You should know where the money’s coming from: a response to the mayor of Tashkent

Last week, I report­ed on a pos­si­ble con­flict of inter­est over a mam­moth urban devel­op­ment in Uzbekistan. The may­or of Tashkent respond­ed to my claims — here’s my reaction.

Tashkent City Press Conference, 31 January. Source: BBC Uzbek / YouTube. On 29 January, openDemocracy pub­lished evi­dence link­ing the may­or of Tashkent, Jaxongir Artikxodjaev, to com­mer­cial, con­struc­tion and invest­ment inter­ests which have been award­ed a slice of Tashkent City, a mega-devel­op­ment labelled Uzbekistan’s biggest-ever prop­er­ty ven­ture. Last month, anoth­er inves­ti­ga­tion showed that one of the for­eign investors in this project, a German com­pa­ny, appears to be hid­ing its true iden­ti­ty behind lay­ers of cor­po­rate ownership.

This press con­fer­ence also fol­lowed claims by Radio Free Europe/Radio Liberty’s Uzbek Service that employ­ees at one of the con­struc­tion com­pa­nies linked to  Artikxodjaev were work­ing in “slave-like con­di­tions” on the Tashkent City project. Likewise, there are ongo­ing reports of com­mu­ni­ties in Tashkent being dis­placed and dis­pos­sessed by this mas­sive con­struc­tion project.

On Thursday 31 January, may­or Artikxodjaev con­vened a press con­fer­ence where he respond­ed to claims about the Tashkent City project.

First, cred­it where cred­it is due. Mayor Artikxodjaev has attempt­ed to address some of the con­cerns for­mal­ly before local jour­nal­ists. This is a pos­i­tive exam­ple of improv­ing pub­lic account­abil­i­ty in Uzbekistan, although there is a long path ahead. 

In the same spir­it of pub­lic account­abil­i­ty, a response is required to the mayor’s press statement.

At the press con­fer­ence, Artikxodjaev acknowl­edged hold­ing a ben­e­fi­cial inter­est in the Akfa Group. He went on to say:

Akfa is a 20-year-old com­pa­ny. I built this com­pa­ny myself. I nev­er dreamed that I would some­day become may­or. I was told about this deci­sion half an hour before I was appoint­ed may­or. When I became may­or, the pres­i­dent tasked me to trans­fer the com­pa­ny to oth­er man­agers. But there was no dis­cus­sion of shares. If I become may­or, why should I trans­fer my shares to anoth­er per­son? Or if I had shares in Apple, why should I sell them?”

With respect, this was not a star­tling rev­e­la­tion. Artikxodjaev’s role in the Akfa Group has been wide­ly report­ed. But it is now for­mal­ly con­firmed, which is a step forward.

However, what is of greater con­cern are the links doc­u­ment­ed in the orig­i­nal arti­cle, con­nect­ing Artikxodjaev to Discover-Invest and Dream City Development, along with Akfa Dream World – com­pa­nies with con­struc­tion, com­mer­cial and invest­ment inter­ests in Tashkent City.

The may­or and mayor’s office do not appear to have direct­ly addressed the mul­ti­ple lines of evi­dence indi­cat­ing a direct link between the Mayor and these com­pa­nies. Discover-Invest’s ties to the Akfa Group were promi­nent­ly dis­played in its pro­mo­tion­al mate­r­i­al, until, that is, Artikxodjaev became act­ing mayor.

It still needs to be deter­mined then whether the may­or has employed a nom­i­nee share­hold­er to hold this Discover-Invest inter­est on his behalf? And why did Discover-Invest remove the Akfa brand from its Facebook posts in May, short­ly after Artikxodjaev’s appoint­ment as act­ing mayor? 

Those ques­tions aside, it would be mis­lead­ing to liken a stake in firms obtain­ing a sig­nif­i­cant slice in Tashkent City to hold­ing shares in Apple of Boeing, as the may­or did. The com­pa­nies at the cen­tre of this con­tro­ver­sy appear to have been award­ed their stake in the Tashkent City devel­op­ment after Artikxodjaev was appoint­ed to head the pub­lic author­i­ty respon­si­ble for over­see­ing this prop­er­ty venture.

The sit­u­a­tion, accord­ing­ly, is dis­tinct­ly dif­fer­ent to the exam­ple that Artikxodjaev brought up dur­ing Thursday’s press con­fer­ence. In the case of Tashkent City, the firms in ques­tion are con­duct­ing busi­ness that falls direct­ly with­in Artikxodjaev’s pub­lic port­fo­lio, and it could be that they gained an inter­est in Tashkent City after Artikxodjaev obtained his pub­lic role.

In which case seri­ous ques­tions emerge.

When gov­ern­ment deci­sions were made on Tashkent City that ben­e­fit­ed Artikxodjaev’s com­pa­nies, did the may­or open­ly declare in advance his ben­e­fi­cial inter­ests in these firms? Did Artikxodjaev recuse him­self from all meet­ings and deci­sions that impinged on his busi­ness interests?

That Artikxodjaev has no involve­ment in the day-to-day man­age­ment of these com­pa­nies is irrel­e­vant. If it was dis­cov­ered he employed his posi­tion in gov­ern­ment to cur­ry favour for a firm in which he has a ben­e­fi­cial stake, this would be cor­rup­tion by any definition.

During the press con­fer­ence, the may­or sug­gest­ed that, despite stren­u­ous efforts, he was unable to attract invest­ment in Tashkent City. The devel­op­ment of Tashkent City was left, Artikxodjaev con­tends, to a few coura­geous busi­ness­men who were pre­pared to take the risk for their nation.

When I began to man­age the Tashkent City [pri­or to being appoint­ed act­ing may­or], on the invi­ta­tion of the pres­i­dent, I was sup­posed to com­plete con­struc­tion in three years. I met with 700 investors. Not one of them agreed, because the site did not look attrac­tive. Not one com­pa­ny believed that this project could be com­plet­ed in three years.”

This is a sur­pris­ing admis­sion. Tashkent is one of Central Asia’s thriv­ing cap­i­tals and is brim­ming with pos­si­bil­i­ty. The project itself has been declared one of nation­al sig­nif­i­cance, with a raft of state sup­ports, which will only ser­vice to boost prof­it mar­gins. But if, hypo­thet­i­cal­ly speak­ing, we accept the mayor’s argu­ment that investors were not inter­est­ed, then sure­ly that would indi­cate this project is not meet­ing a mar­ket need, which is a core deter­mi­na­tion influ­enc­ing investor choice.

The inabil­i­ty to attract inter­est from some 700 inter­est­ed par­ties, how­ev­er, more like­ly sug­gests one of two things: that the win­ners in this process had been decid­ed in advance; or that poten­tial investors are not con­vinced that their inter­ests would be pro­tect­ed by an impar­tial civ­il ser­vice, inde­pen­dent courts and a trans­par­ent com­mer­cial envi­ron­ment, where accu­rate and cred­i­ble infor­ma­tion is read­i­ly available.

At the press con­fer­ence, the may­or also appeared to sug­gest that, while his com­pa­nies will par­tic­i­pate in Tashkent City, they will not retain ownership.

On the pro­pos­al of the pres­i­dent, a con­gress hall and hotel had to be built in Tashkent […] Akfa Dream World took this respon­si­bil­i­ty on itself. After con­struc­tion is com­plet­ed, this con­gress hall will be trans­ferred to the state. It will not be used as a source of income.”

Currently, no sub­stan­tive infor­ma­tion is avail­able on the ten­der process (if they took place) at Tashkent City, includ­ing bids received, awards made and the con­tract amounts. (A minor, but telling point: when the Tashkent City project admin­is­tra­tion was con­tact­ed for com­ment on last week’s arti­cle, press requests for infor­ma­tion were left unan­swered.) We also don’t know if these firms are to receive oth­er ben­e­fits or con­ces­sions, such as state sub­si­dies and pub­lic loans. It is impos­si­ble, there­fore, to deter­mine who will earn what, if the antic­i­pat­ed prof­it rates are rea­son­able, and whether there are red flags indica­tive of poten­tial wrongdoing.

President Shavkat Mirziyoyev and may­or Jahongir Artikxodjaev inspect a Tashkent City site. Source: YouTube.

The may­or also remarked that he is pre­pared to accept any­one who demon­strates an inter­est in Tashkent City as an investor. The exam­ple of the German investor in Tashkent City, Hyper Partners GmbH, is instruc­tive in this regard. Its prin­ci­pal share­hold­er is a 19-year-old man with no pre­vi­ous busi­ness expe­ri­ence. Open Democracy’s inves­ti­ga­tion links this com­pa­ny to a cor­po­rate net­work run by Uighur busi­ness­men from Kazakhstan and Xinjiang.

Artikxodjaev stat­ed: 

It’s not impor­tant whether this com­pa­ny [Hyper Partners GmbH] was cre­at­ed yes­ter­day or the day before. But I can show you that the project is being imple­ment­ed. Work has begun, it’s not with­in our com­pe­ten­cies to ask who is invest­ing, where their mon­ey is from, how funds have trav­elled through the bank­ing sys­tem. The most impor­tant thing is that the project is being imple­ment­ed, the most impor­tant thing is that a for­eign com­pa­ny is invest­ing in our market.”

At the same press con­fer­ence, Uzbekistan’s deputy min­is­ter of invest­ment and for­eign trade, and the first deputy min­is­ter of econ­o­my and indus­try, both stat­edthat the Uzbek author­i­ties do not legal­ly have the pow­ers to demand fur­ther infor­ma­tion about who stands behind for­eign invest­ment com­pa­nies. Laziz Kudratov, deputy min­is­ter of invest­ment and for­eign trade, went on to state that Hyper Partners GmbH is an affil­i­at­ed com­pa­ny, but did not clar­i­fy who Hyper Partners’ par­ent com­pa­ny is.

Large-scale prop­er­ty devel­op­ments are plagued by three evils: fraud, mon­ey-laun­der­ing and bribery. A fail­ure to con­duct prop­er due dili­gence on who is invest­ing, their track record, and the ori­gins of their cap­i­tal, expos­es the gov­ern­ment and pub­lic to seri­ous risks.

It would be extreme­ly dam­ag­ing to the inter­na­tion­al pro­file of Uzbekistan if it was dis­cov­ered this prop­er­ty ven­ture is a front for organ­ised crime, or a cash cow for polit­i­cal­ly exposed per­sons. Failure to scru­ti­nise investors and their track records courts this risk, and is high­ly irresponsible.

You don’t need to dredge far into Uzbekistan’s recent his­to­ry to under­stand why.

A com­pa­ny that Gulnara Karimova, the for­mer president’s eldest daugh­ter, used to chan­nel bribes from inter­na­tion­al telecom­mu­ni­ca­tions was owned on paper by her 20-year-old assis­tant, Gayane Avakyan, who had no expe­ri­ence in the tele­coms sec­tor. The fact that this woman was receiv­ing tens of mil­lions of dol­lars for pro­vid­ing tech­ni­cal advice to inter­na­tion­al telecom­mu­ni­ca­tions firms was a mas­sive red flag, as we know fol­low­ing a 2016 Dutch court rul­ing.

In this $1.3 bil­lion urban rede­vel­op­ment pro­gramme, the Mirziyoyev government’s chase for for­eign invest­ment appears to be fol­low­ing a sad­ly famil­iar path of opaque finan­cial deal­ings at the top and dis­pos­ses­sion at the bot­tom. The appar­ent dis­re­gard for trans­paren­cy, due dili­gence and account­abil­i­ty courts many of the cor­ro­sive forces that plagued the Karimov regime, except now it appears such cor­ro­sive forces may be giv­en a freer hand.

While this may inspire pock­ets of extreme wealth, and extreme pow­er, it is unlike­ly to be the route through which a fair, secure, and free nation is brought into being, fol­low­ing decades of auto­crat­ic rule.

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