Uzbekistan hopes it will begin to see the first dividends of a much-touted privatization drive as early as this summer with the sale of state-owned assets in 55 enterprises.
Local news website Novy Vek on February 24 cited a decree signed by President Islam Karimov estimating that the privatizations could raise up to $437 million.
Those acquisitions would cement agreements reached during an international investment forum that took place in the Uzbek capital, Tashkent, in November.
A government commission has been formed to oversee the privatization process and will be headed by Uzbekistan’s most prominent proponent of economic liberalization, Finance Minister Rustam Azimov.
Negotiations on acquisitions between Azimov’s commission and investors should either be concluded by March 1 or the assets will be offered to alternative buyers by July 1, Novy Vek reported.
A Cabinet decree published on February 10 approved the formation of 89 joint stock companies in which stakes of at least 15 percent are to be sold to foreign investors.
Those companies include telecoms company Uzbektelecom, five banks — one of them being scandal-tainted Asaka Bank — the Uzbek postal service and trading company Uztadbirkorexport.
A 15 percent share is being made available in 64 of the joint stock companies by means of an issue of additional shares. Those companies include 17 servicing the oil and gas industry, nine alcoholic goods factories, and 10 construction companies operating under the auspices of the Uzbekenergo power company.
Companies in Uzbekistan have shelled out around half a billion dollars in fines after failing to pay salaries to their staff.
This is the latest indication that the country is grappling with economic problems which are absent from the rosy official picture of steady growth.
Firms were slapped with fines worth a total of 1.5 billion sum ($500 million at the official exchange rate) last year for wage arrears owed to employees, Russian state news service Sputnik reported this week.
The fines resulted from 1,300 complaints filed with the State Legal Labor Inspection service, Sputnik said.
The wage arrears were generally the result of a lack of funds at the organization in question, an unnamed labor inspection official. Other reasons included organizations holding money back to make a profit on interest, and simple bureaucratic hitches in making payments.
The revelation suggests that companies may be ailing in the face of the economic crisis that is gripping Central Asian — although the government is in denial about the impact of the region-wide crisis on Uzbekistan.
Its bullish economic forecast sees growth at 7.6 percent this year, despite falls in key commodity prices — gold, cotton and gas — and a massive drop in remittances from migrant laborers in Russia that is eating into disposable incomes.
With recession in Russia forcing many migrants out of work, the government is reporting that jobs are being created at home in Uzbekistan on a massive scale.
If Tashkent’s statistics are to be believed (and economists warn that they should be taken with a grain of salt), nearly 2 million extra jobs will have been created over two years by the end of 2016: 980,000 in 2015 and 990,000 in 2016, according to Sputnik.
Russian-owned telecommunications giant VimpelCom is to shell out $835 million in fines after admitting to securing its foothold on the market in Uzbekistan through bribery.
The U.S. Department of Justice said in a statement on February 18 that it is also seeking the forfeiture of $850 million of bribes payments allegedly made by VimpelCom another Russian-owned company, MTS, and now being held in bank accounts in Switzerland, Belgium, Luxembourg and Ireland.
U.S. government officials have described these as historic turning points.
“These cases combine a landmark [Foreign Corrupt Practices Act] resolution for corporate bribery with one of the largest forfeiture actions we have ever brought to recover bribe proceeds from a corrupt government official,” said Assistant Attorney General Caldwell.
The lion’s share of the fines — $795 million — will be paid to the U.S. and Dutch corruption-busting bodies that have been investigating the activities in Uzbekistan of VimpelCom and other telecoms companies.
VimpelCom officially admitted earlier this week to engaging in corrupt practices in Uzbekistan.
VimpelCom admitted it had “through various executives and employees, paid bribes to an Uzbek government official, who was a close relative of a high-ranking government official and had influence over the Uzbek governmental body that regulated the telecom industry,” the Justice Department said.
That individual is widely held to be Gulnara Karimova, the eldest daughter of Uzbekistan’s President Islam Karimov.
Tashkent is also seeking the return of those frozen funds, arguing that it is a victim of bribery.
An international telecoms company has admitted engaging in corrupt practices in Uzbekistan, following bribery probes spanning several continents whose tentacles reach into the heart of the ruling Karimov family.
This marks the first official admission by an international telecommunications company of illegal practices in a case that centers on the affairs of the eldest daughter of Uzbekistan’s President Islam Karimov, Gulnara Karimova, who was last heard of under house arrest in Uzbekistan on corruption charges.
Russian-owned VimpelCom said it is prepared to “acknowledge certain violations of the U.S. Foreign Corrupt Practices Act and relevant Dutch laws” and pay fines to corruption-busting bodies in the United States and Holland.
The admission was made in a report on final quarter results for 2015, released on February 17 by VimpelCom, which is majority owned by Russian billionaire Mikhail Fridman. Norway’s state-owned Telenor owns a minority stake that it is trying to sell.
VimpelCom said that discussions with the U.S. Department of Justice and Securities and Exchange Commission and the Dutch Public Prosecution Service had resulted in “prospective settlements” that, subject to approval, will see it admit breaking U.S. and Dutch anti-corruption laws and paying “fines and disgorgements.”
The size of the anticipated payments was not disclosed, but VimpelCom said that it was within the $900m it set aside last November to cover potential liabilities from the corruption probes.
Hot on the heels of a corruption scandal in Uzbekistan’s financial sector comes news that a commercial bank that has foreign shareholders has been barred from conducting hard currency operations.
The development is the latest sign of troubles hitting Uzbekistan’s banking industry, as Central Asia reels from an economic crisis that is slowing growth and pressuring currencies across the region.
Uzbekistan’s central bank has imposed a six-month ban on Hamkorbank conducting foreign currency operations with businesses on the grounds that it has been breaking currency laws, the Anhor.uz news website reports.
No further specifics were offered for the ban, which is unusual and will present a significant barrier to a bank with foreign capital conducting commercial operations.
The International Finance Corporation (a financing arm of the World Bank) and the Netherlands Development Finance Company (a development bank controlled by the Dutch government) between them own 30 percent of shares in Hamkorbank, according to documents filed with Uzbekistan’s stock exchange.
A top banker has been arrested in Uzbekistan on suspicion of making a fortune out of Uzbekistan’s black currency market and laundering the proceeds.
The arrest comes as the rate of the currency, the sum, soars against the dollar on the black market, creating even larger than usual profit margins for those in control of the illegal trade.
Asaka Bank chairman Kahramon Oripov is in detention on suspicion of “currency crimes and legalization of criminal revenues,” an unnamed spokesperson for the General Prosecutor’s Office told Russia’s RIA Novosti news agency on February 12.
The confirmation of Oripov’s arrest, which had been rumored, came days after he was dismissed by the government as chairman of the state-owned Asaka Bank, which handles payments for the automobile industry in Uzbekistan.
Oripov is suspected of exploiting the bank’s position as the financial institution responsible for taking payments for car purchases to carry out his scheme, the Tashkent-based Uzmetronom.com website reported earlier this month.
This was allegedly made possible by the unorthodox system through which payments are made to purchase cars in Uzbekistan, whereby only dollars, rather than sum, are accepted to buy some models of vehicles assembled in-country by the GM Uzbekistan, a US-Uzbekistani joint venture which accounts for the bulk of the country’s car sales.
The money to buy a car must be deposited in dollars at an account in Asaka Bank, which is supposed to transfer it in hard currency to Uzavtosanoat, the state company that holds Tashkent’s share in GM Uzbekistan.
Uzbekistan’s President Islam Karimov has joined in with the chorus of gay-bashing sweeping the former Soviet Union by condemning same-sex relationships as a “vile phenomenon of Western culture.”
The tenor of the remarks should not come as altogether surprising since homosexual acts are illegal in Uzbekistan and are punishable by prison sentences of up to three years.
Radio Free Europe/Radio Liberty’s Uzbek service, Radio Ozodlik, reported on February 6 that Karimov made the comments during a council session of the people’s deputies of the Tashkent region.
“If a man lives with a man, or a woman with a women, I think that something there isn’t quite right, or some change has happened,” Karimov was quoted as saying.
It is unclear what motivated the president to make the comments.
Sexual minorities are among many social groups targeted for regular intimidation by authorities in Uzbekistan.
In a recent case, two police officers were fired after a video came to light showing them beating a transvestite in the Tashkent district of Chilanzar.
Ozodlik reported that the footage, which was circulated through the Telegram messaging program, shows the two police officers in civilian clothing bursting into a rented apartment and assaulting a young man dressed in women’s clothing and two of his male companions. The raid is said to have taken place following complaints from neighbors.
The incident reportedly occurred in August, but only gained exposure earlier this year.
Uzbekistan is the only country in the former Soviet Union where male homosexuality is illegal, but legislation has been implemented in Russia and is being considered in Kyrgyzstan that aims to further ostracize the LGBT communities there.
The people of Uzbekistan are apparently satisfied corruption is on the wane, while the president of Turkmenistan is indignant it is still rampant.
The “good news” first.
Podrobno.uz website reported on February 1 that a survey in Uzbekistan carried out by polling company Izhtimoy Fikr (Public Opinion) has found that experiences of corruption declined markedly from 2013 to 2014.
Izhtimoy Fikr is notorious for its almost comically unrealistic surveys, so the vat of salt should probably be taken with only a pinch of seriousness and perhaps only to understand the extent to which the government intends to embark on a serious fight against corruption.
Perceptions of corruption in the health care sector dropped from 37.7 percent to 25.5 percent, in education it went from 37.8 percent to 24.2 percent, and in the justice system from 24.3 percent to 14.6 percent, according to the poll.
The question “Is there corruption in Uzbekistan” yielded a 34 percent positive response in the latest query, compared to 36 percent in 2012 and 53 percent in 2011.
As many 74.5 percent of respondents believe the fight against corruption is being waged effectively. Leaving the best for last, Podrobno.uz reveals that Izhtimoiy Fikr’s survey found that 80 percent claimed that they have never been exposed to extortion or bribery.
Strong anecdotal evidence suggests the real number may well literally be zero.
Transparency International’s recently issued Corruption Perceptions Index 2015 shows Uzbekistan in 153rd place out of 165 countries listed, coming in just behind Zimbabwe.
In its eagerness to counteract Islamic extremism, Uzbekistan has embraced a Cultural Revolution-style naming and shaming exercise.
Parents are being hauled before public meetings to be admonished for the sins of their militant sons and daughters in scenes reminiscent of the public castigations common during the Cultural Revolution in 1960s China.
“This sacred land, where model family relations are rooted, never forgives those who do not care about their children's future,” a doom-laden TV program intoned on January 26, according to a translation by BBC Monitoring.
“Unfortunately, some people, who have forgotten their parental obligations and are bringing up their children as traitors, do not seem to realize it,” the program – broadcast on the main state channel – said.
TV screens were filled with a sobbing elderly couple whose son is allegedly fighting with militants in Syria, filmed at a public meeting held in the Andijan Region in eastern Uzbekistan.
Although other areas of the country were featured in the program, the choice of Andijan as a venue was telling. The city was the scene of fatal unrest in 2005 which the government blamed on Islamic extremists, a version disputed by many survivors and by international human rights groups.
“What are the goals of these traitors? Who are they fighting for and dying for as dogs?” state TV asked rhetorically in its latest broadside against extremists, over footage of burials in foreign war zones.
President Islam Karimov frequently embraces alarmist talk about the threat to Uzbekistan and the wider region of Islamic extremism emanating out of Afghanistan.
Uzbekistan’s foreign minister has begun a round of annual consultations in Washington that happen to follow shortly after Tashkent launched an offensive to recover millions of dollars frozen in a U.S. corruption case involving the Uzbek president’s daughter.
Abdulaziz Komilov began the three-day talks on January 19 with a meeting with Nisha Desai Biswal, Assistant Secretary of State for South and Central Asian Affairs, the U.S. Embassy in Tashkent said in an e-mailed statement.
Topics for discussion include the usual suspects: security, political developments, human rights and trade. But one onlie Uzbek media outlet is speculating that Komilov may also be raising another thorny topic behind the scenes.
According to documents recently filed with a U.S. court, copies of which have been seen by EurasiaNet.org, Tashkent has begun pressing for the release of $300 million in assets frozen during a bribery investigation involving the president’s daughter, Gulnara Karimova. The last that was heard of Karimova, she was under house arrest in Tashkent.
The funds are allegedly illicit proceeds from “an international conspiracy to launder corrupt payments” made in Uzbekistan’s telecoms sector, according to a lawsuit filed by the U.S. Department of Justice last summer.
The $300 million – held in Bank of New York Mellon accounts in Belgium, Ireland, and Luxemburg – were frozen by a U.S. Federal Court order in July.
The lawsuit named two Karimova associates, Gayane Avakyan and Rustam Madumarov, as owners of shell companies “beneficially owned by GOVERNMENT OFFICIAL A.”