COMMERCIAL NEWS UPDATE

UZBEKISTAN COMMERCIAL NEWS UPDATE

Date: December 2006

Author: Jahangir Kakharov, BISNIS Representative, Tashkent, Uzbekistan,

NOTE: THIS COMMERCIAL UPDATE IS DRAWN FROM THE UZBEK PRESS AND OTHER OPEN SOURCES AND SHOULD NOT BE INTERPRETED AS OFFICIAL U.S. GOVERNMENT INFORMATION

GMDAT inks accord to buy stake in Uzbekistan's UzDaewoo Auto – report

TASHKENT. November 27 (Uzreport) – South Korea's GM Daewoo and Technology (GMDAT), a subsidiary of US automaker General Motors (GM), has signed a cooperation agreement to buy a stake in Uzbek auto manufacturer UzDaewoo Auto and to launch joint projects with UzDaewoo Auto, a source close to the talks between the companies told Prime-Tass. The agreement was signed by GM DAT and the Uzbek government, which owns Uzbek auto producer Uzavtoprom, which in turn owns UzDaewoo Auto, the source said. The joint projects stipulated by the agreement include plants for the production of engines, car bodies and the assembly of Lacetti cars, the source added. Additionally, an Uzavtoprom spokesman told Prime-Tass Monday that UzDaewoo Auto had postponed a restyling of the Nexia car model. UzDaewoo Auto assembles Nexia cars from components supplied by GM DAT, the owner of the Nexia brand. The restyling was postponed because of uncertainty over the Uzbek government's plan to find an investor for UzDaewoo Auto, the spokesman said, adding that the restyling project needed large investments. UzDaewoo Auto said earlier that it planned to invest US $10 million in Nexia's restyling in 2006 and $20 million in 2007. UzDaewoo Auto was set up on a parity basis in 1992 by Uzavtoprom, also known as Uzavtosanoat, and South Korean automaker Daewoo Motor. Daewoo Motor filed for bankruptcy in 2000 and most of its assets were bought by GM and transferred to GM DAT in 2002. However Daewoo Motor's 50% stake in UzDaewoo Auto was not bought by GM and was instead acquired by Uzavtoprom last year. In 2005, UzDaewooAvto's car output rose 44.2% on the year to 101,010 cars.

Uzbekistan harvests 3.727m tons of cotton - report

TASHKENT. November 28 (Uzreport) – Uzbekistan's MY 06/07 cotton harvest came to an end. As of November 20, 2006 Uzbek farmers harvested 3.727 million metric tons (MMT) of seed cotton in total, which is 3.5% more than the state production target (3.6 MMT), USDA report said. This year's favorable weather conditions during the vegetation period and harvesting in September-October considerably benefited the crop condition and allowed the farmers to over-fulfill the state target. Still, given farmers' low incomes, Post believes that sometimes Government of Uzbekistan's (GOU) official seed cotton production figures can be overestimated by 50,000-60,000 tons. Based on increased seed cotton production, Post forecasts Uzbekistan's MY 06/07 lint production at 1.2 MMT.
Regarding quality, private sector representatives currently do not expect any quality deterioration of the new crop.

Production Policy

At the 2nd International Uzbek Cotton Fair recently held in Tashkent, the Minister of Foreign Economic Relations, Investments and Trade (MFERIT) declared the GOU's plans to keep the state seed cotton production target at the same level as in the past few years. At the same time GOU plans to produce cotton lint at the level of 1.2 MMT.

Consumption

Uzbekistan currently utilizes about 25% domestic cotton production depending on the crop results. A year ago GOU declared that it plans to process 50% of lint for the domestic textile industry by 2008. However, some independent experts believe that it may take longer to achieve this goal in domestic consumption. In order to achieve it, the GOU intends to carry out 100 investment projects, mostly in the textile industry amounting to US$1.2 billion.

The spinning and weaving industries continue to invest heavily in new equipment as well as to renovate existing equipment due to improved profitability over the past three years. The domestic demand, which is getting stronger with a marginal increase over the last year, and the stronger export demand, especially in cotton yarn, are both responsible for the current market surge. Looking to 2006, the textile industry knows it must aggressively pursue quality improvements and production diversification to include more value-added products, rather than rely mainly on low-value yarn based exports, if it wants to remain competitive in the global market. In order to achieve this goal the GOU started providing some tax incentives to textile manufacturers, geared in particular toward production of higher value-added products. The government incentives include reduced inspections and simplified licensing, registration and certification procedures. The concrete tax incentives to manufacturers include exemption from duties on imported equipment, dyes, accessories, and other materials not available domestically. Companies employing a full production cycle in country are eligible for discounts on purchases of lint, and exporters are eligible for VAT exemptions on domestically produced products. Most of these privileges extend until 2009. Most observers believe the GOU's program could be successful if it follows through on promised incentives and employs them consistently.

Domestic Seed Cotton and Lint Prices

In the beginning of September just prior to harvest, the Ministry of Finance established the procurement prices for seed cotton as well as lint for MY06/07. The current average procurement price for seed cotton (based on grade 2 class 5) equals Sums 306,000 per ton, and the average wholesale price for lint procured for state needs is reportedly Sums 1.35 million.

TRADE

There are no any noticeable changes in the pattern of cotton exports. Still, the trading companies of MFERIT handle centralized cotton exports. On October 17-19, 2006 MFERIT with the support of ICAC (International Cotton Advisory Committee) and Cotton Outlook organized the 2nd International Uzbek Cotton Fair. According to organizers, 350 representatives from 32 countries took part in this event. As a result of this year's Fair, as per MFERIT's information, the framework contracts were concluded for the sale of 1.7 million tons of Uzbek lint. Out of this volume 600,000 tons are planned to be exported from 2006 crop and the remaining contracted volumes will be shipped form 2007-2008 crops. Among the biggest buyers in this Fair there were trading companies from China, UAE, Singapore, Bangladesh, South Korea and Russia. Based on production forecast MY 06/07 lint exports are forecast at 900,000 MT (4.1 mln bales).

Cell phone sales in CA at US$525m in Jan-Sep - report

TASHKENT. November 28 (Uzreport) – Mobile handset sales in the Central Asian countries amounted to US$525 million in January-September 2006, MForum Analytics said in a research report released. Of the total, mobile handset sales in Kazakhstan stood at US$405 million in January-September, in Uzbekistan at US$159 million, in Tajikistan at US$74 million, in Kyrgyzstan at US$69 million and in Turkmenistan at US$22 million, the company said. In 2006, mobile handset sales in the five countries are expected to amount to about US$730 million, up 45% on the year, MForum Analytics said. The company added that sales were likely to exceed US$1 billion in 2007.

Uzbekistan's copper output down in Jan-Sep

TASHKENT. November 29 (Uzreport) – Almalyk Mining and Metallurgical Plant, Uzbekistan's only copper and zinc producer, cut cathode copper output in January-September to 70,306 tons from 79,750 tons in the same 2005 period. The plant raised zinc production to 34,923 tons in the first nine months of the year from 31,894 tons in the same period of 2005. It produces zinc mainly from imported concentrate. State-owned Almalyk, located near the capital Tashkent, also produces molybdenum, gold and silver but has not published production figures for these metals. In 2005 Almalyk raised cathode copper production to 103,871 tons from 93,767 tons in 2004. The plant also produced 35,032 tons of zinc, far below the 60,000 tons of 2004.

Several changes take place in COSCOM leadership

TASHKENT. November 29 (Uzreport) – Several changes took place in leadership of COSCOM, the third largest Uzbek mobile operator in terms of number of subscribers. Abraham Smith, representing МСТ Теlecom Сorp. of the USA, became director-general of COSCOM, and replaced Alexey Stepanov in this post. МСТ Теlecom Сorp. is founder of COSCOM. Alexey Stepanov headed COSCOM for ten years. Stepanov left COSCOM to head Central Asian department of CIS Representative Office of МСТ Теlecom Сorp. in Moscow, Russia. Abraham Smith, 28, graduated George Town University and he obtained Bachelor Degree in Business Administration. After joining МСТ Теlecom Сorp., he worked with the company's Uzbek project – COSCOM. He is married and has a child. He knows Russian and now he is studying Uzbek. Zafar Yusupkhodjaev was appointed as executive director of COSCOM. Earlier, he headed COSCOM's commercial department. Director-general of COSCOM will be responsible for all issues, including international relations, while executive director will be liable to internal issues and relations with state bodies of Uzbekistan. Abraham Smith did not commented on new policy of the company. He said that new leadership of the company will hold press conference in the end of January 2007 and sum up results of 2006 and announce new strategy. It should be noted that the strategy of the company probably will not change sharply as Alexei Stepanov also became chairman of expert council and he will "track" Central Asian direction of МСТ Теlecom Сorp.

Net income of VimpelCom's Uzbek arm decreases by 11.1%

TASHKENT. November 30 (Uzreport) – Net income of VimpelCom's subsidiary in Uzbekistan decreased by 11.1% quarter-on-quarter to US$3.2 million in the third quarter of 2006, VimpelCom of Russia said in its financial statement on Thursday, 30 November. VimpelCom acquired Unitel, the second largest Uzbek mobile operator, in February 2006 for US$207.7 million. Earlier, Russian company purchased Buztel for US$62.4 million. In July, Unitel and Buztel merged and started to render services under Unitel brand. In September, Unitel started to render services under Beeline brand. Penetration rate in Uzbekistan is low, approximately 8%, and the company is still at the initial development phase in the country, the company said in its statement. Currently, the company focus is on upgrading the network and services, strengthening the organization and transferring knowledge and experience to subsidiaries in Uzbekistan, it added. Number of subscribers of Unitel increased from 451,600 in the second quarter 2006 to 546,900 in the third quarter of 2006 or grew by 21.1% quarter-on-quarter. The share of the company in Uzbek market fell from 26.7% in the second quarter to 26.2% in the third quarter of 2006. Net operation revenues rose from US$15 million in the second quarter to US$15.7 million in the third quarter of 2006 or the growth rate made up 4.7%. The Uzbek arm of VimpelCom in the third quarter contributed US$9.5 million or the same level in previous quarter. The OIBDA margin made up 60.5% (63.3% in the second quarter) in the third quarter. Operating income before depreciation and amortization (OIBDA) represents operating income before depreciation and amortization. OIBDA margin is defined as OIBDA as a percentage of net revenues. Commenting on financial results, Alexander Izosimov, Chief Executive Officer of VimpelCom, said: "In Uzbekistan and Tajikistan, we launched our "Beeline" brand in September 2006 as planned. We are now concentrating on network build-out, functional improvements of operations and quality growth of our subscriber base."

Uzbek investor signs investment agreement with Oxus

TASHKENT. November 30 (Uzreport) – Oxus Gold plc has signed a subscription agreement with Zeromax, Uzbekistan's largest private-sector company, that brings Zeromax into Oxus as a strategic investor and alliance partner. Zeromax has agreed to invest 12,255,000 pounds through a private placement of 57,000,000 new ordinary shares at 21.5p per share representing 16.1% of an enlarged Oxus share capital base. Some 8,550,000 shares are being subscribed for by 6 December 2006, and the remainder shall be subscribed for by 10 January 2007. Zeromax is a privately-held, Swiss-registered company that operates in Uzbekistan through a series of joint ventures and investments in the oil & gas, mining, agriculture and textile sectors. Zeromax has forged strong working relationships with the Uzbek Government that have created employment for over 23,000 people in the republic with 2006 group turnover expected to exceed $500 million. The Zeromax success story in Uzbekistan is a model of cooperation between a foreign investor and a host government that wishes to encourage foreign investment. Zeromax is owned by Miradil S. Djalalov, a Tashkent entrepreneur who founded the company in 2000. Mr. Djalalov has agreed to join the Oxus board as a non-executive director upon completion of the agreed investment. It has also been agreed that Zeromax will appoint a second director, who will serve as an executive, in the event that its shareholding in the Company exceeds 20%. Bill Trew, CEO of Oxus, commented "We are delighted to have Zeromax as an investor in Oxus and at the prospect of working with a strong and able strategic partner in Uzbekistan. Following the recent State tax audit, Amantaytau Goldfields has appealed the tax judgment, within the deadline imposed by the court, and we have already begun working with Zeromax to resolve these tax and other issues, and to getting operations at AGF back to normal as quickly as possible. "We also believe that this partnership positions us for an expansion of our project base in Uzbekistan. Zeromax's success has been the result of a commitment to jobs creation and economic expansion that has been warmly received and supported by the Uzbek Government. Together with Zeromax we believe that we can strengthen our role within the Uzbek economy for the benefit of the Uzbek people and as a result create additional value for our shareholders." Application has been made for the initial 8,550,000 shares to be admitted for trading on AIM which is expected to occur by 6 December 2006. Application will be made for the balance of the new shares to be admitted for trading on AIM which is expected to occur no later than 10 January 2007. When issued the shares will rank pari passu in all respects with the Company's existing ordinary shares. Following the subscription referred to above the Company will have a total of 355,158,736 shares in issue.

Uzkhimprom to construct potash fertilizer plant in Kashkadarya region.

TASHKENT. December 4 (Uzbekistan Today) – In 2007, Uzkhimprom (Uzbek Chemical Industry) state joint-stock company will start to construct Dehqonobod potash fertilizers plant on the basis of Tyubegatan deposit of potash salts in Kashkadarya region. The Chinese corporation CITIC is currently developing the preliminary feasibility report of the project, which will determine more exact parameters. The Chinese government allocated US$500,000 grant to finance preparation of the preliminary feasibility report. The project is supposed to be financed out of the resources of the Fund for Reconstruction and Development of Uzbekistan and foreign credits. It is expected that a tender will be announced in early 2007 to define a general contractor of the construction, the agency said. According to the preliminary data, the designed capacity of the enterprise will be about 200,000 tons of potash fertilizers a year. Considering that Uzbekistan annually imports about 50,000 tons mainly from Russia, the construction of the plant will allow not only to resolve import substitution , but also to begin export of potash fertilizers. Tyubegatan potash salts deposit in Kashkadarya region is located on the border with Turkmenistan. Total industrial stocks of deposit are 400.2 million tons of ore with the availability of 36.8 % potassium chloride.

Uzbekistan's coal output up 3.8% on year in Jan-Nov

TASHKENT. December 5 (Uzreport) – Uzbekistan's coal output rose 3.8% on the year to 2.868 million tons in January-November, the country's Statistics Committee said. Of the total, open-pit mining increased 3.8% on the year to 2.554 million tons, while underground mining increased 4.2% on the year to 313,600 tons, the committee said. Brown coal output rose 3.6% on the year to 2.787 million tons in January-November, while fossil coal output increased 12.6% on the year to 81,000 tons, the committee said. In 2005, Uzbekistan's coal output increased 17.4% on the year to 3.168 million tons. Uzbekistan's annual coal consumption amounts to about 4 million tons. Uzbekugol company, which operates the Angrensky mine, accounts for 98% of Uzbekistan's total coal output.

NBU, Societe Generale sign credit agreement for US$33m

TASHKENT. December 6 (Uzreport) - National Bank of Uzbekistan for Foreign Economic Activities (NBU) signed a credit agreement on issue of US$33 million to construction of gold mining complex in Central Kyzylkum with Societe Generale of France, press service of NBU said.

The credit issued under guarantees of Uzbek government and it is expected that the French bank will open financing in mid-December. Uzbekistan attracts credit of Societe Generale to construction of gold mining complex at Kokpatas and Daugistau deposits, which is owned by Navoi Mining and Metallurgy Combine (NGMK). Uchkuduk gold mining plant, which will work on the basis of biooxide leaching technology, mining enterprises at Koktapas and Daugistau deposits, are part of complex. The project will be realized in two stages. The first phase envisages construction of capacities on processing 3 million tons of ore a year and production of gold at the volume of 10 tons. In the first phase, the gold recovering plant will receive ore from Kokpatas deposit. Daugistau deposit will be used in the second phase. The designed capacity of the second phase is 2 million tons of ore processing and 10 tons of gold production a year.

The cost of technological part of the first stage of project is US$80.5 million and the second phase – US$30 million. Total cost of the project with construction of mining enterprises valued at US$150 million. The project financed due to own resources of NGMK and credit resources.

Engineering Dobersek GmbH of Germanby and NGMK signed an agreement on supply of equipment for construction of gold mining complex at Koktapas and Daugistau deposits within the first phase of the project. The cost of agreement is US$30 million.

NGMK, fully owned by Uzbek government, is one of the largest gold producers in Central Asia. Muruntau, Central Kyzylkum, is main gold ore base of NGMK. The company has two gold mining plants – GMZ-2 in Zarafshan and GMZ-3 in Uchkuduk.

New gold mining complex, which will process sulphide ores, will be second line of GMZ-3. The company has license agreement with South African Biomin on use of Biox, biooxide leaching technology, in processing of gold-sulfide ore.

KES-ESI, LUKOIL sign agreement on Uzbek project

TASHKENT. December 7 (Uzreport) - KES-EnergoStroiEngineering (KES-ESI involved in KES-Holding) won the tender on the energy transfer to the Khauzak Dengizkulskoe gas field in Uzbekistan, which is explored by LUKOIL Uzbekistan Operating Company, a subsidiary of LUKOIL Overseas. The sides signed a corresponding agreement on the project. The project's cost is over US$9.5 million and it will be implemented within 6 months. It is expected that it will be finished in July 2007. Within the contract KES-ESI will ship the equipment and install Khauzak substation for the launching.

Dengizkul is a part of the large project Kandym-Khauzak-Shady-Kungrad being under the LUKOIL and Uzbekneftegaz realization within the PSA signed in 2004. The KES-ESI contract meets the strategy of the company aimed to increase its operations in the Central Asia. KESEneroStroiEngineering is dealing in the sector of the energy objects construction, designing and launching into the operation. The annual turnover of the works is appraised to exceed 5.2 billion Russian rubles.

KES-Holding is one of the leading private companies performing in the energy business sphere, in particular, it provied the strategic stakes managing in several generating companies including TGK-5, TGK-6, TGK-9. KES Holding also has the shares in UES, Irkutskenergo, Yayvinskaya GRES, Serovskaya GRES, RKS (75%).

Gazprom, Uzbekistan tentatively agree on Uzbek gas field

TASHKENT. December 11 (Uzreport) - Russian natural gas monopoly Gazprom late Thursday said it had agreed with Uzbekistan on the main points of a production sharing agreement to develop the Ustyurt gas field. Gazprom said in a statement that its Chief Executive Officer Alexei Miller met with Uzbekistan's political leadership and gas industry officials to discuss cooperation with a key Central Asian natural gas producer, but it didn't give details of the agreements reached or when the PSA for Ustyurt will be signed. The company is planning an initial output of 8 billion to 9 billion cubic meters of gas at Ustyurt. Citing an unspecified source, news agency Interfax Thursday said Gazprom and Uzbekistan had signed an agreement setting the price for gas at US$100 per 1,000 cubic meters. The current price level is about US$55. Gazprom said Uzbekistan plans to export 9 bcm of natural gas to Russia by the end of this year. Uzbekistan has 6.25 trillion cubic meters of natural gas reserves, Gazprom said.

Premix delivered to Uzbekistan for enriching over 700,000 tonnes of flour

TASHKENT. December 11 (Uzreport) - On December 1, 2006 85 tons of vitamin-mineral premix for enriching flour was delivered to Tashkent. Hexagon Nutrition company delivered this premix, like Fortifivit-FF-Uz. It contains elements of iron, folic acid, zinc and vitamins of group B, www.non.uz says. The received party premix will be sufficient to enrich over 700,000 tons of flour. A joint bureau, designed to implement the project has started to distribute the received premix among enterprises of Uzdonmahsulot joint-stock company that are involved in the implementation of the project, and also among several private flour-grinding enterprises of the republic. This delivery is carried out within the framework of the performance of the Decision by the president of the Republic of Uzbekistan, № 153 of 11 August, 2005 "On measures to implement the National programme on fortification of flour". Within the whole period of 2006 systematic work was conducted to supply flour-grinding enterprises of Uzdonmahsulot joint-stock company with necessary equipment and components for fortification of wheat flour. To date all enterprises of the republic are ready to enrich flour, and since January, 2007 the manufacture of enriched flour will reach the planned capacities. It will make it possible to cover the most part of the population of Uzbekistan with the enriched first grade flour. Further steps of the project will be aimed at the creation of corresponding mechanisms promoting saturation of the market with enriched flour, in particular, attraction of private flour manufacturers and creation of certain conditions for importing only enriched flour.

Subscribers of MTS-Uzbekistan increases by 8.9% in November

TASHKENT. December 12 (Uzreport) - Number of subscribers of MTS-Uzbekistan made up 1.35 million as of November 30, 2006 or increased by 8.9% compared to October 2006, MTS (Russia) disclosed on December 11, 2006. MTS said the subscribers' base rose from 1.24 million as of October 31 to 1.35 million as of November 30, 2006. The company added that the growth of subscribers' base made up 145.1% year-on-year. MTS-Uzbekistan is the first Uzbek mobile operator, subscribers' base of which reached 1 million-point. Mobile TeleSystems OJSC (MTS) owns 74% shares in MTS-Uzbekistan, which worked under Uzdunrobita brand till June 2006. MTS acquired 74% stake in Uzdunrobita in 2004 for US$121 million and signed option to purchase other 26% share.

EBRD considers to subscribe to new shares of UzKDB

TASHKENT. December 12 (Uzreport) - UzKDB plans to increase its capital base through emission of new ordinary shares, one of shareholders of the bank told on its web site. Korea Development Bank holds 61% stake at UzKDB. Other shareholders of UzKDB are European Bank for Reconstruction and Development (EBRD, 28%), National Bank of Uzbekistan for Foreign Economic Activities (5.5%) and Turon Bank (5.5%). The EBRD said on its web site that it is considering project on subscription of newly issued ordinary shares of UzKDB. The web site did not disclose the total sum of emission, but added that total project cost is US$3.3 million. It said the EBRD finance will be up to US$1 million. The project will provide UzKDB with the capital resources needed for the implementation of the bank's medium-term strategy aimed at servicing foreign and local investors in Uzbekistan. The capital increase will also enable UzKDB to upgrade its IT systems and premises, which will provide the bank with essential institutional base to expand its operations and network. In supporting UzKDB in expanding its operations, the EBRD aims to promote further competition in the Uzbek financial sector. UzKDB is the successor of UzDaewoo Bank, which was created in 1997 as part of the international expansion of the Daewoo Group and its financial arm, Daewoo Securities. The bank has emerged as the one of the leading private banks in Uzbekistan with an excellent local reputation. In early 2006 a new strategic investor, Korea Development Bank, acquired a 61% stake in the bank and re-branded it into UzKDB. As earlier reported, UzKDB is planning to increase its charter capital twice within three years. The charter capital of the bank is US$9 million, without consideration of undistributed profits. The authorized capital jumps to US$13 million if to take into account undistributed profits.

Korea-Uzbekistan cooperate in software, pave way for overseas expansion

TASHKENT. December 13 (Uzreport) - The Korea Software Financial Cooperative (KSFC) said that it exchanged a memorandum of understanding with the Information Communication Association of Uzbekistan to promote cooperation in software between the two countries. They agreed to provide full support for member firms expansion into local markets bilaterally, while carrying out joint IT project centering on software. "We will provide administrative support for Korean software firms facing problems in VISA and remittance in Uzbekistan," said Ilhom Zirobich, chairman of the association. "We also plan to provide a database on software users in the country, helping Korean software firms tap into business across a wide range of areas." "The government is now developing a system including electronic document management and open-source, and we expect Korean firms to join such drive," he added. "We also expect cooperation in IT workforce to pick up steam." "The Uzbekistan market has potential," said Baek Won-in, director of KSFC. "Uzbekistan will be able to refer to the Korean government's IT policies such as IT839." Some 30 member firms from the two organizations met at the conference room of the Uzbek association on the day, and discussed business and partnership models. ICA is a non profit organization established last year, and has 45 software member firms.

Oxus shares soar as support grows for new strategy

TASHKENT. December 14 (Uzreport) - Shares in British miner Oxus Gold Plc closed up nearly 20% as investors begin to warm to a new strategy of signing strategic partnerships overseas, an analyst said. The company announced two weeks ago that it had sold a 16% stake to the Uzbekistan investment group Zeromax, a deal viewed as a way for Oxus to resolve a tax dispute with the country's authorities. Last week Oxus announced it was buying a Romanian gold project in concert with the larger KazakhGold Group , sending its shares up on the day. "The Uzbekistan deal is generally thought to be a positive thing," an analyst told Reuters, asking not to be named. "Zeromax is run by a businessman who clearly has connections in Uzbekistan, and the joint venture in Romania may be small but it's low risk. The company is gaining momentum," he added. Oxus is still awaiting the result of an appeal against claims it owes US$223.8 million in taxes and other fees in Uzbekistan, where it has its main gold project. A spokesman for the company confirmed that it was pursuing a strategy of finding locally-based companies with which to work when entering new markets, partly to avoid government-related problems such has have been encountered in Uzbekistan. "I'm not saying we won't do anything on our own ever again, but this kind of deal spreads the risk and reduces funding requirements," he said. One place the group is still operating alone is Kyrgyzstan, but the spokesman would not comment on whether Oxus was actively seeking a partner there. "We have no specific target list and are looking anywhere in the central Asian region," he said. Oxus shares closed up 18.4% at 30.5 pence, valuing the company at 91 million pounds, but the company is still down by almost 50% on the year.

Uzbekistan Jan-Oct copper output down

TASHKENT. December 15 (Uzreport) - Uzbekistan produced 75,735 tons of cathode copper in January-October, down from 86,050 in the same 2005 period, the Central Asian state's sole copper and zinc producer said on Thursday. The Almalyk Mining and Metallurgical Plant, located near the capital Tashkent, produced 40,268 tons of zinc in the first 10 months of the year, compared with 33,324 in the same 2005 period. State-owned Almalyk produces molybdenum, gold and silver but has not provided output data for those metals. In 2005 Almalyk raised cathode copper production to 103,871 tons from 93,767 in 2004. The plant also produced 35,032 tons of zinc, far below the 60,000 of 2004.

GM Daewoo Auto and Technology to become UzDaewooAuto's strategic partner

TASHKENT. December 15 (Uzbekistan Today) - The government of Uzbekistan and GM Daewoo Auto and Technology (GM DAT) are holding talks to deepen cooperation in the automobile industry. Thus, the parties expect to increase their presence in foreign markets and to resolve the problem of load and diversification of production capacities.

The newspaper has learned from Uzavtoprom joint-stock company that they are currently discussing a number of joint projects to renovate a model number and localization of producing completion details, including the building of plant for manufacturing power units (engines and transmissions).

Undoubtedly, the building of engines-producing plant will become a key issue to implement strategic partnership. This will make it possible to bring the level of localization of assembling automobiles in Asaka to 70% from the current 54% and to raise the level of Uzbek car industry on the new qualitative level. Within 10 ten years, about US$500 million-worth foreign investments were attracted to the programme of localization of car production; about 70 enterprises were set up to produce those completing parts, including over 10 JV with foreign partners. All this are the new work sites, which are vitally necessary for Ferghana valley, for the area that is dangerously explosive, with the excess labour resources. Currently, the plant employs almost 5,000 people, and about 40,000 people in cooperating enterprises. Their stoppage could not only substantially strike the entire branch, but also destabilize the political situation in the republic. A similar scenario in no way can satisfy the Uzbek party.

There is another important direction of cooperation with GM DAT - the production of cars Lacetti, which needs to be considerably accelerated. Since August 2003, when Semi Knock-Down [SKD] of Lacetti was adjusted in Asaka from imported details and completing parts, about 3,000 such models were produced. In the opinion of experts, Lacetti of Uzbek assembling will significantly compete in the class of more expensive passenger cars, such as Nissan Almera and Skoda Octavia. According to the statement by the GM DAT company's representatives, this model of motor-car is one of few cars, which successfully underwent tests practically in all well-known agencies, engaged in testing automobiles. According to the results of the testing, carried out by the American insurance association, famous for very stringent requirements in the world for the safety of motor vehicle, Lacetti was highly assessed.

At present, GM needs well-sold motor-cars in the markets of the CIS and, first of all, in Russia. The joint venture "GM-AvtoVAZ" had complexities with the load of production lines practically immediately after their operation in 2002. Not once in all these years the volume of production reach the design capacity, and annual car manufacturing plan each time was reexamined to decrease the capacity. GM-AvtoVAZ's difficulties in the Russian market are connected with the enterprise's marketing issues. The first model, which the JV began to manufacture - Chevrolet Niva, did not justify the company administration's hopes.

Obviously, the rise in price of the car two or three times has shocked the Russian customer, who traditionally used to buy "Niva". The idea to produce turned Opel Astra T3000 under brand Chevrolet Viva in Tolyatti proved to be even more doubtful.

The initial interest, caused by novelty, was lost simply due to high prices and slower delivery. As a result, GM-AvtoVAZ administration had to reduce Chevrolet Viva production schedule, then for some time later completely end production. As a whole, the sale of cars did not exceed several 100 vehicles a year. Analysts doubt that new projects - the production of models Opel Corsa or Zafira will fundamentally change the situation, since the risk of the appearance of the same problems is high as with the manufacturing of Chevrolet Viva.

In turn, the growing level of localization of production to UzDaewooAuto, the establishment of close cooperation with the suppliers of raw material and completing parts in various regions of the world, and also the reaching of agreement with GM DAT will make it possible to considerably increase production efficiency in the plant in Asaka and to enlarge export possibilities.

IMF, Govnt issue statement on visit of IMF mission to Uzbekistan

TASHKENT. December 15 (Uzreport) - The Government and the Central Bank of the Republic of Uzbekistan and the International Monetary Fund (IMF) issued a press release on the mission of IMF to Uzbekistan. Following is full text of the release.

PRESS RELEASE

Of the Government and the Central Bank of the Republic of Uzbekistan and the International Monetary Fund
Tashkent , December 13, 2006

A mission of the International Monetary Fund (IMF) visited the Republic of Uzbekistan from November 30 through December 13, 2006 to hold discussions with the Government of Uzbekistan within the framework of 2006 Article IV consultations. The mission was headed by Ms. Sena Eken, assistant director in the Middle East and Central Asia Department of the IMF.

The discussions between the Government and the IMF mission focused on economic developments in 2005-2006, the outlook for 2007 and the medium term, and the economic reform program of the Government. The discussions were very open and constructive. The mission expressed special gratitude for an excellent cooperation.

The mission recognizes that the economic performance during the past two years was generally strong, with high GDP growth of no less than 7 percent according to official data, large trade and external current account surpluses mainly due to increases in exports, and sharp increases in gold and foreign exchange reserves, which now amount to12 months of imports. Inflation started coming down recently.

On the policy side, the authorities implemented prudent fiscal policies which resulted in budgetary surpluses despite the reduction in tax rates. The strong balance of payments fueled monetary aggregates and created challenges for monetary policy. In response, the Central Bank of Uzbekistan tightened monetary policy appropriately in 2006. Structural reforms continued at a gradual pace with welcomed progress in fiscal reforms.

The mission notes that the economic outlook for 2007 is favorable with continued strong performance projected for economic growth and the balance of payments. The mission is encouraged by the intention of the authorities to further reduce inflation and to this end continue to tighten monetary policy and to pursue prudent fiscal policies.

To ensure continued high rates of economic growth over the medium term in an environment of financial stability, the mission emphasized the need to address the outstanding policy challenges, including to reduce inflation, eliminate constrains to further development of the banking system, and ease barriers to foreign trade. In this regard, the mission made a number of recommendations, including: a more flexible exchange rate policy; discontinuation of non-core functions undertaken by banks; and reduction of tax and administrative costs related to foreign trade. These recommendations will be thoroughly considered by the Government in the formulation and implementation of economic policies.

The mission emphasized to the authorities that the Fund staff stands ready to assist Uzbekistan in its reform efforts, including through technical assistance.

Uzbekistan delays US-Uzbek gold joint venture auction

TASHKENT. December 19 (Prime-Tass) - Uzbekistan has postponed an auction to sell the assets of bankrupt US-Uzbek gold mining joint venture (JV) Zarafshan-Newmont till January 18, Alexander Lolak, the joint venture's court appointed manager, told Prime-Tass. The auction, earlier scheduled for December 18, was postponed due to the absence of a quorum, he said. He added that a creditors meeting slated for late December would consider decreasing the starting price of the venture. The starting price was earlier set at US$140 million.

Zarafshan-Newmont was established in 1992 on a parity basis between the US Newmont Mining and Uzbekistan's Navoi Ore Mining and Metallurgical Plant, or NGMK. In early October, an Uzbek court declared Zarafshan-Newmont bankrupt. The ruling followed a US$49 million back tax claim by the Uzbek government and subsequent seizure of some of the joint venture's assets. Zarafshan-Newmont also owes US$20 million to the European Bank for Reconstruction and Development (EBRD). Zarafshan-Newmont develops the Muruntau open-pit gold mine, owned by NGMK. In 2005 Zarafshan-Newmont produced 7.72 tons of gold, down 65% on the year. The joint venture is one of three gold producers in Uzbekistan.

AGMK Jan-Oct zinc output up by 21%

TASHKENT. December 19 (Uzreport) - Uzbekistan's only zinc and copper producer, the Almalyk Mining and Metallurgical Combine (AGMK), produced in January-October 40,268 metric tons of zinc, 21% more than in the corresponding period last year. Refined copper output during the period fell by 12% to 75,735 tons. Almalyk mines its ore at the Kalmakyr and Sary-Cheku deposits in Tashkent region and at the Uch-Kulach deposit in Jizzakh region of Uzbekistan.

Vympelcom unifies technology platform of subsidiaries

TASHKENT. December 19 (Uzreport) - In November AT Consulting has accomplished the first phase of the project for centralizing systems that support business processes of mobile operators recently acquired by Vympelkom in the CIS. Now such mobile operators as Ukrainian Radiosystems, Unitel from Uzbekistan and Tacom from Tajikistan are servicing 1.3 million, 582.5 thousand and 22 thousand subscribers respectively under Beeline brand. In course of 2006 the main business applications for prepaid client services and sales were integrated. In Ukraine, Uzbekistan, Tajikistan within the project a centralized billing system was installed, necessary integration conducted. Besides, a unified payment system, some systems supporting subscriber operations and billing of additional services were integrated. Moreover, systems of operating and management accounting and data storage were implemented. The second phase of the project, aimed at supporting the service of contract subscribers, has been launched in Ukraine, Uzbekistan and Tajikistan. Yet, the integration of centralized systems supporting Vympelcom's business in Georgia is under way.

Uzbekistan builds up produce export thanks to growth of supplies to Russia

TASHKENT. December 22 (Uzreport) - Since the beginning of this year Uzbekistan has exported around 694,000 tons of agricultural products worth a total of US$342 million, Press-uz.info reports. At the same time, in 2005 the export accounted for about 660 thousands tons. Russia remained the main buyer of Uzbek agricultural produce; the share of this country in the total supplies has increased from 50% to 86%. According to information of the source, around 250,000 tons of vegetables and cucurbits crops (worth US$83 million) and 404,000 tons of fruits (worth US$244 million) have been exported since the beginning of 2006. In addition, 32,800 tons of processed products and 7,000 tons of vine products have been exported during the mentioned period of time. To the opinion of the analysts of "Agrooglyad: Vegetables and Fruits" journal, the growth of produce export from Uzbekistan became possible primarily due to the banned supplies of vegetables, fruits and berries of Polish, Moldavian and Georgian origin to Russia. At the same time Russia created the maximally favorable conditions for the supplies of fresh and processed produce from Uzbekistan to Russian market. The experts point out that Uzbekistan has very favorable climate for the further growth of fruit and vegetable production and export.

South Korean steel maker buys 9.8% in Uzbek gas field

TASHKENT. December 25 (Uzreport) - Posco of South Korea, the world's third-largest steel maker, has secured a stake in an Uzbek natural gas field in a bid to obtain stable energy resources, a company spokesperson said. Posco had acquired a 9.8% stake in the Uzbek field from a business lobby group, the Korea Federation of Small and Medium Business, the two groups said in a statement. South Korea holds a 20% stake in the Uzbek gas field with state-run Korea National Oil Corporation (KNOC) having 10.2%. Posco would pay about 8% of its share of profits from the field to the lobby group, after deducting expenses, once the field proved successful, the groups said. "We want to secure stable energy resources, especially gas, by entering the energy business," the Posco spokesperson said. In August, KNOC signed a US$$20-million production-sharing pact with the Uzbek government that could secure for South Korea 36 million tons of liquefied natural gas (LNG) equivalent to natural gas. The deal was finalized almost a year after a preliminary pact that included Russia's Lukoil, Uzbekistan's state oil and gas holding Uzbekneftegaz, Malaysia's state oil firm Petronas and China's CNPC, parent of listed PetroChina. Uzbekneftegaz said the deal covers a period of 35 years and entitles investors to a 50% share in revenues. The five partners all have equal shares in the field. South Korea's energy ministry said the Aral field may hold as much as 8 trillion cubic feet of gas, although the final reserve figure will be confirmed only after appraisal drilling. The Pohang Iron and Steel Company, or POSCO, is the third largest steel producer in the world based in Pohang, South Korea. Currently, POSCO operates two steel mills in the country, one in Pohang and the other in Gwangyang. In addition, POSCO operates a joint venture with US Steel, USS-POSCO, which is located in Pittsburg, California. Along with Samsung Electronics, POSCO is viewed by many Koreans as a symbol of national pride and 'can do' spirit. With the strong Korean shipbuilding and automobile industry dependent on POSCO for steel, it has been seen as the bedrock of Korea's industrial development over the past 40 years. Revenue of POSCO made up US$27.48 billion in 2005, while operating income comprised 6.07 trillion Korean Won in the same year. Net income of the company made up 4.10 trillion Korean Won in 2005.

UzDaewooAuto's car output up 35.6% January-November

TASHKENT. December 26 (Uzreport) - Car output of UzDaewooAuto, Uzbek carmaker, rose 35.6% on the year to 126,010 vehicles in January-November, Uzbekistan's State Statistics Committee said. UzDaewooAuto projects its car output at 142,000 vehicles in 2006, the committee said. In 2005 UzDaewooAuto's car output rose 44.2% on the year to 101,010 cars. UzDaewooAuto was set up on a parity basis in 1992 by Uzbek state-owned auto maker Uzavtoprom with South Korean automaker Daewoo Motor. Daewoo Motor filed for bankruptcy in 2000 and most of its assets were bought by US auto manufacturer General Motors (GM) in 2002. However, Daewoo Motor's 50% stake in UzDaewooAuto was not bought by GM and was instead acquired by Uzavtoprom last year.

Uzdunrobita completes US$35m network expansion programme

TASHKENT. December 26 (Uzreport) - Uzbekistan's largest mobile operator Uzdunrobita has completed a US$35 million network expansion programme. During the programme, which was identified as the third stage, Uzdunrobita installed equipment with a capacity to serve 630,000 subscribers. The company launched a total of 350 base stations in 150 communities across Uzbekistan this year. This year the company declared the launching of the 1,000th base station in Uzbekistan The company used its own funds and shareholders' investments to finance the expansion, the source said. Last year, Uzdunrobita spent US$50 million to launch 400 base stations, the source said. Founded in 1991, Uzdunrobita has licenses to provide mobile services in GSM and AMPS/DAMPS standards in Uzbekistan. Both licenses are valid until 2016. Uzdunrobita has 1.3 million subscribers and controls 55% of Uzbekistan's mobile communications market. Russia's largest mobile operator Mobile TeleSystems (MTS) owns a 74% stake in Uzdunrobita and has an option to acquire the remaining 26% within three years. MTS invested about $100 million in the operator in 2004-2006. Currently, six mobile telecommunication providers operate in Uzbekistan. The total number of their subscribers rose to 2.12 million as of November 1 from 1.15 million as of January 1.

For more information on Uzbekistan, visit BISNIS online at

http://www.bisnis.doc.gov/bisnis/country/Uzbekistan.cfm

or contact: : Jahangir Kakharov, BISNIS Representative, Tashkent, Uzbekistan,

Email: bisnis.tashkent@bcc.com.uz (cc: Andrew.Colburn@bisnis.doc.gov)

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