Canadian Businessman Alexandre Melkoumov: “There is a window of opportunity opening up right now in Central Asia for investors from the West”
Central Asia, and Uzbekistan in particular, wouldn’t seem like the most obvious place for investors to seek out new markets. However, according to Montreal businessman Alexandre Melkoumov, who has been working in Uzbekistan since 2012, changes that could be of interest to potential Canadian investors are sweeping the country. Alexandre Melkoumov is a good example not only of a successful businessman, but of a particular type of highly qualified professional that appeared on the scene in the final years before the fall of the Soviet Union. By profession Alexandre is a doctor and worked at Moscow’s famous Botkin Hospital. At the end of the 1980s, when the opportunity to open one’s own business had appeared, he took advantage of the situation, first in the Medical Industry, and afterwards in Construction and Oil. In 1993, Alexandre moved with his family to Canada.
What did you do in Canada and why the interest in Uzbekistan?
From Canada I went to Africa for 6 years, to Sudan. My company took part in the building of a pipeline in that country. I returned to Canada in 1998 and opened a construction company in Montreal. I bought some land, divided it into lots, built on them, and sold houses. Later, when my kids had grown up, and the construction business was no longer as profitable as it had been, I found that my old friends, who were doing business in the United States, Israel, Greece, Cyprus – all over, had suddenly started working in Uzbekistan, of all places. And not only because they felt some call to return to their roots. Officially, they were all recognized in Uzbekistan as foreign investors.
Why then?
In my opinion, as a businessman and developer with a great deal of experience working in countries with economic and social systems of very different sorts (like Canada, Russia, Sudan and Uzbekistan), the market in Uzbekistan is very attractive to investors from the West. Besides incredible natural resources and a relatively affordable labour force, the political climate in the republic is favorable.
How stable is the political situation in the country? It’s not a place we hear too much about here in the West.
Frankly speaking, that’s a pretty good indicator. The fact that we don’t hear so much about it in the news is a result of the stability of the situation. And it’s not a question of stagnation. In recent years, and in particular following the election of new president Shavkat Mirziyoyev last year, Uzbekistan has started to show up more and more on investors’ radars. President Mirziyoyev has made it a priority and put First Deputy Chairperson of the Senate Sadyk Safaev in charge of its continuing development. Uzbek authorities’ vision for creating a favorable investment climate includes 14 areas of focus. The United Nations Development Programme and World Bank have lent assistance to the creation of a new Republic of Uzbekistan Investment Climate project, which seeks to resolve three groups of questions centered around changes to legislation, policy (regulatory policy, tax policy, visa policy) and various plans for liberalizing the currency market.
So what kind of opportunities are there for investors in the country?
I can give you an answer to this question supplied right from the top. Last week I met in Washington with Senator Safaev, who was very generous with his time, which speaks volumes to the republic’s very real good intentions towards investors. Many opportunities have opened up in the Textile, Oil and Gas, and Mining Industries as well as in Banking and Tourism. Special terms are being created and offered. For example, my business is located in the special Angren Industrial Zone, which offers a special tax break. For an investment of $300,000, a business is not required to pay taxes for three years. This is just my personal experience, but it seems to me that words alone are not enough to convince businessmen to sink funds into a sector located thousands of kilometers away. You need to show working enterprises and profits to people. And that is something I can do.
What exactly do you produce?
In 2012, after having looked closely at the market, I opened a coal brick factory. It might sound a little exotic for North America, but coal is a necessity good in Uzbekistan, where, as in Canada, the majority of the population lives in private houses and needs to see to its own heating. The Coal is mined there in a quarry and is of very low quality; following its preparation a large quantity of coal dust remains, which must then be made into bricks. I introduced a new production method to Uzbekistan and built my business. During peak season, which starts in a few days, the factory employs around 200 people. We provide fuel for a rather large territory, which includes the Fergana Valley, and Tashkent, Bukhara, and Jizzakh Regions. The factory is located not far from the city Angren, in a village by the name of Nurobod. As I already mentioned, it is located in a Special Industrial Zone, the status of which is currently being changed to that of a Free Industrial Zone.
What do you do with the product? Can you tell us a little bit about the process?
Yeah, there are some particularities to the process. Specifically, we aren’t allowed to sell our product directly to consumers. We deliver our bricks to Territorial Distribution centers, which are run by Uzbek Coal. They then sell the bricks to the people. So we sell our product to the government at a fixed price, determined by the government. Is this a good thing or a bad thing? Well, on the one hand, in 2014, when the current president was prime minister, he signed a resolution on behalf of the Federal Cabinet regarding the production of coal bricks. So I have encountered no production problems. Everything I produce is bought up by the government. Yes, it’s a fixed price that I don’t get to determine, but at the same time, I also purchase raw materials at a fixed price. So basically, you can produce as much of a given product as you want and be sure that it will be bought up in its entirety. It’s a field that is under complete government control. Besides coal bricks for the general population, we also produce bricks for boiler facilities in publicly-funded organizations like hospitals, schools, and so forth. And the government buys them all up, which is very profitable for us. In fact, I think it’s any organizations dream come true: you produce as much as you can, and you sell it all without any catches.
How difficult is it for a foreigner to set up a business in Uzbekistan?
It’s quite simple. Everything goes through the Ministry of Justice. My business, Bricket Coal Standard, pays taxes and supplies hundreds of jobs for locals. Thanks to economic policies we were able to privatize production facilities occupied by the factory. As for the land, we hold a perpetual lease. So the form of ownership is clear, and you can be certain that, as owner, your business belongs to you entirely.
As a Canadian who has spent a lot of time in Uzbekistan, what can you say about how safe it is?
Things are very calm there. There is absolutely nothing that would keep you from being able to carry out business safely.
Finally, and most importantly for any investor: how do you remove your profit when you decide the time has come to leave?
Good question. A clear plan needs to be put in place. The investor has brought in a certain amount of money and must be able to bring it out again together with profits at a given, agreed upon moment. Such plans must be in place and are being developed at present. It is precisely this sort of thing that Senator Safaev is working on at the president’s behest. And it’s the right thing to be working on, because as soon as a simple plan has been put into place for removing investments together with profits, investments will flow in at an even greater pace than they are at present. Because in all other respects, the climate for investment is perfect. And once a plan is in place for investors, we would likewise see an influx of investors among professionals: doctors, lawyers, engineers, and so on, who can’t get a high enough return on their savings in the West. They would be able to invest smaller sums of a few hundred thousand dollars in smaller projects. If we were to speak directly of percentages, I would say investors in Uzbekistan can safely expect returns of 20% and more. Uzbekistan has always been the key to Cental Asia, and nowadays location and natural resources have been joined by political factors to open a new window of opportunity for investors and entrepreneurs from all over the world. Uzbekistan is a former Soviet republic located in Central Asia with a population comparable to that of Canada: approximately 30 million people live in Uzbekistan.
* Following the collapse of the Soviet Union Uzbekistan has sought to position itself as a neutral state.
A lack of internal conflicts and a high level of personal safety are two important characteristics of the republic. According to the 2016 World Happiness Report Uzbekistan ranks as the happiest country in the post-Soviet world.
* Rich Natural Resources.
Uzbekistan ranks among the world’s leaders in silver, tungsten, phosphorite, potassium, rare metals and other valuable mineral reserves. Uzbekistan ranks fourth in the world for surveyed gold reserves, seventh for uranium, eight for molybdenum, tenth for confirmed copper reserves, and fourteenth for natural gas. Uzbekistan likewise boasts worldfamous cotton fields, unique historical cities and landmarks, such as Samarkand, and an ancient civilization.
* Form of government: Presidential Republic.
Current president is Shavkat Mirziyoyev (since 2016), who previously served as prime minister of Uzbekistan (2003-2016). One of the current government’s main priorities is the creation of a favorable climate for investment.