Anticorruption in Uzbekistan: An Opportunity for American Engagement

Author: Christine Li, Research Intern (Spring 2021), Center for Strategic and International Studies

Photo Credits: Giorgio Montersino, “Mother Russia Hotel,” https://www.flickr.com/photos/39442289@N00/1055047184.

An extravagant castle in France, a shell company in Gibraltar, and a Swedish telecom company may seem to be disparate things. However, they weave together as integral parts of an elaborate scheme to amass wealth and power – with Gulnara Karimova at the center. When her father (former Uzbek President Islam Karimov) was in power, Karimova used her status to extort billions for her own personal coffers, even creating her own transnational organized crime group. Known as “the most hated person in Uzbekistan,” she is now serving a 13-year prison sentence. Although this case represents one of the most egregious manifestations of corruption in Uzbekistan, other cases of endemic corruption have siphoned millions from Uzbekistan’s development.

Gulnara Karimova’s actions were indisputably horrific. However, her fall from grace created a rare opportunity for governance reform in Uzbekistan—she was no longer her father’s intended successor after her arrest in 2014. With his death soon after in 2016, power was transferred to Shavkat Mirziyoyev, for the first time in the country’s post-Soviet history.

The aftermath of a historic transition

Considering Mirziyoyev’s 13 years as Karimov’s Prime Minister, one may have rightfully expected little to change. But Mirziyoyev has shifted course from the closed-off, repressive regime of his predecessor. For instance, Mirziyoyev restrained the security forces to a certain extent, while also taking major steps to liberalize the state-run cotton industry. The International Labour Organization recently reported that “the systematic and systemic use of child labour and forced labour in Uzbekistan’s cotton industry has come to an end, although some local vestiges still remain.” The government has also eased currency controls and increased trade with neighbors, boosting flows by 11.3% in only the first year post-transition and marking an era of greater economic liberalization. More broadly, Mirziyoyev recently affirmed his commitment for a more open foreign policy agenda, focused on multilateralism and development cooperation

Beyond this litany of reforms, Mirziyoyev has also prioritized addressing his predecessor Karimov’s pervasive patronage system that forged a cadre of loyal oligarchs. In fact, Mirziyoyev’s first law was titled, “On Combating Corruption,” and provided the first major framework for addressing corruption in Uzbekistan. His government has since continued this momentum for over four years with initiatives, such as the 2018 law “On Public Procurement” and the creation of the Republican Inter-agency Commission on Combating Corruption. Most recently, the government established the landmark Anti-Corruption Agency  in June 2020, further institutionalizing anticorruption efforts.

Considering his ties to Islam Karimov, his somewhat inconsistent expansion of rights and freedoms, and significant pushes for a more liberalized economy, some believe that Mirziyoyev’s moves are more focused on maintaining his power over improving long-term governance conditions for the Uzbek people. However, even if his true intentions differ from his public messaging, these reforms provide some of the first opportunities in Uzbekistan’s post-Soviet history to institutionally cement major change.

Ongoing corruption struggles

Despite changes, there is also evidence that Mirziyoyev is perpetuating corrupt practices within his closest circles, appointing family members to highly influential positions and selectively enforcing anticorruption laws. Journalists exposing corruption have also continued to come under fire from government forces, and international outcry has recently emerged over the six and a half year imprisonment of anticorruption blogger and activist Otabek Sattoriy.

The 2020 Sardoba Reservoir Dam collapse that killed six people and displaced another estimated 70,000 provides an important case study of corruption in Uzbekistan. Though a taskforce was quickly established, there were major conflict of interest issues—the senator in charge was found to have possible business connections and was responsible for awarding construction contracts for the dam. Even more concerning, a closed-door trial recently handed down four to ten year sentences for 17 defendants whose relatives believe that they are scapegoats for larger officials responsible. Considering these ongoing problems, it is no surprise that Uzbekistan ranks 146 out of 179 countries on the 2020 Corruption Perceptions Index.

Mirziyoyev’s reforms are also creating new opportunities for corruption. In a push to demonstrate Uzbekistan’s growth and potential for investment, developers have begun a number of mega-projects with debatable transparency. The Tashkent City project, worth $1.3 billion, underwent an extremely opaque tendering process, and many companies involved in the project were tied to the Akfa-Artel group, founded by the Mayor of Tashkent himself. There has also been a substantial push for privatization, with an ambitious 2020 Presidential Decree for nearly 3,000 state-owned enterprises to be partly or fully privatized. However, there are reports that foreign investment attached to this privatization is “suspiciously circular,” possibly reaping economic benefits for elites within Uzbekistan who have brokered deals with government actors.

Externally, Covid-19 has also increased opportunities of corruption. A greater amount of foreign assistance and credit has created new Covid-19-related programs and, respectively, more opportunities for officials to siphon off money.

Three levels of engagement opportunities

Given these ongoing corruption problems, the U.S. should take advantage of President Mirziyoyev’s public stance on fighting corruption and pursue greater anticorruption cooperation with Uzbekistan. The U.S. and Uzbekistan have already substantially increased cooperation since 2016, with foreign assistance obligations more than doubling from $19.7 million in 2016 to $47.1 million in 2019. In October 2020, USAID also announced the creation of a bilateral mission in Uzbekistan. The initial press release emphasizes the role of USAID in “strengthening private business, non-governmental organizations, and independent media,” providing a beneficial opening. An overarching first step for engagement should be enshrining distinct anticorruption provisions within the next USAID five-year country development cooperation strategy (CDCS). By directly enshrining anticorruption as a priority, the U.S. will have greater latitude and possibly political will from the Uzbek government to undertake ambitious plans.

Strengthening institutions

After framing, the U.S. should prioritize strengthening institutions relevant to anticorruption reforms, beyond the executive branch. With existing concerns on Mirziyoyev’s anticorruption intentions, strengthening both prevention and enforcement institutions, such as the Oliy Majlis (parliament), judiciary, and the Anti-Corruption Agency can help lay foundations for a strengthened anticorruption ecosystem that can more likely hold its own, even after Uzbekistan’s national development strategy for 2017-2021 expires.

The fledgling Anti-Corruption Agency should be a priority institution. Created less than a year ago with relatively few legal mandates, the U.S. has a major opening to shape a powerful anticorruption mechanism. USAID could support foundational best practices through providing technical support for the agency’s early work in “designing an internal anticorruption control system,” monitoring staffing, and drafting future anticorruption legislation. Considering that the weakness of specialized state anticorruption agencies has hindered the success of previous U.S. anticorruption initiatives, this initiative will also be a worthy investment for future anticorruption endeavors. Another benefit of investing in the Anti-Corruption Agency is that implementing reforms may face less enshrined pushback than other institutions, as Uzbek judges and legislative members have traditionally benefitted from the spoils of corruption.

However, because the Anti-Corruption Agency is officially accountable to the legislature, reports to the President, and relies on the judiciary for binding enforcement, its power is still contingent on the strength of other institutions. Thus, the U.S. should also invest in the Oliy Majlis and judiciary. This diversified strategy for institutional strengthening will also prevent anticorruption gains from being easily undone at the behest of executive political whims. The Oliy Majlis is traditionally quite weak, but under Mirziyoyev, powers have expanded to some degree. Building on this tide, the U.S. could work with the National Democratic Institute and the International Republican Institute, common U.S. non-profit implementing partners with a legacy of legislative strengthening, to open projects in Uzbekistan as institutional reforms may be difficult to pursue directly between government actors. While working with local civil society actors would be ideal, the lack of formalized, independent organizations may pose challenges. On the judiciary, the U.S. should continue past efforts, such as digital transformation of the judicial system for transparency.

Increasing transparency and accountability in daily governance practices

Tendrils of corruption reach down to the most local levels of government in Uzbekistan. As such, changing daily practices can dramatically improve petty corruption conditions. One strategy is encouraging digital transformation, building on USAID success in Ukraine and India. As emphasized in USAID’s recent digital strategy, digital platforms can help streamline government processes and remove opportunities for corruption. Uzbekistan has already shown great appetite for digitalization, implementing a “Single Window” digital information system at all border customs posts last September and passing a decree last April on introducing digital procedures in procurement bidding.

Digital transformation should also include efforts to increase citizen accountability mechanisms. Under Mirziyoyev, Uzbek citizens have steadily gained internet access, and USAID could implement programs similar to the Civic Action for Accountability Project in Serbia that provides grants for local anticorruption leaders, organizes public events, and creates an online platform for anticorruption civil society leaders. Furthermore, the U.S. could encourage the creation of a digital citizen-led corruption reporting mechanism or provide accountability opportunities through increasing digital budget and procurement data availability.

There is also room for U.S. technical assistance and oversight on Mirziyoyev’s privatization push of state-owned enterprises. Building on the Terms of Reference signed between the Treasury Office of Technical Assistance and the Uzbek Ministry of Finance in 2019, another iteration could be pursued with a distinct focus on proper privatization of state-owned enterprises, or other U.S. agencies with relevant experience could pursue a similar agreement.

Leveraging multilateral support mechanisms

The U.S. should also work with multilateral partners to generate support and resources for anticorruption reform in Uzbekistan. While Covid-19 has increased opportunities for corruption, calls for international recovery also provide unprecedented resource pools to “build back better”—over $21.3 trillion worldwide. Similar to calls for a “green recovery,” the U.S. could encourage the inclusion of anticorruption considerations in a wide swath of recovery projects led by multilateral development banks, ranging from infrastructure to health system strengthening. Uzbekistan also received $375 million from the IMF last May under the Rapid Credit Facility and Rapid Financing Instrument, and a commitment on anticorruption reform featured as a part of the discussions. If Uzbekistan seeks further financial support from the IMF, the U.S. could encourage the IMF to consider providing finances contingent on anticorruption progress and action from conditions at the time of the previous agreement.

On a more political level, the UN General Assembly Special Session on Corruption is coming up in June 2021. Uzbekistan has yet to submit public contributions ahead of the assembly, providing one immediate area for cooperation. A political declaration is also likely to result from the session, and the U.S. could offer to support Uzbekistan in implementing any results.

Importance of anticorruption efforts in Uzbekistan

Supporting anticorruption in Uzbekistan is not good governance for good governance’s sake. Pervasive corruption prevents substantial and sustainable development from occurring by removing funds to improve citizen livelihoods, eroding public trust in government, turning away prospective international partners, and continuing inefficiencies. Furthermore, the government should be wary of the consequences of neglecting corruption, especially Mirziyoyev himself as he faces presidential elections in October. An increasing number of major protests on corruption increasing globally and a recent string of protests within Uzbekistan on the government’s inability to provide heat and electricity, provide alarming foreshadowing. Looking ahead, Uzbekistan will also have to contend with longer-term issues for the economy—issues that may necessitate a reduction in corruption for meaningful change and stability, such as rural-urban inequality and a growing youth population.

The U.S. also has multiple incentives for countering corruption in Uzbekistan. Corruption is emerging as a foreign policy priority, and both Secretary of State Antony Blinken and incoming USAID Administrator Samantha Power have emphasized addressing this global “Achilles heel.” Engaging on anticorruption in Uzbekistan could provide an early and quick win for the Biden Administration as there are distinct opportunities for cooperation and some form of pre-existing political will. Addressing corruption also supports U.S. business interests in the region. Corruption has long deterred U.S. companies from investing in the region, for fear of prosecution under the Foreign Corrupt Practices Act or uncertainty surrounding the general business climate. Lastly, increasing engagement with Uzbekistan serves U.S. national security interests. Uzbekistan is an integral part of China’s vision for the Belt and Road Initiative, and the most recent Interim National Security Strategy calls for the U.S. “to lean forward, not shrink back” against major challenges and adversaries, including China and Russia. With citizen dissatisfaction toward China mounting in Uzbekistan, this tide of anticorruption reform may be a rare opportunity for the U.S. to increase engagement, promote democratic values, and hedge growing Chinese and Russian influence in the region from an alternate angle—before it is too late to even consider this path.

Christine Li was an intern with the CSIS Project on Prosperity and Development and an undergraduate student at Harvard University studying economics.

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