BUSINESS ENTERPRISES IN THE FERGHANA VALLEY

C O N F I D E N T I A L SECTION 01 OF 02 TASHKENT 001663

SIPDIS

SIPDIS

DEPT FOR SCA/CEN

E.O. 12958: DECL: 09/19/2017
TAGS: PGOV ECON SOCI UZ
SUBJECT: BUSINESS ENTERPRISES IN THE FERGHANA VALLEY

Classified By: CLASSIFIED BY RICHARD FITZMAURICE AND STEVEN PROHASKA FO
R REASONS 1.4 (B, D).


1. (C) Summary: During a visit to the Ferghana Valley on
September 12-13, poloffs met with two former recipients of
USAID grants, the Namangan Credit Union and the
Ferghana-based Unicons consulting firm. These enterprises
show that some of the Uzbek people's traditional
entrepreneurial spirit persists despite the difficult
business climate. End summary.

NAMANGAN CREDIT UNION COOPERATES WITH LOCAL GROUPS
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2. (C) Poloffs met with representatives of the Namangan
Credit Union, which appears to have enjoyed increasing
profits since its opening in 2002 thanks to good advertising
and experienced personnel. Representatives stated that they
had given roughly 451 million soums (355,000 dollars) in
loans over this timeframe. The average size of a loan has
been 2.5 million soums (2,000 dollars),and the credit union
charges a monthly interest rate of between five and six
percent. Their primary goals include the development of
business and improving the living conditions of the
population. Interestingly, the representatives said that the
percentage of men receiving loans has been increasing in the
last year. Before 2007, women represented approximately 70
percent of loan recipients because initially women were
specifically targeted, but this year, 55 percent of loan
recipients have been women.


3. (C) The leader of a mahalla--a community institution
involved in local decision-making--and a leader of the local
branch of the Women's Business Association also attended the
meeting. They noted that the help of their respective
organizations to the union had improved the credit union's
business and decreased the default rate, which has been less
than one percent for 2007. Representatives of the credit
union noted that there were 52 commercially registered banks
and 150 mini-banks in Namangan province, but the Namangan
Credit Union was more successful than the competition because
of its greater efficiency. The credit union also currently
pays a yearly interest rate of 30 percent on deposits, as
opposed to an average of only 24 percent at commercial banks.
They appeared optimistic about the role their organization
plays in society, claiming that unemployment in the province
was decreasing. (Note: Given the presence of the mahalla
leader, who reports to local authorities, such statements
have to be taken with at least a grain of salt. End note.)

UNICONS STRUGGLING TO CARVE OUT PROFITABLE NICHES
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4. (C) Members of the Ferghana-based Unicons consulting firm,
which opened in 2000, also spoke with Poloffs. Unicons
currently has between 15 to 20 paying clients, which include
three joint ventures in the Ferghana Valley with German,
Korean and Indian companies. Their work includes providing
information technology services. They noted internet access
is becoming more widespread, especially in the last year
(Note: It is still far from universal. The next day, a
human rights contact told poloff that Rishton, a large town
in Ferghana province, lacked any type of internet access.
End note.) The internet technician at Unicons told poloffs
that it costs about 200 dollars to set up a website, and
monthly hosting costs between two and five dollars.


5. (C) Unicons is involved in other business as well. In
April the firm became involved in a profitable project
exporting fish from fish farms in Navoi province and Khojand
(Tajikistan) to Russia and Germany, and the firm was planning
to expand this operation in the future. The firm also plans
to build a branch in Samarkand to benefit from Chinese plans
to sell products on the Samarkand manufacturing market.


6. (C) The Unicons representatives noted that the business
climate in Ferghana remains difficult due to significant
barriers and decreasing profit margins as a result of rising
prices. When asked by poloffs, they said that a major
problem for local businesses is securing loans from banks due
to a lack of collateral. Another major problem for foreign

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companies is currency conversion. According to the Unicons
representatives, it now takes between 45 to 60 days to
convert currency, and the wait is longer in the regions other
than in Tashkent. (Note: In general, AMCHAM and other
business contacts tell us that conversion takes three to four
months for currency leaving Uzbekistan. End note.) Unicons
representative said that they advise clients to plan ahead
and assume it will take at least two months to receive their
profits in hard currency.


7. (C) Comment: Enterprises such as the Namangan Credit
Union and Unicons show that some of the Uzbek people's
traditional entrepreneurial spirit persists despite the
difficult business climate. Though representatives of the
Namangan Credit Union (speaking in the presence of a mahalla
representative) dismissed talk of rising prices and claimed
that unemployment in the province was decreasing, other
residents of the Ferghana Valley view the economic situation
much more negatively (septel).
NORLAND