Fast-food giant McDonald's will open its first restaurant in the oil-rich Central Asian state of Kazakhstan next year, in partnership with an energy tycoon related by marriage to President Nursultan Nazarbayev.
The company will open its first burger bar at an unspecified location in Kazakhstan in the second half of 2015, with more to follow, it announced on November 12.
McDonald’s is heading into Kazakhstan with good connections guaranteed: It will be partnering with prominent gas tycoon Kairat Boranbayev, whose daughter Alima is married to Nazarbayev’s grandson, Aysultan Nazarbayev.
“Our agreement with Kairat will enable us to continue to build our brand,” Doug Goare, president of McDonald’s Europe, said of the foray into Kazakhstan, where insiders say that the key to business success is often not what you know but who you know.
The Kazakhstan launch comes as McDonald’s comes under massive pressure in neighboring Russia, where more than half of its 440 locations are under investigation over alleged health and safety violations (which the company denies) and nine outlets have been temporarily closed.
Kazakhstan is a close economic partner of Russia’s, but has been keen to distance itself from Moscow as Western sanctions bite, making it abundantly clear that its doors are always open to foreign investors.
An Ontario court has frozen much of Kyrgyzstan’s share in its largest industrial asset, the Kumtor Gold Mine, adding an awkward new twist to the epic saga over the mine’s future.
Kumtor is fully owned by Toronto-listed Centerra Gold, which is one-third owned by Kyrgyzstan’s state-run Kyrgyzaltyn gold company. Since early 2012, Kyrgyzstan has been trying to increase its share in the high-altitude mine, which accounts for over 50 percent of the impoverished country’s industrial output and 10 percent of GDP in a good year. Early this year, the government and Centerra were moving toward an agreement that would increase Kyrgyzstan’s share in Kumtor to 50 percent, but negotiations have stalled as some lawmakers continue to demand the mine be nationalized.
The Ontario Superior Court of Justice ruling favors another investor with no role in the Kumtor dispute: Stans Energy, which says Kyrgyzstan has failed to pay the $118 million in damages awarded in Moscow this summer related to a different mine site, Kutessay II. In July, the Arbitration Court at the Moscow Chamber of Commerce and Industry ordered the Kyrgyz government to pay Stans in compensation for seizing the company’s license to Kutessay II, a heavy rare earths deposit.
Stans Energy announced on October 14 that the court order “prohibits the Kyrgyz Republic and Kyrgyzaltyn JSC ("KJSC") from selling, disposing, exchanging, assigning, transferring, pledging or encumbering 47,000,000 shares in the capital of Centerra Gold Inc. registered in the name of KJSC.”
A cement company owned by Russian oligarch Filaret Galchev appears to have become the latest target of an assets grab by Uzbekistan’s government, sparking speculation that this is part of a re-division of economic spoils following the fall from grace of Gulnara Karimova, the daughter of President Islam Karimov.
A Tashkent court has ruled that the post-Soviet privatization of the Akhangarantsement company – owned by Galchev’s Russia-based Eurocement – way back in 1994 was illegal, and froze assets worth 414 billion sums (nearly $180 million), the company said in a July 29 statement.
The claims of illegal privatization “are of an unfounded and illegal nature, as was convincingly demonstrated in the court hearing,” it quoted Mikhail Skorokhod, Eurocement’s president, as saying.
The assault on the firm was quite sudden, he said: The company found out about the lawsuit brought by the government’s antimonopoly committee on July 16. Hearings started two days later, and on July 21 the court deemed the privatization illegal.
The ruling effectively places the firm – Uzbekistan’s second largest cement producer – back in the hands of the state, a full two decades after it was put into private hands in the post-Soviet privatization rush.
Eurocement – whose owner, Galchev, is Russia’s 24th richest man with a fortune of $6.1 billion, according to Forbes – acquired a 75-percent stake in Akhangarantsement in 2006 and now owns an 84-percent share, with the rest in the hands of minority shareholders.
A Japanese minerals outfit has signed a deal with Tashkent to begin prospecting for uranium in northern Uzbekistan.
Russia’s state-run RIA Novosti news agency reported this week, citing a source close to the Japan Oil, Gas and Metals National Corporation (JOGMEC), that the company and the state-run Navoi Mining Combine had signed a five-year uranium exploration license for two blocks in Navoi Region. A minimum investment is set at $3 million.
The deal does not cover extraction: "If [uranium] deposits are found on the contract area, JOGMEC will be granted exclusive rights to hold direct talks and sign a production sharing agreement with Uzbekistan," the source told RIA Novosti.
According to the source, this would be the first agreement for a foreign firm to explore for uranium in Uzbekistan. Currently, Navoi Mining Combine has a monopoly to extract and export uranium.
In the past five years, Uzbekistan has tried to attract foreign investors to develop its black-shale uranium deposits, which require sizeable investment and expertise, RIA Novosti said. According to the London-based World Uranium Association, a trade group, Uzbekistan is the world's seventh-largest uranium producer with an annual output of around 2,400 metric tons.
President Islam Karimov has signed a law that promises to do something new in Uzbekistan: “On the defense of private property and guarantee of the rights of owners.”
“Every entrepreneur should know that he can without fear invest in his own business, expand production activities, increase production and generate income [...] keeping in mind that the government is guarding the legal rights of the property owner,” Karimov said two years ago when proposing the law.
The new law, signed on September 24, even has a special section on the rights of foreign businesses in Uzbekistan.
Try telling that to Russian mobile giant MTS.
In June, Uzbek authorities began investigating senior officials at MTS for tax evasion and money laundering. Within two months, the company’s entire Uzbekistan operation was seized, 9.5 million users were left without service, and the company was forced to write off $1 billion. MTS denies wrongdoing and observers believe the company was simply plundered by well-connected Tashkent elites.
If you’re Russian mobile operator MTS, finding yourself threatened by another hostile Central Asian dictatorship must feel like a sick joke. But this time it’s Uzbekistan -- not Turkmenistan -- where MTS faces the unpredictable business culture of an authoritarian country.
The sequel to Mobile TeleSystems’ 2010 Turkmenistan troubles began in mid-June when authorities in Tashkent announced they were searching for Bekzod Akhmedov, the head of MTS Uzbekistan. Akhmedov, authorities said, fled when they accused him of theft and tax evasion.
Uzbekistan’s mobile-connection inspector (GIS) then announced it was investigating MTS Uzbekistan for illegally using 48 cell base stations and for user reports of poor service. GIS threatened to suspend the company’s operating license. MTS promptly denied the allegations, saying that in 2012 alone the company has delegated $150 million dollars to construction of new cell towers.
Finally, on June 28 the Prosecutor General’s office said it was investigating MTS Uzbekistan for “tax evasion, money laundering, being involved in illegal activities, etc.”
The prosecutor claims it has received letters signed by the head of MTS, Andrei Dubovskov, asking the government to investigate MTS Uzbekistan’s “questionable and illegal schemes to hide funds and evade taxes,” and for help locating Akhmedov, the missing head of MTS Uzbekistan.
For all its promises of easy riches, Uzbekistan is having a hard time keeping foreign businessmen around.
The head of the Uzbek branch of Russian telecom firm MTS has apparently become the latest foreign executive to bolt. According to the semi-official Uzmetronom, Bekzod Akhmedov fled this month after government auditors alleged tax evasion, misuse of funds and theft.
He's far from alone. Earlier this year, the general director of beer maker Carlsberg Uzbekistan, Russian citizen Evgeny Shevchenko, quietly left for Latvia. A Carlsberg executive confirmed to Central Asia Newswire that "We have temporarily suspended production [in Uzbekistan] due to an unavoidable shortage of raw materials.” He also said "Shevchenko left Uzbekistan to take up a new position elsewhere in the [Carlsberg] Group at the beginning of 2012."
The timing of these high-profile departures does not bode well for Tashkent's recent investment drive. In May, Tashkent promised to privatize 500 state-run companies. But privatization alone does not a good investment environment make. A June 19 article by the Institute for War and Peace Reporting lists a string of companies that have recently experienced “hostile takeovers” by the Uzbek government.
Kazakhstan offers far and away the most business-friendly climate in Central Asia, but even so, half of the entrepreneurs running small and medium-sized businesses (SMEs) are struggling to get by, a new poll shows. They face all kinds of hurdles, from financial difficulties to recalcitrant officials – and yet a majority of these resilient businesspeople remain upbeat about the future.
The study of 2,000 entrepreneurs was conducted by the Almaty-based BISAM Central Asia center, which researches the business climate. “Half of entrepreneurs are balancing on the brink of survival,” BISAM Central Asia’s president, Leonid Gurevich, told a conference on SMEs on December 14.
The news will come as a disappointment to the state's Damu entrepreneurship development fund, which supports small businesses and which commissioned the poll. Damu has stepped up assistance to SMEs in recent years due to the global financial crisis, offering micro-credits and preferential loans, but the poll indicates that many entrepreneurs are still fighting against the odds to survive.
Some 40 percent would like to overhaul and modernize their businesses but lack the funds to do so. Small farmers are worst off, with 65 percent saying that they only have enough funds to keep afloat or that their businesses are in critical condition.
Kazakhstan has long positioned itself as the “snow leopard” economy, aspiring to compete with the Asian Tigers. So today’s news will be warmly received in Astana: Kazakhstan has topped an international rating of the world’s business climates – not overall, but in terms of efforts over the last year to improve business regulation.
“Kazakhstan improved conditions for starting a business, obtaining construction permits, protecting investors, and trading across borders,” the overview to the World Bank and International Finance Corporation’s Doing Business 2011 report says.
That’s pushed Kazakhstan 15 places up in the overall rankings for ease of doing business to be the world's top reformer: the business climate ranks 59th this year, out of 183.
Tajikistan ranked 121 out of 128 countries globally, a trifling improvement (last year it placed 123) for a country the World Bank calls a global "top ten reformer" for ease of doing business.
The scale cites a variety of sources. Though market performance was measured year on year to August 19, economic data is all based on 2009 statistics.
Thus, Kyrgyzstan did not fall as much as it may have, dropping to 106 from 90 last year. Despite an uprising that toppled the government in April, followed by looting and subsequent ethnic violence in June, Forbes' Kyrgyzstan summary did not mention this year’s events, which have shaken investor confidence -- as has talk of “nationalization."
Uzbekistan, where many an entrepreneur has no choice but to operate within a stifling black market and where the state regularly disseminates fantasy economic statistics, was not ranked at all. Turkmenistan? Ditto (cubed).
By comparison, Lithuania ranked highest of any former Soviet republic at 32. Kazakhstan took the lead for Central Asia at 72, again beating Russia, which placed 97.