Political Interference in Business Scares off Investors
Political Interference in Business Scares off Investors
The Uzbek authorities are looking into how to improve conditions for foreign investors so as to reverse the downward investment trend, but NBCentralAsia observers say increasing political interference in business has tainted its reputation.
In late June, the standing council of Senate, the upper house of Uzbekistan’s parliament met to consider recommendations on how to improve the investment climate.
Although members of the council concluded that investment conditions are favourable, they discussed guarantees of legal protection for foreign investors and highlighted the need to harmonise foreign investment legislation.
Uzbekistan is located in the middle of Central Asia, has relatively well developed transport routes and energy infrastructure, huge agrarian potential, and the largest population in the region. Yet as Tashkent-based independent economic researcher Dinara Dyikanova points out, it has one of the worst investment climates in the former Soviet Union “due to widespread corruption and political instability”.
In late 2006, the Uzbek authorities accused two of its biggest western investors of tax evasion, Britain’s Oxus Gold company and the United States Newmont Mining Corporation.
Although a court ruled that Oxus Gold had not broken the law, it was still forced to sell some of its shares to Uzbek businessmen, while Newmont’s subsidiary Zarafshan-Newmont was declared bankrupt for political reasons, said Dyikanova.
She argues that Uzbekistan’s lawmakers are only considering improving the conditions for investors under pressure from Russia, South Korea and China, the major investors now that the country has alienated itself from the West.
But a staff member at the Tashkent State Finance Institute employee, who wishes to remain anonymous, insists that the Uzbek authorities really are ready to make significant concessions in order to attract foreign investors, including western companies.
The decline in investor confidence is driving foreign businessmen away, and this explains why 2006 was Uzbekistan’s worst year yet for foreign direct investment.
The source said the situation could still be reversed if Uzbekistan were to simplify its legislation – one of the main demands made by international financial institutions and foreign investors. Even then, he said, “The question is whether foreign businessmen would take the bait and risk investing in Uzbekistan again, in view of the reputation the country now has.”
(News Briefing Central Asia draws comment and analysis from a broad range of political observers across the region.)
In late June, the standing council of Senate, the upper house of Uzbekistan’s parliament met to consider recommendations on how to improve the investment climate.
Although members of the council concluded that investment conditions are favourable, they discussed guarantees of legal protection for foreign investors and highlighted the need to harmonise foreign investment legislation.
Uzbekistan is located in the middle of Central Asia, has relatively well developed transport routes and energy infrastructure, huge agrarian potential, and the largest population in the region. Yet as Tashkent-based independent economic researcher Dinara Dyikanova points out, it has one of the worst investment climates in the former Soviet Union “due to widespread corruption and political instability”.
In late 2006, the Uzbek authorities accused two of its biggest western investors of tax evasion, Britain’s Oxus Gold company and the United States Newmont Mining Corporation.
Although a court ruled that Oxus Gold had not broken the law, it was still forced to sell some of its shares to Uzbek businessmen, while Newmont’s subsidiary Zarafshan-Newmont was declared bankrupt for political reasons, said Dyikanova.
She argues that Uzbekistan’s lawmakers are only considering improving the conditions for investors under pressure from Russia, South Korea and China, the major investors now that the country has alienated itself from the West.
But a staff member at the Tashkent State Finance Institute employee, who wishes to remain anonymous, insists that the Uzbek authorities really are ready to make significant concessions in order to attract foreign investors, including western companies.
The decline in investor confidence is driving foreign businessmen away, and this explains why 2006 was Uzbekistan’s worst year yet for foreign direct investment.
The source said the situation could still be reversed if Uzbekistan were to simplify its legislation – one of the main demands made by international financial institutions and foreign investors. Even then, he said, “The question is whether foreign businessmen would take the bait and risk investing in Uzbekistan again, in view of the reputation the country now has.”
(News Briefing Central Asia draws comment and analysis from a broad range of political observers across the region.)
