The value of Uzbekistan’s national currency spiked sharply over the weekend in a development that some have linked to the unfolding corruption scandal involving GM Uzbekistan.
Traders on the black market in the capital, Tashkent, were buying dollars for around 5,500 sum on May 15, up from around 6,400 sum in the days before. They were selling dollars for around 6,000 sum. Rates in the capital typically set the pattern for the rest of the country.
The sudden change in fortunes of the sum has come as something of a shock to small and medium-scale businesses.
Umid, a market trader who rents a small stall from which he sells ice-cream, drinks and fast food snacks, said that he pays $400 in rent every month.
“For me it’s good when the exchange rate is low, since I have to spend much less on buying dollars. The question I have is: How long is this going to last?” Umid told EurasiaNet.org.
Firuze sells clothes imported from Turkey at her stall at the Ippodrom wares market. With the dollar rate dropping, Firuze said she had decided to close up shop for a while.
“The drop in the exchange rate is profitable to those that earn their money in sum, but those who make their money in dollars don’t see any benefit,” she said.
The speculation in Tashkent markets is that the sudden change in the fortunes of the national currency is somehow related to an ongoing corruption scandal involving senior management at carmaker GM Uzbekistan — a joint venture between Uzbekistan’s UzAvtosanoat (75 percent) and US giant General Motors (25 percent).
Prior to the scandal, GM sold some of its cars in dollars, which drove up local demand for the US currency. Now, however, payment is made in sum, which has led naturally to a fall in the desirability of the dollar.
It has been an open secret for months that Tajikistan’s No. 2 bank is completely broke, but the lender has finally come out into the open with a plea for international assistance.
bne Intellinews reported on May 11 that Tojiksodirotbank this week discussed a possible cash injection with officials from the European Bank for Reconstruction and Development in exchange for a 50 percent equity stake.
Tojiksodirotbank chairman Pirzoda Tojidin told the financial news website that he had already met with EBRD top brass and agreed on an assistance program.
"We have another meeting with them [on May 12], but it remains to be seen if we can meet the EBRD's conditions,” Tojidin told bne Intellinews.
This marks the first time Tojiksodirotbank has admitted to its severe liquidity problems, which has been no mystery to anybody unlucky enough to have their savings in the bank.
The lender tried in vain to downplay insistent media reports about its difficulties in March, when it issued a statement attributing interruptions in its services to a switchover in its money-processing system.
“Short-term disruptions in the functioning of bank cards are possible. We apologize for the inconvenience,” the statement said.
Countless deposit-holders at Tojiksodirotbank remain unable to get their cash to this day, however.
Negotiations with EBRD to facilitate some kind of rescue package have been in the works for some months.
The shortage of cash and salary delays in Uzbekistan have now started reaching the capital, Tashkent.
With April over, many working for state companies in the city are complaining they have yet to see payments for even February and March.
A teacher at a Russian school in Tashkent, Alina, told EurasiaNet.org that she last received a wage packet at the end of February.
“We complained to the headmaster, but he just said that there was no money in the bank, so we just have to wait. We don’t earn that much money — around 700,000-900,000 sum ($120-150) — and still they have the gall to delay payment,” said Alina, whose surname has been withheld. “A lecturer at the teacher training college said that they started getting their pay on their bank cards in January, but that they have seen nothing for two months. Earlier, this only used to happen out in the provinces.”
An employee with InfinBank in Tashkent told EurasiaNet.org that all available ready cash is going toward completion of roads and other infrastructure in preparation of a major summit expected later this year.
The hard cash problem is nothing new for Uzbekistan. The scale of the problem became apparent when a leaked letter written last April by the deputy head of the Central Bank and addressed to Prime Minister Shavkat Mirziyoyev revealed there were insufficient funds to cover state salaries, pensions and benefit payments.
A press conference in Almaty on the proposed plans to rent land to foreign investors had to be cancelled April 29 after police detained the organizers.
The heavy-handed effort to prevent a public discussion is highlighting the nervous state of a government that is flailing in its attempts to quell a wave of protests over the land issue.
Mukhtar Taizhan and Rysbek Sarsenbaiuly, who were set to speak at Almaty’s National Press Club, were forcibly denied from getting to the building by police. Rights activists filming the detention, like Galym Ageleuov, were themselves also hauled away by police.
Some time later, Sarsenbaiuly’s wife, Marzhan Aspandiyarova, did manage to reach the National Press Club to explain to reporters what had happened to her husband, but the scene degenerated into chaos as she spoke. As journalists gathered around her to listen, several policemen barged in to physically drag her away into a waiting car.
“If you want to prosecute, go ahead. The land will not be sold,” Aspandiyarova yelled as she was being manhandled.
The protests that have sprung up in several locations in Kazakhstan revolve around government plans to sell off unused farming land, which many Kazakhstanis fear could be bought up by foreign buyers — the Chinese are the main suspects.
Authorities have tried to reassure the public, specifying that the land being made available can be sold only to citizens of Kazakhstan, while foreigners must do with renting for periods of up to 25 years.
Those reassurances have had little effect. Some argue that once the 25 year period is up, foreigners may choose to squat on the land, while others suspect unauthorized sales will be approved on the sly.
The land protest movement in Kazakhstan is gathering momentum and spreading to more cities, while the authorities appear determined to ride out the public anger.
RFE/RL’s Kazakhstan service reported on April 27 that activists in the city of Uralsk applied for permission to rally next month on the heels of major demonstrations earlier in the day in Aktobe and Semey.
The demonstrations are ostensibly against government plans to sell off unused farming land, which many Kazakhstanis fear could be bought up by foreign buyers — the Chinese are the main suspects — but public speeches at the rallies indicate the discontent is spreading to other issues, such as corruption.
Authorities have tried to reassure the public, specifying that the land being made available for acquisition can only be sold to citizens of Kazakhstan, while foreigners will only be able to rent for up to 25 years. The president’s office has argued this move will put the farming land back into circulation and provide economic return on land that is now lying unused.
That has reassured few, however.
Footage uploaded to the Internet from the unsanctioned meeting in Aktobe, which looks to have gathered many hundreds, showed speakers touching on a variety of issues, from the justice system to recurrent plans to build a nuclear power station — another popular source of unhappiness.
All the protests appear to have proceeded peacefully so far, not least as the police have refrained from attempting to break them up.
Although state media have studiously avoided reporting on the protests, President Nursultan Nazarbayev on April 26 criticized what he said was a swirl of disinformation surrounding the planned land sales.
As Russian President Vladimir Putin revealed this week during a visit from Uzbekistan’s President Islam Karimov to Moscow, Russia has lost its top trading partner status with the Central Asian nation for the first time since the fall of the Soviet Union.
Unsurprisingly, it was China that took that title in 2015 after it did $3 billion worth of trade with Uzbekistan. And that was even lower than in 2014, when the figure stood at $4.7 billion.
As Putin noted ruefully, the fall was down to the currency devaluation brought on by the slump in global prices for oil.
“Russia occupies the second place among external trade partners for Uzbekistan. Our share in Uzbekistan’s external trade is 17 percent,” Putin said on April 26, according to a Kremlin transcript.
It’s not all bad news for Moscow though. The volume of bilateral goods trade has actually increased in the first quarter of this year, by 7.9 percent.
According to Russia’s Federal Customs Service, Russia’s trade with Uzbekistan in 2015 hit $2.8 billion. Uzbekistan has a substantial trade deficit with Russia, importing $2.2 billion worth of goods, while exporting $602 million in 2015.
Uzbek political analyst Kamoliddin Rabimov said that although the nominal drop in trade was indeed down to the collapse of the ruble, the overall trend was unmistakeable.
“The scale of the trade turnover between China and Uzbekistan has become so big that we will see it, mostly likely, only continue to increase. Russia is gradually losing its economic presence in Central Asia to Russia, and that is notwithstanding the fact that countries in Central Asia have not entirely opened their doors to China,” Rabimov said.
The shift inevitably bears geopolitical significance as well.
Protests are picking up steam in Kazakhstan against reforms that many fear could enable foreigners to buy up massive swaths of land and open the way to shady and corrupt transactions.
More than 1,000 people rallied in the western city of Atyrau on April 24, only the latest in a string such demonstrations. Civil activist Galymbek Akulbekov was able to hold a one-man picket in the capital, Astana, for about five minutes last week before being hauled away by police. Another larger rally in Almaty on April 22 drew some 30 people.
Although modest in size, the protests are an unusual sight and the authorities will be wary about cracking down too severely over a potentially incendiary and sensitive issue.
As the ninth largest country in the world, Kazakhstan is well-stocked on the land front. The country has 2.7 million square kilometers of farming land stock, of which around one-third is unused, according to the National Economy Ministry. Another 602,000 square kilometers is made up residential space, industrial areas and protected nature reserves.
Under government plans, the unused farming land could be sold or made available for rent, with the revenue going to the National Fund — Kazakhstan’s stabilization fund — instead of the state coffers.
Tajikistan industry’s visiting card: That was how President Emomali Rahmon once described aluminum producer TALCO.
But things are looking a bit grim for the company at the moment with the news that it has had to lay off 607 employees, equivalent to 7 percent of the entire workforce, because of low global prices for its product.
Reuters news agency on April 19 cited TALCO press secretary Igor Sattarov as saying that 8,200 workers would be left at the company after the cutback.
Although the loss of employment will come as a massive blow to the laborers affected, the cutback is still quite a bit short of the 2,000 job cuts called for international consultants. Sattarov said TALCO instead opted for a “mitigated plans for the staffing optimization” and has put a number of people on unpaid leave.
International aluminum prices are currently hovering around $1,600 per ton, which marks something of a recovery from the lows seen last year, but still falls short of a figure that would make TALCO seriously profitable.
Wanting to help TALCO out of a tight spot, the government in November granted the company licenses to develop two gold deposits in the northern Sughd province, Konchoch and Chulobi. Usage rights over the deposits will extend to 25 years.
As Kazakhstan’s economic muddle continues apace, the production and sale of new automobiles has collapsed, while more drivers are choosing to buy or keep old clangers.
Figures released last week by the National Economy Ministry show that in the first quarter of 2016, the production of cars fell by 92.2 percent compared with the same period last year, Trend news agency reported. During the same period, factories in Kazakhstan produced 14.2 percent fewer trucks.
Kazakhstan’s main auto assembly companies — Azia Avto, Saryarka AvtoProm and Agromash Holding — turn out some of the world’s largest brands, including Chevrolet, Kia, Skoda, Lada, Toyota, Hyundai, SsangYong and Peugeot.
Most cars sold in Kazakhstan are imported, and demand has been steadily falling.
In 2015, official dealerships reported the sale of 97,446 automobiles, a 40 percent drop on the year before.
The rate of the drop-off in sales is intensifying. Figures from the Kazakhstan Automobile Business Association (KABA) show that 6,991 cars were bought from official dealerships in the first two months of this year, a 59 percent decrease on the same period in 2015.
A glance around the roads in Kazakhstan’s wealthiest cities, Astana and Almaty, is an easy reminder that many Kazakhs prefer when they can to buy larger cars able to handle some of the country’s worst roads.
But as KABA president Andrey Lavrentyev has noted, the greatest demand registered last year was for compact models costing under 4.5 million tenge ($13,300).
The biggest seller among smaller models last year was the Hyundai Elantra (2,203 units), followed by the Skoda Rapid with 1,351 sales. In a far third place was the KIA Cerato with 883 units sold.
Uzbekistan is trying to give farmers a helping hand as the country seeks to lessen its dependence on cotton-growing and find much-needed sources of revenue.
Local media reported last week that as of July 1, companies and private entrepreneurs holding the proper permits could once again begin to export fruits and vegetables by road. The government in September slapped a ban on trucks taking produce out of the country, leaving all but a select few only the costly alternative of getting their wares out by air or railway freight.
Those measures were taken to avoid Uzbek wares being re-exported onward to lucrative markets like Russia by companies in Kazakhstan. In November 2014, deputy Prime Minister Rustam Azimov told a government meeting that the amount of Uzbek produce being exported to Russia had fallen by 10 percent because of unfavorable tariffs barriers created by the Moscow-led Eurasian Economic Union (EEU).
That state of affairs in turn led to the creation of various opaque and illegal schemes, Azimov said. Fruit and vegetables were first exported to Kazakhstan, where companies would label the goods as Kazakh and then sell them on to Russia and benefit from favorable tariffs for produce cultivated with the EEU, a bloc that Uzbekistan has resisted joining. That set Uzbekistan the challenge of trying to thwart middlemen in Kazakhstan and dealing directly with Russia.