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. Last Updated: 07/27/2016

Uzbek Regulations Keep Investors Away

TASHKENT, Uzbekistan -- Right in the middle of Central Asia and rich in natural resources, Uzbekistan should be an investor's paradise.

But few are tempted to join the Uzbek economy by slipping into its self-imposed straitjacket of foreign exchange controls, unreliable statistics and bureaucratic rules.

"They ought to be wiping the floor with the rest of the region," said one Western diplomat ruefully. "It's the corset of regulations, the accumulation of little things that drives most businessmen here bananas."

Needless to say, Uzbek officials see it rather differently. They point to political stability, the privatization of many small- and medium-sized enterprises and a negligible external debt burden.

"Uzbekistan's rating will not be lower than those of Russia, Kazakhstan and a range of other neighboring countries," said Anvar Rasulev, deputy head of the Uzbek securities commission.

Rasulev said foreigners bought shares worth more than $85 million in about 30 Uzbek companies last year. "It's important for us to forge a path to the Western market," he said.

Yet many foreign experts are far from convinced that the climate is as conducive as Uzbek officials say.

Experts say the centralized system, unrealistic ideas about the value of enterprises, an almost blinkered desire to limit or replace Russian regional influence despite enduring bilateral trade ties and, above all, a persistent Soviet mentality hinder reforms and deter investors.

Few doubt Uzbekistan's potential, and that is the thing that most exasperates those doing business or wanting to.

It is a familiar refrain in Tashkent that Uzbekistan has abundant raw materials -- gold, oil, uranium and copper just for starters. "This is an economic giant that has deliberately tied itself down," one Western banker said. "The credibility of the Uzbek government on economic management is down to zero."

Statistics in the country that hoodwinked the Kremlin over cotton output for years are treated with caution.

Foreign experts put inflation at 50 percent at least last year rather than the official 27.6 percent. Growth in gross domestic product was officially 5.2 percent last year.

Western economists say it was half that and in any case outstripped by population growth. Uzbekistan has 24 million inhabitants.

The figure for foreign reserves is secret. Diplomats put it at around $500 million to $700 million, although they cannot be sure.

"I stopped looking at the figures after six months," said one Western businessman. "I just spot trends."

Despite Tashkent billboards trumpeting major investments, such as those in banking and the auto industry, it is hard to avoid the main trend -- the downturn in foreign investment.

"I keep telling them you're missing investments you don't even know about," said a diplomat, who noted some Western companies were even leaving and Asian firms were harder pressed to realize plans after last year's financial crisis struck.