RFE Energy System Envisions Serious Reforms

UZBEKISTAN COMMERCIAL NEWS UPDATE

Date: March 2007

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

Korea Gas agrees to launch natural gas JV with Uzbekneftegaz

TASHKENT. March 1 (Uzreport) - Korea Gas Corp. Wednesday said it has agreed to launch a joint venture with Uzbekneftegaz, a state-run Uzbekistani gas company, to develop natural gas reserves, Dow Jones reports. The 50:50 joint venture will develop gas reserves in the Surgil region in the northern part of Uzbekistan, to produce 2 million metric tons of natural gas a year, a Korea Gas official said. The Surgil block is estimated to have 84 million tons of natural gas, the official said. The companies will decide in October on when to begin the exploration of the reserves, he said. Separately, the joint venture will also build a petrochemical plant to produce 360,000 metric tons a year of polyethylene and 80,000 tons of polypylene a year, he said.

Uzbekistan's Coscom says fully resumed operations

TASHKENT. March 2 (Prime-Tass) - Coscom, Uzbekistan's third largest mobile operator, has fully resumed its services after a license suspension, a spokesperson with the company told Prime-Tass on Friday. Uzbekistan's Communications and IT Agency suspended Coscom's mobile license for 10 days starting February 5, citing violations of its license agreement. The agency said that the operator failed to inform the regulator of network malfunctions in late January. Although the regulator allowed Coscom to resume services starting on February 16, national fixed-line operator Uzbektelecom and East Telecom, which lease telecom channels to the operator, had not re-opened the telecommunications channels as of late February, the company said earlier. The USA' MCT Corporation holds 85% in Coscom, which had 378,000 users before the license suspension. Some market experts estimated that the company might have lost 20%-40% of its subscribers

UzACI head receives US State Department's official

TASHKENT. March 6 (Uzreport) - Uzbek Deputy Prime Minister and director-general of Uzbek Agency for Communication and Information Abdulla Aripov received Deputy Assistant Secretary for South and Central Asian Affairs of US State Department Evan A. Feigenbaum on March 2. The sides discussed issues on deepening bilateral relations, official web site of UzACI said. It added that the sides considered issues on development of relations and exchange opinion on existing issues. The officials noted great potential for close cooperation in various fields. The sides underlined preparation and training of staff in ICT direction is one of priority tasks and expressed their intention to develop cooperation in this direction.

GM reportedly negotiating with UzDaewoo to build Chevrolet cars

TASHKENT. March 6 (Uzreport) - In a move aimed at increasing its manufacturing footprint in Central Asia, General Motors (GM) is negotiating a manufacturing contract with UzDaewoo Auto to manufacture Chevrolets in Asaka city of Andijan region, eastern Uzbekistan, Automotive World reported. UzDaewoo Auto was set up in 1992 on a parity basis by Uzbek state-owned automaker Uzavtoprom and South Korea's Daewoo Motor. Uzavtoprom acquired 50% stake of Korean side in 2005 for undisclosed sum. Uzbek carmaker produced 140,080 cars in 2006, up 38.7% on the year, Uzbekistan's State Statistics Committee said. UzDaewoo Auto aims to make 200,000 cars in 2008. The carmaker's output rose 44.2% on the year to 101,010 units in 2005. UzDaewoo Auto produces four types of vehicles, including Nexia, Matiz, Damas and Lacetti.

LUKOIL Uzbekistan operating company completes construction of drill cuttings disposal site

TASHKENT. March 6 (Uzreport) - LUKOIL Uzbekistan Operating Company, a subsidiary of LUKOIL Overseas, has completed the construction a temporary storage and waste management facility for drilling cuttings on Khauzak and Shady blocks (Bukhara Region, Southwestern Uzbekistan) within the framework of implementation of the Kandym-Khauzak-Shady-Kungrad PSA. At present commissioning work is being completed on the site. The facility is the first of its kind in Uzbekistan. It will handle 12,000 tons of drilling cuttings per year. Capacity of the base disposal unit is 10 tons per hour. The most modern technology as well as the best global manufacturers' equipment is used at the site. It will provide for separate collection, transportation and disposal of drilling waste (drilling wastewater and drilling cuttings), as well as regeneration and re-circulation of used drilling mud. The stabilization and solidification method has been selected for the disposal of drilling cuttings – i.e. mixing with an absorbent and cement as result of which the components of the cuttings turn into low soluble hydroxides. The processed mix of used drilling mud with drilling cuttings will be used at the facility to produce material for construction, repair of field roads and build drilling rig foundations. Part of processed cuttings will be used to produce cinder blocks, a popular decorating and wall building material. Thus, the modern concept of waste-free production will be implemented during the development of Khauzak and Shady, positively influencing both project economics and environmental performance. Work on the disposal of drilling waste, as well as all other oil & gas operations under the PSA will be accompanied by environmental monitoring carried out by a specialized organization. Construction of a network of 12 monitoring wells and four control stations is planned to ensure control of ground water level and its physical and chemical properties and bacteriological composition within the sanitary protection area. The PSA for the Kandym-Khauzak-Shady-Kungrad project was signed on June 16, 2004 in Tashkent and went into effect on November 24, 2004. The project is being implemented by a consortium of investors, which includes LUKOIL Overseas (90%) and Uzbekneftegaz, the national holding company (10%). The duration of the PSA is 35 years. Commercial production of natural gas is planned to be launched in the fourth quarter of 2007. Peak annual production will reach around 10 billion cubic meters of gas.

Share of car industry in Uzbek GDP makes up 9.2%

TASHKENT. March 7 (Uzreport) - Share of car industry in total volume of gross domestic product (GDP) of Uzbekistan comprised 9.2%, Pravda Vostoka reported quoting Uzavtosanoat (Uzbek Car Industry) data. Over 67% of production in car industry produced by enterprises of Uzavtosanoat and the total growth of machinery and metal processing made up 25.7% year-on-year in 2006. According to Uzavtosanoat, the growth of export volume of enterprises of the company made up 70.1% in 2006 compared to 2005 and rose by 7.5 times against 2000. Six enterprises of Uzbek car industry exported products in 2006. Over 82,500 cars, out of 140,000 cars or 59% of cars produced in 2006, were exported in 2006. Over 17 regional enterprises of UzDaewoo Auto, Uzbek car maker, operate abroad, large number of which located in Russia. The company is expanding its dealers' network and now Uzbek made cars sold in Azerbaijan, Belarus, Moldavia and Kyrgyz Republic. Over 53 dealers operate in largest Uzbek cities and each regional center. Uzbek car maker realized 59.658 cars in internal market, of which 15,162 were Damas, 24,669 – Nexia cars, 18,958 - Matiz cars and 869 – Lacetti cars. Uzavtosanoat plans to expand production by 21.2% compared to 2006 and produce over 170,000 cars at UzDaewoo Auto and 1,500 buses and trucks at SamAuto. The exports are expected to grow 35.6%. Within localization programme, UzDaewoo Auto and enterprises will utilize production of new 253 details and spare parts.

Uzbekistan dissatisfied about delays in implementation of gas field development projects

TASHKENT. March 7 (Uzreport) - Uzbekistan says Gazprom is falling behind the schedule in implementation of the projects on the development of new gas fields on its territory, Deputy Minister of Economic Development and Trade of Russia Andrey Sharonov told journalists commenting on the results of intergovernmental talks held in Tashkent. He said that Gazprom had been issued a territory of over 38,000 square kilometers in Uzbekistan for the exploration works. "The course of implementation of the oil and gas field development projects was discussed during the talks. The Uzbek party is very content about cooperation with LUKOIL, but at the same time it claims that Gazprom has fallen behind the schedule on some of the projects on the development of new fields," the official noted.

According to the Deputy Minister, the Uzbek party is not very happy about the delays in implementation and the flow of investments regarding two of the tree projects currently being run by Gazprom. To be precise, to date the company was supposed to make investments in the amount of US$300 million, however until now only US$30 million has been directed.

"The Uzbek party said cooperation was developing slower than it was originally planned," he added. At the same time, deputy head of the Ministry of Economic Development and Trade emphasized that the license for the development of new fields in Uzbekistan was issued to Gazprom only in the late December 2006. "The license was received only in the late December, and in January Gazprom actively started the field work," Shafronov said.

Speaking of other results of negotiations with the Uzbek government, he said, Russia was considering increasing the supplies of VAZ, GAZ and UAZ automobiles to Uzbekistan with the aim of brining bilateral trade to balance, RIA Novosti reported.

He said last year Russia bought 67,000 Daewoo cars from Uzbekistan. At the same time, the Russian party delivered only 3,500 cars (2,000 VAZs, 1,000 GAZs, and 500 UAZs) to Uzbekistan. "The supply volumes are incomparable," emphasized Sharonov, adding that to the supply of Russian automobiles to Uzbekistan would be increased to correct the situation. At the same time the official noted that "We are not talking about the reduction of import from Uzbekistan, but about the increase of Russian export, including the export of equipment and machinery."

Russia, Uzbekistan discuss Tashkent aircraft builder joining UABC

TASHKENT. March 7 (Uzreport) - Russia and Uzbekistan are debating the possible inclusion of the Tashkent-based Chkalov aircraft building association into Russia's United Aircraft Building Corporation (UABC). "We discussed the issue and agreed to instruct those people who can address it in a professional way to work on it," Russian Prime Minister Mikhail Fradkov told journalists following intergovernmental talks in the Uzbek capital. "It is an urgent and sensitive issue." UABC, which is 90% state owned, consolidates aircraft building companies and state assets engaged in the manufacture, design and sale of military, non-military, transport and unmanned aircraft in a bid to streamline the Russian aviation industry. It incorporates commercial and military aircraft makers, such as Sukhoi, Ilyushin and Tupolev, as well as companies involved in distribution, including Aviaexport, RIA Novosti reported. The Tashkent aircraft builder produces Il-76 Candid military transport planes.

Russia, Uzbekistan sign deal to set up helicopter-repair JV

TASHKENT. March 7 (Uzreport) - Russia and Uzbekistan have signed an agreement to set up a joint venture to carry out repairs on helicopters, Boris Alyoshin, director of Russia's Federal Industry Agency, told reporters. The joint venture, called Uzrosavia, is to be set up later this year in the city of Chirchik in Uzbekistan. The plant will repair and modify Mi-8 and Mi-24 helicopters. Russian companies, including state-controlled helicopter producer Oboronprom and arms exporter Rosoboronexport, are expected to hold at least 51% in the joint venture. Uzbek companies, including aircraft maker Tashkent Aircraft Production Corporation, or TAPOich, and state-owned Uzmakhsusimpeks are expected to hold the remaining stake.

Foreign investment in Uzbekistan jumps 20% in 2006

TASHKENT. March 9 (Interfax) - Foreign investment in Uzbekistan grew 20% in 2006 compared with 2005 to $895.7 million, the Economics Ministry said in materials published by the local media. Foreign investment under sovereign guarantee rose 5.4% to $211.9 million and direct investment was up 25.4% to $683.8 million. Investment with sovereign guarantees accounted for 23.7% of the total investment, up from 22.7% in 2005, and direct investment for 76.3%, down from 77.3%.Industry received 68.3% of the overall investment, with around 50% of the investment going into new technology and the acquisition of new equipment. The fuel and energy sector, chemicals industry, metallurgy and machine building sectors received 34.6% of the investment, the agri-sector and consumer goods manufacturing got 17.8% and the infocom sector received 15.3%. In particular, a project to further develop the Shakhpakhty field under a production sharing agreement with Gazprom (RTS: GAZP) was completed in 2006, commercial drilling was started under a PSA with Lukoil (RTS: LKOH) at the Khauzak-Shady field, Malaysia's Petronas started to study the Gadzhak gas field, and projects are being implemented to build the Tashguzar-Boisun-Kumkurgan railways and Uzbekistanskaya power line. In addition, seven textile joint ventures were launched in five regions, at a total cost of $50.11 million; the Uzbek-U.S. joint venture Coscom continued implementing two projects to modernize mobile communications at a cost of $25 million. China's Huawei started to implement a $12.5-million project to modernize the telecoms network of Uzbektelecom. Investment also financed the completion of an upgrade of the 341-km Samarkand-Khojidavelt railway at a cost of $155 million, and projects are being implemented to supply drinking water in Bukhara, Gulistan, Juzak, Karshi and Samarkand, the comprehensive reconstruction of the Uzbek state radio and television company is continuing and a power-producing unit was launched at Talimarjan thermal power plant. Under an investment program approved by the Uzbek parliament, in 2006 it was planned to attract $917.97 million in foreign investment in 134 investment projects, including $365.41 million in credits with state guarantees, and $552.56 million in direct investment.

MTS-Uzbekistan's subscribers' base increases by 7% in February

TASHKENT. March 16 (Uzreport) - Number of subscribers of MTS-Uzbekistan, formerly Uzdunrobita, increased by 7% in February 2007 to 1.63 million users. Russia's MTS said in its press release that the subscribers' base of the company grew by 110,000 users in February [from 1.52 million users]. MTS-Uzbekistan is the largest mobile operator of Uzbekistan in terms of the amount of subscribers. In August 2004, the company was acquired by MTS. Network of MTS-Uzbekistan covers all large cities and majority of highways. The company's share in Uzbek market made up 55% as of Feburary 1. Mobile TeleSystems OJSC (MTS) is the largest mobile phone operator in Russia and the CIS. Together with its subsidiaries, the Company services over 73.79 million subscribers. The regions of Russia, as well as Belarus, Turkmenistan, Ukraine, and Uzbekistan, in which MTS and its associates and subsidiaries are licensed to provide GSM services, have a total customer base of more than 230 million. Since June 2000, MTS' Level 3 ADRs have been listed on the New York Stock Exchange (ticker symbol MBT).

Uzbekiston Temir Yollari set to implement several big projects

TASHKENT. March 19 (Business-Partner) - The State Joint-Stock Railway Company Uzbekiston Temir Yollari plans to implement three large-scale projects, all focusing on the development of the national network of railway lines, Business Partner reports. To meet their cost, the Uzbek monopoly railway operator will need a total of US$88.6 million. The company hopes to receive loans from the Islamic Development Bank (IDB) and the Japan Bank for International Cooperation (JBIC). A US$18.2 million credit from the IDB will be used to buy equipment for the company's repair facilities, while a US$54.4 million credit to be extended by the JBIC will go to production of carriages within the Republic. As for the credit lines to be provided by both of these international financial institutions (to the tune of US$6 million - from the Islamic Development Bank and US$10 million - from the Japan Bank for International Cooperation), Uzbekiston Temir Yullary will invest them in the development and equipment of a network of railway lines connecting the Republic of Uzbekistan and Afghanistan. Under this project, a combined bridge passage across the Amudarya River and railway stations in the towns of Termez and Galaba will be reconstructed. A remaining portion of the funding will be used to purchase tracklayers and other necessary machinery. Besides, these credits will allow Uzbekiston Temir Yullary to finance the creation, on the basis of its casting-mechanical plant, an enterprise manufacturing vans. For the time being, feasibility studies for all the projects are in full swing. The company expects to receive the first credit lines from the Islamic Development Bank and the Japan Bank for International Cooperation at the end of 2007 - beginning of 2008. The State Joint-Stock Railway Company was founded in 1994, with charter capital totaling 197 billion soums and it is fully owned by the state.

Over 3.19m people use mobile communication services in Uzbekistan

TASHKENT. March 19 (Uzreport) - Number of mobile users in Uzbekistan made up 3,194,645 as of March 1, 2007, State Commission on Radio Frequencies said. The commission said the number of users increased from 2,720,005 users as of January 1, 2007 to 3,194,645 as of 1 March 2007, or rose by 475,000 users. As earlier reported, the number of mobile communication users almost doubled in 2006 increasing from .2 million to 2.7 million users. MTS-Uzbekistan, former Uzdunrobita, served over 1.63 million users or 51% total Uzbek mobile market as of 1 March.

Russian co to build cement plant in Uzbekistan 2007-2010

TASHKENT. March 20 (Prime-Tass) - Russia's Moscow-based TKB-Invest plans to build a cement producing plant in Uzbekistan sometime in 2007-2010, Uzbekistan's Uzstroymateriali, the project's customer announced. A spokesman with the Uzbek company said that the two companies had already signed a memorandum of intent to set up a joint venture for the plant's construction, Prime-Tass reported. The production capacity of the plant is expected to amount to 3 million tons per year, the spokesman said. The spokesman added that a feasibility study for the construction of another cement producing plant, with an expected cost of US$150 million, would soon be completed. According to earlier reports, Uzbekistan planned to build three cement plants at a total cost of US$250 million. Currently, Uzbekistan has six operating cement plants with a total annual production capacity of 6.5 million tons. In 2006, Uzbekistan's cement production increased 10% on the year to 5.58 million tons, while exports rose 18.5% in monetary terms to US$37.9 million.

Uzbekistan cotton fiber output makes up 281,399 tons

TASHKENT. March 20 (Uzreport) - Uzbekistan produced 281,399 metric tons of cotton fiber in January-February, 3.7% less than the first two months of last year, the state statistics committee announced. The state-owned Uzkhlopkoprom association produced 280,671 tons of cotton fiber in the period, 3.5% less than a year ago, while enterprises with foreign participation produced 728 tons, nearly half of the amount produced in January-February 2006. The fall in output is contributed to the fact that a number of cotton refineries have reduced production while they undergo modernization. In 2006 Uzbekistan's cotton harvest fell 3.2% to 3.63 million tons and cotton fiber output fell 1.4% to 1.171 million tons.

Uzbekistan to draw US$10m credit from ADB to create state treasury

TASHKENT. March 20 (Uzreport) - Uzbekistan is considering drawing a US$10 million credit from the Asian Development Bank (ADB) to optimize state budget management and organise treasury operations in 2007. Earlier reports said that Uzbek President Islam Karimov had issued a resolution to establish the Finance Ministry's treasury within two months. The president commissioned the government to take a set of measures to create a unified information system for the budget execution system, involving ADB borrowings. Specifically, the system will help consolidate all state budget incomes into a single treasury account and use it to cover expenditures.

Eventis Telecom plans to spend US$5m on Uzbek Internet services in 2007

TASHKENT. March 20 (Prime-Tasss) - Cyprus-based company Eventis Telecom plans to spend US$5 million on developing Internet services in Uzbekistan this year, Prime-Tass reported quoting Shukhrat Shanazarov, general director of Sarkor Telecom. Eventis Telecom acquired a controlling stake in Sarkor Telecom in December 2006. Sarkor Telecom intends to launch new services, including data storage, corporate LAN networks and virtual private networks (VPN), and roll out a WiMAX wireless broadband access network, Shanazarov said without specifying the timeline for the services launch. Sarkor Telecom is licensed to provide Internet access and data transfer in Uzbekistan. The operator had 650 users of broadband Internet access and around 30,000 dial-up subscribers as of September 30, 2006, according to research company Comnews Research. As of January 1, there were 1.7 million Internet users in Uzbekistan, or about 6.8% of population, according to the country's statistics. Eventis Telecom is reportedly controlled by two Russian businessmen. The company recently founded a mobile subsidiary in Kyrgyzstan and its affiliate received a mobile communications license in Moldova.

IMF Executive Board concludes 2006 Article IV consultation with Uzbekistan

TASHKENT. March 23 (Uzreport) - On February 9, 2007, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with the Republic of Uzbekistan. IMF published Public Information Notices (PIN) on Uzbekistan on March 23, following is full text of PIN.

Background

Uzbekistan's macroeconomic performance was generally strong in 2005-06, reflecting significant macroeconomic policy adjustment and a favorable external environment. According to official data, real GDP growth was over 7 percent, driven by agriculture, industry, and transport and communications, and supported by buoyant external demand. The external current account registered large surpluses due to favorable commodity prices, strong growth in non-commodity exports, increased remittances, and restricted imports. Official foreign exchange reserves continued to rise and reached 12 months of import cover at end-2006. Inflation, as measured by various price indices, picked up in 2005. With a tightening of monetary policy, it started coming down in 2006, but remains high.

After a gradual depreciation in 2005 and early 2006, the sum was de facto pegged to the U.S. dollar during the second half of 2006. The real effective exchange rate appreciated in the past two years due to higher inflation.

Monetary policy was accommodative in 2005, but was tightened in 2006. In 2005, the sharp accumulation of net foreign assets by the Central Bank of Uzbekistan (CBU) was only partially sterilized by a decline in net domestic assets, resulting in surging reserve and broad money. In 2006, to offset the large build up of reserves, the authorities tightened monetary policy significantly via increased deposits from banks, the accumulation of government deposits, including through the newly created Fund for Reconstruction and Development (FRD), and the resumption of the issuance of central bank paper. As a result, growth of monetary aggregates decelerated considerably by end-2006, with growth in reserve money declining from 88 percent in 2005 to 37 percent in 2006.

The banking sector is undergoing structural changes, with the expansion of business areas and the move to local currency lending. Furthermore, prudential ratios exceed minimum standards and non-performing loans are declining. However, monetization is low, growth of cash-in-circulation is faster than that of deposits, and the ratio of credit-to-GDP continues to decline. The banking system's ability to fulfill its intermediary role has been constrained by the limited room for credit expansion given the strong growth in net foreign assets and the need to control the growth of reserve money as well as banks' involvement in financial oversight and implementing government treasury operations, which affects confidence in the banking sector.

Fiscal policy outperformed budget projections in 2005-06. Despite tax cuts, revenue collection was strong due to ongoing tax reforms. On the expenditure side, large increases in public sector wages and pensions were mainly offset by lower capital expenditures. As a result, the consolidated budget registered a surplus of 1.3 percent of GDP in 2005 and is estimated to have registered a small surplus in 2006, compared to the budgeted deficits of about 3 percent of GDP in both years. The overall fiscal surplus, including the FRD, is estimated at about 3Ѕ percent of GDP in 2006.

Structural reforms continued at a gradual pace. Tax reforms to ease the tax burden led to improved collections, while treasury reforms were effective in enhancing fiscal management. Licensing, inspections, and reporting were streamlined, and the restructuring of agricultural enterprises (shirkats) into private farms was mostly completed. Furthermore, restrictions on banks' access to their correspondent accounts at the CBU and cash withdrawals from bank deposits were eased, and a real time gross settlement system was introduced. However, privatization stalled, a difficult investment climate resulted in low FDI inflows, and the trade regime remains protective and complex. Despite improvements in data availability, weaknesses in economic data remain.

Executive Board Assessment

Executive Directors commended the Uzbek authorities on the strong performance of the economy, which has been supported by a favorable external environment, improvements in macroeconomic policies, and gradual progress in structural reforms.

Directors were of the view that economic prospects are strong in the near term, but emphasized that containing inflation, enhancing financial intermediation and confidence in the banking system, and improving the business climate including through the liberalization of trade and payments would be crucial to achieve the authorities' ambitious growth objectives in the medium term.

Directors considered that the main challenge in 2007 is to reduce inflation and supported the authorities' intention to further tighten monetary policy. They recommended a more flexible exchange rate policy to take some pressure off indirect monetary policy instruments in curbing inflation and creating room for greater credit expansion to the private sector. Allowing some nominal appreciation would be compatible with indications that the sum is undervalued.

Directors recommended continuation of cautious fiscal policies in 2007 to help reduce inflation. They also noted that—given the low level of debt—lower inflation would provide room in the medium term for moderate fiscal loosening and small deficits to finance higher social and infrastructure expenditure. Directors expressed concern that the recent increases in public sector salaries and pensions have limited resources for investment spending, and considered that the income objectives could be better served by well-targeted subsidies to the poor. Directors encouraged the authorities to make further progress in tax and treasury reforms, introduce a multi-year budget framework, and integrate the FRD into the government budget.

Directors stressed the crucial importance of financial deepening to enhance the role of banks in economic development and strengthen the monetary transmission mechanism. To enhance confidence in the banking system and encourage deposits, all remaining restrictions on cash withdrawals should be removed and the role of banks in financial oversight and government treasury functions should be discontinued. A Financial Sector Assessment Program would help prioritize banking sector reforms.

Directors noted that the trade system continues to be protective in Uzbekistan. The authorities should reduce and unify tariffs, eliminate differences in excise taxes on imported and domestic goods, reduce administrative costs related to international trade, streamline customs procedures, and accelerate efforts to join the World Trade Organization.

Directors welcomed the authorities' reiteration of their commitment to current account convertibility amid reports of delays in convertibility in 2006. They hoped that the transitory convertibility problems associated with the implementation of the anti-money laundering law would be resolved in early 2007.

Directors regretted that weaknesses in economic data continue to hamper surveillance. They welcomed the authorities' intention to enhance the quality of statistics, and their request for technical assistance in national accounts, price, and balance of payments statistics. Directors urged the authorities to participate in the General Data Dissemination Standards and publish economic data, including in the IFS.

Uzbekistan: Selected Economic Indicators

2002 2003 2004 2005 2006 Est

(Annual percentage change)

Production and prices

Real GDP 4.0 4.2 7.7 7.0 7.2

Consumer price index (e.o.p) 1/ 21.6 3.7 3.8 7.8 7.0

GDP deflator 1/ 45.4 26.7 15.7 15.9 20.3

Producer price index (e.o.p) 1/ 46.1 27.4 26.5 28.2 27.0

(In percent of GDP)

General government 2/

Total revenue and grants 35.7 33.4 32.2 32.2 35.8

Total expenditure and net lending 37.2 33.9 32.1 32.5 32.6

Overall balance (-=deficit) 3/ - 1.9 0.1 0.6 1.3 3.6

(Annual percentage change)

Monetary Indicators

Reserve money 25.2 26.7 38.7 87.5 37.0

Broad money 29.7 27.1 47.8 54.3 37.0

Velocity of average broad 10.8 10.5 9.5 8.0 7.2

money (level)

(In million of U.S. dollars, unless otherwise specified)

External sector

Export of goods 2,510 3,240 4,263 4,757 5,842

Import of goods 2,186 2,405 3,061 3,310 3,787

Current account 117 881 1,215 1,949 3,136

In percent of GDP 1.2 8.7 10.2 14.3 19.5

Gross international reserves 1,215 1,659 2,146 2,895 4,604

In months of imports 5.1 6.4 6.6 8.5 12.0

Sources: Uzbek authorities; and IMF staff estimates.

1/ Official estimates.

2/ Including the Fund for Reconstruction and Development created in 2006.

3/ Based on below-the-line financing data.

Uzbek-Swiss JV starts gas extraction at Severny Nishan

TASHKENT. March 26 (Uzreport) - Gissarneftegaz, an Uzbek-Swiss joint venture set up by Zeromax and Uzbekneftegaz, has recently started to produce natural gas at the Severny Nishan deposit located within the Bukhara-Khiva oil-and-gas-bearing region of Uzbekistan.

It was announced by Ulmaskamal Abdazimov, the first deputy director-general of the joint venture. "At the moment, some 1.5 million c. m. of natural gas is extracted at the deposit a day. In a month, when the construction of new boreholes is completed, the daily extraction volume is expected to amount to 3 million с. m.," he said. According to Mr. Abdazimov, a 33-km gas main from the Severny Nishan deposit to the Shurtanneftegaz Gas Refinery has been built and put into operation. In addition, he has said that "in the near future, a new construction project will be launched under which a 42-km gas pipeline will be placed to link the Severny Nishan deposit with the Shurtanneftegaz enterprise".

Gas extraction at the Severny Guzar deposit is expected to start at the early April. When reached a full rated capacity, it will produce 430 million с. m. of gas and 30,000 tons of gas condensate. As far as the Severny Nishan deposit is concerned, its rated capacity stands at some 2 billion с. m. of natural gas.

Gissarneftegaz JV was established in 2005 by Switzerland's Zeromax GmbH on a par with Shurtanneftegaz (incorporated in the National Holding Company Uzbekneftegaz), with the purpose of carrying out reconnaissance within the Tagam - Shimoliy area of the Gissar region and developing gas-condensate deposits of Severny Nishan, Kamashi, Beshkent, Severny Guzar and Shakarbulak in the Bukhara-Khiva region.

When all these deposits reach their rated capacity, Gissarneftegaz JV will produce up to 3 billion с. m. of gas a year. Overall, the company plans to extract some 30 billion с. m. of natural gas, 1 million tons of gas condensate and 500,000 tons of oil.

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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