In a recent interview with Daryo, Vyacheslav Pak, the First Deputy Director of the National Agency of Perspective Projects (NAPP), outlined the agency's strategic plans and current challenges in regulating Uzbekistan's burgeoning capital market and insurance sector.
Addressing the current state of the stock market sector, Pak stated, 'Currently, we are facing several significant challenges in the stock market sector.' He highlighted the critical issues, noting, 'Firstly, there is a notable issue with the technical infrastructure of the stock market that needs attention.' He further emphasized the need for legal reform: 'Additionally, the legal framework governing this sector is outdated and requires modernization.'
The shortage of skilled professionals was also underlined as a key concern: 'Another major challenge is the shortage of qualified experts and specialists in Uzbekistan.' This, he explained, is 'a consequence of our relatively underdeveloped stock and capital markets.' He affirmed their commitment to improvement: 'These are the primary obstacles we are confronting, and we are actively working towards resolving them.’
Pak, speaking about the new regulatory responsibilities bestowed upon NAPP by presidential decree, emphasized the significance of this shift. "As you know, from September of this year, we are regulators for capital markets and insurance... we were designated as a regulator according to the presidential decree," he said. This move underscores Uzbekistan's commitment to developing its financial markets and aligning with international standards.
In discussing the recent initiatives to enhance Uzbekistan's capital market, Pak noted, 'Our primary aim with this decision is to further develop our capital market.' He emphasized the multifaceted nature of this approach, stating, 'This is not just about market growth; it's also a strategic move to relieve the Ministry of Economic and Finance from its excessive load of functions.'
Highlighting the importance of resolving conflicts of interest, Pak added, 'Previously, the Minister of Economy and Finance's role as a stakeholder in a major state-owned company raised concerns. This decision addresses that by eliminating such conflicts of interest.'
He also underlined the alignment with international standards, asserting, 'Our agency's operational independence, being accountable directly to the President and not part of the Cabinet of Ministers, positions us closer to IOSCO standards.'
A significant development under NAPP's purview is the improvement of the Initial Public Offering (IPO) process. Pak revealed plans for a government draft decision to facilitate distance identification of clients for brokers, which is expected to be implemented shortly.
Pak also addressed the complex issue of granting local brokers access to foreign stock exchanges. He underlined the need for a careful approach, considering potential capital outflow and taxation issues. "This is not the problem that could be solved easily," he stated, indicating the intricate balance required in such policy decisions.
Turning to the insurance sector, Pak highlighted NAPP's role in addressing liquidity and payment issues within insurance companies. He touched upon recent regulatory actions, revealing, "We had to cancel and postpone some licenses due to ongoing issues."
Elaborating on the challenges faced by insurance companies, he stated, "Many are struggling with liquidity and payment problems." Discussing the response to these issues, he added, "In response to these challenges, we've strengthened our enforcement measures."
This led to changes in company behaviors. "Subsequently, some companies are actively seeking to increase their authorized capital," he noted.
"These companies approach us, as capital market regulators, to register the issuance of new stocks." Concluding his statement, he expressed optimism, "We believe this move towards increased capital will enhance their financial stability and ability to fulfill payment obligations."
He also mentioned an upcoming presidential decree aimed at bolstering the insurance market, including raising the minimal amount of authorized capital for insurance companies.
“We are currently preparing a presidential decree focused on advancing the insurance market. This decree is designed to increase the minimum authorized capital for insurance companies, a critical measure for market development. Additionally, it will mandate that all insurance companies establish their own information systems. In today's digital era, having robust information technology infrastructure is essential for business development. This decision aims to significantly enhance the operational standards and capabilities of the insurance sector.”
Regarding NAPP's roadmap for the future, Pak outlined a comprehensive plan that includes drafting a new capital market law and collaborating with international financial institutions.
"One of the key priorities for us will be the drafting of the capital market law," Pak mentioned, signaling a robust legislative approach to market regulation.
Pak's message to both local and international investors:
"I would like to say to the people of Uzbekistan to invest wisely... And for foreign investors, I would like to call them to invest in Uzbekistan, and as a regulator, we will do our best to protect the rights and interests," he stated.
Interview and article by: Tawney Kruger
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