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Uzbekistan Airways is to be privatized, along with 620 state-owned companies and properties, as part of the Central Asian country’s transition to a market economy.

The wholly-owned state airline, as well as Uzbekistan Airports and Railways, are listed amongst 32 of the largest state-owned enterprises to be fully, or partially privatized in terms of a presidential decree issued on October 27, 2020, by President Shavkat Mirziyoyev. The privatization campaign, the country's biggest yet, is part of the government's broader economic reform program launched in 2017.

According to the decree, a department will be created in the Finance Ministry to oversee the transformation of large state-owned enterprises such as Uzbekistan Airways. The airline, as well as other state-owned enterprises, would be subject to the following deadlines:

  • by April 1, 2021, FY2019/20 financial statements would be submitted to the Cabinet for approval; and a financial recovery plan would be developed with the help of international consultancies;
  • by July 1, 2021, a modern corporate governance system would be implemented, involving procurement audits, management compliance, and anti-corruption systems. Supervisory boards comprising at least 30% of qualified international specialists would be also be appointed by July 1, 2021.

The Finance Ministry would develop a draft budget by February 1, 2021, and a three-year business plan by July 1, 2021. Relevant state agencies would consider issues affecting the competitive environment by December 1, 2020; and the Cabinet would approve roadmaps for the implementation of the transforms by January 1, 2021.

Although the size of the stake to be offloaded has yet to be revealed, in May, the Uzbek government said it might allow a “prestigious foreign company” to manage Uzbekistan Airways.

The Uzbekistan government’s reform agenda, supported by USD4.44 billion from the World Bank, currently focuses on a sustainable transformation to a market economy; reform of state institutions; and health and education sector development. In 2020, the World Bank also provided Uzbekistan with USD295 million in emergency financing to help mitigate the impact of COVID-19. While the pandemic tempered the country’s prospects for a quick recovery in 2021, Uzbekistan’s economic outlook nevertheless remained positive as Mirziyoyev's reforms continued to shift the economy toward greater resource efficiency and private sector growth, the bank said in its analysis of the country.

In terms of an agreement signed in January 2020, the World Bank was also advising the government on the modernization of the country’s civil aviation sector, including the preparation of a national aviation policy and development strategies for various segments of the aviation sector, in close cooperation with the Ministry of Transport, Civil Aviation Agency of Uzbekistan, Uzbekistan Airways, and Uzbekistan Airports. A key reform advised by the bank includes the unbundling of Uzbekistan Airways and the restructuring of the company’s core airline business. It also advised the government to establish an independent aviation policy-making body that would be separate from the safety regulator and to liberalize the country’s air-service agreements.

According to the decree, other large state companies to be privatized will include energy firm Uzbekneftegaz; gold and uranium miner Navoi Mining and Metallurgy Combinat; and the carmaker Uzavtosanoat.

Reuters reported the decree also listed 39 companies, including silver and gold miner Almalyk Mining And Metallurgical Complex, several metallurgical plants, and the Fergana oil refinery, where corporate governance would need to be tightened, and financial audits carried out to attract foreign investment.

The Uzbek government also planned to prepare 69 companies in the oil and gas, construction, chemical, winemaking, tourism, and other sectors for privatization and to sell all the shares at public auctions. The state's shares in a further 479 companies would be fully privatized.

Properties would also go under the hammer, including the State Security Service's former headquarters in Tashkent, the main KGB building in Soviet times. Uzbekistan's State Asset Management Agency would hold the first public auctions from November 1, according to the decree.

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