssets may decide to create closed-end investment funds of non-public assets and, with the help of an established or external management company, manage / privatize subsequent groups of state-owned companies. These can be industry funds (companies from one sector) or vertical (companies closing the entire production cycle from raw materials to final products).

After completing the sales mission of the first group of companies, the company is liquidated.

We are staunch supporters of one of the first two scenarios. Someone will say - the guys are dreaming, they think Singaporean Temasek is copying.

I would like to answer, of course, taking into account all the proportions, in the words of President Kennedy when he announced the Apollo program:

“We decided to go to the moon before the end of this decade, and also to do many other things, not because it’s easy, but because it’s difficult, because this goal will unite and measure our best strengths and skills, because it’s a challenge, "which we are ready to accept, one that we do not want to put off, and one that we intend to win."