3 July 2022


We Will Keep Doing PPPs

Deputy Minister of Finance Odilbek Isakov speaks to Jonathan Davies on the journey Uzbekistan has taken, and where it plans to go
We Will Keep Doing PPPs

Uzbekistan is fast becoming one of the world’s major emerging markets for PPPs. Since President Shavkat Mirziyoyev initiated the model in 2018, the country has delivered legislative and regulatory changes helping it to create a $14bn pipeline of PPP projects - and the international market is starting to take note.

Previously a director of HSBC’s emerging markets debt capital markets, Deputy Minister of Finance Odilbek Isakov explains the next steps for the country, and discusses how it’s tackling obstacles.

Where do you see the PPP movement going in Uzbekistan?

We underinvested in our infrastructure during the past 25 years. Some of the power plants we have, and other types of large infrastructure, we didn’t build: we modernised but we are still pretty much using old Soviet equipment - that’s not very efficient both from a CO2 perspective and cost, and for our commitments under the Paris agreement.

So, the energy sector comes to mind as the first beneficiary of PPP, and we have done a significant number of projects in that sector - including solar and wind projects. We want to increase our generation of renewable energy to 25% by 2030 from nearly nothing, the consumption of which will have nearly tripled by that time. Private participation has been so successful that it doesn’t make sense to borrow and build a power plant; what we need to do is tender for the investors and we buy the electricity, which they manage for 25 years.

Alongside this, PPP is gradually being used as a tool to attract the private sector across many different sectors: hospitals, schools, utilities, transport, healthcare, water, irrigation, waste management, education, sports, quite a lot! What used to be purely government or public sector is now open for private sector participation, and the underinvestment in previous years means that we have quite a lot to catch up on infrastructure investment. The general consensus is that we need to invest $5-6bn on top of what we are currently investing each year to reach our Sustainable Development Goals (SDGs) target and we take these SDGs very seriously.

Over the past few years, Uzbekistan has put in place a series of foundational stones to create an atmosphere to attract foreign capital, not least the recent PPP law. 

Can you tell us a bit about the journey you have been on to reach this point?

The whole idea was because we were embarking upon a big journey to invest in our infrastructure, invest in large projects which in previous administrations had used budgetary money - and budgetary money is never enough, especially when you have a relatively small amount of GDP per capita.

In terms of the journey itself, PPP is a rather new topic to Uzbekistan. Our reform partners such as the World Bank, Asian Development Bank and others had been advising that PPP is one of the important tools to actually bring private sector investment in those projects. The president himself and the deputy prime minister had been thinking about that and made a decision in 2018 to establish an agency - this is the burst of PPP in Uzbekistan, that’s how it all started.

The agency was opened in December 2018, and before that, in October, the presidential decree came out in terms of establishing an institutional framework for the development of PPPs - aside from these two decrees there’s been a law, adopted in 2019, and a cabinet minister’s decree to improve the implementation process in 2020 and an amendment of the PPP law in 2021.

The agency was opened to look at some of the large projects which could have fiscal risks to the budget, something the Ministry of Finance closely monitors.

Alongside this, we have around $2.5bn of capex each year for clean water, schools, hospitals, kindergartens and other social sectors - and the ministry of the time was very keen to move some of this capex away from the budget by combining immediate public spending with PPP commitments. Thirdly, the capacity gaps at some of the ministries were huge, so the agency is helping to accelerate the projects while ensuring optimised value.

But in order to do this, we need to have a unified policy, without that it would be difficult to attract and manage the projects. We just wanted to make sure the agency is a regulator, monitoring the projects at the same time as developing them.

What has the reception from the international investors been like?

So far we are pleased with the reception but, of course, the more the merrier - we welcome them.

When you are relatively new in the game you want to be hand-held by those that are experienced and have a significant track record in bringing in investors and knowing what investors want. We have very strong international partners, ADB, IFC, EBRD, and now we’ve started involving private sector advisors.

In terms of the energy sector, initial auctions attracted bids from tens of international investors across Europe and the Middle East, Asia and so on. It was rather diversified, with Middle Eastern firms winning a few times already. It is a good result but we continue to be open and attract more and more diversified players.

For healthcare projects, utility projects, and wastewater, the reception has been good, with a number of participants and the quality is quite good as well.

What steps are being taken to ensure that this momentum can be sustained and project delivery realised?

One of the big obstacles will be a lack of capacity across government. At the moment, we have 195 projects, valued at $14bn, across a number of sectors. We need more and more people, and that can be a constraining factor. We are dealing with it by training, retraining and hiring new people.

I don’t think we have sufficient capacity as yet, but we are still attracting talent and getting more professionals in relevant agencies. Capacity is very important; the political will is there, projects are there, multilateral institutions are there, global financial and legal advisors are there, and now leading international investors are showing keen interest in doing projects with us.

Secondly, we need to be aware of fiscal risks. We are in close contact with the IMF who will provide consultants to help us develop robust risk assessment frameworks here at the ministry for implementing PPP projects as well as advising on general public finance management processes and especially public investment management, as we will ultimately hold the potential fiscal risk, and we believe that’s a prudent thing to do.

This means that eventually we will, once the risk is assessed, start limiting projects with annual limits, how much we can do and how much risk we can take. It’s only the beginning now, but once we do more these risks will pile up and we will monitor them closely and manage them accordingly.

The third constraint will be a potential Covid-like event or global event outside of our control, something that may limit interest from investors in PPPs. We are mindful of the lessons learned in Turkey, Croatia and other places where projects did not benefit in general. We don’t want to have these white elephants in Uzbekistan.

We need to balance between how much we need to invest in a year and how much risk we are taking on board, and the cost of these. As long as we are managing it at the right level we will keep doing PPPs more and more.

The Tashkent district heating deal with Veolia came from an unsolicited proposal. Is this something you would encourage going forward?

It’s a bit of both. The door is wide open for proper government initiated, public tender PPPs, and a small window for private sector unsolicited proposals.

We have a very healthy pipeline and it’s mostly government initiatives, rather than unsolicited proposals. Everyone should be given an equal footing, and we believe that the balance we should have is more and more public sector-led initiatives and fewer and fewer private sector-led unsolicited proposals.

In the initial years of starting this process, we are open, of course, to seeing these proposals. 

There may be some sectors for opportunities that we the government cannot see, and if reputable companies have done projects elsewhere and could do it here that could save money, make sense or add value, then of course we would consider these.

What is the key message that Uzbekistan would like to say to the international market?

If anyone has not yet considered Uzbekistan they can come and participate in tenders and the process. We will be holding a PPP roundtable early next year to showcase the PPP programme and when Covid-19 allows, we will do a roadshow for the whole $14bn pipeline: dozens of projects that we are seeking investors for. 

Uzbekistan is open for business, and we want to keep this open stance.


If you would like to share the information in this article, you may use the headline, link and introduction below:

We Will Keep Doing PPPs


Deputy Minister of Finance Odilbek Isakov speaks to Jonathan Davies on the journey Uzbekistan has taken, and where it plans to go

Copy to clipboard

If you would like to buy a subscription for more people to access our website, or are interested in being granted a licence to reproduce our content, please contact Amanda Nicholls:

+44 (0)20 8675 8030


Log in
Your email address and/or password were not recognised. Please check and try again.
Your subscription has now expired. To renew your subscription, please call our subscription team on +44(0)20 8267 8827 or email subscriptions@partnershipsbulletin.com