Investing. For Victory!

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by Nathan Hamm on 1/26/2012 · 19 comments

A curious press release went out today that urges the US public and government to support investment in Central Asia, especially in Uzbekistan. (Unsurprisingly, it is currently the top news item at The American Uzbekistan Chamber of Commerce at the moment). The release casts US business as the force that should be left behind to secure American strategic interests in Central Asia after troops are withdrawn from Afghanistan in 2014. The release argues that lawmakers will be dropping the ball on achieving long-term benefits to the US should they fail to get behind US investment in the region.

The argument in the press release contains nothing that is self-evidently ridiculous or false, but it is three paragraphs heaping with wishful thinking. In other words, it’s probably perfectly crafted to excite at least a few members of Congress.

Karimov’s government would surely be over the moon to have the US government encouraging massive investment in Uzbekistan, but it should not be forgotten that Uzbekistan ranks almost as poorly in economic freedoms as it does in political rights and civil liberties. It is a terrible climate for foreign investors, with perhaps a few exceptions, where US investors stand risk to suffer as bilateral relations deteriorate. Additionally, investors should be cautious about the finances of the Uzbek state. Official economic statistics are unreliable and suspect, and there are some indicators — major interruptions in gas and power supplies and last year’s massive overhaul of consumer trade outlets — that suggest powerful elites are looking for new stones to squeeze to sustain their lifestyles. Instead of encouraging US businesses to walk into an uncertain environment where they face shakedowns by bureaucrats and cotton campaign labor organizers, Congress would be better served to press Uzbekistan to improve its business climate.

More importantly though, does the US even have a post-2014 strategic policy for Central Asia of any sort, let alone one that a community of US investors in the region could support? The answer to that appears to be “no.” If that is indeed the case, this press release reads instead as a call not for the US government to support US investors in the region as much as it does a plea for it not to abandon them.

Side note: The author of this press release works for the US-Ukraine Business Council. Does anyone know why, aside from freelancing, he’d be writing something that seems more in the lane of the AUCC

Photo: Tashkent, Chorsu Bazaar by Arian Zweger


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– author of 2992 posts on Registan.net.

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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{ 19 comments }

Don Bacon January 26, 2012 at 9:43 pm

Andriy Tsintsiruk, author of the press release, is Assistant Director of Government Relations and Communications at U.S.-Ukraine Business Council (USUBC) and is affiliated with the U.S. Heritage Foundation, a strong proponent for the Military-Industrial Complex.

Besides the U.S.-Ukraine Business Council (US-based) there are the American-Uzbekistan Chamber of Commerce (AUCC) and the American Chamber of Commerce in Uzbekistan (AMCHAM UZBEKISTAN). Why two Chambers in Tashkent?

from the AmCham Uzbek website:
Growing Importance of the Northern Distribution
Network

“In connection with the development of the Northern Development[sic] Networks there are opportunities for local producers to supply goods and services to Afghanistan.
Defense Logistics Agency (DLA) and General Services Administration (GSA) provided AmCham lists of commodities (below) they seek to procure locally.
If you are local producer and can offer goods and services as per the lists of commodities please send information that will include name of the company, contact information and product (from lists) you produce locally to AmCham office at amcham.director@amcham.uz or amcham.assistant@amcham.uz

The U.S. is looking to buy many commodities, including “Danish Pastry, Choc Nut, Fresh” and lots of “Bev, Carb, SBerry”. Also the US Army Corps of Engineers needs “Modular Wastewater Treatment Units, Capacity 20,000 gal per day”
http://amcham.uz/press/NDN

the NSN — the New Silk Road with Danish!

In connection with the development of the Northern Development Networks there are opportunities for local producers to supply goods and services to Afghanistan.
Defense Logistics Agency (DLA) and General Services Administration (GSA) provided AmCham lists of commodities (below) they seek to procure locally.
If you are local producer and can offer goods and services as per the lists of commodities please send information that will include name of the company, contact information and product (from lists) you produce locally to AmCham office at amcham.director@amcham.uz or amcham.assistant@amcham.uz

the NSN — the New Silk Road!

Metin January 27, 2012 at 2:38 pm

Those ‘a few exceptions’ are very successful and are making big changes there. Why should others not replicate such an experience? It is an emerging market and investment climate will improve gradually. US companies should be aware of opportunities of doing business there – there is nothing wrong in inviting them to invest.

Guy Fawkes January 31, 2012 at 3:20 pm

Metin, I bet you are SNB’s dog – you defend the regime in every post with your half-witted comments. Everybody in Uzbekistan, except those who are in position of power of course, will tell you that investing in Uzbekistan is exactly like throwing money into a bottomless barrel. It will disappear into bank accounts of the Uzbek elite, SNB people like yourself and the police who could get on the payroll of the elites. Uzbek regime doesn’t play by the rules and even if they play, it is very unreliable and sporadic. They make up their own rules, change it whenever they think is beneficial to their pockets and intimidate you whenever they can. There is always cost/benefit analysis of expropriating the foreign business vs consequences to them, to them personally. Whenever benefits outweight the consequences they take your money and if you go against them they kick you out of the country. Forget the foreign investment, the Uzbek regime extorts money from its own people, average people on the street. Foreign investments are viewed as a prey by elites, SNB, the police and anybody else who can abuse their position of power to get their dirty little hands on your money. Uzbekistan became a country where the elite became like leeches taking extortion of money from the population and elevating this nefarious activity into an art form. And you are talking about prospects of foreign investment… Give me a break!

Metin February 1, 2012 at 9:11 am

@Guy Fawkes,
don’t you find your wring offensive? if someone does not share your opinion you think this person is ‘SNB’s dog’? are paranoid schizophrenic?

Investment climate might not be the best, but it is not worse than used to be in the past. FDI inflows are small, but growing. This means that there are some opportunities.
http://www.ebrd.com/pages/research/publications/flagships/transition/uzbekistan.shtml

Metin February 1, 2012 at 9:16 am

wanted to say ‘you are schizophrenic’.

Guy Fawkes February 2, 2012 at 1:58 am

Oh, now you care about offensive language? You need to learn a bit more English. In English language and in most of the Western world the word dog doesn’t carry the same negative connotation as it does in Uzbek. Speaking of offensive language, I find your efforts to defend the Uzbek regime and deflect a criticism of it highly offensive to all Uzbeks everywhere. You know very well that that the rule of thumb is the Uzbek regime humiliates its own people and lets the police separate people from their money on the streets under the pretense of propiska. The only people who don’t say anything against the regime are those who directly or indirectly benefit from the status quo, i.e. SNB people, the police and all those who can abuse their power to line their pockets with ordinary people’s hard earned cash. In all of your posts you try to drive the conservation away into a totally different subject when people are trying to shed some light on how brutal and corrupt is the Uzbek police and the regime is. You defend the regime, ipso facto, you are either an SNB agent or something like that. Am I in the ballpark?

It is not a secret that Uzbekistan doesn’t want economic development, the regime prefers having 100% control over people’s lives and they find control and economic development to be mutually exclusive. Foreign investments means economic development which results in more economic activity. More economic activity, in turn, means not everything will be under the regime’s control 24/7. This terrifies the Uzbek elite and they chose to contain the economy instead of growing it. They themselves won’t suffer either way because there is always a “prey” nearby they can prey on. It is an average person who get the short end of the stick.

There is always going to be some limited economic activity in any country no matter how oppressive the regime is because people have to eat, build houses to live in, make clothes to defend themselves from the elements, etc. Uzbek economy is functioning at this very limited level. If the economy functions at this level the only way it can go is up. The fact the “things are getting better” as you put it doesn’t mean the Uzbek regime is actually promoting economic development. It means the economy has bottomed out and there is no way to go but to go up. For instance, after the Iraq war their economy started growing in leaps and bounds. This doesn’t mean that was a result of government’s efforts to grow the economy, it means that the economy was virtually destroyed during the war. Cash cow of their economy, the oil industry got hit the hardest during the war and when it was over everything started coming back up. Obviously, there is no war in Uzbekistan but the regime squandered away Uzbekistan’s potential by preferring to keep control over its own people 24/7 rather than thinking about the economy. Learn more about your own country and the regime since you are trying to defend it tooth and nail in every post. Learn some more English and western culture as well while you are at it so that you don’t have to translate into Uzbek everything said here.

Metin February 2, 2012 at 3:13 am

again, turning discussion into something personal saying like ‘learn English, Western culture, you’re SNB agent, etc’ shows weakness of your argument. Learn some more culture of leading civilized discussion.

Guy Fawkes February 2, 2012 at 11:40 am

The way you defend the regime without any regard to the hardships ordinary Uzbeks are enduring on a daily basis tells me that a civilized debate is going to be wasted on you. So I spoke your language, so to speak. And believe me, you are the only person I have seen in my life who defends the regime like this and tries to deflect the conversation away from it. You are entitled to your opinion, no questions about it, but while you do it be fair, recognize the ordeals people of Uzbekistan go through every day in their own country.

Metin February 2, 2012 at 1:27 pm

obviously you have nothing to say on the subject, don’t you? you keep tossing off ad hominem attacks and silly insults on someone who thinks differently than you. No offence, but you sound like a loser.

Will February 3, 2012 at 12:04 am

I don’t see anything wrong with Metin’s arguments here. Investment is good for Uzbekistan, helps to oil the wheels of the economy and I don’t fathom any Uzbek arguing against it just because the elite is corrupt. I understand others having completely different perspective because of their allegiance to their own countries.

I see “Uzbek” is now “Guy Fawkes”. Didn’t your parents teach you to be humble? Get a life you arrogant parrot. Talk, talk, no backup as always.

P.S. “Uzbek”, your economic reasoning is very primitive. Btw, your English sucks too! Sorry for being rude like you. Couldn’t help it.

Guy Fawkes February 3, 2012 at 9:53 am

Will/Metin – typical! Now you are angry because I blew your cover, didn’t I? Look at your comments – anybody who reads it has to read WSJ for a year to get his IQ back up again.

From all of people you know better that the regime treats economy as a zero sum game which is primitive. Describing it so that people know what is going on is not. I know spelling it out for other people is not in your interest because you defend the regime, you are the regime.

Will February 3, 2012 at 4:56 pm

Fawk the corrupt uzbek police and the corrupt elite. Will I now be accepted as an anti-regime by the chosen ones?

With your tendency to sway every discussion away from the topic to police harassment and “propiska” issues, you must be a dog of opposition figures living abroad and getting paid for your “honest” job by blackmailing Uzbekistan (I hope you are not offended as the term “dog” is not offensive).

I have worked in Tashkent for 6 years, of which 5 years without “propiska” and my application for “propiska” was rejected three times. Don’t be a sheep when militia harasses you for minor issues. Most of the time they act on their own; the government may tolerate this behavior to keep their loyalty to the regime. Ask for their ID before showing your passport if a random militia stops you to check your “propiska”. If you bribe them, they are going to come after you again. For other serious allegations, for example religious persecution, you can’t do anything most of the time.

Those who work at law enforcement agencies are also someone’s son, brother, father, uncle, neighbor, etc. So start from yourself: don’t send your kids to college to become a prosecutor/militia, as it is now popular in Uzbekistan. I am not defending anyone here and believe “propiska” must be abolished. But it is a non-issue given other more serious abuses by the law enforcement agencies. You can live in Tashkent without “propiska” like thousands of other people who are in a similar situation. Look, I welcome any criticism of the country based on evidence and/or arguments, but sick of your constant whining about “propiska” like a small kid on every topic.

P.S. Reading WSJ increases one’s IQ? Seriously? I get WSJ in the mail every day and read only economy-related articles to keep abreast of the current economic issues, but certainly not to boost my IQ. Read academic journals if you are concerned about your IQ. WSJ frequently runs articles from influential economists, like in today’s edition Nobel Prize winner Sargeant writes about the lessons for European bailout. But WSJ is solidly right-wing, every issue runs an article/op-ed to discredit Obama’s policies (I am not a fan of him). So you need to compensate your reading with not off the center media in order not to become a “victim” of the right-wing propaganda machine.

Guy Fawkes February 3, 2012 at 4:20 pm

An article published today in the Telegraph about Uzbekistan. Despite your desperate attempts to prolong the life of the regime this is what people read here:

http://www.telegraph.co.uk/news/worldnews/asia/uzbekistan/9059341/Witnesses-report-fuel-and-power-shortages-in-Uzbekistan.html

Let’s see you do something about this…

Will February 3, 2012 at 5:26 pm

I know how the situation is back home and am frustrated for us selling natural gas to China and electricity to Afghanistan (something the U.S. government encourages) when we ourselves have the shortages. It is good that the issue is drawing international media’s attention and hopefully the government will address the power and natural gas problems.

Will February 3, 2012 at 5:34 pm

P.S. Sorry, I can’t do anything about this. I am neither the president, nor the prime minister to solve the power/fuel shortages.

Metin February 4, 2012 at 4:20 am

though off-topic, I decided to comment on the link you provided. Fuel shortages problem is nothing new. I suggest the cause of fuel shortages is growing number of cars and declining production of crude oil. Automobile market of Uzbekistan has grown to become the second largest in the former Soviet Union, only next to Russia. Growing demand for fuel can not be fully met by domestic crude oil production – country does limited oil reserves.

The problem is likely to be solved tackled through liberalization of the the sector – an opportunity for foreign investors. This, however, does not necessarily mean consumers will be better off. Petrol might end up costing even more than black market price.

Guy Fawkes February 5, 2012 at 9:39 am

Will/Metin,

Finally, I appreciate you having some guts and acknowledging that there is a massive and ubiquitous problem of police corruption and intimidation. Kudos to you! You say that they act on their own and that does not represent the regime. Wrong, I don’t agree with you here! They do represent the regime. They abuse their power to get people’s money and that can be stopped by the regime whenever they want but the regime chooses to look the other way. Because the regime hopes that one day that policeman will defend the regime and prolong its life, allowing the elite to suck people’s blood like ticks further into future. That is even a bigger problem than a policeman stopping you and taking your money if you think about it.

Nathan Hamm January 27, 2012 at 5:57 pm

Invite away. I don’t think the US government should be pushing hard to encourage this though. Several very large companies were absolutely mugged when it was decided that, in light of the west losing favor, that preferential tax deals and other incentives were repealed, even retroactively so.

Metin February 5, 2012 at 12:36 pm

Guy Fawkes,

I am not Will, but I don’t mind if you keep thinking that me and Will are the same person – that’s your problem. One thing I agree with you is that people of Uzbekistan deserve better life.

I think FDIs are important to improve lives of ordinary Uzbeks. Investments will bring not only know-how but also new way of thinking. They can help change communist/traditionalist mentality with liberal one. I wish FDIs came more from the US and other democracies than from Russia or China.

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