Uzbekistan recently demonstrated again that it is not a safe environment for foreign investment (to say nothing of business in general). The target this time was Swedish cosmetics company Oriflame; authorities froze the company’s assets and accounts while it’s under investigation for tax violations and illegally importing beauty products. This, of course, isn’t too out of character in a country where every noticeable part of the economy and society is either under the thumb or in the pocket of the elites running the country. (The action against Oriflame comes amidst attacks on other businesses and the closure of the Navoiy street consumer electronics shops.)
Kyrgyzstan, too, seems to be working to build a reputation for being a poor environment for outside investors. As if a reputation for regular popular unrest — some of which has seen business in the capital torched — wasn’t enough to make potential investors skittish, the attack on a South African mining company in Talas has to give foreign businesses second thoughts about working in Kyrgyzstan, especially with the government signalling that businesses will need to negotiate local politics on their own to survive.
Although mining companies provide much-needed employment, training and amenities to residents in frequently remote spots in the country, local authorities complain about a perceived lack of consultation.
In an effort to avoid that, the government is working on laws requiring mining companies to work more closely with local authorities.
In other words, they’re saying that finding and paying protection to whoever calls the shots locally will be the law of the land. Not to be too cynical or to downplay the passions that large investment projects do actually incite in the public, but “a mob of young men, some of them drunk and on horseback” makes this sound much more like a local elite sent out his gang of karate or billiards enthusiasts than it does a heartfelt expression of public sentiment.
The more often things like this happen, the lower and lower the bar gets preventinng additional actions of the sort. In fact, it seems that it has well and truly become normal and accepted practice for strongmen not getting their way to unleash their sportsmen. With large investors joining the list of normal and accepted targets, it can’t be long before investors considering Kyrgyzstan decide it simply isn’t worth it.