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‘
ABSTRACT
In the Uzbekistan capital market, the state has a significant role as regulator and principal
shareholder. The state actively participates in the capital market through its SOEs and banks that
issue, own, manage various securities, and render intermediary services in the financial market. As
well as the state sets rules to regulate market relations through authorized bodies that are also
responsible for the fairness of dispute resolution. Consequently, a high level of direct and indirect
state participation in securities market relations suggests the prevalence of general administrative
principles over market principles. In such conditions, one of the main tasks of implementing market
principles in the securities market and improve equity financing would be to reduce state share and
administrative methods. Thus, it is necessary to hold extensive and comprehensive reforms
underpinned by sound theory to get proper understanding and direction. In this regard, this chapter
provides an outline of the theoretical bases of state participation in the economy, an overview of the
state’s role and the extent of state ownership, an analysis of the main SOE problems, and provides
perspectives of future SOE reforms in selected CIS countries.
KEYWORDS
Market principles, SOE reforms, planned economies, economy and securities, liberalization and
privatization reforms.
INTRODUCTION
1. Outline of theories on state participation in
the economy
In general, the modern market economy
cannot exist without the state’s economic
State Role And Securities Market Development In Uzbekistan
Said Gulyamov
Doctor Of Law, Professor, Department Of International Private Law, Tashkent State University
Of Law, Tashkent, Uzbekistan
Otabek Narziev
Ph.D. In Law, Department Of International Private Law, Tashkent State University Of Law,
Tashkent, Uzbekistan
Sadoqat Safoeva
Candidate Of Law, Judge Of The Tashkent City Civil Court, Uzbekistan
Jahongir Juraev
Candidate Of Law, Judge Of The Tashkent City Administrative Court, Tashkent, Uzbekistan
Journal
Website:
http://theamericanjour
nals.com/index.php/taj
pslc
Copyright:
Original
content from this work
may be used under the
terms of the creative
commons
attributes
4.0 licence.
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activity. Especially during the last two
decades, the state’s presence in business
relations as a unique subject has only
increased.
For
instance,
according
to
Bremmer,
“governments,
not
private
shareholders, already own the world’s largest
oil companies, and control three-quarters of
the world’s energy reserves.” [1] In the late
70s of the last century, SOEs’ share in
developed countries accounted for about 7%
of GDP; in non-socialist developing countries,
almost 12%, and in planned economies, around
90% [2]. Despite the privatization movements
in the last three decades, SOEs still
significantly impact key industries of the
economy, market capitalization, investment,
and employment, especially in post-Soviet
countries. In such conditions, state presence
in the economy is a crucial issue that
generates fruitful discussion and controversy.
The recent history of the main discussion on
the state’s involvement in market relations
goes to the classics of economic theory (A.
Smith, D. Ricardo, et al.), according to which
the market economy should develop by self-
regulation, that is, without the involvement of
any external forces, including the state [3].
The
classical
model
assumes
minimal
intervention in the economy and is based on
the notion of Adam Smith whereby the state
is the ‘night watchman’ of a market economy.
Following this concept, the business produces
and consumes. The state is engaged in
protecting property rights, ensures the
observance of market principles, and strongly
reacts to the deviation of rules, up to the use
of force (law, court, army, police, and so on).
However, the crisis of the capitalist economy
and securities market crash in 1929-1933
marked the end of the free enterprise ‘era.' It
reflected the inability of the market system to
develop itself without state involvement.
The Keynesian model was presented as a
remedy for the economic crisis. It assumes
active and, as far as possible, maximum
government intervention in the economy to
minimize cyclical fluctuations, unemployment,
inflation, and loss of resources and products
of all market participants. In his ‘The General
Theory of Employment, Interest, and Money,
Keynes questioned the assumption that self-
regulation is automatic in a market economy
and justified the need for government
intervention in economic processes [4]. This
theory received a practical application in the
US economy (in the 50s) and brought specific,
definite results in economic activity. Later,
Keynes’s theory of state regulation formed
the basis of the economic policy of almost all
developed capitalist countries.
In the 1970s-80s, when excessive state
intervention in the economy was considered
responsible
for
slowing
down
the
development
of
social
production,
neoclassical economic ideas have again
become relevant and remain so to this day.
According to this doctrine freeing up markets
and reducing direct state intervention make
economies more flexible and creative. They
inspired liberalization and privatization in
many developed and developing countries
and even political revolution in many socialist
countries [5]. According to Chang, “despite
the continuous widening of their scope,
neoliberal reform programs have failed to
produce expected results”. Neoliberalism
failed in generating faster growth instead of
increased income inequality and economic
instability [5]. By the end of the 20-century
neoclassical theory was no longer dominant.
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Recent research suggests that globalization
has increased government sectors around the
world [6]. The latest tendency in the attitude
of the world’s largest economies to a
maximum usage of state leverages in
economic relations may change the further
direction of theories on the state’s role in the
marketplace.
2. Overview of the state’s role in CIS
countries
Almost three decades earlier, the state in all
CIS countries had an absolute role in market
regulation and economic activity. Around 80
years CIS countries experienced a centrally
planned
economy
and
administrative
command ruling in their economic, social, and
political life. During the command and
regulatory system, the state was the principal
buyer of products, the central monopolist,
and the exclusive distributor of resources,
financial means, equipment, and human
resources. Enterprises sought different ways
of access to these resources. Very often, the
situation developed so that some received
enough resources, sometimes in excess, and
others were deprived of them. In the absence
of competition, enterprises with resources
were not interested in their rational use, and
enterprises deprived of the necessary means
could
not
intensively
develop
their
production.
It seemed that the market economy could
change that situation, but despite the almost
three decades of reforms, most CIS countries
consider
liberalization
and
privatization
reforms very cautiously. As a result, today,
most CIS countries have dominant (i.e., more
than fifty percent of) state shares in their
economy and a tight market regulation
system. For instance, in Russia, by the end of
2015, the share of SOEs in the country’s GDP
was almost seventy percent, in Kazakhstan,
sixty percent, and in Uzbekistan, according to
official statistics, Around twenty percent [7].
Also, in all countries examined here, banks
dominate in the financial sector, and the state
share in bank ownership is around eighty
percent. This has great significance for the
further development of the securities market
in these countries, where banks play a
considerable role in market relations as
securities
issuers,
shareholders,
and
intermediaries.
As for the reasons of high state involvement in
the economy, several factors could be listed,
including
historical,
geographical,
legal/juridical,
political,
and
economic.
Historical elements relate to the heritage of
the centrally planned economy that was in
operation for more than a century. The
geographical aspect is explained through
natural resource abundance in the countries
examined. Usually at the initial stage of
development the management and extraction
of natural resources is the responsibility of
public entities rather than private ones.
Another main factor by which the dominance
of state regulation and state presence in the
economy in CIS countries is explained is
through legal origin theories. For instance,
several scholars in their numerous studies
found that civil law countries were associated
with a greater state ownership and regulation
than common law countries [8]. Political and
economic factors mainly relate to the weak
regulatory framework and the transitional
stage of the economy that is usual for
countries
with
identical
or
similar
characteristics. In other words, there will be
more demand for the state’s paternalistic,
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welfare, and social roles in the transition
period. However, the limits of the transition
period and state participation content may
differ based on a country’s features. To get a
picture of such features, an attempt to outline
the level of state ownership in the case of
Uzbekistan, Russia, and Kazakhstan is offered
below.
2.1. State ownership level in Uzbekistan
The state ownership level issue is one of the
puzzles that occur in studying the issue of
SOEs in Uzbekistan. This puzzle is mainly
caused by inconsistent data and statistics,
including from official sources, on the level of
state ownership. The analyses show that the
socially-oriented market economy and gradual
privatization
reforms
have
significantly
influenced SOE reform in Uzbekistan.
According to official statistics, the share of
state ownership in the GDP structure of the
country decreased from 41 percent in 1995 to
19 percent in 2017 (Figure 2).
Figure 2. Structure of Uzbekistan GDP by ownership form
Source: State Statistic Committee of Uzbekistan.
The above figures are based on the Report of
the Uzbekistan Statistics Committee, but
attempts to scrutinize the figures by checking
other sources, including official sources, give
rise to serious doubts about these figures'
reality and reliability. According to the State
Agency for State Property Management, in
the current period, the number of enterprises
with state participation is 2,965, the nominal
value
of state assets is equal to 111.4 trillion sums,
and their share in GDP is 55 percent [9]. An
attempt follows in the below to interrogate
the statistical data in order to understand the
real share of state ownership in the GDP of
Uzbekistan. First, an examination of the GDP
structure (figure 3) suggests that in 2016
almost half of the GDP relates to the services
sector, nearly one-third to industry, and about
18 percent to agriculture.
41.6
27.4
20.4
19
58.4
72.6
79.6
81
0
20
40
60
80
100
1995
2000
2010
2017
State
Non-state
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Figure 3. Changing dynamics of GDP structure of Uzbekistan
Source: State Statistic Committee of Uzbekistan.
The next step of the investigation is to look
inside the services sector and analyze its
structure. The following chart (figure 4)
demonstrates the main industries within the
services
sector
of
Uzbekistan,
where
transport services lead with around 40
percent of the share, trade covers more than
one-third of the services sector, almost one
fifth goes to finance, and about 10 percent
belongs to the communication services.
Moreover, were one
to dig deeper into specific service sectors, it
would appear that the state has a significant
share in each of them. For instance, in the
transport sector, airways and railways
facilities are entirely owned and managed by
SOEs, in the banking sector, almost 80 percent
of services and assets belong to the state
(figure 5), and in the trade sector, more than
65 percent of export accounts for SOEs or
government-related entities (figure 6).
Figure 4. Services structure of Uzbekistan GDP (2017)Source: State Statistic Committee of
Uzbekistan.
32.4
34.4
29.5
19.8
17.6
27.8
23.1
29.1
33.3
32.9
39.8
42.5
41.4
46.9
49.5
0%
20%
40%
60%
80%
100%
1995
2000
2005
2010
2016
Services
Industry
Agriculture
39%
35%
17%
9%
In percent of services
Transport
Trade
Finance
Communication
82
89
81
66
0
50
100
Assets
Loans
Capital
Depozit
State share in percent as of June 1, 2018
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Figure 5. State ownership in commercial banks of Uzbekistan
Source: Central Bank of Uzbekistan, Information on the leading indicators of commercial banks
activity as of June 1, 2018.
Figure 6. State share in Uzbekistan export (2016)
Note: Export volume in 2016 was USD 7.11 billion.
Going further on with seeking to verify the
figures on the state share in Uzbekistan’s GDP,
it is necessary to analyze the structure of the
industry sector. The following chart shows
that Uzbekistan’s industry sector is quite
diversified (Figure 7). However, in all sectors
of industry, SOEs have a significant share. For
instance, in the mining sector, one of the
largest companies is
Navoiy Mining
and
Metallurgical Combinat
, which is the primary
producer and exporter of uranium and
precious metals, including gold. Other giant
companies in the mining sector include
Bekobod Metallurgical Combinat
and
Angren
Metallurgical Combinat
in which the state
owns a significant share. In the ownership
structure of textile, chemicals, automobile,
electricity, and gas sectors, a similar situation
is witnessed.
Figure 7. Industry structure of Uzbekistan GDP
Source: State Statistic Committee of Uzbekistan.
40
10
6.5
4.4
4.1
In percent from export volume
Gold
Gas
Cotton
Ethylene Polymers
Radioactive Chemicals
10
15
7
8
15
11
In percent of whole industry, 2017
Mining
Textile
Chemicals
Metallurgy
Automobile
Electricity, gas
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Next, an attempt to identify state ownership
in the number of companies could also shed
further light on the question of state
involvement. By January 1, 2017, there are
213,089 acting companies (excluding farmers)
in Uzbekistan, 1.1% of which are unitary
enterprises totally owned by the state (i.e.,
the state holds 100% of their shares). The main
organizational-legal
form
of
operating
companies is that of Limited Liability Company
(LLC) – namely, 57% of companies (Figure 8).
There are only 2,302 large companies, which
cover around 1.1 percent of the total quantity
of acting businesses.
Figure 8. Classification of companies in Uzbekistan by their legal-organizational form (by Jan.1
st
of
2017)
Source: State Statistics Committee of Uzbekistan
The following table presents the summarizing
picture of ownership structure in the
companies, which are mainly JSCs, acting in
the
industry sector (table 6). From the table it is
clear that the state share in these JSCs,
including SOEs shares, exceeds 80 percent.
Table 6. State share in JSCs of Uzbekistan, by January 1, 2017
Structure of stock by nominal
price
USD billion
Number of JSCs
Share in %
State share in JSCs
2.78
158
73.01
SOEs share in JSCs
0.43
326
11.34
Total
3.21
484
84.35
Private sector share
0.6
175
15.65
Source:Concept of Development Secondary Securities market in Uzbekistan in 2017-2018
57
33.2
1.1
0.3
1.1
LLC
Private company
Family company
JSCs
Unitary enterprise
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By quantity, JSCs comprise only 0.3 percent of
all existing companies (figure 8), but by
financial status – they are much larger than
LLCs. According to legislation, the minimal
amount of charter capital of JSCs should be no
less than USD 400,000, while in the case of
LLC this amount is 40 times of minimum wage,
which will be around USD 920 [10].
The following chart demonstrates a change of
the quantity of SOEs in the last five years
(figure 9), where there has been an increase
both in the quantity of JSCs and LLCs until
2015, and a significant decrease in the
previous two years.
Figure 9. Change of SOEs’ quantity of Uzbekistan in the last five years
Source: State Committee of Uzbekistan for Assistance Privatized Enterprises and Development of
Competition.
Also, lastly, the agriculture sector, which,
according to official statistics, covers around
one-fifth of the country’s GDP (figure 3).
Despite several reforms and attempts to
diversify ownership in the sector, the state
remains the principal owner. According to the
Constitution of Uzbekistan, the land amounts
to national wealth, and, consequently, it is
outside the scope of privatization. The Law on
Privatization and Denationalization (1991) also
prohibits the privatization of land and related
resources. Farmers produce agricultural
products in the leased land, which at any time
and for any reason may be taken over by local
and central authorities. In most cases, farmers
do not have actual choice in terms of crop,
marketing, pricing, and selling of their crops.
Usually, local authorities administratively
order what kind of product/crop should be
sown, and
at what price it should be sold. In most cases,
authorities do not take responsibility for
selling the product that was grown by
administrative
pressure,
without
any
marketing analysis. Consequently, farmers
waste time and funds – that in most cases
were borrowed from state-owned commercial
banks –, and lose confidence. In sum, there is
absolute state ownership over the land in the
agricultural sector, which is the primary means
for the organization of business in that sector,
and there is actual state control over farmers’
activities.
302
333
346
139
553
570
644
553
855
903
990
692
0
200
400
600
800
1000
1200
01.01.2013
01.01.2014
01.01.2015
01.01.2018
JSCs
LLC
Total
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The scrutiny and interrogation of the figures
mentioned above concerning state ownership
in the GDP of Uzbekistan suggests the
presence of inconsistencies between official
data and other sets of data and statistics. For
instance, the recent Resolution of the
President of Uzbekistan ‘on Measures to
Improve the System of State Assets
Management, states that: “state-owned
enterprises and other legal entities with the
predominant share of state in the capital fund
play a significant role in the national economy,
occupying key positions in priority sectors,
primarily in the fuel and energy, agro-
industrial, mining, engineering, transport,
chemical
industry,
[and
in]
telecommunications”.
There are some enlightening conclusions in
the EBRD, US Government reports, and in the
ADB concept paper. According to the latest
EBRD country assessment, “the state
continues to play a dominant role in the
economy. Progress under the recently
renewed privatization programme has been
minimal”. The US Government Report of 2018
also mentioned SOE dominance in a range of
sectors
including
in
“energy
(power
generation and transmission, and oil and gas
refining, transportation and distribution),
metallurgy, mining (non-ferrous metals and
uranium),
telecommunications
(fixed
telephony and data transmission), agriculture
(cotton
processing),
machinery
(the
automotive industry, locomotive and aircraft
production and repair), and transportation
(airlines,
railways,
municipal
public
transportation)” A recent ADB concept paper
also mentioned that “SOEs dominate all the
important segments of the economy, and thus
leave little space for the private sector.”
However, as mentioned above, the recent
reforms suggest that the current situation in
Uzbekistan will no longer remain as it is. The
extent, intensity, and content of the intended
reforms may help mitigate SOE problems
within
Uzbekistan
and
lead
to
the
reconsideration of the issue of SOEs by the
other countries within the CIS region.
2.2. Latest reforms
On October 27, 2020, Presidential Decree No.
UP-6096 "On Measures for Accelerated
Reform of Enterprises with State Participation
and Privatization of State Assets" was
adopted.
According to the decree a number of SOEs are
subject to transformation. Among them 32
large SOEs and business associations and 39
enterprises with the participation of the state.
The reform content includes introduction of
corporate governance and financial audit; at
62 state assets, targeted pre-privatization
preparation programs will be implemented; in
479 enterprises, state blocks of shares
(stakes) are fully sold through public auctions;
and15 state-owned real estate objects will be
sold to the private sector.
Since 2017 there has been a sharp increase in
the scale of privatization: from 178 objects in
2016 to 842 in 2019. The presidential decree
notes that the delay in the transition to
market mechanisms of some industries and
large enterprises, in which the state's share
remains, prevents the establishment of
production of new types of competitive
products, the introduction of advanced
technologies, an increase in labor productivity,
the creation of new jobs with the active
attraction of private capital.
3. The share of SOEs in Russia
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The public sector also plays a significant role in
the Russian economy. The share of SOEs’
revenue in terms of the total revenue of the
largest companies has grown steadily in
recent years. According to the recent report
of the Russian Federal Antimonopoly Service
(FAS), the state’s presence in the Russian
economy
is
proliferating.
Thus,
the
contribution of SOEs to GDP grew to 70% in
2015 from 35% in 2005, and the number of
state and municipal unitary enterprises has
tripled in the last three years. According to the
data for 2011, the largest share of the state’s
presence was observed in the transport sector
(73%), banking (49%), oil and gas sector (45%),
housing and public utilities (35%), mechanical
engineering
(15%),
and
in
the
telecommunications sector (14%) [11]. The
dynamics of the sectorial structure of SOEs
ranked by Expert RA (i.e., Russia’s oldest
credit rating agency) according to the annual
accounts for 1998, 2005, 2009, and 2014
shows an increase in the state’s share in the
engineering, oil, and gas, and banking sectors.
The presence of the state has noticeably
decreased however in the chemical and
petrochemical industry. The state is practically
not represented only in the trade, non-
ferrous, and ferrous metallurgy sectors [12].
At the same time, the state demonstrates
inflexibility and is very reluctant now to part
with its property. The FAS report, for example,
notes that in 2012 the list of the largest
companies subject to privatization was
expanded. The state was going to significantly
reduce its share in them, or even wholly
withdraw. However, plans have changed, and
now the state is not going to part with
corporate control [12]. According to Russian
Prime Minister Dmitriy Medvedov “since 2013,
we have doubled the number of unitary
enterprises, while different orders provide for
their further reduction.” As FAS emphasizes,
such enterprises are still being created in
markets
with
relatively
developed
competition, where the use of administrative
resources and budget financing negates the
efforts of more active players. It should be
mentioned that FAS is more active in reducing
anticompetitive actions and the dominant
position of state companies in Russia
compared with the same authorities in
Uzbekistan. For instance, recently FAS
proposed several bills on reducing the state
share of, and promoting competition in, the
market. A separate bill of the FAS proposes to
prohibit the creation of unitary enterprises in
competitive markets, and from February 1,
2018, to eliminate such an organizational and
legal form, which is considered a relic of the
planned economy system. The enormous
growth of state and municipal enterprises is
the most dangerous trend in terms of the
general strengthening of state monopoly in
the economy, which, according to FAS, over
the past three years their number has
doubled. A unitary enterprise, by entering a
competitive market, monopolizes it after a
certain period, and private business is
consequently discriminated.
Furthermore, the FAS prepared a draft
presidential decree approving the national
plan for the development of competition in
2017–2019, which it submitted to the
government for adoption [13]. The main
threat to competition, according to the FAS,
comes from the state itself, and a presidential
decree needs to reduce state participation in
the economy. The FAS proposes to do this in
several ways, and the first is to reduce the
market share of state and municipal
companies. The government should ban SOEs
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and public enterprises from acquiring new
assets, both directly and through subsidiaries.
Also, the state should divest itself of all
existing SOEs, and not only of the less
important ones. According to the draft
decree, SOEs should be obliged to develop
programs to alienation of core assets. The
reality is that these bills may not actually
change the situation much given that the
FAS’s authority is limited against large SOEs
that are fully exploiting their lobbying capacity
to influence state policy in this matter.
Furthermore, there has been a significant
increase in state presence in the financial
services of Russia. For instance, while in 2004
the state share in the banking sector had been
only 30%, by 2018 it had risen to 70% from 61%
at the beginning of 2015 [14]. Currently, there
is no private bank among the top five Russian
banks, and in the top ten, only three, including
a branch of a foreign bank. The share of four
state-owned banks represented in the top 100
largest companies in 2014, accounted for 86%
of the revenues of all companies in the
industry [15]. Since August 2017, the three
largest private banks have come under state
control, as the Bank of Russia began to seize
them through the newly created Fund for the
Banking Sector. The nationalization of the
banking sector carries severe risks for
investors, including the inefficiency of bank
management caused by financing industries
on political grounds – an action that is not
necessarily always economically justified.
State presence in the economy directly
reflects the state's share in the country's
securities market. According to a recent
report, the country’s largest SOEs are in the
top ten most capitalized stock issuer
companies. The total share of the ten most
capitalized
issuers
practically
stopped
shrinking from 2011, and in 2017 this figure was
about 61.5% of total market capitalization
(table 7). For instance, the share of
Gazprom
,
Rosneft
, and
Sberbank
covered over 30% of the
market's total capitalization in 2017. In the
period 2007-2014
Gazprom
had been the
leader concerning capitalization, in 2016 it was
Rosneft
, and in 2017, it was Sberbank.
Table 7. The list of most capitalized Russian issuers (2017)
Company issuer
Capitalization in billion
USD
% in total capitalization
1
Sberbank
87.61
14.06
2
Gazprom
53.35
8.56
3
Rosneft
53.30
8.55
4
Lukoil
48.99
7.86
5
Novatek
35.54
5.70
6
Noril Nickel
29.51
4.74
7
Surgutneftgaz
20.94
3.36
8
Gazprom neft
20.17
3.24
9
Tatneft
18.90
3.03
10
NLMK
15.35
2.46
Total
623.2
61.6
The USA Journals Volume 03 Issue 06-2021
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Source: NAUFOR Report, Russian Stock Market: 2017, Events and Facts, 2018,13
Overall, Russian business attempts to survive
in whatever economic space is not yet
occupied
by the state. According to a Russian Union of
Industrialists and Entrepreneurs survey, 48% of
Russian companies believe that government
considers business as a ‘wallet’ [16]. It is
officials who entrepreneurs consider to be the
main enemies of competition. The actions of
the authorities are the main reason for the
reduction of the number of competitors in the
critical sectors of the economy that directly
reflects the securities market indicators of the
country.
4. SOEs presence in Kazakhstan’s economy
Kazakhstan’s economy is also characterized by
the dominance of large SOEs, industrial and
financial conglomerates, especially in the gas,
transport, electricity, postal, and mobile
telecommunication services sectors. There are
about 7,000 registered SOEs, of which over a
thousand are considered significant, as they
employ more than 250 people. As of October
2017, about 10.3% of all operating companies in
Kazakhstan are either state-owned or involve
state participation. In recent years, the share
of the state in large companies has
significantly increased rather than decrease.
Notably, in October 2017, about 46.9% of all
large operating enterprises in Kazakhstan are
either wholly state-owned or with partial state
participation. This is the highest indicator of
the public sector’s share in large businesses
over the past ten years, while the lowest
record was in 2007 when the state share was
41.7%. The percentage of SOEs in medium-
sized enterprises is significantly higher (56.5%)
than in relation to large companies. Despite
this fact, the state share in relation to
medium-sized enterprises is decreasing.
Kazakhstan has set a goal to reduce the
state’s share in the economy to 15% by 2020,
which is the most ambitious privatization
program since independence. There is
considerable support for the idea that
privatization can lead to a significant increase
in profitability, company performance, and
efficiency. The present privatization program
seems extremely ambitious as it is proposes to
privatize about 800 companies, including the
‘top 65’ and some large enterprises.
As for state presence in the banking sector,
SOEs and various state funds are still the main
creditors
of
the
banking
system
of
Kazakhstan. Together, they account for about
a third of the liabilities of banks, for which
there are objective reasons, such as a high
proportion of the state in the economy,
especially in the oil and gas sector. At the
same time, the state also takes indirect
financial participation in the rehabilitation of
loan portfolios through the framework of
business support programs, construction, and
agriculture. It is difficult for banks to get
significant and stable financial resources in a
relatively
small
and
poorly
diversified
economy. The state had been actively
involved,
through
massive
government
bailouts, in the banking sector in the crisis
years of 2009-2010. At present, the state,
represented
by
the
government
of
Kazakhstan and the National Welfare Fund,
Samruk-Kazyna
, has significantly reduced its
share of the banking sector. So while at the
The USA Journals Volume 03 Issue 06-2021
32
The American Journal of Political Science Law and Criminology
(ISSN
–
2693-0803)
Published:
June 18, 2021 |
Pages:
20-33
Doi:
https://doi.org/10.37547/tajpslc/Volume03Issue06-04
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2021:
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beginning of 2014, the state controlled 19% of
the total assets of Kazakhstan banks, in 2016
the share of state assets was less than 4%.
On the other hand, state presence in
Kazakhstan’s securities market is relatively
significant. For instance, as of January 2017,
second-tier banks invested in securities
amounted to 3,217,295 million
tenges
(c., USD
8.5 billion). More than 76% of this was spent
on government securities of Kazakhstan.
However, recent reforms are promising
further liberalization of the securities market,
reducing state participation in the economy,
and creating a competitive market. Some of
such concrete measures are determined in the
Joint Action Plan on the Development of the
Securities market for 2018–2021, which was
adopted by the Government and the National
Bank of Kazakhstan. According to a report of
the National Bank, part of the measures
mentioned
above
has
already
been
implemented. Particularly, actions on the
simplification of procedures for issuers to
enter the securities market, access to trading
for retail investors, substantial liberalization of
brokers, and the expansion of investment
opportunities of bank-holding companies have
all led to a revival of dealing in securities on
Kazakhstan Stock Exchange. Despite these
reforms, there still are significant problems
that require immediate and comprehensive
solutions. Below follows an attempt to
address-to-address the issue of SOEs in CIS
countries by reference to the case of
Uzbekistan.
CONCLUSION
This article has sought to outline the role of
SOEs in CIS countries' economy, outline the
theoretical basis of state participation in
economics, and address some urgent issues
connected with SOE activity in Uzbekistan.
Among the findings of this thesis is that
despite
extensive
privatization
reforms
implemented since the 1990s, SOEs are still
having a significant role in the economy of
Uzbekistan and the other CIS countries
examined in this thesis. In most cases, SOEs
enjoy privileges and immunities that are not
based on their better performance but due to
the fact that they belong to the state or state-
related officials. Such exclusive privileges and
immunities
ultimately
distorts
market
conditions by weakening competition and
leading to SOEs abusing their dominant
position in the market. A further finding is that
one of the core causes of SOE inefficiency is
their double-aimed (business and political)
feature that should be addressed in
subsequent reforms. A crucial conclusion of
the research behind this thesis is the
recognition
that
securities
market
development reforms can provide practical
solutions for SOE reforms in CIS countries.
Securities market development can assist
privatization process with offering more
public assets to private owners (through
various IPOs and SPOs), which may also lead
to increases in the transparency and
accountability of SOEs through, for instance,
mandatory
information
disclosure
and
effective corporate governance systems).
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(ISSN
–
2693-0803)
Published:
June 18, 2021 |
Pages:
20-33
Doi:
https://doi.org/10.37547/tajpslc/Volume03Issue06-04
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2021:
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