If you have a dire need for a TV, washing machine, or refrigerator and don’t have the money, then my advice to you young man, is go east. Yes, go east and pick cotton in Uzbekistan. In Sirdaryo, a region in Eastern Uzbekistan, the governor of the province has proclaimed that if a family gathers five metric tons of cotton they will be given a free TV. For those who have one, they can pick 10 tons and then have the option of either a refrigerator or washing machine. And if you’re really industrious how about 15 tons? That will allow you to skip all the long lines others have to endure to buy a new car. I kid you not.
Seems like something out of medieval times. You can imagine the workers gathering cotton as fast as their hands permit, and up rides a knight in shining armor, with his sword high above his head, in order to chastise someone for not working hard enough. Oh wait a minute. The incentive has now changed to a dictate. The interim president Shavkat Mirziyoyev who took the place of his recently deceased predecessor, has decided to scrap the incentive and proclaim that those who don’t meet their obligations will be jailed. Can you imagine that? From TV to jail all in a matter of weeks?
The Uzbek economy is basically a closed market with little in the way of investment opportunities there, even though they are rich in natural resources such as oil and gold. Russian companies such as Lukoil and Gazprom operate in the country, and General Motors actually has a factory as a joint venture with UzAvtosanoat, an Uzbekistan motor company producing Chevrolets. Unfortunately, it’s difficult to buy one because in order to be considered one has to put down an 85% deposit, that’s if you’re not crushed to death by a stampede in the process of waiting.
According to a human right organization, business.humanrights.org, Uzbek workers at GM have stated that for the last three years in a row, the company has forced workers to harvest cotton with other multinationals having been accused of the same practice.
GDP growth has averaged around 8% as reported by the central bank, but there is no independent confirmation of that. Uzbekistan, because of its natural resources, should be a wealthy country and could open its economy to foreign investment. However, being a closed society and not embracing democracy has held back the country. Hopefully this will change, with the second-generation leadership becoming more open to foreign investments. Until then, the country remains on my list of if-only. Cotton candy anyone?
Peter Kohli is the CEO of emerging market specialist DMS Funds.