Uzbek Civil Society on the Hazards of Investing in Kleptocracies

Tonight Uzbekistan President Shavkat Mirziyoyev will tout the benefits of investing in his country to executives of multinational firms at a swank dinner at the Onyx Room in mid-town Manhattan.  He will point to measures the government has taken since the death last year of its first president, renowned kleptocrat lslam Karimov, to open the country to foreign investment — from reforms to economic policy to steps to improve its atrocious human rights record.  But before they open their checkbooks, the execs will want to heed the warnings contained in a letter Uzbek civil society activities just sent Washington lawyer Carolyn Lamm, chair of the American-Uzbekistan Chamber of Commerce, the host of tonight’s get-together.

Reprinted below, the letter cautions that there are still many signs that Uzbekistan has yet to shed its kleptocratic past, from the appointment of one of the most notorious kleptocrats of the previous regime as prime minister to the rise to power of Mirziyoyev’s sons-in-law.  The authors remind Ms Lamm and the members of her organization what happened to those who invested in Karimov’s kleptocracy.  Not only did their investments turn out to be a bust, but the bribes the investors had to pay to do business have cost them (or more accurately their shareholders) dearly.  One firm was fined $795 million by Dutch and American authorities and a second recently told shareholders it anticipates paying over $1 billion to resolve the case against it.

The authors sent a copy of their letter to the members of Ms Lamm’s organization, a group that includes General Electric,  General Motors, Boeing, Catepillar, Coca-Cola, Honeywell, Visa, and other well-know, well-respected companies traded on American stock exchanges (and thus subject to the Foreign Corrupt Practices Act). Readers holding shares in any of these companies will want to ensure company executives pay careful attention to the letter’s warnings.

Ms Carolyn Lamm
American-Uzbekistan Chamber of Commerce
601 13th St NW # 600S
Washington, D.C. 20005

September 18, 2017

An Open Letter to the American-Uzbekistan Chamber of Commerce regarding the Situation in Uzbekistan on the Eve of its Meeting with President Mirziyoev

Dear Chairwoman Lamm:

We, the undersigned Uzbek citizens and activists, write to you on the eve of your dinner with President Shavkat Mirziyoev on September 20, 2017, to express concern that your members may be misled into believing that meaningful reform is underway in our country. We ask you to share with them this letter explaining the current conditions in Uzbekistan and the risks any firm investing or doing business in the country will face. We further ask you to urge the President to reform the judiciary and create an independent, impartial and effective body to investigate allegations of corruption.

If Uzbekistan does not take such steps towards establishing rule of law, your members, as well as the other American companies who might consider investing in Uzbekistan, should be aware that their investments and the security of their personnel would be at great risk in the country.

Although the December Presidential elections were neither free nor fair, we recognize that President Mirziyoev has taken some steps to pave the way for reform, mainly by improving relationships with neighbors in Central Asia and by softening restrictions of the freedom of expression within the country. We also welcome the government’s invitation for Human Rights Watch to reinstate its monitoring mission in Uzbekistan, as well as the new round of dialogue with the Office of the United Nations High Commissioner for Human Rights.

Yet Uzbekistan remains an autocratic regime where human rights abuses and corruption are the norm, rather than the exception.

Despite the release of several political prisoners in 2016 and 2017, dozens of civil society activists and journalists still languish in prison, along with thousands of people imprisoned for exercising their right to freely practice their religion.
The practice of forced labor continues on a massive scale, regardless of claims by the ministries of labor and education that they are “banning” the draft of schoolteachers and medical personnel to take part in the cotton harvest.

Restrictions on the right to freedom of association and assembly, reinforced in 2004-2007, and curbs on the right to freedom of movement (through so-called exit visas) remain in force.

The country has not yet made meaningful steps towards establishing an independent judiciary, adopting anti-corruption measures, or other steps necessary to create the rule of law. There remains a climate of complete impunity for corruption and abuse of public office by top officials.

This poses a significant threat to those who would invest in Uzbekistan. Consider what happened to two of the foreign investors, Mobile Telesystems and VimpelCom. Both sought licenses to operate a mobile phone network. Gulnara Karimova, whose father was then president, assisted by Abdulla Aripov, then head of Uzbek telecom state agency, demanded bribes in return. These companies paid hundreds of millions of dollars for “the right to invest”. The bribes were discovered and both were prosecuted by European and American authorities. VimpelCom was fined $795 million and Mobile Telesystems’ parent company is telling shareholders it expects to pay more than $1 billion to settle the case.

While President Mirziyoyev has said that such abuses have ended with his assumption of power, potential investors should consider who he has appointed Prime Minister, Abdulla Aripov, the very same individual that colluded with Karimova to shake down Mobile Telesystems, Teliasonera and VimpelCom.

Further evidence that things have not changed since President Mirziyoyev’s election comes from his government’s recent efforts to recover the bribe monies the three companies paid. The monies are now the subject of civil forfeiture actions brought by the U.S. Department of Justice under its Kleptocracy Initiative. Yet in an attempt to defeat the case, Uzbekistan’s government has held secret trials where they convicted Karimova and a few of her subordinates for related crimes.

In Karimova’s case the trial was staged in the kitchen of her house with only a judge, a prosecutor and a defense lawyer present. All were assigned by the government, making the case a travesty of justice and a plain violation of Uzbekistan’s obligations under the International Covenant on Civil and Political Rights. The government now claims those guilty of demanding the bribes have been brought to justice and the $850 million in bribe money should be returned.

Uzbek activists have already urged the Department of Justice to reject the government’s ludicrous claim and find a way to ensure the funds are used for the benefit of Uzbek citizens, true victims of corruption. One way to show that the country is becoming a safe place for foreign investors would be if it agreed to a settlement with the Department of Justice under which the monies Karimova and her accomplices, among whom Mr. Aripov and security services, stole would be donated to an independent charity established to operate in the interests of the people of Uzbekistan. A good precedent is the creation of the Bota Foundation, which ensures that the proceeds of corruption from Kazakhstan are returned to its citizens through social programs run under the supervision of an international Board.

Government spokespersons have stressed the steps they are taking to improve the investment climate, including a new policy on currency exchange, but these steps are far from being sufficient to create adequate conditions for foreign direct investments. Political risks for foreign (and for local) businesses in Uzbekistan remain extremely high. The state bureaucracy and the judiciary in Uzbekistan are still
controlled by the security services, which operate in secret as a government within a government. The extortion of bribes from foreign companies by Karimova, Aripov, and their cohorts was possible only with the assistance of the security service and other law enforcement agencies.

Nothing has changed since then – except the arrest and conviction of Karimova. Indeed, what we see now is the formation of a new clan around Mirziyoyev, notably through the elevation of his sons-in-law.

In principle, we would welcome foreign investment in Uzbekistan and the chance for our country to open up to the world. But we fear that, without reform, foreign investors will face the same outcome as Mobile Telesystems and VimpelCom. Or the same problems as General Motors – Uzbekistan, whose workers were forced by the Uzbek authorities to pick cotton. We urge you to consider raising the matters mentioned above with the President, as it would be in your own best interests for Mr. Mirziyoyev to create conditions for a safe and healthy business environment in Uzbekistan.


Nadejda Atayeva, Association for Human Rights in Central Asia, Le Mans, France, (contact person)
Umida Niyazova, Uzbek-German Forum for Human Rights, Berlin, Germany, (contact person)
Alisher Abidov, Association for Human Rights in Central Asia, resident of Norway
Alisher Taksanov, journalist, resident of Switzerland
Daniel Anderson, Uzbek refugee, former political prisoner, Oslo, Norway
Dilobar Erkinzoda, Stockholm, Sweden
Kudrat Babadjanov, Stockholm, Sweden
Ulugbek Haydarov, former political prisoner, resident of Canada
Jodgor Obid, former political prisoner, poet, member of the International Pen-Club (Austria), resident of Austria
CC: The Honorable Rex Tillerson, Secretary of State
CC: The Honorable Pamela Spratlen, The U.S. Ambassador to Uzbekistan
CC: Chief Executive Officers of the sponsors of American-Uzbekistan Chamber of Commerce:
American Councils for International Education
Baker & McKenzie
CNH International
General Electric
General Motors Korea
Hogan Lovells
Hyatt Regency (Tashkent)
John Deere
Lockheed Martin
Macro Advisory
McLarty Associates
White & Case
Zeppelin CAT


1 thought on “Uzbek Civil Society on the Hazards of Investing in Kleptocracies

  1. Pingback: Uzbek Civil Society on the Hazards of Investing in Kleptocracies | Matthews' Blog

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