Uzbekistan’s reform agenda in question after Azimov’s demotion

Uzbekistan’s reform agenda in question after Azimov’s demotion
By bne IntelliNews June 26, 2017

He was one of the triumvirate that ruled Uzbekistan after the death of dictator Islam Karimov, and was long considered by western investors to be the champion of reform in Tashkent. Now the sacking of Deputy Prime Minister Rustam Azimov has put in question the promises of reformist President Shavkat Mirziyoyev regarding the future of Uzbekistan’s investment climate. 

Azimov, who had been steadily sidelined in the year and nine months since Karimov’s death, was reported in early June to have been moved to head the state-run Uzbekinvest Export-Import Insurance Company. The demotion came shortly after a leaked tape revealed Mirziyoyev harshly criticising Azimov. 

Back in the first years after Uzbekistan became independent, Azimov established himself as the key westerniser among the Uzbek elite, when he took the helm of the National Bank for Foreign Activities after independence, a role that included handling Tashkent’s relations with the European Bank for Reconstruction and Development (EBRD). 

He has long been considered one of Uzbekistan’s political heavyweights, serving as finance minister from 1998 to 2002, then again from 2005 to 2016, as well as deputy prime minister between 2005 and 2017. As finance minister, Azimov was also one of the key figures behind Uzbekistan’s ambitious privatisation drive announced in 2015. 

In addition, Azimov allegedly has indirect control of the Uzbek commercial bank Ipak Yuli Bank through Rustambek Rakhimbekov, whom Azimov made chairman in 1999. Azimov’s reputation supposedly began to rise after he started securing Asian Development Bank (ADB) financing for the country, including the ADB’s first equity investment into Ipak Yuli in 2012.

More recently under Mirziyoyev, drastic reform plans such as the programme to switch the embattled Uzbek currency over to a floating exchange rate regime and the gradual introduction of foreign banks into the Uzbek market, including the return of the EBRD and the European Investment Bank’s entrance into the Central Asian country, were widely viewed as influenced by Azimov. 

His removal therefore raises further questions about the country’s direction. One Uzbekistan expert told bne IntelliNews last year that Azimov was considered the most pro-Western top official. “It’s hard to judge how strong he is within the elite and whether the system will allow him to implement a pro-reform agenda,” he added at the time. 

This stance made him an exception among the top officials in the country. Prior to Mirziyoyev’s announcement as Karimov’s successor in September, it was noted that Mirziyoyev himself was not seen as an independent politician but as an executor of the system’s day-to-day management. “Among Uzbekistan’s top officials, Mirziyoyev is seen as a ‘fist’ not a ‘brain’,” RFE/RL wrote last year, adding that as president he would become even more repressive than Karimov. Thus, it came as a surprise when Mirziyoyev turned out to be committed to reforms.

Apart from Mirziyoyev himself, Rustam Inoyatov, head of the Uzbek state security service, is now the only influential figure left in the ruling team. Inoyatov has been largely opposed to dramatic reforms, including that of the exchange rate regime. 

Not a true dismissal

Given Azimov’s resume and Mirziyoyev’s reputation prior to Karimov’s death in September, Azimov’s removal would therefore seem to be a bad omen for investors. 

On the other hand, some Central Asian analysts believe that Azimov’s reputation among the foreign investors Tashkent hopes to woo is strong enough that he cannot be entirely sidelined, and he will continue at least to influence policy in this area. They anticipate Mirziyoyev will not only continue to deliver on his commitments, but also that he won’t entirely disregard Azimov’s input into future reforms.

Mirziyoyev’s decision to consolidate power by weakening Azimov politically has to do with what some analysts believe to be a power struggle akin to the conflict within the Soviet Union’s ruling triumvirate that followed Stalin’s death in the USSR. That, however, does not make Azimov’s skills automatically worthless to Mirziyoyev.

“The removal of Azimov is mainly a political move — his role as an expert in investments is not getting shoved aside,” an independent Uzbek analyst told bne IntelliNews. “This is why he will remain as head of Uzbekinvest.”

“Azimov’s demotion will have no bearing on Uzbekistan’s invesment climate,” said Farkhod Aminjonov, deputy director of the Almaty-based Central Asia Institute for Strategic Studies.

“One cannot assume that Azimov is truly out of the picture,” Aminjonov added, “if Mirziyoyev finds [Azimov’s] expertise is required, [Azimov] can still be brought back into the fold as long as he does not stray into politics and away from focusing on investment.”

Indeed, Azimov’s new position as the head of Uzbekinvest sets him in charge of state insurance and investment. According to the company’s website, Uzbekinvest offers “offer political risk insurance to encourage new foreign investment in the infrastructure, natural resource development and industrial production in Uzbekistan”. 

In other words, Azimov’s role as the driving force behind encouraging investment in the Central Asian country will likely largely stay the same.

News

Dismiss