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Comment: A quick look back at 2017

>> The region’s economies and Uzbekistan’s regeneration under Mirziyoyev are the standout features of 2017, writes James Kilner

JAN 5 (The Conway Bulletin) — For Central Asia and the South Caucasus, 2017 was a year of recovery. There have been the usual rounds of elections, generally predictable and cementing the incumbent powers in Georgia, Armenia and Kyrgyzstan, but economics, and not politics, caught the eye and the bigger headlines in 2017.

The economic stupor that had hung over the region since oil prices collapsed in 2014 and Russia’s economy fell into a recession, was finally thrown off. If, at the start of the year, the green shoots of recovery looked tentative, by October they were coming out into full bloom.

Most countries were posting decent economic growth figures and double-digit inflation, a real worry, has been neatly sidestepped.

Special mention here must go to Georgia which has posted exceptionally strong economic results, pushed on by a spurt in tourism and investment.

There have been some serious economic exceptions, though. Azerbaijan’s economy still shrunk and its banking sector looked as shaky as ever. International Bank of Azerbaijan defaulted on its debt repayments and several smaller banks have had their licenses revoked. Tajikistan also looks increasingly fragile and Turkmenistan, while the information stream coming out of the country is as beguiling as ever, looks like it may have been holed below the waterline. Watch out, in 2018, for a serious fracture in Turkmenistan.

As well as a recovery period for the region’s economies, 2017 was also a year of recovery for Uzbekistan’s political structures and their relationships with society. This will go down as the year that Uzbek President Shavkat Mirziyoyev made it clear that he was determined to pursue a reformist agenda after taking over from the authoritarian and brutal Islam Karimov in September 2016.

He devalued the official exchange rate of the Uzbek soum, took thousands of people off blacklists linked to Islamic extremists, reigned in the power of the secret service, encouraged traders to export to neighbouring countries and signed deals with the rest of the region over borders and commerce that his predecessor had spurned.

There is still much to do in Uzbekistan, and some people grumble about the lack of genuine democratic values and the slow pace of human rights progress, but Pres. Mirziyoyev is laying the foundation for a better future for Uzbeks.

If the Conway Bulletin had a ‘Person of the Year’ prize, Mirziyoyev would be a worthy winner.
>> Next week – the first in a 2-part series on what to look out for in 2018

ENDS

— This story was first published on Jan. 5 2018 in issue 356 of The Conway Bulletin

Azerbaijan closes EBRD-owned bank

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DEC. 23 (The Conway Bulletin) — Azerbaijan’s financial watchdog declared DemirBank, a mid-sized lender part-owned by the EBRD and the Dutch development fund FMO, unfit to trade after bad debt swamped it and its capitalisation ratio level dropped.

Azerbaijan’s banking sector has been flooded with bad debt since a 2014 fall in the price of oil triggered a currency devaluation and a recession. In 2017 its biggest bank, International Bank of Azerbaijan, defaulted on its debt.

The failure of Demirbank shows that part-ownership of a bank by major financial institutions doesn’t guarantee survival. The EBRD owned a 25% stake in Demirbank, and had been considering an increase, and FMO owned a 10% stake.

In March, Fitch, the rating agency, had warned that smaller Azerbaijani banks were vulnerable because of a surge in non-performing loans. It said that the proportion of non-performing loans on banks’ debt books had reached 21% up from 12% in 2015.

Demirbank’s licence to trade was withdrawn on Dec. 23 by Azerbaijan’s Financial Markets Supervision Chamber, a decision upheld by an appeal court four days later.

People who had deposits at the bank will be eligible for compensation from a state fund.
Demirbank had deposits of just over 100m manat ($59m) from 55,000 depositors.

ENDS

— This story was first published on Jan. 5 2018 in issue 356 of The Conway Bulletin

Armenia keeps interest rates steady

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DEC. 26 (The Conway Bulletin) — Armenia’s Central Bank said that it was going to keep its interest rates steady at 6% although year-on-year inflation rose to 2.2% in November, up from 1.2% in October. The decision will be cheered by business which had warned that a rise in interest rates would dampen growth. Interest rates in Armenia had been at 10.5% in 2015 and have been steadily cut to stimulate economic growth.

ENDS

— This story was first published on Jan. 5 2018 in issue 356 of The Conway Bulletin

Praise for Georgia’s Central Bank stress tests

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DEC. 26 (The Conway Bulletin) — The Basel Committee on Banking Supervision praised Georgia’s Central Bank for bringing in best-practice stress tests for its banks. The Georgian economy, and in particular its finance sector, has weathered a regional economic downturn since 2014 better than its neighbours. Analysts have said that the stress tests that the Georgian Central Bank has imposed are far more effective than other banking tests in the region.

— This story was first published on Jan. 5 2018 in issue 356 of The Conway Bulletin

Georgia to raise electricity prices

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TBILISI, JAN 1 (The Conway Bulletin) — Electricity prices, a touchy issue in the South Caucasus, are due to rise again in Georgia, media reported.

The Georgian National Energy and Water Supply Regulation Commission (GNERC) approved the rise, asked for by power supply companies Telasi and EnergoPro Georgia, because of the cost of infrastructure upgrades.

The rise will be the second increase in electricity prices in Georgia in the past 2-1/2 years. One of the election promises of the ruling Georgian Dream coalition government in 2012, when it was voted into power, was to cut electricity prices.

From the start of the year, Tbilisi residents will now pay 1.56 tetris more per unit of electricity. In August 2015 the price was increased by 3 tetris.

In 2015, proposed electricity price rises in neighbouring Armenia triggered street protests that lasted weeks until the rises were dropped.

ENDS

— This story was first published on Jan. 5 2018 in issue 356 of The Conway Bulletin

Hundreds of finance ministry staff sacked for corruption in Uzbekistan

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DEC. 27 (The Conway Bulletin) — Uzbekistan sacked 562 staff from its finance ministry in a corruption purge that appears designed to show off President Shavkat Mirziyoyev’s determination to root out bribe-taking. Reuters reported that Mr Mirziyoyev had described the finance ministry staff accused of corruption as “rats”.

ENDS

— This story was first published on Jan. 5 2018 in issue 356 of The Conway Bulletin

Nazarbayev signs “repressive” media bill into law

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DEC. 28 (The Conway Bulletin) — Kazakh President Nursultan Nazarbayev signed into law a bill that officials said should improve the quality of the country’s media but its critics have described as being designed to suppress free speech. Under the new laws, anonymous comments under online stories are no longer allowed. Journalists writing about a subject’s wealth, family or banking records need his or her permission.

ENDS

— This story was first published on Jan. 5 2018 in issue 356 of The Conway Bulletin

Alstom increases stake in Kazakh train-maker

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ALMATY, DEC. 22 (The Conway Bulletin) — French train-maker Alstom, bought another 25% stake in Astana-based EKZ, from Kazakhstan’s Temir Zholy, to bring to 75% its ownership of the locomotive manufacturer.

This is an important deal for Kazakhstan as it shows increased confidence in its manufacturing base by major Western companies. Kazakhstan is trying to show it is serious about diversifying its economy away from oil, gas and minerals.

Didier Pfleger, Alstom Senior Vice-President for Middle-East and Africa, said the deal highlighted the success of the EKZ project and also Alstom’s commitment to the region.

“By increasing once again Alstom’s share in EKZ, we show our confidence in the attractiveness of Kazakhstan and we contribute to the development of new expertise and skills locally to address not only Kazakhstan’s needs but also regional ones,” he said in a press statement.
The value of the deal was not declared.

EKZ was set up to assemble the Prima range of locomotives in 2010 by Alstom (25%), Russia’s Transmashholdings (25%) and Temir Zholy (50%). Alstom bought a 25% stake from Temir Zholy in 2016 too. It now owns 75% of the company and Transmashholding owns 25%.

As well as assembling the Prima locomotives at its factory in Astana, EKZ now also assembles passenger wagons. Outside the extractive industries, EKZ is one of Kazakhstan’s headline companies. It employs 420 and is seen as critical in diversifying the Kazakh economy.

Kazakhstan has become a major hub in China’s Belt and Road infrastructure strategy giving its railway system a boost.

The Kazakh government has also committed itself to upgrading its network. There are 20,000km of railway tracks in Kazakhstan, the third largest railway network in the world using the 1,520mm gauge.

ENDS
— This story was first published on Jan. 5 2018 in issue 356 of The Conway Bulletin

BGEO signs $11.6m contract to build shopping mall in Tbilisi

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DEC. 28 (The Conway Bulletin) — BGEO, part of the Bank of Georgia group that is listed on the London Stock Exchange, said that its real estate unit m2 had signed an $11.6m contract to build the shell of a new shopping mall in Tbilisi (Dec. 28). This is the first major third-party contract for m2 since BGEO bought it in June. Bank of Georgia is spinning off BGEO into a separate company with a separate London stock listing in 2018.

— This story was first published on Jan. 5 2018 in issue 356 of The Conway Bulletin

Kazakhs grumble about switch to Latin alphabet

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ALMATY/SEPT. 24 (The Bulletin) — Four years ago dozens of Kazakh intellectuals wrote to President Nursultan Nazarbayev expressing their opposition to a plan to ditch the Kazakh language’s use of Cyrillic in favour of the Latin alphabet.

They said that the switch would damage the Kazakh language, undermine literature written in Cyrillic and reduce the size of the media.

This opposition is still around today but now that this switch is being heavily pushed by the Kazakh government, a government that doesn’t tolerate opposition and is often described as autocratic, it has withered.

The government and the pliant Kazakh media have presented plans to switch the alphabets by 2025 as the overwhelming will of the people and a necessary modernisation of the Kazakh language that had, in any case, only been switched from Arabic script to the Cyrillic alphabet under Soviet rule in the 1920s.

But there has been no canvassing of public opinion and no poll has been published on how ordinary Kazakhs really feel about it – possibly because the results may not be as overwhelmingly in favour of the changes as the government says.

Online, there are hints of frustration. Many say the money would be better spent developing the, frankly, Third World state of rural Kazakhstan or improving the education system, which is hardly drowning in accolades. One user said he was “fed up with the caprices of the few chosen elites”.

Dariya Orazbayeva is a well-educated PR specialist living in Almaty. She speaks English but she is still against the switch.

“The process of adaptation will be really hard, I think, especially for the older generation,” she told The Conway Bulletin’s correspondent.

There are also concerns over how a 25-letter Latin alphabet, it will lose the ‘x’, can replace a 42-letter Cyrillic alphabet, which had nine letters unique to Kazakh.

The Kazakh language’s switch to Latin is not the clear-cut issue that the government likes to describe.

ENDS

— This story was first published in issue 344 of The Conway Bulletin, now called the Central Asia & South Caucasus Bulletin, on Sept. 24 2017.