For all its promises of easy riches, Uzbekistan is having a hard time keeping foreign businessmen around.
The head of the Uzbek branch of Russian telecom firm MTS has apparently become the latest foreign executive to bolt. According to the semi-official Uzmetronom, Bekzod Akhmedov fled this month after government auditors alleged tax evasion, misuse of funds and theft.
He's far from alone. Earlier this year, the general director of beer maker Carlsberg Uzbekistan, Russian citizen Evgeny Shevchenko, quietly left for Latvia. A Carlsberg executive confirmed to Central Asia Newswire that "We have temporarily suspended production [in Uzbekistan] due to an unavoidable shortage of raw materials.” He also said "Shevchenko left Uzbekistan to take up a new position elsewhere in the [Carlsberg] Group at the beginning of 2012."
The timing of these high-profile departures does not bode well for Tashkent's recent investment drive. In May, Tashkent promised to privatize 500 state-run companies. But privatization alone does not a good investment environment make. A June 19 article by the Institute for War and Peace Reporting lists a string of companies that have recently experienced “hostile takeovers” by the Uzbek government.
Hostile takeovers of foreign investors like Oxus Gold, Spentex Toshkent Toytepa and Wimm Bill Dann, and the Turkish shopping centres Demir and Turkuaz; the seizure of the Bekabad cement concern in which a lot of Kazak and Russian money had been invested; and the problems experienced by the Zaravshan-Newmont and InterContinental Hotels concerns have all aggravated the investment climate.
Intimidation is one familiar tool in Tashkent’s arsenal. Britian's Oxus Gold, which entered Uzbek mining fields in the mid-90s, finally quit the country in 2011 over what it claims was a shady governmental audit that led to a sham buyout by two state mining companies. Oxus claimed the audit was biased and is waging a $400 million legal battle against Uzbek authorities. In addition, Oxus’s chief metallurgist, Said Ashurov, an Uzbek citizen, was convicted of “industrial espionage” in August 2011 and sentenced to 12 years in prison.
Amid all its sweet talk and promises of an open market, the Uzbek government’s heavy hand has capital running for the border.