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Uzbekistan: charity with violations

The activities of the state-owned charity fund “Sakhovat va kumak” (“Kindness and Support”) contradicts to the laws of Uzbekistan, which prohibit the government from creating such foundations. Moreover, the Fund purchases products at inflated prices, and its account replenished through “voluntary” deductions from the salaries of employees of governmental organizations. 


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Photo by CABAR.asia

The COVID-19 pandemic is testing the strength of the economy of Central Asia, and each country of the region reacts in its own way to the events around. Along with attracting external financial flows in the form of loans from international banks and other financial institutions, states are trying to attract charity from entrepreneurs and patrons both inside and outside the country.

While in the long run, governments need to pay interest on loans from international banks and foundations and return them back, the proceeds from charity do not have an obligation to return them in the future. At the same time, as experts note, it is crucial that charity is carried out transparently and on a voluntary basis, and not under any pressure from the state and its structures.

Beginning March 21, after the government of Uzbekistan introduced strict restrictive measures to limit the spread of coronavirus infection, most of the country’s population lost their sources of income. Along with the introduction of quarantine, charity events were also activated with the active participation of public figures, entrepreneurs, volunteers, etc. Private charity events of distribution of foodstuffs, masks and personal care products were observed throughout the country.

Since April 1, 2020, the State Tax Committee of the Republic of Uzbekistan has exempted from taxation the income of individuals received in the form of material benefits from charitable organizations and private sponsors.

Alisher Usmanov, a Russian billionaire of Uzbek origin, also responded to charity events. Funds in the amount of $ 20.0 million through the public fund “Mehr-shafqat va salomatlik” (Charity and Health) were used to equip the infectious diseases hospital with modern medical equipment for the treatment of patients with COVID-19 infection in the Zangiota district of Tashkent region.

However, starting from April 1, the decision of the Republican Commission prohibited private charitable assistance actions throughout the republic.

The delivery of charity assistance by volunteers to elderly was considered as a violation of quarantine requirements and this function was transferred to the recently created Ministry of support the mahalla (community) and the family.

“Taking into account the epidemiological situation in our country, it should be noted that individual acts of charity, organized bypassing the rules of sanitation and hygiene, and quarantine requirements, putting the lives of people, particularly the elderly, at serious risk” – emphasized in a statement.

From that moment, the “Unified Sponsorship Coordination Centers” began to operate with branches in each city and region of the republic. Initially, the activities of the centers were quite transparent. Charity assistance from individuals and companies was delivered to coordination centers in the form of foodstuff, essential products or medicines. Goods were checked for compliance with sanitary and hygienic requirements and, with strict observance of quarantine conditions, were delivered to those in need. In this condition representatives of NGO, donors or volunteers who had wish to participate in this process and personally deliver charity help to those in need could also participate in this actions.

The joint venture LLC International Beverages Tashkent (an exclusive PepsiCo dealer in Uzbekistan) donated anesthetized respiratory devices worth $ 158.0 thousand to the Ministry of Health for the treatment of seriously ill patients with a diagnosis of COVID-19.

“Murad Buildings”, private construction company, handed over 500 boxes, and “Havas” supermarket chain – over 1,000 boxes with foodstuff sets to Unified Coordination Centers. All benefactors cannot be counted for sure.

Saida Mirziyoyeva. Photo from Facebook profile.

Do not stay aside and funds managed by members of the family of Shavkat Mirziyoyev the President of Uzbekistan. In her telegram channel, the daughter of the country’s president, Saida Mirziyoyeva, deputy head of the board of trustees of the Public Fund for Support and Development of National Media, said that on behalf of her foundation, one thousand women received $100 each. Also, a previously unknown international public foundation called “Zamin”, whose board of trustees is headed by the first lady –  wife of the President of Uzbekistan Ziroatkhon Mirziyoyeva, has allocated funds to support women and families who find themselves in a difficult situation due to the coronavirus pandemic. Her foundation has announced the provision of $494.0 thousand to assist 5000 women over all regions of Uzbekistan.

“The Fund’s projects are funded by charitable contributions from individuals and companies, as well as grants from international organizations” -reported on its official website.

However, there is no information on the legal status of the foundation, as well as legal address, registration of the foundation in the Ministry of Justice of the Republic of Uzbekistan, or information on reports on its financial activities.

Another important event regarding charity in the country is the creation of the “Kindness and Support” fund under the Ministry for Support of the Mahalla (Community) and the Family and its territorial units over all cities and regions of the country.

The initiator of this fund on April 20 was the President, Shavkat Mirziyoyev, who pointed out the impossibility of providing assistance from the government to the population in the form of money paid, citing the unjustified experience of foreign countries.

“Obviously, this is an easy way to distribute money to stimulate. But no economist can predict what this will lead to tomorrow.

We want to create a nationwide movement, “Sakhovat va Kumak” (“Kindness and Support”). About those who are struggling with a coronavirus, a selfless people, and our generous entrepreneurs daily inform the media. Books and poems will still be written about those who are persistent in today’s difficult conditions, the peoples who are fighting for our needy compatriots. On them will also write, as well as those who fought in World War II. It – also a war. Only the enemy does not appear externally. We’re fighting with an invisible enemy” – said the President.

According to the official information of the Chamber of Commerce and Industry, it can be concluded that the activity of the “Kindness and Support” fund implies “voluntary-forced attachment” of entrepreneurs to people who need help and are left unemployed.

Adkham Ikramov. Photo from TTP’s official web-site

“The Chamber of Commerce, the Business Ombudsman, commercial banks and the Tax committee, together with the economic bloc of the administration, headed by the first deputy mayor of the districts, conduct activities at the request of entrepreneurs about the possibility of their participation in the national movement” – said in an official statement by the chairman of the Chamber of Commerce of Uzbekistan Adham Ikramov.

“Further, the prepared lists are discussed and approved at the councils of district and city councils of people’s deputies.

The approved lists of entrepreneurs and people in need are combined based on financial opportunities, a certain number of families are allocated to entrepreneurs, thereby business representatives themselves determine the type of assistance, in the form of providing food or directing financial funds to bank cards of heads of families”, – is noted in the publication on the website of the Chamber.

However, the head of the chamber especially emphasized the President’s instructions on inadmissibility to coerce entrepreneurs to participate in the nationwide movement, where the Special Republican Commission, the Chamber of Commerce and the Business Ombudsman were identified as responsible for preventing such cases.

In the framework of the “Kindness and Support” initiative, the Crafers confectionery factory announced the guardianship of 500 families for three months.

 

The biggest national producer of electronic equipment “Artel” company will also assist 1,000 families for three months, each of which will receive financial assistance in the amount of about US $100.

However, it is not possible to find a complete list of entrepreneurs approved by city (district) deputies attached to needy families, as well as any other information on the financial and economic activities of the “Kindness and Support” Foundation. The fund does not have even official website and any information on financial statements. There is only the Telegram bot @svak_bot by which you can find out the telephone contacts of the branches and the bank details of the fund for for donation.

Local media constantly announce the amount of money received in the city (district) branches of the fund. From this information we can conclude that most of the money does not come essentially from “entrepreneurs”, but through “voluntary-forced” deduction of part of the wages of employees of state institutions and commercial banks.

On Telegram channel “Banker’s Weekdays” was announced a copy of document signed by the Deputy Chairman of the Board of Commercial “Agrobank” by No. 678 dated April 24, addressed to all regional branches. In the document, the head office demands to withhold five-day wages from the employees of the bank’s branches and transfer them to the “Kindness and Support” fund:

In response to this news, “Agrobank” issued an official statement confirming the authenticity of the document, informed that the money could be withheld only with the consent of the employee:

According to the press services of the administration of the Bulungur and Tailak districts of the Samarkand region, we can also conclude that the main “benefactors” of these regions are not some “local oligarchs”, but commercial banks headed by the same “Agrobank”:

Zarnews.uz informs that the total amount of funds received to the charity fund “Kindness and Support” due to deduction of wages of employees of Agrobank’s Samarkand region branches amounted to about 40.0 thousand US dollars.

Several independent Uzbek media also report that employees of state institutions are forced to transfer a certain part of their wages to the “Kindness and Support” fund.

Despite messages and comments on social networks, entrepreneurs are hardly agree to share their views on participating in such a campaign.

An entrepreneur from the Dzhambay district of Samarkand region, on condition of anonymity, informed CABAR.asia that he had been forced to take several families into his care and keep them for three months. “State reimbursed me part of my interest bank loan in the amount of 12% by the anti-crisis fund. Referring to this, I was asked to take custody of several families. But my business is also in decline, and even if I want to, I can’t fulfill their requirements” – said the entrepreneur. 

The only official information on the exact number of all “attached” entrepreneurs to needy families in a particular region was obtained from the Samarkand Regional Prosecutor’s Office. According to the agency, as of April 29 in the Samarkand region with a population of 3.86 million people, 47.69 thousand families (98.23 thousand people) were recognized as poor and 7904 business entities were attached to support them:

Along with the transparency of attracting money, another important point in the activities of any charitable foundation is the distribution of funds.

Data on the procurement of goods, including open tenders, transparency of contracts, as well as information on food suppliers of the Kindness and Support Foundation, are not publicly available.

According to information (without seal and signature) taken from the employee of the city administration of Samarkand, who is responsible for attracting sponsorship, the purchase of the foodstuffs by the “Kindness and Support” Fund branch is carried out at the following prices:

If assume that the fund buys food at the above prices, then could make an unambiguous conclusion that the purchase is carried out at inflated prices.

Retail price of 1 kg of product in Samarkand at the time of writing:

Rice “Avangard” – from 6.0 thousand soums (cheaper by 33%),

Onions – from 1.5 thousand soums (50% cheaper)

Medical mask – from 1.0 thousand soums (50% cheaper)

Flour (1 grade) bag – from 125.0 thousand soums (cheaper by 28.5%)

It should be noted that according to the order of the Government of Uzbekistan, starting from April 18, “UzDonMakhsulot” joint stock company set a fixed price of 125.0 thousand soums per bag of flour produced at the enterprises of the system throughout the country. 

To the questions regarding transparency of the fund, Nozim Hakberdiev, chief accountant of the republican department of the “Kindness and Support” Fund, answered: “According to the Decree of the Cabinet of Ministers of the Republic of Uzbekistan No. 213 of April 22, each city (district) of the republic has its own settlement account and the city (district) councils of deputies manage them. We are not interfering with the receipt or expenditure of this money.”

Other details regarding the expenditure of the fund’s money could not be found.

The Article 7 of the Law of the Republic of Uzbekistan “On Charity” dated 05/02/2007 clearly states: 

The bodies of state power and administration, self-government bodies of citizens, as well as state unitary enterprises, state institutions and organizations cannot act as founders of a charitable organization.

In addition to this, article 16 of the same law states:

“Information on the size and structure of the income and expenses of a charitable organization, property, number of employees, their remuneration and the involvement of volunteers is not a trade secret.”

Referring to the Law of the Republic of Uzbekistan “On Charity”, we can conclude that the created Kindness and Support Foundation under the Ministry for the Support of the Mahalla (Community) and the Family is essentially an illegal formation, since the state and its structures cannot engage in charitable activities through the creation of funds. The same restrictions are set in most countries of the world, including neighboring Kazakhstan and Kyrgyzstan.


This article was prepared as part of the Giving Voice, Driving Change – from the Borderland to the Steppes Project

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