Corruption is pervasive in Uzbekistan’s public procurement sector. Bribes are often extorted in exchange for lucrative government contracts (ICS 2016). Likewise, foreign investors report frequent bribe requests; those that refuse have had difficulty in sustaining their operations as a result (ICS 2016). Uzbekistan lacks clear regulations on conflicts of interest and does not have a transparent public procurement system in place (BTI 2016). There is not a single approach to public procurement; not all stages of the process have clear rules and requirements, and different bodies wield power over the process (OECD 2015). Uzbekistan’s public procurement is carried out electronically on the Commodities Exchange internet portal, and regulations require open and non-discriminating bidding process for foreign investors. Formally, this is an open process, but in practice this is only the case in the initial stage of the process (ICS 2016). Companies report a significant lack of transparency in the final stages of the bidding process, which involves a direct negotiation of the contract between the government and the bidders (ICS 2016). Another reported form of corruption in procurement is the establishment of shell companies, which bid on and win contracts, and subsequently, go bankrupt without delivering any goods after receiving payments (OSF 2016). It has been alleged that the money earned is split between corrupt government officials and those connected to the shell companies (OSF 2016). Transparency International classifies Uzbekistan’s defense industry as having a very high risk of corruption; procurement in particular is subject to a critical risk of corruption (GDACI 2015).
A prominent corruption case involves Gulnara Karimova, the oldest daughter of President Karimov. Gulnara Karimova allegedly extorted bribes totaling over USD 1 billion in exchange for helping telecommunications companies obtain operating licenses. Swedish company TeliaSonera paid USD 381 million in bribes and promised an additional USD 75 million (OCCRP, Mar. 2015). In 2015, TeliaSonera paid a combined USD 1.4 billion to U.S. and Dutch prosecutors to settle the charges (Market Watch, Sept 2015). Similarly, Russian-owned cellular company VimpelCom agreed to pay USD 835 million to settle charges brought by U.S. and Dutch authorities for its role in the case (The Guardian, Feb. 2016). While, Dutch bank ING Group is subject to an ongoing investigation over its failure to report irregular transactions related to the VimpelCom case (Reuters, Mar. 2017). Switzerland’s Attorney General’s Office froze over USD 790 million in funds on Gulnara Karimova’s bank accounts that they suspect to be connected to the case (OCCRP, Jan. 2017).