Surprised. Uzbek Firm With Great Ties, No Experience 'Wins' $550 Million State Contract
There was little fanfare in Uzbekistan when a large domestic producer of household appliances like refrigerators and ovens was awarded a massive deal in a secretive process to make millions of gas meters for the most-populous country in Central Asia.
But an investigation by RFE/RL's Uzbek Service showed that the tender that secured the deal for the newly minted Texnopark company showed it had never made a gas meter and that the firm has ties to one of the wealthiest men in Uzbekistan, Tashkent Mayor Jahongir Ortiqkhojaev.
The RFE/RL investigation established that the companies which ultimately profit from the deal are all -- directly or indirectly -- related to Ortiqkhojaev, a close ally of President Shavkat Mirziyoev. In a country often cited by international watchdogs for corruption and cronyism, the deal is seen as yet another that lacked transparency and landed on the laps of those closely connected to the government. Uzbekistan ranked 153rd among 180 countries in Transparency International's Corruption Perceptions Index in 2019, a ranking that has been virtually unchanged for many years.
The initiative to introduce the modern gas meters in Uzbekistan officially came from Mirziyoev, who took office in 2016 after serving as prime minister for 13 years. The Uzbek government decided in 2019 to install so-called smart gas meters in more than 3.5 million homes across the country by 2022. Officials in the natural-gas-rich Central Asian nation say the modern devices will upgrade the current "outdated" gas meters and simplify the billing and payment systems. The Energy Ministry says the process is due to begin on July 1 and will be completed in two years, with the state-controlled Hudud-Gaz-Taminot firm in charge of carrying out the work.
A special government commission announced in February that the total cost of the project will be about $555 million.
The very lucrative contract to make the new gas meters was awarded in a secretive tender to the Texnopark Limited Liability Company (LLC), a household appliances producer set up last year that had no experience making gas meters.
Mirziyoev signed a decree on May 1, 2019, establishing Texnopark at the 141-hectare site of the former Tashkent Mechanical Factory. The company was launched on June 10 with the Tashkent city administration listed as its founder. A month later, Mirziyoev ordered the creation of the Hudud-Gaz-Taminot company, uniting the regional branches of the state-controlled energy giant, Uztrans-Gaz. The president tasked Hudud-Gaz-Taminot with procuring modern gas meters and installing them for all domestic natural-gas customers by 2022. A week later, on July 16, Prime Minister Abdulla Oripov held a meeting of a special group set up to implement the project.
Ortiqkhojaev, who was appointed by Mirziyoev to be Tashkent mayor in 2018, was among various cabinet ministers and other government officials at the meeting.
A copy of an official document obtained by RFE/RL shows the meeting confirmed that Uztrans-Gaz and Hudud-Gaz-Taminot were charged with placing the order -- on behalf of the government -- to produce the gas meters.
And it was ultimately Texnopark that was chosen to produce more than 3.5 million meters bought with millions of dollars of state money. Uztrans-Gaz was given a month to finalize a contract with Texnopark, the document shows.
Another company, Fido Business LLC, was given the job of creating a billing and payment system and a process to collect and store data on gas used.
At the meeting, which was chaired by Oripov, the National Bank was ordered to provide cash for Texnopark to purchase the equipment and components needed to make the electronic gas meters.
'Tender' Seals The Deal
In a rare action in late 2019, the State Anti-Monopoly Committee concluded that the government's handling of the gas-meter project violated Uzbek laws on competition and public procurement. The committee recommended that the government announce a public tender inviting various companies to bid for the lucrative project. RFE/RL obtained a copy of the December 26 letter. The committee's announcement as well as disagreements among different ministries over the cost of the project forced Oripov to temporarily suspend the project.
But on December 31, he ordered Hudud-Gaz-Taminot to conduct the tender as ordered by the Anti-Monopoly Committee.
But the way events unfolded in the following months seemed to show it was a foregone conclusion that Texnopark would be awarded the profitable contract.
Hudud-Gaz-Taminot announced on February 17 that a one-month tender process would be held for firms to bid on the $555 million deal.
The initial March 18 deadline for bids was later prolonged until March 28. The announcement stated that only domestically based companies could take part in the tender.
The details of the process have not been made public but an Uzbek official with knowledge of the tender told RFE/RL that only three companies were deemed to have met the requirements needed to take part in the bidding.
Texnopark was formally competing for the state contract with Gaz Meter LLC and Perfect Plast Profil, the source said.
Gaz Meter LLC has been making modern gas meters since 2018. But Texnopark and Perfect Plast Profil had not ever made a single gas meter as the tender began.
Texnopark, in fact, was only added to the state register of gas-meter producers on February 26, nine days after the tender started. Perfect Plast Profil was added to the list on March 27, a day before the tender ended.
But Gaz Meter LLC -- the only one of the companies with experience in gas meters -- failed to make it to the final round of bidding, with organizers saying the firm garnered less points than the two other competitors because it did not manufacture certain components needed for the device.
On April 3, the commission in charge of the tender announced that Texnopark had won the bid over Perfect Plast Profil.
As the runner-up, Perfect Plast Profil would automatically take over the contract should Texnopark not be able to complete the project.
RFE/RL discovered that Perfect Plast Profil is linked to Ortiqkhojaev through the Artel Akfa company, which the mayor controls.
The Power Behind Texnopark
The head of the household appliance producer Texnopark, Sarvar Ahadov, previously worked as the manager of Dream Production LLC, which reportedly belongs to Ortiqkhojaev. Without giving an exact date, Texnopark's website says the company began making smart gas meters under the Osten brand in February. Osten is part of the J-United Group, a holding company entirely owned by Ortiqkhojaev.
The website goes on to claim that the company has the capacity to make 3 million gas meters a year, apparently implying that Texnopark is capable of producing the 3.5 million smart devices the state needs to complete the project by 2022.
Mirziyoev visited Texnopark on February 28, where he was shown on state media checking the firm's first smart gas meters. According to a TV report, the president was satisfied with the quality of the devices.
His visit to the firm's plant came just a month before Texnopark won the tender for the contract to make gas meters.
Several government officials in Tashkent told RFE/RL on condition of anonymity that during the visit Mirziyoev gave a final "green light" for the deal to be awarded to Texnopark.
In Uzbekistan, the president enjoys enormous power that goes far beyond politics. Public tenders often serve only as a smoke screen for dubious deals.
Since Mirziyoev came to power after the death of longtime authoritarian leader Islam Karimov nearly four years ago, several major government projects have been given -- without a tender being held -- to companies controlled by Ortiqkhojaev.
Among them is the massive Tashkent City project, a project worth some $2 billion designed to transform the Uzbek capital's downtown.
'The Real Winner'
Ortiqkhojaev -- who has famously said "any business is a good business" -- has never spoken publicly about his business dealings. The mayor has also said he would not speak to Ozodlik, the local name of RFE/RL's Uzbek Service. One Uzbek government official with inside knowledge of the situation told RFE/RL that Ortiqkhojaev is, as indicated, the real winner of the tender for the huge government contract to make gas meters. "Texnopark -- which belongs to the city administration run by Ortiqkhojaev -- will produce gas meters under the brand that belongs to Ortiqkhojaev. It means that Ortiqkhojaev will make money as the owner of the brand," the official said on condition of anonymity. Ortiqkhojaev, 45, previously made headlines late last year when an alleged audio recording of him threatening journalists was released on social media. The man believed to be Ortiqkhojaev in the recording said he would "destroy" some members of the media.
RFE/RL's Uzbek Service contacted Hudud-Gaz-Taminot and Texnopark for comment in mid-May. The press office of Hudud-Gaz-Taminot refused to comment, saying: "We don't talk to media outlets that don't have accreditation in Uzbekistan." When RFE/RL contacted Texnopark on May 18, a company representative said a management-authorized representative would call back. However, no one from the company has done so.
Putting Lives At Risk?
Another government official familiar with the process said selecting a company with no experience in gas-meter production could be dangerous and risk people's safety.
"Who would be held liable if some tragic incident happens? These gas meters [made by Texnopark] haven't passed any extensive testing as required by law," the official explained.
The official said the Uzbek government should learn a lesson from the recent tragedy in Sardoba, a newly built dam that collapsed in early May, killing at least four people, driving tens of thousands from their homes, and destroying massive amounts of farmland.
The Sardoba collapse shone a spotlight on a wealthy senator, Addulghani Sanginov, who was involved in the construction of the dam through a private company he allegedly owns. Sanginov is said to have used his government position to gain the lucrative state contract for his own company in a fixed public tender.
By Farangis Najibullah based on reporting by RFE/RL's Uzbek Service,
June 01, 2020, Published on RadioFreeEurope
Thanks to Alexandra Gorn for sharing their work on Unsplash.