EBRD invests in Uzbek brewer

Related tags Investment

The European Bank for Reconstruction and Development will encourage
Uzbekistan to implement economic reforms by pledging nearly €3
million to improve quality and double capacity at a private
domestic brewer, reports Chris Mercer.

The EBRD will lend the €2.8 million to the Mekhnat Pivo brewer, based near the country's capital, Tashkent, which aims to double its monthly production capacity to 50,000 hectolitres by mid-2005.

Mekhnat Pivo, which separated from agro-firm Mekhnat's wine, mineral water and juice business in January 2004, will also increase marketing and improve its distribution network as part of its aim to become Uzbekistan's leading brewery.

The firm needs to expand to fight off foreign brewers, which control two thirds of the Uzbek beer market, though conversely, improvements to its facilities may make it a more attractive foreign investment prospect. The EBRD said its loan was part of its Early Transition Countries initiative, designed to stimulate markets in its poorest countries of operation.

Mekhnat Pivo plans to attack the market by establishing recognised, quality local brands; a policy suited to the vastness of the country and the fact that 60 per cent of people live in densely populated rural communities.

Precious little information is available on Uzbek markets due to the closed nature of the country's economy, but the EBRD says Uzbekistan's beer sales have grown strongly in the last several years, mimicking its Russian neighbour. Mekhnat's improved monthly production capacity will also be vital in a market where one fifth of beer sales take place in a single summer month.

For the EBRD, the new loan is a gesture to Uzbekistan that it is willing to co-operate with progressive companies in the country's agribusiness sector, according to Hans Christian Jacobsen, EBRD director of agribusiness. "We intend to increase our financing of this key economic sector,"​ he added.

Uzbekistan's economy in the last decade has been notoriously subject to rigorous government controls and interference. Foreign direct investment in the country was among the lowest of all ex-Soviet states in 2003, at a little more than $60 million.

"We've had some frustration with the political and social side of things. They've got a lot of work to do,"​ said Jeff Hiday, also of the EBRD. He said the government had taken a positive step by liberalising the exchange rate in early 2003, but was still restricting cash supplies and maintaining tough border controls.

"The place is full of promise and there is clearly a decent amount of interest in the country, but it is not moving in either direction at the moment,"​ said Hiday, who nevertheless added that he was encouraged that the Uzbek government had granted a production licence to French dairy group Danone two weeks ago.

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