Poor Business Climate, At Least

by Nathan Hamm on 3/30/2011 · 4 comments

I’ve taken a bit of heat in comments to my post on poor signs for investors in Uzbekistan and Kyrgyzstan because it appears that Oriflame probably was doing some illegal things in Uzbekistan. Though I only brought up Uzbekistan as a contrast to why investors are beginning to have more worries about Kyrgyzstan, I think the point stands that Uzbekistan’s business climate is poor. And on occasion, it gets really poor for murky reasons that invite the explanation that powerful members of the regime or their associates are simply being rapacious.

For example, the Alayskiy bazaar clothing market and nearby shops are being closed and demolished to make way for a parking lot, just like the shops on Navoi street recently were (see also).* Surely some illegal things such as black market currency exchange go on at these markets, but the game is rigged, so everyone’s doing something illegal to survive. So, I honestly ask, what’s the rationale for these actions? How is it wise to cannibalize or otherwise distort economic activity like this?

For more on this and some discussion of the lack of official explanation, see neweurasia.

*Yes, apologists, I realize that eminent domain laws in the US have similar effects. And, yes, I oppose their use to transfer property to developers. But in the US, we usually know which wealthy businessman is benefiting from the government’s land grabs.

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– author of 2991 posts on 17_PersonNotFound.

Nathan is the founder and Principal Analyst for Registan, which he launched in 2003. He was a Peace Corps Volunteer in Uzbekistan 2000-2001 and received his MA in Central Asian Studies from the University of Washington in 2007. Since 2007, he has worked full-time as an analyst, consulting with private and government clients on Central Asian affairs, specializing in how socio-cultural and political factors shape risks and opportunities and how organizations can adjust their strategic and operational plans to account for these variables. More information on Registan's services can be found here, and Nathan can be contacted via Twitter or email.

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Tojik March 30, 2011 at 2:25 pm

The government of Tajikistan is implementing a similar policy and using ’eminent domain laws’ to force people out of their houses they built within the last 3-4 years.

In Dushanbe they managed to bulldoze one of the biggest markets and gave the lot to a well connected businessman from Rahmon clan (who to his credit built a shopping center on it).

Probably its a way to re-design the city (not necessarily into a better) and make money for their hollow infundibular pockets at the same time. Does this sound like a rationale?!

Catherine Fitzpatrick March 30, 2011 at 6:09 pm

Well, there was the muscling of Onux Gold recently that led to them suffering half their market value and uncertainty about whether they will sell their 50 percent stake, and then WikiLeaks revelations that reveal a lot of that has gone on in the past with Onux as well as Newmont.


Narcogen March 30, 2011 at 11:18 pm

Without commenting specifically on Oriflame– because I have no particular knowledge of their circumstances– what I can say is that it is such a challenge to do business in Uzbekistan that doing so completely legally is something most businesses don’t even aspire to, and many of the benefits of doing business in that region (such as repatriating profits) cannot be practically realized if one commits to operating completely within the law. As such, cases like this one are almost always cases of selective enforcement.

Metin March 31, 2011 at 6:16 pm

According to local media electronics shops (and bazars) are being relocated to new modern specialty stores for customers convenience. Here is the link:
New stores will have to accept bank cards for payments. This is to make it hard for shops to trade with smuggled goods. Price of goods is likely to increase, but the pressure to pay bribes would probably decrease.

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