Tashkent Squashes Another Investor

The Uzbek authorities’ pursuit of a Russian-owned mobile phone company looks like part of a familiar pattern of inviting foreign companies into the country, only to turn against them later and hound them out.

On August 27, a trial opened at Tashkent’s criminal court in which four top managers at MTS Uzbekistan, the local subsidiary of Russia’s Mobile Telesystems, are accused of tax evasion to the tune of 263 million US dollars.

After buying part of local phone operator Uzdonrobita in 2004 and the rest three years later, MTS built a successful business with over nine million customers, before the authorities took against it.

Uzdonrobita’s licenses were suspended at local level across the country in July, and in August, MTS Uzbekistan’s general operating license was withdrawn in a court application made by the state telecoms agency.

The company rejects allegations of tax evasion and other wrongdoing, saying prosecutors have thrown accusations “nearly every financial crime that exists” at it, in breach of Uzbekistan’s own laws. It says its staff have been harassed and threatened.

Its acting director in Uzbekistan, Radik Dautov, was freed from detention on August 17 and has since left the country.

NBCentralAsia commentator says the all-out campaign against MTS is strikingly similar to action the government has taken against other wholly or partly foreign-owned businesses.

In February, the Turkish retail companies Demir and Turkuaz were nationalised, and the same happened to Indian textile company Spentex Toshkent Toytepa, the Russian dairy firm Wimm Bill Dann, and the Coscom Mobile Company. In 2010, the government targeted Newmont Mining and Oxus Gold, American and British investors, respectively. They also went after Zeromax, UzCaseagroleasing, and Bekabadcement, which had a substantial Kazak shareholding.

As with MTS Uzbekistan, each of these cases featured similar allegations of tax evasion, money-laundering and fraud.

Tashpolat Yoldashev, a political analyst from Uzbekistan and now based in the United States, says it is a familiar tactic – when successful businesses become desirable acquisitions, the law is deployed to kick out the foreigners and allow either the state or individuals close to it to take them over.

"When foreign investors do business, they’re vulnerable to interference,” Yoldashev said. "They’re asked for money to prettify urban areas or to provide staff and vehicles to pick cotton or gather scrap metal. Some foreign companies are stripped of their assets, others have to close up in Uzbekistan at a loss to themselves."

This article was produced as part of IWPR's News Briefing Central Asia output, funded by the National Endowment for Democracy.