ASTANA (TCA) — E-Zhasyl LLP, founded by a consortium of Spanish companies GruppoAnka, ftE and SoroznoEco, has started a series of projects on construction of waste recycling facilities with energy production in Kazakhstan. The total cost of the projects is 147 million euros, Kazakh Invest national company for investment support and promotion said on its website.

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ASTANA (TCA) — Kazakh Invest national company for investment support and promotion and the Turkish company BioTRend Energy recently signed a Memorandum on further cooperation in the construction of a waste processing complex in Kazakhstan. The document was signed after a meeting in Astana between Saparbek Tuyakbayev, the Chairman of the Board of Kazakh Invest, and Murat Aslan, the head of BioTRend Energy, Kazakh Invest reported.

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ASTANA (TCA) — As part of his working trip to Almaty on December 21, Prime Minister Bakytzhan Sagintayev visited a number of infrastructure facilities to see the development of the tourist potential of the city: the Almaty-2 railway station and the Visit Almaty tourist hub. A presentation of the new Carsharing service also took place in Almaty, the official website of the Prime Minister of Kazakhstan reported.

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TASHKENT (TCA) — Uzbekistan and Kazakhstan aim to launch a program dubbed Silk Visa, which will allow foreigners with visas issued by either of the two countries to travel in both Central Asian republics, RFE/RL reported citing an Uzbek official.

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BISHKEK (TCA) — This week, the local media reported that the State Financial Intelligence Service (FIS) of Kyrgyzstan requested all commercial banks of the country to provide data on customers’ accounts and cells.

On December 18, the 24.kg news agency posted a letter to commercial banks, dated December 10 and signed by FIS Chairman Gulamjan Anarbaev. The letter stated that in line with the law “On Counteracting the Financing of Terrorist Activities and Legalization (Laundering) of Criminal Proceeds”, all commercial banks should provide data on their customers’ accounts and cells. The deadline was December 17, but none of the banks has provided this information so far.

The Union of Banks of Kyrgyzstan was the first one to respond.

The head of the Union of Banks, Anvar Abdraev, told the media that, having discussed the situation, leaders and lawyers of the banks concluded that this requirement is contrary to the Constitution and legislation of Kyrgyzstan, and would negatively affects the image of the country’s banking system and the transition to a system of cashless payments. The FIS actions are illegal and harmful to the investment attractiveness of Kyrgyzstan, the Union of Banks concluded.

Officials’ opinion

All information on bank cells and accounts of citizens is an integral part of bank secrecy and should be protected. It can be disclosed only by a court decision or with bank customers’ own consent, Chairman of the National Bank of Kyrgyzstan Tolkunbek Abdygulov told 24.kg news agency on December 20. Decrease in public confidence in the banking system may lead to an outflow of deposits from commercial banks, he added.

Trust in the banking system has been forming for decades. The banking sector is quite sensitive and vulnerable to all sorts of information, Abdygulov said.

Violation of banking secrecy can cause as much damage to the economy as corruption, the Economy Ministry stated on its website, commenting the FIS actions. Such requirements are already affecting the investment climate in the country and industries sensitive to changes in the financial sector, the ministry said.

The disclosure of banking information should be carried out in accordance with the law, if there are relevant criminal cases and a court decision.

If this measure is aimed at eradicating corruption among public servants, then amendments to the relevant laws should be made, the Economy Ministry stated.

At the same time, Economy Minister Oleg Pankratov agreed to provide information about his bank accounts and cells for the entire period of his work in the public service.

Lawyers see many risks

In accordance with the law, the Financial Intelligence Service is charged with collecting and storing reports on suspicious financial transactions for money laundering, and the FIS has the right to request information and documents, including banking, commercial or other secrets, said the Adilet Legal Clinic headed by Cholpon Jakupova, a well-known lawyer, human rights activist and ex-MP.

However, in this particular case, the FIS has clearly gone beyond its authority.

First, according to Article 9 of the Law “On Counteracting the Financing of Terrorist Activities and Legalization (Laundering) of Criminal Proceeds”, the procedure for providing information and documents to the FIS shall be approved by the Government. However, the FIS required information from banks according to Form No. 3 approved by its own order.

Second, Article 131 of the Law outlines the requirements for a request for the provision of information constituting banking secrecy. The request should be related to a specific person. But in this case, the FIS requires total information related to all individuals without any reason.

Third, the FIS refers to the OECD’s (Organisation for Economic Co-operation and Development) 43rd recommendation. However, this recommendation does not mention bank cells. In fact, the FIS has gone beyond the recommendation and, arbitrarily interpreting, uses it for its own purposes, Adilet said.

Besides distrust towards the banking system of Kyrgyzstan, there will also be a risk of using banking information for personal gain by law enforcement agencies including pressure, blackmail and extortion against citizens and businesspeople who use bank accounts and cells, the lawyers concluded.

Bill approved hastily

The Financial Intelligence Service has authority over its initiative, MP Dastan Bekeshev believes. “Unfortunately, the parliament endowed it with such a right,” he told VB.KG news agency.

When MPs discussed this bill in June, its authors assured that data on bank accounts will be requested only for those who are at risk, arrested on charges of illegal enrichment. But the words are gone with the deeds, the MP concluded.

The law provides for the creation of a list of high-risk groups, individuals and countries. All banks, pawnshops, realtors, exchange bureaus, NPOs, individuals, and legal entities that make financial transactions with the listed ones should immediately report to the Financial Intelligence Service.

The FIS asked the MPs to approve the bill in an extraordinary order, explaining the risk for the country to be included in the Financial Action Task Force (FATF) gray list.

Financial Action Task Force is an inter-governmental body established in 1989 to combat money laundering and terror financing. As of 2018, there are 37 members including the European Commission and the Gulf Cooperation Council.

FATF has two types of lists — the black list and the grey list. Black list is given to countries that FATF considers as uncooperative “tax havens” (offshore financial centers). These countries are known as Non-Cooperative Countries or Territories (NCCTs).

Grey list is a warning given to a country that it might be included in the black list (just like a yellow card in a soccer match). Countries on the grey list face problems with getting loans and may suffer from economic sanctions.

After quick discussion, the Kyrgyz Parliament almost unanimously approved the bill on June 28, 2018. Only three MPs opposed, including Bekeshev.

Not to get back into the FATF grey list

“We want to get background information on the owners of banking cells and accounts to create a centralized database, but not to carry out any unlawful actions,” Chairman of the State Financial Intelligence Service Gulamjan Anarbayev said at a press conference in Bishkek on December 21.

The FIS did not request the information on the amount of deposits and the contents of depositors’ cells from commercial banks, he said. The FIS will require full information about the financial transactions if there is a suspicion that an entity or a person is engaged in money laundering or financing of terrorist organizations, or in corruption, Anarbayev added.

As a member of the Eurasian Group on Combating Money Laundering and Financing of Terrorism (EAG), Kyrgyzstan is obliged to comply with its standards. The EAG is intensively monitoring Kyrgyzstan, with only one year given to improve the situation, the FIS said.

Kyrgyzstan is also a party to the UN Convention against Corruption and should have a fast account tracking mechanism. Financial crimes occur mostly with the use of financial institutions, and it is difficult to track them quickly, the FIS said.

To create a centralized register, the FIS approved the form #3 and sent requests to banks to fill it, he added. For individuals, it is a full name, identification number, and account or cell number. For legal entities, the banks should provide information on the names and TIN (taxpayer identification number).

According to the FIS, the most important task for Kyrgyzstan is not to get back into the FATF sanctions list. From 2012 to 2014, the country was on the FATF gray list.

The FIS acknowledged that there is a conflict in the law regarding the provision of data by commercial banks to the State Financial Intelligence Service. In the near future, the FIS intends to discuss the issue with the National Bank of Kyrgyzstan and commercial banks.

TASHKENT (TCA) — Uzbekistan has so far taken some steps towards economic and political liberalization, but much is yet to be done on the country’s way to real democracy and economic success. We are republishing this article on the issue, originally published by Eurasianet:

For its first 25 years of independence, Uzbekistan was a spiky creature.

It mostly shunned multinational blocs, engaged only cautiously with large partners and was outright hostile to its neighbors. Inside the country, authorities terrified the population into submission.

The death of the tyrant Islam Karimov in September 2016 marked a turning point of sorts. President Shavkat Mirziyoyev, who was formally inaugurated in December 2016, has hung an “open for business” sign on Uzbekistan’s door to the outside world and sought better relations with all neighbors. Progress inside the country has been more halting – there is still no real evidence the government is intent on adopting root-and-branch political reforms.

The ratings battle

Late last month, Finance Minister Jamshid Kuchkarov declared during a presentation on planned structural reforms for 2019-2021 that Uzbekistan intended to obtain a sovereign rating by the year’s end. Kuchkarov said the government was in talks with Fitch, Moody’s and Standard & Poor’s to that end.

“Of course they are not revealing what evaluation they will provide,” the minister was quoted as saying by Gazeta.uz. “We have objective minuses and objective pluses.”
The ambition outlined by Kuchkarov was for Uzbekistan to make a foray into the debt market by early 2019. When this happens, it will arguably mark a capstone to the domestic economic reforms enacted by Mirziyoyev so far.

Yuliy Yusupov, an economist who has been a prolific commentator on the reform agenda, points to several developments he finds to have been particularly revolutionary. Changes to the tax and customs systems, the simplification of the visa regime and efforts to develop the digital economy are some.

“But the most important change in the economy has been monetary liberalization. We haven’t had [currency] convertibility for a long time. Now enterprises can easily buy cash for export-import operations. The old economic model was hogtied in the absence of convertibility,” Yusupov told Eurasianet.

The inevitable reverse side of this wave of liberalization has been the soaring price for everyday staples, from food to gas. According to Minsk-based economic news portal BelaPAN, which studied data from all the countries in question, Uzbekistan ranked first among former Soviet republics for inflation between January and October. The figure for Uzbekistan was 9.5 percent. The only other nation to come close was Ukraine, at 7.4 percent.

In a generally rosy evaluation of reforms made to date, a group of specialists from the World Bank and the International Finance Corporation earlier this week nonetheless identified four areas crimping development.

The private sector is not creating enough work and too many are still forced to go abroad for jobs, the specialists said. There is a gap where there should be medium-sized, fast-growing companies, so “most jobs are in agriculture and services, and state-owned enterprises dominate the formal sector.” Weak export competitiveness represents a missed opportunity just as the appetite of Asia’s consumer class is on the ascendancy. And energy waste in Uzbekistan is both economically and environmentally harmful.

Rights and wrongs

France-based political analyst Kamoliddin Rabbimov is gloomy about the country’s prospects. As far as ordinary Uzbeks are concerned, he argues, reforms have led to an increase in the cost of living and produced little by way of practical benefits. In the meantime, Mirziyoyev has tiptoed around the thorny matter of political reforms.

“In his speeches, this new president makes little use of terms like democracy, human rights and public oversight. It is likely that Mirziyoyev does not want to resemble his predecessor in this regard. The more Karimov would speak about democracy, the harsher his dictatorship would become,” Rabbimov told Eurasianet.

Mirziyoyev’s tenure certainly began on the right track. As Human Rights Watch, or HRW, has documented, the government has so far released 35 people jailed on political grounds. The most eye-catching gesture of this type was among the first. In February 2017, Muhammad Bekjanov, a political journalist who is also the brother of a well-known exiled dissident, was allowed out of prison after serving 18 years.

Many more need to be released until this softening can appear credible, however. And HRW argues that systemic changes are also needed to ensure the law is not exploited to target politically incommodious figures.

“The government should […] amend vague and over-broad criminal code provisions relating to extremism that are commonly used to criminalize dissent […] and bring them into compliance with Uzbekistan’s international human rights obligations,” HRW said in a statement last month.

HRW researcher Steve Swerdlow has told Eurasianet that he believes the government needs to make more effort to ensure that security services, police and prosecutors are placed under further scrutiny from parliament and the media.

Authorities insist they are adopting practical steps toward the previous default criminalization of certain sections of the population. In remarks to journalists on December 19, the Prosecutor General insisted that the state’s blacklist of people suspected of harboring extremist religious views has been abolished.

“The recently adopted law on combating extremism testifies to how methods on preventing terrorism and extremism are changing, and that the emphasis is now being placed on prevention,” Deputy Prosecutor General Erkin Yuldashev was quoted as saying by RFE/RL.

Walking the tightrope

Looking at the bigger picture, it is evident that Uzbekistan remains at a standstill when it comes to reimagining governance.

“In the first months after his election, Mirziyoyev spoke about the need to elect governors at all levels and strengthen the role of political parties. He also spoke about the usefulness of the opposition. But two years later, the vertical of power is as unshakeable as it was under Karimov,” said Rabbimov.

Sebastian Schiek, a researcher at the Berlin-based German Institute for International and Security Affairs, attributes this apparent rigidity to Uzbekistan’s decision to go down the path of smart authoritarianism – a form of rule that blends economically indispensable global engagement and soft repression.

“Becoming a smart autocracy and implementing economic reform […] will require both political reform and societal reform. The most difficult tasks will be to decentralize the political system, professionalize the state administration, create a new class of private economic entrepreneurs, and organize the relationship between the state and this entrepreneurial class,” Schiek wrote in emailed remarks to Eurasianet.

Schiek also explained that smart autocracies usually implement some kind of mechanism for civic participation. There is some slender evidence this is happening in Uzbekistan, although genuinely grassroots initiatives are few and typically ad hoc, and the government cannot quite shake the habit of trying to nurture an astroturf civil society.

The trajectory of Mirziyoyev’s time in charge so far speaks to a tightrope act that few nations have pulled off successfully.

“The best model would probably be Singapore, although this is hard to achieve economically and politically. The crucial factor for stability in Uzbekistan will be whether the government manages to develop the economy and create inclusive growth,” said Schiek.