oDR: Investigation

Amid Tashkent’s rapid redevelopment, this factory cries foul over demolition

The troubled story of a wheelchair manufacturer raises questions about decision-making and power in Uzbekistan’s political and commercial elite

Kristian Lasslett Dilmira Matyakubova
24 March 2021, 6.00am
Sergei Aleksandrov
Image: Authors

Laying flowers on his family plot is a rare moment of solitude for Sergei Aleksandrov. On most days, he spends his time winding through Kafkaesque layers of bureaucracy, after the factory he manages was effectively shut down by city authorities in Tashkent, the capital of Uzbekistan, in 2018.

Sergei is the general manager of Altromark, an Uzbekistan-based manufacturer of wheelchairs, established in the 1990s as the country emerged from the Soviet Union. Aleksandrov was inspired to set up the company by the difficulties faced by his son Nikita, who died aged 12, in 1994. Birth complications had left Nikita struggling with significant mobility issues and regular seizures, prompting Aleksandrov and colleagues to found Altromark, with the help of foreign investment.

Today, having survived the corrupt tenure of Uzbekistan’s first president, Islam Karimov, Altromark is up against a new challenge: the rapid and often opaque redevelopment of Uzbekistan.

The current president, Shavkat Mirziyoyev, came to power in 2016 and has overseen a programme of rapid reforms focusing on market liberalisation, modernisation of public services and privatisation. Mirziyoyev has focused on nation-building projects, with urban redevelopment and infrastructure at the core.

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Tashkent is the principal staging ground for redevelopment, with a raft of new property construction and upscale commercial projects. Residents have found themselves abruptly shunted from their homes and communities without consultation or compensation, to make way for mega-developments tied to some of the country’s most influential oligarchies.

Altromark, which is owned via a US parent company, is one of the casualties. In early 2018, city authorities informed the company that its factory was to be demolished to make room for a new metro line running out to the east of the city.

“We have appealed to every official body that exists in our country. The cabinet of ministers, state security services, prosecutor’s office, the ministry of justice, and so on ... we even wrote to the assistant of the president. No support whatsoever”

The company publicly denounced officials for what it argues are breaches of the law. Aleksandrov claims that city authorities doctored independent property valuations in an effort to dilute compensation payments. The demolition and ongoing saga over compensation has left the company unable to operate for nearly three years.

“We have appealed to every official body that exists in our country,” Aleksandrov told openDemocracy. “The cabinet of ministers, state security services, prosecutor’s office, the ministry of justice, and so on ... we even wrote to the assistant of the president. No support whatsoever.”

A further complication is that Tashkent’s mayor Jahongir Artikxodjaev is also the founder of the Akfa-Artel conglomerate, which has achieved dominant market positions in a range of sectors. The Akfa-Artel group has recently moved into smart gas meters, where Altromark had also built a small business. While Artikhodjaev insists he plays no role in the group’s day-to-day activities, Aleksandrov fears the mayor has little time for the city’s small and medium enterprises.

As Aleksandrov explained, his company’s appeals to the mayor’s office have also been unsuccessful. The story he tells, supported by documents and correspondence provided to openDemocracy, is one of opaque decision-making and false promises. Neither the mayor’s office, nor Akfa-Artel, responded to requests for comment.

Demolition story

The story of Altromark’s eviction begins in February 2018. In a letter from Tashkent municipality’s buildings management department, the company received notice that their premises were scheduled to be condemned, after 27 years of successful operation. The demolition would make way for the new metro line, a planned development worth $422 million that passes through the city’s eastern district of Yashnabad, where Altromark is based.

The expansion of the metro was announced in a 2017 presidential decree, which gives the mayor of Tashkent responsibility for demolishing buildings, releasing land and compensating the affected individuals and organisations

President Shavkat Mirziyoyev rides Tashkent's new metro, December 2020 | Image: President of Uzbekistan

In response to the official notice, Altromark argued that under national legislation, it was entitled to financial compensation for loss of revenues and assets. Altromark, which is owned by a US company, also requested the allocation of alternative land where it could resume operations.

During negotiations with the city authorities, Altromark cited a 2018 presidential decree which states that where land is required for public purposes, owners must be openly consulted and fully compensated for all damages incurred, including the value of the forfeited property.

Altromark’s dilemma speaks to a wider experience in Uzbekistan of businesses facing rough treatment at the hands of opaque political authorities and courts

In formal correspondence with Altromark, government agencies claimed all compensation payments would be decided according to law. Altromark, however, says that its experience has fallen short of that standard.

In October 2018, Altromark’s US founder Natalia Malyuga claimed in an open letter that the head of Tashkent’s buildings management department told the company that its entire property would be demolished – and that the company should dismantle its operations.

Altromark claims it nevertheless commissioned a professional valuation of their business in December 2018, which measured their loss at 24 billion soum ($2.4 million). City authorities rejected the figure.

The government’s municipal asset management centre and the state asset management agency agreed that Altromark would commission a different company, Hisob va biznes baholash LLC, to conduct a fresh valuation of their business. The report would then be submitted to the Tashkent city administration for consideration.

The completed report was submitted to the city authorities in April 2019. It recommended a compensation payment of 21 billion soum ($2.1 million).

Altromark then received a second evaluation report with the same identifying code, but with a reduced compensation price of 18 billion soum ($1.75 million). The company alleges that officials in the Tashkent city administration amended the initial report improperly. The authors attempted to contact Hisob va biznes baholash regarding this evaluation, but did not receive a response.

Following this exchange, the Tashkent city authorities sent a senior delegation of officials to Altromark’s office on 4 July 2019. Security footage shows that one member of the city delegation arrived holding an axe. According to Sergei Aleksandrov, Altromark’s security personnel were threatened by the delegation during the visit.

The security footage received media attention after the visit was publicly condemned by Altromark and Novosti Uzbekistana (Nuz.uz) published the video. The company was then granted a meeting with the mayor of Tashkent and the head of the Yashnabad district, where the factory is located.

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Jahongir Artikhodjaev | Source: YouTube

This meeting was complicated by the city authorities’ own business ventures – and the often less than transparent overlap in Tashkent between private business and public office.

Who is Jahongir Artikhodjaev?

Since Shavkat Mirziyoyev became president of Uzbekistan in 2016, businessman Jahongir Artikhodjaev, 46, has enjoyed a rapid ascendancy. From his Artel-Akfa manufacturing holdings, he became director of Tashkent City, a mammoth $1.3bn state-sponsored property development, before rising to the position of mayor of Tashkent.

As previously detailed in a Power Brief series report, companies tied to Artikhodjaev’s business holdings both received construction contracts and invested funds in Tashkent City, via an opaque tender award process, raising questions about a conflict of interest. As a 2019 investigation covered by openDemocracy showed, several of these interests are controlled by corporate entities in the UK.

Speaking at a press conference in 2019, Artikhodjaev said that he had stepped down from management at Akfa-Artel, but had not relinquished his personal stake. He has not responded to requests for comment.

A few weeks before city officials’ ominous visit to Altromark, the Tashkent authorities set up a new fully-owned manufacturing company, Texnopark LLC. This company was established to produce gas meters, set to be rolled out as part of a 2017 government initiative to introduce new smart meters across Uzbekistan.

An investigation by RFE/RL’s Uzbek service found that, despite no previous experience, Texnopark LLC was selected in April 2020 to supply 3.5 million Osten brand gas meters to homes across Uzbekistan – a tender worth $555 million.

Uzbekistan’s intellectual property register confirms that the Osten brand is registered to Artel Engineering and Management and the J-United Group - the latter's shares are fully owned in a private capacity by Artikhodjaev, Tashkent’s mayor. According to RFE/RL, the current head of Texnopark is a former manager of another company reportedly controlled by Artikhodjaev.

This is where Altromark comes in. Aside from wheelchairs, since 1996 Altromark has expanded into the production of gas and water metering devices, at the invitation of the Uzbek government. According to the company, drawing on industry-leading technology, Altromark has produced 300,000 gas meters without complaint.

President Shavkat Mirziyoyev visits a Texnopark factory in Tashkent, February 2020 | Image: President of Uzbekistan

This has placed Altromark in the awkward position of having to appeal for compensation to city authorities in the same line of trade and a mayor who is the founder of a much larger commercial competitor – one that is often caricatured on Uzbek social media because of its market dominance.

Previously, Artikhodjaev has stated he has no role in the day to day management of Artel, and that his private corporate interests do not present a conflict of interest with his political role.

In late 2019, the Uzbek state anti-monopoly committee announced that Texnopark’s tender award had violated laws on public procurement and competition, and should be reopened.

However, the tender was awarded once again to Texnopark. What’s more, RFE/RL discovered that the second-choice company was also connected to Artikhodjaev’s Akfa-Artel conglomerate.

In a video recording of a meeting on 21 November 2019 between Altromark and the Yashnabad district head, the latter says that the compensation issue will be resolved and that Altromark will be given land on which to set up a new factory. According to Altromark, Artikhodjaev allegedly confirmed this in a meeting later that day, and once more in a telephone call. Altromark said that it does not have a recording of the meeting with Artikhodjaev, because it agreed to turn off its cameras beforehand.

In what the company says contravenes the agreement reached on 21 November, Artykhodjaev then issued a decree capping compensation at 18 billion soum ($1.75 million). The mayor also refused to provide Altromark with an alternative site for its factory.

Alexksandrov said that he believed the verbal assurances that he claims were given on 21 November 2019. “After meeting the person who runs the capital of an independent state, it is hard to imagine that they will lie to you,” he said.

For Sergei Aleksandrov, the irony is not lost that his son Nikita’s dream survived for decades under the heavy hand of Islam Karimov, only to be dashed by a new regime

The mayor’s decree also requires that the city authorities enter into a formal agreement with Altromark, confirming the proposed compensation payment. No such agreement was reached, says Altromark – instead, the city unilaterally made a payment of 18 billion soum ($1.75 million) to the company on 26 November 2019.

Although this was less than the sum Altromark believes it is due, Tashkent authorities have since initiated legal action against the company, claiming that it was in fact overpaid.

In August 2020, Altromark appealed against the Tashkent city authorities in Uzbekistan’s Supreme Court, including over the alleged tampering of the compensation price for their property. The company is now waiting to hear the results of their appeal.

Collateral damage

Altromark’s dilemma speaks to a wider experience in Uzbekistan of businesses facing rough treatment at the hands of opaque political authorities and courts. This has given rise to an increasingly polarised environment where powerful groups like Akfa-Artel appear to receive lavish state aid, such as grants of prime land and significant tax exemptions, while smaller businesses lacking political capital - like Altromark - continue to face a bureaucratic house of mirrors.

More pressingly, the demolition of Altromark could have wider consequences in Uzbekistan for people with disabilities, whose needs often go unmet. “The biggest problem is the lack of an accessible [urban] environment,” said Oybek Isakov, who chairs the Association of Disabled People of Uzbekistan. “People just stay at home as if they are under house arrest.”

Isakov said that it was “immoral to eliminate a manufacturer at this time,” claiming that Uzbek authorities were “killing a local manufacturer to pave the way for low quality wheelchairs from China”.

Dilmurad Yusupov, a disability advocate and doctoral researcher at the University of Sussex, agrees. “The more producers we have, the better the competition and price,” he said. “From this point of view, losing a producer like Altromark may have a negative impact on the market competition and supply of wheelchairs in Uzbekistan.”

For Aleksandrov, the irony is not lost that his son Nikita’s dream survived for decades under the heavy hand of Islam Karimov, only to be dashed by a new regime – one that extols its business-friendly credentials, as well as its respect for liberal values and human rights.

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