President Lee Myung-bak’s administration in South Korea is making a risky bet on Uzbekistan. Seoul is ramping up its investments in the Central Asian state, but given that Uzbekistan is home to one of the most world’s most repressive and arbitrary regimes, South Korean deals stand a higher than usual chance of souring.
On paper, South Korea and Uzbekistan are a match made in heaven. While South Korea is anxious to acquire access to natural resources to fuel its booming economy, Uzbekistan’s authoritarian president, Islam Karimov, is looking for friends with large checkbooks that do not ask questions about human rights, and who are not Russia or China.
So far things look rosy. The two countries recently signed an agreement worth $2.5 billion [7] to jointly build the UzKorGasChemical complex at the Surgil field of Uzbekistan, and South Korea has made Uzbekistan one of 26 foreign aid priority countries for its aid agency KOICA. As such, Uzbekistan will be the main recipient of Korean aid in Central Asia, even though it ranks higher in UNDP’s Human Development Index for 2011 than neighboring Kyrgyzstan and Tajikistan.
In the political sphere, South Korea has readily complied with Tashkent’s requests to deport Uzbek citizens. In one recent instance, Usmon Rakhimov, an Uzbek citizen with a valid legal status in South Korea, was arrested and subsequently deported [8], despite having applied for refugee status. The deportation request came from the Uzbek Embassy in Seoul, who claimed that Rakhimov was a terrorist without presenting compelling evidence.
Such actions do not sit well with all South Koreans. For example, a younger and more idealistic generation of KOICA staff is disgruntled with the decision to prioritize Uzbekistan. Younger KOICA staffers tend to believe that aid policy should be driven by development needs assessments, not by foreign policy interests.
Meanwhile, South Korean civil society activists are starting to take a closer look at the government’s foreign aid strategy. Groups like ODA Watch and Korean House for International Solidarity are scrutinizing, for instance, Seoul’s assistance policies in Burma, as well as the mistreatment of Indonesian sailors [9] working on Korean vessels.
Uzbekistan is not on Korean activists’ radar yet, but this could soon change. APIL, a group of public interest lawyers, is currently representing the wife of Usmon Rakhimov, and that initiative could have a cascade effect. In researching their case, APIL lawyers have established that KOMSCO, the state-owned South Korean minting and security printing company, is part of a joint venture with Daewoo that operates a cotton pulp mill [10] in Uzbekistan. Thus, It would seem to be only a matter of time before Uzbekistan’s cotton sector, specifically the widespread use of forced child labor, attracts the interest of South Korean activists.
Uzbekistan’s track record should not offer South Korean investors reason to feel confident, as the Central Asian country has a reputation for turning on foreigners. In one high-profile case, British mining giant Oxus Gold ceased operations in the country after its chief metallurgist was thrown in jail [11]. In another instance, Uzbek authorities stiffed several German enterprises [12] engaged in the construction of a government-owned palace, failing to pay up on millions of dollars’ worth of bills.
Given such examples, it is not surprising that Foreign Direct Investment (FDI) has fallen at a 50-percent clip during the first quarter of 2012 alone. For all 2011, FDI was down 27 percent over the previous year. Statements made by Islam Karimov himself, instructing the country’s notoriously greedy bureaucrats to not hinder foreign business activities [13], sounded more helpless than determined.
The recent past is littered with failed South Korean investments and joint ventures, including UzDaewooAuto, Kabool Textiles and Daewoo Unitel. There was also an instance in 2010 in which a South Korean-run golf club was arbitrarily raided [14] by Uzbek tax police. Even if the latest round of South Korean investments don’t run up against Uzbek governmental corruption and administrative arbitrariness, practical issues, such as the inconvertibility of the Uzbek currency, will hamper the ability of South Korean investors to make a decent return on their money.
All of this suggests that South Korea’s embrace of Uzbekistan is more of a gamble, rather than a refined long-term strategy to ensure return-on-investment and access to resources. If this gamble does not pay off, Lee Myung-bak’s government might find itself embarrassed twice: once for sinking significant amounts of money into the bottomless pit of the Uzbek economy; and another time for its unquestioning engagement with the notorious repressive and corrupt regime of Islam Karimov.