Regions and Countries

	Table of Contents
p. 13 of 19 BACK | NEXT I. Country Performance Assessment II. Country Operational Strategy III. Sector Strategies A. Agriculture B. Infrastructure C. Social Infrastructure and Environment D. Governance Dimensions of ADB Operations E. Gender Dimensions of ADB Operations F. Private Sector Development IV. Regional Cooperation V. Donor Activities and Aid Coordination VI. Cofinancing and Catalyzing External Resources VII. ADB’s Operational Program VIII. Economic and Sector Work Program IX. Local Cost Financing

Country Assistance Plans - Uzbekistan : III. Sector Strategies

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F. Private Sector Development

71. ADB's public sector operations are designed, where appropriate, to support improvement of incentives for private investment by enhancing the policy, legislative, regulatory, and institutional framework. ADB prepared a Private Sector Strategy for Central Asia in March 1998. The strategy proposes that ADB responds to the region's needs by (i) focusing on private sector operations that would be directly complementary to public sector programs; (ii) developing programs in those sectors that can have a direct impact on reducing the costs of transition, particularly in the social sectors; and (iii) seeking the maximum involvement of other investors or participants. The strategy recognizes that, given the existing programs of ADB and other funding agencies, there are likely opportunities for ADB to provide direct assistance to the private sector in (i) the financial sector, especially to encourage good corporate governance; (ii) infrastructure, especially in rehabilitation and operation projects; (iii) the company towns enterprise assistance; and (iv) social infrastructure, to help create private sector service providers.

72. The Private Sector Group (PSG) staff participated in the country programming and the COS missions in 1998 and 1999 and explained PSG assistance modalities and identified possible areas of assistance. Consistent with the Private Sector Strategy for Central Asia and the ADB's new Private Sector Strategy policy, the Government has made a request for expanding the scope of ADB assistance in certain specific sectors related to private sector development. In the new COS, private sector development is a key operational thrust. Especially with respect to small and medium enterprise (SME) support, ADB will continue to explore viable channels for providing financial assistance to SMEs through financial intermediaries and through capacity-building exercises directed at both the private sector and relevant public institutions. Investments could be made in non-bank financial enterprises such as leasing companies to address the funding needs of SMEs. Other forms of assistance such as providing business-oriented technical assistance, business planning, accounting, enterprise restructuring, post-privatization rehabilitation, and the development of entrepreneurs will be considered in cooperation with other international funding agencies.

73. The Government has initiated the privatization and its post-privatization support program. In addition, the National Investment Program has identified its strategies and sector focus (such as export oriented and import substitution industries; agro-based industry, tourism, mining, high-tech industries, construction, and telecommunications), and developed a legal and regulatory framework on foreign direct investment and national investment. The slow foreign direct investment into Uzbekistan largely reflects the overvalued currency and imminent fears of an impending devaluation, the highly restrictive exchange control practices, and attempts by the Government to micro-manage and regulate investment policies. ADB supports the Government's initiative to privatize over 270 manufacturers and banks, including some of the largest state enterprises and encourages the Government to inform potential investors and sponsors of ADB modalities available to support private sector investments. Some proposals such as Uzbekleasing have been submitted to PSG for review.

74. The Government has requested PSG's participation in the privatization of one of the banks and the telecommunication utility. These are currently being prepared for sale through the World Bank assistance. However, PSG would not consider any investment in Uzbekistan until the current account convertibility and the unification of the exchange rates issues have been resolved, and the country has recovered from the resulting fallout. This development will be particularly important when the Government considers the privatization of the larger utilities. Subject to the current account convertibility and the unification of the exchange rates, ADB could have a worthwhile private sector pipeline in Uzbekistan.

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