Silk Road pathfinder

Ben Aris travels to Uzbekistan to meet Mayer Brown & Platt's 29-year-oldpath finding

partner Mwana Logogo, head of the firm's Tashkent office.Tashkent, the capital of

Uzbekistan in Central Asia, is about as far fromeverywhere else on earth as it is

possible to be. A major nexus on the SilkRoad, Marco Polo passed this way on his way to

China as did Alexander theGreat on his way to India more than 2000 years ago.With

regular flights from London and Moscow, getting to Tashkent thesedays is simpler, but

Mwana Logogo, 29, travelled a long way before arrivingto take over running the Mayer

Brown & Platt (MBP) office a year ago.Born in Kenya, Logogo studied law in the USA,

first at VirginiaPolytechnique and then at Harvard. After a stint with Steptoe & Johnson

inWashington, she joined MBP. But like many foreigners working in the East,it was a

quirk of fate that sent Logogo to Uzbekistan.”I studied Russian in college in Kenya just

to be different,” she says,sitting in the modern office building opposite the new

Tashkentpresidential palace.”It just popped into my head when I was four. I guess that

it was becauseof my Russian that MBP decided to send me here.”A former republic of the

Soviet Union – Uzbekistan declared independencein 1991 – it has been the least affected

by the collapse of the USSR thanksto a plentiful supply of hard currency-earning cotton

and gold productionwhich make up more than three-quarters of all exports.With 24 million

citizens, Uzbekistan is the most populous of the fiveCentral Asian states and has

significant natural resources. It should be asuccess story.However, President Karimov's

“go-slow” attitude to reform and what isessentially still a centrally-run economy, has

put investors off and madethe republic a difficult place to work.What was already a

difficult investment climate was made much worse by thedouble-whammy of the Asian and

then Russian economic crises in 1997 and1998.Lukewarm investor sentiment has turned

positively sour as the government'sknee-jerk reaction was to crack down further on

commercial companies'activities in an attempt to husband the few resources the republic

has.Despite attempts to diversify its industry, Uzbekistan remains a largelyagricultural

economy, with “white gold”, as cotton is known, retainingpride of place. Indeed Logogo's

office is covered with cotton, a cheapalternative to expensive imported wallpaper.The

current community of foreign investors in Uzbekistan is small, withonly four large

companies actually setting up production on anything like alarge scale.Newmont Mines

(US) was the first to exploit the world's largest open-castgold mine in the central

Kyzyl Kum desert.Coca Cola Tashkent Bottlers (US) and BAT (British American Tobacco

-UK/US) have opened sparkling new factories in the last year. And UzDaewoois a South

Korean-Uzbek joint venture that is building an entire industrialcomplex from scratch

around automotive production.Other multinationals like Procter & Gamble, Philip Morris

and Nestle arealso active in Uzbekistan, but the problems with converting sum, the

localcurrency, into dollars, has severely hampered their growth (see box).Like many

business service companies, MBP followed the largemultinationals into this developing

market.The firm's first work was on the financing of the Zarafshan Newmont goldmining

project in 1996 and the firm made the full commitment to opening anoffice in May

1997.”The business is cyclical. It stayed at the peaks for a long time, but nowthere is

less business.”A staple part of our business was working for companies coming in

andsetting up offices.”We help establish companies. Some of them we never see again. In

otherswe are involved in managing their systems,” says Logogo.By Uzbek standards the MBP

office is a large one, with 4 full-time locallawyers: two have American Masters degrees

in law and one has passed theNew York bar exam.Working for commercial companies makes

up most of MBP's income, but thereis also a significant amount of work associated with

transforming atransitional economy.The MBP office is participating in an IFC

(International FinancialCompany, the commercial branch of the World Bank) debt equity

programme andinvestment negotiations with the government.”Often the deals are signed

off-shore and governed by UK or US law, but weare constantly being called by London and

New York asking how their dealscould be affected by Uzbek law.”This office gives advice,

as the legal concepts used in the US and UKdon't necessarily exist here,” says

Logogo.One international company, involved in agriculture, alone accounts fornearly half

of MBP's income.Being in some ways a pioneer, Logogo inevitably spends as much of her

timedeveloping new business as she does looking after the firm's existingclients.During

our interview the telephone rings constantly and secretaries pop inand out of the office

with messages from clients asking advice, or withqueries from the London head office.

“I am the point of contact for anyonethat needs to talk to MBP here,” she explains.The

foreign community is small. Most of the clients are scattered aroundthe few modern

office blocks that the city offers and evenings are spent atembassy receptions or in the

handful of decent restaurants.Go to the Salty Dog bar of the Hotel Le Meridien on a

Friday and you willmore than likely run into nearly every expat in town.”You get into

a village mentality” Logogo says. “You know if you go outyou will run into clients over

and over again.”Immersing yourself in the community is part of the job, Logogo

believes.However, it is not all networking. In a place like Uzbekistan, which isstill

struggling to get used to the idea of a free market, administrationcan be

time-consuming.Much of her time, Logogo complains, is taken up with running the

office.Even the decision to buy a new water cooler, she notes, ends up on

herdesk.Despite the administrative work, Logogo sees herself as something of

apathfinder. “It is one of the things that keeps the job interesting here.It is a

feeling of being on the frontier, the constant change. It is morefrustrating for the

investors than a lawyer,” she says.Since the Russian crisis, the Uzbek economy, which

had been growinghealthily, has slowed. And with the currency restrictions

hobblingbusiness, for the meantime few new companies, it is believed, are likely toset

up shop in Tashkent.The same is not true of law firms, however. At least four

internationallaw firms are keeping their offices open.LeBoeuf Lamb Greene & MacRae,

Baker & McKenzie and Cameron McKenna allhave offices with at least a skeleton staff,

supplemented by lawyers flownin from Alma-Ata, the commercial capital of Kazakstan.These

firms believe that the republic's large consumer market and itspotential as a regional

production and distribution centre remains largelyuntapped.They are keeping their eye

on Uzbekistan in the hope that, when theconversion restrictions are dropped, Uzbekistan

will boom.The Currency ProblemThe Uzbeks earn about $3bn (u1.87bn) a year from cotton

and gold exports.In the run-up to November 1996, trade had become increasingly

liberalizedand the economy boomed. In that year almost $2bn (u1.25bn) of goods

wereimported.When the government got the bill it got a nasty shock and clamped down

oneveryone's access to dollars.Since then the smaller trading companies that survived

have been forcedunderground.Uzbekistan is one of very few former Soviet Republics to

still have a dualexchange rate. And rates of exchange have mushroomed from 20 per

centdifference between official and black rates in 1996 to more than 340 percent by the

start of 1999.They are expected to climb higher as the state is even shorter of cashthan

last year as the impact of the crises works its way through.The lack of convertability

of the sum is hurting all businesses.Coca Cola says it is meeting only 60 per cent of

the market demand. Itcould sell more, but the company cannot get the dollars to pay for

theimported ingredients.Smaller companies are completely unable to get an allocation at

all andare forced on to the black market. The result is that foreign investmenthas been

falling steadily. Foreign direct investment reached a peak of$150m (u93.75m) in 1996.