How the EBRD president evaluates reforms in Uzbekistan. The Dialogue with Suma Chakrabarti.

What has changed since the EBRD returned to Uzbekistan? What awaits investors in Uzbekistan? What areas need to be developed? The Dialogue with the EBRD President Suma Chakrabarti. Subtitles are available on English, Russian and Uzbek.

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Interview with Sir Suma Chakrabarti

Mr. Oybek Shaykhov: Hello and welcome. We are here with Uzbek Review at EBRD Tashkent office with Sir Suma Chakrabarti. Welcome to Tashkent!

Sir Suma Chakrabarti: Thank you very much.

Mr. Oybek Shaykhov: EBRD is currently operating across three continents in 38 emerging economies and 2019 seems have been great for you. The investments topped ten billion Euro and you have financed an incredible 452 projects. But as President of EBRD, how successful do you think the year really was for the bank?

 Sir Suma Chakrabarti: Well, it was a record year for the bank. It was year as you say in terms of the investment levels, that was the highest ever across our 38 countries. And you have to remember that we are working in emerging markets trying to do things that normal bank in existing sector wouldn’t do. So we are doing things that are much more risky and really taking on a lot of change in those economies. Some changes are for the better, some changes are going backwards. So and the conditions in those economies are very low, so to achieve 10.10 billion plus in those economies was an extraordinary effort. On top of that, I have to say that emerging markets at the moment, they are quite able to make profits in. And if you look at how the other multilateral banks did, it was such qualitative year for them. We also may record profits are higher, highest profits since 2007 and 1.5 billion Euros as well, so it was a very-very good year, indeed in that sense. 

Mr. Oybek Shaykhov: […] What role does Uzbekistan play in that?  

Sir Suma Chakrabarti: Well, Uzbekistan is one of the star performers within our total levels. So, you know, we came back to Uzbekistan, what I call the new beginning some three years ago. And if you look at what’s happened with EBRD in Uzbekistan is that 1.1 billion dollars of investments in those, in that time from a standing start and we had the time when we started back in early 2017. We just had two staff on the ground and now we have thirty-three staff and much bigger office in Tashkent, now this resident office, this office we have in Andijan as well as Tashkent. We’re going to open another office in Urgench. These are ready to help the local SMEs in those two areas as well. And if you just look at the investment level of last year that EBRD had in Uzbekistan there’s a rough 580 million dollars. That placed Uzbekistan at 5th place in our “lead table”, if you like, of markets, after just three years. So, Uzbekistan has, you know, done very-very well. We’ve done very well working with the government, reforming government, political and economic reform happening. More for more: the more reform there is, the more we can do. And that’s what happened very much for us in Uzbekistan. 

Mr. Oybek Shaykhov: The country is focusing very much on the development of the regions, as you very well know. You’ve been in Fergana region yesterday, as far as I know. I’d like to ask what are the key impressions while your memory is still fresh that you had yesterday?

Sir Suma Chakrabarti: So, I think this regional development is incredibly important. I mean, if multilateralization in government just focused on capital cities, we would be getting it wrong, quite frankly. Because in all the markets we’re working, the capital cities are the most developed part of the economy. So, we really do need to reach out to the regions, not least actually to create jobs in those regions, because otherwise migration pressures will be much greater into the capital area, and also because there’s so much to do in those regions. The gaps, as we call them, transition gaps are greater, whether it’s just issues like companies know the regions are becoming more competitive, whether it has to do with gender in labor force composition, inclusion, better governance of companies, all of these things matter lot, so we need to work in the regions very heavily with SMEs, as I mentioned earlier, but also with larger entities. So, I’m very interested in our strength to do more in the Fergana Valley, for example, which is why I went out to Kokand to see both of very small silk manufacturing company and much larger cotton enterprise as well. And these are, you know, two ends restructure 04:39 what EBRD can do, but we have to and must really increase our profile in the regions. And that’s what we’re aiming to do. 

Mr. Oybek Shaykhov: Now, you’ve been coming to, as you said, you’ve been coming here since 2017, every year, you’ve been meeting the leadership of the country every year. And what I want to ask is what has changed in the last three years for EBRD, of course, the profile of the banks, involvement in the market has changed significantly. What I really want to ask is how the interactions have changed, especially with the government since these three years?   

  Sir Suma Chakrabarti: So, one phrase for me sums it up: “today, three years on, it’s quite clear that the reform is irreversible”. The situation three – three and a half years ago was the beginning of reform. The beginning of the President Mirziyoyev very much trying to change the approach in the country economically and politically as well. Now, three years later, you know, we know that this is, this viewpoint is in the ascendancy. We know that politically because of the very good, I think, parliamentary elections, the desire of the government to act on the observations, of those observers, election observers and also as he said, “democracy is the future for this country”. It’s now getting more and more engraved. So, political reform is happening; that is extremely important for the bank, which has a mandate to support multiparty democracy, political pluralism. The other part of it is that the economic reform is happening. Three years ago, I think, a lot of people weren’t sure where the President’s desire for the economic reform would be challenged, firstly, and secondly where would withstand contact with realities on the ground. He has shown enormous commitment to this reform. Sometimes, you know it’s a lonely journey in this leadership journey of pushing reform but he’s done it and it’s continuing! And that is laid overall to The Economist last year declaring Uzbekistan –  country of the year in 2019! Now, could you believe that back into 2016-2017? No. But it’s happened. And we should celebrate it. But we should never ever stop there and the President is fortunate. We are very lucky to have a President like him in Uzbekistan – he wants to keep moving forward, pushing the envelope out, trying to do more reform and it’s a job that we, EBRD and other multilateral institutions that support this process. We will do so through investment, of course, but also supporting aspects of policy reform and engagement, trying to build the capability of the public institutions that they can help the private sector. And here I would highlight his desire to create Foreign Investors’ Council later this year, which would be, again, another step towards a new Uzbekistan, I think.

Mr. Oybek Shaykhov: […] And what would you say to a foreign investor, who is still hesitating, in Europe, for example, to go into the market. But he sees a lot of activity and he sees the success of EBRD, but he is still hesitating. What would you say to such an investor?

  Sir Suma Chakrabarti: One of the first things any foreign investor can do is come and see us in Tashkent, in Andijan and soon in Urgench. You will get free market intelligence about potential projects, you will get free market intelligence why and what works, also clear advice about what doesn’t work in the current situation. And you will get the opportunity to invest alongside us, to be a client of us, a partner of us, and of course, if you invest with the EBRD, you get all the protections that multilateral institution has, preferred credits and so on, so we’re a good way, actually if you’re entering the market first time, actually, we’re a very good way of entering. Secondly, what you are always going to get, even if you don’t come to EBRD, just come as the investor – you are going to get a government, which is now more and more committed to the things you as investor look for. So they are getting pushed towards more transparent practices and approaches, procurement, for example, and government that wants high standards, environmental and social standards as well, in companies, local and foreign investors, and so you’re getting a government that is listening, that is open, that wants actually to attract, but doesn’t want to do that through direct contracts, they really want to have competitive approach in business scene. That should give you a lot of comfort. But fundamentally that is not the government that is going to say: “We’re perfect.” They actually are going to say: “No, we’ve got some things still to work on. So, we want you, the investors, to tell us, what are the further changes you need really to make it even more attractive destination for you.” That’s, you know, companies from abroad, foreign investors, they can compare markets, but I think they increasingly like the language of Uzbekistan what is saying  about the challenges but also about the opportunities. And therefore, there’s an increasing interest in this market. 

Mr. Oybek Shaykhov: […] EBRD played the substantial role in setting it up (Foreign Investors’ Council – прим. пер.), in working with this idea, working closely with the government to develop and to ultimately get commitments from a lot of stake holders. What are the hopes that the bank puts into this mechanism […] and what the hopes of Uzbekistan government could be in your view? […]

  Sir Suma Chakrabarti: First of all, these councils work well if the players in the council – government, private sector, international institutions like EBRD, when there’s a very honest dialogue  about what is working and what needs to change further, to make even more investment in this country. I feel that the way this Foreign Investors’ Council, FIC, is being set up is exactly on that, you know, approach. That the government wants that dialogue. And it’s open and ready for that dialogue. It’s not nervous, it’s not worried about that dialogue, but being open about it. The second thing is if you have the dialogue, you then have to follow it up. So, the FICs that succeed are not just the ones that have a great, showy, you know, conferences, if you like, they are the ones that have that but then also follow up in between the annual events with pieces of work. That had been agreed with the private sector that we must all work together on to try to improve the climate even further. But it’s also important to arrive at your first FIC, first Foreign Investors’ Council meeting in a right shape and so I have advised the President very closely that it’s really important that we have a sense of momentum on, for example, privatization, because that is something that would be very attractive to foreign investors. To arrive at the first big conference like this without that sort of sense of momentum and opportunity would not be a good idea. So, we have a good story here, in Uzbekistan, because privatization is going to happen, we see clearly a very big push on that and that will be making it very I think good first Foreign Investors’ Council. But then we must follow up afterwards.

Mr. Oybek Shaykhov: Who decides who is on it, who is not? How does the selection criteria look?

  Sir Suma Chakrabarti: Well, in the end, it will be the government that decides the make up of the Foreign Investors’ Council. They will take advice from us, from other international institutions, from foreign investors themselves, like that, but in the end, it has to be government owned and very much championed by the government. So, they must make final decisions. 

 Mr. Oybek Shaykhov: […] Local media announced that the annual meeting of EBRD in 2023 would be in Samarkand. I want to ask if that’s the final decision and how significant that decision is for the country?

  Sir Suma Chakrabarti: Well, the formal decision on the locations of the annual meetings of EBRD for 2022 and 2023 will be made in May, actually, by virtue of our governance. For 2022 there’s one candidate Marakesh and for 2023 is one candidate Samarkand. So, barring some unforeseen circumstances, I think it’s quite likely that Samarkand will be chosen. It’s a very important thing because, you know, that EBRD is back and now really working very well in Uzbekistan. By 2023 we will have an even bigger portfolio of investments here, and also it’s a chance to show-case not just Uzbekistan but the whole Central Asian region. Because what’s also happening, again, investors will be interested in that thing is the opening up between the countries, so Uzbekistan and Tajikistan, Uzbekistan and Kazakhstan, Kyrgyz Republic, this opening up is also of attraction. Many cross-border projects and so on. So, by that time, I think we will have not just a very strong portfolio here to show-case, but also we will be able to show-case potential projects throughout the region. So, provided the governance vote in the right way in May, it’s a real opportunity for Uzbekistan and the region, I think, to use at Samarkand annual meeting. To show-case themselves. And for all of us to forget the 2003 meeting. 

Mr. Oybek Shaykhov: […] How important is regional connectivity for EBRD?

 Sir Suma Chakrabarti: So, regional connectivity is extremely important for EBRD. It has been across all of our regions. So, to give you an example: the Western Balkans, the Former Yugoslavia, you know, many of those economies were quite small, so, economically, their future depends on being able to be seen as a region rather than individual countries. EBRD has championed the connectivity agenda there. Same now in Central Asia. I think the big problem in Central Asia had been the politics really in the past. When I used to come in the early days of my eight years as now, as EBRD President, a lot of time was spent really in many countries complaining about each other. And therefore, a lot of energy, emotional energy, political energy was taken up with that sort of discussion and it wasn’t a very positive discussion. I think what has happened is that Uzbekistan’s change in 2016-2017 and the new President that has opened up the opportunity for a positive dialogue on regional connectivity. And by connectivity I mean, obviously, hard connectivity – infrastructure, energy projects and things like that, but also I mean soft connectivity – digital, you know, connections as well, barriers to trade, things like that that we have to work on as well. So, the chance of having more of a regional economic space is growing. And that’s a positive agenda. And again, President Mirziyoyev has played a major role in this, of course, gathering together the regional leaders in, I think, now two summits that they’ve had. So, that’s been very-very important. But this positive energy now needs to be translated into actual projects that connect the countries much more. It’s good that the airlinks are opening up, we are doing some road projects that are connecting up. And I’d like to see more and more of that. 

 Mr. Oybek Shaykhov: […] 2020 economic growth will be impacted by the coronavirus. Even though it may be hard to assess at this time, but what do you think about the economic growth: coronavirus doesn’t care about Central Banks’ rates, when people are at home and supply chains are disrupted, how does the President of EBRD assess the possible economic impact by the coronavirus?

 Sir Suma Chakrabarti:  So, you will have EBRD’s latest projections for each of our countries of operation including Uzbekistan in May. So, we are couple of months away from giving you the latest, but I don’t think it requires an Einstein to work out that compared with what we were forecasting in November, the last time we did a forecast, there’s bound to be a major major hit from the coronavirus situation. In this region, which is economically quite linked both to Russia and to China, China has clearly been very badly hit economically and that’s going to affect a number of countries in this region. So, I would expect that growth rates, when we publish them in May, to be down on the growth rates we had forecast like in November. I think, that’s going to happen for many-many countries that are linked into the global supply chains. The question in for EBRD is in those countries where we operate, which are most affected by the economic slowdown, can we compensate in some way by actually taking on and helping those companies, particularly in the private sector actually, which had been hit particularly hard. May be three working capital facilities in other ways that are making sure that they survive this period of economic turbulence. We’ve done that in other places, so in 2014-2015, when the Ukrainian economy was very badly hit by impacts in Russia and interactions with Russia, we actually had a crisis program to help the Ukrainians through their problem period. We may have to think a while, some is going be same for some other economies this time around and we have the resources to do that. So, let’s see what the forecast is and then we will be able to design appropriate measures as well. And we would have to work in coordination with other multilateral institutions and with national governments as well. 

Mr. Oybek Shaykhov: […] End of 2019 a very important step and then very important investment has been announced; EBRD has always been very focused on the private sector. And the first acuity investment in a private company was announced in late 2019. Does the bank have appetite for more  such investments in this country?

Sir Suma Chakrabarti: One way to answer – yes. We are essentially a bank that likes to have the private sector really develop in each of the countries. And it is understandable that in Uzbekistan in the first few years of restarting our operations we’ve been quite public sector focused. That is clearly being changed now: this Acuity investment is the first sign of that, but if I look at the pipeline ahead of us, with our team, it’s very heavy with private sector opportunities. So, yes, we will do both debt financing, but also acuity, we’re always trying to take out the project, the structure of the project to client and the need of a time. But you can certainly expect, I think, a shift in the composition of our operations more towards the private sector in the coming years. But also I think trying to work more on things like the privatization agenda in both state enterprises but also state owned banks as well. So, I think you’re going to see quite a big shift in this going forward. We will not neglect infrastructure, energy, we’ll continue to do those projects as well. But I think the percentage of public sector will go down and private sector shall go up.     

Mr. Oybek Shaykhov: Now, switching to different, but very important topic as well: gender equality, women’s entrepreneurship and inclusivity. There has been a lot of progress in certain areas in Uzbekistan of the past several years from this. But we still have a very long way to go compared to the standards that we see in the most developed countries. Does EBRD have any programs or projects, which would support these areas?

Sir Suma Chakrabarti: Yeah, so, we have women business facilities, you know, we try to focus in on female entrepreneurs. In many countries and Uzbekistan is not the only one, female entrepreneurs are often locked out of the access to finance from the capital markets, from banks. We have designed facilities, which can work through local banks that really help, these female SMEs, for example. We can also make sure more of our SME advisory services are targeted on female entrepreneurs. And then we often use our projects, project finance to include conditions, which would mean that more focus on women at the workplace, then before, for example, a number of women we’re employing, but it’s not only about women. It’s also about inclusion in all its different varieties. So I was very pleased when I went to Kokand to a silk manufacture to see; actually, I’ve focused firstly on female labor force, but also on disabilities and so they were working, they were focusing quite a lot of their work trying get their work done through workers with disabilities and to try to help them and bring them into the labor force as well. This was good, this needs supporting. And we took that and we think about that example for some other companies we might work with and say: “Could you do the same? And we will support you with even more financing if you could do the same”. So, there’s got to be a push I think in that direction more generally. And of course, there is backward regions problem as well, we are going to help these backward regions become more forward as well. 

Mr. Oybek Shaykhov: Thank you, this is very important information, I believe that is something that will, indeed, be a big focus as well of the country the next years. Now, I have a slightly personal question: you have had a brilliant, successful career since 1984 in the public office first and then as President of EBRD. Over these many years, what are the three key principles or three key ideas, which have governed your decision making, which have been your guiding principles through the public office career and then in EBRD company?

 Sir Suma Chakrabarti: Gosh, I wish I had notice of that question. So, look, I mean, I think if I look back on what I’ve learned throughout my career, I guess, one of things would be really to find way of engaging with other people across the table whether it’s in a negotiation, whether it’s in a partnership, whether it’s a client relationship, a way that understands what is on their minds, what is actually their background, what is actually their context. I don’t believe you can really be a very good partner unless you understand where that person is coming from. So my engagement with the President Mirziyoyev – I try to understand what he is going through, what the country is going through, what the political context he’s facing is and try to engage in that way. That emotional context, if you like, is very important for any serious partnership and for to be trusted as a partner, I think. That would be number one, I think. Secondly, I guess, I’ve learned that, sometimes through painful experience, the leadership involves difficult decisions where not everyone could be a winner. That you have to make choices. You know, there’s a famous British politician who said: “To govern is to choose”. And the idea that you can please everyone all of the time is not possible. And that requires guts and courage sometimes, it is a lonely business, so is that and it’s true, but it also actually then requires you to have both the empathy for those who don’t always agree with your decisions and may actually be the losers from your decisions, but also to have some time for yourself. So, the third thing I would say is resilience. You need to be a resilient human being to do this sort of jobs, I don’t mean just at my level, I mean, jobs, which could be, you could be a small scale entrepreneur, or you can be a big shot corporate leader – you need to be resilient at personal level as well as in your finance at the company, whatever. Because you will be making decisions, which affect you and other people and they will not always be popular. Resilience comes from other things in your life, so I’m lucky enough to have a great family, lucky enough to have other interests, lucky enough to have balance. So that you can be fairly resilient in the situations; resilient but also sensitive – resilient and cold I would not want anyone to be.

 Mr. Oybek Shaykhov: Thank you very much for finding the time in your very busy schedule.

Sir Suma Chakrabarti: My pleasure. 

Mr. Oybek Shaykhov: And we hope to see more of you in Central Asia. Thank you very much.  

Sir Suma Chakrabarti: Thanks very much indeed.  

Mr. Oybek Shaykhov:  This is Uzbek Review, specially from the office of EBRD in Tashkent. Thank you very much.


Special thanks to Universal Bank for their partnership within this project.

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