Get your act straight Uzbekistan. You need more Foreign Direct Investment.

 Full of rich natural resources such as gold, cotton, oil and natural gas with the largest population in Central Asia and fairly developed human capital with low wages, Uzbekistan is potentially the best country in the region for foreign investments. The inability to stabilize macroeconomic and structural refinement has aggravated bureaucratic incompetency and promoted vast corruption. After the collapse of the Soviet Union, which led to huge losses in technological development and economic growth, Foreign Direct Investment (FDI) is the best way to diversify and improve the economy of Uzbekistan. For Uzbekistan to attract more FDI it has to standardize and increase currency-converting process, as well as unify and organize licensing and investment entry procedures, restrain corruption for more efficient investing environment as well as increase tax-cutting incentives.

     Uzbekistan has to revise the foreign currency exchange processes and allow FDIs to convert greater amounts of currency in more efficient ways as the first step to bring in foreign businesses into the economy. Currency conversion is one of the greatest difficulties for foreign businesses wishing to invest in Uzbek markets (Lautier and Francois). National Bank of Uzbekistan (NBU), which is the Central Bank, is the only bank authorized for any transactions by FDIs. Thus, the government has full control over how much profit money the FDI can withdraw or transfer for its operations and at which speed this process is initiated. As the centralized economy, Uzbekistan is trying to prevent easy outflow of money from the country; thus, slows down the exchange processes. However, these policies hurt FDIs ability to smoothly make transactions, pay wages and do basic business like buying equipment, so fewer investments are made.

       The initial process of licensing and investment for foreign businesses has to become more systematic and centralized. Licensing and initial registration of investment are ambiguously separated between different agencies and ministries, which are poorly coordinated and often contradict with each other’s policies (Loungani). Moreover, some of these agencies are in charge of State Owned Enterprises (SOEs), so they present competing interests to investments that make the licensing process counteractive (Abdurakhmonov, p.200). Instead of having multiple malfunctioning agencies that slow down the preliminary registration and legalization of FDI, there should be one concentrated ministry. It can consist of one or two representatives from each ministry in the same locale, who are in control to oversee the entire procedure and expedite it accordingly. Also, these ministries can’t acquire shares in FDI competing SOE industries.

        Uzbekistan Ministry for International Trade and Investment (MITI) has to create universal laws, instead of case-by-case based regulations, which are passed in top down manner in order to eliminate lower levels of corruption and provide safe and stable environment for the FDI. Uzbekistan is ranked “177th out of 183 in Transparency International’s 2011 Corruption Perceptions Index”(US Department of State). Executive branch of Uzbekistan highly advocates in favor of FDI, but poorly organized local and regional ministries “Hokimiyat” are able to tweak regulations on individual case that promotes corruption (Allan, Jorg p.43). Expropriation rules and regulations change so often that it’s almost impossible to abide with them that result in arbitrary and illegal fines. MITI has to provide standardized and universal regulations, which will protect FDIs and represent interest of the executive government instead of corrupt small bureaucrats.

      While Uzbekistan is very attractive state for FDI in Central Asian region, it has to compete with other states that don’t have as much potential, but provide enough tax incentives and safety regulations to become more desirable place for investment. After July 2006 cancelation of tax holidays and protection from expropriations to 10 years, many FDIs closed their businesses (Abdurakhmonov, p.183). Uzbekistan won’t sustain and loose FDI if it will not introduce more vigorous pro-investment tax reforms immediately. First, the MITI should reconsider property tax, the environment tax and the road user tax and eliminate it. These taxes are not rational for the government and represent strain for the investors. Secondly, it should remove all the inconsequential and extraneous limitations on removal of advertising, entertaining and labor costs.

      The productivity potential, low labor costs and substantial market are very inviting conditions for the FDI. Unfortunate inability to follow through with its promises and punishing regulations serve as very discouraging attributes for FDI in Uzbekistan. If Uzbek government wishes to enjoy more FDI, great technological advancement and human capital growth, besides rapidly growing economy it has to revise its policies and stabilize its operations. Otherwise, it will remain stagnant and lose its last remaining FDIs.

                                                            Works Cited:

Abdurakhmonov, Mukhsinkhuja. "FDI Scenario in Uzbekistan-Glancing at the First Decade after Independence." Economic journal of Hokkaido University 32 (2003): 183-200. Web. 23 Oct. 2014. <http://www.worldcat.org.libproxy.usc.edu/title/fdi-scenario-in-uzbekistan-glancing-at-the-first-decade-after-independence/oclc/678242350&referer=brief_results>.

Allan, Rorry, and Jorg Weber. "Investment Policy Review in Uzbekistan." UNCTAD. New York and Geneva. 1999. Web. 23 Oct. 2014. <http://unctad.org/en/docs/poiteiipm13.en.pdf>.

Lautier, Marc, and François Moreaub. "DOMESTIC INVESTMENT AND FDI IN DEVELOPING COUNTRIES: THE MISSING LINK."Journal of Economic Development 37.3 (2012): 1-23. ProQuest. Web. 16 Oct. 2014.

Loungani, Prakash, and Assaf Razin. "How Beneficial Is Foreign Direct Investment for Developing Countries?" Finance and Development. A quarterly magazine of the IMF. June 2001. Web. 16 Oct. 2014.

United States. Department of State. Burreau of Economic and Business Affairs. “2012 Investment Climate Statement – Uzbekistan.” N.p., n.d. Web. 22 Oct. 2014. <http://www.state.gov/e/eb/rls/othr/ics/2012/191261.htm>.

Forgive But Don't Forget

How much is enough when you punish people for their wrong doings? How much should they suffer for their mistakes? Should they experience just as much loss and pain as they brought upon others? Or maybe even more that they can learn their lesson? Or should they be given a second chance to get educated and rehabilitated? Can they possibly be brought back to our society as fully functional members? Or maybe they need to be kept isolated from the rest of us because they don’t belong here anymore.

If you have clear answers for all of these questions, you might not be interested in this post. But if you even had a slight moment of hesitation answering any of these questions above, keep reading.

Last week I read an article in The Guardian about an Iranian mother taking a noose off of her son’s killer. Apparently in Iran it’s very common when family of victims determines a type of death for the killer of their loved ones. It all happens through the legal system of criminal justice. After court determines that a person is at fault, family of a victim can choose and pick the way this person will be going to die. The honor of killing the murderer (sounds paradoxical) goes so far that the family can actually put a noose over murderer’s head and push the chair under his feet. To some it may seem as a fair exchange. If you took somebody’s life, expect to loose your life as well. But how far can we go away with that until we run out of people? In The Guardian’s article this procedure went as far as having a noose over killer’s head, but all over sudden the mother of a dead son changed her mind. She changed her mind and didn’t want to bring the same sorrow and grieve to the family of the killer. She said she doesn’t wish her pain to anybody. She said that her vengeance went away after she spared his life and she felt in peace after all these years of suffering. The killer’s life was saved, but he still going to remain imprisoned in a system where he is a lost case. He will be seen as a killer for the rest of his life and won’t ever have a chance to regain any rights or possibilities not even close to other members of society. Or should he?

After reading this article I remembered another article that I read about a year ago in The Guardian as well about very different judicial system in Norway.  In this article, James Erwin talks about his trip to one of the most extra ordinary of prisons that is located in Norway. Bastoy prison is placed on an isolated island, which lies a couple of miles off the coast in the Oslo fjord, just 46 miles southeast of Norway's capital. This prison has people of different ages and with different types of sentences. Prisoners' convictions may vary from stealing to drug smuggling, from single murders to man slaughtering and massacres. One of the first interesting notions that I discovered in this article is the fact that Norway doesn't use life sentences or death penalties at all. Thus, any prisoner after 5 years of being in a regular prison and the ones that show some attempts of admitting and realizing consequences of their crimes, as well as trying to put some effort to become better people, can be potentially transferred to Bastoy.

As mentioned earlier, Bastoy is a very unusual prison, where prisoners have a chance to reconcile and not forget what the free life is about. All the prisoners live in small houses that can accommodate up to 6 people. Everybody in Bostoy is occupied by paid jobs and extracurricular activities. These men have a chance for some education if they wish to pursue such and access to religious establishments. There are 70 members of staff on the 2.6 sq km island during the day, 35 of which are uniformed guards. The main job of these guards is very different from what we are used to. They don’t monitor prisoners; they don’t physically abuse or humiliate them. They simply keep the count of them. It is so contradicting with our mainstream understanding of prison guards, such as punishing, restricting, monitoring and dehumanizing prisoners.

You begin to understand the logic of this prison step by step from the words of different prisoners of Bastoy, when they describe their own experience there, where Bastoy is “an arena of developing responsibility,” where “ they [are] give[n] trust and responsibility” and where the prisoners “treat[ed] like grownups.” Later in the article James Erwin introducers the reader to one of the female guards called Rutchie. After her several words you finally realize what Norwegian government is trying to do with these people. She says, "There is so much to learn about the people who come to prison. We need to try to understand how they became criminals, and then help them to change. I'm still learning." Norway realizes that you don't change people by power. Instead, you give prisoners respect; this way you teach them to respect others, while they are being watched all the time. It is important that when they are released they are less likely to commit more crimes. “That is justice for society,” says a clinical psychologist Nilsen.

Both of these systems of dealing with criminals are so critically different. Bastoy seems like a great opportunity to rehabilitate people, to try and give them a second chance. Maybe even regain our members of society as better people. On the other hand, it is hard to judge families of Iran that are wishing for justice after their loved ones death. Even after writing this, I am still not sure if we can forgive that much. And if we forgive, how much should we forget?

Oligarch's benefits are citizens' costs.

Some say “be careful of what you wish for, otherwise you might just get it,” sadly Ukrainians forgot to.

By coming out to Maidan Square and demanding Yanukovich’s ouster and close economic ties with the European Union, Ukraine’s citizens are digging their own grave.

At the end of 2013 president of Ukraine, Victor Yanukovich refused to sign already agreed upon association trade agreement with the European Union. In the future this agreement could’ve led Ukraine to join European Union as some Ukrainian citizens wished. Some people even believed that this trade agreement with the EU would improve Ukraine’s economic stability. Yanukovich’s revoke of the agreement drove Ukrainians to come out on Maidan Square in Kiev, capital of Ukraine. People began riots and demanded impeachment of the president for betraying their trust and driving economy of Ukraine into a crisis.

Yanukovich’s choice of keeping business and economic relationships with Russia is a no-brainer to understand. If Ukraine is to remain a political and economical partner of Russia, it can receive unconditional financial and political assistance as well as price relief on energy. Russia can offer so much more of the financial aid, no strings attached. While IMF, EU and USA’s money will come with extensive lists of conditionality that will put Ukraine’s economy even further in a deep debt-hole. The reality is that the EU still cannot afford to deliver on promises of significant financial aid. Nor will the USA, which is quietly trying in the background to convince western European governments to ‘backstop’ (restore) financial aid Europe may commit to the Ukraine. Obama will not risk a Ukraine aid package of any significant dimensions in a US election year.

If to think realistically in terms of colossal economical losses and gains, it is in Ukrainians’ best interest to stick with “big bear brother” Russia. Other wise, good luck to Ukraine’s people with suffering, loosing jobs and jumping off a ledge that they were balancing on through all of the revolution. Meanwhile, their oligarch’s are enjoying new opportunity of trading with more of Western partners through EU community than ever while expanding their business.

It’s very important for Ukrainians to understand that Yanukovich was never the problem of Ukrainian economy, or at least he wasn’t the one and only. He wasn’t the dictator who made all the decisions on his own in order to suppress and control people as well as increase personal gains. Right next to him were his two main supporters and two people that controlled half of Yanukovich’s party. These two men, Rinat Akhmetov and Dmitry Firtash, are the most influential oligarchs in the country.

All three, Yanukovich, Akhmetov and Firtash, became skyrocketing rich after USSR collapsed and all the businesses were in the hands of people. They split Ukraine’s market and worked back to back all the way to the top until they reached the highest point and made Yanukovich the president of Ukraine. All the decisions that were made by Yanukovich were made with the approval of the other two and never alone.

As Yanukovich’s popularity was on the decline, Akhmetov and Firtash realized that they need a plan of action that would allow them to stay in power and not let their businesses to suffer too much. They carefully began looking around for new candidates for power and shifted attention from Yanukovich to let him drown on his own. They began supporting new, inexperienced and ambitious people like Vitaliy Klitchko with his party UDAR and Arseniy Yatsenyuk, who took over Yuliya Timoshenko’s Fatherland alliance.

Ukrainian people can think that they’ve got a new, non-corrupted Westward looking type of politicians, but in the end it is the same people, Akhmetov and Firtash that are in charge of Ukrainian government. By changing the leader they couldn’t change the regime and instead of Yanukovich’s ‘crony capitalist’ regime they’ve got tons of new young and power-money hungry economic vultures that are manipulated by the same two.

If to blame Yanukovich for the entire Ukrainian economic crisis it is to overlook the bigger picture that is much more complicated. Any economic trends do not occur overnight or even in couple of years. It takes decades to build and even more time to rebuild or implement any drastic economic changes. It is a fact that Ukrainian GDP per capita was rising safely, compare to other former USSR countries, until the ‘Orange Revolution’ in 2004. It was happening because of tightly integrated economic relations with the Russian Federation. After the ‘Orange Revolution’ and attempts of shifting Ukrainian exports and financial flow to the West, Ukraine experienced natural adjustment period of slower economic growth. Further, it was negatively affected by oil price shocks, financial crash of 2008, inability of western economies to generate a robust sustained recovery since 2008, and emerging markets crisis today.

When Viktor Yanukovich came to power in 2010, Ukrainian economy was already all the way down the hill. That doesn’t mean that his golden mansions helped Ukrainian economy to rise. Contrary, corruption and policy ineptness of his regime may well be included among the various causes of the Ukraine’s current economic problems, but nonetheless broader historical economic causes are involved as well. The smartest and tactical of all his decisions was probably his refusal to sign the association agreement with the European Union, a major reason that encouraged the protests.

Energy reform was one of the main aspects of the association agreement. This reform would force Ukrainian government to lift up energy subsidies that are put in place to make it cheaper for regular citizens and small businesses. If to do so, a lot of business will be closed down and people will be cut off energy flow that they are not able to pay for.

Different Perspective on Ukraine

     Since all the protest began in Ukraine, on multiple occasions I’ve been approached and asked by different people what do I think about it and on whose side I am on. It seems that as a former Soviet Union citizen and Uzbek national I should be able to relate to these sad and worrisome events in Ukraine. Well, I am very sorry do disappoint all of you that I am not on anybody’s side and I am just a curious observer. I care very much about everything that is happening in Ukraine and I’m deeply worried about wellbeing of Ukrainian, Russian and all other people from former Soviet Union that are in Ukraine and involved in these events.

      First of all, I am very happy that people rose up and spoke up about their interests, freedoms and complaints as this young woman did

     Most of the newly independent countries of the former Soviet Union are highly corrupt with no opportunities of bright future for young generations. Political and social systems are stagnant and not flexible for any changes or modifications. There is no room for independent thoughts or freedom of speech. In order to change this type of lives people have to get together, rise up, speak up and turn over these regimes. However, it is hard to realize that the main problem of these countries is not any particular authoritative leader but a fraud system as a whole.

     Now, in Ukraine people got together to overturn their democratically elected president Viktor Yanukovich that disagreed to sign a trade agreement with European Union that could’ve led to a future unification. It is very concerning why people decided to march and revolve against Yanukovich instead of democratically impeaching him. Violence always provokes evenfurther violence and that is exactly what happened in Ukraine.

     Further, people who appeared on Maydan square didn’t represent opinion and political stand of the entire Ukrainian population neither it represented the majority. Even if some people didn’t support Yanukovich’s leadership they did support not signing the agreement. These people supported trade relationship with Russia and that’s where the Ukrainian national identity crisis begins. The country at this moment was already divided internally between people supporting relationship with Europe and others that were supporting relationship with Russia.

        The new leading political party SVOBODA (from Russian FREEDOM) is a anti-Russian, anti-Semitic, neo-Nazi party, whose emblem is a version of a Nazi swastika This new leadership began an anti-Russian pro-Ukrainian heritage campaign. New government tries to implement new passports where people have to identify themselves as Ukrainians, Russians, or Jewish that would allow Ukrainians receive special benefits, while others will suffer losses. They try to forcefully bust Ukrainian language and traditions, which further allows them to build Ukrainian national identity. However, in order to do so they oppress the use of Russian language and prohibit it use in media, education, jurisprudence, etc. What strikes me the most is that there are no radical differences between Russians and Ukrainians, as well as Belarusians. They are ethnically, culturally and traditionally the same people that share the same history, blood, culture and language. The base of all three languages is the same, but have slight dialectical differences. That’s why these nationalistic rivalries do not make any sense to me.

“The new parliament's first post-revolution legislative action was to repeal the law "On State Language Policy" -- a law passed in 2012 that allowed the use of "regional languages", including Russian, Hungarian, Romanian and Tatar, in courts and certain government functions in areas of the country where such speakers constituted at least 10 percent of the population. Thirteen out of Ukraine's 27 regions, primarily in Eastern Ukraine, subsequently adopted Russian as a second official language, while two western regions introduced Romanian and Hungarian as official languages. The annulment, which left Ukrainian as the only official language of Ukraine, was a direct attack on the cultural and linguistic rights of the Russian-speaking minority. After the European Parliament protested, demanding the new Ukrainian regime respect the rights of minorities. Interim President Oleksandr Turchynov (a Baptist) subsequently vetoed the repeal, but the episode sent alarm bells rings through the ethnic minorities.” 

[About] 1.7 million Jews were shot in Ukraine during WWII under supervision of the Nazis. In 2010, Ukraine's then US-backed President Viktor Yushchenko pronounced World War II-era nationalist leader Stepan Bandera a national hero. (Bandera was an ally of Nazi Germany whose followers participated in massacres of Ukrainian Jews.)  And on 1 Jan 2014, some 1500 Euromaidan protesters marched in a Svoboda-run torchlight procession in honor of Bandera. [ It is so] disturbing because the Bandera-honoring, Svoboda flag-bearing marchers are not scary skinheads; they are families and priests. (NB: The red and black flag represents an ultra-nationalist paramilitary.)

    Now here is the question if European Union would like a new member whose leading party is represented by neo-Nazis and represses minorities. Not that far ago the US as well as some of the European countries was trying to pull out of the Olympic games in Sochi because of Russian unwillingness to provide equal rights for the LGBTQ community. However, now the US with European Union has no problems supporting and accepting neo-Nazi leaders that oppress all the minorities of Ukraine. Doesn’t it seem like double standards with very selfish reasons?

       The situation in Ukraine is very complicated and multifaceted. On one hand we see genuine people trying to make a good change for their brighter future. On the other hand, they are backed up and represented by nationalistic neo-Nazi politicians whose goals and values are terrifying. Its terrifying because it is our grandfathers and grandmothers just a hundred years ago were fighting Nazis and were willing to die just to save our lives and futures. Now it’s on our heroically dead grandparents’ land a new Nazi party promoting values and thoughts that they were fighting against for. What is our role now? And what should we do?

A great Op-ed about events in Ukraine and Putin's actions regarding Crimea is written by the director of the School of International Relations at USC, Robert English.