Abdullaev, Umidjon. State-Owned Enterprises in Uzbekistan: Taking Stock and Some Reform Priorities. ADBI Working Paper No. 1068. Tokyo: Asian Development Bank Institute, 2020.

Abdullaev, Umidjon. State-Owned Enterprises in Uzbekistan: Taking Stock and Some Reform Priorities. ADBI Working Paper No. 1068. Tokyo: Asian Development Bank Institute, 2020.

• This study was completed around the end of 2018, so it covers the situation at that point in time (1, footnote 1).
• An incomplete list of major state-owned enterprises in Uzbekistan is found on page 3 and includes: Uzpaxtakorsanoateksport, Uzdonmahsulot, Almalyk Mining and Metallurgy Complex, Navoiy Mining and Metallurgy State Company, Uzmetkombinat, Uzbekneftegaz, Uzbekenergo, Uzbekhydroenergo, Uzagrotehsanoatholding, Uzavtosanoat, Uzbekengilsanoat, Uzeltexsanoat, Uzbekoziovqovqatholding, Uzkimyosanoat, Uzstroymaterialy, Uzsharobsanoat, Uzbekiston Havo Yollari, Uzbekiston Temir Yollari 
• Uzbekistan commenced on major economic reforms at the end of 2016, aimed at liberalizing the economy (1).
• Uzbekistan's economy remains dominated by state-owned enterprises, will likely to continue being dominated by them, and any reforms must take into account their role in the economy (1, 8).
• State-owned enterprises are present in every sector of the economy and continue to account for fairly high levels in some economic sectors, like technical activities and construction, see Table 2 (4). 
• Based on the author's estimates from major state-owned enterprises, they still are responsible for approximately half of national GDP as of 2017, with this figure varying greatly by region. As of 2013, they were also responsible for 37% of total employment and half of all wage employment, the rest being self-employment (4-5). 
• Many state-owned enterprises are either monopolies or the dominant company in their sector and nearly all quasi-monopolistic companies are state-owned enterprises. As of 2018, state-owned enterprises dominated production of 120 different goods and service sectors (5).
• Considering how important the Uzbekistani government views state-owned enterprises as tools in carrying out industrial policy, it is likely that the government will adopt a gradualist approach to any reform (14). 
• State-owned enterprises are some of the main tools used to implement national industrial policy and national goals for import-export and production levels have translated into specific goals for some state-owned enterprises (2).  
• Historically, production in the Soviet Union was organized into sector-specific ministries, or "line ministries", that were responsible for organizing enterprises in that sector to complete planned objectives. In Uzbekistan, these ministries have largely been replaced by holding companies, associations, or concerns that serve the same organizational role in an economic sector (2, 5).
• While these ministries have largely been transformed into holding companies or joint stock companies, they retain many of their same functions and are expected to manage both the many smaller SOEs they control and also regulate private companies in that sector (2, 5-6).
• The government has recently begun to transfer some of these regulatory functions from state-owned enterprises to state agencies and ministries (6). 
• State-owned enterprises have priority access to scarce resources, electricity, fuel, foreign currency reserves, and financing. This gives them an unfair advantage over private firms. The fact that state-owned enterprises receive further tax breaks and incentives for completing the goals set for them by the state further privileges them over private businesses (15).  
• I have to question the idea that tax breaks for complete tasks assigned by the government is an advantage. It strikes me as an attempt to reduce the negative impact on SOEs of having to undertake projects that may be unprofitable or an otherwise non-ideal allocation of resources
• State-owned enterprise is not a specific legal-organizational form, but in fact encompasses several types of companies in which the state has a controlling interest. Most major state-owned enterprises are organized as joint stock companies (2-3).
• The fact that many companies that are effectively state-owned are not entirely owned by the state, instead having minority stock ownership by private persons, means that calculating the share of state control in the economy is difficult and Uzbekistan keeps no exact figures. Instead the government supplies misleading statistics that only show the share of economic activity by entities entirely owned by the government (4-5). 
• Joint stock companies are particularly likely to be state-owned. Of 659 joint stock companies in existence at the end of 2016, 73% were majority state owned, usually through another state-owned company controlling the majority stake in a smaller joint stock company. Moreover, 83% of all stock in joint stock companies was owned by the state (5). 
• Most, but not all, state-owned enterprises are organized as either joint stock companies, limited liability companies, or state unitary enterprises. Of these, sectorally-dominant companies are usually joint stock companies, with their subsidiaries taking a variety of legal-organization forms (8). 
• Privatization in Uzbekistan occurred in two stages: one from 1992 until the late 1990s, and one from the late 1990s until the present. The first stage was large-scale privatization of small business, including commerce, service industries, construction, transport, and agriculture, and privatization of housing stock. The second stage was a case-by-case privatization of larger state-owned companies (6). 
• Some state-owned enterprises have always been kept state-owned from the beginning of privatization in 1991. The most recently list (as of 2018) was a 2017 list of 50 major state-owned enterprises across multiple sectors that were not allowed to be privatized (7). 
• Privatization of large state-owned enterprises since the late 1990s have been largely unsuccessful, with the state retaining a controlling interest. Successful privatizations have mainly focused on the privatization of smaller components of these businesses or the sale of unused real estate assets (6). 
• Uzbekistan's method of privatization demonstrates a continued instance on the state retaining a major role in the economy. When a series of companies were privatized in 2015, half of those sold to strategic investors and one-third sold at public auction had the state retain 51% majority stake in the company (7).
• Of these companies, the Uzbekistani government was particularly likely to demand retention of majority stakes in companies in the chemical sector, grain processing, cotton processing, and ownership of city marketplaces (7). 
• Most state-owned enterprises are controlled at either the national or regional level. As of 2016, only 340 of over 1,000 state-owned enterprises were owned by local governments (8). 
• Joint stock companies in Uzbekistan are governed by a general meeting of shareholders, a supervisory board, and the company's daily management, which can be an individual, a board, or even outsourced to a third-party management company (8).
• Management is selected by a combination of the supervisory board and the shareholders. The shareholders meeting selects a chairman of the management board or CEO and may select the other members of the board. In practice, the shareholders usually vote to cede the power to appoint other management board members to the supervisory board. In some enterprises, the shareholders may also vote to cede the power to appoint the chairman to the supervisory board. At some major enterprises, the chairman of the management board needs to be approved by the shareholders, the supervisory board, and the Cabinet of Ministers or the President (9).
• The supervisory boards of joint stock companies usually include high-level government officials and various ministers. Major state-owned enterprises usually have their supervisory boards composed of ministers, deputy ministers, and heads of state agencies (9). 
• Control over state shares in a joint stock company is exercised by appointing an individual or a company to act as the state's representative. The company can either be a state-owned company or a private asset management company selected via competitive bidding. These state's representatives have to be approved in this role by the Cabinet of Ministers (9-10). 
• Two different types of state representative exist. "State trustees" are appointed for enterprises where the government owns more than 25% of all shares, while "state representatives" are appointed for enterprises in which the government has less than a 25% share (10). 
• As of 2014, joint stock companies are required to uphold certain levels of transparency regarding their activities. These standards of disclosure are not consistently followed (8).
• Corporate governance standards were approved in early 2016, but they are voluntary and not all provisions are widely applied. One component of these standard is having independent supervisory board members, but, again, this is not widely done (8-9).
• The system used to monitor the performance of state-owned enterprises has gotten significantly better in the 2010s. In 2015, an elaborate and detailed set of key performance indicators (KPIs) were mandated for state-owned enterprises. This new system is used to determine the variable part of compensation to management and low scores for multiple quarters will result in the firing of the management board chairman (10). 
• Disclosure and transparency practices around the newly introduced KPIs still need to improve, as information on individual KPIs is not always available (10-11).
• The main document produced by state-owned enterprises to indicate their performance is a business plan, which must predict future goals in production and profitability. Business plans must be compared against actual performance by the supervisory board on a quarterly basis (10).
• Major state-owned enterprises must make additional reports. The chairman of the management board and the chairman of the supervisory board must report to the Cabinet of Ministers on a yearly basis on the performance of the company (10). 
• In addition to the formal governance practices introduced for joint stock companies, the government also has a number of other informal ways to influence the production and pricing decisions of state-owned enterprises (11).
• The assignment of ranks equivalent to minister and deputy minister to the chairmen and deputy chairmen of the management board blurs the lines between state and company and means that management often reports directly to the executive branch of the government, not to the supervisory board (11, 13).
• Important to note that this was recorded as a theoretical consequence of management ranks equivalent to minister. It may not be reflected in actual practice
• Many aspects of corporate policy for state-owned enterprises are not autonomously determined by the corporate management, but are set by governmental decree. Governmental decrees and laws regulate corporate investments, prices, and procurement of input goods (11-12, 14-15). 
• In particular, state-owned enterprises are expected to contribute to state investment projects, often using their own internal revenue to finance part of these projects (11-12). 
• Allocation of material resources is still largely determined by the Ministry of the Economy, which consults with relevant state-owned enterprises and other ministries to determine the quantities of certain goods that will be needed and allocates them between different state-owned enterprises, the government, exporters, and the domestic private sector (12). 
• There were indications in 2017 that this system would be changed, as access to controlled goods was limited for state-owned companies who now had to engage in commodity swaps. This may indicate a future trend towards market allocation of these scarce goods (13).
• Some state-owned companies do not have direct control over the use of the revenues from their own operations, as is true for Uzbekenergo and Uztransgaz (13, 15).
• Some highly profitable state-owned enterprises have their finances directly monitored by inspectors from the Ministry of Finance to prevent fraud and ensure correct calculation of taxes. This is the case for Uzbekneftegaz and Uzpaxtayog (13, 15).  
• The present [as of 2018] structure of government control over state-owned enterprises allows the government is effectively use these companies to advance industrial policy, but at the cost of effective corporate governance. Moreover, the way in which it intervenes into corporate governance erodes the effectiveness of the existing systems of corporate governance and accountability (13). 
• The level of government intervention limits the ability of the state-owned companies to effectively respond to market signals and to use their own resources to maximize growth/profit (13). 
• The regulatory role of major state-owned enterprises poses future regulatory problems, as these usually are no regulatory agencies outside of the dominant state-owned enterprise. Additionally, dominant enterprises usually sit on the commissions that issue permits to new entrants into a sector, creating potential conflicts of interest (14).
• In is unlikely that, baring further reforms, the priorities of state-owned enterprise management will switch from meeting quantitative production quotas to trying to improve general corporate governance, as per the KPIs introduced in 2015 (15).