Uzbekistan’s largest-ever public market transaction has highlighted growing investor interest in the country and its economic reforms, while shifting attention to the next stage of developing its financial markets.
The listing of the National Investment Fund of Uzbekistan, managed by Franklin Templeton, raised more money than all previous IPOs in the country combined over the past 30 years, according to Marius Dan, Central Asia CEO at Templeton Global Investments.
For investors and market operators, the transaction has drawn attention to a wider issue: how Uzbekistan develops the rules, institutions and market depth needed to support capital markets, debt financing, venture capital and private investment.
“What investors really want to know is that they’ll put their money in and that they will get their money back,” Julia Hoggett, chief executive of the London Stock Exchange, told Euronews.
Hoggett said investors usually begin by looking at a country’s fundamentals, including currency stability, inflation, economic growth, population trends and assets, before turning to the regulatory environment.
Building the infrastructure behind investment
Uzbekistan is preparing new financial legislation as it seeks to expand the range of financing available to companies and investors.
Laziz Kudratov, the country’s minister of Investment, Industry and Trade, told Euronews that legislation establishing the Tashkent International Financial Centre is expected to be signed soon.
The project would create a separate jurisdiction based on common law principles. Kudratov said the aim is to give foreign financial companies a legal environment based on international standards rather than requiring them to operate solely through local legislation.
He also said the planned jurisdiction would include 50 years of tax incentives, including exemptions from corporate income tax, value-added tax (VAT), property tax and customs duties.
The government is also preparing legislation covering alternative investment structures, including venture capital, private equity and limited partner-general partner investment models.
“We are also coming up with a new law on alternative investments,” Kudratov said. “It will create a framework to protect venture capital, LP and GP investment, and private equity investment in Uzbekistan.”
Dan said the National Investment Fund listing showed that international investors were willing to participate when transactions were structured in the right way.
“The initial public offering of the National Investment Fund shows that, in the right structure, investors are very keen to participate in the capital markets of the country,” he said.